AMERICAN STATES WATER CO [AWR] Filings

10-Q 1 awr-20220930.htm 10-Q awr-20220930

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 September 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 001-14431

American States Water Company

(Exact Name of Registrant as Specified in Its Charter)

California

95-4676679

(State or Other Jurisdiction of Incorporation or Organization)

(IRS Employer Identification No.)

630 E. Foothill Blvd

San Dimas

91773-1212

(Address of Principal Executive Offices)

(Zip Code)

(909) 394-3600

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

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

Commission file number 001-12008

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

Title of each class

Trading symbol

Name of each exchange on which registered

Common shares

AWR

New York Stock Exchange

Golden State Water Company

(Exact Name of Registrant as Specified in Its Charter)

California

95-1243678

(State or Other Jurisdiction of Incorporation or Organization)

(IRS Employer Identification No.)

630 E. Foothill Blvd

San Dimas

91773-1212

(Address of Principal Executive Offices)

(Zip Code)

(909) 394-3600

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

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

Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

American States Water Company

Yes

Golden State Water Company

Yes

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

American States Water Company

Yes

Golden State Water Company

Yes

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

American States Water Company

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

Golden State Water Company

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.¨

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

American States Water Company

Yes

☐

Golden State Water Company

Yes

☐

As of November 4, 2022, the number of Common Shares outstanding of American States Water Company was 36,960,897 shares. As of November 4, 2022, all of the 170 outstanding Common Shares of Golden State Water Company were owned by American States Water Company.

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

AMERICAN STATES WATER COMPANY

and

GOLDEN STATE WATER COMPANY

FORM 10-Q

INDEX


Part I	Financial Information	3

Item 1:	Financial Statements	1

	Consolidated Balance Sheets of American States Water Company as of September 30, 2022 and December 31, 2021	2

	Consolidated Statements of Income of American States Water Company for the Three and Nine Months Ended September 30, 2022 and 2021	4

	Consolidated Statements of Changes in Common Shareholders' Equity for the Nine Months Ended September 30, 2022	5

	Consolidated Statements of Changes in Common Shareholders' Equity for the Nine Months Ended September 30, 2021	6

	Consolidated Statements of Cash Flows of American States Water Company for the Nine Months Ended September 30, 2022 and 2021	7

	Balance Sheets of Golden State Water Company as of September 30, 2022 and December 31, 2021	8

	Statements of Income of Golden State Water Company for the Three and Nine Months Ended September 30, 2022 and 2021	10

	Statements of Changes in Common Shareholder's Equity for the Nine Months Ended September 30, 2022	11

	Statements of Changes in Common Shareholder's Equity for the Nine Months Ended September 30, 2021	12


	Statements of Cash Flows of Golden State Water Company for the Nine Months Ended September 30, 2022 and 2021	13

	Notes to Consolidated Financial Statements	14

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3:	Quantitative and Qualitative Disclosures About Market Risk	57

Item 4:	Controls and Procedures	57

Part II	Other Information

Item 1:	Legal Proceedings	58

Item 1A:	Risk Factors	58

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	59

Item 3:	Defaults Upon Senior Securities	59

Item 4:	Mine Safety Disclosure	59

Item 5:	Other Information	59

Item 6:	Exhibits	60

	Signatures	63

Table of Contents

PART I

Item 1. Financial Statements

General

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

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

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

Filing Format

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

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

Forward-Looking Information

This Form 10-Q and the documents incorporated herein contain forward-looking statements intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current estimates, expectations and projections about future events and assumptions regarding these events and include statements regarding management’s goals, beliefs, plans or current expectations, taking into account the information currently available to management. Forward-looking statements are not statements of historical facts. For example, when we use words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may” and other words that convey uncertainty of future events or outcomes, we are making forward-looking statements. We are not able to predict all the factors that may affect future results. We caution you that any forward-looking statements made by us are not guarantees of future performance and the actual results may differ materially from those in our forward-looking statements.

Factors affecting our financial performance are summarized under Forward-Looking Information and under “Risk Factors” in our Form 10-K for the period ended December 31, 2021 filed with the SEC. Please consider our forward-looking statements in light of these risks as you read this Form 10-Q. We qualify all of our forward-looking statements by these cautionary statements.

Table of Contents

AMERICAN STATES WATER COMPANY

CONSOLIDATED BALANCE SHEETS

ASSETS

(Unaudited)


(in thousands)	September 30, 2022		December 31, 2021
Property, Plant and Equipment
Regulated utility plant, at cost	$	2,284,066	$	2,183,183
Non-utility property, at cost	37,838		37,085
Total	2,321,904		2,220,268
Less - Accumulated depreciation	(603,752)		(594,264)
Net property, plant and equipment	1,718,152		1,626,004

Other Property and Investments
Goodwill	1,116		1,116
Other property and investments	34,113		40,806
Total other property and investments	35,229		41,922

Current Assets
Cash and cash equivalents	2,258		4,963
Accounts receivable — customers (less allowance for doubtful accounts of $6,598 in 2022 and $3,516 in 2021)	31,829		34,416
Unbilled receivable	25,165		27,147
Receivable from the U.S. government (Note 2)	25,493		27,827
Other accounts receivable (less allowance for doubtful accounts of $53 in 2022 and $53 in 2021)	3,369		6,510
Income taxes receivable	91		236
Materials and supplies, at weighted average cost	13,444		12,163
Regulatory assets — current	13,048		8,897
Prepayments and other current assets	7,292		5,317
Unrealized gains on purchased power contracts	7,569		4,441
Contract assets (Note 2)	9,232		6,135
Total current assets	138,790		138,052

Other Assets
Unbilled revenue — receivable from the U.S. government	7,260		9,671
Receivable from the U.S. government (Note 2)	48,992		51,991
Contract assets (Note 2)	4,348		3,452
Operating lease right-of-use assets	9,172		10,479
Regulatory assets	5,291		3,182
Other	15,341		16,230
Total other assets	90,404		95,005

Total Assets	$	1,982,575	$	1,900,983

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

Table of Contents

AMERICAN STATES WATER COMPANY

CONSOLIDATED BALANCE SHEETS

CAPITALIZATION AND LIABILITIES

(Unaudited)


(in thousands, except number of shares)	September 30, 2022		December 31, 2021
Capitalization
Common shares, no par value
Authorized: 60,000,000 shares
Outstanding: 36,960,897 shares in 2022 and 36,936,285 shares in 2021	$	260,011	$	258,442
Earnings reinvested in the business	445,493		427,505
Total common shareholders’ equity	705,504		685,947
Long-term debt	446,817		412,176
Total capitalization	1,152,321		1,098,123

Current Liabilities
Notes payable to bank	238,500		31,000
Long-term debt — current	399		377
Accounts payable	69,982		65,902
Income taxes payable	5,464		4,662
Accrued other taxes	15,760		17,137
Accrued employee expenses	15,529		16,256
Accrued interest	7,234		4,545
Regulatory liabilities	4,821		1,896
Contract liabilities (Note 2)	1,253		257
Operating lease liabilities	1,892		2,044
Other	12,345		11,498
Total current liabilities	373,179		155,574

Other Credits
Notes payable to bank	3,000		174,500
Advances for construction	65,210		66,727
Contributions in aid of construction - net	146,711		147,482
Deferred income taxes	142,726		140,290
Regulatory liabilities	17,609		32,979
Unamortized investment tax credits	1,099		1,153
Accrued pension and other postretirement benefits	58,835		61,365
Operating lease liabilities	7,721		8,920
Other	14,164		13,870
Total other credits	457,075		647,286

Commitments and Contingencies (Note 9)

Total Capitalization and Liabilities	$	1,982,575	$	1,900,983

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

Table of Contents

AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2022 AND 2021

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)	2022		2021		2022		2021
Operating Revenues
Water	$	100,799	$	102,768	$	265,561	$	269,430
Electric	8,919		8,564		29,028		28,211
Contracted services	25,266		25,423		71,572		84,588
Total operating revenues	134,984		136,755		366,161		382,229

Operating Expenses
Water purchased	20,304		24,093		58,115		60,248
Power purchased for pumping	3,878		3,584		9,182		8,590
Groundwater production assessment	5,650		5,185		14,726		14,845
Power purchased for resale	2,673		2,875		9,186		8,203
Supply cost balancing accounts	640		(2,446)		(6,160)		(7,959)
Other operation	9,696		9,414		28,028		26,165
Administrative and general	21,594		20,255		65,030		62,938
Depreciation and amortization	10,117		9,826		30,402		29,156
Maintenance	3,408		2,979		10,120		8,908
Property and other taxes	5,942		6,052		17,247		17,265
ASUS construction	10,742		12,154		31,263		42,910
Total operating expenses	94,644		93,971		267,139		271,269

Operating Income	40,340		42,784		99,022		110,960

Other Income and Expenses
Interest expense	(7,331)		(5,553)		(19,246)		(17,843)
Interest income	667		333		1,387		1,136
Other, net	338		467		(2,370)		2,998
Total other income and expenses, net	(6,326)		(4,753)		(20,229)		(13,709)

Income before income tax expense	34,014		38,031		78,793		97,251

Income tax expense	8,360		9,878		19,026		23,254

Net Income	$	25,654	$	28,153	$	59,767	$	73,997

Weighted Average Number of Common Shares Outstanding	36,958		36,933		36,953		36,916
Basic Earnings Per Common Share	$	0.69	$	0.76	$	1.61	$	2.00

Weighted Average Number of Diluted Shares	37,042		37,025		37,034		37,004
Fully Diluted Earnings Per Common Share	$	0.69	$	0.76	$	1.61	$	2.00

Dividends Paid Per Common Share	$	0.3975	$	0.365	$	1.1275	$	1.035

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

AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF CHANGES

IN COMMON SHAREHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

(Unaudited)


	Nine Months Ended September 30, 2022
	Common Shares			Reinvested
	Number			Earnings
	of			in the
(in thousands)	Shares	Amount		Business		Total
Balances at December 31, 2021	36,936	$	258,442	$	427,505	$	685,947
Add:
Net income				14,162		14,162
Exercise of stock options and other issuances of Common Shares	20	—				—
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		801				801
Dividend equivalent rights on stock-based awards not paid in cash		41				41
Deduct:
Dividends on Common Shares				13,485		13,485
Dividend equivalent rights on stock-based awards not paid in cash				41		41
Balances at March 31, 2022	36,956	$	259,284	$	428,141	$	687,425

Add:
Net income				19,951		19,951
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		338				338
Dividend equivalent rights on stock-based awards not paid in cash		34				34
Deduct:
Dividends on Common Shares				13,489		13,489
Dividend equivalent rights on stock-based awards not paid in cash				34		34
Balances at June 30, 2022	36,956	$	259,656	$	434,569	$	694,225

Add:
Net income				25,654		25,654
Exercise of stock options and other issuances of Common Shares	5	—				—
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		315				315
Dividend equivalent rights on stock-based awards not paid in cash		40				40
Deduct:
Dividends on Common Shares				14,690		14,690
Dividend equivalent rights on stock-based awards not paid in cash				40		40
Balances at September 30, 2022	36,961	$	260,011	$	445,493	$	705,504

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

AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF CHANGES

IN COMMON SHAREHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

(Unaudited)


	Nine Months Ended September 30, 2021
	Common Shares			Reinvested
	Number			Earnings
	of			in the
(in thousands)	Shares	Amount		Business		Total
Balances at December 31, 2020	36,889	$	256,666	$	385,007	$	641,673
Add:
Net income				19,268		19,268
Exercise of stock options and other issuances of Common Shares	24	—				—
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		813				813
Dividend equivalent rights on stock-based awards not paid in cash		49				49
Deduct:
Dividends on Common Shares				12,361		12,361
Dividend equivalent rights on stock-based awards not paid in cash				49		49
Balances at March 31, 2021	36,913	$	257,528	$	391,865	$	649,393

Add:
Net income				26,576		26,576
Exercise of stock options and other issuances of Common Shares	19	—				—
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		531				531
Dividend equivalent rights on stock-based awards not paid in cash		42				42
Deduct:
Dividends on Common Shares				12,366		12,366
Dividend equivalent rights on stock-based awards not paid in cash				42		42
Balances at June 30, 2021	36,932	$	258,101	$	406,033	$	664,134

Add:
Net income				28,153		28,153
Exercise of stock options and other issuances of Common Shares	4	—				—
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		128				128
Dividend equivalent rights on stock-based awards not paid in cash		35				35
Deduct:
Dividends on Common Shares				13,480		13,480
Dividend equivalent rights on stock-based awards not paid in cash				35		35
Balances at September 30, 2021	36,936	$	258,264	$	420,671	$	678,935

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

Table of Contents

AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(Unaudited)


	Nine Months Ended September 30,
(in thousands)	2022		2021
Cash Flows From Operating Activities:
Net income	$	59,767	$	73,997
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	30,688		29,440
Provision for doubtful accounts	833		873
Deferred income taxes and investment tax credits	(1,098)		1,205
Stock-based compensation expense	2,439		2,456
Loss (gain) on investments held in a trust	6,445		(2,313)
Other — net	263		273
Changes in assets and liabilities:
Accounts receivable — customers	(1,760)		(8,748)
Unbilled receivable	4,393		2,564
Other accounts receivable	3,179		(935)
Receivables from the U.S. government	5,333		(7,847)
Materials and supplies	(1,281)		(1,621)
Prepayments and other assets	520		(1,139)
Contract assets	(3,993)		172
Regulatory assets	(14,065)		(8,319)
Accounts payable	(575)		2,924
Income taxes receivable/payable	947		(3,235)
Contract liabilities	996		(1,245)
Accrued pension and other postretirement benefits	(3,070)		1,416
Other liabilities	(28)		2,005
Net cash provided	89,933		81,923

Cash Flows From Investing Activities:
Capital expenditures	(122,056)		(106,721)
Other investing activities	321		229
Net cash used	(121,735)		(106,492)

Cash Flows From Financing Activities:

Receipt of advances for and contributions in aid of construction	5,489		10,636
Refunds on advances for construction	(3,941)		(3,613)
Repayments of long-term debt	(377)		(28,356)
Proceeds from the issuance of long-term debt, net of issuance costs	34,826		—
Net change in notes payable to banks	36,000		55,800
Dividends paid	(41,664)		(38,207)
Other financing activities	(1,236)		(1,287)
Net cash provided (used)	29,097		(5,027)
Net change in cash and cash equivalents	(2,705)		(29,596)
Cash and cash equivalents, beginning of period	4,963		36,737
Cash and cash equivalents, end of period	$	2,258	$	7,141

Non-cash transactions:
Accrued payables for investment in utility plant	$	37,510	$	29,101
Property installed by developers and conveyed	$	511	$	6,093

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

Table of Contents

GOLDEN STATE WATER COMPANY

BALANCE SHEETS

ASSETS

(Unaudited)


(in thousands)	September 30, 2022		December 31, 2021
Utility Plant
Utility plant, at cost	$	2,112,923	$	2,022,417
Less - Accumulated depreciation	(528,035)		(522,672)
Net utility plant	1,584,888		1,499,745

Other Property and Investments	31,975		38,659

Current Assets
Cash and cash equivalents	386		525
Accounts receivable — customers (less allowance for doubtful accounts of $6,315 in 2022 and $3,168 in 2021)	29,431		31,870
Unbilled receivable	18,181		20,525
Other accounts receivable (less allowance for doubtful accounts of $53 in 2022 and $53 in 2021)	2,068		3,791


Materials and supplies, at average cost	5,323		5,384
Regulatory assets — current	13,048		8,897
Prepayments and other current assets	5,642		4,223
Total current assets	74,079		75,215

Other Assets
Operating lease right-of-use assets	8,804		10,439

Other	14,427		14,424
Total other assets	23,231		24,863

Total Assets	$	1,714,173	$	1,638,482

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

Table of Contents

GOLDEN STATE WATER COMPANY

BALANCE SHEETS

CAPITALIZATION AND LIABILITIES

(Unaudited)


(in thousands, except number of shares)	September 30, 2022		December 31, 2021
Capitalization
Common Shares, no par value:
Authorized: 1,000 shares
Outstanding: 170 shares in 2022 and 2021	$	357,970	$	356,530
Earnings reinvested in the business	275,429		259,156
Total common shareholder’s equity	633,399		615,686
Long-term debt	411,985		412,176
Total capitalization	1,045,384		1,027,862

Current Liabilities
Intercompany payable to Parent	112,235		—
Long-term debt — current	399		377
Accounts payable	60,033		50,627
Accrued other taxes	13,879		14,960
Accrued employee expenses	12,430		12,867
Accrued interest	6,052		4,210
Income taxes payable to Parent	6,169		2,972
Operating lease liabilities	1,780		2,029
Other	11,410		10,505
Total current liabilities	224,387		98,547

Other Credits
Intercompany payable to Parent	—		49,280
Advances for construction	65,190		66,707
Contributions in aid of construction — net	146,711		145,848
Deferred income taxes	133,762		132,314
Regulatory liabilities	17,609		32,979
Unamortized investment tax credits	1,099		1,153
Accrued pension and other postretirement benefits	58,535		61,170
Operating lease liabilities	7,477		8,891
Other	14,019		13,731
Total other credits	444,402		512,073

Commitments and Contingencies (Note 9)

Total Capitalization and Liabilities	$	1,714,173	$	1,638,482

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

Table of Contents

GOLDEN STATE WATER COMPANY

STATEMENTS OF INCOME

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2022 AND 2021

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2022		2021		2022		2021
Operating Revenues
Water	$	100,799	$	102,768	$	265,561	$	269,430
Total operating revenues	100,799		102,768		265,561		269,430

Operating Expenses
Water purchased	20,304		24,093		58,115		60,248
Power purchased for pumping	3,878		3,584		9,182		8,590
Groundwater production assessment	5,650		5,185		14,726		14,845
Supply cost balancing accounts	885		(2,114)		(5,682)		(8,445)
Other operation	7,273		7,287		20,908		19,476
Administrative and general	14,362		13,677		43,945		41,973
Depreciation and amortization	8,475		8,272		25,573		24,547
Maintenance	2,526		2,140		7,193		6,236
Property and other taxes	4,995		5,185		14,440		14,665

Total operating expenses	68,348		67,309		188,400		182,135

Operating Income	32,451		35,459		77,161		87,295

Other Income and Expenses
Interest expense	(5,950)		(5,184)		(16,650)		(16,625)
Interest income	325		86		562		352
Other, net	(70)		429		(3,070)		2,684
Total other income and expenses, net	(5,695)		(4,669)		(19,158)		(13,589)

Income before income tax expense	26,756		30,790		58,003		73,706

In