Welcome to the Southwest Gas Holdings 2017 First Quarter Earnings Call. [Operator Instructions]. I would now like to turn the call over to your host, Mr. Ken Kenny, Vice President of Finance and Treasurer. Mr. Kenny, the call is yours.

Thank you, Sherrie. Welcome to Southwest Gas Holdings, Inc.'s 2017 First Quarter Earnings Conference call. As Sherrie 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.swgasholdings.com and click on the conference call link. We have slides on the Internet which can be accessed to follow our presentation. Today, we have Mr. John Hester, President and Chief Executive Officer; Mr. Roy Centrella, Senior Vice President and Chief Financial Officer; Mr. Justin Brown, Southwest Gas Vice President, Regulation and Public Affairs; and other members of senior management to provide a brief overview of the company's operations and earnings ended March 31, 2017, and a full year outlook for 2017. Our general practice is not to provide earnings projections, therefore, no attempt will be made to project earnings for 2017. 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 on Slide 3 in the press release and also our SEC filings for a description of the 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 John.

Thanks, Ken. Turning to Slide #4. While we're still early into 2017, we wanted to touch on a number of highlights for the year so far on today's call. First, from a consolidated results perspective, we increased our dividend for the 11th straight year in a row. The latest change represents an approximately 10% increase, so we are now in an annualized dividend of $1.98 per share. We also entered into an incremental $100 million credit facility for our holding company that will run through March 2022, and we established a $150 million equity shelf program. Next, for our natural gas operations, we saw the Arizona Corporation Commission approve a settlement in our previously pending rate case proceeding. The commission's approval established new rates effective April 1, 1 month earlier than originally anticipated. We added 30,000 new customers over the past year, moving ever closer to the 2 million customer mark for our company. And we amended the utility's credit facility to expand our borrowing capacity from $300 million to $400 million. Then, for our unregulated construction services segment, we saw detrimental first quarter impacts from weather as well as the temporary slowdown of work with one of our larger customers. We do remain optimistic about this segment's full year prospects, however. Moving to Slide #5. For the outline for today's call, Roy Centrella will provide an overview of consolidated earnings along with segment details for our regulated and unregulated operations, Justin Brown will provide an update on our regulatory activities, and I will close with an update on customer growth, regional economic metrics, capital expenditures and our expectations for 2017. With that, I will turn the call to Roy.

Thank you, John. Let's jump right into things on Slide 6 with a look at consolidated operating results. For the three months ended March 2017, we earned $69.3 million or $1.46 per basic share, down from $75.4 million or $1.59 per share in the first quarter last year. During the 12-month period, our earnings improved from $142 million or $3 per basic share to $146 million or $3.07 per share. Next, we'll look at the relative contributions of each segment to the change in earnings starting on Slide 7. Natural gas operations results were flat between periods, consistent with our internal expectations. Recall that our Arizona rate relief does not kick in until the second quarter. Construction services, on the other hand, saw their losses increase by $5.2 million between periods. Several factors influenced those results, which I'll speak to later. This next slide breaks down the change in earnings between 12-month periods. Gas segment net income increased $8.5 million, while construction services experienced a net decrease of $4.1 million. Next, let's look at each segment, starting with natural gas operations on Slide 9. Now although the change in contributed net income was minor, I'd like to mention a couple of offsetting items. Operating margin increased $4.2 million as a result of customer growth and California rate relief. We added 30,000 net new customers over the last 12 months, the highest annual level in about 10 years. Offsetting the margin growth were O&M cost increases totaling $7.9 million or 7.8%. About 1/3 of the increase pertains to compensation programs, whose accounting expense is skewed toward the first quarter of the year for retirement-eligible employees. Also, proxy-related costs were higher than usual this year. Lastly, income on company-owned life insurance, or COLI, policies exceeded the prior year by $1.9 million. Moving…

Thanks, Roy. On Slide 15, our regulation highlights that I'll cover today include an update on our recent Arizona rate case result and potential future rate case timing in our other states as well as continued progress on our infrastructure replacement programs and an update on 2 expansion projects. Turning to Slide 16. The Arizona Corporation Commission approved our proposed $61 million rate case settlement, and rates became effective April 1, 1 month earlier than was originally expected. I believe this result is reflective of the constructive working relationship we have with the commission and their staff in Arizona as well as other stakeholders. Slide 16 illustrates the anticipated impact of the $61 million increase to operating income for both 2017 and 2018, including the earlier effective date. We're very pleased with the rate case outcome in terms of the operating income amount but also the tools that were approved as part of the rate case to help mitigate regulatory lag going forward, namely the continuation of our fully decoupled rate design, expansion of our existing customer-owned yard line program, implementation of a vintage steel pipe replacement program and the implementation of our property tax tracker. Turning to Slide 17. From a California rate case planning perspective, we are on a 5-year rate case cycle, which means we're currently scheduled to file our next rate case later this year. However, following discussions with the Office of Ratepayer Advocates, we filed a petition requesting to extend the rate case cycle by 2 years. The petition essentially requested that the commission extend the rate case cycle, leaving all other aspects of the decision intact, including the ability to make post-test-year attrition adjustments for 2 additional years. The Office of Ratepayer Advocates supports the petition, and it is our expectation that a decision…

Thanks, Justin. Moving to Slide 21. As I mentioned earlier in the call, we added 30,000 net new customers over the past year and now serve just under 2 million customers across our 3-state service territory. Turning to Slide 22. Economic conditions in our service territories continued to be robust. Population growth in the areas we serve is forecasted to be notably above the national average over the coming 5-year period. And as the table on this slide shows, unemployment rates in all 5 of our operating divisions declined year-on-year, with continued positive job growth. On Slide 23, we show our expectations for capital expenditures for the coming 3 years compared to this past year. We invested $457 million last year to serve growth and improve the safety and reliability of our gas delivery systems. As Justin Brown outlined earlier, much of that capital investment is associated with support of cost recovery mechanisms authorized by our regulators. These capital expenditures are expected to total $1.6 billion to $1.8 billion for 2017 through 2019. Finally, wrapping up on Slide 24, updates to 2 items with respect to our expectations for this calendar year. On the utility side, as I mentioned earlier, we received rate relief in our Arizona rate case 1 month earlier than expected, which should slightly improve year-end utility results. And on the construction services side, we expect operating income to approximate 5% of revenues, a slight decline compared to our previously reported range of 5% to 5.5%. Overall, these 2 updated expectations should largely offset each other, such that our consolidated year-end expectations are in line with those provided in our last call. With that, I'll return the call to Ken.

Thanks, John. That concludes our prepared presentation. For those who have access to our slides, we also have provided an appendix with slides that include other pertinent information about Southwest Gas Holdings and its 2 business segments and can be reviewed at your convenience. Our operator, Sherrie, will now explain the process for asking questions.

[Operator Instructions]. Our first question comes from Tim Winter with Gabelli.

I was wondering if you could provide a little more color on the work stoppage and the customer. Is that completely behind you now, the stoppage, are all the employees now properly trained and able to work and so all good going forward?

Hi, Tim, this is Roy. We are still qualifying some of our employees or increasing the number of crews each week as weeks go by as we're able to add -- get to the training that's been required. It probably won't be until later this year that we're back to full staffing with that customer. And so there could be a little bit of an impact to our earnings, which is why we kind of lowered that operating income range from 5% to 5.5% down to 5%.

Okay. And then from a bigger picture perspective, is there any more -- any update on the thinking to perhaps separating Centuri from Southwest in any way?

Tim, this is John. No change in that from our perspective at the current time. We still think that there are a lot of good prospects to continue growing that business, both organically as well as potentially through additional acquisitions. I think the slide that Roy referenced earlier in the call, Slide 13, that shows the earnings growing at that business, continued to show that that's a good contributor to shareholder value. That said, as we've talked before, Tim, we are going to be mindful of our business mix, and we don't want to stray too far from the business mix that we have now because we want to maintain our core utility identity. And as we see that business continue to grow, we'll continue to evaluate the prospects for doing other things with it in the future.

Our next question comes from Paul Ridzon of KeyBanc.

Given first quarter results at the construction business and kind of looking at Slide 46 with the drivers, should we be tending towards the lower end of the 2% to 5% revenue growth?

Not at this point. We still feel good about the potential to be in the middle of that or even reach the upper end. It's just so early in the year, it's hard to predict with certainty where we're going to be, but we have a lot of bid contracts out there. We have a lot of master service agreement contracts that are active. And so we'd probably have a better view on that in the second quarter call when we get to the first part of the year when we've started to ramp up our construction crews, a better view on that.

And could you just give a little more detail about the stoppage? Who ordered it, and what drove that -- drove it?

Well, we really don't want to comment on the specific customer. The stoppage was statewide, and it was for all the contractors working for the customer. There's been a number of contractor qualification processes that have been undertaken in East Coast states like New York, New Hampshire, Massachusetts, Virginia, and only one of our state areas was impacted by the stoppage. But as we get our employees requalified, we're putting them back to work. And later this year, we should be back to full force.

Was it the customer who ordered the stoppage or the state?

It was -- it ended up being both. The state was looking at the contractor qualification processes and felt like there were some things that concerned them. And so they mandated the customers that worked with their contractors and have all the -- all of their employees requalified.

Your employees or the customer's employees?

All of the contractors' employees.

[Operator Instructions]. Speakers, I'm showing no further questions at this time. I'll turn the call back over to you.

Thank you, Sherrie. This concludes our conference call, and we appreciate your participation and interest in Southwest Gas Holdings, Inc. Everyone, have a great day. Thank you.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may all disconnect, and have a wonderful day.