SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended March 31, 2024

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   001-14431 

American States Water Company

(Exact Name of Registrant as Specified in Its Charter)

California			95-4676679
(State or Other Jurisdiction of Incorporation or Organization)			(IRS Employer Identification No.)
630 E. Foothill Blvd	San Dimas	CA	91773-1212
(Address of Principal Executive Offices)			(Zip Code)

(909) 394-3600

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Commission file number   001-12008 

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class	Trading symbol	Name of each exchange on which registered
Common shares	AWR	New York Stock Exchange

Golden State Water Company

(Exact Name of Registrant as Specified in Its Charter)

California			95-1243678
(State or Other Jurisdiction of Incorporation or Organization)			(IRS Employer Identification No.)
630 E. Foothill Blvd	San Dimas	CA	91773-1212
(Address of Principal Executive Offices)			(Zip Code)

(909) 394-3600

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class	Trading symbol	Name of each exchange on which registered
N/A	N/A	N/A

Indicate by check mark whether 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 Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

American States Water Company	Yes	x	No	¨
Golden State Water Company	Yes	x	No	¨

Indicate by check mark whether Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or such shorter period that the Registrant was required to submit such files).

American States Water Company	Yes	x	No	¨
Golden State Water Company	Yes	x	No	¨

 Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

American States Water Company

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ☐ Emerging growth company ☐

Golden State Water Company

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

 Indicate by check mark whether Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

American States Water Company	Yes	☐	No	x
Golden State Water Company	Yes	☐	No	x

As of May 6, 2024, the number of common shares, no par value (“Common Shares”) outstanding of American States Water Company was 37,228,883. As of May 6, 2024, all of the 171 outstanding shares of common stock, no par value, of Golden State Water Company were owned by American States Water Company.

Golden State Water Company meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this Form, in part, with the reduced disclosure format for Golden State Water Company.

AMERICAN STATES WATER COMPANY

and

GOLDEN STATE WATER COMPANY

FORM 10-Q

INDEX

Glossary of Terms
Information Regarding Forward-Looking Statements
Part I	Financial Information	3
Item 1:	Financial Statements	1
	Consolidated Balance Sheets of American States Water Company as of March 31, 2024 and December 31, 2023	2
	Consolidated Statements of Income of American States Water Company for the Three Months Ended March 31, 2024 and 2023	4
	Consolidated Statements of Changes in Common Shareholders' Equity for the Three Months Ended March 31, 2024 and 2023	5
	Consolidated Statements of Cash Flows of American States Water Company for the Three Months Ended March 31, 2024 and 2023	6
	Balance Sheets of Golden State Water Company as of March 31, 2024 and December 31, 2023	7
	Statements of Income of Golden State Water Company for the Three Months Ended March 31, 2024 and 2023	9
	Statements of Changes in Common Shareholder's Equity for the Three Months Ended March 31, 2024 and 2023	10
	Statements of Cash Flows of Golden State Water Company for the Three Months Ended March 31, 2024 and 2023	11
	Notes to Consolidated Financial Statements	12
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	44
Item 4:	Controls and Procedures	44
Part II	Other Information
Item 1:	Legal Proceedings	45
Item 1A:	Risk Factors	45
Item 2:	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	45
Item 3:	Defaults Upon Senior Securities	45
Item 4:	Mine Safety Disclosure	45
Item 5:	Other Information	46
Item 6:	Exhibits	47
	Signatures	49

GLOSSARY OF TERMS

The following terms and acronyms used in this Form 10-Q are defined below:

Term or Acronym	Definition
ASUS	American States Utility Services, Inc.
ATM	At-The-Market Offering Program
AWR	American States Water Company
BSUS	Bay State Utility Services LLC
BVES	Bear Valley Electric Service, Inc.
COC	Cost of Capital
CPUC	California Public Utilities Commission
CWA	California Water Association
DDW	Division of Drinking Water
ECUS	Emerald Coast Utility Services, Inc.
EPA	Economic Price Adjustment
EPS	Earnings Per Share
Exchange Act	Securities Exchange Act of 1934, as amended
FBWS	Fort Bliss Water Services Company
FRUS	Fort Riley Utility Services, Inc.
GAAP	Generally Accepted Accounting Principles in the United States of America
gpcd	Gallons Per Capita Per Day
GSWC	Golden State Water Company
IOWU	Investor-Owned Water Utility
LCRI	Lead and Copper Rule Improvements
MCBA	Modified Cost Balancing Account
MCL	Maximum Contamination Level
Moody’s	Moody’s Investors Service
MWD	Metropolitan Water District of Southern California
ODUS	Old Dominion Utility Services, Inc.
OEIS	Office of Energy Infrastructure Safety
ONUS	Old North Utility Services, Inc.
PFAS	Perfluoroalkyl Substances
PFOA	Perfluorooctanoic Acid
PRUS	Patuxent River Utility Services LLC
PSUS	Palmetto State Utility Services, Inc.
REA	Request for Equitable Adjustment
Registrant	American States Water Company and Golden State Water Company
SB	Senate Bill
SEC	Securities and Exchange Commission
SERP	Supplemental Executive Retirement Plan
SWP	State Water Project
SWRCB	State Water Resources Control Board
TUS	Terrapin Utility Services, Inc.
U.S.	United States
WCCM	Water Cost of Capital Mechanism
WMP	Wildfire Mitigation Plan
WRAM	Water Revenue Adjustment Mechanism

INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect the current views of our senior management with respect to future events and our financial performance. These statements include forward-looking statements with respect to our business and industry in general. Statements that include the words “expect,” “intend,” “believe,” “estimate,” “may,” “can,” “will,” “likely,” “should,” “could,” “anticipate,” “plan” and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal securities laws or otherwise. Forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, the following:

•the impact of laws, regulations and policies of regulatory agencies or the U.S. government applicable to water, wastewater and electric utility operations;

•the ability of GSWC and BVES to recover their respective costs through regulated rates, including increased costs associated with addressing climate change risks, such as drought and wildfires in California, costs incurred in connection with complying with water quality regulations, and increased costs of operation and maintenance due to inflation, supply chain disruptions and increases in interest rates, while facing an increase in customer rate increase opposition and possible reluctance from the CPUC to pass through all such costs to customers;

•customer dissatisfaction due to rising rates needed to recover the costs of replacing aging infrastructure, address climate change risks, comply with water quality, renewable energy and greenhouse gas regulation;

•all of our contracts for providing services on military bases are provided to the U.S. government under long-term, fixed-price contracts subject to annual economic price adjustments;

•all contracts for providing services on military bases may be terminated or suspended at any time by the government;

•ASUS is subject to potential government audits or investigations of its business practices and compliance with government procurement statutes and regulations that could result in fines and penalties;

•GSWC and BVES are subject to potential audit and investigations by the CPUC for failure to comply with regulations applicable to public utilities, including failure to comply with state and federal water quality requirements, wildfire mitigation plans, renewable energy legislation, greenhouse gas regulations and other climate related regulations that could result in fines and penalties;

•we compete with other companies in bidding on providing utility services on military bases which involves estimating costs and potential profits that may not be realized;

•the impact of water quality and wastewater quality regulations on military bases;

•asset or business acquisitions may not yield the anticipated benefits;

•the impact of climate change and extreme weather events, including droughts, storms, high wind events, wildfires, flash flooding and other natural disasters, and the effects they could have on our operations;

•our assets at our regulated utilities are subject to condemnation by municipalities and other governmental subdivisions;

•increases in the costs of obtaining and complying with the terms of franchise agreements;

•damage to our reputation or adverse publicity may lead to increased regulatory oversight or sanctions;

•costs and effects of legal and administrative proceedings, settlements, investigations and claims;

•our ability to control operation and maintenance costs within the amounts that have been approved in rates or estimated in our military base contracts;

•the outbreak of pandemics, such as COVID-19, and other events may cause region wide, statewide, nationwide or even global disruption, which could impact our businesses, operations, cash flows or financial results;

•the inherent risk of damage to private property and injury to employees and the general public involved in the generation, transmission and distribution of electricity, the handling of hazardous materials and equipment, and being in close proximity to public utility construction and maintenance operations;

•the impact of groundwater contamination and the increasing costs associated with treatment of groundwater due to contamination and increasing water quality regulation and mitigation of contaminants;

•risks of incurring losses not covered by insurance or recoverable in rates;

•the adequacy of water supplies due to fluctuations of weather, climate change and other uncontrollable factors;

•the impact that water conservation efforts may have on GSWC’s operations and costs incurred;

•changes in electricity and natural gas prices in California;

•failure to make accurate estimates about financing and accounting matters;

•changes in accounting, public utility, environmental and tax laws and regulations affecting our businesses;

•changes in fair value of investments and other assets;

•the performance of subcontractors engaged to assist us in the performance of contracted services on military bases;

•incomplete or delayed reimbursement from the U.S. government and delays in obtaining decisions from the CPUC on regulated public utility rates that can adversely impact our financial condition and liquidity;

•physical security of our critical assets, personnel and data critical to our business, employees, customers and vendors;

•cybersecurity incidents that could disrupt operations and critical information technology systems, resulting in the inability to deliver services to customers, loss of financial and other information critical for operations and the breach of confidential information of our customers, employees and vendors;

•our ability to attract, retain, train, motivate, develop, and transition key employees;

•the failure of our employees to maintain required certifications and licenses or to complete required compliance training;

•changes in interest rates and our ability to borrow funds and access bank and capital markets on reasonable terms;

•the impact of inflation and supply chain disruptions on our operational costs and costs of capital that may not be recovered in rates for our regulated utilities and through economic price adjustments for our military bases;

•results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, interest rate fluctuations, compliance with debt covenants and conditions, delays in receiving general rate case decisions from the CPUC, and general market and economic conditions;

•actions by credit rating agencies to downgrade AWR or GSWC’s credit ratings or to place those ratings on negative outlook;

•our ability to finance the significant capital expenditures required by our operations, which are increasing;

•volatility in the price of our Common Shares;

•declines in the market prices of equity and fixed-income securities and resulting cash funding requirements for defined benefit pension plans and other post-retirement benefit plans;

•our reliance on cash flow from our subsidiaries to meet our financial obligations and to pay dividends on our Common Shares;

•the geographic concentration of our operations in California; and

•other risks and uncertainties described under the heading “Item 1A. Risk Factors” in the Form 10-K that we filed with the SEC.

Although we believe that the expectations reflected in these forward-looking statements are reasonable based on our current knowledge of our business and operations, we cannot guarantee future results, levels of activity, performance or achievements. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Any forward-looking statements you read in this Form 10-Q and the information incorporated herein by reference reflect our views as of their respective dates and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. You should not place undue reliance on these forward-looking statements and you should carefully consider all of the factors identified in this Form 10-Q and the information incorporated herein by reference that could cause actual results to differ. Forward-looking statements speak only as of the date they are made and except as required by law, Registrant expressly disclaims an obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I

Item 1. Financial Statements

General

 The basic financial statements included herein have been prepared by Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.

 Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments consisting of normal recurring items and estimates necessary for a fair statement of results for the interim period have been made.

 It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto in the latest Annual Report on Form 10-K of American States Water Company and its wholly owned subsidiary, Golden State Water Company. 

Filing Format

American States Water Company (“AWR”) is the parent company of Golden State Water Company (“GSWC”), Bear Valley Electric Service, Inc. (“BVES”) and American States Utility Services, Inc. and its subsidiaries (“ASUS”).

This quarterly report on Form 10-Q is a combined report being filed by two separate Registrants: AWR and GSWC. For more information, please see Note 1 of the Notes to Consolidated Financial Statements and the heading titled “General” in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” References in this report to “Registrant” are to AWR and GSWC, collectively, unless otherwise specified. GSWC makes no representations as to the information contained in this report other than with respect to itself.

1

AMERICAN STATES WATER COMPANY

CONSOLIDATED BALANCE SHEETS

ASSETS

(Unaudited)

(in thousands)	March 31, 2024		December 31, 2023
Property, Plant and Equipment
Regulated utility plant, at cost	$	2,525,055	$	2,476,509
Non-utility property, at cost	41,236		40,243
Total	2,566,291		2,516,752
Less - accumulated depreciation	(632,597)		(624,472)
Net property, plant and equipment	1,933,694		1,892,280
Other Property and Investments
Goodwill	1,116		1,116
Other property and investments	44,896		42,932
Total other property and investments	46,012		44,048
Current Assets
Cash and cash equivalents	17,007		14,073
Accounts receivable — customers (less allowance for doubtful accounts of $3,640 in 2024 and $3,537 in 2023)	28,897		34,250
Unbilled receivable	24,733		23,516
Receivable from the U.S. government (Note 2)	43,153		49,306
Other accounts receivable (less allowance for doubtful accounts of $53 in 2024 and 2023)	4,492		6,340
Materials and supplies	16,225		17,574
Regulatory assets — current	44,652		45,144
Prepayments and other current assets	11,777		5,819
Contract assets (Note 2)	14,155		9,956
Total current assets	205,091		205,978
Other Assets
Unbilled revenue — receivable from the U.S. government (Note 2)	5,933		4,886
Receivable from the U.S. government (Note 2)	41,420		42,183
Contract assets (Note 2)	329		4,422
Operating lease right-of-use assets	7,452		7,982
Regulatory assets	34,040		25,585
Other	18,925		18,758
Total other assets	108,099		103,816
Total Assets	$	2,292,896	$	2,246,122

The accompanying notes are an integral part of these consolidated financial statements.

2

AMERICAN STATES WATER COMPANY

CONSOLIDATED BALANCE SHEETS

CAPITALIZATION AND LIABILITIES

(Unaudited)

(in thousands, except number of shares)	March 31, 2024		December 31, 2023
Capitalization
Common shares, no par value
Authorized: 60,000,000 shares
Outstanding: 37,228,883 shares in 2024 and 36,980,612 shares in 2023	$	280,377	$	263,179
Retained earnings	520,116		512,930
Total common shareholders’ equity	800,493		776,109
Long-term debt	575,530		575,555
Total capitalization	1,376,023		1,351,664
Current Liabilities
Notes payable to banks	43,000		42,000
Long-term debt — current	358		353
Accounts payable	69,584		68,705
Income taxes payable	5,105		492
Accrued other taxes	12,581		14,654
Accrued employee expenses	18,428		14,738
Accrued interest	9,003		8,607
Contract liabilities (Note 2)	653		1,352
Operating lease liabilities	1,788		1,856
Purchase power contract derivative at fair value (Note 5)	6,168		2,360
Other	11,909		11,506
Total current liabilities	178,577		166,623
Other Credits
Notes payable to banks	294,500		291,500
Advances for construction	69,468		67,431
Contributions in aid of construction - net	152,026		151,414
Deferred income taxes	166,027		161,577
Regulatory liabilities	1,123		1,222
Unamortized investment tax credits	993		1,011
Accrued pension and other postretirement benefits	33,504		32,652
Operating lease liabilities	6,138		6,619
Other	14,517		14,409
Total other credits	738,296		727,835
Commitments and Contingencies (Note 9)
Total Capitalization and Liabilities	$	2,292,896	$	2,246,122

The accompanying notes are an integral part of these consolidated financial statements.

3

AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED

MARCH 31, 2024 AND 2023

(Unaudited)

	Three Months Ended March 31,
(in thousands, except per share amounts)	2024		2023
Operating Revenues
Water	$	90,265	$	112,712
Electric	12,205		12,904
Contracted services	32,781		35,807
Total operating revenues	135,251		161,423
Operating Expenses
Water purchased	13,761		14,304
Power purchased for pumping	2,832		2,354
Groundwater production assessment	4,854		3,833
Power purchased for resale	4,332		4,986
Supply cost balancing accounts	(608)		11,566
Other operation	9,623		10,116
Administrative and general	25,347		23,547
Depreciation and amortization	10,722		11,203
Maintenance	3,225		3,150
Property and other taxes	6,487		6,295
ASUS construction	15,702		18,904
Total operating expenses	96,277		110,258
Operating Income	38,974		51,165
Other Income and Expenses
Interest expense	(12,855)		(9,481)
Interest income	2,070		1,864
Other, net	2,342		1,611
Total other income and expenses, net	(8,443)		(6,006)
Income before income tax expense	30,531		45,159
Income tax expense	7,396		10,752
Net Income	$	23,135	$	34,407
Weighted Average Number of Common Shares Outstanding	37,030		36,968
Basic Earnings Per Common Share	$	0.62	$	0.93
Weighted Average Number of Diluted Shares	37,107		37,047
Fully Diluted Earnings Per Common Share	$	0.62	$	0.93
Dividends Paid Per Common Share	$	0.4300	$	0.3975

The accompanying notes are an integral part of these consolidated financial statements.

4

AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF CHANGES

IN COMMON SHAREHOLDERS' EQUITY

(Unaudited)

	Three Months Ended March 31, 2024
	Common Shares
	Number
	of			Retained
(in thousands)	Shares	Amount		Earnings		Total
Balances at December 31, 2023	36,981	$	263,179	$	512,930	$	776,109
Add:
Net income				23,135		23,135
Issuance of Common Shares from an at-the-market program, net of issuance costs	228	15,584				15,584
Issuances of Common Shares under stock-based compensation plans	20	—				—
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		1,570				1,570
Dividend equivalent rights on stock-based awards not paid in cash		44				44
Deduct:
Dividends on Common Shares				15,905		15,905
Dividend equivalent rights on stock-based awards not paid in cash				44		44
Balances at March 31, 2024	37,229	$	280,377	$	520,116	$	800,493

	Three Months Ended March 31, 2023
	Common Shares
	Number
	of			Retained
(in thousands)	Shares	Amount		Earnings		Total
Balances at December 31, 2022	36,962	$	260,158	$	449,391	$	709,549
Add:
Net income				34,407		34,407
Issuances of Common Shares under stock-based compensation plans	14	—				—
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		1,587				1,587
Dividend equivalent rights on stock-based awards not paid in cash		47				47
Deduct:
Dividends on Common Shares				14,695		14,695
Dividend equivalent rights on stock-based awards not paid in cash				47		47
Balances at March 31, 2023	36,976	$	261,792	$	469,056	$	730,848

The accompanying notes are an integral part of these consolidated financial statements.

5

AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(Unaudited)

	Three Months Ended   March 31,
(in thousands)	2024		2023
Cash Flows From Operating Activities:
Net income	$	23,135	$	34,407
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	10,885		11,572
Provision for doubtful accounts	352		458
Deferred income taxes and investment tax credits	2,731		(3,286)
Stock-based compensation expense	2,505		2,254
Gain on investments held in a trust	(2,070)		(1,630)
Other — net	128		(71)
Changes in assets and liabilities:
Accounts receivable — customers	5,001		4,455
Unbilled receivable	(2,264)		(3,115)
Other accounts receivable	1,848		824
Receivables from the U.S. government	6,916		(5,842)
Materials and supplies	1,349		(1,659)
Prepayments and other assets	(5,773)		(5,656)
Contract assets	(106)		1,509
Regulatory assets/liabilities	(2,234)		(35,863)
Accounts payable	(3,071)		(8,542)
Income taxes receivable/payable	4,615		12,873
Contract liabilities	(699)		(343)
Accrued pension and other postretirement benefits	693		1,020
Other liabilities	1,870		3,599
Net cash provided (used)	45,811		6,964
Cash Flows From Investing Activities:
Capital expenditures	(47,550)		(49,337)
Other investing activities	136		172
Net cash provided (used)	(47,414)		(49,165)
Cash Flows From Financing Activities:
Proceeds from issuance of Common Shares, net of issuance costs	16,088		—
Receipt of advances for and contributions in aid of construction	2,332		2,064
Refunds on advances for construction	(752)		(712)
Repayments of long-term debt	(115)		(109)
Proceeds from the issuance of long-term debt, net of issuance costs	—		129,665
Net changes in notes payable to banks	4,000		(77,000)
Dividends paid	(15,905)		(14,695)
Other financing activities	(1,111)		(883)
Net cash provided (used)	4,537		38,330
Net change in cash and cash equivalents	2,934		(3,871)
Cash and cash equivalents, beginning of period	14,073		5,997
Cash and cash equivalents, end of period	$	17,007	$	2,126
Non-cash transactions:
Accrued payables for investment in utility plant	$	38,435	$	29,746
Property installed by developers and conveyed	$	2,210	$	364

The accompanying notes are an integral part of these consolidated financial statements.

6

GOLDEN STATE WATER COMPANY

BALANCE SHEETS

ASSETS

(Unaudited)

(in thousands)	March 31, 2024		December 31, 2023
Utility Plant
Utility plant, at cost	$	2,321,389	$	2,278,669
Less - accumulated depreciation	(549,706)		(543,135)
Net utility plant	1,771,683		1,735,534
Other Property and Investments	42,447		40,480
Current Assets
Cash and cash equivalents	7,470		3,195
Accounts receivable — customers (less allowance for doubtful accounts of $3,457 in 2024 and $3,394 in 2023)	25,736		31,018
Unbilled receivable	15,199		17,185
Other accounts receivable (less allowance for doubtful accounts of $53 in 2024 and 2023)	3,146		4,301
Intercompany receivable	1,223		380
Income taxes receivable from Parent	—		222
Materials and supplies	7,679		7,380
Regulatory assets — current	44,434		44,007
Prepayments and other current assets	8,330		4,544
Total current assets	113,217		112,232
Other Assets
Operating lease right-of-use assets	7,300		7,796
Regulatory assets	8,237		2,944
Other	17,175		17,169
Total other assets	32,712		27,909
Total Assets	$	1,960,059	$	1,916,155

The accompanying notes are an integral part of these financial statements.

7

GOLDEN STATE WATER COMPANY

BALANCE SHEETS

CAPITALIZATION AND LIABILITIES

(Unaudited)

(in thousands, except number of shares)	March 31, 2024		December 31, 2023
Capitalization
Common Shares, no par value:
Authorized: 1,000 shares
Outstanding: 171 shares in 2024 and 2023	$	372,511	$	370,909
Retained earnings	350,672		332,919
Total common shareholder’s equity	723,183		703,828
Long-term debt	540,709		540,738
Total capitalization	1,263,892		1,244,566
Current Liabilities
Long-term debt — current	358		353
Accounts payable	55,263		55,488
Accrued other taxes	10,328		12,658
Accrued employee expenses	14,140		11,502
Accrued interest	7,561		7,508
Income taxes payable to Parent	3,040		—
Operating lease liabilities	1,650		1,725
Other	11,123		10,715
Total current liabilities	103,463		99,949
Other Credits
Notes payable to banks	164,000		150,000
Advances for construction	69,448		67,411
Contributions in aid of construction — net	152,026		151,414
Deferred income taxes	151,506		147,458
Regulatory liabilities	1,123		1,222
Unamortized investment tax credits	993		1,011
Accrued pension and other postretirement benefits	33,131		32,309
Operating lease liabilities	6,125		6,568
Other	14,352		14,247
Total other credits	592,704		571,640
Commitments and Contingencies (Note 9)
Total Capitalization and Liabilities	$	1,960,059	$	1,916,155

The accompanying notes are an integral part of these financial statements.

8

GOLDEN STATE WATER COMPANY

STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED

MARCH 31, 2024 AND 2023

(Unaudited)

	Three Months Ended March 31,
(in thousands)	2024		2023
Operating Revenues
Water	$	90,265	$	112,712
Total operating revenues	90,265		112,712
Operating Expenses
Water purchased	13,761		14,304
Power purchased for pumping	2,832		2,354
Groundwater production assessment	4,854		3,833
Supply cost balancing accounts	(17)		12,625
Other operation	6,580		7,271
Administrative and general	16,977		15,381
Depreciation and amortization	9,034		9,606
Maintenance	1,828		1,960
Property and other taxes	5,249		5,139
Total operating expenses	61,098		72,473
Operating Income	29,167		40,239
Other Income and Expenses
Interest expense	(9,392)		(6,922)
Interest income	1,511		1,428
Other, net	2,332		1,628
Total other income and expenses, net	(5,549)		(3,866)
Income before income tax expense	23,618		36,373
Income tax expense	5,824		8,910
Net Income	$	17,794	$	27,463

The accompanying notes are an integral part of these consolidated financial statements.

9

GOLDEN STATE WATER COMPANY

STATEMENTS OF CHANGES

IN COMMON SHAREHOLDER'S EQUITY

(Unaudited)

	Three Months Ended March 31, 2024
	Common Shares
	Number
	of			Retained
(in thousands, except number of shares)	Shares	Amount		Earnings		Total
Balances at December 31, 2023	171	$	370,909	$	332,919	$	703,828
Add:
Net income				17,794		17,794
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		1,561				1,561
Dividend equivalent rights on stock-based awards not paid in cash		41				41
Deduct:
Dividend equivalent rights on stock-based awards not paid in cash				41		41
Balances at March 31, 2024	171	$	372,511	$	350,672	$	723,183

	Three Months Ended March 31, 2023
	Common Shares
	Number
	of			Retained
(in thousands, except number of shares)	Shares	Amount		Earnings		Total
Balances at December 31, 2022	170	$	358,123	$	285,783	$	643,906
Add:
Net income				27,463		27,463
Issuance of Common Share to Parent	1	10,000				10,000
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		1,603				1,603
Dividend equivalent rights on stock-based awards not paid in cash		44				44
Deduct:
Dividends on Common Shares				24,700		24,700
Dividend equivalent rights on stock-based awards not paid in cash				44		44
Balances at March 31, 2023	171	$	369,770	$	288,502	$	658,272

The accompanying notes are an integral part of these financial statements.

10

GOLDEN STATE WATER COMPANY

STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(Unaudited)

	Three Months Ended   March 31,
(in thousands)	2024		2023
Cash Flows From Operating Activities:
Net income	$	17,794	$	27,463
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,167		9,947
Provision for doubtful accounts	282		420
Deferred income taxes and investment tax credits	2,460		(4,348)
Stock-based compensation expense	2,425		2,190
Gain on investments held in a trust	(2,070)		(1,630)
Other — net	91		(105)
Changes in assets and liabilities:
Accounts receivable — customers	5,000		3,990
Unbilled receivable	1,986		1,607
Other accounts receivable	1,155		405
Materials and supplies	(299)		(218)
Prepayments and other assets	(3,337)		(3,380)
Regulatory assets/liabilities	(3,935)		(34,059)
Accounts payable	(3,064)		(7,831)
Intercompany receivable/payable	(843)		1,077
Income taxes receivable/payable from/to Parent	3,262		12,086
Accrued pension and other postretirement benefits	667		1,004
Other liabilities	251		2,259
Net cash provided (used)	30,992		10,877
Cash Flows From Investing Activities:
Capital expenditures	(41,278)		(42,005)
Other investing activities	136		171
Net cash provided (used)	(41,142)		(41,834)
Cash Flows From Financing Activities:
Proceeds from issuance of Common Shares to AWR (parent)	—		10,000
Receipt of advances for and contributions in aid of construction	2,332		2,064
Refunds on advances for construction	(752)		(712)
Repayments of long-term debt	(115)		(109)
Proceeds from the issuance of long-term debt, net of issuance costs	—		129,665
Net change in intercompany borrowings	—		(84,000)
Net borrowings on notes payable to banks	14,000		—
Dividends paid	—		(24,700)
Other financing activities	(1,040)		(808)
Net cash provided (used)	14,425		31,400
Net change in cash and cash equivalents	4,275		443
Cash and cash equivalents, beginning of period	3,195		370
Cash and cash equivalents, end of period	$	7,470	$	813
Non-cash transactions:
Accrued payables for investment in utility plant	$	36,304	$	28,363
Property installed by developers and conveyed	$	2,210	$	364

The accompanying notes are an integral part of these financial statements.

11

AMERICAN STATES WATER COMPANY AND SUBSIDIARIES

AND

GOLDEN STATE WATER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Summary of Significant Accounting Policies

Nature of Operations: American States Water Company (“AWR”) is the parent company of Golden State Water Company (“GSWC”), Bear Valley Electric Service Inc. (“BVES”), and American States Utility Services, Inc. (“ASUS”) (and its subsidiaries, Fort Bliss Water Services Company (“FBWS”), Old Dominion Utility Services, Inc. (“ODUS”), Terrapin Utility Services, Inc. (“TUS”), Palmetto State Utility Services, Inc. (“PSUS”), Old North Utility Services, Inc. (“ONUS”), Emerald Coast Utility Services, Inc. (“ECUS”), Fort Riley Utility Services, Inc. (“FRUS”), Bay State Utility Services LLC (“BSUS”), and Patuxent River Utility Services LLC (“PRUS”)). AWR and its subsidiaries may be collectively referred to as “the Company.” AWR, through its wholly owned subsidiaries, serves over one million people in ten states.

 GSWC and BVES are both California public utilities. GSWC is engaged in the purchase, production, distribution and sale of water throughout California serving approximately 264,200 customer connections. BVES distributes electricity in several San Bernardino County mountain communities in California serving approximately 24,800 customer connections. The California Public Utilities Commission (“CPUC”) regulates GSWC’s and BVES’s businesses in matters including properties, rates, services, facilities, and transactions between GSWC, BVES, and their affiliates.

ASUS, through its wholly owned subsidiaries, operates, maintains and performs construction activities (including renewal and replacement capital work) on water and/or wastewater systems at various U.S. military bases pursuant to initial 50-year firm fixed-price contracts with the U.S. government and one 15-year contract with the U.S. government. These contracts are subject to annual economic price adjustments and modifications for changes in circumstances, changes in laws and regulations, and additions to the contract value for new construction of facilities at the military bases. ASUS also from time to time performs construction services on military bases as a subcontractor or pursuant to a task order agreement.

In August and September of 2023, ASUS was awarded new contracts with the U.S. government to serve two military bases for which operations began in April 2024. After completion of the transition periods, ASUS has begun operating the water and wastewater utility systems at Naval Air Station Patuxent River in Maryland under a 50-year privatization contract with the U.S. government and at Joint Base Cape Cod in Massachusetts under a 15-year contract with the U.S. government. Operations commenced at Naval Air Station Patuxent River on April 1, 2024. The value of this contract is estimated at approximately $349 million over a 50-year period and is subject to an inventory adjustment and annual economic price adjustments. Operations at Joint Base Cape Cod commenced on April 15, 2024. Under this contract, ASUS will perform work through the annual issuance of task orders by the U.S. government over a 15-year period up to a maximum value to ASUS of $75.0 million subject to adjustments as task orders are issued. In April 2024, the U.S. government awarded a task order valued at $4.1 million to ASUS for the first year of operation, maintenance, and renewal and replacement services of the water and wastewater systems at Joint Base Cape Cod.

There is no direct regulatory oversight by the CPUC over AWR or the operations, rates or services provided by ASUS or any of its wholly owned subsidiaries.

Basis of Presentation: The consolidated financial statements and notes hereto are presented in a combined report filed by two separate Registrants: AWR and GSWC. References in this report to “Registrant” are to AWR and GSWC, collectively, unless otherwise specified. AWR owns all of the outstanding common shares of GSWC, BVES and ASUS. ASUS owns all of the outstanding equity of its subsidiaries. The consolidated financial statements of AWR include the accounts of AWR and its subsidiaries. These financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Intercompany transactions and balances have been eliminated in the AWR consolidated financial statements.

The consolidated financial statements included herein have been prepared by Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  The December 31, 2023 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. In the opinion of management, all adjustments consisting of normal, recurring items, and estimates necessary for a fair statement of the results for the interim periods have been made. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Form 10-K for the year ended December 31, 2023 filed with the SEC.

12

Related Party and Intercompany Transactions: GSWC, BVES and ASUS provide and/or receive various support services to and from their parent, AWR, and among themselves. GSWC allocates certain corporate office administrative and general costs to its affiliates, BVES and ASUS, using allocation factors approved by the CPUC. GSWC allocated corporate office administrative and general costs to BVES of $936,000 and $1.3 million during the three months ended March 31, 2024 and 2023, respectively. GSWC also allocated corporate office administrative and general costs to ASUS of $1.6 million and $1.5 million during the three months ended March 31, 2024 and 2023, respectively. In addition, as discussed under Liquidity and Financing Activities, under AWR’s credit facility, AWR borrows and provides funds to ASUS in support of its operations.

Liquidity and Financing Activities: On February 27, 2024, AWR entered into an Equity Distribution Agreement with third-party sales agents, under which AWR, may offer and sell its Common Shares, from time to time at its sole discretion, through an at-the-market (“ATM”) offering program having an aggregate gross offering price of up to $200 million over a three-year period and pursuant to AWR’s effective shelf registration statement on Form S-3. AWR intends to use the net proceeds from these sales, after deducting commissions on such sales and offering expenses, for general corporate purposes, including, but not limited to, repayment of debt and equity contributions to its subsidiaries. During the first quarter of 2024, AWR sold 227,981 Common Shares through this ATM offering program and raised proceeds of $16.2 million, net of $247,000 in commissions paid under the terms of the Equity Distribution Agreement. AWR has also incurred $643,000 of other expenses, which was primarily legal and other costs to establish this ATM offering program. The net proceeds raised during the first quarter of 2024 were used to pay down outstanding borrowings under AWR’s credit facility. As of March 31, 2024, approximately $183.5 million remained available for sale under the ATM offering program.

In June 2023, AWR and GSWC each entered into credit agreements with a term of five years provided by a syndicate of banks and financial institutions. Both credit agreements will mature in June 2028. The credit agreements currently provide AWR and GSWC unsecured revolving credit facilities with borrowing capacities of $165.0 million and $200.0 million, respectively. Under the terms of the credit agreements, the borrowing capacities for AWR and GSWC may currently be expanded up to an additional $60.0 million and $75.0 million, respectively, subject to the lenders’ approval.

AWR's credit facility is primarily used to provide support to AWR (parent) and ASUS. As of March 31, 2024, AWR’s outstanding borrowings under its credit facility of $130.5 million have been classified as non-current liabilities on AWR’s Consolidated Balance Sheet. GSWC’s credit facility provides support for its water operations and is considered a short-term debt arrangement by the CPUC. Therefore, pursuant to the CPUC’s requirements, borrowings under GSWC’s credit facility are required to be paid-off in full within a 24-month period after which GSWC may borrow under the credit facility again. GSWC’s next pay-off period ends in June 2025. Accordingly, GSWC’s outstanding borrowings under its credit facility of $164.0 million as of March 31, 2024 are classified as non-current liabilities on GSWC’s Balance Sheet.

BVES has a separate revolving credit facility without a parent guaranty that supports its electric operations and capital expenditures with a current borrowing capacity of $65.0 million. Currently, the credit agreement provides BVES an option to increase the borrowing capacity of the facility by an additional $10.0 million, subject to lender approval. BVES’s revolving credit facility is considered a short-term debt arrangement by the CPUC. Therefore, pursuant to the CPUC’s requirements, borrowings under this credit facility are required to be fully paid off within a 24-month period after which BVES may borrow under the credit facility again. BVES’s pay-off period for its credit facility ends in August 2024. Accordingly, the $43.0 million outstanding under BVES’s credit facility has been classified as a current liability in AWR’s Consolidated Balance Sheet as of March 31, 2024.

Recent Accounting Pronouncements: In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-07 (Segment Reporting: Improvements to Reportable Segment Disclosures). The new standard enhances reportable segment disclosures and expands the disclosures required for reportable segments in annual and interim consolidated financial statements, primarily through enhanced disclosures of significant segment expenses. Registrant is currently evaluating the impact of this standard on its segment disclosures and will adopt the updated accounting guidance in the Annual Report on Form 10-K for the year ended December 31, 2024 and interim periods beginning in 2025.

13

Note 2 — Revenues

Most of Registrant’s revenues are derived from contracts with customers, including tariff-based revenues from its regulated utilities at GSWC and BVES. ASUS’s initial firm fixed-price long-term contracts with the U.S. government are considered service concession arrangements under ASC 853, Service Concession Arrangements. ASUS’s military base contracts consist primarily of 50-year contracts and one 15-year contract with the U.S. government. Accordingly, the services under these contracts are accounted for under Topic 606—Revenue from Contracts with Customers, and the water and/or wastewater systems are not recorded as Property, Plant and Equipment on Registrant’s balance sheets.

Although GSWC and BVES have a diversified customer base of residential, commercial, industrial, and other customers, revenues derived from residential and commercial customers generally account for approximately 90% of total water and electric revenues. Most of ASUS’s revenues are derived from the U.S. government. For the three months ended March 31, 2024 and 2023, disaggregated revenues from contracts with customers by segment were as follows:

	Three Months Ended March 31,
(dollars in thousands)	2024		2023
Water:
Tariff-based revenues	$	84,661	$	100,541
CPUC-approved surcharges (cost-recovery activities)	547		317
Other	582		737
Water revenues from contracts with customers	85,790		101,595
WRAM under/(over)-collection (alternative revenue program)	4,475		11,117
Total water revenues (1)	90,265		112,712
Electric:
Tariff-based revenues	12,673		13,063
CPUC-approved surcharges (cost-recovery activities)	74		149
Electric revenues from contracts with customers	12,747		13,212
BRRAM under/(over)-collection (alternative revenue program)	(542)		(308)
Total electric revenues	12,205		12,904
Contracted services:
Water	21,567		22,488
Wastewater	11,214		13,319
Contracted services revenues from contracts with customers	32,781		35,807
Total AWR revenues	$	135,251	$	161,423

(1) Water revenues for the three months ended March 31, 2023 include approximately $30 million, which represents the impact of retroactive new rates for the full year of 2022 as a result of a proposed decision issued by the CPUC in April 2023 on GSWC's general rate case (Note 3).

The opening and closing balances of the receivable from the U.S. government, contract assets, and contract liabilities from contracts with customers, which are related entirely to ASUS, were as follows:    

(dollars in thousands)	March 31, 2024		December 31, 2023
Unbilled receivables	$	13,854	$	9,693
Receivable from the U.S. government	$	84,573	$	91,489
Contract assets	$	14,484	$	14,378
Contract liabilities	$	653	$	1,352

Unbilled receivables and Receivable from the U.S. government represent receivables where the right to payment is conditional only by the passage of time.

Contract Assets - Contract assets are assets of ASUS and consist of unbilled revenues recognized from work-in-progress construction projects, where the right to payment is conditional on something other than the passage of time. The classification of this asset as current or noncurrent is based on the timing of when ASUS expects to bill these amounts.

14

Contract Liabilities - Contract liabilities are liabilities of ASUS and consist of billings in excess of revenue recognized. The classification of this liability as current or noncurrent is based on the timing of when ASUS expects to recognize revenue. Revenues for the three months ended March 31, 2024, which were included in contract liabilities at the beginning of the period were not material. Contracted services revenues recognized during the three months ended March 31, 2024 from performance obligations satisfied in previous periods were also not material.

As of March 31, 2024, AWR’s aggregate remaining performance obligations, which are entirely from the contracted services segment, were $4.0 billion. ASUS expects to recognize revenue on these remaining performance obligations over the remaining term of each of the contracts, which range from 15 to 50 years. Each of the contracts with the U.S. government is subject to termination, in whole or in part, prior to the end of its contract term for convenience of the U.S. government.

Note 3 — Regulatory Matters

In accordance with accounting principles for rate-regulated enterprises, GSWC and BVES record regulatory assets, which represent probable future recovery of incurred costs from customers through the ratemaking process, and regulatory liabilities, which represent probable future refunds that are to be credited to customers through the ratemaking process. At March 31, 2024, GSWC and BVES had approximately $62.8 million of regulatory liabilities, net of regulatory assets, not accruing carrying costs. Of this amount, (i) $73.7 million of regulatory liabilities are excess deferred income taxes arising from the lower federal income tax rate under the Tax Cuts and Jobs Act enacted in December 2017 that are being refunded to customers, (ii) $5.6 million of net regulatory assets relates to flowed-through deferred income taxes including the gross-up portion on the deferred tax resulting from the excess deferred income tax regulatory liability, (iii) $3.7 million of net regulatory liabilities relates to the overfunded position in Registrant’s pension and other retirement obligations (not including the two-way pension balancing accounts), and (iv) $6.2 million of regulatory assets relate to memorandum accounts authorized by the CPUC to track unrealized gains and losses on BVES’s purchase power contracts over the term of the contracts. The remainder relates to other items that do not provide for or incur carrying costs.

Regulatory assets represent costs incurred by GSWC and/or BVES for which they have received or expect to receive rate recovery in the future. In determining the probability of costs being recognized in other periods, GSWC and BVES consider regulatory rules and decisions, past practices, and other facts or circumstances that would indicate if recovery is probable. If the CPUC determines that a portion of either GSWC’s or BVES’s regulatory assets are not recoverable in customer rates, the applicable utility must determine if it has suffered an asset impairment that requires it to write down the asset’s value. Regulatory assets are offset against regulatory liabilities within each ratemaking area. Amounts expected to be collected or refunded in the next twelve months have been classified as current assets and current liabilities by ratemaking area. Regulatory assets, less regulatory liabilities, included in the consolidated balance sheets are as follows:

(dollars in thousands)	March 31, 2024		December 31, 2023
GSWC
2022/2023 general rate case memorandum accounts (unbilled revenue)	$	50,010	$	52,795
Water revenue adjustment mechanism, net of modified cost balancing account	47,529		41,545
Asset retirement obligations	7,258		7,099
Flowed-through deferred income taxes, net	4,348		3,190
Low income rate assistance balancing accounts	6,846		5,763
Other regulatory assets	10,600		10,661
Excess deferred income taxes	(69,878)		(70,189)
Pensions and other post-retirement obligations	(4,861)		(4,867)
Other regulatory liabilities	(304)		(268)
Total GSWC	$	51,548	$	45,729
BVES
Derivative instrument memorandum account (Note 5)	6,168		2,360
Wildfire mitigation and other fire prevention related costs memorandum accounts	18,638		17,716
Electric supply cost adjustment mechanism	2,268		2,583
Other regulatory assets	7,795		7,697
Other regulatory liabilities	(8,848)		(6,578)
Total AWR	$	77,569	$	69,507

Regulatory matters are discussed in the consolidated financial statements and the notes thereto included in the Company’s Form 10-K for the year ended December 31, 2023 filed with the SEC. The discussion below focuses on significant matters and developments since December 31, 2023.

15

Water General Rate Case and the 2022/2023 General Rate Case Memorandum Accounts:

In June 2023, the CPUC adopted a final decision in GSWC’s general rate case application for all its water regions and its general office that determines new water rates for the years 2022–2024. The new rates approved were retroactive to January 1, 2022. Upon receiving the final decision, GSWC filed for the implementation of new 2023 rate increases that went into effect on July 31, 2023. Due to the delay in finalizing the water general rate case, water revenues billed to customers for the year ended December 31, 2022 and for the period from January 1, 2023 to July 30, 2023 were based on 2021 adopted rates. GSWC was authorized to create general rate case memorandum accounts to track the revenue differences between the 2021 adopted rates and the 2022 and 2023 rates authorized by the CPUC for future recovery. In October 2023, surcharges were implemented to recover the cumulative retroactive rate differences over 36 months. As of March 31, 2024, there is an aggregate cumulative amount of $50.0 million under-collection in the general rate case memorandum accounts that GSWC has recorded as regulatory assets for retroactive water revenues.

Alternative-Revenue Programs:

GSWC records the difference between what it bills its water customers and that which is authorized by the CPUC using the Water Revenue Adjustment Mechanism (“WRAM”) and the Modified Cost Balancing Account (“MCBA”) approved by the CPUC. The over- or under-collection of the WRAM is aggregated with the MCBA over- or under-collection for the corresponding ratemaking area and bears interest at the current 90-day commercial-paper rate. 

As of March 31, 2024, GSWC had an aggregated net regulatory asset of $47.5 million, which is comprised of a $50.0 million under-collection in the WRAM accounts and a $2.5 over-collection in the MCBA accounts. During the three months ended March 31, 2024, GSWC recorded additional net under-collections in the WRAM/MCBA accounts of approximately $8.0 million that resulted largely from lower-than-adopted water usage as authorized in the general rate case decision. On March 15, 2024, GSWC filed an advice letter to recover all pre-2024 WRAM/MCBA balances. The surcharges were effective May 1, 2024.

As required by the accounting guidance for alternative revenue programs, GSWC is required to collect its WRAM balances within 24 months following the year in which an under-collection is recorded. As of March 31, 2024, there were no significant WRAM under-collections that were estimated to be collected over more than 24 month period.

BVES Regulatory Assets:

Wildfire Mitigation and Other Fire Prevention Related Costs Memorandum Accounts

The CPUC adopted regulations intended to enhance the fire safety of overhead electric power lines. Those regulations included increased minimum clearances around electric power lines. BVES was authorized to track incremental costs incurred to implement the regulations in a fire hazard prevention memorandum account for the purpose of obtaining cost recovery in a future general rate case. In August 2019, the CPUC issued a final decision on the electric general rate case, which set new rates for BVES through the year 2022. Among other things, the decision authorized BVES to record incremental costs related to vegetation management, such as costs for increased minimum clearances around electric power lines, in a CPUC-approved memorandum account for future recovery. As of March 31, 2024, BVES had approximately $12.5 million in incremental vegetation management costs recorded as a regulatory asset. BVES has requested recovery of these costs in its general rate case application filed with the CPUC in August 2022 for future recovery. The incremental costs related to vegetation management included in the memorandum account will be subject to review during the general rate case proceeding.

California legislation enacted in September 2018 requires all investor-owned electric utilities to have a wildfire mitigation plan (“WMP”) approved by the Office of Energy Infrastructure Safety (“OEIS”) and ratified by the CPUC. The WMP must include a utility’s plans on constructing, maintaining, and operating its electrical lines and equipment to minimize the risk of catastrophic wildfire. The OEIS has approved and the CPUC has ratified BVES’s 2023-2025 WMP. As of March 31, 2024, BVES has approximately $6.2 million related to expenses accumulated in its other WMP memorandum accounts that have been recognized as regulatory assets for future recovery.

All capital expenditures and other incremental costs incurred through March 31, 2024 as a result of BVES’s WMPs are not currently in rates and are being addressed for future recovery in BVES’s general rate case application. These costs are subject to review during BVES’s general rate case proceeding.

Other Regulatory Assets:

Other regulatory assets represent costs incurred by GSWC or BVES for which they have received or expect to receive rate recovery in the future. Registrant believes that these regulatory assets are supported by regulatory rules and decisions, past practices, and other facts or circumstances that indicate recovery is probable. If the CPUC determines that a portion of either GSWC’s or BVES’s regulatory assets are not recoverable in customer rates, the applicable entity must determine if an asset impairment has occurred that requires it to write down the regulatory asset to the amount that is probable of recovery.

16

Note 4 — Earnings per Share/Capital Stock

In accordance with the accounting guidance for participating securities and earnings per share (“EPS”), Registrant uses the “two-class” method of computing EPS. The “two-class” method is an earnings allocation formula that determines EPS for each class of common stock and participating security. AWR has participating securities related to restricted stock units that earn dividend equivalents on an equal basis with AWR’s Common Shares, and that have been issued under AWR’s stock incentive plans for employees and the non-employee directors stock plans.  In applying the “two-class” method, undistributed earnings are allocated to both Common Shares and participating securities.

The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding used to calculate basic EPS:

Basic:	For The Three Months Ended   March 31,
(in thousands, except per share amounts)	2024		2023
Net income	$	23,135	$	34,407
Less: impact from participating securities	56		87
Total income available to common shareholders	$	23,079	$	34,320
Weighted average Common Shares outstanding, basic	37,030		36,968
Basic earnings per Common Share	$	0.62	$	0.93

Diluted EPS is based upon the weighted average number of Common Shares, including both outstanding shares and shares potentially issuable in connection with restricted stock units granted under AWR’s stock incentive plans for employees and directors, and net income. There were no stock options outstanding as of March 31, 2024 and 2023 under these plans.

The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding used to calculate diluted EPS:

Diluted:	For The Three Months Ended   March 31,
(in thousands, except per share amounts)	2024		2023
Common shareholders earnings, basic	$	23,079	$	34,320
Undistributed earnings for dilutive stock options and restricted stock units	17		50
Total common shareholders earnings, diluted	$	23,096	$	34,370
Weighted average Common Shares outstanding, basic	37,030		36,968
Stock-based compensation (1)	77		79
Weighted average Common Shares outstanding, diluted	37,107		37,047
Diluted earnings per Common Share	$	0.62	$	0.93

    

(1)     In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in calculating diluted EPS, 128,668 and 106,817 restricted stock units, including performance awards to officers of the Company at March 31, 2024 and 2023, respectively, were deemed to be outstanding and included in the calculation of diluted EPS.

During the three months ended March 31, 2024, AWR sold 227,981 Common Shares through its ATM offering program and raised proceeds of $16.2 million, net of $247,000 in commissions paid (Note 1). During the three months ended March 31, 2024 and 2023, AWR also issued 20,290 and 14,043 Common Shares related to restricted stock units, respectively, pursuant to stock-based compensation plans.

During the three months ended March 31, 2024 and 2023, AWR paid $1.1 million and $883,000, respectively, to taxing authorities on employees’ behalf for shares withheld related to net share settlements. During the three months ended March 31, 2024 and 2023, GSWC paid $1.0 million and $808,000, respectively, to taxing authorities on employees’ behalf for shares withheld related to net share settlements. These payments are included in the stock-based compensation caption of the statements of equity.

During the three months ended March 31, 2024 and 2023, AWR paid quarterly dividends of approximately $15.9 million, or $0.4300 per share, and $14.7 million, or $0.3975 per share, respectively. GSWC did not pay a dividend to AWR during the three months ended March 31, 2024. During the three months ended March 31, 2023, GSWC paid dividends of $24.7 million to AWR. During the three months ended March 31, 2023, GSWC issued one Common Share to AWR for $10.0 million. Proceeds from the stock issuance were used to pay down a portion of intercompany borrowings owed to AWR.

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Note 5 — Derivative Instruments

BVES has entered into long-term fixed price contracts to purchase power over three- and five-year terms.  These long-term contracts will expire during the fourth quarter of 2024 and are subject to the accounting guidance for derivatives and require mark-to-market derivative accounting. In July 2023, the CPUC approved a new power purchase agreement between BVES and a third party to procure renewable portfolio standard eligible energy and renewable energy credits as a bundled product. BVES will begin taking power under this long-term contract during the fourth quarter of 2024 to replace the existing expiring contracts. The new contract provides for the purchase of electricity during a delivery period from November 1, 2024 through December 31, 2035. Under this contract, there is an embedded derivative that also requires mark-to-market accounting.

The CPUC authorized the use of a regulatory asset and liability memorandum account to offset the mark-to-market entries required by the accounting guidance.  Accordingly, all unrealized gains and losses generated from derivative instruments in purchase power contracts are deferred on a monthly basis into a non-interest-bearing regulatory memorandum account that tracks the changes in fair value of the derivative throughout the terms of the contracts. As a result, these unrealized gains and losses do not impact Registrant’s earnings. As of March 31, 2024, there was a $6.2 million derivative liability at fair value for the derivatives in the power purchase contracts, with a corresponding regulatory asset recorded in the derivative instrument memorandum account as a result of overall fixed prices under BVES’s purchase power contracts being higher than future energy prices. The notional volume of derivatives remaining under these long-term contracts as of March 31, 2024 was 653,396 megawatt hours.

The accounting guidance for fair value measurements applies to all financial assets and financial liabilities that are measured and reported on a fair value basis. Under the accounting guidance, Registrant has made fair value measurements that are classified and disclosed in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

To value the derivatives in the purchase power contracts, BVES utilizes various inputs that include quoted market prices for energy over the duration of the contracts. The market prices used to determine the fair value for the derivative instruments were estimated based on independent sources such as broker quotes and publications that are not observable in or corroborated by the market.  When such inputs have a significant impact on the measurement of fair value, the instruments are categorized as Level 3. Accordingly, the valuation of the derivatives within BVES’s purchase power contracts have been classified as Level 3 for all periods presented.

The following table presents changes in the fair value of the Level 3 derivatives for the three months ended March 31, 2024 and 2023. The change in fair value was due to the change in market energy prices during the three months ended March 31, 2024 and 2023.

	For The Three Months Ended   March 31,
(dollars in thousands)	2024		2023
Fair value at beginning of the period	$	(2,360)	$	11,847
Unrealized (losses) gains on purchase power contracts	(3,808)		(5,178)
Fair value at end of the period	$	(6,168)	$	6,669

Note 6 — Fair Value of Financial Instruments

For cash and cash equivalents, accounts receivable, accounts payable and short-term debt, the carrying amount is assumed to approximate fair value due to the short-term nature of these items.

Investments held in a Rabbi Trust for the supplemental executive retirement plan (“SERP”) are measured at fair value and totaled $36.2 million as of March 31, 2024 and $34.1 million as of December 31, 2023. All equity investments in the Rabbi Trust are Level 1 investments in mutual funds. The investments held in the Rabbi Trust are included in “Other Property and Investments” on Registrant’s balance sheets.

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The table below estimates the fair value of long-term debt held by AWR and GSWC, respectively. The fair values as of March 31, 2024 and December 31, 2023 were determined using rates for similar financial instruments of the same duration utilizing Level 2 methods and assumptions. Changes in the assumptions will produce different results.

	March 31, 2024				December 31, 2023
(dollars in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial liabilities:
Long-term debt—AWR (1)	$	578,932	$	549,031	$	579,047	$	556,214
	March 31, 2024				December 31, 2023
(dollars in thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial liabilities:
Long-term debt—GSWC (2)	$	543,932	$	516,176	$	544,047	$	522,883

__________________

(1) Excludes debt issuance costs of approximately $3.0 million and $3.1 million as of March 31, 2024 and December 31, 2023, respectively.

(2) Excludes debt issuance costs of approximately $2.9 million and $3.0 million as of March 31, 2024 and December 31, 2023, respectively.

Note 7 — Income Taxes

AWR’s effective income tax rate (“ETR”) was 24.2% and 23.8% for the three months ended March 31, 2024 and 2023, respectively. GSWC’s ETR was 24.7% and 24.5% for the three months ended March 31, 2024 and 2023, respectively.

The AWR and GSWC ETRs differed from the federal corporate statutory tax rate of 21% primarily due to (i) state taxes; (ii) permanent differences, including certain tax effects from stock compensation; (iii) the ongoing amortization of the excess deferred income tax liability; and (iv) differences between book and taxable income that are treated as flowed-through adjustments in accordance with regulatory requirements (principally from plant, rate-case, and compensation-related items). As regulated utilities, GSWC and BVES treat certain temporary differences as being flowed-through to customers in computing their income tax expense consistent with the income tax method used in their CPUC-jurisdiction rate making. Flowed-through items either increase or decrease tax expense and thus impact the ETR.

Note 8 — Employee Benefit Plans

The components of net periodic benefit costs for Registrant’s pension plan, postretirement medical benefit plan and SERP for the three months ended March 31, 2024 and 2023 were as follows:

	For The Three Months Ended March 31,
	Pension Benefits				Other Postretirement Benefits				SERP
(dollars in thousands)	2024		2023		2024		2023		2024		2023
Components of Net Periodic Benefits Cost:
Service cost	$	850	$	846	$	32	$	33	$	358	$	312
Interest cost	2,550		2,513		23		25		426		411
Expected return on plan assets	(3,009)		(2,623)		(142)		(120)		—		—
Amortization of prior service cost	108		108		—		—		—		—
Amortization of actuarial (gain) loss	—		—		(263)		(240)		(4)		(8)
Net periodic benefits costs under accounting standards	499		844		(350)		(302)		780		715
Regulatory adjustments - deferred	—		(92)		—		—		—		—
Total expense (benefit) recognized, before surcharges and allocation to overhead pool	$	499	$	752	$	(350)	$	(302)	$	780	$	715

In 2024, Registrant expects to contribute approximately $3.3 million to its pension plan.

As authorized by the CPUC in the water and electric general rate case decisions, GSWC and BVES each utilize two-way balancing accounts to track differences between the forecasted annual pension expenses in rates, or expected to be in rates, and the actual annual expense recorded in accordance with the accounting guidance for pension costs. During the three months ended

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March 31, 2024, GSWC’s actual pension expense was lower than the amounts included in water customer rates by $134,000. During the three months ended March 31, 2023, GSWC’s actual pension expense was higher than the amounts included in water customer rates by $92,000. BVES’s actual expense was lower than the amounts included in electric customer rates for all periods presented. Over-collections are recorded as a reduction in revenues. As of March 31, 2024, GSWC and BVES had over-collections in their two-way pension balancing accounts of $1,231,000 and $368,000, respectively, that have been included as part of regulatory liabilities (Note 3).

Note 9 — Contingencies

Environmental Clean-Up and Remediation at GSWC:

GSWC has been involved in environmental remediation and cleanup at one of its plant sites that contained an underground storage tank which was used to store gasoline for its vehicles. This tank was removed from the ground in July 1990 along with the dispenser and ancillary piping. Since then, GSWC has been involved in various remediation activities at this site. 

As of March 31, 2024, the total amount spent to clean-up and remediate the plant site was approximately $6.6 million, of which $1.5 million has been paid by the State of California Underground Storage Tank Fund. Amounts paid by GSWC have been included in rate base and approved by the CPUC for recovery. As of March 31, 2024, GSWC has a regulatory asset and an accrued liability for the estimated remaining cost of $1.3 million to complete the clean-up at the site. The estimate includes costs for continued activities of groundwater cleanup and monitoring, future soil treatment and site-closure-related activities. The ultimate cost may vary as there are many unknowns in remediation of underground gasoline spills and this is an estimate based on currently available information. Management believes it is probable that the estimated additional costs will continue to be approved in rate base by the CPUC as approved historically.

Other Litigation:

Registrant is also subject to other ordinary routine litigation incidental to its business, some of which may include claims for compensatory and punitive damages. Management believes that rate recovery, proper insurance coverage and reserves are in place to insure against, among other things, property, general liability, employment, and workers’ compensation claims incurred in the ordinary course of business. Insurance coverage may not cover certain claims involving punitive damages. Registrant does not believe the outcome from any pending suits or administrative proceedings will have a material effect on Registrant’s consolidated results of operations, financial position, or cash flows.

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Note 10 — Business Segments

AWR has three reportable segments: water, electric and contracted services. GSWC has one segment, water. On a stand-alone basis, AWR has no material assets or liabilities other than its equity investments in its subsidiaries, note payables to bank, deferred taxes and intercompany note receivables.  

All GSWC and BVES business activities are conducted in California. Activities of ASUS and its subsidiaries are conducted in California, Florida, Kansas, Maryland, Massachusetts, New Mexico, North Carolina, South Carolina, Texas and Virginia. Some of ASUS’s wholly owned subsidiaries are regulated by the state in which the subsidiary primarily conducts water and/or wastewater operations. Fees charged for operations and maintenance and renewal and replacement services are based upon the terms of the contracts with the U.S. government, which have been filed, as appropriate, with the commissions in the states in which ASUS’s subsidiaries are incorporated.

The tables below set forth information relating to AWR’s operating segments and AWR (parent). The utility plant balances are net of respective accumulated provisions for depreciation. Capital additions reflect capital expenditures paid in cash and exclude U.S. government-funded and third-party prime contractor funded capital expenditures for ASUS, and property installed by developers and conveyed to GSWC and BVES.

	As Of And For The Three Months Ended March 31, 2024
					Contracted		AWR		Consolidated
(dollars in thousands)	Water		Electric		Services		Parent		AWR
Operating revenues	$	90,265	$	12,205	$	32,781	$	—	$	135,251
Operating income (loss)	29,167		3,141		6,667		(1)		38,974
Interest expense (income), net	7,881		865		317		1,722		10,785
Net property, plant and equipment	1,771,683		145,289		16,722		—		1,933,694
Depreciation and amortization expense (1)	9,034		884		804		—		10,722
Income tax expense (benefit)	5,824		560		1,560		(548)		7,396
Capital additions	41,278		5,216		1,056		—		47,550

	As Of And For The Three Months Ended March 31, 2023
					Contracted		AWR		Consolidated
(dollars in thousands)	Water		Electric		Services		Parent		AWR
Operating revenues	$	112,712	$	12,904	$	35,807	$	—	$	161,423