Susan Giles - Vice President of Investor Relations Kim Cocklin - Chief Executive Officer, President and Director Bret Eckert - Chief Financial Officer and Senior Vice President.

Christopher Turnure - JP Morgan Spencer Joyce - Hilliard Lyons Andy Levi - Avon Capital Advisors.

Greetings, and welcome to the Atmos Energy First Quarter 2015 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Ms. Susan Giles, Vice President of Investor Relations for Atmos Energy. Thank you. Please begin..

Thank you, Melissa, and good morning, everyone. Thank you all for joining us. Our speakers this morning are Kim Cocklin, President and CEO; and Bret Eckert, Senior Vice President and CFO. There are also other members of our leadership team here to assist with questions as needed.

Our earnings release and conference call slide presentation are available on our website. To access these materials, please visit our website at atmosenergy.com. We will refer to just a few of the slides during this live call, but we'll take questions on any of them at the end of our prepared remarks.

Additionally the company’s Form 10-Q was filed last night and is also available on our website. 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.

Please see Slide 17 for more information regarding the risks and uncertainties we consider in making these forward-looking statements and where to go to get more information on such risks and uncertainties. Now I'd like to turn the call over to Kim Cocklin..

Thank you very much, Susan, and good morning to everyone. We certainly appreciate you joining us and your interest in Atmos Energy and congratulations to anybody that is a New England Patriots fan. Next year is the Cowboys year again.

Yesterday we did report first quarter consolidated net income of $98 million or $0.96 per diluted share and after excluding the unrealized margins, net income was $93 million or $0.91 per diluted share. The regulated operations drove substantially all of our quarter-over-quarter growth.

These operations are driven by very focused rate and regulatory strategy, which render stable and predictable earnings. The rate relief for our regulated distribution and pipeline operations combined generated about $32 million of incremental margin in our first quarter of fiscal '15. Our liquidity and financial position remained very strong.

In October you will recall we issued $500 million of senior notes at a rate of 4.125%, replacing $500 million of senior notes with a rate of 4.95%, and our debt-to-capital ratio was 49.5% at December 31 compared with 54.2% one year ago. Yesterday at our board meeting our board of directors declared our 125th consecutive quarterly cash dividend.

The indicated annual dividend rate for fiscal '15 is $1.56, and then last month we announced the appointment of Mike Haefner as Executive Vice President.

This allows us the opportunity to strengthen the bench within the organization as Mike will become more involved in managing the operations of the company and the appointment also affords me the luxury and time to focus on building shareholder value, devoting more time to existing and potential investors and to continue to promote the exceptional value proposition of Atmos Energy.

Our CFO, Bret Eckert, is going to now review our financial results in greater detail.

Bret?.

Thanks Kim, and good morning, everyone. If you follow me on Slide 2, as Kim mentioned reported net income for the quarter was $98 million or $0.96 per diluted share compared with $87 million or $0.95 one year ago.

After excluding unrealized margins in both periods net income was $93 million or $0.91 per diluted share, compared with $81 million or $0.88 per share last year. We experienced business as usual in the first quarter of fiscal 2015.

With return to more normal weather conditions during the quarter, spending levels for maintenance and capital activities were more in line with expectation compared to last year.

We continue to execute on our long-term strategy of enhancing the safety and the reliability of our infrastructure coupled with constructive regulation across our service areas. Turning now to Slide 3 quarter-over-quarter gross profit in our regulated distribution segment increased by about $25 million.

$19 million of the increase is the result of rate outcomes received during fiscal 2014 primarily in Texas and Kentucky.

We also experienced a 13% increase in transportation volumes in the current quarter versus last year’s quarter primarily due to increased economic activity in our West Texas and Kentucky/Mid-States division, which added about $2 million of incremental gross profit.

Service fee revenues were up quarter-over-quarter by about $2 million and was largely driven by increased customer reconnection activities following our fiscal 2014 customer collection efforts. These increases were partially offset by lower margins resulting to a return to more normal weather conditions during the quarter.

Weather during the current quarter was slightly colder than normal and was 14% warmer than the prior year quarter. Therefore, although we experienced a 12% decrease in sales volume gross profit declined by just $2 million or less than 1%.

This demonstrates how our weather normalization mechanisms insulate both the company and our customers during periods of atypical weather. Turning to Slide 4, our regulated pipeline generated over $12 million of incremental margin quarter-over-quarter primarily as the result of $12.5 million increase in rates from the approved 2014 GRIP filings.

APT experienced an increase in third-party transportation volumes, transportation rates and pipeline demand fees and that generated about $3 million of additional revenue.

However, these increases were partially offset by declines in other third-party ancillary services of blending, [Indiscernible] treating and storage of about $1 million, and as a reminder the prior year quarter included a non-recurring $2 million benefit associated with the renewal of APT's annual adjustment mechanism.

Turning now to our non-regulated segment and you may want to turn to Slide 12. Gross profit decreased about $2.5 million in our non-regulated segment due to a decrease in unrealized margins quarter-over-quarter.

Realized margins for gas delivery and related services decreased $1.7 million, marginally due to a decrease in gas delivery per unit margins to $0.10 per MCF from $0.12 a year ago, and a 2% decrease in consolidated sales volumes.

The decrease in both per unit margins and consolidated sales volumes reflects the impact of warmer weather during the current quarter compared to last year’s quarter. Additionally, increased transportation cost adversely impacted per unit margins.

offsetting the decrease in delivered gas margins was a $2.2 million increase in other realized margins, primarily due to a reduction in third-party storage fees and the timing and magnitude of settled financial positions quarter-over-quarter. Turning briefly to the expense side of the income statement.

O&M increased by almost $3 million quarter-over-quarter, mainly due to higher labor and benefits expense and increased pipeline maintenance spending. Offsetting these increases was a reductions in legal expenses.

As expected interest expense decreased about $2 million quarter-over-quarter due to the replacing of the $500 million of ten-year debt at an interest rate of 4.95% with $500 million of 30-year debt at an interest rate of 4.125%. Details about our capital spending are presented on Slide 5.

As you can see CapEx increased almost $81 million in the first quarter compared to one year ago. Spending in our regulated pipeline segment increased by almost $42 million due to the enhancement and fortification of the Bethel and TriCities storage field.

We are drilling horizontal wells to improve the storage capabilities of the TriCities facility and installing pipelines to connect the [Indiscernible] Salt Dome Bethel storage to TriCities to better utilize the combined compression capabilities of the storage facilities and to better meet peak day requirements at the Mid-Tex and other LDC customers.

Spending in the regulated distribution segment increased to almost $39 million primarily due to our continued focus on the safety and reliability of our system.

You may recall our construction crews were sidelined for a portion of December 2013 due to the wintry weather, which also contributed to the increase in spending in the current quarter compared to the prior year quarter. Moving now to our earnings guidance for fiscal 2015 and you may want to turn to Slide 14.

We expect fiscal 2015 earnings per share to be in the previously announced range of $2.90 to $3.05 per diluted share, excluding unrealized margins at September 30, 2015.

Details on this slide are the expected contributions from our regulated and non-regulated operations, as well as selective expenses for the year none of which has changed since our year-end earnings call in early November.

We expect the continued execution of our infrastructure investment strategy coupled with constructive regulation to be the primary driver for this year’s results. Looking on Slide 24, we anticipate annual operating income increases of $105 million to $125 million from approved rate outcomes in the year.

Looking now on Slide 15, our capital budget range has not changed and remains between $900 million and $1 billion for fiscal 2015. Thank you for your time and now, I'll hand the call back over to Kim..

Thank you, Bret. Exceptional report and solid earnings report for the fiscal first quarter of ’15. Regulated rate relief does remain the primary driver of our financial performance and through the first quarter of ’15 rate outcomes and incremental deferrals have provided annual operating increases of about $6 million.

Additionally yesterday we settled the Mississippi stable rate filing, which will provide an increase in annual operating income of $4.4 million.

Other rate actions year-to-date that are filed and pending total about $18 million of annual operating increases and the more significant filings include the Tennessee rate case seeking an increase of about $6 million, the rate review mechanism for the West Texas cities seeking an increase of about $5 million and the Mid-Tex rate review mechanism for the city of Dallas, which is requesting about $7 million.

We do expect an additional 10 to 12 filings in fiscal '15 requesting between $80 million and $90 million of additional increases to operating income and you can see those details on slides 7 through 11 in the deck that was provided.

Our earnings are straightforward with the business model of delivering safe and reliable natural gas in the States we serve are companies totally domestic with no direct exposure to risk associated with foreign currency or unstable economies.

Outside the United States, Atmos Energy and our regulated distribution customers are significant beneficiaries of the following energy prices.

We are able to pass through these lower natural gas prices to our customers and this has provided us the continued opportunity to proactively upgrade our system as we strive to be the safest gas utility in the nation, while keeping customers’ bills affordable.

And assuming normal weather and pricing conditions we do expect through at least fiscal 2018 that our customer bills will be flat to lower than the average bill that they have incurred for most of the last 10 years.

As a result our customers will be able to affordably benefit from a much safer and more reliable system as we continue to invest, and as Bret said these quarter results really are a result of business as usual for us.

Our earnings report should come as no surprise as we have continuously communicated our growth through investment – in infrastructure investment. We remain dedicated to this strategy and remain focused on spending between $900 million to $1.1 billion of capital annually through fiscal 2018 to enhance the safety and reliability of our system.

The enhanced value of the rate base is expected to generate earnings per share growth of 6% to 8% through fiscal 2018. We thank you very much for your time and now we will open up the call for your questions.

Melissa?.

[Operator Instructions] Our first question comes from the line of Brian Russo with Ladenburg Thalmann. Please proceed with your question..

Hi, good morning..

Good morning..

Just noticed the debt-to-cap ratio now at 49.5% up from 46%, and I noticed the short-term debt balance up meaningfully at $550 million, just kind of curious when you might term that out or kind of where you see the debt-to-cap ratio kind of play out towards the end of 2015?.

Brian this is Bret Eckert, the debt-to-cap ratio that you saw move obviously is through the growth of the short-term [debt balance].

We use that to fund seasonal gas purchases, but you are always going to see it spike when you get to the end of our first fiscal quarter and then those balances tend to come down as you come out of the spring and into the summer.

So last year at the same time there was about $690 million of short-term debt outstanding and so it is lower than last year, but it really is just the ebb and flow of gas purchases..

Okay, got it and with the first quarter now behind you are – any sense of where you might fall within that $105 million to $125 million rate revenue range that you are forecasting for ’15?.

No, we – we still remain confident we’re going to fall within the $105 million to $125 million range based on what we have seen so far this year..

Okay, and then just with the decline in oil and expected impacts to the Texas economy can you just talk about any impact if at all to your Texas based regulated operations?.

Brian this is Kim, there is really as we have said our significant beneficiary of the falling oil prices are all of our customers and consequently it gives them much more discretionary income as their utility bills continues to fall and it has an immediate benefit primarily to our the uncollectibles or the [Indiscernible] account balance as well is reduced as a result of the reduced oil price or gas prices and oil prices.

So –.

No, I noticed an increase in transportation revenues, is that tied to kind of the energy industry or is that separate from that?.

It is separate from that, I mean, we have, traditional customers commercial and industrial customers and we are picking up additional loads as some of the economies continue to come back that we have been serving primarily because of the reduction in oil and gas prices as part of their process for their manufacture of the products that they are manufacturing..

Okay understood, and then lastly if you annualize your first quarter ’15 O&M it is tracking below 495 million to 515 million assumption in your guidance, I’m just curious is there any kind of seasonality around that O&M, where would be higher in subsequent quarters?.

Well, you always have the weather to contend with in our first fiscal quarter Brian, and so we still feel confident in the 495 million to 515 million O&M range that we have put out, but you will see if you look back at the first quarter last year O&M was clearly lower, but we had such wintry weather at the time that it was difficult to get out and get things completed.

So, I think you still will find us falling in the range disclosed..

Okay, great. Thank you very much..

Thank you..

Thank you. Our next question comes from the line of Spencer Joyce with Hilliard Lyons. Please proceed with your question..

Good morning folks. Great quarter..

Hi, Spencer, thank you. Thank you very much..

One question here kind of in the [Indiscernible] have you all noted the potential size of this year’s GRIP filing for the pipeline segments?.

Well, Spencer, the teams obviously are in the process of putting that filing together, but it is going to fall within the range that is driving the 105 million to 125 million of annual increases that we disclosed..

Okay, great, great.

Fair enough, and from a filing standpoint we are still looking at a filing on that this month sometime?.

That is correct..

Okay.

finally and you all have sort of have touched on this a little bit throughout the call, can you just spend a little bit more time explaining to us the impact to you all of the low gas prices, I know it is pretty easy on the retail side to understand the falling customer bills and the ability for you all to perhaps do some extra infrastructure on the retail side, but particularly on the pipeline segment is there a risk that perhaps some contraction on the industrial growth could either hamper growth or perhaps even drive a decline there, just hoping to get a little better handle on what the falling energy prices could do there?.

No, they will not impact the pipeline operations or the expected assumptions we have around the margins and the income associated with that. Primarily, we have fixed contracts on sort of a pretty good term and they are designed on the straight fixed variable basis so they are not tied to throughput.

We are not experiencing any reduction in throughput on the pipeline system either, I mean, we are continuing to see although they are laying down rigs in many of the production areas, they are going back in on the wells that they’re currently producing and doing some secondary and territory recovery.

Mechanisms to continue to increase the production, so we looked at that and we see no threat to the pipeline operations through what we consider the near and the midterm for sure..

Okay, fantastic. That's all I had, nice quarter..

Thank you very much, Spencer..

[Operator Instructions] Our next question comes from the line of Joe Zhou with Avon Capital Advisors, please proceed with your question..

Hi, it's Andy Levi, how are you?.

Hi, Andy, how are you?.

I am alright. Just a few questions. Just on bonus depreciation and also on pension/discount rates, I guess, since your Analyst Day and since you gave guidance, the year ended in bonus appreciation was extended.

So, I was just wondering if that has any effect on the numbers that you had given us and then also as far as pensions and mortality rates and things like that whether that has any change there?.

No. No, on both counts Andy, both the bonus appreciation where we thought that was coming out, it doesn’t really impact the income statement more of a cash flow item and from the discount rates there, we are in-line with what we expected coming into the year..

Okay and just remind us pension wise kind of where you are as far as what percentage is funded?.

It's over 90% on a pre-map 21 basis and map 21 basis higher than that. I don't have the exact percentages, I think Susan, we could look at that but its north of 90%..

Okay, thank you. And then, one last question.

Just a little bit of that happening on the electric side, it’s happened on the gas side already but just your thoughts on, I guess, in Texas it probably won't make any sense, but in some of your other jurisdictions on rate basing, net gas prices are low right now?.

You are talking about like regulated production?.

Yes..

Yes, [indiscernible] we are not, no I mean, there is no need to do that with where gas prices are currently and certainly where they’re anticipated to be if you look at any of the forecast from the EIA or any other forecasting services that are reputable and reliable.

They have through the next 10 years, gas prices in the $4 to $6 range and I think, I was looking, yesterday our [indiscernible] dropped from last year to this year of about $0.70.

We were at $4.40 I think last year and this year we have [indiscernible] of about 370 and that's all driven as a result of the 50% market purchases that we make annually to fulfill those requirements.

So, if you set that up, you got to assume production of the field and then you got to assume an ROE and by the time a lot of that stuff puts you out of the market or above market prices which I don't think it's a – it's not a good – it's not anything that we would consider doing right now.

Our highest and best uses to put the dollars we have in our infrastructure and we have a significant amount of infrastructure that we can invest in for a long period of time and as long as we are able to have the balanced regulation and all of the jurisdictions where we are situated and achieve the returns and continue to reduce the regulatory lag and continue to improve the recovery of the fixed cost in a customer charge that's our strategy.

But, we want to put it, I mean, the production side doesn’t help us with our continued desire and highest priority to become the safest utility in the country either..

Got it and one last question.

I don’t know if you can quantify this, but just price of gasoline has clearly dropped, you guys have a lot of trucks, I am just curious if the prices were to stay kind of where they are what the angle benefit could be?.

Our trucks run on natural gas. We don't have anything on [just getting] no, I don't know..

Hi Andy, we don’t think if that had the impact. On moving items, I think we will still be in that same [indiscernible].

We’ve got a system which dispatches those trucks very efficiently and effectively so that we minimize the mileage that they travel every day. But that's not a needle move or either..

Right, thank you very much..

Thank you very much..

Thank you. Ms. Giles, there are no further questions at this time. I would like to turn the floor back to you for any final remarks..

Well, thank you Melisa and I just want to remind all of you that a recording of this call is available for replay on our website through May 6. We appreciate your interest in Atmos and thank you for joining us..