Good day and welcome to the Aqua America First Quarter 2016 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Brian Dingerdissen. Please go ahead, Mr. Dingerdissen.

Thank you, Zack. Good morning, everyone. Thank you for joining us for Aqua America's 2016 first quarter 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 Scott Siegel at 610-520-6361. The slides that we will be referencing can be found on our website. There will also be a webcast of this event available on our site. As a reminder, some of the matters discussed during this call may include forward-looking statements that involve risk, 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 risk 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. Presenting today is Chris Franklin, Aqua America’s Chief Executive Officer and Dave Smeltzer, the Company’s Chief Financial Officer. After the presentation, we will open the call up for questions. At this time, I would like to pass it over to Chris Franklin, Aqua’s President and Chief Executive Officer.

Thanks, Brian, and welcome everyone. Thanks for joining us this morning. Today’s agenda, we’ll start with some recent news about the company and I’ll comment on some of the highlights from the first quarter of the year, including our customer growth updates. Then Dave is going to comment on the company’s financial results and rate activity. And finally, we will end up formal portion of the discussion of the presentation recapping of our guidance for 2016, and we’ll wrap with some questions, and see if we can answer whatever is on your mind. So let’s just start right in with the update on the Pennsylvania Legislation, many of you have already reported on this, but I think it’s significant to our business and so I wanted to mention it again. You will recall that in mid-April, House Bill 1326 was passed in the Pennsylvania Legislature, which allows for a fair market value to be used when acquiring municipal water and wastewater systems. We believe this could be a game changer for us. We’ve said this before, but really are optimistic about the results of this legislation. We think it could be much like the impact that the DSIC, the DSIC language that passed in 1990s had on infrastructure. We are excited to see the opportunities that might open up in Pennsylvania and also across the country as other states adopt similar policies. As you may have seen in recent news, we have rounded out -- as I come toward the end of my first year as CEO, we have rounded out our Senior Management team, and just recently, we announced that Sue Haindl was hired back in mid-March as our Chief Administrative Officer. She reports directly to Dave Smeltzer and is responsible for information services, customer service, fleet and supply…

Thanks, Chris, and morning everyone. Today I'll review the first quarter financial results and some of the driving factors that affected the company's performance and I will also provide a look at our rate activity for the year so far. In the first quarter 2016 our annual revenues increased 1.2% to $192.6 million, up from the $190.3 million in the same period last year. I will show a waterfall chart on these amounts in a moment, but the bottom line is, when you look at Q1 ‘15 versus Q1 '16 much of the increase in revenues from rates, surcharges and regulated growth was offset by reduced revenue from the market based activities and lower consumption. O&M expenses were up about 0.5% to $73.5 million for the quarter compared to $73.2 million in Q1 of '15 and again I will touch on this in the waterfall chart, but new regulated acquisitions and employee related costs were mostly offset by lower expenses tied to the market based activities, decreased production costs and other factors. Other factors driving the company's results included approximately $73 million in capital spending which had twofold impact on our results. It generated $1.1 million increase in AFUDC compared to the first quarter of 2015. And additionally, through the tax deductions recognized in the qualifying infrastructure improvement projects in Aqua Pennsylvania, the company was able to reduce its effective tax rate year-over-year. So in the end, net income was $51.7 million for the quarter, up 6.6% compared to the $48.5 million same period last year. Earnings per share at $0.29 were up 7.4% over the $0.27 reported in Q1 2015. As a result, I am sure you’ve noticed that our Q1 results beat the consensus estimates and while we're still comfortable with the full year projections and the guidance…

Hey, thanks Dave. Let's just take you through the chart here, our guidance really unchanged through the first quarter of 2016, so we expect full year earnings per share to be $1.30 and $1.35. As Dave mentioned there might be some adjustments or I should say some movement of $0.01 between the first – we were over consensus by $0.01 and the second so, I'll just point that out but year-over-year, customer growth will still be on track 1.5% to 2% and we expect to invest more than $350 million in capital this year in 2016 and we remain on track to spend just over $1 billion through 2018. Ongoing rate base growth will be again between 6% and 7% and same system O&M we don't expect to exceed 2% between 1% and 2% for the full year of 2016. Before we end the call, I'd like to up open it up for any questions that you might have.

[Operator Instructions] And we'll go first to Richard Verdi with Ladenburg. Please go ahead.

Chris I just wanted to clarify something first, the $30.5 million revenue decline, you mean year-over-year right?

Correct. I mean it's really the divestiture of the company's - the smaller companies that will reduce that revenue.

And how should we think about that in terms of timing for the model?

I would think that we'll have the first one done, our transportation company should close in the next let's call 30 days and that is about $5 million reduction in revenue. And then the others would come I would say between third and the fourth quarter probably results impacting 2017.

And then and another one, looking at the press release today through April it's stated that the company had added about 5,250 connections I think it says and so with that being based on four months and eight months left in the year two sets of four months, should we expect another 10,500 additional customer connections by year-end and if so would it be heavily weighted towards any certain quarter. I'm just hoping you give me some sense about acquisitions here for the rest of '16?

You know Rich, we're hopeful but it's very difficult as you know to predict closing of these kind of opportunities especially as you call talk municipal which have moving parts to them. So I'm just going to have a very difficult time locking into certain time period but we're hopeful that we have that kind of achievement for customer growth, it's just to difficulty give you timing.

Okay, sure. I got it. Thank you, Chris. Another question I had is actually for Dave. Dave, at the Analyst Day, you had indicated Aqua would not be going back into Pennsylvania in ‘16 and maybe the DSIC will be filed in ‘17, filed by rate case in ‘18 and so with that 3.5 months, having passed, I'm assuming that outlook is unchanged, so I guess is this assumption rough and what do you see add up or pushing it out further?

You're right, Rich. The assumptions is, as it was last year that this could be in ‘17 or ‘18 and rates in ‘18 or ‘19 and really those factors are based on a lot of things which is in fact why -- we've actually started this year to prepare what that rate case will look like, because we know there are a lot of moving parts, the repair tax complicates it a bit, there is a new test here in Pennsylvania that's very favorable and more projection oriented than future test year oriented. So we have a lot of things going on there. But overall, yeah, we still believe that the timeframe is reasonably consistent and I think any changes to that timeframe would likely be based more on how our expenses blow over the next 18 months and our ability to install all the capital that we anticipate during that period as well.

Thank you, Dave. That's great color. And then just one more question and I'll jump out, I guess it was about a month ago, say, very end of March, maybe early April, I had a conversation with one of the more prominent leaders at [indiscernible], he was telling me that consumer advocates are looking to meaningfully push back on a DSIC and mirroring surcharge mechanisms in other states, because basically the group is thinking that the DSIC is being abused, where it's just one filing after the next. So given that it was pretty much the pioneer behind this and Aqua employs the DSIC frequently, I'm wondering if you guys have seen this yet and how the company would deal with it if it does play out.

Rich, I'll be honest with you. We're pretty active in the regulatory circles and conferences. We've not seen that frankly. I'll say this, we've actually seen expansion of the DSIC, certainly the gas guys are now using it to replace their mains and very successfully so. And I think the large part of the results speak for themselves, let's focus on our customers first. The DSIC has really allowed us to replace maintenance at a pace that is much more aligned with the life of that pipe. Think about it, when 20 years ago, when Nick first arrived at Aqua, we were on him, call it an 800 year plus replacement cycle for our water means and we've reduced that cycle down to a very reasonable level, let's call it, under 100 years in that period of time and that's really what we need to do in this country is invest in the infrastructure and we've done it. If you look at it, it's still very reasonable rates. Now, I understand it is a quarterly adjustment in some cases, depending on how the mechanism is put to use, but in large part, we've found regulators to be very supportive of the DSIC in each of the states where we are. So that's new news to me. I don't know, Dave, do you have any other information on that?

Yeah. Sure. I'll just give you some thoughts that we have, we were part of the writing of the first disc rules in Pennsylvania in 96 and subsequent states as well. And as you may remember, there are a number of safeguards in the disc rules to protect the customers. So there is not abuse and it's fair for all parties. So for example, you can't file a disc when you're over earning your authorized rate of return and that's watched very closely in Pennsylvania and likely in some other states as well. It's typically related to the capital and excess of depreciation. We're not spending the depreciation dollars on capital and then getting a return. It's really capital far and above that. The projects are clear. Many of them are approved and advanced by state public utility commissions and in the end, these are projects that are obviously critical to the country, critical to our company and result in improved work quality, less main breaks and better service for our customers. So we're really convinced that it's still the win-win that we felt it was in 96 when we started this process in Pennsylvania.

That's excellent color. Thank you very much guys. I appreciate the time and again nice quarter. I appreciate it.

Thanks Rich.

[Operator Instructions] And it appears we have no further questions at this time.

All right. Well, thank you all for joining us today. We appreciate your time and we're always available for follow-up if needed. Thank you.

Thank you. This does conclude today's conference. You may now disconnect and have a wonderful day.