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, 1997
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 Identification No.)
of incorporation or organization)
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 April 28, 1997 - 6,309,570. This Form 10-Q contains a total of 10 pages.
PART I - FINANCIAL INFORMATION
CALIFORNIA WATER SERVICE COMPANY
ITEM 1 FINANCIAL STATEMENTS BALANCE SHEET
MARCH 31, 1997 DEC. 31, 1996
In Thousands
ASSETS
Utility plant $623,713 $618,432
Less depreciation 178,844 174,844
Net utility plant 444,869 443,588
Current assets:
Cash and cash equivalents 970 1,368
Accounts receivable 12,740 12,965
Unbilled revenue 5,452 5,353
Unbilled conservation revenue 175 224
Materials and supplies 2,219 2,324
Taxes and other prepaid expenses 4,420 4,537
Total current assets 25,976 26,771
Regulatory assets 37,691 37,556
Other deferred assets 4,426 4,475
$512,962 $512,390
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity:
Common stock 44,941 44,941
Retained earnings 108,839 109,285
Total common shareholders' equity 153,780 154,226
Preferred stock 3,475 3,475
Long term debt 142,153 142,153
Total capitalization 299,408 299,854
Current liabilities:
Short-term borrowings 4,000 7,500
Accounts payable 17,266 14,692
Accrued expenses and other liabilities 14,403 12,602
Total current liabilities 35,669 34,794
Unamortized investment tax credit 3,086 3,086
Deferred income taxes 24,097 23,736
Advances for construction 95,000 95,226
Contributions in aid of construction 43,075 43,067
Regulatory liabilities 12,627 12,627
$512,962 $512,390
See accompanying notes on page 5 2
CALIFORNIA WATER SERVICE COMPANY
STATEMENT OF INCOME
March 31
1997 1996
FOR THE THREE MONTHS ENDED: In Thousands
Operating revenue $37,558 $32,298
Operating expenses:
Operation 23,006 20,864
Maintenance 1,921 1,817
Depreciation 3,388 3,005
Federal income taxes 1,347 597
State income taxes 267 181
Property and other taxes 1,917 1,840
Total operating expenses 31,846 28,304
Net operating income 5,712 3,994
Other income and expenses:
Interest and amortization on long term debt 2,890 2,952
Other income and expenses, net (99) (135)
2,791 2,817
Net income 2,921 1,177
Preferred dividends 38 38
Net income available for common stock $2,883 $1,139
Weighted average shares outstanding 6,310 6,275
Earnings per share of common stock $0.46 $0.18
Dividends per share of common stock $0.5275 $0.52
See accompanying notes on page 5 3
CALIFORNIA WATER SERVICE COMPANY
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED
In Thousands
MARCH 31
1997 1996
Operating activities:
Net Income $2,921 $1,177
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 3,388 3,005
Regulatory assets and liabilities, net (135) (66)
Deferred income taxes and investment tax credits, net 361 (70)
Change in assets and liabilities:
Accounts receivable 225 2,502
Unbilled revenue (50) 1,174
Materials and supplies 105 (131)
Taxes and other prepaid expenses 117 214
Accounts payable 2,574 (1,029)
Accrued expenses and other liabilities 1,801 1,133
Other changes, net 440 274
Net adjustments 8,826 7,006
Net cash provided by operating activities 11,747 8,183
Investing activities:
Utility plant expenditures (5,471) (11,695)
Financing activities:
Net short-term borrowings (3,500) 1,000
Proceeds from issuance of common stock 0 363
Advances for construction 645 1,420
Contributions in aid of construction 405 376
Refunds of advances for construction (857) (795)
Dividends (3,367) (3,298)
Net cash used for financing activities (6,674) (934)
Change in cash and cash equivalents (398) (4,446)
Cash and cash equivalents at start of period 1,368 6,273
Cash and cash equivalents at end of period $970 $1,827
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 1996 Annual Report on Form 10-K for a summary of significant
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 FIRST QUARTER OPERATIONS
First quarter net income was $2,921,000 equivalent to $0.46 per common share,
a 28 cents increase from the $0.18 earned in 1996's first quarter. These
results represent the Company's highest first quarter earnings, except for
1987's first quarter which included $0.39 due to a change in accounting
method related to recording unbilled revenue.
Operating revenue increased $5,260,000 from 1996 to $37,558,000. Weather,
rate increases and new customers were important factors contributing to the
revenue increase. Consumption levels during the latter part of the quarter
were significantly greater than last year because of warm and dry weather.
Average sales per customer increased 6% and average revenue per customer 13%.
The 6,000 City of Hawthorne customers added on March 1, 1996, are included
in revenue from new customers for January and February of 1997. A breakdown
of the increase in operating revenue is accounted for in the following table:
Rate increases $2,007,000
Increased consumption 2,377,000
Usage by new customers 876,000
Net revenue increase $5,260,000
Water production for the quarter was 13% above last year's level. Well
production provided 44% of the supply with 54% purchased from wholesale
suppliers and 2% obtained from surface supply and processed through the
Company's Bear Gulch district treatment plant. Water production costs,
which includes purchased water, purchased power and pump taxes, increased
$1,819,000 or 17% due to the additional production and suppliers' rate
increases which became effective in six districts since last year. The
purchased water rate increases ranged from 1% to 7%. Power savings were
achieved commencing last February by taking advantage of modified power rate
tariffs offered by suppliers; on a comparative basis, some benefit continued
to be realized in the first part of the current quarter. Three districts
have higher pump tax rates in effect this year. The components of water
production expense and the changes from last year are shown in the table
below:
First Quarter Dollar
1997 Cost Change
Purchased water $10,103,000 $1,384,000
Purchased power 1,701,000 303,000
Pump taxes 430,000 132,000
Total $12,234,000 $1,819,000
Other operations expense increased $323,000, primarily due to a 3.0% general
wage increase which was effective January 1st and increases in related
employee benefits.
Depreciation and amortization expense increased $383,000 due primarily to
increased depreciation expense authorized by the Commission in the rate case
decision received in 1996 affecting five districts. The additional expense
was about $250,000 and is reflected in customer rates. Amortization expense
increased to reflect the write off of the Hawthorne lease up front payment.
Federal and state income taxes increased $836,000 because of greater taxable
income.
REGULATORY MATTERS
In July 1996, the Company filed with the California Public Utilities Commission
(Commission) for rate increases in two districts representing about 11% of
total customers. In early January 1997, hearings before the Commission
regarding this filing were completed and a decision regarding the application
was received from the full Commission in April. The Commission's decision
authorizes a 10.35% return on common equity. The decision is expected to
increase 1997 revenue by about $2.5 million.
LIQUIDITY
Interest expense on long-term debt decreased by $62,000 as a result of the
retirement of Series K first mortgage bonds and sinking fund payments made in
the fourth quarter of 1996. Short-term interest expense increased $81,000
due to additional borrowings under the Company's bank line of credit during
the current quarter. At March 31, 1997, $4 million was borrowed under the
bank line of credit at an effective interest rate of 6.9%.
The first quarter common dividend was paid on February 15, 1997, at $0.5275
per share. The $0.5275 represents a $0.0075 increase in the quarterly dividend
rate as approved by the Board of Directors at their January meeting.
Annualized, the dividend rate is $2.11 per common share.
No new common shares were issued under the Company's Dividend Reinvestment
Plan (Plan) during the first quarter. Shares required for the Plan were
purchased on the open market and redistributed to shareholders who elected to
participate in the Plan. About 11% of the outstanding shares participate in
the Plan.
During the quarter, utility plant expenditures totaled $5,471,000 for additions
to and replacements of utility plant. Of the $5,471,000, $3,718,000 was funded
through the Company's construction budget with the balance consisting of funds
received from developers as contributions in aid of construction and refundable
advances for construction. The 1997 Company construction budget is $23,200,000.
WATER SUPPLY
The Company believes that its various sources of water supply are sufficient to
meet customer demand for the remainder of the year. Approximately half of the
water source is purchased from wholesale suppliers with the other half pumped
from wells. Storage in state reservoirs was 113% of historic average as of
March 31, 1997, and groundwater levels remain adequate.
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
None
(b) No reports on Form 8-K have been filed during the quarter ended
March 31, 1997.
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
April 28, 1997 Gerald F. Feeney
Vice President, Chief Financial Officer
and Treasurer