Thank you, Claudia, and good morning, everyone. Thank you all for joining us.

This call is open to the general public and media but designed for financial analysts. It is being webcast live over the Internet.

We have placed slides on our website that summarize our financial results. We will refer to just a few of the slides during the call, but we will be happy to take questions on any of them at the end of our prepared remarks.

If you would like to access the webcast and slides, please visit our website at atmosenergy.com and click on the Conference Call link. Additionally, we plan to file the company's Form 10-Q later today.

Our speakers this morning are Kim Cocklin, President and CEO; and Fred Meisenheimer, Senior Vice President and CFO. There are also other members of our leadership team here to assist with questions, as needed.

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. Any forward-looking statements are intended to fall within the Safe Harbor rules of the Private Securities Litigation Reform Act of 1995.

And now, I'd like to turn the call over to Kim Cocklin. Kim?

Thank you very much, Susan, and good morning, everyone. We certainly appreciate you joining us and your interest in Atmos Energy.

Yesterday, we recorded second quarter consolidated net income of $109 million or $1.20 per diluted share compared to $132 million or $1.45 per share one year ago. When you exclude the unrealized losses, net income was $117 million or $1.28 this quarter compared to $134 million or $1.47 last year.

Last year's quarter had onetime items totaling $11 million or $0.12 per share. After eliminating both the onetime items and the unrealized net losses, net income was $1.35 per share last year versus the $1.28 per diluted share in the current quarter.

For the first 6 months of last year, recorded earnings were $2.26 per share compared with $1.94 this year. Again, after eliminating the onetime items last year and the unrealized gains and losses in both years, adjusted earnings were $1.88 this year compared to $2.16 a year ago.

Our liquidity and financial position remains very strong. We have healthy credit ratings.

Our debt capital ratio was 50.2% at March 31 compared to 47.6% one year ago. We've contributed over $40 million to our employee pension and retirement plan to date this year to attain an 80% funding target for the pension plan.

Yesterday, our Board of Directors declared the 114th consecutive quarterly cash dividend. The indicated annual dividend rate for fiscal '12 is $1.38.

Our CFO, Fred Meisenheimer, will review our financial results in greater detail now, and will return for closing comments and open the call up for any questions. Fred?

Thanks, Kim. Good morning, everyone.

As a reminder, because of the agreement to sell our distribution assets in Missouri, Illinois and Iowa, we combined and report the financial results for those assets on the net income statement as discontinued operations for the periods presented. Therefore, the corresponding detail of our line item will be excluded from my comparative discussions.

Rate relief remains the primary driver of our success in the regulated operations. Rate increases for distribution and Atmos pipeline, Texas combined generated almost $15 million of incremental margin quarter-over-quarter and about $28 million for the 6 months compared to the same period last year.

Weather for the second quarter was 27% warmer than normal and 17% warmer than normal for the 6 months across our distribution service area. However, with WNA mechanisms protecting about 94% of our operating margins, we have largely mitigated the negative effects of a warm winter like we experienced this year.

Despite of a period-over-period 10% decline in consolidated throughput at the utilities, the overall negative revenue impact of warmer weather this past 6 months, after adjusting for WNA, was just $2.9 million.

In spite of the warm weather that caused deliveries to the Mid-Tex utility customers to decline, the Texas intrastate pipeline continued to experience an increase in its consolidated throughput, which was 17% higher quarter-over-quarter and 11% higher year-to-date. This increase is primarily from incremental through-system demand resulting from the execution of new delivery contracts with local producers, albeit at lower transportation rates.

Much of this increased throughput is gas being produced in association with crude oil wells.

Turning now to the expense side of the income statement. The silver lining to all this warm weather this winter, in addition to having WNA, was that our crews were able to focus on capital projects, thereby reducing O&M expenses by about $1 million for the quarter and about $4 million for the 6 months compared to the same periods last year.

Additionally, in the current quarter, we implemented regulatory asset treatment in Texas for our pension and postretirement liabilities, which allows us to defer the difference between our actual cost and what we’re currently recovering in rates. These costs will become eligible for recovery in our next rate proceeding.

In the current quarter, we deferred about $1.5 million of expense, and we expect to defer about $4 million of expense by the end of the fiscal year.

Partially offsetting these positives was a rise in legal cost. As we discussed on our first quarter call, these increases are primarily due to higher settlements and overall higher outside attorneys’ fees at the utility.

And the Texas intrastate pipeline experienced pipeline integrity spending that is running slightly up ahead of last year, about $1.8 million year-to-date and $500,000 quarter-over-quarter.

Turning now to our nonregulated operations, and you might want to turn to Slides 8 and 15. The ongoing and unfavorable natural gas market conditions continue to pressure this segment, though we anticipate natural gas storage levels will remain high for an extended period of time, gas prices to remain relatively low with little volatility and spot the forward spread values of basis differentials to remain compressed.

As a result, while we anticipate continuing to profit from our nonregulated activities on a fiscal year basis, we expect per-unit margins from our delivered gas activities and margins earned from our asset optimization activities will be lower than in previous years.

Realized delivered gas margins decreased about $5 million quarter-over-quarter and almost $10 million year-over-year due to a 7% decrease for the quarter and a 6% decrease year-over-year in consolidated sales volumes, mainly due to less consumption by weather-sensitive customers due to the warm weather; and a decrease in gas delivery per-unit margins from $0.15 per Mcf in the prior year quarter to $0.13 per Mcf in the current year quarter; and from $0.15 per Mcf in the prior 6 months to $0.12 per Mcf in the current 6 months, primarily due to lower basis differentials resulting from increased natural gas supply.

Realized asset optimization margins decreased about $9 million from the prior year quarter and almost $30 million from the prior 6-month period. In both the current quarter and the 6-month period, AEH took advantage of falling natural gas prices by purchasing and injecting into storage a net 9 Bcf for the quarter and a net 25 Bcf for the 6 months, and capturing incremental fiscal-forward spread values that should be realized primarily in the third and fourth quarters of fiscal 2012.

As a result of this decision and falling prices, we’ve realized significantly higher losses on the settlement of financial instruments used to hedge these natural gas purchases.

Unlike the regulated segments, operating expense is tracking below last year. Excluding the $19 million non-cash asset impairment charge recorded in last year's second quarter, operating expense is down $6 million year-over-year.

The decrease is primarily due to the capitalization of labor related to the development and implementation of a new energy, trading and risk management system and lower legal fees related to litigation in the nonregulated business.

Moving now to our earnings guidance for fiscal 2012. We have reaffirmed our fiscal 2012 earnings per share guidance of $2.30 to $2.40 per diluted share and have updated the expected contribution by business segment.

This range assumes no mark-to-market impact at September 30, 2012.

Let me draw your attention to Slides 32 through 38, where we have outlined our budget assumptions and earnings re-projections. We expect the regulated businesses to generate over 90% of total net income for fiscal 2012.

The distribution segment is now expected to achieve net income in a range of $134 million to $138 million and the regulated pipeline in Texas to earn between $59 million and $62 million.

The nonregulated business is reprojected to generate net income in the range of $17 million to $20 million. As a result of the continuing challenges of high natural gas storage levels and the unseasonably warm weather, we re-project nonregulated delivered gas and storage and transportation margins to range between $57 million to $62 million.

We also now anticipate delivered gas volumes of 420 Bcf to 430 Bcf at a per-unit rate of $0.09 to $0.10. Our expectations for asset optimization margins continue to remain in the range of breakeven to $2 million.

For the near term, we are expecting asset optimization activities to at least offset the contracted storage land fees. Keep in mind, however, that storage is essential for the over 1,000 customers to which ADH provides services, such as our distribution divisions, utilities and other regulated municipalities contracted for firm natural gas supply.

We are working to shorten the lease terms for the contracted storage to one year to better manage our cost.

Original earnings projection assumes a $5 million pretax gain on the sale of the distribution properties in Missouri, Illinois and Iowa. As we have continued to refine the investment in those assets that we'll transfer to the purchaser, we now anticipate a pretax gain of approximately $10 million.

And as we have already discussed, the unseasonably warm weather this past quarter enabled us to accelerate our capital spending and slow the O&M run rate. As a result, we're now projecting a $5 million reduction in the O&M expense to a range of $460 million to $470 million for the full fiscal year.

Our capital budget was increased by $50 million last quarter and another $10 million this quarter, which sets the new range of between $690 million to $710 million for fiscal 2012. The increased capital spending will primarily be at the Texas intrastate pipeline on our 2 previously announced infrastructure projects.

We are also increasing our operating cash flow projection by $40 million this quarter to a range of $550 million to $570 million. Driven by the warm weather, we cycled less gas from storage, make fewer gas purchases to replenish the storage withdrawals and the gas purchases that were made were made at reduced prices.

As Kim mentioned, we contributed $43.3 million to our pension and postretirement plans. The pension obligation was driven by both a reduction in the discount rate and a decline in the fair value of plan assets compared to the last year.

We expect to contribute an additional $23 million to $28 million to the plans before September 15, 2012.

Thank you for your time. And now, I'll hand the call back over to Kim.

Kim?

Thank you very much, Fred, for that very thorough and excellent report. Obviously, while the weather has been anything but cooperative for winter service, it has created excellent conditions to jump start our strategy to grow the company by investing in our regulated asset base.

As we have previously discussed, we're targeting significant capital investment over the next 5 years to fortify, strengthen and/or replace our infrastructure to make our system even safer and our service even more reliable, all while spurring economic growth and jobs in our service territory.

As a result of the various policy pronouncements encouraging investment, we expect to increase our rate base from about $4 billion at the beginning of the current fiscal year to between $5.8 billion and $6 billion by the end of fiscal 2016, which equates to a compounded annual growth rate in rate base of 8% to 8.5% over that timeframe. You can find the details on the Slides 42 to 45 in the appendix of the slide deck.

We do plan to finance this growth from internally generated cash flow and a combination of debt and equity.

Our current plan assumes a net $200 million increase in debt over that period. Additionally, an equity issue may be necessary in the out years to optimize the debt-to-equity balance for rate-making purposes.

Despite the slight dilution from issuing equity, the enhanced value of the rate base is expected to generate earnings growth in the range of 6% to 8% on a compounded annual basis by 2016.

As we announced last quarter, we have begun investing significant capital in our Texas intrastate pipeline system to increase its capacity to secure new long-term gas supply on a firm, reliable basis and also to enhance the reliability of our service in certain critical locations along the Mid-Tex system. The Line W looping project is designed to secure new long-term gas supply for the Dallas-Fort Worth Metroplex and will require capital of between $47 million and $52 million.

Also, during fiscal 2012 through fiscal 2014, we will spend between $110 million, $120 million in capital on the Texas intrastate pipeline to construct Line X, which will improve service reliability for our regulated customers. These capital expenses are GRIP eligible with an 11.8% return on equity, and these projects improve the reliability of our pipeline system for all the customers that we serve.

Moving to the distribution business. In Texas, we do have a risk-based program that encourages spending for system safety and reliability pursuant to Rule 8.209.

Projects under Rule 8.209 are approved in advance, and the rule allows regulatory asset treatment for the carrying costs. We expect Rule 8 spending to be about $100 million in fiscal '12 and increase to more than $200 million by fiscal 2016.

Also in Texas, we have the steel service line replacement program, which is expected to be completed by the end of September. This is also a risk-based program, where the carrying cost and return are collected in advance of the spend by way of a customer surcharge.

This program is set to expire at the end of this fiscal year, September 30, 2012, and we expect to have spent almost $70 million during that period in fiscal '12.

The Kentucky pipeline replacement program also encourages capital spending related to safety by allowing carrying cost and return to be collected in advance by way of a customer surcharge. This program is expected to run for 10 to 15 years.

And coupled with similar projects in Georgia and Kansas, we expect to spend almost $40 million of capital is these 3 states in fiscal 2012.

All told, we anticipate spending over $200 million on enhanced infrastructure replacement programs this fiscal year compared to about $65 million spent on similar programs last year. And over the 5 years, we expect this type of spending to grow at a compounded annual rate of about 27%.

We continue to execute our rate strategy to reduce lag, improve return on equities and increase the recovery of fixed cost. Fiscal year-to-date, we have received operating income increases of about $23 million from rate outcomes.

In total, we have almost $70 million in rate requests pending and anticipate filing another 5 to 7 cases this fiscal year requesting between $10 million and $15 million of incremental operating income increases.

We anticipate closing the sale of our Missouri, Illinois and Iowa distribution assets by July 1. Final approval by Illinois is pending, and all other requisite regulatory approvals have been obtained.

Our transition team communicates weekly with the purchaser, which is Liberty, to ensure that a smooth transfer of these assets will occur. Cash proceeds from the sale will be redeployed into the rate base investment opportunities that we've identified.

The nonregulated marketing group will continue to focus on its delivered gas sales business and its track record for excellent customer service. Growth for this business is difficult given current market conditions, but we intend to continue to focus on decreasing annual sales and improving margins, and we'll be realistic by expecting less than 10% of the consolidated earnings to be generated from this unit.

our shareholders, our customers, our communities and the regulators. Therefore, we'll focus on the earnings growth potential from our accelerated rate base investment over the next 5 years.

We remain committed to growing our assets and delivering consistent long-term financial success.

We thank you for your time this morning. We will now open up for the questions now.

Claudia?

I guess I'm trying to understand, for this 8.209, is -- what's the ROE that you'll book on that? Is that tied to what you'll get in the Mid-Tex case that you're currently in?

Yes.

Yes.

It's at West Texas.

So for both West Texas and Mid-Tex. Okay.

Yes.

Yes.

Okay. So until you get a decision on that, you'll book it at your historical ROE.

And then whatever that decision is, you'll then implement that?

Right.

Right.

So maybe just update us on where are you on Mid-Tex, the $46 million ask. What should we you think about in terms of timing?

How are the negotiations going with the cities, et cetera?

Well, the negotiations are going fairly well. There seems to be -- continue to be a lot of discussion.

At this point in time, it doesn't appear that we're headed for a settlement in the short term. We're continuing to anticipate that, that case may go before the commission and be heard.

And that's really what -- we hope to settle it, and -- but we're not -- I mean, at this point it's hard to handicap it, Ted. We do -- we were -- we're planning as if we're not going to have an outcome probably until the fiscal 2013 period.

Yes. And I think that, yes, you had made that pretty clear, that you had not really put anything in guidance for that, so okay.

And then just shifting over to the -- on the Texas pipeline side, I guess I'm wondering what's the nature of all the spending you'll be doing. Are these -- is this new build pipeline or just sort of fortifying the [indiscernible].

Part of the reason I ask is we -- I keep hearing that we're well piped in Texas; you have low basis differentials. You have energy transfers, talking about converting some gas pipelines to liquids.

I'm just trying to understand the need for the pipeline spending in Texas.

Well, the need for the pipeline -- obviously, the Line W that is going in right now and that we'll expect to be in service by the end of this fiscal period is supported by an 8-year contract with EOG. And they've already -- essentially, that's a demand charge-based contract.

It's in -- it involved with what we understand to be wet gas that they're drilling up right now, and there's not enough capacity coming out of that Monte County area. So that -- I mean, we've already -- we've essentially -- that firm contract is to back up the investment there.

And then the other project, the Line X, is really the southern part of the system, and it is really just fortifying the price that we have down there and improving the system reliability. We experienced some weak spots on that system during the cold snap that occurred last winter, and as a consequence, it was identified by the engineers as necessary to be bolstered up.

And so that is going to be a GRIP-eligible project, and it's really being utilized to serve the needs of the regulated customers that are on their -- serviced by the pipeline itself. So neither one of those projects are at risk in terms of being forced to have competition from whatever you're -- whatever other discussion you're hearing about.

Yes. That's fair.

I guess I'm maybe thinking about beyond the 2 announced projects. It looks like it's $100 million to $200 million and maybe $150 million in the rest -- sort of '13 through '16.

Kind of how are you envisioning that -- those type of projects?

That's all, Ted, is infrastructure improvements, which we're getting a lot of support from the regulators and various people to do that because of the events that have occurred in the past few years, San Bruno, et cetera. And I think both the company and new regulators see this as a good time to spend this type money to make these infrastructure improvements while gas prices are very low.

It has minimal impact, if any, on the customer base.

I guess I'm just wondering, you obviously had some weather impact so far in the year and the quarter. I guess outside of the weather-related consumption changes, can you talk about some of the economic factors that you're seeing in your results thus far?

I'm seeing a little bit of a tick-up in your bad debt. Are there any large accounts driving it?

Or is it more kind of across the system?

No, I -- bad debts, we believe, are in excellent condition. Our provision is roughly 3/10 of 1%.

Our net write-offs year-to-date are $200,000 on utility. And so we believe our allowance account is very adequate, and our bad debt situation is well in hand.

It is something we have a lot of people focused on, working on, dedicated to. And for the past several years, our bad debt experience has been very, very low.

And then you might comment on weather normalization.

Yes, weather normalization. Had we not had weather normalization, we would have had an impact of about $47 million from weather.

But with the weather normalization, our impact was $2.9 million. So our WNA worked very, very well for us.

There are a few states where we do not have WNA. Colorado being the one that we don't have it and that we will be retaining.

The others where we don't have it are those 3 states that we're disposing of. So our WNA has worked extremely well for us.

Yes. I mean, it's been quite the opposite of what you described, because obviously, the weather has dampened the price of gas, and obviously, that has reduced the exposure on the uncollectible side of the business.

But we've got also adequate coverage on the recovery of the gas cost portion of bad debt in a lot of our jurisdictions, so that risk has been minimized and been an excellent job. And again, if there was ever a test for WNA, it was this year.

And the silver lining, obviously, is that it has worked very beautifully along with the rest of the rate strategy that we’ve deployed over the last 5 years. And the biggest bonus is that we've had the opportunity to have a construction season for about the last 14 months going, and we've taken full advantage of that to continue to ramp up the investment in the regulated assets and get ahead of the curve on this infrastructure fortification and replacement.

I mean, the regulators are -- they're doing a lot of things to incentivize and motivate the utilities right now to get out in front and to avoid any kind of infrastructure upset like you saw in Minnesota with bridges or even -- obviously, no one wants another San Bruno. And we're doing a lot on that side and you’re seeing some very, very good results in terms of the statistics that we're seeing for leak detection, leak results and the safety outcomes.

Yes. And also, in addition to that, the industrial demand that we have seen this year compared to last year on a consolidated basis is up 2% over last year on the industrial demand.

And we do have a detailed slide on that in the slide deck on -- #54 will give you a breakdown on that, but we've seen a 2% increase in industrial demand.

Yes. I mean, I guess I wasn't really -- I didn't really mean in the financial results from the usage, because as you said, you have good protection there, and it worked very well.

I guess I just kind of wanted some more general commentary on the economic environment across your territories.

Well, Texas has generated more jobs than anywhere else in the country and continues to do so. The economy here is very good.

Texas is probably -- and in fact, I heard on the news this morning, it's been deemed the most business-friendly state in the U.S., and the economy here has remained better than most of the rest of the country.

A quick question on the increased capital expenditure plan. You did mention that you'd be issuing some incremental debt and potentially some equity.

Debt-to-capital has increased slightly. Can you give me an idea, sort of a range that you want to stay debt to capital-wise throughout the build-out?

And sort of just comment on your credit ratings for us.

We have stated and will continue to state and will stay within this range of the 50% to 55% of debt-to-cap. That's the sweet spot from the regulator standpoint.

That's where we have the company now. We're 50-50 right now.

And we will stay in the 50% to 55% range throughout our 5-year cycle here that we're looking at, and we'll actually improve a little over time in the out years.

Okay. Excellent, I appreciate it.

And any thoughts on the higher credit rating? I know you were recently upgraded, but given the focus on internal growth instead of acquisitions and the emphasis on the regulated operations, it seems like the organization could actually procure a higher rating.

Any thoughts on that?

Well, we visit with the 3 rating agencies each year, and we have recently visited with them. Fitch did come out the other day and reaffirmed our ratings as an A- and stable.

They have us one notch higher than the other 2 have us. We believe with these basic numbers, that we are very, very high in the rating grouping and possibly one notch higher.

For whatever reasons the rating agencies are -- have not -- 2 of them have not bumped us up into that higher notch. From a regulatory standpoint, we get very good treatment being in the BBB+ class where we are from the standpoint of regulators.

While it would be nice to be a notch higher, it's not something that we feel is absolutely necessary.

Thank you, Claudia. Just as a reminder, a recording of the call is available for replay on our website through August 8.

And if you have any additional questions, please call me, I'm around all day, or visit us at the upcoming AGM Financial Forum. We appreciate your interest in Atmos Energy, and thank you all for joining us.

Goodbye.