Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company Conference Call, discussing the Company’s Second Quarter 2016 Results. This call is being recorded. If you would like to listen to the replay of this call, it will begin this afternoon at approximately 5 PM Eastern Time and run through Friday, August 12, 2016 on the Company’s website, www.aswater.com. The slides that the Company will be referring to are also available on the website. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] This call will be limited to an hour. Presenting today from American States Water Company is Bob Sprowls, President and Chief Executive Officer; and Eva Tang, Chief Financial Officer. As a reminder, certain matters discussed during this 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. In addition, this conference call will include a discussion of certain measures that are not prepared in accordance with Generally Accepted Accounting Principles or GAAP in the United States and constitute non-GAAP financial measures under SEC rules. These non-GAAP financial measures are derived from consolidated financial information but are not presented in our financial statements that are prepared in accordance with GAAP. For more details, please refer to the press release. At this time, I will turn the call over to Eva Tang, Chief Financial Officer of American States Water Company.

Thank you Denise. Welcome, everyone, and thank you for joining us today. During today’s call, I will review the Company’s financial results for the second quarter and Bob will discuss some highlights for the quarter, Golden State Water’s pending rate case, California’s drought related matters, and our contracted services business segment at American States Utility Services, or ASUS. I’ll begin with an overview of our financial results. For the second quarter, diluted earnings were $0.45 per share compared to $0.41 per share for the same period in 2015. Of the $0.45 earnings per share for the quarter, $0.36 was from our Water segment, $0.01 was from our Electric segment, $0.07 from our Contracted Services segment, and our parent company contributed $0.01. Net income for the quarter was $16.7 million compared to $15.7 million for the same period in last year. I will discuss major items that impacted our revenues and expenses for the quarter. Water revenue were $81.1 million for the quarter as of today, Golden State Water has now received a decision on its pending water general rate case, which will set new rates for years 2016 through 2018. As discussed in our first quarter call, we expected 2016 revenue requirements from the decision to be lower than the 2016 adopted level due to decreases in various operating expenses. As a result, we adjusted our water revenue downward by $7 million for the quarter with corresponding decreases to supply costs, depreciation, and other operating expenses to reflect the settlement position with the CPUC’s Office of Ratepayer Advocates. The adjustments to 2016 recorded water revenue also reflects Golden State Water’s, unlitigated capital budgets and compensation related issues in the pending rate case. These adjustments do not have a specific impact to pretax operating account for the quarter. Partially offsetting this…

Thank you, Eva. Hello everyone. I appreciate everyone joining us today. The Company delivered solid earnings in the second quarter. In addition, our water and electric utilities continue to invest to maintain and improve the reliability of our systems. For the six months ended June 30 this year, Golden State Water invested $63 million on Company funded necessary infrastructure work. We are on track to invest approximately $95 million in capital projects during 2016, which may change somewhat once a decision is issued by the CPUC on the pending water rate case. I’m also very pleased to report that ASUS was awarded a 50-year contract by the U.S. government to operate, maintain and provide construction management services for the water and wastewater systems at Eglin Air Force Base located in Florida. The value of the contract is estimated at approximately $510 million over the 50-year period, and is subject to annual economic price adjustments. ASUS will assume operations at Eglin following the completion of a 10-month transition period. This contract is a result of years of focus and hard work from our ASUS team, who remain committed to winning new base proposals. Our team is involved at various stages of the proposal process at a number of bases considering privatization. We are not able to share more about the status of these proposals because of the competitive nature of this business. The U.S. government is expected to release additional bases for bidding over the next several years, and we believe we are well-positioned to compete for these contracts. As we’ve discussed in previous quarters, we filed a general rate case in mid-2014 for all of our water regions and the general office. The application will be determine rates charged to customers for the years 2016, 2017, and 2018. Golden State…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Jonathan Reeder of Wells Fargo. Please go ahead.

Hey Bob and Eva. How are you all doing today?

Good. Thanks, Jonathan.

Good. Thank you.

Just a couple of minor questions. Consumption levels in the GRC, you’re saying they reflect the 2015 mandatory reduction usage levels. Does that mean you could be I guess over-collecting in the WRAM accounts during the rest of the year, since the mandatory reductions are backed off and now they are just voluntary, assuming the usage kind of bounces back a little?

Yes, that’s right. We’re using 2015 approximately the mandated consumption level. But you know, this year, year-to-date, our consumption is still 8% less than last year in the same period, six months. So we don’t expect over-collection in the WRAM balancing account. We think the WRAM balance will decrease, but it’s hard to say. It depends on how the remaining months are going to be, but hopefully the WRAM balances will be less than what we experienced in 2015.

Though what was included in the rate case was based upon 2015 mandatory reduction levels, I believe they did back those down by roughly 3% off the mandatory reduction. So the average is 25%. I think they were looking more into 22%. But as Eva says, what happens the rest of the year will tell the tale, I guess. And then of course you don’t know what kind of action the State Board is going to take if a lot of these systems put in no reductions, and there’s some speculation that it’s going to be difficult to avoid sort of new reductions coming out in the future. So it is definitely a work in process.

Okay. So let me just make sure I understand. Your WRAM balance, where is it at, at this point, in terms of the under collection in aggregate?

For this year, for 2016, we had about $22 million accumulated. However, once the decisions come about, because we have a higher base rate in the 2016 adopted revenues appropriately, a partial - a portion of the $22 million will become another regulatory memo account to collect the retroactive revenue back to January 1. So even though the $22 million represents the WRAM balance right now but we will replace by another regulatory memo account once the decision is issued. Does that make sense?

Yes, I think so. And then I guess my other question on ASUS, I didn’t know if, Bob, you felt in position to try to estimate what the impact to EPS power could be from the addition of Eglin, or is it still too early since you haven’t had a lot of time to get in there and see the base and the amount of assets and all that stuff?

We know it would be helpful for you folks to have some sort of estimate, so we going to try to give you one. The contract award included both O&M and R&R and a little bit of initial capital upgrade work. And if you just look at those items, we think it’s going to be on a sort of full-year run rate basis $0.02 to $0.03 per share. However, if we get substantial initial capital upgrades or later new capital upgrades, that amount could go up.

Okay. So, it’s kind of $0.02 to $0.03, but then if you have any I guess of the special projects or just the projects that are awarded on kind of an annual basis related to Eglin, that would be incremental? Is that right?

Yes. That’s a good way to look at it. Just so you understand, there is a 10-month transition here. So the $0.02 to $0.03 we wouldn’t see that completely in 2017. We would see about half of it, I would guess, and then the annual run rate $0.02 to $0.03.

Right, and the timing of the special construction projects, I’m assuming that wouldn’t start until 2018 as you wouldn’t I guess get the budget until September 2017 for Eglin. Is that right?

There’s a lot of things to be worked out with the military on the base in terms of special construction. But the initial capital upgrades, it’s hard to say when we will start to see those, but it’s possible 2018.

Okay.

During the transition period of this 10 months, it’s more like a due diligence period, so we can work on the inventory level to make sure we have the inventory correct compared to when we submitted it. So there is opportunity to make sure we have the right inventory level to go forward with every year price adjustment mechanism on the military base.

So, we will be going through with our GIS systems to identify both where – make sure the pipe that we are taking over is consistent with the maps we will be given as well as the age of the pipe. So there will be a lot of work done in that particular area to make sure that the inventory that we are taking over is – has been substantiated and that it’s accurate.

Okay. We’ll wait for your update regarding that. And congratulations on adding the 10th base, and I guess we will look forward to the 11th one, right?

We’ve got some momentum now.

There you go. Take care. I appreciate the time today.

Thank you, Jonathan.

Thank you. End of Q&A

[Operator Instructions] At this time, I’m showing no additional questions. I would like to hand the conference back over to Bob Sprowls for any closing remarks.

Yes, I just wanted to close with just passing along my thank you for all your participation today, and I look forward to speaking with everyone next quarter if not before.

Thank you. Ladies and gentlemen, this concludes our conference for today. Thank you for your participation. You may now disconnect your lines.