Total Number of Pages - 70
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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 No. 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)
1720 North First Street San Jose, California 95112
(Address of Principal Executive Offices) (Zip Code)
1-408-451-8200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Cumulative Preferred Stock, Par Value, $25
(Title of Class)
(Title of Class)
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 .
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by
nonaffiliates of the Registrant - $199,905,088 at February 28,
1995.
Common stock outstanding at February 28, 1995 - 6,247,034 shares.
1
EXHIBIT INDEX
The exhibit index to this Form 10-K is on page 25.
DOCUMENTS INCORPORATED BY REFERENCE
Designated portions of Registrant's Annual Report to
Shareholders for the calendar year ended December 31, 1994 ("1994
Annual Report") are incorporated by reference in Part I (Item 1),
Part II (Items 5, 6, 7 and 8) and in Part IV (Item 14(a)(1))
Designated portions of the Registrant's Proxy Statement
dated March 13, 1995, relating to the 1995 annual meeting of
shareholders ("Proxy Statement") are incorporated by reference in
Part III (Items 10, 11 and 12) as of the date the Proxy Statement
was filed with the Securities and Exchange Commission.
2
TABLE OF CONTENTS
Page
PART I
Item 1. Business............................ 5
a. General Development of Business..... 5
Regulation and Rates.............. 5
b. Financial Information about
Industry Segments................. 7
c. Narrative Description of Business... 8
Geographical Service Areas
and Number of Customers at
Year-End.......................... 9
Water Supply........................ 10
Utility Plant Construction Program
and Acquisitions.................. 13
Quality of Supplies................. 13
Competition and Condemnation........ 13
Environmental Matters .............. 14
Human Resources..................... 14
d. Financial Information about
Foreign and Domestic Operations
and Export Sales ................. 14
Item 2. Properties ......................... 14
Item 3. Legal Proceedings................... 15
Item 4. Submission of Matters to a Vote of
Security Holders.................. 15
Executive Officers of the Registrant......... 16
PART II
Item 5. Market for Registrant's
Common Equity and Related
Stockholder Matters............... 17
Item 6. Selected Financial Data............. 17
Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations......... 17
3
Item 8. Financial Statements and
Supplementary Data................ 17
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure............. 18
PART III
Item 10. Directors and Executive Officers
of the Registrant................. 18
Item 11. Executive Compensation.............. 18
Item 12. Security Ownership of Certain
Beneficial Owners and Management.. 18
Item 13. Certain Relationships and Related
Transactions...................... 18
PART IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on
Form 8-K.......................... 19
Signatures........................................ 21
Independent Auditors' Report...................... 23
Schedules......................................... 24
Exhibit Index..................................... 25
Exhibits.......................................... 30
4
PART I
Item 1 Business.
a. General Development of Business.
California Water Service Company (the "Company") is a
public utility water company which owns and operates
20 water systems serving 38 cities and communities and
adjacent territories in California with an estimated
population of more than 1,500,000.
The Company, one of the largest investor-owned water
companies in the United States, was incorporated under
the laws of the State of California on December 21, 1926.
Its principal executive offices are located at 1720 North
First Street, San Jose, California, and its mailing
address is Post Office Box 1150, San Jose, California
95108 (telephone number:1-408-451-8200).
Effective April 8, 1994 the Company's Common Stock
began trading on the New York Stock Exchange under
the symbol CWT. The Company was previously in the
over-the-counter market and quoted by the National
Association of Securities Dealers Automated
Quotation System (NASDAQ) under the symbol CWTR
During the fiscal year ended December 31, 1994 (the "1994
fiscal year"), there were no significant changes in the
kind of products produced or services rendered by the
Company, or in the Company's markets or methods of
distribution.
Regulation and Rates.
The Company is subject to regulation of its rates, service
and other matters affecting its business by the Public
Utilities Commission of the State of California
("Commission" or "PUC").
The Company's systems, which are operated as 20 separate
districts in the State of California, are not integrated
with one another, and except for allocation of general
office expenses and the determination of cost of capital,
the expenses and revenues of individual districts are not
affected by operations in other districts. Cost of
capital (i.e. return on debt and equity) is determined on
a Company-wide basis. Otherwise, the PUC requires that
each district be considered a separate and distinct entity
for rate-making purposes.
5
The Commission requires that water rates for each
Company operating district be determined independently.
Each year the Company attempts to file general rate
increase applications for approximately one-third of its
operating districts. According to its rate case
processing procedures for water utilities, the
Commission attempts to issue decisions within eight
months of acceptance of the Application. Rates are set
prospectively for a three-year period, with a provision
for step increases to maintain the authorized rate of
return. Offset rate adjustments are also allowed as
required for changes in purchased water, power and pump
tax costs.
During 1994, general rate increase applications were
filed with the Commission requesting rate relief of
$3,023,000 in six Company districts representing 15
percent of the Company's customer base. The
applications requested a rate of return on common
equity of 12 percent. However, the Commission staff
has recommended a rate of return of 10.9 percent.
Public hearings for these cases were completed February
1995 and the Commission's decision is expected in mid-
May. In the meantime, step rate increases for 15
districts totaling approximately $2,102,000 became
effective in January 1995.
In July 1994 the Commission issued a decision of
general rate cases filed in July 1993, for three
districts representing 13 percent of customer base,
resulting in the authorization of $540,000 in additional
revenue and authorizing a return on common equity of 10.2
percent
In 1994 the Commission issued its long awaited decision
in its investigation of the financial and operational
risks for water utilities. While the Commission
concluded that no fundamental change in its ratemaking
procedures is necessary, it authorized water utilities
to accrue interest on balancing and memorandum accounts.
Additionally, the decision allows water utilities to
request prospective recovery for unanticipated Safe
Drinking Water Act compliance costs. The Company does
not expect the decision to have a material effect on
its operations.
Effective March 14, 1994, the Commission closed all
voluntary conservation memorandum accounts. The
Company has filed an advice letter seeking authority
to transfer $1,748,000 in conservation expenses from
the drought memorandum accounts to its expense balancing
accounts. These amounts would be recoverable on a
district by district basis through the Commission's
offset procedures which allow surcharges to amortize
account balances.
6
Offset rate increases of $1,944,000 and $2,327,000 were
authorized during the year for water production cost
increases and balancing account undercollections,
respectively. Additionally, the Commission approved
rate increases of $292,000 to recover increased costs
from the 1993 general office renovation, $87,000 for a
new water tank in the South San Francisco district, and
$215,000 for post-retirement benefits other than
pensions. This latter rate increase relates to an
expense which was incurred as a result of accounting
changes mandated by Statement of Financial Accounting
Standards No. 106.
In January 1995 a consultant retained by the
Commission's Division of Ratepayer Advocates delivered a
report on the reasonableness of the Second Amended
Contract between the Company, Stockton-East Water
District, the City of Stockton and certain other
governmental bodies, pertaining to the sale and delivery
of water to the Company's Stockton District by the
Stockton-East Water District. The report alleges that
the Company was required to receive prior Commission
approval before entering into the Second Amended
Contract and furthermore challenges the reasonableness
of the Second Amended Contract for ratemaking purposes.
However the report does not include specific ratemaking
recommendations. It is difficult and premature at this
time to assess the potential impact on the Company if
the report were to be adopted by the Commission.
However, the Company anticipates that if there is any
adverse financial impact as a result of the report, such
impact would be prospective, affecting only future
rates for the Stockton district. Hearings have not yet
been scheduled on the report by the assigned
administrative law judge. Following hearings at which
the Company intends to present evidence to rebut the
report, the assigned administrative law judge will
render a proposed decision for comment and then
Commission consideration. The management of the Company
intends to vigorously defend its position that the
Second Amended Contract did not require prior Commission
approval and is reasonable for ratemaking purposes.
b. Financial Information about Industry Segments.
The Company has only one business segment.
7
c. Narrative Description of Business.
The business of the Company consists of the production,
purchase, storage, purification, distribution and sale
of water for domestic, industrial, public, and
irrigation uses, and for fire protection. The
Company's business fluctuates according to the demand
for water, which is partially dictated by seasonal
conditions, such as summer temperatures or the amount
and timing of rain during the year. The Company holds
such franchises or permits in the communities it serves
as it judges necessary to operate and maintain its
facilities in the public streets. The Company
distributes its water to customers in accordance with
accepted water utility methods, which include pumping
from storage and gravity feed from high elevation
reservoirs.
The Company has various contracts under which it
operates three municipally owned water systems and two
reclaimed water distribution systems and provides
billing services for certain cities.
8
Geographical Service Areas and Number of Customers at Year-End.
The principal markets for the Company's products are users of water
within the Company's service areas. The Company's geographical
service areas and the approximate number of customers served in
each at December 31, 1994, are as follows:
SAN FRANCISCO BAY AREA
Mid-Peninsula (San Mateo and San Carlos) 35,300
South San Francisco (including Colma
and Broadmoor) 15,300
Bear Gulch (including Menlo Park, Atherton,
Woodside and Portola Valley) 17,100
Los Altos (including Los Altos
and portions of Cupertino, Los Altos
Hills, Mountain View and Sunnyvale) 17,800
Livermore 14,900
100,400
SACRAMENTO VALLEY
Chico (including Hamilton City) 20,700
Oroville 3,500
Marysville 3,800
Dixon 2,700
Willows 2,200
32,900
SALINAS VALLEY
Salinas 23,000
King City 1,900
24,900
SAN JOAQUIN VALLEY
Bakersfield 54,400
Stockton 40,800
Visalia 26,200
Selma 4,600
126,000
LOS ANGELES AREA
East Los Angeles (including portions
of City of Commerce and Montebello) 26,400
Hermosa Beach and Redondo Beach (including
a portion of Torrance) 24,800
Palos Verdes (including Palos Verdes
Estates, Rancho Palos Verdes, Rolling
Hills Estates and Rolling Hills) 23,400
Westlake (a portion of Thousand Oaks) 6,700
81,300
TOTAL 365,500
9
Water Supply
The Company's water supply is obtained from wells, surface
runoff or diversion and by purchase from public agencies and
other suppliers. The effects of the recent California
drought (which ended after the 1992-93 winter) and 1994
winter rains are discussed below. Except for periods of
drought, the Company in the past has had adequate water
supplies to meet the existing requirements of its service
areas. During drought periods, some districts experienced
water rationing.
The Company delivered approximately 100 billion gallons of
water during the 1994 fiscal year of which approximately 51%
was obtained from wells and 49% was purchased from the
following suppliers:
% of
Supply
District Purchased Source of Purchased Supply
SAN FRANCISCO BAY AREA
Mid-Peninsula 100% San Francisco Water Department
South San Francisco 83% San Francisco Water Department
Bear Gulch 95% San Francisco Water Department
Los Altos 82% Santa Clara Valley Water
District
Livermore 65% Alameda County Flood Control
and Water Conservation District
SACRAMENTO VALLEY
Oroville 70% Pacific Gas and Electric
Company
6% County of Butte
SAN JOAQUIN VALLEY
Bakersfield 20% Kern County Water Agency
Stockton 75% Stockton-East Water District
LOS ANGELES AREA
East Los Angeles 89% Central Basin Municipal
Water District
Hermosa Beach and
Redondo Beach 95% West Basin Municipal
Water District
10
% of
Supply
District Purchased Source of Purchased Supply
LOS ANGELES AREA (Continued)
Palos Verdes 100% West Basin Municipal
Water District
Westlake 100% Russell Valley Municipal
Water District
The balance of the required supply for the above districts
is obtained from wells, except for Bear Gulch where the
balance is obtained from surface runoff from a local
watershed.
The Chico, Marysville, Dixon and Willows districts in the
Sacramento Valley, the Salinas and King City districts in
the Salinas Valley, and the Selma and Visalia districts in
the San Joaquin Valley obtain their entire supply from
wells. In these districts, although groundwater levels
declined during the six consecutive years of below normal
precipitation (1986-1992), they remain, in the opinion of
the Company, adequate for anticipated future needs.
However, in the Salinas Valley, declining water tables have
resulted in salt water intrusion in some areas adjacent to
Monterey Bay. Operational changes have been made in the
Salinas district in an attempt to retard the movement of
salt water toward the Company's production wells. Pumping
of vulnerable wells has been curtailed and supply
supplemented by boosting water from other zones. The Company
continues to cooperate with the Monterey County Water
Resources Agency and other groups on long-term mitigation
plans.
Purchases for the Los Altos, Livermore, Oroville, Stockton
and Bakersfield districts are pursuant to long-term
contracts expiring on various dates after 2011. A new 30
year contract for the Livermore District with Zone 7 of the
Alameda County Flood Control and Water Conservation District
was signed on November 16, 1994. The supplies for the East
Los Angeles, Hermosa-Redondo, Palos Verdes and Westlake
districts are provided to the Company by public agencies
pursuant to an obligation of continued nonpreferential
service to persons within their boundaries.
Purchases for the South San Francisco, Mid-Peninsula and
Bear Gulch districts are pursuant to long-term contracts
with the San Francisco Water Department expiring June 30,
2009.
The 1993-1994 water season was California's fourth driest
year on record, leading the Department of Water resources to
declare a 'drought watch' in May of 1994. But these fears
began to be allayed as early as November 1994 when a
series of storms began pouring rain and snow throughout the
state's watersheds.
11
By late January 1995, cumulative average Sierra snowpack was
at 175 percent of normal, storage in the state's 155
reservoirs was at more than 90 percent of average and the
drought watch was cancelled. These promising figures
substantially improve the likelihood that 100 percent of
state water project deliveries will be made in 1995.
Substantial water reserves remain in the groundwater
aquifers that supply Company districts served by well water.
While recovery from drought-related depletion of these
reserves was interrupted by drier than normal conditions in
1994, the mean groundwater levels in these districts were
stable. In addition, districts located in regions with
existing groundwater management mechanisms showed noticeable
improvements in storage. Regional groundwater management
planning is receiving greater attention throughout the state
as its importance as a tool for addressing long-term water
supply concerns is realized. The passage of legislation
that enables management of this resource by existing local
government agencies further stimulated this attention.
Despite the promise of an abundant water year, California is
expected to have long-term water supply problems. To
compensate for this trend, the Company continues to promote
water conservation programs initiated during the drought on
a district-by-district basis outlined in our water
management plans and as permitted by the Commission.
Significant developments affecting future water supply
occurred in several of our districts. On August 16, 1994
the State Water Resources Control Board (SWRCB) informed the
Monterey County Board of Supervisors that it was initiating
an investigation into the groundwater supply issues in the
Salinas Valley. This is a prelude to a possible adjudication
of the groundwater basin by the SWRCB should Monterey County
fail to develop short and long-term solutions to the nitrate
contamination and saltwater intrusion threatening the
aquifers. In a related matter the SWRCB refused to consider
a separate investigation of groundwater use in our King City
district. This action will save the Company a considerable
amount of litigation expense.
In Solano County, the location of our Dixon district, the
Solano County Water Agency agreed to reimburse the Company
for costs it incurred as a party to the Putah Creek
adjudication. This action will determine the rights to
water from Putah Creek which recharges the groundwater from
which our Dixon district derives its water supply.
12
Utility Plant Construction Program and Acquisitions.
The Company is continually extending and enlarging its
facilities as required to meet increasing demands and to
maintain its service. Capital expenditures for these
purposes and for the replacement of existing facilities
amounted to approximately $28 million in 1994. Financing
was obtained from funds from operations, short-term bank
borrowings, sale of common stock, advances for construction,
and contributions in aid of construction as set forth in the
section entitled "Statement of Cash Flows" on page 26 of the
Company's 1994 Annual Report and is incorporated herein by
reference. Advances for construction of main extensions are
received by the Company from subdivision developers under
the rules of the PUC. These advances are refundable without
interest over a period of years. Contributions in aid of
construction consist of nonrefundable cash deposits or
facilities received from developers.
The Company now estimates that additions and improvements to
its facilities during 1995 will amount to approximately
$20,700,000 (exclusive of additions and improvements
financed through advances for construction and contributions
in aid of construction), which is expected to be financed
with internally generated funds and short-term borrowings to
be refinanced by funds from the anticipated issuance of
approximately $20,000,000 of long-term debt in 1995.
Quality of Supplies.
The Company maintains procedures to produce potable water in
accordance with accepted water utility practice. All water
entering the distribution systems from surface sources is
chlorinated and in most cases filtered. Samples of water
from each district are analyzed regularly by Company
bacteriologists.
Competition and Condemnation.
The Company is a public utility regulated by the PUC. The
Company provides service within filed service areas approved
by the PUC. Under the laws of the State of California, no
privately owned public utility may compete with the Company
in any territory already served by the Company without first
obtaining a certificate of public convenience and necessity
from the PUC. Under PUC practice, such certificate will be
issued only on a showing that the Company's service in such
territory is inadequate.
California law also provides that whenever a public agency
constructs facilities to extend a utility service into the
service area of a privately owned public utility, such an
act constitutes the taking of property and for such taking
the public utility is to be paid just compensation.
13
Under the constitution and statutes of the State of
California, municipalities, water districts and other public
agencies have been authorized to engage in the ownership and
operation of water systems. Such agencies are empowered to
condemn properties already operated by privately owned
public utilities upon payment of just compensation and are
further authorized to issue bonds (including revenue bonds)
for the purpose of acquiring or constructing water systems.
To the Company's knowledge, no municipality, water district
or other public agency has pending any action to condemn any
of the Company's systems.
Environmental Matters.
The Company is subject to environmental regulation by
various governmental authorities. Compliance with federal,
state and local provisions which have been enacted or
adopted regulating the discharge of materials into the
environment, or otherwise relating to the protection of the
environment, has not had, as of the date of filing of this
Form 10-K, any material effect on the Company's capital
expenditures, earnings or competitive position. No such
material effect is anticipated for the fiscal years ending
December 31, 1995 and 1996.
Human Resources.
As of December 31, 1994, the Company had 624 employees, of
whom 158 were executive and administrative officials and
supervisory employees, and 466 were members of unions. The
Company presently has two-year collective bargaining
agreements expiring December 31, 1995, with the Utility
Workers of America, AFL-CIO, representing the majority of
employees, and the International Federation of Professional
and Technical Engineers, AFL-CIO, representing certain
engineering department employees. The Company plans to
enter negotiations to renew the collective bargaining
agreements prior to their expiration. The agreements have
been successfully renewed in the past without a labor
interruption.
d. Financial Information about Foreign and Domestic Operations
and Export Sales.
The Company makes no export sales.
Item 2.Properties.
The Company's physical properties consist of offices and
water systems for the production, storage, purification, and
distribution of water. These properties are located in or
near the service areas listed above in the section entitled
"Water Supply." The Company maintains all of its properties
in good operating condition.
14
The Company holds all its principal properties in fee,
subject to the lien of the indenture securing the Company's
first mortgage bonds, of which there were outstanding at
December 31, 1994, $128,944,000 in principal amount.
Item 3.Legal Proceedings.
The Company is involved in only routine litigation which is
incidental to the business.
Item 4.Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders in
the fourth quarter of fiscal year 1994.
15
Executive Officers of the Registrant.
Name Positions and Offices with the Company Age
C. H. Stump Chairman of the Board since 1991. 69
Director since 1976 and Member of
Executive Committee since 1977. Mr. Stump
was Secretary of the Company from 1959 to
1966, Secretary and Treasurer from 1966 to
1975, Executive Vice President from 1975
to 1981, President and Chief Operating
Officer from 1981 to 1986, and President
and Chief Executive Officer from 1986 to
May 1992.
Donald L. Houck President and Chief Executive Officer 62
since May 1992. Director since
1988. Mr. Houck was Executive Vice President
and Chief Operating Officer from 1986 to
1992 and a Vice President since 1977.
Prior to that, Mr. Houck was a supervising
engineer with the California Public
Utilities Commission with eighteen years
experience in the rate-making process.
Gerald F. Feeney Vice President, Chief Financial Officer and 50
Treasurer since November 1994.
Controller, Assistant Secretary and
Assistant Treasurer from 1976 to 1994.
From 1970 to 1976, Mr. Feeney was an
audit manager with Peat Marwick Mitchell
& Co.
Francis S. Ferraro Vice President since August 1989. Mr. 45
Ferraro previously had 15 years
experience in regulatory matters with the
California Public Utilities Commission,
from June 1985 through August 1989 in the
capacity of an administrative law judge.
James L. Good Vice President since December 1994. 31
Mr. Good was Director of Congressional
Relations for the National Association of
Water Companies from 1991 to 1994.
Raymond H. Taylor Vice President since April 1990. Mr. Taylor 49
had been director of water quality since
1986 and previously had been employed by
the Environmental Protection Agency
before joining the Company in 1982.
Helen Mary Kasley Secretary and Legal Counsel since 43
1993. From 1990 to 1992, Mrs. Kasley was
Secretary. From 1986 to 1990, she was an
associate attorney with McCutchen, Doyle,
Brown & Enersen.
16
Calvin L. Breed Controller, Assistant Secretary and Assistant 39
Treasurer since November 1994. Previously
Mr. Breed served as Treasurer of TCI
International, Inc.
John S. Simpson Assistant Secretary since 1992. Mr. 50
Simpson has been Manager of New Business
Development for the past nine years and
has held various management positions
with the Company since 1967.
No officer or director has any family relationship to any other
executive officer or director. No executive officer is appointed
for any set term. There are no agreements or understandings
between any executive officer and any other person pursuant to
which he was selected as an executive officer, other than those
with directors or officers of the Company acting solely in their
capacities as such.
PART II
Item 5.Market for Registrant's Common Equity and Related
Stockholder Matters
The information required by this item is contained in the
Section captioned "Quarterly Financial and Common Stock Market
Data" on pages 34 and 35 of the Company's 1994 Annual Report
and is incorporated herein by reference. The number of
holders listed in such section includes the Company's record
holders and also individual participants in security position
listings.
Item 6.Selected Financial Data.
The information required by this item is contained in the
section captioned "California Water Service Company Ten Year
Financial Review" on pages 16 and 17 of the Company's 1994
Annual Report and is incorporated herein by reference.
Item 7.Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The information required by this item is contained in the
sections captioned "Management's Discussion and Analysis of
Financial Condition and Results of Operations," on pages 18
through 21 of the Company's 1994 Annual Report and is
incorporated herein by reference.
Item 8.Financial Statements and Supplementary Data.
The information required by this item is contained in the
sections captioned "Balance Sheet," "Statement of Income,"
"Statement of Common Shareholders' Equity," "Statement of Cash
Flows," "Notes to Financial Statements" and "Independent
Auditors' Report" on pages 22 through 35 of the Company's 1994
Annual Report and is incorporated herein by reference.
17
Item 9.Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
PART III
Item 10.Directors and Executive Officers of the Registrant.
Information regarding executive officers of the Company is
included in a separate item captioned "Executive Officers of
the Registrant" contained in Part I of this report. The
information required by this item as to directors of the
Company is contained in the section captioned "Election of
Directors" on pages 2 through 6 of the Proxy Statement and
is incorporated herein by reference. (The Proxy Statement
was filed under EDGAR on March 10, 1995).
Item 11.Executive Compensation.
The information required by this item as to directors and
executive officers of the Company is contained in the
section captioned "Compensation of Executive Officers" on
pages 8 through 11 of the Proxy Statement and is
incorporated herein by reference. (The Proxy Statement was
filed under EDGAR on March 10, 1995).
Item 12.Security Ownership of Certain Beneficial Owners and
Management.
The information required by this item is contained in the
sections captioned "Election of Directors," "Security
Ownership of Certain Beneficial Owners" and "Security
Ownership of Management" pages 2 through 6 and 13,
respectively, of the Proxy Statement and is incorporated
herein by reference. (The Proxy Statement was filed under
EDGAR on March 10, 1995).
Item 13.Certain Relationships and Related Transactions.
None.
18
PART IV
Item 14.Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
(a) (1) Financial Statements:
Balance Sheet as of December 31, 1994 and 1993.
Statement of Income for the years ended
December 31, 1994, 1993, and 1992.
Statement of Common Shareholders' Equity for the
years ended December 31, 1994, 1993, and 1992.
Statement of Cash Flows for the years
ended December 31, 1994, 1993, and 1992.
Notes to Financial Statements, December 31,
1994, 1993, and 1992.
The above financial statements are contained in
sections bearing the same captions on pages 22
through 35 of the Company's 1994 Annual Report
and are incorporated herein by reference.
(2) Financial Statement Schedule:
Schedule
Number
Independent Auditors' Report
January 20, 1995.
II Valuation and Qualifying Accounts and
Reserves--years ending December 31,
1994, 1993, and 1992.
All other schedules are omitted as the required
information is inapplicable or the information is
presented in the financial statements or related notes.
19
(3) Exhibits required to be filed by Item 601 of Regulation
S-K.
See Exhibit Index on page 25 of this document which is
incorporated herein by reference.
The exhibits filed herewith are attached hereto (except as noted)
and those indicated on the Exhibit Index which are not filed
herewith were previously filed with the Securities and Exchange
Commission as indicated. Except where stated otherwise, such
exhibits are hereby incorporated by reference.
Exhibits filed herewith and attached hereto under separate cover
will be furnished to security holders of the Company upon written
request and payment of a fee of $.30 per page which fee covers
only the Company's reasonable expenses in furnishing such
exhibits.
(b) Report on Form 8-K.
None required to be filed during the last quarter of 1994.
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CALIFORNIA WATER SERVICE COMPANY
Date: March 15, 1995 By /s/ Donald L. Houck
DONALD L. HOUCK, President and
Chief Executive Officer
21
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated:
Date: March 15, 1995 /s/ William E. Ayer
WILLIAM E. AYER, Member,
Board of Directors
Date: March 15, 1995 /s/ Robert W. Foy
ROBERT W. FOY, Member,
Board of Directors
Date: March 15, 1995 /s/ Edward D. Harris, Jr.
EDWARD D. HARRIS, JR. M.D., Member,
Board of Directors
Date: March 15, 1995 /s/ Donald L. Houck
DONALD L. HOUCK
President, Chief Executive
Officer, Member,
Board of Directors
Date: March 15, 1995 /s/ Robert K. Jaedicke
ROBERT K. JAEDICKE, Member,
Board of Directors
Date: March 15, 1995 /s/ Linda R. Meier
LINDA R. MEIER, Member,
Board of Directors
Date: March 15, 1995 /s/ J. W. Weinhardt
J. W. WEINHARDT, Member,
Board of Directors
Date: March 15, 1995 /s/ C. H. Stump
C. H. STUMP, Chairman of the
Board, Member, Board of Directors
Date: March 15, 1995 /s/ Edwin E. van Bronkhorst
EDWIN E. VAN BRONKHORST, Member,
Board of Directors
Date: March 15, 1995 /s/ Gerald F. Feeney
GERALD F. FEENEY,
Vice President, Chief Financial
Officer and Treasurer
Date: March 15, 1995 /s/ Calvin L. Breed
CALVIN L. BREED, Controller,
Assistant Secretary and Assistant
Treasurer
22
Independent Auditors' Report
Shareholders and Board of Directors
California Water Service Company:
Under date of January 20, 1995, we reported on the balance sheet
of California Water Service Company as of December 31, 1994 and
1993, and the related statements of income, common shareholders'
equity, and cash flows for each of the years in the three-year
period ended December 31, 1994, as contained in the 1994 annual
report to shareholders. These financial statements and our
report thereon are incorporated by reference in the annual report
on Form 10-K for the year 1994. In connection with our audits of
the aforementioned financial statements, we also audited the
related financial statement schedule as listed in accompanying
index. This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as
a whole, presents fairly, in all material respects, the
information set forth therein.
San Jose, California /s/ KPMG Peat Marwick,LLP
January 20, 1995
23
<TABLE>
CALIFORNIA WATER SERVICE COMPANY Schedule II
Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 1994, 1993 and 1992
<CAPTION>
Additions
---------------------
Balance at Charged to Charged to Balance
beginning costs and other at end
Description of period expenses accounts Deductions of period
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
(A) Reserves deducted in the balance sheet from assets
to which they apply:
Allowance for doubtful accounts $72,696 $363,284 $71,235(3) $456,399(1) $50,816
Allowance for obsolete materials and supplies 61,395 11,000 69,002(2) 3,393
----------- -------- -------- ---------- -----------
(B) Reserves classified as liabilities in the balance sheet:
Miscellaneous reserves:
General Liability $1,064,300 $340,000 $0 $442,148(2) $962,152
Employees' group health plan 882,143 2,549,056 12,262 3,243,074(2) 200,387
Retirees' group health plan 237,000 480,998 189,000 481,000(2) 425,998
Workers compensation 150,523 648,374 0 691,321(2) 107,576
Deferred revenue - contributions in aid of construction 1,649,386 572,366 304,366(6) 1,917,386
Disability insurance 97,352 256,969 238,191(2) 116,130
----------- ---------- --------- ---------- ------------
Total $4,080,704 $4,018,428 $1,030,597 $5,400,100 $3,729,629
----------- ---------- ---------- ---------- -----------
Contributions in aid of construction $34,915,778 $3,858,961(4) $907,940(5) $37,866,799
----------- ---------- ---------- ---------- ------------
1993
(A) Reserves deducted in the balance sheet from assets to which they apply:
Allowance for doubtful accounts $75,155 $316,748 $65,280(3) $384,487(1) $72,696
Allowance for obsolete materials and supplies 5,000 72,000 15,605(2) 61,395
----------- ---------- ---------- ---------- ------------
(B) Reserves classified as liabilities in the balance sheet:
Miscellaneous reserves:
General Liability $1,200,000 $330,000 $44,401 $510,101(2) $1,064,300
Employees' group health plan 511,985 2,240,000 9,578 1,879,420(2) 882,143
Retirees' group health plan 0 480,000 267,360 510,360(2) 237,000
Workers compensation 226,386 497,043 0 572,906(2) 150,523
Deferred revenue - contributions in aid of construction 1,247,256 758,380 356,250(6) 1,649,386
Disability insurance 47,113 255,017 204,778(2) 97,352
----------- ---------- ---------- ---------- ------------
Total $3,232,740 $3,547,043 $1,334,736 $4,033,815 $4,080,704
----------- ---------- ---------- ---------- ------------
Contributions in aid of construction $32,119,906 $3,637,420(4) $841,548(5) $34,915,778
----------- ---------- ---------- ---------- ------------
1992
(A) Reserves deducted in the balance sheet from assets to which they apply:
Allowance for doubtful accounts $79,767 $319,280 $66,374(3) $390,266(1) $75,155
Allowance for obsolete materials and supplies 5,000 190,527 190,527(2) 5,000
----------- ---------- --------- ---------- ------------
(B) Reserves classified as liabilities in the balance sheet:
Miscellaneous reserves:
General Liability $1,081,494 $315,443 $196,937(2) $1,200,000
Employees' group health plan 322,404 2,842,000 248,696 2,901,115(2) 511,985
Workers compensation 188,120 487,153 32,112 480,999(2) 226,386
Deferred revenue - contributions in aid of construction 1,058,112 466,429 277,285(6) 1,247,256
Disability insurance 63,929 239,296 256,112(2) 47,113
---------- ---------- ---------- ---------- -----------
Total $2,714,059 $3,644,596 $986,533 $4,112,448 $3,232,740
---------- ---------- ---------- ---------- -----------
Contributions in aid of construction $29,349,230 $3,515,621(4) $744,945(5) $32,119,906
----------- ---------- ---------- ---------- -----------
Notes:
(1) Accounts written off during the year.
(2) Expenditures and other charges made during the year.
(3) Recovery of amounts previously charged to reserve.
(4) Properties acquired at no cost, cash contributions and net transfer on non-refundable balances from advances to construction.
(5) Depreciation of utility plant acquired by contributions charged to a balance sheet account.
(6) Amortized to revenue.
24
</TABLE>
EXHIBIT INDEX
Sequential
Page Numbers
Exhibit Number in this Report
3. Articles of Incorporation and By-Laws:
3.1 Restated Articles of Incorporation dated 25
March 20, 1968 Certificate of Ownership
Merging Palos Verdes Water Company into
California Water Service Company dated
December 22, 1972; Certificate of Amendment
of Restated Articles of Incorporation dated
April 7, 1975; Certificate of Amendment of
Restated Articles of Incorporation dated
April 16, 1984; Certificate of Amendment of
Restated Articles of Incorporation dated July
31, 1987; Certificate of Amendment of
Restated Articles of Incorporation dated
October 19, 1987 (Exhibit 3.1 to Form 10-K
for fiscal year 1987, File No. 0-464)
3.2 Certificates of Determination of Preferences 25
for Series C Preferred Stock (Exhibit 3.2 to
Form 10-K for fiscal year 1987, File No. 0-464)
3.3 Certificate of Amendment of the Company's 25
Restated Articles of Incorporation dated
April 27, 1988. (Exhibit 3.3 to Form 10-K
for fiscal year 1989, File No. 0-464)
3.4 By-Laws dated September 21, 1977, as 25
amended 24 November 19, 1980, April 21, 1982,
June 15, 1983, September 17, 1984, and
November 16, 1987 (Exhibit 3.3 to Form 10-K
for fiscal year 1987, File No. 0-464).
3.5 Amendment to By-laws dated May 16, 1988. 25
(Exhibit 3.5 to Form 10-K for fiscal year
1991, File No. 0-464)
25
4. Instruments Defining the Rights of Security 26
Holders, including Indentures:
Mortgage of Chattels and Trust Indenture 26
dated April 1, 1928; Eighth Supplemental Indenture
dated November 1, 1945, covering First Mortgage
3.25% Bonds, Series C; Fifteenth Supplemental
Indenture dated November 1, 1965, covering First
Mortgage 4.85% Bonds, Series J; Sixteenth
Supplemental Indenture dated November 1, 1966,
covering First Mortgage 6.25% Bonds, Series K;
Seventeenth Supplemental Indenture dated
November 1, 1967, covering First Mortgage 6.75%
Bonds, Series L; Twenty-First Supplemental
Indenture dated October 1, 1972, cover First
Mortgage 7.875% Bonds, Series P; Twenty-Fourth
Supplemental Indenture dated November 1, 1973,
covering First Mortgage 8.50% Bonds, Series S
(Exhibits 2(b), 2(c), 2(d), Registration Statement
No. 2-53678, of which certain exhibits are
incorporated by reference to Registration
Statement Nos. 2-2187, 2-5923, 2-9681, 2-10517 and
2-11093.)
Twenty-Sixth Supplemental Indenture dated May 1, 26
1976 (Exhibit 4 to Form 10-K for fiscal year
1986, File No. 0-464).
Twenty-Seventh Supplemental indenture dated 26
November 1, 1977; Twenty-Eighth Supplemental
Indenture dated May 1, 1978; Twenty-Ninth
Supplemental Indenture dated November 1, 1979
(Exhibit 4 to Form 10-K for fiscal year 1989,
File No. 0-464).
Thirty-Fifth Supplemental Indenture dated as of 26
November 1, 1992, covering First Mortgage 8.63%
Bonds, Series DD. (Exhibit 4 to Form 10-Q
dated September 30, 1992, File No. 0-464)
Thirty-Sixth Supplemental Indenture dated as of 26
May 1, 1993, covering First Mortgage 7.90% Bonds
Series EE (Exhibit 4 to Form 10-Q dated
June 30, 1993, File No. 0-464)
Thirty-Seventh Supplemental Indenture dated as 26
of September 1, 1993, covering First Mortgage
6.95% Bonds, Series FF (Exhibit 4 to Form 10-Q
dated September 30, 1993, File No. 0-464)
Thirty-Eighth Supplemental Indenture dated as 26
of October 15, 1993, covering First Mortgage 6.98%
Bonds, Series GG (Exhibit 4 to Form 10-K for fiscal
year 1994, File No. 0-464)
26
Sequential
Page Numbers
Exhibit Number in this Report
10. Material Contracts.
10.1 Water Supply Contract between the Company 27
and the County of Butte relating to the
Company's Oroville District; Water Supply
Contract between the Company and the Kern
County Water Agency relating to the
Company's Bakersfield District; Water
Supply Contract between the Company and
Stockton East Water District relating to
the Company's Stockton District.
(Exhibits 5(g), 5(h), 5(i), 5(j),
Registration Statement No. 2-53678, which
incorporates said exhibits by reference to
Form 1O-K for fiscal year 1974, File No.
0-464).
10.2 Settlement Agreement and Master Water Sales 27
Contract between the City and County of San
Francisco and Certain Suburban Purchasers
dated August 8, 1984; Supplement to
Settlement Agreement and Master
Water Sales Contract, dated August 8, 1984;
Water Supply Contract between the Company and
the City and County of San Francisco relating
to the Company's Bear Gulch District dated
August 8, 1984; Water Supply Contract
between the Company and the City and County
of San Francisco relating to the Company's
San Carlos District dated August 8, 1984;
Water Supply Contract between the Company
and the City and County of San Francisco
relating to the Company's San Mateo District
dated August 8, 1984; Water Supply Contract
between the Company and the City and County
of San Francisco relating to the Company's
South San Francisco District dated August 8,
1984. (Exhibit 10.2 to Form l0-K for fiscal
year 1984, File No. 0-464).
10.3 Water Supply Contract dated January 27, 27
1981, between the Company and the Santa
Clara Valley Water District relating to
the Company's Los Altos District
(Exhibit 10.3 to Form 10-K for fiscal
year 1992, File No. 0-464)
10.4 Amendments No. 3, 6 and 7 and Amendment 27
dated June 17, 1980, to Water Supply
Contract between the Company and the
County of Butte relating to the Company's
Oroville District. (Exhibit 10.5 to Form
10-K for fiscal year 1992, File No. 0-464)
27
Sequential
Page Numbers
Exhibit Number in this Report
10.5 Amendment dated May 31, 1977, to Water 28
Supply Contract between the Company and
Stockton-East Water District relating to
the Company's Stockton District.
(Exhibit 10.6 to Form 10-K for fiscal
year 1992, File No. 0-464)
10.6 Second Amended Contract dated September 25, 28
1987 among the Stockton East Water District,
the California Water Service Company, the
City of Stockton, the Lincoln Village
Maintenance District, and the Colonial Heights
Maintenance District Providing for the Sale of
Treated Water. (Exhibit 10.7 to Form 10-K for
fiscal year 1987, File No. 0-464).
10.7 Dividend Reinvestment Plan. (Exhibit 10.8 to 28
Form 10-Q dated March 31, 1994, File No. 0-464)
10.8 Water Supply Contract dated April 19, 1927, 28
and Supplemental Agreement dated June 5,
1953, between the Company and Pacific Gas
and Electric Company relating to the
Company's Oroville District. (Exhibit 10.9
to Form 10-K for fiscal year 1992, File No.
0-464)
10.9 California Water Service Company Pension Plan 28
(Exhibit 10.10 to Form 10-K for fiscal year
1992, File No. 0-464)
10.10 California Water Service Company Supplemental 28
Executive Retirement Plan. (Exhibit 10.11 to
Form 10-K for fiscal year 1992, File No.0-464)
10.11 California Water Service Company Salaried 28
Employees' Savings Plan. (Exhibit 10.12 to
Form 10-K for fiscal year 1992, File
No. 0-464)
10.12 California Water Service Company 28
Directors Deferred Compensation Plan
(Exhibit 10.13 to Form 10-K for fiscal
year 1992, File No. 0-464)
10.13 Board resolution setting forth 28
the terms of the retirement plan,
as amended, for Directors of
California Water Service Company
(Exhibit 10.14 to Form 10-K for
fiscal year 1992, File No. 0-464)
28
Sequential
Page Numbers
Exhibit Number in this Report
10.14 Registration statement on Form S-3, 29
dated September 8, 1994 regarding the
sale of 550,000 shares of Registrant's
common stock (filed with the Commission
on September 8, 1994, Registration
No. 33-55233, File No. 0-464)
10.15 Water Supply Contract dated November 16, 1994, 30
between the Company and Alameda County Flood
Control and Water Conservation District
relating to the Company's Livermore District
13. Annual Report to Security Holders, Form 10-Q 46
or Quarterly Report to Security Holders:
1994 Annual Report. The sections of the
1994 Annual Report which are incorporated
by reference in this 10-K filing. This
includes those sections referred to in
Part II, Item 5, Market for Registrant's
Common Equity and Related Shareholder
Matters; Part II, Item 6, Selected
Financial Data; Part II, Item 7,
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; and Part II, Item 8,
Financial Statement and Supplementary
Data.
27. Financial Data Schedule as of December 31, 1994 70
29
CONTRACT BETWEEN EXHIBIT 10.15
ZONE 7 OF ALAMEDA COUNTY FLOOD CONTROL AND WATER
CONSERVATION DISTRICT AND CALIFORNIA WATER SERVICE COMPANY
FOR A MUNICIPAL & INDUSTRIAL WATER SUPPLY
THIS CONTRACT, made and entered into this 16th day of
November , 1994 , by and between ZONE 7 OF ALAMEDA COUNTY FLOOD
CONTROL AND WATER CONSERVATION DISTRICT, commonly known as the Zone 7
Water Agency, hereinafter referred to as "Zone 7" and the CALIFORNIA
WATER SERVICE COMPANY, hereinafter referred to as "Contractor."
W I T N E S S E T H:
For and in consideration of the terms and conditions herein
contained, Zone 7 agrees to furnish and provide a water supply to
Contractor, and Contractor agrees to purchase and accept such water
supply consistent with the provisions herein.
A. INTRODUCTORY PROVISIONS
1. Definitions
When used in this contract, the following terms shall have the
meanings hereinafter set forth:
a. "Board" shall mean the Board of Directors of Zone 7 of
Alameda County Flood Control and Water Conservation District.
b. "Each Contractor" or "Other Contractor" shall mean any
entity, public or private, contracting with Zone 7 for a
Municipal & Industrial Water Supply.
c. "Extract," "Extraction" or "Extracting" shall mean obtaining
groundwater, by pumping or any other means, from wells,
shafts, tunnels, excavations or other sources of such
groundwater, for domestic, municipal, irrigation, industrial
or other use.
d. "Groundwater Pumping Quota" shall mean that quantity of
water that the Contractor is entitled to extract from the
Main Basin without paying a recharge fee to Zone 7.
e. "In-Lieu Treated Water" shall mean that quantity of treated
water delivered from Zone 7 in exchange for an equal
reduction in Contractor's extraction of its Groundwater
Pumping Quota.
f. "Main Basin" shall mean that part of the Livermore-Amador
Valley groundwater basin located essentially within the
valley floor sections of the Castle, Bernal, Amador and
Mocho (II) Subbasins as defined in Bulletin No. 118-2,
Evaluation of Groundwater Resources: Livermore and Sunol
Valleys, State of California, Department of Water Resources
and shown in Exhibit A attached.
g. "Municipal & Industrial Water Supply" shall mean a supply of
water from Zone 7 to Each Contractor regardless of the
source of said water or Contractor's use of said water.
30
h. "Other Sources" shall mean a water source from any person,
corporation or entity, whether public or private, other than
from Zone 7.
i. "Recharge" or "Recharged" shall mean managed replenishment
of the Main Basin including but not limited to spreading on
natural or improved channels or basins or well injection
with imported, locally developed, or recycled water, or
through In-Lieu Treated Water. Applied irrigation water
percolation shall not be considered recharge.
j. "Recycled Water" shall mean wastewater treated for reuse as
permitted by the California Department of Health Services,
the Regional Water Quality Control Board and other agencies
that from time to time may have jurisdiction.
k. "Safe Yield" shall mean the quantity of water that can be
successfully extracted from the Main Basin on an annual
basis over an extended number of years without reducing
groundwater storage. Such safe yield is the net quantity of
groundwater added to the Main Basin by stream percolation
(including percolation from stream releases required for
prior water rights), rainfall percolation, applied
irrigation water percolation, and net subsurface inflow.
l. "Treated Water" shall mean water that is processed as
necessary to comply with drinking water requirements of the
California Department of Health Services, the United States
Environmental Protection Agency and other agencies that from
time to time may have jurisdiction.
m. "Turnout Facilities" shall mean the facilities required to
provide treated water deliveries from Zone 7's water system
to the Contractor's water system. See Exhibit B for a
schematic of a typical turnout facility.
n. "Zone 7 Boundary" shall mean the boundary of Zone 7 as shown
on Exhibit C and as may be revised from time to time.
2. Term of Contract
This contract shall become fully effective upon execution of the
duly authorized signatures of the parties hereto and shall remain
in effect for a period of thirty (30) years from the date hereof,
unless terminated or extended prior to expiration of term by
mutual agreement at an earlier date.
B. WATER SERVICE PROVISIONS
3. Quantity of Water
Contractor shall purchase from Zone 7 all water required by
Contractor for use within Contractor's service area as defined in
Section 6 except that Contractor may extract groundwater as
provided in the Groundwater Extraction Provisions herein or
31
obtain water from Other Sources under the conditions in Section
5. No quantity of water purchased from Zone 7 or extracted as
part of Contractor's Groundwater Pumping Quota shall be delivered
by or provided from Contractor to any area other than
Contractor's service area, except for short-term emergency and/or
public health purposes.
4. Quality of Water
All treated water to be delivered by Zone 7 to Contractor shall
be of a quality that complies with the Requirements for Drinking
Water of the California Department of Health Services and the
United States Environmental Protection Agency or their successor
regulatory agencies. Zone 7 will endeavor to provide treated
water that is aesthetically acceptable to the Contractor's
customers. Zone 7 will blend its different sources of water
within its operational capabilities to provide water of
approximately equal quality to Each Contractor.
5. Water from Other Sources
In order to protect Zone 7's financial interest, Contractor shall
not contract for, purchase or receive, with or without
compensation, either directly or indirectly, any water for use in
its service area from any source other than by extraction of its
Groundwater Pumping Quota or from purchase from Zone 7, except
for any one or more of the following:
(a) The water received is for fire flow or fire storage
requirements or other emergency purposes;
(b) The water delivered through Zone 7's turnout facility does
not comply with drinking water requirements of California
Department of Health Services, United States Environmental
Protection Agency, or successor regulatory agencies. The
quantity of water obtained shall be limited to that
necessary to meet Contractor's treated water needs as a
result of Zone 7's non-compliance with said drinking water
requirements;
(c) Zone 7 is unable to deliver the quantity of treated water
necessary to satisfy the requirements of Contractor. Zone 7
shall specify the quantity of treated water that it cannot
deliver and the time period for which it cannot satisfy the
Contractor's requirements. Contractor is otherwise
obligated to secure all water from Zone 7 to the extent Zone
7 can provide it;
(d) Zone 7 is able to meet Contractor's water delivery request,
and Contractor has paid Zone 7 for obligated fixed costs of
Zone 7 associated with the quantity of water the Contractor
will obtain from Other Sources. These obligated fixed costs
shall include but are not limited to water facility
improvements, water contract obligations, and debt service
thereto incurred by Zone 7 in supplying water that would
have gone to the Contractor, and for which said costs would
have been recovered through the sale of said water to
32
Contractor. The Contractor shall obtain the prior written
approval from the Board which approval shall not be
unreasonably withheld;
(e) The source of water is groundwater extracted within Zone 7's
boundary but outside the Main Basin provided said extraction
does not cause an adverse impact on the Main Basin; or
(f) The source of water is recycled water from Contractor's or
Other Contractors' treated wastewater.
6. Contractor's Service Area
As used herein, the Contractor's service area shall include all
areas presently served water by Contractor. Contractor's service
area shall also include any future areas to be served by the
Contractor within the boundaries of Zone 7 subject to Subsection
32c. Contractor may include any future areas outside the
boundaries of Zone 7 upon a finding of the Board that providing
water to said area is in the best interests of Zone 7 and after
written modification of this contract providing for said service
area. The Contractor's present service area is designated on the
map attached hereto as Exhibit D. Contractor shall promptly
notify Zone 7 of changes in its service area, as may occur from
time to time, by furnishing a map to Zone 7 showing any change in
said service area so that Zone 7 can maintain a map indicating
the most recent Zone 7 water service area. Said changes in
service area shall be in accordance with the requirements of the
Local Agency Formation Commission, Public Utility Commission or
other agency having authority to set service areas.
Any future areas outside Zone 7 boundaries to be served by
Contractor which receive water from sources other than Zone 7 or
the Main Basin shall not be considered part of the Contractor's
service area under the terms of this contract.
7. Turnout Facilities
a. Turnout facilities shall be constructed at the general
location requested by Contractor. The exact location shall
be determined by Zone 7 after consultation with Contractor.
Turnout facilities shall be designed and/or constructed
either by Zone 7 or by Contractor (upon the written approval
of Zone 7) based on the ranges of flow set forth in Section
9. Turnout facilities shall include the necessary valves,
piping, meter and recording equipment, vaults, telemetry
equipment and any other appurtenances necessary to meet the
standards and operational needs of Zone 7. Zone 7 shall
submit its design of new turnout facilities to contractor
for review and written approval.
b. Contractor shall reimburse Zone 7 for all costs incurred by
Zone 7 related to the new turnout facilities including but
not limited to design, engineering, design review,
33
construction, right-of-way and acquisition thereof,
inspection, and contract administration. Contractor shall
also pay all costs for the installation of all associated
landscaping and recognizes that Zone 7 shall not be
responsible for maintenance of landscaping under the terms
and conditions of this contract. Contractor further agrees
to grant or cause to be granted to Zone 7 the necessary
permanent right-of-way and right of ingress thereto and
egress therefrom, as determined by Zone 7, for the purposes
of constructing, operating and maintaining said turnout
facilities.
c. Zone 7 shall install the nozzle outlet portion of all
turnout facilities requested by Contractor prior to the
construction of the transmission pipeline. For turnout
facilities requested by Contractor subsequent to the
construction of Zone 7's transmission pipeline, Contractor
shall pay for the nozzle outlet portion of the turnout
facility, and all costs set forth in subsection b. above.
Ownership of turnout facility, including the shut off valve
downstream of the turnout facility, shall be with Zone 7,
and Contractor shall have no obligation to operate,
maintain, repair, replace or relocate the same.
8. Measurement of Treated Water Deliveries
At any time or times, Contractor may, upon request, inspect said
turnout facilities (in the presence of a Zone 7 representative),
and the measurements and records taken therefrom. Zone 7 shall
test and calibrate the instrumentation at each turnout meter at
least annually and furnish such results to the Contractor. When
requested by the Contractor, Zone 7 shall test and calibrate any
meter through which treated water is served to Contractor. The
Contractor shall have the right to be represented by a qualified
observer at and during any instrumentation and/or meter tests
and/or calibration. Whenever testing and/or calibration of the
instrumentation and/or the meter is requested by Contractor, and
in the event that any such test shall disclose an error exceeding
two percent (2.0%), an adjustment shall be made in charges
against the Contractor covering the known or estimated period of
duration of such error, but in no event exceeding six (6) months,
and the expenses of such test shall be borne by Zone 7;
otherwise, such expenses shall be borne by Contractor requesting
such tests.
9. Ranges of Flow
a. It is recognized that the range of flow rates of water
through a turnout facility may vary considerably over the
contract term. A normal range of flow rates for a turnout
facility is hereby established as from ten percent (10%) to
one hundred percent (100%) of a maximum design flow rate.
Contractor shall provide Zone 7 with the following
information for each turnout facility prior to the design of
such facilities:
(1) Anticipated ultimate (future) maximum flow rate,
(2) Anticipated present design range of flow rates. (The
34
maximum design flow rate shall not exceed ten (10) times
the minimum design flow rate for this range in normal
installations.)
(3) Anticipated pressure ranges for (1) and (2) above on the
Contractor's side of the turnout facility.
b. Zone 7 shall design the metering and/or recording
installation for the range set forth in accordance with
Subsections (2) and (3) above with provisions for future
modifications in accordance with a range based on
Subsections (1) and (3) above.
c. Contractor shall regulate the flow demands through the
turnout facility such that the range of flow rates set forth
in accordance with Subsection b above will be maintained
insofar as such regulation is reasonable and practicable.
Zone 7 shall make modification of the metering and/or
recording equipment upon request of Contractor or at such
time that the actual flow rate exceeds the maximum design
flow rate or is less than the minimum design flow rate;
provided, however, that flow rates resulting from
emergencies shall not apply to such requirement for
modification. Said modification will be at the expense of
the Contractor and payment thereof shall be in accordance
with Section 27.
10. Delivery Schedule of Municipal & Industrial Water
Each year, the Contractor shall submit in writing to Zone 7 a
preliminary water delivery schedule on a form provided by Zone 7
indicating the anticipated quantity of treated water and
groundwater in excess of its Groundwater Pumping Quota required
by Contractor during each month of the succeeding five (5)
calendar years and the anticipated peak day treated water demand
from Zone 7 for each such year. Zone 7 shall review such
schedule, and after consultation with Contractor, shall approve
such schedule in a timely manner or make such revisions in the
same as may, in the judgment of Zone 7, be necessary to make such
deliveries. To the extent water is available to Zone 7, Zone 7
will approve in writing, a delivery schedule each year for
delivery to Contractor during the next succeeding calendar year
of an amount of water not less than the amount of water set forth
in the approved schedule for the then-current calendar year. The
amount of water set forth in the approved delivery schedule for
the next succeeding calendar year shall be the basis for which
Zone 7 shall contract with the State of California or other
entity for delivery to Zone 7. Zone 7 shall identify the reason
for any revisions or disapproval of Contractor's delivery
request. Zone 7 shall only revise or disapprove Contractor's
delivery request for the reasons set forth in Sections 12, 13, 14
or 15.
11. Reporting Use of Water
The Contractor shall report to Zone 7 on or before the tenth day
of each month the total volume, in acre-feet, of groundwater
extracted from the Main Basin and any water obtained from Other
Sources (including any water recharged to the Main Basin) for the
preceding month. The report shall become the basis for which
35
water charge determinations and hydrologic inventory calculations
of the Main Basin are made by Zone 7. Said report shall be made
on a form or forms provided by or acceptable to Zone 7. The
measurement and recordation of such flows shall be subject to the
same provisions for inspection and testing of meters and
instrumentation by Zone 7 as is provided to Contractor in
Section 8.
12. Peak Demands
The Zone 7 system is not designed to serve all Contractor's peak
demands. As water demands increase, it may be necessary to
curtail peak deliveries to conform to Zone 7 system capacity as
it exists from time to time. However, so long as water and line
capacity are available, Zone 7 will endeavor to meet all
reasonable demands for peak deliveries and will use reasonable
diligence to provide a regular and uninterrupted supply of water
from its turnout facility, but shall not be liable to Contractor
for damages, breach of contract, or otherwise, for failure,
suspension, diminution, or other variations of service occasioned
by any cause beyond the control of, or without the fault or
negligence of Zone 7. Such causes may include, but are not
restricted to, acts of God, acts of war, or criminal acts of
others, acts of Contractor or Other Contractors, water shortages,
fires, floods, earthquakes, epidemics, quarantine restrictions,
strikes, or failure or breakdown of transmission or other
facilities.
13. Curtailment of Delivery During Maintenance Periods
Zone 7 will make all reasonable effort to provide continuous
service to Contractor but may schedule to temporarily discontinue
or reduce the delivery of water to Contractor for the purpose of
necessary investigation, inspection, maintenance, repair or
replacement of any of the facilities necessary for the delivery
of treated water to Contractor. Zone 7 shall notify Contractor
as far in advance as possible of any scheduled discontinuance or
reduction and the estimated duration of such discontinuance or
reduction. Recognizing that Contractor may rely on Zone 7 for
deliveries of water with minimal interruption, particularly
during the high water consumption months, Zone 7 shall use its
best efforts to make any such discontinuance or reduction in the
delivery of water only during the period of November through
March. In the event of any discontinuance or reduction in
delivery of water, Contractor may elect to receive the amount of
water that otherwise would have been delivered to it during such
period under the approved water delivery schedule at other times
during the year, consistent with Zone 7's delivery ability
considering the then current delivery schedules of all Other
Contractors.
14. Availability of Water
In any year in which a shortage occurs due to drought or other
cause in the supply of water available for delivery to Each
Contractor such that the supply to Zone 7 is less than the total
amount included in the approved delivery schedule of Each
Contractor for that year, Zone 7 shall reduce deliveries to Each
36
Contractor in an amount that results in a reduction of total
water used within Contractor's service area that is equal to the
percent reduction for total water used within Zone 7's service
area for that year, all as determined by Zone 7; provided, that
Zone 7 may apportion on another basis if such is required to meet
minimum demands for domestic supply, fire protection, or public
health during the year.
The amount of water available under this contract and Zone 7's
obligation to supply water shall be subject to the terms and
conditions of the contract between Zone 7 and the State of
California for water service via the South Bay Aqueduct and any
other contracts Zone 7 may enter into for water supply; provided,
further, that wherever the provisions of the contract with the
State of California or other entity as to the availability of
water conflict with the provisions of this contract, the terms
and provisions of this contract shall prevail. Zone 7 shall give
Contractor written notice as far in advance as possible of any
reduction in deliveries that would be necessary because of a
shortage in water supply. Neither Zone 7 nor any of its
officers, agents, or employees shall be liable for any damage,
direct or indirect, arising from this contract caused by drought,
regulatory constraints, operation of area of origin statutes, or
any other cause beyond the control or without the negligence of
Zone 7.
15. Suspension of Service
In the event that Contractor shall be delinquent in the payment
for water for more than ninety (90) days after the due date (as
said due date is defined in Section 28), such delinquency shall
be called to the attention of the Board and the Board may, in its
discretion and after giving Contractor an opportunity to be
heard, order the suspension or reduction of service to
Contractor.
C. GROUNDWATER EXTRACTION PROVISIONS
16. Groundwater Pumping from the Main Basin
Zone 7 acknowledges Contractor's right to extract groundwater
based on Contractor's historical groundwater extractions and
based on the mutually agreed upon limitations in Contractor's
original water supply contract with Zone 7. Contractor
acknowledges that Zone 7 manages the Main Basin and that Zone 7
recharges, stores, and extracts from the Main Basin as necessary
to supply water to Each Contractor. Accordingly, Contractor
shall not extract under this agreement, more than 3,069 acre-
feet (1,000 million gallons), its Groundwater Pumping Quota, from
the Main Basin in any calendar year except as follows:
(a) The Contractor pays Zone 7 a recharge fee for recharging the
Main Basin as set forth in Section 17;
(b) The groundwater extracted is Contractor's accumulated carry-
over of its Groundwater Pumping Quota from prior years as
provided in Section 18; or
37
(c) The source of the groundwater extracted is from Other
Sources obtained by Contractor pursuant to 5(c), 5(d), and
5(f) herein and the Contractor has previously recharged said
groundwater into the Main Basin. Said recharged water shall
not adversely impact Zone 7's use of the Main Basin,
including the recharge, storage or extraction thereof.
17. Recharge Water
In any calendar year, if Contractor should extract groundwater
from the Main Basin in an amount in excess of its Groundwater
Pumping Quota plus any accumulated carry-over and any groundwater
recharged by Contractor per 16 (c), Contractor shall pay Zone 7,
in addition to other payments required by this contract, a
recharge fee as set forth in the rate schedule and Sections 23
and 24 herein, for each acre-foot of water (or portion thereof)
in excess of said amount. In express consideration of
Contractor's agreement to pay such recharge fee, as aforesaid,
Zone 7 shall recharge the Main Basin in an amount aggregating the
quantity of such excess water.
Because said recharge fee would be in the nature of an assessment
fee upon annual extractions in excess of the Groundwater Pumping
Quota, if Zone 7 (or any other public body or agency) shall
impose a valid replenishment assessment fee or other charge upon
or measured by the pumping or extraction of water for use in
Contractor's service area, then the provisions of this Section
shall be superseded accordingly, except as to any payment
attributable to a period prior to the effective date of any such
assessment fee or other charge.
18. Carry-over of Groundwater Pumping Quota
If, in any calendar year, Contractor does not extract its entire
Groundwater Pumping Quota from the Main Basin, Contractor may
carry-over from that calendar year the unextracted portion of
Groundwater Pumping Quota for extraction from the Main Basin
during subsequent calendar years. Said carry-over or accumulated
carry-over shall not exceed 20 percent of the Contractor's
Groundwater Pumping Quota. Said carry-over shall not include any
Groundwater Pumping Quota waived under the In-Lieu Treated Water
provision of Section 19.
19. In-Lieu Treated Water
During periods when sufficient water is available to Zone 7 at
reasonable cost and Zone 7 desires to raise or maintain
groundwater levels, Zone 7 will offer delivery of treated water
at a cost that is less than treated water rates to Contractor in
lieu of Contractor extracting groundwater per its Groundwater
Pumping Quota. The amount of In-Lieu Treated Water that
Contractor may receive shall not exceed its Groundwater Pumping
Quota plus any accumulated carry-over or its operational
capability to extract said Groundwater Pumping Quota and
accumulated carry-over. Zone 7's offer to deliver In-Lieu
Treated Water for a given calendar year will be made on or about
May 1 of that year, however, said rates may be retroactive for
38
the entire calendar year or other mutually agreed upon portion
thereof. Credit or payment for In-Lieu Treated Water will be as
provided for under Section 25. Contractor is not required to
take or purchase any In-Lieu Treated Water.
Contractor acknowledges that any credits or payments received
under Section 25 are received in-lieu of the Contractor's right
to extract its Groundwater Pumping Quota, and Contractor agrees
that its Groundwater Pumping Quota and any accumulated carry-over
shall be reduced by an amount equivalent to the amount of In-Lieu
Treated Water delivered by Zone 7 to Contractor for the year in
which the delivery is made.
20. Water Delivery Shortage Emergency Extractions
During a water supply emergency, as declared by the Board, in
which Zone 7 is unable to deliver the quantity of treated water
as approved on the delivery schedule, the Contractor may extract
water from the Main Basin in excess of the Contractor's
Groundwater Pumping Quota at a reduced recharge rate. Said rate
shall be the same as the In-Lieu Treated Water rate.
21. Transfer of Groundwater Pumping Quota
Temporary or permanent transfer of Contractor's Groundwater
Pumping Quota outside of the Zone 7 boundary shall not be
permitted. Temporary or permanent transfer of Contractor's
Groundwater Pumping Quota within Zone 7's boundary shall be
permitted provided that it is transferred to an Other Contractor.
Said transfer of Contractor's Groundwater Pumping Quota shall be
permitted upon written notification to Zone 7 from each
contractor that is a party to the transfer.
22. Changes in Contractor's Groundwater Pumping Quota
The annual Safe Yield of the Main Basin, estimated as
approximately 13,200 acre-feet per year in 1993, is essentially
the same as the long-term average extraction by existing
groundwater producers. The Board shall not increase any Other
Contractor's Groundwater Pumping Quota unless such increase in
Groundwater Pumping Quota is acceptable to Each Contractor with a
Groundwater Pumping Quota.
Neither Contractor nor Zone 7 waives any rights to pursue a court
adjudication of the safe yield of the Main Basin or any other
court action on extraction of groundwater from the Main Basin
that may change Contractor's Groundwater Pumping Quota.
Furthermore, Zone 7 reserves its authority to levy a
replenishment assessment on the extraction of any groundwater,
including Contractor's Groundwater Pumping Quota (excluding any
adjudication of the safe yield), as necessary to protect the
water supplies for users within Zone 7.
D. CHARGE AND PAYMENT PROVISIONS
23. Rate Schedule
Zone 7 shall charge for water in accordance with a rate schedule
39
for water service, as such rate schedule is established or
amended by the Board. The Board shall review the rate schedule
and establish a rate schedule for each calendar year period in
accordance with the most recent costs and revenues of Zone 7.
The Board shall review the rate schedule at the September regular
meeting and endeavor to establish the rate schedule at the
November regular meeting prior to January 1 of the following
calendar year for which the rate schedule is to be effective.
The rates, including but not limited to the treated water,
in-lieu treated water, meter fee, and recharge fee, to be so
established, shall be based on the cost of providing service, and
shall not be unreasonable, arbitrary, or discriminatory. In the
event the Board fails, in conformity to the preceding schedule,
to establish a new rate schedule for any calendar year the rate
schedule in effect for the prior calendar year shall be continued
in full force and effect until otherwise modified by the Board.
24. Recharge Fee
The recharge fee shall be charged to Contractor in accordance
with the rates included in the rate schedule. Contractor shall
be invoiced by Zone 7 in accordance with Section 26 at the time
in which Contractor exceeds its Groundwater Pumping Quota as
provided in Section 17. Section 28 herein shall apply to said
charges. The recharge fee shall be based upon Zone 7's costs
including but not limited to the cost to purchase or develop the
water, as well as the cost to construct, maintain, and operate
the facilities needed to import, distribute, store, treat and
recharge said water into the Main Basin for the benefit of Each
Contractor.
25. In-Lieu Treated Water Credit
In any calendar year in which the Contractor has foregone pumping
of its Groundwater Pumping Quota, plus accumulated carry-over, as
set forth in Section 19, Zone 7 shall determine the amount of
delivered treated water that should be charged at the In-Lieu
Treated Water rate, and shall credit or make payment to the
Contractor the difference between the treated water rate and the
In-Lieu Treated Water rate.
26. Time for Payment
Contractor shall be invoiced on a calendar month basis for
charges. Contractor shall pay promptly all charges invoiced by
Zone 7, such invoices to be rendered on or about the 5th day of
each month for charges incurred in the preceding month and to
become due and payable within 30 days from date of invoice. In
the event that Contractor in good faith contests the accuracy of
any invoices submitted to it pursuant to this Section, it shall
give Zone 7 notice thereof at least ten (10) days prior to the
day upon which payment of the stated amount is due. To the
extent that Zone 7 finds Contractor's contentions regarding the
statement to be correct, it shall revise the statement
accordingly and Contractor shall make payment of the revised
amounts on or before the due date. To the extent that Zone 7
does not find Contractor's contentions to be correct or where
time is not available for a review of such contentions prior to
40
the due date, Contractor shall make payment of the invoiced
amount on or before the due date and make the contested part of
such payment under protest and seek to recover the amount thereof
from Zone 7.
27. Payment for Turnout Facilities
Prior to commencing with the design of a turnout facility,
Contractor shall deposit with Zone 7 an amount of money estimated
by Zone 7 to cover all costs to be incurred by Zone 7 for
designing said turnout facility or shall request in writing to be
invoiced for such design in accordance with Section 26. The
option of invoicing Contractor shall be at the sole discretion of
Zone 7. Prior to constructing said turnout facility, Contractor
shall deposit with Zone 7 an amount of money estimated by Zone 7
to cover all costs to be incurred by Zone 7 for completion of
turnout facility or request to be invoiced for such construction
in accordance with Section 26. Following completion of the
construction of the turnout facility, Zone 7 shall submit to
Contractor a statement for the actual costs incurred for
completion of the design and construction of said turnout
facility as provided in Section 7. The deposit shall be applied
to the actual costs incurred by Zone 7, and the appropriate
refund or invoicing to Contractor will be made. Contractor shall
make payment of any such invoicing to Zone 7 within thirty (30)
days of submission of said statement. Zone 7 shall refund any
deposit in excess of actual cost within thirty days of Zone 7's
determination of said cost. Contractor shall have the right to
audit the records of Zone 7 for the purpose of verifying actual
costs.
28. Delinquent Payments
In the event that Contractor is delinquent in the payment of
invoiced charges for more than thirty (30) days after the due
date, delinquent amounts shall accrue at the legal rate of
interest commencing on the due date and continuing each month
thereafter until payment of both the principal amount of such
charges and the interest thereon is paid in full insofar as
permitted by law. Unless otherwise determined by law, the legal
rate of interest shall be the combined per annum discount rate of
the Federal Reserve Bank of San Francisco on the 25th day of the
current month and five percent (5%).
E. GENERAL PROVISIONS
29. Remedies
By reason of the specialized nature of the water service
rendered, and for the further reason that the extent of any
damage caused to either party by the other by reason of any
breach of this contract or agreement may be extremely difficult
to determine, it is agreed by the parties hereto that an action
for damages is an inadequate remedy for any breach, and that
specific performance, without precluding any other remedy
41
available in equity or law, will be necessary to furnish either
party hereto with an adequate remedy for the breach thereof.
30. Assignment
This contract is not for the benefit of any person, corporation
or other entity, other than the parties hereto, and no person,
corporation or other entity except the parties hereto, shall have
any rights or interest in or under this contract unless otherwise
specifically provided herein. Contractor shall not assign or
transfer any rights or privileges under this contract, either in
whole or in part, without the prior written consent of Zone 7,
which consent shall not be unreasonably withheld, or make any
transfer of all or any part of its water system, or allow the use
thereof, in any manner whereby any provisions of this contract
will not continue to be binding on it, its assignee or
transferee, or such user of the system. This contract and the
rights and responsibilities provided for herein shall be binding
on the successors and assigns of the parties hereto.
31. Contract Modification
This contract may be amended or modified any time only by mutual
written agreement of the parties.
32. Liabilities
a. Zone 7 and/or any of its officers, agents or employees shall
not be liable for the control, carriage, handling, use,
disposal, or distribution of treated water supplied to
Contractor by Zone 7, after such water has passed through
the turnout facility or for claims of damage of any nature
whatsoever, including but not limited to property damage,
personal injury or death, arising out of or connected with
the control, carriage, handling, use, disposal or
distribution of such water beyond said turnout facility.
Contractor shall indemnify, save and hold harmless Zone 7
and its officers, agents, and employees from any such
damages or claims of damages. Contractor shall further
reimburse Zone 7 for costs of repair of Zone 7's facilities
and other damages resulting from the operations of
Contractor.
b. Contractor and/or any of its officers, agents, or employees
shall not be liable for the control, carriage, handling,
use, disposal, or distribution of water prior to such water
being delivered through the turnout facility or for claims
of damage of any nature whatsoever, including but not
limited to property damage, personal injury or death,
arising out of or connected with the control, carriage,
handling, use, disposal, or distribution of such water prior
to its delivery to Contractor, excepting, however, claims by
Zone 7 for costs of repair to Zone 7's facilities and other
damages resulting from the operations of the Contractor.
Zone 7 shall indemnify, save and hold harmless the
Contractor and its officers, agents, and employees from any
such damages or claims of damages, except claims by Zone 7
42
for costs of repair of Zone 7's facilities and other damages
resulting from the operations of Contractor.
c. Zone 7 needs to be protected from any obligation to supply
water to projects or consumers which the contractor has
supplied from sources other than what has been directly
purchased from Zone 7. Accordingly, any other provision
herein notwithstanding, Zone 7 shall not be obligated nor
liable to provide, without exception, that quantity of water
obtained by Contractor pursuant to Subsections 5a-f, to
Contractor or any customer of Contractor regardless of
purpose. Accordingly, Contractor shall indemnify, save and
hold harmless Zone 7 from any and all obligations,
liability, responsibility, costs, expenses, or fees
associated in any way with any claims, demands, requests,
suits, causes of action of whatever type or nature
concerning the provision of any quantity of water obtained
by Contractor pursuant to Subsections 5a-f herein.
d. Likewise, if pursuant to Section 3 herein, Contractor is
instructed by Zone 7 to acquire water from Zone 7 which has
been previously acquired from third parties pursuant to
Subsections 5a-f herein, Zone 7 shall save and hold harmless
Contractor from any and all obligations, liability,
responsibility, costs, expenses, or fees that may arise from
such third parties.
33. Renewability
At the expiration of the thirty (30) year term of this contract,
said contract may be renewed upon the mutual consent of the
parties hereto. If no such renewal shall take place and in the
absence of any new contract, Zone 7 shall nevertheless continue
delivery to Contractor in accordance with this contract, that
quantity of water set forth in the approved delivery schedule for
the last full calendar year before the expiration of the term of
this contract. However, if a new contract is not entered into
within two (2) years from the date of expiration of this
contract, then the Board may, at its option, set the terms and
conditions for a Municipal & Industrial Water Supply.
34. Notices
All notices or other writings in this contract provided to be
given or made or sent, or which may be given or made or sent, by
one party hereto to another, shall be deemed to have been fully
given or made or sent when made in writing and deposited in the
United States mail, registered, certified or first class, postage
prepaid, and addressed as follows:
To Zone 7: General Manager
Zone 7 Water Agency
5997 Parkside Drive
Pleasanton, CA 94588
43
To Contractor: President
California Water Service Company
1720 North First Street
San Jose, CA 95112-4598
The address to which any notice or other writing may be given or
made or sent to any party may be changed upon written notice
given by such party as provided above.
35. Severability
If any one or more of the terms or conditions set forth in this
contract to be performed on the part of Zone 7 or Contractor, or
either of them, should be contrary to any provisions of law or
contrary to the policy of law to such an extent as to be
unenforceable in any court of competent jurisdiction, then such
terms or conditions, shall be null and void and shall be deemed
severable from the remaining terms or conditions and shall not
affect the validity of the remaining provisions of this contract.
36. Section Headings
Section headings in this contract are for convenience only and
are not to be construed as a part of this contract or in any way
limiting or amplifying the provisions hereof.
37. Waiver
None of these terms or conditions herein contained can be waived
except by mutual written consent.
38. Water Conservation
In order to increase water supply by demand reduction or to
comply with regulatory requirements, Zone 7 will undertake and
support water conservation programs. To that end, Zone 7 will
develop, implement or participate in such programs and enter into
agreements with Other Contractors, and other entities to make
more efficient use of water supplies through water conservation
programs so long as such agreements serve a beneficial purpose to
the residents of Zone 7.
39. Contracts to be Substantially Similar
Zone 7 agrees that each contract for a Municipal & Industrial
Water Supply hereafter entered into by Zone 7 with any Other
Contractor shall contain provisions substantially similar to
those herein set forth and shall not contain any provisions of a
material nature more favorable to the Other Contractor than the
provisions herein applicable to Contractor. This section shall
not restrict Zone 7 from considering other terms and conditions
for subsequent Municipal & Industrial Water Supply contracts
provided that if such other terms and conditions are not
substantially similar, Zone 7 shall notify all Other Contractors
and offer such other terms and conditions in accordance with
Section 31 to Each Contractor. This section shall not limit Zone
7 from entering into other contracts for services not provided
44
for under the terms and conditions of this contract.
IN WITNESS WHEREOF, the parties hereto and have executed this
contract on the date and year first above written.
CALIFORNIA WATER SERVICE ZONE 7 WATER AGENCY
COMPANY
BY \s\ DONALD L. HOUCK BY \s\ DAVID W. LAYTON
President Chairman, Board of Directors
ATTEST: ATTEST:
BY \s\ HELEN MARY KASLEY BY \s\ JIM DIXON
Secretary Secretary
APPROVED AS TO FORM:
KELVIN H. BOOTY, JR.,
COUNTY COUNSEL
BY \s\ BRIAN WASHINGTON
Deputy County Counsel
45
EXHIBIT XIII
SERVICE AREAS AND CUSTOMERS
A map of State of California indicating the twenty districts in which the
company operates is included on this page.
SAN FRANCISCO BAY AREA
Mid-Peninsula (San Mateo and San Carlos) 35,300
South San Francisco (including Colma and Broadmoor) 15,300
Bear Gulch (including Menlo Park, Atherton,
Woodside and Portola Valley) 17,100
Los Altos (including Los Altos and portions of Cupertino,
Los Altos Hills, Mountain View and Sunnyvale) 17,800
Livermore 14,900
100,400
SACRAMENTO VALLEY
Chico (including Hamilton City) 20,700
Oroville 3,500
Marysville 3,800
Dixon 2,700
Willows 2,200
32,900
SALINAS VALLEY
Salinas 23,000
King City 1,900
24,900
SAN JOAQUIN VALLEY
Bakersfield 54,400
Stockton 40,800
Visalia 26,200
Selma 4,600
126,000
LOS ANGELES AREA
East Los Angeles (including portions of
City of Commerce and Montebello 26,400
Hermosa Beach and Redondo Beach
(including a portion of Torrance) 24,800
Palos Verdes (including Palos Verdes Estates, Rancho
Palos Verdes, Rolling Hills Estates and Rolling Hills) 23,400
Westlake (a portion of Thousand Oaks) 6,700
81,300
365,500
46
NEW BUSINESS DEVELOPMENT
New business activity improved somewhat over 1993. New residential and
commercial services added through installation of new mains totaled 2,018,
up approximately 21 percent from last year.
Nine districts showed an increase in new business activity above the figures
posted in 1993. The Visalia district was by far the growth leader for the
Company in 1994. This district increased its activity by nearly 75 percent
over the already high level of activity experienced in 1993. This year,
Visalia accounted for nearly one-third of the Company's total new business
growth. Net refundable advances and contributions received from developers
in 1994 were $8,800,000 compared with $8,400,000 received in 1993.
The Company, in cooperation with San Mateo County and a local homeowners
association, is acquiring Palomar Park County Water District #3. Palomar
Park, containing about 200 customers, will be a welcome addition to our
Mid-Peninsula district.
The Company has entered into a number of contracts to include municipal
utility bills on customers' monthly water bills. Agreement was reached with
the City of Willows and the City of King to bill city residents for sewer
charges. In Visalia, we were awarded a similar contract for sewer and
refuse billing services. These contracts are a promising area of growth for
the Company. We will continue to seek these opportunities where they arise.
Agreements were signed with the Central and West Basin Municipal Water
Districts in Los Angeles for the operation and maintenance of their recycled
water distribution systems. As with billing contracts, the Company is
quickly developing expertise in the operation of recycled water distribution
systems, and is now involved with three such systems. As California's
growing population continues to exert pressure on the state's water supply,
so too grows the use of recycled water for non-potable uses such as municipal
irrigation and industrial processes. The Company believes this sector is a
promising growth area.
47
RATES AND REGULATION
The California Public Utilities Commission requires that rates for each
district be determined independently. Each year, the Company files general
rate increase applications for approximately one-third of its operating
districts. The Commission attempts to resolve these within eight months of
acceptance. Offset rate adjustments are also allowed for changes in purchased
water, power costs and pump taxes.
During 1994, general rate increase applications were filed with the Commission
requesting rate relief of $3,023,000 in six districts representing 15 percent
of the Company's customer base. The applications requested a rate of return
on common equity of 12 percent. However, the Commission staff has recommended
a rate of return of 10.9 percent. Public hearings for these cases were
completed in early February 1995, the Commission's decision is expected in
mid-May. Step increases authorized in previous rate decisions for 15 districts
totaling approximately $2,102,000 became effective in January 1995.
In July 1994, the Commission issued a decision on general rate cases filed in
July 1993, for three districts representing 13 percent of customer base,
resulting in $540,000 in additional revenue and yielding a return on common
equity of 10.2 percent.
The Commission issued its long awaited decision in its investigation of the
financial and operational risks for water utilities. While the Commission
concluded that no fundamental change in its ratemaking procedures is necessary,
it authorized water utilities to accrue interest on balancing and memorandum
accounts. Additionally, the decision allows water utilities to request
prospective recovery for unanticipated Safe Drinking Water Act compliance
costs.
Effective March 14, 1994, the Commission closed all voluntary conservation
memorandum accounts. The Company is seeking to transfer $1,748,000 in lost
revenue and conservation expenses from the drought memorandum accounts to its
expense balancing accounts. These amounts would be recoverable through the
Commission's offset procedures which allow surcharges to amortize account
balances.
Offset rate increases of $1,944,000 and $2,327,000 were authorized during the
year for water production cost increases and balancing account
undercollections, respectively. Additionally, the Commission approved rate
increases of $292,000 to recover increased costs from the 1993 general
office renovation; $87,000 for a new water tank in the South San Francisco
district; and $215,000 for post-retirement benefits other than pensions. This
latter expense was a result of accounting changes mandated by Statement of
Financial Accounting Standards No. 106.
48
WATER QUALITY AND ENVIRONMENTAL AFFAIRS
The trends of the past few years continued in 1994. Increasing numbers of
stringent federal and state water quality regulations require increased
monitoring and analysis of all sources and distribution systems. Particular
effort was devoted to preparation of reports in compliance with the second
phase of the United States Environmental Protection Agency's lead and copper
rule. Changes in the federal Safe Drinking Water Act which would have brought
treatment costs in line with the actual health threat posed by contaminants
were not adopted by Congress in 1994.
Meanwhile, the Company continued to upgrade its treatment capabilities to
ensure compliance with all regulations now and in the future. These upgrades
include the installation of:
~ Chlorinators on all wells to ensure compliance with bacteriological
regulations.
~ An innovative granular activated carbon system in Bakersfield for removal of
hydrogen sulfide taste and odor.
~ Our third treatment system in Chico for the removal of volatile organic
compounds (VOCs). We also agreed to operate a granular activated carbon
system for the removal of VOCs installed by the State Environmental
Protection Agency.
In other environmental areas, the Company continues to maintain an aggressive
employee training program in recycling, hazardous materials management, and
hazardous waste management. The training program is an essential part of
ensuring that all operations are conducted in accordance with good
environmental practice, and in compliance with all applicable environmental
laws, regulations and rules.
WATER SUPPLY
The 1993-94 water season was California's fourth driest year on record, leading
the Department of Water Resources to declare a 'drought watch' in May. But
these fears began to be allayed as early as November 1994 when a seemingly
endless series of storms began pouring rain and snow throughout the state's
watersheds.
By late January 1995, cumulative average Sierra snowpack was at 175 percent of
normal; storage in the state's 155 reservoirs was at more than 90 percent of
49
average and the drought watch was cancelled. These promising figures guarantee
100 percent of state water project deliveries will be made in 1995.
Substantial water reserves remain in the groundwater aquifers that supply
Company districts served by well water. While recovery from drought-related
depletion of these reserves was interrupted by drier than normal conditions
in 1994, the mean groundwater levels in these districts were stable. In
addition, districts located in regions with existing groundwater management
mechanisms showed noticeable improvements in storage. Regional groundwater
management planning is receiving greater attention throughout the state as
its importance as a tool for addressing long-term water supply concerns is
realized. The passage of legislation that enables management of this resource
by existing local government agencies further stimulated this attention.
Despite the promise of an abundant water year, California is expected to have
long-term water supply problems. To compensate for this trend, the Company
continues to promote water conservation programs initiated during the drought
on a district-by-district basis outlined in our water management plans and as
permitted by the California Public Utilities Commission.
Significant developments affecting future water supply occurred in several of
our districts. On August 16, 1994, the State Water Resources Control Board
(SWRCB) informed the Monterey County Board of Supervisors that it was
initiating an investigation into the groundwater supply issues in the Salinas
Valley. This is a prelude to a possible adjudication of the groundwater basin
by the SWRCB should Monterey County fail to develop short- and long-term
solutions to the nitrate contamination and saltwater intrusion threatening
the aquifers. In a related matter, the SWRCB refused to consider a separate
investigation of groundwater use in our King City district. This action will
save the Company a considerable amount of litigation expenses.
In Solano County, the location of our Dixon district, the Solano County Water
Agency agreed to reimburse the Company for costs it incurred as a party to the
Putah Creek adjudication. This action will determine the rights to water from
Putah Creek which recharges the groundwater from which our Dixon district
derives its water supply.
50
<TABLE>
TEN YEAR FINANCIAL REVIEW
<CAPTION>
(Dollars in thousands except common share and other data)
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Operating revenue
Residential $114,751 $111,526 $101,842 $87,560 $90,178 $84,295 $81,404 $82,254 $79,131 $75,508
Business 27,023 25,247 23,670 20,759 20,910 19,870 19,480 19,986 19,095 17,847
Industrial 5,478 5,123 4,925 4,490 5,146 5,166 4,754 4,361 4,539 4,636
Public authorities 7,995 7,396 6,892 5,734 6,412 6,225 6,232 6,491 6,285 6,118
Other 2,024 2,424 2,476 8,633 1,741 1,932 1,885 693 1,385 1,382
TOTAL OPERATING REVENUE 157,271 151,716 139,805 127,176 124,387 117,488 113,755 113,785 110,435 105,491
Operating expenses 131,766 123,861 116,031 102,855 101,017 95,150 91,265 90,587 87,788 83,722
Interest expense, other income and
expenses, net 11,097 12,354 11,245 10,393 9,004 8,566 8,416 8,026 8,808 9,115
Net income $14,408 $15,501 $12,529 $13,928 $14,366 $13,772 $14,074 $15,172* $13,839 $12,654
COMMON SHARE DATA
Earnings per share $2.44 $2.70 $2.18 $2.42 $2.50 $2.40 $2.45 $2.63* $2.40 $2.21
Dividends paid 1.98 1.92 1.86 1.80 1.74 1.68 1.60 1.48 1.40 1.30
DIVIDEND PAYOUT RATIO 81% 71% 85% 74% 70% 70% 65% 49% 58% 59%
Book value at year-end $23.12 $21.80 $21.02 $20.70 $20.08 $19.32 $18.59 $17.72 $16.11 $15.03
Market price at year-end 32.00 40.00 33.00 28.00 26.75 28.00 25.50 30.00 26.625 22.625
Common shares outstanding at year-end
(in thousands) 6,247 5,689 5,689 5,689 5,689 5,689 5,672 5,636 5,607 5,576
Return on common shareholders equity 10.6% 12.4% 10.4% 11.7% 12.4% 12.4% 13.2% 14.8% 14.9% 14.7%
Bond interest coverage 3.2 3.2 2.9 3.2 3.6 3.4 3.8 4.3 3.9 3.5
BALANCE SHEET DATA
Net utility plant $407,895 $391,703 $374,613 $349,937 $325,409 $307,802 $289,363 $273,619 $262,216 $246,467
Utility plant expenditures 28,275 28,829 35,188 34,459 26,861 27,277 23,994 19,511 22,710 16,469
Advances for construction 92,190 90,812 89,127 84,424 77,202 69,016 59,145 54,887 50,907 45,790
Capitalization:
Common shareholders equity 144,447 123,999 119,574 117,779 114,244 109,929 105,435 99,897 90,336 83,818
Preferred stock 3,475 3,475 3,475 3,475 3,475 3,475 3,475 5,783 5,909 6,031
First mortgage bonds 128,944 129,608 122,069 103,505 104,905 86,012 86,959 73,930 77,056 84,009
Total capitalization 276,866 257,082 245,118 224,759 222,624 199,416 195,869 179,610 173,301 173,858
Capitalization ratios:
Common shareholders equity 52.2% 48.2% 48.8% 52.4% 51.3% 55.1% 53.8% 55.6% 52.1% 48.2%
Preferred stock 1.3% 1.4% 1.4% 1.5% 1.6% 1.8% 1.8% 3.2% 3.4% 3.5%
First mortgage bonds 46.5% 50.4% 49.8% 46.1% 47.1% 43.1% 44.4% 41.2% 44.5% 48.3%
OTHER DATA
Water production (million gallons)
Wells 50,325 47,205 52,000 48,930 51,329 51,350 48,828 48,097 45,222 43,589
Purchased 49,300 48,089 40,426 36,686 45,595 45,978 48,254 50,744 50,782 50,328
Total water production 99,625 95,294 92,426 85,616 96,924 97,328 97,082 98,841 96,004 93,917
Customers
Metered 286,700 282,100 278,700 275,200 272,100 269,200 267,000 261,000 258,600 256,000
Flat rate 78,800 80,800 82,000 82,400 81,200 79,400 77,800 76,800 75,600 74,300
Total customers at year-end 365,500 362,900 360,700 357,600 353,300 348,600 344,800 337,800 334,200 330,300
New customers added 2,600 2,200 3,100 4,300 4,700 3,800 7,000 3,600 3,900 4,200
Revenue per customer $430 $418 $388 $356 $352 $337 $330 $337 $330 $319
Utility plant per customer $1,530 $1,469 $1,406 $1,327 $1,251 $1,198 $1,140 $1,098 $1,058 $1,007
Employees at year-end 624 614 610 593 581 565 550 534 528 525
* Net income excludes $2,196 for a change in accounting for unbilled revenue;$.39 is excluded from earnings per share.
Common share data is adjusted to reflect the 2-for-1 stock split effective October 1987.
51
</TABLE>
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS
California Water Service Company is a public utility supplying water service
through 20 separate water systems to 365,500 customers living in 38 California
communities. These systems, or districts, are located throughout the state as
shown in the tabulation on page 4.
The Company's rates and operations are regulated by the California Public
Utilities Commission (Commission) with the rates for each district determined
separately. A detailed discussion of Rates and Regulation begins on page 11 of
this report.
The six-year drought in California which required water rationing in a number
of the Company's districts was declared officially ended after near-record
precipitation in the first three months of 1993. A detailed discussion of
Water Supply begins on page 14 of this report.
RESULTS OF OPERATIONS
EARNINGS AND DIVIDENDS
The Company's earnings per share for 1994 were $2.44, compared with $2.70 in
1993 and $2.18 in 1992. Net income was $14,408,000 in 1994 compared with
$15,501,000 in 1993 and $12,529,000 in 1992. Earnings and revenue in 1992 were
impacted by mandatory water rationing in some Company districts and water
conservation in all districts.
In January 1994, the Board of Directors increased the dividend rate for the
twenty-seventh consecutive year. The annual rate paid in 1994 was $1.98 per
share, an increase of 3.1% compared with the 1993 dividend of $1.92 per share,
which represented an increase of 3.2% over the 1992 dividend of $1.86 per
share. The increased dividends were based on projections that the higher
dividend could be sustained while still providing the Company with adequate
financial flexibility. The dividend payout ratio was 81% in 1994 compared with
71% in 1993 and 85% in 1992, an average of 79% for the three-year period.
Earnings not paid as dividends are reinvested in the Company.
OPERATING REVENUE
Operating revenue was a record $157.3 million in 1994, compared with $151.7
million in 1993 and $139.8 million in 1992. The increase was $5.6 million,
or 4% over 1993. Step and general rate increases accounted for $4.1 million
of added revenue. Offset rate adjustments, primarily for purchased water and
pump tax cost increases, added $2.7 million. Average water consumption per
customer increased 4%, adding $2.4 million to revenue. During 1993, $2.9
million of rationing loss recoveries were recorded, and as authorized by the
Commission, conservation penalties totaling $1.6 million were transferred to
revenue to offset undercollections in expense balancing accounts. Since there
were no similar revenue sources in 1994, revenue decreased by $4.5 million.
Sales to 2,600 new customers accounted for $0.9 million in additional revenue.
52
In 1993, operating revenue increased $11.9 million, or 9% from 1992. Step and
general rate increases accounted for $2.7 million of added revenue. Offset
rate adjustments, primarily for purchased water and pump tax rate increases,
added $7.3 million. Average water consumption per customer increased 3%,
adding $2.3 million to revenue. However, rationing loss recoveries declined
$1.2 million from 1992 due to the ending of rationing. Sales to 2,200 new
customers accounted for $0.8 million in additional revenue.
In 1992, operating revenue increased $12.6 million from 1991. Step and general
rate increases accounted for $3.4 million of added revenue. Offset rate
adjustments, primarily for purchased water and pump tax cost increases, added
$7.0 million. Average water consumption per customer increased 6%, adding $3.9
million to revenue. The discontinuance of mandatory rationing in four
districts in April 1992 helped account for higher water consumption. However,
this also resulted in lower rationing loss recoveries of $4.0 million compared
with $6.9 million in 1991. Sales to 3,100 new customers accounted for $1.2
million in additional revenue.
OPERATING AND INTEREST EXPENSES
Operating expenses in 1994 increased $7.9 million compared with increases of
$7.8 million in 1993 and $13.2 million in 1992.
Purchased water expense continued to be the largest component of operating
expense at $42.8 million, an increase of $4.4 million. This was attributable
to a 3% increase in water purchases to 49 billion gallons and to wholesale
water suppliers' rate increases. Total water production, including well
production and surface supplies was up 5% from 1993 to 100 billion gallons.
Total cost of water production, including purchased water, purchased power and
pump taxes, was $58.3 million in 1994, $52.9 million in 1993, and $50.2 million
in 1992. Commission regulatory procedures allow offset rate adjustments for
changes in these costs through use of balancing accounts. However, there was
a delay in recovery of some cost increases as discussed under the caption
Rates and Regulation on page 11.
Employee payroll and benefits charged to operations and maintenance expense was
$28.0 million in 1994 compared with $26.2 million in 1993 and $24.8 million in
1992. The increases in payroll and benefits is attributable to wage increases
and additional employees. At year-end 1994, 1993 and 1992 there were 624, 614
and 610 employees, respectively.
Income taxes were $9.6 million in 1994, $10.6 million in 1993, and $8.2 million
in 1992. The changes in taxes are due to variations in taxable income and the
increase in the Federal tax rate to 35% from 34% effective in 1993.
Interest on first mortgage bonds decreased $1.4 million in 1994 due to the bond
refinancing program completed at lower interest rates in 1993. In 1993, bond
interest expense increased $1.5 million over 1992 due to the sale of $20
million new bonds in November 1992 and the sale of additional new bonds in
1993. Bond financing is discussed under the caption Liquidity and Capital
Resources. Interest on short-term bank borrowings in 1994 increased $.2
million due to increased borrowings at higher interest rates than in the
prior year. The increase in 1993 bond interest was partially offset by a
$.3 million reduction in interest on short-term debt due to reduced borrowings.
Bond interest coverage before income taxes was 3.2 in 1994 and 1993, and 2.9 in
1992.
53
OTHER INCOME
Other income increased to $.4 million in 1994. Other income in 1993 was $.3
million and $.2 million in 1992. Other income is derived from management
contracts under which the Company operates three municipally owned water
systems, agreements for operation of two reclaimed water systems, billing
services provided to various cities, interest on short-term investments and
other non-utility sources. The Company intends to continue to pursue
opportunities to expand these revenue sources.
ACCOUNTING STANDARDS
The Financial Accounting Standards Board issued three new statements which
affected the financial statements in 1993 or 1992. These are Statement No.
106 "Employers' Accounting for Postretirement Benefits Other Than Pensions",
Statement No. 107 "Disclosures About Fair Value of Financial Instruments",
and Statement No. 109 "Accounting for Income Taxes". The effect of these
statements is discussed in Notes to Financial Statements: Note 5-Income
Taxes; Note 6-Employee Benefit Plans; and Note 7-Fair Value of Financial
Instruments.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY
The Company's liquidity is primarily provided by cash generated from operations
and the utilization of a short-term bank line of credit of $30 million as
described in Note 3 to the financial statements. The credit line was
temporarily increased to $40 million during the bond refinancing periods in
May and November 1993 to allow for short-term cash requirements between the
calling of bonds and the issuance of new bonds.
The sale of 550,000 common shares was completed in September 1994 at an offer
price of $33.375. Proceeds of $17.4 million, net of underwriters' commissions
and issuance costs, were used to repay $15.5 million of short-term bank
borrowings which had been incurred to fund the 1994 construction program and
for temporary working capital requirements. The Company's regular practice
has been to purchase shares for the dividend reinvestment plan in the market,
however, for the first quarter 1994 dividend, 8,280 new common shares were
issued under the reinvestment plan.
A major refinancing program was completed in 1993. Eight series of bonds in
he principal amount of $49,593,000 and bearing coupons ranging from 8.6% to
12-7/8% were called prior to maturity using a portion of the proceeds from the
sale of three $20 million dollar bond issues. Series EE 7.9% first mortgage
bonds were issued in June 1993, Series FF 6.95% bonds were issued in October
1993 and Series GG 6.98% bonds were issued in November 1993. Interest savings
from the refunding was approximately $1.9 million annually. Standard & Poor's
and Moody's maintained their bond ratings of AA- and Aa3 respectively on
the new Series GG bond issue. Capital requirements consist primarily of new
construction expenditures for expanding and replacing the Company's utility
plant facilities. They also include refunds of advances for construction and
retirement of bonds.
54
CAPITAL REQUIREMENTS
During 1994, utility plant expenditures totaled $28.3 million including $20.8
million covered by Company funding and $7.5 million received from developers
through refundable advances and contributions in aid of construction. Company
funded expenditures were in the following areas: wells, pumping and water
treatment equipment, and storage facilities, $5.7 million; distribution
systems, $8.0 million; services and meters, $4.7 million; equipment, $2.4
million. Company projects were funded through cash generated from operations,
the use of the short-term line of credit and the proceeds from the common stock
offering.
The 1995 Company construction program has been authorized by the Directors for
$20.7 million. Expenditures are expected to be in the following areas: wells,
pumping and water treatment equipment, and storage facilities, $4.6 million;
distribution systems, $7.4 million; services and meters, $6.0 million; and
equipment, $2.7 million. The funds for this program are expected to be
provided by cash from operations and a new bond issue. New subdivision
construction will be financed generally by developers' refundable advances and
contributions. Company funded construction budgets over the next five years
are projected to total $110 million.
CAPITAL STRUCTURE
The Company's total capitalization at December 31, 1994 and 1993 was $276.9
million and $257.1 million, respectively. Capital ratios were:
1994 1993
Common shareholders' equity 52.2% 48.2%
Preferred stock 1.3% 1.4%
Long-term debt 46.5% 50.4%
The increase in the common equity percentage from 1993 to 1994 and the
corresponding decrease in the long-term debt percentage were primarily caused
by the common stock offering, completed in September 1994.
The return on year-end common equity was 10.6% compared with 12.4% in 1993 and
10.4% in 1992.
55
BALANCE SHEET
December 31, 1994 1993
(In thousands)
ASSETS
UTILITY PLANT:
Land $ 6,904 $ 6,742
Depreciable plant and equipment 549,044 522,614
Construction work in progress 2,589 3,466
Intangible assets 643 391
Total utility plant 559,180 533,213
Less depreciation 151,285 141,510
Net utility plant 407,895 391,703
CURRENT ASSETS:
Cash and cash equivalents 1,301 1,461
Accounts receivable:
Customers 9,121 8,984
Other 4,040 1,851
Unbilled revenue 5,992 7,548
Materials and supplies at average cost 3,018 2,853
Taxes and other prepaid expenses 3,927 3,716
Total current assets 27,399 26,413
OTHER ASSETS:
Regulatory assets 24,135 23,404
Unamortized debt premium
and expense 4,247 4,467
Other 552 632
Total other assets 28,934 28,503
$464,228 $446,619
See accompanying notes to financial statements.
56
1994 1993
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock $ 42,800 $ 25,059
Retained earnings 101,647 98,940
Total common shareholders' equity 144,447 123,999
Preferred stock without mandatory
redemption provision 3,475 3,475
First mortgage bonds 128,944 129,608
Total capitalization 276,866 257,082
CURRENT LIABILITIES:
Short-term borrowings 7,000 15,000
Accounts payable 12,231 11,234
Accrued taxes 2,561 2,810
Accrued interest 1,788 1,788
Other accrued liabilities 6,548 7,124
Total current liabilities 30,128 37,956
Unamortized investment tax credits 3,265 3,341
Deferred income taxes 12,445 11,045
Regulatory liabilities 11,467 11,467
Advances for construction 92,190 90,812
Contributions in aid of construction 37,867 34,916
$464,228 $446,619
57
STATEMENT OF INCOME
For the years ended December 31, 1994 1993 1992
(In thousands, except per share data)
Operating revenue $157,271 $151,716 $139,805
Operating expenses:
Operations:
Purchased water 42,812 38,454 33,065
Purchased power 12,641 11,852 12,766
Pump taxes 2,859 2,601 4,370
Administrative and general 18,210 16,910 16,349
Other 20,405 19,718 19,051
Maintenance 7,855 7,250 6,965
Depreciation 10,958 10,304 9,412
Income taxes 9,600 10,600 8,250
Property and other taxes 6,426 6,172 5,803
Total operating expenses 131,766 123,861 116,031
Net operating income 25,505 27,855 23,774
Other income and expenses, net 287 273 169
Income before interest expense 25,792 28,128 23,943
Interest expense:
Bond interest 10,557 11,992 10,443
Other interest 827 635 971
Total interest expense 11,384 12,627 11,414
Net income $ 14,408 $ 15,501 $ 12,529
Earnings per share of
common stock $ 2.44 $ 2.70 $ 2.18
Average number of common
shares outstanding 5,838 5,689 5,689
See accompanying notes to financial statements.
58
STATEMENT OF COMMON SHAREHOLDERS' EQUITY
COMMON
For the years ended December 31, SHARES COMMON RETAINED
(In thousands, except shares) OUTSTANDING STOCK EARNINGS TOTAL
Balance at December 31, 1991 5,688,754 $ 25,059 $ 92,720 $117,779
Net income 12,529 12,529
Dividends paid:
preferred stock 153 153
common stock 10,581 10,581
Total dividends paid 10,734 10,734
Income reinvested in business 1,795 1,795
Balance at December 31, 1992 5,688,754 25,059 94,515 119,574
Net income 15,501 15,501
Dividends paid:
preferred stock 153 153
common stock 10,923 10,923
Total dividends paid 11,076 11,076
Income reinvested in business 4,425 4,425
Balance at December 31, 1993 5,688,754 25,059 98,940 123,999
Net income 14,408 14,408
Dividends paid:
preferred stock 153 153
common stock 11,548 11,548
Total dividends paid 11,701 11,701
Income reinvested in business 2,707 2,707
Dividend reinvestment shares issued 8,280 304 304
Issuance of common stock, net 550,000 17,437 17,437
Balance at December 31, 1994 6,247,034 $ 42,800 $101,647 $144,447
See accompanying notes to financial statements.
59
STATEMENT OF CASH FLOWS
For the years ended December 31, 1994 1993 1992
(In thousands)
Operating activities:
Net income $ 14,408 $ 15,501 $ 12,529
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 10,958 10,304 9,412
Deferred income taxes and investment tax
credits, net 1,324 12,355 (821)
Regulatory assets and liabilities, net (731) (11,937) 0
Changes in operating assets and liabilities:
Accounts receivable (2,326) 908 (2,633)
Unbilled revenue 1,556 (804) 842
Accounts payable 997 2,124 1,218
Other current liabilities (825) (1,338) 1,084
Other changes, net 130 247 645
Net adjustments 11,083 11,859 9,747
Net cash provided by operating activities 25,491 27,360 22,276
Investing activities:
Utility plant expenditures (28,275) (28,829) (35,188)
Financing activities:
Net short-term borrowings (8,000) 3,500 (2,500)
Proceeds from issuance of common stock, net 17,741 0 0
Proceeds from sale of first mortgage bonds 0 60,000 20,000
Advances for construction 4,980 5,024 8,187
Refunds of advances for construction (3,565) (3,428) (3,443)
Contributions in aid of construction 3,833 3,402 3,446
Retirements of first mortgage bonds
including premiums (664) (55,391) (1,458)
Dividends paid (11,701) (11,076) (10,734)
Net cash provided by financing activities 2,624 2,031 13,498
Change in cash and cash equivalents (160) 562 586
Cash and cash equivalents at beginning of year 1,461 899 313
Cash and cash equivalents at end of year $1,301 $1,461 $899
Supplemental disclosures of
cash flow information
Cash paid during the year for:
Interest (net of amounts capitalized) $ 11,165 $ 12,763 $ 11,042
Income taxes $ 10,950 $ 9,188 $ 11,384
See accompanying notes to financial statements.
60
NOTES TO FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting records of the Company are maintained in accordance with the
uniform system of accounts prescribed by the California Public Utilities
Commission (Commission). Certain prior years' amounts have been reclassified,
where necessary, to conform to the current presentation.
REVENUE
Revenue consists of monthly cycle customer billings for water service at rates
authorized by the Commission. Revenue from metered accounts includes unbilled
amounts based on the estimated usage from the latest meter reading to the end
of the accounting period. Flat rate accounts, which are billed at the
beginning of the service period are included in revenue on a pro rata basis for
the portion applicable to the current accounting period.
In October 1991 the Commission issued a decision on its investigation into the
effects of the drought on water utilities which permitted the Company to
recover revenue lost through water conservation as recorded in memorandum
accounts.
During 1992, $4,087,000 of revenue lost due to water conservation was recorded
as revenue and accrued in unbilled revenue. Of that amount, $2,355,000 was
recovered through customer surcharges and penalty charge transfers collected
from customers who had exceeded their monthly allotments. As of December 31,
1992, a total of $2,151,000 of revenue lost due to water conservation was
included in unbilled revenue.
In 1993, $2,904,000 was recorded as lost water conservation revenue and accrued
in unbilled revenue, while $2,631,000 was recovered through customer surcharges
and penalty charge transfers. As of December 31, 1993, $2,424,000 of lost water
conservation revenue was included in unbilled revenue.
In 1994, $32,000 was recorded as lost water conservation revenue and accrued in
unbilled revenue, while $1,445,000 was recovered through customer surcharges
and penalty charge transfers. As of December 31, 1994, $1,011,000 of lost water
conservation revenue remains in unbilled revenue.
UTILITY PLANT
Utility plant is carried at original cost when first constructed or purchased,
except for certain minor units of property recorded at estimated fair values at
dates of acquisition. Costs of depreciable plant retired are eliminated from
utility plant accounts and such costs are charged against accumulated
depreciation. Maintenance of utility plant, other than transportation
equipment, is charged to operation expenses. Maintenance and depreciation of
transportation equipment are charged to a clearing account and subsequently
distributed, primarily to operations. Interest is capitalized on plant
expenditures during the construction period and amounted to $195,000 in 1994,
$141,000 in 1993, and $523,000 in 1992.
Intangible assets arising during the period of initial development of the
Company and those acquired as parts of water systems purchased are stated at
amounts as prescribed by the Commission. All other intangibles have been
recorded at cost.
61
BOND PREMIUM, DISCOUNT AND EXPENSE
The discount and expense on first mortgage bonds is being amortized over the
original lives of the related bond issues. Premiums paid on the early
redemption of bonds and unamortized original issue discount and expense of
those bonds are amortized over the life of new bonds issued in conjunction with
the early redemption.
CASH EQUIVALENTS
Cash equivalents include highly liquid investments, primarily a money market
mutual fund, stated at cost with original maturities of three months or less.
As of December 31, 1994, and 1993, cash equivalents were $124,000 and $135,000,
respectively.
DEPRECIATION
Depreciation of utility plant for financial statement purposes is computed on
the straight-line remaining life method at rates based on the estimated useful
lives of the assets. The provision for depreciation expressed as a percentage
of the aggregate depreciable asset balances was 2.4% in 1994 and 1993 and 2.3%
in 1992. For income tax purposes, the Company computes depreciation using the
accelerated methods allowed by the respective taxing authorities.
ADVANCES FOR CONSTRUCTION
Advances for construction of water main extensions are primarily refundable to
depositors over a 20-year or 40-year period. Refund amounts under the 20-year
contracts are based on annual revenues from the extensions. Unrefunded
balances at the end of the contract period are credited to Contributions in Aid
of Construction and are no longer refundable. Contracts entered into since
1982 provide for full refunds at a 2.5% rate per year for 40 years. Estimated
refunds for 1995 for all water main extension contracts are $3,800,000.
INCOME TAXES
Effective January 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
SFAS 109 requires a change from the deferred method of accounting for income
taxes under APB Opinion 11 to the asset and liability method. Under SFAS 109
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Measurement of the deferred tax assets and liabilities is at enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under SFAS 109,
the effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the period that includes the enactment date.
Due to the implementation of SFAS 109 as of January 1, 1993, the Company
recorded an increase in both net regulatory assets and net deferred income
taxes of $9,905,000. There was no impact on the results of operations. It is
anticipated that future rate action by the Commission will reflect revenue
requirements for the tax effects of temporary differences recognized under SFAS
109 which have previously been flowed through to customers.
62
Prior to 1993, the provision for income taxes was based on income and expenses
included in the Statement of Income as prescribed by APB Opinion 11. In
accordance with Commission requirements, deferred taxes were not provided for
items flowed through for rate-making and accounting purposes. Flow through
items included excess state tax depreciation and excess federal depreciation on
assets placed in service prior to 1981. Prior year amounts have not been
restated to apply the provisions of SFAS 109.
The Commission has granted the Company customer rate increases to reflect the
normalization of the tax benefits of the federal accelerated methods and
available investment tax credits (ITC) for all assets placed in service since
1980. ITC are deferred and amortized over the lives of the related properties.
Advances for Construction and Contributions in Aid of Construction received
from developers subsequent to 1986 are taxable for federal income tax purposes
and subsequent to 1991 subject to state income tax.
EARNINGS PER SHARE
Earnings per share are calculated using the weighted average number of common
shares outstanding during the year after deducting dividend requirements on
preferred stock.
NOTE 2 - PREFERRED AND COMMON STOCK
As of December 31, 1994, 380,000 shares of preferred stock were authorized.
Dividends on outstanding shares are payable quarterly at a fixed rate before
any dividends can be paid on common stock. Preferred shares are entitled to
eight votes each with the right to cumulative votes at any elections of
directors.
The outstanding 139,000 shares of $25 par value cumulative, 4.4% Series C
preferred shares are not convertible to common stock. A premium of $243,250
would be due upon voluntary liquidation of Series C. There is no premium in
the event of an involuntary liquidation.
The Company is authorized to issue 8,000,000 shares of no par value common
stock. In September 1994, the Company sold 550,000 shares of common stock in a
public offering with net proceeds of $17,437,000. As of December 31, 1994 and
1993, 6,247,034 and 5,688,754 shares, respectively, of common stock were issued
and outstanding.
NOTE 3 - SHORT-TERM BORROWINGS
As of December 31, 1994, the Company maintained a bank line of credit which
provided for unsecured borrowings of up to $30,000,000 at the prime lending
rate or lower rates as quoted by the bank. The agreement does not require
minimum or specific compensating balances. The following table represents
borrowings under bank line of credit.
IN THOUSANDS
1994 1993 1992
Maximum short-term borrowings $21,500 $33,500 $24,500
Average amount outstanding 13,196 11,746 17,431
Weighted average interest rate 5.40% 4.31% 4.85%
Interest rate at December 31 7.38% 4.38% 4.48%
63
NOTE 4 - FIRST MORTGAGE BONDS
As of December 31, 1994 and 1993 first mortgage bonds outstanding were:
IN THOUSANDS
1994 1993
Series J 4.85% due 1995 $ 2,565 $ 2,581
Series K 6.25% due 1996 2,580 2,595
Series L 6.75% due 1997 2,164 2,177
Series P 7.875% due 2002 2,670 2,685
Series S 8.50% due 2003 2,685 2,700
Series BB 9.48% due 2008 17,280 17,370
Series CC 9.86% due 2020 19,500 19,600
Series DD 8.63% due 2022 19,800 19,900
Series EE 7.90% due 2023 19,900 20,000
Series FF 6.95% due 2023 19,900 20,000
Series GG 6.98% due 2023 19,900 20,000
$128,944 $129,608
Aggregate maturities and sinking fund requirements for each of the succeeding
five years 1995 through 1999 are $3,215,000, $3,197,000, $2,758,000, $620,000,
and $2,240,000, respectively. The first mortgage bonds are secured by
substantially all of the Company's utility plant.
NOTE 5 - INCOME TAXES
Income tax expense consists of the following:
IN THOUSANDS
FEDERAL STATE TOTAL
1994
Current $ 6,492 $ 2,567 $ 9,059
Deferred 908 (367) 541
Total $ 7,400 $ 2,200 $ 9,600
1993
Current $ 6,800 $ 2,408 $ 9,208
Deferred 1,400 (8) 1,392
Total $ 8,200 $ 2,400 $ 10,600
1992
Current $ 3,371 $ 1,650 $ 5,021
Deferred 3,229 3,229
Total $ 6,600 $ 1,650 $ 8,250
64
Income tax expense differs from the amount computed by applying the current
federal tax rates of 35% in 1994 and 1993 and and 34% in 1992, to pretax book
income from the amount shown in the Statement of Income. The differences are
listed in the table below:
IN THOUSANDS
1994 1993 1992
Computed "expected" tax expense $ 8,401 $ 9,135 $ 7,065
Increase (reduction) in taxes due to:
State income taxes net of federal tax benefit 1,444 1,565 1,089
Investment tax credits (132) (100) (85)
Other (113) 181
Total income tax $ 9,600 $10,600 $ 8,250
The components of deferred income tax expense in 1994, 1993 and 1992 were:
IN THOUSANDS
1994 1993 1992
Depreciation $ 3,748 $ 3,858 $ 3,314
Developer advances and contributions (3,536) (3,951)
Bond redemption premiums 75 1,333
Investment tax credits (90) (72) (85)
Other 344 224
Total deferred income tax expense $ 541 $ 1,392 $ 3,229
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1994
and 1993 are presented in the following table:
IN THOUSANDS
1994 1993
Deferred tax assets:
Developer deposits for extension agreements
and contributions in aid of construction $37,359 $31,270
Federal benefit of state tax deductions 3,895 3,798
Book plant cost reduction for
future deferred ITC amortization 1,758 1,799
Insurance loss provisions 617 682
Total deferred tax assets 43,629 37,549
Deferred tax liabilities:
Utility plant, principally due to
depreciation differences 47,670 42,796
Premium on early retirement of bonds 2,081 1,918
Miscellaneous 6,323 3,880
Total deferred tax liabilities 56,074 48,594
Net deferred tax liability $12,445 $11,045
A valuation allowance was not required during 1994 and 1993. Based on
historical taxable income and future taxable income projections over the
periods in which the deferred assets are deductible, management believes it is
more likely than not the Company will realize the benefits of the deductible
differences.
65
NOTE 6 - EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company provides a qualified, defined benefit, noncontributory pension plan
for substantially all employees. The cost of the plan was charged to expense
and utility plant. The Company makes annual contributions to fund the amounts
accrued for pension cost. Plan assets are invested in pooled equity, bond and
short-term investment accounts. The data below includes an unfunded,
non-qualified supplemental executive retirement plan.
Net pension cost for the years ending December 31, 1994, 1993 and 1992 included
the following components:
IN THOUSANDS
1994 1993 1992
Service cost-benefits earned during the period $1,333 $1,167 $1,076
Interest cost on projected obligation 2,154 2,153 1,970
Actual loss (return) on plan assets 627 (3,672) (1,410)
Net amortization and deferral (2,286) 2,132 (262)
Net pension cost $1,828 $1,780 $1,374
The following table sets forth the plan's funded status as of December 31, 1994
and 1993:
IN THOUSANDS
1994 1993
Accumulated benefit obligation, including vested
benefits of $19,824 in 1994 and $20,719 in 1993 $(20,329) $(21,386)
Projected benefit obligation $(30,246) $(31,179)
Plan assets at fair value 27,833 29,319
Projected benefit obligation in excess of plan assets (2,413) (1,860)
Unrecognized net gain (3,540) (4,556)
Prior service cost not yet recognized
in net periodic pension cost 3,543 3,925
Remaining net transition obligation at
adoption date January 1, 1987 2,002 2,288
Accrued pension liability recognized
in the balance sheet $ (408) $ (203)
The projected long-term rate of return on plan assets used in determining
pension cost was 8.0% for the years 1994 and 1993. A discount rate of 8.0% in
1994 and 7.0% in 1993 and future compensation increases of 5.0% in 1994 and
4.75% in 1993 were used to calculate the projected benefit obligations for 1994
and 1993.
SAVINGS PLAN
The Company sponsors a 401(k) qualified, defined contribution savings plan
which allows participants to contribute up to 15% of pre-tax compensation.
The Company matches fifty cents for each dollar contributed by the employee up
to a maximum Company match of 3% of the employees' compensation. Company
contributions were $678,000, $606,000 and $561,000 for the years 1994, 1993,
and 1992, respectively.
66
OTHER POSTRETIREMENT PLANS
The Company provides substantially all active employees medical, dental and
vision benefits through a self-insured plan. Employees retiring at or after
age 58 with 10 or more years of service are offered, along with their spouses
and dependents, continued participation in the plan. Prior to 1993 the
Company's share of the costs of this plan were recorded as expense as they
were paid. Retired employees are also provided with a $5,000 life insurance
benefit.
In 1993 the Company adopted SFAS No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions" which requires that the costs of
postretirement benefits be accrued during the employees' years of active
service. The Commission has issued a decision which authorizes rate recovery
of tax deductible funding for postretirement benefits and permits recording of
a regulatory asset for the portion of costs that will be recoverable in future
rates.
Net postretirement benefit cost for the years ending December 31, 1994 and 1993
included the following components:
IN THOUSANDS
1994 1993
Service cost - benefits earned $120 $ 85
Interest cost on accumulated postretirement benefit
obligation 326 384
Actual return on plan assets (4)
Net amortization of transition obligation 228 248
Net periodic postretirement benefit cost $670 $717
Postretirement benefit expense recorded in 1994 and 1993 was $481,000 and
$480,000, respectively. The remaining $426,000 which is recoverable through
future customer rates, was recorded as a regulatory asset. The Company intends
to make annual contributions to the plan up to the amount deductible for tax
purposes. Plan assets are invested in a balanced mutual fund, short-term money
market instruments and commercial paper.
The following table sets forth the plan's funded status and the plan's accrued
liability as of December 31, 1994 and 1993:
IN THOUSANDS
1994 1993
Accumulated postretirement benefit obligation:
Retirees $(2,882) $(2,850)
Other fully eligible participants (366) (657)
Other active participants (1,150) (1,542)
Total (4,398) (5,049)
Plan assets at fair value 172 215
Accumulated postretirement benefit obligation
in excess of plan assets (4,226) (4,834)
Unrecognized net gain (668) (119)
Remaining unrecognized transition obligation 4,468 4,716
Net postretirement benefit liability included
in current liabilities $ (426) $ (237)
67
For 1994 measurement purposes, an 8% annual rate of increase in the per capita
cost of covered benefits was assumed; the rate was assumed to decrease
gradually to 5% in the year 2000 and remain at that level thereafter. The
health care cost trend rate assumption has a significant effect on the amounts
reported. Increasing the assumed health care cost trend rates by one percentage
point in each year would increase the accumulated postretirement benefit
obligation as of December 31, 1994, by $527,000 and the aggregate of the
service and interest cost components of the net periodic postretirement benefit
cost for the year ended December 31, 1994, by $77,000.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8% at December 31, 1994 and 7% at
December 31, 1993. The long-term rate of return on plan assets was 8% for 1994
and 1993.
NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS
For those financial instruments for which it is practicable to estimate a fair
value the following methods and assumptions were used to estimate the fair
value.
CASH EQUIVALENTS
The carrying amount of cash equivalents approximates fair value because of the
short term maturity of the instruments.
FIRST MORTGAGE BONDS
The fair value of the Company's first mortgage bonds is estimated at
$126,584,000 as of December 31,1994, and $133,415,000 as of December 31, 1993,
using a discounted cash flow analysis, based on the current rates available to
the Company for debt of similar maturities.
ADVANCES FOR CONSTRUCTION
The fair value of advances for construction contracts is estimated at
$21,000,000 as of December 31, 1994, and $22,000,000 as of December 31, 1993,
based on data provided by brokers.
NOTE 8 - QUARTERLY FINANCIAL AND COMMON STOCK MARKET DATA
(unaudited)
The Company's common stock has traded on the New York Stock Exchange since
April 8, 1994, under the symbol "CWT". Prior to April 8, 1994, the common
stock was traded in the over-the-counter market and quoted in the NASDAQ
National Market System under the symbol "CWTR". There were approximately
6,000 holders of common stock at December 31, 1994. Quarterly dividends have
been paid on common stock for 200 consecutive quarters and the quarterly rate
has been increased during each year since 1968. The 1994 and 1993 quarterly
range of common stock market prices was supplied by The New York Stock Exchange
since April 8, 1994, and by NASDAQ for earlier periods.
68
1994
(In Thousands, except per share amounts)
first second third fourth
Operating revenue $30,579 $40,147 $50,303 $36,242
Net operating income 4,164 6,892 8,730 5,719
Net income 1,395 4,070 5,857 3,086
Earnings per share .24 .71 1.02 .49
Common stock market price range:
High 41 36-3/4 36 33-1/8
Low 34-1/4 33-3/4 32-7/8 29-3/8
Dividends paid .49-1/2 .49-1/2 .49-1/2 .49-1/2
1993
first second third fourth
Operating revenue $27,833 $40,504 $47,431 $35,948
Net operating income 4,116 7,747 9,377 6,615
Net income 979 4,689 6,221 3,612
Earnings per share .17 .82 1.09 .62
Common stock market price range:
High 37-1/4 36-3/4 40-1/2 41-1/4
Low 32-1/2 32-1/4 33-1/2 37-1/2
Dividends paid .48 .48 .48 .48
69
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