<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
___
|_X_| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
___
|___| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission file number 0-464
CALIFORNIA WATER SERVICE COMPANY
(Exact name of registrant as specified in its charter)
California 94-0362795
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1720 North First Street, San Jose, Ca. 95112
(Address of principal executive offices) (Zip Code)
1-408-451-8200
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common shares outstanding as of July 28, 1995 - 6,247,034
This Form 10-Q contains a total of 12 pages.
1
PART I - FINANCIAL INFORMATION
CALIFORNIA WATER SERVICE COMPANY
ITEM 1 FINANCIAL STATEMENTS BALANCE SHEET
JUNE 30, 1995 Dec. 31, 1994
In Thousands
ASSETS
Utility plant $570,995 $559,180
Less depreciation (157,030) (151,285)
Net utility plant 413,965 407,895
Current assets:
Cash and cash equivalents 1,185 1,301
Accounts receivable 13,587 13,161
Unbilled revenue 6,242 5,992
Materials and supplies 3,004 3,018
Taxes and other prepaid expenses 2,894 3,927
Total current assets 26,912 27,399
Regulatory assets 24,230 24,135
Other deferred charges 4,681 4,799
$469,788 $464,228
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholders' equity:
Common stock $ 42,800 $ 42,800
Retained earnings 99,705 101,647
Total common shareholders' equity 142,505 144,447
Preferred stock without mandatory
redemption provision 3,475 3,475
First mortgage bonds 128,944 128,944
Total capitalization 274,924 276,866
Current liabilities:
Short-term borrowings 10,000 7,000
Accounts payable 14,384 12,231
Accrued expenses and other liabilities 11,562 10,897
Total current liabilities 35,946 30,128
Unamortized investment tax credits 3,265 3,265
Deferred income taxes 12,657 12,445
Advances for construction 93,282 92,190
Contributions in aid of construction 38,247 37,867
Regulatory liabilities 11,467 11,467
$469,788 $464,228
See accompanying notes on page 5 2
CALIFORNIA WATER SERVICE COMPANY
STATEMENT OF INCOME
June 30
1995 1994
In Thousands
FOR THE THREE MONTHS ENDED:
Operating revenue $40,371 $40,147
Operating expenses:
Operations 25,493 24,445
Maintenance 1,847 1,769
Depreciation 2,859 2,735
Federal income taxes 1,834 2,117
State Income taxes 543 635
Property and other taxes 1,634 1,554
34,210 33,255
Net operating income 6,161 6,892
Other income and expenses:
Interest and amortization on first
mortgage bonds 2,637 2,655
Other income and expenses, net 57 167
2,694 2,822
Net income 3,467 4,070
Preferred dividends 38 38
Net income available for common stock $ 3,429 $4,032
Weighted average shares outstanding 6,247 5,697
Earnings per share of common stock $ 0.55 $ 0.71
Dividends per share of common stock $ 0.51 $ 0.49-1/2
FOR THE SIX MONTHS ENDED:
Operating revenue $ 70,787 $ 70,726
Operating expenses:
Operations 45,087 43,556
Maintenance 3,709 3,709
Depreciation 5,718 5,472
Federal income taxes 2,357 2,873
State income taxes 703 855
Property and other taxes 3,367 3,205
60,941 59,670
Net operating income 9,846 11,056
Other income and expenses:
Interest and amortization on first
mortgage bonds 5,274 5,305
Other income and expenses, net 66 286
5,340 5,591
Net income 4,506 5,465
Preferred dividends 76 76
Net income available for common stock $ 4,430 $ 5,389
Weighted average shares outstanding 6,247 5,695
Earnings per share of common stock $ .71 $ .95
Dividends per share of common stock $ 1.02 $ .99
See accompanying notes on page 5 3
CALIFORNIA WATER SERVICE COMPANY
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED:
In Thousands
JUNE 30
1995 1994
Operating activities:
Net income $ 4,506 $ 5,465
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 5,718 5,472
Regulatory assets and liabilities, net (95) (118)
Deferred income taxes and investment tax credits 211 240
Change in assets and liabilities:
Accounts receivable (426) (2,567)
Unbilled revenue (250) (117)
Materials and supplies 14 (143)
Taxes and other prepaid expenses 1,034 1,078
Accounts payable 2,153 2,709
Accrued expenses and other liabilities 665 (661)
Other changes, net 323 405
Net adjustments 9,347 6,298
Net cash provided by operating activities 13,853 11,763
Investing activities:
Utility plant expenditures (12,492) (12,925)
Financing activities:
Net short-term borrowings 3,000 3,800
Proceeds from issuance of common stock 0 304
Advances for construction 2,791 3,198
Contributions in aid of construction 876 1,163
Refunds of advances for construction (1,696) (1,790)
Dividends (6,448) (5,712)
Net cash used for financing activities (1,477) 963
Change in cash and cash equivalents (116) (199)
Cash and cash equivalents at start of period 1,301 1,461
Cash and cash equivalents at end of period $ 1,185 $ 1,262
See accompanying notes on page 5 4
Notes:
1. Due to the seasonal nature of the water business, the results for
interim periods are not indicative of the results for a twelve month
period.
2. The interim financial information is unaudited. In the opinion of
management, the accompanying financial statements reflect all
adjustments which are necessary to provide a fair statement of the
results for the periods covered. The adjustments consist only of
normal recurring adjustments.
3. Earnings per share are calculated on the weighted average number of
common shares outstanding during the period and net income
available for common stock as shown on the Statement of Income.
4. Refer to 1994 Annual Report on Form 10-K for a summary of significant
accounting policies and detailed information regarding the financial
statements.
5
PART I FINANCIAL INFORMATION
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF SECOND QUARTER OPERATIONS
For the second quarter net income was $3,467,000 equivalent to $.55 per
common share, a decline of $.16 from the $.71 earned in 1994. The decrease in
net income was primarily attributable to unusually heavy rainfall and cool
weather during the spring months this year which caused a decrease in
consumption, compared to last year when there was less than normal
precipitation which resulted in increased consumption during the second
quarter. Average consumption per metered customer declined six percent.
The $224,000 increase in operating revenue is accounted for in the following
table:
General and step rate increases $ 586,000
Offset rate increases 1,032,000
Total rate increases 1,618,000
Reduced consumption (1,596,000)
Usage by 2,239 new customers 202,000
Net revenue increase $ 224,000
Water production for the quarter was equal to 90 percent of 1994's second
quarter. During the quarter, 50% of the supply was pumped from wells, 49%
purchased and 1% from the Company's watershed in the Bear Gulch district.
6
Despite the reduced production, net water production costs, which includes
purchased water, purchased power and pump taxes, increased $472,000 or 3 %
due to rate increases for purchased water and pump taxes which became
effective since last year in certain districts. Purchased water rate increases
included a 7% increase by wholesale suppliers serving the four Los Angeles area
districts, a 19% increase by San Francisco Water Department which supplies
three districts on the San Francisco Peninsula, a 49% increase by Kern County
Water Agency supplying the Bakersfield district and a 19% increase by Stockton
East Water District which provides Stockton's wholesale water. Pump tax rates
were increased 50% in Bakersfield and 11% in the Los Angeles districts. The
components of water production expense and the changes from last year are shown
in the table below:
Second Quarter Dollar Percent
1995 Cost Change Change
Purchased water $11,103,000 386,000 4
Purchased power 3,176,000 (237,000) (7)
Pump taxes 970,000 323,000 50
Total 15,249,000 472,000 3
Other operations expense increased $576,000, primarily due to a 3.5%
general wage increase which was effective January 1 and increases in related
employee benefits.
Federal and state income taxes decreased $375,000 because of reduced
taxable income.
7
REGULATORY MATTERS
The California Public Utilities Commission (Commission) is expected to
issue a decision in mid-August on the 1994 rate case series. The decision,
effecting six districts and representing about 15 percent of total customers,
had been expected in late spring. The Commission's original draft decision
would authorize a 10.9 % return on equity, however, an alternate
decision has been introduced which would authorize an 11.05 % return on
equity with $1,378,000 additional revenue in 1995 and step rate increases
totaling $1,558,000 spread over 1996 through 1998.
The Commission authorized a $2,158,000 increase in the Palos Verdes
district's rates to recover undercollections in the district's expense
balancing account and to offset purchased water costs. The increase became
effective in July.
In July, the Company filed the 1995 rate case series with the Commission.
The filing involves five districts which represent about 47% of total
customers. The Company's total revenue increase request is $26,000,000 based on
a 12.1 percent return on equity. The revenue increase would be spread over a
four year period with $8,000,000 requested for 1996 and an additional
$6,000,000 in each year 1997 through 1999. The Commission has not set hearing
dates, but a decision would be anticipated in mid 1996.
8
LIQUIDITY
The Company's 1995 capital improvement budget of $20.7 million is being
temporarily financed through short-term borrowings under a $30 million bank
line of credit. The line of credit was renewed in April for a two year period,
expiring in April 1997. Short-term borrowings, which are also used to meet
seasonal cash requirements, totaled $10 million at June 30, 1995. Permanent
financing will be provided by cash from operation and the sale of senior notes.
During June, the Company received commitments from two institutional
investors to purchase a total of $20 million of the Company's 30 year,
Series A, 7.28% Senior Notes. It is anticipated, that the financing will be
completed in August after the Company receives Commission authorization to
issue senior notes.
Effective with the August 1995 dividend, new shares will be issued to
satisfy the requirement for shares acquired through the Company's Dividend
Reinvestment Plan (Plan). The Company had been purchasing shares on the open
market for reissue under the Plan. About 10.7 % of the outstanding
shares participate in the Plan.
WATER SUPPLY
Because of this year's heavy winter rains, California's water supply is
adequate to meet the 1995 demand. Storage in state reservoirs is above average
and it is expected that there will be a storage carryover from this year into
1996.
9
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of shareholders of California Water Service Company
was held at the Company's executive office in San Jose, California on
April 19, 1995.
(b) At the annual shareholders meeting, a board of directors was elected for
the ensuing year. All directors nominated were elected:
William E. Ayer Robert W. Foy
Edward D. Harris, Jr., M. D. Donald L. Houck
Robert K. Jaedicke Linda R. Meier
C. H. Stump Edwin E. van Bronkhorst
J. W. Weinhardt
(c) Two matters were voted on at the meeting: (1) election of directors for the
ensuing year and (2) ratification of the Company's selection of independent
auditors for 1995.
(1) Tabulation of votes for the election of directors was:
For Withheld
William E. Ayer 6,135,660 53,740
Robert W. Foy 6,147,586 41,814
Edward D. Harris, Jr., M. D. 6,135,555 53,845
Donald L. Houck 6,142,727 46,673
Robert K. Jaedicke 6,134,519 54,881
Linda R. Meier 6,116,979 72,421
C. H. Stump 6,145,957 43,443
Edwin E. van Bronkhorst 6,137,868 51,532
J. W. Weinhardt 6,125,352 64,048
10
(2) KPMG Peat Marwick was elected to serve as independent auditors for
1995. There were 6,087,715 votes cast in favor of KPMG Peat Marwick,
38,923 votes against and 62,762 abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K.
None
(b) No reports on Form 8-K have been filed during the quarter ended
June 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CALIFORNIA WATER SERVICE COMPANY
Registrant
/s/ Gerald F. Feeney
August 3, 1995 Gerald F. Feeney
Vice President, Chief Financial Officer
and Treasurer
11
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