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Atmos Energy Corp. (NYSE:ATO)

Q3 FY08 Earnings Call

August 6, 2008, 8:00 AM ET

Executives

Susan Giles - VP, IR

Robert W. Best - Chairman, President and CEO

J. Patrick Reddy - Sr. VP and CFO

Kim R. Cocklin - Sr. VP of Regulated Operations

Mark H. Johnson - Sr. VP, Nonregulated Operations, President, Atmos Energy Marketing, LLC

C. Richard Alford - Sr. VP Finance & Administration

Analysts

Ted Durbin - Goldman Sachs

Elvira Scotto - Bank of America

Operator

Welcome to the Fiscal 2008 Third Quarter Earnings Conference Call on 6 of August 2008. Throughout today's recorded presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. [Operator Instructions].

I would now hand the conference over to Susan Giles, Vice President of Investor Relations. Please go ahead.

Susan Giles - Vice President, Investor Relations

Good morning, everyone, and thank you f 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've placed slides on our website to summarize our financial results. We will not review them in detail, but we will be happy to take any questions at the end of our 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.

Also, we plan to file the company's Form 10-Q later today, which will also be available on our website.

With me today are Bob Best, Chairman, President and CEO; and Pat Reddy, Senior Vice President and CFO. There are other members of our leadership team with us 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.

With that, I will turn the call over to Mr. Bob Best. Bob?

Robert W. Best - Chairman, President and Chief Executive Officer

Thank you, Susan, and good morning everyone. And as always, we appreciate you joining us today and thank you for your interest in Atmos Energy. As Susan said, Pat Reddy will review the financial results in greater detail in just a moment. But before he does that, I want to talk about several of our recent business developments.

Yesterday, after the market closed we reported improved financial results for both our third quarter and nine months of fiscal 2008. For third quarter, we reported a net loss of about $7 million, a 51% improvement over the net loss of $13 million in the same quarter a year ago. On an EPS basis, that equates to a net loss of about $0.07 per diluted share compared to the net loss of $0.15 per diluted share in last year's third quarter.

For the nine months, net income was up slightly year-over-year to almost $179 million.

As you know, due to the seasonality of our business, primarily the regulated distribution business, fiscal third and fourth quarters are typically characterized by costs that exceed revenues.

The regulated businesses, comprised of our gas distribution operations and our Texas intrastate pipeline, experienced solid net income growth over last year of 78% for the quarter and 22% for the nine months ended June 30. Net income from the nonregulated businesses declined 17% quarter-over-quarter and for the nine months, net income dropped 43% from the same period a year ago.

Also yesterday, our Board declared our 99th consecutive cash dividends. Our indicated annual dividend rate for fiscal 2008 is $1.30 per share. I want to spend some time talking this morning about the Mid-Tex rate case we filed last September of about $50 million

As you may recall, the case has been settled with all cities in the Mid-Tex Division with the exception of the City of Dallas and the unincorporated areas representing about 20% of the Mid-Tex customers. On June 24th, the Railroad Commission of Texas issued its final order on the litigated case with the City of Dallas and unincorporated areas.

The components of the final order include a $19.6 million system-wide annual rate increase, the ability to recover the gas cost portion of bad debt expanse, an authorized return on equity of 10%, an improved capital structure of 52% debt and 49% equity, and a conservation program with cost share between customers and the company.

Final order did not include a Rate Review Mechanism unlike the settlement cities. We will continue to make annual GRIP filings to recover capital expenditures and file traditional rate cases as necessary, seek recovery of increased expenses. In fact, in May, the Mid-Tex Division made a 2007 GRIP filing on a system-wide basis of $10.3 million. In November, we anticipate implementing about $2 million annually for the customers of the City of Dallas and the unincorporated areas since they do not have the Rate Review Mechanism.

For the settlement cities representing approximately 80% of the Mid-Tex customers, the Rate Review Mechanism filing is pending. First Rate Review Mechanism filing was made in April, requested an adjustment to rate of about $33.5 million. The cities are currently reviewing the filing and after some negotiation and ultimate agreement, implementation is scheduled for October 1, 2008.

On our nonregulated side, our nonregulated Park City Gathering project in Kentucky is now complete and fully operational. This is a 23-mile low-pressure gas gathering system and treating facility.

Total project cost is almost $12 million with about $9 million of capital spent in fiscal 2008. In the first year of operation, net income is expected to be about $1 million, but the longer term value of this project is that it should give us a foothold in a much larger regional strategy.

Last month we completed an non-binding open season for the Ft. Necessity salt-dome gas storage facility located in Franklin Parish, Louisiana, with optimistic and favorable results. Our open season participants requested storage capacity that in total was more than three times greater than the 5 billion cubic feet of capacity proposed in Phase I of the project.

The first cavern is projected to be operational in 2011 and the other two caverns in 2012 and 2014. Drilling in the test well began on June 30th and is expected to be complete by mid-October. We anticipate full evaluation of the salt core by mid-December. This well will be configured to serve as a cavern well upon FERC 7C certification.

I'll now ask Pat Reddy to review our financial results. Then will return with a few closing comments and will be happy at that time to take your questions. Pat?

J. Patrick Reddy - Senior Vice President and Chief Financial Officer

Thanks, Bob, and good morning everyone. Thanks for joining our call. For the third quarter of fiscal 2008, we experienced a sizable improvement over the same quarter a year ago, as Bob mentioned. Our reported net loss was $6.6 million or $0.07 per diluted share as compared to a net loss of $13.4 million or $0.14 per share a year ago. For the nine-month period, net income rose 2% to about $179 million or $1.99 per diluted share compared with $174 million or $2 per share for the same period a year ago.

For both current periods, the regulated natural gas distribution business continued to benefit from the cumulative effect of changes in rate design in several of our service areas. We still experienced a net loss of $12 million at the distribution business this quarter, that is a 21% improvement from the same period a year ago. In the current nine-period, distribution net income climbed to over $113 million, a 23% improvement over last year.

The regulated transmission and storage segment experienced terrific growth. Net income grew 67% to $10.2 million in the quarter and 21% to $35 million in the current nine-month period. This segment continues to benefit from increased transportation and higher per unit margins from the Barnett Shale gas producing region of Texas, as well as GRIP recovery of annual capital expenses in Texas. Together, the regulated businesses experienced year-over-year growth in net income of 22% contributing $149 million in the current nine-month period.

Nonregulated operations experienced a net loss of about $4.5 million in the current quarter, a decrease of about 17%. For the current nine months, the nonregulated operations posted almost $30 million of net income. However, this was down about 43% from the same period a year ago. Earnings continue to be reduced in the quarter and year-to-date, mainly due to reduced realized margins on asset optimization activities due primarily to a decrease in natural gas price volatility.

If you now turn to slide 6 and 13, you can follow along as we take a closer look at the nonregulated natural gas marketing segment. Natural gas marketing's gross profit decreased about $2 million for the quarter and $26 million for the nine months as compared to same periods one year ago. Realized asset optimization margins decreased $4 million quarter-over-quarter. During the current quarter, AEM realized about $37 million of losses compared to about $33 million of realized losses in last year's quarter.

During the current quarter, AEM elected to defer storage withdrawals and reset the corresponding financial instruments to enhance the potential gross profit in future periods. As a result, AEM realized financial hedge settlement losses without the corresponding storage withdrawal gain, which contributed to the loss of about $37 million of realized asset optimization margins.

In the prior year's third quarter, AEM realized financial hedge settlement losses without the corresponding storage withdrawal gains because the storage had already been withdrawn in the fiscal 2007 second quarter; i.e., ahead of the original planned schedule. That's contributing to the realized loss of about $33 million in last year's third quarter.

Let's turn now to our fiscal 2008 nine-month period, where our natural gas marketing gross profit was about $26 million lower tan in the same nine months last year. The biggest driver again was in the realized asset optimization margin, which decreased $49 million period-over-period.

During the current nine months, AEM realized about $10 million of loss compared to about $39 million of realized gains last year. Due to the less volatile natural gas market we experienced this entire year, AEM has been regularly deferring storage withdrawals and resetting the associated financial instruments, in other words, rolling them forward. As a result, AEM recognized settlement losses without corresponding storage withdrawal gains throughout the current fiscal year as we just discussed for the third quarter.

Additionally, AEM experienced increased storage fees charged by third parties. This is in sharp contrast to last year where AEM was able to recognize arbitrage gains as changes in its originally scheduled storage injection and withdrawal plans had a significantly smaller impact.

Partially offsetting these losses are the increases we have experienced in our delivered gas margins of about $1 million in the current quarter and about $11 million in the current nine months, largely attributable to higher per unit margins in both periods as a result of favorable basis gains and a 14% increase in gross sales volumes for the year-over-year nine months.

Unrealized margins also increased about $1 million quarter-over-quarter and about $12 million year-over-year, mainly as a result of the narrowing of the spreads between current cash prices and forward natural gas prices. Information concerning AEM storage book is shown on the appendix to our slide presentation and it begins on slide 38. You can see that the difference between the economic value, which is the measure we use to manage the business and our GAAP reported value at the end of the reporting period.

At the end of June, the potential gross profit, which is future economic value not yet realized in GAAP reported results, of our gas and storage was about $14 million, which we expect to realize primarily in the first quarter of fiscal 2009 if our optimization efforts are executed as planned.

Spreads climbed to about $2.75 per Mcf at June 30 compared to $0.52 per Mcf at the end of March 2008. As a reminder, Atmos Energy marketing attempts to always maintain a flat trading book and does not engage speculative trading. There is a more detailed discussion of economic gross profit and conventional gross profit in the MD&A section of our 10-Q, which, as Susan mentioned, will be filed later today.

Tuning now to the expense side of our income statement, our consolidated operation and maintenance expense increased almost $3 million in the current quarter and about $17 million in the nine months period. The primary drivers of the increase include: higher labor and benefits costs associated with annual wage increases and higher contract labor increases of about $1 million in the quarter and $4 million in the current nine months.

Other administrative cost rose about $1 million in the quarter and about $3 million in the current nine-month period, and pipeline authorization and vehicle fuel costs increased O&M by almost $4 million for the current nine months.

Our current nine-month period is impacted by the absence of about $4 million last year from the deferral of 2005 and 2006 Katrina-related expenses, which we were allowed to recover by Louisiana Regulatory Commission and which were reflected in the first nine-month period of last year.

We also experienced a rise in outside legal fees of about $5 million for the current nine-month period. Our bad debt expense decreased about $4 million in the current nine months, mainly due to a continued focus on collections. Year-to-date, our bad debt expense remains at about three-tenths of 1% of revenues, and we anticipate that no more than 15 million of bad debt expense will have to be recognized in fiscal 2008.

Looking at our capital expenditures for the nine month, they rose about $15 million to $313 million; this primarily reflects cost associated with the automated metering initiatives in our gas distribution segment, main replacement activity in our Mid-Tex Division, and capital to the nonregulated Park City gathering project that Bob discussed.

Turning now to our earnings guidance for fiscal 2008, we are maintaining our previously announced estimate for fiscal 2008 in the range of $1.95 to $2.05 per diluted share of common stock. However, we are fine-tuning the expected contribution by business segment.

We are quite pleased with the performance of the distribution and pipeline operations and are gratified that our continued focus on rate design is improving our financial results. In addition, Atmos Pipeline-Texas continues to perform very well. Year-to-date APT has transported 30 Bcf more than originally planned, while also capturing higher per unit margin on incremental transactions.

So, let me draw your attention to slide 31 where we have projected an increased contribution from the regulated segment and a reduced contribution from the nonregulated businesses. We are increasing expected regulated net income by $11 million to $12 million with an equal and offsetting decrease in nonregulated net income. $10 million to $11 million of the decrease comes from the natural gas marketing segment where we continue to expect relatively low price volatility for the remainder of the year.

Our guidance range assumes no material mark-to-market impact at September 30, 2008. However, as you know, there is no way to predict today what the mark will be until the end of our fiscal year. We are projecting between $455 million and $465 million in CapEx in fiscal 2008. Of that, $350 million to $355 million will be maintenance capital and about $105 million to $110 million will be growth capital.

And with that, I will turn it back to Bob.

Robert W. Best - Chairman, President and Chief Executive Officer

Thanks, Pat. We will make a few closing comments and then will be glad to take your questions. As you heard today, we have a good foundation and the diverse foundation of assets. We continue to realize substantial progress in our regulated distribution and Texas pipeline operations, and we are really encouraged and uplifted by the reports you just heard from Pat about the performance of our regulated entities for the first nine months of fiscal 2008. I think this shows the progress we have made and the effectiveness that we've had in our rate making process in every jurisdiction that we serve.

On our nonregulated operation side, it really does complement the gas distribution business. And although as you heard, the income from the marketing storage has dipped because of the lack of gas price volatility, the natural gas marketing segment continues to provide solid earnings growth through its more predictable delivered gas services revenues.

Looking forward, we are finishing up our fiscal 2009 budget cycle and will be communicating those details to you in the coming months. Any of you may be asking what's next for Atmos Energy, but with Mid-Tex essentially fixed, how can we grow our distribution business? Well, I would just say that much of the work that we've been doing over the past few years with rate design and rate filings has now paid off for us and we will continue to make incremental improvements in our regulatory assets as we move forward.

With the Texas pipeline, we have several projects that are under review as we explore opportunities with all of the drilling going on in the state, and particularly in the Barnett Shale. And we hope that we will be able to announce one of those projects in the near term. Certainly, it's an exciting time to be operating the pipeline in Texas.

Prospects for our Fr. Necessity Storage Project are also promising as we reported today, and although it's still in the early stages, we will continue to update you as it progress. Again, we anticipate the first phase to be operational in 2011.

We appreciate you taking time to be with us this morning and now we will be glad to open it up for any questions that you may have.

Question And Answer

Operator

Thank you. [Operator Instructions]. Thank you. The first question comes from Ted Durbin from Goldman Sachs. Please go ahead.

Ted Durbin - Goldman Sachs

Hey, guys. On the Mid-Tex rate request, what are the key issues that are sort of going on now like there is some negotiations and what's the process, can you talk us through that?

Robert W. Best - Chairman, President and Chief Executive Officer

This is Bob. I'm going to let Kim Cocklin who runs our regulated operations answer that question for you.

Kim R. Cocklin - Senior Vice President of Regulated Operations

Good morning. Well, the process, I think, we've had several conversations with a lot of... it's an expedited, abbreviated approach to reviewing the capital investment and the expense increases. We were now seeking $33.5 million. And as a matter of fact, we are having meetings today with one group of cities and we have already had two meetings with the other group of cities. So, the process is probably going to be about two to three meetings and we anticipate settling on a dollar increase and that increase will be reflected in rates that will be made effective with our fiscal year beginning October 1.

Ted Durbin - Goldman Sachs

So, if I think about what are the big issues that are likely to be part of the negotiations?

Kim R. Cocklin - Senior Vice President of Regulated Operations

Well, there really aren't any big issues because we stipulated to return cap structure, depreciation, there is the normal discussion, and to-date about what expense levels are appropriate. There really... there is no difference actually with us and the settling parties on our capital investment. Most of it is associated with the O&M expenses. And if you follow the rate cases that's in the Texas Railroad Commission before, you know that we've had a lot of issues around shared services, corporate costs that are allocated to the divisions, and how the level of costs that should be allocated. So principally, the shared service was corporate costs that we are talking to them about right now.

Ted Durbin - Goldman Sachs

Okay. And then, if I could ask about the Ft. Necessity project, did you get a sense of pricing that you might see out of that based on the open season, you have got producer demand, but just a sense of what the sort of the demand curve actually looks like for the project?

Robert W. Best - Chairman, President and Chief Executive Officer

I'm going to let Mark Johnson who runs our nonregulated operations to answer that.

Mark H. Johnson - Senior Vice President, Nonregulated Operations, President, Atmos Energy Marketing, LLC

Yes, Ted, we had a strong turnout of bidders and we didn't get a good sense of pricing, pricing was consistent with all of our market research ahead of time. We had a good range, a good diversity of people interested, entities interested taking [ph] down capacity. And it was encouraging to see that there was still a robust need for additional storage capacity. So, yes, the open season served its purpose, and we are going to move forward with the project on a very conservative basis and begin discussions with those entities, and be sure that we draw a line as to what are our expectations on it.

Ted Durbin - Goldman Sachs

Okay. And then, can you just talk a little bit about construction costs? Have you sort of started to talk to vendors about they would be doing and then also about potential returns on the project?

Mark H. Johnson - Senior Vice President, Nonregulated Operations, President, Atmos Energy Marketing, LLC

Well, the construction costs, we were fortunate enough, we have already begun our stratographic test well and the virtual [ph] well, which we were fortunate enough to lock in the drilling costs for that over nine months ago. And those costs are something to be concerned with. But we have got a pretty good handle based on all the information out there today. Our costs are current, and that's all factored in as we start to look at what the economic viability of the project is. At this time we are not going ahead with any kind of economic forecast, but we are discussing it with the parties that are interested in that capacity.

J. Patrick Reddy - Senior Vice President and Chief Financial Officer

Ted, this is Pat. As you can imagine, we have run a whole bunch of different scenarios with various levels of construction costs, various expectations about needs for storage injection and withdrawal cycles, and different levels of extrinsic and intrinsic value. So, obviously, we wouldn't be going forward with it if it wasn't meeting our internal hurdle rates, which, as we have discussed on earlier calls, tend to be about 15% after tax for nonregulated projects.

Ted Durbin - Goldman Sachs

That 15% unlevered or --?

J. Patrick Reddy - Senior Vice President and Chief Financial Officer

Unlevered.

Ted Durbin - Goldman Sachs

Okay, great. Thanks a lot.

J. Patrick Reddy - Senior Vice President and Chief Financial Officer

Thank you.

Operator

Thank you. The next question comes from Faisel Khan from Citigroup. Please go ahead.

Unidentified Analyst

It's actually Barry Klein. A couple of questions on the marketing division, the estimates for the year, I think are $27 million to $30 million in net income, you had said that the... you thought that there was going to be low price volatility for the rest of the year. Has this number been updated from previous quarters or... and does this assume sort of normal type of volatility, or is this assuming the lower volatility for the rest of the year?

Robert W. Best - Chairman, President and Chief Executive Officer

This is Rick Alford, who is Head of the financial part of our nonregulated operations.

C. Richard Alford - Senior Vice President Finance & Administration

This number has been updated. Our original projections and even our revised projections had no material storage contribution in the fourth quarter. So, we really didn't have to update that part. This is standard operations on our marketing book, primarily that's generating these numbers.

Unidentified Analyst

Okay. I don't know if you said it during the call, do you know what type of impact the... deferring those withdrawals versus the prior year should have, or is that, I don't know if you've released that or not?

C. Richard Alford - Senior Vice President Finance & Administration

Well, what we do every month and every quarter, we evaluate our economic value, which is our future income that we expect from our storage operation. And then we also have a GAAP number we have in our slide, the $13 plus million of future economic value. So that's the way we track the impact of our resetting the financial positions.

Unidentified Analyst

Okay, got you. Thanks a lot.

Robert W. Best - Chairman, President and Chief Executive Officer

Thank you.

Operator

[Operator Instructions]. Thank you. The next question comes from the line of Elvira Scotto from Bank of America. Please go ahead.

Elvira Scotto - Bank of America

Hi, good morning.

Robert W. Best - Chairman, President and Chief Executive Officer

Good morning.

Elvira Scotto - Bank of America

Question on your distribution businesses. What's the driver behind raising your guidance for distribution and what gives you the confidence that you can hit these higher numbers? And then, just as a follow on, I know that on bad debt expense, you haven't seen much of an increase in the quarter despite a big jump in natural gas prices. But what's your view, as we head into winter, particularly given sort of the current macro backdrop, and maybe you can run through your different operations and talk about, if you have any riders in place for bad debt expense that would be helpful. Thanks.

Robert W. Best - Chairman, President and Chief Executive Officer

I'm going to let Kim Cocklin answer you question. But I wanted to say something about bad debt expense first and that is, we have been started back really in the winter of 2001 when gas prices spiked and we put a special emphasis on our collections activities, and I think that has really helped us through the last seven or eight years to keep our bad debt expense where it is. And so that... we had to really give some accolades to those who work in that area because it's a daily... every day you have to just stay right on top of the situation. So, I think we've really performed at a very high level when it comes to bad debt expense. But as far as the operations and why we feel confident about our regulated operations for the rest of the year, I am going to let Kim Cocklin answer that question. Kim?

Kim R. Cocklin - Senior Vice President of Regulated Operations

Well, thank you, Bob. Well, I mean, obviously we are relatively confident that we are going to make the number and principally it's related to a lot of the rates, the regulatory activity that began about two to three years ago and the annual filings that we make now in Texas, Mississippi, Louisiana, Virginia, and some of the successes that we've had in the past in Kentucky and Tennessee that are now starting to show up on an entirely annual basis. And I think if you look at the incremental revenue that's been added in the past 12 months from rate and regulatory activity, it amounts to about $67 million of additional margin that is coming in this year that has not been coming in in the past.

And obviously, we have filings that are in process right now that have filed for amounts that we'll obviously negotiate down and that's... some of that's included. And then we have other applications that are in the process stage. I mean, as Bob and Pat have continually emphasized, I mean, the road for success with the regulated business is obviously in the rate and regulatory world and it's not only the processing of the applications that are necessary to reflect the net capital investment and the expense increases that we're incurring, but also it's very dependent upon the relationships that we have established.

Pat talked about the RRM processes in Texas. And we are confident that that is going to work and work very well, principally again because of the relationships and the amount of the investments that we made on those relationships, not only with the customers, but also with the city officials as well as legislators and then the regulators themselves. So that's really where we are at and that's why we are enjoying the success that we are reflecting in the results. And it's more of a collaborative partnership, and things that are being litigated. And the other upside to all of this is that there is significant savings associated with rate case expenses that's being occurred as part of the litigation that has been going on in the past.

So, I know that's a the long way around it, the bottom line is that we're confident that the numbers are very achievable.

Robert W. Best - Chairman, President and Chief Executive Officer

And our pipeline has been doing really well with all the volumes that it's been transporting, which is part of the regulated operations.

Kim R. Cocklin - Senior Vice President of Regulated Operations

Yes, that pointed out, I mean, the volumes that are going through the Barnett Shale field right now that have increased significantly. I think we are 70 Bcf over last year and we are also significantly above the margins that we were realizing through that same transportation because of the bases spread that are existing in the Barnett Shale and where that pipeline is situated.

J. Patrick Reddy - Senior Vice President and Chief Financial Officer

Kim, on that point, our transportation volumes and margins are expected to be about $9 million higher than we planned. And so we factored that into our guidance in the mix of the earnings contribution.

Elvira Scotto - Bank of America

Okay, thank you, that's very helpful. I just wanted to go back to the bad debt expense. Do you have... I am just thinking about going into this winter, heating season, do you have riders in place, in case you do have, you do see some increased bad debt expense?

Robert W. Best - Chairman, President and Chief Executive Officer

We do have, I mean, several states. That's one of the things that we are working on in the rate process everywhere we file, but Kim, why don't you mention --

Kim R. Cocklin - Senior Vice President of Regulated Operations

Well, I hope, Elvira, that you are very accurate and correct that we are going to have a winter heating season this year for a lot of reasons. But we have, in most of the bigger divisions, I think it's about 50... at least 50% of the jurisdictions or the meters are covered with the recovery of bad debt in a PGA type mechanism rather than in the rate level. So, it's an actual recovery of the gas cost piece of bad debt rather than trying to establish a representative level and hitting that mark and trying to assign an assumption around gas prices. So, we have significantly reduced our exposure. In the Mid-Tex settlement in particular, that was the significant condition in the settlement that we would get the recovery of gas cost portion of bad debt in our gas cost recovery filing that we make in Texas. We have it in West Texas as well and we have it in Tennessee, Virginia and Louisiana.

J. Patrick Reddy - Senior Vice President and Chief Financial Officer

Elvira, going back several years, we have done some blocking and tackling around, making sure that we can charge customers appropriate deposits and reconnection fees. We're very diligent about going through the disconnection process for customers that don't pay their bill and so that we can have them offline before they get too far into our pocket. And so you are never happy about that process, so we are very diligent to control bad debt expense.

Robert W. Best - Chairman, President and Chief Executive Officer

I will say this, I mean, our collections efforts in our area for collections, I mean, we have a group that's responsible for collections internally, and they do a magnificent job. I mean, if you look at us compared to the rest of the industry, we are incurring bad debt of about 0.34%... 0.34% of overall revenues. So, 3.34 of 1%.

[Multiple Speakers] 1%, which is magnificent given obviously the economic conditions requirement. But it's something that's focused on everyday and we have got people that go to bed and wake up thinking about collections, they do a wonderful job.

Elvira Scotto - Bank of America

Okay, great, excellent. Thank you very much.

Robert W. Best - Chairman, President and Chief Executive Officer

Thank you.

Kim R. Cocklin - Senior Vice President of Regulated Operations

Thank you, Elvira.

Operator

Thank you. There appears to be no further questions. Are there any further points you wish to rise.

Susan Giles - Vice President, Investor Relations

I just would like to say, this is Susan, that a recording of this call is available for replay on our website through the November 10. And again we appreciate you joining us. Thank you. Have a great day.

Operator

Thank you. You may now disconnect.

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