Good day, ladies and gentlemen, and welcome to the Southwest Gas 2013 Year End Earnings Conference Call. My name is Britney, and I will be the operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today, Vice President of Finance and Treasurer, Ken Kenny. Please proceed.

Thank you, Britney. Welcome to Southwest Gas Corporation's 2013 Earnings Conference Call. As Britney stated, my name is Ken Kenny, and I am the Vice President of Finance and Treasurer. Our conference call is being broadcast live over the Internet. For those of you who would like to access the webcast, please visit our website at www.swgas.com and click on the conference call link. We will have slides on the Internet, which can be accessed to follow our presentation. Today, we have Mr. Jeffrey W. Shaw, Southwest's President and Chief Executive Officer; Mr. John P. Hester, Executive Vice President; and Mr. Roy R. Centrella, Senior Vice President, Chief Financial Officer; and other members of senior management to provide a brief overview of 2013 earnings and an outlook for 2014. Our general practice is not to provide earnings projections, therefore, no attempt will be made to project earnings for 2014. Rather, the company will address those factors that may impact this coming year's earnings. Further, our lawyers have asked me to remind you that some of the information that will be discussed contains forward-looking statements. These statements are based on management's assumptions, which may or may not come true, and you should refer to the language in the press release, our SEC filings, and also Slide #2 presented today for a description of factors that may cause actual results to differ from our forward-looking statements. All forward-looking statements are made as of today, and we assume no obligation to update any such statement. With that said, I'd like to turn the time over to Jeff.

Thank you, Ken. I will begin on Slide 3 highlights -- 2013 highlights. In 2013, we posted record earnings per share which were, in part, impacted by strong market returns underlying our company-owned life insurance policies. We'll speak more about that in today's call. Given our earnings, cash flows, and strength of balance sheet, the board recently increased the annualized dividend on common stock by $0.14 per share or 10.6%. This marked the eighth straight year the dividend has been increased and the third straight year of double-digit percentage increases. In addition to fully decoupled rate designs in all of our jurisdictions, we now have infrastructure replacement mechanisms approved in Arizona and Nevada, and a pending proposed order in California that would authorize a similar mechanism there. We are anticipating a decision of a proposed general rate order in California next month that we will discuss during today's call. Over the course of the last 12 months, all 3 credit rating agencies have lifted the company's ratings due to the improved earnings, cash flows, balance sheet and regulatory environment. We'll discuss this further in a few minutes. Finally, we continue to make solid progress with our pipeline construction services subsidiary. NPL posted their highest earnings in its history. Their focus on safety and service has earned them a solid reputation and the recent growth reflects this. Great strides have been made to strengthen the management infrastructure to accommodate this growth. We believe they are well positioned to grow the bottom line going forward. Next, the call outline. First, Roy Centrella, our Chief Financial Officer, will summarize 2013 financial results. He will discuss financial results for both the -- the Natural Gas segment of the business and our pipeline construction services segment or NPL. John Hester, our Executive Vice President, whose responsibilities include all regulatory activities, will then discuss all current regulatory proceedings and initiatives being pursued by the company. I will then conclude by discussing expected customer growth, an economic overview of our service areas, our projected capital expenditures for the next 3 years, a comment regarding future dividend growth, and I will make concluding comments regarding 2014 expectations and our focus going forward. So with that, let me turn the call over to Roy.

Thank you, Jeff. And let me welcome those of you joining us today. I plan to provide a summary of 2013 operating results, recap the primary factors impacting the change in 2012 and review financing-related activities. And then I'll give some commentary on expectations around 2014. So let's move to Slide 5. Our consolidated net income increased from $133 million in 2012 to $145 million in 2013. As a result, basic EPS increased from $2.89 to $3.14. Both operating segments showed improvement between years and returns on investment underlying company-owned life insurance, or COLI policies, was a significant contributing factor. More on that later. Let's move to Slide 6 in the Natural Gas segment highlights. The Gas segment contribution earnings was a record, although operating income was a little lower than last year. The increase was mainly driven by strong COLI returns and interest savings resulting from our refinancing efforts. Operating margin improved by 3% in 2013, in part, due to the company adding 28,000 net new customers. This is a 1.5% growth rate and the highest customer addition level since 2007. This next slide summarizes the Gas segment income statement. Operating margin increased by $22 million in between years. However, operating expenses increased by $26.5 million or 4%, resulting in a net decrease in operating income of $4.5 million between years. Other income increased $8.1 million between years, and net interest deductions were also favorable, declining $4.4 million. The net result was an increase in the Gas segment contribution to net income from $117 million in 2012 to $124 million in 2013. Slide 8 breaks down the increase in operating margin from 2012 to '13. The rate relief contributed $8 million in incremental operating margin, and most of that was from Nevada. Customer growth contributed $7 million, as the…

Thanks, Roy. Turning to Slide 19, we have a number of topics that we would like to review as part of the regulatory portion of our call today. I'll start with the report on the status of our currently pending California rate case filing, followed by updates on our use of infrastructure recovery mechanisms, our Arizona decoupled rate design, our Paiute Pipeline general rate case application, our proposed Paiute Pipeline-Elko lateral expansion, and our proposal to build an LNG facility in Arizona. Moving to Slide 20. Our most recent California rate case application was filed with the California Public Utilities Commission in December 2012. Our request sought an $11.6 million revenue increase, incorporating a 10.7% return on equity on a 57% common equity component. We further proposed to decrease depreciation expense by $3.1 million, continue our current 5-year rate case cycle and request a 2.95% annual attrition increase for years 2015 through 2018. We also requested establishing a new infrastructure recovery mechanism. The administrative law judge in the proceeding originally issued a draft decision in December of last year, which was subsequently amended and reissued earlier this month. The proposed decision recommends a $7.5 million revenue increase based on a 10.1% return on equity and a 55% common equity ratio. The draft decision also adopts our proposals relative to depreciation expense, continuation of our 5-year rate case cycle, 2.95% annual attrition rate increases and establishment of an infrastructure recovery mechanism. We currently expect the Commission to issue a final decision in this case next month. Turning to Slide 21. The company and its customers continue to have a positive experience with Southwest Arizona customer-owned yard line program. Under this program, the company offers to perform a leak survey on such customer facility and can replace the line with utility-owned facilities…

Thank you, John. Let's turn to Slide 28 and discuss customer growth breakdown. You'll see on the table, the beginning and ending customer numbers for 2011, 2012 and 2013. Note the gradual improvement in the first time -- new meter sets from 13,000 to 21,000 between '11 and '13. This is consistent with what we have discussed in previous calls, that the recovery in our service areas would be positive but gradual. And that's what we're seeing. We had at one time, you may recall, excess inactive meters, those that were not taking service over and above what we normally would expect, of around 55,000, at the peak of the recession. We're now down to 26,000 meters as of the end of 2013. So as you can see, the meter turn-on, turn-offs, we had 7,000 such customers restored to service in the year 2013. So we believe that again, gradually, these customers will be hooked up and we'll get to a more normalized level eventually. Slide 29. The graph is favorable in that all these lines are going in the right direction. The unemployment rate, seasonally adjusted, is improving. And that being said, you can see that all of our service areas still are in excess of the national average. We need to see job growth at a greater level, we believe, in our service areas before we see any significant increase in customer growth. We're watching that statistic very carefully. Move to Slide 30. An economic overview. You can see that there is moderate employment growth year-to-year. This should help drive moderate customer growth on a going-forward basis. Again, consistent with what Roy had just said a few minutes ago, we expect about 1.5% growth rate going forward. Slide 31. Capital expenditures. The $375 million you see estimated for…

Thanks, Jeff. That concludes our prepared presentation. For those of you who have accessed our slides, we have also provided an appendix to the slides, which includes other pertinent information about Southwest Gas, and can be reviewed at your convenience. Our operator, Britney, will now explain the process for asking questions.

[Operator Instructions] And your first question comes from the line of Grier Buchanan with KeyBanc Capital Markets.

This is Grier Buchanan on Matt Tucker's team. The first question I wanted to ask on NPL. Well, I guess, first off. Was the $4 million legal charge all incurred in the fourth quarter?

Not -- this is Roy. Not all of it, but about $2.7 million was.

Okay. That's helpful. And then in terms of 2014. Are you expecting margins similar to last year? And are you seeing any changes in terms of pricing or competition?

No, I think that would be a fair assumption. I agree with that -- margin rates to be fairly similar.

Okay. And then just one more on NPL, and I'll jump back in the queue. In terms of new construction, are these jobs you're seeing are still mainly within the traditional -- focusing on the traditional LDC customer or is there any new customer segment that you see emerging?

No, at this point, our focus is still primarily on the LDCs, that's their bread-and-butter. Lots of times, when they're in an area, there may be some ancillary business they get by having crews there, maybe some paving work, things of that nature. But by and large, there is so much work available at the LDC space that they're still pretty focused on that.

And your next question comes from John Hanson.

Just a couple quick questions. You did a good job with your slides and all your commentary, but just you've got a couple of big projects that are potentially coming up with the pipeline expansion and the LNG. Will we have enough financing to cover those or will we need to do some external financing on those?

I think that we'll evaluate that in the context of all of our needs. We are focused, John, on trying to grow rate base in a way that will benefit both the customer and the shareholder. And these projects both have those elements. So we expect to be successful. I think that our cash flow's going to be strong but it -- we will, over time, build the need to do a moderate amount of additional financing. That's what we just did with this $250 million debt facility that we've done in 2013. We used our credit facility over time, until we have a sizable, something sufficient that is efficient to go into the market and get the best rate that we can. And that's what we just did and we'll do that again. But I wouldn't say those projects, specifically, will drive this, it will be part of a larger evaluation that we do in all of our capital needs.

And your next question comes from the line of Tim Winter with Gabelli.

I was wondering, as NPL continues to grow, making up a bigger portion of the whole company, and the market sort of appreciating that this business is in the early stages. Any thoughts about doing anything creative with NPL, such as an IPO or anything of that nature?

Tim, that's a great question. And I think that as we evaluate NPL, I'm not sure if you had asked me 5 years ago, we could have seen what's happened with this business. But because of the reputation, they really are positioned well to take advantage of an opportunity. And so we're going to do that. We think they need to be of a sufficient size in order to increase the optionality for the business. But I will tell you that, yes, we have certainly talked about that as a management team and as a board. And we will do what we think is in the best interest of the shareholder over time. Right now, we're focused on building the business and making it as attractive as possible, making the value as great as we can. And I think that's a sensible thing to do when you have a business and you have an opportunity that stares you in the face like this does.

And at this time, there are no further questions in the queue.

Okay, then. Well, thank you, Britney. This concludes our conference call, and we appreciate your participation and interest in Southwest Gas Corporation. Thank you.