Good day, everyone and welcome to the Aqua America third quarter 2008 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brian Dingerdissen, Director of Investor Relations. Please go ahead, sir.

Good morning, everyone. Thank you for joining us for Aqua America's third quarter 2008 earnings conference call. If you did not receive a copy of the press release, you can find it by visiting the Investor Relations section of our website at, www.aquaamerica.com or call Will Meade at 610-520-6309. There will also be a webcast of this event available on our site. Presenting today is Nicholas DeBenedictis, Chairman and President of Aqua America, along with David Smeltzer, the company's Chief Financial Officer. As a reminder, some of the matters discussed during this call may include forward-looking statements that involve risks, uncertainties, and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward-looking statements. Please refer to our most recent 10-Q, 10-K, and other SEC filings for a description of such risks and uncertainties. During the course of this call, reference maybe made to certain non-GAAP financial measures. Reconciliation of these non-GAAP to GAAP financial measures are posted in the Investor Relations section of the company's website. At this time, I would like to turn the call over to Nick for his formal remarks, after which we will open up the call for questions.

Thanks, Brian and welcome, everyone. We are obviously pleased with our third quarter and also our outlook which I will try and get into a little bit today. I think the results verify our successful business model, which we have stuck with and has been successful for over a decade and now its returning to its norms. I think this quarter also validates and I will get into some of the credit issues that everybody is being affected by today, but I think the numbers, the balance sheet, the strength that we are showing also validates the fact that for the past decade, we have been working to strengthen our balance sheet and be prudent in our use of debt. I think that is going to come in very handy over the next, hopefully not too long but maybe, 12 months as the country and the world work its way out of the current credit crises. I would like to start there. The major issue I would like to tell you is that we are still borrowing and can borrow and people want to lend this money. I think that is puts us aside for many companies today. Yesterday, S&P just reiterated our A plus rating, actually AA minus on the debt and give us a one plus, which is the highest 100% recovery estimate that they put out. We also were approved last week for as a special state tax free loan, which we have to issue now through a private company. The state [fax] it as $80 million, we have a 68 pricing window and the S&P rating yesterday reiterates what they feel is an AA minus on that to the possible buyers of this note. We have little refinancing ahead. We only have $7 million in [9],…

Thank you. (Operator Instructions).

Hey, no questions?

We'll take our first question from [Michael Roomberg] with Boenning & Scatter. Michael Roomberg - Boenning & Scattergood: Good morning, guys. Thanks for taking my call. You did mention a little about delinquency rates and bad debt expense. I am wondering, as we've have gotten into September, October, November, have you seen an uptick in that at all? I know you talked about getting it to a lower number. But given that unemployment is up and there is lot of uncertainty, has that affected your delinquency rates or bad debt in any meaningful way?

Michael, actually it's ironic, but the bigger problem we had was the fact that we had changed over the customer service program late in '07, had to delay bills for a month, and then we decided not to try and collect. So we lost a quarter of our normal collection process, and we saw our bad debt jump, because people were transient in some of our areas, and they leave trying to collect. The biggest was in the Woodhaven, the one we sold. That was our biggest bad debt write-off, but we've seen it come down, even though the economy has worsened. You're absolutely right on the foreclosure issue, which we've been fortunate our areas have not had as much impact as California, Arizona, or some of the areas where there was speculation, like Southern Florida. The parts of Florida we're in, we're not seeing that as much. I am not saying it's not there, but it's not to the degree of reading at least in the areas we're seeing. We've become more aggressive now that we have our new computer system. It permits us to have centralized collections versus every state do their own collections and have 13 different policies. If you haven't paid your bill on the 10th day after the bill was mailed, you get a dinging notice and then sent out by computer to the field. They have to address it, which means you could get the money or [shut] the person off within a certain timeframe. It's no longer an individual decision made by the collection agents sitting in an individual local area, so we have not seen an uptick. In fact, we're going the other way. But I would say, we are doing it based on the fact that we were artificially high in Q1 versus our norm. So, those are two in our mix. Probably it's a little worse, because as I mentioned, point eight is like what we'd like to see. The run rate is now about 1.0, 1%. But I think most people would agree that's not a bad number for utility in this economy. Michael Roomberg - Boenning & Scattergood: Okay. That's helpful. And another major question.

Let me address one more area, Michael, the other is, the new computer system allows us to bill people monthly, not quarterly. We're addressing these issues on a 30-day period, not a 90-day period. And the result of that is that our bill has been cut by a third, easier to pay, and it's still a third of the electric company bill. When we're billing quarterly, our bill and the electric company bill were about the same, and people had to choose which one to pay. Michael Roomberg - Boenning & Scattergood: Right, right. Okay. That is helpful. Switching gears a little bit to the acquisition front. A couple of questions that come to mind, particularly with what's transpired in the last 24 hours. In general, do you think that the political shift that we are seeing across the country is going to add some stigma to the trend towards privatization of public infrastructure that's obviously such an important part of your business? And in addition to that, in the Pennsylvania market, which obviously is huge, how, if at all, does the $400 million PA water bond affect your outlook on the state?

Well, I'm on the taskforce that helped to develop it. So we were very supportive of it. We are eligible for it. It gives you low interest loans through what's called PENNVEST, which means that we can borrow as low as 1.5%, which we had been the number one user of PENNVEST over the past 10 years in Pennsylvania. And I think it will provide more dollars for everybody. So I'm not worried about the fact that somebody will use it, and therefore, wouldn't let us squeeze out or possibly not sell their system to us, because they can get a low interest loan. The backlog in Pennsylvania is about $12 billion. So this is going to be used by those who are ready now to use it, which obviously we are, and can put people to work right away to help the economy more than the ultimate solution by a planner to how to solve Pennsylvania's backlog of water and wastewater infrastructure commitments without having the government do it all. This is just a little nudge by government. With the current state of the Pennsylvania budget, and I'm fairly close with both the administration and the legislature, I don't see any more programs being initiated in this vein. This was meant to give a jumpstart and to take care of the worst issues. We'll do the jumpstart part, companies like ourselves, and American Water, and everybody else will do the jumpstart part. The other part will be addressing long-term combined sewer overflows in Pittsburg things of that sort, where the environment law is requiring them to do something and there is no money. Therefore, they'll use some of this funding probably to do it. I thought it was an overall positive, not anticompetitive, not a government bailout, it's basically a nudge. I think it's more economic development-oriented than it is entitlement-oriented. Michael Roomberg - Boenning & Scattergood: Okay. And if you could also…

Medical shifts? I'm sorry. Michael Roomberg - Boenning & Scattergood: Sure.

I thought when you meant the last 24 hours, Iverson trade to Detroit. Michael Roomberg - Boenning & Scattergood: That's just the capital from trade anyway.

Having been in government for 15 years, and having run an environmental [NC] book at federal and state level, I found and served under four presidents. The shift of the environmental agencies will be about 5% one way or the other, depending on what administration, conservative or non-conservative, that's in office. I think there will be a lot more rules and regulations developed under a new administration. Whether they enforce as much as the old administration, I hope they do, because you only have so many people in government, if they're writing rules, it can't be enforcing. So I'm hoping there is a balance. I think it will all depend if they come up with a $100 billion sewer fund to help every city in the country so that they don't have to raise rates, then it will be just one more inflationary tax added to the rest of the population. If they follow the current strategy of both the Clinton and Bush administrations, which was a cost of service model, we’ll give you a little help, fix your system, but raise your rates to support it, return on and return off your capital. I think we'll finally start addressing the $0.25 trillion backlog in water and $0.25 trillion backlog in sewer, and people will start not getting subsidized, including big industries that get subsidized, by rates that don't really pay the bill. I think that's the biggest shift that we'll see that affects our business directly. Energy is a whole new policy. It's a lot more precise. I think you'll see a lot more innovative things there. Whether they are productive or not, I can't tell you. Whether a wind mill is better than a nuclear plant, it's to do what's better for our country, but that's not my realm of activity. Michael Roomberg - Boenning & Scattergood: All right. Okay. Well, thank you. It will be interesting to see how that plays out. One last one and then I'll let somebody else hop in. You said in the past the long-term dividend target gross rate is about 5%. You've obviously been growing above that for quite sometime now. Has the thinking on that changed or are we still thinking long-term that the 5% is a safe bet?

We're still under 70% payout. I think even with that type of 8% increase, obviously 5% would be less of an impact on payout ratio, I think it's affordable when we look at our five-year model. I think the bigger shift would be if credit markets are such that we have to conserve more capital, which is lot of companies are doing, cutting dividends to make sure they have enough money to continue the programs. We don't see that at this point. And the second is, if tax policies change. Right now, the dividend tax policy is such that I think our shareholders want the dividend. If the tax policy shifts and it's not as valuable a way of rewarding shareholders, obviously, we'll shift our policy. Michael Roomberg - Boenning & Scattergood: All right, okay. Thank you very much.

We'll take our next question from Debra Coy with Janney.

Yes, thanks. Good morning Nick, good morning Dave.

Hi, Debra

Question on rates, you talked, Nick, about the success that you've had in the rate cases so far. I think perhaps the question we get from investors, more than any other, is what makes you think that water utilities can continue to put these large rate increases through in this type of an economic and political environment. What is your answer to that as we look at your big backlog of cases that you're going to filing going into '09?

Sort of the two remaining cases that are in progress that I mentioned, which are first time through those state cases. In the every other, every new development that we bought with AquaSource, Heater, and Florida Water has now been filed and gone through one set of rates which means the books have been cleaned up. Our second round of rates are more normalized returns, more in the high single digits, low double digits. The risk factor on size of rate increases. I'm not saying dollar amount, because the lower the rate, the higher the percentage. But that's really the political that your investors are asking about are behind this, and that's something we learned the hard way, that we couldn't go and get small modified rates, till we fixed everything and that meant two or three more years of no rate while you're building up a lot of capital. That's all been captured in the first round. We didn't get full return, like the 75% rate increase that I mentioned in the Fort Wayne area. We didn't get full return, but we got close to it. So any future rate relief would be to make up that small difference that we didn't get this time, because our capital spend is now more in line with our return on the cash from depreciation in those areas.

Okay.

I would argue that every utility, electric even more or so than water, with the infrastructure needs that are out there if we have an inflationary period, are going to be in for rates. We did this last two years of rates. A lot of cases with high amounts and a time period where there was a void and no competition if you want to call it, competition among the regulators, time with the electrics, and the telephones. And I think you're going to start seeing your return of the gas. You start to see that already, and the electrics, where the amount of rate dollars are going to make us look paltry.

Indeed. And related to that on ROEs, we were particularly pleased to see the 11% ROE you got in Pennsylvania a couple of months ago. How are you seeing the environment for the allowed returns and how do you think regulators are viewing this in terms of relative competition for [rocky] capital market? How are your utility regulators thinking about ROEs these days?

Well, I'll give you a plug, because you've been to some of the forums that we've had, and where we have really addressed our biggest risk is the fact that if we don't get adequate return, investors will not provide us the money, because we're not a part in the [discretion] sexy industry. We just say we plow along. If we do things right, we'll get fair returns. It's a lag with regulators. But they'll treat us fairly and we'll earn our key and when I had a meeting one time with the Chairman of [GEML] and I told him that we should pertain to 11% return. He said, well, that allows your business. We look a little better today compared to what's happening at other companies, but it's the tortoise and the hare basically, steady and straight, but you just can't startup, stop your capital program, because the environmental community won't let you. And we are already the lowest and most efficient utility, I'd say at 40% owning the revenue, I'd argue probably in the country, not only among water but probably among electric, because they have their high fuels. I think regulators are starting to understand more and more that if we don't get the fair returns, we won't be able to [require] closely S&P ratings that we need to borrow the huge amount of money that we have. And the fact that there were regulators, the legislators in the same states with the regulators are now trying to pass infrastructure rehab bills and put all kinds of money on the table, say how important what we're doing is, they are doing on a progressive and steady basis. I also think the electrics coming back in will raise ROEs, because I don't think they could afford to maintain…

Me too. Thanks. One more big picture question and then one kind of housekeeping question. You mentioned the potential opportunities on the municipal side. We've been hearing more discussion of that over the last, I would say, six to nine months. It doesn't seem like much has come to fruition. Can you give us an update of where you're seeing those kinds of conversations, what kind of municipalities, kind of what the activity level is on the potential acquisition front or probably prior partnership front on the municipal level?

Well, to probably pry that we've never really gotten into that in a big way, if there is opportunity going forward, because that's the model people want to follow, we'll try and look at it. It's in most of the states that are more mature, that are facing high cost for their labor, because tension is starting come home to roost in many of these municipalities. And that means the water and waste water plants have workers who have high legacy costs. The fact that the EPA has now issued orders in many of these areas for combined sewer flow on the sewer side and on the water side for unaccounted for water which is horrendous in some of these old towns and/or the new standards for THMs, trihalomethanes or cryptosporidium and parasitic type of things. All of this is now meaning money to be spent, and that's when you see decisions are made. I can't tell you we have 10 right on the table that we're ready to announce in next quarter, but there's a digestion period to these things that's usually over a year.

Can you say how many you have that are kind of on your radar screen, not for the next quarter, but for the next 12 to 18, 24 months.

We're talking about at least a half a dozen.

Interesting. Okay. And my last question is on the O&M ratio. As you mentioned earlier, there are some moving parts there relative to what appears to be down or a little tad under 38%. You mentioned around 40 normalized. We backed out some numbers and came out with closer to 41. Maybe that's a question for Dave. How should we look at those O&M numbers in terms of what is included or not included there from a one-time basis?

We had seven numbers that had some one-time and eight numbers that had some one-time, including goodies. I tried to take the goodies out. I think '08 for seven would be flat if you take gap, which should be about 42, which is well above what we'd like to be. The numbers are not coming down as rapidly in the south as I had hoped, but that's because we didn't get the rate increases as rapidly as I had hoped. They'll come down next year with cases in two of our southern states and with more normalized accounting in Texas, because now we don't have all these deferrals any more and amortization. It's going be straight revenues with less expense, a lot easier to gauge. I think the fact that we were up almost 200 basis points through six months and now we are going to end the year flat gives you an indication that we're back on that track. I'll project that nine versus eight, you're going to see at least 100 basis points off.

Okay. Thanks. I appreciate it.

Good.

Our next question comes from Jim Lykins with Hilliard Lyons.

Good morning, everyone.

Hi, Jim.

First of all, I was wondering if you go into a little bit more detail with your rate cases. The eight that are filed right now for 21 million, could you give us an idea when you expect those to start to come in. And then also, in '09, I know you said there is 25 being prepared. But maybe you can just fill in a few of the bigger ones and when you anticipate making those filings?

Sure. Of the eight, I think four will be decided by the end of the year. But they are the smallest amount, less than $1 million. The two big ones are North Carolina and Florida. I think they will be decided sometime in Q1 or Q2 of next year.

Okay.

For the nine filings, the biggest group in those would be Pennsylvania, late in '09, to be filed; New Jersey, late in '09, to be filed; New York, early in '09, to be filed; and then the number of small cases in Illinois; price indexes in Florida; six cases in Virginia to catch up; and a major case in Maine; two small cases in Indiana; and three cases for our three divisions in Ohio.

Okay. And I can't remember if this is in the press release or not, but did you disclose, or if you didn't could you tell us what do you think you might be falling for in PA, New Jersey and New York in '09?

Well, we're finalizing it. I'm giving you nine months in advance. I can give you rough numbers.

Yeah, that will be great.

Dave could call you on that.

Okay.

We'll get with our rates person and have him talk to you about all the specifics.

Okay.

However, one other thing I didn't mention was short-term interests. We have borrowed almost $100 million, almost all the time short, and then we turn into long if the projects were done. LIBOR came down again yesterday. It is now lower than it was before all these crises occurred, and actually lower than it was last year. Yesterday's LIBOR was 2.18. We borrowed in ranges of 30 to 50 above LIBOR. So you can see our short-term money is backed down to the 2.5 range again. And at this point we have about a $100 million still on our lines to borrow if we have to. I think LIBOR was the number one issue that least bothered us three weeks ago when it was as high as 4 or 5. Less than a month ago, it was double what it is today. And we're just seeing a steady drop over the last two weeks. I think that's very, very good news for overall credit markets.

And one last thing I want to ask you, you mentioned housing stabilizing, but if you could just give us a better feel for how you see that turning into '09, maybe the first half versus second half?

Yeah, I think with this new administration, it may occur even before that if Congress gets involved. I think there's going to be some squeeze on the banks to hop the foreclosures. And when that occurs, we'll all pay for it, let's not kid ourselves. It will be principle reductions and don't pay interest for a couple of months. This is me speaking. I'm not obviously in anybody's administration. But I think once the prices stop dropping, you're going to see people who have waited in their apartment for a little longer than they would have normally because they want to make sure they hit the ultimate bottom of the market, and at that point, I think you'll see the returns to the normalized. Right now, I think our housing starts at 700,000, something like that, even less that. And I've talked to some of the bigger builders, and they said, the money is out there, that means we're still plucking 6.5% mortgage. My first mortgage was 14%. Young kids can afford 6.5%, young families. I think nobody wants to buy a house once they think they're getting the absolutely lowest price. There might be another 5% in the market, in certain areas where there wasn't rapid speculation. I'm not talking about Nevada, Las Vegas, and Southern California or Southern Florida. But North Carolina would be a good example, slowed down drastically. We were almost 3.5%, 4% growth just a year ago, it slowed down to less than 1%. The builders are telling me once people think that the housing price is at the bottom, they are expecting an upturn, because the financing is there. That's more affordable obviously than what they were getting before. They won't have this idea where they put a house up for sale and four bidders come in outbid each other, asking price which was occurring in the summer of the '05. It will be more normalized than it was 10 years ago. You have a house on the market for a month or two, and you have to bargain a little bit, and you ask 5% more than you think you're going to get, and you actually put some money down on the house, all those kind of things. So I think you're looking at another quarter or two of stale sales. You’ve get the winter coming up in most of the Northern States anyhow. Nobody buys a house around Christmas. But I think probably by second quarter of next year you can start seeing the housing bottom. And I think you have to or you're going to have to stabilize the banking accounting. That's me speaking. So that's what we're projecting here at this time.

Okay. That's helpful. Thanks, Nick.

Our next question comes from Richard Verdi with Sturdivant & Co. Richard Verdi - Sturdivant & Co.: Good morning. Thank you for taking my call and nice quarter.

Thank you. Richard Verdi - Sturdivant & Co.: Nick, I wanted to back up to the rate case activity. I'm looking at a slide here from a presentation on your website and you went through it on your call here about rates approved in 2008. We're about $60 million. And I believe you mentioned that 81% of them has been approved so far?

No. Richard, what I said was that that represented 81% of what we asked. Richard Verdi - Sturdivant & Co.: Okay.

I think a lot of times analyst say, well, if you ask X in XYZ state, you usually get 50% or 60% what you ask. Richard Verdi - Sturdivant & Co.: Yeah.

80% is probably at the high end of the range. I think reason for that was we modified our request. In some cases took less than what probably would have been the norm rule in the ROE in order to capture all the capital against some earnings on it, and knowing that we probably have to go back in a year or two to get the rest, but we felt the number was just too high to ask for at one shot. Richard Verdi - Sturdivant & Co.: Okay. So you're saying you got about 50% of this so far?

No, no. Of what we got… Richard Verdi - Sturdivant & Co.: Yeah.

80% of what we asked for is in the bank. Richard Verdi - Sturdivant & Co.: Okay.

It's annualized, but it's in the bank. The last one went into effect October 1. Richard Verdi - Sturdivant & Co.: Okay.

That will affect us positively for the next 12 months, so you could argue a 60% that to current rate revenues over the next 12 months. Richard Verdi - Sturdivant & Co.: Okay, perfect. And I had another question here. Most of my other questions have been answered. On the acquisition front with America Waterworks back in the arena in the competitive environment are these shown up on the table on acquisition here and if so, how that's affecting your cost?

In some states they really were there, even when they were private. RWE wanted them to grow too. I'd say no more or no less than in the past. I think at this point, probably less competition from people we had never heard of before who had money, but no normal water experience. That's gone. We're not seeing any of those types of investors coming into bench. Richard Verdi - Sturdivant & Co.: Okay, all right. That's it from me. Thank you very much and great quarter again.

Thanks, Richard.

Our next question comes from Jonathan Reeder with Wachovia

Hi, Good afternoon, I guess it is now guys.

Good afternoon.

Congrats on the Phillies first of all, I know that was the forefront you outlined.

That's right.

Didn't see Tampa Bay going on quite that easy, because it speaks the silly strength.

I'll have my 270 yard drive when we play.

Exactly. Pretty detailed call so far. Just a couple quick clarifications if you don't mind. In Pennsylvania, in 2009, you guys are planning on filing full blown rate cases, is that correct?

Yes

Okay. And then at that point you….

We have a number of DSIC filings through the end of '09, and then a filing for all the non-DSIC capital and expenses incurred over the past two years.

Okay. And then after that point, Nick, is that when you might be able to get onto kind of the three-year rate case cycle and kind of avoid the debacle with the electrics coming in, is that sort of the plan?

That's our strategy. Contingent on return to growth denying from a standpoint of normalized consumption and normalized organic growth. If you don't have any growth, that deters your revenue stream, but I am pretty confident that's going to return. And then, the second piece is inflation. You know we don't calculate anything, I think we're looking at about 4% which is right now, inflation looks like its going down, but I don't know how we can keep putting all this money out and keep inflation down. And if inflation pops up again, in '010 and stays for '010, '011 something like that, then I think you're going to see all the utilities running more normally. But without that and with reasonable growth, and with the cash-flow we're going to be providing, we're not going to be going to the markets that much more to borrow. I think we could probably extend it from two to three years.

Okay. And any update on doing about 7.5% limit on the--?

No, but my understanding of – we've had the lawyers working over getting ready to file it. When that becomes effective, before you spend a cent, have it approved. If we're under the old rules, which are five and we get it approved anytime in the next year or whatever to 7.5, then we're eligible for that 7.5. It's not like you have to start over it.

Right. But it sounds like, I guess, you plan on filing on late 2009 rate case, I guess the timing you get in that increase isn't has imperative in the near-term, its more for post 2009?

Actually, you file a case in '09, you don't get it for to mid late '10, that extra five to 7.5 could have a positive impact in Q1 and Q2 of '10.

Okay.

As soon as I get off this call, as a matter of fact, we're going to start our meetings on the filing.

Okay. Probably going to be around a little late based on how long the call is. Okay, quickly on the CapEx, if I understand you correctly, your plan is 250 in 2009 and unless you see, I guess changes in our credit markets, you're going forward with that no need to reduce that like some of the electrics have been doing?

No. At this point, the 250 could actually grow if the Tax Reconciliation Act of 2008 is extended per year, because this year we're up to $37 million because of the cash generated from the spend, and where we could lower it somewhat or drastically, if we have to. But, as I mentioned, we're sitting with probably a line plus the $80 million plus what's left from the other -- we have about a year of spending already booked basically. We're not having to worry about them.

Right. So, I mean, as long as we don't see deterioration further from point, you don't see any issues?

No.

Okay. And then last, just touching on the organic growth plus the acquisition, you are saying you're targeting now 2% or so for '08, '09. What do you see kind of beyond that? When can we get back maybe to the 4% range? Is that reasonable or do you think longer-term it might more in the 3% range?

I think I'm still comfortable with 4%. Texas, North Carolina, Florida, we're growing that without any acquisitions. Now that we have our rates, at least we have our regulatory relationship and our rates, and are starting to understand the rules a little better, we're starting to some acquisition possibility. I mean we have not changed our model, although we did not hit it last year or we won't hit this year. Last year, I think we were mid threes, and something there. But we had all that digestion, Jonathan, from growing 20% in two years. I mean they were all small systems. I'd love to say we could level it off exactly for each year. But when you look at it over a five year period, we’re comfortable with it.

Right. So they're ratcheting down. I mean that's just near term, given the economic pressures.

Yeah.

Okay

Everybody just grows for a couple of months unfortunately.

Right. Okay, fair enough. I appreciate the time.

Okay.

Our next question comes from Tim Winter with Jesup & Lamont. Tim Winter - Jesup & Lamont: Good morning, Nick. I'll be quick. The North Carolina and Florida properties, if you were to separate given what you've spent adding to the system and what you purchased it for, what is roughly the current rate base and what is the return on equity or earning there and how long do you think it will take to get up to the normalized 10.5%, 11% range?

I'll have to get back to you on the exact rate bases. In Florida, we look at it two ways. In Sarasota, which regulates itself, and we've had two rate cases and we're closing in on full earning there. And I don't know how much the rate base is in Sarasota. Dave might have that. But on the Florida properties, the Florida water properties and so on that we purchased, we have not made any money on them up until now. And that's even without the write-off last year. So, at this point, our return on equity is zero. And we'll give you the rate base. And we did ask for that states formula is on return on equity in this rate case. And we're hopeful that that's not going to be an issue. And see what is the --.

Well, Florida rate base is about $57 million.

Without Sarasota?

All in.

In North Carolina, we're about 90 in rate base. We are earning, I am going to say, well, this year was a bad year, because there was a drought in North Carolina. So the --.

120.

120. And we feel that's pretty good. 120 in North Carolina. I am going to guess it's not consolidated yet. We bought from four different companies properties. Hydraulics is now we've started. We've booked three new properties. We booked the ASI properties and then the AquaSource. We're trying to get them all into one rate base now. Now, the only separate rate case was Brookwood and LaGrange, which I am going to say is about $10 million of the 120, and there, we're earning our full key, because we had our rate case. That was the one I mentioned had a 70% rate increase. But the rest of the North Carolina, we're trying to put all of these disparate units together in one company, and get the rules of it. We're following all the accounting rules and the booking rules of the North Carolina, very first rate state, very professional state. We're in the rate proceeding now and we're asking for full return on it. Does that sound right? Tim Winter - Jesup & Lamont: Yeah. 120, about 10 million is the --.

But we didn't give you much more detail. Tim Winter - Jesup & Lamont: Okay. I'll follow-up afterward. Thanks, guys.

Okay.

Our next question comes from [Stan Robbins with Robbins Planning].

Hello. I am a newcomer to the company. And my questions are basically long-term oriented. One question that goes through my head is, it would seem to me that over time it would be harder percentage-wise to grow the company as fast as you have in the past, simply because your base is larger. In other words, is there a possibility over the next five years than maybe your growth would be increasing at a decreasing rate? Is there a possibility that you would have to use more equity to acquire companies, because you probably have a much debt as you want to handle. And so, does that mean the possibility looking from Mount Olympus down and, well, ask the little people when they're around, looking long-term, does that mean you might end up being a growth company, but not a growth stock? Pardon me for embarrassing questions.

No, it's fine. First of all, with the internal cash generation growing and the EBIDTA growth of 10% a year, the need for equity becomes diminished, not increased, even with acquisitions. The second question you asked was really the IBM issue. Probably you could ask that same question of IBM 30 years ago, 20 years ago, 10 years ago, and the answer is yes. As we get bigger, we have to grow faster to continue the same growth rate. On the other hand, there are 50,000 individual water companies and we haven't even touched the surface in our model of being able to address them all. So if you believe that there shouldn't be that disparate an organizational structure the way the industry has grown, there will be many large cities, 500 or so large cities will always be probably municipal, which is why the Europeans go after that for maintenance operation and maintenance contract. Then, there will be a number of other ones with eight or ten big companies that are private, I think in a way the consolidators of all these small, either municipal or private companies, who have gotten into the water business and now don't have an exit strategy. So I mean my job -- and I guess why you would buy the stock and why I own the stock is because I'm confident in the future that we can continue to grow. Now, if we grow earnings from the current pace, and double them in X years, at some point your stock value is going to increase just because of the current earnings, even before you get to how much can you grow next year. I realize that's always what the investors are looking at. I think over the next year or so though, a stock that can grow, even at a bad market, has a steady track record, pays a nice dividend may be considered a good defensive play after the shakeout of the market over the past year.

Another question I'd like to ask is, and you alluded to this a while ago, we all know that there is a deflation evolving in the economy. We know there is a recession probably becoming a depression and so on. But eventually, with all the money that they are printing and bailing out various institutions, I think we all realize there is going to be a hefty rate of inflation in due course. How will, I don't want to say run away inflation, God forbid, but if we get a rapid running inflation, will you be able or how will you be able to cope with that because you'll have inflation and costs without being able to readily raise your rates?

Right. I referred to that Mr. Robbins earlier and we did go through that. This company is a 107 years old. We did go through that in the late '70s all the way through up until the early '90s. And what happened was more money was spent on operations then on capital infusion, rate cases were every 10 months, and it was just a constant [O&Ms] getting relief because that's the rules of the regulators.

I know.

We're hopeful for the country's sake that doesn't return. But, basically, where [you have some gain] as much as any industry, so other than the lag, which means you have to go in more often for rates rather than stay out for three, four years.

Yeah.

And I mentioned earlier, some of these properties we bought in the South hadn't been in for rates since the mid '90s and that's when inflation had slowed down. That would have been impossible had inflation been higher than the 2% or 3% it's been over the last 10 years.

Finally, what's the risk of acquiring a company? Many companies must be a 100 years old and there could be all kinds of piping time bombs that nobody knows about, how do you account for that risk when you are appraising a company?

We value the company based on its inherent value of its book. We try and take book or less. We feel very confident that we can fix anything because we've been around a 100 years and we know what it looks like. Some of our pipe was 100 years old. We've been replacing it for the last 10 years. And we have our own engineering department, our own environmental compliance department, our own legal department, and we basically don't have to rely on other people's opinions, we can do it ourselves. We feel pretty comfortable. The pipe work is usually not the issue as much as it is. It's a waste, it's inefficient, and eventually has to be fixed, but it's not as immediate as a wastewater plant that's in violation of a stream standard where the EPA wants it fixed yesterday. In cases like that, we work with the EPA before we buy the system, get it what's called a consent decree so that we're held harmless as long as we feel our obligations and we've been able to do those flawlessly number of times over the past 10 years.

Okay. Thank you.

Thank you for your interest. We'll get to meet you some day.

Yeah, we'll get that. Thank you.

Thanks.

(Operator Instructions). And with no questions in the queue, I'll turn it back over to Mr. DeBenedictis for any additional or closing remarks.

I just thank everybody for the time. Sorry it ran so long, but the questions were good and I wanted to thoroughly answer them. Thank you.

That does conclude our conference for today. Thank you for your participation and have a wonderful day.