Greetings, and welcome to the Atmos Energy 2018 Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jennifer Hills, Vice President of Investor Relations. Thank you, Ms. Hills, you may begin.

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 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 some material differences are outlined on Slide 29 and are more fully described in our SEC filings. Our President and CEO, Mike Haefner, will begin our call with some opening comments. Mike?

Thank you, Jennifer, and good morning, everyone. We appreciate you joining us and your interest in Atmos Energy. During the quarter, we continued 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 the exceptional dedication and effort on the part of our 4,600 employees, continues to benefit our customers in the form of improved reliability and service. We remain very well positioned for the future as we move through the seventh consecutive year of our journey to become the safest natural gas utility. Nothing is more important to our employees than the safety of our customers and communities. In late February, there were three gas-related incidents in Northwest Dallas, one of which resulted in the tragic death of a 12-year-old child. We're in direct contact with the National Transportation Safety Board and the Railroad Commission of Texas and are supporting a coordinated investigation into the incident. Soon after that and in the days leading up to March 1, we experienced a sudden and unexplained increase in leaks in a 1.5 square-mile area of our system in Northwest Dallas. To understand why a system that had been performing normally was suddenly performing in this way, we hired a geotechnical, engineering and forensics firm to assess the system. Their preliminary assessment indicated an extraordinary combination of unique conditions, including geology, hydrology, soil conditions and record rainfall in this concentrated area caused differential ground movement that damaged our pipeline system. Their report further stated that this could not have been readily modeled, predicted, anticipated or foreseen. On March 1, we acted with the utmost of caution, made the decision to undertake a planned outage to accelerate the replacement of all mains, service lines and meters for…

Thank you, Mike, and good morning, everybody. Yesterday, we reported fiscal 2018 second quarter earnings from continuing operations of $179 million or $1.60 per diluted share, compared with $162 million or $1.52 per diluted share in the prior year second quarter. Results from continuing operations included $4 million or $0.03 per diluted share noncash income tax benefit related to tax reform. Earnings from continuing operations for the six months ending March 31 were $493 million or $4.7 [ph] per diluted share compared to $276 million or $2.61 per diluted share in the prior year period. Results for the current six-month period included $166 million or $1.50 per diluted share nonrecurring income tax benefit from tax reform. Our second quarter results were driven by the contribution from recent rate activity due to continued increase in pipe replacement and other system modernization spending, strong consumption trends and higher operating expenses. Operating income in our distribution segment increased 7.5% to $210 million in the current quarter, due to a number of drivers. Recovery from recent regulatory actions provided an incremental $28 million of contribution margin. Additionally, we experienced a more normal winter heating season this year, compared to last year's unseasonably warm weather. As a result, we experienced a $9 million quarter-over-quarter increase in residential and commercial consumption and a $15 million increase year-to-date. Additionally, weather-driven demand drove a $2 million increase in transportation revenues in our tax provisions. Finally, we continue to experience solid customer growth. Over the last 12 months, our distribution segment added net 36,000 customers, which represents 1.1% net customer growth. Additionally, we continue to add transportation customers to the system, primarily in our Kentucky/Mid-States Division. Combined, this growth added over $4 million in contribution margin for the quarter and up $7 million year-to-date. This growth in our contribution…

Thank you, Chris, for that update on the quarter. As you can see from our second quarter results, we remain focused and are on track to meet our fiscal 2018 targets, driven by our proactive pipe replacement and system modernization investments. In the second quarter, we continued to benefit from recent regulatory outcomes, colder weather compared to the prior year and customer growth. We continue to invest in our infrastructure and are on track to spend approximately $1.4 billion this year. Our spending will continue to accelerate annually over the next four years with approximately 80% of that spending focused on safety and reliability. On the regulatory front, we've completed 11 filings, which should add approximately $47 million in annualized operating income over fiscal 2018 and fiscal 2019. And we have 11 filings pending, seeking over $91 million in annualized operating income, inclusive of the impact of tax reform. We remain well on our way to meet our targets for annual increases from implemented rate activity in fiscal 2018, including the impact of tax reform. In fact, the tax changes due to the Tax Cuts and Jobs Act will lower the annual ratemaking results, but that impact will not affect the overall results of ratemaking on Atmos Energy's earnings. Slides 8 through 20 provide details about the progress we've made during fiscal 2018 and pursuing our regulatory strategy. Our key regulatory accomplishment during the second quarter was the renewal of several annual rate review mechanisms in Texas with constructive terms. These mechanisms cover approximately 80% of our distribution customers in Texas. In February, we successfully settled the outstanding statement of intent with the City of Dallas. As part of the settlement, we were able to begin reflecting the benefits of tax reform in customers' rates. We were also able to…

Thank you. [Operator Instructions] Our first question comes from the line of Chris Turnure with JPMorgan. Please proceed with your question.

Good morning Mike and Chris. I wanted to get an understanding of the NTSB investigation, the potential timing of an outcome now that we have the preliminary reports and any other open investigations that might be out there or your knowledge of any of those that might be forthcoming?

Yes, good morning Chris. As you know, the NTSB issued a preliminary report on March 23, confirming that they've done site inspections, collected records and materials. They also interviewed our personnel and other first responders. And we understand it could be months before a factual report is issued, and we expect a final report from them in the 2019 calendar year time frame. There are no other investigations underway from the NTSB at this time.

Okay. And from the NTSB report that would be upcoming here in months, and then I guess, the final one, at some point next year, would you expect a determination of cause and any determination of fault within that?

That's a good question, Chris. First of all, just I want to remind everyone that NTSB is an independent agency and the board has no regulatory authority. Its whole focus is on improving safety of the industry. And so, their focus is on identifying probable cause and then they'll make safety recommendations aimed at preventing any similar future accidents.

Okay. Got it. That's helpful context. And then, can you maybe give us a little bit of color on your dialogue, if any, with the Railroad Commission since the incidence and maybe some color on how that's going, if they intend to look into the incident further?

Yes. Yes, absolutely. We've been communicating openly and regularly with them. They're conducting their own investigation, which is standard practice. And the focus there is on whether we complied with regulations in our own procedures. So, we've been in continuing contact with them as well as the City of Dallas and Dallas County. And so far, I mean the regulators have been supportive of the planned outage that we undertook and all of our response efforts to date. And you may have seen in the paper Railroad Commissioner, Ryan Sitton, confirmed in an interview that their view is that we're doing everything that we can and did everything that we could to keep the area safe.

Got it. And just one last question on that topic. Do you have a sense as to when the RRC would complete that investigation and make the findings public?

No, I don't have a time line on that. And I also want to remind you that the Railroad Commission – we fall under very strict guidelines, both federally and at the state level, and the Railroad Commission has auditors in working with our employees on auditing our practices and our system almost on a daily basis, I think almost every week of the year. So, it's very standard practice. It's not unusual for them to be involved because we all share the same objective, which is safety. So, there's nothing out of the ordinary, unusual here. It's just an extremely unfortunate and tragic event that there was an explosion and a child's death. I mean, just nothing we can say or do that's going to diminish that tragedy.

Got it. Thank you, Mike. I appreciate the color.

Thanks, Chris.

Our next question comes from the line of Charles Fishman from Morningstar. Please proceed with your question.

I'm comparing Slide 7 to some past Slide 7s, and the percentage of the mix of capital spending has gone up materially since last year, 87% for safety and reliability, 80% last year. Is that just a timing thing as you accelerate – I mean, your planned acceleration of CapEx, which is more focused on the safety and reliability. I mean, I wouldn't think it has anything to do with these incidents because just hasn't been enough time to react to it.

No, Charles, good question. It really is timing and where our projects are falling out. For example, over the last 3 years to 4 years, 2 years to 4 years, we've invested very significantly in kind of our storage and compression capabilities, as well as other system fortification projects. So, I think it just varies, but our target is to be 80% or greater in safety and reliability. We also have timing of public works projects, and you've got varying demand in terms of system extension spending for customer growth.

So, in terms of your annual CapEx, I think at your Analyst Day, you were talking $1.3 billion to $1.9 billion per year, accelerating over the next – or through 2022. Is that – you're confirming that and reaffirming that, and I mean, you still see yourself in that range. In other words, you're going to be $1.4 billion this year and then accelerating to $1.9 billion over the next 5?

Correct. Yes, $1.4 billion, approximately $1.4 billion this year. $1.4 billion to $1.9 million each year going forward, accelerating gradually, and we put out there the expectation of about approximately $8 billion through 2022.

Okay, thank you very much. That’s all I had.

Thanks Charles.

[Operator Instructions] There are no further questions in the queue. I'd like to hand the call back over to management for closing comments.

Thank you, Doug, and thank you, everyone, for joining us today. Just as a reminder, a recording of this call is available for replay on our website, through August 8, 2018. We appreciate your interest in Atmos Energy and thank you for joining us. Good bye.