Condensed Consolidating Financial Statements

9 Months Ended

Sep. 30, 2017

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Consolidating Financial Statements

On April 17, 2009, Cal Water issued $100.0 million aggregate principal amount of 5.875% First Mortgage Bonds due 2019, and on November 17, 2010, Cal Water issued $100.0 million aggregate principal amount of 5.500% First Mortgage Bonds due 2040, all of which are fully and unconditionally guaranteed by the Company. As a result of these guarantee arrangements, the Company is required to present the following condensed consolidating financial information. The investments in affiliates are accounted for and presented using the “equity method” of accounting.

The following tables present the condensed consolidating balance sheets as of September 30, 2017 and December 31, 2016, the condensed consolidating statements of income for the three and nine months ended September 30, 2017 and 2016, and the condensed consolidating statements of cash flows for the nine months ended September 30, 2017 and 2016 of (i) California Water Service Group, the guarantor of the First Mortgage Bonds and the parent company; (ii) California Water Service Company, the issuer of the First Mortgage Bonds and a 100% owned consolidated subsidiary of California Water Service Group; and (iii) the other 100% owned non-guarantor consolidated subsidiaries of California Water Service Group. No other subsidiary of the Company guarantees the securities. The condensed consolidating statement of cash flows for the nine months ended September 30, 2016 reflects the retrospective adoption of ASU 2016-09 (refer to Note 2 Summary of Significant Accounting Policies for more details).

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING BALANCE SHEET

As of September 30, 2017

(In thousands)



	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
ASSETS
Utility plant:
Utility plant	$	1,321		$	2,695,106		$	203,435		$	(7,196	)	$	2,892,666
Less accumulated depreciation and amortization	(896		)	(858,386		)	(53,448		)	1,988			(910,742		)
Net utility plant	425			1,836,720			149,987			(5,208		)	1,981,924
Current assets:
Cash and cash equivalents	2,722			17,851			7,768			—			28,341
Receivables and unbilled revenue	—			127,858			5,398			—			133,256
Receivables from affiliates	22,568			703			261			(23,532		)	—
Other current assets	184			17,665			1,039			—			18,888
Total current assets	25,474			164,077			14,466			(23,532		)	180,485
Other assets:
Regulatory assets	—			376,041			3,843			—			379,884
Investments in affiliates	693,766			—			—			(693,766		)	—
Long-term affiliate notes receivable	24,677			—			—			(24,677		)	—
Other assets	217			56,886			3,912			(204		)	60,811
Total other assets	718,660			432,927			7,755			(718,647		)	440,695
TOTAL ASSETS	$	744,559		$	2,433,724		$	172,208		$	(747,387	)	$	2,603,104
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stockholders’ equity	$	687,723		$	620,892		$	78,143		$	(699,035	)	$	687,723
Affiliate long-term debt	—			—			24,677			(24,677		)	—
Long-term debt, less current maturities	—			518,802			898			—			519,700
Total capitalization	687,723			1,139,694			103,718			(723,712		)	1,207,423
Current liabilities:
Current maturities of long-term debt	—			35,606			409			—			36,015
Short-term borrowings	55,100			140,000			—			—			195,100
Payables to affiliates	—			1,257			22,275			(23,532		)	—
Accounts payable	—			86,374			3,020			—			89,394
Accrued expenses and other liabilities	154			55,607			4,091			—			59,852
Total current liabilities	55,254			318,844			29,795			(23,532		)	380,361
Unamortized investment tax credits	—			1,798			—			—			1,798
Deferred income taxes	1,582			325,619			2,448			(143		)	329,506
Pension and postretirement benefits other than pensions	—			227,819			—			—			227,819
Regulatory liabilities and other	—			87,714			3,292			—			91,006
Advances for construction	—			182,298			522			—			182,820
Contributions in aid of construction	—			149,938			32,433			—			182,371
TOTAL CAPITALIZATION AND LIABILITIES	$	744,559		$	2,433,724		$	172,208		$	(747,387	)	$	2,603,104

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2016

(In thousands)



	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
ASSETS
Utility plant:
Utility plant	$	1,318		$	2,519,785		$	203,433		$	(7,197	)	$	2,717,339
Less accumulated depreciation and amortization	(826		)	(805,992		)	(53,163		)	1,919			(858,062		)
Net utility plant	492			1,713,793			150,270			(5,278		)	1,859,277
Current assets:
Cash and cash equivalents	5,216			13,215			7,061			—			25,492
Receivables and unbilled revenue	—			98,850			4,173			—			103,023
Receivables from affiliates	19,566			3,608			8			(23,182		)	—
Other current assets	80			12,442			1,032			—			13,554
Total current assets	24,862			128,115			12,274			(23,182		)	142,069
Other assets:
Regulatory assets	—			352,139			3,791			—			355,930
Investments in affiliates	666,525			—			—			(666,525		)	—
Long-term affiliate notes receivable	25,744			—			—			(25,744		)	—
Other assets	376			50,361			3,765			(33		)	54,469
Total other assets	692,645			402,500			7,556			(692,302		)	410,399
TOTAL ASSETS	$	717,999		$	2,244,408		$	170,100		$	(720,762	)	$	2,411,745
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stockholders’ equity	$	659,471		$	595,003		76,833			$	(671,836	)	$	659,471
Affiliate long-term debt	—			—			25,744			(25,744		)	—
Long-term debt, less current maturities	—			530,850			895			—			531,745
Total capitalization	659,471			1,125,853			103,472			(697,580		)	1,191,216
Current liabilities:
Current maturities of long-term debt	—			25,657			551			—			26,208
Short-term borrowings	57,100			40,000			—			—			97,100
Payables to affiliates	—			539			22,643			(23,182		)	—
Accounts payable	—			74,998			2,815			—			77,813
Accrued expenses and other liabilities	88			47,232			1,789			—			49,109
Total current liabilities	57,188			188,426			27,798			(23,182		)	250,230
Unamortized investment tax credits	—			1,798			—			—			1,798
Deferred income taxes	1,340			296,781			803			—			298,924
Pension and postretirement benefits other than pensions	—			222,691			—			—			222,691
Regulatory and other liabilities	—			80,518			3,130			—			83,648
Advances for construction	—			181,907			541			—			182,448
Contributions in aid of construction	—			146,434			34,356			—			180,790
TOTAL CAPITALIZATION AND LIABILITIES	$	717,999		$	2,244,408		$	170,100		$	(720,762	)	$	2,411,745

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the three months ended September 30, 2017

(In thousands)



	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
Operating revenue	$	—		$	199,002		$	12,729		$	—		$	211,731
Operating expenses:
Operations:
Water production costs	—			73,061			2,200			—			75,261
Administrative and general	—			22,362			2,524			—			24,886
Other operations	—			18,979			2,356			(127		)	21,208
Maintenance	—			5,729			328			—			6,057
Depreciation and amortization	21			18,115			1,117			(22		)	19,231
Income tax (benefit) expense	(136		)	16,190			1,028			266			17,348
Property and other taxes	—			5,680			864			—			6,544
Total operating (income) expenses	(115		)	160,116			10,417			117			170,535
Net operating income	115			38,886			2,312			(117		)	41,196
Other income and expenses:
Non-regulated revenue	505			3,218			450			(631		)	3,542
Non-regulated expenses	—			(2,151		)	(425		)	—			(2,576		)
Allowance for equity funds used during construction	—			1,105			—			—			1,105
Income tax expense on other income and expenses	(206		)	(885		)	(7		)	257			(841		)
Total other income	299			1,287			18			(374		)	1,230
Interest:
Interest expense	313			8,951			525			(505		)	9,284
Allowance for borrowed funds used during construction	—			(684		)	(23		)	—			(707		)
Net interest expense	313			8,267			502			(505		)	8,577
Equity earnings of subsidiaries	33,748			—			—			(33,748		)	—
Net income	$	33,849		$	31,906		$	1,828		$	(33,734	)	$	33,849

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the three months ended September 30, 2016

(In thousands)



	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
Operating revenue	$	—		$	173,223		$	11,045		$	—		$	184,268
Operating expenses:
Operations:
Water production costs	—			68,045			2,130			—			70,175
Administrative and general	—			21,679			2,165			—			23,844
Other operations	—			18,037			1,692			(168		)	19,561
Maintenance	—			5,322			223			—			5,545
Depreciation and amortization	57			14,777			1,074			(24		)	15,884
Income tax (benefit) expense	(105		)	12,165			920			267			13,247
Property and other taxes	—			5,182			775			—			5,957
Total operating (income) expenses	(48		)	145,207			8,979			75			154,213
Net operating income	48			28,016			2,066			(75		)	30,055
Other income and expenses:
Non-regulated revenue	464			3,024			541			(632		)	3,397
Non-regulated expenses	—			(2,170		)	(347		)	—			(2,517		)
Income tax expense on other income and expenses	(189		)	(345		)	(73		)	258			(349		)
Total other income	275			509			121			(374		)	531
Interest:
Interest expense	201			8,259			488			(463		)	8,485
Less: capitalized interest	—			(759		)	(15		)	—			(774		)
Net interest expense	201			7,500			473			(463		)	7,711
Equity earnings of subsidiaries	22,753			—			—			(22,753		)	—
Net income	$	22,875		$	21,025		$	1,714		$	(22,739	)	$	22,875

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the nine months ended September 30, 2017

(In thousands)



	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
Operating revenue	$	—		$	473,518		$	31,381		$	—		$	504,899
Operating expenses:
Operations:
Water production costs	—			175,339			6,121			—			181,460
Administrative and general	—			65,985			7,946			—			73,931
Other operations	—			50,108			5,931			(379		)	55,660
Maintenance	—			16,144			733			—			16,877
Depreciation and amortization	70			54,328			3,320			(68		)	57,650
Income tax (benefit) expense	(362		)	24,344			1,331			786			26,099
Property and other taxes	(4		)	16,407			2,314			—			18,717
Total operating (income) expenses	(296		)	402,655			27,696			339			430,394
Net operating income	296			70,863			3,685			(339		)	74,505
Other income and expenses:
Non-regulated revenue	1,482			9,822			1,300			(1,861		)	10,743
Non-regulated expenses	—			(5,326		)	(918		)	—			(6,244		)
Allowance for equity funds used during construction	—			2,763			—			—			2,763
Income tax expense on other income and expenses	(604		)	(2,958		)	(143		)	758			(2,947		)
Net other income	878			4,301			239			(1,103		)	4,315
Interest:
Interest expense	823			26,216			1,516			(1,482		)	27,073
Allowance for borrowed funds used during construction	—			(1,702		)	(63		)	—			(1,765		)
Net interest expense	823			24,514			1,453			(1,482		)	25,308
Equity earnings of subsidiaries	53,161			—			—			(53,161		)	—
Net income	$	53,512		$	50,650		$	2,471		$	(53,121	)	$	53,512

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the nine months ended September 30, 2016

(In thousands)



	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
Operating revenue	$	—		$	428,592		$	29,848		$	—		$	458,440
Operating expenses:
Operations:
Water production costs	—			162,933			5,900			—			168,833
Administrative and general	—			67,289			7,748			—			75,037
Other operations	—			53,128			5,016			(378		)	57,766
Maintenance	—			16,854			688			—			17,542
Depreciation and amortization	171			44,427			3,246			(72		)	47,772
Income tax (benefit) expense	(292		)	17,356			1,366			762			19,192
Property and other taxes	—			15,241			2,198			—			17,439
Total operating (income) expenses	(121		)	377,228			26,162			312			403,581
Net operating income	121			51,364			3,686			(312		)	54,859
Other income and expenses:
Non-regulated revenue	1,390			9,659			1,338			(1,798		)	10,589
Non-regulated expenses	—			(7,422		)	(884		)	—			(8,306		)
Income tax expense on other income and expenses	(566		)	(909		)	(172		)	733			(914		)
Net other income	824			1,328			282			(1,065		)	1,369
Interest:
Interest expense	547			24,421			1,435			(1,419		)	24,984
Less: capitalized interest	—			(2,293		)	(48		)	—			(2,341		)
Net interest expense	547			22,128			1,387			(1,419		)	22,643
Equity earnings of subsidiaries	33,187			—			—			(33,187		)	—
Net income	$	33,585		$	30,564		$	2,581		$	(33,145	)	$	33,585

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the nine months ended September 30, 2017

(In thousands)



	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
Operating activities:
Net income	$	53,512		$	50,650		$	2,471		$	(53,121	)	$	53,512
Adjustments to reconcile net income to net cash provided by operating activities:
Equity earnings of subsidiaries	(53,161		)	—			—			53,161			—
Dividends received from affiliates	25,920			—			—			(25,920		)	—
Depreciation and amortization	70			55,623			3,392			(69		)	59,016
Changes in value of life insurance contracts	—			(1,871		)	—			—			(1,871		)
Allowance for equity funds used during construction	—			(2,763		)	—			—			(2,763		)
Changes in operating assets and liabilities	(38		)	(40,941		)	1,036			—			(39,943		)
Other changes in noncurrent assets and liabilities	2,420			37,125			2,263			29			41,837
Net cash provided by operating activities	28,723			97,823			9,162			(25,920		)	109,788
Investing activities:
Utility plant expenditures	(4		)	(175,234		)	(5,204		)	—			(180,442		)
Changes in affiliate advances	(334		)	2,905			(287		)	(2,284		)	—
Issuance of affiliate short-term borrowings	(2,610		)	—			—			2,610			—
Reduction of affiliates long-term debt	1,010			—			—			(1,010		)	—
Life insurance proceeds	—			1,558			—			—			1,558
Purchase of life insurance contracts	—			(3,948		)	—			—			(3,948		)
Changes in restricted cash	—			(679		)	—			—			(679		)
Net cash used in investing activities	(1,938		)	(175,398		)	(5,491		)	(684		)	(183,511		)
Financing Activities:
Short-term borrowings	—			185,000			—			—			185,000
Repayment of short-term borrowings	(2,000		)	(85,000		)	—			—			(87,000		)
Changes in affiliate advances	—			718			(3,002		)	2,284			—
Proceeds from affiliate short-term borrowings	—			—			2,610			(2,610		)	—
Repayment of affiliates long-term borrowings	—			—			(1,010		)	1,010			—
Repayment of long-term debt	—			(2,336		)	(461		)	—			(2,797		)
Advances and contributions in aid of construction	—			14,900			64			—			14,964
Refunds of advances for construction	—			(6,311		)	(5		)	—			(6,316		)
Repurchase of common stock	(1,359		)	—			—			—			(1,359		)
Dividends paid to non-affiliates	(25,920		)	—			—			—			(25,920		)
Dividends paid to affiliates	—			(24,760		)	(1,160		)	25,920			—
Net cash (used in) provided by financing activities	(29,279		)	82,211			(2,964		)	26,604			76,572
Change in cash and cash equivalents	(2,494		)	4,636			707			—			2,849
Cash and cash equivalents at beginning of period	5,216			13,215			7,061			—			25,492
Cash and cash equivalents at end of period	$	2,722		$	17,851		$	7,768		$	—		$	28,341

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the nine months ended September 30, 2016

(In thousands)



	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
Operating activities:
Net income	$	33,585		$	30,564		$	2,581		$	(33,145	)	$	33,585
Adjustments to reconcile net income to net cash provided by operating activities:
Equity earnings of subsidiaries	(33,187		)	—			—			33,187			—
Dividends received from affiliates	24,807			—			—			(24,807		)	—
Depreciation and amortization	171			45,466			3,381			(72		)	48,946
Changes in value of life insurance contracts	—			(915		)	—			—			(915		)
Changes in operating assets and liabilities	1,844			12,552			(6,623		)	54			7,827
Other changes in noncurrent assets and liabilities	387			24,726			9,297			(24		)	34,386
Net cash provided by operating activities	27,607			112,393			8,636			(24,807		)	123,829
Investing activities:
Utility plant expenditures	—			(163,179		)	(3,227		)	—			(166,406		)
Changes in affiliate advances	(957		)	4,419			(319		)	(3,143		)	—
Reduction of affiliate short-term borrowings	2,000			42,100			—			(44,100		)	—
Issuance of affiliate short-term borrowings	(4,615		)	(20,600		)	—			25,215			—
Reduction of affiliates long-term debt	829			—			—			(829		)	—
Life insurance proceeds	—			495			—			—			495
Purchase of life insurance contracts	—			(2,710		)	—			—			(2,710		)
Changes in restricted cash	—			(685		)	—			—			(685		)
Net cash used in investing activities	(2,743		)	(140,160		)	(3,546		)	(22,857		)	(169,306		)
Financing Activities:
Short-term borrowings	44,100			61,000			—			—			105,100
Repayment of short-term borrowings	(20,615		)	(61,000		)	—			—			(81,615		)
Changes in affiliate advances	—			1,367			(4,510		)	3,143			—
Proceeds from affiliate short-term borrowings	20,600			—			4,615			(25,215		)	—
Repayment of affiliate short-term borrowings	(42,100		)	—			(2,000		)	44,100			—
Repayment of affiliates long-term borrowings	—			—			(829		)	829			—
Proceeds from long-term debt, net of issuance costs	—			49,823			—			—			49,823
Repayment of long-term debt	—			(2,516		)	(349		)	—			(2,865		)
Advances and contributions in aid for construction	—			18,096			90			—			18,186
Refunds of advances for construction	—			(5,172		)	(22		)	—			(5,194		)
Repurchase of common stock	(637		)	—			—			—			(637		)
Dividends paid to non-affiliates	—			(24,173		)	(634		)	—			(24,807		)
Dividends paid to affiliates	(24,807		)	—			—			24,807			—
Net cash (used in) provided by financing activities	(23,459		)	37,425			(3,639		)	47,664			57,991
Change in cash and cash equivalents	1,405			9,658			1,451			—			12,514
Cash and cash equivalents at beginning of period	582			4,270			3,985			—			8,837
Cash and cash equivalents at end of period	$	1,987		$	13,928		$	5,436		$	—		$	21,351

- Definition

The entire disclosure for condensed financial information, including the financial position, cash flows, and the results of operations of the registrant (parent company) as of the same dates or for the same periods for which audited consolidated financial statements are being presented. Alternatively, the details of this disclosure can be reported by the specific parent company taxonomy elements, indicating the appropriate date and period contexts in an instance document.

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