Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company conference call discussing the company's fourth quarter and full year 2012 results. If you have not received a copy of this morning's earnings release, please call (909) 394-3600 extension 651, and one will be faxed or e-mailed to you. If you would like to listen to the replay of this call, it will begin this afternoon at approximately 2:00 p.m. Pacific Time and run through Thursday, March 7, 2013. After logging onto the website, click the Investors button at the top of the page. The archive is located just above the Stock Quote section. [Operator Instructions] As a reminder, this call is being recorded and will be limited to no more than 1 hour. At this time, I would like to turn the call over to Ms. Eva Tang, Chief Financial Officer of American States Water Company. Ms. Tang, the floor is yours, ma'am.

Welcome, everyone, and thank you for joining us today. On the call with me is our President and CEO, Bob Sprowls. Before I start with the fourth quarter results, I would like to remind you that certain matters discussed during the conference call may be forward-looking statements intended to qualify for the Safe Harbor from 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. With that, I will now discuss the fourth quarter financial results. As noted in our earnings release this morning, we again delivered exceptionally strong quarterly earnings due to capital construction work at several military bases operated by our contracted services segment, American States Utility Services, or ASUS in short. Our fourth quarter earnings from continuing operations increased by 51.4% to $0.53 per fully diluted share as compared to $0.35 per share for the fourth quarter of '11. Net income for the quarter increased by 53.4% or $3.6 million compared to the same period in 2011. ASUS contributed $0.23 per share to the consolidated earnings as compared to $0.06 for the same period in '11. Now I would like to discuss the various components of our earning -- of our income from continuing operations, starting with revenues. For the fourth quarter of 2012, our operating revenues increased by $16.3 million or 17.1% to $111.5 million. The main driver of this increase continues to be ASUS. ASUS' revenue increased by $14.1 million or 68.6% to $34.7 million compared to the same period of 2011 due to an increase in renewal and replacement work and the new construction activities. We continue to make progress on major construction projects at the…

Thank you, Eva. Good afternoon, ladies and gentlemen. I am extremely pleased with our strong operating and financial performance for the year. In 2012, the company was able to achieve record financial results, announced a significant dividend increase and provide one of the highest total shareholder returns among all publicly traded utilities. These improved results were due in large part to our operating successes in our contracted services business, which continues to make significant contribution to the company's earnings. ASUS accounted for approximately 27% of the company's consolidated revenues in 2012 compared to 20% in 2011. As Eva mentioned, the company's earnings from continuing operations increased to $2.82 per share for 2012, a 26.5% increase from 2011. The company has grown its revenues from continuing operations to nearly $467 million in 2012 from $294 million in 2007, which represents a 5-year compound annual growth rate of 10%. Our net income from continuing operations has grown at a compound annual growth rate of 15% over the same 5-year period from $27.1 million in 2007 to $54.1 million in 2012. As you recall, in July 2012, our Board of Directors approved a 27% increase in the quarterly cash dividend. This substantial increase reflects our board's confidence in the sustainability of our earnings, prospects for our future and the desire to have a payout ratio more in line with our peers. I would like to take some time now to provide you with an update on the regulatory activities at our water and electric utility business segments. In June 2012, Golden State Water Company filed a motion to adopt a settlement agreement between the company, the Division of Ratepayer Advocates, or DRA for short, and The Utility Reform Network in connection with the water general rate case filing made in July 2011. The…

[Operator Instructions] The first question we have comes from Jonathan Reeder of Wells Fargo.

I was just wondering that if you could give us some kind of indication that based on the 3 major projects outlined and I guess there is even a fourth one kind of added in there that wasn't in the release. Is it fair to assume a similar level of construction work in 2013 for ASUS as in 2012 or might it even be higher?

Well, first of all, thank you, Jonathan, and hello. Yes, regarding the outlook for 2013 for ASUS, as you know, a key component of ASUS' earnings over the past several years has been this new construction work, both with the government and through either prime contractors at the bases where ASUS operates. And as we've mentioned earlier today, we have a number of funded construction projects currently underway, which we expect will continue to contribute to earnings in 2013. So we're -- we think we'll have a strong 2013. However, I did want to mention that during 2012, there was a significant amount of renewal and replacement work being done at Fort Bliss, consistent with the requirements of our 50-year contract there. We expect that work to continue in 2013 but at a slower pace than in 2012. So if you're looking for 2013 to outstrip 2012, we don't see that happening given that we're going to have a slowdown in this renewal and replacement work at Fort Bliss. Also, it's difficult at this time to really estimate the possible impact of sequestration on any new construction activity beyond those projects that are currently funded. That help?

Yes, that's very helpful. And then did you mention, Bob, what the value of the project was at the Virginia base?

I did not.

I think those are a few smaller magnitude kind of the dollar amount, Jonathan, unlike Fort Bragg's big project. Virginia base's usually run from $3 million to $5 million smaller projects. So that's why we don't call it out as a single project like that.

Okay. But there's a bunch of smaller projects that are underway at the Virginia bases?

That's right.

Okay. And then I was thinking before with the GRC and the settlement agreement that you had, you had indicated the gross margin impact was going to be $18 million versus the $14.5 million now. What accounts for that change?

I think one reason could be because we factored the cost of capital preceding the adjustment to the return on equity, Jonathan. So before, we're probably using the 9.99 ROE and we adjusted with the 9.43 ROE to our new calculation. That's probably one of the major reasons.

That makes sense, yes, because the $18 million that I was talking about was from, I think, the Q2 call, so that's probably exactly what it is. And then, if you could just touch upon the dividend and maybe what sort of growth we might expect going forward following the big increase last year, what do you think the sustainable growth rate is.

Yes. We really haven't put out there what the sustainable growth rate is, but we have talked about our desire to have a growth rate of at least 5%. Now at this point, our earnings have ramped up considerably from where they've been in the past. And historically, we've taken a look at where our peer group is regarding payout ratio and then sort of done of an evaluation of where we think we should be relative to that peer group based upon the businesses that we manage. As we've said in the past, the timely replacement of infrastructures is important to our ability to provide service to our customers. Given that we've got ASUS as an increasing component to the overall mix, the government contracting-type firms do not provide as high a payout ratio on their earnings. But -- I mean, we think there's a substantial potential here to continue to increase the dividend going forward. And we continue to look sort of out into the 3-, 4-, 5-year period to see what our sustainable earnings are and then derive our dividends from that. But again, the goal is to have a compound annual growth rate of over -- of 5% or over a 5-year period.

Okay, that makes sense. And, Bob, if you figure out what that sustainable earnings growth rate is, let me know. It's always a challenge figuring out the ASUS, and this year is just an amazing year and figuring out what the base line is going forward is the challenge for all of us out there. So appreciate the additional commentary.

Yes. I mean, there's -- on sort of both sides of the ledger, there's significant issues going on, of course. You've got the sequestration, its impact could be a negative on future construction projects. On the other hand, there's a lot of bases being bid out there, and we're obviously very interested in acquiring additional bases, so we're in the hunt there. So that is what sort of makes it difficult going forward. And we're trying to, I guess, help as much as we can -- help you guys as much as we can in terms of giving you transparency here.

[Operator Instructions] Next question we have comes from Heike Doerr of Robert W. Baird. Heike M. Doerr - Robert W. Baird & Co. Incorporated, Research Division: Eva, I wanted to follow up on something you said about the CapEx program. I'm trying to understand why your 2012 spending levels would decline as it relates to the 2011 general rate case, which is looking for 2013 through '15?

Well, Heike, the rate case cycle for new rates start in 2013. So 2012 become a transitional year because that's the year that we project to spend a lot of capital, expenditures with different projects submitted to the PUC. So when we go into the rate case, we really have to project our capital expenditure for '12, '13 and '14. Given that we don't really have the rate settlement for -- going forward for '13 at this point, so we're trying to judge what kind of project is at the higher certainty that we can start performing. And the things that -- at the time, we were in negotiation with DRA, there were quite a few projects that had some kind of uncertainties, and we don't want to start working on those projects and end up facing challenge from the commission and writing off things in the future. So transition year is always a tough year for us to figure out how much we can start doing. And so we're kind of waiting to see where the settlement discussion will end up with before we start doing big projects. Heike M. Doerr - Robert W. Baird & Co. Incorporated, Research Division: So that spending that wasn't done in 2012 is spending that would have -- or will continue into 2013?

Yes, and we try to catch up. If we -- if the settlement is approved by the commission, you can see, we will catch up those spending as the settlement allow us to do about $85 million a year for 3 years in the next 3 -- I mean, from '13 on. So we'll catch up the things that we left off in 2012. Heike M. Doerr - Robert W. Baird & Co. Incorporated, Research Division: Would we see 2013 a little higher from -- a little higher than that $85 million if you're -- because there was spending that got deferred from 2012, so maybe it's $88 million or $90 million and then $85 million, $85 million?

I think it's possible, Heike. We try to do as much as we can when the settlement is approved by the PUC. So we hope that would resolve in the first quarter, we're really going to ramp up our expenditures. So it's possible we'll spend more than $85 million in '12 -- in '13. Heike M. Doerr - Robert W. Baird & Co. Incorporated, Research Division: Okay. And just so we understand the process, we're -- the next step is a proposed decision, correct?

That's right.

Yes. Heike M. Doerr - Robert W. Baird & Co. Incorporated, Research Division: And then what happens between then and when you get rates implemented?

There are opportunities for commissioners to sponsor alternate decisions in that there's usually a 30-day period between when the proposed decision is and -- when the proposed decision comes out and when the final decision is voted on. And during that period, they can -- the different parties can seek commission -- like a DRA could go to a commissioner and ask them to sponsor an alternate decision or we could if we didn't like the proposed decision and then the alternate and the ALJ's decision would get voted on at the commission's hearing -- or the commission meeting. Generally, they have a commission meeting once or twice a month where they take up the decision -- proposed decisions that are out there. Heike M. Doerr - Robert W. Baird & Co. Incorporated, Research Division: And, Bob, could you maybe help us understand information flow for ASUS. If a project is large enough, would we see an 8-K, or is this something that you guys would wait and share with us on an earnings call or in the 10-Q, 10-Ks?

Yes. In the past, we've shared during the earnings call and the 10-Qs and 10-Ks. So we've -- there's stops and starts on these projects, and we really want to be sure that it's a go before we alert the market to it. We don't want any sort of premature notification. Heike M. Doerr - Robert W. Baird & Co. Incorporated, Research Division: And there's no trigger then? If you got everything all squared away, let's say, tomorrow, there's no trigger that you would need to put out an 8-K on that?

Generally, no. I mean, it's a -- if we got like a special project depending upon the size, of course, we would alert the market, but if it's not a substantial project, of course, we wouldn't. Eva, if you have anything to add?

Yes. I mean, generally, if the project, $10 million or so is a small percentage to our total revenue. So we'll make a judgment whether as to the mature level that we need to alert the market. But definitely, we'll put in our disclosures as much as we can. Heike M. Doerr - Robert W. Baird & Co. Incorporated, Research Division: Okay. And, Eva, you said the 10-K is going to come out this afternoon?

Yes, probably later this afternoon. The last few points the auditors are trying to wrap up, and so, we expect to issue later this afternoon.

[Operator Instructions] It appears that we have no further questions at this time. I would like to hand the conference back over to Mr. Bob Sprowls for any closing remarks. Sir?

Yes, thank you, Mike. Again, thank you all for your participation today, and we really appreciate your continued interest and investment in American States Water Company. And have a great day, everybody.

And we thank you, sir, and you also have a great day, and also to Ms. Tang. This concludes today's American States Water Company Conference Call. As a reminder, the call will be archived on our website and can be replayed beginning Thursday, February 28, 2013, at 5:00 p.m. Eastern Time, 2:00 p.m. Pacific time and will run through Thursday, March 7, 2013. After logging on to the website, click the Investors button at the top of the page. The archive is located just above the Stock Quote section. Again, we thank you all for your participation, and please have a great day. At this time, you may disconnect your lines. Thanks again.

Thank you.