Condensed Consolidating Financial Statements

9 Months Ended

Sep. 30, 2019

Condensed Financial Information Disclosure [Abstract]

Condensed Consolidating Financial Statements

On November 17, 2010, Cal Water issued $100.0 million aggregate principal amount of 5.500% First Mortgage Bonds due 2040, all of which is fully and unconditionally guaranteed by the Company. As a result of this guarantee arrangement, 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, 2019 and December 31, 2018, the Condensed Consolidating Statements of Income for the three and nine months ended September 30, 2019 and 2018, and the Condensed Consolidating Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 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.

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING BALANCE SHEET

As of September 30, 2019

(In thousands)



	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
ASSETS
Utility plant:
Utility plant	$	1,318		$	3,194,372		$	222,726		$	(7,197	)	$	3,411,219
Less accumulated depreciation and amortization	(1,083		)	(1,004,387		)	(64,654		)	2,159			(1,067,965		)
Net utility plant	235			2,189,985			158,072			(5,038		)	2,343,254
Current assets:
Cash and cash equivalents	2,408			39,187			9,662			—			51,257
Receivables and unbilled revenue	—			133,281			5,319			—			138,600
Receivables from affiliates	28,896			540			214			(29,650		)	—
Other current assets	235			19,435			2,529			—			22,199
Total current assets	31,539			192,443			17,724			(29,650		)	212,056
Other assets:
Regulatory assets	—			377,962			4,522			—			382,484
Investments in affiliates	756,177			—			—			(756,177		)	—
Long-term affiliate notes receivable	26,288			—			—			(26,288		)	—
Other assets	460			80,480			4,692			(214		)	85,460
Total other assets	782,925			458,442			9,214			(782,679		)	467,944
TOTAL ASSETS	$	814,699		$	2,840,870		$	185,010		$	(817,367	)	$	3,023,254
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stockholders’ equity	$	757,795		$	679,037		$	82,366		$	(761,403	)	$	757,795
Affiliate long-term debt	—			—			26,288			(26,288		)	—
Long-term debt, net	—			807,019			459			—			807,478
Total capitalization	757,795			1,486,056			109,113			(787,691		)	1,565,273
Current liabilities:
Current maturities of long-term debt, net	—			5,122			158			—			5,280
Short-term borrowings	55,100			100,000			—			—			155,100
Payables to affiliates	—			4,906			24,744			(29,650		)	—
Accounts payable	—			103,748			4,845			—			108,593
Accrued expenses and other liabilities	329			60,621			4,021			—			64,971
Total current liabilities	55,429			274,397			33,768			(29,650		)	333,944
Unamortized investment tax credits	—			1,649			—			—			1,649
Deferred income taxes	1,475			224,549			3,213			—			229,237
Pension and postretirement benefits other than pensions	—			203,557			—			(26		)	203,557
Regulatory liabilities and other	—			253,843			6,953			—			260,812
Advances for construction	—			189,781			491			—			190,272
Contributions in aid of construction	—			207,038			31,472			—			238,510
TOTAL CAPITALIZATION AND LIABILITIES	$	814,699		$	2,840,870		$	185,010		$	(817,367	)	$	3,023,254

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2018

(In thousands)



	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
ASSETS
Utility plant:
Utility plant	$	1,318		$	3,021,437		$	213,888		$	(7,197	)	$	3,229,446
Less accumulated depreciation and amortization	(1,013		)	(938,072		)	(59,735		)	2,097			(996,723		)
Net utility plant	305			2,083,365			154,153			(5,100		)	2,232,723
Current assets:
Cash and cash equivalents	3,779			33,763			9,634			—			47,176
Receivables and unbilled revenue	126			118,632			4,201			—			122,959
Receivables from affiliates	21,318			4,074			61			(25,453		)	—
Other current assets	80			16,907			1,580			—			18,567
Total current assets	25,303			173,376			15,476			(25,453		)	188,702
Other assets:
Regulatory assets	—			349,414			4,155			—			353,569
Investments in affiliates	733,156			—			—			(733,156		)	—
Long-term affiliate notes receivable	27,829			—			—			(27,829		)	—
Other assets	133			58,959			3,821			(203		)	62,710
Total other assets	761,118			408,373			7,976			(761,188		)	416,279
TOTAL ASSETS	$	786,726		$	2,665,114		$	177,605		$	(791,741	)	$	2,837,704
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stockholders’ equity	$	730,157		$	659,340		79,093			$	(738,433	)	$	730,157
Affiliate long-term debt	—			—			27,828			(27,828		)	—
Long-term debt, net	—			709,444			583			—			710,027
Total capitalization	730,157			1,368,784			107,504			(766,261		)	1,440,184
Current liabilities:
Current maturities of long-term debt, net	—			104,664			247			—			104,911
Short-term borrowings	55,100			10,000			—			—			65,100
Payables to affiliates	17			488			24,948			(25,453		)	—
Accounts payable	—			92,310			3,270			—			95,580
Accrued expenses and other liabilities	107			53,655			1,813			—			55,575
Total current liabilities	55,224			261,117			30,278			(25,453		)	321,166
Unamortized investment tax credits	—			1,649			—			—			1,649
Deferred income taxes	1,376			210,052			1,648			(43		)	213,033
Pension and postretirement benefits other than pensions	—			193,538			—			—			193,538
Regulatory and other liabilities	(31		)	250,720			5,817			16			256,522
Advances for construction	—			185,843			499			—			186,342
Contributions in aid of construction	—			193,411			31,859			—			225,270
TOTAL CAPITALIZATION AND LIABILITIES	$	786,726		$	2,665,114		$	177,605		$	(791,741	)	$	2,837,704

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the three months ended September 30, 2019

(In thousands)



	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
Operating revenue	$	—		$	219,261		$	13,276		$	—		$	232,537
Operating expenses:
Operations:
Water production costs	—			78,048			2,520			—			80,568
Administrative and general	—			24,498			2,281			—			26,779
Other operations	—			22,872			1,825			(147		)	24,550
Maintenance	—			6,823			242			—			7,065
Depreciation and amortization	23			20,770			1,501			(21		)	22,273
Income tax (benefit) expense	(132		)	11,332			779			215			12,194
Property and other taxes	—			6,620			921			—			7,541
Total operating (income) expenses	(109		)	170,963			10,069			47			180,970
Net operating income	109			48,298			3,207			(47		)	51,567
Other income and expenses:
Non-regulated revenue	599			3,865			399			(745		)	4,118
Non-regulated expenses	—			(3,907		)	(444		)	—			(4,351		)
Other components of net periodic benefit cost	—			(1,784		)	(73		)	—			(1,857		)
Allowance for equity funds used during construction	—			1,868			—			—			1,868
Income tax (expense) benefit on other income and expenses	(168		)	268			22			208			330
Net other income (loss)	431			310			(96		)	(537		)	108
Interest:
Interest expense	450			9,820			608			(599		)	10,279
Allowance for borrowed funds used during construction	—			(954		)	(74		)	—			(1,028		)
Net interest expense	450			8,866			534			(599		)	9,251
Equity earnings of subsidiaries	42,334			—			—			(42,334		)	—
Net income	$	42,424		$	39,742		$	2,577		$	(42,319	)	$	42,424

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the three months ended September 30, 2018

(In thousands)



	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
Operating revenue	$	—		$	208,695		$	12,593		$	—		$	221,288
Operating expenses:
Operations:
Water production costs	—			76,317			2,501			—			78,818
Administrative and general	—			23,878			2,615			—			26,493
Other operations	—			20,271			1,816			(144		)	21,943
Maintenance	—			6,538			230			—			6,768
Depreciation and amortization	23			19,632			1,376			(22		)	21,009
Income tax (benefit) expense	(142		)	10,435			1,271			222			11,786
Property and other taxes	—			6,205			937			—			7,142
Total operating (income) expenses	(119		)	163,276			10,746			56			173,959
Net operating income	119			45,419			1,847			(56		)	47,329
Other income and expenses:
Non-regulated revenue	628			4,589			259			(773		)	4,703
Non-regulated expenses	—			(4,675		)	(222		)	—			(4,897		)
Other components of net periodic benefit cost	—			(1,834		)	(141		)	—			(1,975		)
Allowance for equity funds used during construction	—			1,023			—			—			1,023
Income tax (expense) benefit on other income and expenses	(176		)	252			13			216			305
Net other income (loss)	452			(645		)	(91		)	(557		)	(841		)
Interest:
Interest expense	486			10,443			574			(628		)	10,875
Allowance for borrowed funds used during construction	—			(522		)	(38		)	—			(560		)
Net interest expense	486			9,921			536			(628		)	10,315
Equity earnings of subsidiaries	36,088			—			—			(36,088		)	—
Net income	$	36,173		$	34,853		$	1,220		$	(36,073	)	$	36,173

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the nine months ended September 30, 2019

(In thousands)



	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
Operating revenue	$	—		$	502,785		$	34,894		$	—		$	537,679
Operating expenses:
Operations:
Water production costs	—			183,617			7,178			—			190,795
Administrative and general	23			73,908			7,379			—			81,310
Other operations	—			59,851			5,499			(437		)	64,913
Maintenance	—			18,469			743			—			19,212
Depreciation and amortization	70			62,471			4,488			(62		)	66,967
Income tax (benefit) expense	(411		)	12,019			1,265			651			13,524
Property and other taxes	—			19,431			2,471			—			21,902
Total operating (income) expenses	(318		)	429,766			29,023			152			458,623
Net operating income	318			73,019			5,871			(152		)	79,056
Other income and expenses:
Non-regulated revenue	1,826			13,374			1,212			(2,263		)	14,149
Non-regulated expenses	—			(9,610		)	(860		)	—			(10,470		)
Other components of net periodic benefit cost	—			(4,177		)	(131		)	—			(4,308		)
Allowance for equity funds used during construction	—			5,087			—			—			5,087
Income tax expense on other income and expenses	(511		)	(1,028		)	(79		)	633			(985		)
Net other income	1,315			3,646			142			(1,630		)	3,473
Interest:
Interest expense	1,376			32,141			1,841			(1,826		)	33,532
Allowance for borrowed funds used during construction	—			(2,592		)	(191		)	—			(2,783		)
Net interest expense	1,376			29,549			1,650			(1,826		)	30,749
Equity earnings of subsidiaries	51,523			—			—			(51,523		)	—
Net income	$	51,780		$	47,116		$	4,363		$	(51,479	)	$	51,780

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the nine months ended September 30, 2018

(In thousands)



	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
Operating revenue	$	—		$	499,173		$	31,606		$	—		$	530,779
Operating expenses:
Operations:
Water production costs	—			185,149			6,648			—			191,797
Administrative and general	—			69,531			7,664			—			77,195
Other operations	—			55,626			5,117			(436		)	60,307
Maintenance	—			16,974			622			—			17,596
Depreciation and amortization	70			58,909			3,763			(65		)	62,677
Income tax (benefit) expense	(342		)	15,081			1,591			620			16,950
Property and other taxes	—			17,894			2,359			—			20,253
Total operating (income) expenses	(272		)	419,164			27,764			119			446,775
Net operating income	272			80,009			3,842			(119		)	84,004
Other income and expenses:
Non-regulated revenue	1,716			13,572			831			(2,152		)	13,967
Non-regulated expenses	—			(15,943		)	(506		)	—			(16,449		)
Other components of net periodic benefit cost	—			(6,618		)	(366		)	—			(6,984		)
Allowance for equity funds used during construction	—			2,644			—			—			2,644
Income tax (expense) benefit on other income and expenses	(480		)	1,776			(16		)	602			1,882
Net other income (loss)	1,236			(4,569		)	(57		)	(1,550		)	(4,940		)
Interest:
Interest expense	1,155			29,095			1,673			(1,716		)	30,207
Allowance for borrowed funds used during construction	—			(1,250		)	(109		)	—			(1,359		)
Net interest expense	1,155			27,845			1,564			(1,716		)	28,848
Equity earnings of subsidiaries	49,863			—			—			(49,863		)	—
Net income	$	50,216		$	47,595		$	2,221		$	(49,816	)	$	50,216

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the nine months ended September 30, 2019

(In thousands)



	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
Operating activities:
Net income	$	51,780		$	47,116		$	4,363		$	(51,479	)	$	51,780
Adjustments to reconcile net income to net cash provided by operating activities:
Equity earnings of subsidiaries	(51,523		)	—			—			51,523			—
Dividends received from affiliates	28,507			—			—			(28,507		)	—
Depreciation and amortization	70			63,975			4,539			(62		)	68,522
Changes in value of life insurance contracts	—			(3,433		)	—			—			(3,433		)
Allowance for equity funds used during construction	—			(5,087		)	—			—			(5,087		)
Changes in operating assets and liabilities	194			(6,744		)	1,509			—			(5,041		)
Other changes in noncurrent assets and liabilities	5,239			14,560			1,785			18			21,602
Net cash provided by operating activities	34,267			110,387			12,196			(28,507		)	128,343
Investing activities:
Utility plant expenditures	—			(185,883		)	(9,059		)	—			(194,942		)
Changes in affiliate advances	(3,199		)	3,534			(320		)	(15		)	—
Issuance of affiliate short-term borrowings	(4,300		)	—			—			4,300			—
Reduction of affiliates long-term debt	1,462			—			—			(1,462		)	—
Purchase of life insurance contracts	—			(2,216		)	—			—			(2,216		)
Net cash used in investing activities	(6,037		)	(184,565		)	(9,379		)	2,823			(197,158		)
Financing Activities:
Short-term borrowings	—			210,000			—			—			210,000
Repayment of short-term borrowings	—			(120,000		)	—			—			(120,000		)
Changes in affiliate advances	(17		)	4,419			(4,417		)	15			—
Proceeds from affiliate short-term borrowings	—			—			4,300			(4,300		)	—
Repayment of affiliates long-term borrowings	—			—			(1,462		)	1,462			—
Issuance of long term debt, net of expenses	—			398,431			—			—			398,431
Repayment of long-term debt	—			(401,417		)	(213		)	—			(401,630		)
Advances and contributions in aid of construction	—			21,176			90			—			21,266
Refunds of advances for construction	—			(5,560		)	—			—			(5,560		)
Repurchase of common stock	(2,355		)	—			—			—			(2,355		)
Issuance of common stock	1,278			—			—			—			1,278
Dividends paid to non-affiliates	(28,507		)	—			—			—			(28,507		)
Dividends paid to affiliates	—			(27,419		)	(1,088		)	28,507			—
Net cash (used in) provided by financing activities	(29,601		)	79,630			(2,790		)	25,684			72,923
Change in cash, cash equivalents, and restricted cash	(1,371		)	5,452			27			—			4,108
Cash, cash equivalents, and restricted cash at beginning of period	3,779			34,238			9,698			—			47,715
Cash, cash equivalents, and restricted cash at end of period	$	2,408		$	39,690		$	9,725		—			$	51,823

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the nine months ended September 30, 2018

(In thousands)



	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
Operating activities:
Net income	$	50,216		$	47,595		$	2,221		$	(49,816	)	$	50,216
Adjustments to reconcile net income to net cash provided by operating activities:
Equity earnings of subsidiaries	(49,863		)	—			—			49,863			—
Dividends received from affiliates	27,029			—			—			(27,029		)	—
Depreciation and amortization	70			60,298			3,828			(65		)	64,131
Changes in value of life insurance contracts	—			124			—			—			124
Allowance for equity funds used during construction	—			(2,644		)	—			—			(2,644		)
Changes in operating assets and liabilities	(281		)	6,135			1,178			—			7,032
Other changes in noncurrent assets and liabilities	2,518			(3,881		)	1,989			18			644
Net cash provided by operating activities	29,689			107,627			9,216			(27,029		)	119,503
Investing activities:
Utility plant expenditures	4			(205,218		)	(7,642		)	—			(212,856		)
Changes in affiliate advances	(975		)	3,198			(269		)	(1,954		)	—
Issuance of affiliate short-term borrowings	(23,700		)	—			—			23,700			—
Reduction of affiliates long-term debt	1,224			—			—			(1,224		)	—
Life insurance proceeds	—			3,491			—			—			3,491
Purchase of life insurance contracts	—			(4,925		)	—			—			(4,925		)
Net cash used in investing activities	(23,447		)	(203,454		)	(7,911		)	20,522			(214,290		)
Financing Activities:
Short-term borrowings	20,000			121,000			—			—			141,000
Repayment of short-term borrowings	—			(341,000		)	—			—			(341,000		)
Changes in affiliate advances	—			1,129			(3,083		)	1,954			—
Proceeds from affiliate short-term borrowings	—			20,000			3,700			(23,700		)	—
Repayment of affiliates long-term borrowings	—			—			(1,224		)	1,224			—
Issuance of long-term debt, net of expenses	—			299,383			—			—			299,383
Repayment of long-term debt	—			(12,299		)	(200		)	—			(12,499		)
Advances and contributions in aid for construction	—			13,288			342			—			13,630
Refunds of advances for construction	—			(5,452		)	(10		)	—			(5,462		)
Repurchase of common stock	(1,496		)	—			—			—			(1,496		)
Dividends paid to non-affiliates	(27,029		)	—			—			—			(27,029		)
Dividends paid to affiliates	—			(25,959		)	(1,070		)	27,029			—
Net cash (used in) provided by financing activities	(8,525		)	70,090			(1,545		)	6,507			66,527
Change in cash, cash equivalents, and restricted cash	(2,283		)	(25,737		)	(240		)	—			(28,260		)
Cash, cash equivalents, and restricted cash at beginning of period	4,728			81,453			9,171			—			95,352
Cash, cash equivalents, and restricted cash at end of period	$	2,445		$	55,716		$	8,931		—			$	67,092