Greetings, and welcome to the Atmos Energy Fiscal 2017 Year-End Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Jennifer Hills, VP of Investor Relations. Thank you. Ms. Hills, you may begin.

Thank you, Jim. Good morning, everyone, and thank you for joining us. This call is being webcast live on the Internet. Our earnings release and conference call slide presentation are available on our website at atmosenergy.com. As we review these financial results and discuss further -- our 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, on 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, Jennifer, and good morning, everyone. We appreciate you joining us and your interest in Atmos Energy. Yesterday, we recorded fiscal 2017 earnings from continuing operations of $3.60 per diluted share, which represents the 15th consecutive year of increased earnings per share. Our performance, as expected, was in the middle of our updated guidance range that we communicated in August. Slides 5 and 6 provide financial highlights for each of our segments. Our 2017 performance was especially satisfying as we're able to achieve earnings per share growth of about 8% despite weather that was 30% warmer than normal and 12% warmer than the prior year. This underscores the importance of our rate design and regulatory mechanisms that serve as the foundation for consistent and predictable revenues and cash flows. Rate outcomes from our 2016 and 2017 regulatory activities provided approximately $97 million of incremental margin year-over-year. In fiscal 2017, we completed 19 filings that resulted in annualized operating income increases of approximately $104 million, which will also benefit fiscal 2018. We also experienced positive economic activity and customer growth, particularly in our distribution segment. Net customer growth approximated 1% or about 28,000 customers, which contributed almost $6 million in incremental margin. And we saw about $6 million of incremental transportation margins through increased automotive manufacturing activity and the addition of several new customers, primarily in our Kentucky/Mid-States service area. Our O&M spending focused in safely maintaining our system in hydro testing, in-line integrity testing and other monitoring activities. Our employees did an excellent job managing all of this work, keeping O&M inflation to just 1.5% year-over-year. Capital spending increased 5% to $1.14 billion, with approximately 80% of our spending focused on improving the safety and reliability of our system. We spent $850 million in our distribution segment, an increase…

Well, thank you very much, Chris, for that great update, and good morning, everyone. Fiscal 2017 represented yet another remarkable year for Atmos Energy as we continue to successfully execute our investment and regulatory strategy, focused on becoming the safest and most reliable natural gas utility in the country. This strategy, along with exceptional dedication and effort on the part of our 4,600 employees, is paying huge dividends to our customers in the form of improved reliability and service; paying dividends to our employees in the form of meaningful and challenging work as well as development opportunities; and to our shareholders in the form of delivering consistent financial results, including an increasing dividend. Our shareholders experienced a 15% total return on their investment for the 2017 fiscal year. And since launching our infrastructure investment strategy back in October of 2011, our total return to shareholders was 211% as of September 30, which significantly outpaced the peer group average of 156%. In recognition of our consistent performance, the board declared our 136th consecutive quarterly cash dividend. The indicated annual dividend for fiscal 2018 is now $1.94 per diluted share, a 7.8% increase over fiscal 2017. This is our 34th consecutive year of increasing the dividend, and it supports our commitment to providing an attractive return to our investors while continuing to successfully execute our infrastructure investment strategy. We're very well positioned for the future as we move into the seventh year of our journey to become the nation's safest natural gas utility. With the sale of our non-regulated marketing business, Atmos Energy is now a fully regulated, pure-play natural gas distributor, making the company an even more attractive investment with a stronger valuation. We're operating in jurisdictions where regulators understand that investment is needed to modernize our distribution and transmission system.…

[Operator Instructions] Our first question comes from the line of Christopher Turnure of JP Morgan.

I know we're going to have to wait until next week to get the refresh of your long-term plan. But can you remind us, within the current plan as it stands through 2020, what are you modeling for customer growth and refinancings, third-party transport margin, etcetera?

This is Chris Forsythe. In terms of the current plan through 2020, we didn't assume any material customer growth. It's hard to predict that year in and year out, same thing for transportation margins. In terms of financing, we did have in there a very balanced mix of long-term debt and equity financing. And again, we'll update that through 2022 next week.

Okay. So it sounds like on the customer growth and transport margin side, you guys had a pretty conservative base in there. And then on...

Yes.

Chris, consistent with everything else we have in our plan, I mean, we base it on things that we know and already have in place. So we're conservative about any estimates for upside of growth.

Okay. And then on financing; I think I've been pretty -- consistently gotten the message from you guys regarding the equity that's in that plan. But are there other opportunities to maybe retire debt a little bit early or be a little bit more creative on the debt side of the balance sheet there than kind of what's in the plan right now?

I think you'll find that the financing strategy is going to be consistent with what we've been doing the last few years.

Okay, fair enough. And then just for modeling purposes, can you give us a share count that is underlying your 2018 guidance? And tell us what the impact for 2017 for weather overall was -- versus normal so we can kind of model out the walk between '17 and '18 on weather.

Right. On the weather side, remember, we have -- WNA has 97% coverage in our margins. So year-over-year, we were just down about $3 million. If I recall correctly, we lost $86 million margin from weather before WNA. But WNA pretty much brought all that back. So again, the mechanisms are working very, very well. And on the share count, we'll update that for everybody next week.

Our next question comes from the line of Charles Fishman of Morningstar.

Those of us that cover electric utilities are back from the Edison Electric Conference earlier this week, and a topic that occurred in many of those discussions was, of course, the recent movement with the house on tax reform. And those discussions typically talked about the way utility commissions at the state level handled the Reagan tax cuts that landed almost 30 years ago. But obviously, Atmos has a unique situation in Texas with the Railroad Commission. Do you have any input on how the Railroad Commission handled -- I'm assuming the Railroad Commission was regulating natural gas distribution 30 years ago. But do you have any insight about how that happened 30 years ago, similar to what we just heard from utilities about how state commissions handled the Reagan tax cuts for electrics?

This is Chris. The Railroad Commission was guiding the -- or regulating the industry in Texas 30 years ago. Unfortunately, I do not immediately recall what the Commission did at that time. We can find out very quickly, but it just -- right now, we don't have that at our fingertips.

Well, I certainly understand that. Maybe I'll give that to Jennifer as her first assignment of research and get back to her on that.

Okay.

[Operator Instructions] Our next question comes from the line of Mark Levin of Seaport Global Securities.

Congratulations to everyone. Obviously, a lot of changes over the last quarter or so, and everybody in new roles. So congratulations to everyone. A quick question when you think about the Atmos going forward. Obviously, the -- certainly, over the last X number of years, you sort of transformed yourselves from being an M&A-centric model to one that was much more organic growth. Is there any reason why that may change over the next three to five years? Is there anything out there that you -- I mean, could you see Atmos becoming more acquisitive? Or will it still be kind of the same sort of trajectory that's been happening over the last several years?

Yes, Mark, thanks. This is Mike. No, we do not see any change in our views on M&A, and we don't expect to have that as a portion of any of our plans between now and 2022. I mean, we've -- as you know, valuations are extremely high, and we've got the opportunity today to convert over $1 billion a year in spending into earnings with reasonable certainty. So it's definitely not in our plans given the environmental conditions we're operating in now, but we never say never. Obviously, if something came along, we would look at it but really, we've got this tremendous opportunity. We've got a very long runway of investment opportunities, we've got constructive regulation, we've got regulators that understand the importance of investing in safety and reliability at this time when gas prices are low and stable, it keeps customers' bills very affordable. And we've got a lot of growth in our areas to support. So we don't see that our views on that have changed or will change.

And alternatively, are there any opportunities -- or would you consider pursuing any divestitures maybe in states where the regulatory jurisdictions aren't as favorable or the growth opportunities aren't as robust?

No. We're very comfortable with the assets we have right now and the plans that we have at this point in time.

There are no further questions over the audio portion of the conference at this time. I would now like to turn the conference back over to the VP of Investor Relations, Ms. Jennifer Hills.

Thank you, Tim. Thank you for joining us today. I'm going to remind you that a recording of this call is available for replay on our website through February 6. We appreciate your interest in Atmos Energy, and thank you for joining us. Goodbye.