cwt-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-13883

CALIFORNIA WATER SERVICE GROUP

(Exact name of registrant as specified in its charter)


Delaware						77-0448994
(State or other jurisdiction						(I.R.S. Employer Identification No.)
of incorporation or organization)

1720 North First Street

San Jose, California 95112

(Address of principal executive offices)

408-367-8200

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

Title of Each Class:

Trading Symbol(s)

Name of Each Exchange on Which Registered:

Common Stock, $0.01 par value per share

CWT

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit). Yes ý No o

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


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

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

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act) Yes ☐ No ☒

As of June 30, 2022 — there were approximately 54,356,000 shares of common stock outstanding.

Table of Contents

TABLE OF CONTENTS


			Page
PART I Financial Information			3
Item 1 Financial Statements			3
Condensed Consolidated Balance Sheets (unaudited) as of June 30, 2022 and December 31, 2021			3
Condensed Consolidated Statements of Operations (unaudited) For the Three Months Ended June 30, 2022 and 2021			4
Condensed Consolidated Statements of Operations (unaudited) For the Six Months Ended June 30, 2022 and 2021			5
Condensed Consolidated Statements of Cash Flows (unaudited) For the Six Months Ended June 30, 2022 and 2021			6
Notes to Unaudited Condensed Consolidated Financial Statements			7
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3 Quantitative and Qualitative Disclosure about Market Risk			32
Item 4 Controls and Procedures			32
PART II Other Information			32
Item 1 Legal Proceedings			32
Item 1A Risk Factors			33
Item 6 Exhibits			33
Signatures			34

Table of Contents

PART I FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

The condensed consolidated financial statements presented in this filing on Form 10-Q have been prepared by management and are unaudited.

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited (In thousands, except per share data)


	June 30, 2022		December 31, 2021
ASSETS
Utility plant:
Utility plant	$	4,341,433	$	4,197,344
Less accumulated depreciation and amortization	(1,406,757)		(1,350,482)
Net utility plant	2,934,676		2,846,862
Current assets:
Cash and cash equivalents	61,749		78,380
Receivables:
Customers, net	68,404		60,785
Regulatory balancing accounts	56,625		78,597
Other, net	19,803		18,452
Unbilled revenue, net	38,796		32,760
Materials and supplies at weighted average cost	10,567		9,511
Taxes, prepaid expenses, and other assets	20,708		21,973
Total current assets	276,652		300,458
Other assets:
Regulatory assets	287,625		285,692
Goodwill	36,814		36,814
Other assets	146,985		153,445
Total other assets	471,424		475,951
TOTAL ASSETS	$	3,682,752	$	3,623,271
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock, $0.01 par value; 68,000 shares authorized, 54,356 and 53,716 outstanding in 2022 and 2021, respectively	$	544	$	537
Additional paid-in capital	682,353		651,121
Retained earnings	519,625		525,936
Noncontrolling interests	4,784		5,386
Total equity	1,207,306		1,182,980
Long-term debt, net	1,054,170		1,055,794
Total capitalization	2,261,476		2,238,774
Current liabilities:
Current maturities of long-term debt, net	5,783		5,192
Short-term borrowings	70,000		35,000
Accounts payable	139,732		144,369
Regulatory balancing accounts	9,627		17,547
Accrued interest	6,740		6,542
Accrued expenses and other liabilities	54,201		47,926
Total current liabilities	286,083		256,576
Deferred income taxes	300,489		298,945
Pension	94,796		92,287
Regulatory liabilities and other	254,109		252,938
Advances for construction	198,674		198,086
Contributions in aid of construction	287,125		285,665
Commitments and contingencies (Note 10)
TOTAL CAPITALIZATION AND LIABILITIES	$	3,682,752	$	3,623,271

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

Table of Contents

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited (In thousands, except per share data)


For the three months ended	June 30, 2022		June 30, 2021
Operating revenue	$	206,194	$	213,123
Operating expenses:
Operations:
Water production costs	70,907		74,911
Administrative and general	32,686		31,756
Other operations	29,417		20,720
Maintenance	7,615		6,610
Depreciation and amortization	28,773		27,237
Income taxes	1,454		1,972
Property and other taxes	8,053		7,671
Total operating expenses	178,905		170,877
Net operating income	27,289		42,246
Other income and expenses:
Non-regulated revenue	7,002		5,374
Non-regulated expenses	(8,541)		(1,815)
Other components of net periodic benefit credit	3,765		2,688
Allowance for equity funds used during construction	1,042		848
Income tax expense on other income and expenses	(345)		(512)
Net other income	2,923		6,583
Interest expense:
Interest expense	11,586		11,206
Allowance for borrowed funds used during construction	(589)		(453)
Net interest expense	10,997		10,753
Net income	19,215		38,076
Net loss attributable to noncontrolling interests	(269)		(149)
Net income attributable to California Water Service Group	$	19,484	$	38,225
Earnings per share of common stock:
Basic	$	0.36	$	0.75
Diluted	0.36		0.75
Weighted average shares outstanding:
Basic	54,007		51,080
Diluted	54,042		51,080

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

Table of Contents

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited (In thousands, except per share data)


For the six months ended	June 30, 2022		June 30, 2021
Operating revenue	$	379,187	$	360,860
Operating expenses:
Operations:
Water production costs	132,445		129,737
Administrative and general	66,097		62,125
Other operations	55,269		38,632
Maintenance	14,956		13,379
Depreciation and amortization	57,543		54,284
Income taxes	37