Notes to Consolidated Financial Statements
December 31,
2016
,
2015
, and
2014
Dollar amounts in thousands unless otherwise stated
1 ORGANIZATION AND OPERATIONS
California Water Service Group (Company) is a holding company that provides water utility and other related services in California, Washington, New Mexico, and Hawaii through its wholly-owned subsidiaries. California Water Service Company (Cal Water), Washington Water Service Company (Washington Water), New Mexico Water Service Company (New Mexico Water), and Hawaii Water Service Company, Inc. (Hawaii Water) provide regulated utility services under the rules and regulations of their respective state's regulatory commissions (jointly referred to as the Commissions). CWS Utility Services and HWS Utility Services LLC provide non-regulated water utility and utility-related services.
The Company operates in
one
reportable segment, providing water and related utility services.
Basis of Presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and include the Company's accounts and those of its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated from the consolidated financial statements. In the opinion of management, the consolidated financial statements reflect all adjustments that are necessary to provide a fair presentation of the results for the periods covered.
The preparation of the Company's consolidated financial statements in accordance with GAAP 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 consolidated balance sheet dates and the reported amounts of revenues and expenses for the periods presented. These include, but are not limited to, estimates and assumptions used in determining the Company's regulatory asset and liability balances based upon probability assessments of regulatory recovery, utility plant useful lives, revenues earned but not yet billed, asset retirement obligations, allowance for doubtful accounts, pension and other employee benefit plan liabilities, and income tax-related assets and liabilities. Actual results could differ from these estimates.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue
Revenue generally includes monthly cycle customer billings for regulated water and wastewater services at rates authorized by regulatory commissions (plus an estimate for water used between the customer's last meter reading and the end of the accounting period) and billings to certain non-regulated customers at rates authorized by contract with government agencies.
The Company's regulated water and related utility services requirements are authorized by the Commissions in the states in which we operate. The revenue requirements are intended to provide the Company a reasonable opportunity to recover its operating costs and earn a return on investments.
For metered customers, Cal Water recognizes revenue from rates which are designed and authorized by the CPUC. Under the Water Revenue Adjustment Mechanism (WRAM), Cal Water records the adopted level of volumetric revenues, which would include recovery of cost of service and a return on investments, as established by the CPUC for metered accounts (adopted volumetric revenues).The adopted volumetric revenue considers the seasonality of consumption of water based upon historical averages. The variance between adopted volumetric revenues and actual billed volumetric revenues for metered accounts is recorded as a component of revenue with an offsetting entry to a regulatory asset or liability balancing account (tracked individually for each Cal Water district) subject to certain criteria under the accounting for regulated operations being met. The variance represents amounts that will be billed or refunded to customers in the future. In addition to volumetric-based revenues, the revenue requirements approved by the CPUC include service charges, flat rate charges, and other items not subject to the WRAM.
Cost-recovery rates are designed to permit full recovery of certain costs allowed to be recovered by the Commissions. Cost-recovery rates such as the Modified Cost Balancing Account (MCBA) provide for recovery of adopted expense levels for purchased water, purchased power and pump taxes, as established by the CPUC. In addition, cost-recovery rates include recovery of costs related to water conservation programs and certain other operating expenses adopted by the CPUC. Variances between adopted and actual costs are recorded as a component of revenue, as the amount of such variances will be recovered from or refunded to our customers at a later date. Revenue is generally recognized when expenses are incurred with
no
markup for return or profit.
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The balances in the WRAM and MCBA asset and liability accounts will fluctuate on a monthly basis depending upon the variance between adopted and actual results. The recovery or refund of the WRAM is netted against the refund or recovery of the MCBA for the corresponding district. The recovery or refund of net WRAM and MCBA balances are interest bearing at the current
90
day commercial paper rate. At the end of each calendar year, Cal Water files with the CPUC to refund or recover the balance in the accounts. Under-collected net WRAM and MCBA receivable balances are collected over
12
,
18
or
18
+ months. Cal Water defers net WRAM and MCBA operating revenues and associated costs whenever the net receivable balances are estimated to be collected more than
24 months
after the respective reporting periods in which it was recognized. The deferred net WRAM and MCBA revenues and associated costs were determined using forecasts of customer consumption trends for future reporting periods and the timing of when the CPUC will authorize Cal Water's filings to recover the under-collected balances. Deferred net WRAM and MCBA revenues and associated costs will be recognized as revenues and costs in future periods when collection is within
24 months
of the respective reporting period.
Customers meter reads occur on various business days throughout the month. As a result, there is unbilled revenue each month. The estimated unbilled revenue for monthly unmetered customer usage is recorded using the number of unbilled days for that month and the average daily customer billing rate for the previous month. The average daily customer billing rate for the previous month fluctuates depending on customer usage. Estimated unbilled revenue is not included in the WRAM until it is billed.
Flat rate customers are billed in advance at the beginning of the service period. The revenue is prorated so that the portion of revenue applicable to the current period is included in that period's revenue, with the remaining balance recorded as unearned revenue on the balance sheet and recognized as revenue when earned in the subsequent accounting period. The unearned revenue liability was
$0.8
million and
$1.3
million as of December 31, 2016 and 2015, respectively. This liability is included in "other accrued liabilities" on our consolidated balance sheets.
Non-Regulated Revenue
Revenues from non-regulated operations and maintenance agreements are recognized when services have been rendered to companies or municipalities under such agreements. For construction and design services, revenue is generally recognized on the completed contract method, as most projects are completed in less than
3 months
. Other non-regulated revenue is recognized when title has transferred to the buyer, or ratably over the term of the lease.
Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts receivable. The allowance is based upon specific identified accounts plus an estimate of uncollectible accounts based upon historical percentages. The balance of customer receivables is net of the allowance for doubtful accounts of
$0.8 million
,
$0.7 million
, and
$0.7 million
as of December 31, 2016, 2015 and 2014, respectively.
The activities in the allowance for doubtful accounts are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Beginning Balance
|
$
|
730
|
|
|
$
|
697
|
|
|
$
|
668
|
|
Provision for uncollectible accounts
|
2,111
|
|
|
1,674
|
|
|
1,561
|
|
Net write off of uncollectible accounts
|
(2,011
|
)
|
|
(1,641
|
)
|
|
(1,532
|
)
|
Ending Balance
|
$
|
830
|
|
|
$
|
730
|
|
|
$
|
697
|
|
Utility Plant
Utility plant is carried at original cost when first constructed or purchased, or at fair value when acquired through acquisition. When depreciable plant is retired, the cost is eliminated from utility plant accounts and such costs are charged against accumulated depreciation. Maintenance of utility plant is charged to operating expenses as incurred. Maintenance projects are not accrued for in advance. Interest is capitalized on plant expenditures during the construction period and amounted to
$3.0
million in 2016 and
$1.9
million in 2015.
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Intangible assets acquired as part of water systems purchased are recorded at fair value. All other intangibles have been recorded at cost and are amortized over their useful life.
The following table represents depreciable plant and equipment as of December 31:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Equipment
|
$
|
561,909
|
|
|
$
|
499,502
|
|
Office buildings and other structures
|
218,711
|
|
|
198,798
|
|
Transmission and distribution plant
|
1,741,554
|
|
|
1,603,541
|
|
Total
|
$
|
2,522,174
|
|
|
$
|
2,301,841
|
|
Depreciation of utility plant is computed on a straight-line basis over the assets' estimated useful lives including cost of removal of certain assets as follows:
|
|
|
|
Useful Lives
|
Equipment
|
5 to 50 years
|
Transmission and distribution plant
|
40 to 65 years
|
Office Buildings and other structures
|
50 years
|
The provision for depreciation expressed as a percentage of the aggregate depreciable asset balances was
2.70%
in 2016,
2.80%
in 2015 and
2.97%
in 2014.
Asset Retirement Obligation
The Company has a legal obligation to retire wells in accordance with State Water Resources Control Board regulations. In addition, upon decommission of a wastewater plant or lift station certain wastewater infrastructure would need to be retired in accordance with State Water Resources Control Board regulations. An asset retirement cost and corresponding retirement obligation is recorded when a well or waste water infrastructure is placed into service. As of December 31, 2016 and 2015, the retirement obligation is estimated to be
$20.3 million
and
$19.5 million
, respectively. The change only impacted the consolidated balance sheet.
Cash Equivalents
Cash equivalents include highly liquid investments with remaining maturities of three months or less at the time of acquisition. Cash and cash equivalents was
$25.5
million and
$8.8
million as of December 31, 2016 and December 31, 2015, respectively.
Restricted Cash
In 2016 restricted cash includes
$0.4
million of proceeds collected through a surcharge on certain customers' bills plus interest earned on the proceeds and is used to service California Safe Drinking Water Bond obligations. All restricted cash is included in "taxes, prepaid expenses, and other assets". As of December 31, 2016 and 2015, restricted cash was
$0.4
million and
$0.5
million, respectively.
Regulatory Assets and Liabilities
Because we operate almost exclusively in a regulated business, we are subject to the accounting standards for regulated utilities. The Commissions in the states in which we operate establish rates that are designed to permit the recovery of the cost of service and a return on investment. We capitalize and record regulatory assets for costs that would otherwise be charged to expense if it is probable that the incurred costs will be recovered in future rates. Regulatory assets are amortized over the future periods that the costs are expected to be recovered. If costs expected to be incurred in the future are currently being recovered through rates, we record those expected future costs as regulatory liabilities. In addition, we record regulatory liabilities when the Commissions require a refund to be made to our customers over future periods.
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Determining probability requires significant judgment by management and includes, but is not limited to, consideration of testimony presented in regulatory hearings, proposed regulatory decisions, final regulatory orders, and the strength or status of applications for rehearing or state court appeals.
If we determine that a portion of our assets used in utility operations is not recoverable in customer rates, we would be required to recognize the loss of the assets disallowed.
Regulatory assets and liabilities were comprised of the following as of December 31:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Regulatory Assets
|
|
|
|
|
|
Pension and retiree group health
|
$
|
188,880
|
|
|
$
|
205,614
|
|
Property-related temporary differences (tax benefits flowed through to customers)
|
92,099
|
|
|
81,522
|
|
Other accrued benefits
|
27,503
|
|
|
27,327
|
|
Interim rates long-term accounts receivable
|
4,605
|
|
|
5,238
|
|
Net WRAM and MCBA long-term accounts receivable
|
16,148
|
|
|
15,410
|
|
Asset retirement obligations, net
|
15,812
|
|
|
14,682
|
|
Tank coating
|
8,452
|
|
|
6,829
|
|
Health care balancing account
|
1,000
|
|
|
3,503
|
|
Other regulatory assets
|
1,431
|
|
|
1,768
|
|
Total Regulatory Assets
|
$
|
355,930
|
|
|
$
|
361,893
|
|
Regulatory Liabilities
|
|
|
|
|
|
Future tax benefits due customers
|
$
|
33,231
|
|
|
$
|
29,505
|
|
Conservation program
|
584
|
|
|
2,317
|
|
Net WRAM and MCBA long-term payable
|
611
|
|
|
488
|
|
Pension balancing account
|
695
|
|
|
792
|
|
Other liabilities
|
3,614
|
|
|
2,162
|
|
Total Regulatory Liabilities
|
$
|
38,735
|
|
|
$
|
35,264
|
|
Short-term regulatory assets and liabilities are excluded from the above table. The short-term regulatory assets for 2016 and 2015 were
$30.3
million and
$35.1
million, respectively. The short-term regulatory assets as of December 31, 2016 were primarily interim rates, 2014-2015 drought recovery, and net WRAM and MCBA receivables. As of December 31, 2015, the short-term regulatory assets were primarily interim rates and net WRAM and MCBA receivables. The short-term portion of regulatory liabilities for 2016 and 2015 were
$4.8
million and
$2.2
million, respectively. The short-term regulatory liabilities as of December 31, 2016 were primarily net WRAM and MCBA liability balances and net refund balances to customers for the pension and conservation programs from the 2012 GRC. As of December 31, 2015 the short-term regulatory liabilities were primarily net WRAM and MCBA liability balances and net refund balances to customers for the conversation program from the 2009 GRC.
The Company's pension and postretirement health care benefits regulatory asset is the amount the Company expects to recover from customers in the future for these plans at the end of the calendar year.
The property-related temporary differences were primarily due to the difference between book and federal income tax depreciation on utility plant that was placed in service before the regulatory Commissions adopted normalization for rate making purposes. Full normalization requires no flow-through of tax benefits to customers. The regulatory asset will be recovered in rates in future periods as the tax effects of the temporary differences previously flowed-through to customers reverse.
Other accrued benefits are accrued benefits for vacation, self-insured workers' compensation, and directors' retirement benefits. The net WRAM and MCBA long-term accounts receivable is the under-collected portion of recorded revenues that are not expected to be collected from customers within
12 months
. The asset retirement obligation regulatory asset represents the difference between costs associated with asset retirement obligations and amounts collected in rates. Tank coating represents the
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
maintenance costs for tank coating projects that are recoverable from customers. The health care balancing account regulatory asset is for incurred health care costs that exceeded the cost recovery in rates and is recoverable from customers.
The future tax benefits due to customers represent regulatory liabilities for tax deductions that will be taken and flowed through to customers in the future. Regulatory liabilities also reflect timing differences provided at higher than the current tax rate, which will flow-through to future customers. The conservation program and pension balancing account regulatory liabilities are for cost recovery in rates that exceeded incurred costs and are refundable to customers.
Impairment of Long-Lived Assets, Intangibles and Goodwill
The Company's long-lived assets include transmission and distribution plant, equipment, land, buildings, and intangible assets. Long-lived assets, other than land, are depreciated or amortized over their estimated useful lives, and are reviewed for impairment whenever changes in circumstances indicate the carrying value of the assets may not be recoverable. Such circumstances would include items such as a significant decrease in the market value of a long-lived asset, a significant adverse change in the manner in which the asset is being used or planned to be used or in its physical condition, or a history of operating or cash flow losses associated with the uses of the asset. In addition, changes in the expected useful life of these long-lived assets may also be an impairment indicator. When such events or changes occur, we estimate the fair value of the asset from future cash flows expected to result from the use and, if applicable, the eventual disposition of the assets, and compare that to the carrying value of the asset. If the carrying value is greater than the fair value, then an impairment loss is recognized equal to the amount by which the asset's carrying value exceeds its fair value. The key variables that must be estimated include assumptions regarding sales volume, rates, operating costs, labor and other benefit costs, capital additions, assumed discount rates and other economic factors. These variables require significant management judgment and include inherent uncertainties since they are forecasting future events. A variation in the assumptions used could lead to a different conclusion regarding the realizability of an asset and, thus could have a significant effect on the consolidated financial statements.
Goodwill is measured as the excess of the cost of an acquisition over the sum of the amounts assigned to identifiable assets acquired less liabilities assumed. Goodwill is not amortized but instead is reviewed annually at November 30
th
for impairment or more frequently if impairment indicators arise. The impairment test is performed at the reporting unit level using a two- step, fair-value based approach. The first step determines the fair value of the reporting unit and compares it to the reporting unit's carrying value. If the fair value of the reporting unit is less than its carrying amount, a second step is performed to measure the amount of impairment loss, if any. The second step allocates the fair value of the reporting unit to the Company's tangible and intangible assets and liabilities. This derives an implied fair value for the reporting unit's goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized equal to the excess.
Long-Term Debt Premium, Discount and Expense
The premiums, discounts, and issuance expenses on long-term debt are amortized over the original lives of the related debt on a straight-line basis which approximates the effective interest method. Premiums paid on the early redemption of certain debt and the unamortized original issuance discount and expense are amortized over the life of new debt issued in conjunction with the early redemption. Amortization expense included in interest expense was
$0.9
million for 2016 and
$0.8
million for 2015 and 2014.
Advances for Construction
Advances for construction consist of payments received from developers for installation of water production and distribution facilities to serve new developments. Advances are excluded from rate base for rate setting purposes. Annual refunds are made to developers without interest. Advances of
$182.4
million, and
$180.2
million at December 31, 2016 and 2015, respectively, will be refunded primarily over a
40
-year period in equal annual amounts. Estimated refunds of advances for the succeeding 5 years are approximately
$7.9
million in 2017,
$7.7
million in 2018,
$7.7
million in 2019,
$7.6
million in 2020, and
$7.6
million in 2021.
Contributions in Aid of Construction
Contributions in aid of construction represent payments received from developers, primarily for fire protection purposes, which are not subject to refunds. Facilities funded by contributions are included in utility plant, but excluded from rate base. Depreciation related to assets acquired from contributions is charged to the Contributions in Aid of Construction account.
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Measurement of the deferred tax assets and liabilities is at enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. The Company evaluates the need for a valuation allowance on deferred tax assets based on historical taxable income and projected taxable income for future tax years.
Historically the Commissions reduced revenue requirements for the tax effects of certain originating temporary differences and allowed recovery of these tax costs as the related temporary differences reverse. The Commissions have granted the Company rate increases to reflect the normalization of the tax benefits of the federal accelerated methods and available Investment Tax Credits (ITC) for all assets placed in service after 1980. ITCs are deferred and amortized over the lives of the related properties for book purposes. The CPUC granted flow-through for state taxes.
Advances for Construction and Contributions in Aid of Construction received from developers subsequent to 1986 were taxable for federal income tax purposes and subsequent to 1991 were subject to California income tax. In 1996, the federal tax law, and in 1997, the California tax law, changed and only deposits for new services were taxable. In late 2000, federal regulations were further modified to exclude contributions of fire services from taxable income.
The accounting standards for accounting for uncertainty in income taxes allows the inclusion of interest and penalties related to uncertain tax positions as a component of income taxes. See note 10 "Income Taxes".
Workers' Compensation
For workers' compensation, the Company estimates the liability associated with claims submitted and claims not yet submitted based on historical data. Expenses for workers compensation insurance are included in rates on a pay-as- you-go basis. Therefore, a corresponding regulatory asset has been recorded.
Earnings per Share
The computations of basic and diluted earnings per share are noted below. Basic earnings per share are computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts were exercised or converted into common stock. Restricted Stock Awards (RSAs) are included in the common shares outstanding because the shares have all the same voting and dividend rights as issued and unrestricted common stock.
The Company did not grant any Stock Appreciation Rights (SARs) in 2016, 2015, and 2014. There were
no
SARs outstanding as of December 31, 2016,
64,500
shares outstanding as of December 31, 2015, and
186,356
shares outstanding as of December 31, 2014.
All SARs were dilutive in 2016, 2015 and 2014. The dilutive effect is shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands,
except per share data)
|
Net income available to common stockholders
|
$
|
48,675
|
|
|
$
|
45,017
|
|
|
$
|
56,738
|
|
Weighted average common shares, basic
|
47,953
|
|
|
47,865
|
|
|
47,791
|
|
Dilutive SARs (treasury method)
|
3
|
|
|
15
|
|
|
38
|
|
Weighted average common shares, dilutive
|
47,956
|
|
|
47,880
|
|
|
47,829
|
|
Earnings per share—basic
|
$
|
1.02
|
|
|
$
|
0.94
|
|
|
$
|
1.19
|
|
Earnings per share—diluted
|
$
|
1.01
|
|
|
$
|
0.94
|
|
|
$
|
1.19
|
|
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock-based Compensation
Stock-based compensation cost is measured at the grant date based on the fair value of the award. The Company recognizes compensation expense on a straight-line basis over the requisite service period, which is the vesting period.
Comprehensive Income or Loss
Comprehensive income for all periods presented was the same as net income.
Accumulated Other Comprehensive Income
The Company did not have any accumulated other comprehensive income or loss transactions as of December 31, 2016 and 2015, respectively.
New Accounting Standards
In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-03,
Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,
which amends the existing guidance relating to the presentation of debt issuance costs. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The Company adopted this guidance effective January 1, 2016 and applied the requirements retrospectively for all periods presented. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements. The long term debt unamortized debt issuance costs were
$4.5 million
as of December 31, 2016 and
$4.8 million
as of December 31, 2015. The following table shows the effect of the accounting change to the consolidated balance sheet as of December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
Balance Sheet Classification
|
As Reported on Form 10-K
|
|
Adjusted Balance on Form 10-K
|
|
Decrease from Retrospective Adoption
|
Other Assets
|
$
|
52,241
|
|
|
$
|
47,399
|
|
|
$
|
4,842
|
|
Long-term debt, less current maturities
|
512,287
|
|
|
508,002
|
|
|
4,285
|
|
Current maturities of long-term debt
|
6,600
|
|
|
6,043
|
|
|
557
|
|
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers,
which amends the existing revenue recognition guidance
.
In August 2015, the FASB deferred the effective date of this amendment for public companies by one year to January 1, 2018, with early adoption permitted as of the original effective date of January 1, 2017. The Company expects to adopt the new revenue standard using the modified retrospective method and does not expect the ASU to materially impact the timing or recognition of revenue related to the sale and delivery of water to their customers, which is a significant percentage of the Company's revenue. The Company is still evaluating the impact the ASU has on the related revenue disclosures and treatment of CIAC.
In February 2016, the FASB issued ASU 2016-02,
Leases
. This update changes the accounting treatment of operating leases for lessees and related disclosure requirements. ASU 2016-2 is effective for annual reporting periods beginning after December 15, 2018 and early adoption is permitted. The Company will adopt the standard using the modified retrospective method for its existing leases and is currently evaluating the impact of adopting the new lease standard on its consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU 2016-09,
Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
. The amendments in ASU 2016-09 involve multiple aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the Statement of Cash Flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 and early adoption is permitted. The new standard was implemented on January 1, 2017 and is not expected to have a significant impact on the Company's consolidated financial statements and related disclosures.
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
In August 2016, the FASB issued ASU 2016-15,
Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments
. This update adds and clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017 and early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial statements and related disclosures.
3 OTHER INCOME AND EXPENSES
The Company conducts various non-regulated activities as reflected in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
Revenue
|
|
Expense
|
|
Revenue
|
|
Expense
|
|
Revenue
|
|
Expense
|
Operating and maintenance
|
$
|
8,430
|
|
|
$
|
9,061
|
|
|
$
|
9,385
|
|
|
$
|
10,438
|
|
|
$
|
9,748
|
|
|
$
|
10,256
|
|
Leases
|
1,923
|
|
|
204
|
|
|
1,929
|
|
|
208
|
|
|
2,029
|
|
|
208
|
|
Design and construction
|
1,792
|
|
|
1,473
|
|
|
1,399
|
|
|
1,292
|
|
|
1,258
|
|
|
1,102
|
|
Meter reading and billing
|
242
|
|
|
62
|
|
|
597
|
|
|
434
|
|
|
803
|
|
|
615
|
|
Interest income
|
18
|
|
|
|
|
|
39
|
|
|
—
|
|
|
186
|
|
|
—
|
|
Change in value of life insurance contracts (gain) loss
|
|
|
|
(1,026
|
)
|
|
—
|
|
|
218
|
|
|
—
|
|
|
(994
|
)
|
Other non-regulated income and expenses
|
4,180
|
|
|
1,671
|
|
|
2,275
|
|
|
1,454
|
|
|
3,294
|
|
|
3,098
|
|
Total
|
$
|
16,585
|
|
|
$
|
11,445
|
|
|
$
|
15,624
|
|
|
$
|
14,044
|
|
|
$
|
17,318
|
|
|
$
|
14,285
|
|
Operating and maintenance services and meter reading and billing services are provided for water and wastewater systems owned by private companies and municipalities. The agreements call for a fee-per-service or a flat-rate amount per month. Leases have been entered into with telecommunications companies for cellular phone antennas placed on the Company's property. Design and construction services are for the design and installation of water mains and other water infrastructure for others outside the Company's regulated service areas. Third-party insurance program gains and losses are included in other non-regulated income and expenses. Also, 2016 other non-regulated income and expenses included a litigation gain of
$1.5 million
.
4 INTANGIBLE ASSETS
As of December 31, 2016 and 2015, intangible assets that will continue to be amortized and those not amortized were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average
Amortization
Period
(years)
|
|
2016
|
|
2015
|
|
Gross
Carrying
Value
|
|
Accumulated
Amortization
|
|
Net
Carrying
Value
|
|
Gross
Carrying
Value
|
|
Accumulated
Amortization
|
|
Net
Carrying
Value
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water pumping rights
|
usage
|
|
$
|
1,084
|
|
|
$
|
105
|
|
|
$
|
979
|
|
|
$
|
1,084
|
|
|
$
|
98
|
|
|
$
|
986
|
|
Water planning studies
|
11
|
|
15,734
|
|
|
9,307
|
|
|
6,427
|
|
|
14,824
|
|
|
7,859
|
|
|
6,965
|
|
Leasehold improvements and other
|
18
|
|
1,331
|
|
|
696
|
|
|
635
|
|
|
1,532
|
|
|
745
|
|
|
787
|
|
Total
|
|
|
$
|
18,149
|
|
|
$
|
10,108
|
|
|
$
|
8,041
|
|
|
$
|
17,440
|
|
|
$
|
8,702
|
|
|
$
|
8,738
|
|
Unamortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perpetual water rights and other
|
|
|
$
|
3,776
|
|
|
$
|
—
|
|
|
$
|
3,776
|
|
|
$
|
3,778
|
|
|
$
|
—
|
|
|
$
|
3,778
|
|
Water pumping rights usage is the amount of water pumped from aquifers to be treated and distributed to customers.
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
4 INTANGIBLE ASSETS (Continued)
For the year ended December 31, 2016, amortization of intangible assets was
$1.6
million and for the years ended December 31, 2015 and 2014, amortization of intangible assets was
$1.4 million
. Estimated future amortization expense related to intangible assets for the succeeding 5 years is approximately
$1.3
million in 2017,
$1.3
million in 2018,
$1.2
million in 2019,
$1.0
million in 2020,
$1.0
million in 2021, and
$2.2
million thereafter.
5 PREFERRED STOCK
The Company is authorized to issue
241,000
shares of Preferred Stock as of December 31, 2016.
No
shares of Preferred Stock were issued and outstanding as of December 31, 2016 or 2015.
6 COMMON STOCKHOLDERS' EQUITY
As of December 31, 2016 and 2015,
47,964,915
shares and
47,875,139
shares, respectively, of common stock were issued and outstanding.
Dividend Reinvestment and Stock Repurchase Plan
The Company has a Dividend Reinvestment and Stock Purchase Plan (DRIP Plan). Under the DRIP Plan, stockholders may reinvest dividends to purchase additional Company common stock without commission fees. The DRIP Plan also allows existing stockholders and other interested investors to purchase Company common stock through the transfer agent up to certain limits. The Company's transfer agent operates the DRIP Plan and purchases shares on the open market to provide shares for the Plan.
7 SHORT-TERM BORROWINGS
On March 10, 2015, the Company and Cal Water entered into Syndicated Credit Agreements, which provide for unsecured revolving credit facilities of up to an initial aggregate amount of
$450.0 million
for a term of
5 years
. The Company and subsidiaries that it designates may borrow up to
$150.0 million
under the Company’s revolving credit facility. Cal Water may borrow up to
$300.0 million
under its revolving credit facility; however, all borrowings need to be repaid within
12 months
unless otherwise authorized by the CPUC. The credit facilities may each be expanded by up to
$50.0 million
subject to certain conditions. The proceeds from the revolving credit facilities may be used for working capital purposes, including the short-term financing of capital projects. The base loan rate may vary from LIBOR plus
72.5 basis points
to LIBOR plus
95 basis points
, depending on the Company’s total capitalization ratio. Likewise, the unused commitment fee may vary from
8 basis points
to
12.5 basis points
based on the same ratio.
The revolving credit facilities contain affirmative and negative covenants and events of default customary for credit facilities of this type including, among other things, limitations and prohibitions relating to additional indebtedness, liens, mergers, and asset sales. Also, these unsecured credit agreements contain financial covenants governing the Company and its subsidiaries' consolidated total capitalization ratio and interest coverage ratio.
As of December 31, 2016 and December 31, 2015, the outstanding borrowings on the Company lines of credit were
$57.1
million and
$33.6
million, respectively. The borrowings on the Cal Water lines of credit as of December 31, 2016 was
$40.0 million
and there were
no
borrowings as of December 31, 2015.
The following table represents borrowings under the bank lines of credit:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Maximum short-term borrowings
|
$
|
97,100
|
|
|
$
|
139,582
|
|
Average amount outstanding
|
$
|
65,804
|
|
|
$
|
104,863
|
|
Weighted average interest rate
|
1.33
|
%
|
|
1.04
|
%
|
Interest rate at December 31
|
1.40
|
%
|
|
1.03
|
%
|
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
8 LONG-TERM DEBT
As of December 31, 2016 and 2015, long-term debt outstanding was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series
|
|
Interest Rate
|
|
Maturity Date
|
|
2016
|
|
2015
|
First Mortgage Bonds
|
TTT
|
|
4.610
|
%
|
|
2056
|
|
$
|
10,000
|
|
|
$
|
—
|
|
|
SSS
|
|
4.410
|
%
|
|
2046
|
|
40,000
|
|
|
—
|
|
|
QQQ
|
|
3.330
|
%
|
|
2025
|
|
50,000
|
|
|
50,000
|
|
|
RRR
|
|
4.310
|
%
|
|
2045
|
|
50,000
|
|
|
50,000
|
|
|
PPP
|
|
5.500
|
%
|
|
2040
|
|
100,000
|
|
|
100,000
|
|
|
LL
|
|
5.875
|
%
|
|
2019
|
|
100,000
|
|
|
100,000
|
|
|
AAA
|
|
7.280
|
%
|
|
2025
|
|
20,000
|
|
|
20,000
|
|
|
BBB
|
|
6.770
|
%
|
|
2028
|
|
20,000
|
|
|
20,000
|
|
|
CCC
|
|
8.150
|
%
|
|
2030
|
|
20,000
|
|
|
20,000
|
|
|
DDD
|
|
7.130
|
%
|
|
2031
|
|
20,000
|
|
|
20,000
|
|
|
EEE
|
|
7.110
|
%
|
|
2032
|
|
20,000
|
|
|
20,000
|
|
|
FFF
|
|
5.900
|
%
|
|
2017
|
|
20,000
|
|
|
20,000
|
|
|
GGG
|
|
5.290
|
%
|
|
2022
|
|
10,909
|
|
|
12,727
|
|
|
HHH
|
|
5.290
|
%
|
|
2022
|
|
10,909
|
|
|
12,727
|
|
|
III
|
|
5.540
|
%
|
|
2023
|
|
6,364
|
|
|
7,273
|
|
|
JJJ
|
|
5.440
|
%
|
|
2018
|
|
1,818
|
|
|
2,727
|
|
|
LLL
|
|
5.480
|
%
|
|
2018
|
|
10,000
|
|
|
10,000
|
|
|
OOO
|
|
6.020
|
%
|
|
2031
|
|
20,000
|
|
|
20,000
|
|
|
CC
|
|
9.860
|
%
|
|
2020
|
|
17,000
|
|
|
17,100
|
|
Total First Mortgage Bonds
|
|
|
|
|
|
|
|
547,000
|
|
|
502,554
|
|
California Department of Water Resources Loans
|
|
|
2.6% to 8%
|
|
|
2017- 32
|
|
6,519
|
|
|
6,857
|
|
Other Long-term debt
|
|
|
|
|
|
|
|
8,909
|
|
|
9,476
|
|
Unamortized debt issuance costs
|
|
|
|
|
|
|
(4,475
|
)
|
|
(4,842
|
)
|
Total long-term debt
|
|
|
|
|
|
|
|
557,953
|
|
|
514,045
|
|
Less current maturities
|
|
|
|
|
|
|
|
26,208
|
|
|
6,043
|
|
Long-term debt excluding current maturities
|
|
|
|
|
|
|
|
$
|
531,745
|
|
|
$
|
508,002
|
|
Cal Water sold
$50.0 million
of first mortgage bonds on March 16, 2016 to pay down some of the short term borrowings. Also, on October 13, 2015, the Cal Water sold
$100.0 million
of first mortgage bonds to pay down outstanding short-term borrowings, fund capital expenditures, and general corporate purposes.
On October 4, 2011, Cal Water entered into a capital lease arrangement with the City of Hawthorne to operate the City's water system for a
15
-year period. The
$7.0 million
and
$7.5 million
capital lease liability as of December 31, 2016 and 2015 is included in other long-term debt and current maturities set forth above.
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
9 OTHER ACCRUED LIABILITIES
As of December 31, 2016 and 2015, other accrued liabilities were:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Accrued and deferred compensation
|
$
|
22,572
|
|
|
$
|
18,784
|
|
Accrued benefits and workers' compensation claims
|
6,460
|
|
|
6,154
|
|
Other
|
6,028
|
|
|
6,190
|
|
|
$
|
35,060
|
|
|
$
|
31,128
|
|
10 INCOME TAXES
Income tax expense (benefit) consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
State
|
|
Total
|
2016
|
|
|
|
|
|
|
|
|
Current
|
$
|
130
|
|
|
$
|
2
|
|
|
$
|
132
|
|
Deferred
|
26,603
|
|
|
81
|
|
|
26,684
|
|
Total
|
$
|
26,733
|
|
|
$
|
83
|
|
|
$
|
26,816
|
|
2015
|
|
|
|
|
|
|
|
|
Current
|
$
|
9,591
|
|
|
$
|
1,706
|
|
|
$
|
11,297
|
|
Deferred
|
15,374
|
|
|
(1,382
|
)
|
|
13,992
|
|
Total
|
$
|
24,965
|
|
|
$
|
324
|
|
|
$
|
25,289
|
|
2014
|
|
|
|
|
|
|
|
|
Current
|
$
|
(16,509
|
)
|
|
$
|
(1,852
|
)
|
|
$
|
(18,361
|
)
|
Deferred
|
44,730
|
|
|
1,603
|
|
|
46,333
|
|
Total income tax
|
$
|
28,221
|
|
|
$
|
(249
|
)
|
|
$
|
27,972
|
|
The Company's 2016, 2015 and 2014 federal qualified repairs and maintenance deductions totaled
$72.0 million
,
$60.0 million
, and
$45.2 million
, respectively.
The total federal NOL carry-forward was
$52.1 million
and the state NOL carry-forward was
$49.2 million
as of December 31, 2016. Management has concluded that the NOL carry-forward amounts are more likely than not to be recovered and therefore require
no
valuation allowance. The loss and credit carry-forward will begin to expire in 2032.
As of December 31, 2016, the California Enterprise Zone (EZ) credit was
$3.7 million
net of federal tax benefit for qualified property purchased before January 1, 2015, and placed in service before January 1, 2016. The Company has carry-forward California EZ credits of
$2.2 million
net of any unrecognized tax benefit. Unused State of California EZ credits can carry-forward until 2024.
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
10 INCOME TAXES (Continued)
The difference between the recorded and the statutory income tax expense was reconciled in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Statutory income tax
|
$
|
26,422
|
|
|
$
|
24,607
|
|
|
$
|
29,649
|
|
Increase (reduction) in taxes due to:
|
|
|
|
|
|
|
|
|
State income taxes net of federal tax benefit
|
4,341
|
|
|
4,043
|
|
|
4,871
|
|
Effect of regulatory treatment of fixed asset differences
|
(4,298
|
)
|
|
(3,450
|
)
|
|
(5,541
|
)
|
Investment tax credits
|
(74
|
)
|
|
(74
|
)
|
|
(74
|
)
|
Other
|
425
|
|
|
163
|
|
|
(933
|
)
|
Total income tax
|
$
|
26,816
|
|
|
$
|
25,289
|
|
|
$
|
27,972
|
|
The effect of regulatory treatment of fixed asset differences includes estimated repair and maintenance deductions and asset related flow through items.
The tax effects of differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2016 and 2015 are presented in the following table:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Deferred tax assets:
|
|
|
|
|
|
Developer deposits for extension agreements and contributions in aid of construction
|
$
|
46,318
|
|
|
$
|
45,670
|
|
Net operating loss carryforward and tax credits
|
12,348
|
|
|
15,042
|
|
Pension
|
9,865
|
|
|
7,922
|
|
Other
|
5,651
|
|
|
3,341
|
|
Total deferred tax assets
|
74,182
|
|
|
71,975
|
|
Deferred tax liabilities:
|
|
|
|
|
|
Property related basis and depreciation differences
|
347,071
|
|
|
309,088
|
|
WRAM/MCBA and interim rates balancing accounts
|
20,714
|
|
|
23,894
|
|
Other
|
5,321
|
|
|
3,890
|
|
Total deferred tax liabilities
|
373,106
|
|
|
336,872
|
|
Net deferred tax liabilities
|
$
|
298,924
|
|
|
$
|
264,897
|
|
A valuation allowance was not required at December 31, 2016 and 2015. Based on historical taxable income and future taxable income projections over the period in which the deferred assets are deductible, management believes it is more likely than not that the Company will realize the benefits of the deductible differences.
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
10 INCOME TAXES (Continued)
The following table reconciles the changes in unrecognized tax benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|
December 31, 2014
|
Balance at beginning of year
|
$
|
10,298
|
|
|
$
|
7,916
|
|
|
$
|
612
|
|
Additions for tax positions taken during prior year
|
—
|
|
|
—
|
|
|
7,304
|
|
Additions for tax positions taken during current year
|
201
|
|
|
2,382
|
|
|
|
|
Reductions for tax positions taken during a prior year
|
—
|
|
|
—
|
|
|
—
|
|
Lapse of statute of limitations
|
—
|
|
|
—
|
|
|
—
|
|
Balance at end of year
|
$
|
10,499
|
|
|
$
|
10,298
|
|
|
$
|
7,916
|
|
The Company does not expect a material change in its unrecognized tax benefits within the next 12 months. The component of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of December 31, 2016, for the Company was
$2.3 million
, with the remaining balance representing the potential deferral of taxes to later years.
The Company federal income tax years subject to an examination are 2015, 2014 and 2013 and the state income tax years subject to an examination are 2015, 2014, 2013 and 2012. The State of California Franchise Tax Board is presently auditing the Company's 2008 through 2011 EZ credit filings which were amended by the Company in 2013. It is uncertain when the State audits will be completed.
11 EMPLOYEE BENEFIT PLANS
Savings Plan
The Company sponsors a 401(k) qualified defined contribution savings plan that allows participants to contribute up to
20%
of pre-tax compensation. Effective January 1, 2010, the Company matches
75
cents for each dollar contributed by the employee up to a maximum Company match of
6.0%
of base salary. Company contributions were
$5.4
million,
$5.0
million, and
$4.5
million, for the years 2016, 2015, and 2014, respectively.
Pension Plans
The Company provides a qualified, defined-benefit, non-contributory pension plan for substantially all employees. The accumulated benefit obligations of the pension plan are
$438.0
million and
$392.7
million as of December 31, 2016 and 2015, respectively. The fair value of pension plan assets was
$376.5
million and
$328.6
million as of December 31, 2016 and 2015, respectively.
Prior to 2010, pension payment obligations were generally funded by the purchase of an annuity from a life insurance company. Beginning in 2010, the pension plan trust pays monthly benefits to retirees, rather than the purchase of an annuity. Expected payments to be made are
$12.0
million in 2017,
$13.5
million in 2018,
$15.1
million in 2019,
$16.7
million in 2020, and
$18.3
million in 2021. The aggregate benefits expected to be paid in the 5 years 2022 through 2026 are
$117.6
million. The expected benefit payments are based upon the same assumptions used to measure the Company's benefit obligation at December 31, 2016, and include estimated future employee service.
The Company also maintains an unfunded, non-qualified, supplemental executive retirement plan. The unfunded supplemental executive retirement plan accumulated benefit obligations were
$46.0
million and
$40.4
million as of December 31, 2016 and 2015, respectively. Benefit payments under the supplemental executive retirement plan are paid currently and are included in the preceding paragraph.
The costs of the pension and retirement plans are charged to expense and utility plant. The Company makes annual contributions to fund the amounts accrued for pension cost.
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
11 EMPLOYEE BENEFIT PLANS (Continued)
Other Postretirement Plan
The Company provides substantially all active, permanent employees with medical, dental, and vision benefits through a self-insured plan. Employees retiring at or after age
58
, along with their spouses and dependents, continue participation in the plan by payment of a premium. Plan assets are invested in mutual funds, short-term money market instruments and commercial paper based upon a similar asset mix to the pension plan. Retired employees are also provided with a
five thousand
dollar life insurance benefit.
The Company records the costs of postretirement benefits other than pensions (PBOP) during the employees' years of active service. Postretirement benefit expense recorded in 2016, 2015, and 2014, was
$8.9
million,
$15.1
million, and
$8.4
million, respectively. The remaining net periodic benefit cost was
$4.1
million at December 31, 2016, and is being recovered through future customer rates and is recorded as a regulatory asset. The expected benefit payments, net of retiree premiums and Medicare Part D subsidies, are
$2.2
million in 2017,
$2.5
million in 2018,
$2.7
million in 2019,
$3.0
million in 2020, and
$3.2
million in 2021. The aggregate benefits expected to be paid in the 5 years 2022 through 2026 are
$19.5
million. The expected Medicare Part D subsidies are
$0.2
million in 2017,
$0.3
million in 2018,
$0.3
million in 2019,
$0.3
million in 2020, and
$0.4
million in 2021.
Benefit Plan Assets
The Company actively manages pensions and PBOP trust (Plan) assets. The Company's investment objectives are:
|
|
•
|
Maximize the return on the assets, commensurate with the risk that the Company deems appropriate to, meet the obligations of the Plans, minimize the volatility of the pension expense, and account for contingencies;
|
|
|
•
|
Generate a rate of return for the total portfolio that equals or exceeds the actuarial investment rate assumption;
|
Additionally, the rate of return of the total fund is measured periodically against an index comprised of
35%
of the Standard & Poor's Index,
15%
of the Russell 2000 Index,
10%
of the MSCI EAFE Index, and
40%
of the Lehman Aggregate Bond Index. The index is consistent with the Company's rate of return objective and indicates the Company's long-term asset allocation objective.
The Company applies a risk management framework for managing the risks associated with employee benefit plan trust assets. The guiding principles of this risk management framework are the clear articulation of roles and responsibilities, appropriate delegation of authority, and proper accountability and documentation. Trust investment policies and investment manager guidelines include provisions to ensure prudent diversification, manage risk through appropriate use of physical direct asset holdings and derivative securities, and identify permitted and prohibited investments.
The Company's target asset allocation percentages for major categories of the pension plan are reflected in the table below:
|
|
|
|
|
|
|
|
|
|
|
Minimum
Exposure
|
|
Target
|
|
Maximum
Exposure
|
Fixed Income
|
35
|
%
|
|
40
|
%
|
|
45
|
%
|
Total Domestic Equity:
|
40
|
%
|
|
50
|
%
|
|
60
|
%
|
Small Cap Stocks
|
10
|
%
|
|
15
|
%
|
|
20
|
%
|
Large Cap Stocks
|
30
|
%
|
|
35
|
%
|
|
45
|
%
|
Non-U.S. Equities
|
5
|
%
|
|
10
|
%
|
|
15
|
%
|
The fixed income category includes money market funds, short-term bond funds, and cash. The majority of fixed income investments range in maturities from less than
1
to
5 years
.
The Company's target allocation percentages for the PBOP trust is similar to the pension plan except for a larger allocation in fixed income investments and a lower allocation in equity investments.
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
11 EMPLOYEE BENEFIT PLANS (Continued)
We use the following criteria to select investment funds:
|
|
•
|
Fund meets criteria of Employee Retirements Income Security Act (ERISA);
|
|
|
•
|
Timeliness and completeness of fund communications and reporting to investors;
|
|
|
•
|
Stability of fund management company;
|
|
|
•
|
Fund management fees; and
|
|
|
•
|
Administrative costs incurred by the Plan.
|
Plan Fair Value Measurements
The fair value measurements standard establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under the standard are described below:
Level 1
—Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.
Level 2
—Inputs to the valuation methodology include:
|
|
•
|
Quoted market prices for similar assets or liabilities in active markets;
|
|
|
•
|
Quoted prices for identical or similar assets or liabilities in inactive markets;
|
|
|
•
|
Inputs other than quoted prices that are observable for the asset or liability; and
|
|
|
•
|
Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3
—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
All Plan investments are level one investments in mutual funds and are valued at the net asset value (NAV) of the shares held at December 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
2016
|
|
%
|
|
2015
|
|
%
|
|
2016
|
|
%
|
|
2015
|
|
%
|
Fixed Income
|
$
|
141,576
|
|
|
38
|
%
|
|
$
|
132,736
|
|
|
40
|
%
|
|
$
|
54,166
|
|
|
63
|
%
|
|
$
|
48,325
|
|
|
66
|
%
|
Domestic Equity: Small Cap Stocks
|
61,036
|
|
|
16
|
%
|
|
47,014
|
|
|
14
|
%
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
Domestic Equity: Large Cap Stocks
|
136,405
|
|
|
36
|
%
|
|
116,306
|
|
|
36
|
%
|
|
32,412
|
|
|
37
|
%
|
|
24,561
|
|
|
34
|
%
|
Non U.S. Equities
|
37,532
|
|
|
10
|
%
|
|
32,578
|
|
|
10
|
%
|
|
|
|
|
|
|
|
—
|
|
|
—
|
%
|
Total Plan Assets
|
$
|
376,549
|
|
|
100
|
%
|
|
$
|
328,634
|
|
|
100
|
%
|
|
$
|
86,578
|
|
|
100
|
%
|
|
$
|
72,886
|
|
|
100
|
%
|
The pension benefits fixed income category includes
$2.3
million and
$11.1
million of money market fund investments as of December 31, 2016 and 2015, respectively. The other benefits fixed income category includes
$35.5
million and
$32.7
million of money market fund investments as of December 31, 2016 and 2015, respectively.
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
11 EMPLOYEE BENEFIT PLANS (Continued)
Changes in Plan Assets, Benefits Obligations, and Funded Status
The following table reconciles the funded status of the plans with the accrued pension liability and the net postretirement benefit liability as of December 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Change in projected benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
$
|
501,879
|
|
|
$
|
502,585
|
|
|
$
|
136,736
|
|
|
$
|
135,233
|
|
Service cost
|
20,971
|
|
|
21,306
|
|
|
6,513
|
|
|
8,476
|
|
Interest cost
|
22,226
|
|
|
20,104
|
|
|
4,863
|
|
|
5,654
|
|
Assumption change
|
15,599
|
|
|
(50,393
|
)
|
|
(8,748
|
)
|
|
(12,580
|
)
|
Experience loss
|
14,075
|
|
|
16,779
|
|
|
(16,041
|
)
|
|
1,794
|
|
Benefits paid, net of retiree premiums
|
(9,995
|
)
|
|
(8,502
|
)
|
|
(1,215
|
)
|
|
(1,841
|
)
|
End of year
|
$
|
564,755
|
|
|
$
|
501,879
|
|
|
$
|
122,108
|
|
|
$
|
136,736
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
$
|
328,634
|
|
|
$
|
306,344
|
|
|
$
|
72,886
|
|
|
$
|
59,841
|
|
Actual return on plan assets
|
27,916
|
|
|
(2,101
|
)
|
|
5,342
|
|
|
(919
|
)
|
Employer contributions
|
29,994
|
|
|
32,893
|
|
|
9,565
|
|
|
15,805
|
|
Retiree contributions and Medicare part D subsidies
|
—
|
|
|
—
|
|
|
1,611
|
|
|
1,666
|
|
Benefits paid
|
(9,995
|
)
|
|
(8,502
|
)
|
|
(2,826
|
)
|
|
(3,507
|
)
|
Fair value of plan assets at end of year
|
$
|
376,549
|
|
|
$
|
328,634
|
|
|
$
|
86,578
|
|
|
$
|
72,886
|
|
Funded status(1)
|
$
|
(188,206
|
)
|
|
$
|
(173,245
|
)
|
|
$
|
(35,530
|
)
|
|
$
|
(63,850
|
)
|
Unrecognized actuarial loss
|
126,610
|
|
|
108,798
|
|
|
31,821
|
|
|
59,440
|
|
Unrecognized prior service cost
|
26,123
|
|
|
32,341
|
|
|
207
|
|
|
250
|
|
Net amount recognized
|
$
|
(35,473
|
)
|
|
$
|
(32,106
|
)
|
|
$
|
(3,502
|
)
|
|
$
|
(4,160
|
)
|
_______________________________________________________________________________
|
|
(1)
|
The short-term portion of the pension benefits was
$2.0 million
and
$1.8
million as of December 31, 2016 and 2015, respectively.
|
Amounts recognized on the balance sheet consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
(Accrued) benefit costs
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(4,119
|
)
|
|
$
|
(4,785
|
)
|
Accrued benefit liability
|
(188,206
|
)
|
|
(173,245
|
)
|
|
(35,530
|
)
|
|
(63,850
|
)
|
Regulatory asset
|
152,733
|
|
|
141,139
|
|
|
36,147
|
|
|
64,475
|
|
Net amount recognized
|
$
|
(35,473
|
)
|
|
$
|
(32,106
|
)
|
|
$
|
(3,502
|
)
|
|
$
|
(4,160
|
)
|
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
11 EMPLOYEE BENEFIT PLANS (Continued)
Valuation Assumptions
Below are the actuarial assumptions used in determining the benefit obligation for the benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Weighted average assumptions as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
4.15
|
%
|
|
4.40
|
%
|
|
4.25
|
%
|
|
4.40
|
%
|
Long-term rate of return on plan assets
|
6.50
|
%
|
|
6.50
|
%
|
|
5.50
|
%
|
|
5.50
|
%
|
Rate of compensation increases
|
3.25
|
%
|
|
3.25
|
%
|
|
—
|
|
|
—
|
|
Cost of living adjustment
|
2.50
|
%
|
|
2.50
|
%
|
|
—
|
|
|
—
|
|
The discount rate was derived from the Citigroup Pension Discount Curve using the expected payouts for the plan. The long-term rate of return assumption is the expected rate of return on a balanced portfolio invested roughly
60%
in equities and
40%
in fixed income securities. Returns on equity investments were estimated based on estimates of dividend yield and real earnings added to a
2.50%
long-term inflation rate. For the pension and other benefit plans, the assumed returns were
7.73%
for domestic equities and
8.64%
for foreign equities. Returns on fixed-income investments were projected based on investment maturities and credit spreads added to a
2.50%
long-term inflation rate. For the pension and other benefit plans, the assumed returns were
4.57%
for fixed income investments and
3.18%
for short-term cash investments. The average return for the pension and other benefit plans for the last 5 and 10 years was
8.70%
and
5.30%
, respectively. The Company is using a long-term rate of return of
6.50%
for the pension plan and
5.50%
for the other benefit plan, which is between the 25th and 75th percentile of expected results.
In 2016, the Company used the Society of Actuaries 2014 Mortality Tables Report (RP-2014) and Mortality Improvement Scale (MP-2016 with modifications) for measuring retirement plan obligations. The RP-2014 mortality table and improvement scale extended the assumed life expectancy of plan participants which resulted in an increase in the Company's accrued benefit obligation as of December 31, 2016 and 2015.
Components of Net Periodic Benefit Cost
Net periodic benefit costs for the pension and other postretirement plans for the years ended December 31, 2016, 2015, and 2014 included the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plan
|
|
Other Benefits
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
Service cost
|
$
|
20,971
|
|
|
$
|
21,306
|
|
|
$
|
15,964
|
|
|
$
|
6,513
|
|
|
$
|
8,476
|
|
|
$
|
5,205
|
|
Interest cost
|
22,226
|
|
|
20,104
|
|
|
18,920
|
|
|
4,863
|
|
|
5,654
|
|
|
4,455
|
|
Expected return on plan assets
|
(21,826
|
)
|
|
(19,138
|
)
|
|
(16,599
|
)
|
|
(4,129
|
)
|
|
(3,519
|
)
|
|
(3,119
|
)
|
Net amortization and deferral
|
11,990
|
|
|
15,485
|
|
|
10,074
|
|
|
1,660
|
|
|
4,536
|
|
|
1,861
|
|
Net periodic benefit cost
|
$
|
33,361
|
|
|
$
|
37,757
|
|
|
$
|
28,359
|
|
|
$
|
8,907
|
|
|
$
|
15,147
|
|
|
$
|
8,402
|
|
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
11 EMPLOYEE BENEFIT PLANS (Continued)
Below are the actuarial assumptions used in determining the net periodic benefit costs for the benefit plans, which uses the end of the prior year as the measurement date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Weighted average assumptions as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
4.40
|
%
|
|
4.00
|
%
|
|
4.40
|
%
|
|
4.00
|
%
|
Long-term rate of return on plan assets
|
6.50
|
%
|
|
6.50
|
%
|
|
5.50
|
%
|
|
5.50
|
%
|
Rate of compensation increases
|
3.25
|
%
|
|
3.25
|
%
|
|
—
|
|
|
—
|
|
The health care cost trend rate assumption has a significant effect on the amounts reported. For 2016 measurement purposes, the Company assumed a
7.9%
annual rate of increase in the per capita cost of covered benefits with the rate decreasing to
5.2%
by 2019, then gradually grading down to
4.4%
over the next
50 years
. A 1-percentage point change in assumed health care cost trends is estimated to have the following effect:
|
|
|
|
|
|
|
|
|
|
1-Percentage
Point Increase
|
|
1-Percentage
Point (Decrease)
|
Effect on total service and interest costs
|
$
|
3,648
|
|
|
$
|
(2,598
|
)
|
Effect on accumulated postretirement benefit obligation
|
$
|
31,518
|
|
|
$
|
(23,345
|
)
|
The Company intends to make annual contributions that meet the funding requirements of ERISA. The Company estimates in 2017 that the annual contribution to the pension plans will be
$31.5
million and the annual contribution to the other postretirement plan will be
$9.3
million.
12 STOCK-BASED COMPENSATION PLANS
The Company's equity incentive plan was approved and amended by stockholders on April 27, 2005 and May 20, 2014. The Company is authorized to issue awards up to
2,000,000
shares of common stock.
During 2016 and 2015, the Company granted annual Restricted Stock Awards (RSAs) of
72,317
and
61,862
, respectively, of common stock to officers and directors of the Company. In 2016 and 2015,
16,617
RSAs and
18,452
RSAs were canceled respectively. Officer RSAs granted in 2016 and 2015 vest over
36 months
with the first year cliff vesting. Director RSAs generally vest at the end of
12 months
. During 2016 and 2015, the RSAs granted were valued at
$25.17
and
$24.27
per share, respectively, based upon the fair market value of the Company's common stock on the date of grant.
The Company granted performance-based Restricted Stock Unit Awards (RSUs) of
43,659
and
38,983
of common stock to officers in 2016 and 2015 respectively. Each award reflects a target number of common shares that may be issued to the award recipient. The awards may be earned upon the completion of a
3
-year performance period ending on December 31, 2016 for the 2013 RSUs, December 31, 2017 for the 2014 RSUs, and December 31, 2018 for the 2015 RSUs. During 2016, the Company issued
28,424
RSUs, and there were
no
RSUs issued in 2015 and 2014. Whether RSUs are earned at the end of the performance period will be determined based on the achievement of certain performance objectives set by the Board of Director Compensation Committee in connection with the issuance of the RSUs. The performance objectives are based on the Company's business plan covering the performance period. The performance objectives include achieving the budgeted return on equity, budgeted investment in utility plant, customer service standards, employee safety standards and water quality standards. Depending on the results achieved during the
3
-year performance period, the actual number of shares that a grant recipient receives at the end of the performance period may range from
0%
to
200%
of the target shares granted, provided that the grantee is continuously employed by the Company through the vesting date. If prior to the vesting date employment is terminated by reason of death, disability or normal retirement, then a pro rata portion of this award will vest. RSUs are not included in diluted shares until earned. The RSUs are recognized as expense ratably over the
3
year performance period using a fair market value of
$25.17
per share for the 2016 RSUs and
$24.28
per share for the 2015 RSUs based on an estimate of RSUs earned during the performance period.
The Company has recorded compensation costs for the RSAs and RSUs which are included in administrative and general operating expenses in the amount of
$2.8
million,
$2.2
million, and
$1.8
million for 2016, 2015 and 2014, respectively.
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
13 FAIR VALUE OF FINANCIAL INSTRUMENTS
The accounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires certain disclosures about assets and liabilities measured at fair value. A hierarchal framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value is established by this guidance. The three levels in the hierarchy are as follows:
Level 1
—Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.
Level 2
—Inputs to the valuation methodology include:
|
|
•
|
Quoted market prices for similar assets or liabilities in active markets;
|
|
|
•
|
Quoted prices for identical or similar assets or liabilities in inactive markets;
|
|
|
•
|
Inputs other than quoted prices that are observable for the asset or liability; and
|
|
|
•
|
Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3
—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
Specific valuation methods include the following:
Accounts receivable and accounts payable carrying amounts approximated the fair value because of the short-term maturity of the instruments.
Long-term debt fair values were estimated using the published quoted market price, if available, or the discounted cash flow analysis, based on the current rates available using a risk-free rate (a U.S. Treasury securities yield curve) plus a risk premium of
1.70%
.
Advances for construction fair values were estimated using broker quotes from companies that frequently purchase these investments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Fair Value
|
|
Cost
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Long-term debt, including current maturities
|
$
|
557,953
|
|
|
|
|
|
$
|
630,510
|
|
|
|
|
|
$
|
630,510
|
|
Advances for construction
|
182,448
|
|
|
|
|
|
74,460
|
|
|
|
|
|
74,460
|
|
Total
|
$
|
740,401
|
|
|
$
|
—
|
|
|
$
|
704,970
|
|
|
$
|
—
|
|
|
$
|
704,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
Fair Value
|
|
Cost
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Long-term debt, including current maturities
|
$
|
514,045
|
|
|
$
|
—
|
|
|
$
|
600,440
|
|
|
$
|
—
|
|
|
$
|
600,440
|
|
Advances for construction
|
180,172
|
|
|
—
|
|
|
72,866
|
|
|
—
|
|
|
72,866
|
|
Total
|
$
|
694,217
|
|
|
$
|
—
|
|
|
$
|
673,306
|
|
|
$
|
—
|
|
|
$
|
673,306
|
|
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2015, 2014, and 2013
Amounts in thousands, except share and per share data or as otherwise stated
14 COMMITMENTS AND CONTINGENCIES
Commitments
The Company leases offices, equipment and other facilities,
two
water systems from cities, and has long-term commitments to purchase water from water wholesalers. The commitments are noted in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Facility
Leases
|
|
System
Lease
|
|
Water Supply
Contracts
|
|
Capital
Lease
Obligations
|
2017
|
$
|
1,075
|
|
|
$
|
845
|
|
|
$
|
28,823
|
|
|
$
|
1,109
|
|
2018
|
826
|
|
|
493
|
|
|
28,824
|
|
|
1,016
|
|
2019
|
620
|
|
|
—
|
|
|
28,824
|
|
|
1,248
|
|
2020
|
504
|
|
|
—
|
|
|
28,825
|
|
|
940
|
|
2021
|
443
|
|
|
—
|
|
|
28,825
|
|
|
940
|
|
Thereafter
|
3,127
|
|
|
—
|
|
|
533,435
|
|
|
4,465
|
|
Facility Leases
Company Facility leases include office and other facilities in many of its operating districts. The total paid and charged to operations for such leases was
$1.0
million in 2016,
$1.1
million in 2015, and
$0.9
million in 2014.
System Lease
The system lease is a
15
-year lease with the City of Commerce. The lease includes an annual lease payment of
$0.8
million per year plus a cost savings sharing arrangement.
Water Supply Contracts
The Company has a long-term contract with the Santa Clara Valley Water District that requires the Company to purchase minimum annual water quantities. Purchases are priced at the districts then-current wholesale water rate. The Company operates to purchase sufficient water to equal or exceed the minimum quantities under the contract. The total paid to Santa Clara Valley Water District was
$8.5
million in 2016,
$6.3
million in 2015, and
$5.5
million in 2014.
The Company also has a water supply contract with Stockton East Water District (SEWD) that requires a fixed, annual payment. Each year, the fixed annual payment is adjusted for changes to SEWD's costs. Because of the fixed annual price arrangement, the Company operates to receive as much water as possible from SEWD in order to minimize the cost of operating Company-owned wells used to supplement SEWD deliveries. The total paid under the contract was
$12.2
million in 2016,
$9.8
million in 2015, and
$8.7
million in 2014.
Estimated annual contractual obligations in the table above are based on the same payment levels as 2016. Future increased costs by SEWD are expected to be offset by a decline in the allocation of costs to the Company, as other customers of SEWD are expected to receive a larger allocation based upon growth of their service areas.
On September 21, 2005, the Company entered into an agreement with Kern County Water Agency (Agency) to obtain treated water for the Company's operations. The term of the agreement is to January 1, 2035, or until the repayment of the Agency's bonds (described hereafter) occurs. Under the terms of the agreement, the Company is obligated to purchase approximately
20,000
acre feet of treated water in 2016 and an incrementally higher volume of water for each subsequent year until 2017, when the Company is obligated to purchase
20,500
acre feet of treated water per year. The Company is obligated to pay the Capital Facilities Charge and the Treated Water Charge regardless of whether it can use the water in its operation, and is obligated for these charges even if the Agency cannot produce an adequate amount to supply the
20,500
acre feet in the year. This agreement supersedes a prior agreement with Kern County Water Agency for the supply of
11,500
acre feet of water per year.
Three
other parties, including the City of Bakersfield, are also obligated to purchase a total of
32,500
acre feet per year under separate agreements with the Agency. Further, the Agency has the right to proportionally reduce the water supply provided to all of the participants if it cannot produce adequate supplies. If any of the other parties does not use its allocation, that party is obligated to pay its contracted amount.
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
14 COMMITMENTS AND CONTINGENCIES (Continued)
If any of the parties were to default on making payments of the Capital Facilities Charge, then the other parties are obligated to pay for the defaulting party's share on a pro-rata basis. If there is a payment default by a party and the remaining parties have to make payments, they are also entitled to a pro-rata share of the defaulting party's water allocation.
The Company expects to use all its entitled water in its operations every year. In addition, if the Company were to pay for and receive additional amounts of water due to a default of another participating party; the Company believes it could use this additional water in its operations without incurring substantial incremental cost increases. If additional treated water is available, all parties have an option to purchase this additional treated water, subject to the Agency's right to allocate the water among the parties.
The total obligation of all parties, excluding the Company, is approximately
$82.4
million to the Agency. Based on the credit worthiness of the other participants, which are government entities, it is believed to be highly unlikely that the Company would be required to assume any other parties' obligations under the contract due to their default.
We pay a capital facilities charge and charges related to treated water that together total
$9.1
million annually, which equates to
$443.1
dollars per acre foot. Total treated water charge for 2016 was
$3.2
million. As treated water is being delivered, we will also be obligated for our portion of the operating costs; that portion is currently estimated to be
$63.9
dollars per acre foot. The actual amount will vary due to variations from estimates, inflation, and other changes in the cost structure. Our overall estimated cost of
$443.1
dollars per acre foot is less than the estimated cost of procuring untreated water (assuming water rights could be obtained) and then providing treatment.
Capital Lease Obligations
There are
three
capital leases; the most significant was the City of Hawthorne water system. In 2011, we entered into a
15
-year capital lease agreement to operate the City of Hawthorne water system. The system, which is located near the Hermosa Redondo district, serves about half of Hawthorne's population. The agreement required us to make an up-front
$8.1
million lease deposit to the city that is being amortized over the lease term. Additionally, annual lease payments of
$0.9
million are made to the city and shall be increased or decreased each year on July 1, by the same percentage that the rates charged to customers served by the water system increased or decreased, exclusive of pass-through increases or decreases in the cost of water, power, and city-imposed fees, compared to the rates in effect on July 1 of the prior year, provided, that in no event will the annual lease payment be less than
$0.9
million. Under the lease we are responsible for all aspects of system operation and capital improvements, although title to the system and system improvements reside with the city. In exchange, we receive all revenue from the water system, which was
$8.5
million,
$8.0
million, and
$7.8
million in 2016, 2015, and 2014, respectively. At the end of the lease, the city is required to reimburse us for the unamortized value of capital improvements made during the term of the lease. The annual payments were
$1.0
million in 2016 and
$0.9
million in 2015, and 2014. The capital lease asset was
$7.5
million as of December 31, 2016.
Contingencies
Groundwater Contamination
The Company has undertaken litigation against third parties to recover past and future costs related to ground water contamination in our service areas. The cost of litigation is expensed as incurred and any settlement is first offset against such costs. The CPUC's general policy requires all proceeds from contamination litigation to be used first to pay transactional expenses, then to make customers whole for water treatment costs to comply with the CPUC's water quality standards. The CPUC allows for a risk-based consideration of contamination proceeds which exceed the costs of the remediation described above and may result in some sharing of proceeds with the shareholder, determined on a case by case basis. The CPUC has authorized various memorandum accounts that allow the Company to track significant litigation costs to request recovery of these costs in future filings and uses of proceeds to comply with CPUC's general policy.
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
14 COMMITMENTS AND CONTINGENCIES (Continued)
Other Legal Matters
From time to time, the Company is involved in various disputes and litigation matters that arise in the ordinary course of business. The status of each significant matter is reviewed and assessed for potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount of the range of loss can be estimated, a liability is accrued for the estimated loss in accordance with the accounting standards for contingencies. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. While the outcome of these disputes and litigation matters cannot be predicted with any certainty, management does not believe when taking into account existing reserves the ultimate resolution of these matters will materially affect the Company's financial position, results of operations, or cash flows. The Company has recognized a liability of
$6.0
million for all known legal matters as of December 31, 2016 mostly due to main and service leaks. The cost of litigation is expensed as incurred and any settlement is first offset against such costs. Any settlement in excess of the cost to litigate is accounted for on a case by case basis, dependent on the nature of the settlement.
On July 21, 2016, the San Francisco Bay Area Regional Water Quality Control Board (the Water Control Board) approved a settlement between Cal Water and the Water Control Board and California Department of Fish and Wildlife (Fish and Wildlife) to resolve purported complaints from the Water Control Board and Fish and Wildlife alleging Cal Water discharged approximately
8,207,560
gallons of drinking water into Polhemus Creek that was caused by an undetected crack in a large water main located 10 feet below ground in a remote area. The water was disinfected as required to meet all federal and state water quality standards and make it safe for human consumption. Drinking water, however, can be harmful to fish and the environment.
As part of the settlement, Cal Water replaced 2,000 feet of 18-inch cast iron water main in 2016 with new ductile iron main along Polhemus Road and Polhemus Creek in San Mateo. Cal Water will also conduct a streambed restoration project in San Mateo Creek to improve conditions in the creek for native fish. This work will be performed in coordination with the California Department of Fish and Wildlife. In addition to investing in these improvement projects and as required by the settlement Cal Water paid
$0.5 million
to the Water Control Board and
$0.02 million
to Fish and Wildlife during the third quarter of 2016.
Under the terms of the settlement, Cal Water will be released from all claims unless it fails to complete the projects. The agreement contains no admission of wrongdoing.
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
15 QUARTERLY FINANCIAL DATA (UNAUDITED)
The Company's common stock is traded on the New York Stock Exchange under the symbol "CWT."
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
Operating revenue
|
$
|
121,727
|
|
|
$
|
152,445
|
|
|
$
|
184,268
|
|
|
$
|
150,930
|
|
Net operating income
|
6,270
|
|
|
18,534
|
|
|
30,055
|
|
|
21,335
|
|
Net income
|
(798
|
)
|
|
11,508
|
|
|
22,875
|
|
|
15,090
|
|
Diluted earnings per share
|
(0.02
|
)
|
|
0.24
|
|
|
0.48
|
|
|
0.31
|
|
Common stock market price range:
|
|
|
|
|
|
|
|
|
|
|
|
High
|
27.33
|
|
|
34.95
|
|
|
35.62
|
|
|
36.85
|
|
Low
|
22.48
|
|
|
26.22
|
|
|
29.93
|
|
|
29.25
|
|
Dividends paid per common share
|
0.1725
|
|
|
0.1725
|
|
|
0.1725
|
|
|
0.1725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
Operating revenue
|
$
|
121,985
|
|
|
$
|
144,414
|
|
|
$
|
183,543
|
|
|
$
|
138,426
|
|
Net operating income
|
7,497
|
|
|
16,493
|
|
|
32,201
|
|
|
14,962
|
|
Net income
|
1,575
|
|
|
9,845
|
|
|
25,120
|
|
|
8,477
|
|
Diluted earnings (loss) per share
|
0.03
|
|
|
0.21
|
|
|
0.52
|
|
|
0.18
|
|
Common stock market price range:
|
|
|
|
|
|
|
|
|
|
|
|
High
|
25.99
|
|
|
25.30
|
|
|
24.36
|
|
|
24.35
|
|
Low
|
23.63
|
|
|
22.58
|
|
|
19.55
|
|
|
21.01
|
|
Dividends paid per common share
|
0.1675
|
|
|
0.1675
|
|
|
0.1675
|
|
|
0.1675
|
|
16 CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
On April 17, 2009, Cal Water issued
$100.0 million
aggregate principal amount of
5.875%
First Mortgage Bonds due 2019, and on November 17, 2010, Cal Water issued
$100.0 million
aggregate principal amount of
5.500%
First Mortgage Bonds due 2040, all of which are fully and unconditionally guaranteed by the Company. As a result of these guarantee arrangements, the Company is required to present the following condensed consolidating financial information. The investments in affiliates are accounted for and presented using the “equity method” of accounting
The following tables present the condensed consolidating balance sheets as of December 31, 2016 and 2015, the condensed consolidating statements of income for the years ended December 31, 2016, 2015 and 2014, and the condensed consolidating statements of cash flows for the years ended December 31, 2016, 2015, and 2014, of (i) California Water Service Group, the guarantor of the First Mortgage Bonds and the parent company; (ii) California Water Service Company, the issuer of the First Mortgage Bonds and a
100%
owned consolidated subsidiary of California Water Service Group; and (iii) the other
100%
owned non-guarantor consolidated subsidiaries of California Water Service Group. No other subsidiary of the Company guarantees the securities. The condensed consolidating balance sheet as of December 31, 2015 reflects the retrospective adoption of ASU 2015-03 (refer to Note 2 Summary of Significant Accounting Policies for more details).
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
16 CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (Continued)
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Cal Water
|
|
All Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(In thousands)
|
|
ASSETS
|
Utility plant:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utility plant
|
$
|
1,318
|
|
|
$
|
2,519,785
|
|
|
$
|
203,433
|
|
|
$
|
(7,197
|
)
|
|
$
|
2,717,339
|
|
Less accumulated depreciation and amortization
|
(826
|
)
|
|
(805,992
|
)
|
|
(53,163
|
)
|
|
1,919
|
|
|
(858,062
|
)
|
Net utility plant
|
492
|
|
|
1,713,793
|
|
|
150,270
|
|
|
(5,278
|
)
|
|
1,859,277
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
5,216
|
|
|
13,215
|
|
|
7,061
|
|
|
—
|
|
|
25,492
|
|
Receivables and unbilled revenue
|
—
|
|
|
98,850
|
|
|
4,173
|
|
|
—
|
|
|
103,023
|
|
Receivables from affiliates
|
19,566
|
|
|
3,608
|
|
|
8
|
|
|
(23,182
|
)
|
|
—
|
|
Other current assets
|
80
|
|
|
12,442
|
|
|
1,032
|
|
|
—
|
|
|
13,554
|
|
Total current assets
|
24,862
|
|
|
128,115
|
|
|
12,274
|
|
|
(23,182
|
)
|
|
142,069
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory assets
|
—
|
|
|
352,139
|
|
|
3,791
|
|
|
—
|
|
|
355,930
|
|
Investments in affiliates
|
666,525
|
|
|
—
|
|
|
—
|
|
|
(666,525
|
)
|
|
—
|
|
Long-term affiliate notes receivable
|
25,744
|
|
|
—
|
|
|
—
|
|
|
(25,744
|
)
|
|
—
|
|
Other assets
|
376
|
|
|
50,361
|
|
|
3,765
|
|
|
(33
|
)
|
|
54,469
|
|
Total other assets
|
692,645
|
|
|
402,500
|
|
|
7,556
|
|
|
(692,302
|
)
|
|
410,399
|
|
TOTAL ASSETS
|
$
|
717,999
|
|
|
$
|
2,244,408
|
|
|
$
|
170,100
|
|
|
$
|
(720,762
|
)
|
|
$
|
2,411,745
|
|
|
CAPITALIZATION AND LIABILITIES
|
Capitalization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stockholders' equity
|
$
|
659,471
|
|
|
$
|
595,003
|
|
|
$
|
76,833
|
|
|
$
|
(671,836
|
)
|
|
$
|
659,471
|
|
Affiliate long-term debt
|
—
|
|
|
—
|
|
|
25,744
|
|
|
(25,744
|
)
|
|
—
|
|
Long-term debt, less current maturities
|
—
|
|
|
530,850
|
|
|
895
|
|
|
—
|
|
|
531,745
|
|
Total capitalization
|
659,471
|
|
|
1,125,853
|
|
|
103,472
|
|
|
(697,580
|
)
|
|
1,191,216
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
—
|
|
|
25,657
|
|
|
551
|
|
|
—
|
|
|
26,208
|
|
Short-term borrowings
|
57,100
|
|
|
40,000
|
|
|
—
|
|
|
—
|
|
|
97,100
|
|
Payables to affiliates
|
—
|
|
|
539
|
|
|
22,643
|
|
|
(23,182
|
)
|
|
—
|
|
Accounts payable
|
—
|
|
|
74,998
|
|
|
2,815
|
|
|
—
|
|
|
77,813
|
|
Accrued expenses and other liabilities
|
88
|
|
|
47,232
|
|
|
1,789
|
|
|
—
|
|
|
49,109
|
|
Total current liabilities
|
57,188
|
|
|
188,426
|
|
|
27,798
|
|
|
(23,182
|
)
|
|
250,230
|
|
Unamortized investment tax credits
|
—
|
|
|
1,798
|
|
|
—
|
|
|
—
|
|
|
1,798
|
|
Deferred income taxes
|
1,340
|
|
|
296,781
|
|
|
803
|
|
|
—
|
|
|
298,924
|
|
Pension and postretirement benefits other than pensions
|
—
|
|
|
222,691
|
|
|
—
|
|
|
—
|
|
|
222,691
|
|
Regulatory and other long-term liabilities
|
—
|
|
|
80,518
|
|
|
3,130
|
|
|
—
|
|
|
83,648
|
|
Advances for construction
|
—
|
|
|
181,907
|
|
|
541
|
|
|
—
|
|
|
182,448
|
|
Contributions in aid of construction
|
—
|
|
|
146,434
|
|
|
34,356
|
|
|
—
|
|
|
180,790
|
|
TOTAL CAPITALIZATION AND LIABILITIES
|
$
|
717,999
|
|
|
$
|
2,244,408
|
|
|
$
|
170,100
|
|
|
$
|
(720,762
|
)
|
|
$
|
2,411,745
|
|
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
16 CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (Continued)
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Cal Water
|
|
All Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(In thousands)
|
|
ASSETS
|
Utility plant:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utility plant
|
$
|
1,318
|
|
|
$
|
2,313,704
|
|
|
$
|
199,121
|
|
|
$
|
(7,197
|
)
|
|
$
|
2,506,946
|
|
Less accumulated depreciation and amortization
|
(605
|
)
|
|
(758,362
|
)
|
|
(48,034
|
)
|
|
1,823
|
|
|
(805,178
|
)
|
Net utility plant
|
713
|
|
|
1,555,342
|
|
|
151,087
|
|
|
(5,374
|
)
|
|
1,701,768
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
582
|
|
|
4,270
|
|
|
3,985
|
|
|
—
|
|
|
8,837
|
|
Receivables and unbilled revenue
|
—
|
|
|
100,777
|
|
|
3,728
|
|
|
—
|
|
|
104,505
|
|
Receivables from affiliates
|
19,677
|
|
|
26,219
|
|
|
—
|
|
|
(45,896
|
)
|
|
—
|
|
Other current assets
|
79
|
|
|
13,077
|
|
|
1,080
|
|
|
|
|
14,236
|
|
Total current assets
|
20,338
|
|
|
144,343
|
|
|
8,793
|
|
|
(45,896
|
)
|
|
127,578
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
Regulatory assets
|
—
|
|
|
358,254
|
|
|
3,639
|
|
|
—
|
|
|
361,893
|
|
Investments in affiliates
|
651,449
|
|
|
—
|
|
|
—
|
|
|
(651,449
|
)
|
|
—
|
|
Long-term affiliate notes receivable
|
25,099
|
|
|
—
|
|
|
—
|
|
|
(25,099
|
)
|
|
—
|
|
Other assets
|
758
|
|
|
45,544
|
|
|
4,616
|
|
|
(904
|
)
|
|
50,014
|
|
Total other assets
|
677,306
|
|
|
403,798
|
|
|
8,255
|
|
|
(677,452
|
)
|
|
411,907
|
|
TOTAL ASSETS
|
$
|
698,357
|
|
|
$
|
2,103,483
|
|
|
$
|
168,135
|
|
|
$
|
(728,722
|
)
|
|
$
|
2,241,253
|
|
|
CAPITALIZATION AND LIABILITIES
|
Capitalization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stockholders' equity
|
$
|
642,155
|
|
|
$
|
581,792
|
|
|
$
|
75,024
|
|
|
$
|
(656,816
|
)
|
|
$
|
642,155
|
|
Affiliate long-term debt
|
—
|
|
|
—
|
|
|
25,099
|
|
|
(25,099
|
)
|
|
—
|
|
Long-term debt, less current maturities
|
—
|
|
|
507,034
|
|
|
968
|
|
|
|
|
508,002
|
|
Total capitalization
|
642,155
|
|
|
1,088,826
|
|
|
101,091
|
|
|
(681,915
|
)
|
|
1,150,157
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
—
|
|
|
5,654
|
|
|
389
|
|
|
—
|
|
|
6,043
|
|
Short-term borrowings
|
33,615
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33,615
|
|
Payables to affiliates
|
21,500
|
|
|
667
|
|
|
23,729
|
|
|
(45,896
|
)
|
|
—
|
|
Accounts payable
|
—
|
|
|
63,814
|
|
|
2,566
|
|
|
—
|
|
|
66,380
|
|
Accrued expenses and other liabilities
|
102
|
|
|
40,173
|
|
|
1,585
|
|
|
—
|
|
|
41,860
|
|
Total current liabilities
|
55,217
|
|
|
110,308
|
|
|
28,269
|
|
|
(45,896
|
)
|
|
147,898
|
|
Unamortized investment tax credits
|
—
|
|
|
1,872
|
|
|
—
|
|
|
—
|
|
|
1,872
|
|
Deferred income taxes
|
985
|
|
|
264,823
|
|
|
—
|
|
|
(911
|
)
|
|
264,897
|
|
Pension and postretirement benefits other than pensions
|
—
|
|
|
236,266
|
|
|
—
|
|
|
—
|
|
|
236,266
|
|
Regulatory and other long-term liabilities
|
—
|
|
|
79,477
|
|
|
2,937
|
|
|
—
|
|
|
82,414
|
|
Advances for construction
|
—
|
|
|
179,630
|
|
|
542
|
|
|
—
|
|
|
180,172
|
|
Contributions in aid of construction
|
—
|
|
|
142,281
|
|
|
35,296
|
|
|
—
|
|
|
177,577
|
|
TOTAL CAPITALIZATION AND LIABILITIES
|
$
|
698,357
|
|
|
$
|
2,103,483
|
|
|
$
|
168,135
|
|
|
$
|
(728,722
|
)
|
|
$
|
2,241,253
|
|
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
16 CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (Continued)
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Cal Water
|
|
All Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(In thousands)
|
Operating revenue
|
$
|
—
|
|
|
$
|
570,514
|
|
|
$
|
38,856
|
|
|
$
|
—
|
|
|
$
|
609,370
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased water
|
—
|
|
|
181,018
|
|
|
497
|
|
|
—
|
|
|
181,515
|
|
Purchased power
|
—
|
|
|
19,791
|
|
|
7,389
|
|
|
—
|
|
|
27,180
|
|
Pump taxes
|
—
|
|
|
11,298
|
|
|
—
|
|
|
—
|
|
|
11,298
|
|
Administrative and general
|
—
|
|
|
88,001
|
|
|
10,473
|
|
|
—
|
|
|
98,474
|
|
Other
|
—
|
|
|
73,918
|
|
|
6,669
|
|
|
(505
|
)
|
|
80,082
|
|
Maintenance
|
—
|
|
|
22,053
|
|
|
940
|
|
|
—
|
|
|
22,993
|
|
Depreciation and amortization
|
220
|
|
|
59,138
|
|
|
4,337
|
|
|
(96
|
)
|
|
63,599
|
|
Income tax (benefit) expense
|
(398
|
)
|
|
22,743
|
|
|
1,449
|
|
|
1,010
|
|
|
24,804
|
|
Property and other taxes
|
—
|
|
|
20,331
|
|
|
2,900
|
|
|
—
|
|
|
23,231
|
|
Total operating (income) expenses
|
(178
|
)
|
|
498,291
|
|
|
34,654
|
|
|
409
|
|
|
533,176
|
|
Net operating income
|
178
|
|
|
72,223
|
|
|
4,202
|
|
|
(409
|
)
|
|
76,194
|
|
Other income and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-regulated revenue
|
1,850
|
|
|
15,114
|
|
|
2,006
|
|
|
(2,385
|
)
|
|
16,585
|
|
Non-regulated expenses
|
—
|
|
|
(10,122
|
)
|
|
(1,323
|
)
|
|
—
|
|
|
(11,445
|
)
|
Loss on sale of non-utility properties
|
—
|
|
|
(146
|
)
|
|
—
|
|
|
—
|
|
|
(146
|
)
|
Income tax expense on other income and expenses
|
(754
|
)
|
|
(1,976
|
)
|
|
(254
|
)
|
|
972
|
|
|
(2,012
|
)
|
Net other income
|
1,096
|
|
|
2,870
|
|
|
429
|
|
|
(1,413
|
)
|
|
2,982
|
|
Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
757
|
|
|
32,682
|
|
|
1,906
|
|
|
(1,879
|
)
|
|
33,466
|
|
Less: capitalized interest
|
—
|
|
|
(2,905
|
)
|
|
(60
|
)
|
|
—
|
|
|
(2,965
|
)
|
Net interest expense
|
757
|
|
|
29,777
|
|
|
1,846
|
|
|
(1,879
|
)
|
|
30,501
|
|
Equity earnings of subsidiaries
|
48,158
|
|
|
—
|
|
|
—
|
|
|
(48,158
|
)
|
|
—
|
|
Net income
|
$
|
48,675
|
|
|
$
|
45,316
|
|
|
$
|
2,785
|
|
|
$
|
(48,101
|
)
|
|
$
|
48,675
|
|
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
16 CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (Continued)
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Cal Water
|
|
All Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(In thousands)
|
Operating revenue
|
$
|
—
|
|
|
$
|
552,202
|
|
|
$
|
36,166
|
|
|
$
|
—
|
|
|
$
|
588,368
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
|
|
|
Purchased water
|
—
|
|
|
168,157
|
|
|
400
|
|
|
—
|
|
|
168,557
|
|
Purchased power
|
—
|
|
|
20,282
|
|
|
7,608
|
|
|
—
|
|
|
27,890
|
|
Pump taxes
|
—
|
|
|
11,479
|
|
|
—
|
|
|
—
|
|
|
11,479
|
|
Administrative and general
|
—
|
|
|
101,244
|
|
|
11,866
|
|
|
—
|
|
|
113,110
|
|
Other
|
—
|
|
|
61,154
|
|
|
6,599
|
|
|
(505
|
)
|
|
67,248
|
|
Maintenance
|
—
|
|
|
20,659
|
|
|
804
|
|
|
—
|
|
|
21,463
|
|
Depreciation and amortization
|
228
|
|
|
56,911
|
|
|
4,343
|
|
|
(101
|
)
|
|
61,381
|
|
Income tax (benefit) expense
|
(388
|
)
|
|
23,964
|
|
|
(56
|
)
|
|
1,008
|
|
|
24,528
|
|
Property and other taxes
|
—
|
|
|
18,848
|
|
|
2,711
|
|
|
—
|
|
|
21,559
|
|
Total operating (income) expenses
|
(160
|
)
|
|
482,698
|
|
|
34,275
|
|
|
402
|
|
|
517,215
|
|
Net operating income
|
160
|
|
|
69,504
|
|
|
1,891
|
|
|
(402
|
)
|
|
71,153
|
|
Other Income and Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-regulated revenue
|
1,787
|
|
|
14,460
|
|
|
1,699
|
|
|
(2,322
|
)
|
|
15,624
|
|
Non-regulated expenses
|
—
|
|
|
(12,870
|
)
|
|
(1,174
|
)
|
|
—
|
|
|
(14,044
|
)
|
Gain on sale of non-utility properties
|
—
|
|
|
315
|
|
|
—
|
|
|
—
|
|
|
315
|
|
Income tax expense on other income and expenses
|
(728
|
)
|
|
(776
|
)
|
|
(224
|
)
|
|
967
|
|
|
(761
|
)
|
Net other income
|
1,059
|
|
|
1,129
|
|
|
301
|
|
|
(1,355
|
)
|
|
1,134
|
|
Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
718
|
|
|
28,450
|
|
|
1,834
|
|
|
(1,817
|
)
|
|
29,185
|
|
Less: capitalized interest
|
—
|
|
|
(1,873
|
)
|
|
(42
|
)
|
|
—
|
|
|
(1,915
|
)
|
Net interest expense
|
718
|
|
|
26,577
|
|
|
1,792
|
|
|
(1,817
|
)
|
|
27,270
|
|
Equity earnings of subsidiaries
|
44,516
|
|
|
—
|
|
|
—
|
|
|
(44,516
|
)
|
|
—
|
|
Net income
|
$
|
45,017
|
|
|
$
|
44,056
|
|
|
$
|
400
|
|
|
$
|
(44,456
|
)
|
|
$
|
45,017
|
|
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
16 CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (Continued)
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Cal Water
|
|
All Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(In thousands)
|
Operating revenue
|
$
|
—
|
|
|
$
|
564,508
|
|
|
$
|
32,991
|
|
|
$
|
—
|
|
|
$
|
597,499
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased water
|
—
|
|
|
177,561
|
|
|
323
|
|
|
—
|
|
|
177,884
|
|
Purchased power
|
—
|
|
|
24,089
|
|
|
9,070
|
|
|
—
|
|
|
33,159
|
|
Pump taxes
|
—
|
|
|
12,898
|
|
|
—
|
|
|
—
|
|
|
12,898
|
|
Administrative and general
|
66
|
|
|
87,130
|
|
|
10,177
|
|
|
—
|
|
|
97,373
|
|
Other
|
—
|
|
|
59,291
|
|
|
7,021
|
|
|
(505
|
)
|
|
65,807
|
|
Maintenance
|
—
|
|
|
19,141
|
|
|
713
|
|
|
—
|
|
|
19,854
|
|
Depreciation and amortization
|
214
|
|
|
56,836
|
|
|
4,274
|
|
|
(107
|
)
|
|
61,217
|
|
Income tax (benefit) expense
|
(275
|
)
|
|
27,286
|
|
|
(1,248
|
)
|
|
964
|
|
|
26,727
|
|
Property and other taxes
|
—
|
|
|
18,086
|
|
|
2,647
|
|
|
—
|
|
|
20,733
|
|
Total operating expenses
|
5
|
|
|
482,318
|
|
|
32,977
|
|
|
352
|
|
|
515,652
|
|
Net operating income (loss)
|
(5
|
)
|
|
82,190
|
|
|
14
|
|
|
(352
|
)
|
|
81,847
|
|
Other Income and Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-regulated revenue
|
1,811
|
|
|
16,085
|
|
|
1,592
|
|
|
(2,170
|
)
|
|
17,318
|
|
Non-regulated expenses
|
—
|
|
|
(13,086
|
)
|
|
(1,199
|
)
|
|
—
|
|
|
(14,285
|
)
|
Gain on sale of non-utility properties
|
|
|
51
|
|
|
|
|
|
|
51
|
|
Income tax expense on other income and expenses
|
(738
|
)
|
|
(1,243
|
)
|
|
(184
|
)
|
|
920
|
|
|
(1,245
|
)
|
Net other income
|
1,073
|
|
|
1,807
|
|
|
209
|
|
|
(1,250
|
)
|
|
1,839
|
|
Interest:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: capitalized interest
|
—
|
|
|
(1,460
|
)
|
|
(75
|
)
|
|
—
|
|
|
(1,535
|
)
|
Net interest expense
|
394
|
|
|
26,317
|
|
|
1,903
|
|
|
(1,666
|
)
|
|
26,948
|
|
Equity earnings of subsidiaries
|
56,064
|
|
|
—
|
|
|
—
|
|
|
(56,064
|
)
|
|
—
|
|
Net income (loss)
|
$
|
56,738
|
|
|
$
|
57,680
|
|
|
$
|
(1,680
|
)
|
|
$
|
(56,000
|
)
|
|
$
|
56,738
|
|
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
16 CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (Continued)
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Cal Water
|
|
All Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(In thousands)
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
48,675
|
|
|
$
|
45,316
|
|
|
$
|
2,785
|
|
|
$
|
(48,101
|
)
|
|
$
|
48,675
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity earnings of subsidiaries
|
(48,158
|
)
|
|
—
|
|
|
—
|
|
|
48,158
|
|
|
—
|
|
Dividends received from affiliates
|
33,081
|
|
|
—
|
|
|
—
|
|
|
(33,081
|
)
|
|
—
|
|
Depreciation and amortization
|
220
|
|
|
60,572
|
|
|
4,507
|
|
|
(96
|
)
|
|
65,203
|
|
Amortization of debt premium
|
—
|
|
|
871
|
|
|
—
|
|
|
—
|
|
|
871
|
|
Change in deferred income taxes
|
—
|
|
|
26,818
|
|
|
—
|
|
|
—
|
|
|
26,818
|
|
Change in value of life insurance contract
|
—
|
|
|
(1,026
|
)
|
|
—
|
|
|
—
|
|
|
(1,026
|
)
|
Stock-based compensation
|
2,849
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,849
|
|
Loss on sale of non-utility properties
|
—
|
|
|
146
|
|
|
—
|
|
|
—
|
|
|
146
|
|
Write-off of capital costs
|
—
|
|
|
3,221
|
|
|
—
|
|
|
—
|
|
|
3,221
|
|
Changes in operating assets and liabilities
|
(14
|
)
|
|
6,534
|
|
|
261
|
|
|
—
|
|
|
6,781
|
|
Other changes in noncurrent assets and liabilities
|
(389
|
)
|
|
4,645
|
|
|
1,867
|
|
|
39
|
|
|
6,162
|
|
Net cash provided by operating activities
|
36,264
|
|
|
147,097
|
|
|
9,420
|
|
|
(33,081
|
)
|
|
159,700
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utility plant expenditures
|
—
|
|
|
(224,378
|
)
|
|
(4,560
|
)
|
|
—
|
|
|
(228,938
|
)
|
Proceeds from sale of non-utility assets
|
—
|
|
|
395
|
|
|
—
|
|
|
—
|
|
|
395
|
|
Change in affiliate advances
|
291
|
|
|
1,111
|
|
|
(67
|
)
|
|
(1,335
|
)
|
|
—
|
|
Collection of affiliate short-term borrowings
|
365
|
|
|
42,100
|
|
|
—
|
|
|
(42,465
|
)
|
|
—
|
|
Issuance of affiliate short-term borrowings
|
(2,365
|
)
|
|
(20,600
|
)
|
|
—
|
|
|
22,965
|
|
|
—
|
|
Collection of affiliate long-term debt
|
1,175
|
|
|
—
|
|
|
—
|
|
|
(1,175
|
)
|
|
—
|
|
Life insurance benefits
|
—
|
|
|
495
|
|
|
—
|
|
|
—
|
|
|
495
|
|
Purchase of life insurance
|
—
|
|
|
(2,857
|
)
|
|
—
|
|
|
—
|
|
|
(2,857
|
)
|
Changes in restrict cash
|
—
|
|
|
66
|
|
|
—
|
|
|
—
|
|
|
66
|
|
Net cash used in investing activities
|
(534
|
)
|
|
(203,668
|
)
|
|
(4,627
|
)
|
|
(22,010
|
)
|
|
(230,839
|
)
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
44,100
|
|
|
101,000
|
|
|
—
|
|
|
—
|
|
|
145,100
|
|
Repayment of short-term borrowings
|
(20,615
|
)
|
|
(61,000
|
)
|
|
—
|
|
|
—
|
|
|
(81,615
|
)
|
Change in affiliate advances
|
—
|
|
|
(128
|
)
|
|
(1,207
|
)
|
|
1,335
|
|
|
—
|
|
Proceeds from affiliate short-term borrowings
|
20,600
|
|
|
—
|
|
|
2,365
|
|
|
(22,965
|
)
|
|
—
|
|
Repayment of affiliate short-term borrowings
|
(42,100
|
)
|
|
—
|
|
|
(365
|
)
|
|
42,465
|
|
|
—
|
|
Repayment of affiliates long-term debt
|
—
|
|
|
—
|
|
|
(1,175
|
)
|
|
1,175
|
|
|
—
|
|
Issuance of long term debt, net of expenses
|
—
|
|
|
49,823
|
|
|
—
|
|
|
—
|
|
|
49,823
|
|
Advances and contribution in aid of construction
|
—
|
|
|
21,329
|
|
|
119
|
|
|
—
|
|
|
21,448
|
|
Refunds of advances for construction
|
—
|
|
|
(6,855
|
)
|
|
(30
|
)
|
|
—
|
|
|
(6,885
|
)
|
Repayment of long-term debt
|
—
|
|
|
(6,548
|
)
|
|
(448
|
)
|
|
—
|
|
|
(6,996
|
)
|
Dividends paid to non-affiliates
|
(33,081
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33,081
|
)
|
Dividends paid to affiliates
|
—
|
|
|
(32,105
|
)
|
|
(976
|
)
|
|
33,081
|
|
|
—
|
|
Net cash provided by (used in) financing activities
|
(31,096
|
)
|
|
65,516
|
|
|
(1,717
|
)
|
|
55,091
|
|
|
87,794
|
|
Change in cash and cash equivalents
|
4,634
|
|
|
8,945
|
|
|
3,076
|
|
|
—
|
|
|
16,655
|
|
Cash and cash equivalents at beginning of period
|
582
|
|
|
4,270
|
|
|
3,985
|
|
|
—
|
|
|
8,837
|
|
Cash and cash equivalents at end of year
|
$
|
5,216
|
|
|
$
|
13,215
|
|
|
$
|
7,061
|
|
|
$
|
—
|
|
|
$
|
25,492
|
|
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
16 CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (Continued)
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Cal Water
|
|
All Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(In thousands)
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
45,017
|
|
|
$
|
44,056
|
|
|
$
|
400
|
|
|
$
|
(44,456
|
)
|
|
$
|
45,017
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity earnings of subsidiaries
|
(44,516
|
)
|
|
—
|
|
|
—
|
|
|
44,516
|
|
|
—
|
|
Dividends received from affiliates
|
32,066
|
|
|
—
|
|
|
—
|
|
|
(32,066
|
)
|
|
—
|
|
Depreciation and amortization
|
228
|
|
|
58,385
|
|
|
4,670
|
|
|
(101
|
)
|
|
63,182
|
|
Change in value of life insurance contracts
|
—
|
|
|
218
|
|
|
—
|
|
|
—
|
|
|
218
|
|
Stock-based compensation
|
2,578
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,578
|
|
(Gain) on sale of non-utility properties
|
—
|
|
|
(315
|
)
|
|
—
|
|
|
—
|
|
|
(315
|
)
|
Changes in deferred income taxes
|
—
|
|
|
24,393
|
|
|
—
|
|
|
—
|
|
|
24,393
|
|
Changes in operating assets and liabilities
|
(758
|
)
|
|
(6,417
|
)
|
|
5,392
|
|
|
(94
|
)
|
|
(1,877
|
)
|
Other changes in noncurrent assets and liabilities
|
1,436
|
|
|
14,807
|
|
|
(4,943
|
)
|
|
135
|
|
|
11,435
|
|
Net cash provided by operating activities
|
36,051
|
|
|
135,127
|
|
|
5,519
|
|
|
(32,066
|
)
|
|
144,631
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utility plant expenditures
|
—
|
|
|
(171,645
|
)
|
|
(5,188
|
)
|
|
—
|
|
|
(176,833
|
)
|
Proceeds from sale of non-utility assets
|
—
|
|
|
319
|
|
|
—
|
|
|
—
|
|
|
319
|
|
Investment in affiliates
|
(1,000
|
)
|
|
—
|
|
|
—
|
|
|
1,000
|
|
|
—
|
|
Change in affiliate advances
|
(239
|
)
|
|
(1,111
|
)
|
|
115
|
|
|
1,235
|
|
|
—
|
|
Issuance of affiliate short-term borrowings
|
(3,280
|
)
|
|
(21,500
|
)
|
|
—
|
|
|
24,780
|
|
|
—
|
|
Collection of affiliate short-term borrowings
|
3,000
|
|
|
—
|
|
|
—
|
|
|
(3,000
|
)
|
|
—
|
|
Collection of affiliate-long term debt
|
1,007
|
|
|
—
|
|
|
—
|
|
|
(1,007
|
)
|
|
—
|
|
Purchase of life insurance contracts
|
—
|
|
|
(2,032
|
)
|
|
—
|
|
|
—
|
|
|
(2,032
|
)
|
Changes in Restricted cash
|
—
|
|
|
288
|
|
|
—
|
|
|
—
|
|
|
288
|
|
Net cash used in investing activities
|
(512
|
)
|
|
(195,681
|
)
|
|
(5,073
|
)
|
|
23,008
|
|
|
(178,258
|
)
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings, net of expenses
|
15,101
|
|
|
79,202
|
|
|
—
|
|
|
—
|
|
|
94,303
|
|
Repayment of short-term borrowings
|
(43,600
|
)
|
|
(97,400
|
)
|
|
—
|
|
|
—
|
|
|
(141,000
|
)
|
Investment from affiliates
|
—
|
|
|
—
|
|
|
1,000
|
|
|
(1,000
|
)
|
|
—
|
|
Change in affiliate advances
|
—
|
|
|
397
|
|
|
838
|
|
|
(1,235
|
)
|
|
—
|
|
Proceeds from affiliate short-term borrowings
|
21,500
|
|
|
—
|
|
|
3,280
|
|
|
(24,780
|
)
|
|
—
|
|
Repayment of affiliate short-term borrowings
|
—
|
|
|
—
|
|
|
(3,000
|
)
|
|
3,000
|
|
|
—
|
|
Repayment of affiliate long-term debt
|
—
|
|
|
—
|
|
|
(1,007
|
)
|
|
1,007
|
|
|
—
|
|
Proceeds from long-term debt
|
—
|
|
|
99,293
|
|
|
50
|
|
|
—
|
|
|
99,343
|
|
Advances and contributions in aid for construction
|
—
|
|
|
14,195
|
|
|
1,831
|
|
|
—
|
|
|
16,026
|
|
Refunds of advances for construction
|
—
|
|
|
(6,681
|
)
|
|
(45
|
)
|
|
—
|
|
|
(6,726
|
)
|
Repayment of long-term debt
|
—
|
|
|
(6,528
|
)
|
|
(475
|
)
|
|
—
|
|
|
(7,003
|
)
|
Dividends paid to non-affiliates
|
(32,066
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(32,066
|
)
|
Dividends paid to affiliates
|
—
|
|
|
(31,583
|
)
|
|
(483
|
)
|
|
32,066
|
|
|
—
|
|
Net cash provided by (used in) financing activities
|
(39,065
|
)
|
|
50,895
|
|
|
1,989
|
|
|
9,058
|
|
|
22,877
|
|
Change in cash and cash equivalents
|
(3,526
|
)
|
|
(9,659
|
)
|
|
2,435
|
|
|
—
|
|
|
(10,750
|
)
|
Cash and cash equivalents at beginning of period
|
4,108
|
|
|
13,929
|
|
|
1,550
|
|
|
—
|
|
|
19,587
|
|
Cash and cash equivalents at end of year
|
$
|
582
|
|
|
$
|
4,270
|
|
|
$
|
3,985
|
|
|
$
|
—
|
|
|
$
|
8,837
|
|
CALIFORNIA WATER SERVICE GROUP
Notes to Consolidated Financial Statements (Continued)
December 31, 2016, 2015, and 2014
Dollar amounts in thousands unless otherwise stated
16 CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (Continued)
California Water Service Group
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Cal Water
|
|
All Other
Subsidiaries
|
|
Consolidating
Adjustments
|
|
Consolidated
|
|
(In thousands)
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$
|
56,738
|
|
|
$
|
57,680
|
|
|
$
|
(1,680
|
)
|
|
$
|
(56,000
|
)
|
|
$
|
56,738
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity earnings of subsidiaries
|
(56,064
|
)
|
|
—
|
|
|
—
|
|
|
56,064
|
|
|
—
|
|
Dividends received from affiliates
|
31,063
|
|
|
—
|
|
|
—
|
|
|
(31,063
|
)
|
|
—
|
|
Depreciation and amortization
|
214
|
|
|
58,657
|
|
|
4,558
|
|
|
(107
|
)
|
|
63,322
|
|
Change in value of life insurance contracts
|
—
|
|
|
(994
|
)
|
|
—
|
|
|
—
|
|
|
(994
|
)
|
Stock-based compensation
|
2,195
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,195
|
|
(Gain) on sale of non-utility properties
|
—
|
|
|
(51
|
)
|
|
—
|
|
|
—
|
|
|
(51
|
)
|
Changes in deferred income taxes
|
—
|
|
|
34,125
|
|
|
—
|
|
|
—
|
|
|
34,125
|
|
Changes in operating assets and liabilities
|
16
|
|
|
(11,803
|
)
|
|
(894
|
)
|
|
—
|
|
|
(12,681
|
)
|
Other changes in noncurrent assets and liabilities
|
789
|
|
|
(15,596
|
)
|
|
243
|
|
|
43
|
|
|
(14,521
|
)
|
Net cash provided by operating activities
|
34,951
|
|
|
122,018
|
|
|
2,227
|
|
|
(31,063
|
)
|
|
128,133
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utility plant expenditures
|
—
|
|
|
(125,048
|
)
|
|
(6,967
|
)
|
|
—
|
|
|
(132,015
|
)
|
Proceeds from sale of non-utility assets
|
—
|
|
|
57
|
|
|
—
|
|
|
—
|
|
|
57
|
|
Investment in affiliates
|
(47,650
|
)
|
|
—
|
|
|
—
|
|
|
47,650
|
|
|
—
|
|
Change in affiliate advances
|
(3,200
|
)
|
|
2,147
|
|
|
(80
|
)
|
|
1,133
|
|
|
—
|
|
Collection of affiliate long-term debt
|
938
|
|
|
—
|
|
|
—
|
|
|
(938
|
)
|
|
—
|
|
Purchase of life insurance contracts
|
—
|
|
|
(3,207
|
)
|
|
—
|
|
|
—
|
|
|
(3,207
|
)
|
Changes in Restricted cash
|
—
|
|
|
396
|
|
|
—
|
|
|
—
|
|
|
396
|
|
Net cash used in investing activities
|
(49,912
|
)
|
|
(125,655
|
)
|
|
(7,047
|
)
|
|
47,845
|
|
|
(134,769
|
)
|
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings
|
64,900
|
|
|
52,400
|
|
|
—
|
|
|
—
|
|
|
117,300
|
|
Repayment of short-term borrowings
|
(20,000
|
)
|
|
(65,000
|
)
|
|
—
|
|
|
—
|
|
|
(85,000
|
)
|
Investment from affiliates
|
—
|
|
|
42,000
|
|
|
5,650
|
|
|
(47,650
|
)
|
|
—
|
|
Change in affiliate advances
|
(48
|
)
|
|
270
|
|
|
911
|
|
|
(1,133
|
)
|
|
—
|
|
Repayment of affiliate long-term debt
|
—
|
|
|
—
|
|
|
(938
|
)
|
|
938
|
|
|
—
|
|
Proceeds from long-term debt
|
—
|
|
|
—
|
|
|
497
|
|
|
—
|
|
|
497
|
|
Repayment of long-term debt
|
—
|
|
|
(6,934
|
)
|
|
(1,771
|
)
|
|
—
|
|
|
(8,705
|
)
|
Advances and contributions in aid for construction
|
—
|
|
|
11,219
|
|
|
1,110
|
|
|
—
|
|
|
12,329
|
|
Refunds of advances for construction
|
—
|
|
|
(6,529
|
)
|
|
(112
|
)
|
|
—
|
|
|
(6,641
|
)
|
Dividends paid to non-affiliates
|
(31,063
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(31,063
|
)
|
Dividends paid to affiliates
|
—
|
|
|
(30,650
|
)
|
|
(413
|
)
|
|
31,063
|
|
|
—
|
|
Net cash provided by (used in) financing activities
|
13,789
|
|
|
(3,224
|
)
|
|
4,934
|
|
|
(16,782
|
)
|
|
(1,283
|
)
|
Change in cash and cash equivalents
|
(1,172
|
)
|
|
(6,861
|
)
|
|
114
|
|
|
—
|
|
|
(7,919
|
)
|
Cash and cash equivalents at beginning of period
|
5,280
|
|
|
20,790
|
|
|
1,436
|
|
|
—
|
|
|
27,506
|
|
Cash and cash equivalents at end of year
|
$
|
4,108
|
|
|
$
|
13,929
|
|
|
$
|
1,550
|
|
|
$
|
—
|
|
|
$
|
19,587
|
|