Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company Conference Call discussing the company's Second Quarter 2020 Results. The call is being recorded. If you would like to listen to the replay of this call, it will begin this afternoon at 5 p.m. Eastern Time and run through Tuesday, August 9, 2022, on the company's Web site www.aswater.com. The slides that the company will be referring to are also available on the Web site. After today’s presentation, there will be an opportunity to ask questions [Operator Instructions]. Presenting today from American States Water Company is 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 and liability established by the Private Securities 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 would like to turn the call over to Bob Sprowls, President and Chief Executive Officer of American States Water Company. Sir, you may begin.

Thank you, Chad. Welcome, everyone, and thank you for joining us today. I'll begin with some brief comments on the quarter. Eva will then discuss some financial details. And then I'll wrap it up with some further thoughts on the quarter, updates on regulatory activity, California's drought, ASUS, dividends and then we'll take your questions. Before I provide some highlights on the second quarter results, I'm pleased to report that last week, our Board approved another sizable dividend increase. The annualized dividend rate after this increase is $1.59 per share, which represents nearly a 9% increase from the current annualized dividend rate of $1.46 per share. This action marks the 345th consecutive dividend payment by the company. American States has paid dividends every year since 1931, increasing the dividends received by shareholders each calendar year now for 68 consecutive years. Now on to the second quarter results. Like the first quarter of this year, this was a unique quarter with earnings per share decreasing from the prior year second quarter. This was in large part due to losses incurred on our investments to fund one of the company's retirement plans as compared to gains in the same period of 2021, as well as timing issues with receiving a final decision from the California Public Utilities Commission, or CPUC, on our water general rate case at Golden State Water. Excluding the gains and losses on investments from both periods and including the additional revenues and water supply caused from the delay in the water general rate case in our second quarter results, adjusted consolidated diluted earnings for the second quarter of 2022 were $0.71 per share as compared to adjusted diluted earnings of $0.69 per share for the same period in 2021, an adjusted increase of $0.02 per share. Eva will discuss these results in detail. We continue to deliver high quality water, wastewater and electric services to customers during the quarter. We're making good progress on our goal to spend the $140 million to $160 million this year in infrastructure investments at our regulated utilities that we discussed during previous calls, strengthening the critical infrastructure that our customers require for the long term. Along with a waiting a decision from the CPUC and Golden State Water's general rate case, we are also actively involved in processing our cost of capital application. Hearings on this proceeding occurred in May of this year and briefs were filed one month later in June. Also in June, Standard & Poor's affirmed its A+ credit rating for both American States Water Company and Golden State Water Company. Although both ratings continue to carry a negative outlook. With the company's sound capital structure and A+ credit ratings, it will enable us to continue accessing debt financing on reasonable terms, which we expect to do over the next year. Eva will provide an update on our financing plans, and I'll now turn the call over to her.

Thank you, Bob, and hello, everyone. Again, thank you for joining us today. Let me start with our second quarter financial results. Consolidated earnings recorded were $0.54 per share compared to $0.72 per share last year, a decrease of $0.18 per share. This included losses of $3.5 million or $0.07 per share on investments held to fund a retirement plan as compared to gains of $1.6 million or $0.03 per share for Q2 last year. This item alone resulted in an unfavorable variance of $0.10 per share. Furthermore, due to the delay in receiving a final decision on the pending water general rate case, while the revenues for 2022 were based on 2021 adopted rates. Has the new rates being approved and implemented on January 1, 2022, consistent with November 2021 settlement agreement reached between Golden State Water and the public office of the CPUC, we would have recorded additional revenues and water supply costs that will have resulted in higher earnings of $0.10 per share for the second quarter of 2022. So excluding the gains and losses on investments from both periods and including the additional revenues and water supply cost caused by the delays in the water general rate case in the results, adjusted consolidated earnings for the second quarter of 2022 were $0.71 per share as compared to adjusted earnings of $0.69 per share for Q2 of 2021, that's an increase of $0.02 per share. For our water utility subsidiary, Golden State Water Company, earnings were $0.40 per share as compared to $0.57 per share last year, a $0.14 decrease. Both items as discussed affected earnings at the water segment. So factoring the same effect from the two items, adjusted earnings for the second quarter at water segment were $0.57 per share, which was an increase of…

Thank you, Eva. Before I get into regulatory matters, I would just like to reiterate a few key factors impacting our second quarter and year-to-date earnings. At 2022, water rates been approved, consistent with the settlement agreement in the general rate case and implemented on January 1, 2022, Golden State Water's earnings contribution for the second quarter would have been $0.10 per share higher and $0.19 per share higher for the first half of 2022. Once a final decision is issued by the CPUC in the general rate case, the new rates will be retroactive to January 1, 2022. Therefore, we will record the cumulative retroactive impact at the time a decision is issued. While it's unfortunate that the delay in the general rate case has negatively affected our earnings thus far in 2022, we view this as a timing difference for the year. We also recorded a reduction to water revenues, which decreased the quarterly and year-to-date per share earnings by $0.03 and $0.06, respectively, to reflect our best estimate at this time based on our accounting assessment of revenues subject to refund from the pending cost of capital proceeding filed in May 2021, which includes primarily the impact of Golden State Water's lower cost of debt requested in its application. However, at this time, we cannot fully predict the ultimate outcome of the cost of capital application and the associated impact on 2022 revenues. Changes in estimates will be made, if necessary, as more information in this proceeding becomes available. The investment losses on one of our retirement plans during the second quarter and year-to-date periods of 2022 negatively impacted earnings per share by $0.10 and $0.14 respectively as compared to the same period last year. We also expect ASUS to catch up on its construction activity during…

[Operator Instructions] And the first question will come from Angie Storozynski from Seaport.

So just wondering, I mean what do you think is the reason why you haven't heard from the CPUC at either on the settlement for your rate case or the cost of capital proceeding? I appreciate that you'd still expect decisions in both cases in the second half. Well, the time is running out. And again, I'm just wondering if you have an idea what's been going on?

So with regard to the general rate case, we were told earlier this year that the assigned administrative law judge was involved in several weeks of evidentiary hearings and another general rate case proceeding. Fortunately, those hearings are now over and we understand that the ALJ is now focused on preparing the proposed decision in our water general rate case. So that covers the general rate case. The cost of capital is a little harder to understand, although we just completed the hearings in May and the briefing in June, and so we'll just have to see how long it takes for the commission to get out a proposed decision in that hearing.

Do you think that there could be some link between -- on the cost of capital side, between when the commission plans to issue -- the ALJ plans to issue a proposed decision and that's end of September, October 1st mark for the cost of capital adjustment mechanism on the water side? I mean is it possible that the commission is waiting to see if an adjustment, upward adjustment could happen and based on that rule in this pending cost of capital proceeding?

Angie, I think it is possible that they may wait until after September 30th to see where the adjustment mechanism comes out, because it's pretty close as to whether it's going to trigger or not. But the general rate case, they're behind on that, so I think they're just behind too. Although you could craft some strategy behind why they might want to wait until after September 30th.

And could you remind us what is the benchmark against, which I'm measuring that 100 bps band for that adjustment? What's the -- I mean…

AA utility bond rate…

Yes, and the benchmark right now is at 2.89%, Angie. And so you have to be 100 basis points in over so that’s trigger 50% of that change.

And it is an average for the period…

12 month average…

Yes, 12 month average.

Well, so lately, the pullback in rates is not helpful, to hit that mark. I mean as you said, it's a close call at this point..

Yes, it's going to be close.

But [Multiple Speakers] impact on the rates in 2023, right? So in a sense, if they were to lower the base ROE in anticipation of that 50 bps increase that would happen in '23, '22 is still being impacted downwards, no?

Correct. So the ROE and the decision covers the period 2022 through 2024, but the adjustment mechanism would apply to 2023. And so theoretically, they need to establish the proper ROE for 2022 and then let the adjustment of mechanism do what it's going to do.

And then just separately from -- so basically just assuming that the cost capital proceeding is just the adjustment of the cost of debt as you're currently reflecting in your results. And assuming that ASUS does catch up for the remainder of the year to have at least -- well, to have, say, flat earnings year-over-year. Given this drag that you were seeing from the pension accounts I mean, is there any chance you could actually get to flat earnings year-over-year? I mean, I've been actually looking at it. I mean it's -- I understand that you have no control over the pension -- of the performance of your pension funds, but then again, you did account for benefits from those pension funds and prior earnings from kind of torn -- if that drag should be excluded. And again, knowing of the drag that we see thus far, any way you can be flat year-over-year in earnings?

Well, so far, as you know, the retirement plan is $0.10 under -- $0.10 of losses to date. I don't recall what the gain was last year in the $2 -- what was it $2.55. So we'd have to not only make up the loss of the $0.10, we'd also have to make up the gain that we had last year, which I think the S&P was up 30% in 2021. The rest of the businesses would need to make up for that difference for us to get back there. I mean it's possible. The market's been better lately. These are June 30 numbers, of course. So it's possible. I mean we think ASUS will make up some ground and we think both of our utilities are doing fine, but for the delay in the various proceedings.

[Operator Instructions] Our next question will come from Jonathan Reeder from Wells Fargo.

So just to clarify one of your earlier comments, Bob. Do you believe like a proposed decision from the ALJ and the GRC is imminent then, or did the ALJ just kind of start working on it? What's kind of the timing of the -- how far into this drafting of the PD ALJ is?

I don't think we've heard the word imminent. And it always seems to take longer than what one would expect. But there's two parties in this not to get on my soap box, but there's two parties in this general rate case. And we have -- the two parties have signed a settlement agreement, sort of frustrating is to okay, where is the difficulty here. But hopefully, we can see something in the next few months, I would say. I don't think we're talking about days. I think perhaps we're talking a couple of months.

And so then, I mean, it sounds like it's probably not going to be approved in Q3, but assuming that's the case. Do you know like how much of an EPS it would be to the Q3 EPS along the lines of the $0.09 in Q1 and $0.10 in Q2 like how that distribution goes?

Yes, typically, third quarter is higher than the second quarter.

Annual impact, Jonathan, the GRC is about $0.40 higher compared to our current, but then you have to decrease that by $0.15 of cost of debt adjustment. So the annual impact is about $0.25 a net impact. So we already incurred 19 minus 6 so 13. So we have about another $0.12 to $0.13 for the third and fourth quarter.

Another $0.12 to $0.13 for the back half of the year from…

And this is net of the cost of debt adjustment.

So $0.19 is not net, the 19 is…

So I guess we should be looking at it as $0.21 still for the second half of the year just purely from the GRC.

Yes, correct…

And the bulk of that being Q3 or maybe 75% or something of it.

Yes, the third quarter is typically greater than the second quarter in terms of usage.

Just I like you, I'm hopeful, I guess, the settlement is approved by the end of the year and then the full year number kind of is what it is. But in the meantime, just trying to figure out how to adjust Q3, so appreciate that. And then my last question, shifting over to ASUS. I think the construction activity during the first six months was only like two thirds of what it was during the same period last year due to the delays. And I know you reiterated the guidance range, 45 to 49 and last year, ASUS contributed $0.48. So it just kind of seems like potentially a lot of ground to make up in '22 on the construction side. Should we be thinking more the low end of the range for this year just due to those delays?

Well, just a couple of comments on that. The first quarter of 2021, that was a very strong quarter from a construction activity standpoint relative to other first quarters. So when we look sort of versus last year, that strong first quarter last year was a hard benchmark to hit. The other point I'll make is we have had strong construction in the third and fourth quarter historically. So we're looking at making up the difference here in the last two quarters, although the world is a bit different than it was last year, given material pricing and lead times, et cetera. So I mean, we're going to try to bring out as much construction as we can here in the last two quarters. I don't know where that's going to put us in that 45 to 49 that range.

But I mean…

We will provide an update in Q3 to you, Jonathan, how we do there…

But I guess, the way you're seeing it today, I mean, if things go well, you got the materials ordered stuff like that, like you could still execute as you were anticipating for the full year...

Yes.

Well, good luck getting some proposed decisions and constructive ones out of the CPUC. We're eagerly awaiting them.

[Operator Instructions] Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Bob Sprowls for any closing remarks.

Thank you, Chad. I just want to wrap it up today by thanking everyone for their participation and let you know that we look forward to speaking with you the next quarter. Thanks, everybody. Good rest of your summer.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.