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 September 30, 1995
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 October 31, 1995 - 6,258,729
This Form 10-Q contains a total of 72 pages.
PART I - FINANCIAL INFORMATION
CALIFORNIA WATER SERVICE COMPANY
ITEM 1 FINANCIAL STATEMENTS BALANCE SHEET
SEPT. 30, 1995 Dec. 31, 1994
In Thousands
ASSETS
Utility plant $576,741 $559,180
Less depreciation (159,818) (151,285)
Net utility plant 416,923 407,895
Current assets:
Cash and cash equivalents 15,743 1,301
Accounts receivable 15,989 13,161
Unbilled revenue 8,366 5,992
Materials and supplies 2,730 3,018
Taxes and other prepaid expenses 5,661 3,927
Total current assets 48,489 27,399
Regulatory assets 24,277 24,135
Other deferred charges 4,617 4,799
$494,306 $464,228
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholders' equity:
Common stock $ 43,154 $ 42,800
Retained earnings 102,953 101,647
Total common shareholders' equity 146,107 144,447
Preferred stock without mandatory
redemption provision 3,475 3,475
Long term debt 148,944 128,944
Total capitalization 298,526 276,866
Current liabilities:
Short-term borrowings 0 7,000
Accounts payable 17,357 12,231
Accrued expenses and other liabilities 19,220 10,897
Total current liabilities 36,577 30,128
Unamortized investment tax credits 3,265 3,265
Deferred income taxes 12,549 12,445
Advances for construction 93,403 92,190
Contributions in aid of construction 38,519 37,867
Regulatory liabilities 11,467 11,467
$494,306 $464,228
2
See accompanying notes on page 5
CALIFORNIA WATER SERVICE COMPANY
STATEMENT OF INCOME
Sept. 30
1995 1994
In Thousands
FOR THE THREE MONTHS ENDED:
Operating revenue $53,276 $50,303
Operating expenses:
Operations 33,008 30,848
Maintenance 2,000 2,192
Depreciation 2,859 2,748
Federal income taxes 3,447 3,118
State Income taxes 1,018 920
Property and other taxes 1,848 1,747
44,180 41,573
Net operating income 9,096 8,730
Other income and expenses:
Interest and amortization on
long term debt 2,791 2,653
Other income and expenses, net (167) 220
2,624 2,873
Net income 6,472 5,857
Preferred dividends 38 38
Net income available for common stock $ 6,434 $ 5,819
Weighted average shares outstanding 6,253 5,709
Earnings per share of common stock $ 1.03 $ 1.02
Dividends per share of common stock $ 0.51 $ 0.49-1/2
FOR THE NINE MONTHS ENDED:
Operating revenue $124,063 $121,029
Operating expenses:
Operations 78,095 74,404
Maintenance 5,708 5,901
Depreciation 8,577 8,220
Federal income taxes 5,804 5,991
State income taxes 1,721 1,775
Property and other taxes 5,215 4,952
105,120 101,243
Net operating income 18,943 19,786
Other income and expenses:
Interest and amortization on
long term debt 8,065 7,958
Other income and expenses, net (101) 506
7,964 8,464
Net income 10,979 11,322
Preferred dividends 114 114
Net income available for common stock $ 10,865 $ 11,208
Weighted average shares outstanding 6,249 5,700
Earnings per share of common stock $ 1.74 $ 1.97
Dividends per share of common stock $ 1.53 $1.48-1/2
See accompanying notes on page 5 3
CALIFORNIA WATER SERVICE COMPANY
STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED:
In Thousands
Sept. 30
1995 1994
Operating activities:
Net income $ 10,979 $ 11,322
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 8,577 8,220
Regulatory assets and liabilities, net (142) (142)
Deferred income taxes and investment tax credits 103 335
Change in assets and liabilities:
Accounts receivable (2,827) (3,923)
Unbilled revenue (2,375) (563)
Materials and supplies 288 (175)
Taxes and other prepaid expenses (1,734) (1,328)
Accounts payable 5,126 3,609
Accrued expenses and other liabilities 8,323 5,780
Other changes, net 944 637
Net adjustments 16,283 12,450
Net cash provided by operating activities 27,262 23,772
Investing activities:
Utility plant expenditures (18,716) (20,835)
Financing activities:
Net short-term borrowings (7,000) (15,000)
Proceeds from issuance of senior notes 20,000 0
Proceeds from issuance of common stock 0 17,863
Advances for construction 3,870 4,429
Contributions in aid of construction 1,370 1,459
Refunds of advances for construction (2,671) (2,766)
Dividends (9,673) (8,571)
Net cash provided by financing activities 5,896 (2,586)
Change in cash and cash equivalents 14,442 351
Cash and cash equivalents at start of
period 1,301 1,461
Cash and cash equivalents at end of
period $ 15,743 $ 1,812
4
See accompanying notes on page 5
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 1994 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
RESULTS OF THIRD QUARTER OPERATIONS
Third quarter net income was $6,472,000 equivalent to $1.03 per common
share, a one cent increase from the $1.02 earned in 1994's third quarter.
During this year's third quarter, there were 6,253,000 weighted average common
shares outstanding, compared to 5,709,000 last year, resulting in a decrease in
earnings per share. The increase in the weighed average common shares
outstanding was primarily due to the sale of 550,000 shares in September 1994.
Operating revenue increased $2,973,000 from 1994 to $53,276,000. The
increase in operating revenue is accounted for in the following table:
General and step rate increases $ 688,000
Offset rate increases 1,064,000
Total rate increases 1,752,000
Increased consumption 1,019,000
Usage by 1,897 new customers 202,000
Net revenue increase $2,973,000
Water production for the quarter was 2% above last year's level. Well
production provided 45% of the supply with 55% purchased from wholesale
suppliers. Water production cost, which includes purchased water, purchased
power and pump taxes, increased $1,630,000 or 8% due to the additional
production and rate increases for purchased water in certain districts which
became effective since last year. Districts with purchased water wholesale
rate increases included East Los Angeles with 6%, a 15% increase in Hermosa
Redondo and Palos Verdes, an 8% increase in Livermore and a 4% increase in
Stockton. Pump tax rates were increased 50% in Bakersfield and 11% in the Los
Angeles districts. The components of water production expense and the changes
from last year are shown in the table below:
Third Quarter Dollar Percent
1995 Cost Change Change
Purchased water $15,516,000 $1,666,000 12
Purchased power 5,335,000 115,000 2
Pump taxes 1,498,000 (151,000) (9)
Total $22,349,000 $1,630,000 8
Other operations expense increased $530,000, primarily due to a 3.5%
general wage increase which was effective January 1 and increases in related
employee benefits.
Federal and state income taxes increased $427,000 because of greater
taxable income. Interest on long term debt increased $140,000 due to the sale
of the Series A senior notes. Short-term borrowings were reduced with proceeds
from the note sale, resulting in a decrease in short-term interest expense of
about $200,000.
REGULATORY MATTERS
In August, the Company was granted an 11.05% return on common equity
by the California Public Utilities Commission (Commission). The decision,
effecting six districts and representing about 15% of total customers, had been
expected in late spring. Additional revenue expected from the decision is
$1,378,000 during the twelve months subsequent to the decision, followed by
step rate increases totaling $1,558,000 distributed over 1996 through 1998.
In July, the Company filed the 1995 rate case series with the Commission.
The filing involves five districts which represent about 45% of total
customers. The Company's total revenue increase request is $26,000,000 based
on a 12.1 percent return on equity. The revenue increase would be spread over
a four year period with $8,000,000 requested for 1996 and an additional
$6,000,000 in each year 1997 through 1999. A decision is anticipated in mid
1996.
LIQUIDITY
In August, the Company completed the sale of $20,000,000 Series A 7.28%
30 year Senior Notes. Proceeds from the issue were used to repay outstanding
short-term borrowings under the Company's bank line of credit of $6,000,000
with the balance invested in short-term U. S. Government securities. The
remaining proceeds will be used to fund a portion of the Company's 1995 $20.7
million capital improvement budget, and on November 1, to redeem upon maturity
the outstanding $2,565,000 Series J first mortgage bonds and to satisfy first
mortgage bonds sinking fund requirements. Additional funding for this year's
construction budget will be provided by operations.
On August 15, 1995, the third quarter common dividend was paid at $.51
per share. Under the Company's Dividend Reinvestment Plan (Plan), 11,695 new
common shares were issued to shareholders who elected to reinvest their
dividend in additional shares. Shares needed by the Plan for this year's
first and second quarter dividends had been acquired by cash purchases on the
open market and redistributed of the purchased shares to the Plan's
participating shareholders. About 10.7% of the outstanding shares participate
in the Plan. It is the Company's intention to continue to issue new shares to
satisfy future quarterly Plan requirements. The change to issuing new shares
under the Plan will reduce quarterly cash required to fund dividend payments
by about $350,000. Issuance of the additional shares will have a dilutive
effect in earnings per share calculations and upon existing equity of
shareholders not participating in the Plan.
The Company was awarded a contract by the City of Menlo Park to provide
meter reading, billing and customer service to the City's 3,900 water
customers. Service under the contract commenced October 1, 1995. The Company
expects to receive about $175,000 annually from the contract.
WATER SUPPLY
The Company believes that its various sources of water supply are adequate
to meet customer demand for the remainder of the year. Storage in state
reservoirs is above average and it is expected that there will be an above
average storage carryover from this year into 1996.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K
Sequential
Exhibit Page Numbers
Number Description in this report
4 Note Agreement dated August 15, 1995 11
pertaining to issuance of $20,000,000
7.28% Series A Senior Notes, Due
November 1, 2025
10.16 $30,000,000 Business Loan Agreement 65
between California Water Service
Company and Bank of America
(b) No reports on Form 8-K have been filed during the quarter ended
September 30, 1995.
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
/s/ Gerald F. Feeney
November 3, 1995 Gerald F. Feeney
Vice President, Chief Financial Officer
and Treasurer