Susan Giles - Vice President of Investor Relations Kim R. Cocklin - Chief Executive Officer, President and Director Bret J. Eckert - Chief Financial Officer and Senior Vice President

Greetings, and welcome to the Atmos Energy Fiscal 2013 Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Susan Giles, VP, Investor Relations for Atmos Energy Corporation. Thank you. Mrs. Giles, you may begin.

Thank you, Brenda. And good morning, everyone. Thank you, all, for joining us. This call is open to the general public and media but designed for financial analysts. It is being webcast live over the Internet. We have placed slides on our website that summarize our financial results. We will refer to a few of the slides during this live call, and we'll be happy to take questions on any of them at the end of our prepared remarks. If you would like to access the webcast and slides, please visit our website at atmosenergy.com and click on the conference call link. Additionally, we plan to file the company's Form 10-Q later today. Joining me in this morning are Kim Cocklin, President and CEO; and Bret Eckert, Senior Vice President and CFO. There are other members of our leadership team here to assist with questions, if needed. As we review these financial results and discuss future expectations, please keep in mind that some of our discussion might contain forward-looking statements within the meaning of the Securities Act and the Securities Exchange Act. Please see Slide 2 for more information regarding the risks and uncertainties we consider in making these forward-looking statements and where to go to get more information on such risks and uncertainties. And with that, I'd like to turn the call over now to Kim Cocklin. Kim?

Thank you, Susan. And good morning, everyone. We certainly appreciate you joining us and your interest in Atmos Energy. Yesterday, we reported second quarter consolidated net income of $116 million or $1.27 per diluted share compared to $109 million or $1.20 per diluted share a year ago. And for the 6 months, reported earnings were $2.15 per share compared with $1.94 last year. On April 1, we closed the sale of about 64,000 meters in our distribution assets in Georgia for approximately $155 million. We will record an after-tax gain next quarter of approximately $6 million or $0.07 per diluted share, subject to final purchase price adjustments. The net proceeds are being reinvested in our regulated capital investment opportunities. This disposition, along with that of Missouri, Illinois and Iowa last year, delivers our commitment to become more geographically efficient and continues our focus on growing our remaining regulated rate base by 8% to 8.5% by the end of fiscal 2016. In February, we began publicizing the impact of the Mid-Tex rate case and the expectation for gas margins to shift from the first half of our fiscal year into the back half of this year. As we anticipated and communicated to you, the shift reduced results in the current quarter but will be more than offset with increased natural gas distribution margin in our third and fourth fiscal quarters. With 6 months of actual experience and the early arrival of returns from our growth through investment strategy, we have confidence that we can achieve the higher earnings range of $2.45 to $2.55 per diluted share, up from our original guidance of $2.40 to $2.50, excluding the mark and the gain on the Georgia sale. Bret is going to provide more details on this development. Yesterday, our Board of Directors declared our 118th consecutive quarterly cash dividend. The indicated annual dividend rate for fiscal '13 is $1.40 per share. For the 12 months ended March 31, our total return to shareholders stood at 41%. We stand committed to all stakeholders, providing growth in earnings while delivering an essential and safe service to our customers. Our CFO, Bret Eckert, will review our financial results in greater detail, and then I'll return with closing comments. And we'll address any questions you have. Bret?

Thanks, Kim, and good morning, everyone. If you follow me on Slide 3. As Kim mentioned, reported earnings for the second quarter of fiscal 2013 were $116 million or $1.27 per share compared with $109 million or $1.20 per share 1 year ago. Excluding unrealized margins, net income in the current quarter was $1.25 per diluted share versus $1.28 per diluted share last year, a decrease of $0.03 quarter-over-quarter. Turning now to Slide 4. For the 6 months ended March 31, reported earnings were $2.15 per share compared with $1.94 last year. After eliminating the unrealized gains in both years, earnings were $1.99 this year compared to $1.88 1 year ago, an increase of $0.11 per share or about 6%. We successfully completed the sale of our distribution assets in Georgia on April 1. However, the financial results for those assets on the income statement will continue to be reported as discontinued operations in the current quarter. Prior year results also include the discontinued operations of the Illinois, Iowa and Missouri service areas, which were sold in August 2012. Looking now on Slide 5 for the current quarter and 6-month periods. Distribution gross profit decreased by about $25 million in the quarter and about $29 million for the 6 months compared to the same periods 1 year ago. The decrease is a direct result to the shift in margins from the rate design changes in Texas. As expected and publicized, margin is down this quarter because of that shift, but higher margins will be achieved in the third and fourth quarters of our fiscal year. As noted on Slide 11, we expect margins from our Mid-Tex operations to be approximately $25 million to $30 million higher than historical results in each of the last 2 fiscal quarters of 2013, during…

Thank you, Bret. Very well done. We've obviously had another very solid quarter and are very encouraged with the positive outlook for the remainder of fiscal '13. I do want to briefly comment on the retirement of Bob Best. As you know, Bob retired as the Executive Chairman of Atmos Energy on April 1. The company experienced tremendous growth during Bob's 16-year tenure, which included 7 acquisitions and growing the company from 660,000 to over 3 million regulated customers, also adding one of the largest intrastate pipelines in Texas as well as a very successful nonregulated marketing unit. Bob provided valuable leadership to the industry, serving as chair of the American Gas Association, the Southern Gas Association and also as a member of the National Energy Council. Many in the industry and more here at Atmos Energy are deeply grateful to Bob for his leadership, his coaching, his mentoring and his friendship. While we'll miss Bob on a day-to-day basis, he will remain engaged and a very important part of our company by continuing to serve as Chairman of the Board. We continue to successfully execute our rate strategy. As Bret said, we've completed 11 rate proceedings which, when combined with regulatory expense deferrals, result in an increase of about $87 million in annual operating income, which nearly reaches our commitment to deliver $90 million to $110 million of new revenue this year from rate outcomes. We currently have 4 cases pending with annual operating income request totaling more than $32 million. The largest of these is the 2012 APT GRIP filing in Texas requesting a $26.7 million increase. We expect the commission will act during its May 7 meeting and are hopeful that the rate adjustment will be reflected on the May 1 billing statements. We anticipate filing between…

[Operator Instructions] Okay, it seems there are no questions over the phone line at this time. I'd like to turn the floor back over for closing comments.

Thank you, Brenda. Just one last thing: The -- a recording of this call is available for replay on our website through August 6. If you do have any additional questions, please call me or Rose all day long, we're here, or visit us at the upcoming AGA Financial Forum. We appreciate your interest in Atmos Energy, and thank you for joining us this morning. Goodbye.