Greetings, and welcome to the Atmos Energy Corporation Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Susan Giles, Vice President of Investor Relations for Atmos Energy Corporation. Thank you. Ms. Giles, you may begin.

Thank you, Doug, and good morning, everyone. Thank you all for joining us. This call is being webcast live on the Internet. Our earnings release, conference call slide presentation and 10-Q are all available on our website at atmosenergy.com. 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. Our forward-looking statements and projections could differ materially from actual results. The factors that could cause such material differences are outlined on Slide 26 and are more fully described in our SEC filings. Our first speaker is Chris Forsythe, Senior Vice President and CFO of Atmos Energy. Chris?

Thank you, Susan, and good morning, everyone. We appreciate you joining us and your interest in Atmos Energy. Our performance for the periods ended June 30 was driven by the ongoing investments we are making to improve the safety and reliability of our distribution and transmission systems. Additionally, we continue to benefit from increased economic activity and customer growth in many of our service areas. Net income from continuing operations for the third quarter increased to $71 million, or $0.67 per diluted share, compared with $66 million, or $0.64 one year ago. For the current nine-month period, net income from continuing operations reached $347 million, or $3.27 per diluted share, compared with $311 million, or $3.01 from the same period one year ago. Slides 4 and 5 provide financial highlights in each of our segments for the three and nine-month periods. Rate relief generated about $14 million of incremental margin in the third quarter. Substantially, all this increase is recognized in our distribution segment. Since APT had a general rate case in progress, we did not file its customary annual GRIP filing during the second quarter of the fiscal year. That case concluded earlier this week, and Kim will provide additional details during his remarks. Rate relief for the nine months ended June 30 was about $81 million. About 33% or $59 million of the incremental margin was reflected in our distribution segment with the largest increases in our Mid-Tex, Mississippi and Louisiana Divisions. Increased economic activity and customer growth have also favorably impacted our performance. In our distribution business, we continued to experience customer growth and higher consumption, primarily in Texas and Middle Tennessee, resulting in a gross profit increase of about $3 million quarter-over-quarter and about $7.5 million in the current nine-month period. Over the last 12 months,…

Thank you very much, Chris, and good morning, everyone. Thank you for joining us. We recorded another rock-solid, strong quarter, which sets us up nicely for the remainder of fiscal 2017. Our performance offers another confirmation that our long-term strategy to grow by investing in the safety and reliability of our infrastructure continues to generate consistent operational and financial results. This strategy continues to pay huge benefits to our customers in the form of improved reliability and service to our employees in the form of job security and developmental opportunities and to our shareholders in the form of delivering consistent financial results. In recognition of this consistent performance, the Board declared our 135th consecutive quarterly cash dividend. The indicated annual dividend for 2017 is now $1.80 per diluted share. And as Chris mentioned, the execution of our rate strategy continues as the key to our success, and rate outcomes have generated annual operating increases of about $104 million and we have about $16 million on file and pending final action. Most notably, as Chris noted, on August 1, the Texas Railroad Commission adopted a final order in the Atmos Pipeline-Texas rate case. The commission approved an increase to annual operating income of $13 million, effective August 1 of 2017. The significant components of the final order, which were approved include: a rate base value of $1.77 billion compared to $814 million in the last case, which occurred in 2011; an authorized return on equity component of a 11.5%; an overall rate of return of 8.87%; an authorized cap structure of 53% equity and 47% debt; and then the Rider REV mechanism, which was modified to reflect the change in the benchmark from $83.7 million to $69.4 million. You’ll remember that Rider REV is the annual adjustment mechanism that trues up…

Thank you. Ladies and gentlemen at this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Spencer Joyce with Hilliard Lyons. Please proceed with your question.

Hi, Kim, good morning.

Hi. Good morning, Spencer.

Yes, I’d tell you I was saddened last night to see the news, but I’m honored to be the first here to congratulate you on an amazing run at the helm here, and thank you for what you’ve done for our clients and shareholders.

You’re too kind, Spencer, good to hear.

I’m going to miss our quarterly banter here, but do love you staying on as Executive Chairman to kind of keep tabs on the company here?

I’m glad to hear it from you, and I’m glad you’re still surviving the hockey for AMEX Serve League.

Yes, I’m a little creaky, but so far hanging in there. Congrats on a nice quarter, not a whole lot operationally for me. But actually want to go back to Chris for a second. Chris, you mentioned LNG a little bit and how that had affected the company. Can you just kind of walk back through that? I know that’s kind of a new piece of the commentary there. And just given how much activity is there in your region, I know, it’s been something we’ve kind of been looking toward for a little while. But can you just kind of rehash your comments toward LNG?

Well, I think, what I was trying to convey was that, the LNG activity along the Gulf Coast is impacting the spreads between Katy and Waha, and as a – as one of the shippers that we have the opportunity to take advantage of those spreads. So it’s the spreads themselves and the increased transportation and through system revenues that we’re generating from that is where the LNG opportunity is going impacting us. It’s not LNG in and of itself, but it’s the spreads and then therefore the resulting through system revenues that we are able to pick up on that.

The – in addition to that, there’s lots of increasing petrochemical activity along the Gulf Coast. So that’s also helping to drive the spreads, which of course, feeds into our transportation services we can provide by the pipeline.

Okay. And will that be somewhat volatile kind of year-to-year or quarter-to-quarter, not that it’s hugely impactful to the overall company? But I mean, is it sort of cyclical or volatile, or is it really just kind of a step function change?

Well, yes, it’s – the way we look at our pipeline, we’ve got really all of our capacity, excess capacity, subscribed between Waha and Katy in long-term contracts. But we can take advantage of the spreads in our daily business when we have excess capacity. So it’s just another way for us to pick up crumbs along the way. And again, it benefits our rate-paying customers and draws more gas to the system, increases the value of our assets, gives us opportunity to invest additionally and enhancing those assets as well.

And there – Spencer, there’s really no way to anticipate or manage the variability in the geographical spreads that show up. The only time that you can really plan for them is maybe in the summer when certain of the pipelines are taken out of service or maintenance activities and then you’ll see some spreads pop up. But this LNG thing, that shows up kind of unexpected. So not any way to model it. But as Mike said, we are perfectly situated with our pipe and because we connect to Waha, Katy and Carthage, that we can – we could certainly take advantage and will take advantage of this – of the geographical spreads that may show up at any point in time.

Okay. Thanks for the color there. And finally, just one other small one. Can you talk a little bit about the assets – the pipeline assets we acquired in North Texas earlier in the year? Have they been, I guess, integrated for lack of a better word pretty smoothly? I mean, are they kind of up to par now that you’ve had them for a quarter or two?

Yes absolutely, Spencer. They were, again, perfectly positioned assets for our system. They’ve been operationally integrated completely with the assets in their current state. As Chris mentioned, we’ve had some incremental O&M directed there towards maintenance and integrity work on both their pipeline and our – and the compressor station to kind of upgrade some of the capabilities. But we’ve also got increased margin revenue from those contracts we have on that pipe already. And I just kind of – Dennis Gordon, who runs the pipeline now – Dick Erskine just retired – or is retiring this week. You guys will have a chance to meet Dennis in November, when we come out and refresh the five-year plan. And Dennis will talk about the opportunities and the capital that we have in their five-year plan to further integrate that asset by creating interconnects with our – some of our existing – other existing pipe segments. So it’s just been working exceptionally well and as well as we expected.

Okay. Yes, great to hear, and look forward to obviously any updates at that November time.

The other point there is that, as Chris may have mentioned, that the GRIP filing we’ll make now, which as Kim said, covers the capital investment from last October through December of 2016, that will also include the $85 million that was spent on that asset purchase.

Okay, perfect. That’s all I had. Thanks, guys.

Thanks, Spencer.

Our next question comes from the line of Brian Russo with Ladenburg Thalmann. Please proceed with your question.

Hi, good morning.

Good morning, Brian.

Is it accurate to say that the Railroad Commission’s final order is relatively similar to what the proposal before decision was?

Yes, it’s exactly that.

And so, would you view this order as constructive and supportive of the 6% to 8% of forecasted EPS CAGR?

Yes, we would, absolutely yes. I mean, first of all, we think it’s a very reasonable outcome. Equity at 53% is higher than our last case coming out of 50%. We’ve got the ROE of 11.5%, which is a little under the 11.8%, but with $13 million increase in operating income, you’ve got a $1.77 billion rate base versus $814 million in the last case. And really importantly is that, the final order kind of reaffirmed that this is a pipeline asset and it should be compared to a pipeline peer group. So again, that reaffirms that precedent. And I think further, one commissioner during the commissioners’ conference reaffirmed the importance of certainty in regulation in the State of Texas and to the companies operating in the State in Texas. So from that perspective, it’s a good outcome. It shows the balance, I think, that the commission has to strike between the interests of all parties. And it really supports and enables our continued investment in safety and reliability in the pipeline, further fortification for all the customer growth were experienced in North Texas, and then adding supply diversity. It’s a key component. It’s going to really enable us to continue the growth, EPS growth in the 6% to 8%.

Got it. Thanks for that. And then so now you just file GRIPs on an annual basis. And then what’s the rules there? How many GRIP filings can you make until you have to file another rate case?

I think it’s five years.

Five years, got it. Okay. And with obviously, the major regulatory item behind you, what should we look for going forward in terms of the more meaningful regulatory filings?

I think, GRIP, for the pipeline, we’ll have the GRIP filing later this month. We’ll have a GRIP filing at the beginning of the second quarter of next year to fix up all of our investments in calendar year 2017. And so for the pipeline, it’s – that’s really the focus. It’s getting back into the mode of enhancing the system and modernizing it and making our GRIP filings.

Okay. And then just lastly, on the revised guidance, it looks like the midpoint was increased by $0.04. And you cited a number of operating performance type of items that enabled you to tighten the range and raise the midpoint. Is this midpoint kind of like the going-forward base to forecast 6% to 8% EPS CAGR?

Yes, I would say that’s the case.

Okay, great. Thank you.

Thanks, Brian. We’ll see you next week.

[Operator Instructions] Our next question comes from the line of [Geoff Healy] [ph] from [Guardian Life] [ph].

Hi, Kim, this is Geoff Healy from Guardian Life. Just not many questions. But I just want to call on behalf of the buy-side fixed-income investors out there and really want to tip my hat to you guys and the tremendous job you did at Atmos, and hopefully looking forward to continuing to support the growth going forward, and best of luck in your future endeavors.

Thank you, Geoff, very much. Enjoyed it very much, and we appreciate your interest and your continuation to vote with your wallet.

Sounds great. Thanks a lot, Kim.

There are no further questions in the queue. I’d like to hand the call back over to management for closing comments.