American States Water Company

Ladies and gentlemen, thank you for standing by and welcome to the American States Water Company conference call discussing the company's first quarter 2021 results. The call is being recorded. If you would like to listen to the replay of this call, it will begin this afternoon at 5 p.m. Eastern time and run through Tuesday, May 11, 2021 on the company's website, www.aswater.com. The slides that the company will be referring to will also be available on the website. All participants are currently in a listen-only mode. If you should need assistance during today's conference, you may say no to an operator by pressing star and zero on your phones. After today's presentation, we will have a question and answer session. To ask a question, you may press star and one. Please note today's conference will also be limited to one hour. Presenting today from American States Water Company is Bob Sprouse, President and Chief Executive Officer, and Ava 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 the 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 and 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'll turn the conference call over to Bob Sprouls, President and Chief Executive Officer of American States Water Company.

Thank you, Jamie. Welcome, everyone, and thank you for joining us today. I'll begin with some brief comments on the quarter. Eva will then discuss some 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. In this year's first quarter, we achieved consolidated earnings of 52 cents per share versus 38 cents per share during the first quarter of 2020. That's a 37% increase or a 21% increase on an adjusted basis. You can see from this slide that each of our three operating segments contributed to the year over year earnings per share growth. The results of our regulated utilities were driven by CPUC approved rate increases, while our contracted services segment performed a higher level of construction work during the quarter compared to last year. Eva will discuss this slide in more detail. We continue to execute on our business strategies in the quarter, provide high quality water, wastewater, and electric services to over 1 million people, and make timely investment in our systems, all while keeping our unwavering commitment to reliability and safety. Our capital investments allow us to replace and upgrade critical infrastructure, as well as ensure we can meet our customers' needs for generations to come. We also remain committed to conservation, environmental stewardship, employee safety and well-being, diversity and inclusion, and sound governance practices. While these issues have always been at the core of our company, we created an environmental social responsibility and governance section, also known as ESG, on our website to more clearly make our disclosures available in these areas. The website includes our corporate social responsibility report, CCFD and SASB disclosures, and other relevant documents. We will continue to focus on our ESG commitments, which benefit our customers, suppliers, employees, broader communities, and ultimately our shareholders. In addition to producing strong first quarter results in all of our business segments, We filed the cost of capital application for the water segment yesterday and saw new water and electric rates go into effect starting in January, which generate additional gross margin. And on a longer-term scale, we continue to invest in infrastructure at our regulated utilities and contracted services business to provide quality services to our customers, perform more work on the military bases we serve, compete for new military-based contracts, and deliver consistent dividend growth to our shareholders. I'll touch on these in greater detail later on in the call. I'll now turn the call over to Eva to review the financial results for the quarter.

Thank you, Bob. Hello, everyone. Let me start with our first quarter financial results on slide eight. I'm pleased to report that the company had a great quarter. with consolidated earnings of $0.52 per share, as compared to $0.38 per share last year. Excluding the $0.05 per share loss on an investment item from the first quarter of last year, earnings for the first quarter of 2021 increased by $0.09 per share, or 20.9%, as compared to last year. For our water utility subsidiaries, Golden State Water Company, Earnings were $0.33 per share as compared to $0.29 per share, as adjusted to exclude the $0.05 per share loss on investments incurred in the first quarter of last year. The increase in earnings were due to a higher water goals margin generated from new rates authorized by the California Public Utilities Commission, partially offset by an increase in depreciation expense and property taxes. Our electric segments earning for the first quarter of 2021 were $0.07 per share as compared to $0.06 per share for the first quarter of 2020 due to an increase in electric rates and a decrease in interest expense. Earnings from our contracted services segment increased $0.04 per share for the quarter. This was due largely to an increase in construction activity as a result of timing differences of when work was performed as compared to the first quarter of last year, as well as lower expenses for legal and other outside services. The timing differences were expected to reverse over the remainder of 2021. We still expect the contracted services segment to contribute 45 cents to 49 cents per share for this year. Consolidated revenues for the first quarter increased by $8 million as compared to the same period in 2020. Water revenues increased $3.6 million during the quarter due to third-year step increases for 2021 as a result of passing earnings tests. The increase in electric revenues was largely due to CPUC approved rate increases effective January 1 this year. as well as an increase in usage as compared to the first quarter of 2020. Contracted services revenues for the quarter increased $3.8 million, largely due to an increase in construction activity, resulting from timing differences of when construction activity was performed as compared to the first quarter of last year. In addition, there were increases in management fees due to the successful resolution of various economic price adjustments. Turning to slide 10, our water and electric supply costs were $22.6 million for the quarter, an increase of $1.6 million from the same period last year. Any changes in supply costs for both the water and electric segments as compared to the adopted supply costs are tracked in balancing accounts. Looking at total operating expenses other than supply costs, consolidated expenses increased $1.7 million as compared to the first quarter of 2020. This was primarily due to an increase in construction costs at ASUS, resulting from increased construction activity. partially offset by lower unplanned maintenance costs at the water segment, and a decrease in administrative and general expense because of lower legal outside service costs. Interest expense, net of interest income, and other, decreased by $2.5 million due primarily to gains on investments held for a retirement benefit plan. compared to losses incurred during the first quarter of last year, as previously discussed. Slide 11 shows the EPS bridge comparing the first quarter of 2021 with last year's first quarter. Turning to liquidity on slide 12, net cash provided by operating activity was $24.7 million as compared to $15.7 million in 2020. This was largely due to recent improvement in cash flows from accounts receivable from utility customers, which were negatively impacted by the COVID-19 pandemic throughout 2020. The timing of cash receipts and disbursements related to other working capital items also affected the change in net cash provided by operating activities. Our regulated utility invested $35.8 million in company-funded capital projects during the quarter, and we estimate our full-year 2021 company-funded capital expenditures to be $120 to $135 million. In addition, we intended to prepay the entire $28 million of Golden State Waters 9.56% notes issued in 1991 and due in 2031 later this month. The early redemption will include a premium of 3% of par value or $840,000 if redeemed before May 15, 2022. Golden State Water recovered redemption premiums in its embedded cost of capital as filed in the cost of capital proceedings where the cost savings from redeeming high interest rate debt are passed down to customers. At this time, we do not expect American States Water to issue additional equity. With that, I'll turn the call back to Bob.