Atmos Energy Corp. Stock

Hello, everyone. Thank you for joining us, and welcome to Atmos Energy Corporation's Fiscal 2026 Third Quarter Earnings Conference Call. [Operator Instructions]

I will now hand the conference over to Dan Meziere, Vice President of Investor Relations and Treasurer. Dan, please go ahead.

Thank you, Lucas. Good morning, everyone, and thank you for joining our fiscal 2026 third quarter earnings call. With me today are Kevin Akers, President and Chief Executive Officer; and Chris Forsythe, Senior Vice President and Chief Financial Officer. Our earnings release and conference call slide presentation, which we will reference in our prepared remarks, are available at atmosenergy.com under the Investor Relations tab.

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 such material differences are outlined on Slide 32 and are more fully described in our SEC filings.

With that, I will turn the call over to Kevin.

Thank you, Dan, and good morning, everyone. We appreciate your interest in Atmos Energy. Yesterday, we reported year-to-date fiscal '26 net income of $1.2 billion or $7.33 per diluted share. And we reaffirmed our earnings per share guidance in the range of $8.40 to $8.50. Our capital expenditures for the fiscal year totaled $3.1 billion, with over 87% of these investments focused on enhancing the safety and reliability of our distribution, transmission and underground storage systems.

Across our service territories, we continue to see steady diversified customer growth. For the 12 months ending June 30, 2026, we added nearly 51,000 new customers with nearly 39,000 of those new customers located here in Texas. And during the third quarter, we added 600 commercial customers and over 2,500 commercial customers fiscal year-to-date. Additionally, we added 5 new industrial customers during the third quarter and 12 new industrial customers fiscal year-to-date. The 12 new industrial customers are anticipated to use approximately 950,000 Mcf per year once they are fully operational. That is volumetrically equivalent to adding 18,000 residential customers. This continued demand from all customer classes demonstrates the value and vital role natural gas plays in economic development across our Atmos Energy service territory.

The Texas Workforce Commission reported that Texas once again added jobs at a faster rate than the nation over the last 12 months ending June 2026. And in 2026, Texas added 3 Fortune 500 companies, bringing the total number of Fortune 500 companies to 57, the most in the nation at the highest level in Texas since 2010. In APT, we continue to work to enhance the safety, reliability, versatility and supply diversification of our system as well as support the continued growth we are seeing in the local distribution company behind APT system. APT is currently working on 2 separate projects to the Southeast of the DFW Metroplex that will install a total of 29 miles of 36-inch pipeline to connect 2 adjacent compressor stations to our Tri-City storage facility. These projects enhance system reliability and capacity for gas transported from the Haynesville and Cotton Valley shale plays to our Bethel and Tri-City storage facility, all to support the growing DFW Metroplex.

To the east of the Metroplex, we began construction of a bilateral compressor station in Carthage, Texas that will increase the capacity of our 36-inch line S2 pipeline. Finally, we are working on the final phase of the WA Loop project to support growth in the northwestern portion of the Metroplex. This final phase will install 15 miles of 36-inch pipe, and it will complete a 92-mile 36-inch pipeline loop. All of these projects are currently scheduled to be placed into service by the end of the calendar year. This month, APT will submit its annual Rider REV tariff seeking to reflect $160 million to $165 million in revenue credits for LDC customers on the system between November 1, 2026, and October 31, 2027. If this amount is approved as filed, these customers will have received over $300 million in savings through the Rider REV mechanism from November 2023 through October 2027.

Our customer support associates and service technicians continue to provide exceptional customer service, achieving customer satisfaction ratings in excess of 97% for the first 9 months of this fiscal year. Finally, during the first 9 months of the fiscal year, our customer advocacy team helped nearly 49,000 customers receive about $16.2 million in funding assistance.

I'll now turn the call over to Chris for his update.

Thank you, Kevin, and thank you to everyone for joining us this morning. As Kevin mentioned, earnings per share for the first 9 months of the fiscal year was $7.33, which represents a 14.5% increase over the prior year period. Our year-to-date results include $132 million or $0.63 on the impact of Texas House Bill 4384, $71 million is recognized in our distribution segment and the remaining $61 million is recognized at APT.

In addition to the impact of House Bill 4384, I wanted to highlight a few other drivers of our financial performance for the fiscal year-to-date period. Rate increases in both of our operating segments totaled $227 million. Operating income increased by an additional $41 million due to residential and commercial customer growth and increased customer load. APT's through-system revenues, net of Rider REV, increased about $34 million or $0.16. This increase continues to reflect significantly higher spreads realized during fiscal '26 compared with fiscal '25 that we've been discussing this entire fiscal year.

During the first 9 months of fiscal '26, the spreads we captured averaged $4.66 compared with $1.77 in the prior year period, reflecting rising associated gas production, constrained takeaway capacity and lower demand due to unseasonably warm weather during the past winter heating season. Finally, consolidated O&M decreased $14 million, reflecting higher employee compliance and safety-related spending in our distribution segment, higher maintenance spending at APT, all offset by the impact of the implementation of the House Bill 4384 deferrals. From a regulatory perspective, since the beginning of the fiscal year, we have implemented $396 million of annualized operating income increases. Of this amount, $260 million was implemented during our third and fourth fiscal quarters. Currently, we have 7 filings in progress, seeking nearly $334 million in annualized operating income increases. We expect to implement most of this amount in the first quarter of fiscal '27.

Our equity capitalization as of June 30 was 60%, and we do not have any short-term debt outstanding. At quarter end, we had $4.6 billion in available liquidity to support our operations. This includes approximately $937 million in net proceeds available under existing forward sale agreements, which is expected to satisfy the remainder of our anticipated fiscal '26 equity needs and a significant portion of our anticipated equity needs for fiscal '27. As we reported last night, we reaffirmed our fiscal '26 earnings per share guidance in the range of $8.40 to $8.50. APT's through-system business during the third fiscal quarter was in line with our expectations.

Beginning in June, spreads have narrowed significantly now that additional takeaway capacity has come online, some sooner than expected. Additionally, O&M spending in fiscal '26 is trending slightly higher. We now expect fiscal '26 O&M, excluding bad debt expense be in the range of $875 million to $885 million. Finally, we remain on track to spend approximately $4.2 billion in capital expenditures for fiscal '26. We appreciate your time this morning and your interest in Atmos Energy. We'll now open up the call for questions.

[Operator Instructions] Your first question comes from the line of Constantine Lednev with Wells Fargo Securities.

This is [indiscernible] for Constantine. Great quarter. Given we are a quarter short of the year, do you anticipate to be in the top end of guidance? Do you anticipate any offsets to the strong year-to-date performance in 4Q? And maybe just a quick question around APT. Given where Waha has been trading, are contributions still moving in the same direction or do you anticipate some narrowing?

Yes. As we mentioned, we've reaffirmed our guidance in the range of $8.40 to $8.50. As I mentioned, APT's performance in the third quarter was in line with our expectations. But as I also highlighted, we are seeing a significantly narrower spreads beginning in the latter half of the third quarter and continuing that through today as a result of additional takeaway capacity coming online, some of which was coming online sooner than expected. A couple of different pipes expected to go online in the fourth quarter of the calendar year, and they came on one in late June and one here in late July. And they're beginning to ramp up, which has had a -- causing the compression of the spread.

So all in all, we are standing by our $8.40 to $8.50 range for EPS for fiscal '26, and we will see where the fourth quarter takes us in terms of spread opportunities and other operational factors for the remainder of the fiscal year.

Got it. Okay. And just to squeeze a tiny question. Given the strength in fiscal year '26, do you feel you can carry some flex into fiscal year '27 just from an O&M and cost perspective? That will be all.

If I understand your question correctly, in terms of -- if you're talking about APT, we certainly had mentioned before that we would continue to reflect in our base plan that we will roll forward in the fall an amount coming from APT's through-system business in line with the benchmark that we have established at roughly $107 million. With respect to O&M in our 5-year guidance that we have out there right now, we anticipate a 4% O&M increase per year, and we'll refresh that when we roll forward the 5-year plan later this fall.

Your next question comes from the line of Richard Sunderland with Truist Securities.

I actually want to follow up on some of those APT questions. Just last quarter, I think it was an $0.08 to $0.12 range for 2H uptick you guys had spoken to. It looks like you captured most of that this quarter, but is $0.08 to $0.12 still the right range to be thinking about over that period, meaning moving for the balance of the year on 4Q?

Yes, Rich, thanks for the call. Thanks for the question this morning. As you mentioned, we did pick up the $0.08 in the third quarter with the tightening of the spreads. I would say that we're probably going to be in the lower end of that range at this point in that $0.08, $0.12. So we'll see. And again, we'll have to continue to see what happens with maintenance on some of this takeaway capacity where the summer heat loads going or winter -- cooling load, excuse me, and we'll just see where we go from that. But I think the lower of that. But I think the lower of that range is more appropriate.

Okay. That's helpful context. And then I also wanted to follow up on O&M. And just, I think, I ask sort of in a similar way, right? Like you took up the low end of the range, $10 million. I realize it's relatively modest, but is that reflective of any activities kind of getting pulled forward into '26 from '27? Or is that more around line locates, other kind of external drivers? Just curious to parse that a little bit and think about kind of '26 versus '27 O&M activity.

Yes. Typically at this time of the year, it's more related to ongoing activity across the Metroplex in other areas with the growth that we're seeing line-locate activities. Ongoing compliance and maintenance activities in that area, but that's what we normally see around this time of the year.

Our next question comes from the line of Julien Dumoulin-Smith with Jefferies.

Luke Fenker on for Julien. Nicely done in the quarter. I just wanted to ask on Rule 7.7102. Just given the benefits we've seen of late, can we expect this to like maybe remain a discrete earnings benefit in '27? Or does it increasingly roll into Texas recovery from here? Just want to get a sense of how that's trending.

Yes. Well, thanks for the question, Luke. Fiscal '26 is a step year change as a result of the implementation of 7.7102. And as we've said going forward, we expect that year-over-year to be more in line with what we've experienced in the past with respect to Rule 8.209. And so as we said at the end of the second quarter, we are anticipating launching a 6% to 8% earnings per share growth off of our current range off of our current range or guidance range of $8.40 to $8.50. So that reflects that it's more of a moderation effect going forward now that we've got a full year's impact of the rule under our belt at this point.

Awesome. And then maybe just wanted to see the latest timing and your confidence level around the Mid-Tex cities', RRM and maybe like how you see yourself positioned on customer bill affordability in Texas more broadly?

Yes. If you look at our deck that's out there, particularly our May investor deck, I think Slides 18 through 21 or 22, we have good information out there about affordability, both from a customer bill perspective, where we remain the lowest bill in the house. You want to look at it on an energy comparison basis, kilowatt to kilowatt, BTU to BTU. Across our service territories, we range from 2% to 4% lower than electricity on a household basis. Then you go to look at wallet share, both from the low income and a median income perspective, we range from 1% to 1.2% of the wallet with on the electric side ranging at about 2 to almost 3x wallet share. So we think our team continues to do an excellent job of keeping affordability top of mind, focusing on things we can control and being an efficient provider.

[Operator Instructions] Your next question comes from the line of Dylan Lipner with Mizuho.

Congrats on a good quarter here. I just kind of wanted to get back to Waha. Waha now back in positive territory and additional takeaway capacity expected to come online over the next several quarters. How are you guys thinking about how this is going to impact APT's earning power and utilization in the near term?

Well, as we said, Chris just highlighted where we think we're going to be on the guidance we gave before at the lower end of the $0.08 to $0.12 range. Again, we budget the benchmark for Rider REV. And we'll continue to monitor what we see over the next few months as we head into the fall and heating season. Definitely no crystal balls here. We're not going to try and guess what's going to be going on in that period. We'll just have to see what the rest of the summer cooling load looks like. And then as we move into the fall, the winter and fall show up early and cause a spike in demand, what does that look like. So again, pretty much back to basics as we do every year, year in and year out. We're going to budget the benchmark, and then we'll see what comes our way from there.

[Operator Instructions] There are no further questions at this time. I will now turn the call back to Dan Meziere for closing remarks. Dan, please go ahead.

We appreciate your interest in Atmos Energy, and thank you again for joining us this morning. A recording of this call is available for replay on our website through September 30, 2026. Have a good day.

This concludes today's call. Thank you for attending. You may now disconnect.

Thank you for standing by. My name is Kayla, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Atmos Energy Corporation Fiscal 2026 Second Quarter Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Jennifer Wernicki, Director of Investor Relations and Assistant Treasurer. You may begin.

Thank you, Kayla. Good morning, everyone, and thank you for joining our fiscal 2026 second quarter earnings call. With me today are Kevin Akers, President and Chief Executive Officer; and Chris Forsythe, Senior Vice President and Chief Financial Officer. Our earnings release and conference call slide presentation, which we will reference in our prepared remarks, are available at atmosenergy.com under the Investor Relations tab. 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 such material differences are outlined on Slide 29 and are more fully described in our SEC filings.

With that, I will turn the call over to Kevin Akers, our President and CEO. Kevin?

Thank you, Jennifer, and good morning, everyone. We appreciate your interest in Atmos Energy. Yesterday, we reported year-to-date fiscal '26 net income of $985 million or $5.92 per diluted share, and we updated our earnings per share guidance range to $8.40 to $8.50. Our capital expenditures for the first half of the fiscal year totaled $2 billion, with over 89% of those investments focused on enhancing the safety and reliability of our distribution, transmission and underground storage systems.

Across our service territories, we continue to see steady customer growth. For the 12 months ending March 31, 2026, we added over 51,000 new customers with over 39,000 of those new customers located here in Texas. And during the second quarter, we added over 800 commercial customers and 4 new industrial customers. This continued demand from all customer classes demonstrates the value and vital role natural gas plays in economic development across our service territories. In APT, we continue to work to enhance the safety, reliability, versatility and supply diversification of our system as well as support the continued growth we are seeing in the local distribution companies behind APT system.

During the second quarter, we completed Phase 2 of the Line WA project. This project installed approximately 44 miles of 36-inch pipeline to the west of Fort Worth to support growth in this area of the DFW Metroplex. Additionally, APT enhanced supply optionality, reliability and system versatility with the completion of 5 interconnect projects and adding nearly 100,000 Mcf a day of additional natural gas supply to the APT system. These investments further enhance APT's ability to serve the LDC customers behind the city gate. These LDC customers also benefit from APT's Rider REV tariff, which shares approximately 75% of APT's other revenue build that is above a specified benchmark. As a reminder, these revenues vary from year-to-year based upon available capacity on our pipeline and natural gas pricing dynamics in Texas.

Over the last 3 years, these customers have received approximately $150 million in total as credit from the Rider REV tariff. As you'll hear from Chris in a few minutes, natural gas pricing dynamics have positively impacted APT other revenue build in the first half of fiscal 2026 and are expected to favorably impact our financial results for the remainder of the fiscal year. Our customer support associates and service technicians continue to provide exceptional customer service, achieving customer satisfaction ratings of 97% for the first 6 months of the fiscal year, truly outstanding work by this team.

Additionally, during the first half of the fiscal year, our customer advocacy team helped over 33,000 customers to receive approximately $9.5 million in funding assistance. And recently, we were named to the Forbes list of America's best large employers, ranking as one of the top 100 employers overall and placing second among all utilities. This is the sixth consecutive year Atmos Energy has been named to this list. This recognition reflects the continued dedication, focus and effort of all Atmos Energy employees to safely deliver reliable and efficient natural gas to homes, businesses and industries to fuel our energy needs now and in the future. Their commitment has us well positioned for the remainder of the fiscal year.

Now I'll turn the call over to Chris for his update.

Thank you, Kevin, and thank you to everyone for joining us this morning. As Kevin mentioned, earnings per share for the first 6 months of the fiscal year was $5.92, which represents a 12.5% increase over the prior year period. Our year-to-date results include $94 million or $0.43 from the impact of Texas House Bill 4384. Of this amount, $44 million was recognized in our Distribution segment and the remaining $50 million was recognized at APT. During the second quarter, the Texas Rev Commission completed its final rulemaking to codify Texas Household 4384 into Rule 7.7102. As you know, this rulemaking reduces lag in Texas by permitting gas utilities to defer post-in-service carrying costs, depreciation and ad valorem taxes associated with non-eligible Rule 8.209 capital investments such as new customer growth and system expansion. Since adopting Rule 7.7102 in late fiscal '25, we've been presenting the deferral of post-in-service carrying costs as a reduction to interest expense to be consistent with Texas Rule 8.209. With the new rule now final, we have determined it is most appropriate to present the deferral of post-in-service carrying costs in the income statement line items where the incurred costs are classified, O&M and interest expense. This updated presentation has been reflected in our fiscal second quarter and fiscal year-to-date results, which reduced reported O&M for the first 6 months of the fiscal year by $41 million.

Our year-to-date performance was influenced by several additional factors. Freight increases in both of our operating segments totaled $171 million. Operating income increased by an additional $32 million due to residential and commercial customer growth and increased customer load. Finally, APT's through-system revenues net of Rider REV increased about $16 million or $0.08. Substantially, all of this increase reflected higher spreads realized during fiscal '26 compared with fiscal '25. During this first 6 months of fiscal '26, the spreads we captured averaged $4.35 compared to $1.80 in the prior year period, reflecting rising associated with gas production, constrained takeaway capacity and lower demand due to unseasonably warm weather during this past winter heating season.

Excluding the impact of Rule 7.7102 deferrals, consolidated O&M increased $27 million, reflecting higher employee, compliance and safe-related spending in our distribution segment and higher maintenance spending at APT. From a regulatory perspective, since the beginning of the fiscal year, we have implemented $136 million of annualized operating income increases in our distribution segment. Currently, we have 13 filings in progress, seeking nearly $600 million in annualized operating income increases. We expect to implement approximately 40% of this amount primarily during our third fiscal quarter. The largest filing we expect to implement during the second half of the fiscal year, APT's [ script ] filing seeking $112 million in annualized operating income increases is scheduled to be considered by the Texas Royal Commission next Tuesday, May 12.

Our equity capitalization as of March 31 was 61%, and we did not have any short-term debt outstanding. During the second quarter, we extended our 4 credit facilities that provide $3.1 billion in total liquidity. At quarter end, we had $4.1 billion in available liquidity to support our operations. This amount includes approximately $890 million in net proceeds available under existing forward sale agreements, which is expected to satisfy the remainder of our anticipated fiscal '26 equity needs and a portion of our anticipated equity needs for fiscal '27. As we reported last night, we have increased our fiscal '26 earnings per share guidance from an original range of $8.15 to $8.25 (sic) [ $8.35 ] to a new range of $8.40, $8.50. We expect the remaining contribution to fiscal '26 earnings per share to be recognized somewhat evenly by quarter in the back half of the fiscal year.

Two key items are driving the increase in our fiscal '26 guidance. First, our guidance reflects our expectations for the performance of APT's through-system business for the second half of the fiscal year. As we've mentioned before, going into a fiscal year, we based our assumptions for this line of APT's business, assuming revenues in line with our benchmark based on historical norms for available capacity on our system and pricing. Although we have recently seen some modest improvement in Waha, we anticipate natural gas pricing in the Permian will remain challenging for the remainder of our fiscal year. As I mentioned earlier, this part of APT's business added $0.08 period-over-period. We currently anticipate that APT's through-systems business will add an additional $0.08 to $0.12 for fiscal '26 results during the second half of the fiscal year. Secondly, with final rulemaking completed and improved visibility into the timing of our capital spending in Texas for the remainder of the fiscal year, we believe the impact of implementing Rule 7.7102 will be higher than originally planned. We estimate this impact will range from $155 million to $165 million for the entire fiscal year, including the deferral of incurred post-in-service carrying costs, depreciation and ad valorem taxes.

We still anticipate our O&M to be in the range of $865 million to $885 million. We have reflected the estimated impact of Rule 7.7102 deferrals in our O&M guidance. However, we anticipate this decrease to be substantially offset by higher system monitoring compliance and employee costs. And we anticipate our interest expense to be in a new range of $155 million to $160 million. This increase is solely due to the reclassification of the 7.7102 deferrals of interest into O&M that I mentioned earlier.

Finally, we remain on track to spend approximately $4.2 billion in capital expenditures in fiscal '26. We appreciate your time this morning and your interest in Atmos Energy.

We'll now open up the call for questions.

[Operator Instructions] Your first question comes from the line of Julien Dumoulin-Smith with Jefferies.

It's Paul Zimbardo on for Julien. The first I had was just on the dividend increase, like roughly 15%, again, quite impressive and better than where you've been trending in the past. Just any thoughts on kind of how sustainable? Do you intend to kind of keep increasing above trend? And just overall thoughts on the dividend perspectively, would be useful.

Yes. I think we stated for a while now that we're going to grow the earnings per share at a 6% to 8% range, incrementally grow the dividend, and that's where we're going to continue to go as we move forward.

Yes. As a reminder, that 15% year-over-year is reflective of the dividend being rebased in addition to rebasing the earnings per share because of the expected impact from Texas Rule 7.7102.

Okay. So you're kind of converging back to where you were before after the rebates, okay.

Yes.

And then the other was just -- could you unpack a little bit more? I know you gave some detail on the kind of the shift between O&M and interest expense. If you could give a little more detail and just confirming that is kind of a basically a one-for-one change, not a net earnings impact there.

Correct. It is not a net earnings impact, is a reclassification in how we present the deferral of the post -- incurred post-in-service -- incurred carrying costs at the end of the day. So originally we had all of that in the interest expense line item, final rulemaking, we looked at the proper classification of that. Incurred post-in-service carrying costs reflects all costs associated with the gas plant investments. That has been -- is subject to the rulemaking that has not yet reflected in rates that includes O&M, interest and other costs to be elected to present that deferral in the line item of the income segment where the costs were originally incurred and reported, if that makes sense.

Okay. No, that does make sense. And then if I can sneak in a last one quickie. You mentioned that there's been a pretty dramatic move in Waha. Just any way that you would frame that kind of beyond 2026 for customers?

No. I mean, obviously, we don't have a crystal ball out there. We'll continue to watch what happens over the next 6 months. We're not even into the real heat here in Texas. So the power gen load hasn't kicked in yet as well. As Chris said earlier, we have seen some moderation from some of the historic highs at Waha and the basis differential. We're going to continue to monitor as we go through the next 6 months. We'll keep you updated on these calls as we move forward.

And your next question comes from the line of Richard Sunderland with Truist Securities.

Turning to the guidance raise. I know you parsed two different pieces there. How do you think about that as a base for growth going forward? Obviously, that clarification on rulemaking for Texas 7.7102 sounds like a new long-term view, but is that $8.40 to $8.50 a good clean base for the 6% to 8%?

Yes. At this point, we think that's a pretty good base to think about fiscal '27 and beyond as a launch point within that range.

Great. And then on the ATM, I think if I'm reading the disclosures correctly, you didn't price anything on the quarter. I know you're a little bit ahead with having part of '27 addressed. But how are you thinking about activity there? Was there any hang up on the quarter specifically and just timing overall of ATM activity?

No. On the ATM activity, you're correct, we didn't price anything during the second quarter. As you mentioned, we were fully priced for fiscal '26. We got a pretty good portion already established for fiscal '27. So we just wanted to kind of see what the market is doing. As you know, there's a lot of volatility in the second quarter with geopolitical events and economic news and whatnot. So we decided to keep our powder dry for the quarter, but we'll evaluate as we move forward pricing opportunities, so we can get ahead -- further ahead on fiscal '27's equity needs at the right time.

[Operator Instructions] Your next question comes from the line of Ryan Levine with Citi.

I appreciate the disclosure around the commodity price movements in Waha. Are you going to break out what the earnings contribution was this quarter? And any early indications of what you were seeing last month?

We're breaking out the earnings for the quarter on just the APT through-system business?

Correct.

Well, as I said, I look at it more on a year-over-year basis because we really just look at our performance in totality on a full fiscal year basis. And that was $16 million or about $0.08 year-over-year.

Okay. And would you -- and given what we saw last month, would the monthly benefit be trending higher, given some of the commodity spread movements that we have seen?

Well, as I mentioned, kind of in wrapping up my comments around the guidance, we're anticipating another $0.08 to $0.12 in the second half of this fiscal year, which contemplates the activity you saw in the month of April.

Great. And then lastly, just in terms of the Dallas Fort Worth area growth dynamics, what are you seeing on the ground in terms of kind of just customer growth and expansion of volumes across your footprint?

Again, as we talked about in my opening remarks, of the 53,000-or-so we added for the last 12 months ending March about 39,000-plus-or-so of that was here in Texas. So again, we continue to see good growth across all areas, good residential growth across Texas. And again, with -- on our opening remarks there, good commercial growth as well with what we've added year-to-date. And the industrial side continues to show good positive results as well across the footprint, adding industrial accounts, Kentucky, Tennessee, Virginia area as well.

Your next question comes from the line of Aditya Gandhi with Wolfe Research.

I wanted to start on your comment about $8.40 to $8.50, the updated guidance range being a good base or launch pad for 6% to 8% growth in 2027 and beyond. Just can you maybe speak to how you're thinking about APT spreads maybe normalizing when you get back out to 2027, and how we should think about that impact in '27 and beyond? Is that sort of contemplated within sort of your 6% to 8% growth view off of the updated guidance range?

Yes. At this point, I'd encourage us to let's get through the next 6 months and just see what the world brings. Again, we've seen where the spreads have been the previous 6 months. We've got a short window end of what it looks like here in the next few weeks. But again, we haven't even gotten into the heating season yet here. So we're going to let the market move through the next 6 months. We'll see what it presents itself. And as we get closer to the end of '26, and we're ready to talk about '27, we'll let you know what we think about the market and where the market currently stands, and how we incorporate that into '27 and forward.

Understood. And my second question is regarding your comment about the benefit from the Texas legislation now the final rulemaking being higher than originally planned sort of in that $155 million to $165 million range for fiscal year '26. Can you, one, clarify, is that a pretax or posttax amount, and it seems significantly higher than the original sort of maybe $0.40 annual run rate that you've pointed to. How should we think about that benefit sort of beyond '26? Should we see a similar maybe even growing benefit as your capital plan grows in the out years?

Yes. So to clarify, the $155 million to $165 impact from 7.7102 for the full fiscal year is a pretax number. And as I mentioned earlier, kind of going into the fiscal year, the rule was fairly new when we were establishing our budget and guidance. There was certainly rulemaking that was going on that actually modified the rule a little bit from our original thinking. So we've got a better handle on that going forward now, also visibility in our spending, as I mentioned. So this is basically, as we talked about at the beginning of the fiscal year, a rebasing year because we're now layering in the impact of the new rule to ink all the APT spending and the remainder of the distribution spending in Texas that didn't qualify under Rule 8.209. So going forward, we were still guiding in that 6% to 8% off of, as you mentioned earlier, a new range of $8.40 to $8.50. So the impact in our 5-year guidance is reflective of that as well. So we feel confident we're not going to see another rebasing going into fiscal '27. It's going to be more steady state as we move forward.

[Operator Instructions] And there are no further questions at this time. Jennifer Wernicki, I turn the call back over to you.

We appreciate your interest in Atmos Energy, and thank you for joining us. A recording of this call is available for replay on our website through June 30, 2026. Have a good day.

And this concludes today's conference call. You may now disconnect.

Thank you for standing by. At this time, I would like to welcome everyone to the Atmos Energy Corporation Fiscal 2026 First Quarter Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Dan Meziere, Vice President of Investor Relations and Treasurer. You may begin.

Thank you, Janie. Good morning, everyone, and thank you for joining us. With me today are Kevin Akers, President and Chief Executive Officer; and Chris Forsythe, Senior Vice President and Chief Financial Officer. Our earnings release and conference call slide presentation, which we will reference in our prepared remarks, are available at atmosenergy.com under the Investor Relations tab.

As we review our financial results and discuss further 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 such material differences are outlined on Slide 29 and are more fully described in our SEC filings.

I will now turn the call over to Kevin.

Thank you, Dan. Good morning, everyone, and thank you for joining us today. I wanted to begin today's call by thanking every one of our Atmos Energy employees for their preparation, focus and dedication to safely providing natural gas service to our customers and communities during the very challenging weather conditions of Winter Storm Fern. And for their dedication throughout the year to execute upon our system modernization strategy as we continue our journey toward our vision to be the safest provider of natural gas services.

During Winter Storm Fern, all segments of our business, Distribution, Transmission, Atmos Pipeline Texas, our underground storage systems, gas supply plans and our customer support operations all performed very well and to design expectations. I am very proud of our team and their efforts. I would also like to thank the first responders, emergency responders and emergency management services teams across our service territory for what they do every day for our communities.

Yesterday, we reported fiscal 2026 first quarter net income of $403 million or $2.44 per diluted share. Our first quarter capital expenditures totaled $1 billion with over 85% of these investments focused on enhancing the safety and reliability of our distribution, transmission and underground storage systems. As a reminder, we rebased our fiscal 2026 guidance to reflect the passage of Texas House Bill 4384. As we stated on our November earnings call and in our investor material, our rebased fiscal 2026 earnings per share guidance is in the range of $8.15 to $8.35 per share. Additionally, we rebased the fiscal 2026 annual dividend to $4 per share, and we plan to grow our dividend in line with our earnings per share growth of 6% to 8% annually.

Moving to our Atmos Pipeline-Texas division. We achieved several project milestones during the first quarter. We completed the installation of approximately 55 miles of 36-inch pipeline from APT's Bethel storage facility to our Groesbeck compressor station. This provides additional pipeline capacity to transport gas from our Bethel storage into the growing DFW Metroplex and the Interstate 35 corridor between Waco and Austin. We continue to work on Phase 2 of APT's Line WA Loop project as we have placed 13 miles of this project into service. As a reminder, this project is designed to install approximately 44 miles of 36-inch pipeline to the west of Fort Worth to support growth in this area of the DFW Metroplex. The remaining 31 miles is expected to be placed in service this spring.

In addition to the enhanced supply capacity of those projects, we completed a project that more than doubles the takeaway capacity at our Bethel Salt Dome storage facility, providing additional peak day deliverability into the APT system for our LDC customers. Finally, we enhanced APT supply optionality, reliability and system versatility with the completion of 2 interconnect projects, adding 700,000 Mcf per day of additional natural gas supply to the APT system. Across our service territories, we continue to see steady customer growth. For the 12 months ending December 31, 2025, we added nearly 54,000 new customers with approximately 42,000 of those new customers located here in Texas. And during the first quarter, we added over 1,100 commercial customers and 3 new industrial customers. This continued demand from all customer classes demonstrates the value and vital role natural gas plays in economic development across our service territories.

The Texas Workforce Commission reported that at the end of December that the seasonally adjusted number of employees was 14.3 million. Texas once again added jobs at a faster rate than the nation over the last 12 months ending December 2025. Our customer support associates and service technicians continue to provide exceptional customer service, achieving customer satisfaction ratings of 98% for the quarter. And our customer advocacy team and customer support agents continued their outreach efforts to energy assistance agencies and customers during the first quarter. Through those efforts, the team helped over 11,000 customers receive nearly $3 million in funding assistance.

Recently, our team's customer service efforts were recognized by J.D. Power and Escalent. In December, the J.D. Power 2025 Gas Utility Residential Customer Satisfaction Study ranked Atmos Energy #1 in customer satisfaction in the South and Midwest among large utilities. This is Atmos Energy's fourth consecutive year to receive this honor for the Midwest region. And in January, Atmos Energy was named an Escalent 2025 Utility Customer Champion in both the South and Midwest regions. More than 96% of our customers are located in these 2 regions, and we are very proud of our entire team for their ongoing focus and dedication to providing exceptional customer service. Congratulations, and thank you all.

I'll now turn the call over to Chris for his update.

Thank you, Kevin, and good morning, everyone. We appreciate you joining us this morning. Our fiscal '26 first quarter diluted earnings per share of $2.44 represented a 9.4% increase over the prior year quarter. Our first quarter results include $35 million or $0.16 of the impact of Texas House Bill 4384. $20 million was recognized in our Distribution segment and the remaining $15 million is recognized at APT.

Our first quarter performance was also influenced by several other factors. Rate increases in both of our operating segments totaled $68 million. Operating income increased by an additional $24 million due to residential commercial customer growth and increased customer load. Finally, APT's through system revenues net of Rider REV increased about $7 million. During the quarter, APT's through system volumes declined approximately 2 Bcf as we performed more maintenance during this quarter compared to the prior year quarter. However, spreads widened significantly to an average of $3.99 compared to $1.56 in the prior year quarter due to rising associated gas production, constrained takeaway capacity and lower demand due to unseasonably warm weather during the first quarter.

Partially offsetting these increases was a $23 million increase in consolidated O&M expense. We experienced a $12 million increase in compliance and safety-related spending associated with increased leak survey work in our distribution segment and the timing of maintenance work at APT that I mentioned a moment ago. Additionally, employee-related costs increased approximately $5 million, primarily due to increased headcount to support company growth and higher overtime and standby costs driven by increased service work.

From a regulatory perspective, since the beginning of the fiscal year, we have implemented $123 million in annualized operating income increases in our distribution segment. Currently, we have 5 filings in progress seeking approximately $81 million in annualized operating income increases, and we plan to make an additional filing this fiscal year, seeking approximately $400 million in annualized operating income increases.

During the quarter, we completed over $1 billion of long-term debt and equity financing, highlighted by the $600 million long-term debt financing we completed in October 2025. Additionally, we settled $472 million in equity forward agreements. Our equity capitalization as of December 31 was 60%, and we do not have any short-term debt outstanding. We also had $4.6 billion in available liquidity. This amount includes approximately $1.1 billion in net proceeds available under existing forward sale agreements, which is expected to satisfy the remainder of our anticipated fiscal '26 equity needs and a portion of our anticipated equity needs for fiscal '27. Our first quarter performance has us well positioned to achieve our rebased fiscal '26 earnings per share guidance in the range of $8.15 to $8.35 per share, and we remain on track to achieve our capital spending plan of $4.2 billion.

Thank you for your time this morning. I will now open the call for questions.

[Operator Instructions] And your first question comes from Julien Dumoulin-Smith with Jefferies.

Nicely done, I got to say, as always. Maybe just to kick things off, you just commented in your remarks and in the Q here about the $35 million benefit for the quarter. Can you talk a little bit about how we should think about that ratably through the year here? And just ultimately, what that might imply as you think about like an annualized benefit relative to the guidance you guys gave? It seems like it puts you guys in a good place. So I'd love to get your thoughts.

Yes. Julien, thank you for joining us this morning. And yes, we're off to a good start for the fiscal year. As we talked about before, the influence or the impact of the deferrals under House Bill 4384 will be influenced by the timing of our spending, the timing of project closings and the underlying operational activities of the company. So it's right now, off to a good start, $35 million quarter-over-quarter. And we are still holding firm right now on our earnings per share guidance of $8.15 to $8.35, and we'll see what the second quarter brings for us.

Got it. But just pining down a little bit further, would you assume that that's a good run rate, at least for the purposes this year? I know it's CapEx timing driven. Any reason why you wouldn't, for the purposes of our conversation, start to do that or at least do some kind of ratio relative to CapEx against annualized targets?

I think it's going to depend upon the flow of spend in the quarter. As we've had here in the last couple of weeks, they're very busy operationally focused around supporting Winter Storm Fern. So construction activities were down a little bit. Obviously, we're now beginning to ramp that back up. And I think it would be dangerous to say take 35 and multiply it by 4. As a reminder, year-over-year, we did have the impact of the House Bill 4384 in the fourth quarter last year. So I would probably steer clear of just going too strong at this point and just saying 35 times 4 moving forward.

Yes. No, no, fair enough. And then just as it pertains to the winter storm, I mean, obviously, folks are zeroed in on and certainly cognizant of the impact to customers. How do you think about the preliminary financial impacts here, if you can break that down a little bit. I mean, obviously, there's working capital consideration and ultimately, there's a few other moving pieces. Do you care to elaborate a little bit further just given the history?

Yes, Julien, maybe rephrase your question because I'm not quite following either where you're talking about gas costs.

Yes. I was thinking about the just the balance sheet and the earnings impact from the winter storm in the last couple of weeks cumulatively.

Yes. So let's start with the winter storm itself. It was very significant. As you saw the icing across all of the country. I think 40 states were impacted at one point by the storm. But the storm was not nearly as significant as Uri. I think the upstream supply as we've reported, and I think you'll hear from some of the other folks that do upstream of us, supply performed very well. We had minimal supply issues. And what we did have, we were able to backfill with storage itself to keep a steady, reliable supply of natural gas flowing.

And with that, we had an exceptional gas supply plan laid out from baseload to peaking contracts to some spot purchases to our storage supply. So again, I don't think you're going to see the impact as you did in Uri, both on the operational nor a financing from gas supply cost related to Winter Storm Fern.

Your next question comes from the line of David Arcaro with Morgan Stanley.

I was wondering if you could maybe touch on what you're hearing maybe on the ground and in some of your regulatory proceedings going on with regard to affordability pressures. Is this an issue that you're seeing migrate into the gas LDC space? Is it coming up politically surrounding the cost of natural gas? What are you seeing on the ground right now?

It's always a part of what we talked about with our commissions. It's always top of mind for us. And I'll point you back to our deck in Slides 15 through 17, I believe, that's in the deck there and how we look at the metrics around affordability, but it's always a topic we continue to have with our regulators. They understand the need for our investment just as it helped us get through Winter Storm Fern. You have to start these things a year in advance in prepping your system, putting on additional supply upstream of that, increasing your capacity on your pipelines, bringing on more additional supply points, all those go into that equation for reliability on a go-forward basis for our customers.

But again, it's more of the conversation. We're not getting any sort of negative feedback or impression from our regulators at this point as they understand the need to maintain reliability and safety across the system.

Okay. Got it. Understood. And I wanted to check in to see whether you're seeing any inflection or meaningful projects on the gas power side of things, either major power plants moving forward or what we're seeing is on-site power using natural gas at data centers at pretty high volumes. So are you seeing more activity or opportunities there?

As we said before, we continue to get inquiries around large loads, whether they're data centers themselves or additional power generation. We'll share more about those once we have a signed contract. We don't want to get out in front and have to walk any of that sort of load back at this point. But we continue to get inquiries. Our engineering, our operations teams continue to investigate those and respond to those data requests. But when we have something to report, we'll bring those forward. And as you know, APT already serves some power gen facilities across its transmission footprint as well today.

Your next question comes from the line of Jeremy Tonet with JPMorgan.

This is Eli on for Jeremy. I wanted to start on the special election that was just recently happened in Texas. There was a Democrat seat, I believe, that flipped. Is there any impact overall? Or I mean, how do you guys kind of see that outcome in relation to the business?

Yes. We're apolitical. We work with R's and D's and I's or anybody to share our stakeholder strategy, why we do the things we do, why it's important for our communities, why natural gas is important for our customers, why it's important for economic development. And we've been around for 43 years now, and we've been through many administration changes, both at the federal, state and city level, county level as well. And again, we see ourselves as an essential energy source for our communities, and we'll work with anybody that is in public office today or has an interest in what we do.

Awesome. And then maybe just shifting to the Mississippi rate case outcome and kind of the process going forward. How do you adjust your plan for outcomes in that jurisdiction going forward?

Well, one, there's -- and I'll let Chris follow up here in a second. There's not an adjustment to plan. Remember, we say on our November call when we lay out our 5-year plan, we update it every quarter. Chris and I both mentioned it on this call. 85-plus percent of our investment goes towards safety and reliability. That does not change our plan. It is all driven by the needs of our system, the growth on our system, the demand across our system, the safety across our system. That's what drives our plans out there. And that's what's going to continue to fuel our plans in the state of Mississippi.

Yes. I would add to that, Jeremy (sic) [ Eli ]. I mean, since the outcome, we have been in regular dialogue with the commission, first, working to implement the tariff that to reflect the order that came out late last year. That tariff was filed in early in early January. We're expecting a decision potentially today on that. Included in that tariff is also a request for deferral like mechanisms as well as other opportunities to potentially mitigate or reduce lag going forward. We still have an annual filing mechanism in the state. It's now on a historical test basis. So we're evaluating and model the impact of shifting that from a forward look back to historical look.

And as we've also -- you've probably seen in the public notice in early January, we filed a public notice of our intent to appeal the decision to the State Supreme Court in Mississippi, and we are working through that process as we speak. So a lot going on that we're taking to evaluate, but it's also stepping back in a bigger picture, Mississippi is roughly 5% of the business. So we believe we've got the ability to absorb whatever outcome comes through in our plans going forward.

Your next question comes from the line of Fei She with Barclays.

It's actually Nick Campanella on. I hope you can hear me. I hope everything is well. So I just wanted to ask just the $0.21 Texas benefit in the quarter. Is that something that we can annualize? Or just how would you kind of frame that against the $0.40 guide that you originally pointed to?

Yes. So Nick, so the impact on the quarter was approximately $0.16. And as I was chatting with Julien at the top of the call, it's to say that you can just simply take a run rate, multiply by 3 or 4 to get through that because the underlying operations are impacting the timing of those deferrals. So we said a few minutes ago, we'll just take it quarter-by-quarter as we work through this first year of implementation, and we'll see where the second quarter brings us, and we'll have an update for you at that point.

Okay. Okay. And then just I just wanted to make sure I was just directionally understanding the benefit it's kind of a similar benefit than what was booked in fourth quarter last year. Like would it be kind of like 3x the benefit given you did about $1 billion of the $4 billion of CapEx this quarter. Just is that the right way through this?

Yes. I mean, again, 25% through the year. A lot needs to occur between now and then operationally. As Kevin talked about, we've been focused the last couple of weeks on winter operations, which has put a capital on the back burner. So as we come through that right now, we get back up to speed, we'll see what the impact is on deferrals. But again, I would caution against just taking a simple number and multiply it by 3 or 4 at this point in time.

Okay. Okay. And then just you kind of brought up the strength in spreads. Is there a way to explicitly quantify what the margin benefit was from Waha spread this quarter?

Well, quarter-over-quarter, we attributed about $7 million operating income increase as a result of those activities.

[Operator Instructions] And your next question comes from Ryan Levine with Citi.

Given the recent Storm Fern and increasing gas demand in your service areas, do you see incremental opportunities to add gas storage? And can you give us some updated color around that opportunity set?

Ryan, as you've heard us talk about before, we have 15 storage fields placed across Kentucky, Kansas, Mississippi and here in Texas. Additionally, we have third-party contract storage and then we have storage as part of our upstream interstate pipeline capacity as well. That's something our gas supply team and our operations team look at post winter. We'll do a rigorous review of system performance, gas supply plan performance and overlay that with a third-party consulting engineering firm to overlay with customer growth and demand expectations, and then we'll evaluate how that may impact additional needs for gas supply where those may need to come in and any future needs for storage. But it's something we always continue to look at based on past performance, historical weather and customer growth across the system.

There are no further questions at this time. I will now turn the call back over to Dan Meziere for closing remarks.

We appreciate your interest in Atmos Energy, and thank you again for joining us this morning. Have a good day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Atmos Energy Corporation Fiscal 2025 Fourth Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Dan Meziere, Vice President of Investor Relations and Treasurer. Dan, please go ahead.

Thank you, Tiffany. Good morning, everyone, and thank you for joining us. With me today are Kevin Akers, President and Chief Executive Officer; and Chris Forsythe, Senior Vice President and Chief Financial Officer. Our earnings release and conference call slide presentation, which we will reference in our prepared remarks, are available at atmosenergy.com under the Investor Relations tab.

As we review our 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 such material differences are outlined on Slide 37 and are more fully described in our SEC filings. I will now turn the call over to Kevin.

Thank you, Dan. As Tuesday is Veterans Day, I would like to take this opportunity to thank those who have served in our armed forces and those currently serving. Approximately 300 of our Atmos Energy teammates are part of the 18 million Americans who bravely served our country. Thank you for your service.

Yesterday, we reported diluted earnings per share of $7.46. This marks the 23rd consecutive year of earnings per share growth. Fiscal '25 also represents the 41st consecutive year of dividend growth. Our fiscal year results reflect the focus and dedication of the entire Atmos Energy team and their continued successful execution of our proven strategy of operating safely and reliably while we modernize our natural gas distribution, transmission and storage systems. Their exceptional work has us well positioned for fiscal '26 and beyond.

During fiscal '25, we continue to experience solid customer growth, adding approximately 57,000 residential customers with over 44,000 of those new customers located in Texas. We also added nearly 3,200 commercial customers and 29 industrial customers during fiscal '25. When these industrial customers are fully operational, they are anticipated to consume approximately 4 Bcf of gas annually. This usage is equivalent to adding over 74,000 residential customers on a volumetric basis. Over the last 5 years, we have added nearly 300,000 residential and commercial customers. And over the last 5 years, we've added 225 industrial customers with an estimated annual load to 63 Bcf when fully operational. On a volumetric basis, this is equivalent to adding nearly 1.2 million residential customers.

This growing natural gas demand from all of our customer classes continues to demonstrate the vital role natural gas has in economic development across our entire service territory. According to the Texas Workforce Commission for the 12 months ending August, the seasonally adjusted number of employee taxes reached 14.35 million. Texas again added jobs at a faster rate than the nation over the last 12 months, growing at a rate of 1.14%. And Texas was recently ranked the Best State for Business for the 21st year in a row by Chief Executive magazine.

According to the North Central Texas Council of government, the current population estimate for the Metroplex is approximately 8.6 million people as of April 2025. And many analysts project the Metroplex to be the third largest metropolitan area in the U.S. by 2030. The U.S. Census Bureau has the population for Texas at 31.3 million and it is projected that Texas will reach a population of 32.4 million by 2030.

Now turning to Atmos Pipeline-Texas. Our Bethel to gross back project is nearing completion of approximately 55 miles of 36-inch pipeline from our Bethel storage facility to our compressor station. This project will provide additional pipeline capacity to transport gas from our Bethel storage facility into the growing DFW Metroplex and the Interstate 35 corridor between Waco, Temple and Austin. This project is anticipated to be in service late this calendar year.

APT's Line WA Loop Phase 2 project is also nearing completion of approximately 44 miles of 36-inch pipeline. This phase of the multiyear project will provide additional pipeline capacity from our Line X to the northern areas of the growing DFW Metroplex. This phase is anticipated to be in service late calendar year 2025. APT completed our integrity inspection and verification per Texas for our Bethel caverns 2 and 3. And we have begun the integrity inspection and verification work on our Bethel #1. This work is expected to continue into late calendar year 2026.

Turning to our updated 5-year plan through fiscal 2030. Focus continues to be on safety and reliability through system modernization, being mindful of customer affordability, timely recovery of our costs through our various regulatory mechanisms and maintaining a strong balance sheet. Following our robust 5-year planning process, we plan to invest $26 billion with approximately 85% of that planned investment allocated to safety and reliability. This investment will support the continued modernization of our natural gas distribution, transmission and storage systems and support the growing natural gas demand across our jurisdictions. Approximately $21 billion or 80% of our total planned capital spending is expected to be incurred in Texas. The 5-year plan reflects the impact of Texas House Bill 4384 on our earnings. As a reminder, House Bill 4384 reduces lag in Texas by permitting gas utilities to defer post in-service carrying costs, depreciation and taxes associated the noneligible Rule 8209 capital investments, such as customer growth and system expansion.

With the passage of House Bill 4384 we will now begin to recover over 95% of our capital spending within 6 months and 99% within 12 months. We believe the successful execution of our strategy will support earnings per share growth at 6% to 8% from the midpoint of our rebased fiscal '26 EPS guidance. Additionally, we intend to grow the dividend in line with earnings per share growth.

Now I'll turn the call over to Chris, who will provide some additional color on fiscal '25 and the fiscal '26 5-year plan, and I'll return later with some closing comments. Chris?

Thank you, Kevin, and good morning, everyone. We appreciate you joining us this morning. Before getting into the details of our fiscal '26 5-year plan, I wanted to share a few highlights from fiscal '25. As Kevin mentioned, fiscal '25 earnings per share was $7.46. Included in this amount is $0.12 resulting from the adoption of Texas House Bill 4384, approximately $0.09 was recognized in our distribution business and the remaining $0.03 is recognized at APT.

Consolidated capital spending increased to $3.6 billion, 87% dedicated to improving the safety and reliability of our system. In fiscal '25, we replaced over 880 miles of distribution and transmission pipe and nearly 54,000 service lines and rate base increased by 14% to an estimated $21 billion as of September 30. Consolidated O&M, excluding bad debt expense of $874 million and then slightly above the midpoint of our updated guidance for fiscal '25. O&M spending continued to focus on system monitoring and damage prevention activities. We also experienced higher employee-related costs, primarily due to increased headcount to support growth and higher employee training and administrative costs.

We had another busy regulatory calendar in fiscal '25. We implemented $334 million in annualized operating income increases excluding the amortization of excess deferred tax liabilities. We also completed general rate cases in Kentucky, portions of our Mid-Tex division and in our West Texas division. Finally, we finished the fiscal year with an equity capitalization of 60% and approximately $4.9 billion of available liquidity, which leaves us well positioned to support our future operations. This amount, $1.6 billion relates to forward equity proceeds that we have priced through our ATM program. This not fully satisfies our fiscal '26 equity needs in a portion of our anticipated fiscal '27 equity need.

Looking forward, we have initiated our fiscal '26 earnings per share guidance in the range of $8.15 to $8.35. Because of the impact from Texas HouseholdHouse Bill 4384, we are rebasing our earnings per share guidance beginning this fiscal year. From the midpoint of this rebased guidance range, we anticipate earnings per share growth of 6% to 8% annually, with anticipated earnings per share in fiscal 2030 to be in the range of $10.80 to $11.20. Additionally, this week, Atmos Energy's Board of Directors approved a 168th consecutive quarterly cash dividend with an indicated fiscal '26 annual dividend of $4, a 15% increase over fiscal '25. This increase reflects a rebasing of the dividend to align with the rebased earnings per share guidance. Our updated 5-year plan assumes that we've increased the dividend annually in line with earnings per share growth.

Over the next 5 years, we are planning approximately $26 billion in capital spending, with over 85% of our capital allocated to safety and reliability spending. This level of spending is expected to support 13% to 15% annual rate base growth. By the end of fiscal 2030, we anticipate rate base to approximate $42 billion. And in fiscal '26, we anticipate capital spending will approximately $4.2 billion. Approximately $21 billion or 80% of our 5-year spending plan is currently allocated to Texas. This amount, approximately $15 billion is planned in our Texas distribution division and approximately $6 billion is planned at APT as it continues to focus on gas supply reliability and supply diversification while fortifying its system to support the growth of its LDC customer. As a reminder, our Texas distribution operations have deferral mechanisms to support the recovery of safety-related spending. Texas HouseholdHouse Bill 4384 similar deferral treatment to our remaining capital spending in our Texas distribution business into all of APT's capital spending. As a result, we will now begin to recover 95% of our capital spending within 6 months. We anticipate that approximately 60% of the impact of Texas Health Bill 4384 will be recognized in our distribution segment over the 5-year plan.

From a revenue perspective, we have assumed normal weather, market condition and modest customer growth in both of our segments. In fiscal '26, most of the regulatory outcomes are anticipated to come through the execution of our annual regulatory filing process. For these filings, we are assuming existing ROEs, capital structures and regulatory features, meaning we are not assuming the approval of new mechanisms or other new regulatory features. Beginning of fiscal '26, we had $146 million in annualized operating income increases in our distribution segment. This amount of $139 million relates to the implementation of our annual rate review mechanism in Mid-Tex.

Regarding O&M, we continue to assume 4% annual increases driven by system safety, system monitoring and prevention activities and employee costs, and we will continue to evaluate options to accelerate compliance-related work as system conditions dictate or other opportunities arise. For fiscal '26, we currently anticipate O&M, excluding bad debt expense to range from $865 million to $885 million. Finally, this 5-year-plan includes approximately $16 billion of incremental long-term financing operations and cash needs, including the expected payment of the corporate alternative minimum tax beginning in fiscal '27. We will continue to use a combination of long-term debt and equity to preserve the strength of our balance sheet, minimize the cost of financing for our customers and reduce financing risk. And we continue to anticipate beating all of our equity needs through our ATM program.

As a reminder, this incremental financing has included our earnings per share guidance for both fiscal '26 and through the 5-year plan ending in fiscal 2030. Thank you very much for your time this morning. Now I'll turn it back over to Kevin for some closing remarks.

Thank you, Chris. Our operational and financial execution in fiscal '25 has laid the foundation for continued success into fiscal '26 and beyond. Our 5-year plan supports our ability to meet the safety, reliability and economic development expectations of our customers, our communities and our key stakeholders across the service territory. As you've heard me say before, the things that differentiate Atmos Energy are that we operate in a diversified and growing communities that are supportive of natural gas and our investment in natural gas infrastructure to supply their growing economy and energy needs. That 96% of our rate base is situated in 6 of our 8 states that have passed customer choice or all fuels legislation. We operate in regulatory jurisdictions that support reliability, versatility, abundance and affordability of natural gas and the modernization of our natural gas distribution, transmission and storage systems to provide safe and reliable delivery.

The strength of our balance sheet and available liquidity. We have a weighted average cost of debt of 4.2% with an average maturity of 17.5 years. We currently have $4.9 billion in liquidity. That our residential customers average monthly natural gas bill is again expected to remain the lowest utility bill in the home, consistent performance, 23 years of consecutive earnings per share growth and 41 consecutive years of dividend growth. That all 5,500 of us here at Atmos Energy proudly serve our customers and our communities as we continue to be guided by the simple values of our Founding Chairman, Charles K. of honesty, integrity and good moral character. Those differentiators will continue to support the vital role we play in every community to safely deliver reliable, efficient natural gas to homes, businesses and industries to fuel our energy needs now and in the future. We appreciate your time this morning, and we'll now open the call for questions.

[Operator Instructions] Your first question comes from the line of Jeremy Tonet with JP Morgan Securities, LLC.

This is Ely on for Jeremy. Just wanted to start on maybe some of the larger load customers you guys are seeing across your service territory. Recognize that the refreshed capital plan contemplates a lot of that demand. But can you just talk about and help quantify what's in the plan? And then what could kind of be incremental to that and just bifurcating those two?

Yes. Again, as Chris said on the front end, there -- we got 85% of our spend is dedicated towards safety and reliability. We do have some modest growth included in the plan as well. But again, most of that is going to be focused on safety, reliability. We do have some additional fortifications that are in that to support that growth. That our long-range planning models have indicated we need because of the folks moving into Texas and the demand anticipated with them coming in in the load from their use of natural gas. And then any other thing that will be outside of that will be probably driven by safety, reliability and anticipated fortifications to handle that additional growth.

Great. And then maybe just talking a little bit about capital recovery. I know that you guys were able to kind of ratchet up the speed there? And can you just kind of talk about a little bit more about how you're able to -- how that flows into the plan and optimizes growth going forward? Just recognizing that's kind of some of the best capital recovery out there.

Yes. Again, we're very blessed with the jurisdictions we serve in, and they recognize and support natural gas and our need to fuel these communities and meet the needs of all stakeholders, our communities, the state legislative bodies and the overall demand for natural gas. But I'd also say that we haven't sped anything up. This has all been part of our planning process since 2011, 2012, and identifying the needs of the system, both safety, reliability and growth. So this has been on the same cadence year after year. And through our robust planning process, we go out and identify and look at our systems each year for the need, not only for population and demand growth, but also from the safety reliability need, fortification needs. So this is all well laid out, well orchestrated through the demand models, the integrity models, the forecasting of population growth year after year, we repeat that same sort of process. And that's what drives the investment at the end of the day.

Awesome. Yes. And then just if I could squeeze in one more, apologies. But just I think the 2030 implied range is about 7.5 of the '26 midpoint. So is it kind of fair to say you guys are targeting the upper half of the CAGR?

Jeremy, this is Chris. We talked about a 6% to 8% growth rate off of the rebased guidance range from the midpoint. So that falls in line with that 6% to 8% expectation, and that's what we're intending to pursue at this point in time.

Your next question comes from the line of Nicholas Campanella with Barclays. .

This is Fei for Nick today. Maybe I just want to double-click on the EPS rabates, if I could. Now seeing over 95% of CapEx is recovered within 12 months comparing to the previous 90%. Would you be able to just parse out how much incremental reg like improvement are you seeing in this refresh plan? Is it mostly coming from the Texas legislation? Or is there something else baked into the assumption?

Yes, I'll start, and Chris can add anything he wants to. Yes, as we mentioned in our opening remarks, it's all coming from the House Bill 4384. Again, our plan has been the same year after year on how we approach the capital budget. It's by identified projects and needs of the system and supporting the growth. And this 4384 will now allow us to include APT's investment into its system as well.

Yes. And Nick, this is Chris. I'll just remind you, again, on our regulatory cadence, annual funding mechanisms are contemplated throughout the 5-year plan. We have a couple of small general rate case that we plan to execute this year. But the overall theme there is the recoverability, and we assume in the 5-year plan that there's no new regulatory features, no new deferral mechanisms, regulatory asset treatment. It's basically we planted based on what we know and have today.

Understood. That's very helpful. And if I could, just on O&M budgeting for '26. Could you just help clarify on how are we getting to a lower assumption for '26 and how those ramping to a 4% annual increase would evolve going deeper into the longer term?

Yes. I think that the guidance that we put out there is pretty much -- the midpoint of the guidance is pretty consistent with where we were this year. We had some opportunities in fiscal '25 to spend some additional O&M dollars and compliance-related activities. As we saw market conditions at APT materialize, particularly in the late in third and fourth quarter. So we kind of reset the O&M plan based on what we need to do from a compliance sector, what we want to do from a system monitoring system, prevention activities. And then, as I said, we'll continue to evaluate that O&M throughout the year, and the system conditions dictate or other opportunities arise, we'll evaluate options and alternatives to pursue further compliance and safety run spending. .

Your next question comes from the line of Gabriel Moreen with Mizuho.

So Waha gas prices have been on a bit of a wild ride the last couple of weeks. I'm just wondering to what extent you've incorporated some of the deeply negative prices here that we've seen over the last couple of weeks into your guidance for '26? I know what you're assuming for the rest of the year as far as your Waha outlook?

Yes. As we've done with all of our 5-year plan roll forwards, we do not incorporate that in. We assume normal activity. We continue to monitor and look at that. We're still very early into the season right now, just basically just out of October, if you will. So it's something we'll continue to keep our on on as we move forward, but we do not try and use a crystal ball to forecast what's going to happen with that market at all, and we'll continue to keep you updated on our quarterly call.

Gabriel, too, that all that activity to the extent that it materializes 35% of that impact flows back to the benefit of our customers. So well, like Kevin said, we'll keep an eye on it. And we'll provide updates as we move through the fiscal year.

And then maybe if I could follow up. It looks like you raised your long-term gas price assumption in the 5-year outlook. Can you just talk about drivers behind that, if there's anything beyond the forward curve? And also was that an impact at all and maybe slightly moderating your kind of CapEx CAGR within the context of kind of how you're viewing customer builds over the medium to long term.

Yes. That's just the forward curve that's out there that we have available to us now. And again, I think if you go back and look at what we projected in that long history on that slide, whether it's Page 23 or 24 there. We generally have come in under that. So right now, that's just a forward-looking curve. We're projecting outward on our customer bills. And again, probably point you to the Pages 23 through 25 there as we talked about customer bills and going forward. And like to remind everybody that when we look at the household bills overall that our natural gas residential bill is again expected to be the lowest bill in the household going forward into '26 at this point. We continue to remain anywhere between 2 to almost 5x more affordable than our electric counterparts in each of our states and jurisdictions that are out there. And again, there's a slide out there on percent share of wallet for our customers as well, and we remain right at or below the natural gas industry average 4% of wallet share and about 2 to 3x below the percentage of wallet share on the electric side. So I believe we're extremely well positioned right now and always keep affordability at top of mind. That's part of our both short term, mid-term and long-term planning process as we look at investments. We always won through what the potential impact may be on our customer base as well. But again, feel like that we are well positioned and mindful of affordability.

Your next question comes from the line of Aditya Gandhi with Wolfe Research.

Great. Maybe just starting on Texas HP 4384. I appreciate that you've rebased the 26% range higher. Can you maybe just clarify what the annual impact from the legislation is just roughly? Is it fair to assume that if we annualize the $0.10 impact from Q4 that you mentioned on last quarter's call, $0.40, is that a reasonable run rate?

This is Chris. So in the rebasing, we assumed the impact of House Bill 4384, and from fiscal '25 to '26 because we will have a full year impact of the House Bill 4384, that's why you're seeing that rebasing going forward. And then after that, it will begin to -- become a little bit more consistent year-over-year. So again, we factored all that in, into our 6% to 8% with a midpoint via a guidance range right now, it's right around $8.25, and we will intend to grow at 6% to 8% off of that.

Okay. And then maybe just touching on the equity. You mentioned balanced equity and debt funding. Can you just clarify whether that sort of means 50% of that $16 billion -- roughly 50% of that $16 billion over the course of your 5-year plan? And then just could you give us a rough sense of how much equity you're assuming in 2026? And how we should think about the cadence of equity beyond 2026?

Right. So looking at the incremental plan over 5 years, we've got roughly $16 billion that's out there. We are very comfortable with our equity capitalization of approximately 60%. And as of September 30, we intend to keep your equity capitalization at that level. We prevent I think the strength of the balance sheet is important for financial strength to be able to withstand unexpected events supporting our customers if we need to in terms of moving our PGAs around as we pass through gas costs. So when you think about capitalization being where it is, it's roughly 50-50 split between debt and equity. And then by year, you can see generally about 50% of our annual cash needs or come from our FFO number, which I think you have, and then you can apply by year in your modeling, 50% roughly for equity, 50% for the debt.

Your next question comes from the line of Julien Dumoulin with Jefferies.

This is Spark on for Julian. Congrats on the strong quarter. I have -- if I can quickly come back to the HB 4384 benefits. I appreciate the color on the prepared remarks. I believe you mentioned 60 -- roughly 60% for distribution, 40% for APT. I'm just thinking, would that 60-40 split change meaningful year-over-year just given potentially different CapEx cadence at each segment each year?

No. We do not expect that. Again, our 5-year planning process has been the same year in and year out. Our team does a robust deep dive into the needs of that and has it well laid out year after year. So we're very confident in what we have put out there for the 5-year plan.

Got it. Another question on the dividend. I mean, nicely done on the dividend guide up here. Just given the durability of the HB 4384 uplift, is it fair to view this dividend guide up as a long-term guide up here?

I think in our prepared remarks, we mentioned that we moved the dividend 15% from '25 to '26 on an indicated basis to basically rebase that dividend in line with the rebased earnings per share guidance, and we intend to grow the dividend 6% to 8% over the next 5 years.

That concludes our question-and-answer session. I will now turn the call back over to Dan Meziere for closing remarks.

We appreciate your interest in Atmos Energy, and thank you once again for joining us. Have a great day.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.