UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20172018
or
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o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-13883
CALIFORNIA WATER SERVICE GROUP
(Exact name of registrant as specified in its charter)
|
| | |
Delaware | | 77-0448994 |
(State or other jurisdiction | | (I.R.S. Employer identification No.) |
of incorporation or organization) | | |
|
| | |
1720 North First Street, San Jose, CA.CA | | 95112 |
(Address of principal executive offices) | | (Zip Code) |
408-367-8200
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated Filer x | | Accelerated filer o |
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Non-accelerated filer o | | Smaller reporting company o |
(Do not check if a smaller reporting company) | | Emerging growth company o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act) Yes o No o
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common shares outstanding as of March 31, 20172018 — 48,021,70448,074,000
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1.
FINANCIAL STATEMENTS
The condensed consolidated financial statements presented in this filing on Form 10-Q have been prepared by management and are unaudited.
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited (In thousands, except per share data)
| | | March 31, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
ASSETS | |
| | |
| |
| | |
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Utility plant: | |
| | |
| |
| | |
|
Utility plant | $ | 2,766,232 |
| | $ | 2,717,339 |
| $ | 3,025,611 |
| | $ | 2,970,179 |
|
Less accumulated depreciation and amortization | (878,227 | ) | | (858,062 | ) | (942,573 | ) | | (922,214 | ) |
Net utility plant | 1,888,005 |
| | 1,859,277 |
| 2,083,038 |
| | 2,047,965 |
|
Current assets: | |
| | |
| |
| | |
|
Cash and cash equivalents | 11,990 |
| | 25,492 |
| 34,702 |
| | 94,776 |
|
Receivables: | |
| | |
| |
| | |
|
Customers | 24,685 |
| | 30,305 |
| 28,161 |
| | 32,451 |
|
Regulatory balancing accounts | 30,661 |
| | 30,332 |
| 34,119 |
| | 36,783 |
|
Other | 17,394 |
| | 17,158 |
| 21,216 |
| | 16,464 |
|
Unbilled revenue | 24,303 |
| | 25,228 |
| 28,132 |
| | 29,756 |
|
Materials and supplies at weighted average cost | 6,405 |
| | 6,292 |
| 6,478 |
| | 6,463 |
|
Taxes, prepaid expenses, and other assets | 12,767 |
| | 7,262 |
| 12,977 |
| | 11,180 |
|
Total current assets | 128,205 |
| | 142,069 |
| 165,785 |
| | 227,873 |
|
Other assets: | |
| | |
| |
| | |
|
Regulatory assets | 367,476 |
| | 355,930 |
| 405,041 |
| | 401,147 |
|
Goodwill | 2,615 |
| | 2,615 |
| 2,615 |
| | 2,615 |
|
Other assets | 53,997 |
| | 51,854 |
| 60,028 |
| | 60,775 |
|
Total other assets | 424,088 |
| | 410,399 |
| 467,684 |
| | 464,537 |
|
TOTAL ASSETS | $ | 2,440,298 |
| | $ | 2,411,745 |
| $ | 2,716,507 |
| | $ | 2,740,375 |
|
CAPITALIZATION AND LIABILITIES | |
| | |
| |
| | |
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Capitalization: | |
| | |
| |
| | |
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Common stock, $0.01 par value; 68,000 shares authorized, 48,022 and 47,965 outstanding in 2017 and 2016, respectively | $ | 480 |
| | $ | 480 |
| |
Common stock, $0.01 par value; 68,000 shares authorized, 48,074 and 48,012 outstanding in 2018 and 2017, respectively | | $ | 481 |
| | $ | 480 |
|
Additional paid-in capital | 334,220 |
| | 334,856 |
| 335,625 |
| | 336,229 |
|
Retained earnings | 316,633 |
| | 324,135 |
| 345,205 |
| | 356,753 |
|
Total common stockholders’ equity | 651,333 |
| | 659,471 |
| 681,311 |
| | 693,462 |
|
Long-term debt, less current maturities | 521,715 |
| | 531,745 |
| 515,670 |
| | 515,793 |
|
Total capitalization | 1,173,048 |
| | 1,191,216 |
| 1,196,981 |
| | 1,209,255 |
|
Current liabilities: | |
| | |
| |
| | |
|
Current maturities of long-term debt | 36,139 |
| | 26,208 |
| 5,924 |
| | 15,920 |
|
Short-term borrowings | 130,100 |
| | 97,100 |
| 275,100 |
| | 275,100 |
|
Accounts payable | 69,276 |
| | 77,813 |
| 73,556 |
| | 93,955 |
|
Regulatory balancing accounts | 8,197 |
| | 4,759 |
| 56,206 |
| | 59,303 |
|
Accrued interest | 12,583 |
| | 5,661 |
| 12,342 |
| | 6,122 |
|
Accrued expenses and other liabilities | 37,078 |
| | 38,689 |
| 41,189 |
| | 40,559 |
|
Total current liabilities | 293,373 |
| | 250,230 |
| 464,317 |
| | 490,959 |
|
Unamortized investment tax credits | 1,798 |
| | 1,798 |
| 1,724 |
| | 1,724 |
|
Deferred income taxes | 299,464 |
| | 298,924 |
| 192,313 |
| | 192,946 |
|
Pension and postretirement benefits other than pensions | 224,851 |
| | 222,691 |
| 256,520 |
| | 252,141 |
|
Regulatory liabilities and other | 84,318 |
| | 83,648 |
| 232,587 |
| | 224,127 |
|
Advances for construction | 182,815 |
| | 182,448 |
| 184,479 |
| | 182,502 |
|
Contributions in aid of construction | 180,631 |
| | 180,790 |
| 187,586 |
| | 186,721 |
|
Commitments and contingencies (Note 10) |
|
| |
|
|
|
| |
|
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TOTAL CAPITALIZATION AND LIABILITIES | $ | 2,440,298 |
| | $ | 2,411,745 |
| $ | 2,716,507 |
| | $ | 2,740,375 |
|
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME (LOSS)
Unaudited (In thousands, except per share data)
| | For the three months ended | | March 31, 2017 | | March 31, 2016 | | March 31, 2018 | | March 31, 2017 |
Operating revenue | | $ | 122,036 |
| | $ | 121,727 |
| | $ | 132,247 |
| | $ | 122,036 |
|
Operating expenses: | | |
| | |
| | |
| | |
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Operations: | | |
| | |
| | |
| | |
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Water production costs | | 42,068 |
| | 41,069 |
| | 47,606 |
| | 42,068 |
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Administrative and general | | 25,249 |
| | 27,827 |
| | 26,319 |
| | 22,746 |
|
Other operations | | 16,124 |
| | 19,302 |
| | 17,640 |
| | 16,124 |
|
Maintenance | | 6,112 |
| | 6,063 |
| | 5,439 |
| | 6,112 |
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Depreciation and amortization | | 19,201 |
| | 16,046 |
| | 20,715 |
| | 19,201 |
|
Income tax benefit | | (884 | ) | | (925 | ) | | (229 | ) | | (884 | ) |
Property and other taxes | | 6,116 |
| | 6,075 |
| | 6,704 |
| | 6,116 |
|
Total operating expenses | | 113,986 |
| | 115,457 |
| | 124,194 |
| | 111,483 |
|
Net operating income | | 8,050 |
| | 6,270 |
| | 8,053 |
| | 10,553 |
|
Other income and expenses: | | |
| | |
| | |
| | |
|
Non-regulated revenue | | 3,462 |
| | 3,428 |
| | 4,419 |
| | 3,462 |
|
Non-regulated expenses | | (2,054 | ) | | (2,980 | ) | | (5,437 | ) | | (2,054 | ) |
Allowance for equity funds used during construction (Note 2) | | 779 |
| | — |
| |
Income tax expense on other income and expenses | | (889 | ) | | (181 | ) | |
Net other income | | 1,298 |
| | 267 |
| |
Other components of net periodic benefit cost | | | (2,546 | ) | | (2,503 | ) |
Allowance for equity funds used during construction | | | 911 |
| | 779 |
|
Income tax benefit (expense) on other income and expenses | | | 758 |
| | (889 | ) |
Net other loss | | | (1,895 | ) | | (1,205 | ) |
Interest expense: | | |
| | |
| | |
| | |
|
Interest expense | | 8,710 |
| | 8,065 |
| | 9,198 |
| | 8,710 |
|
Allowance for borrowed funds used during construction (Note 2) | | (494 | ) | | (730 | ) | |
Allowance for borrowed funds used during construction | | | (495 | ) | | (494 | ) |
Net interest expense | | 8,216 |
| | 7,335 |
| | 8,703 |
| | 8,216 |
|
Net income (loss) | | $ | 1,132 |
| | $ | (798 | ) | |
Earnings (loss) per share: | | |
| | |
| |
Net (loss) income | | | $ | (2,545 | ) | | $ | 1,132 |
|
(Loss) earnings per share: | | | |
| | |
|
Basic | | $ | 0.02 |
| | $ | (0.02 | ) | | $ | (0.05 | ) | | $ | 0.02 |
|
Diluted | | 0.02 |
| | (0.02 | ) | | (0.05 | ) | | 0.02 |
|
Weighted average shares outstanding: | | |
| | |
| | |
| | |
|
Basic | | 47,984 |
| | 47,905 |
| | 48,030 |
| | 47,984 |
|
Diluted | | 47,984 |
| | 47,905 |
| | 48,030 |
| | 47,984 |
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Dividends declared per share of common stock | | $ | 0.1800 |
| | $ | 0.1725 |
| | $ | 0.1875 |
| | $ | 0.1800 |
|
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
CALIFORNIA WATER SER VICESERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited (In thousands)
| | For the three months ended: | | March 31, 2017 | | March 31, 2016 | | March 31, 2018 | | March 31, 2017 |
Operating activities: | | |
| | |
| | |
| | |
|
Net income (loss) | | $ | 1,132 |
| | $ | (798 | ) | |
Adjustments to reconcile net income (loss) to net cash: | | |
| | |
| |
Net (loss) income | | | $ | (2,545 | ) | | $ | 1,132 |
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | | |
| | |
|
Depreciation and amortization | | 19,658 |
| | 16,454 |
| | 21,207 |
| | 19,658 |
|
Change in value of life insurance contracts | | (319 | ) | | 43 |
| | 1,137 |
| | (319 | ) |
Allowance for equity funds used during construction | | (779 | ) | | — |
| | (911 | ) | | (779 | ) |
Changes in operating assets and liabilities: | | |
| | |
| | |
| | |
|
Receivables and unbilled revenue | | (4,564 | ) | | 7,127 |
| | 5,438 |
| | (4,564 | ) |
Accounts payable | | (5,535 | ) | | (5,129 | ) | | (7,015 | ) | | (5,535 | ) |
Other current assets | | (5,359 | ) | | (1,728 | ) | | (1,727 | ) | | (5,359 | ) |
Other current liabilities | | 5,084 |
| | 10,453 |
| | 6,385 |
| | 5,084 |
|
Other changes in noncurrent assets and liabilities | | 4,979 |
| | 5,070 |
| | 6,283 |
| | 4,979 |
|
Net cash provided by operating activities | | 14,297 |
| | 31,492 |
| | 28,252 |
| | 14,297 |
|
Investing activities: | | |
| | |
| | |
| | |
|
Utility plant expenditures | | (51,853 | ) | | (56,463 | ) | | (70,650 | ) | | (51,853 | ) |
Life insurance proceeds | | 450 |
| | 495 |
| | — |
| | 450 |
|
Purchase of life insurance contracts | | (836 | ) | | (960 | ) | | — |
| | (836 | ) |
Change in restricted cash | | (260 | ) | | (465 | ) | |
Net cash used in investing activities | | (52,499 | ) | | (57,393 | ) | | (70,650 | ) | | (52,239 | ) |
Financing activities: | | |
| | |
| | |
| | |
|
Short-term borrowings | | 35,000 |
| | 54,500 |
| | 45,022 |
| | 35,000 |
|
Repayment of short-term borrowings | | (2,000 | ) | | (53,615 | ) | | (45,022 | ) | | (2,000 | ) |
Proceeds from long-term debt, net of expenses of $0 for 2017, $177 for 2016 | | — |
| | 50,039 |
| |
Repayment of long-term debt | | (286 | ) | | (254 | ) | | (10,224 | ) | | (286 | ) |
Advances and contributions in aid of construction | | 3,975 |
| | 7,608 |
| | 4,763 |
| | 3,975 |
|
Refunds of advances for construction | | (2,236 | ) | | (1,612 | ) | | (1,918 | ) | | (2,236 | ) |
Repurchase of common stock | | (1,119 | ) | | (466 | ) | | (1,239 | ) | | (1,119 | ) |
Dividends paid | | (8,634 | ) | | (8,258 | ) | | (9,003 | ) | | (8,634 | ) |
Net cash provided by financing activities | | 24,700 |
| | 47,942 |
| |
Change in cash and cash equivalents | | (13,502 | ) | | 22,041 |
| |
Cash and cash equivalents at beginning of period | | 25,492 |
| | 8,837 |
| |
Cash and cash equivalents at end of period | | $ | 11,990 |
| | $ | 30,878 |
| |
Net cash (used in) provided by financing activities | | | (17,621 | ) | | 24,700 |
|
Change in cash, cash equivalents, and restricted cash | | | (60,019 | ) | | (13,242 | ) |
Cash, cash equivalents, and restricted cash at beginning of period | | | 95,352 |
| | 25,935 |
|
Cash, cash equivalents, and restricted cash at end of period | | | $ | 35,333 |
| | $ | 12,693 |
|
Supplemental information: | | |
| | |
| | |
| | |
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Cash paid for interest (net of amounts capitalized) | | $ | 994 |
| | $ | 481 |
| | $ | 1,251 |
| | $ | 994 |
|
Supplemental disclosure of non-cash activities: | | |
| | |
| | |
| | |
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Accrued payables for investments in utility plant | | $ | 24,191 |
| | $ | 22,904 |
| | $ | 28,367 |
| | $ | 24,191 |
|
Utility plant contribution by developers | | 3,481 |
| | 2,490 |
| | 4,518 |
| | 3,481 |
|
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements
CALIFORNIA WATER SERVICE GROUP
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 20172018
Dollar amounts in thousands unless otherwise stated
Note 1. Organization and Operations and Basis of Presentation
California Water Service Group (the Company) is a holding company that provides water utility and other related services in California, Washington, New Mexico and Hawaii through its wholly-owned subsidiaries. California Water Service Company (Cal Water), Washington Water Service Company (Washington Water), New Mexico Water Service Company (New Mexico Water), and Hawaii Water Service Company, Inc. (Hawaii Water) provide regulated utility services under the rules and regulations of their respective state’s regulatory commissions (jointly referred to herein as the Commissions). CWS Utility Services and HWS Utility Services LLC provide non-regulated water utility and utility-related services.
The Company operates in one reportable segment, providing water and related utility services.
Basis of Presentation
The unaudited condensed consolidated interim financial information has been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (SEC) and therefore do not contain all of the information and footnotes required by GAAP and the SEC for annual financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2016,2017, included in its annual report on Form 10-K as filed with the SEC on February 23, 2017.March 1, 2018.
The preparation of the Company’s unaudited condensed consolidated interim financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses for the periods presented. These include, but are not limited to, estimates and assumptions used in determining the Company’s regulatory asset and liability balances based upon probability assessments of regulatory recovery, revenues earned but not yet billed, asset retirement obligations, allowance for doubtful accounts, pension and other employee benefit plan liabilities, and income tax-related assets and liabilities. Actual results could differ from these estimates.
In the opinion of management, the accompanying unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of normal recurring transactions that are necessary to provide a fair presentation of the results for the periods covered. The results for interim periods are not necessarily indicative of the results for any future period.
Due to the seasonal nature of the water business, the results for interim periods are not indicative of the results for a 12-month period. Revenue and income are generally higher in the warm, dry summer months when water usage and sales are greater. Revenue and income are generally lower in the winter months when cooler temperatures and rainfall curtail water usage and sales.
Note 2. Summary of Significant Accounting Policies
Operating revenue
RevenueThe following table disaggregates the Company’s operating revenue by source:
|
| | | | | | | |
| Three Months Ended March 31, |
| 2018 | | 2017 |
Revenue from contracts with customers | $ | 134,254 |
| | $ | 112,812 |
|
Regulatory balancing account revenue | (2,007 | ) | | 9,224 |
|
Total operating revenue | $ | 132,247 |
| | $ | 122,036 |
|
Revenue generally includes monthly cycle customer billings forfrom contracts with customers
The Company principally generates operating revenue from contracts with customers by providing regulated water and wastewater services at rates authorized by the Commissions (plus an estimate for water used between the customer's last meter reading and the end of the accounting period) and billings to certain non-regulated customers at rates authorized by contract with government agencies.
The Company’s regulated water and wastewater revenue requirements aretariff-rates authorized by the Commissions in the states in which they operate. operate and non-regulated water and wastewater services at rates authorized by contracts with government agencies. Revenue from contracts with customers reflects amounts billed for the volume of consumption at authorized per unit rates, for a service charge, and for other authorized charges.
The revenue requirements are intendedCompany satisfies its performance obligation to provide water and wastewater services over time as services are rendered. The Company applies the Company a reasonable opportunity to recover its operating costsinvoice practical expedient and earn a return on investments.
For metered customers, Cal Water recognizes revenue from ratescontracts with customers in the amount for which the Company has a right to invoice. The Company has a right to invoice for the volume of consumption, for the service charge, and for other authorized charges.
The measurement of sales to customers is generally based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each month, the Company estimates consumption since the date of the last meter reading and a corresponding unbilled revenue is recognized. The estimate is based upon the number of unbilled days that month and the average daily customer billing rate from the previous month (which fluctuates based upon customer usage).
Contract terms are designedgenerally short-term and at will by customers and, as a result, no separate financing component is recognized for their collections from customers, which generally require payment within 30 days of billing. The Company applies judgment, based principally on historical payment experience, in estimating their customers’ ability to pay.
Certain customers are not billed for volumetric consumption, but are instead billed a flat rate at the beginning of each monthly service period. The amount billed is initially deferred and subsequently recognized over the monthly service period, as the performance obligation is satisfied. The deferred revenue balance, which is included in "other accrued liabilities" on the consolidated balance sheets, is inconsequential.
In the following table, revenue from contracts with customers is disaggregated by class of customers:
|
| | | | | | | |
| Three Months Ended March 31, |
| 2018 | | 2017 |
Residential | $ | 91,319 |
| | $ | 75,865 |
|
Business | 27,057 |
| | 22,026 |
|
Industrial | 7,579 |
| | 6,954 |
|
Public authorities | 5,444 |
| | 4,146 |
|
Other | 2,855 |
| | 3,821 |
|
Total revenue from contracts with customers | $ | 134,254 |
| | $ | 112,812 |
|
Regulatory balancing account revenue
The Company’s ability to recover revenue requirements authorized by the California Public Utilities Commission (CPUC). Under in its triennial General Rate Case (GRC), is decoupled from the volume of the sales. Regulatory balancing account revenue is revenue related to rate mechanisms authorized in California by the CPUC, which allow the Company to recover the authorized revenue and are not considered contracts with customers.
The Water Revenue Adjustment Mechanism (WRAM), Cal Water records allows the Company to recognize the adopted level of volumetric revenues, which would include recovery of cost of service and a return on investments, as
established by the CPUC for metered accounts. The adopted volumetric revenue considers the seasonality of consumption of water based upon historical averages.revenues. The variance between adopted volumetric revenues and actual billed volumetric revenues for metered accounts is recorded as a component of revenue with an offsetting entry to a regulatory asset or liability balancing account (tracked individually for each Cal Water district) subject to certain criteria under the accounting guidance for regulated operations. The variance amount represents amounts that will be billed or refunded to customers in the future. In addition to volumetric revenues, the revenue requirements approved by the CPUC include service charges, flat rate charges, and other items not subject to the WRAM.revenue.
Cost-recovery rates are designed to permit full recovery of certain costs allowed to be recovered by the Commissions. Cost-recovery rates, such as the Modified Cost Balancing Account (MCBA), provide for recovery of the adopted expense levels of expenses for purchased water, purchased power, and pump taxes, as established by the CPUC. In addition, cost-recovery rates include recovery of costs related to water conservation programsprogram costs and certain other operating expenses adopted by the CPUC.expenses. Variances (which include the effects of changes in both rates and volumes for the MCBA) between adopted and actual costs are recorded as a component of revenue, as the amount of such variances will be recovered from or refunded to customers in the future. Cost-recovery expenses are generally recognized when expenses are incurred with no markup for return on investments or profit.regulatory balancing account revenue.
The balances in theEach district's WRAM and MCBA regulatory assets and liabilities accounts will fluctuate on a monthly basis depending upon the variance between adopted and actual results. The recovery or refund of the WRAM isare allowed to be netted against one another. The Company recognizes regulatory balancing accountrevenues that have been authorized for rate recovery, are objectively determinable and probable of recovery, and are expected to be collected within 24 months. To the MCBA over- or under-recovery for the corresponding district and the deferred net balances are interest bearing at the current 90 day commercial paper rate. Subsequent to calendar year-end, Cal Water files with the CPUC to refund or collect the balance in the accounts. The majority of under-collected net WRAM and MCBA receivable balances are collected over 12 and 18 months. Cal Water defers net WRAM and MCBA operating revenues and associated costs whenever the net receivable balances areextent that regulatory balancing accountrevenue is estimated to be collected more thancollectible beyond 24 months, after the respective reporting period in which it was recorded. The deferred net WRAM and MCBA revenue and associated costs were determined using forecasts of customer consumption trends in future reporting periods and the estimated timing of when the CPUC will authorize Cal Water's filings to recover unbilled balances. Deferred revenues and associated costs are recorded in the periods when the collectionrecognition is within 24 months of the respective reporting period.
Customers' meter reads occur on various business days throughout the month. As a result, there are unmetered or unbilled customer usage each month. The estimated unbilled revenue for monthly unmetered customer usage is recorded using the number of unbilled days for that month and average daily customer billing rate for the previous month. The average daily customer billing rate for the previous month fluctuates depending on customer usage. Estimated unbilled revenue is not included in the WRAM until it is billed.
Flat rate customers are billed in advance at the beginning of the service period. The revenue is prorated so that the portion of revenue applicable to the current period is included in that period’s revenue, with the balance recorded as unearned revenue on the balance sheet and recognized as revenue when earned in the subsequent accounting period. The unearned revenue liability was $0.8 million as of March 31, 2017 and December 31, 2016, respectively. This liability is included in “accrued expenses and other liabilities” on the condensed consolidated balance sheets.
Allowance for Funds Used During Construction
The allowance for funds used during construction (AFUDC) represents the capitalized cost of funds used to finance the construction of utility plant. In general, AFUDC is applied to Cal Water construction projects requiring more than one month to complete. No AFUDC is applied to projects funded by customer advances for construction, contributions in aid of construction, or applicable state-revolving fund loans. AFUDC includes the net cost of borrowed funds and a rate of return on other funds when used, and is recovered through water rates as the utility plant is depreciated. Cal Water was authorized by the CPUC to record AFUDC on construction work in progress effective January 1, 2017. Prior to January 1, 2017, the CPUC authorized Cal Water to only record capitalized interest on borrowed funds. Cal Water previously reported the amounts authorized as capitalized interest and a reduced interest expense. The amount of AFUDC related to equity funds during the three months ended March 31, 2017 was $0.8 million and there was $0 million for the three months ended March 31, 2016. The amount of AFUDC related to borrowed funds for the three months ended March 31, 2017 was $0.5 million and the equivalent amount of capitalized interest on borrowed funds was $0.7 million for the three months ended March 31, 2016.
deferred.
Non-regulated Revenue
Adoption |
| | | | | | | |
| Three Months Ended March 31, |
| 2018 | | 2017 |
Operating and maintenance revenue | $ | 3,165 |
| | $ | 1,913 |
|
Other non-regulated revenue | 743 |
| | 1,042 |
|
Non-regulated revenue from contracts with customers | $ | 3,908 |
| | $ | 2,955 |
|
Lease revenue | $ | 511 |
| | $ | 507 |
|
Total non-regulated revenue | $ | 4,419 |
| | $ | 3,462 |
|
Operating and maintenance services are provided for water and wastewater systems owned by private companies and municipalities. The Company negotiates formal agreements with the customers, under which they provide operating, maintenance and customer billing services related to the customers’ water system. The formal agreements outline the fee schedule for the services provided. The agreements typically call for a fee-per-service or a flat-rate amount per month. The Company typically satisfies its performance obligation of New Accounting Standardproviding operating and maintenance services over time as services are rendered; as a result, the Company employs the invoice practical expedient and recognizes revenue in the amount that it has the right to invoice. Contract terms are generally short-term and as a result no separate financing component is recognized for its collections from customers, which generally require payment within 30 days of billing.
Other non-regulated revenue primarily relates to services for the design and installation of water mains and other water infrastructure for customers outside the regulated service areas and insurance program administration. Other non-regulated revenue is inconsequential.
In March 2016,The Company is the Financial Accounting Standards Board (FASB) issued updated accounting guidance on simplifying the accounting for share-based payments (ASU 2016-09),lessor in operating lease agreements with telecommunications companies under which includes the accounting for share-based payment transactions, the income tax consequences, classification of awards as either equity or liabilities, and classificationcellular phone antennas are placed on the statement of cash flows. The Company adoptedCompany's property. Lease revenue is not considered revenue from contracts with customers and implemented the changes to accounting for share-based payments on January 1, 2017is recognized following current operating lease standards.
Cash, Cash Equivalents, and applied the requirements retrospectively on the statement of cash flows for all periods presented. The Company's forfeiture policy did not change and the Company continues to account for forfeitures when they occur. For the three month period ended March 31, 2017, the Company recorded $0.5 million of income tax benefits in excess compensation costs for share-based compensation which reduced the effective tax rate. The tax-related cash flows resulting from share-based payments were reported as operating activities and the associated cash paid by the company for employee tax withholding transactions were reported as financing activities on the consolidated statement of cash flows.
Restricted Cash
The following table showsprovides a reconciliation of cash, cash equivalents, and restricted cash within the effectCondensed Consolidated Balance Sheets that sum to the total of the accounting change tosame such amounts shown on the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016:Flows:
|
| | | | | | | | | | | |
| Three Months Ended March 31, 2016 |
Cash Flow Classification | As Reported on Form 10-Q | | Adjusted Balance on Form 10-Q | | Increase (Decrease) from Retrospective Adoption |
Other changes in noncurrent assets and liabilities | $ | 4,604 |
| | $ | 5,070 |
| | $ | 466 |
|
Net cash provided by operating activities | 31,026 |
| | 31,492 |
| | 466 |
|
Repurchase of common stock | — |
| | (466 | ) | | (466 | ) |
Net cash provided by financing activities | 48,408 |
| | 47,942 |
| | (466 | ) |
|
| | | | | | | |
| March 31, 2018 | | December 31, 2017 |
Cash and cash equivalents | 34,702 |
| | 94,776 |
|
Restricted cash (included in "taxes, prepaid expenses and other assets") | 631 |
| | 576 |
|
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows | $ | 35,333 |
| | $ | 95,352 |
|
Adoption of New Accounting Standards
In May of 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (codified in ASC 606), which amends the existing revenue recognition guidance. In August 2015, the FASB deferred the effective date of this amendment for public companies by one year to January 1, 2018, with early adoption permitted as of the original effective date of January 1, 2017. The Company expects to adoptcompleted an evaluation of the new revenue standard usingand implemented the modified retrospective method and does not expect the ASU to materially impact the timing or recognition of revenue related to the sale and delivery of water to their customers, which is a significant percentage of the Company's revenue. The Company is still evaluating the impact the ASU hasstandard on the related revenue disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases. This update changes the accounting treatment of operating leases for lessees and related disclosure requirements. ASU 2016-02 is effective for annual reporting periods beginning after December 15,January 1, 2018 and early adoption is permitted. The Company will adopt the standard using the modified retrospective method for its existing leasesall contracts. The reported results for the first three months of 2018 reflect the application of ASC 606 guidance, while prior period amounts were not adjusted and is currently evaluatingcontinue to be reported in accordance with the accounting standards in effect for those periods. Other than increased disclosures regarding revenues related to contracts with customers, the implementation did not have a significant impact of adoptingon the new lease standard on itsCompany’s consolidated financial statements and related disclosures.(see "Operating Revenue" section of note 2 above).
In August of 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments. This update adds and clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017 and early adoption is permitted. The Company is currently evaluatingwill continue to classify proceeds from the settlement of insurance claims on the basis of the nature of the loss and from the settlement of corporate-owned life insurance policies as cash inflows on the Condensed Consolidated Statements of Cash Flows. The Company implemented the standard on January 1, 2018 and retrospectively applied the standard in the comparative period. The standard does not have a significant impact on itsto the Company's consolidated financial statementsstatements.
In November of 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) - Restricted Cash. The update requires the Company to combine restricted cash with cash and related disclosures.cash equivalents when reconciling the beginning and end
of period balances in the Condensed Consolidated Statements of Cash Flows. The Company implemented the standard on January 1, 2018 and retrospectively applied the standard in the comparative period.
The following table shows the effect of the accounting change to the Condensed Consolidated Statements of Cash Flows:
|
| | | | | | | | | | | |
| Three Months Ended March 31, 2017 |
Condensed Consolidated Statements of Cash Flows line item | As Reported on Form 10-Q | | Adjusted Balance on Form 10-Q | | Increase (Decrease) from Retrospective Adoption |
Change in restricted cash | $ | (260 | ) | | $ | — |
| | $ | 260 |
|
Net cash used in investing activities | $ | (52,499 | ) | | $ | (52,239 | ) | | $ | 260 |
|
Change in cash, cash equivalents, and restricted cash | $ | (13,502 | ) | | $ | (13,242 | ) | | $ | 260 |
|
Cash, cash equivalents, and restricted cash at beginning of period | $ | 25,492 |
| | $ | 25,935 |
| | $ | 443 |
|
Cash, cash equivalents, and restricted cash at end of period | $ | 11,990 |
| | $ | 12,693 |
| | $ | 703 |
|
In March of 2017, the FASB issued Accounting Standards Update No.ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost(“ASU 2017-07”). The update requires employers to present the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost, including interest cost, expected return on plan assets, amortization of prior service cost/credit and actuarial gain/loss, and settlement and curtailment effects, are to be presented as non-operating items. Employers will have to discloseIn addition, the line(s) used to present the other components of net periodic benefit cost, if the components are not presented separately in the income statement. The standard only allows the service cost component to be eligible for capitalization.
The standard became effective as of January 1, 2018. The presentation amendments were applied retrospectively and the capitalization amendments were applied prospectively on and after the effective date. The company applied the practical expedient that permits the Company to use the amounts disclosed in its pension and other postretirement benefit plan footnote from the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. The Commissions have authorized the Company to recover the other components of net periodic benefit cost through the Company’s capital program and thus on and after the effective date, the other components of net periodic benefit cost that have previously been recorded as part of utility plant have been recognized as a regulatory asset (see note 9). As a result, the changes required by the standard did not have a material impact on the results of operations.
The following table shows the effect of the accounting change to the Condensed Consolidated Statements of (Loss) Income for the three months ended March 31, 2017:
|
| | | | | | | | | | | |
| Three Months Ended March 31, 2017 |
Condensed Consolidated Statement of (Loss) Income line item | As Reported on Form 10-Q | | Adjusted Balance on Form 10-Q | | Increase (Decrease) from Retrospective Adoption |
Administrative and general | $ | 25,249 |
| | $ | 22,746 |
| | $ | (2,503 | ) |
Total operating expenses | $ | 113,986 |
| | $ | 111,483 |
| | $ | (2,503 | ) |
Net operating income | $ | 8,050 |
| | $ | 10,553 |
| | $ | 2,503 |
|
Other components of net periodic benefit cost | $ | — |
| | $ | (2,503 | ) | | $ | 2,503 |
|
Net other income | $ | 1,298 |
| | $ | (1,205 | ) | | $ | (2,503 | ) |
New Accounting Standards Issued But Not Yet Adopted
In February of 2016, the FASB issued ASU 2017-072016-02, Leases. This update changes the accounting treatment of leases and related disclosure requirements. In November of 2017, the FASB tentatively decided to amend the new leasing guidance such that entities may elect not to restate their comparative periods in the period of adoption. The guidance requires lessees to recognize an asset and liability on the balance sheet for all of their lease obligations. Operating leases were previously not recognized on the balance sheet. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2017,2018 and early adoption is permitted. The Company is currently evaluatingwill adopt the standard using the modified retrospective method for its existing leases and expects this standard to increase lease assets and lease liabilities on the Condensed Consolidated Balance Sheets. The Company does not expect that the guidance will have a material impact on its consolidated financial statementsthe Condensed Consolidated Statements of (Loss) Income, Condensed Consolidated Statements of Cash Flows, and relatedlease disclosures. The adoption of this guidance will change the
Company's financial statement presentation of net benefit costs. However, based on current regulatory authorization, the changes required by the standard are not expected to materially impact the results of operations.
Note 3. Stock-based Compensation
Equity Incentive Plan
During the three months ended March 31, 20172018 and 2016,2017, the Company granted annual Restricted Stock Awards (RSAs) of 48,71746,135 and 72,317,48,717, respectively, to officers and directors of the Company. During those same periods, 9,464 RSAs and 10,902 and 7,731 RSAs, respectively, were canceled, respectively. Employeecanceled. RSAs granted in 2017 and 2016to officers vest over 36 months. Directormonths with the first year cliff vesting. RSAs granted to directors generally vest at the end of 12 months. During the first three months of 20172018 and 2016,2017, the RSAs granted were valued at $36.75$35.40 and $25.17$36.75 per share, respectively, based upon the fair market value of the Company’s common stock on the date of grant.
During the three months ended March 31, 20172018 and 2016,2017, the Company granted 31,38928,594 and 43,65931,389 performance-based Restricted Stock Unit Awards (RSUs), respectively, to officers. During those same periods, the Company issued 38,709 and 28,42448,753 RSUs and 38,709 RSUs, respectively, to officers, and canceled 19,73524,009 RSUs and 6,60219,735 RSUs, respectively. Each RSU award reflects a target number of shares that may be issued to the award recipient. The 20172018 and 20162017 awards may be earned upon the completion of the three-year performance period and are recognized as expense ratably over the three-year performance period using a fair market value of $36.75$35.40 per share and $25.17$36.75 per share, respectively, and an estimate of RSUs earned during the performance period. The Company has recorded compensation costs for the RSAs and RSUs in administrative and general operating expenses in the amount of $0.7 million for the three months ended March 31, 20172018 and March 31, 2016.
2017.
Note 4. Equity
The Company’s changes in total common stockholders’ equity for the three months ended March 31, 20172018 were as follows:
|
| | | |
| Total Common Stockholders’ Equity |
Balance at December 31, 2017 | $ | 693,462 |
|
Common stock issued | 1 |
|
Share-based compensation expense | 635 |
|
Repurchase of common stock | (1,239 | ) |
Common stock dividends declared | (9,003 | ) |
Net loss | (2,545 | ) |
Balance at March 31, 2018 | $ | 681,311 |
|
|
| | | |
| Total Common Stockholders’ Equity |
Balance at December 31, 2016 | $ | 659,471 |
|
Common stock issued | — |
|
Share-based compensation expense | 483 |
|
Repurchase of common stock | (1,119 | ) |
Common stock dividends declared | (8,634 | ) |
Net income | 1,132 |
|
Balance at March 31, 2017 | $ | 651,333 |
|
The repurchase of common stock represents vesting shares of common stock which employees elected to surrender to the Company in order to pay withholding taxes owed upon vesting of stock grants.
Note 5. (Loss) Earnings Per Share
The computations of basic and diluted (loss) earnings per share are noted in the table below. Basic (loss) earnings per share isare computed by dividing the net (loss) income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts were exercised or converted into common stock. RSAs are included in the weighted average common shares outstanding because the shares have all the same voting and dividend rights as issued and unrestricted common stock. RSUs are not included in diluted shares for financial reporting until authorized by the Compensation & Organization Committee of the Board of Directors.
There were no shares of Stock Appreciation Rights (SARs) outstanding as of March 31, 2017 and as of March 31, 2016.
|
| | | | | | | |
| Three Months Ended March 31 |
| 2018 | | 2017 |
| (In thousands, except per share data) |
Net (loss) income available to common stockholders | $ | (2,545 | ) | | $ | 1,132 |
|
Weighted average common shares outstanding, basic | 48,030 |
| | 47,984 |
|
Weighted average common shares outstanding, dilutive | 48,030 |
| | 47,984 |
|
(Loss) Earnings per share - basic | $ | (0.05 | ) | | $ | 0.02 |
|
(Loss) Earnings per share - diluted | $ | (0.05 | ) | | $ | 0.02 |
|
|
| | | | | | | |
| Three Months Ended March 31 |
| 2017 | | 2016 |
| (In thousands, except per share data) |
Net income (loss) available to common stockholders | $ | 1,132 |
| | $ | (798 | ) |
Weighted average common shares outstanding, basic | 47,984 |
| | 47,905 |
|
Dilutive SARs (treasury method) | — |
| | — |
|
Weighted average common shares outstanding, dilutive | 47,984 |
| | 47,905 |
|
Earnings (loss) per share - basic | $ | 0.02 |
| | $ | (0.02 | ) |
Earnings (loss) per share - diluted | $ | 0.02 |
| | $ | (0.02 | ) |
Note 6. Pension Plan and Other Postretirement Benefits
The Company provides a qualified, defined-benefit, non-contributory pension plan for substantially all employees. The Company makes annual contributions to fund the amounts accrued for in the qualified pension plan. The Company also maintains an unfunded, non-qualified, supplemental executive retirement plan. The costs of the plans are charged to expense or are capitalized in utility plant as appropriate.
The Company offers medical, dental, vision, and life insurance benefits for retirees and their spouses and dependents. Participants are required to pay a premium, which offsets a portion of the cost.
Cash contributions by the Company related to pension plans were $7.5$7.3 million and $7.3$7.5 million for the three months ended March 31, 20172018 and March 31, 2016,2017, respectively. There were no cash contributions madeby the Company related to the other postretirement benefit plans duringwere for the first three months of 2017ended March 31, 2018 and 2016.2017. The 2017total 2018 estimated cash contribution to the pension plans is $29.5$33.4 million and to the other postretirement benefit plans is $9.3$10.1 million.
The following table lists components of net periodic benefit costs for the pension plans and other postretirement benefits. The data listed under “pension plan” includes the qualified pension plan and the non-qualified supplemental executive retirement plan. The data listed under “other benefits” is for all other postretirement benefits.
| | | Three Months Ended March 31 | Three Months Ended March 31 |
| Pension Plan | | Other Benefits | Pension Plan | | Other Benefits |
| 2017 | | 2016 | | 2017 | | 2016 | 2018 | | 2017 | | 2018 | | 2017 |
Service cost | $ | 5,865 |
| | $ | 5,067 |
| | $ | 2,019 |
| | $ | 2,304 |
| $ | 7,402 |
| | $ | 5,865 |
| | $ | 2,550 |
| | $ | 2,019 |
|
Interest cost | 5,791 |
| | 5,453 |
| | 1,491 |
| | 1,800 |
| 5,995 |
| | 5,791 |
| | 1,484 |
| | 1,491 |
|
Expected return on plan assets | (6,029 | ) | | (5,454 | ) | | (1,218 | ) | | (1,046 | ) | (6,862 | ) | | (6,029 | ) | | (1,416 | ) | | (1,218 | ) |
Amortization of prior service cost | 1,445 |
| | 1,555 |
| | 11 |
| | 11 |
| 1,263 |
| | 1,445 |
| | 11 |
| | 11 |
|
Recognized net actuarial loss | 1,752 |
| | 1,293 |
| | 649 |
| | 1,261 |
| 2,797 |
| | 1,752 |
| | 773 |
| | 649 |
|
Net periodic benefit cost | $ | 8,824 |
| | $ | 7,914 |
| | $ | 2,952 |
| | $ | 4,330 |
| $ | 10,595 |
| | $ | 8,824 |
| | $ | 3,402 |
| | $ | 2,952 |
|
Service cost portion of the pension plan and other postretirement benefits is recognized in administrative and general within the Condensed Consolidated Statements of (Loss) Income. Other components of net periodic benefit costs include interest costs, expected return on plan assets, amortization of prior service costs, and recognized net actuarial loss and are reported together as other benefits was due to reductions in health care claim payments in 2016.
components of net periodic benefit costs within the Condensed Consolidated Statements of (Loss) Income (see note 2).
Note 7. Short-term and Long-term Borrowings
In March 2016, Cal Water issued $50.0 million of First Mortgage Bonds, consisting of $40.0 million of 4.41% series SSS maturing April 16, 2046 and $10.0 million of 4.61% series TTT maturing April 14, 2056. Cash proceeds of approximately $49.7 million, net of $0.3 million debt issuance costs, were received. Cal Water used a portion of the net proceeds from the offering to repay outstanding borrowings on the Company and Cal Water lines of credit of $48.6 million.
Both short-term unsecured credit agreements contain affirmative and negative covenants and events of default customary for credit facilities of this type including, among other things, limitations and prohibitions relating to additional indebtedness, liens, mergers, and asset sales. Also, these unsecured credit agreements contain financial covenants governing the Company and its subsidiaries’ consolidated total capitalization ratio and interest coverage ratio.
The outstanding borrowings on the Company lines of credit were $55.1 million as of March 31, 20172018 and $57.1 million as of December 31, 2016.2017. There were $75.0$220.0 million and $40.0 million of borrowings on the Cal Water lines of credit as of
March 31, 20172018 and December 31, 2016, respectively.2017. The average borrowing rate for borrowings on the Company and Cal Water lines of credit during the three months ended March 31, 20172018 was 1.6%2.45% compared to 1.27%1.60% for the same period last year.
Note 8. Income Taxes
The Company accounts for income taxes under the provisions of ASC 740, Accounting for Income Taxes. The Company adjusts its effective tax rate each quarter to be consistent with the estimated annual effective tax rate. The Company also records the tax effect of unusual or infrequently occurring discrete items.
The provision for income taxes consists of the following:is shown below:
|
| | | | | | | |
| Three Months Ended March 31 |
| 2017 | | 2016 |
Income tax provision (benefit) | $ | 5 |
| | $ | (744 | ) |
|
| | | | | | | |
| Three Months Ended March 31 |
| 2018 | | 2017 |
Income tax (benefit) expense | $ | (987 | ) | | $ | 5 |
|
The increase in theoperating income tax provision for 2017 from 2016 was due primarilybenefit decreased $0.7 million to an increase in the Company’s earnings$0.2 million for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017 which was partially offset bymostly due to a $0.5decrease in the corporate federal income tax rate from 35 percent to 21 percent, effective January 1, 2018. The non-operating income tax expense decreased $1.6 million to $0.8 million for the three months ended March 31, 2018, as compared to the three months ended March 31, 2017, mostly due to a $1.5 million unrealized loss on certain benefit plan investments and a decrease in the corporate federal income tax benefit associated with the settlement of equity awards.rate from 35 percent to 21 percent, effective January 1, 2018. The Company’s fiscal year 2017Company's 2018 effective tax rate, before discrete items, is estimated to be 37%23%.
During the month of AprilFor year ended December 31, 2017, the Franchise Tax BoardCompany recorded a provisional re-measurement of California completed an auditits deferred tax balances (related mostly to timing differences for plant-related items) which was offset by a change from a net deferred income tax regulatory asset to a net regulatory liability. The Company is continuing to work with state regulators to finalize the ratepayer net refund of $108.0 million to ensure compliance with federal normalization rules.
The final transition impacts of the Company's StateTax Cuts and Jobs Act (TCJA) may differ from the recorded amounts, possibly materially, due to, among other things, regulatory decisions that could differ from the Company’s determination of California EZ credit filinghow the impacts of the TCJA are allocated between customers and shareholders. In addition, while the Company was able to make reasonable estimates of the impact of the reduction in federal tax rate and the elimination of bonus depreciation due to the enactment of the TCJA; the Company has not completed analysis for years 2008-2012.areas of the TCJA around Internal Revenue Code Section 162(m), full expensing of fixed assets, and other asset related items of the TCJA. Changes in interpretations, guidance on legislative intent, and any changes in accounting standards for income taxes in response to the TCJA could impact the recorded amounts. The completed auditCompany will not have a materialfinalize and record any adjustments related to the TCJA within the one year measurement period provided under Staff Accounting Bulletin No. 118. The balances relating to TCJA impact on the Company's 2017 consolidated financial statements.
Ascontinue to be provisional as of March 31, 2017 and December 31, 2016, the2018.
The Company had unrecognized tax benefits of approximately $11.3 million and $10.5 million.million as of March 31, 2018 and March 31, 2017, respectively. Included in the balance of unrecognized tax benefits as of March 31, 2018 and March 31, 2017 are approximately $2.1 million and December 31, 2016 is approximately $2.3 million, respectively, of tax benefits that, if recognized, would result in an adjustment to the Company’s effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly within the next 12 months.
Note 9. Regulatory Assets and Liabilities
Regulatory assets and liabilities were comprised of the following as of March 31, 20172018 and December 31, 2016:2017:
| | | March 31, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
Regulatory Assets | |
| | |
| |
| | |
|
Pension and retiree group health | $ | 188,715 |
| | $ | 188,880 |
| $ | 214,084 |
| | $ | 214,249 |
|
Property-related temporary differences (tax benefits flowed through to customers) | 92,676 |
| | 92,099 |
| 87,700 |
| | 87,323 |
|
Other accrued benefits | 26,456 |
| | 27,503 |
| 29,073 |
| | 28,251 |
|
Net WRAM and MCBA long-term accounts receivable | 27,300 |
| | 16,148 |
| 35,278 |
| | 34,879 |
|
Asset retirement obligations, net | 16,148 |
| | 15,812 |
| 17,473 |
| | 17,126 |
|
Interim rates long-term accounts receivable | 4,597 |
| | 4,605 |
| 4,568 |
| | 4,568 |
|
Tank coating | 8,922 |
| | 8,452 |
| 11,052 |
| | 10,998 |
|
Health care balancing account | 96 |
| | 1,000 |
| 522 |
| | 496 |
|
Pension cost balancing account | 510 |
| | — |
| |
Pension balancing account | | 3,742 |
| | 2,322 |
|
Other components of net periodic benefit cost | | 811 |
| | — |
|
Other regulatory assets | 2,056 |
| | 1,431 |
| 738 |
| | 935 |
|
Total Regulatory Assets | $ | 367,476 |
| | $ | 355,930 |
| $ | 405,041 |
| | $ | 401,147 |
|
| | | | | | |
Regulatory Liabilities | |
| | |
| |
| | |
|
Future tax benefits due to customers | $ | 33,271 |
| | $ | 33,231 |
| $ | 168,366 |
| | $ | 168,343 |
|
Health care balancing account | | 9,282 |
| | 7,749 |
|
Conservation program | 1,034 |
| | 584 |
| 3,797 |
| | 2,273 |
|
Pension balancing account | 82 |
| | 695 |
| 154 |
| | 364 |
|
Net WRAM and MCBA long-term payable | 566 |
| | 611 |
| 2,035 |
| | 513 |
|
Tax accounting memorandum account | | 1,982 |
| | — |
|
Cost of capital memorandum account | | 1,151 |
| | — |
|
Other regulatory liabilities | 2,992 |
| | 3,614 |
| 299 |
| | 464 |
|
Total Regulatory Liabilities | $ | 37,945 |
| | $ | 38,735 |
| $ | 187,066 |
| | $ | 179,706 |
|
Short-term regulatory assets and liabilities are excluded from the above table.
The short-term regulatory assets were $30.7$34.1 million as of March 31, 20172018 and $30.3$36.8 million as of December 31, 2016. The2017. As of March 31, 2018 and December 31, 2017, the short-term regulatory assets were primarily consist of net WRAM and MCBA accounts receivable, 2012 General Rate Case (GRC) health cost balancing account receivable, 2014-2015 drought recovery, interim rate memorandum account receivable, and East LA memorandum accounts receivable as of March 31, 2017 and December 31, 2016. receivables.
The short-term portions of regulatory liabilities were $8.2$56.2 million as of March 31, 20172018 and $4.8$59.3 million as of December 31, 2016.2017. The short-term regulatory liabilities as of March 31, 2018, primarily consist of 1,2,3 trichloropropane (TCP) settlement proceeds. As of MarchDecember 31, 2017, the short-term regulatory liabilities were primarily consist of TCP settlement proceeds and net WRAM and MCBA liability balances, refund balance from an interim rates true up authorized prior to 2009 GRC, net refund balances to customers for the pensionbalances.
The tax accounting and conservation programs from the 2012 GRC. Ascost of December 31, 2016, the short-termcapital memorandum account regulatory liabilities were primarilyare related to the estimated ratepayer refunds due to changes in the federal income tax rate and to the cost of capital decision in California.
The other components of net WRAMperiodic benefit cost regulatory asset are authorized by the Commissions and MCBA liability balances and net refund balances to customersare probable for rate recovery through the pension and conservation programs from the 2012 GRC
capital program (see Note 2).
Note 10. Commitments and Contingencies
Commitments
The Company has significant commitments to lease certain office spaces and water systems and to purchase water from water wholesalers. These commitments are described in Form 10-K for the year ended December 31, 2016.2017. As of March 31, 2017,2018, there were no significant changes from December 31, 2016.
2017.
Contingencies
Groundwater Contamination
The Company has undertaken litigation against third parties to recover past and anticipated costs related to groundwater contamination in our service areas. The cost of litigation is expensed as incurred and any settlement is first offset against such costs. The CPUC’s general policy requires all proceeds from groundwater contamination litigation to be used first to pay transactional expenses, then to make ratepayers whole for water treatment costs to comply with the CPUC’s water quality standards. The CPUC allows for a risk-based consideration of contamination proceeds which exceed the costs of the remediation described above and may result in some sharing of proceeds with the shareholder, determined on a case by case basis. The CPUC has authorized various memorandum accounts that allow the Company to track significant litigation costs to request recovery of these costs in future filings and uses of proceeds to comply with CPUC’s general policy.
Other Legal Matters
From time to time, the Company is involved in various disputes and litigation matters that arise in the ordinary course of business. The status of each significant matter is reviewed and assessed for potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount of the range of loss can be estimated, a liability is accrued for the estimated loss in accordance with the accounting standards for contingencies. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. While the outcome of these disputes and litigation matters cannot be predicted with any certainty, management does not believe when taking into account existing reserves the ultimate resolution of these matters will materially affect the Company’s financial position, results of operations, or cash flows. As of March 31, 20172018 and December 31, 2016,2017, the Company recognized a liability of $6.4$6.9 million and $6.0$6.1 million, respectively, for known legal matters. The cost of litigation is expensed as incurred and any settlement is first offset against such costs. Any settlement in excess of the cost to litigate is accounted for on a case by case basis, dependent on the nature of the settlement.
Note 11. Fair Value of Financial Assets and Liabilities
The accounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires certain disclosures about assets and liabilities measured at fair value. A hierarchical framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value is established by this guidance. The three levels in the hierarchy are as follows:
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.
Level 2 - Inputs to the valuation methodology include:
Quoted market prices for similar assets or liabilities in active markets;
Quoted prices for identical or similar assets or liabilities in inactive markets;
Inputs other than quoted prices that are observable for the asset or liability; and
Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
Specific valuation methods include the following:
Accounts receivable and accounts payable carrying amounts approximated the fair value because of the short-term maturity of the instruments.
Long-term debt fair values were estimated using the published quoted market price, if available, or the discounted cash flow analysis, based on the current rates available using a risk-free rate (a U.S. Treasury securities yield curve) plus a risk premium of 1.70%.
Advances for construction fair values were estimated using broker quotes from companies that frequently purchase these investments.
| | | March 31, 2017 | March 31, 2018 |
| | | Fair Value | | | Fair Value |
| Cost | | Level 1 | | Level 2 | | Level 3 | | Total | Cost | | Level 1 | | Level 2 | | Level 3 | | Total |
Long-term debt, including current maturities | $ | 557,854 |
| |
|
| | $ | 633,901 |
| |
|
| | $ | 633,901 |
| $ | 521,594 |
| | — |
| | $ | 584,764 |
| | — |
| | $ | 584,764 |
|
Advances for construction | 182,815 |
| |
|
| | 76,346 |
| |
|
| | 76,346 |
| 184,479 |
| | — |
| | 77,621 |
| | — |
| | 77,621 |
|
Total | $ | 740,669 |
| | $ | — |
| | $ | 710,247 |
| | $ | — |
| | $ | 710,247 |
| $ | 706,073 |
| | $ | — |
| | $ | 662,385 |
| | $ | — |
| | $ | 662,385 |
|
| | | December 31, 2016 | December 31, 2017 |
| | | Fair Value | | | Fair Value |
| Cost | | Level 1 | | Level 2 | | Level 3 | | Total | Cost | | Level 1 | | Level 2 | | Level 3 | | Total |
Long-term debt, including current maturities | $ | 557,953 |
| |
|
| | $ | 630,510 |
| |
|
| | $ | 630,510 |
| $ | 531,713 |
| | $ | — |
| | $ | 607,492 |
| | $ | — |
| | $ | 607,492 |
|
Advances for construction | 182,448 |
| |
|
| | 74,460 |
| |
|
| | 74,460 |
| 182,502 |
| | — |
| | 75,083 |
| | — |
| | 75,083 |
|
Total | $ | 740,401 |
| | — |
| | $ | 704,970 |
| | $ | — |
| | $ | 704,970 |
| $ | 714,215 |
| | — |
| | $ | 682,575 |
| | $ | — |
| | $ | 682,575 |
|
Note 12. Condensed Consolidating Financial Statements
On April 17, 2009, Cal Water issued $100.0 million aggregate principal amount of 5.875% First Mortgage Bonds due 2019, and on November 17, 2010, Cal Water issued $100.0 million aggregate principal amount of 5.500% First Mortgage Bonds due 2040, all of which are fully and unconditionally guaranteed by the Company. As a result of these guarantee arrangements, the Company is required to present the following condensed consolidating financial information. The investments in affiliates are accounted for and presented using the “equity method” of accounting.
The following tables present the condensed consolidating balance sheetsCondensed Consolidating Balance Sheets as of March 31, 20172018 and December 31, 2016,2017, the condensed consolidating statementsCondensed Consolidating Statements of income (loss)(Loss) Income for the three months ended March 31, 2018 and 2017, and 2016, and the condensed consolidating statementsCondensed Consolidating Statements of cash flowsCash Flows for the three months ended March 31, 20172018 and 20162017 of (i) California Water Service Group, the guarantor of the First Mortgage Bonds and the parent company; (ii) California Water Service Company, the issuer of the First Mortgage Bonds and a 100% owned consolidated subsidiary of California Water Service Group; and (iii) the other 100% owned non-guarantor consolidated subsidiaries of California Water Service Group. No other subsidiary of the Company guarantees the securities. The condensed consolidating statementCondensed Consolidating Statement of cash flowsCash Flows for the three months ended March 31, 20162018 and 2017 reflect the retrospective adoption of ASU 2016-18 (refer to Note 2 for more details). The Condensed Consolidating Statement of (Loss) Income for the three months ended March 31, 2017 reflects the retrospective adoption of ASU 2016-092017-07 (refer to Note 2 Summary of Significant Accounting Policies for more details).
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING BALANCE SHEET
As of March 31, 20172018
(In thousands)
| | | Parent Company | | Cal Water | | All Other Subsidiaries | | Consolidating Adjustments | | Consolidated | Parent Company | | Cal Water | | All Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
ASSETS | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
Utility plant: | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
Utility plant | $ | 1,318 |
| | $ | 2,567,142 |
| | $ | 204,969 |
| | $ | (7,197 | ) | | $ | 2,766,232 |
| $ | 1,321 |
| | $ | 2,824,077 |
| | $ | 207,409 |
| | $ | (7,196 | ) | | $ | 3,025,611 |
|
Less accumulated depreciation and amortization | (849 | ) | | (824,791 | ) | | (54,529 | ) | | 1,942 |
| | (878,227 | ) | (943 | ) | | (887,919 | ) | | (55,743 | ) | | 2,032 |
| | (942,573 | ) |
Net utility plant | 469 |
| | 1,742,351 |
| | 150,440 |
| | (5,255 | ) | | 1,888,005 |
| 378 |
| | 1,936,158 |
| | 151,666 |
| | (5,164 | ) | | 2,083,038 |
|
Current assets: | | | | | |
| | | | | | | | | |
| | | | |
Cash and cash equivalents | 3,985 |
| | 2,618 |
| | 5,387 |
| | — |
| | 11,990 |
| 2,242 |
| | 24,471 |
| | 7,989 |
| | — |
| | 34,702 |
|
Receivables and unbilled revenue | — |
| | 93,155 |
| | 3,888 |
| | — |
| | 97,043 |
| — |
| | 107,838 |
| | 3,790 |
| | — |
| | 111,628 |
|
Receivables from affiliates | 19,317 |
| | 2,653 |
| | 186 |
| | (22,156 | ) | | — |
| 22,494 |
| | 858 |
| | 157 |
| | (23,509 | ) | | — |
|
Other current assets | 395 |
| | 17,743 |
| | 1,034 |
| | — |
| | 19,172 |
| 400 |
| | 17,894 |
| | 1,161 |
| | — |
| | 19,455 |
|
Total current assets | 23,697 |
| | 116,169 |
| | 10,495 |
| | (22,156 | ) | | 128,205 |
| 25,136 |
| | 151,061 |
| | 13,097 |
| | (23,509 | ) | | 165,785 |
|
Other assets: | | | | | |
| | | | | | | | | |
| | | | |
Regulatory assets | — |
| | 363,672 |
| | 3,804 |
| | — |
| | 367,476 |
| — |
| | 401,169 |
| | 3,872 |
| | — |
| | 405,041 |
|
Investments in affiliates | 658,889 |
| | — |
| | — |
| | (658,889 | ) | | — |
| 686,964 |
| | — |
| | — |
| | (686,964 | ) | | — |
|
Long-term affiliate notes receivable | 25,393 |
| | — |
| | — |
| | (25,393 | ) | | — |
| 26,024 |
| | — |
| | — |
| | (26,024 | ) | | — |
|
Other assets | 274 |
| | 52,636 |
| | 3,744 |
| | (42 | ) | | 56,612 |
| 90 |
| | 58,937 |
| | 3,820 |
| | (204 | ) | | 62,643 |
|
Total other assets | 684,556 |
| | 416,308 |
| | 7,548 |
| | (684,324 | ) | | 424,088 |
| 713,078 |
| | 460,106 |
| | 7,692 |
| | (713,192 | ) | | 467,684 |
|
TOTAL ASSETS | $ | 708,722 |
| | $ | 2,274,828 |
| | $ | 168,483 |
| | $ | (711,735 | ) | | $ | 2,440,298 |
| $ | 738,592 |
| | $ | 2,547,325 |
| | $ | 172,455 |
| | $ | (741,865 | ) | | $ | 2,716,507 |
|
CAPITALIZATION AND LIABILITIES | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
Capitalization: | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
Common stockholders’ equity | $ | 651,333 |
| | $ | 587,853 |
| | $ | 76,333 |
| | $ | (664,186 | ) | | $ | 651,333 |
| $ | 681,311 |
| | $ | 614,914 |
| | $ | 77,291 |
| | $ | (692,205 | ) | | $ | 681,311 |
|
Affiliate long-term debt | — |
| | — |
| | 25,393 |
| | (25,393 | ) | | — |
| — |
| | — |
| | 26,024 |
| | (26,024 | ) | | — |
|
Long-term debt, less current maturities | — |
| | 520,815 |
| | 900 |
| | — |
| | 521,715 |
| — |
| | 514,894 |
| | 776 |
| | — |
| | 515,670 |
|
Total capitalization | 651,333 |
| | 1,108,668 |
| | 102,626 |
| | (689,579 | ) | | 1,173,048 |
| 681,311 |
| | 1,129,808 |
| | 104,091 |
| | (718,229 | ) | | 1,196,981 |
|
Current liabilities: | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
Current maturities of long-term debt | — |
| | 35,636 |
| | 503 |
| | — |
| | 36,139 |
| — |
| | 5,604 |
| | 320 |
| | — |
| | 5,924 |
|
Short-term borrowings | 55,100 |
| | 75,000 |
| | — |
| | — |
| | 130,100 |
| 55,100 |
| | 220,000 |
| | — |
| | — |
| | 275,100 |
|
Payables to affiliates | 715 |
| | 64 |
| | 21,377 |
| | (22,156 | ) | | — |
| 245 |
| | 157 |
| | 23,107 |
| | (23,509 | ) | | — |
|
Accounts payable | — |
| | 66,254 |
| | 3,022 |
| | — |
| | 69,276 |
| — |
| | 69,950 |
| | 3,606 |
| | — |
| | 73,556 |
|
Accrued expenses and other liabilities | 141 |
| | 55,368 |
| | 2,349 |
| | — |
| | 57,858 |
| 215 |
| | 106,958 |
| | 2,564 |
| | — |
| | 109,737 |
|
Total current liabilities | 55,956 |
| | 232,322 |
| | 27,251 |
| | (22,156 | ) | | 293,373 |
| 55,560 |
| | 402,669 |
| | 29,597 |
| | (23,509 | ) | | 464,317 |
|
Unamortized investment tax credits | — |
| | 1,798 |
| | — |
| | — |
| | 1,798 |
| — |
| | 1,724 |
| | — |
| | — |
| | 1,724 |
|
Deferred income taxes | 1,433 |
| | 297,254 |
| | 777 |
| | — |
| | 299,464 |
| 1,721 |
| | 188,278 |
| | 2,441 |
| | (127 | ) | | 192,313 |
|
Pension and postretirement benefits other than pensions | — |
| | 224,851 |
| | — |
| | — |
| | 224,851 |
| — |
| | 256,520 |
| | — |
| | — |
| | 256,520 |
|
Regulatory liabilities and other | — |
| | 81,129 |
| | 3,189 |
| | — |
| | 84,318 |
| — |
| | 229,072 |
| | 3,515 |
| | — |
| | 232,587 |
|
Advances for construction | — |
| | 182,268 |
| | 547 |
| | — |
| | 182,815 |
| — |
| | 183,980 |
| | 499 |
| | — |
| | 184,479 |
|
Contributions in aid of construction | — |
| | 146,538 |
| | 34,093 |
| | — |
| | 180,631 |
| — |
| | 155,274 |
| | 32,312 |
| | — |
| | 187,586 |
|
TOTAL CAPITALIZATION AND LIABILITIES | $ | 708,722 |
| | $ | 2,274,828 |
| | $ | 168,483 |
| | $ | (711,735 | ) | | $ | 2,440,298 |
| $ | 738,592 |
| | $ | 2,547,325 |
| | $ | 172,455 |
| | $ | (741,865 | ) | | $ | 2,716,507 |
|
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 20162017
(In thousands)
|
| | | | | | | | | | | | | | | | | | | |
| Parent Company | | Cal Water | | All Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
ASSETS | |
| | |
| | |
| | |
| | |
|
Utility plant: | |
| | |
| | |
| | |
| | |
|
Utility plant | $ | 1,318 |
| | $ | 2,519,785 |
| | $ | 203,433 |
| | $ | (7,197 | ) | | $ | 2,717,339 |
|
Less accumulated depreciation and amortization | (826 | ) | | (805,992 | ) | | (53,163 | ) | | 1,919 |
| | (858,062 | ) |
Net utility plant | 492 |
| | 1,713,793 |
| | 150,270 |
| | (5,278 | ) | | 1,859,277 |
|
Current assets: | |
| | |
| | |
| | |
| | |
|
Cash and cash equivalents | 5,216 |
| | 13,215 |
| | 7,061 |
| | — |
| | 25,492 |
|
Receivables and unbilled revenue | — |
| | 98,850 |
| | 4,173 |
| | — |
| | 103,023 |
|
Receivables from affiliates | 19,566 |
| | 3,608 |
| | 8 |
| | (23,182 | ) | | — |
|
Other current assets | 80 |
| | 12,442 |
| | 1,032 |
| | — |
| | 13,554 |
|
Total current assets | 24,862 |
| | 128,115 |
| | 12,274 |
| | (23,182 | ) | | 142,069 |
|
Other assets: | |
| | |
| | |
| | |
| | |
|
Regulatory assets | — |
| | 352,139 |
| | 3,791 |
| | — |
| | 355,930 |
|
Investments in affiliates | 666,525 |
| | — |
| | — |
| | (666,525 | ) | | — |
|
Long-term affiliate notes receivable | 25,744 |
| | — |
| | — |
| | (25,744 | ) | | — |
|
Other assets | 376 |
| | 50,361 |
| | 3,765 |
| | (33 | ) | | 54,469 |
|
Total other assets | 692,645 |
| | 402,500 |
| | 7,556 |
| | (692,302 | ) | | 410,399 |
|
TOTAL ASSETS | $ | 717,999 |
| | $ | 2,244,408 |
| | $ | 170,100 |
| | $ | (720,762 | ) | | $ | 2,411,745 |
|
CAPITALIZATION AND LIABILITIES | |
| | |
| | |
| | |
| | |
|
Capitalization: | |
| | |
| | |
| | |
| | |
|
Common stockholders’ equity | $ | 659,471 |
| | $ | 595,003 |
| | 76,833 |
| | $ | (671,836 | ) | | $ | 659,471 |
|
Affiliate long-term debt | — |
| | — |
| | 25,744 |
| | (25,744 | ) | | — |
|
Long-term debt, less current maturities | — |
| | 530,850 |
| | 895 |
| | — |
| | 531,745 |
|
Total capitalization | 659,471 |
| | 1,125,853 |
| | 103,472 |
| | (697,580 | ) | | 1,191,216 |
|
Current liabilities: | |
| | |
| | |
| | |
| | |
|
Current maturities of long-term debt | — |
| | 25,657 |
| | 551 |
| | — |
| | 26,208 |
|
Short-term borrowings | 57,100 |
| | 40,000 |
| | — |
| | — |
| | 97,100 |
|
Payables to affiliates | — |
| | 539 |
| | 22,643 |
| | (23,182 | ) | | — |
|
Accounts payable | — |
| | 74,998 |
| | 2,815 |
| | — |
| | 77,813 |
|
Accrued expenses and other liabilities | 88 |
| | 47,232 |
| | 1,789 |
| | — |
| | 49,109 |
|
Total current liabilities | 57,188 |
| | 188,426 |
| | 27,798 |
| | (23,182 | ) | | 250,230 |
|
Unamortized investment tax credits | — |
| | 1,798 |
| | — |
| | — |
| | 1,798 |
|
Deferred income taxes | 1,340 |
| | 296,781 |
| | 803 |
| | — |
| | 298,924 |
|
Pension and postretirement benefits other than pensions | — |
| | 222,691 |
| | — |
| | — |
| | 222,691 |
|
Regulatory and other liabilities | — |
| | 80,518 |
| | 3,130 |
| | — |
| | 83,648 |
|
Advances for construction | — |
| | 181,907 |
| | 541 |
| | — |
| | 182,448 |
|
Contributions in aid of construction | — |
| | 146,434 |
| | 34,356 |
| | — |
| | 180,790 |
|
TOTAL CAPITALIZATION AND LIABILITIES | $ | 717,999 |
| | $ | 2,244,408 |
| | $ | 170,100 |
| | $ | (720,762 | ) | | $ | 2,411,745 |
|
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)
For the three months ended March 31, 2017
(In thousands)
|
| | | | | | | | | | | | | | | | | | | |
| Parent Company | | Cal Water | | All Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
Operating revenue | $ | — |
| | $ | 113,342 |
| | $ | 8,694 |
| | $ | — |
| | $ | 122,036 |
|
Operating expenses: | |
| | |
| | |
| | |
| | |
|
Operations: | |
| | |
| | |
| | |
| | |
|
Water production costs | — |
| | 40,189 |
| | 1,879 |
| | — |
| | 42,068 |
|
Administrative and general | — |
| | 22,476 |
| | 2,773 |
| | — |
| | 25,249 |
|
Other operations | — |
| | 14,400 |
| | 1,850 |
| | (126 | ) | | 16,124 |
|
Maintenance | — |
| | 5,906 |
| | 206 |
| | — |
| | 6,112 |
|
Depreciation and amortization | 23 |
| | 18,111 |
| | 1,090 |
| | (23 | ) | | 19,201 |
|
Income tax benefit | (103 | ) | | (946 | ) | | (92 | ) | | 257 |
| | (884 | ) |
Property and other taxes | (4 | ) | | 5,412 |
| | 708 |
| | — |
| | 6,116 |
|
Total operating (income) expenses | (84 | ) | | 105,548 |
| | 8,414 |
| | 108 |
| | 113,986 |
|
Net operating income | 84 |
| | 7,794 |
| | 280 |
| | (108 | ) | | 8,050 |
|
Other income and expenses: | |
| | |
| | |
| | |
| | |
|
Non-regulated revenue | 481 |
| | 3,135 |
| | 454 |
| | (608 | ) | | 3,462 |
|
Non-regulated expenses | — |
| | (1,747 | ) | | (307 | ) | | — |
| | (2,054 | ) |
Allowance for equity funds used during construction (Note 2) | — |
| | 779 |
| | — |
| | — |
| | 779 |
|
Income tax expense on other income and expenses | (196 | ) | | (883 | ) | | (58 | ) | | 248 |
| | (889 | ) |
Total other income | 285 |
| | 1,284 |
| | 89 |
| | (360 | ) | | 1,298 |
|
Interest: | |
| | |
| | |
| | |
| | |
|
Interest expense | 235 |
| | 8,470 |
| | 486 |
| | (481 | ) | | 8,710 |
|
Allowance for borrowed funds used during construction (Note 2) | — |
| | (476 | ) | | (18 | ) | | — |
| | (494 | ) |
Net interest expense | 235 |
| | 7,994 |
| | 468 |
| | (481 | ) | | 8,216 |
|
Equity earnings of subsidiaries | 998 |
| | — |
| | — |
| | (998 | ) | | — |
|
Net income (loss) | $ | 1,132 |
| | $ | 1,084 |
| | $ | (99 | ) | | $ | (985 | ) | | $ | 1,132 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Parent Company | | Cal Water | | All Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
ASSETS | |
| | |
| | |
| | |
| | |
|
Utility plant: | |
| | |
| | |
| | |
| | |
|
Utility plant | $ | 1,321 |
| | $ | 2,771,259 |
| | $ | 204,795 |
| | $ | (7,196 | ) | | $ | 2,970,179 |
|
Less accumulated depreciation and amortization | (919 | ) | | (868,762 | ) | | (54,543 | ) | | 2,010 |
| | (922,214 | ) |
Net utility plant | 402 |
| | 1,902,497 |
| | 150,252 |
| | (5,186 | ) | | 2,047,965 |
|
Current assets: | |
| | |
| | |
| | |
| | |
|
Cash and cash equivalents | 4,728 |
| | 80,940 |
| | 9,108 |
| | — |
| | 94,776 |
|
Receivables and unbilled revenue | — |
| | 110,928 |
| | 4,526 |
| | — |
| | 115,454 |
|
Receivables from affiliates | 19,952 |
| | 4,093 |
| | 43 |
| | (24,088 | ) | | — |
|
Other current assets | 80 |
| | 16,569 |
| | 994 |
| | — |
| | 17,643 |
|
Total current assets | 24,760 |
| | 212,530 |
| | 14,671 |
| | (24,088 | ) | | 227,873 |
|
Other assets: | |
| | |
| | |
| | |
| | |
|
Regulatory assets | — |
| | 397,333 |
| | 3,814 |
| | — |
| | 401,147 |
|
Investments in affiliates | 698,690 |
| | — |
| | — |
| | (698,690 | ) | | — |
|
Long-term affiliate notes receivable | 26,441 |
| | — |
| | — |
| | (26,441 | ) | | — |
|
Other assets | 192 |
| | 59,581 |
| | 3,822 |
| | (205 | ) | | 63,390 |
|
Total other assets | 725,323 |
| | 456,914 |
| | 7,636 |
| | (725,336 | ) | | 464,537 |
|
TOTAL ASSETS | $ | 750,485 |
| | $ | 2,571,941 |
| | $ | 172,559 |
| | $ | (754,610 | ) | | $ | 2,740,375 |
|
CAPITALIZATION AND LIABILITIES | |
| | |
| | |
| | |
| | |
|
Capitalization: | |
| | |
| | |
| | |
| | |
|
Common stockholders’ equity | $ | 693,462 |
| | $ | 626,300 |
| | 77,647 |
| | $ | (703,947 | ) | | $ | 693,462 |
|
Affiliate long-term debt | — |
| | — |
| | 26,441 |
| | (26,441 | ) | | — |
|
Long-term debt, less current maturities | — |
| | 514,952 |
| | 841 |
| | — |
| | 515,793 |
|
Total capitalization | 693,462 |
| | 1,141,252 |
| | 104,929 |
| | (730,388 | ) | | 1,209,255 |
|
Current liabilities: | |
| | |
| | |
| | |
| | |
|
Current maturities of long-term debt | — |
| | 15,598 |
| | 322 |
| | — |
| | 15,920 |
|
Short-term borrowings | 55,100 |
| | 220,000 |
| | — |
| | — |
| | 275,100 |
|
Payables to affiliates | — |
| | 580 |
| | 23,508 |
| | (24,088 | ) | | — |
|
Accounts payable | — |
| | 90,561 |
| | 3,394 |
| | — |
| | 93,955 |
|
Accrued expenses and other liabilities | 271 |
| | 104,002 |
| | 1,711 |
| | — |
| | 105,984 |
|
Total current liabilities | 55,371 |
| | 430,741 |
| | 28,935 |
| | (24,088 | ) | | 490,959 |
|
Unamortized investment tax credits | — |
| | 1,724 |
| | — |
| | — |
| | 1,724 |
|
Deferred income taxes | 1,652 |
| | 189,004 |
| | 2,424 |
| | (134 | ) | | 192,946 |
|
Pension and postretirement benefits other than pensions | — |
| | 252,141 |
| | — |
| | — |
| | 252,141 |
|
Regulatory and other liabilities | — |
| | 220,779 |
| | 3,348 |
| | — |
| | 224,127 |
|
Advances for construction | — |
| | 181,979 |
| | 523 |
| | — |
| | 182,502 |
|
Contributions in aid of construction | — |
| | 154,321 |
| | 32,400 |
| | — |
| | 186,721 |
|
TOTAL CAPITALIZATION AND LIABILITIES | $ | 750,485 |
| | $ | 2,571,941 |
| | $ | 172,559 |
| | $ | (754,610 | ) | | $ | 2,740,375 |
|
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)
For the three months ended March 31, 2018
(In thousands)
|
| | | | | | | | | | | | | | | | | | | |
| Parent Company | | Cal Water | | All Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
Operating revenue | $ | — |
| | $ | 123,570 |
| | $ | 8,677 |
| | $ | — |
| | $ | 132,247 |
|
Operating expenses: | |
| | |
| | |
| | |
| | |
|
Operations: | |
| | |
| | |
| | |
| | |
|
Water production costs | — |
| | 45,623 |
| | 1,983 |
| | — |
| | 47,606 |
|
Administrative and general | — |
| | 23,606 |
| | 2,713 |
| | — |
| | 26,319 |
|
Other operations | — |
| | 16,217 |
| | 1,569 |
| | (146 | ) | | 17,640 |
|
Maintenance | — |
| | 5,244 |
| | 195 |
| | — |
| | 5,439 |
|
Depreciation and amortization | 23 |
| | 19,613 |
| | 1,101 |
| | (22 | ) | | 20,715 |
|
Income tax benefit | (78 | ) | | (340 | ) | | (8 | ) | | 197 |
| | (229 | ) |
Property and other taxes | — |
| | 6,007 |
| | 697 |
| | — |
| | 6,704 |
|
Total operating (income) expenses | (55 | ) | | 115,970 |
| | 8,250 |
| | 29 |
| | 124,194 |
|
Net operating income | 55 |
| | 7,600 |
| | 427 |
| | (29 | ) | | 8,053 |
|
Other income and expenses: | |
| | |
| | |
| | |
| | |
|
Non-regulated revenue | 531 |
| | 4,244 |
| | 320 |
| | (676 | ) | | 4,419 |
|
Non-regulated expenses | — |
| | (5,293 | ) | | (144 | ) | | — |
| | (5,437 | ) |
Other components of net periodic benefit cost | — |
| | (2,447 | ) | | (99 | ) | | — |
| | (2,546 | ) |
Allowance for equity funds used during construction | — |
| | 911 |
| | — |
| | — |
| | 911 |
|
Income tax (expense) benefit on other income and expenses | (148 | ) | | 741 |
| | (24 | ) | | 189 |
| | 758 |
|
Total other income (loss) | 383 |
| | (1,844 | ) | | 53 |
| | (487 | ) | | (1,895 | ) |
Interest: | |
| | |
| | |
| | |
| | |
|
Interest expense | 258 |
| | 8,934 |
| | 537 |
| | (531 | ) | | 9,198 |
|
Allowance for borrowed funds used during construction | — |
| | (458 | ) | | (37 | ) | | — |
| | (495 | ) |
Net interest expense | 258 |
| | 8,476 |
| | 500 |
| | (531 | ) | | 8,703 |
|
Equity loss of subsidiaries | (2,725 | ) | | — |
| | — |
| | 2,725 |
| | — |
|
Net loss | $ | (2,545 | ) | | $ | (2,720 | ) | | $ | (20 | ) | | $ | 2,740 |
| | $ | (2,545 | ) |
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the three months ended March 31, 20162017
(In thousands)
| | | Parent Company | | Cal Water | | All Other Subsidiaries | | Consolidating Adjustments | | Consolidated | Parent Company | | Cal Water | | All Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
Operating revenue | $ | — |
| | $ | 113,027 |
| | $ | 8,700 |
| | $ | — |
| | $ | 121,727 |
| $ | — |
| | $ | 113,342 |
| | $ | 8,694 |
| | $ | — |
| | $ | 122,036 |
|
Operating expenses: | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
Operations: | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
Water production costs | — |
| | 39,245 |
| | 1,824 |
| | — |
| | 41,069 |
| — |
| | 40,189 |
| | 1,879 |
| | — |
| | 42,068 |
|
Administrative and general | — |
| | 24,943 |
| | 2,884 |
| | — |
| | 27,827 |
| — |
| | 20,126 |
| | 2,620 |
| | — |
| | 22,746 |
|
Other operations | — |
| | 17,726 |
| | 1,702 |
| | (126 | ) | | 19,302 |
| — |
| | 14,400 |
| | 1,850 |
| | (126 | ) | | 16,124 |
|
Maintenance | — |
| | 5,840 |
| | 223 |
| | — |
| | 6,063 |
| — |
| | 5,906 |
| | 206 |
| | — |
| | 6,112 |
|
Depreciation and amortization | 57 |
| | 14,915 |
| | 1,098 |
| | (24 | ) | | 16,046 |
| 23 |
| | 18,111 |
| | 1,090 |
| | (23 | ) | | 19,201 |
|
Income tax (benefit) expense | (94 | ) | | (1,037 | ) | | (51 | ) | | 257 |
| | (925 | ) | |
Income tax benefit | | (103 | ) | | (946 | ) | | (92 | ) | | 257 |
| | (884 | ) |
Property and other taxes | — |
| | 5,390 |
| | 685 |
| | — |
| | 6,075 |
| (4 | ) | | 5,412 |
| | 708 |
| | — |
| | 6,116 |
|
Total operating (income) expenses | (37 | ) | | 107,022 |
| | 8,365 |
| | 107 |
| | 115,457 |
| (84 | ) | | 103,198 |
| | 8,261 |
| | 108 |
| | 111,483 |
|
Net operating income | 37 |
| | 6,005 |
| | 335 |
| | (107 | ) | | 6,270 |
| 84 |
| | 10,144 |
| | 433 |
| | (108 | ) | | 10,553 |
|
Other income and expenses: | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
Non-regulated revenue | 464 |
| | 3,196 |
| | 374 |
| | (606 | ) | | 3,428 |
| 481 |
| | 3,135 |
| | 454 |
| | (608 | ) | | 3,462 |
|
Non-regulated expenses | — |
| | (2,705 | ) | | (275 | ) | | — |
| | (2,980 | ) | — |
| | (1,747 | ) | | (307 | ) | | — |
| | (2,054 | ) |
Income tax (expense) benefit on other income and expenses | (189 | ) | | (200 | ) | | (39 | ) | | 247 |
| | (181 | ) | |
Total other income | 275 |
| | 291 |
| | 60 |
| | (359 | ) | | 267 |
| |
Other components of net periodic benefit cost | | — |
| | (2,350 | ) | | (153 | ) | | — |
| | (2,503 | ) |
Allowance for equity funds used during construction | | — |
| | 779 |
| | — |
| | — |
| | 779 |
|
Income tax expense on other income and expenses | | (196 | ) | | (883 | ) | | (58 | ) | | 248 |
| | (889 | ) |
Total other income (loss) | | 285 |
| | (1,066 | ) | | (64 | ) | | (360 | ) | | (1,205 | ) |
Interest: | | | | | |
| | | | | |
| | |
| | |
| | |
| | |
|
Interest expense | 173 |
| | 7,899 |
| | 473 |
| | (480 | ) | | 8,065 |
| 235 |
| | 8,470 |
| | 486 |
| | (481 | ) | | 8,710 |
|
Less: capitalized interest | — |
| | (714 | ) | | (16 | ) | | — |
| | (730 | ) | |
Allowance for borrowed funds used during construction | | — |
| | (476 | ) | | (18 | ) | | — |
| | (494 | ) |
Net interest expense | 173 |
| | 7,185 |
| | 457 |
| | (480 | ) | | 7,335 |
| 235 |
| | 7,994 |
| | 468 |
| | (481 | ) | | 8,216 |
|
Equity earnings of subsidiaries | (937 | ) | | — |
| | — |
| | 937 |
| | — |
| 998 |
| | — |
| | — |
| | (998 | ) | | — |
|
Net loss | $ | (798 | ) | | $ | (889 | ) | | $ | (62 | ) | | $ | 951 |
| | $ | (798 | ) | |
Net income | | $ | 1,132 |
| | $ | 1,084 |
| | $ | (99 | ) | | $ | (985 | ) | | $ | 1,132 |
|
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the three months ended March 31, 20172018
(In thousands)
| | | Parent Company | | Cal Water | | All Other Subsidiaries | | Consolidating Adjustments | | Consolidated | Parent Company | | Cal Water | | All Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
Operating activities: | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
Net income (loss) | $ | 1,132 |
| | $ | 1,084 |
| | $ | (99 | ) | | $ | (985 | ) | | $ | 1,132 |
| |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |
| | |
| | |
| | |
| | |
| |
Equity earnings of subsidiaries | (998 | ) | | — |
| | — |
| | 998 |
| | — |
| |
Net loss | | $ | (2,545 | ) | | $ | (2,720 | ) | | $ | (20 | ) | | $ | 2,740 |
| | $ | (2,545 | ) |
Adjustments to reconcile net loss to net cash provided by operating activities: | | |
| | |
| | |
| | |
| | |
|
Equity loss of subsidiaries | | 2,725 |
| | — |
| | — |
| | (2,725 | ) | | — |
|
Dividends received from affiliates | 8,634 |
| | — |
| | — |
| | (8,634 | ) | | — |
| 9,003 |
| | — |
| | — |
| | (9,003 | ) | | — |
|
Depreciation and amortization | 23 |
| | 18,542 |
| | 1,116 |
| | (23 | ) | | 19,658 |
| 23 |
| | 20,081 |
| | 1,125 |
| | (22 | ) | | 21,207 |
|
Changes in value of life insurance contracts | | — |
| | 1,137 |
| | — |
| | — |
| | 1,137 |
|
Allowance for equity funds used during construction | — |
| | (779 | ) | | — |
| | — |
| | (779 | ) | — |
| | (911 | ) | | — |
| | — |
| | (911 | ) |
Changes in value of life insurance contracts | — |
| | (319 | ) | | — |
| | — |
| | (319 | ) | |
Changes in operating assets and liabilities | (67 | ) | | (11,003 | ) | | 696 |
| | — |
| | (10,374 | ) | (376 | ) | | 1,728 |
| | 1,729 |
| | — |
| | 3,081 |
|
Other changes in noncurrent assets and liabilities | 483 |
| | 4,241 |
| | 245 |
| | 10 |
| | 4,979 |
| 806 |
| | 5,368 |
| | 102 |
| | 7 |
| | 6,283 |
|
Net cash provided by operating activities | 9,207 |
| | 11,766 |
| | 1,958 |
| | (8,634 | ) | | 14,297 |
| 9,636 |
| | 24,683 |
| | 2,936 |
| | (9,003 | ) | | 28,252 |
|
Investing activities: | | | | | |
| | | | | | | | | |
| | | | |
Utility plant expenditures | — |
| | (50,509 | ) | | (1,344 | ) | | — |
| | (51,853 | ) | — |
| | (67,841 | ) | | (2,809 | ) | | — |
| | (70,650 | ) |
Changes in affiliate advances | 593 |
| | 955 |
| | (175 | ) | | (1,373 | ) | | — |
| (2,520 | ) | | 3,235 |
| | (153 | ) | | (562 | ) | | — |
|
Issuance of affiliate short-term borrowings | (325 | ) | | | | — |
| | 325 |
| | — |
| |
Reduction of affiliates long-term debt | 332 |
| | — |
| | — |
| | (332 | ) | | — |
| 395 |
| | — |
| | — |
| | (395 | ) | | — |
|
Life insurance proceeds | — |
| | 450 |
| | — |
| | — |
| | 450 |
| |
Purchase of life insurance contracts | — |
| | (836 | ) | | — |
| | — |
| | (836 | ) | |
Changes in restricted cash | — |
| | (260 | ) | | — |
| | — |
| | (260 | ) | |
Net cash provided by (used in) investing activities | 600 |
| | (50,200 | ) | | (1,519 | ) | | (1,380 | ) | | (52,499 | ) | |
Net cash used in investing activities | | (2,125 | ) | | (64,606 | ) | | (2,962 | ) | | (957 | ) | | (70,650 | ) |
Financing Activities: | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
Short-term borrowings | — |
| | 35,000 |
| | — |
| | — |
| | 35,000 |
| — |
| | 45,022 |
| | — |
| | — |
| | 45,022 |
|
Repayment of short-term borrowings | (2,000 | ) | | — |
| | — |
| | — |
| | (2,000 | ) | — |
| | (45,022 | ) | | — |
| | — |
| | (45,022 | ) |
Changes in affiliate advances | 715 |
| | (475 | ) | | (1,613 | ) | | 1,373 |
| | — |
| 245 |
| | (423 | ) | | (384 | ) | | 562 |
| | — |
|
Proceeds from affiliate short-term borrowings | — |
| | — |
| | 325 |
| | (325 | ) | | — |
| |
Repayment of affiliate long-term borrowings | — |
| | — |
| | (332 | ) | | 332 |
| | — |
| |
Repayment of affiliates long-term borrowings | | — |
| | — |
| | (395 | ) | | 395 |
| | — |
|
Repayment of long-term debt | — |
| | (170 | ) | | (116 | ) | | — |
| | (286 | ) | — |
| | (10,158 | ) | | (66 | ) | | — |
| | (10,224 | ) |
Advances and contributions in aid of construction | — |
| | 3,952 |
| | 23 |
| | — |
| | 3,975 |
| — |
| | 4,663 |
| | 100 |
| | — |
| | 4,763 |
|
Refunds of advances for construction | — |
| | (2,236 | ) | | — |
| | — |
| | (2,236 | ) | — |
| | (1,908 | ) | | (10 | ) | | — |
| | (1,918 | ) |
Repurchase of common stock | (1,119 | ) | | — |
| | — |
| | — |
| | (1,119 | ) | (1,239 | ) | | — |
| | — |
| | — |
| | (1,239 | ) |
Dividends paid to non-affiliates | (8,634 | ) | | — |
| | — |
| | — |
| | (8,634 | ) | (9,003 | ) | | — |
| | — |
| | — |
| | (9,003 | ) |
Dividends paid to affiliates | — |
| | (8,234 | ) | | (400 | ) | | 8,634 |
| | — |
| — |
| | (8,665 | ) | | (338 | ) | | 9,003 |
| | — |
|
Net cash (used in) provided by financing activities | (11,038 | ) | | 27,837 |
| | (2,113 | ) | | 10,014 |
| | 24,700 |
| |
Change in cash and cash equivalents | (1,231 | ) | | (10,597 | ) | | (1,674 | ) | | — |
| | (13,502 | ) | |
Cash and cash equivalents at beginning of period | 5,216 |
| | 13,215 |
| | 7,061 |
| | — |
| | 25,492 |
| |
Cash and cash equivalents at end of period | $ | 3,985 |
| | $ | 2,618 |
| | $ | 5,387 |
| | $ | — |
| | $ | 11,990 |
| |
Net cash used in financing activities | | (9,997 | ) | | (16,491 | ) | | (1,093 | ) | | 9,960 |
| | (17,621 | ) |
Change in cash, cash equivalents, and restricted cash | | (2,486 | ) | | (56,414 | ) | | (1,119 | ) | | — |
| | (60,019 | ) |
Cash, cash equivalents, and restricted cash at beginning of period | | 4,728 |
| | 81,453 |
| | 9,171 |
| | — |
| | 95,352 |
|
Cash, cash equivalents, and restricted cash at end of period | | $ | 2,242 |
| | $ | 25,039 |
| | $ | 8,052 |
| | — |
| | $ | 35,333 |
|
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the three months ended March 31, 20162017
(In thousands)
| | | Parent Company | | Cal Water | | All Other Subsidiaries | | Consolidating Adjustments | | Consolidated | Parent Company | | Cal Water | | All Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
Operating activities: | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
Net loss | $ | (798 | ) | | $ | (889 | ) | | $ | (62 | ) | | $ | 951 |
| | $ | (798 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |
| | |
| | |
| | |
| | |
| |
Net income (loss) | | $ | 1,132 |
| | $ | 1,084 |
| | $ | (99 | ) | | $ | (985 | ) | | $ | 1,132 |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | |
| | |
| | |
| | |
| | |
|
Equity earnings of subsidiaries | 937 |
| | — |
| | — |
| | (937 | ) | | — |
| (998 | ) | | — |
| | — |
| | 998 |
| | — |
|
Dividends received from affiliates | 8,258 |
| | — |
| | — |
| | (8,258 | ) | | — |
| 8,634 |
| | — |
| | — |
| | (8,634 | ) | | — |
|
Depreciation and amortization | 57 |
| | 15,277 |
| | 1,144 |
| | (24 | ) | | 16,454 |
| 23 |
| | 18,542 |
| | 1,116 |
| | (23 | ) | | 19,658 |
|
Change in value of life insurance contracts | — |
| | 43 |
| | — |
| | — |
| | 43 |
| |
Changes in value of life insurance contracts | | — |
| | (319 | ) | | — |
| | — |
| | (319 | ) |
Allowance for equity funds used during construction | | — |
| | (779 | ) | | — |
| | — |
| | (779 | ) |
Changes in operating assets and liabilities | (280 | ) | | 9,414 |
| | 1,589 |
| | — |
| | 10,723 |
| (67 | ) | | (11,003 | ) | | 696 |
| | — |
| | (10,374 | ) |
Other changes in noncurrent assets and liabilities | 621 |
| | 4,432 |
| | 7 |
| | 10 |
| | 5,070 |
| 483 |
| | 4,241 |
| | 245 |
| | 10 |
| | 4,979 |
|
Net cash provided by operating activities | 8,795 |
| | 28,277 |
| | 2,678 |
| | (8,258 | ) | | 31,492 |
| 9,207 |
| | 11,766 |
| | 1,958 |
| | (8,634 | ) | | 14,297 |
|
Investing activities: | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
Utility plant expenditures | — |
| | (54,944 | ) | | (1,519 | ) | | — |
| | (56,463 | ) | — |
| | (50,509 | ) | | (1,344 | ) | | — |
| | (51,853 | ) |
Changes in affiliate advances | 40 |
| | 1,468 |
| | (140 | ) | | (1,368 | ) | | — |
| 593 |
| | 955 |
| | (175 | ) | | (1,373 | ) | | — |
|
Reduction of affiliate short-term borrowings | — |
| | 21,500 |
| | — |
| | (21,500 | ) | | — |
| |
Issuance of affiliate short-term borrowings | (250 | ) | | (20,600 | ) | | — |
| | 20,850 |
| | — |
| (325 | ) | | — |
| | — |
| | 325 |
| | — |
|
Reduction of affiliates long-term debt | 279 |
| | — |
| | — |
| | (279 | ) | | — |
| 332 |
| | — |
| | — |
| | (332 | ) | | — |
|
Life insurance proceeds | — |
| | 495 |
| | — |
| | — |
| | 495 |
| — |
| | 450 |
| | — |
| | — |
| | 450 |
|
Purchase of life insurance contracts | — |
| | (960 | ) | | — |
| | — |
| | (960 | ) | — |
| | (836 | ) | | — |
| | — |
| | (836 | ) |
Changes in restricted cash | — |
| | (465 | ) | | — |
| | — |
| | (465 | ) | |
Net cash provided by (used in) investing activities | 69 |
| | (53,506 | ) | | (1,659 | ) | | (2,297 | ) | | (57,393 | ) | 600 |
| | (49,940 | ) | | (1,519 | ) | | (1,380 | ) | | (52,239 | ) |
Financing Activities: | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
|
Short-term borrowings | 21,500 |
| | 33,000 |
| | — |
| | — |
| | 54,500 |
| — |
| | 35,000 |
| | — |
| | — |
| | 35,000 |
|
Repayment of short-term borrowings | (20,615 | ) | | (33,000 | ) | | — |
| | — |
| | (53,615 | ) | (2,000 | ) | | — |
| | — |
| | — |
| | (2,000 | ) |
Changes in affiliate advances | — |
| | (98 | ) | | (1,270 | ) | | 1,368 |
| | — |
| 715 |
| | (475 | ) | | (1,613 | ) | | 1,373 |
| | — |
|
Proceeds from affiliate short-term borrowings | 20,600 |
| | — |
| | 250 |
| | (20,850 | ) | |
| — |
| | — |
| | 325 |
| | (325 | ) | | — |
|
Repayment of affiliate short-term borrowings | (21,500 | ) | | — |
| | — |
| | 21,500 |
| |
|
| |
Repayment of affiliates long-term borrowings | — |
| | — |
| | (279 | ) | | 279 |
| | — |
| — |
| | — |
| | (332 | ) | | 332 |
| | — |
|
Proceeds from long-term debt, net of expenses | — |
| | 49,823 |
| | 216 |
| | — |
| | 50,039 |
| |
Repayment of long-term debt | — |
| | (175 | ) | | (79 | ) | | — |
| | (254 | ) | — |
| | (170 | ) | | (116 | ) | | — |
| | (286 | ) |
Advances and contributions in aid for construction | — |
| | 7,590 |
| | 18 |
| | — |
| | 7,608 |
| — |
| | 3,952 |
| | 23 |
| | — |
| | 3,975 |
|
Refunds of advances for construction | — |
| | (1,611 | ) | | (1 | ) | | — |
| | (1,612 | ) | — |
| | (2,236 | ) | | — |
| | — |
| | (2,236 | ) |
Repurchase of common stock | (466 | ) | | — |
| | — |
| | — |
| | (466 | ) | (1,119 | ) | | — |
| | — |
| | — |
| | (1,119 | ) |
Dividends paid to non-affiliates | (8,258 | ) | | — |
| | — |
| | — |
| | (8,258 | ) | (8,634 | ) | | — |
| | — |
| | — |
| | (8,634 | ) |
Dividends paid to affiliates | — |
| | (8,058 | ) | | (200 | ) | | 8,258 |
| | — |
| — |
| | (8,234 | ) | | (400 | ) | | 8,634 |
| | — |
|
Net cash (used in) provided by financing activities | (8,739 | ) | | 47,471 |
| | (1,345 | ) | | 10,555 |
| | 47,942 |
| (11,038 | ) | | 27,837 |
| | (2,113 | ) | | 10,014 |
| | 24,700 |
|
Change in cash and cash equivalents | 125 |
| | 22,242 |
| | (326 | ) | | — |
| | 22,041 |
| |
Cash and cash equivalents at beginning of period | 582 |
| | 4,270 |
| | 3,985 |
| | — |
| | 8,837 |
| |
Cash and cash equivalents at end of period | $ | 707 |
| | $ | 26,512 |
| | $ | 3,659 |
| | $ | — |
| | $ | 30,878 |
| |
Change in cash, cash equivalents, and restricted cash | | (1,231 | ) | | (10,337 | ) | | (1,674 | ) | | — |
| | (13,242 | ) |
Cash, cash equivalents, and restricted cash at beginning of period | | 5,216 |
| | 13,595 |
| | 7,124 |
| | — |
| | 25,935 |
|
Cash, cash equivalents, and restricted cash at end of period | | $ | 3,985 |
| | $ | 3,258 |
| | $ | 5,450 |
| | — |
| | $ | 12,693 |
|
Item 2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Dollar amounts in thousands unless otherwise stated
FORWARD LOOKING STATEMENTS
This quarterly report, including all documents incorporated by reference, contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995 (Act). Forward-looking statements in this quarterly report are based on currently available information, expectations, estimates, assumptions and projections, and our management’s beliefs, assumptions, judgments and expectations about us, the water utility industry and general economic conditions. These statements are not statements of historical fact. When used in our documents, statements that are not historical in nature, including words like “expects,” “intends,” “plans,” “believes,” “may,” “estimates,” “assumes,” “anticipates,” “projects,” “predicts,” “forecasts,” “should,” “seeks,” or variations of these words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not guarantees of future performance. They are based on numerous assumptions that we believe are reasonable, but they are open to a wide range of uncertainties and business risks. Consequently, actual results may vary materially from what is contained in a forward-looking statement.
Factors which may cause actual results to be different than those expected or anticipated include, but are not limited to:
governmental and regulatory commissions’ decisions, including decisions on proper disposition of property;
consequences of eminent domain actions relation to our water systems;
changes in regulatory commissions’ policies and procedures;
the timeliness of regulatory commissions’ actions concerning rate relief;
inability to renew leases to operate city water systems on beneficial terms;
changes in California State Water Resources Control Board water quality standards;
changes in environmental compliance and water quality requirements;
electric power interruptions;
housing and customer growth trends;
the impact of opposition to rate increases;
our ability to recover costs;
availability of water supplies;
issues with the implementation, maintenance or security of our information technology systems;
civil disturbances or terrorist threats or acts, or apprehension about the possible future occurrences of acts of this type;
labor relations matters as we negotiate with the unions;
restrictive covenants in or changes to the credit ratings on current or future debt that could increase financing costs or affect the ability to borrow, make payments on debt, or pay dividends;
changes in customer water use patterns and the effects of conservation;
the impact of weather, climate, natural disasters, and climatediseases on water quality, water availability, water sales and operating results;
the unknown impact of contagious diseases on the Company’s operations;
the risks set forth in “Risk Factors” included in the Company's annual report on 20162017 Form 10-K.
In light of these risks, uncertainties and assumptions, investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this quarterly report or as of the date of any document incorporated by reference in this report, as applicable. When considering forward-looking statements, investors should keep in mind the cautionary statements in this quarterly report and the documents incorporated by reference. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.
CRITICAL ACCOUNTING POLICIES
We maintain our accounting records in accordance with accounting principles generally accepted in the United States of America (GAAP) and as directed by the Commissions to which our operations are subject. The process of preparing financial statements in accordance with GAAP requires the use of estimates on the part of management. The estimates used by management are based on historic experience and an understanding of current facts and circumstances. Management
believes that the following accounting policies are critical because they involve a higher degree of complexity and judgment, and can have a material impact on our results of operations, financial condition, and cash flows of the business. These policies and their key characteristics are discussed in detail in the 20162017 Form 10-K. They include:
revenue recognition;
regulated utility accounting;
income taxes;
pension and postretirement health care benefits;
For the three month period ended March 31, 2017,2018, except for changes to revenue recognition from the adoption of ASC 606 (see Note 2), there were no changes in the methodology for computing critical accounting estimates, no additional accounting estimates met the standards for critical accounting policies, and there were no material changes to the important assumptions underlying the critical accounting estimates.
RESULTS OF FIRST QUARTER 20172018 OPERATIONS
COMPARED TO FIRST QUARTER 20162017 OPERATIONS
Dollar amounts in thousands unless otherwise stated
Overview
Net incomeloss for the three month period ended March 31, 2017,2018, was $1.1$2.5 million or $0.02 earnings$0.05 net loss per diluted common share compared to a net lossincome of $0.8$1.1 million or $0.02 net lossearnings per diluted common share for the three month period ended March 31, 2016, an increase of $1.9 million.2017. The increase$3.6 million decrease in net income was driven primarily by factors outside our immediate control, including a result of rate increases and operating expenses decreases, notably a $1.8$1.5 million reduction in California drought program incremental costs.unrealized income from certain benefit plan investments due to market conditions, a $0.8 million increase in uninsured loss costs due to water main breaks, and a $0.7 million reduction in unbilled revenue accrual. The implementationnet effect of allowance for equity funds used during constructionthe following regulated revenue changes and accounting changes for share-based payments, effective January 1, 2017,other operating costs also increased net income. These increases were partiallyaffected quarterly results. We received general rate relief of $4.7 million, offset by a decreasereduction in rates due to the accrualnew adopted cost of capital for unbilled revenue and increasesCal Water of $1.2 million, $1.5 million in additional depreciation and amortization costs, $0.7 million in additional wage costs, a $0.6 million increase in property and other taxes, and $0.5 million in additional interest expenses. The changeThese cost increases were offset by a $0.7 million reduction in accrued unbilled revenue resulted mostly from a decrease in water usage. The change in accrued unbilled revenue is not included in the WRAM until it is billed. The WRAM account records changes in billed revenue. Accrued unbilled revenue is seasonal and the pattern of accrued unbilled revenue changes can fluctuate on a year-to-year basis.
maintenance expense.
Operating Revenue
Operating revenue increased $0.3$10.2 million, or 8.4%, to $122.0$132.2 million in the first quarter of 20172018 as compared to the first quarter of 2016.2017. The factors that impacted the operating revenue for the first quarter of 20172018 as compared to 2016the first quarter of 2017 are as follows:
| | Net change due to rate changes, usage, and other (1) | $ | 10,086 |
| $ | 2,822 |
|
MCBA Revenue (2) | (4,587 | ) | 4,177 |
|
Other balancing account revenue (3) | (2,365 | ) | 1,295 |
|
Deferral of revenue (4) | (2,825 | ) | 1,917 |
|
Net operating revenue increase | $ | 309 |
| $ | 10,211 |
|
| |
1. | The net change due to rate changes, usage, and other in the above table was mainly driven by rate increases (see table below forpartially offset by $3.0 million reduction in revenue as a result of the impacts of recognizing the cost of capital and tax accounting memorandum accounts. The components of the rate increases) offset by a $3.3 million decrease in accrued unbilled revenue.increases are as follows: |
|
| | | |
General rate case | $ | 1,709 |
|
Escalation rate increases | 2,417 |
|
Purchased water and pump tax offset increases | 1,067 |
|
Ratebase offset increases | 562 |
|
Total increase in rates | $ | 5,755 |
|
| |
2. | The MCBA revenue decreaseincrease resulted from a decreasean increase in customer consumption, which decreased water production in the first quarter of 2017 as compared to the first quarter of 2016. As required by the MCBA mechanism, the decrease inactual water production costs relative to adopted water production costs in the first quarter of 2018 as compared to the first quarter of 2017. The actual water production costs increased in 2018 as a result of an increase in customer consumption in the first quarter of 2018 as compared to the first quarter of 2017. As required by the MCBA mechanism, the change in water production costs in California also decreasedchanges operating revenue forin the same amount. |
| |
3. | The other balancing account revenue consists of the pension, conservation and health care balancing account revenues. Pension and conservation balancing account revenues are the differences between actual expenses and adopted rate recovery. Health care balancing account revenue is 85% of the difference between actual health care expenses and adopted rate recovery. The decreaseincrease in revenue was mainly due to a decreasean increase in actual health care and pension expenses relative to adopted in the first quarter of 2018 as compared to the first quarter of 2016.2017, which was partially offset by a decrease in actual conservation expenses relative to adopted in the first quarter of 2018 as compared to the first quarter of 2017. |
| |
4. | The deferral of revenue is the balancing account balancesconsists of amounts that are expected to be collected from customers beyond 24 months following the end of the accounting period in which these revenues were earned.recorded. The deferral increaseddecreased in the first quarter of 20172018 as compared to the first quarter of 20162017 due to a decrease in customer usage, which ledthe balancing account revenue expected to an increase in the net WRAM balance for 2017.be collected beyond 24 months. |
There were rate increases during the first quarter of 2017 that increased Service, Other, and WRAM revenue. The components of the rate increases are as follows:
|
| | | |
Purchased water offset increases | $ | 2,414 |
|
Ratebase offset increases | 339 |
|
General rate case | 8,789 |
|
Total increase in rates | $ | 11,542 |
|
Total Operating Expenses
Total operating expenses decreased $1.5increased $12.7 million, or 1.3%11.4%, to $114.0$124.2 million in the first quarter of 2017,2018, as compared to $115.5$111.5 million in the first quarter of 2016.2017.
Water production costs consists of purchased water, purchased power, and pump taxes. It represents the largest component of total operating expenses, accounting for approximately 36.9%38.3% of total operating expenses in the first quarter of 2017,2018, as compared to 35.6%37.7% of total operating expenses in the first quarter of 2016.2017. Water production costs increased 2.4%13.2% as compared to the same period last year mainly due to a blended 4.5%an 11.6% increase in purchased water production and higher wholesaler rates, partially offset by a 2.7% decrease in purchased water production.
rates.
Sources of water as a percent of total water production are listed in the following table:
| | | Three Months Ended March 31 | Three Months Ended March 31 |
| 2017 | | 2016 | 2018 | | 2017 |
Well production | 48 | % | | 47 | % | 47 | % | | 48 | % |
Purchased | 48 | % | | 49 | % | 49 | % | | 48 | % |
Surface | 4 | % | | 4 | % | 4 | % | | 4 | % |
Total | 100 | % | | 100 | % | 100 | % | | 100 | % |
The components of water production costs are shown in the table below:
| | | Three Months Ended March 31 | Three Months Ended March 31 |
| 2017 | | 2016 | | Change | 2018 | | 2017 | | Change |
Purchased water | $ | 34,369 |
| | $ | 33,790 |
| | $ | 579 |
| $ | 38,523 |
| | $ | 34,369 |
| | $ | 4,154 |
|
Purchased power | 4,908 |
| | 4,828 |
| | 80 |
| 5,523 |
| | 4,908 |
| | 615 |
|
Pump taxes | 2,791 |
| | 2,451 |
| | 340 |
| 3,560 |
| | 2,791 |
| | 769 |
|
Total | $ | 42,068 |
| | $ | 41,069 |
| | $ | 999 |
| $ | 47,606 |
| | $ | 42,068 |
| | $ | 5,538 |
|
Administrative and general and other operations expenses decreased $5.7increased $5.1 million or 12.2%, to $41.4$44.0 million in the first quarter of 2017,2018, as compared to $47.1$38.9 million in the first quarter of 2016.2017. The decreaseincrease was mostly due primarily to the deferral of $2.6 million of MCBA costs associated with the deferral of operating revenue, decreases in employee health care costs of $1.9 million, California drought program incremental costs of $1.8 million, on-going conservation program costs of $0.8 million, and outside service fees of $0.3 million. These cost decreases were partially offset by increases in employee wages of $0.9 million
wage and benefits costs and uninsured loss costs of $0.3 million. Water conservation program costs are affected by seasonal patterns and are dependent on customer demand for our programs.costs. Changes in employee pension and other postretirement benefit costs, water conservation program costs, and employee health care costs for regulated California operations generally do not affect earnings givennet income, because the regulatory treatment that allows the Company is authorized to track these costs in balancing accounts for future recovery, which createscreate a corresponding change to operating revenue. At March 31, 2017,2018, there were 1,1561,172 employees and at March 31, 2016,2017, there were 1,1541,156 employees.
Maintenance expense remained consistent atdecreased $0.7 million, or 11.0%, to $5.4 million in the first quarter of 2018, as compared to $6.1 million in the first quarter of 2017, and 2016. Maintenance costs were for repairs ofmostly due to decreases in transmission and distribution mains services, wells, and water treatment equipmentrepairs.
Depreciation and amortization expense increased $3.2$1.5 million, or 19.7%7.9%, to $20.7 million in the first quarter of 2018, as compared to $19.2 million in the first quarter of 2017, as compareddue to $16.02017 capital additions.
Income tax benefits decreased $0.7 million, to $0.2 million in the first quarter of 2016, due2018, as compared to 2016 capital additions.
Income tax benefit remained consistent at $0.9 million in the first quarter of 2017 and 2016 mostly2017. The decrease was mainly due to anthe federal income tax benefitrate reduction from 35 percent to 21 percent, effective January 1, 2018. The Company’s estimated combined effective income tax rate for 2018 is in the range from 23 to 25 percent.
Property and other taxes increased $0.6 million, or 9.6%, to $6.7 million in the first quarter of 2017 associated with the implementation of the new stock compensation accounting procedures. The Company’s fiscal year 2017 effective tax rate is estimated at 37%.
Property and other taxes remained consistent at2018, as compared to $6.1 million in the first quarter of 2017, mostly due to an increase in assessed property values in 2017 and 2016.
increased local franchise taxes.
Other Income and Expenses
Net other incomeloss increased $1.0$0.7 million to $1.3a net loss of $1.9 million in the first quarter of 2018, as compared to a net loss of $1.2 million in the first quarter of 2017, as comparedprincipally due to $0.3an unrealized loss on certain benefit plan investments, which was partially offset by increases in non-regulated revenue and allowance for equity funds used during construction.
Interest Expense
Net interest expense increased $0.5 million, or 5.9%, to $8.7 million in the first quarter of 2016 mostly due to the implementation of allowance for equity funds used during construction and an unrealized gain on our benefit plan insurance investment.
Interest Expense
Net interest expense increased $0.9 million, or 12.0%,2018, as compared to $8.2 million in the first quarter of 2017, as compared to $7.3 million in the first quarter of 2016.2017. The increase was due primarily to the sale of $50.0 million of First Mortgage Bonds during the first quarter of 2016, an increase in borrowings on the lines of credit, and a reduction in capitalized interest.
short-term financing for capital investments as well as increased short-term interest rates.
REGULATORY MATTERS
20172018 California Regulatory Activity
California GRC filing
On December 15, 2016, the CPUC voted to approve Cal Water's 2015 GRC settlement agreement. The approved decision, which was proposed by the presiding Administrative Law Judge in November 2016, authorized Cal Water to increase gross revenue by approximately $45.0 million starting on January 1, 2017, up to $17.2 million in 2018, up to $16.3 million in 2019, and up to $30.0 million upon completion and approval of the Company’s advice letter projects. The 2018 and 2019 revenue increases are subject to the CPUC’s earningearnings test protocol.
The CPUC’s decision also authorized Cal Water to invest $658.8 million in water system improvements throughout California over the three-year period of 2016-2018 in order to continue to provide safe and reliable water to its customers. This figure includes $197.3 million of water system infrastructure improvements that will be subject to the CPUC’s advice letter procedure.
The CPUC follows a rate case plan, which requires Cal Water to file a GRC for each of its regulated operating districts (except Grand Oaks) every three years. In a GRC proceeding, the CPUC not only considers the utility's rate setting requests, but may also consider other issues that affect the utility's rates and operations. The CPUC is generally required to issue its GRC decision prior to the first day of the test year or authorize interim rates. In accordance with the rate case plan, Cal Water will file its next GRC application in July of 2018.
Cost of Capital Application
In April of 2017, Cal Water, along with three other water utilities, filed an application to adopt a new cost of capital and capital structure for 2018. On March 22. 2018, the CPUC adopted a revised decision in the cost of capital proceeding for Cal Water requestedand three other water utilities for the years 2018-2020, establishing for Cal Water a 9.20% return on equity and a 5.51% cost of debt, with a capital structure of 46.60% long-term debt and 53.40% common equity, and an authorized return on rate base of 7.48%, compared with Cal Water’s prior return on equity of 10.75%9.43%, cost of debt of 6.24%, and a 53.4% equityauthorized return on rate base of 7.94%. The adopted capital structure as well as a waterdid not change. The adopted returns on debt and
equity will reduce Cal Water’s 2018 adopted revenue by approximately $6.7 million. The CPUC also authorized continuation of the WCCM, which provides for an adjustment in the return on equity if the cost of capital adjustment mechanism similar to that last adopted forlong-term debt as defined by an index of utility debt rates varies from the company. The California Division of Ratepayer Advocatesmost recent index by 100 basis points or more in 2019 and other parties will submit testimony later in the year and may propose a different cost of capital and capital structure. The CPUC schedule for the application anticipates a decision on the matter by the end of 2017.2020.
School Lead Testing Memorandum Account (SLT MA)
InOn March of 2017,30, 2018, Cal Water submitted an advice letter that established the SLT MA, which givesCost of Capital Memorandum Account (CoC MA) to track the difference between current rates and rates based upon the new cost of capital adopted by the CPUC as if the new cost of capital had been in effect beginning January 1, 2018. For the first three months of 2018, Cal Water recorded a $1.2 million reduction to revenue with a corresponding regulatory liability due to the opportunity to recover costs related to lead monitoring and testing required by the State Water Resources Control Board's Division of Drinking Water. The SLT MA will track all incremental expenses associated with lead testing conducted at the request of K-12 schools within Cal Water's service territory.CoC MA.
California Drought2018 Tax Accounting Memorandum Account (TAMA)
The incremental costs tracked inOn December 22, 2017, the drought memorandum account for the three month period ended March 31, 2017 were $0.2 million, of which less than $0.1 million was spent on capital. For the three month period ended March 31, 2016, incremental costs were $2.4 million, of which $0.4 million was spent on capital. On July 15, 2016, Cal Water submitted an adviceCPUC sent a letter to recover $4.2 millionAll Class A and B Water and Sewer Utilities on the subject of incremental drought expenses associated with calendar years 2014 and 2015. During the third quarter of 2016, Cal Water discussed the request with interested parties, including the ORA. A revised advice letter was submitted on October 12, 2016 by“Changes in Federal Tax Rates for 2018.” The CPUC required Cal Water to recover $2.9 millionestablish a memo account to track the impact of the TCJA on Cal Water. The TAMA will track the revenue requirement impact of the TCJA not otherwise reflected in incremental costs relatedrates from January 1, 2018 until current rates are modified to 2014 and 2015 expenses. On December 15, 2016,reflect all impacts of the CPUC approved a resolution to allowTCJA. For the first three months of 2018, Cal Water recorded a $1.9 million reduction to begin recoveringrevenue with a corresponding regulatory liability due to the requested $2.9TAMA. The Hawaii Water, Washington Water, and New Mexico Water Commissions have similar requirements to track the impact of the changes to the federal tax law. For the first three months of 2018, the Company recorded a reduction to revenue for $0.1 million throughfor Hawaii Water, Washington Water and New Mexico Water.
Escalation increase requests
As a surcharge, which became effective January 1, 2017.
part of the decision on the 2015 GRC, Cal Water was authorized to request annual escalation rate increases for 2018 for those districts that passed the earnings test. In November of 2017, Cal Water expects to submit an advice letter to request recovery forrequested escalation rate increases in all of its regulated districts. The annual adopted gross revenue associated with the incremental drought expenses from 2016November 2017 and the incremental capital expenditures from 2015-2016.
filing was $15.9 million. The new rates became effective on January 1, 2018.
WRAM and MCBA filings
In MarchApril of 2017,2018, Cal Water submitted an advice letter to true up the revenue over- and under-collections in the 20162017 annual WRAMs/MCBAs of its regulated districts. A net under-collection of $25.8$50.1 million is being recovered from customers in the form of 12, 18, and 18+ month surcharges/surcredits.greater-than-18-month surcharges. The new rates became effective April 15, 2017.2018. This surcharge/surcredit issurcharge in some cases is in addition to surcharges/surcredits authorized in prior years which have not yet expired.
Expense Offset filings
Expense offsets are dollar-for-dollar increases in revenue to match increased expenses, and therefore do not affect net operating income. In October of 2016,2017, Cal Water submitted advice letters to offset increasedrequest offsets for increases in purchased water costs and pump taxes in 4five of its regulated districts totaling $1.9$2.2 million. The new rates became effective on January 1, 2017.
In March of 2017, Cal Water submitted an advice letters to offset increased purchased water in one of its regulated districts, totaling $1.0 million. The new rates became effective on April 15, 2017.
2018.
Ratebase Offset filings
For construction projects that are authorized in GRCs as advice letter projects, companies are allowed to file ratebase offsets to increase revenues after the plant is placed into service. In November of 2016,2017, Cal Water submitted an advice letter to recover $2.6$1.4 million of annual revenue increase for ratebase offsetsa rate base offset in fiveone of its regulated districts. The new rates became effective on January 1, 2017.2018.
California Drought Memorandum Account
In AprilMarch of 2017,2018, Cal Water submitted an advice lettersletter to request recovery of 2016 and 2017 incremental drought expenses of $3.2 million. The advice letter requires a Commission resolution and Cal Water may recover $0.9 millionless than the requested amount. Cal Water anticipates a decision on the matter by the end of annual revenue increase for ratebase offsets in two of its regulated districts. The new rates became effective on April 15, 2017.
2018.
Travis Air Force Base
On September 29, 2016, Cal Water has entered into a 50-year agreement with the U.S. Department of Defense to acquire the water distribution assets of and distribute water to provide water utility service to, themost of Travis Air Force Base beginning in 2018, subject2018. On May 31, 2017, Cal Water submitted an application to the CPUC approval.
seeking approval to distribute water service to most of the base and to establish rates for its service.
The water system utilizes surface water treated at a water treatment plant and groundwater from five wells, and includes distribution piping, storage tanks, hydrants, and other appurtenances to serve about 15,280 active and reserve personnel
and civilians on the 6,400-acre base. If approved, Cal Water will also make initial capital improvements of about $12.7 million, with an anticipated capital investment of about $52.0 million over the 50-year term of the utility service contract.
20172018 Regulatory Activity—Other States
2016 Pukalani (Hawaii)2017 Waikoloa (Hawaii Water) GRC Filing
Filings
In December of 2016,2017, Hawaii waterWater filed a GRC for its Pukalani wastewater systemapplications requesting an additional $1.3$3.8 million in revenues on an annual basis. This revenue increase will be implemented over 5 years.basis for its Waikoloa Village and Resort Systems with the Hawaii Public Utilities Commission. The application requestedGRCs seek recovery forof capital investments in the Waikoloa Village and Waikoloa Resort Systems as well as increases in operating expenses since the previous rate case. Additionally,If approved, the application requested recovery of the balance of the cost of the wastewater treatment plant that was not approved to be included in customerCompany anticipates rates in the
previous rate case. The first phase of the revenue increase is expected towould become effective in the fourth quarter of 2017. Discovery between the parties has begun.
2018.
LIQUIDITY
Cash flow from Operations
Cash flow from operations for the first three months of 20172018 was $14.3$28.3 million compared to $31.5$14.3 million for the same period in 2016.2017. Cash generated by operations varies during the year due to customer billings, and timing of collections and contributions to our benefit plans.
During the first three months of 20172018, we made contributions of $7.5$7.3 million to our employee pension plan compared to contributions of $7.3$7.5 million made during the first three months of 2016. There were no2017. During the first three months of 2018 and 2017, we did not make any contributions made to the other postretirement benefit plans during the first three months of 2017 and 2016.plans. The 2017total 2018 estimated cash contribution to the pension plans is $29.5$33.4 million and to the other postretirement benefit plans is $9.3$10.1 million.
Cal Water customer drought surcharges were discontinued on July 29, 2016. As such there were no drought surcharge billings during the first quarter of 2017 as compared to $11.5 million in the first quarter of 2016. In addition, Cal Water made $6.6 million of prepayments for water charges and property taxes in the first quarter of 2017, as compared to none in the first quarter of 2016.
The water business is seasonal. Billed revenue is lower in the cool, wet winter months when less water is used compared to the warm, dry summer months when water use is highest. This seasonality results in the possible need for short-term borrowings under the bank lines of credit in the event cash is not available to cover operating and utility plant costs during the winter period. The increase in cash flows during the summer allows short-term borrowings to be paid down. Customer water usage can be lower than normal in drought years and when more than normal precipitation falls in our service areas or temperatures are lower than normal, especially in the summer months. In addition, short-term borrowings are used to finance utility plant expenditures until long-term financing is arranged.
Investing Activities
During the first three months of 20172018 and 2016,2017, we used $51.9$70.7 million and $56.5$51.9 million, respectively, of cash for company-funded and developer-funded utility plant expenditures. The 20172018 budget estimates utility plant expenditures to be between $200.0 and $220.0 million. Annual expenditures fluctuate each year due to the availability of construction resources and our ability to obtain construction permits in a timely manner.
Financing Activities
Net cash providedused by financing activities was $24.7$17.6 million during the first three months of 20172018 compared to $47.9$24.7 million of net cash provided by financing activities for the same period in 2016.2017.
During the first three months of 20172018 and 2016,2017, we borrowed $35.0$45.0 million and $54.5$35.0 million, respectively, on our unsecured revolving credit facilities. Repayments of unsecured revolving credit facilities borrowings during the first three months of 20172018 were $2.0$45.0 million and $53.6$2.0 million for the same period in 2016.2017. We also repaid $10.0 million of First Mortgage Bonds that matured in the first quarter of 2018.
The undercollected net WRAM and MCBA receivable balances were $48.0$68.2 million and $33.6$48.0 million as of March 31, 20172018 and March 31, 2016,2017, respectively. The undercollected balances were primarily financed by Cal Water using short-term and long-term financing arrangements to meet operational cash requirements. Interest on the undercollected balances, the interest recoverable from ratepayers, is limited to the current 90-day commercial paper rates which is significantly lower than Cal Water’s short and long-term financing rates.
Short-TermShort-term and Long-Term Financing
During the first three months of 2017,2018, we utilized cash generated from operations and borrowings on the unsecured revolving credit facilities to fund operations and proceeds from the issuance of long-term debt.capital investments. We did not sell Company common stock during the
first three months of 20172018 and 2016.2017. In future periods, management anticipates funding our utility plant needs through a relatively balanced approach between long term debt and equity.
Short-term liquidity is provided by our unsecured revolving credit facilities and internally generated funds. Long-term financing is accomplished through the use of both debt and equity. On September 23, 2010, the CPUC authorized Cal Water to issue $350.0 million of debt and common stock to finance utility plant projects and operations.
On March 10, 2015, the Company and Cal Water entered into Syndicated Credit Agreements, which provided for unsecured revolving credit facilities of up to an initial aggregate amount of $450.0 million for a term of five years. The Syndicated Credit Facilities amended, expanded, and replaced the Company’s and its subsidiaries’ credit facilities originally entered into on September 29, 2011. The new credit facilities extended the terms until March 10, 2020 and increased the Company’s unsecured revolving line of credit. The credit facilities may each be expanded by up to $50.0 million subject to certain conditions. The Company and subsidiaries that it designates may borrow up to $150.0 million under the Company’s revolving credit facility. Cal Water may borrow up to $300.0 million under its revolving credit facility. On May 13, 2016, the CPUC approved additional financing for Cal Water. As part of that decision, Cal Water is now allowedfacility; however, all borrowings need to use its revolving credit facilities for up tobe repaid within 24 months. Previously, Cal Water had to pay down its credit facility every 12 months unless otherwise authorized by the CPUC. The proceeds from the revolving credit facilities may be used for working capital purposes, including the short-term financing of utility plant projects. The base loan rate may vary from LIBOR plus 72.5 basis points to LIBOR plus 95 basis points, depending on the Company’s total capitalization ratio. Likewise, the unused commitment fee may vary from 8 basis points to 12.5 basis points based on the same ratio.
As of March 31, 2018 and December 31, 2017, there were short-term borrowings of $130.1$275.1 million outstanding on the unsecured revolving credit facilities compared to $97.1 million as of December 31, 2016. The increase in short-term borrowings during the first three months of 2017 was mostly to fund general operations and capital investment.facilities.
Given our ability to access our lines of credit on a daily basis, cash balances are managed to levels required for daily cash needs and excess cash is invested in short-term or cash equivalent instruments. Minimal operating levels of cash are maintained for Washington Water, New Mexico Water, and Hawaii Water.
Both short-term credit agreements contain affirmative and negative covenants and events of default customary for credit facilities of this type including, among other things, limitations and prohibitions relating to additional indebtedness, liens, mergers, and asset sales. Also, these unsecured credit agreements contain financial covenants governing the Company and its subsidiaries’ consolidated total capitalization ratio not to exceed 66.7% and an interest coverage ratio of three or more. As of March 31, 2017,2018, we are in compliance with all of the covenant requirements and are eligible to use the full amount of our credit facilities.
In March 2016, Cal Water issued $50.0 million of First Mortgage Bonds, consisting of $40.0 million of 4.41% series SSS maturing April 16, 2046 and $10.0 million of 4.61% series TTT maturing April 14, 2056. Cash proceeds of approximately $49.7 million, net of $0.3 million debt issuance costs, were received. Cal Water used a portion of the net proceeds from the offering to repay outstanding borrowings on the Company and Cal Water lines of credit of $48.6 million.
Bond principal and other long-term debt payments were $10.2 million during the first three months of 2018 and $0.3 million during the first three months of 2017 and the first three months of 2016.2017.
Long-term financing, which includes senior notes, other debt securities, and common stock, has typically been used to replace short-term borrowings and fund utility plant expenditures. Internally generated funds, after making dividend payments, provide positive cash flow, but have not been at a level to meet the needs of our utility plant expenditure requirements. Management expects this trend to continue given our utility plant expenditures plan for the next five years. Some utility plant expenditures are funded by payments received from developers for contributions in aid of construction or advances for construction. Funds received for contributions in aid of construction are non-refundable, whereas funds classified as advances in construction are refundable. Management believes long-term financing is available to meet our cash flow needs through issuances in both debt and equity instruments.
Dividends
During the first three months of 2017,2018, our quarterly common stock dividend payments were $0.18$0.1875 per share compared to $0.1725$0.1800 during the first three months of 2016.2017. For the full year 2016,2017, the payout ratio was 68%51% of net income. On a long-term basis, our goal is to achieve a dividend payout ratio of 60% of net income accomplished through future earnings growth.
At the April 26, 201725, 2018 meeting, the Board declared the firstsecond quarter dividend of $0.18$0.1875 per share payable on May 19, 2017,18, 2018, to stockholders of record on May 8, 2017.7, 2018. This was our 289th294th consecutive quarterly dividend.
20172018 Financing Plan
We intend to fund our utility plant needs in future periods through a relatively balanced approach between long-term debt and equity. The Company and Cal Water have a syndicated unsecured revolving line of credit of $150.0 million and $300.0 million, respectively, for short-term borrowings. As of March 31, 2017,2018, the Company’s and Cal Water’s availability on these unsecured revolving lines of credit was $94.9 million and $225.0$80.0 million, respectively.
Book Value and Stockholders of Record
Book value per common share was $13.56$14.17 at March 31, 20172018 compared to $13.75$14.44 at December 31, 2016.2017. There were approximately 1,1181,934 stockholders of record for our common stock as of February 6, 2017.12, 2018.
Utility Plant Expenditures
During the first three months of 2017,2018, utility plant expenditures totaled $51.9$70.7 million for company-funded and developer-funded projects. The 20172018 budget estimates company-funded utility plant expenditures to be between $200.0 and $220.0 million. The actual amount may vary from the budget number due to timing of actual payments related to current year and prior year projects. We do not control third-party-funded utility plant expenditures and therefore are unable to estimate the amount of such projects for 2017.
2018.
As of March 31, 2017,2018, construction work in progress was $150.5$197.4 million compared to $171.9$150.5 million as of March 31, 2016.2017. Work in progress includes projects that are under construction but not yet complete and placed in service.
WATER SUPPLY
Our source of supply varies among our operating districts. Certain districts obtain all of their supply from wells; some districts purchase all of their supply from wholesale suppliers; and other districts obtain supply from a combination of wells and wholesale suppliers. A small portion of supply comes from surface sources and is processed through Company-owned water treatment plants. To the best of management’smanagement's knowledge, we are meeting water quality, environmental, and other regulatory standards for all company-ownedCompany-owned systems.
Historically, approximately 49%46.5% of our annual water supply is pumped from wells. State groundwater management agencies operate differently in each state. Some of our wells extract ground water from water basins under state ordinances. These are adjudicated groundwater basins, in which a court has settled the dispute between landowners or other parties over how much annual groundwater can be extracted by each party. All of our adjudicated groundwater basins are located in the State of California. Our annual groundwater extraction from adjudicated groundwater basins approximates 6.8 billion gallons or 15%14.4% of our total annual water supply pumped from wells. Historically, we have extracted less than 100% of our annual adjudicated groundwater rights and have the right to carry forward up to 20% of the unused amount to the next annual period. All of our remaining wells extract ground water from managed or unmanaged water basins. There are no set limits for the ground water extracted from these water basins; however, the state or local water management agencies have the authority to regulate the groundwater extraction quantity whenever there are unforeseen large decreases to water basin levels.basins. Our annual groundwater extraction from managed groundwater basins approximates 28.128.0 billion gallons or 59%58.9% of our total annual water supply pumped from wells. Our annual groundwater extraction from unmanaged groundwater basins approximates 12.212.7 billion gallons or 26%26.7% of our total annual water supply pumped from wells. Most of the managed groundwater basins we extract water from have groundwater recharge facilities. We are required to pay well pump taxes to financially support these groundwater recharge facilities. Our wellWell pump taxes were $2.8$3.6 million and $2.5$2.8 million for the three months ended March 31, 20172018 and 2016,2017, respectively. In 2014, the State of California enacted the Sustainable Groundwater Management Act of 2014. The law and its implementing regulations will require most basins to select a sustainability agency by 2017, develop a sustainability plan by 2022, and show progress toward sustainability by 2027. We expect that in the future, groundwater will be produced mainly from managed and adjudicated basins.
California’sCalifornia's normal weather pattern yields little precipitation between mid-spring and mid-fall. The Washington Water service areas receive precipitation in all seasons, with the heaviest amounts during the winter. New Mexico Water’sWater's rainfall is heaviest in the summer monsoon season. Hawaii Water receives precipitation throughout the year, with the largest amounts in the winter months. Water usage in all service areas is highest during the warm and dry summers and declines in the cool winter months. Rain and snow during the winter months in California replenish underground water aquifers and fill reservoirs, providing the water supply for subsequent delivery to customers. As of March 31, 2017,30, 2018, the State of California snowpack water content and rainfall accumulation during the 2016 - 20172017-2018 water year was 167%is 57% of normallong-term averages (per the California
Department of Water Resources, Northern Sierra Precipitation Accumulation report). The northern Sierra region is the most important for the state’s urban water supplies. The central and southern portions of the Sierras also have recorded 64% and 55%, respectively, of long-term averages. In January of 2014, California's Governor Brown proclaimed a drought emergency and directed State officials to take all necessary actions to make water immediately available. On April 7, California's2017, the Governor Brown declared an end to the drought emergency in 54 of California’s 58 counties. Two of Cal Water's districts remain under a declared drought; these were areas where groundwater was impacted by five years of drought conditions. Management believes that supply pumped from underground aquifers and purchased from wholesale suppliers will be adequate to meet customer demand during 20172018 and beyond. Long-term water supply plans are developed for each of our districts to help assure an adequate water supply under various operating and supply conditions. Some districts have unique challenges in meeting water quality standards, but management believes that supplies will meet current standards using current treatment processes.
CONTRACTUAL OBLIGATIONS
During the three months ended March 31, 2017,2018, there were no material changes in contractual obligations outside the normal course of business.
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We do not hold, trade in or issue derivative financial instruments and therefore are not exposed to risks these instruments present. Our market risk to interest rate exposure is limited because the cost of long-term financing and short-term bank borrowings, including interest costs, is covered in consumer water rates as approved by the commissions. We do not have foreign operations; therefore, we do not have a foreign currency exchange risk. Our business is sensitive to commodity prices and is most affected by changes in purchased water and purchased power costs.
Historically, the CPUC’s balancing account or offsetableoffsettable expense procedures allowed for increases in purchased water, pump tax, and purchased power costs to be flowed through to consumers. Traditionally, a significant percentage of our net income and cash flows comescome from California regulated operations; therefore the CPUC’s actions have a significant impact on our business. See Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Regulatory Matters”.Matters.”
Item 4.
CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(c) under the Exchange Act) that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow for timely decisions regarding required disclosure.
In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Accordingly, our disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives.
Our management, with the participation of our CEO and our CFO, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2017.2018. Based on that evaluation, we concluded that our disclosure controls and procedures were effective at the reasonable assurance level.
(b) Changes to Internal Control over Financial Reporting
There was no change in our internal controls over financial reporting that occurred during the quarter ended March 31, 2017,2018, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
PART II OTHER INFORMATION
Item 1.
LEGAL PROCEEDINGS
From time to time, the Company is involved in various disputes and litigation matters that arise in the ordinary course of business. The status of each significant matter is reviewed and assessed for potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount of the range of loss can be estimated, a liability is accrued for the estimated loss in accordance with the accounting standards for contingencies. Legal proceedings
are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. While the outcome of these disputes and litigation matters cannot be predicted with any certainty, management does not believe when taking into account existing reserves the ultimate resolution of these matters will materially affect the Company’s financial position, results of operations, or cash flows. In the future, we may be involved in disputes and litigation related to a wide range of matters, including employment, construction, environmental issues and operations. Litigation can be time consumingtime-consuming and expensive and could divert management’s time and attention from our business. In addition, if we are subject to additional lawsuits or disputes, we might incur significant legal costs and it is uncertain whether we would be able to recover the legal costs from ratepayers or other third parties. For more information refer to Notefootnote 10.
Item 1A.
RISK FACTORS
There have been no material changes to the Company’s risk factors set forth in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year-ended December 31, 20162017 filed with the SEC on February 23, 2017.March 1, 2018.
Item 5.
OTHER INFORMATION
The Company confirmed in a Form 8K filing on April 26, 2018 that it has made a proposal to acquire San Jose Water Group (SJW) for $68.25 per share in an all-cash transaction valued at approximately $1.9 billion including the assumption of debt. The proposal represents a 20% premium to SJW’s closing stock price on April 25, 2018 and has been rejected by the SJW Board of Directors.
Item 6.
EXHIBITS
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Exhibit | | Description |
4 |
| | The Company agrees to furnish upon request to the Securities and Exchange Commission a copy of each instrument defining the rights of holders of long-term debt of the Company |
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10.1 |
| | Credit Agreement dated as of March 10, 2015 among California Water Service Group and certain of its subsidiaries from time to time party thereto, as borrowers, Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, Merrill Lynch, Pierce, Fenner & Smith incorporated, as sole lead arranger and sole bookrunner, CoBank, ACB and U.S. Bank National Association, as co-syndication agents, and Bank of China, Los Angeles Branch, as documentation agent, and the other lender parties thereto (Exhibit 10.1 to the Current Report on Form 8-K filed March 11, 2015) |
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| | |
10.2 |
| | Credit Agreement dated as of March 10, 2015 among California Water Service Company, as borrower, Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole lead arranger and sole bookrunner, CoBank, ACB and U.S. Bank National Association, as co-syndication agents, and Bank of China, Los Angeles Branch, as documentation agent, and the other lender parties thereto (Exhibit 10.2 to the Current Report on Form 8-K filed March 11, 2015) |
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31.1 |
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31.2 |
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32 |
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101.INS |
| | XBRL Instance Document |
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| | |
101.SCH |
| | XBRL Taxonomy Extension Schema Document |
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101.CAL |
| | XBRL Taxonomy Extension Calculation Linkbase Document |
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| | |
101.DEF |
| | XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
| | XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
| | XBRL Taxonomy Extension Presentation Linkbase Document |
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | |
| CALIFORNIA WATER SERVICE GROUP |
| Registrant |
| |
April 27, 2017 | By: | /s/ Thomas F. Smegal III |
| | Thomas F. Smegal III |
| | Vice President, |
| | Chief Financial Officer and Treasurer |
Exhibit Index
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| | | |
Exhibit | | Description |
4 |
| | The Company agrees to furnish upon request to the Securities and Exchange Commission a copy of each instrument defining the rights of holders of long-term debt of the Company |
| | |
10.1 |
| | Credit Agreement dated as of March 10, 2015 among California Water Service Group and certain of its subsidiaries from time to time party thereto, as borrowers, Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, Merrill Lynch, Pierce, Fenner & Smith incorporated, as sole lead arranger and sole bookrunner, CoBank, ACB and U.S. Bank National Association, as co-syndication agents, and Bank of China, Los Angeles Branch, as documentation agent, and the other lender parties thereto (Exhibit 10.1 to the Current Report on Form 8-K filed March 11, 2015) |
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| | |
10.2 |
| | Credit Agreement dated as of March 10, 2015 among California Water Service Company, as borrower, Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole lead arranger and sole bookrunner, CoBank, ACB and U.S. Bank National Association, as co-syndication agents, and Bank of China, Los Angeles Branch, as documentation agent, and the other lender parties thereto (Exhibit 10.2 to the Current Report on Form 8-K filed March 11, 2015) |
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31.1 |
| | Chief Executive Officer certification of financial statements pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 |
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31.2 |
| | Chief Financial Officer certification of financial statements pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 |
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32 |
| | Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 |
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101.INS |
| | XBRL Instance Document |
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| | |
101.SCH |
| | XBRL Taxonomy Extension Schema Document |
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| | |
101.CAL |
| | XBRL Taxonomy Extension Calculation Linkbase Document |
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| | |
101.DEF |
| | XBRL Taxonomy Extension Definition Linkbase Document |
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| | |
101.LAB |
| | XBRL Taxonomy Extension Label Linkbase Document |
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| | |
101.PRE |
| | XBRL Taxonomy Extension Presentation Linkbase Document |
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | |
| CALIFORNIA WATER SERVICE GROUP |
| Registrant |
| |
April 26, 2018 | By: | /s/ Thomas F. Smegal III |
| | Thomas F. Smegal III |
| | Vice President, |
| | Chief Financial Officer and Treasurer |