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Operator 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 2015 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 o’clock PM Eastern Time and run through Thursday, March 3, 2016 on the company’s website, www.aswater.com. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] This call will be limited to an hour. 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 on file with the Securities and Exchange Commission. At this time, I would like to turn the call over to Eva Tang, Chief Financial Officer of American States Water Company. Eva Tang Thank you, Carrie. Good afternoon and welcome, everyone. Thank you for joining us today. On the call with me today is our President and CEO, Bob Sprowls. I’ll start by reviewing our financial results. Diluted earnings for the year ended 2015 were $1.60 per share, which is $0.03 per share increase as compared to $1.57 in 2014. For the fourth quarter of 2015, diluted earnings were $0.31 per share, compared to $0.35 per share for the same period in 2014. I’ll first discuss the key items that affected our fourth quarter results. For the quarter, revenue at our Water segment decreased $830,000, due mainly to a delay in recognizing $1.4 million of Water Revenue Adjustment Mechanism or the WRAM revenue, partially offset by rate increases approved by the California Public Utilities Commission. As we discussed in our third quarter earnings call, under the accounting guidance for alternative revenue programs, we can only recognize WRAM revenue for amounts collectable within 24 months following the year in which they are recorded. Please note that the accounting guidance affects the timing of when we can recognize the WRAM revenue, but not the collectability of the WRAMs. We have just filed that with the CPUC for recovery of the 2015 WRAM balances, including the $1.4 million. Under the current CPUC amortization guidelines, we expect to collect the balances between 12 to 36 months. The $1.4 million will be recognized as revenue when it becomes collectable within 24 months. At this time, we estimate the majority of the $1.4 million will be recognized as revenue in 2016. As part of our pending water general rate case, the forecasted consumption used to set rates for 2016 through 2018 reflects state-mandated consumption levels. Therefore, we do not expect the WRAM balances during the next rate case cycle to continue growing at the same rate as in 2015. First quarter revenue for electric operations were – was $9.2 million as compared to $7 million for the same period in 2014. The increase in revenue resulted from CPUC-approved rate increases effective January 1, 2015, and additional revenue increases January from advice letter filings. In addition, we recorded a cumulative reduction revenue in the fourth quarter of 2014, along with a accumulative reduction in depreciation expense and other expenses. As a result of the delayed decision issued by the CPUC in November of 2014, which was retroactive to January 2013. You may recall that the impact of the retroactive effects on the new rates to the electric segments 2014 net earnings was not significant. Revenue from contracted services was $28.7 million for Q4 2015, compared to $29.9 million for the same period in 2014. Higher revenue in the prior year was due in large part to the recording of construction revenues as a result of the closeout of a large pipeline replacement capital project, which did not recur in 2015. Our water and electric supply cost were $23.1 million or about 26% of consolidated operating expenses for the quarter. Any changes in supply cost for both the water and electric segments as compared to adopted level are tracked in balancing accounts, which will be recovered from or refunded to our customers in the future. Other operation expenses increased by $553,000 for the quarter, compared to Q4 2014 the increase was due to increases in drought related expenses at our water segment and higher operation related labor cost in our contract into service segment. The CPUC has authorized Golden State Water to track incremental drought related cost, in a memorandum account for possible future recovery. We incurred about $343,000 of drought related cost for Q4 2015 and $937,000 for the year. Administrative and general expenses for the fourth quarter of 2015 were $20.6 million as compared to $18.5 million for the same period in 2014. The increase was due to higher legal costs incurred to the same condemnation related activity in our water segment and higher costs associated with energy efficiency and solar initiative programs approved by the CPUC in our electric segment. In addition there was a shift in labor and other indirect cost to A&G related activities from construction related activities in support of various functions at ASUS. Maintenance expense increased by $924,000 for the quarter due to increase in both planned and unplanned level of maintenance activities in 2015; although the expense increased significantly during the quarter, it was $793,000 higher for the full year 2015 as compared to 2014. Depreciation and amortization expense increased by $968,000 to $10.4 million for the fourth of 2015 resulting from additions to utility plant at the water segment during 2014. Total other expenses net of interest income increased by $454,000 to $4.4 million for the fourth quarter of 2015 primarily due to additional interest income collected certain outstanding balances owed to Golden State Water during 2014, there was no similar items in 2015. Let me briefly discuss our 2015 full-year results. First of all as part of the 2014 and 2015 stock repurchase program authorized by our Board of Directors, we have repurchased approximately 2.45 million shares of AWR common stock, driving reduction in weighted average shares outstanding on a diluted basis, which positively benefited earning per share in 2015 and in 2014. Both stock repurchase programs were completed in 2015. Diluted earnings per share for 2015 were $1.60 compared to $1.57 for 2014. This increase was largely attributable to $0.03 per share increasing our water segment resulting from third year rate increases and advice letter filing for completion of certain capital projects not previously included in rate. The increase was partially offset by $1.4 million of 2015 WRAM revenue not recorded as previously discussed and higher operating expenses due primarily to increases in maintenance and depreciation expenses. Our contracted services segment also contributed to the increase in earnings by $0.01 per share, resulting from a successful resolution of various price redeterminations received during the third quarter of 2015. This increase was partially offset by higher operating expenses, due to an increase in labor, insurance and other outside services costs, and a decrease in construction activity due to significant work on several large projects being substantially completed during 2014. Diluted earnings from AWR parent decreased $0.01 per share for 2015, as compared to 2014 due primarily to higher state income taxes. Net cash provided by operating activities decreased by $68.1 million to $95.1 million for 2015. The decrease in operating cash flow during 2015 was due to large part to a decrease in customer water usage resulting from conservation efforts, which lowered the customer billings at the Golden State Water and increased the WRAM regulatory assets. There was also a decrease in cash generated by ASUS. During 2014 cash payments at ASUS were received for completion of several large capital upgrade projects that did not recurred in 2015. These decreases were partially offset by lower income tax payments made during 2015 mainly due to the implementation of new repair, new tax repair regulation during the fourth quarter of 2014. For additional details on our fourth quarter and year-to-date performance, please refer to our earnings release and Form 10-K issued yesterday. With that, I’ll turn the call over to Bob. Robert Sprowls Thank you, Eva. Hello, everyone. I appreciate everyone joining us today. American States Water produced another year of solid financial performance in 2015, as we earned $1.60 per share. Achieved a consolidated return on equity for the year of 12.4%, increased our dividend yet again, and achieved above market returns on our common stock. Our consolidated performance reflects excellent financial results by our two first year subsidiaries Golden State Water Company, which is our regulated water and electric utility, and American States Utility Services, our contracted services business. Let me discuss some of the highlights for 2015 by business segment. Our water and electric utilities continue to invest to maintain an improved reliability of our systems. During 2015 Golden State Water invested $91 million in infrastructure; well above the $61 million we spent in 2014, a year where we experienced project delays. Of the $91 million in company funded capital expenditures, fair value electric service accounted for approximately $8 million, reflecting our electric divisions work on two large projects. We anticipate capital investments in 2016 to be approximately $85 million to $95 million, which may change once a decision is issued by the California public utility commission on our pending water rate case. While we continue to make prudent investments to maintain and improve the reliability of our systems, Golden State Water also remains very focused on cost control and this was further evidenced in 2015. Excluding depreciation expenses and supply cost, operating expenses for 2015 were relatively unchanged compared to 2014. In fact the overall staffing level at Golden State Water has declined by approximately 8% since 2011. Lastly, in October 2015 we completed an asset purchase agreement and acquired all of the operating water assets of Rural Water Company and began serving 960 new customers. Our contracted services business, American States Utility Services continued to make significant contribution to the company’s earnings. ASUS accounted for 20.5% of the company’s consolidated revenues in 2015. During 2015, ASUS successfully completed several filings with the U.S. government for price redeterminations and asset transfers, which positively affected its earnings. ASUS’s contribution helped the consolidated company earn its 12.4% return on equity for 2015. It’s been a solid year for American States Water and its subsidiaries, and we’re looking forward to continued strength and progress in 2016. With that I’d like to discuss a few regulatory matters pertaining to Golden State Water in the California drought. As we discussed in previous quarters, Golden State Water filed a general rate case in 2014 for all of its water regions and the general office. The application will determine the rates charged to customers for the years 2016, 2017, and 2018. Our requested capital budgets in the application average approximately $90 million a year for the three-year period. The 2016 water gross margin is expected to decrease as compared to the currently adopted levels due, in part, to a decrease in annual depreciation expense resulting from an updated depreciation study. As Eva mentioned earlier, the consumption level is used to calculate rates for 2016 through 2018 and incorporated into the settlement with the PUC’s Office of Ratepayer Advocates reflect the state-mandated conservation targets for each ratemaking area. The decision on this rate case is expected by the end of the second quarter of 2016 with new rates retroactive to January 1, 2016. We are scheduled to file our next cost-of-capital application in March – we were scheduled to file our next cost of capital application in March 2016, based on an extension previously granted. In December of 2015, Golden State Water along with three other Class A California water utilities filed a request with the PUC for a further extension. On February 1st of this year, the PUC approved a one-year extension until March 31, 2017, by which date each of the four Class A utilities must file their next cost-of-capital application. As part of the extension agreement, the four water utilities agreed to forgo any adjustments that would be triggered by the water cost of capital adjustment mechanism for one year. Golden State Water’s current authorized return on equity at 9.43% will continue in effect through December 31, 2017. Based on the current economic environment, we don’t believe interest rates will increase enough by September 30 to trigger the water cost of capital adjustment mechanism if it were in place. Our Electric segment was originally scheduled to file its next general rate case application by January 31, 2016. In November of last year, we filed a petition with the PUC, requesting to defer the rate case filing by one year to January 31, 2017, due to our effective cost control measures. The Administrative Law Judge issued a proposed decision granting Golden State Water’s request to defer to general rate case to January 31, 2017. The PUC is expected to vote on the proposed decision in the first quarter. I’ll now turn to water conservation and the drought situation in California. In February earlier this month, the State Water Resources Control Board extended the Governor of California’s executive order imposing mandatory restrictions through October 31, 2016. Golden State Water intends to implement Stage II or higher of our staged mandatory conservation and rationing plan in those areas, which have not met their cumulative targets. Once the final allocations are determined based on the amended regulations. Stage II and hire include penalties for customers that use water in excess of their allotments. In connection with conservation, the commission has authorized us to track incremental costs incurred in promoting conservation and implementing restriction measures in drought memorandum accounts for possible future recovery. Through the end of 2015, we have incurred approximately $1.1 million of drought-related costs. We’d now like to discuss our contracted services business at American States Utility Services or ASUS. During 2015, ASUS has made significant progress on the resolution of outstanding price redeterminations with the U.S. government. Specifically, ASUS resolved its price redeterminations at Fort Jackson, joint Base Andrews and the military bases we serve in Virginia and an asset transfer at two of the Virginia bases during the third quarter, resulting in contract modifications, which include retroactive operation and maintenance management fees. As a result, ASUS recorded approximately $3.5 million of retroactive revenues and pretax operating income during the third quarter of which $3 million was for periods prior to 2015. We expect the fourth price redetermination for Fort Bliss to be finalized in the first quarter of 2016. Filings for these price redeterminations requests for equitable adjustment and contract modifications awarded for new projects provide ASUS with additional revenues and margin and the opportunity to consistently generate positive earnings. We also continue to work closely with the U.S. government for contract modifications relating to potential capital upgrade work as deemed necessary for improvement of the water and wastewater infrastructure at the military bases. In addition, we continue to actively engage in new proposals and expect the U.S. government to release additional basis for bidding over the next several years. We remain very optimistic about the future of our contracted service business. Lastly I’d like turn your attention to dividends. 2015 marks the 61st consecutive year of increases in our annual dividend, placing us in an exclusive group of companies on the New York Stock Exchange who had achieved that result. In 2015, we increased the quarterly dividend by 5.2%. Given American States current low payout ratio compared to the companies we compete with for capital, our high shareholders equity ratio as a percent of total capitalization and our earnings growth prospects, there is room to grow the dividend in the future. Before I close from my prepared remarks, I’d like to thank you for your interest in American States Water, and we’ll now turn the call over to the operator for questions. Question-and-Answer Session Operator We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Richard Verdi of Ladenburg. Please go ahead. Richard Verdi Hey, Bob and Eva, good quarter and thank you for taking my call. Eva Tang Thank you, Richard. Robert Sprowls Thanks, Richard. Richard Verdi I just have one very quick question Bob. On the past few calls and specifically you know on the last call, you had provided some framework surrounding the ASUS group, and I should say at this way, last year on the 4Q call, you had stated that ASUS would look similar to the prior year and maybe down a little bit? Here we are and ASUS came out flat year-over-year, and on the last call you had indicated that maybe it could be down a little bit, this year versus last year. So given that it ended up being flat this year-over-year I mean could that be the case again in 2016 or could we see a modest drop in earnings in from ASUS unit this year? Robert Sprowls Well Richard, I’ll start with some of the earning for 2015. We achieved $0.32 per share. We had included in that $0.32 million to $0.5 million sense of retroactive O&M fees for prior years, so that would lead sort of one to believe that we may go down a little bit from 2015 to 2016. However, as you know, and I think many of the folks on the call know in September, we received $50 million in government funding for new capital work at the basis we serve, which will largely be performed in 2016. So this should allow us to increase our construction revenues in 2016 from the level we achieved in 2015. We do have the $0.05 retroactive that sort of going away, but I think we can make some of that back through the construction – additional construction revenues. So we’re projecting an EPS contribution from ASUS of $0.28 to $0.32 per share for 2016. Richard Verdi Okay. That’s very helpful. Thank you for that. I guess, I’d say thank you, guys. Good quarter. I appreciate it. Robert Sprowls Thank you, Rich. Eva Tang Thank you. Operator [Operator Instructions] Our next question comes from Jonathan Reeder of Wells Fargo. Please go ahead. Jonathan Reeder Hey, good afternoon or good morning, I guess for you guys, Bob and Eva. Thanks for the guidance. First off Bob on ASUS that’s always helpful. Did I miss in your remarks that you said you had a settlement in water general rate case, is that accurate, or do I hear wrong? Robert Sprowls That’s correct. We had settled a number of our operating expenses. The outstanding items that we have remaining in the case that we went to hearings on was the entire capital budget and management compensation. So it’s largely a capital related item. Jonathan Reeder Did you settle though the capital budget and compensation issues, or those are still kind of litigated? Robert Sprowls Yes, we litigated that during the summer and we’re – that’s now been turned over to the Administrative Law Judge to decide the outcome for those two items. Jonathan Reeder Okay. Sorry, I was confused if you had said you had gotten a comprehensive settlement now at this point. But – okay, so we’re expecting an outcome you said in Q2, is that right? Robert Sprowls We believe so, yes. Jonathan Reeder Okay. And so with the new rates affective at the water utility, do you expect like your full-year 2016, if it has to be higher, lower, about the same as the $1.19 and $1.15 given your operating efficiencies or I think allowing the sub to earn above the allowed ROE in 2015? Robert Sprowls Yes, that’s a difficult question to answer without completely knowing what the rate case is going to come out with. We, as you know put it on our forecasted operating expenses and really without knowing where the decision comes out It’s difficult to project whether it will be higher or slightly lower than 2015. Jonathan Reeder Okay. But it might be kind of similar, it sounds like more than likely. Robert Sprowls Yes, it could be similar. It’s – we’ve done just a great job in controlling expenses and the folks at this company- what I’ve learned in my tenure as CEO was, you have to do is ask these folks to do things and they go and do it. And I couldn’t be more impressed with what our organization has done over the last four or five years, so… Jonathan Reeder You make it sound so easy, Bob. Robert Sprowls You’re welcome. Jonathan Reeder I’m sure it’s not that easy. But… Robert Sprowls It’s easier for me than it is for them, I guess. Jonathan Reeder Right. Do you think there’s opportunities and realize additional efficiencies over this next GRC cycle? Robert Sprowls I believe there are, yes. I mean as you know, it gets a little tougher each time. But we’ve got some very innovative people at this company and they really have done a great job. Eva Tang The other thing that I think as Bob mentioned are 2015 for Golden State Water or 2015 operating expenses excluding the depreciation in supply cost. This is basically not changed much from last year. So we’ll continue to try to do our best to control our cost, I think that’s where the efficiency comes from. Robert Sprowls Ultimately, when we do a great job controlling costs, it does, in fact, ultimately go back to our customers in the form of lower rate increases and that’s really important to us too. So, I mean, that’s – we’re very focused on making sure our water rates are affordable. Jonathan Reeder Right. And would you expect the GRC filing, does it kind of contemplate those flat costs in 2015, or is that how you’re kind of saying this depends on where the expense levels shakeout given how you ended the year? Robert Sprowls Well, it does depend on where these expense levels shakeout in terms of whether we can do better than that. I mean, it’s a – it will be a challenge, but, again, we have a lot of capability at the company to take on those challenges. Jonathan Reeder All right. And then my last question, Eva, do you have what your authorized weighted average rate base was for 2015? And then what the GRC requests for 2016 is? Eva Tang We – for the 2016, as what we currently have stipulated, it was $725 million for 2016. That’s filed with the PUC as our position right now. But as Bob mentioned, we are contesting on – the OIA is contesting the capital expenditure. So the $725 million rate base is our position at this point. Jonathan Reeder Is that just for water, or does that include that electric portion too? Eva Tang Just water. Jonathan Reeder Okay. Robert Sprowls We filed the rate case that had virtually no increase in rate. Jonathan Reeder Right. Robert Sprowls All we want to do here is maintain the system and well hopefully that will play with the Administrative Law Judge. We’re not sure whether it will or it well ORA. We’re always apart with ORA on the CapEx budget. So it was little hard to me that they weren’t a little easier to deal with on that, but particularly given that we have basically a flat rate. Jonathan Reeder Okay. And then what was your authorized 2015 water rate base? How is that compared to the 7.25 you have requested? Eva Tang Not sure, I have that number. I think the 2015 authorized rate base is about 700 range. I can get you that number from our position, Jonathan. Jonathan Reeder Okay. All right, great. That would be appreciated. And that’s all I have today. Thanks so much for the time. Robert Sprowls Thank you, Jonathan. Operator [Operator Instructions] Seeing no further questions. This concludes our question-and-answer session. I’d now like to turn the conference back over to Bob Sprowls for any closing remarks. Robert Sprowls Thank you, Carrie. I just want to wrap up today by thanking all of you for your participation on the call today and your continued interest and investment in American States Water Company. So, thank you very much. Operator This conclude today’s American States Water Company conference call. Thank you for attending today’s presentation. You may now disconnect your lines. Have a great day. 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