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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to                    
Commission File Number 1-10042
Atmos Energy Corporation
(Exact name of registrant as specified in its charter)
Texas and Virginia 75-1743247
(State or other jurisdiction of
incorporation or organization) 		(IRS employer
identification no.)
1800 Three Lincoln Centre
5430 LBJ Freeway
Dallas Texas 75240
(Address of principal executive offices) (Zip code)
(972) 934-9227
(Registrant’s telephone number, including area code)
Title of each class Trading Symbol Name of each exchange on which registered
Common stock No Par Value ATO New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes  ☐    No  þ
Number of shares outstanding of each of the issuer’s classes of common stock, as of February 4, 2022.
Class Shares Outstanding
Common stock No Par Value 135,432,277


GLOSSARY OF KEY TERMS
 
AEC Atmos Energy Corporation
AOCI Accumulated other comprehensive income
ARM Annual Rate Mechanism
ASC Accounting Standards Codification
Bcf Billion cubic feet
DARR Dallas Annual Rate Review
FASB Financial Accounting Standards Board
GAAP Generally Accepted Accounting Principles
GRIP Gas Reliability Infrastructure Program
GSRS Gas System Reliability Surcharge
LIBOR London Interbank Offered Rate
Mcf Thousand cubic feet
MMcf Million cubic feet
Moody’s Moody’s Investors Services, Inc.
NTSB National Transportation Safety Board
PRP Pipeline Replacement Program
RRC Railroad Commission of Texas
RRM Rate Review Mechanism
RSC Rate Stabilization Clause
S&P Standard & Poor’s Corporation
SAVE Steps to Advance Virginia Energy
SEC United States Securities and Exchange Commission
SIP System Integrity Program
SIR System Integrity Rider
SRF Stable Rate Filing
SSIR System Safety and Integrity Rider
TCJA Tax Cuts and Jobs Act of 2017
WNA Weather Normalization Adjustment

2

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS 
December 31,
2021 		September 30,
2021
  (Unaudited)
  (In thousands, except
share data)
ASSETS
Property, plant and equipment $ 18,573,857  $ 17,885,098 
Less accumulated depreciation and amortization 2,847,066  2,821,128 
Net property, plant and equipment 15,726,791  15,063,970 
Current assets
Cash and cash equivalents 264,005  116,723 
Accounts receivable, net (See Note 5) 514,333  342,967 
Gas stored underground 220,279  178,116 
Other current assets (See Note 8) 2,275,588  2,200,909 
Total current assets 3,274,205  2,838,715 
Goodwill 731,257  731,257 
Deferred charges and other assets (See Note 8) 813,531  974,720 
$ 20,545,784  $ 19,608,662 
CAPITALIZATION AND LIABILITIES
Shareholders’ equity
Common stock, no par value (stated at $0.005 per share); 200,000,000 shares authorized; issued and outstanding: December 31, 2021 — 135,425,081 shares; September 30, 2021 — 132,419,754 shares
$ 677  $ 662 
Additional paid-in capital 5,293,541  5,023,751 
Accumulated other comprehensive income 23,856  69,803 
Retained earnings 2,971,471  2,812,673 
Shareholders’ equity 8,289,545  7,906,889 
Long-term debt 5,555,177  4,930,205 
Total capitalization 13,844,722  12,837,094 
Current liabilities
Accounts payable and accrued liabilities 398,431  423,222 
Other current liabilities 626,684  686,681 
Current maturities of long-term debt 2,401,377  2,400,452 
Total current liabilities 3,426,492  3,510,355 
Deferred income taxes 1,744,648  1,705,809 
Regulatory excess deferred taxes 508,731  549,227 
Regulatory cost of removal obligation 474,695  468,688 
Deferred credits and other liabilities 546,496  537,489 
$ 20,545,784  $ 19,608,662 
See accompanying notes to condensed consolidated financial statements.
3

ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
  Three Months Ended December 31
  2021 2020
(Unaudited)
(In thousands, except per
share data)
Operating revenues
Distribution segment $ 972,422  $ 876,650 
Pipeline and storage segment 162,918  159,713 
Intersegment eliminations (122,554) (121,883)
Total operating revenues 1,012,786  914,480 
Purchased gas cost
Distribution segment 496,799  411,072 
Pipeline and storage segment (3,411) (1,244)
Intersegment eliminations (122,225) (121,568)
Total purchased gas cost 371,163  288,260 
Operation and maintenance expense 159,110  138,643 
Depreciation and amortization expense 127,856  115,285 
Taxes, other than income 78,796  73,452 
Operating income 275,861  298,840 
Other non-operating income 8,702  6,072 
Interest charges 19,851  22,010 
Income before income taxes 264,712  282,902 
Income tax expense 15,503  65,224 
Net income
$ 249,209  $ 217,678 
Basic net income per share $ 1.86  $ 1.71 
Diluted net income per share $ 1.86  $ 1.71 
Cash dividends per share $ 0.680  $ 0.625 
Basic weighted average shares outstanding 133,682  127,034 
Diluted weighted average shares outstanding 133,689  127,034 
Net income $ 249,209  $ 217,678 
Other comprehensive income (loss), net of tax
Net unrealized holding losses on available-for-sale securities, net of tax of $20 and $18
(69) (63)
Cash flow hedges:
Amortization and unrealized gain (loss) on interest rate agreements, net of tax of $(13,260) and $17,395
(45,878) 60,184 
Total other comprehensive income (loss) (45,947) 60,121 
Total comprehensive income $ 203,262  $ 277,799 
See accompanying notes to condensed consolidated financial statements.

4

ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
  Three Months Ended December 31
  2021 2020
(Unaudited)
(In thousands)
Cash Flows From Operating Activities
Net income $ 249,209  $ 217,678 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 127,856  115,285 
Deferred income taxes 11,813  64,587 
Other (12,689) (2,976)
Net assets / liabilities from risk management activities (8,834) (816)
Net change in other operating assets and liabilities (305,531) (236,689)
Net cash provided by operating activities
61,824  157,069 
Cash Flows From Investing Activities
Capital expenditures (684,180) (456,809)
Debt and equity securities activities, net 2,374  511 
Other, net 2,058  2,706 
Net cash used in investing activities
(679,748) (453,592)
Cash Flows From Financing Activities
Net proceeds from equity offering 261,943  216,002 
Issuance of common stock through stock purchase and employee retirement plans 3,918  4,007 
Proceeds from issuance of long-term debt 596,142  597,390 
Cash dividends paid (90,411) (79,023)
Debt issuance costs (6,386) (5,062)
Net cash provided by financing activities
765,206  733,314 
Net increase in cash and cash equivalents
147,282  436,791 
Cash and cash equivalents at beginning of period 116,723  20,808 
Cash and cash equivalents at end of period $ 264,005  $ 457,599 

See accompanying notes to condensed consolidated financial statements.
5

ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 2021
1.    Nature of Business
Atmos Energy Corporation (“Atmos Energy” or the “Company”) and its subsidiaries are engaged in the regulated natural gas distribution and pipeline and storage businesses. Our distribution business is subject to federal and state regulation and/or regulation by local authorities in each of the states in which our regulated divisions and subsidiaries operate.
Our distribution business delivers natural gas through sales and transportation arrangements to over three million residential, commercial, public authority and industrial customers through our six regulated distribution divisions, which at December 31, 2021, covered service areas located in eight states.
Our pipeline and storage business, which is also subject to federal and state regulations, includes the transportation of natural gas to our Texas and Louisiana distribution systems and the management of our underground storage facilities used to support our distribution business in various states.
    
2.    Unaudited Financial Information
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, 2021. 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, 2021. Because of seasonal and other factors, the results of operations for the three-month period ended December 31, 2021 are not indicative of our results of operations for the full 2022 fiscal year, which ends September 30, 2022.
Except as described in Note 6 and Note 8 to the unaudited condensed consolidated financial statements, no events have occurred subsequent to the balance sheet date that would require recognition or disclosure in the unaudited condensed consolidated financial statements.
Significant accounting policies
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, 2021.
Recently issued accounting pronouncements
In November 2021, the Financial Accounting Standards Board (FASB) issued guidance which will require disclosure about government assistance in the notes to the financial statements. The amendment requires annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy, including information about the nature of the transactions and the related accounting policy used to account for the transactions, the line items on the balance sheet and income statement that are affected by the transactions and the significant terms and conditions of the transactions, including commitments and contingencies. The amendment is effective for us beginning October 1, 2022; however, we elected to adopt this amendment during the first quarter of fiscal 2022 as permitted by the guidance. As the guidance is related only to disclosures in the notes to the financial statements, there will be no impact on our financial position, results of operations or cash flows.
In March 2020, the FASB issued optional guidance which will ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The amendments provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by the cessation of the London Interbank Offered Rate (LIBOR). The amendments can be elected immediately, as of March 12, 2020, through December 31, 2022. We are currently evaluating if we will apply the optional guidance as we assess the impact of the cessation of LIBOR on our current contracts and hedging relationships and the potential impact on our financial position, results of operations and cash flows.
Regulatory assets and liabilities
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
6

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 other current assets and deferred charges and other assets and our regulatory liabilities are recorded as a component of other current liabilities and deferred credits and other liabilities. Deferred gas costs are recorded either in other current assets or liabilities.
Significant regulatory assets and liabilities as of December 31, 2021 and September 30, 2021 included the following:
December 31,
2021 		September 30,
2021
  (In thousands)
Regulatory assets:
Pension and postretirement benefit costs $ 41,327  $ 45,922 
Infrastructure mechanisms (1)
166,560  222,795 
Winter Storm Uri incremental costs (2)
2,106,840  2,100,728 
Deferred gas costs 84,014  66,395 
Regulatory excess deferred taxes 48,873  45,370 
Recoverable loss on reacquired debt 3,655  3,789 
Deferred pipeline record collection costs 33,748  32,099 
Other 18,222  4,343 
$ 2,503,239  $ 2,521,441 
Regulatory liabilities:
Regulatory excess deferred taxes $ 667,882  $ 705,084 
Regulatory cost of removal obligation 547,779  541,511 
Deferred gas costs 3,988  52,553 
Asset retirement obligation 18,373  18,373 
APT annual adjustment mechanism 31,815  31,110 
Pension and postretirement benefit costs 54,786  56,201 
Other 20,747  19,363 
$ 1,345,370  $ 1,424,195 
 
(1)Infrastructure mechanisms in Texas, Louisiana and Tennessee allow for the deferral of all eligible expenses associated with capital expenditures incurred pursuant to these rules, including the recording of interest on deferred expenses until the next rate proceeding (rate case or annual rate filing), at which time investment and costs would be recoverable through base rates.
(2)Includes extraordinary gas costs subject to securitization incurred during Winter Storm Uri and permissible carrying costs. See Note 8 to the unaudited condensed consolidated financial statements for further information. This amount is recorded within other current assets and deferred charges and other assets on the condensed consolidated balance sheet as of December 31, 2021.

3.    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 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, 2021.
Income statements and capital expenditures for the three months ended December 31, 2021 and 2020 by segment are presented in the following tables:
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  Three Months Ended December 31, 2021
  Distribution Pipeline and Storage Eliminations Consolidated
  (In thousands)
Operating revenues from external parties $ 971,636  $ 41,150  $ —  $ 1,012,786 
Intersegment revenues 786  121,768  (122,554) — 
Total operating revenues 972,422  162,918  (122,554) 1,012,786 
Purchased gas cost
496,799  (3,411) (122,225) 371,163 
Operation and maintenance expense 123,284  36,155  (329) 159,110 
Depreciation and amortization expense 92,797  35,059  —  127,856 
Taxes, other than income 69,045  9,751  —  78,796 
Operating income 190,497  85,364  —  275,861 
Other non-operating income 1,916  6,786  —  8,702 
Interest charges 8,548  11,303  —  19,851 
Income before income taxes
183,865  80,847  —  264,712 
Income tax expense 4,294  11,209  —  15,503 
Net income $ 179,571  $ 69,638  $ —  $ 249,209 
Capital expenditures $ 437,382  $ 246,798  $ —  $ 684,180 

  Three Months Ended December 31, 2020
  Distribution Pipeline and Storage Eliminations Consolidated
  (In thousands)
Operating revenues from external parties $ 875,887  $ 38,593  $ —  $ 914,480 
Intersegment revenues 763  121,120  (121,883) — 
Total operating revenues 876,650  159,713  (121,883) 914,480 
Purchased gas cost
411,072  (1,244) (121,568) 288,260 
Operation and maintenance expense 108,802  30,156  (315) 138,643 
Depreciation and amortization expense 82,870  32,415  —  115,285 
Taxes, other than income 64,352  9,100  —  73,452 
Operating income 209,554  89,286  —  298,840 
Other non-operating income 835  5,237  —  6,072 
Interest charges 10,712  11,298  —  22,010 
Income before income taxes
199,677  83,225  —  282,902 
Income tax expense 45,985  19,239  —  65,224 
Net income $ 153,692  $ 63,986  $ —  $ 217,678 
Capital expenditures $ 306,016  $ 150,793  $ —  $ 456,809 
Balance sheet information at December 31, 2021 and September 30, 2021 by segment is presented in the following tables:
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  December 31, 2021
  Distribution Pipeline and Storage Eliminations Consolidated
  (In thousands)
Property, plant and equipment, net $ 11,676,614  $ 4,050,177  $ —  $ 15,726,791 
Total assets $ 19,778,943  $ 4,309,629  $ (3,542,788) $ 20,545,784 
  September 30, 2021
  Distribution Pipeline and Storage Eliminations Consolidated
  (In thousands)
Property, plant and equipment, net $ 11,232,649  $ 3,831,321  $ —  $ 15,063,970 
Total assets $ 18,847,266  $ 4,076,844  $ (3,315,448) $ 19,608,662 

4.    Earnings Per Share
We use the two-class method of computing earnings per share because we have participating securities in the form of non-vested restricted stock units with a nonforfeitable right to dividend equivalents, for which vesting is predicated solely on the passage of time. The calculation of earnings per share using the two-class method excludes income attributable to these participating securities from the numerator and excludes the dilutive impact of those shares from the denominator. Basic weighted average shares outstanding is calculated based upon the weighted average number of common shares outstanding during the periods presented. Also, this calculation includes fully vested stock awards that have not yet been issued as common stock. Additionally, the weighted average shares outstanding for diluted EPS includes the incremental effects of the forward sale agreements, discussed in Note 7 to the unaudited condensed consolidated financial statements, when the impact is dilutive. Basic and diluted earnings per share for the three months ended December 31, 2021 and 2020 are calculated as follows:

  Three Months Ended December 31
  2021 2020
  (In thousands, except per share amounts)
Basic Earnings Per Share
Net income $ 249,209  $ 217,678 
Less: Income allocated to participating securities
166  151 
Income available to common shareholders
$ 249,043  $ 217,527 
Basic weighted average shares outstanding
133,682  127,034 
Net income per share — Basic
$ 1.86  $ 1.71 
Diluted Earnings Per Share
Income available to common shareholders $ 249,043  $ 217,527 
Effect of dilutive shares
—  — 
Income available to common shareholders
$ 249,043  $ 217,527 
Basic weighted average shares outstanding
133,682  127,034 
Dilutive shares 7  — 
Diluted weighted average shares outstanding
133,689  127,034 
Net income per share - Diluted
$ 1.86  $ 1.71 

5.    Revenue and Accounts Receivable
Revenue
Our revenue recognition policy is fully described in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. The following tables disaggregate our revenue from contracts with customers by customer type and segment and provide a reconciliation to total operating revenues, including intersegment revenues, for the three months ended December 31, 2021 and 2020.
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Three Months Ended December 31, 2021 Three Months Ended December 31, 2020
Distribution Pipeline and Storage Distribution Pipeline and Storage
(In thousands)
Gas sales revenues:
Residential $ 575,841  $ —  $ 591,834  $ — 
Commercial 250,761  —  208,947  — 
Industrial 48,681  —  24,708  — 
Public authority and other 15,192  —  13,062  — 
Total gas sales revenues 890,475  —  838,551  — 
Transportation revenues 27,869  163,859  27,767  164,761 
Miscellaneous revenues 2,599  6,543  2,396  5,148 
Revenues from contracts with customers 920,943  170,402  868,714  169,909 
Alternative revenue program revenues (1)
50,986  (7,484) 7,441  (10,196)
Other revenues 493  —  495  — 
Total operating revenues $ 972,422  $ 162,918  $ 876,650  $ 159,713 
(1)    In our distribution segment, we have weather-normalization adjustment mechanisms that serve to mitigate the effects of weather on our revenue. Additionally, APT has a regulatory mechanism that requires that we share with its tariffed customers 75% of the difference between the total non-tariffed revenues earned during a test period and a regulatorily determined revenue benchmark.
Accounts receivable and allowance for uncollectible accounts
Accounts receivable arise from natural gas sales to residential, commercial, industrial, public authority and other customers. Our accounts receivable balance includes unbilled amounts which represent a customer’s consumption of gas from the date of the last cycle billing through the last day of the month. The receivable balances are short term and generally do not extend beyond one month. To minimize credit risk, we assess the credit worthiness of new customers, require deposits where necessary, assess late fees, pursue collection activities and disconnect service for nonpayment. After disconnection, accounts are written off when deemed uncollectible.
Our policy related to the accounting for our allowance for uncollectible accounts is fully described in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. During the three months ended December 31, 2021, there were no material changes to this policy. Rollforwards of our allowance for uncollectible accounts for the three months ended December 31, 2021 and 2020 are presented in the table below. The allowance excludes the gas cost portion of customers’ bills for approximately 79 percent of our customers as we have the ability to collect these gas costs through our gas cost recovery mechanisms in most of our jurisdictions.
  Three Months Ended December 31, 2021
  (In thousands)
Beginning balance, September 30, 2021
$ 64,471 
Current period provisions 6,370 
Write-offs charged against allowance (6,429)
Recoveries of amounts previously written off 522 
Ending balance, December 31, 2021
$ 64,934 
  Three Months Ended December 31, 2020
  (In thousands)
Beginning balance, September 30, 2020
$ 29,949 
Current period provisions 6,937 
Write-offs charged against allowance (2,288)
Recoveries of amounts previously written off 491 
Ending balance, December 31, 2020
$ 35,089 
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6.    Debt
The nature and terms of our debt instruments and credit facilities are described in detail in Note 7 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. Other than as described below, there were no material changes in the terms of our debt instruments during the three months ended December 31, 2021.
Long-term debt at December 31, 2021 and September 30, 2021 consisted of the following:
December 31, 2021 September 30, 2021
  (In thousands)
Unsecured 0.625% Senior Notes, due 2023
$ 1,100,000  $ 1,100,000 
Unsecured 3.00% Senior Notes, due 2027
500,000  500,000 
Unsecured 2.625% Senior Notes, due 2029
300,000  300,000 
Unsecured 1.50% Senior Notes, due 2031
600,000  600,000 
Unsecured 5.95% Senior Notes, due 2034
200,000  200,000 
Unsecured 5.50% Senior Notes, due 2041
400,000  400,000 
Unsecured 4.15% Senior Notes, due 2043
500,000  500,000 
Unsecured 4.125% Senior Notes, due 2044
750,000  750,000 
Unsecured 4.30% Senior Notes, due 2048
600,000  600,000 
Unsecured 4.125% Senior Notes, due 2049
450,000  450,000 
Unsecured 3.375% Senior Notes, due 2049
500,000  500,000 
Unsecured 2.85% Senior Notes, due 2052
600,000  — 
Floating-rate term loan, due April 2022
200,000  200,000 
Floating-rate Senior Notes, due 2023
1,100,000  1,100,000 
Medium-term note Series A, 1995-1, 6.67%, due 2025
10,000  10,000 
Unsecured 6.75% Debentures, due 2028
150,000  150,000 
Finance lease obligations 52,873  18,739 
Total long-term debt 8,012,873  7,378,739 
Less:
Original issue discount on unsecured senior notes and debentures 6,529  2,811 
Debt issuance cost 49,790  45,271 
Current maturities 2,401,377  2,400,452 
$ 5,555,177  $ 4,930,205 
On October 1, 2021, we completed a public offering of $600 million of 2.85% senior notes due 2052, with an effective interest rate of 2.58%, after giving effect to the offering costs and settlement of our interest rate swaps. The net proceeds from the offering, after the underwriting discount and offering expenses, of $589.8 million, were used for general corporate purposes.
On January 14, 2022, we completed a public offering of $200 million of 2.625% senior notes due 2029, with an effective interest rate of 2.55%, after giving effect to the estimated offering costs. The net proceeds from the offering, after the underwriting discount and estimated offering expenses, of approximately $200 million were used to repay our $200 million floating-rate term loan on January 18, 2022.
Short-term debt
We utilize short-term debt to provide cost-effective, short-term financing until it can be replaced with a balance of long-term debt and equity financing that achieves the Company’s desired capital structure with an equity-to-total-capitalization ratio between 50% and 60%, inclusive of long-term and short-term debt. Our short-term borrowing requirements are driven primarily by construction work in progress and the seasonal nature of the natural gas business.
Our short-term borrowing requirements are satisfied through a combination of a $1.5 billion commercial paper program and four committed revolving credit facilities with third-party lenders that provide $2.5 billion of total working capital funding.
The primary source of our funding is our commercial paper program, which is supported by a five-year unsecured $1.5 billion credit facility that expires on March 31, 2026. This facility bears interest at a base rate or at a LIBOR-based rate for the applicable interest period, plus a margin ranging from zero percent to 0.25 percent for base rate advances or a margin ranging from 0.75 percent to 1.25 percent for LIBOR-based advances, based on the Company’s credit ratings. Additionally, the facility
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contains a $250 million accordion feature, which provides the opportunity to increase the total committed loan to $1.75 billion. At December 31, 2021 and September 30, 2021, there were no amounts outstanding under our commercial paper program.
We have a $900 million three-year unsecured revolving credit facility, which expires March 31, 2024 and is used to provide additional working capital funding. This facility bears interest at a base rate or at a LIBOR-based rate for the applicable interest period, plus a margin ranging from zero percent to 0.25 percent for base rate advances or a margin ranging from 0.75 percent to 1.25 percent for LIBOR-based advances, based on the Company's credit ratings. Additionally, the facility contains a $100 million accordion feature, which provides the opportunity to increase the total committed loan to $1.0 billion. At December 31, 2021, there were no borrowings outstanding under this facility.
Additionally, we have a $50 million 364-day unsecured facility, which will expire March 31, 2022 and is used to provide working capital funding. There were no borrowings outstanding under this facility as of December 31, 2021.
Finally, we have a $50 million 364-day unsecured revolving credit facility, which was renewed April 29, 2021 and is used to issue letters of credit and to provide working capital funding. At December 31, 2021, there were no borrowings outstanding under this facility; however, outstanding letters of credit reduced the total amount available to us to $44.4 million.
Debt covenants
The availability of funds under these credit facilities is subject to conditions specified in the respective credit agreements, all of which we currently satisfy. These conditions include our compliance with financial covenants and the continued accuracy of representations and warranties contained in these agreements. We are required by the financial covenants in each of these facilities to maintain, at the end of each fiscal quarter, a ratio of total-debt-to-total-capitalization of no greater than 70 percent. At December 31, 2021, our total-debt-to-total-capitalization ratio, as defined in the agreements, was 50 percent. In addition, both the interest margin and the fee that we pay on unused amounts under certain of these facilities are subject to adjustment depending upon our credit ratings.
These credit facilities and our public indentures contain usual and customary covenants for our business, including covenants substantially limiting liens, substantial asset sales and mergers. Additionally, our public debt indentures relating to our senior notes and debentures, as well as certain of our revolving credit agreements, each contain a default provision that is triggered if outstanding indebtedness arising out of any other credit agreements in amounts ranging from in excess of $15 million to in excess of $100 million becomes due by acceleration or if not paid at maturity. We were in compliance with all of our debt covenants as of December 31, 2021. If we were unable to comply with our debt covenants, we would likely be required to repay our outstanding balances on demand, provide additional collateral or take other corrective actions.

7.    Shareholders' Equity

The following tables present a reconciliation of changes in stockholders' equity for the three months ended December 31, 2021 and 2020.
  Common stock Additional
Paid-in
Capital 		Accumulated
Other
Comprehensive Income
(Loss) 		Retained
Earnings 		Total
Number of
Shares 		Stated
Value
  (In thousands, except share and per share data)
Balance, September 30, 2021
132,419,754  $ 662  $ 5,023,751  $ 69,803  $ 2,812,673  $ 7,906,889 
Net income —  —  —  —  249,209  249,209 
Other comprehensive loss —  —  —  (45,947) —  (45,947)
Cash dividends ($0.68 per share)
—  —  —  —  (90,411) (90,411)
Common stock issued:
Public and other stock offerings 2,730,115  13  265,848  —  —  265,861 
Stock-based compensation plans 275,212  2  3,942  —  —  3,944 
Balance, December 31, 2021 135,425,081  $ 677  $ 5,293,541  $ 23,856  $ 2,971,471  $ 8,289,545 
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  Common stock Additional
Paid-in
Capital 		Accumulated
Other
Comprehensive Income
(Loss) 		Retained
Earnings 		Total
Number of
Shares 		Stated
Value
  (In thousands, except share and per share data)
Balance, September 30, 2020
125,882,477  $ 629  $ 4,377,149  $ (57,589) $ 2,471,014  $ 6,791,203 
Net income —  —  —  —  217,678  217,678 
Other comprehensive income —  —  —  60,121  —  60,121 
Cash dividends ($0.625 per share)
—  —  —  —  (79,023) (79,023)
Common stock issued:
Public and other stock offerings 2,126,118  11  219,998  —  —  220,009 
Stock-based compensation plans 144,366  1  3,167  —  —  3,168 
Balance, December 31, 2020 128,152,961  $ 641  $ 4,600,314  $ 2,532  $ 2,609,669  $ 7,213,156 
Shelf Registration, At-the-Market Equity Sales Program and Equity Issuances
We have a shelf registration statement with the Securities and Exchange Commission (SEC) that allows us to issue up to $5.0 billion in common stock and/or debt securities through June 29, 2024. As of the date of this report, $3.2 billion of securities were available for issuance under this shelf registration statement.
We have an at-the-market (ATM) equity sales program under which we may issue and sell shares of our common stock up to an aggregate offering price of $1.0 billion through June 29, 2024 (including shares of common stock that may be sold pursuant to forward sale agreements entered into concurrently with the ATM equity sales program).
During the three months ended December 31, 2021, we executed forward sales under our ATM equity sales program with various forward sellers who borrowed and sold 2,712,043 shares of our common stock at an aggregate price of $260.2 million. During the three months ended December 31, 2021, we also settled forward sale agreements with respect to 2,689,327 shares that had been borrowed and sold by various forward sellers under the ATM program for net proceeds of $261.9 million. As of December 31, 2021, $499.7 million of equity was available for issuance under the ATM program. Additionally, we had $294.7 million in available proceeds from outstanding forward sale agreements, as detailed below.
Maturity Shares Available Net Proceeds Available
(In thousands) 		Forward Price
September 30, 2022 1,142,291  $ 108,348  $ 94.85 
November 30, 2022 1,319,733  124,680  $ 94.47 
June 30, 2023 632,416  61,657  $ 97.49 
Total 3,094,440  $ 294,685  $ 95.23 
Accumulated Other Comprehensive Income (Loss)
We record deferred gains (losses) in AOCI related to available-for-sale debt securities and interest rate agreement cash flow hedges. Deferred gains (losses) for our available-for-sale debt securities are recognized in earnings upon settlement, while deferred gains (losses) related to our interest rate agreement cash flow hedges are recognized in earnings as they are amortized. The following tables provide the components of our accumulated other comprehensive income (loss) balances, net of the related tax effects allocated to each component of other comprehensive income (loss).
Available-
for-Sale
Securities 		Interest Rate
Agreement
Cash Flow
Hedges 		Total
  (In thousands)
September 30, 2021 $ 47  $ 69,756  $ 69,803 
Other comprehensive loss before reclassifications (69) (46,622) (46,691)
Amounts reclassified from accumulated other comprehensive income —  744  744 
Net current-period other comprehensive loss (69) (45,878) (45,947)
December 31, 2021 $ (22) $ 23,878  $ 23,856 
 
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Available-
for-Sale
Securities 		Interest Rate
Agreement
Cash Flow
Hedges 		Total
  (In thousands)
September 30, 2020 $ 238  $ (57,827) $ (57,589)
Other comprehensive income (loss) before reclassifications (63) 59,042  58,979 
Amounts reclassified from accumulated other comprehensive income —  1,142  1,142 
Net current-period other comprehensive income (loss) (63) 60,184  60,121 
December 31, 2020 $ 175  $ 2,357  $ 2,532 

8.    Winter Storm Uri
Overview
As described in Note 9 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021, a historic winter storm impacted supply, market pricing and demand for natural gas in our service territories in mid-February 2021. During this time, the governors of Kansas and Texas each declared a state of emergency, and certain regulatory agencies issued emergency orders that impacted the utility and natural gas industries, including statewide utilities curtailment programs and orders encouraging or requiring jurisdictional natural gas utilities to work to ensure customers were provided with safe and reliable natural gas service.
Due to the historic nature of this winter storm, we experienced unforeseeable and unprecedented market pricing for gas costs, which resulted in aggregated natural gas purchases during the month of February of approximately $2.3 billion. These gas costs were paid using funds received from a public offering of debt securities completed in March 2021 of $2.2 billion.
Regulatory Asset Accounting
Our purchased gas costs are recoverable through purchased gas cost adjustment mechanisms in each state where we operate. Due to the unprecedented level of purchased gas costs incurred during Winter Storm Uri, the Kansas Corporation Commission (KCC) and the Railroad Commission of Texas (RRC) issued orders authorizing natural gas utilities to record a regulatory asset to account for the extraordinary costs associated with the winter storm. Pursuant to these orders, as of December 31, 2021, we have recorded a $2.1 billion regulatory asset for incremental costs, including carrying costs, incurred in Kansas ($89.4 million) and Texas ($2,017.5 million).
Securitization Proceedings
To minimize the impact on the customer bill by extending the recovery periods for these unprecedented purchased gas costs, the Kansas and Texas State Legislatures each enacted securitization legislation in 2021, as described in further detail in Note 9 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021.
Kansas
On September 14, 2021, we filed with the KCC an application to securitize $94.1 million of extraordinary gas costs incurred during Winter Storm Uri. This amount also includes an estimate of penalties, carrying costs and administrative costs that we expect to incur in connection with the resolution of this filing. A procedural schedule has been established that will result in a final Commission order in the third fiscal quarter of 2022. Because we intend to securitize these costs and recover over several years, we have recorded the regulatory asset for Kansas as a long-term asset in deferred charges and other assets as of December 31, 2021.
Texas
We filed our application with the RRC on July 30, 2021 to securitize $2.0 billion of extraordinary gas costs incurred during Winter Storm Uri. This amount also included an estimate of carrying costs and administrative costs that we expect to incur in connection with the resolution of this filing.
On November 10, 2021, the RRC issued a Final Determination of the Regulatory Asset (the Final Determination). The Final Determination stipulates that all of our gas and storage costs were prudently incurred. Additionally, the Final Determination permits us to defer, through December 31, 2021 our actual carrying costs associated with the $2.2 billion of incremental financing issued in March 2021 and to recover approximately $0.6 million of our administrative costs.
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On February 8, 2022, the RRC issued a Financing Order that authorizes the Texas Public Financing Authority to issue customer rate relief bonds to securitize the costs that were approved in the Final Determination over a period not to exceed 30 years. As required by the Financing Order, the Texas Public Financing Authority has 180 days to issue the securitization bonds. Issuance may occur after 180 days if necessary based on bond market conditions, the receipt of necessary approvals and the timely receipt of necessary financial disclosure information from each participating gas utility. Upon receipt of the securitization funds we will repay the $2.2 billion in public notes issued to finance the incremental gas costs incurred during Winter Storm Uri. Accordingly, we have recorded the regulatory asset for Texas in other current assets and these notes as current maturities of long-term debt as of December 31, 2021.

9.     Interim Pension and Other Postretirement Benefit Plan Information
The components of our net periodic pension cost for our pension and other postretirement benefit plans for the three months ended December 31, 2021 and 2020 are presented in the following tables. Most of these costs are recoverable through our tariff rates. A portion of these costs is capitalized into our rate base or deferred as a regulatory asset or liability. The remaining costs are recorded as a component of operation and maintenance expense or other non-operating expense.

  Three Months Ended December 31
  Pension Benefits Other Benefits
  2021 2020 2021 2020
  (In thousands)
Components of net periodic pension cost:
Service cost $ 4,323  $ 4,612  $ 2,559  $ 4,306 
Interest cost (1)
5,063  5,028  2,683  2,660 
Expected return on assets (1)
(7,383) (6,978) (3,312) (2,614)
Amortization of prior service cost (credit) (1)
(58) (58) (3,309) 43 
Amortization of actuarial (gain) loss (1)
1,951  3,172  —  — 
Net periodic pension cost $ 3,896  $ 5,776  $ (1,379) $ 4,395 
(1)    The components of net periodic cost other than the service cost component are included in the line item other non-operating expense in the condensed consolidated statements of comprehensive income or are capitalized on the condensed consolidated balance sheets as a regulatory asset or liability, as described in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021.
For the three months ended December 31, 2021 we contributed $4.0 million to our postretirement medical plans. We anticipate contributing a total of between $15 million and $25 million to our postretirement plans during fiscal 2022.

10.    Commitments and Contingencies
Litigation and Environmental Matters
In the normal course of business, we are subject to various legal and regulatory proceedings. For such matters, we record liabilities when they are considered probable and estimable, based on currently available facts, our historical experience and our estimates of the ultimate outcome or resolution of the liability in the future. While the outcome of these proceedings is uncertain and a loss in excess of the amount we have accrued is possible though not reasonably estimable, it is the opinion of management that any amounts exceeding the accruals will not have a material adverse impact on our financial position, results of operations or cash flows.
We maintain liability insurance for various risks associated with the operation of our natural gas pipelines and facilities, including for property damage and bodily injury. These liability insurance policies generally require us to be responsible for the first $1.0 million (self-insured retention) of each incident.
The National Transportation Safety Board (NTSB) held a public meeting on January 12, 2021 to determine the probable cause of the incident that occurred at a Dallas, Texas residence on February 23, 2018 that resulted in one fatality and injuries to four other residents. At the meeting, the Board deliberated and voted on proposed findings of fact, a probable cause statement, and safety recommendations. On February 8, 2021, the NTSB issued its final report that included an Executive Summary, Findings, Probable Cause, and Recommendations. Also on February 8, 2021, safety recommendations letters were distributed to recommendation recipients, including Atmos Energy. Atmos Energy timely provided a written response on May 7, 2021. Following the release of the NTSB’s final report, the Railroad Commission of Texas (RRC) completed its safety evaluation related to the same incident finding four alleged violations and initiated an enforcement proceeding to pursue administrative
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penalties totaling $1.6 million. Atmos Energy is working with the RRC to resolve the alleged violations and satisfy the administrative penalties.
The NTSB is investigating a worksite accident that occurred in Farmersville, Texas on June 28, 2021 that resulted in two fatalities and injuries to two others. Together with the Railroad Commission of Texas and the Pipeline and Hazardous Materials Safety Administration, Atmos Energy is a party to the investigation and in that capacity is working closely with all parties to help determine the cause of this incident. On July 16, 2021 and July 28, 2021, two civil actions were filed in Dallas, Texas against Atmos Energy and one of its contractors in response to the accident.
We are a party to various other litigation and environmental-related matters or claims that have arisen in the ordinary course of our business. While the results of such litigation and response actions to such environmental-related matters or claims cannot be predicted with certainty, we continue to believe the final outcome of such litigation and matters or claims will not have a material adverse effect on our financial condition, results of operations or cash flows.
Purchase Commitments
Our distribution divisions maintain supply contracts with several vendors that generally cover a period of up to one year. Commitments for estimated base gas volumes are established under these contracts on a monthly basis at contractually negotiated prices. Commitments for incremental daily purchases are made as necessary during the month in accordance with the terms of the individual contract.
Our Mid-Tex Division also maintains a limited number of long-term supply contracts to ensure a reliable source of gas for our customers in its service area, which obligate it to purchase specified volumes at prices indexed to natural gas hubs or fixed price contracts. These purchase commitment contracts are detailed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. There were no material changes to the purchase commitments for the three months ended December 31, 2021.
Rate Regulatory Proceedings
As of December 31, 2021, routine rate regulatory proceedings were in progress in several of our service areas, which are discussed in further detail below in Management’s Discussion and Analysis — Recent Ratemaking Developments. Except for these proceedings, there were no material changes to rate regulatory proceedings for the three months ended December 31, 2021.

11.    Income Taxes

Income Tax Expense
Our interim effective tax rates reflect the estimated annual effective tax rates for the fiscal years ended September 30, 2022 and 2021, adjusted for tax expense associated with certain discrete items. The effective tax rates for the three months ended December 31, 2021 and 2020 were 5.9% and 23.1%. These effective tax rates differ from the federal statutory tax rate of 21% primarily due to the amortization of excess deferred federal income tax liabilities, tax credits, state income taxes and other permanent book-to-tax differences. These adjustments have a relative impact on the effective tax rate proportionally to pretax income or loss.
Beginning in the second quarter of fiscal 2021 and through the end of the fiscal year, we reached agreement with regulators in various states to begin refunding excess deferred tax liabilities generally over a three to five year period. This increased the refund of excess deferred tax liabilities to customers in the current year period and significantly reduced the effective tax rate for the three month period ended December 31, 2021 compared to the prior year period.

Regulatory Excess Deferred Taxes

Regulatory excess net deferred taxes represent changes in our net deferred tax liability related to our cost of service ratemaking due to the enactment of the Tax Cuts and Jobs Act of 2017 (the "TCJA") and state tax legislative changes in Kansas and Louisiana. Currently, the regulatory excess net deferred tax liability of $619.0 million is being returned over various periods. Of this amount, $497.9 million, is being returned to customers over 35 - 60 months. An additional $106.0 million is being returned to customers on a provisional basis over 15 - 69 years until our regulators establish the final refund periods. The refund of the remaining $15.1 million will be addressed in future rate proceedings.
As of December 31, 2021 and September 30, 2021, $159.2 million and $155.9 million is recorded in other current liabilities.


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12.    Financial Instruments
We currently use financial instruments to mitigate commodity price risk and interest rate risk. The objectives and strategies for using financial instruments and the related accounting for these financial instruments are fully described in Notes 2 and 15 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. During the three months ended December 31, 2021, there were no material changes in our objectives, strategies and accounting for using financial instruments. Our financial instruments do not contain any credit-risk-related or other contingent features that could cause payments to be accelerated when our financial instruments are in net liability positions. The following summarizes those objectives and strategies.
Commodity Risk Management Activities
Our purchased gas cost adjustment mechanisms essentially insulate our distribution segment from commodity price risk; however, our customers are exposed to the effects of volatile natural gas prices. We manage this exposure through a combination of physical storage, fixed-price forward contracts and financial instruments, primarily over-the-counter swap and option contracts, in an effort to minimize the impact of natural gas price volatility on our customers during the winter heating season.
We typically seek to hedge between 25 and 50 percent of anticipated heating season gas purchases using financial instruments. For the 2021-2022 heating season (generally October through March), in the jurisdictions where we are permitted to utilize financial instruments, we anticipate hedging approximately 42 percent, or 23.9 Bcf, of the winter flowing gas requirements. We have not designated these financial instruments as hedges for accounting purposes.
Interest Rate Risk Management Activities
We manage interest rate risk by periodically entering into financial instruments to effectively fix the Treasury yield component of the interest cost associated with anticipated financings.
Quantitative Disclosures Related to Financial Instruments
The following tables present detailed information concerning the impact of financial instruments on our condensed consolidated balance sheet and statements of comprehensive income.
As of December 31, 2021, our financial instruments were comprised of both long and short commodity positions. A long position is a contract to purchase the commodity, while a short position is a contract to sell the commodity. As of December 31, 2021, we had 12,982 MMcf of net long commodity contracts outstanding. These contracts have not been designated as hedges.
Financial Instruments on the Balance Sheet
The following tables present the fair value and balance sheet classification of our financial instruments as of December 31, 2021 and September 30, 2021. The gross amounts of recognized assets and liabilities are netted within our unaudited condensed consolidated balance sheets to the extent that we have netting arrangements with our counterparties. However, for December 31, 2021 and September 30, 2021, no gross amounts and no cash collateral were netted within our consolidated balance sheet.
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December 31, 2021
Balance Sheet Location Assets Liabilities
     (In thousands)
Designated As Hedges:
Interest rate contracts Other current assets /
Other current liabilities 		$ 61,867  $ (3,439)
Interest rate contracts Deferred charges and other assets /
Deferred credits and other liabilities 		67,553  (16,609)
Total 129,420  (20,048)
Not Designated As Hedges:
Commodity contracts Other current assets /
Other current liabilities 		10,342  (1,572)
Commodity contracts Deferred charges and other assets /
Deferred credits and other liabilities 		1,790  (14)
Total 12,132  (1,586)
Gross / Net Financial Instruments $ 141,552  $ (21,634)
 
September 30, 2021
Balance Sheet Location Assets Liabilities
     (In thousands)
Designated As Hedges:
Interest rate contracts Deferred charges and other assets /
Deferred credits and other liabilities 		$ 169,469  $ — 
Total 169,469  — 
Not Designated As Hedges:
Commodity contracts Other current assets /
Other current liabilities 		55,073  (5,269)
Commodity contracts Deferred charges and other assets /
Deferred credits and other liabilities 		6,144  — 
Total 61,217  (5,269)
Gross / Net Financial Instruments $ 230,686  $ (5,269)
Impact of Financial Instruments on the Statement of Comprehensive Income
Cash Flow Hedges
As discussed above, our distribution segment has interest rate agreements, which we designated as cash flow hedges at the time the agreements were executed. The net loss on settled interest rate agreements reclassified from AOCI into interest charges on our condensed consolidated statements of comprehensive income for the three months ended December 31, 2021 and 2020 was $1.0 million and $1.5 million.
The following table summarizes the gains and losses arising from hedging transactions that were recognized as a component of other comprehensive income (loss), net of taxes, for the three months ended December 31, 2021 and 2020. The amounts included in the table below exclude gains and losses arising from ineffectiveness because those amounts are immediately recognized in the statement of comprehensive income as incurred.
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  Three Months Ended December 31
  2021 2020
  (In thousands)
Increase (decrease) in fair value:
Interest rate agreements $ (46,622) $ 59,042 
Recognition of losses in earnings due to settlements:
Interest rate agreements 744  1,142 
Total other comprehensive income (loss) from hedging, net of tax
$ (45,878) $ 60,184 
Deferred gains (losses) recorded in AOCI associated with our interest rate agreements are recognized in earnings as they are amortized over the terms of the underlying debt instruments. As of December 31, 2021, we had $61.0 million of net realized losses in AOCI associated with our interest rate agreements. The following amounts, net of deferred taxes, represent the expected recognition in earnings of the deferred net losses recorded in AOCI associated with our interest rate agreements, based upon the fair values of these agreements at the date of settlement. The remaining amortization periods for these settled amounts extend through fiscal 2052. However, the table below does not include the expected recognition in earnings of our outstanding interest rate swaps as those instruments have not yet settled.
Interest Rate
Agreements
  (In thousands)
Next twelve months $ (2,976)
Thereafter (57,994)
Total $ (60,970)

Financial Instruments Not Designated as Hedges
As discussed above, commodity contracts which are used in our distribution segment are not designated as hedges. However, there is no earnings impact on our distribution segment as a result of the use of these financial instruments because the gains and losses arising from the use of these financial instruments are recognized in the consolidated statement of comprehensive income as a component of purchased gas cost when the related costs are recovered through our rates and recognized in revenue. Accordingly, the impact of these financial instruments is excluded from this presentation.

13.    Fair Value Measurements
We report certain assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We record cash and cash equivalents, accounts receivable and accounts payable at carrying value, which substantially approximates fair value due to the short-term nature of these assets and liabilities. For other financial assets and liabilities, we primarily use quoted market prices and other observable market pricing information to minimize the use of unobservable pricing inputs in our measurements when determining fair value. The methods used to determine fair value for our assets and liabilities are fully described in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. During the three months ended December 31, 2021, there were no changes in these methods.
Fair value measurements also apply to the valuation of our pension and postretirement plan assets. Current accounting guidance requires employers to annually disclose information about fair value measurements of the assets of a defined benefit pension or other postretirement plan. The fair value of these assets is presented in Note 10 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021.
Quantitative Disclosures
Financial Instruments
The classification of our fair value measurements requires judgment regarding the degree to which market data is observable or corroborated by observable market data. Authoritative accounting literature establishes a fair value hierarchy that prioritizes the inputs used to measure fair value based on observable and unobservable data. The hierarchy categorizes the inputs into three levels, with the highest priority given to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1), with the lowest priority given to unobservable inputs (Level 3). The following tables summarize, by level within the fair value hierarchy, our assets and liabilities that were accounted for at fair value on a recurring basis as of
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December 31, 2021 and September 30, 2021. Assets and liabilities are categorized in their entirety based on the lowest level of input that is significant to the fair value measurement.
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)(1)
Significant
Other
Unobservable
Inputs
(Level 3) 		Netting and
Cash
Collateral 		December 31, 2021
  (In thousands)
Assets:
Financial instruments $ —  $ 141,552  $ —  $ —  $ 141,552 
Debt and equity securities
Registered investment companies 31,805  —  —  —  31,805 
Bond mutual funds 34,100  —  —  —  34,100 
Bonds (2)
—  35,792  —  —  35,792 
Money market funds —  5,064  —  —  5,064 
Total debt and equity securities 65,905  40,856  —  —  106,761 
Total assets $ 65,905  $ 182,408  $ —  $ —  $ 248,313 
Liabilities:
Financial instruments $ —  $ 21,634  $ —  $ —  $ 21,634 

Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)(1)
Significant
Other
Unobservable
Inputs
(Level 3) 		Netting and
Cash
Collateral 		September 30, 2021
  (In thousands)
Assets:
Financial instruments $ —  $ 230,686  $ —  $ —  $ 230,686 
Debt and equity securities
Registered investment companies 35,175  —  —  —  35,175 
Bond mutual funds 34,298  —  —  —  34,298 
Bonds (2)
—  35,655  —  —  35,655 
Money market funds —  2,943  —  —  2,943 
Total debt and equity securities 69,473  38,598  —  —  108,071 
Total assets $ 69,473  $ 269,284  $ —  $ —  $ 338,757 
Liabilities:
Financial instruments $ —  $ 5,269  $ —  $ —  $ 5,269 
 
(1)Our Level 2 measurements consist of over-the-counter options and swaps, which are valued using a market-based approach in which observable market prices are adjusted for criteria specific to each instrument, such as the strike price, notional amount or basis differences, municipal and corporate bonds, which are valued based on the most recent available quoted market prices and money market funds that are valued at cost.
(2)Our investments in bonds are considered available-for-sale debt securities in accordance with current accounting guidance.
Debt and equity securities are comprised of our available-for-sale debt securities and our equity securities. As described in Note 2 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021, we evaluate the performance of our available-for-sale debt securities on an investment by investment basis for impairment, taking into consideration the investment’s purpose, volatility, current returns and any intent to sell the security. As of December 31, 2021, no allowance for credit losses was recorded for our available-for-sale debt securities. At December 31, 2021 and September 30, 2021, the amortized cost of our available-for-sale debt securities was $35.8 million and $35.6 million. At December 31, 2021, we maintained investments in bonds that have contractual maturity dates ranging from January 2022 through November 2024.
Other Fair Value Measures
Our long-term debt is recorded at carrying value. The fair value of our long-term debt, excluding finance leases, is determined using third party market value quotations, which are considered Level 1 fair value measurements for debt
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instruments with a recent, observable trade or Level 2 fair value measurements for debt instruments where fair value is determined using the most recent available quoted market price. The carrying value of our finance leases materially approximates fair value. The following table presents the carrying value and fair value of our long-term debt, excluding finance leases, debt issuance costs and original issue premium or discount, as of December 31, 2021 and September 30, 2021:
  December 31, 2021 September 30, 2021
  (In thousands)
Carrying Amount $ 7,960,000  $ 7,360,000 
Fair Value $ 8,653,665  $ 8,086,136 
14.    Concentration of Credit Risk
Information regarding our concentration of credit risk is disclosed in Note 17 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. During the three months ended December 31, 2021, there were no material changes in our concentration of credit risk.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of Atmos Energy Corporation

Results of Review of Interim Financial Statements
We have reviewed the accompanying condensed consolidated balance sheet of Atmos Energy Corporation (the Company) as of December 31, 2021, the related condensed consolidated statements of comprehensive income and cash flows for the three months ended December 31, 2021 and 2020, and the related notes (collectively referred to as the "condensed consolidated interim financial statements"). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements for them to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of September 30, 2021, the related consolidated statements of comprehensive income, shareholders’ equity, and cash flows for the year then ended, and the related notes (not presented herein); and in our report dated November 12, 2021, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of September 30, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
These financial statements are the responsibility of the Company's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/    ERNST & YOUNG LLP
Dallas, Texas
February 8, 2022
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION
The following discussion should be read in conjunction with the condensed consolidated financial statements in this Quarterly Report on Form 10-Q and Management’s Discussion and Analysis in our Annual Report on Form 10-K for the year ended September 30, 2021.
Cautionary Statement for the Purposes of the Safe Harbor under the Private Securities Litigation Reform Act of 1995
The statements contained in this Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this Report are forward-looking statements made in good faith by us and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. When used in this Report, or any other of our documents or oral presentations, the words “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “goal”, “intend”, “objective”, “plan”, “projection”, “seek”, “strategy” or similar words are intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the statements relating to our strategy, operations, markets, services, rates, recovery of costs, availability of gas supply and other factors. These risks and uncertainties include the following: federal, state and local regulatory and political trends and decisions, including the impact of rate proceedings before various state regulatory commissions; increased federal regulatory oversight and potential penalties; possible increased federal, state and local regulation of the safety of our operations; the impact of greenhouse gas emissions or other legislation or regulations intended to address climate change; possible significant costs and liabilities resulting from pipeline integrity and other similar programs and related repairs; the inherent hazards and risks involved in distributing, transporting and storing natural gas; the availability and accessibility of contracted gas supplies, interstate pipeline and/or storage services; increased competition from energy suppliers and alternative forms of energy; adverse weather conditions; the impact of climate change; the inability to continue to hire, train and retain operational, technical and managerial personnel; increased dependence on technology that may hinder the Company's business if such technologies fail; the threat of cyber-attacks or acts of cyber-terrorism that could disrupt our business operations and information technology systems or result in the loss or exposure of confidential or sensitive customer, employee or Company information; natural disasters, terrorist activities or other events and other risks and uncertainties discussed herein, all of which are difficult to predict and many of which are beyond our control; the capital-intensive nature of our business; our ability to continue to access the credit and capital markets to execute our business strategy; market risks beyond our control affecting our risk management activities, including commodity price volatility, counterparty performance or creditworthiness and interest rate risk; the concentration of our operations in Texas; the impact of adverse economic conditions on our customers; changes in the availability and price of natural gas; increased costs of providing health care benefits, along with pension and postretirement health care benefits and increased funding requirements; and the outbreak of COVID-19 and its impact on business and economic conditions. Accordingly, while we believe these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. Further, we undertake no obligation to update or revise any of our forward-looking statements whether as a result of new information, future events or otherwise.
OVERVIEW
Atmos Energy and our subsidiaries are engaged in the regulated natural gas distribution and pipeline and storage businesses. We distribute natural gas through sales and transportation arrangements to over three million residential, commercial, public authority and industrial customers throughout our six distribution divisions, which at December 31, 2021 covered service areas located in eight states. In addition, we transport natural gas for others through our distribution and pipeline systems.

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.
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CRITICAL ACCOUNTING ESTIMATES AND POLICIES
Our condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States. Preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosures of contingent assets and liabilities. We based our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. On an ongoing basis, we evaluate our estimates, including those related to the allowance for doubtful accounts, legal and environmental accruals, insurance accruals, pension and postretirement obligations, deferred income taxes and the valuation of goodwill and other long-lived assets. Actual results may differ from such estimates.
Our critical accounting policies used in the preparation of our consolidated financial statements are described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021 and include the following:
•Regulation
•Unbilled revenue
•Pension and other postretirement plans
•Impairment assessments
Our critical accounting policies are reviewed periodically by the Audit Committee of our Board of Directors. There were no significant changes to these critical accounting policies during the three months ended December 31, 2021.
RESULTS OF OPERATIONS

Executive Summary
Atmos Energy strives to operate our businesses safely and reliably while delivering superior shareholder value. Our commitment to modernizing our natural gas distribution and transmission systems requires a significant level of capital spending. We have the ability to begin recovering a significant portion of these investments timely through rate designs and mechanisms that reduce or eliminate regulatory lag and separate the recovery of our approved rate from customer usage patterns. The execution of our capital spending program, the ability to recover these investments timely and our ability to access the capital markets to satisfy our financing needs are the primary drivers that affect our financial performance.
During the three months ended December 31, 2021, we recorded net income of $249.2 million, or $1.86 per diluted share, compared to net income of $217.7 million, or $1.71 per diluted share for the three months ended December 31, 2020.
The 14.5 percent year-over-year increase in net income largely reflects positive rate outcomes driven by safety and reliability spending and customer growth in our distribution segment, offset by higher spending on certain operating and maintenance expenses in both our segments due to the timing of certain activities.
During the three months ended December 31, 2021, we implemented ratemaking regulatory actions which resulted in an increase in annual operating income of $24.9 million. Excluding the impact of the refund of excess deferred income taxes resulting from previously enacted tax reform legislation, our total rate outcomes were $68.5 million for the three months ended December 31, 2021. Additionally, as of December 31, 2021, we had ratemaking efforts in progress seeking a total increase in annual operating income of $22.0 million.
Capital expenditures for the three months ended December 31, 2021 were $684.2 million. Over 85 percent was invested to improve the safety and reliability of our distribution and transportation systems, with a significant portion of this investment incurred under regulatory mechanisms that reduce lag to six months or less.
During the three months ended December 31, 2021, we completed approximately $862 million of long-term debt and equity financing. As of December 31, 2021, our equity capitalization was 51.0 percent. Excluding the $2.2 billion of incremental financing issued in conjunction with Winter Storm Uri, our equity capitalization was 59.0 percent. As of December 31, 2021, we had approximately $3.1 billion in total liquidity, including cash and cash equivalents and funds available through equity forward sales agreements.
As a result of our sustained financial performance, our Board of Directors increased the quarterly dividend by 8.8 percent for fiscal 2022.
The following discusses the results of operations for each of our operating segments.
Distribution Segment
The distribution segment is primarily comprised of our regulated natural gas distribution and related sales operations in eight states. The primary factors that impact the results of this segment are our ability to earn our authorized rates of return, competitive factors in the energy industry and economic conditions in our service areas.
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Our ability to earn our authorized rates of return is based primarily on our ability to improve the rate design in our various ratemaking jurisdictions to minimize regulatory lag and, ultimately, separate the recovery of our approved rates from customer usage patterns. Improving rate design is a long-term process and is further complicated by the fact that we operate in multiple rate jurisdictions. Under our current rate design, approximately 70 percent of our distribution segment revenues are earned through the first six months of the fiscal year. Additionally, we currently recover approximately 60 percent of our distribution segment revenue, excluding gas costs, through the base customer charge, which partially separates the recovery of our approved rate from customer usage patterns.
Seasonal weather patterns can also affect our distribution operations. However, the effect of weather that is above or below normal is substantially offset through weather normalization adjustments, known as WNA, which have been approved by state regulatory commissions for approximately 96 percent of our residential and commercial revenues in the following states for the following time periods:
Kansas, West Texas October — May
Tennessee October — April
Kentucky, Mississippi, Mid-Tex November — April
Louisiana December — March
Virginia January — December
Our distribution operations are also affected by the cost of natural gas. We are generally able to pass the cost of gas through to our customers without markup under purchased gas cost adjustment mechanisms; therefore, increases in the cost of gas are offset by a corresponding increase in revenues. Revenues in our Texas and Mississippi service areas include franchise fees and gross receipts taxes, which are calculated as a percentage of revenue (inclusive of gas costs). Therefore, the amount of these taxes included in revenues is influenced by the cost of gas and the level of gas sales volumes. We record the associated tax expense as a component of taxes, other than income.
The cost of gas typically does not have a direct impact on our operating income because these costs are recovered through our purchased gas cost adjustment mechanisms.  However, higher gas costs may adversely impact our accounts receivable collections, resulting in higher bad debt expense.  This risk is currently mitigated by rate design that allows us to collect from our customers the gas cost portion of our bad debt expense on approximately 79 percent of our residential and commercial revenues.  Additionally, higher gas costs may require us to increase borrowings under our credit facilities, resulting in higher interest expense.   Finally, higher gas costs, as well as competitive factors in the industry and general economic conditions may cause customers to conserve or, in the case of industrial consumers, to use alternative energy sources.
Three Months Ended December 31, 2021 compared with Three Months Ended December 31, 2020
Financial and operational highlights for our distribution segment for the three months ended December 31, 2021 and 2020 are presented below.
  Three Months Ended December 31
  2021 2020 Change
  (In thousands, unless otherwise noted)
Operating revenues $ 972,422  $ 876,650  $ 95,772 
Purchased gas cost 496,799  411,072  85,727 
Operating expenses 285,126  256,024  29,102 
Operating income 190,497  209,554  (19,057)
Other non-operating income 1,916  835  1,081 
Interest charges 8,548  10,712  (2,164)
Income before income taxes 183,865  199,677  (15,812)
Income tax expense 4,294  45,985  (41,691)
Net income $ 179,571  $ 153,692  $ 25,879 
Consolidated distribution sales volumes — MMcf
69,545  88,861  (19,316)
Consolidated distribution transportation volumes — MMcf
38,597  39,609  (1,012)
Total consolidated distribution throughput — MMcf
108,142  128,470  (20,328)
Consolidated distribution average cost of gas per Mcf sold $ 7.14  $ 4.63  $ 2.51 
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Operating income for our distribution segment decreased nine percent. During the three months ended December 31, 2021 we refunded $28.8 million more excess deferred taxes to customers in the distribution segment compared to the prior year, which reduced operating income year over year and reduced the interim effective income tax rate for this segment to 2.3% compared to 23.0% in the prior year. Additional key drivers for the change in operating income include:
•a $32.2 million increase in rate adjustments, primarily in our Mid-Tex, Louisiana and Kentucky/Mid-States Divisions.
•a $4.3 million increase in customers, primarily in our Mid-Tex Division.
Partially offset by:
•a $10.1 million increase in depreciation expense and property taxes associated with increased capital investments.
•a $3.2 million increase in pipeline maintenance and related activities.
•an $11.3 million increase in other operation and maintenance expense, primarily due to employee related costs, insurance premiums and other administrative costs.
The following table shows our operating income by distribution division, in order of total rate base, for the three months ended December 31, 2021 and 2020. The presentation of our distribution operating income is included for financial reporting purposes and may not be appropriate for ratemaking purposes.
  Three Months Ended December 31
  2021 2020 Change
  (In thousands)
Mid-Tex $ 106,358  $ 102,320  $ 4,038 
Kentucky/Mid-States 25,538  24,106  1,432 
Louisiana 21,154  23,119  (1,965)
West Texas 20,874  20,047  827 
Mississippi 24,700  24,634  66 
Colorado-Kansas 2,815  13,230  (10,415)
Other (10,942) 2,098  (13,040)
Total $ 190,497  $ 209,554  $ (19,057)
Recent Ratemaking Developments
The amounts described in the following sections represent the operating income that was requested or received in each rate filing, which may not necessarily reflect the stated amount referenced in the final order, as certain operating costs may have changed as a result of a commission’s or other governmental authority’s final ruling. During the first three months of fiscal 2022, we implemented regulatory proceedings, resulting in a $24.9 million increase in annual operating income as summarized below. Ratemaking outcomes include the refund of excess deferred income taxes resulting from previously enacted tax reform legislation and do not reflect the true economic benefit of the outcomes because they do not include the corresponding income tax benefit. Excluding these amounts, our total rate outcomes for ratemaking activities for the three months ended December 31, 2021 were $68.5 million.
Rate Action Annual Increase in
Operating Income
  (In thousands)
Annual formula rate mechanisms $ 24,881 
Rate case filings — 
Other rate activity — 
$ 24,881 








26

The following ratemaking efforts seeking $22.0 million in increased annual operating income were in progress as of December 31, 2021:
Division Rate Action Jurisdiction Operating Income (Loss) Requested
(In thousands)
Colorado-Kansas Infrastructure Mechanism
Colorado (1)
$ 2,610 
Colorado-Kansas Infrastructure Mechanism
Kansas (2)
1,829 
Colorado-Kansas Ad Valorem
Kansas (3)
(370)
Kentucky/Mid-States Rate Case
Kentucky (4)
14,394 
Kentucky/Mid-States Infrastructure Mechanism Kentucky 3,506 
$ 21,969 
(1)    The Colorado Public Utilities Commission approved the SSIR implementation at their December 22, 2021 meeting with rates effective January 1, 2022.
(2)    The Kansas Corporation Commission approved the GSRS filing on January 27, 2022, with rates effective February 1, 2022..
(3)    The Kansas Corporation Commission approved the Ad Valorem filing on January 13, 2022, with rates effective February 1, 2022.
(4)    Included with the Kentucky rate case filing is the $3.5 million filing related to the annual Kentucky pipeline replacement program.

Annual Formula Rate Mechanisms
As an instrument to reduce regulatory lag, formula rate mechanisms allow us to refresh our rates on an annual basis without filing a formal rate case. However, these filings still involve discovery by the appropriate regulatory authorities prior to the final determination of rates under these mechanisms. We currently have formula rate mechanisms in our Louisiana, Mississippi and Tennessee operations and in substantially all the service areas in our Texas divisions. Additionally, we have specific infrastructure programs in substantially all of our distribution divisions with tariffs in place to permit the investment associated with these programs to have their surcharge rate adjusted annually to recover approved capital costs incurred in a prior test-year period. The following table summarizes our annual formula rate mechanisms by state:
Annual Formula Rate Mechanisms
State Infrastructure Programs Formula Rate Mechanisms
Colorado System Safety and Integrity Rider (SSIR) —
Kansas Gas System Reliability Surcharge (GSRS), System Integrity Program (SIP) —
Kentucky Pipeline Replacement Program (PRP) —
Louisiana (1) Rate Stabilization Clause (RSC)
Mississippi System Integrity Rider (SIR) Stable Rate Filing (SRF)
Tennessee (1) Annual Rate Mechanism (ARM)
Texas Gas Reliability Infrastructure Program (GRIP), (1) Dallas Annual Rate Review (DARR), Rate Review Mechanism (RRM)
Virginia Steps to Advance Virginia Energy (SAVE) —

(1)    Infrastructure mechanisms in Texas, Louisiana and Tennessee allow for the deferral of all expenses associated with capital expenditures incurred pursuant to these rules, which primarily consists of interest, depreciation and other taxes (Texas only), until the next rate proceeding (rate case or annual rate filing), at which time investment and costs would be recoverable through base rates.


27

The following annual formula rate mechanisms were approved during the three months ended December 31, 2021:
Division Jurisdiction Test Year
Ended 		Increase (Decrease) in
Annual
Operating
Income 		Effective
Date
    (In thousands)
2022 Filings:
Mid-Tex
Mid-Tex Cities RRM (1)
12/31/2020 $ 21,673  12/01/2021
West Texas
West Texas Cities RRM (1)
12/31/2020 151  12/01/2021
Mississippi
Mississippi - SIR (1)
10/31/2022 8,354  11/01/2021
Mississippi
Mississippi - SRF (1)
10/31/2022 (5,624) 11/01/2021
Kentucky/Mid-States Virginia - SAVE 09/30/2022 327  10/01/2021
Total 2022 Filings $ 24,881 
(1)    The rate change for the RRM and Mississippi filings include $33.8 million for the Mid-Tex Cities RRM filing, $3.3 million for the West Texas Cities RRM filing, $2.1 million for the Mississippi SIR filing and $4.3 million for the Mississippi SRF filing related to the refund of excess deferred income taxes that will be offset by lower income tax expense. Excluding the amounts related to the refund of excess deferred taxes, our total rate outcomes for our formulate rate mechanisms for the three months ended December 31, 2021 were $68.5 million.
Rate Case Filings
A rate case is a formal request from Atmos Energy to a regulatory authority to increase rates that are charged to our customers. Rate cases may also be initiated when the regulatory authorities request us to justify our rates. This process is referred to as a “show cause” action. Adequate rates are intended to provide for recovery of the Company’s costs as well as a fair rate of return and ensure that we continue to deliver reliable, reasonably priced natural gas service safely to our customers. There was no rate case activity completed during the three months ended December 31, 2021.
Other Ratemaking Activity
The Company had no other ratemaking activity during the three months ended December 31, 2021.

Pipeline and Storage Segment
Our pipeline and storage segment consists of the pipeline and storage operations of our Atmos Pipeline–Texas Division (APT) and our natural gas transmission operations in Louisiana. APT is one of the largest intrastate pipeline operations in Texas with a heavy concentration in the established natural gas producing areas of central, northern and eastern Texas, extending into or near the major producing areas of the Barnett Shale, the Texas Gulf Coast and the Permian Basin of West Texas. APT provides transportation and storage services to our Mid-Tex Division, other third-party local distribution companies, industrial and electric generation customers, as well as marketers and producers. Over 80 percent of this segment’s revenues are derived from these services. As part of its pipeline operations, APT owns and operates five underground storage facilities in Texas.
Our natural gas transmission operations in Louisiana are comprised of a 21-mile pipeline located in the New Orleans, Louisiana area that is primarily used to aggregate gas supply for our distribution division in Louisiana under a long-term contract and, on a more limited basis, to third parties. The demand fee charged to our Louisiana distribution division for these services is subject to regulatory approval by the Louisiana Public Service Commission. We also manage two asset management plans, which have been approved by applicable state regulatory commissions. Generally, these asset management plans require us to share with our distribution customers a significant portion of the cost savings earned from these arrangements.
Our pipeline and storage segment is impacted by seasonal weather patterns, competitive factors in the energy industry and economic conditions in our Texas and Louisiana service areas. Natural gas prices do not directly impact the results of this segment as revenues are derived from the transportation and storage of natural gas. However, natural gas prices and demand for natural gas could influence the level of drilling activity in the supply areas that we serve, which may influence the level of throughput we may be able to transport on our pipelines. Further, natural gas price differences between the various hubs that we serve in Texas could influence the volumes of gas transported for shippers through our Texas pipeline system and rates for such transportation.
The results of APT are also significantly impacted by the natural gas requirements of its local distribution company customers. Additionally, its operations may be impacted by the timing of when costs and expenses are incurred and when these costs and expenses are recovered through its tariffs.
28


Three Months Ended December 31, 2021 compared with Three Months Ended December 31, 2020
Financial and operational highlights for our pipeline and storage segment for the three months ended December 31, 2021 and 2020 are presented below.
  Three Months Ended December 31
  2021 2020 Change
  (In thousands, unless otherwise noted)
Mid-Tex / Affiliate transportation revenue $ 127,323  $ 125,261  $ 2,062 
Third-party transportation revenue 30,625  30,821  (196)
Other revenue 4,970  3,631  1,339 
Total operating revenues 162,918  159,713  3,205 
Total purchased gas cost (3,411) (1,244) (2,167)
Operating expenses 80,965  71,671  9,294 
Operating income 85,364  89,286  (3,922)
Other non-operating income 6,786  5,237  1,549 
Interest charges 11,303  11,298  5 
Income before income taxes 80,847  83,225  (2,378)
Income tax expense 11,209  19,239  (8,030)
Net income $ 69,638  $ 63,986  $ 5,652 
Gross pipeline transportation volumes — MMcf 181,468  204,865  (23,397)
Consolidated pipeline transportation volumes — MMcf 136,067  144,587  (8,520)
Operating income for our pipeline and storage segment decreased four percent. During the three months ended December 31, 2021, we refunded $10.0 million in excess deferred taxes to pipeline and storage customers, which reduced operating income year over year and reduced the interim effective income tax rate for this segment to 13.9% compared to 23.1% in the prior year. Additional drivers for the change in operating income include:
•a $14.5 million increase due to rate adjustments from the GRIP filing approved in May 2021. The increase in rates was driven by increased safety and reliability spending.
Partially offset by:
•a $5.8 million increase in system maintenance expense primarily due to spending on hydro testing.
•a $2.5 million net decrease in APT's thru-system activities primarily associated with the tightening of regional spreads driven by increased competing takeaway capacity in the Permian Basin.
•a $3.1 million increase in depreciation expense and property taxes associated with increased capital investments.
Liquidity and Capital Resources
The liquidity required to fund our working capital, capital expenditures and other cash needs is provided from a combination of internally generated cash flows and external debt and equity financing. Additionally, we have a $1.5 billion commercial paper program and four committed revolving credit facilities with $2.5 billion in total availability from third-party lenders. The commercial paper program and credit facilities provide cost-effective, short-term financing until it can be replaced with a balance of long-term debt and equity financing that achieves the Company's desired capital structure with an equity-to-total-capitalization ratio between 50% and 60%, inclusive of long-term and short-term debt. Additionally, we have various uncommitted trade credit lines with our gas suppliers that we utilize to purchase natural gas on a monthly basis.
We have a shelf registration statement on file with the Securities and Exchange Commission (SEC) that allows us to issue up to $5.0 billion in common stock and/or debt securities. As of the date of this report, $3.2 billion of securities were available for issuance under the shelf registration statement, which expires June 29, 2024.
We also have an at-the-market (ATM) equity sales program that allows us to issue and sell shares of our common stock up to an aggregate offering price of $1.0 billion (including shares of common stock that may be sold pursuant to forward sale agreements entered into in connection with the ATM equity sales program), which expires June 29, 2024. As of December 31, 2021, $499.7 million of equity was available for issuance under this ATM equity sales program. Additionally, as of
29

December 31, 2021, we had $294.7 million in proceeds from executed forward sale agreements available through June 30, 2023. Additional details are summarized in Note 7 to the unaudited condensed consolidated financial statements.
The liquidity provided by these sources is expected to be sufficient to fund the Company's working capital needs and capital expenditure program for the remainder of fiscal year 2022. Additionally, we expect to continue to be able to obtain financing upon reasonable terms as necessary.
The following table presents our capitalization inclusive of short-term debt and the current portion of long-term debt as of December 31, 2021, September 30, 2021 and December 31, 2020:
 
  December 31, 2021 September 30, 2021 December 31, 2020
  (In thousands, except percentages)
Short-term debt $ —  —  % $ —  —  % $ —  —  %
Long-term debt(1)
7,956,554  49.0  % 7,330,657  48.1  % 5,125,033  41.5  %
Shareholders’ equity(2)
8,289,545  51.0  % 7,906,889  51.9  % 7,213,156  58.5  %
Total $ 16,246,099  100.0  % $ 15,237,546  100.0  % $ 12,338,189  100.0  %
(1)     Inclusive of our finance leases.
(2)     Excluding the $2.2 billion of incremental financing issued to pay for the purchased gas costs incurred during Winter Storm Uri, our equity capitalization ratio was 59.0% at December 31, 2021 and 60.6% at September 30, 2021 .

Cash Flows
Our internally generated funds may change in the future due to a number of factors, some of which we cannot control. These factors include regulatory changes, the price for our services, demand for such products and services, margin requirements resulting from significant changes in commodity prices, operational risks and other factors.
Cash flows from operating, investing and financing activities for the three months ended December 31, 2021 and 2020 are presented below.
  Three Months Ended December 31
  2021 2020 Change
  (In thousands)
Total cash provided by (used in)
Operating activities $ 61,824  $ 157,069  $ (95,245)
Investing activities (679,748) (453,592) (226,156)
Financing activities 765,206  733,314  31,892 
Change in cash and cash equivalents 147,282  436,791  (289,509)
Cash and cash equivalents at beginning of period 116,723  20,808  95,915 
Cash and cash equivalents at end of period $ 264,005  $ 457,599  $ (193,594)
Cash flows from operating activities
For the three months ended December 31, 2021, we generated cash flow from operating activities of $61.8 million compared with $157.1 million for the three months ended December 31, 2020. The $95.2 million decrease in operating cash flows reflects working capital changes, primarily due to the timing of gas cost recoveries under our purchase gas cost mechanisms partially offset by the positive effects of successful rate case outcomes achieved in fiscal 2021.
Cash flows from investing activities
Our capital expenditures are primarily used to improve the safety and reliability of our distribution and transmission system through pipeline replacement and system modernization and to enhance and expand our system to meet customer needs. Over the last three fiscal years, approximately 88 percent of our capital spending has been committed to improving the safety and reliability of our system.
For the three months ended December 31, 2021, cash used for investing activities was $679.7 million compared to $453.6 million for the three months ended December 31, 2020. Capital spending increased $227.4 million, primarily as a result of timing of spending in our distribution and pipeline and storage segments.
Cash flows from financing activities
30

For the three months ended December 31, 2021, our financing activities provided $765.2 million of cash compared with $733.3 million of cash provided by financing activities in the prior-year period.
In the three months ended December 31, 2021, we received $851.7 million in net proceeds from the issuance of long-term debt and equity. We completed a public offering of $600 million of 2.85% senior notes due 2052 and received net proceeds from the offering, after the underwriting discount and offering expenses, of $589.8 million. Additionally, during the three months ended December 31, 2021, we settled 2,689,327 shares that had been sold on a forward basis for net proceeds of $261.9 million. The net proceeds were used primarily to support capital spending and for other general corporate purposes.
Cash dividends increased due to an 8.8 percent increase in our dividend rate and an increase in shares outstanding.
In the three months ended December 31, 2020, we received $808.3 million in net proceeds from the issuance of long-term debt and equity. The net proceeds were used primarily to support capital spending and for other general corporate purposes. Cash dividends increased due to an 8.7 percent increase in our dividend rate and an increase in shares outstanding.
The following table summarizes our share issuances for the three months ended December 31, 2021 and 2020:
  Three Months Ended December 31
  2021 2020
Shares issued:
Direct Stock Purchase Plan 20,983  19,918 
1998 Long-Term Incentive Plan 275,212  144,366 
Retirement Savings Plan and Trust 19,805  20,708 
Equity Issuance 2,689,327  2,085,492 
Total shares issued 3,005,327  2,270,484 
Credit Ratings
Our credit ratings directly affect our ability to obtain short-term and long-term financing, in addition to the cost of such financing. In determining our credit ratings, the rating agencies consider a number of quantitative factors, including but not limited to, debt to total capitalization, operating cash flow relative to outstanding debt, operating cash flow coverage of interest and pension liabilities. In addition, the rating agencies consider qualitative factors such as consistency of our earnings over time, the quality of our management and business strategy, the risks associated with our businesses and the regulatory structures that govern our rates in the states where we operate.
Our debt is rated by two rating agencies: Standard & Poor’s Corporation (S&P) and Moody’s Investors Service (Moody’s). As of December 31, 2021, our outlook and current debt ratings, which are all considered investment grade are as follows:
S&P   Moody’s
Senior unsecured long-term debt A-    A1
Short-term debt A-2    P-1
Outlook Negative Negative
A significant degradation in our operating performance or a significant reduction in our liquidity caused by more limited access to the private and public credit markets as a result of deteriorating global or national financial and credit conditions could trigger a negative change in our ratings outlook or even a reduction in our credit ratings by the two credit rating agencies. This would mean more limited access to the private and public credit markets and an increase in the costs of such borrowings.
A credit rating is not a recommendation to buy, sell or hold securities. The highest investment grade credit rating is AAA for S&P and Aaa for Moody’s. The lowest investment grade credit rating is BBB- for S&P and Baa3 for Moody’s. Our credit ratings may be revised or withdrawn at any time by the rating agencies, and each rating should be evaluated independently of any other rating. There can be no assurance that a rating will remain in effect for any given period of time or that a rating will not be lowered, or withdrawn entirely, by a rating agency if, in its judgment, circumstances so warrant.
Debt Covenants
We were in compliance with all of our debt covenants as of December 31, 2021. Our debt covenants are described in greater detail in Note 6 to the unaudited condensed consolidated financial statements.
31

Contractual Obligations and Commercial Commitments
Except as noted in Note 10 to the unaudited condensed consolidated financial statements, there were no significant changes in our contractual obligations and commercial commitments during the three months ended December 31, 2021.
Risk Management Activities
In our distribution and pipeline and storage segments, we use a combination of physical storage, fixed physical contracts and fixed financial contracts to reduce our exposure to unusually large winter-period gas price increases. Additionally, we manage interest rate risk by periodically entering into financial instruments to effectively fix the Treasury yield component of the interest cost associated with anticipated financings.
The following table shows the components of the change in fair value of our financial instruments for the three months ended December 31, 2021 and 2020:
  Three Months Ended December 31
  2021 2020
  (In thousands)
Fair value of contracts at beginning of period $ 225,417  $ 78,663 
Contracts realized/settled 22,601  1,332 
Fair value of new contracts 1,184  87 
Other changes in value (129,284) 68,473 
Fair value of contracts at end of period 119,918  148,555 
Netting of cash collateral —  — 
Cash collateral and fair value of contracts at period end $ 119,918  $ 148,555 
The fair value of our financial instruments at December 31, 2021 is presented below by time period and fair value source:
  Fair Value of Contracts at December 31, 2021
Maturity in Years  
Source of Fair Value Less
Than 1 		1-3 4-5 Greater
Than 5 		Total
Fair
Value
  (In thousands)
Prices actively quoted $ 67,198  $ 60,088  $ (7,368) $ —  $ 119,918 
Prices based on models and other valuation methods —  —  —  —  — 
Total Fair Value $ 67,198  $ 60,088  $ (7,368) $ —  $ 119,918 
32

OPERATING STATISTICS AND OTHER INFORMATION
The following tables present certain operating statistics for our distribution and pipeline and storage segments for the three months ended December 31, 2021 and 2020.
Distribution Sales and Statistical Data
  Three Months Ended December 31
  2021 2020
METERS IN SERVICE, end of period
Residential 3,120,873  3,077,786 
Commercial 282,155  281,840 
Industrial 1,653  1,673 
Public authority and other 8,248  8,323 
Total meters 3,412,929  3,369,622 
INVENTORY STORAGE BALANCE — Bcf 70.5  58.1 
SALES VOLUMES — MMcf (1)
Gas sales volumes
Residential 37,834  53,530 
Commercial 23,008  26,687 
Industrial 7,073  6,651 
Public authority and other 1,630  1,993 
Total gas sales volumes 69,545  88,861 
Transportation volumes 40,315  41,285 
Total throughput 109,860  130,146 
Pipeline and Storage Operations Sales and Statistical Data
  Three Months Ended December 31
  2021 2020
CUSTOMERS, end of period
Industrial 95  92 
Other 202  217 
Total 297  309 
INVENTORY STORAGE BALANCE — Bcf 1.4  1.3 
PIPELINE TRANSPORTATION VOLUMES — MMcf (1)
181,468  204,865 
Note to preceding tables:

(1)Sales and transportation volumes reflect segment operations, including intercompany sales and transportation amounts.
RECENT ACCOUNTING DEVELOPMENTS
Recent accounting developments and their impact on our financial position, results of operations and cash flows are described in Note 2 to the unaudited condensed consolidated financial statements.
 

33

Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information regarding our quantitative and qualitative disclosures about market risk are disclosed in Item 7A in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. During the three months ended December 31, 2021, there were no material changes in our quantitative and qualitative disclosures about market risk.

Item 4. Controls and Procedures
Management’s Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act). Based on this evaluation, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2021 to provide reasonable assurance that information required to be disclosed by us, including our consolidated entities, in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by the SEC’s rules and forms, including a reasonable level of assurance that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
    
    We did not make any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first quarter of the fiscal year ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

34

PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
During the three months ended December 31, 2021, except as noted in Note 10 to the unaudited condensed consolidated financial statements, there were no material changes in the status of the litigation and other matters that were disclosed in Note 13 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. We continue to believe that the final outcome of such litigation and other matters or claims will not have a material adverse effect on our financial condition, results of operations or cash flows.
Item 1A.
Risk Factors
There were no material changes from the risk factors disclosed under the heading “Risk Factors” in Item 1A in the Annual Report on Form 10-K for the year ended September 30, 2021.
Item 6. Exhibits
The following exhibits are filed as part of this Quarterly Report.
 
35

Exhibit
Number 		   Description Page Number or
Incorporation by
Reference to
3.1 Restated Articles of Incorporation of Atmos Energy Corporation - Texas (As Amended Effective February 3, 2010)
3.2 Restated Articles of Incorporation of Atmos Energy Corporation - Virginia (As Amended Effective February 3, 2010)
3.3 Amended and Restated Bylaws of Atmos Energy Corporation (as of February 5, 2019)
4.1(a) Officers' Certificate dated October 1, 2021
4.1(b) Global Security for the 2.850% Senior Notes due 2052
4.1(c) Global Security for the 2.850% Senior Notes due 2052
4.1(d) Officers' Certificate dated January 14, 2022
4.1(e) Global Security for the 2.625% Senior Notes due 2029
10.1
15   
31   
32   
101.INS    XBRL Instance Document - the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH    Inline XBRL Taxonomy Extension Schema
101.CAL    Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF    Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB    Inline XBRL Taxonomy Extension Labels Linkbase
101.PRE    Inline XBRL Taxonomy Extension Presentation Linkbase
104 Cover Page Interactive Data File - the cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document

* These certifications, which were made pursuant to 18 U.S.C. Section 1350 by the Company’s Chief Executive Officer and Chief Financial Officer, furnished as Exhibit 32 to this Quarterly Report on Form 10-Q, will not be deemed to be filed with the Commission or incorporated by reference into any filing by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates such certifications by reference.

36

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
ATMOS ENERGY CORPORATION
               (Registrant)
 
By: /s/    CHRISTOPHER T. FORSYTHE
 
Christopher T. Forsythe
Senior Vice President and Chief Financial Officer
(Duly authorized signatory)
Date: February 8, 2022
37

Exhibit 10.1




ATMOS ENERGY CORPORATION
ACCOUNT BALANCE
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN


AS AMENDED AND RESTATED
EFFECTIVE AS OF JANUARY 1, 2022






TABLE OF CONTENTS
Article

ARTICLE I Purpose and Effective Date
Section 1.1. Purpose
Section 1.2. Effective Date
ARTICLE II Definitions and Construction
Section 2.1. Definitions
Section 2.2. Construction
Section 2.3. Governing Law
ARTICLE III Eligibility and Participation
Section 3.1. Employees Eligible to Participate
ARTICLE IV Assets Used for Benefits
Section 4.1. Amounts Provided by the Employer
Section 4.2. Funding
ARTICLE V Supplemental Benefits
Section 5.1. Eligibility for Supplemental Benefit
Section 5.2. Amount of Supplemental Benefit
Section 5.3. Form of Payment of Supplemental Benefit
Section 5.4. Time of Payment of Supplemental Benefit
ARTICLE VI Administration
Section 6.1. Plan Administration
Section 6.2. Powers of Plan Administrator
Section 6.3. Annual Statements
ARTICLE VII Miscellaneous Provisions
Section 7.1. Amendment or Termination of the Plan
Section 7.2. No Guaranteed Rights
Section 7.3. Nonalienation of Benefits
Section 7.4. Liability
Section 7.5. Participation Agreement
Section 7.6. Successors to the Employer
Section 7.7. Tax Withholding
Section 7.8. Code Section 409A

Exhibit A Participation Agreement




ARTICLE I

Purpose and Effective Date

Section 1.1. Purpose: The purpose of the Atmos Energy Corporation Account Balance Supplemental Executive Retirement Plan (the “Plan”) is to provide a supplemental retirement income benefit to certain executive employees of Atmos Energy Corporation. The Plan is intended to be unfunded and maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees so as to be exempt from the requirements of Parts 2, 3 and 4 of Title I of ERISA, and will be so interpreted.
Section 1.2. Effective Date: The Plan was originally adopted effective as of August 5, 2009. The Plan was most recently amended and restated effective as of January 1, 2016 (the “Prior Plan”). By this instrument, the Plan is being amended and restated, effective as of January 1, 2022 to clarify the Annual Pay Credits attributable to Performance Awards for a Participant who ceases active participation in the Plan during a Plan Year, provide continued Annual Pay Credits for Participants who cease active participation in the Plan during a Plan Year due to death, Disability or a Change in Control, and clarify the duration of Annual Pay Credits for Management Committee members. The Plan as amended and restated will apply generally to any Participant in the Prior Plan who did not terminate employment before January 1, 2022, as well as any Eligible Employee who becomes a Participant in the Plan on or after January 1, 2022. Except as otherwise provided herein, any Eligible Employee who was a participant in the Prior Plan and who terminated employment before January 1, 2022, will be entitled to those benefits, if any, provided by the Prior Plan.


ARTICLE II
Definitions and Construction
Section 2.1. Definitions: The following words and phrases used in the Plan will have the respective meanings set forth below, unless the context in which they are used clearly indicates a contrary meaning:
(a) Account: The notional account described in, and maintained for each Participant pursuant to Section 5.2(a) of the Plan.
(b) Account Balance: The notional amount in a Participant’s Account pursuant to Section 5.2(d) of the Plan.
(c) Annual Pay Credit: The notional amounts credited to a Participant’s Account pursuant to Section 5.2(b) of the Plan.
(d) Beneficiary: The Participant’s designated Beneficiary. In the event that no Beneficiary has been effectively designated, the Participant’s surviving spouse will be deemed the designated Beneficiary, or if the Participant has no surviving spouse, his children, if any, per stirpes, will be deemed the designated Beneficiary, and if none, the estate of the Participant will be deemed the designated Beneficiary.
(e) Board of Directors: The Board of Directors of the Employer.
(f) Cause: The termination of employment by the Employer upon the happening of either (i) or (ii) as follows:
(i) The willful and continued failure by the Participant to substantially perform his duties with the Employer (other than any such failure resulting from the Participant’s incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Participant by the Employer that specifically identifies the manner in which the Employer believes that the Participant has not substantially performed his duties.
(ii) The Participant’s willful engagement in conduct that is demonstrably and materially injurious to the Employer, monetarily or otherwise.
For purposes of this Section, no act, or failure to act, on the Participant’s part will be deemed “willful” if done, or omitted to be done, by the Participant in good faith and with a reasonable belief that the action or omission was in the best interests of the Employer. Notwithstanding the foregoing, the Participant will not be deemed to have been terminated for Cause unless and until there will have been delivered to the Participant a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board of Directors of the Employer at a meeting of such Board of Directors called and held for such purpose (after reasonable notice to the Participant and an opportunity for the Participant, together with the Participant’s counsel, to be heard before the Board of Directors), finding that in the good faith opinion of the Board of Directors that the Participant was guilty of conduct set forth above in subparagraph (i) or (ii) and specifying the particulars thereof in detail.





(g) Change in Control:
(i) A “Change in Control” of the Employer occurs upon a change in the Employer’s ownership, its effective control or the ownership of a substantial portion of its assets, as follows:

(A) Change in Ownership. A change in ownership of the Employer occurs on the date that any “Person” (as defined in subparagraph (ii) below), other than (1) the Employer or any of its subsidiaries, (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Employer or any of its Affiliates, (3) an underwriter temporarily holding stock pursuant to an offering of such stock, or (4) a corporation owned, directly or indirectly, by the shareholders of the Employer in substantially the same proportions as their ownership of the Employer’s stock, acquires ownership of the Employer’s stock that, together with stock held by such Person, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the Employer’s stock. However, if any Person is considered to own already more than fifty percent (50%) of the total fair market value or total voting power of the Employer’s stock, the acquisition of additional stock by the same Person is not considered to be a Change of Control. In addition, if any Person has effective control of the Employer through ownership of thirty percent (30%) or more of the total voting power of the Employer’s stock, as discussed in subparagraph (i)(B) below, the acquisition of additional control of the Employer by the same Person is not considered to cause a Change in Control pursuant to this Section 2.1(g)(i)(A); or

(B) Change in Effective Control. Even though the Employer may not have undergone a change in ownership under Section 2.1(g)(i)(A) above, a change in the effective control of the Employer occurs on either of the following dates:

(1) the date that any Person acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such Person) ownership of the Employer’s stock possessing thirty percent (30%) or more of the total voting power of the Employer’s stock. However, if any Person owns thirty percent (30%) or more of the total voting power of the Employer’s stock, the acquisition of additional control of the Employer by the same Person is not considered to cause a Change in Control pursuant to this Section 2.1(g)(i)(B)(1); or

(2) the date during any twelve (12)-month period when a majority of members of the Board is replaced by directors whose appointment or election is not endorsed by a majority of the Board before the date of the appointment or election; provided, however, that any such director will not be considered to be endorsed by the Board if his initial assumption of office occurs as


a result of an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(C) Change in Ownership of Substantial Portion of Assets. A change in the ownership of a substantial portion of the Employer’s assets occurs on the date that a Person acquires (or has acquired during the twelve (12)-month period ending on the date of the most recent acquisition by such Person) assets of the Employer, that have a total gross fair market value equal to at least forty percent (40%) of the total gross fair market value of all of the Employer’s assets immediately before such acquisition or acquisitions. However, there is no Change in Control when there is such a transfer to an entity that is controlled by the shareholders of the Employer immediately after the transfer, through a transfer to (1) a shareholder of the Employer (immediately before the asset transfer) in exchange for or with respect to the Employer’s stock; (2) an entity, at least fifty percent (50%) of the total value or voting power of the stock of which is owned, directly or indirectly, by the Employer; (3) a Person that owns directly or indirectly, at least fifty percent (50%) of the total value or voting power of the Employer’s outstanding stock; or (4) an entity, at least fifty percent (50%) of the total value or voting power of the stock of which is owned by a Person that owns, directly or indirectly, at least fifty percent (50%) of the total value or voting power of the Employer’s outstanding stock.

(ii) For purposes of Section 2.1(g)(i) above and, in the case of Section 2.1(g)(ii)(B) below, and Exhibit A,

(A) “Person” has the meaning given in section 7701(a)(1) of the Code. Person will include more than one Person acting as a group as defined by the Final Treasury Regulations issued under section 409A of the Code.

(B) “Affiliate” has the meaning set forth in Rule 12b‑2 promulgated under section 12 of the Securities Exchange Act of 1934, as amended.

(iii) The provisions of this Section 2.1(g) will be interpreted in accordance with the requirements of the Final Treasury Regulations under Code section 409A, it being the intent of the parties that this Section 2.1(g) will be in compliance with the requirements of said Code section and said Regulations.

(h) Code: The Internal Revenue Code of 1986, as amended, or any successor thereto.
(i) Compensation: The total of all amounts paid to a Participant by an Employer for personal services as reported on the Participant's Federal Income Tax Withholding Statement (Form W-2) plus any amounts excluded from such reporting pursuant to Code sections 125, 401(k) and 132(f)(4), but excluding (A) expense reimbursements, (B) any contributions made under any plan of deferred compensation or any welfare benefit plan (other than amounts contributed pursuant to such sections


125 and 401(k)), (C) other special payments of any kind that are unrelated to the Participant's activities associated with or in lieu of his performance of services for the Employer, and (D) any bonus payments or awards which are not Performance Awards.
(j) Covered Employment: The total period of employment with the Employer, beginning on the date specified in the Participation Agreement, while a Participant in the Plan.
(k) Disability: A disability (i) as determined under The Atmos Energy Corporation Group Long-Term Disability Plan, as in effect from time to time, or (ii) a determination of total disability for purposes of eligibility for Social Security disability benefits, if such Group Long-Term Disability Plan is not then in existence. If a Participant’s Disability is based on his eligibility for Social Security disability benefits, such Participant will not be treated as having suffered a Disability unless he provides the Plan Administrator, or a committee which may be established pursuant to Section 6.1, with written proof, in a form and within the time determined by the Plan Administrator, or such committee, if applicable, to be satisfactory, that such Participant is receiving Social Security disability benefits.
(l) Disability Termination: A Separation from Service due to a Disability.
(m) Eligible Employee: An employee of the Employer who is either a (i) corporate officer of the Employer selected by the Board of Directors, in its discretion, to participate in the Plan, or (ii) the president of an operating division of the Employer or any other employee of the Employer selected by the Board of Directors in its discretion to participate in the Plan.
(n) Employer: Atmos Energy Corporation.
(o) ERISA: The Employee Retirement Income Security Act of 1974, as amended.
(p) Interest Credit(s): The interest amounts credited to a Participant’s Account pursuant to Section 5.2(c) of the Plan.
(q) Involuntary Employment Termination: The termination of a Participant’s participation in the Plan due to the involuntary termination of the Participant’s employment by the Employer, provided said termination constitutes a Separation from Service and such termination is for any reason other than Cause.
(r) Involuntary Participation Termination: The termination of a Participant’s participation in the Plan by the Employer for any reason other than Cause before the Participant’s Separation from Service with the Employer as provided for in Section 5.1 of the Plan.
(s) Participant: An Eligible Employee of the Employer who meets the requirements to participate in the Plan in accordance with the provisions of Article III hereof.
(t) Participation Agreement: The agreement between the Employer and a Participant described in Section 7.5 of the Plan, executed in the form attached hereto as Exhibit A, or in such other form as the Board of Directors, in its sole discretion, may establish from time to time.
(u) Performance Award: Any amount paid, or authorized to be paid, to a Participant while a Participant in the Plan pursuant to any annual performance bonus or incentive compensation plan adopted or established by the Employer, or, upon and after


a Participant’s Involuntary Employment Termination, Involuntary Participation Termination, death, Disability Termination or Change in Control, any amount paid, or authorized to be paid, to a Participant as a performance related cash bonus in addition to his base cash compensation. Notwithstanding the foregoing, Performance Awards will not include any Employer stock award granted under the 1998 Long-Term Incentive Plan or other incentive plan, other than a stock award which is elected by a participant under an incentive plan to be received in lieu of cash.
(v) Plan: The Atmos Energy Corporation Account Balance Supplemental Executive Retirement Plan, as set forth herein and as amended from time to time.
(w) Plan Administrator: The Board of Directors.
(x) Plan Year: Each twelve (12) month period beginning on January 1 and ending on December 31.
(y) Retirement or Retire: Participant’s voluntary termination from employment with the Employer that constitutes a Separation from Service after he has completed at least three (3) years of Covered Employment and has attained age 55.

(z) Separation from Service: A Participant’s termination from employment with the Employer that constitutes a “separation from service” as defined in section 1.409A-1(h) of the Final Treasury Regulations under Code section 409A, or any successor provision thereto.

(aa) Supplemental Benefit: A Participant’s benefit provided under the Plan in accordance with Section 5.2.
(bb) Additional Terms. The expressions listed below are defined in the Sections noted below:
“Affiliate” Section 2.1(g)(ii)(B)
“Applicable Percent” Section 5.2(b)(i)(B)
“Management Committee” Section 5.2(b)(i)(A)
“Mid-Year Terminated Employee” Section 5.2(b)(ii)
“Ongoing Employee” Section 5.2(b)(i)
“Original Payment Date” Section 5.4(c)
“Person” Section 2.1(g)(ii)(A)
“Specified Employee” Section 5.4(c)
Section 2.2. Construction: The masculine gender, whenever appearing in the Plan, will be deemed to include the feminine gender; the singular may include the plural; and vice versa, unless the context clearly indicates to the contrary.
Section 2.3. Governing Law: The Plan will be construed in accordance with and governed by the laws of the State of Texas, except to the extent otherwise preempted by ERISA or any other Federal law.



ARTICLE III
Eligibility and Participation
Section 3.1. Employees Eligible to Participate: Each Eligible Employee who becomes a Participant will participate in the Plan, provided he enters into a Participation Agreement in accordance with Section 7.5. Any Participant who ceases being an Eligible Employee during his employment with the Employer will immediately cease active participation in the Plan and will no longer be a Participant, except as otherwise set forth herein.
ARTICLE IV
Assets Used for Benefits
Section 4.1. Amounts Provided by the Employer: Benefits payable under the Plan will constitute general obligations of the Employer in accordance with the terms of the Plan.
Section 4.2. Funding: Immediately upon a Change in Control, the Employer will contribute to a trust or other funding arrangement that is subject to the claims of the Employer’s general unsecured creditors an amount necessary to fund one hundred percent (100%) of the then‑value of the Account Balance for each Participant, regardless of whether any such Participant is then eligible to Retire or to receive a Supplemental Benefit. The Employer will review the funding status of such trust or other funding arrangement required to be established under this Section 4.2 on an annual basis and will make such contributions thereto as may be required to maintain the value of the assets thereof at no less than one hundred percent (100%) of the then-value of all such Account Balances.
ARTICLE V
Supplemental Benefits
Section 5.1. Eligibility for Supplemental Benefit:
(a) Upon Retirement or an Involuntary Employment Termination or Involuntary Participation Termination with Three (3) or More Years of Covered Employment that is not due to a Change in Control, Disability Termination or Death: A Participant who Retires or suffers an Involuntary Employment Termination or an Involuntary Participation Termination after such Participant has at least three (3) years of Covered Employment and none of such events


are due to a Change in Control, Disability Termination or death will be entitled to receive a Supplemental Benefit equal to his or her Account Balance as of the date of such Retirement, Involuntary Employment Termination or Involuntary Participation Termination increased by any Annual Pay Credits pursuant to Section 5.2(b)(ii)(A) of the Plan and any Interest Credits Pursuant to Section 5.2(c) of the Plan. Payment of such Supplemental Benefit will be made at the time provided for in Section 5.4 of the Plan.

(b) Upon an Involuntary Employment Termination or Involuntary Participation Termination due to a Change in Control, Disability Termination or Death: A Participant who suffers an Involuntary Employment Termination or Involuntary Participation Termination regardless of the Participant’s years of Covered Employment that is due to a Change in Control, Disability Termination or death will be entitled to receive a Supplemental Benefit equal to his or her Account Balance as of the date of such Involuntary Employment Termination or Involuntary Participation Termination increased by any Annual Pay Credits pursuant to Section 5.2(b)(ii)(B) of the Plan and any Interest Credits Pursuant to Section 5.2(c) of the Plan. Payment of such Supplemental Benefit will be made at the time provided for in Section 5.4 of the Plan.

(c) Upon Voluntary Termination, Termination For Cause or Involuntary Participation Termination with Less Than Three (3) Years of Covered Employment or that is not due to a Change in Control, Disability Termination or Death: A Participant who (i) voluntarily resigns from employment with the Employer before being eligible for Retirement, (ii) is terminated from employment with the Employer for Cause or (iii) suffers an Involuntary Participation Termination before such Participant has at least three (3) years of Covered Employment or is not due to a Change in Control, Disability Termination or death will not be entitled to receive a Supplemental Benefit.

Section 5.2. Amount of Supplemental Benefit: A Participant’s Supplemental Benefit will be equal to his Account Balance determined as follows:
(a) Establishment of Account: An Account will be established and maintained for each Participant. A Participant’s Account will be credited with Annual Pay Credits in accordance with Section 5.2(b) of the Plan and Interest Credits in accordance with Section 5.2(c) of the Plan.

(b) Annual Pay Credits: An Annual Pay Credit will be credited to the Account of each Participant during the Plan Year, as follows:

(i) Ongoing Participants. An Annual Pay Credit will be credited to the Account of each Participant who is employed by the Employer and actively participating in the Plan on the last day of the Plan Year (an “Ongoing Participant”), equal to (A) and/or (B) below, as applicable:

(A) Non-Management Committee Members. The Annual Pay Credit for an Ongoing Participant who is not a member of the Company’s Management Committee (“Management Committee”) will be ten percent


(10%) of the Participant’s Compensation and Performance Award for such Plan Year.

(B) Management Committee Members. The Annual Pay Credit for an Ongoing Participant who becomes a member of the Management Committee on or after January 1, 2016, for each Plan Year during which such Participant is a member of the Management Committee, will equal such percentage of the Participant’s Compensation and Performance Award for such Plan Year as determined by the Board of Directors (the “Applicable Percent”) before the beginning of such Plan Year; provided; however, that such Annual Pay Credits will cease during the Plan Year following the Plan Year in which the Participant reaches age sixty-two (62).

The Annual Pay Credit for an Ongoing Participant will be made as of the last day of the Plan Year.

(ii) Participants who Terminate Participation Mid-Year. An Annual Pay Credit will be credited to the Account of each Participant who terminates participation in the Plan during the Plan Year for one of the reasons specified below (i.e., who has not voluntary resigned from employment with the Employer before being eligible for Retirement, has not been terminated from employment with the Employer for Cause or has not suffered an Involuntary Participation Termination before such Participant has at least three (3) years of Covered Employment or is not due to a Change in Control) (a “Mid-Year Terminated Participant”) equal to (A) or (B) below, as applicable:

(A) Retirement or Involuntary Employment Termination or Involuntary Participation Termination with Three (3) or More Years of Covered Employment not due to a Change in Control, Disability Termination or Death. In the case of a Mid-Year Terminated Participant who terminates participation in the Plan during a Plan Year due to Retirement or an Involuntary Employment Termination or an Involuntary Participation Termination after such Participant has three (3) or more years of Covered Employment and none of such events are due to a Change in Control, Disability Termination or death, the following amounts will be credited to the Participant’s Account:

(1) Non-Management Committee Members. For each Mid-Year Terminated Participant who is a not a Management Committee Member as of the day of the Participant’s termination of participation in the Plan, an Annual Pay Credit will be credited to the Participant’s Account as of the date of such termination of participation equal to ten percent (10%) of the Participant’s Compensation for the Plan Year before such termination and ten percent (10%) of the Participant’s target Performance Award.

(2) Management Committee Members. For each Mid-Year Terminated Participant who is a Management Committee Member as of the day of the Participant’s termination of participation in the Plan, an Annual Pay Credit will be credited to the Participant’s Account as of the date of such termination of participation equal to the Applicable Percent of the Participant’s Compensation for the Plan Year


before such termination and the Applicable Percent of the Participant’s pro rata target Performance Award for such Plan Year.

For purposes of this Section 5.2(b)(ii)(A), the pro rata portion of the Participant’s target Performance Award will equal the full target Performance Award for the fiscal year of the Employer ending in the Plan Year in which the Participant terminated participation in the Plan multiplied by a fraction the numerator of which is the number of months the Plan Year in which the Participant actively participated in the Plan and the denominator of which is twelve (12).

(B) Involuntary Employment Termination or Involuntary Participation Termination due to a Change in Control, Disability Termination or Death. In the case of a Mid-Year Terminated Participant who incurs an Involuntary Employment Termination or Involuntary Participation Termination regardless of the Participant’s number of years of Covered Employment during a Plan Year that is due to a Change in Control, Disability Termination or Death, the following amounts will be credited to the Participant’s Account:

(1) Non-Management Committee Members. For a Mid-Year Terminated Participant who is not a Management Committee Member, the sum of the following amounts:

(a) With respect to each Plan Year before the Participant attains age fifty-five (55), an Annual Pay Credit will be credited to the Account of the Participant equal to ten percent (10%) of the Participant’s Compensation in effect for the Plan Year in which he or she terminated participation in the Plan and ten percent (10%) of the Participant’s target Performance Award for the fiscal year of the Employer ending in the Plan Year in which the Participant terminated participation in the Plan.

(b) With respect to the Plan Year in which the Participant will attain age fifty-five (55), an Annual Pay Credit will be credited to the Account of the Participant equal to ten percent (10%) of the Participant’s Compensation as in effect for the Plan Year in which the Participant terminated participation in the Plan for the portion of the Plan Year before he or she will attain age fifty-five (55) and ten percent (10%) of the pro rata portion of the Participant’s target Performance Award.

(2) Management Committee Members. For a Mid-Year Terminated Participant who is a Management Committee Member, the sum of the following amounts:

(a) With respect to each Plan Year before the Participant attains age sixty-two (62), an Annual Pay Credit will be credited to the Account of the Participant equal to the Applicable Percentage of the Participant’s Compensation in effect for the Plan


Year in which he or she terminated participation in the Plan and the Applicable Percent of the Participant’s target Performance Award for the fiscal year of the Employer ending in the Plan Year in which the Participant terminated participation in the Plan.

(b) With respect to the Plan Year in which the Participant will attain age sixty-two (62), an Annual Pay Credit will be credited to the Account of the Participant equal to the Applicable Percent of the Participant’s Compensation in effect for the Plan Year in which the Participant terminated participation in the Plan for the portion of the Plan Year before he or she will attain age sixty-two (62) and the Applicable Percent of the pro rata portion of the Participant’s target Performance Award.

For purposes of this Section 5.2(b)(ii)(B), the pro rata portion of the Participant’s target Performance Award will equal the full target Performance Award for the fiscal year of the Employer ending in the Plan Year in which the Participant terminated participation in the Plan multiplied by a fraction the numerator of which is the number of months in the Plan Year before the Participant attains age fifty-five (55) or sixty-two (62), as applicable, and the denominator of which is twelve (12)).

The Annual Pay Credits provided by this Section 5.2(b)(ii)(B) will be determined for all Plan Years for which they are due and made as of the date the Participant terminated participation in the Plan.

(c) Interest Credits:

(i) Timing of Interest Credits: Interest Credits based on the Participant’s Account Balance as of the first day of each Plan Year will be added to each Participant’s Account as of the last day of the Plan Year, before the crediting of any Annual Pay Credit for such Plan Year. Interest Credits will be added to a Participant’s Account for each Plan Year in which such Participant’s Account has an Account Balance. However, for any Plan Year in which a Plan distribution is made to a Participant, interest will be credited on the Participant’s Account Balance as of the first day of the Plan Year for the period from the first day of such Plan Year to the date of such Participant’s Separation from Service.

(ii) Rate of Interest Credits: The rate of interest used to determine the Interest Credit will be the same rate utilized for “interest credits” under the Employer’s Pension Account Plan; currently that rate is the thirty (30) -year Treasury securities rate in effect for the November preceding the first day of the Plan Year (as published by the Commissioner of Internal Revenue) subject to a minimum interest rate of four and sixty-nine one hundredths of one percent (4.69%) and a maximum interest rate of seven percent (7%) for any twelve (12)-month Plan Year.

(d) Account Balance: A Participant’s Account Balance will be equal to the sum of the Annual Pay Credits and the Interest Credits.



Section 5.3. Form of Payment of Supplemental Benefit: Each Participant will be paid his Supplemental Benefit in a lump sum payment equal to his Account Balance at the time of payment.
Section 5.4. Time of Payment of Supplemental Benefit:
(a) Upon Retirement: Except as otherwise provided in Section 5.4(c) below, the Supplemental Benefit of a Participant who Retires at any time will be paid as soon as administratively possible, but in no event later than ninety (90) days following such Participant’s date of Retirement.

(b) Upon Involuntary Employment Termination, Involuntary Participation Termination, Disability Termination or Death: The Supplemental Benefit of a Participant who suffers an Involuntary Employment Termination, an Involuntary Participation Termination pursuant to Section 5.1(c) of the Plan, or a Disability Termination will, except as otherwise provided in Section 5.4(c) of the Plan, be paid as soon as administratively possible following such Participant’s Separation from Service, but in no event later than ninety (90) days following the date on which such Participant incurs a Separation from Service with the Employer. The Supplemental Benefit of a Participant who dies will be paid to such Participant’s Beneficiary as soon as administratively possible, but in no event later than ninety (90) days following the date on which such Participant dies.

(c) Six Months Delay in Payment: Notwithstanding the foregoing provisions of this Section 5.4 and Section 7.1(b), if a Participant who is entitled to payments under said applicable Section is a “specified employee,” as defined in § 1.409A-1(i) of the Final Regulations under Code section 409A, and the Supplemental Benefit would otherwise be paid to the Participant (the “Original Payment Date”) before a date which is at least six (6) months following the date of the Participant’s Separation from Service, the Supplemental Benefit will be paid on the date which is six (6) months following the date of the Participant’s Separation from Service (or, if earlier, the date of death of the Participant, in which case payment will be made to such Participant’s Beneficiary as soon as administratively possible, but in no event date later than ninety (90) days following the date on which such Participant dies), provided the six (6) months delay requirements of Code section 409A otherwise apply to the payments under said applicable Section. The lump sum payments which are delayed as provided in this Section 5.4(c) will accrue interest for the period from the Original Payment Date until the date such payment is actually made. Said interest will be based upon the rate of interest used to determine the Interest Credits pursuant to Section 5.2 (c)(ii) as in effect for the Plan Year in which occurs the date of such Participant’s Separation from Service.







ARTICLE VI
Administration
Section 6.1. Plan Administration: The Plan will be administered by the Board of Directors. The Board of Directors may, in its sole discretion, establish a committee to carry out the day-to-day administration of the Plan and may delegate any portion of its authority and responsibilities as Plan Administrator to such committee.
Section 6.2. Powers of Plan Administrator: The Plan Administrator will have the discretionary power and authority to interpret and administer the Plan according to its terms, including the power to construe and interpret the Plan, to supply any omissions therein, to reconcile and correct any errors or inconsistencies, to decide any questions in the administration and application of the Plan, and to make equitable adjustments for any mistakes or errors in the administration and application of the Plan. The Plan Administrator will have such additional powers as may be necessary to discharge its duties and responsibilities hereunder.
Section 6.3. Annual Statements: As soon as practicable after the end of each Plan Year, the Employer will deliver to each Participant a statement containing the Participant’s Account Balance as of the end of such Plan Year, and the aggregate current value of the assets, if any, held in a trust or other funding arrangement for any Participant for whom assets are required to be held in trust.
ARTICLE VII
Miscellaneous Provisions
Section 7.1. Amendment or Termination of the Plan:
(a) In General: Subject to the remaining provisions of this Section 7.1, the Board of Directors may by resolution, in its absolute discretion, from time to time, amend, suspend, or terminate any or all of the provisions of the Plan; provided, however, that no amendment, suspension, or termination may apply so as to decrease the payment to any Participant or Beneficiary of any benefit under the Plan that he accrued before the effective date of such amendment, suspension, or termination, nor will such amendment, suspension, or termination change the time and form of payment to be made under the provisions of the Plan as in effect before such amendment, suspension, or termination, except as otherwise permitted or required under Code section 409A and the Treasury regulations issued thereunder.

(b) Termination of the Plan: If the Board of Directors terminates all or any portion of the Plan and such termination adversely affects a Participant’s


Supplemental Benefit, such Participant will be entitled to receive a Supplemental Benefit, whether or not such Participant has at least three (3) years of Covered Employment, whether or not such Participant’s Separation from Service is involuntary (other than a Separation from Service for Cause) or voluntary and, if voluntary, whether or not such Participant has attained age fifty-five (55). The Supplemental Benefit payable to a Participant upon termination of the Plan will be a lump sum payment equal to the Account Balance determined at the time of payment as provided in this Section 7.1(b). Except as otherwise provided in Section 5.4(c), the Supplemental Benefit determined under this Section 7.1(b) will be paid as soon as administratively possible following a Participant’s Separation from Service, but in no event later than ninety (90) days following the date on which such Participant incurs a Separation from Service.


(c) Amendments to Comply with Internal Revenue Code Section 409A: Notwithstanding any of the foregoing provisions of this Section 7.1 or any of the terms and conditions of the Participation Agreement to the contrary, the Board of Directors reserves the right, in its sole discretion, to amend the Plan and/or any Participation Agreement in any manner it deems necessary or desirable in order to comply with or otherwise address issues resulting from Code section 409A.

Section 7.2. No Guaranteed Rights: Nothing contained in the Plan will be construed as a contract of employment between the Employer and any employee, as a right of any employee to be continued either in the employment of the Employer or as a Participant in the Plan, or as a limitation of the right of the Employer either to discharge any of its employees, with or without Cause, or to terminate any Participant’s participation in the Plan.
Section 7.3. Nonalienation of Benefits: To the extent permitted by law, benefits payable under the Plan will not, without the Plan Administrator’s consent, be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary. Any unauthorized attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or otherwise dispose of any right to benefits payable hereunder will be void. No part of the assets of the Employer will be subject to seizure by legal process resulting from any attempt by creditors of or claimants against any Participant or Beneficiary or any person claiming under or through the foregoing to attach his interest under the Plan.
Section 7.4. Liability: No director, officer, or employee of the Employer will be liable for any act or action, whether of commission or omission, taken by any other director, officer, employee, or agent of the Employer under the terms of the Plan or, except in circumstances


involving his bad faith, for anything done or omitted to be done by him under the terms of the Plan.
Section 7.5. Participation Agreement: Each Participant will enter into a Participation Agreement as a condition to his participation in the Plan. In the event of a conflict between the Plan and the Participation Agreement, the Plan will control.
Section 7.6. Successors to the Employer: Any successor to the Employer hereunder, which successor continues or acquires any of the business of the Employer, will be bound by the terms of the Plan in the same manner and to the same extent as the Employer.
Section 7.7. Tax Withholding: The Employer will have the right to deduct from all amounts paid in cash or other form under the Plan any Federal, state, local or other taxes required by law to be withheld.
Section 7.8. Code Section 409A: The Plan will be interpreted in accordance with the requirements of the Final Treasury Regulations under section 409A of Code, it being the intent of the parties that the Plan will be in compliance with the requirements of said Code section and said Regulations.
IN WITNESS WHEREOF, and as conclusive evidence of its adoption of this Account Balance Supplemental Executive Retirement Plan, the Employer has caused the Amended and Restated Plan to be duly executed on this ________ day of _________, 2021, to be effective as of the date set forth in Section 1.2 above.
ATMOS ENERGY CORPORATION


By: /s/ KEVIN AKERS
Kevin Akers
President and Chief Executive Officer





EXHIBIT A
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT (“Agreement”) is entered into as of the ____day of _________, 20___ by and between ATMOS ENERGY CORPORATION, a Texas and Virginia corporation (the “Employer”), and __________________________ (“Participant”).
W I T N E S S E T H:
WHEREAS, the Employer has adopted the Atmos Energy Corporation Account Balance Supplemental Executive Retirement Plan (the “Plan”), pursuant to which certain executive or management employees of the Employer may receive supplemental benefits; and
WHEREAS, in accordance with Section 7.5 of the Plan, the Employer and Participant have agreed to execute and enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Agreement. The Employer hereby agrees to provide to Participant the benefits described in the Plan, pursuant to the terms and conditions set forth in the Plan, a copy of which has been provided to Participant and is incorporated by reference into this Agreement. Participant acknowledges he or she has received a copy of the Plan. In the event of a conflict between the Plan and the Participation Agreement, the Plan will control.

2. Calculation of Supplemental Benefit. For purposes of all applicable provisions of the Plan, Covered Employment for the Participant commenced ___________.

3. Delay in Payment of Supplemental Benefit For Certain Participants. If a Participant’s Supplemental Benefit is payable on or before a date which is at least six (6) months following the date of Participant’s Separation from Service, the Supplemental Benefit will be paid to such Participant as provided for in the Plan on the date which is six (6) months following the date of Participant’s Separation from Service, provided such six (6) month delay is required by Code section 409A.

4. Confidential Information.

(a) Participant will not disclose or use at any time, either during employment or thereafter, any Confidential Information (as defined below) of which Participant is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by Participant’s performance in good faith of duties assigned to Participant by the Employer. Participant will take all appropriate steps to safeguard Confidential Information and to protect it against disclosure, misuse, espionage, loss and theft. Participant will deliver to the Employer at the termination of employment or at any time the Employer may request all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof, including electronic copies) relating to the


Confidential Information, work product or the business of the Employer or any of its Affiliates which he may then possess or have under his control.

(b) As used in this Agreement, the term “Confidential Information” means information that is not generally known to the public and that is used, developed or obtained by the Employer in connection with its business, including but not limited to (i) information, observations and data obtained by Participant while employed by the Employer and its predecessors (including information, observations and data obtained before the date of this Agreement), concerning the business or affairs of the Employer, (ii) products or services, (iii) fees, costs and pricing structures, (iv) designs, (v) analyses, (vi) drawings, photographs and reports, (vii) computer software, including operating systems, applications and program listings, (viii) flow charts, manuals and documentation, (ix) data bases, (x) accounting and business methods, (xi) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (xii) customers and clients and customer or client lists (including names of contact persons, purchasing patterns or preferences, past purchase and sale history and other information), (xiii) other copyrightable works, (xiv) all production methods, processes, technology and trade secrets, (xv) business strategies, acquisition plans and candidates, financial or other performance data and personnel lists and data, and (xvi) all similar and related information in whatever form. Confidential Information will not include any information that has been published in a form generally available to the public, or has become otherwise generally known by the public (in each case, through no fault of Participant) before the date Participant proposes to disclose or use such information. Participant will not disclose Confidential Information unless it is required to be disclosed by law, regulation or an order of a court or other governmental entity. In the event that an action is initiated pursuant to which Participant may become legally compelled to disclose all or any portion of the Confidential Information, he will provide the Employer with prompt notice thereof, so that the Employer may seek a protective order or other appropriate remedy. In the event that such protective order or other remedy is not obtained, Participant will furnish only that portion of the Confidential Information which is legally required and will exercise his best efforts to obtain reliable assurances that confidential treatment will be afforded such portion of the Confidential Information. Confidential Information will not be deemed to have been published merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.

5. No Guarantee of Employment or Participation. Nothing contained in this Agreement or the Plan will be construed as a contract of employment between the Employer and Participant, or as a right of Participant to be continued either in the employment of the Employer or as a Participant in the Plan, or as a limitation of the right of the Employer either to discharge Participant with or without cause or to terminate the Participant’s participation in the Plan.
6. Capitalized Terms. Each capitalized term used in this Agreement that is not otherwise defined herein will have the same meaning attributed to it in the Plan.
7. Governing Law. This Agreement will be construed and enforced in accordance with the laws of the State of Texas to the extent not otherwise preempted by ERISA.


8. Code Section 409A: The Plan is intended to comply with Code section 409A and the Plan will be interpreted in a manner intended to comply with Code section 409A.
IN WITNESS WHEREOF, the parties hereto have executed this Participation Agreement as of the date first written above.
PARTICIPANT: ATMOS ENERGY CORPORATION:

By:



Exhibit 15

Board of Directors and Shareholders of Atmos Energy Corporation
Atmos Energy Corporation

We are aware of the incorporation by reference in the Registration Statements (Form S-3, No. 33-37869; Form S-3, No. 33-58220; Form S-3D/A, No. 33-70212; Form S-3, No. 33-56915; Form S-3/A, No. 333-03339; Form S-3/A, No. 333-32475; Form S-3, No. 333-95525; Form S-3D, No. 333-113603; Form S-3D, No. 333-155666; Form S-3D, No. 333-208317; Form S-3ASR, No. 333-236369; Form S-3ASR, No. 333-257504; Form S-4, No. 333-13429; Form S-8, No. 33-57687; Form S-8, No. 33-57695; Form S-8, No. 333-32343; Form S-8, No. 333-46337; Form S-8, No. 333-73143; Form S-8, No. 333-73145; Form S-8, No. 333-63738; Form S-8, No. 333-88832; Form S-8, No. 333-116367; Form S-8, No. 333-138209; Form S-8, No. 333-145817; Form S-8, No. 333-155570; Form S-8, No. 333-166639; Form S-8, No. 333-177593; Form S-8, No. 333-199301; Form S-8, No. 333-210461; and Form S-8, No. 333-217739) of Atmos Energy Corporation and in the related Prospectuses of our report dated February 8, 2022, relating to the unaudited condensed consolidated interim financial statements of Atmos Energy Corporation, which are included in its Form 10-Q for the quarter ended December 31, 2021.
/s/ ERNST & YOUNG LLP
Dallas, Texas
February 8, 2022



EXHIBIT 31
RULE 13a-14(a)/15d-14(a) CERTIFICATIONS
I, John K. Akers, certify that:
1.    I have reviewed this Quarterly Report on Form 10-Q of Atmos Energy Corporation;
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.    The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and     
5.    The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions):
(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 8, 2022
 
/s/ JOHN K. AKERS  
John K. Akers  
President and  
Chief Executive Officer  



I, Christopher T. Forsythe, certify that:
1.    I have reviewed this Quarterly Report on Form 10-Q of Atmos Energy Corporation;
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.    The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and     
5.    The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing equivalent functions):
(a)    All significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 8, 2022
 
/s/ CHRISTOPHER T. FORSYTHE  
Christopher T. Forsythe  
Senior Vice President and  
Chief Financial Officer  



Exhibit 32
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Quarterly Report of Atmos Energy Corporation (the “Company”) on Form 10-Q for the first quarter of the fiscal year ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John K. Akers, President and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1)    The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
February 8, 2022
 
/s/ JOHN K. AKERS  
John K. Akers  
President and  
Chief Executive Officer  
A signed original of this written statement has been provided to Atmos Energy Corporation and will be retained by Atmos Energy Corporation and furnished to the Securities and Exchange Commission or its staff upon request.



CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Quarterly Report of Atmos Energy Corporation (the “Company”) on Form 10-Q for the first quarter of the fiscal year ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher T. Forsythe, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1)    The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
February 8, 2022
 
/s/ CHRISTOPHER T. FORSYTHE  
Christopher T. Forsythe  
Senior Vice President and  
Chief Financial Officer  
A signed original of this written statement has been provided to Atmos Energy Corporation and will be retained by Atmos Energy Corporation and furnished to the Securities and Exchange Commission or its staff upon request.