-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IUcXlVC9b8uGAL/AfMPUBB2EyyjmbpAjHoRoVKAHFPcP+rL1X44qMAsVtxhLa8UW lGYUT+Z/aZZeAYfnzHia6g== 0000016422-97-000011.txt : 19971111 0000016422-97-000011.hdr.sgml : 19971111 ACCESSION NUMBER: 0000016422-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971110 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA WATER SERVICE CO CENTRAL INDEX KEY: 0000016422 STANDARD INDUSTRIAL CLASSIFICATION: WATER SUPPLY [4941] IRS NUMBER: 940362795 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11309 FILM NUMBER: 97711303 BUSINESS ADDRESS: STREET 1: 1720 N FIRST ST CITY: SAN JOSE STATE: CA ZIP: 95112 BUSINESS PHONE: 4084518200 MAIL ADDRESS: STREET 1: 1720 NORTH FIRST STREET CITY: SAN JOSE STATE: CA ZIP: 95112 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ___ |_X_| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 OR ___ |___| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to _________________________ Commission file number 0-464 CALIFORNIA WATER SERVICE COMPANY (Exact name of registrant as specified in its charter) California 94-0362795 (State or other jurisdiction (I.R.S. Employer identification No.) of incorporation or organization) 1720 North First Street, San Jose, CA. 95112 (Address of principal executive offices) (Zip Code) 1-408-367-8200 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X_ No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes _____ No _____ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common shares outstanding as of October 31, 1997 - 6,309,570. This Form 10-Q contains a total of 12 pages. PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS CALIFORNIA WATER SERVICE COMPANY BALANCE SHEET Sept 30, 1997 Dec 31, 1996 (In Thousands) ASSETS Utility plant $638,238 $618,432 Less depreciation 185,001 174,844 Net utility plant 453,237 443,588 Current assets: Cash and cash equivalents 934 1,368 Accounts receivable 16,436 12,965 Unbilled revenue 7,982 5,577 Materials and supplies 2,091 2,324 Taxes and other prepaid expenses 6,435 4,537 Total current assets 33,878 26,771 Regulatory assets 37,574 37,556 Other deferred assets 4,332 4,475 $529,021 $512,390 CAPITALIZATION AND LIABILITIES Capitalization Common shareholders' equity: Common stock 44,941 44,941 Retained earnings 118,845 109,285 Total common shareholders' equity 163,786 154,226 Preferred stock 3,475 3,475 Long term debt 142,153 142,153 Total capitalization 309,414 299,854 Current liabilities: Short-term borrowings 2,000 7,500 Accounts payable 19,001 14,692 Accrued expenses and other liabilities 19,517 12,602 Total current liabilities 40,518 34,794 Unamortized investment tax credit 3,086 3,086 Deferred income taxes 24,444 23,736 Advances for construction 95,658 95,226 Contributions in aid of construction 43,409 43,067 Regulatory liabilities 12,492 12,627 $529,021 $512,390 See accompanying notes on page 5 2 CALIFORNIA WATER SERVICE COMPANY STATEMENT OF INCOME September 30 1997 1996 FOR THE THREE MONTHS ENDED: In Thousands Operating revenue $59,551 $59,230 Operating expenses: Operation 35,971 34,319 Maintenance 2,560 2,186 Depreciation 3,435 3,263 Federal income taxes 4,017 4,634 State income taxes 1,008 1,365 Property and other taxes 2,020 1,975 Total operating expenses 49,011 47,742 Net operating income 10,540 11,488 Other income and expenses: Interest and amortization on long term debt 2,889 2,953 Other income and expenses, net (209) (138) 2,680 2,815 Net income 7,860 8,673 Preferred dividends 38 38 Net income available for common stock $7,822 $8,635 Weighted average shares outstanding 6,310 6,295 Earnings per share of common stock $1.24 $1.37 Dividends per share of common stock $0.5275 $0.52 FOR THE NINE MONTHS ENDED: Operating revenue $152,192 $140,577 Operating expenses: Operation 89,005 84,604 Maintenance 6,782 5,999 Depreciation 10,211 9,407 Federal income taxes 9,936 8,339 State income taxes 2,436 2,464 Property and other taxes 5,783 5,550 Total operating expenses 124,153 116,363 Net operating income 28,039 24,214 Other income and expenses: Interest and amortization on long term debt 8,668 8,859 Other income and expenses, net (289) (331) 8,379 8,528 Net income 19,660 15,686 Preferred dividends 114 114 Net income available for common stock $19,546 $15,572 Weighted average shares outstanding 6,310 6,285 Earnings per share of common stock $3.10 $2.48 Dividends per share of common stock $1.5825 $1.56 See accompanying notes on page 5 3 CALIFORNIA WATER SERVICE COMPANY STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED In Thousands SEPTEMBER 30 1997 1996 Operating activities: Net Income $19,660 $15,686 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 10,211 9,407 Regulatory assets and liabilities, net (153) (181) Deferred income taxes and investment tax credits, net 708 582 Change in assets and liabilities: Accounts receivable (3,471) (3,037) Unbilled revenue (2,405) (2,097) Materials and supplies 233 165 Taxes and other prepaid expenses (1,898) (2,262) Accounts payable 4,309 4,036 Accrued expenses and other liabilities 6,915 9,158 Other changes, net 714 644 Net adjustments 15,163 16,415 Net cash provided by operating activities 34,823 32,101 Investing activities: Utility plant expenditures (21,795) (27,298) Financing activities: Net short-term borrowings (5,500) 0 Proceeds from issuance of common stock 0 1,076 Advances for construction 3,562 4,059 Contributions in aid of construction 1,343 2,440 Refunds of advances for construction (2,767) (2,724) Dividends (10,100) (9,911) Net cash used for financing activities (13,462) (5,060) Change in cash and cash equivalents (434) (257) Cash and cash equivalents at start of period 1,368 6,273 Cash and cash equivalents at end of period $934 $6,016 See accompanying notes on page 5 4 Notes: 1. Due to the seasonal nature of the water business, the results for interim periods are not indicative of the results for a twelve month period. 2. The interim financial information is unaudited. In the opinion of management, the accompanying financial statements reflect all adjustments which are necessary to provide a fair statement of the results for the periods covered. The adjustments consist only of normal recurring adjustments. 3. Earnings per share are calculated on the weighted average number of common shares outstanding during the period and net income available for common stock as shown on the Statement of Income. 4. Refer to 1996 Annual Report on Form 10-K for a summary of significant accounting policies and detailed information regarding the financial statements. 5 PART I FINANCIAL INFORMATION Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF THIRD QUARTER OPERATIONS Third quarter net income was $7,860,000 equivalent to $1.24 per common share, a 13 cents decrease from the $1.37 earned in 1996's third quarter. Operating revenue increased $321,000 to $59,551,000. Rate increases and billings to new customers added to revenue, however, those increases were offset by a decline in usage by existing customers. Consumption levels, as measured by average sales per metered customer, decreased by 1% during the quarter primarily due to unseasonable summer rains. A breakdown of the increase in operating revenue is accounted for in the following table: General rate increases $566,000 Step rate increases 546,000 Total rate increases 1,112,000 Decreased consumption (1,237,000) Usage by 3,310 new customers 446,000 Net revenue increase $321,000 Total operating expenses increased 3% this year. Water production was 0.4% above 1996's level. Well production provided 56% of the supply with 44% purchased from wholesale suppliers. Water production costs, which includes purchased water, purchased power and pump taxes, increased $940,000. Wholesale water suppliers' rate increases ranging from 1% to 7% became effective in five districts since last year. The components of water production expense and the changes from last year are shown in the table below: 6 Third Quarter Dollar 1997 Cost Change Purchased water $17,191,000 $991,000 Purchased power 4,830,000 (39,000) Pump taxes 1,719,000 (12,000) Total $23,740,000 $940,000 Other operations expense increased $712,000, primarily due to the impact of the 3.0% general wage increase which was effective at the start of the year and increases in related employee benefits. Maintenance expense increased $374,000 due to various main repairs and scheduled tank maintenance and painting. Depreciation and amortization expense increased $172,000 due to increased depreciation expense authorized by the Commission in the rate case decision received in April 1997 affecting the Livermore and Palos Verdes districts, and due to greater utility plant investments in all districts. The additional expense is being reflected in customer rates. Federal and state income taxes decreased $974,000 because of lower taxable income. The California tax rate decreased from last year's 9.3% to 8.84% this year. REGULATORY MATTERS In July 1997, the Company filed its 1997 rate case applications with the California Public Utilities Commission (Commission) for rate increases in four districts representing 7.4% of total customers. The applications request additional first year annual revenue of about $650,000 and step rate increases of about $240,000 in each year 1999 through 2001. The Company's proposal also includes the continuation of the current return on equity (ROE) rate at 10.35%. For the Oroville and Selma districts, the application proposes that rate increases for the succeeding five years be based on the increase in the Consumer Price Index for water/sewerage. These proposed increases are designed to cover increases in operating expenses and plant investments, and allows for Commission action if the Rate of Return ("ROR") varies more than 250 7 basis points from the requested 9.32% ROR. LIQUIDITY Interest expense, including amortization of debt premium, on long-term debt decreased by $64,000 as a result the reduction in outstanding debt by the retirement of Series K first mortgage bonds and sinking fund payments made in November 1996. Short-term interest expense increased $20,000 due to additional borrowings under the Company's bank line of credit during the current quarter. At September 30, 1997, $2 million was borrowed under the Company's $50 million bank line of credit at an effective interest rate of 7.025%. The short-term borrowings were repaid in early October, however, the Company expects cash needs to require borrowing under the credit line again in November. The third quarter common dividend, the 211th consecutive quarterly dividend, was paid on August 15, 1997 at $0.5275 per share. The $0.5275 represents a $0.0075 increase in the quarterly dividend rate from last year as authorized by the Board of Directors at their January meeting. Annualized, the dividend rate is $2.11 per common share. Based on the 12 month earnings per share of $3.63 at September 30, 1997, the dividend payout ratio is 58%. About 11% of the outstanding shares participate in the Company's current Dividend Reinvestment Plan (DRP). No new common shares were issued under the DRP during the third quarter. Shares required for the DRP were purchased on the open market and redistributed to DRP participants. Book value per common share was $25.96 at September 30, 1997 compared to $24.41 a year earlier. During the quarter, utility plant expenditures totaled $9,278,000 for additions to and replacements of utility plant. Of that amount, $6,366,000 was funded through the Company's construction budget with the balance provided by funds received from developers as contributions in aid of construction and refundable advances for construction. The 1997 Company construction budget is $23,200,000. 8 HOLDING COMPANY FORMATION Regulatory approval necessary to complete formation of the holding company is anticipated during the fourth quarter this year. The two-for-one common stock split and a proportional increase in the Series C preferred stock's voting rights will occur in conjunction with the holding company formation. An effective date of January 1, 1998 is expected for both events. NEW DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN On October 15, 1997, the Company announced plans to introduce a new Dividend Reinvestment and Stock Purchase Plan ("Plan"). The Plan will allow registered shareholders to reinvest dividends in Company shares and to purchase additional shares directly from the Company without incurring a commission. Investors purchasing Company shares for the first time can do so through the Plan, also without paying a commission. There will be a provision for selling Plan shares through the transfer agent, Boston EquiServe, who will be the Plan Administrator. Shareholders who participate in the current dividend reinvestment plan will automatically be enrolled in the new Plan. The Plan is expected to be activated during the first quarter of 1998 at which time Plan documents will be distributed. 9 WATER SUPPLY The Company believes that its various sources of water supply are sufficient to meet customer demand for the remainder of the year. Historically, approximately half of the water source is purchased from wholesale suppliers with the other half pumped from wells. Storage in state reservoirs remains at or above historic levels and groundwater levels remain adequate. 10 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits required to be filed by Item 601 of Regulation S-K. None. (b) No reports on Form 8-K have been filed during the quarter ended September 30, 1997. 11 SIGNATURES Pursuant to the requirement of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the authorized undersigned. CALIFORNIA WATER SERVICE COMPANY Registrant /s/ Gerald F. Feeney Vice President, Chief Financial Officer and Treasurer October 31, 1997 12 EX-27 2
UT 9-MOS DEC-31-1997 SEP-30-1997 PER-BOOK 453237000 0 33878000 4332000 37574000 529021000 44941000 0 118845000 163786000 0 3475000 142153000 2000000 0 0 0 0 0 0 217607000 529021000 152192000 12372000 111781000 124153000 28039000 289000 28328000 8668000 19660000 114000 19546000 9985000 8668000 34823000 3.10 0
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