Ladies and gentlemen, thank you for standing by. Welcome to the American States Water Company conference call discussing the company's second quarter 2019 results. The call is being recorded. If you would like to listen to the replay of this call, it will begin this afternoon at approximately 5:00 p.m. Eastern Time and run through Tuesday, August 13, 2019, on the company's website, www.aswater.com. The slides that the company will be referring to are also available on the website. [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, Senior Vice President of Finance and 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 Bob Sprowls, President and Chief Executive Officer of American States Water Company.

Thanks, Brandon. Welcome everyone, and thank you for joining us today. I'll begin with some highlights for the quarter. Eva will then discuss some important financial details, and then I'll wrap it up with some updates on regulatory filings, ASUS and dividends, and then we'll take your questions. I'm very pleased to report that we delivered excellent earnings and performance during the second quarter for both of our subsidiaries, resulting in a 45% increase in adjusted earnings per share. In May, we received a final decision issued by the California Public Utilities Commission, or CPUC, on our water segment's general rate case. And in July, a proposed decision was issued on our Electric segment's general rate case, which adopted all the settlement terms jointly filed with the CPUC's Public Advocates Office. Our newest military base privatization contract contributed nicely to earnings, and we remain well positioned to win new military base contracts. In addition, last week, the company raised the dividend by a sizable 10.9% and updated our dividend policy to target a compounded annual growth rate in the dividend of more than 7% over the long term. As a result of these milestones and continued solid execution of our businesses, earnings were $0.72 per diluted share as recorded and $0.64 per share excluding the first quarter retroactive impact of our water rate case. This adjusted earnings amount represents an increase of $0.20 per share or 45% over the second quarter last year. In addition, Golden State Water Company continues to invest in the reliability of our water and electric systems. During the first six months of 2019, we spent $70.7 million in company-funded capital expenditures and are on target to spend $115 million to $125 million for the year, about 3x our expected annual depreciation expense. American States Utility Services, or ASUS, our contracted services business, saw its earnings double over last year as a result of the Fort Riley addition as well as increased construction at other bases and an increase in management fees. All in all, it was a very productive and positive quarter while laying the groundwork for continued earnings growth. With that, I'll now turn the call over to Eva to review the important financial details for the quarter.

Thank you, Bob. Hello, everyone. Let me start with an overview of our second quarter financial results on Slide 8. Consolidated earnings as reported for the quarter were $0.72 per share compared to $0.44 per share for the same period in 2018. As Bob mentioned, earnings at our water segment were positively impacted by the CPUC final decision on the general rate case with the new rate retroactive to January 1, 2019. This retroactive impact of this decision was reflected in the results for the second quarter. And of the water segment's $0.59 earnings per share, $0.08 per share was related to the first quarter of this year, which is shown on a separate line in the table on the slide. Further impacting the comparability of the water segment's earnings between the second quarter of 2019 versus 2018 was the recording of a $1.1 million reduction to the administrative and general expense, positively impact earnings by $0.02 per share. This is to adjust the recovery of costs previously incurred or expensed as incurred and tracked in memorandum accounts, which were approved in the CPUC final decision in May. The remainder of the earnings increase at the water segment was due to a higher water gross margin from the new water rates, lower operating expenses and an increase in gains on investment held to fund a retirement benefit plan. Our electric segment's earnings for the second quarter of 2019 were $0.01 per share as compared to $0.02 per share for the second quarter of last year. This was largely due to an increase in operating expenses with our increase in customer base rates. Billed electric revenue during the first six months of 2019 were still based on 2017 adopted rates, pending a final decision by the CPUC on the electric rate…

Thank you, Eva. I'd like to provide an update on our recent regulatory activity. In May of this year, the CPUC issued a final decision on Golden State Water Company's water general rate case, which sets new water rates for the years 2019 to 2021, with rates retroactive to January 1, 2019. The final decision approves in its entirety an August 2018 settlement agreement entered into between Golden State Water and the PUC's Public Advocates Office. As a result, final decision authorizes Golden State Water to invest $334.5 million over the rate cycle, which includes $20.4 million of capital projects to be filed for revenue recovery through advice letters when those projects are completed. Excluding the advice letter project revenues, the new rates approved will increase the 2019 water gross margin by approximately $7.1 million, adjusted for updated inflation index values since the August 2018 settlement as compared to the 2018 adopted water gross margin. The 2019 water revenue requirement has been reduced to reflect a decrease of $7 million in depreciation expense compared to the adopted 2018 depreciation expense due to a reduction in the overall composite depreciation rates based on the revised study filed in the general rate case. The decrease in depreciation expense lowers the water gross margin and is offset by a corresponding decrease in depreciation expense, resulting in no impact to net earnings. In addition, the 2019 water revenue requirement includes a decrease of approximately $2.2 million for excess deferred tax refunds as a result of the 2017 Tax Cuts and Jobs Act, which has a corresponding decrease in income tax expense and also results in no impact to net earnings. Had depreciation expense remained the same as the 2018 adopted amount and there were no excess deferred tax refunds that lowered the 2019 revenue…

[Operator Instructions]. Our first question comes from Richard Verdi with Coker & Palmer.

First of all, very good quarter. I just have two quick questions. On the ASUS front, so the guidance last quarter was $0.43 to $0.47 for 2019. It's the same this quarter, for the year. But then we also had a very strong quarter in ASUS. And so maybe, Bob or Eva, can one of you please discuss a little bit about what goes into this quarter and what goes into the guidance in the sense of was this quarter maybe stronger because of the weather pushout from Q1? Or maybe was there some activity that could have been expected later in the year that slid back up into the second quarter? Or just how can we think about this moving forward and maybe what went into the second quarter strength?

Sure, Richard. I'll take a stab at it. And Eva, you can fill in the gaps if I miss something here. I would say 2019 is different from maybe the last couple of years in that we were doing more of our construction work in the first and second quarters in 2019 than we did in the prior years. So maybe you've seen more of a levelized quarterly contribution by ASUS for the four quarters of 2019. So if you look at year-to-date, we're at $0.22 versus last year, we were at $0.11. We've made a pretty strong push the last six months of the year last year doing construction work. This year, it's just going to be more normal quarterly construction.

Okay, that's great. I appreciate it. And then just the second very quick question, then I'll hand it back. For the dividend, Bob, you had mentioned in the prepared remarks how the company just increased the dividend 10.9%. The policy has been updated to 7% on a long-term CAGR basis. So how should we think about the CAGR move -- or I'm sorry, I misspoke, how should we think about the dividend moving forward? Could we see that may be moving -- the growth in the dividend may be moving in line with earnings growth, where it then sort of slows in the outer years so that we get a 7% CAGR? Or could it be somewhat staggered? I'm just trying to get some sort of sense of how this dividend could grow. And maybe if it could be because of accelerated earnings strength here over the next couple of years, what have you.

Well, first of all, we plan to continue, as you know, to grow the earnings at our two subsidiaries, Golden State Water and ASUS. And in thinking about the dividend, we're pretty comfortable with a growth rate that's more than 7%. And looking out at our forecast, I wouldn't -- I don't think you need to necessarily think that we're going to back our dividend down moving forward. I mean it's just a pretty conservative company and when we set a target of more than 7%, we expect to do that and probably more.

[Operator Instructions]. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Bob Sprowls for any closing remarks.

Thank you, Brandon. I just wanted to close today by thanking everyone for their participation, and we look forward to speaking with everyone next quarter. Thank you.

This concludes today's American States Water Company conference call. You may now disconnect.