Good day, and welcome to the Aqua America, Inc. First Quarter 2012 Earnings Conference Call. As a reminder today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Brian Dingerdissen. Please go ahead.

Thank you, Lisa. Good morning, everyone. Thank you for joining us for Aqua America's First Quarter 2012 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 aquaamerica.com or by calling Fred Martino at (610) 645-1196. There will also be a webcast of this event available on our website. 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 may be 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.

Thank you, Brian, and good morning, everyone. Pleased to report another solid quarter of growing revenue, earnings, cash generation as distinguished by EBITDA and proud to say we're continuing to invest in our water systems and growth opportunities at a pace of 2.5x our depreciation. So we're still investing in our economy. Confident that we're on our way to our 13th straight year of record earnings as we continue as one of the nation's most efficient, profitable, financially sound, and fastest-growing water utilities. As I start my 21st year as CEO this year, the first 4 months of 2012 has been among the busiest I've had. Let me just recap for you. We began '12 with a new organization and a succession plan. My contract was extended till 2015 and 3 new executive vice president positions were established and filled with experienced Aqua executives, so we can prepare for the company's future. Since that time, a number of key management positions have been reestablished with a focus on increased efficiency in our operations and future growth potential. We've taken some major governance initiatives through the board as we move towards our annual meeting, which is coming up next week. The board has recommended a declassified board, which the vote is overwhelming to date. We adopted -- the board adopted a policy for majority voting. We recommended a new compensation plan, which is being voted on by the shareholders, which is geared towards total shareholder return and earnings growth. And we recommend a renewal of our employee stock purchase plan and have already recommended our existing shelf renewed -- I'm sorry our existing shelf registration, which is done by the board individually. And that's even though we have no plans -- and I don't want to give anybody the impression we…

[Operator Instructions] We'll go to our first question, Michael Roomberg with Ladenburg Thalmann. Michael G. Roomberg - Ladenburg Thalmann & Co. Inc., Research Division: Can you just briefly just kind of update us on what Phase 1 of this Marcellus project entailed and what Phase 2 entails? I know you mentioned that it will increase the amount of water that you can put through the pipeline. I imagine it doesn't involve necessarily expanding the capacity per se, but maybe expand the geographic reach. Is that kind of how we should think about this? And can you just kind of provide a general update on that, please?

Sure. Phase 1, think of an L lying on its side, Phase 1 is the length, it would be a horizontal part and Phase 2 will be the vertical. The horizontal part is about 18 miles, $20 million, it is taking water from a local authority's reservoir, about 0.5 million to 1 million gallons a day. It's the allotment we've received. It's being pumped through a 12-inch line, heavy steel, and we've been -- already have all the protections and the pump, the booster pumps and everything in and then it's pumping as we speak. And that's selling water to one customer at this point, who has their drilling right in that area, and that's Range Resources. We start, we have all the permits now of the allocation permits. We're waiting for a final permit from the DEP. We have all the easements for a $30 million to $40 million Phase 2. Now divide these numbers in half because we're 50-50 partners in it. And that will get started, hopefully, in June and will be done by November. And along that line, we will be able to add another 3 million gallons to the already 0.5 million to 1 million we have. And we have -- we're in negotiations with at least 2 other drilling companies that would have their impoundments or their drill pads close to that line. Phase 3, which we have not initiated yet, would go due north, another 20 miles or so, and pick up some major drillers that are north of this area. The area is in Lycoming County, which is one of the hotbeds for the gas drilling. It's near Williamsport, Pennsylvania. And there's 3 or 4 northern tier counties that have huge deposits of the dry gas, the methane. Is that helpful? Michael G. Roomberg - Ladenburg Thalmann & Co. Inc., Research Division: Okay. Yes, that's very helpful. In terms of the run rate that you had disclosed in the press release, I think last week or earlier this week, I think it equates to a run rate of around 3 million barrels of water per year 2,000 trucks, and I think you mentioned there were about 125 barrels per truck. Is that a run rate that you expect to continue in coming months or accelerate, or can you kind of just update on that -- aside from obviously the addition of Phase 2?

Yes, the reason we put the truck trips in there was because the #1 reason we got into this and also the reason we believe long-term infrastructure is important is that the only way of accessing -- and we sell a lot of water to truckers, they come to our water sites, the only way of getting it to the drill pads is truck at this point, and it's just not an efficient way if this is going to be a long-term business. And I really do believe this is a game changer in Pennsylvania. We're going to be an energy-rich state for decades to come. And otherwise, we wouldn't be putting this major money in. And also you're partnering with gas companies who, I think, also have a good sign as to how much gas is really under the ground there. The use of the truck traffic was to basically address the issue that many of the environmentalists are upset about, and that is the fact that trucks are ripping up roads and also causing head streams -- the truck tires running through the little head streams of these small streams up there and cause damage, environmental damage. So what we said is if you think of an average truck at about 5,000 gallons, it's a 1,000 trucks per well because usually you put 5 million gallons into the well. And as of the date, we've put that release out, we had already pumped 11 million gallons. So that's 2,000 trucks. I don't want to put more into it for your analysis. I think we can give you a little bit more of an estimate as to what ranges drilling projections are. That's how we're judging it, and we don't have any dollars in our revenue projection for the other 2 companies, mainly because it will be November, December, assuming everything works perfectly before we're ready to pump them water. So for this year, we're covering all our start-up costs, and we have about $0.01 baked in the earnings into the guidance I provided earlier. But we're hoping for much better in the outyears.

[Operator Instructions] And we'll now go to Heike M. Doerr with Robert W. Baird. Heike M. Doerr - Robert W. Baird & Co. Incorporated, Research Division: Nick, thanks for the clarity on all of those rate cases. I think I might have missed the discussion about Pennsylvania. Can you tell us where that stands?

We're in settlement discussions. We hope to have rates in place by early summer and obviously, we're satisfied with the settlement or we wouldn't be in those discussions. And so... Heike M. Doerr - Robert W. Baird & Co. Incorporated, Research Division: Right. So you think -- I'm sorry go ahead.

Yes, it will be in the same range as you're seeing in the New Jersey cases and probably a little better than New Jersey. Heike M. Doerr - Robert W. Baird & Co. Incorporated, Research Division: Okay. So you think we can get rates in effect by August 1 the way the process is progressing?

Absolutely. I hope we can get it earlier than that.

[Operator Instructions] We'll now go to Stewart Scharf with S&P Capital IQ. Stewart Scharf - S&P Equity Research: Firstly, regarding the O&M ratio. I think in the past you've targeted a larger percentage, maybe 100 to 150 basis point improvement. And now you're saying for this year, you see it improving slightly. And could you just elaborate a little more on that?

Yes, sure. Of course, when it was 41%, 42% we had all the changes in the South that we wanted to do. We were saying 100 basis -- up to 100 basis points and we delivered on that for, I guess, to -- it was 42%, then 40%, and then 38%, so we actually beat that projection. The one anomaly I mentioned, we're not assuming any system sales in 2012 so that would have to offset -- that would be a little bit of a negative on -- if you want to play the percentage game. I mean, the overall expenses would be still at the same run rate. And the revenue growth until we get the rate cases in are holding us at closer to a 38%. And I think we'll beat that, but I didn't want to overestimate. Stewart Scharf - S&P Equity Research: Okay, and regarding the shale gas again. Could you just talk a little bit about the environmental issues and if you've accounted any -- also there was some opposition to a land sale, I believe. And any long-term projections as far as -- the share is going to add about $0.01 to earnings, and just a little more detail on that?

Sure. As you are -- as you know, living in New York, Westchester County, it's a very controversial issue in the bigger cities, New York City is opposed to any drilling in New York. In Philadelphia, I'd say, the support is not as strong as it is throughout the rest of the state to develop the gas deposit. However, we are, throughout the state, we are selling a lot of water and it just was inefficient to continue to sell by truck load and have the trucks drive 2 hours, diesel fuel being used and everything else. So without a doubt, on a -- if you wanted to compare the pluses and minuses of infrastructure like we're building versus the truck traffic, it's definitely better for the environment. When we bought the land to put our big pump station on that will do the 3 million gallons of water from the Susquehanna River, the gentleman who sold it to us -- this is the controversy you're talking about. The gentleman who sold it to us had a mobile home park on the land that he was supposed to have cleared because it's industrial land, and he was nowhere to be found when we showed up and the homes are still there. So a couple of the people complained that they thought they were going to get evicted, which we had no plans to do, and it's in an orderly progression of people leaving as we've offered them incentives to move as we start construction. But that made the newspaper and I think some of the anti-drilling activists used that as a reason to be opposing it more than the people in the area that were affected directly. And I didn't realize that it got all the way to New York, but I guess, it made the Internet. But I think it's under control now and it's not going to affect our schedule on the pumps being built or our permitting. Enough people have already left that we have room. Stewart Scharf - S&P Equity Research: Okay. And any long-term targets -- growth targets for that business, and also anything -- any drilling plans for pumps in Texas?

We have not done anything yet in Texas and that is because some of the -- as you probably know, if you follow utilities, the gas prices have plummeted, lowering electric revenues also for the merchant power producers and lowering electric bills for almost everybody, at least, in the Northeast, also lowering heating fuel. But when the prices had dropped so much, there's also -- it's not as profitable to drill and the drilling has slowed. Now as soon as -- it's supply and demand. As soon as the drilling slows and the supply goes down, then the demand is going to go up because it's a cheaper fuel and a lot of people are converting to the natural gas vehicles, which will be the biggest user. And you're already seeing some coal producing utilities, generating utilities switching to gas because of the price differential. So I think it's a balancing act. So for me to predict long term might be difficult, but the investments are already paying off. How big they'll pay off is depending on how much drilling, and I don't want to overestimate the amount of drilling because we have no control over that. But there's no doubt in my mind when they drill and if -- not if, but when they drill and they are drilling -- still drilling now, they'll use the pipe because it's so much more efficient and it's reliable. And it's actually less expensive than buying it by the truck load. So it is a structural way of addressing what we think is going to be a very long-term demand in the northeast part of the state. I can -- when we come up to visit you, I can show you who we're dealing with and you can make your own projections. I don't want to project it because I really don't have firm enough numbers. Stewart Scharf - S&P Equity Research: Okay. And are you seeing any conflict at all between the people who oppose drilling, concerned about environmental issues, of things getting into -- the fracing -- and getting into the drinking water system and being a utility and being just involved in it even though it's in a positive way? Is there any kind of just opposition to your involvement?

I guess, there are a group of people who are very, very opposed. I mean, if you saw the press clip, there were 8 people outside our building. So I don't want to over -- it's not like thousands of people. I think people are concerned. They want to make sure it's being done safely. And I think there's no way that anybody could argue that having us involved is better than having the way it's being done now. But if you're opposed to the whole process, then anybody who helps the process become more efficient gets blamed. I think the bigger picture is national energy security. And then you've -- let's start there and then work our way down. So there'll be people who are upset with us, but it has not -- absolutely not worked into anybody in the regulated section having any problems. That's what your real question is, right? Stewart Scharf - S&P Equity Research: Yes.

It's not affecting in any way our regulated area.

[Operator Instructions] It appears there's no further questions at this time. I'd like to turn the conference back to Mr. DeBenedictis. Please go ahead.

Well, thank you, everyone, for listening. And if you have any questions, feel free to call. Thanks.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation.