Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company Conference Call, discussing the company’s Second Quarter 2017 Results. The call is being recorded. If you would like to listen to the replay of this call, it will begin this afternoon at approximately 5 o’clock PM Eastern Time and run through August 10, 2017 on the company’s website, www.aswater.com. The slides that the company will be referring to are also available on the website. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded, and the call will be limited to an hour. Presenting today from American States Water Company are Bob Sprowls, President and Chief Executive Officer; and Eva Tang, Senior Vice President of Finance and Chief Financial Officer. As a reminder, certain matters discussed during this conference call may be forward-looking statements intended to qualify for the Safe Harbor from liability established by the Private Security Litigation Reform Act of 1995. Please review a description of the company’s risks and uncertainties in our most recent Form 10-K and Form 10-Q on file with the Securities and Exchange Commission. In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with Generally Accepted Accounting Principles or GAAP in the United States and constitute non-GAAP financial measures under SEC rules. These non-GAAP financial measures are derived from consolidated financial information, but are not presented in our financial statements that are prepared in accordance with GAAP. For more details, please refer to the press release. At this time, I will turn the call over to Bob Sprowls, President and Chief Executive Officer of American States Water Company. Please go ahead.

Thank you, Nicole. Welcome, everyone, and thank you for joining us today. I’ll begin with some highlights for the quarter, Eva will then discuss some second quarter and year-to-date details, and then I’ll wrap it up with some updates on various regulatory filings, ASUS and dividend, and then Eva and I will take your questions. I’m pleased to report another solid quarter of increased earnings in all three of our business segments, as compared to the same period last year. This is due to our hard work on regulatory and U.S. government filings over the past year, in conjunction with our focus on operational efficiencies. During the past few months, Golden State Water has filed its cost of capital application, electric general rate case and water general rate case with the California Public Utilities Commission or the CPUC. Our regulated utilities continue to invest in the reliability of our water and electric system. We are on track to invest $110 million to $120 million of capital for the year, about three times our expected depreciation expense for the year. On June 8, we completed the sale of our operating assets of Golden State Water’s 2,900-connection Ojai water system to resolve the Eminent Domain Action and other litigation brought by Casitas Municipal Water District and Ojai Friends of Locally Owned Water. As a result, Golden State Water received $34.3 million in cash and recognized a pre-tax gain of approximately $8.3 million, or $0.13 per share. While we were not looking to sell this system, we are pleased with the terms of the settlement agreement, which enabled us to achieve a comprehensive resolution of this Eminent Domain Action. Our contracted services business, American State Utility Services or ASUS had a very productive quarter. In June, ASUS successfully resolved the third price redetermination for Fort Bragg in North Carolina, resulting in an increase in management fee revenue, including retroactive revenue. ASUS also assumed the operation of the water and wastewater systems at Florida’s Eglin Air Force Base under a 50-year contract with the U.S. government. ASUS now provides water and/or our wastewater utility services to 10 military bases, including three of the largest military installations in the United States; Fort Bragg, Fort Bliss and Eglin Air Force Base; as well as one of the most high profile bases, Andrews Air Force Base. Yesterday, we announced a 5.4% increase in our third quarter cash dividend. Our calendar year dividend has grown at a compound annual growth rate of 11% for the five years ended 2016. I’ll now turn the call over to Eva to review the financial results for the quarter.

Thank you, Bob, and good afternoon, everyone. An overview of our financial results is on Slide 7. Diluted earnings for the quarter as reported were $0.62 per share, compared to $0.45 per share for the same period in 2016, an increase of $0.17. I will discuss the major items that impacted our revenues and expenses, including certain items that affected the comparability of our quarterly results. So some of these items are shown on this slide as non-GAAP adjustments, which is excluded from earnings would how resulted in adjusted earnings per share of $0.49 for the second quarter of 2017, as compared to an adjusted earnings per share of $0.42 for the second quarter of last year. I’ll discuss the adjustments on the next slide. The operating income on this slide reflects the following non-GAAP adjustments. The first adjustment relates to California Public Utilities Commission’s delay issuing a decision on the water general rate case. Due to the uncertainty of the outcome of the water general rate case at the time, the water gross margin recorded for the second quarter of 2016 reflected Golden State Water’s position in the then pending water GRC. The decision issued in December 2016 authorized 87% of our capital request and allowed only a portion of our executive incentive compensation program. When the decision was issued last December, with new rates retroactive to January 1, 2016, we recorded accumulative downward adjustment of $5.2 million to the water gross margin in Q4 of last year, related to the first three quarters of 2016. Of this amount, $1.8 million related to the second quarter of 2016, which would have decreased revenues by approximately $900,000 and increased supply cost by $900,000 for the second quarter of last year. The second adjustment relates to Golden State Waters sales of…

Thank you Eva. I’d like to provide an update on our recent regulatory activity. Following a delayed decision the CPUC received in December of last year, set water rates for 2016, the CPUC ordered Golden State Water to bypass implementing 2016 rate and to implement 2017 rates. The new 2017 rates were retroactive to January 1, 2017 and were implemented in April of this year. Last month Golden State Water filed with the CPUC the recovery of $9.9 million in revenue shortfall, representing the net differences between the actual rates billed from January 2016 through April 2017 and the new rates adopted in the final decision. Surcharges to recover this revenue shortfall are expected to be effective September 1st. The new rates and adopted supply costs are expected to increase the adopted water gross margin in 2017 by approximately $3.7 million as compared to 2016. Also last month Golden State Water filed its water general rate case application which will determine new water rates for the years 2019, 2020 and 2021. Among other things, Golden State Water’s requested capital budgets in this application average approximately $125 million per year for the three-year rate cycle. A decision from the CPUC in this general rate case is scheduled to be finalized in the fourth quarter of 2018. In April of this year Golden State Water filed its water cost to capital application. The application recommend an overall weighted return on rate base of 9.11%, including an updated cost of debt of 6.6% and a return on equity or ROE of 11%. The current authorized return on rate base is 8.34% including an ROW of 9.43%. A decision on the application is scheduled to be received by the end of this year and become effective January 1st, 2018. In May of this year…

Thank you. We will now take your questions. [Operator Instructions] Our first question comes from Jonathan Reeder of Wells Fargo. Please go ahead.

Hi, Bob and Eva, how are you all doing.

Very good. Thank you.

Good, Jonathan. How about you?

Oh, not too bad, getting towards the tail end of earning season. So that – a light at the end of the tunnel.

Okay.

[It might be anther one.] [ph]

Yes. So, Bob, what period did the $0.02 retroactive component of the Fort Bragg price redetermination cover? I noticed you didn’t back that out of ongoing EPS for Q2?

Yes. So the $0.02 was for…

For Q1 and the prior year.

Yes, right.

We didn’t back it out, Jonathan, because every year we’ll have this kind of retroactive revenue. Going forward, we’ll – probably, we’ll have less if everything is on schedule.

Right, we’re sort of migrating all of these contracts to economic price adjustment vehicles. And so likely that we won’t have a lot of the way there, given those are quite a bit easier to sort of get through the process on.

Okay. Okay, so I mean, just, the fact that you have these in the past, you just didn’t consider it one-time in Q2, but going forward, they should kind of, I guess, be less frequent, it sounds like?

Yes. And if you want to normalize that, I think you can figure it out. We just talk about it, because it’s been ongoing. Every year, we have similar expenses.

Okay. One other revenue thing – sorry

Yes, just the process there is to substantiate all the inventory. And if we’re comfortable that we’re getting credit for all the inventory, we will – not until we’re comfortable that we’re getting credits to all of the inventory, where we migrate to the economic price adjustment model. But that’s why we have it at some place – some odd bases and other bases, we’re still moving towards that.

Okay. And hey, what – what’s the revenue change requested in the recently filed water GRC?

Compared to 2017, I’d say, it’s about 7%, Jonathan.

And what’s that [Multiple Speakers]

It’s really kind of a – I don’t know how helpful that number is.

Yes, it’s revenue.

Because that has supply cost and other same thing.

But it’s a 10% increase?

In terms of revenue. But I think that probably the rate base will be a better benchmark for you.

Right. We can give you what the requested rate base is, that would be helpful.

Yes, we have 8 rate-making area. So if you look at our other rate case applications, which you can obtain from this PUC side, and we listed revenue requirements and rate base for each of the rate-making area. So if we sum them up and the consolidated rate base for the water segment is $876 million for 2019, as filed, that compares to our 2017 adopted rate base of $717 million. So, again, this is just for the water segment only. BDE [ph] has about $27 million of rate case.

Okay. So you said $876 million is what you requested per average rate base in 2019…

Yes.

$717 million adopted in 2017 on the water side and then another $49 million for electric…

$47 million.

Oh, sorry. Okay, and then…

The $876 million is for water only.

Right, right.

Yes, because we think the revenue impact by a lot factors. There’s supply cost in that we’ll have higher supply cost this time too. So probably the rate base will be a better eval.

Yes, and I appreciate that. I didn’t anticipate you give me the rate base now. So thank you.

It’s in our filings. So I kind of – really, it’s a public information before I let it go.

Yes, it sounds like a future slide for the deck, if you ask me. And then…

We first do in the past and so we’re trying to make your job easier, Jonathan.

No, I do appreciate that. It’s much appreciated. So remind us, Eva, what’s the averaging of CapEx that was approved in 2016 GRC order?

I think we got approved of $250 million for a three-year contract.

Okay. Gotcha. Okay, so you’re asking for…

85.

You’re asking about 85 [Multiple Speakers] That was about 87% what we requested so…

Okay. So you’re looking for a pretty good step up in this one?

We hope so. We spend-ed more than $110 million last year.

Yes, $110 million, $115 million last year.

So we’re proving out that we have a need to put capital under the ground.

Right. And then this year, we’re looking to do $110 million to $120 million, I guess $110 million to $120 million includes electric or the $110 million last year was just the water side.

Yes, definitely.

Okay. And then last and I’ll let somebody else go. What are your thoughts on the ORA testimony in the cost of capital proceeding?

Well, we’re kind of disappointed that they didn’t agree with our request in the application. But we’re not surprised, of course, nor we surprised by the difference between our two positions. I’ll kind of remind you that in our last cost of capital application in 2011, ORA had recommended an ROE of 8.75%, and we had requested about 275 basis points above that. And we’re able to reach agreement with them and able to reach a settlement with ORA yet to 9.99% in that case, which as you know that adjustment mechanism then triggered a year or so later and brought that down to 9.43%. So it’s not unexpected. But it’s something we’re going to have to – hopefully, we can reach a settlement agreement on, if not, we’ll do, we got to do to litigate this whole thing.

Besides the ROE, I mean, equity structure and cost of debt – those items, so that’s kind of concerning, or you guys kind of the adjustments that they’re getting at?

Well, the equity was not a surprise and we’re few 100 basis apart on that. So I would say, that’s not a bridge too far, I would say.

And we’re filing our revolving testimony in the next few weeks then we’ve got all the forms already filled out.

Okay.

We’ll see how that goes from there.

All right. I appreciate you taking my call today and good luck. Hopefully, being able to reach a settlement between you and the other water utilities and the ORA.

Yes. Thank you, Jonathan.

Thank you.

[Operator Instructions] As we have no further questions, I would like to turn the conference back over to Mr. Bob Sprowls for any closing remarks.

Yes, I just wanted to thank everyone for their participation today, and I look forward to speaking with you all, as does Eva, next quarter. Thank you.