Ladies and gentlemen, good day, and welcome to the Aqua America’s Q2 2018 Earnings Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. Brian Dingerdissen. Please go ahead, sir.

Thank you, David. Good morning, everyone, and thank you for joining us for Aqua America’s second quarter 2018 earnings 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. The slides that we will be referencing and the webcast of this event can also be found on our website. 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. A reconciliation of these non-GAAP to GAAP financial measures is posted in the Investor Relations section of the company’s website. Moving on to Slide 3, presenting today are Chris Franklin, Aqua America’s Chairman and Chief Executive; Dave Smeltzer, the company’s Chief Financial Officer; Dan Schuller, Executive Vice President and Deputy Chief Financial Officer; and Matt Rhodes, Executive Vice President of Strategy and Corporate Development. As you recall, we’ve announced Matt’s hiring in April and then he started at the company in June. Thus, this is the first time he is joining us for an earnings call. After the presentation, we will open the call for questions. At this time, I’d like to pass it over to Chris Franklin.

Hey, thanks, Brian, and welcome, everybody. Thanks for joining us. Today, we’ve got several important topics on the agenda. As we discussed last quarter, we have some key organizational changes taking effect, Brian alluded to this a moment ago. This will likely be Dave Smeltzer’s last earnings call. He has been with the company 32 years and plans to retire in October. Taking over for Dave will be Dan Schuller, we’ve announced this previously, who is currently – Dan is currently our Executive Vice President of Strategy and Corporate Development, and he has been there since 2015. And I have the pleasure really today, and I’ll do it in a few moments of introducing our new Executive Vice President of Strategy and Corporate Development taking over after Dan, and his name is Matt Rhodes. And I think, many of you know, Matt, probably already either personally or by reputation. Also, on the agenda today, we have obviously our standard financials and Dave will take you through those. But in addition, and I think many of you have been waiting to hear more details about – is the Pennsylvania rate case that we plan to file later this month. This is the first Pennsylvania rate case since 2011. And I think, you’re aware that we’ve closed a good number of acquisitions and made fairly substantial investments in infrastructure in Pennsylvania throughout that time. And I’ll say that the investment in Pennsylvania alone has been over $2 billion by the time we filed the case. And, as many of you know also, we’ve got some new mechanisms involved in this case that we will use for the first time. Dan Schuller will discuss those in – about PA rate case in just a few moments. Also, we’ve got a lot of activity…

Thanks, Chris. Yes, it was a solid quarter and happy to talk about it. We reported revenues of almost $212 million for the quarter, up about 4.2% compared to last year’s second quarter. O&M expenses were $73.5 million for the second quarter, compared to about $69.6 million in the same period last year. When we get to the waterfall slide, I’ll discuss what drove this and explain why the increase is more in line with our typical rate when considering some one-time non-recurring items. We reported net income of $66.6 million, compared to $61 million in the second quarter last year, an increase of over 9%. Earnings per share were $0.037, up from $0.34 last year, an increase of 8.8%. And lastly, as you may notice, when you review our Q, which will come out tomorrow, we also increased our credit facility. Our combined facilities now allow us to borrow up to $635 million. And we don’t see this as a big deal, but we figured some of you might flag it and wonder why we went this direction and essentially, we compared our credit line to our peer companies and other companies, and we consulted with credit agencies in the normal process of talking to them anyway. And through those items, we really determined it will be advantageous to us to increase the facility and be more in line with our peer companies. So with that, we move on to the next slide and look at the year-to-date results. For the year-to-date, we see a similar story here with strong growth on both the top and bottom lines, revenues up 3.8%, EPS up 6.5% for the first-half. We’ve seen an increase in O&M, which I’ll go into in a later slide breaking down some of the drivers there, which…

Dave, thanks for that introduction and certainly for your kind remarks. I appreciate all the support that you’ve provided to me during my time at Aqua, and I really enjoyed getting to know you better during these past three years. Your legacy at Aqua is truly impressive. You helped create the Aqua that we know today and it provided us with strong foundation on which to go. So thanks for that Dave. With that, let’s discuss our rate activity thus far this year. So far in 2018, we completed rate cases or surcharge filings in seven of our eight states, resulting in $20 million in additional annualized revenue. We also have rate cases or surcharges pending in Indiana, North Carolina, Ohio and Virginia, where we’re requesting an additional $8.8 million in revenue. For further detail on rate activity, please refer to the slides in the appendix. Next let’s turn to Slide 15 to discuss our upcoming Pennsylvania rate case. As you know, we’ve not filed a rate case in Pennsylvania since 2011. Thus, this is our first Pennsylvania rate case in seven years, which is considerably longer than usual cycle of filings every two to three years. If you follow Pennsylvania’s previous activities closely, you may have seen that we intend to file no later than August 17. Given the timeline for rate case proceeding, new rates are expected to be affected in the spring of 2019. If you turn to Slide 16, you’ll see the rate case summary slide that we’ve shown previously. The slide outlines several of the key items for this rate case. In the time since we last filed in Pennsylvania, we completed more than 20 water and wastewater acquisitions and we will invest in more than $2 million of capital to replace and expand our infrastructure. This is also our first rate case since the Fully Projected Future Test Year came into effect. This mechanism will reduce regulatory lag by allowing us to includeourprojected investments and expenses for the first full-year after rates take effect. And, of course, tax-related matters will be an important component for this case. So we will file later this month, we’ll work through the proceedings to the balance of this year and into 2019, when we expect new rates to be effective in the spring. With that, I will hand the call back over to Chris.

Thanks, Dan. And before I introduce formally, Matt Rhodes, I want to again recognize the contributions of my friend and colleague for over 25 years, Dave Smeltzer. One of the legacies that Dave will leave at Aqua when he retires is the experienced team that he hired and invested in for so many years. Dave, as Dan mentioned, has also spent a good deal of time with Dan and preparing him to be our next CFO. And I’ve got to say, to Dave’s work that my confidence in our financial strength and stability has never been stronger. And while we expect that this will be Dave’s last earnings call, Dave has committed to see the Pennsylvania rate case through. So in the outside chance that Dave’s needed for testimony or additional work on the case beyond October, Dave has agreed to generously stay with us into early November. But in anticipation that this is Dave’s last call, I want to publicly thank him for his good work, his contributions over the years and wish he and Debbie well in their retirement together. So now I get to introduce the newest member of our executive team, Matt Rhodes. And Matt will fill the position of Executive Vice President of Strategy and Corporate Development, which was formerly led by Dan Schuller. Matt comes to us, as many of you know, from Goldman Sachs, where he covered utility companies for a decade. He has deep knowledge of the utility sector and I think many of you know Matt already. And since he joined us in mid-June, he’s really hit the ground running and has already become deeply involved in all aspects of our growth program at the company. I have to say, I’m excited about Matt being on Board for a number of reasons. But I know and I’m certain to help build on the strong track record that Dan and his team have established over the last three years. With that Matt, I’ll turn it over to you for an update on our municipal acquisition strategy.

Thank you very much, Chris, much appreciated. I have to say in my short time here, I’ve enjoyed getting to know the team at Aqua and I’ve been impressed by the work completed to build the platform for growth. There’s also reporting today related to acquisitions, a reflection of the efforts of Dan and fellow Aqua leaders, including our state presidents, who strategically focused on opportunities across our operations, where we can be a solution to municipalities and privately owned water systems. If you’ve been following our leases over the past month or so, you know that we’ve closed two sizable municipal acquisitions, as outlined here on Slide 18. One is in Illinois and one is in Pennsylvania and they both total over 900,000 customers and about $100 million in purchase price. When we add these two acquisitions to the three small private deals announced earlier this year and our organic growth through June, you can see that our customer growth so far in 2018 is 1.4%. We remain on track for 2% to 3% customer growth for the year, which I will discuss in more detail on the next slide. In addition to the deals already closed, we have a very strong pipeline of municipal acquisitions that are currently under agreement. This reflects the opportunities we continue to see in the municipal market and the hard work that our state leadership teams are doing. In May’s earnings deck, we provided a schedule of six systems with signed purchase agreements. Since then, two of these are now closed, Manteno and Limerick, as we just discussed. You can see that, we now have a revised list of six agreements with municipalities. This includes two new deals, one being System H in Illinois and the recently announced signed asset purchase agreement with…

Thanks Matt, nice job. Glad to have you on the call.

Thank you.

Lastly, for today’s call, we’ll review the guidance, 2018 guidance, and I say we remain confident in that guidance. We expect full-year earnings per diluted share to be between $1.37 and $1.42. We expect to invest approximately $500 million in capital – in infrastructure in 2018. Again, this is a record amount for us and approximately $1.4 billion in CapEx over the next three years, that’s through 2020. So it’s important to note that this CapEx doesn’t include any investment in additional systems would be required. So the full CapEx will be likely higher when we look back in 2021 into these years. Rate base is expected to grow at approximately a 7% clip over the period. And, as Dan mentioned, we’ll be filing a Pennsylvania rate case later this month. Year-over-year, we’ll grow our customer growth between 2% and 3%. And I want to point out, we’re just about 3,000 customers away from hitting a key milestone of 1 million customer mark, and we should hit that before the year is out. And just a point of reference, when I came into the company in 1992, the company had just over 240,000 customers. So we’ve seen tremendous growth over the period. And just before we open it up for questions, just make a couple of final points here. One is that, the company, the base company continued to perform with excellence. We know we talked about operations, but under Rick Fox’s leadership, we continue to achieve high marks even record achievements in safety and environmental compliance. And we’re doing all of that while we continue to – we continue to invest in infrastructure at record levels and we continue to review and do due diligence and integrate acquisitions. So it’s a tremendous job done by our operating team led by Rick. Second point I’ll make is that, for the last three years, Dan Schuller has really done a complete revamp of our acquisition program and built a great foundation for Matt to continue it. And so, Dan just done a fantastic job, and as he transitioned, we’re thrilled with the results he put on the Board. And finally, while Dave will most certainly be missed in the coming months when he leaves in October, it gives me and all of us on the management team great confidence that Dan will be our next CFO upon Dave’s retirement. I think, in your dealings, you’ll find Dan to be not only knowledgeable and accessible, but unquestionably honest. And this transition has been just a really good example of the strong succession planning we do at the company, which is really for the long-term benefit and the building of shareholder value. So with that, I’ll conclude and offer up the time for any questions you might have.

Thank you. Operator Instructions] And our first question will come from Mr. Ryan Connors with Boenning & Scattergood.

Great. Thanks for taking my question. Actually, the first one I had was just little more of a housekeeping item. The JV line was a nice tailwind and I assume that was the pipeline JV, pretty major jump sequentially in year-over-year. So is that something we should expect to continue rising as the oil and gas markets recover, or do we level out there? Any outlook on that?

Yes. Good question, Ryan. I’m going to let Dan fill that, but I think, the first one is, yes, good news. And that we’ve taken – we’ve written it down a couple of years ago, 2015, as you know, and we’re pleased with the contract. We have a multi-year contract in place now. But in terms of this growth, I’ll let Dan and Matt fill that.

Yes. Thanks, Ryan. So, we’ve had very nice success in terms of water sales this year. Actually, thus far this year, we’ve sold more water than we sold in any full-year previously. So it’s positive from a volume perspective. As Chris mentioned, we’ve got one long-term contract in place. We’ve got another contract in place. We’re a second driller. And I’d say, we would expect to see the types of volumes that we had thus far this year kind of strong volumes continuing through the balance of the year and then through 2019 at this point. Target visibility is too far out so in the situation. I mean, we have some visibility to what they’re going to request in terms of water delivery, but there’s only so many months of that that we really can see. But our understanding from how things are shaping up in the basin is, yes, we should have a good year this year another good year coming up.

Great. That – that’s helpful. Next, I echo the sentiments on Dave, best of luck and thanks for all your help over the years. And the last thing I want to do to you Dave on your last calls make you dive back into repair tax. But can you just – we’ve got a PA rate case now. Obviously, the long stay out was a function in some ways on repair tax. Can you just walk us through maybe not even the granular details, but just logically, what happens to the tax rate both in Pennsylvania, but maybe more importantly, on a consolidated basis once this rate case is in effect?

Yes. Well, as you know and as we’ve talked previously, the repair change when made was a permanent change the way the company treats its repairs, right? So nothing changes in terms of the way we treat repairs and in terms of the tax deduction that’s afforded from those repairs. From a leveling standpoint, the amount could change a little bit over the years. There’ll be years when we’ll do more repairs, there’ll be years when we’ll do a little bit less repairs. But as we look forward into the future test year, in fact, the fully projected future test year, we have projected the level of repairs, which will take place during that year, and there’s an appropriate reduction in our income taxes incorporated into the PA rate case requests for that. And so when we do that, we look forward to make sure that during the tendency of those rates, we’ll be in a position to deliver a fairly constant rate reduction in income tax – income taxes. And so, that’s unlikely to be an issue that provides a significant benefit for the shareholders or any detriment in the context of that three-year period between rate cases.

Okay. So we shouldn’t expect the tax rate to jump once the rate – the new rates go into effect?

Yes. There’s a chance the rate changes – once the new rates go into effect, but that change will be fairly constant item than for the three-year duration of the rates.

I see, okay. Okay, and then – okay, I got it. And my last one was on regarding the rate case in Pennsylvania, our read of the Limerick settlement is that the Limerick will not be included in that PA rate case. So can you just affirm we have that right? And also, are there any other recent deals that will not be included in that rate case due to similar stay out agreements?

You’re correct, Ryan, that Limerick is not being included in the current case, the case that we’re about to file. In terms of others, so, for example, others haven’t closed yet, obviously, would not be – would not make their case either.

Okay. So there’s no – so all the other deals that have closed will go in?

That’s right.

Okay.

I think we have 20 or 20 some deals that are for the first time being incorporated into a Pennsylvania rate case, yes.

Okay.

Yes. But sort of the main deals that we’ve talked about here recently, you’re correct. Limerick does not make this case. And then going forward, we’ll – they obviously don’t make this case. They’re included in the 20 – the later case down the road.

Got it. Okay, that’s good news. And then you mentioned the deal that haven’t closed. Any update on the New Garden that you can give us?

It’s hard to give much of an update there. Obviously, it’s been a feel good – they’re kind of well on course, and we’d expect some proceedings starting in September related to that.

Okay. Well, thanks for all your time this morning. Best of luck, Dave.

Thanks, Ryan.

Thanks, Ryan.

Take care.

Operator Instructions] At this time we have no further questions. I’ll turn it back to Mr. Franklin for closing comments.

Well, thank you again for joining us today. And again, congratulations to Dave and obviously, we’ll all be prepared to answer your questions you might have that you think of after the call. So enjoy the rest of your day. Thank you.

Ladies and gentlemen, that concludes this morning’s presentation. You may disconnect your phone lines, and thank you for joining us today.