The paragraph is an introduction to Atmos Energy Corporation's Fiscal 2025 Second Quarter Earnings Conference Call. The Operator introduces the call and hands it over to Dan Meziere, Vice President of Investor Relations and Treasurer, who welcomes participants and mentions the financial release and presentation materials on their website. Meziere warns of forward-looking statements. Kevin Akers, President and CEO, then reports a year-to-date fiscal 2025 net income of $837 million or $5.26 per diluted share, and updates the fiscal 2025 earnings per share guidance to a range of $7.20 to $7.30. He attributes this performance to the commitment of employees in modernizing gas systems and serving 3.4 million customers in eight states.

During the quarter, the company experienced significant growth, largely driven by favorable employment trends in Texas, adding nearly 59,000 new customers over the 12 months ending March 2025, with most coming from Texas. The Texas Workforce Commission indicated record employment numbers, and Texas outpaced national job growth. Commercial and industrial customer growth was strong, with numerous new connections made, and the demand for natural gas remained solid. Several infrastructure projects are underway to enhance system reliability and support ongoing growth, including the Phase 2 expansion of APT's Line WA Loop and the continued work on the Bethel to Groesbeck project.

The paragraph discusses a pipeline project that will add approximately 55 miles of 36-inch pipe from the Bethel storage facility to the Groesbeck compressor station to increase pipeline capacity to the DFW Metroplex and the Interstate 35 corridor. The project is expected to be operational by late 2025. APT also completed two interconnect projects this quarter, adding over 1 Bcf of gas supplies to enhance supply reliability. Customer service received a 98% satisfaction rating, with nearly 32,000 customers helped to receive over $10 million in energy assistance funding in the first six months of fiscal year '25. The company's operating income grew by 14.6%, and diluted earnings per share increased by 6.7% to $5.26. Rate increases amounted to $185 million, contributing to financial performance improvements.

The paragraph discusses financial outcomes in the company's distribution and Pipeline and Storage segments, highlighting an increase in operating income and revenues due to growth in residential and industrial customers and higher transported volumes. It notes a significant rise in consolidated operating and maintenance expenses by $74 million, attributed to employee costs, increased bad debt expense, and heightened safety and inspection activities. Regulatory changes contributed to a previous bad debt reduction, and ongoing regulatory implementations are expected to result in significant future operating income increases. The paragraph also mentions a proposed decision in a West Texas rate case.

The paragraph discusses a financial and regulatory update for a company, highlighting several key points: a 9.8% return on equity based on a capital structure with 60.97% equity, and an approved rate base totaling $1.2 billion. It mentions the capitalization of cloud computing costs as fixed assets to be recovered over 15 years. Regulatory asset trackers are authorized, including one for deferring certain O&M expenses related to safety regulations. A proposed settlement, potentially increasing annual operating income by $30.6 million, is pending approval. In the Mid-Tex division, two rate cases were consolidated, impacting 15% of the customer base. A proposed settlement has been filed, with key terms mirroring those in a previous decision, and if approved, will be considered by the Rail Commission on upcoming dates.

The paragraph discusses the company's financial outlook and activities. If a segment is approved, it will boost annual operating income by $6.7 million, while the Rail Commission might review a $77.2 million APT line. The company is awaiting a decision on a rate case in Kentucky during its fiscal fourth quarter. The balance sheet is strong, with 61% equity capitalization and no short-term debt, and $5.3 billion in liquidity. It has raised its fiscal '25 earnings per share guidance due to the strong performance of APT’s through-system business, which is expected to continue performing well, despite some variations in revenue timing compared to fiscal '24.

In the provided paragraph, the company reports that by March 31, approximately half of the anticipated fiscal 2025 contribution from a specific segment of APT's business has already been recognized. In the previous year, nearly 80% of APT's business was recognized in the latter half of the fiscal year. They expect ad valorem taxes to be lower than planned and have increased their O&M spending to ensure compliance and improve system safety and reliability. They are also preparing for the winter heating season with additional measures. The expected O&M (excluding bad debt) for this year is projected to be between $860 million and $880 million, with most of the year-over-year increase already recognized. They forecast a slight increase in O&M in the latter half of fiscal 2025 compared to the prior year. The capital spending guidance remains at approximately $3.7 billion. The operator opens the floor for questions, and JPMorgan's Richard Sunderland asks about the guidance and whether the higher 2025 guidance should be considered a base for future growth or if normalization for 2025 needs to be considered for subsequent years. Chris Forsythe responds, acknowledging the market's volatile conditions and indicating they will continue to assess the situation over the summer.

The paragraph discusses the planning and operational strategies for fiscal year '26, highlighting the approach of assessing market conditions to guide fiscal plans. It addresses the increase in operational and maintenance (O&M) expenses in '25 as partly due to advancing expenses anticipated for '26. Chris Forsythe explains that the company takes an opportunistic approach to O&M spending, advancing maintenance efforts when scheduling and system conditions allow. Kevin Akers adds that the increase in line locating activities, due to growth in properties, contributes to higher O&M costs. Richard Sunderland acknowledges this explanation and requests further discussion on the O&M topic.

In the paragraph, there is a discussion regarding a potential retroactive component in Texas GRCs related to a regulatory asset tracker that could impact guidance for 2025. Chris Forsythe clarifies that the current guidance already accounts for expectations concerning operations, maintenance, and cloud computing treatments. Fei She, filling in for Nick Campanella, inquires about the company's equity financing strategy, noting higher year-to-date equity issuance and potential changes from previous messaging. Chris Forsythe responds that their financing strategy remains consistent, utilizing a mix of equity and long-term debt. He mentions the $1.7 billion available for equity needs for fiscal years 2025 and 2026, which will be drawn upon as necessary, and they anticipate a 30-year debt issue in the fall tied to existing interest rate swaps.

The paragraph features a discussion about gas demand and projects in Texas, focusing on the growth driven by commercial and industrial customers. Fei She inquires about the gas needs and any projects or backlog, to which Kevin Akers responds that there is no specific backlog, but highlights ongoing high-priority projects like the WA Loop and Bethel to Groesbeck projects and the completion of a salt-dome cavern as part of a maintenance program. Safety and reliability investments account for 85% of their capital spending. An unidentified analyst asks about legislative developments, specifically mentioning HB-4384, and their potential impact on the business. Kevin Akers confirms they are monitoring legislative sessions across eight states.

The paragraph discusses legislative developments affecting the utility sector in Mississippi and Kentucky, where some sessions are closed or concluded. The speaker emphasizes the importance of letting the legislative process finalize and notes that any utility-related decisions will need approval from specific jurisdictional commissions. An unidentified analyst inquires about using the new FY '25 EPS guidance midpoint of $7.25 as the base for calculating the 5-year CAGR, to which Chris Forsythe agrees it's a fair assumption. Additionally, the discussion touches on the timing of a delayed Colorado rate case. Kevin Akers notes that they are continually assessing the situation.

The paragraph involves a discussion about the regulatory strategy and cloud computing costs in West Texas, with Chris Forsythe explaining that their approach involves starting with specific jurisdictions and attempting to replicate successful regulatory constructs in other states. Decisions regarding cloud costs will be influenced by upcoming votes from rail commissions. Ryan Levine from Citigroup then questions about expansion projects and growth assumptions, to which Kevin Akers responds that planning is based on city models and anticipated demand and capacity requirements stemming from population growth across service areas.

In the paragraph, the discussion focuses on forecasting demand and ensuring supply readiness through modeling that is reviewed several times a year, particularly with customers' NVQs (nominated volume quantities) around the winter season. Ryan Levine inquires whether this refresh has already occurred, suggesting no changes are anticipated until post-winter 2026. Kevin Akers mentions that the review is ongoing, with plans to adjust before the next heating season if necessary. The call concludes with Dan Meziere thanking attendees and mentioning that a recording will be available on their website until June 30.

This summary was generated with AI and may contain some inaccuracies.