August 12, 1994
Securities and Exchange Commission
450 5 th Street
Washington, DC 20549
Gentlemen :
Pursuant to the requirements of the Securities Exchange Act of 1934, we are
transmitting herewith the attached Form 10 - Q.
Very truly yours,
CALIFORNIA WATER SERVICE COMPANY
HAROLD C. ULRICH
Harold C. Ulrich
Vice President, Treasurer and
Chief Financial Officer
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 June 30, 1994
OR
___
|___| 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 0-464
CALIFORNIA WATER SERVICE COMPANY
(Exact name of registrant as specified in its charter)
California 94-0362795
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1720 North First Street, San Jose, Ca. 95112
(Address of principal executive offices) (Zip Code)
1-408-451-8200
(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 X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
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 July 29, 1994 - 5,697,034
This Form 10-Q contains a total of 10 pages.
PART I - FINANCIAL INFORMATION
CALIFORNIA WATER SERVICE COMPANY
ITEM 1 FINANCIAL STATEMENTS BALANCE SHEET
June 30, 1994 Dec. 31, 1993
In Thousands
ASSETS
Utility plant $545,648 $533,213
Less depreciation (147,2l3) (141,510)
Net utility plant 398,435 391,703
Current assets:
Cash and cash equivalents 1,262 1,461
Accounts receivable 13,402 10,835
Unbilled revenue 5,691 5,124
Unbilled conservation revenue 1,974 2,424
Materials and supplies 2,996 2,853
Taxes and other prepaid expenses 2,638 3,716
Total current assets 27,963 26,413
Regulatory assets 23,522 23,404
Other deferred charges 4,961 5,099
$454,881 $446,619
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholders' equity:
Common stock $ 25,363 $ 25,059
Retained earnings 98,693 98,940
Total common shareholders' equity 124,056 123,999
Preferred stock without mandatory
redemption provision 3,475 3,475
First mortgage bonds 129,608 129,608
Total capitalization 257,139 257,082
Current liabilities:
Short-term borrowings 18,800 15,000
Accounts payable 13,943 11,234
Accrued expenses and other liabilities 11,061 11,722
Total current liabilities 43,804 37,956
Unamortized investment tax credits 3,320 3,341
Deferred income taxes 11,306 11,045
Regulatory liabilities 11,467 11,467
Advances for construction 92,217 90,812
Contributions in aid of construction 35,628 34,916
$454,881 $446,619
See accompanying notes on page 5 2
CALIFORNIA WATER SERVICE COMPANY
STATEMENT OF INCOME
June 30
1994 1993
In Thousands
FOR THE THREE MONTHS ENDED:
Operating revenue $40,147 $40,503
Operating expenses:
Operations 24,445 23,920
Maintenance 1,769 1,673
Depreciation 2,735 2,550
Income taxes 2,752 3,027
Property and other taxes 1,554 1,586
33,255 32,756
Net operating income 6,892 7,747
Other expenses, net (2,822) (3,058)
Net income 4,070 4,689
Preferred dividends 38 38
Net income available for common stock $ 4,032 $ 4,651
Weighted average shares outstanding 5,697 5,689
Earnings per share of common stock $ 0.71 $ 0.82
Dividends per share of common stock $ 0.495 $ 0.48
FOR THE SIX MONTHS ENDED:
Operating revenue $70,726 $68,336
Operating expenses:
Operations 43,556 41,297
Maintenance 3,708 3,366
Depreciation 5,472 5,193
Income taxes 3,728 3,567
Property and other taxes 3,206 3,050
59,670 56,473
Net operating income 11,056 11,863
Other expenses, net (5,591) (6,196)
Net income 5,465 5,667
Preferred dividends 76 76
Net income available for common stock $ 5,389 $ 5,591
Weighted average shares outstanding 5,695 5,689
Earnings per share of common stock $ 0.95 $ 0.98
Dividends per share of common stock $ 0.99 $ 0.96
See accompanying notes on page 5 3
CALIFORNIA WATER SERVICE COMPANY
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED:
In Thousands
JUNE 30
1994 1993
Operating activities:
Net income $ 5,465 $ 5,667
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 5,472 5,194
Regulatory assets and liabilities, net (118) (10,182)
Deferred income taxes and investment tax credits 240 10,486
Change in operating assets and liabilities:
Accounts receivable (2,567) (390)
Unbilled revenue (117) (1,635)
Materials and supplies (143) (40)
Taxes and other prepaid expenses 1,078 1,950
Accounts payable 2,709 3,569
Accrued expenses and other liabilities (661) (800)
Other changes, net 405 (410)
Net adjustments 6,298 7,742
Net cash provided by operating activities 11,763 13,409
Investing activities:
Utility plant expenditures (12,925) (13,257)
Financing activities:
Net short-term borrowings 3,800 (2,000)
Proceeds from issuance of common stock 304 0
Proceeds from sale of first mortgage bonds 0 20,000
Advances for construction 3,198 2,416
Contributions in aid of construction 1,163 1,228
Refunds of advances for construction (1,790) (1,731)
Retirements of first mortgage bonds 0 (14,768)
Dividends (5,712) (5,538)
Net cash provided (used) by
financing activities 963 (393)
Change in cash and cash equivalents (199) (241)
Cash and cash equivalents at start of
period 1,461 899
Cash and cash equivalents at end of
period $ 1,262 $ 658
See accompanying notes on page 5 4
Notes:
1. Due to the seasonal nature of the water business, the results for
interim periods are not indicative of the results for a twelve month
period.
2. The interim financial information is unaudited. In the opinion of
management, the accompanying financial statements reflect all
adjustments which are necessary to provide a fair statement of the
results for the periods covered. The adjustments consist only of
normal recurring adjustments.
3. Earnings per share are calculated on the weighted average number of
common shares outstanding during the period and net income
available for common stock as shown on the Statement of Income.
4. Refer to 1993 Annual Report on Form 10-K for a summary of signifi-
cant accounting policies and detailed information regarding the
financial statements.
5
PART I FINANCIAL INFORMATION
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY
The Company's 1994 capital improvement budget of $21.6 million is being
temporarily financed through short-term borrowings under its $30 million bank
line of credit. Short-term borrowings which are also used to meet seasonal
cash requirements totaled $18.8 million at June 30, 1994. Permanent financing
will be provided by cash from operations and the anticipated sale of up to
600,000 shares of common stock. The stock sale is planned to be completed
during the third quarter of 1994, subject to market conditions. The California
Public Utilities Commission (Commission) authorized the issuance of the new
shares in April 1994.
RESULTS OF SECOND QUARTER OPERATIONS
Net income for the quarter was $4,070,000, a decline of $619,000 from the
prior year. Earnings per share were 71 cents, down 11 cents per share from the
record second quarter of 1993. Operating revenue declined 1% to $40,147,000
from $40,503,000 in 1993.
In the second quarter of 1993 a Commission decision authorized the transfer
of water conservation penalties collected during the mandatory rationing period
to revenue in order to offset under-collection in balancing accounts. The
Commission also permitted the recording in memorandum accounts of revenue lost
due to water conservation during 1993. The amount of revenue so recorded under
this authority totaled approximately $2,500,000 in the second quarter of 1993,
equivalent to 26 cents per share in earnings. Since this authority expired in
1993, no similar revenue was recorded in 1994.
The revenue drop was partially offset by rate relief of $1,520,000 and
$260,000 from new customers. Although water supply was adequate and rationing
was no longer in force, average water consumption per customer increased only
4% to 70.8 Ccf. This consumption remained well below the 5 year pre-drought
average of 75.6 Ccf. and added only $360,000 to revenue for the quarter.
REGULATORY MATTERS
On July 20, 1994, the Commission issued decisions for the 1993 series of
general rate increase applications covering the Chico, Oroville and Salinas
districts which contain approximately 13% of the Company's customers. The
decisions authorize revenue increases of approximately $850,000 in the
aggregate on an annualized basis with further step increases of $650,000
effective on each January 1 in 1995, 1996 and 1997. The decisions allow a
return on common equity of 10.2 percent compared with a return of 11 percent on
the previous year's decisions. The Commission also approved offset rate
increases of $300,000 for the amortization of the water production balancing
accounts for the Chico and Salinas districts.
In July 1994, the Company initiated the process with the Commission for
filing general rate cases for six districts, the 1994 series consisting of
Dixon, Los Altos, Marysville, South San Francisco, Westlake and Willows which
contain approximately 13% of the Company's customers. The applications request
a return on common equity of 12 percent and combined annual increases in
revenue of approximately $2,900,000 starting in mid-1995 followed by step
increases of about $550,000 in the years 1996 - 1998.
On June 22, 1994 the Commission issued its final decision in its OII (Order
Instituting Investigation) proceeding regarding the Risk of Water Utilities.
While the Commission concluded that no fundamental change in ratemaking
procedures was necessary at this time, it authorized interest on water utility
expense balancing accounts and broadened the coverage of existing water quality
memorandum accounts. In addition, the Commission directed its staff to hold
workshops and formulate recommendations on conservation, water rate design,
performanced-based ratemaking, water reclamation, assistance to low-income
families and related legislation.
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of shareholders of California Water Service Company
was held at the Company's executive office, San Jose, California on
April 20, 1994.
(b) At the annual shareholders meeting, a board of directors was elected
for the ensuing year. All directors nominated were elected:
William E. Ayer Robert W. Foy
Edward D. Harris, Jr., M. D. Donald L. Houck
Robert K. Jaedicke L. W. Lane, Jr.
C. H. Stump Edwin E. van Bronkhorst
J. W. Weinhardt
(c) Two matters were voted on at the meeting: (1) election of directors for
the ensuing year and (2) ratification of the Company's selection of independent
auditors for 1994.
(1) Tabulation of the votes for the election of directors was:
For Withheld
William E. Ayer 5,834,252 49,032
Robert W. Foy 5,839,537 43,747
Edward D. Harris, Jr. M. D. 5,832,639 50,645
Donald L. Houck 5,840,817 42,467
Robert K. Jaedicke 5,836,367 46,917
L. W. Lane, Jr. 5,835,987 47,297
C. H. Stump 5,839,316 43,968
Edwin E. van Bronkhorst 5,838,710 44,574
J. W. Weinhardt 5,829,533 53,751
(2) KPMG Peat Marwick was elected to serve as independent auditors for
1994. There were 5,795,567 votes cast in favor of KPMG Peat Marwick,
24,859 votes against and 62,858 abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K.
None.
(b) No reports on Form 8-K have been filed during the quarter ended
June 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CALIFORNIA WATER SERVICE COMPANY
Registrant
August 12, 1994 /s/ HAROLD C. ULRICH
Harold C. Ulrich
Vice President, Treasurer and
Chief Financial Officer