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, 2024.

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; 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; failure to attract and retain a qualified workforce; natural disasters, adverse weather, 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; failure of technology that affects the Company's business operations; 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; the impact of new cybersecurity compliance requirements; adverse weather conditions; the impact of legislation to reduce or eliminate greenhouse gas emissions or fossil fuels; the impact of climate change; 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; and increased costs of providing health care benefits, along with pension and postretirement health care benefits and increased funding requirements. 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 3.3 million residential, commercial, public authority, and industrial customers throughout our six distribution divisions, which at March 31, 2025 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 comprised of our regulated natural gas distribution and related sales operations in eight states.

• The pipeline and storage segment is comprised primarily of the regulated pipeline and storage operations of our Atmos Pipeline-Texas division and our natural gas transmission operations in Louisiana.

Our vision is to be the safest provider of natural gas services. Our commitment to this vision requires significant levels of capital spending to modernize our natural gas distribution system and operating costs to deliver natural gas safely and reliably and in full compliance with the various safety regulations impacting our business. We have the ability to begin recovering a significant portion of our expenditures 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 expenditures timely, and our ability to access the capital markets to satisfy our financing needs are the primary drivers that affect our financial performance.

We anticipate making significant capital expenditures for the foreseeable future to modernize our distribution and transmission system, to comply with the safety rules and regulations issued by the regulatory authorities responsible for the service areas in which we operate, and to prepare to serve the growing needs of the communities we serve. Between fiscal years 2025 and 2029, we anticipate spending approximately $24 billion, with more than 80 percent dedicated to safety and reliability spending. The magnitude and allocation of these expenditures may be affected by factors such as new policy and regulations, population growth, and increased labor and materials costs. Although we believe these costs are ultimately recoverable through our rates based on the regulatory frameworks currently available to us, full recovery is not assured.

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, 2024 and include the following:

• Regulation

• Pension and other postretirement plans

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 six months ended March 31, 2025.

RESULTS OF OPERATIONS

Executive Summary

During the six months ended March 31, 2025, we recorded net income of $837.4 million, or $5.26 per diluted share, compared to net income of $743.3 million, or $4.93 per diluted share for the six months ended March 31, 2024.

The 13 percent year-over-year increase in net income largely reflects positive rate outcomes driven by safety and reliability spending, partially offset by higher bad debt expense, depreciation and property tax expenses, and higher spending on certain operating expenses.

During the six months ended March 31, 2025, we implemented, or received approval to implement, ratemaking regulatory actions which resulted in an increase in annual operating income of $152.6 million. Additionally, as of March 31, 2025, we had ratemaking efforts in progress seeking a total increase in annual operating income of $224.7 million.

Capital expenditures for the six months ended March 31, 2025 were $1,730.9 million. Approximately 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 six months ended March 31, 2025, we completed approximately $1.0 billion of long-term debt and equity financing. As of March 31, 2025, our equity capitalization was 60.9 percent. As of March 31, 2025, we had approximately $5.3 billion in total liquidity, consisting of $543.5 million in cash and cash equivalents, $1,659.6 million in funds available through equity forward sales agreements and $3,094.4 million in undrawn capacity under our credit facilities.

The following discusses the results of operations for each of our operating segments.

Distribution Segment

The distribution segment is 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.

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 50 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 97 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 89 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 March 31, 2025 compared with Three Months Ended March 31, 2024

Financial and operational highlights for our distribution segment for the three months ended March 31, 2025 and 2024 are presented below.

			Three Months Ended March 31
			2025						2024						Change
			(In thousands, unless otherwise noted)
Operating revenues			$	1,882,528					$	1,589,181					$	293,347
Purchased gas cost			969,037						788,643						180,394
Operating expenses			429,773						374,348						55,425
Operating income			483,718						426,190						57,528
Other non-operating income			13,444						9,359						4,085
Interest charges			30,087						36,784						(6,697)
Income before income taxes			467,075						398,765						68,310
Income tax expense			86,432						56,073						30,359
Net income			$	380,643					$	342,692					$	37,951
Consolidated distribution sales volumes — MMcf			143,153						131,537						11,616
Consolidated distribution transportation volumes — MMcf			46,298						44,693						1,605
Total consolidated distribution throughput — MMcf			189,451						176,230						13,221
Consolidated distribution average cost of gas per Mcf sold			$	6.77					$	6.00					$	0.77

Operating income for our distribution segment increased 13.5 percent. Key drivers for the change in operating income include:

• an $86.4 million increase in rate adjustments, primarily in our Mid-Tex Division.

• an $8.3 million increase related to residential customer growth, primarily in our Mid-Tex Division, and increased industrial load.

• an $18.6 million decrease in refunds of excess deferred taxes to customers, which is substantially offset in income tax expense.

Partially offset by:

• a $23.7 million increase in depreciation expense and property taxes associated with increased capital investments.

• a $15.6 million increase in employee-related costs primarily due to an increase in headcount to support company growth.

• a $6.2 million increase in system monitoring, line locating, and other compliance-related activities.

The following table shows our operating income by distribution division, in order of total rate base, for the three months ended March 31, 2025 and 2024. The presentation of our distribution operating income is included for financial reporting purposes and may not be appropriate for ratemaking purposes.

			Three Months Ended March 31
			2025						2024						Change
			(In thousands)
Mid-Tex			$	273,478					$	238,093					$	35,385
Kentucky/Mid-States			48,833						42,375						6,458
Louisiana			43,082						37,070						6,012
West Texas			41,551						39,890						1,661
Mississippi			51,066						47,357						3,709
Colorado-Kansas			24,280						25,359						(1,079)
Other			1,428						(3,954)						5,382
Total			$	483,718					$	426,190					$	57,528

Six Months Ended March 31, 2025 compared with Six Months Ended March 31, 2024

Financial and operational highlights for our distribution segment for the six months ended March 31, 2025 and 2024 are presented below.

			Six Months Ended March 31
			2025						2024						Change
			(In thousands, unless otherwise noted)
Operating revenues			$	2,991,863					$	2,694,519					$	297,344
Purchased gas cost			1,391,607						1,285,305						106,302
Operating expenses			800,490						702,543						97,947
Operating income			799,766						706,671						93,095
Other non-operating income			23,528						15,198						8,330
Interest charges			64,336						71,365						(7,029)
Income before income taxes			758,958						650,504						108,454
Income tax expense			138,102						86,375						51,727
Net income			$	620,856					$	564,129					$	56,727
Consolidated distribution sales volumes — MMcf			215,077						214,253						824
Consolidated distribution transportation volumes — MMcf			83,960						85,193						(1,233)
Total consolidated distribution throughput — MMcf			299,037						299,446						(409)
Consolidated distribution average cost of gas per Mcf sold			$	6.47					$	6.00					$	0.47

Operating income for our distribution segment increased 13.2 percent. Key drivers for the change in operating income include:

• a $137.1 million increase in rate adjustments, primarily in our Mid-Tex Division.

• a $14.4 million increase related to residential customer growth, primarily in our Mid-Tex Division, and increased industrial load.

• a $32.2 million decrease in refunds of excess deferred taxes to customers, which is substantially offset in income tax expense.

Partially offset by:

• a $40.7 million increase in depreciation expense and property taxes associated with increased capital investments.

• a $26.7 million increase in employee-related costs primarily due to an increase in headcount to support company growth.

• a $9.2 million increase in system monitoring, line locating, and other compliance-related activities.

• a $15.7 million increase in bad debt expense due to a regulatory change in Mississippi in the first quarter of fiscal 2024, as discussed in Note 6 to the condensed consolidated financial statements.

The following table shows our operating income by distribution division, in order of total rate base, for the six months ended March 31, 2025 and 2024. The presentation of our distribution operating income is included for financial reporting purposes and may not be appropriate for ratemaking purposes.

			Six Months Ended March 31
			2025						2024						Change
			(In thousands)
Mid-Tex			$	442,086					$	381,207					$	60,879
Kentucky/Mid-States			86,263						69,434						16,829
Louisiana			72,385						63,509						8,876
West Texas			68,236						65,910						2,326
Mississippi			85,266						91,301						(6,035)
Colorado-Kansas			37,780						41,464						(3,684)
Other			7,750						(6,154)						13,904
Total			$	799,766					$	706,671					$	93,095

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 six months of fiscal 2025, we implemented, or received approval to implement, regulatory proceedings, resulting in a $152.6 million increase in annual operating income as summarized below. Our ratemaking outcomes include the refund (return) of excess deferred income taxes (EDIT) 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 six months ended March 31, 2025 were $153.3 million.

Rate Action						Annual Increase in Operating Income						EDIT Impact						Annual Increase in Operating Income Excluding EDIT
						(In thousands)
Annual formula rate mechanisms						$	152,447					$	782					$	153,229
Rate case filings						—						—						—
Other rate activity						111						—						111
						$	152,558					$	782					$	153,340

The following ratemaking efforts seeking $147.5 million in increased annual operating income were in progress as of March 31, 2025:

Division						Rate Action						Jurisdiction						Operating Income Requested
																		(In thousands)
Colorado-Kansas						Infrastructure Mechanism						Kansas (1)						$	612
Kentucky/Mid-States						Rate Case						Kentucky						33,654
Kentucky/Mid-States						Formula Rate Mechanism						Tennessee						1,718
Louisiana						Formula Rate Mechanism						Louisiana						22,304
Mid-Tex						Formula Rate Mechanism						City of Dallas						29,470
Mid-Tex						Rate Case						ATM Cities						12,531
Mid-Tex						Rate Case						Environs						7,994
West Texas						Rate Case						West Texas Systemwide						39,196
																		$	147,479

(1) The Kansas Corporation Commission approved the SIP filing on March 25, 2025, with rates effective April 1, 2025.

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 and Tennessee only), until the next rate proceeding (rate case or annual rate filing), at which time investment and costs would be recoverable through base rates.

The following annual formula rate mechanisms were approved during the six months ended March 31, 2025:

Division						Jurisdiction						Test Year Ended						Increase in Annual Operating Income						EDIT Impact						Increase in Annual Operating Income Excluding EDIT						Effective Date
																		(In thousands)
2025 Filings:
Colorado-Kansas						Colorado SSIR						12/31/2025						$	1,907					$	—					$	1,907					01/01/2025
Colorado-Kansas						Kansas GSRS						09/30/2024						1,998						—						1,998						12/17/2024
Mississippi						Mississippi - SIR						10/31/2025						23,995						—						23,995						11/04/2024
Mississippi						Mississippi - SRF						10/31/2025						3,800						15						3,815						11/04/2024
Kentucky/Mid-States						Kentucky PRP (1)						09/30/2025						3,441						—						3,441						10/02/2024
Mid-Tex						Mid-Tex Cities RRM						12/31/2023						112,144						645						112,789						10/01/2024
West Texas						West Texas Cities RRM						12/31/2023						4,414						122						4,536						10/01/2024
Kentucky/Mid-States						Virginia - SAVE						09/30/2025						748						—						748						10/01/2024
Total 2025 Filings																		$	152,447					$	782					$	153,229

(1) On September 27, 2024, the Kentucky Public Service Commission approved a rate increase of $3.4 million effective October 2, 2024, subject to refund.

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 in our distribution segment during the six months ended March 31, 2025.

Other Ratemaking Activity

The following table summarizes other ratemaking activity during the six months ended March 31, 2025.

Division						Jurisdiction						Rate Activity						Change in Annual Operating Income						Effective Date
																		(In thousands)
2025 Other Rate Activity:
Colorado-Kansas						Kansas						Ad Valorem (1)						$	111					02/01/2025
Total 2025 Other Rate Activity																		$	111

(1) The Ad Valorem filing relates to property taxes that are either over or undercollected compared to the amount included in our Kansas service area's base rate.

Pipeline and Storage Segment

Our pipeline and storage segment consists of the regulated pipeline and storage operations of our Atmos Pipeline–Texas Division (APT) and our natural gas transmission operations in Louisiana. APT is an intrastate pipeline 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 APT services. These revenues are subject to traditional ratemaking governed by the Texas Railroad Commission (RRC). 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.

APT annually uses GRIP to recover capital costs incurred in the prior calendar year. On February 26, 2025, APT made a GRIP filing that covered changes in net property, plant and equipment investments from January 1, 2024 through December 31, 2024 with a requested increase in operating income of $77.2 million.

The demand fee our Louisiana natural gas transmission pipeline charges to our Louisiana distribution division increases five percent annually and has been approved by the Louisiana Public Service Commission until September 30, 2027.

Three Months Ended March 31, 2025 compared with Three Months Ended March 31, 2024

Financial and operational highlights for our pipeline and storage segment for the three months ended March 31, 2025 and 2024 are presented below.

			Three Months Ended March 31
			2025						2024						Change
			(In thousands, unless otherwise noted)
Mid-Tex / Affiliate transportation revenue			$	198,239					$	172,241					$	25,998
Third-party transportation revenue			56,690						49,233						7,457
Other revenue			4,070						2,013						2,057
Total operating revenues			258,999						223,487						35,512
Total purchased gas cost			968						840						128
Operating expenses			112,810						97,847						14,963
Operating income			145,221						124,800						20,421
Other non-operating income			10,728						7,328						3,400
Interest charges			19,927						18,658						1,269
Income before income taxes			136,022						113,470						22,552
Income tax expense			31,089						24,139						6,950
Net income			$	104,933					$	89,331					$	15,602
Gross pipeline transportation volumes — MMcf			244,583						219,709						24,874
Consolidated pipeline transportation volumes — MMcf			154,675						136,902						17,773

Operating income for our pipeline and storage segment increased 16.4 percent. Key drivers for the change in operating income include:

• a $25.4 million increase primarily due to rate adjustments from the GRIP filing approved in May 2024 and the System Safety and Integrity Rider filing approved in November 2024.

• a $3.4 million increase in APT's through-system activities primarily associated with increased spreads.

• a $4.1 million increase due to higher capacity contracted by tariff-based customers due to their increased peak day demand.

Partially offset by:

• a $7.9 million increase in depreciation expense and property taxes associated with increased capital investments.

• a $4.7 million increase in expenses recognized as a result of the System Safety and Integrity Rider filing approved in November 2024, which is offset in operating revenues.

Six Months Ended March 31, 2025 compared with Six Months Ended March 31, 2024

Financial and operational highlights for our pipeline and storage segment for the six months ended March 31, 2025 and 2024 are presented below.

			Six Months Ended March 31
			2025						2024						Change
			(In thousands, unless otherwise noted)
Mid-Tex / Affiliate transportation revenue			$	394,161					$	337,131					$	57,030
Third-party transportation revenue			113,639						92,506						21,133
Other revenue			6,589						5,019						1,570
Total operating revenues			514,389						434,656						79,733
Total purchased gas cost			910						844						66
Operating expenses			224,826						190,388						34,438
Operating income			288,653						243,424						45,229
Other non-operating income			25,278						19,375						5,903
Interest charges			38,603						35,952						2,651
Income before income taxes			275,328						226,847						48,481
Income tax expense			58,750						47,661						11,089
Net income			$	216,578					$	179,186					$	37,392
Gross pipeline transportation volumes — MMcf			462,041						428,981						33,060
Consolidated pipeline transportation volumes — MMcf			323,765						290,436						33,329

Operating income for our pipeline and storage segment increased 18.6 percent. Key drivers for the change in operating income include:

• a $48.2 million increase primarily due to rate adjustments from the GRIP filing approved in May 2024, the System Safety and Integrity Rider filing approved in November 2024, and the rate case approved in December 2023.

• an $11.4 million increase in APT's through-system activities primarily associated with increased spreads.

• a $9.1 million decrease in refunds of excess deferred taxes to customers, which is partially offset in income tax expense.

• an $8.2 million increase due to higher capacity contracted by tariff-based customers due to their increased peak day demand.

Partially offset by:

• a $13.3 million increase in depreciation expense and property taxes associated with increased capital investments.

• a $9.4 million increase in expenses recognized as a result of the System Safety and Integrity Rider filing approved in November 2024, which is offset in operating revenues.

• a $5.6 million increase in expenses related to compliance-related activities.

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 $3.1 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. Additionally, we have various uncommitted trade credit lines with our gas suppliers that we utilize to purchase natural gas on a monthly basis.

On December 3, 2024, we filed a shelf registration statement with the Securities and Exchange Commission (SEC) that allows us to issue up to $8.0 billion in common stock and/or debt securities, which expires December 3, 2027. As of March 31, 2025, $6.3 billion of securities were available for issuance under this shelf registration statement.

On December 3, 2024, we filed a prospectus supplement under the shelf registration statement relating to 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 $1.7 billion through December 3, 2027 (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 December 3, 2027. This ATM equity sales program replaced our previous ATM equity sales program, filed on May 8, 2024. As of March 31, 2025, $1.0 billion of equity was available for issuance under our existing ATM equity sales program. Additionally, as of March 31, 2025, we had $1.7 billion in available proceeds from outstanding forward sale agreements. Additional details are summarized in Note 8 to the 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 2025. Additionally, we expect to continue to be able to obtain financing upon reasonable terms as necessary.

The following table summarizes our existing forward starting interest rate swaps as of March 31, 2025.

Planned Debt Issuance Date						Amount Hedged						Effective Interest Rate
						(In thousands)
Fiscal 2026						$	300,000					2.16		%
						$	300,000

The following table presents our capitalization inclusive of short-term debt and the current portion of long-term debt as of March 31, 2025, September 30, 2024 and March 31, 2024:

			March 31, 2025												September 30, 2024												March 31, 2024
			(In thousands, except percentages)
Short-term debt			$	—					—		%				$	—					—		%				$	—					—		%
Long-term debt (1)			8,425,437						39.1		%				7,785,297						39.0		%				7,446,446						39.1		%
Shareholders’ equity			13,137,965						60.9		%				12,157,669						61.0		%				11,618,639						60.9		%
Total			$	21,563,402					100.0		%				$	19,942,966					100.0		%				$	19,065,085					100.0		%

(1) Inclusive of our finance leases, but exclusive of AEK's securitized long-term debt.

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 six months ended March 31, 2025 and 2024 are presented below.

			Six Months Ended March 31
			2025						2024						Change
			(In thousands)
Total cash provided by (used in)
Operating activities			$	1,204,959					$	991,873					$	213,086
Investing activities			(1,717,538)						(1,409,264)						(308,274)
Financing activities			748,843						661,912						86,931
Change in cash and cash equivalents and restricted cash and cash equivalents			236,264						244,521						(8,257)
Cash and cash equivalents and restricted cash and cash equivalents at beginning of period			308,856						19,248						289,608
Cash and cash equivalents and restricted cash and cash equivalents at end of period			$	545,120					$	263,769					$	281,351

Cash flows from operating activities

For the six months ended March 31, 2025, we generated cash flow from operating activities of $1,205.0 million compared with $991.9 million for the six months ended March 31, 2024. Operating cash flow increased $213.1 million primarily due to the positive effects of successful rate case outcomes achieved in fiscal 2024.

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 86 percent of our capital spending has been committed to improving the safety and reliability of our system.

For the six months ended March 31, 2025, cash used for investing activities was $1,717.5 million compared to $1,409.3 million for the six months ended March 31, 2024. Capital spending in our distribution segment increased $148.3 million, primarily as a result of increased system modernization and customer growth spending. Capital spending in our pipeline and storage segment increased $167.0 million primarily due to increased spending for pipeline system safety and reliability in Texas.

Cash flows from financing activities

For the six months ended March 31, 2025, our financing activities provided $748.8 million of cash compared with $661.9 million of cash provided by financing activities in the prior-year period.

In the six months ended March 31, 2025, we received approximately $1.0 billion in net proceeds from the issuance of long-term debt and equity. We completed a public offering of $650 million of 5.00% senior notes due December 2054, and received net proceeds from the offering, after the underwriting discount and offering expenses, of $639.4 million. Additionally, during the six months ended March 31, 2025, we settled 3,300,904 shares that had been sold on a forward basis for net proceeds of $379.5 million. The net proceeds were used primarily to support capital spending and for other general corporate purposes. Cash dividends increased due to an 8.1 percent increase in our dividend rate and an increase in shares outstanding.

In the six months ended March 31, 2024, we received approximately $1.2 billion in net proceeds from the issuance of long-term debt and equity. We completed a public offering of $500 million of 6.20% senior notes due November 2053 and $400 million of 5.90% senior notes due November 2033, and received net proceeds from the offering, after the underwriting discount and offering expenses, of $889.4 million. Additionally, during the six months ended March 31, 2024, we settled 2,144,558 shares that had been sold on a forward basis for net proceeds of $254.0 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.

The following table summarizes our share issuances for the six months ended March 31, 2025 and 2024:

			Six Months Ended March 31
			2025						2024
Shares issued:
Direct Stock Purchase Plan			25,431						31,742
1998 Long-Term Incentive Plan			220,553						169,218
Retirement Savings Plan and Trust			29,390						36,251
Equity Issuance			3,300,904						2,144,558
Total shares issued			3,576,278						2,381,769

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). On April 2, 2025, Moody's reaffirmed its short-term credit rating, downgraded our long-term credit rating to A2,

and placed our ratings under stable outlook. Currently, our outlook and debt ratings, which are all considered investment grade, are as follows:

			S&P									Moody’s
Senior unsecured long-term debt			A-									A2
Short-term debt			A-2									P-1
Outlook			Stable									Stable

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 March 31, 2025. Our debt covenants are described in greater detail in Note 7 to the condensed consolidated financial statements.

Contractual Obligations and Commercial Commitments

Except as noted in Note 11 to the condensed consolidated financial statements, there were no significant changes in our contractual obligations and commercial commitments during the six months ended March 31, 2025.

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 and six months ended March 31, 2025 and 2024:

			Three Months Ended March 31												Six Months Ended March 31
			2025						2024						2025						2024
			(In thousands)
Fair value of contracts at beginning of period			$	116,888					$	299,271					$	88,651					$	370,256
Contracts realized/settled			(2,465)						(14,774)						(10,801)						(34,103)
Fair value of new contracts			(561)						153						(43)						385
Other changes in value			8,786						66,611						44,841						14,723
Fair value of contracts at end of period			122,648						351,261						122,648						351,261
Netting of cash collateral			—						—						—						—
Cash collateral and fair value of contracts at period end			$	122,648					$	351,261					$	122,648					$	351,261

The fair value of our financial instruments at March 31, 2025 is presented below by time period and fair value source:

			Fair Value of Contracts at March 31, 2025
			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			$	122,648					$	—					$	—					$	—					$	122,648
Prices based on models and other valuation methods			—						—						—						—						—
Total Fair Value			$	122,648					$	—					$	—					$	—					$	122,648

OPERATING STATISTICS AND OTHER INFORMATION

The following tables present certain operating statistics for our distribution and pipeline and storage segments for the three and six months ended March 31, 2025 and 2024.

Distribution Sales and Statistical Data

			Three Months Ended March 31												Six Months Ended March 31
			2025						2024						2025						2024
METERS IN SERVICE, end of period
Residential			3,148,902						3,100,162						3,148,902						3,100,162
Commercial			259,023						257,952						259,023						257,952
Industrial			1,485						1,511						1,485						1,511
Public authority and other			7,724						8,046						7,724						8,046
Total meters			3,417,134						3,367,671						3,417,134						3,367,671
INVENTORY STORAGE BALANCE — Bcf			40.6						45.4						40.6						45.4
SALES VOLUMES — MMcf (1)
Gas sales volumes
Residential			86,552						78,701						125,915						126,013
Commercial			45,926						42,244						70,407						69,160
Industrial			7,825						7,846						14,343						14,539
Public authority and other			2,850						2,746						4,412						4,541
Total gas sales volumes			143,153						131,537						215,077						214,253
Transportation volumes			48,287						46,676						87,825						88,968
Total throughput			191,440						178,213						302,902						303,221

Pipeline and Storage Operations Sales and Statistical Data

			Three Months Ended March 31												Six Months Ended March 31
			2025						2024						2025						2024
CUSTOMERS, end of period
Industrial			92						94						92						94
Other			209						189						209						189
Total			301						283						301						283
INVENTORY STORAGE BALANCE — Bcf			0.3						0.9						0.3						0.9
PIPELINE TRANSPORTATION VOLUMES — MMcf (1)			244,583						219,709						462,041						428,981

Note to preceding tables:

(1)Sales and transportation volumes reflect segment operations, including intercompany sales and transportation amounts.

RECENT ACCOUNTING DEVELOPMENTS

Recent accounting developments, if any, and their impact on our financial position, results of operations and cash flows are described in Note 2 to the condensed consolidated financial statements.