AMERICAN STATES WATER CO [AWR] Filings

10-Q 1 awr-20220630.htm 10-Q awr-20220630

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 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 July 29, 2022, the number of Common Shares outstanding of American States Water Company was 36,956,824 shares. As of July 29, 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 June 30, 202 2 and December 31, 20 21	2

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

	Consolidated Statements of Changes in Common Shareholders' Equity - For the Three and Six Months Ended June 30, 2022	5

	Consolidated Statements of Changes in Common Shareholders' Equity - For the Three and Six Months Ended June 30, 2021	6

	Consolidated Statements of Cash Flows of American States Water Company for the Six Months Ended June 30, 202 2 and 202 1	7

	Balance Sheets of Golden State Water Company as of June 30, 202 2 and December 31, 202 1	8

	Statements of Income of Golden State Water Company for the Three and Six Months Ended June 30, 202 2 and 202 1	10

	Statements of Changes in Common Shareholder's Equity - For the Three and Six Months Ended June 30, 202 2	11

	Statements of Changes in Common Shareholder's Equity - For the Three and Six Months Ended June 30, 2021	12


	Statements of Cash Flows of Golden State Water Company for the Six Months Ended June 30, 202 2	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	55

Item 4:	Controls and Procedures	55

Part II	Other Information

Item 1:	Legal Proceedings	56

Item 1A:	Risk Factors	56

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	57

Item 3:	Defaults Upon Senior Securities	57

Item 4:	Mine Safety Disclosure	57

Item 5:	Other Information	57

Item 6:	Exhibits	58

	Signatures	61

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)	June 30, 2022		December 31, 2021
Property, Plant and Equipment
Regulated utility plant, at cost	$	2,242,589	$	2,183,183
Non-utility property, at cost	37,813		37,085
Total	2,280,402		2,220,268
Less - Accumulated depreciation	(596,915)		(594,264)
Net property, plant and equipment	1,683,487		1,626,004

Other Property and Investments
Goodwill	1,116		1,116
Other property and investments	35,527		40,806
Total other property and investments	36,643		41,922

Current Assets
Cash and cash equivalents	10,825		4,963
Accounts receivable — customers (less allowance for doubtful accounts of $7,746 in 2022 and $3,516 in 2021)	27,119		34,416
Unbilled receivable	24,811		27,147
Receivable from the U.S. government (Note 2)	23,110		27,827
Other accounts receivable (less allowance for doubtful accounts of $53 in 2022 and $53 in 2021)	3,972		6,510
Income taxes receivable	94		236
Materials and supplies, at weighted average cost	13,151		12,163
Regulatory assets — current	10,325		8,897
Prepayments and other current assets	8,458		5,317
Unrealized gains on purchased power contracts	8,114		4,441
Contract assets (Note 2)	8,991		6,135
Total current assets	138,970		138,052

Other Assets
Unbilled revenue — receivable from the U.S. government	8,064		9,671
Receivable from the U.S. government (Note 2)	50,050		51,991
Contract assets (Note 2)	5,186		3,452
Operating lease right-of-use assets	9,617		10,479
Regulatory assets	2,263		3,182
Other	15,366		16,230
Total other assets	90,546		95,005

Total Assets	$	1,949,646	$	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)	June 30, 2022		December 31, 2021
Capitalization
Common shares, no par value
Authorized: 60,000,000 shares
Outstanding: 36,956,027 shares in 2022 and 36,936,285 shares in 2021	$	259,656	$	258,442
Earnings reinvested in the business	434,569		427,505
Total common shareholders’ equity	694,225		685,947
Long-term debt	446,940		412,176
Total capitalization	1,141,165		1,098,123

Current Liabilities
Notes payable to bank	223,500		31,000
Long-term debt — current	394		377
Accounts payable	71,929		65,902
Income taxes payable	3,350		4,662
Accrued other taxes	13,847		17,137
Accrued employee expenses	13,160		16,256
Accrued interest	4,944		4,545
Regulatory liabilities	3,444		1,896
Contract liabilities (Note 2)	322		257
Operating lease liabilities	1,968		2,044
Other	11,878		11,498
Total current liabilities	348,736		155,574

Other Credits
Notes payable to bank	—		174,500
Advances for construction	65,403		66,727
Contributions in aid of construction - net	146,578		147,482
Deferred income taxes	142,340		140,290
Regulatory liabilities	20,382		32,979
Unamortized investment tax credits	1,117		1,153
Accrued pension and other postretirement benefits	61,764		61,365
Operating lease liabilities	8,095		8,920
Other	14,066		13,870
Total other credits	459,745		647,286

Commitments and Contingencies (Note 9)

Total Capitalization and Liabilities	$	1,949,646	$	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 SIX MONTHS ENDED

JUNE 30, 2022 AND 2021

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share amounts)	2022		2021		2022		2021
Operating Revenues
Water	$	90,856	$	91,633	$	164,762	$	166,662
Electric	8,217		8,108		20,109		19,647
Contracted services	23,534		28,673		46,306		59,165
Total operating revenues	122,607		128,414		231,177		245,474

Operating Expenses
Water purchased	19,963		20,916		37,811		36,155
Power purchased for pumping	2,930		2,861		5,304		5,006
Groundwater production assessment	4,865		5,220		9,076		9,660
Power purchased for resale	1,347		2,130		6,513		5,328
Supply cost balancing accounts	(457)		(3,086)		(6,800)		(5,513)
Other operation	9,665		8,534		18,332		16,751
Administrative and general	20,464		20,630		43,436		42,683
Depreciation and amortization	10,171		9,770		20,285		19,330
Maintenance	3,572		3,267		6,712		5,929
Property and other taxes	5,452		5,273		11,305		11,213
ASUS construction	10,318		15,052		20,521		30,756
Total operating expenses	88,290		90,567		172,495		177,298

Operating Income	34,317		37,847		58,682		68,176

Other Income and Expenses
Interest expense	(6,309)		(6,032)		(11,915)		(12,290)
Interest income	437		348		720		803
Other, net	(2,289)		1,875		(2,708)		2,531
Total other income and expenses, net	(8,161)		(3,809)		(13,903)		(8,956)

Income before income tax expense	26,156		34,038		44,779		59,220

Income tax expense	6,205		7,462		10,666		13,376

Net Income	$	19,951	$	26,576	$	34,113	$	45,844

Weighted Average Number of Common Shares Outstanding	36,956		36,916		36,950		36,907
Basic Earnings Per Common Share	$	0.54	$	0.72	$	0.92	$	1.24

Weighted Average Number of Diluted Shares	37,039		37,007		37,029		36,993
Fully Diluted Earnings Per Common Share	$	0.54	$	0.72	$	0.92	$	1.24

Dividends Paid Per Common Share	$	0.365	$	0.335	$	0.730	$	0.670

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 THREE AND SIX MONTHS ENDED JUNE 30, 2022

(Unaudited)


	Three and Six Months Ended June 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

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 THREE AND SIX MONTHS ENDED JUNE 30, 2021

(Unaudited)


	Three and Six Months Ended June 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

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 SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(Unaudited)


	Six Months Ended June 30,
(in thousands)	2022		2021
Cash Flows From Operating Activities:
Net income	$	34,113	$	45,844
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	20,475		19,520
Provision for doubtful accounts	549		548
Deferred income taxes and investment tax credits	(152)		353
Stock-based compensation expense	2,183		2,379
Loss (gain) on investments held in a trust	5,171		(2,208)
Other — net	178		215
Changes in assets and liabilities:
Accounts receivable — customers	2,455		(2,087)
Unbilled receivable	3,943		(2,128)
Other accounts receivable	2,538		(1,001)
Receivables from the U.S. government	6,658		(3,584)
Materials and supplies	(988)		(154)
Prepayments and other assets	(1,215)		(1,997)
Contract assets	(4,590)		(1,316)
Regulatory assets	(8,404)		(8,802)
Accounts payable	1,509		2,266
Income taxes receivable/payable	(1,170)		(7,437)
Contract liabilities	65		(1,112)
Accrued pension and other postretirement benefits	83		3,595
Other liabilities	(6,496)		(1,750)
Net cash provided	56,905		41,144

Cash Flows From Investing Activities:
Capital expenditures	(76,552)		(76,147)
Other investing activities	136		64
Net cash used	(76,416)		(76,083)

Cash Flows From Financing Activities:

Receipt of advances for and contributions in aid of construction	4,111		6,837
Refunds on advances for construction	(3,174)		(2,922)
Retirement or repayments of long-term debt	(205)		(28,156)
Proceeds from the issuance of long-term debt, net of issuance costs	34,820		—
Net change in notes payable to banks	18,000		53,800
Dividends paid	(26,974)		(24,727)
Other financing activities	(1,205)		(1,271)
Net cash provided	25,373		3,561
Net change in cash and cash equivalents	5,862		(31,378)
Cash and cash equivalents, beginning of period	4,963		36,737
Cash and cash equivalents, end of period	$	10,825	$	5,359

Non-cash transactions:
Accrued payables for investment in utility plant	$	37,373	$	27,758
Property installed by developers and conveyed	$	255	$	3,401

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)	June 30, 2022		December 31, 2021
Utility Plant
Utility plant, at cost	$	2,076,132	$	2,022,417
Less - Accumulated depreciation	(522,743)		(522,672)
Net utility plant	1,553,389		1,499,745

Other Property and Investments	33,386		38,659

Current Assets
Cash and cash equivalents	3,458		525
Accounts receivable — customers (less allowance for doubtful accounts of $7,086 in 2022 and $3,168 in 2021)	25,118		31,870
Unbilled receivable	19,566		20,525
Other accounts receivable (less allowance for doubtful accounts of $53 in 2022 and $53 in 2021)	2,524		3,791


Materials and supplies, at average cost	5,536		5,384
Regulatory assets — current	10,325		8,897
Prepayments and other current assets	6,353		4,223
Total current assets	72,880		75,215

Other Assets

Operating lease right-of-use assets	9,210		10,439

Other	14,422		14,424
Total other assets	23,632		24,863

Total Assets	$	1,683,287	$	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)	June 30, 2022		December 31, 2021
Capitalization
Common Shares, no par value:
Authorized: 1,000 shares
Outstanding: 170 shares in 2022 and 2021	$	357,616	$	356,530
Earnings reinvested in the business	255,541		259,156
Total common shareholder’s equity	613,157		615,686
Long-term debt	412,118		412,176
Total capitalization	1,025,275		1,027,862

Current Liabilities
Intercompany payable to Parent	102,399		—
Long-term debt — current	394		377
Accounts payable	60,194		50,627
Accrued other taxes	12,453		14,960
Accrued employee expenses	10,506		12,867
Accrued interest	4,252		4,210
Income taxes payable to Parent	4,420		2,972
Operating lease liabilities	1,846		2,029
Other	10,947		10,505
Total current liabilities	207,411		98,547

Other Credits
Intercompany payable to Parent	—		49,280
Advances for construction	65,383		66,707
Contributions in aid of construction — net	146,578		145,848
Deferred income taxes	133,902		132,314
Regulatory liabilities	20,382		32,979
Unamortized investment tax credits	1,117		1,153
Accrued pension and other postretirement benefits	61,499		61,170
Operating lease liabilities	7,819		8,891
Other	13,921		13,731
Total other credits	450,601		512,073

Commitments and Contingencies (Note 9)

Total Capitalization and Liabilities	$	1,683,287	$	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 SIX MONTHS ENDED

JUNE 30, 2022 AND 2021

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2022		2021		2022		2021
Operating Revenues
Water	$	90,856	$	91,633	$	164,762	$	166,662
Total operating revenues	90,856		91,633		164,762		166,662

Operating Expenses
Water purchased	19,963		20,916		37,811		36,155
Power purchased for pumping	2,930		2,861		5,304		5,006
Groundwater production assessment	4,865		5,220		9,076		9,660
Supply cost balancing accounts	(1,500)		(3,411)		(6,567)		(6,331)
Other operation	7,281		6,376		13,635		12,189
Administrative and general	13,987		13,861		29,583		28,296
Depreciation and amortization	8,553		8,213		17,098		16,275
Maintenance	2,511		2,356		4,667		4,096
Property and other taxes	4,555		4,464		9,445		9,480

Total operating expenses	63,145		60,856		120,052		114,826

Operating Income	27,711		30,777		44,710		51,836

Other Income and Expenses
Interest expense	(5,464)		(5,643)		(10,700)		(11,441)
Interest income	146		179		237		266
Other, net	(2,402)		1,604		(3,000)		2,255
Total other income and expenses, net	(7,720)		(3,860)		(13,463)		(8,920)

Income before income tax expense	19,991		26,917		31,247		42,916

Income tax expense	5,103		5,957		7,792		9,725

Net Income	$	14,888	$	20,960	$	23,455	$	33,191

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

GOLDEN STATE WATER COMPANY

STATEMENTS OF CHANGES

IN COMMON SHAREHOLDER'S EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022

(Unaudited)


	Three and Six Months Ended June 30, 2022
	Common Shares			Reinvested
	Number			Earnings
	of			in the
(in thousands, except number of shares)	Shares	Amount		Business		Total
Balances at December 31, 2021	170	$	356,530	$	259,156	$	615,686
Add:
Net income				8,567		8,567
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		742				742
Dividend equivalent rights on stock-based awards not paid in cash		39				39
Deduct:
Dividends on Common Shares				13,500		13,500
Dividend equivalent rights on stock-based awards not paid in cash				39		39
Balances at March 31, 2022	170	$	357,311	$	254,184	$	611,495

Add:
Net income				14,888		14,888
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		274				274
Dividend equivalent rights on stock-based awards not paid in cash		31				31
Deduct:
Dividends on Common Shares				13,500		13,500
Dividend equivalent rights on stock-based awards not paid in cash				31		31
Balances at June 30, 2022