AMERICAN STATES WATER CO [AWR] Filings

10-Q 1 awr-20220331.htm 10-Q awr-20220331

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 March 31, 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 April 28, 2022, the number of Common Shares outstanding of American States Water Company was 36,955,756 shares. As of April 28, 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

Item 1:	Financial Statements	1

	Consolidated Balance Sheets of American States Water Company as of March 3 1 , 202 2 and December 31, 202 1	2

	Consolidated Statements of Income of American States Water Company for the Three Months Ended March 31 , 202 2 and 202 1	4

	Consolidated Statements of Changes in Common Shareholders' Equity - For the Three Months Ended March 31, 2022 and 2021	5

	Consolidated Statements of Cash Flows of American States Water Company for the Three Months Ended Ma rch 3 1 , 202 2 and 202 1	6

	Balance Sheets of Golden State Water Company as of March 3 1 , 202 2 and December 31, 202 1	7

	Statements of Income of Golden State Water Company for the Three Months Ended March 3 1, 202 2 and 202 1	9

	Statements of Changes in Common Shareholder's Equity - For the Three Months Ended March 3 1 , 202 2 and 2021	10

	Statements of Cash Flows of Golden State Water Company for the Three Months Ended March 31, 2022 and 2021	11

	Notes to Consolidated Financial Statements	12

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3:	Quantitative and Qualitative Disclosures About Market Risk	41

Item 4:	Controls and Procedures	41

Part II	Other Information

Item 1:	Legal Proceedings	42

Item 1A:	Risk Factors	42

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	43

Item 3:	Defaults Upon Senior Securities	43

Item 4:	Mine Safety Disclosure	43

Item 5:	Other Information	43

Item 6:	Exhibits	44

	Signatures	47

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 ("SEC").

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)	March 31, 2022		December 31, 2021
Property, Plant and Equipment
Regulated utility plant, at cost	$	2,205,801	$	2,183,183
Non-utility property, at cost	37,268		37,085
Total	2,243,069		2,220,268
Less - Accumulated depreciation	(593,210)		(594,264)
Net property, plant and equipment	1,649,859		1,626,004

Other Property and Investments
Goodwill	1,116		1,116
Other property and investments	39,018		40,806
Total other property and investments	40,134		41,922

Current Assets
Cash and cash equivalents	10,126		4,963
Accounts receivable — customers (less allowance for doubtful accounts of $6,615 in 2022 and $3,516 in 2021)	23,353		34,416
Unbilled receivable	25,500		27,147
Receivable from the U.S. government (Note 2)	21,834		27,827
Other accounts receivable (less allowance for doubtful accounts of $53 in 2022 and $53 in 2021)	3,043		6,510
Income taxes receivable	45		236
Materials and supplies, at weighted average cost	11,943		12,163
Regulatory assets — current	9,054		8,897
Prepayments and other current assets	11,223		5,317
Unrealized gains on purchased power contracts	7,020		4,441
Contract assets (Note 2)	7,715		6,135
Total current assets	130,856		138,052

Other Assets
Unbilled revenue — receivable from U.S. government	8,867		9,671
Receivable from the U.S. government (Note 2)	50,610		51,991
Contract assets (Note 2)	4,856		3,452
Operating lease right-of-use assets	10,008		10,479
Regulatory assets	3,289		3,182
Other	15,453		16,230
Total other assets	93,083		95,005

Total Assets	$	1,913,932	$	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)	March 31, 2022		December 31, 2021
Capitalization
Common shares, no par value
Authorized: 60,000,000 shares
Outstanding: 36,955,633 shares in 2022 and 36,936,285 shares in 2021	$	259,284	$	258,442
Earnings reinvested in the business	428,141		427,505
Total common shareholders’ equity	687,425		685,947
Long-term debt	412,150		412,176
Total capitalization	1,099,575		1,098,123

Current Liabilities
Notes payable to bank	32,000		31,000
Long-term debt — current	382		377
Accounts payable	67,490		65,902
Income taxes payable	2,879		4,662
Accrued other taxes	14,983		17,137
Accrued employee expenses	18,293		16,256
Accrued interest	6,320		4,545
Contract liabilities (Note 2)	210		257
Regulatory liabilities	3,642		1,896
Operating lease liabilities	1,991		2,044
Other	11,964		11,498
Total current liabilities	160,154		155,574

Other Credits
Notes payable to bank	189,500		174,500
Advances for construction	66,469		66,727
Contributions in aid of construction - net	146,186		147,482
Deferred income taxes	142,661		140,290
Regulatory liabilities	24,193		32,979
Unamortized investment tax credits	1,135		1,153
Accrued pension and other postretirement benefits	61,594		61,365
Operating lease liabilities	8,497		8,920
Other	13,968		13,870
Total other credits	654,203		647,286

Commitments and Contingencies (Note 9)

Total Capitalization and Liabilities	$	1,913,932	$	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 MONTHS ENDED

MARCH 31, 2022 AND 2021

(Unaudited)


	Three Months Ended March 31,
(in thousands, except per share amounts)	2022		2021
Operating Revenues
Water	$	73,906	$	75,029
Electric	11,892		11,539
Contracted services	22,772		30,492
Total operating revenues	108,570		117,060

Operating Expenses
Water purchased	17,848		15,239
Power purchased for pumping	2,374		2,145
Groundwater production assessment	4,211		4,440
Power purchased for resale	5,166		3,198
Supply cost balancing accounts	(6,343)		(2,427)
Other operation	8,667		8,217
Administrative and general	22,972		22,053
Depreciation and amortization	10,114		9,560
Maintenance	3,140		2,662
Property and other taxes	5,853		5,940
ASUS construction	10,203		15,704
Total operating expenses	84,205		86,731

Operating Income	24,365		30,329

Other Income and Expenses
Interest expense	(5,606)		(6,258)
Interest income	283		455
Other, net	(419)		656
Total other income and expenses, net	(5,742)		(5,147)

Income before income tax expense	18,623		25,182

Income tax expense	4,461		5,914

Net Income	$	14,162	$	19,268

Weighted Average Number of Common Shares Outstanding	36,944		36,898
Basic Earnings Per Common Share	$	0.38	$	0.52

Weighted Average Number of Diluted Shares	37,019		36,993
Fully Diluted Earnings Per Common Share	$	0.38	$	0.52

Dividends Paid Per Common Share	$	0.365	$	0.335

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

AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF CHANGES

IN COMMON SHAREHOLDERS' EQUITY

(Unaudited)


	Three Months Ended March 31, 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


	Three Months Ended March 31, 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

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 THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(Unaudited)


	Three Months Ended March 31,
(in thousands)	2022		2021
Cash Flows From Operating Activities:
Net income	$	14,162	$	19,268
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	10,208		9,656
Provision for doubtful accounts	258		255
Deferred income taxes and investment tax credits	1,552		(343)
Stock-based compensation expense	1,905		1,930
Loss (gain) on investments held in a trust	1,653		(628)
Other — net	83		104
Changes in assets and liabilities:
Accounts receivable — customers	7,627		5,711
Unbilled receivable	2,451		3,161
Other accounts receivable	3,467		1,386
Receivables from the U.S. government	4,589		(1,015)
Materials and supplies	220		(132)
Prepayments and other assets	(4,584)		(4,026)
Contract assets	(199)		(3,763)
Regulatory assets	(5,713)		(3,493)
Accounts payable	341		(7,267)
Income taxes receivable/payable	(1,592)		(274)
Contract liabilities	(47)		(751)
Accrued pension and other postretirement benefits	71		1,796
Other liabilities	1,574		3,101
Net cash provided	38,026		24,676

Cash Flows From Investing Activities:
Capital expenditures	(35,170)		(37,093)
Other investing activities	121		113
Net cash used	(35,049)		(36,980)

Cash Flows From Financing Activities:
Receipt of advances for and contributions in aid of construction	1,795		2,016
Refunds on advances for construction	(833)		(569)
Retirement or repayments of long-term debt	(103)		(99)
Net change in notes payable to banks	16,000		(5,200)
Dividends paid	(13,485)		(12,361)
Other financing activities	(1,188)		(1,269)
Net cash provided (used)	2,186		(17,482)
Net change in cash and cash equivalents	5,163		(29,786)
Cash and cash equivalents, beginning of period	4,963		36,737
Cash and cash equivalents, end of period	$	10,126	$	6,951

Non-cash transactions:
Accrued payables for investment in utility plant	$	34,101	$	28,700
Property installed by developers and conveyed	$	130	$	2,761

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)	March 31, 2022		December 31, 2021
Utility Plant
Utility plant, at cost	$	2,043,851	$	2,022,417
Less - Accumulated depreciation	(520,186)		(522,672)
Net utility plant	1,523,665		1,499,745

Other Property and Investments	36,874		38,659

Current Assets
Cash and cash equivalents	4,677		525
Accounts receivable — customers (less allowance for doubtful accounts of $5,992 in 2022 and $3,168 in 2021)	21,244		31,870
Unbilled receivable	16,342		20,525
Other accounts receivable (less allowance for doubtful accounts of $53 in 2022 and $53 in 2021)	1,847		3,791


Materials and supplies, at average cost	4,587		5,384
Regulatory assets — current	9,054		8,897
Prepayments and other current assets	8,039		4,223
Total current assets	65,790		75,215

Other Assets

Operating lease right-of-use assets	9,977		10,439

Other	14,415		14,424
Total other assets	24,392		24,863
Total Assets	$	1,650,721	$	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)	March 31, 2022		December 31, 2021
Capitalization
Common Shares, no par value:
Authorized: 1,000 shares
Outstanding: 170 shares in 2022 and 2021	$	357,311	$	356,530
Earnings reinvested in the business	254,184		259,156
Total common shareholder’s equity	611,495		615,686
Long-term debt	412,150		412,176
Total capitalization	1,023,645		1,027,862

Current Liabilities

Long-term debt — current	382		377
Accounts payable	55,296		50,627
Accrued other taxes	13,257		14,960
Accrued employee expenses	14,446		12,867
Accrued interest	5,980		4,210
Income taxes payable to Parent	1,181		2,972
Operating lease liabilities	1,977		2,029
Other	10,893		10,505
Total current liabilities	103,412		98,547

Other Credits
Intercompany payable to Parent	67,683		49,280
Advances for construction	66,449		66,707
Contributions in aid of construction — net	146,186		145,848
Deferred income taxes	134,349		132,314
Regulatory liabilities	24,193		32,979
Unamortized investment tax credits	1,135		1,153
Accrued pension and other postretirement benefits	61,364		61,170
Operating lease liabilities	8,479		8,891
Other	13,826		13,731
Total other credits	523,664		512,073

Commitments and Contingencies (Note 9)

Total Capitalization and Liabilities	$	1,650,721	$	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 MONTHS ENDED

MARCH 31, 2022 AND 2021

(Unaudited)


	Three Months Ended March 31,
(in thousands)	2022		2021
Operating Revenues
Water	$	73,906	$	75,029
Total operating revenues	73,906		75,029

Operating Expenses
Water purchased	17,848		15,239
Power purchased for pumping	2,374		2,145
Groundwater production assessment	4,211		4,440
Supply cost balancing accounts	(5,067)		(2,920)
Other operation	6,354		5,813
Administrative and general	15,596		14,435
Depreciation and amortization	8,545		8,062
Maintenance	2,156		1,740
Property and other taxes	4,890		5,016

Total operating expenses	56,907		53,970

Operating Income	16,999		21,059

Other Income and Expenses
Interest expense	(5,236)		(5,798)
Interest income	91		87
Other, net	(598)		651
Total other income and expenses, net	(5,743)		(5,060)

Income before income tax expense	11,256		15,999

Income tax expense	2,689		3,768

Net Income	$	8,567	$	12,231

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

GOLDEN STATE WATER COMPANY

STATEMENTS OF CHANGES

IN COMMON SHAREHOLDER'S EQUITY

(Unaudited)


	Three Months Ended March 31, 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

	Three Months Ended March 31, 2021
	Common Shares			Reinvested
	Number			Earnings
	of			in the
(in thousands, except number of shares)	Shares	Amount		Business		Total
Balances at December 31, 2020	170	$	354,906	$	228,392	$	583,298
Add:
Net income				12,231		12,231
Stock-based compensation, net of taxes paid from shares withheld from employees related to net share settlements (Note 4)		782				782
Dividend equivalent rights on stock-based awards not paid in cash		45				45
Deduct:
Dividends on Common Shares				12,400		12,400
Dividend equivalent rights on stock-based awards not paid in cash				45		45
Balances at March 31, 2021	170	$	355,733	$	228,178	$	583,911

The accompanying notes are an integral part of these financial statements

Table of Contents

GOLDEN STATE WATER COMPANY

STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

(Unaudited)


	Three Months Ended March 31,
(in thousands)	2022		2021
Cash Flows From Operating Activities:
Net income	$	8,567	$	12,231
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	8,610		8,126
Provision for doubtful accounts	222		221
Deferred income taxes and investment tax credits	1,305		(505)
Stock-based compensation expense	1,751		1,790

Loss (gain) on investments held in a trust	1,653		(628)
Other — net	84		83
Changes in assets and liabilities:
Accounts receivable — customers	7,499		6,033
Unbilled receivable	4,183		1,525
Other accounts receivable	1,944		1,463
Materials and supplies	797		(267)
Prepayments and other assets	(3,268)		(1,956)
Regulatory assets	(5,135)		(3,165)
Accounts payable	2,886		(5,674)
Intercompany receivable/payable	428		8
Income taxes receivable/payable from/to Parent	(1,791)		(391)
Accrued pension and other postretirement benefits	36		1,760
Other liabilities	1,494		2,145
Net cash provided	31,265		22,799

Cash Flows From Investing Activities:
Capital expenditures	(31,465)		(31,824)
Note receivable from AWR parent	—		(23,000)
Receipt of payment of note receivable from AWR parent	—		11,000

Other investing activities	117		109
Net cash used	(31,348)		(43,715)

Cash Flows From Financing Activities:
Receipt of advances for and contributions in aid of construction	1,759		2,013
Refunds on advances for construction	(833)		(569)
Retirement or repayments of long-term debt	(103)		(99)

Net change in intercompany borrowings	18,000		—
Dividends paid	(13,500)		(12,400)
Other financing activities	(1,088)		(1,155)
Net cash provided (used)	4,235		(12,210)

Net change in cash and cash equivalents	4,152		(33,126)
Cash and cash equivalents, beginning of period	525		35,578
Cash and cash equivalents, end of period	$	4,677	$	2,452

Non-cash transactions:
Accrued payables for investment in utility plant	$	32,439	$	25,529
Property installed by developers and conveyed	$	130	$	2,761

The accompanying notes are an integral part of these financial statements

Table of Contents

AMERICAN STATES WATER COMPANY AND SUBSIDIARIES

AND

GOLDEN STATE WATER COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Summary of Significant Accounting Policies

Nature of Operations: 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. (“ASUS”) (and its wholly owned subsidiaries: Fort Bliss Water Services Company (“FBWS”), Terrapin Utility Services, Inc. (“TUS”), Old Dominion Utility Services, Inc. (“ODUS”), Palmetto State Utility Services, Inc. (“PSUS”), Old North Utility Services, Inc. (“ONUS”), Emerald Coast Utility Services, Inc. ("ECUS"), and Fort Riley Utility Services, Inc. ("FRUS")). The subsidiaries of ASUS are collectively referred to as the “Military Utility Privatization Subsidiaries”. AWR, through its wholly owned subsidiaries, serves over one million people in nine states.

GSWC and BVESI are both California public utilities. GSWC is engaged in the purchase, production, distribution and sale of water throughout California serving approximately 262,900 customer connections. BVESI distributes electricity in several San Bernardino County mountain communities in California serving approximately 24,700 customer connections. The California Public Utilities Commission (“CPUC”) regulates GSWC’s and BVESI's businesses in matters including properties, rates, services, facilities, and transactions between GSWC, BVESI, and their affiliates.

ASUS, through its wholly owned subsidiaries, operates, maintains and performs construction activities (including renewal and replacement capital work) on water and/or wastewater systems at various U.S. military bases pursuant to initial 50-year firm fixed-price contracts. These contracts are subject to annual economic price adjustments and modifications for changes in circumstances, changes in laws and regulations, and additions to the contract value for new construction of facilities at the military bases.

There is no direct regulatory oversight by the CPUC over AWR or the operations, rates or services provided by ASUS or any of its wholly owned subsidiaries.

Basis of Presentation: The consolidated financial statements and notes thereto are presented in a combined report filed by two separate Registrants: AWR and GSWC. References in this report to “Registrant” are to AWR and GSWC, collectively, unless otherwise specified. AWR owns all of the outstanding common shares of GSWC, BVESI and ASUS. ASUS owns all of the outstanding common stock of the Military Utility Privatization Subsidiaries. The consolidated financial statements of AWR include the accounts of AWR and its subsidiaries. These financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). Intercompany transactions and balances have been eliminated in the AWR consolidated financial statements.

The consolidated financial statements included herein have been prepared by Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The December 31, 2021 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The preparation of the consolidated financial statements 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 date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. In the opinion of management, all adjustments consisting of normal, recurring items, and estimates necessary for a fair statement of the results for the interim periods have been made. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Form 10-K for the year ended December 31, 2021 filed with the SEC.

Related Party Transactions and Financing Activities: GSWC, BVESI and ASUS provide and/or receive various support services to and from their parent, AWR, and among themselves. GSWC has allocated certain corporate office administrative and general costs to its affiliates, BVESI and ASUS, using allocation factors approved by the CPUC. GSWC allocated corporate office administrative and general costs to BVESI of approximately $794,000 and $799,000 during the three months ended March 31, 2022 and 2021, respectively. GSWC allocated corporate office administrative and general costs to ASUS of approximately $1.6 million and $1.5 million during the three months ended March 31, 2022 and 2021, respectively.

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AWR borrows under a credit facility and provides funds to GSWC and ASUS in support of their operations. On April 22, 2022, the credit facility was amended to increase the borrowing capacity from $200.0 million to $280.0 million. The amendment also changed the benchmark interest rate from the London Interbank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR"). This credit agreement expires in May 2023. Registrant does not believe the change in benchmark rates will have a material impact on its financing costs. The interest rate charged to GSWC and ASUS is sufficient to cover AWR’s interest expense under the credit facility. As of March 31, 2022, there was $189.5 million outstanding under this facility. Registrant expects to issue long-term debt through GSWC prior to May 2023, and use the debt proceeds to pay off borrowings under this facility.

BVESI has a separate $35 million revolving credit facility, which was amended in December 2021 to reduce the interest rate and fees charged, as well as to extend the maturity date by a year to July 1, 2024. As of March 31, 2022, there was $32.0 million outstanding under this facility. Under the terms of the credit agreement, BVESI has the option to increase the facility by an additional $15 million, subject to lender approval. Interest rates under this facility are generally based on LIBOR. Under the terms of the December 2021 amendment, upon discontinuation of a benchmark rate such as LIBOR, the lender may replace LIBOR with a benchmark rate replacement such as SOFR. Registrant does not believe the change from LIBOR to a new benchmark rate will have a material impact on its financing costs. Registrant does not have any other borrowings or debt indexed to LIBOR.

GSWC’s intercompany borrowing agreement with AWR and BVESI’s revolving credit facility are considered short-term debt arrangements by the CPUC. Both GSWC and BVESI have been authorized by the CPUC to borrow under these arrangements for a term of up to 24 months. Borrowings under these arrangements are, therefore, required to be fully paid off within a 24-month period. GSWC’s next pay-off period for its intercompany borrowings from AWR ends in May 2023, and BVESI’s pay-off period for its credit facility ends in July 2022. Accordingly, as of March 31, 2022, the $32.0 million outstanding under BVESI's credit facility has been classified as a current liability in AWR's Consolidated Balance Sheet. On April 28, 2022, BVESI completed the issuance of $35 million in unsecured private placement notes consisting of $17.5 million at a coupon rate of 4.548% due April 28, 2032, and $17.5 million at a coupon rate of 4.949% due April 28, 2037. The covenant requirements under these notes are similar to the terms of BVESI's revolving credit facility. BVESI used the proceeds to pay down amounts outstanding under its credit facility, thus complying with the CPUC's 24-month rule.

COVID-19 Impact: GSWC, BVESI and ASUS have continued their operations throughout the COVID-19 pandemic given that their water, wastewater and electric utility services are deemed essential. The Company continues to monitor the guidance provided by federal, state, and local health authorities and other government officials. Due to falling transmission rates in California and other variables, employees have begun returning to company offices.

The CPUC has authorized GSWC and BVESI to track incremental costs, including bad debt expense, in excess of what is included in their respective revenue requirements incurred as a result of the pandemic in COVID-19-related memorandum accounts, such as a Catastrophic Event Memorandum Account ("CEMA"), which is to be filed with the CPUC for future recovery. As of March 31, 2022, GSWC and BVESI had approximately $4.5 million and $576,000, respectively, in regulatory asset accounts related to bad debt expense in excess of their revenue requirements, the purchase of personal protective equipment, additional incurred printing costs, and other incremental COVID-19-related costs. CEMA and other emergency-type memorandum accounts are well-established cost recovery mechanisms authorized as a result of a state/federal declared emergency, and are therefore recognized as regulatory assets for future recovery. As a result, the amounts recorded in the COVID-19-related memorandum accounts have not impacted GSWC's or BVESI's earnings. Thus far, the COVID-19 pandemic has not had a material impact on ASUS's current operations.

GSWC and BVESI continue to experience delinquent customer accounts receivable due to the lingering effects of the COVID-19 pandemic, resulting in both GSWC and BVESI increasing their allowances for doubtful accounts during the three months ended March 31, 2022. However, the CPUC's moratoriums on service disconnections for nonpayment for water and electric customers have ended, and service disconnections due to nonpayment for commercial customers have resumed. In accordance with Senate Bill 998 guidelines, service disconnections due to nonpayment for residential customers are set to resume in May 2022. Furthermore, in January 2022, GSWC received $9.5 million in COVID relief funds through the California Water and Wastewater Arrearage Payment Program to provide assistance to customers for their water debt accrued during the COVID-19 pandemic by remitting federal funds that the state received from the American Rescue Plan Act of 2021 to the utility on behalf of eligible customers. GSWC applied these funds to its delinquent customers' eligible balances. In February 2022, BVESI received $321,000 from the state of California for similar customer relief funding for unpaid electric customer bills incurred during the pandemic.

The CPUC requires that amounts tracked in GSWC's and BVESI's COVID-19 memorandum accounts for unpaid customer bills be first offset by any (i) federal and state relief for water or electric utility bill debt, and (ii) customer payments through payment plan arrangements, prior to receiving recovery from customers at large. After these offsets are made, GSWC will file with the CPUC for recovery of the remaining balance. BVESI intends to include the remaining balance in its COVID-19 memorandum account for recovery in its next general rate case application expected to be filed in June 2022.

Accounting Pronouncements to Be Adopted in 2022:

In November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2021-10 Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. The

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amendments in this Update require disclosures about transactions with a government such as government grants or assistance. The amendments in this Update are effective for all entities within their scope for financial statements issued for annual periods beginning after December 15, 2021. Registrant does not expect this guidance to have a material impact on Registrant's financial statement disclosures.

Note 2 — Revenues

Most of Registrant's revenues are derived from contracts with customers, including tariff-based revenues of its regulated utilities, GSWC and BVESI. ASUS's initial 50-year firm fixed-price contracts with the U.S. government are considered service concession arrangements under ASC 853, Service Concession Arrangements. Accordingly, the services under these contracts are accounted for under Topic 606—Revenue from Contracts with Customers, and the water and/or wastewater systems are not recorded as Property, Plant and Equipment on Registrant’s balance sheets.

Although GSWC and BVESI have a diversified base of residential, commercial, industrial, and other customers, revenues derived from residential and commercial customers generally account for approximately 90% of total water and electric revenues. Almost all of ASUS's revenues are from the U.S. government. For the three months ended March 31, 2022 and 2021, disaggregated revenues from contracts with customers by segment were as follows:


	Three Months Ended March 31,
(dollar in thousands)	2022		2021
Water:
Tariff-based revenues	$	72,498	$	74,288
Surcharges (cost-recovery activities)	549		534
Other	518		517
Water revenues from contracts with customers	73,565		75,339
WRAM under (over)-collection (alternative revenue program)	341		(310)
Total water revenues	73,906		75,029

Electric:
Tariff-based revenues	12,552		11,677
Surcharges (cost-recovery activities)	27		202
Electric revenues from contracts with customers	12,579		11,879
BRRAM over-collection (alternative revenue program)	(687)		(340)
Total electric revenues	11,892		11,539

Contracted services:
Water	13,546		18,883
Wastewater	9,226		11,609
Contracted services revenues from contracts with customers	22,772		30,492

Total AWR revenues	$	108,570	$	117,060

The opening and closing balances of ASUS's unbilled receivables, receivable from the U.S. government, contract assets, and contract liabilities from contracts with customers were as follows:


(dollar in thousands)	March 31, 2022		December 31, 2021
Unbilled receivables	$	16,378	$	14,835
Receivable from the U.S. government	$	72,444	$	79,818
Contract assets	$	12,571