Document

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 June 30, 2020



☐	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 July 31, 2020.



Class		Shares Outstanding
Common stock	No Par Value	123,354,982

GLOSSARY OF KEY TERMS



Adjusted diluted net income per share	Non-GAAP measure defined as diluted net income per share before the non-cash income tax benefit
Adjusted net income	Non-GAAP measure defined as net income before the non-cash income tax benefit
AEC	Atmos Energy Corporation
AOCI	Accumulated other comprehensive income
ARM	Annual Rate Mechanism
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
PPA	Pension Protection Act of 2006
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
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

PART I. FINANCIAL INFORMATION



Item 1.	Financial Statements

ATMOS ENERGY CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS



	June 30, 2020			September 30, 2019
	(Unaudited)
	(In thousands, except share data)
ASSETS
Property, plant and equipment	$	15,443,224		$	14,180,593
Less accumulated depreciation and amortization	2,562,374			2,392,924
Net property, plant and equipment	12,880,850			11,787,669
Current assets
Cash and cash equivalents	208,064			24,550
Accounts receivable, net	236,466			230,571
Gas stored underground	84,886			130,138
Other current assets	72,743			72,772
Total current assets	602,159			458,031
Goodwill	730,706			730,706
Deferred charges and other assets	657,267			391,213
	$	14,870,982		$	13,367,619
CAPITALIZATION AND LIABILITIES
Shareholders’ equity
Common stock, no par value (stated at $0.005 per share); 200,000,000 shares authorized; issued and outstanding: June 30, 2020 — 123,351,267 shares; September 30, 2019 — 119,338,925 shares	$	617		$	597
Additional paid-in capital	4,100,130			3,712,194
Accumulated other comprehensive loss	(116,727		)	(114,583		)
Retained earnings	2,477,451			2,152,015
Shareholders’ equity	6,461,471			5,750,223
Long-term debt	4,531,341			3,529,452
Total capitalization	10,992,812			9,279,675
Current liabilities
Accounts payable and accrued liabilities	200,116			265,024
Other current liabilities	502,413			479,501
Short-term debt	—			464,915
Current maturities of long-term debt	157			—
Total current liabilities	702,686			1,209,440
Deferred income taxes	1,420,065			1,300,015
Regulatory excess deferred taxes	702,493			705,101
Regulatory cost of removal obligation	458,101			473,172
Deferred credits and other liabilities	594,825			400,216
	$	14,870,982		$	13,367,619

See accompanying notes to condensed consolidated financial statements.

ATMOS ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Three Months Ended June 30
	2020			2019
	(Unaudited) (In thousands, except per share data)
Operating revenues
Distribution segment	$	435,308		$	444,944
Pipeline and storage segment	158,008			149,198
Intersegment eliminations	(100,321		)	(108,404		)
Total operating revenues	492,995			485,738

Purchased gas cost
Distribution segment	126,093			139,518
Pipeline and storage segment	(11		)	(96		)
Intersegment eliminations	(100,010		)	(108,096		)
Total purchased gas cost	26,072			31,326

Operation and maintenance expense	149,460			164,545
Depreciation and amortization expense	107,104			97,700
Taxes, other than income	71,324			69,965
Operating income	139,035			122,202
Other non-operating income	7,235			1,645
Interest charges	19,580			19,592
Income before income taxes	126,690			104,255
Income tax expense	8,899			23,789
Net income	$	117,791		$	80,466
Basic net income per share	$	0.96		$	0.68
Diluted net income per share	$	0.96		$	0.68
Cash dividends per share	$	0.575		$	0.525
Basic weighted average shares outstanding	123,026			118,075
Diluted weighted average shares outstanding	123,032			118,430

Net income	$	117,791		$	80,466
Other comprehensive income (loss), net of tax
Net unrealized holding gains on available-for-sale securities, net of tax of $96 and $27	364			94
Cash flow hedges:
Amortization and unrealized gain (loss) on interest rate agreements, net of tax of $(1,115) and $312	(4,450		)	1,053
Total other comprehensive income (loss)	(4,086		)	1,147
Total comprehensive income	$	113,705		$	81,613

See accompanying notes to condensed consolidated financial statements.

ATMOS ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Nine Months Ended June 30
	2020			2019
	(Unaudited) (In thousands, except per share data)
Operating revenues
Distribution segment	$	2,196,817		$	2,341,668
Pipeline and storage segment	452,421			419,318
Intersegment eliminations	(303,015		)	(302,821		)
Total operating revenues	2,346,223			2,458,165

Purchased gas cost
Distribution segment	942,586			1,147,598
Pipeline and storage segment	290			(544		)
Intersegment eliminations	(302,053		)	(301,887		)
Total purchased gas cost	640,823			845,167

Operation and maintenance expense	449,529			452,572
Depreciation and amortization expense	318,082			290,537
Taxes, other than income	214,535			213,546
Operating income	723,254			656,343
Other non-operating income (expense)	9,133			(1,846		)
Interest charges	68,980			74,390
Income before income taxes	663,407			580,107
Income tax expense	127,297			127,107
Net income	$	536,110		$	453,000
Basic net income per share	$	4.38		$	3.89
Diluted net income per share	$	4.37		$	3.88
Cash dividends per share	$	1.725		$	1.575
Basic weighted average shares outstanding	122,352			116,485
Diluted weighted average shares outstanding	122,463			116,673

Net income	$	536,110		$	453,000
Other comprehensive income (loss), net of tax
Net unrealized holding gains on available-for-sale securities, net of tax of $47 and $56	200			191
Cash flow hedges:
Amortization and unrealized loss on interest rate agreements, net of tax of $(492) and $(7,093)	(2,344		)	(23,997		)
Total other comprehensive loss	(2,144		)	(23,806		)
Total comprehensive income	$	533,966		$	429,194

See accompanying notes to condensed consolidated financial statements.

ATMOS ENERGY CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



	Nine Months Ended June 30
	2020			2019
	(Unaudited) (In thousands)
Cash Flows From Operating Activities
Net income	$	536,110		$	453,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	318,082			290,537
Deferred income taxes	137,996			120,220
One-time income tax benefit	(20,962		)	—
Other	5,935			9,649
Net assets / liabilities from risk management activities	1,295			(1,976		)
Net change in operating assets and liabilities	(82,970		)	(62,502		)
Net cash provided by operating activities	895,486			808,928
Cash Flows From Investing Activities
Capital expenditures	(1,405,673		)	(1,199,199		)
Proceeds from the sale of discontinued operations	—			4,000
Debt and equity securities activities, net	(692		)	(4,041		)
Other, net	6,098			3,839
Net cash used in investing activities	(1,400,267		)	(1,195,401		)
Cash Flows From Financing Activities
Net decrease in short-term debt	(464,915		)	(500,838		)
Net proceeds from equity offering	358,047			593,731
Issuance of common stock through stock purchase and employee retirement plans	14,125			14,128
Proceeds from issuance of long-term debt	999,450			1,045,221
Settlement of interest rate swaps	—			(90,141		)
Repayment of long-term debt	—			(450,000		)
Cash dividends paid	(210,674		)	(181,982		)
Debt issuance costs	(7,738		)	(11,254		)
Net cash provided by financing activities	688,295			418,865
Net increase in cash and cash equivalents	183,514			32,392
Cash and cash equivalents at beginning of period	24,550			13,771
Cash and cash equivalents at end of period	$	208,064		$	46,163

See accompanying notes to condensed consolidated financial statements.

ATMOS ENERGY CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

June 30, 2020

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 June 30, 2020, 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, aside from accounting policy changes noted below, 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, 2019. 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, 2019. Because of seasonal and other factors, the results of operations for the nine-month period ended June 30, 2020 are not indicative of our results of operations for the full 2020 fiscal year, which ends September 30, 2020.

Except as noted below related to recent ratemaking activity and in Note 12 to the unaudited condensed consolidated financial statements regarding new cash flow hedges, 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, 2019.

During the second quarter of fiscal 2020, we completed our annual goodwill impairment assessment. Based on the assessment performed, we determined that our goodwill was not impaired.

Accounting pronouncements adopted in fiscal 2020

In February 2016, the Financial Accounting Standards Board (FASB) issued a comprehensive new leasing standard that requires lessees to recognize a lease liability and a right-of-use (ROU) asset for all leases, including operating leases on its balance sheet. The new standard was effective for us beginning on October 1, 2019. See Note 6 to the unaudited condensed consolidated financial statements for further details regarding our adoption of the new lease standard and the related disclosures.

Accounting pronouncements that will be effective after fiscal 2020

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.

In December 2019, the FASB issued new guidance related to accounting for income taxes which removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocations and calculating income taxes in interim periods. The new standard also adds guidance to reduce complexity in certain areas, such as recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The new standard will be effective for us beginning

on October 1, 2021; early adoption is permitted. We are currently evaluating the potential impact of this new guidance on our financial position, results of operations and cash flows.

In June 2016, the FASB issued new guidance which will require credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model. Under this model, entities will estimate credit losses over the entire contractual term of the instrument from the date of initial recognition of that instrument. In contrast, current U.S. GAAP is based on an incurred loss model that delays recognition of credit losses until it is probable the loss has been incurred. The new guidance also introduces a new impairment recognition model for available-for-sale debt securities that will require credit losses to be recorded through an allowance account. The new standard will be effective for us beginning on October 1, 2020. We are currently evaluating the potential impact of this new guidance 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 as regulatory assets when future recovery through customer rates is considered probable. Regulatory liabilities are recorded when it is probable that revenues will be reduced for amounts that will be credited to customers through the ratemaking process. Substantially all of our regulatory assets are recorded as a component of deferred charges and other assets and 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 and our regulatory excess deferred taxes and regulatory cost of removal obligation are reported separately.

Significant regulatory assets and liabilities as of June 30, 2020 and September 30, 2019 included the following:



	June 30, 2020		September 30, 2019
	(In thousands)
Regulatory assets:
Pension and postretirement benefit costs	$	79,108	$	86,089
Infrastructure mechanisms⁽¹⁾	180,390		131,894
Deferred gas costs	—		23,766
Recoverable loss on reacquired debt	5,259		6,551
Deferred pipeline record collection costs	28,700		26,418
Rate case costs	401		1,346
Other	6,173		8,483
	$	300,031	$	284,547
Regulatory liabilities:
Regulatory excess deferred taxes⁽²⁾	$	723,400	$	726,307
Regulatory cost of service reserve	2,559		5,238
Regulatory cost of removal obligation	528,932		528,893
Deferred gas costs	48,917		14,112
Asset retirement obligation	17,054		17,054
APT annual adjustment mechanism	62,461		78,402
Other	21,923		16,120
	$	1,405,246	$	1,386,126


(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)

Due to the passage of the Kansas House Bill 2585, on June 1, 2020, we remeasured our deferred tax liability and updated our state deferred tax rate resulting in a $12.1 million regulatory liability as of June 30, 2020. See further details in Note 11. The remaining amount reflects the remeasurement of the net deferred tax liability included in our rate base as a result of the Tax Cuts and Jobs Act of 2017 (the "TCJA"). Of this amount, $20.9 million as of June 30, 2020 and $21.2 million as of September 30, 2019 is recorded in other current liabilities. These liabilities are being returned to customers in most of our jurisdictions on a provisional basis over 15 to 46 years until formal orders establish the final refund periods.

During the nine months ended June 30, 2020, we received regulatory orders in Louisiana, Mississippi, Texas (including APT) and Virginia to defer into a regulatory asset all expenses, beyond the normal course of business, related to Coronavirus Disease 2019 (COVID-19 or virus), including bad debt expense. Subsequent to June 30, 2020, we also received a regulatory order in Kansas to defer into a regulatory asset these expenses. As of June 30, 2020, no amounts have been recorded as regulatory assets or liabilities for expenses related to COVID-19, including bad debt expense.

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, 2019.

Income statements and capital expenditures for the three and nine months ended June 30, 2020 and 2019 by segment are presented in the following tables:



	Three Months Ended June 30, 2020
	Distribution		Pipeline and Storage			Eliminations			Consolidated
	(In thousands)
Operating revenues from external parties	$	434,650	$	58,345		$	—		$	492,995
Intersegment revenues	658		99,663			(100,321		)	—
Total operating revenues	435,308		158,008			(100,321		)	492,995
Purchased gas cost	126,093		(11		)	(100,010		)	26,072
Operation and maintenance expense	107,537		42,234			(311		)	149,460
Depreciation and amortization expense	77,187		29,917			—			107,104
Taxes, other than income	61,980		9,344			—			71,324
Operating income	62,511		76,524			—			139,035
Other non-operating income	5,167		2,068			—			7,235
Interest charges	7,969		11,611			—			19,580
Income before income taxes	59,709		66,981			—			126,690
Income tax expense	810		8,089			—			8,899
Net income	$	58,899	$	58,892		$	—		$	117,791
Capital expenditures	$	342,385	$	68,551		$	—		$	410,936



	Three Months Ended June 30, 2019
	Distribution		Pipeline and Storage			Eliminations			Consolidated
	(In thousands)
Operating revenues from external parties	$	444,287	$	41,451		$	—		$	485,738
Intersegment revenues	657		107,747			(108,404		)	—
Total operating revenues	444,944		149,198			(108,404		)	485,738
Purchased gas cost	139,518		(96		)	(108,096		)	31,326
Operation and maintenance expense	123,998		40,855			(308		)	164,545
Depreciation and amortization expense	70,611		27,089			—			97,700
Taxes, other than income	62,134		7,831			—			69,965
Operating income	48,683		73,519			—			122,202
Other non-operating income (expense)	3,005		(1,360		)	—			1,645
Interest charges	10,597		8,995			—			19,592
Income before income taxes	41,091		63,164			—			104,255
Income tax expense	8,693		15,096			—			23,789
Net income	$	32,398	$	48,068		$	—		$	80,466
Capital expenditures	$	316,825	$	104,788		$	—		$	421,613



	Nine Months Ended June 30, 2020
	Distribution		Pipeline and Storage		Eliminations			Consolidated
	(In thousands)
Operating revenues from external parties	$	2,194,786	$	151,437	$	—		$	2,346,223
Intersegment revenues	2,031		300,984		(303,015		)	—
Total operating revenues	2,196,817		452,421		(303,015		)	2,346,223
Purchased gas cost	942,586		290		(302,053		)	640,823
Operation and maintenance expense	337,740		112,751		(962		)	449,529
Depreciation and amortization expense	229,526		88,556		—			318,082
Taxes, other than income	190,636		23,899		—			214,535
Operating income	496,329		226,925		—			723,254
Other non-operating income	1,930		7,203		—			9,133
Interest charges	35,128		33,852		—			68,980
Income before income taxes	463,131		200,276		—			663,407
Income tax expense	87,411		39,886		—			127,297
Net income	$	375,720	$	160,390	$	—		$	536,110
Capital expenditures	$	1,119,945	$	285,728	$	—		$	1,405,673



	Nine Months Ended June 30, 2019
	Distribution		Pipeline and Storage			Eliminations			Consolidated
	(In thousands)
Operating revenues from external parties	$	2,339,660	$	118,505		$	—		$	2,458,165
Intersegment revenues	2,008		300,813			(302,821		)	—
Total operating revenues	2,341,668		419,318			(302,821		)	2,458,165
Purchased gas cost	1,147,598		(544		)	(301,887		)	845,167
Operation and maintenance expense	347,386		106,120			(934		)	452,572
Depreciation and amortization expense	210,224		80,313			—			290,537
Taxes, other than income	189,377		24,169			—			213,546
Operating income	447,083		209,260			—			656,343
Other non-operating income (expense)	1,791		(3,637		)	—			(1,846		)
Interest charges	44,703		29,687			—			74,390
Income before income taxes	404,171		175,936			—			580,107
Income tax expense	85,195		41,912			—			127,107
Net income	$	318,976	$	134,024		$	—		$	453,000
Capital expenditures	$	912,640	$	286,559		$	—		$	1,199,199

Balance sheet information at June 30, 2020 and September 30, 2019 by segment is presented in the following tables:



	June 30, 2020
	Distribution		Pipeline and Storage		Eliminations			Consolidated
	(In thousands)
Property, plant and equipment, net	$	9,644,503	$	3,236,347	$	—		$	12,880,850
Total assets	$	14,098,715	$	3,471,282	$	(2,699,015	)	$	14,870,982



	September 30, 2019
	Distribution		Pipeline and Storage		Eliminations			Consolidated
	(In thousands)
Property, plant and equipment, net	$	8,737,590	$	3,050,079	$	—		$	11,787,669
Total assets	$	12,579,741	$	3,279,323	$	(2,491,445	)	$	13,367,619

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 8 to the unaudited condensed consolidated financial statements, when the impact is dilutive. Basic and diluted earnings per share for the three and nine months ended June 30, 2020 and 2019 are calculated as follows:



	Three Months Ended June 30				Nine Months Ended June 30
	2020		2019		2020		2019
	(In thousands, except per share amounts)
Basic Earnings Per Share
Net income	$	117,791	$	80,466	$	536,110	$	453,000
Less: Income allocated to participating securities	88		64		408		386
Income available to common shareholders	$	117,703	$	80,402	$	535,702	$	452,614
Basic weighted average shares outstanding	123,026		118,075		122,352		116,485
Net income per share — Basic	$	0.96	$	0.68	$	4.38	$	3.89
Diluted Earnings Per Share
Income available to common shareholders	$	117,703	$	80,402	$	535,702	$	452,614
Effect of dilutive shares	—		—		—		—
Income available to common shareholders	$	117,703	$	80,402	$	535,702	$	452,614
Basic weighted average shares outstanding	123,026		118,075		122,352		116,485
Dilutive shares	6		355		111		188
Diluted weighted average shares outstanding	123,032		118,430		122,463		116,673
Net income per share - Diluted	$	0.96	$	0.68	$	4.37	$	3.88

5. Revenue

Our revenue recognition policy is fully described in Note 2 to the financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019. 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 and nine months ended June 30, 2020 and 2019.



	Three Months Ended June 30, 2020						Three Months Ended June 30, 2019
	Distribution			Pipeline and Storage			Distribution		Pipeline and Storage
	(In thousands)
Gas sales revenues:
Residential	$	286,937		$	—		$	269,484	$	—
Commercial	101,055			—			113,591		—
Industrial	17,019			—			25,277		—
Public authority and other	7,063			—			6,305		—
Total gas sales revenues	412,074			—			414,657		—
Transportation revenues	22,532			164,675			22,923		166,864
Miscellaneous revenues	2,793			2,277			6,125		2,407
Revenues from contracts with customers	437,399			166,952			443,705		169,271
Alternative revenue program revenues⁽¹⁾	(2,567		)	(8,944		)	748		(20,073		)
Other revenues	476			—			491		—
Total operating revenues	$	435,308		$	158,008		$	444,944	$	149,198



	Nine Months Ended June 30, 2020				Nine Months Ended June 30, 2019
	Distribution		Pipeline and Storage		Distribution		Pipeline and Storage
	(In thousands)
Gas sales revenues:
Residential	$	1,435,328	$	—	$	1,513,239	$	—
Commercial	543,148