Table of Contents

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x                              Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

for the quarterly period ended June 30, 2011

 

or

 

o                                 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, CA

 

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

 

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, CA

 

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 x No o

Golden State Water Company

 

Yes x No o

 

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 o No o

Golden State Water Company

 

Yes o No o

 

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 o

Accelerated filer x

Non-accelerated filer o

Smaller reporting company o

 

Golden State Water Company

 

Large accelerated filer o

Accelerated filer o

Non-accelerated filer x

Smaller reporting company o

 

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 o Nox

Golden State Water Company

 

Yes o Nox

 

As of August 5, 2011, the number of Common Shares outstanding, of American States Water Company was 18,684,812 shares. As of August 5, 2011, all of the 142 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.

 

 

 



Table of Contents

 

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 June 30, 2011 and December 31, 2010

2

 

 

 

 

Consolidated Statements of Income of American States Water Company for the Three Months Ended June 30, 2011 and 2010

4

 

 

 

 

Consolidated Statements of Income of American States Water Company for the Six Months Ended June 30, 2011 and 2010

5

 

 

 

 

Consolidated Statements of Cash Flow of American States Water Company for the Six Months Ended June 30, 2011 and 2010

6

 

 

 

 

Balance Sheets of Golden State Water Company as of June 30, 2011 and December 31, 2010

7

 

 

 

 

Statements of Income of Golden State Water Company for the Three Months Ended June 30, 2011 and 2010

9

 

 

 

 

Statements of Income of Golden State Water Company for the Six Months Ended June 30, 2011 and 2010

10

 

 

 

 

Statements of Cash Flow of Golden State Water Company for the Six Months Ended June 30, 2011 and 2010

11

 

 

 

 

Notes to Consolidated Financial Statements

12

 

 

 

Item 2:

Management’s Discussion and Analysis of Financial Condition and Results of Operations

30

 

 

 

Item 3:

Quantitative and Qualitative Disclosures About Market Risk

62

 

 

 

Item 4:

Controls and Procedures

62

 

 

 

Part II

Other Information

 

 

 

 

Item 1:

Legal Proceedings

63

 

 

 

Item 1A:

Risk Factors

63

 

 

 

Item 2:

Unregistered Sales of Equity Securities and Use of Proceeds

63

 

 

 

Item 3:

Defaults Upon Senior Securities

63

 

 

 

Item 4:

Removed and Reserved

63

 

 

 

Item 5:

Other Information

63

 

 

 

Item 6:

Exhibits

64

 

 

 

 

Signatures

65

 



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 (hereinafter “AWR”) is the parent company of Golden State Water Company (hereinafter “GSWC”) and American States Utility Services, Inc. (hereinafter “ASUS”) and its subsidiaries.  AWR was also the parent company of Chaparral City Water Company (“CCWC”) until its sale to EPCOR Water (USA) Inc. on May 31, 2011.

 

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 to 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 relating to AWR and its subsidiaries, other than GSWC.

 

Forward-Looking Information

 

This Form 10-Q and the documents incorporated by reference 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 include statements regarding our 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 “believes,” “anticipates,” “expects,” “plans,” “estimates,” “intends,” “may” and other words that convey uncertainty of future events or outcome, we are making forward-looking statements. Such statements address future events and conditions concerning such matters as our ability to raise capital, capital expenditures, earnings, litigation, rates, water sales, water quality and other regulatory matters, adequacy of water supplies, our ability to recover electric, natural gas and water supply costs from ratepayers, contract operations, liquidity and capital resources, and accounting matters.

 

We caution you that any forward-looking statements made by us are not guarantees of future performance and that actual results  may differ materially from those currently anticipated in such statements, by reason of factors such as: changes in utility regulation; recovery of regulatory assets not yet included in rates; future economic conditions which affect changes in customer demand and changes in water and energy supply costs; changes in pension and post-retirement benefit plan costs; future climatic conditions; delays in customer payments or price redeterminations and/or equitable adjustments on contracts executed by ASUS and its subsidiaries; potential assessments for failure to meet interim targets for the purchase of renewable energy; fines, penalties or disallowance of costs by state regulatory commissions or by the federal government; termination of contracts and suspension or debarment for a period of time from contracting with the federal government due to violations of federal law and regulations in connection with military utility privatization activities; and legislative, legal proceedings, regulatory and other circumstances affecting anticipated revenues and costs.

 

1



Table of Contents

 

AMERICAN STATES WATER COMPANY

CONSOLIDATED BALANCE SHEETS

ASSETS

(Unaudited)

 

(in thousands)

 

June 30,
2011

 

December 31,
2010

 

Property, Plant and Equipment

 

 

 

 

 

Regulated utility plant, at cost

 

$

1,274,724

 

$

1,227,107

 

Non utility property, at cost

 

6,484

 

5,904

 

Total

 

1,281,208

 

1,233,011

 

Less - Accumulated depreciation

 

(398,215

)

(378,055

)

Net property, plant and equipment

 

882,993

 

854,956

 

 

 

 

 

 

 

Other Property and Investments

 

 

 

 

 

Goodwill

 

1,116

 

1,116

 

Other property and investments

 

10,868

 

10,981

 

Total other property and investments

 

11,984

 

12,097

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

 

11,262

 

4,197

 

Accounts receivable — customers (less allowance for doubtful accounts of $669 in 2011 and $657 in 2010)

 

23,347

 

17,507

 

Unbilled revenue

 

23,832

 

20,348

 

Receivable from the U.S. government (less allowance for doubtful accounts of $0 in 2011 and $43 in 2010)

 

14,407

 

3,689

 

Other accounts receivable (less allowance for doubtful accounts of $393 in 2011 and $338 in 2010)

 

9,565

 

7,808

 

Income taxes receivable

 

8,756

 

12,342

 

Materials and supplies, at average cost

 

2,487

 

2,161

 

Regulatory assets — current

 

33,944

 

34,152

 

Prepayments and other current assets

 

5,127

 

6,157

 

Costs and estimated earnings in excess of billings on uncompleted contracts

 

30,134

 

36,924

 

Deferred income taxes — current

 

9,312

 

8,816

 

Assets of discontinued operations (Note 10)

 

 

50,883

 

Total current assets

 

172,173

 

204,984

 

 

 

 

 

 

 

Regulatory and Other Assets

 

 

 

 

 

Regulatory assets

 

106,687

 

101,801

 

Other accounts receivable

 

4,029

 

3,777

 

Costs and estimated earnings in excess of billings on uncompleted contracts

 

10,942

 

5,824

 

Deferred income taxes

 

486

 

495

 

Other

 

8,585

 

8,101

 

Total regulatory and other assets

 

130,729

 

119,998

 

 

 

 

 

 

 

Total Assets

 

$

1,197,879

 

$

1,192,035

 

 

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

 

2



Table of Contents

 

AMERICAN STATES WATER COMPANY

CONSOLIDATED BALANCE SHEETS

CAPITALIZATION AND LIABILITIES

(Unaudited)

 

(in thousands)

 

June 30,
2011

 

December 31,
2010

 

Capitalization

 

 

 

 

 

Common shares, no par value

 

$

229,228

 

$

227,385

 

Earnings reinvested in the business

 

163,581

 

150,156

 

Total common shareholders’ equity

 

392,809

 

377,541

 

Long-term debt

 

340,395

 

299,839

 

Total capitalization

 

733,204

 

677,380

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Notes payable to banks

 

12,000

 

60,900

 

Long-term debt — current

 

392

 

376

 

Accounts payable

 

57,972

 

36,155

 

Income taxes payable

 

521

 

2,277

 

Accrued employee expenses

 

8,878

 

8,084

 

Accrued interest

 

3,902

 

3,256

 

Deferred income taxes — current

 

29

 

88

 

Unrealized loss on purchased power contracts

 

7,475

 

6,850

 

Billings in excess of costs and estimated earnings on uncompleted contracts

 

19,033

 

16,808

 

Other

 

14,428

 

17,017

 

Liabilities of discontinued operations (Note 10)

 

 

27,031

 

Total current liabilities

 

124,630

 

178,842

 

 

 

 

 

 

 

Other Credits

 

 

 

 

 

Advances for construction

 

75,900

 

78,325

 

Contributions in aid of construction - net

 

97,976

 

95,460

 

Deferred income taxes

 

101,649

 

101,917

 

Unamortized investment tax credits

 

2,018

 

2,063

 

Accrued pension and other postretirement benefits

 

44,809

 

42,152

 

Billings in excess of costs and estimated earnings on uncompleted contracts

 

10,534

 

8,618

 

Other

 

7,159

 

7,278

 

Total other credits

 

340,045

 

335,813

 

 

 

 

 

 

 

Commitments and Contingencies (Note 9)

 

 

 

 

 

 

 

 

 

Total Capitalization and Liabilities

 

$

1,197,879

 

$

1,192,035

 

 

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

 

3



Table of Contents

 

AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS

ENDED JUNE 30, 2011 AND 2010

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

(in thousands, except per share amounts)

 

2011

 

2010

 

Operating Revenues

 

 

 

 

 

Water

 

$

80,151

 

$

72,816

 

Electric

 

7,710

 

7,845

 

Contracted services

 

21,968

 

14,815

 

Total operating revenues

 

109,829

 

95,476

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

Water purchased

 

12,924

 

13,564

 

Power purchased for pumping

 

2,165

 

2,047

 

Groundwater production assessment

 

3,886

 

2,664

 

Power purchased for resale

 

2,854

 

2,876

 

Supply cost balancing accounts

 

4,245

 

4,686

 

Other operation expenses

 

6,946

 

7,262

 

Administrative and general expenses

 

18,305

 

16,568

 

Depreciation and amortization

 

9,538

 

8,365

 

Maintenance

 

4,623

 

4,375

 

Property and other taxes

 

3,406

 

3,281

 

ASUS construction expenses

 

11,926

 

8,633

 

Net (gain) loss on sale of property

 

(128

)

5

 

Total operating expenses

 

80,690

 

74,326

 

 

 

 

 

 

 

Operating Income

 

29,139

 

21,150

 

 

 

 

 

 

 

Other Income and Expenses

 

 

 

 

 

Interest expense

 

(6,869

)

(5,870

)

Interest income

 

161

 

158

 

Other

 

(289

)

(69

)

Total other income and expenses

 

(6,997

)

(5,781

)

 

 

 

 

 

 

Income from continuing operations before income tax expense

 

22,142

 

15,369

 

Income tax expense

 

9,414

 

6,499

 

Income from continuing operations

 

12,728

 

8,870

 

 

 

 

 

 

 

Income from discontinued operations, net of tax

 

3,234

 

105

 

 

 

 

 

 

 

Net Income

 

$

15,962

 

$

8,975

 

 

 

 

 

 

 

Basic Earnings Per Common Share

 

 

 

 

 

Income from continuing operations

 

$

0.68

 

$

0.47

 

Income from discontinued operations

 

0.17

 

0.01

 

Net Income

 

$

0.85

 

$

0.48

 

 

 

 

 

 

 

Fully Diluted Earnings Per Share

 

 

 

 

 

Income from continuing operations

 

$

0.68

 

$

0.47

 

Income from discontinued operations

 

0.17

 

0.01

 

Net Income

 

$

0.85

 

$

0.48

 

 

 

 

 

 

 

Weighted Average Number of Shares Outstanding

 

18,668

 

18,576

 

Weighted Average Number of Diluted Shares

 

18,738

 

18,720

 

 

 

 

 

 

 

Dividends Declared Per Common Share

 

$

0.28

 

$

0.26

 

 

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

 

4



Table of Contents

 

AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF INCOME

FOR THE SIX MONTHS

ENDED JUNE 30, 2011 AND 2010

(Unaudited)

 

 

 

Six Months Ended
June 30,

 

(in thousands, except per share amounts)

 

2011

 

2010

 

Operating Revenues

 

 

 

 

 

Water

 

$

144,477

 

$

128,873

 

Electric

 

18,434

 

18,824

 

Contracted services

 

41,225

 

36,245

 

Total operating revenues

 

204,136

 

183,942

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

Water purchased

 

21,585

 

21,566

 

Power purchased for pumping

 

3,701

 

3,603

 

Groundwater production assessment

 

6,512

 

5,286

 

Power purchased for resale

 

6,729

 

6,545

 

Supply cost balancing accounts

 

9,324

 

8,501

 

Other operation expenses

 

13,863

 

13,946

 

Administrative and general expenses

 

37,289

 

35,196

 

Depreciation and amortization

 

19,275

 

16,724

 

Maintenance

 

8,349

 

8,568

 

Property and other taxes

 

6,958

 

6,903

 

ASUS construction expenses

 

23,545

 

16,801

 

Net (gain) loss on sale of property

 

(128

)

2

 

Total operating expenses

 

157,002

 

143,641

 

 

 

 

 

 

 

Operating Income

 

47,134

 

40,301

 

 

 

 

 

 

 

Other Income and Expenses

 

 

 

 

 

Interest expense

 

(12,613

)

(11,528

)

Interest income

 

298

 

819

 

Other

 

(209

)

(5

)

Total other income and expenses

 

(12,524

)

(10,714

)

 

 

 

 

 

 

Income from continuing operations before income tax expense

 

34,610

 

29,587

 

Income tax expense

 

14,927

 

12,427

 

Income from continuing operations

 

19,683

 

17,160

 

 

 

 

 

 

 

Income from discontinued operations, net of tax

 

3,868

 

305

 

 

 

 

 

 

 

Net Income

 

$

23,551

 

$

17,465

 

 

 

 

 

 

 

Basic Earnings Per Common Share

 

 

 

 

 

Income from continuing operations

 

$

1.05

 

$

0.92

 

Income from discontinued operations

 

0.20

 

0.02

 

Net Income

 

$

1.25

 

$

0.94

 

 

 

 

 

 

 

Fully Diluted Earnings Per Share

 

 

 

 

 

Income from continuing operations

 

$

1.05

 

$

0.91

 

Income from discontinued operations

 

0.20

 

0.02

 

Net Income

 

$

1.25

 

$

0.93

 

 

 

 

 

 

 

Weighted Average Number of Shares Outstanding

 

18,658

 

18,561

 

Weighted Average Number of Diluted Shares

 

18,797

 

18,695

 

 

 

 

 

 

 

Dividends Declared Per Common Share

 

$

0.54

 

$

0.52

 

 

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

 

5



Table of Contents

 

AMERICAN STATES WATER COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOW

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(Unaudited)

 

 

 

Six Months Ended
June 30,

 

(in thousands)

 

2011

 

2010

 

Cash Flows From Operating Activities:

 

 

 

 

 

Net income

 

$

23,551

 

$

17,465

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Gain on sale of CCWC, net of taxes

 

(2,454

)

 

Depreciation and amortization

 

19,275

 

17,690

 

Provision for doubtful accounts

 

577

 

553

 

(Gain) loss on sale of property

 

(128

)

2

 

Deferred income taxes and investment tax credits

 

(216

)

(931

)

Stock-based compensation expense

 

969

 

952

 

Other — net

 

679

 

671

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable — customers

 

(6,318

)

(113

)

Unbilled revenue

 

(3,484

)

(8,415

)

Other accounts receivable

 

(1,159

)

(93

)

Receivable from the U.S. government

 

(10,718

)

(65

)

Materials and supplies

 

(326

)

(345

)

Prepayments and other current assets

 

1,030

 

1,376

 

Regulatory assets — supply cost balancing accounts

 

9,324

 

8,501

 

Costs and estimated earnings in excess of billings on uncompleted contracts

 

1,672

 

(8,487

)

Other assets (including other regulatory assets)

 

(12,224

)

(10,559

)

Accounts payable

 

9,583

 

4,967

 

Income taxes receivable/payable

 

(2,202

)

1,751

 

Billings in excess of costs and estimated earnings on uncompleted contracts

 

4,141

 

8,861

 

Accrued pension and other postretirement benefits

 

1,745

 

2,743

 

Other liabilities

 

(378

)

(6,983

)

Net cash provided

 

32,939

 

29,541

 

 

 

 

 

 

 

Cash Flows From Investing Activities:

 

 

 

 

 

Construction expenditures

 

(37,295

)

(38,345

)

Proceeds from the sale of CCWC

 

29,025

 

 

Other

 

(72

)

86

 

Net cash used

 

(8,342

)

(38,259

)

 

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

 

Proceeds from issuance of Common Shares and stock option exercises

 

953

 

1,316

 

Receipt of advances for and contributions in aid of construction

 

3,497

 

2,674

 

Refunds on advances for construction

 

(2,351

)

(2,653

)

Repayments of long-term debt

 

(22,279

)

(283

)

Proceeds from issuance of long-term debt, net of issuance costs

 

61,914

 

 

Net change in notes payable to banks

 

(48,900

)

22,800

 

Dividends paid

 

(10,074

)

(9,651

)

Other — net

 

(292

)

(142

)

Net cash (used) provided

 

(17,532

)

14,061

 

Net increase in cash and cash equivalents

 

7,065

 

5,343

 

Cash and cash equivalents, beginning of period

 

4,197

 

1,685

 

Cash and cash equivalents, end of period

 

11,262

 

7,028

 

Less cash and cash equivalents of discontinued operations

 

 

425

 

Cash and cash equivalents of continuing operations

 

$

11,262

 

$

6,603

 

 

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

 

6



Table of Contents

 

GOLDEN STATE WATER COMPANY

BALANCE SHEETS

ASSETS

(Unaudited)

 

(in thousands)

 

June 30,
2011

 

December 31,
2010

 

Utility Plant

 

 

 

 

 

Utility plant, at cost

 

$

1,274,724

 

$

1,227,107

 

Less - Accumulated depreciation

 

(395,467

)

(375,740

)

Net utility plant

 

879,257

 

851,367

 

 

 

 

 

 

 

Other Property and Investments

 

8,385

 

8,899

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and cash equivalents

 

2,576

 

1,541

 

Accounts receivable-customers (less allowance for doubtful accounts of $669 in 2011 and $670 in 2010)

 

23,347

 

17,507

 

Unbilled revenue

 

23,832

 

20,348

 

Inter-company receivable

 

28

 

2,057

 

Other accounts receivable (less allowance for doubtful accounts of $345 in 2011 and $335 in 2010)

 

5,229

 

6,174

 

Income taxes receivable from Parent

 

11,536

 

7,421

 

Materials and supplies, at average cost

 

1,881

 

1,779

 

Regulatory assets — current

 

33,944

 

34,152

 

Prepayments and other current assets

 

4,835

 

5,695

 

Deferred income taxes — current

 

8,217

 

7,814

 

Total current assets

 

115,425

 

104,488

 

 

 

 

 

 

 

Regulatory and Other Assets

 

 

 

 

 

Regulatory assets

 

106,687

 

101,801

 

Other accounts receivable

 

4,029

 

3,777

 

Other

 

8,600

 

8,146

 

Total regulatory and other assets

 

119,316

 

113,724

 

 

 

 

 

 

 

Total Assets

 

$

1,122,383

 

$

1,078,478

 

 

The accompanying notes are an integral part of these financial statements

 

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Table of Contents

 

GOLDEN STATE WATER COMPANY

BALANCE SHEETS

CAPITALIZATION AND LIABILITIES

(Unaudited)

 

(in thousands)

 

June 30,
2011

 

December 31,
2010

 

Capitalization

 

 

 

 

 

Common shares, no par value

 

$

217,975

 

$

217,149

 

Earnings reinvested in the business

 

147,505

 

141,146

 

Total common shareholder’s equity

 

365,480

 

358,295

 

Long-term debt

 

340,395

 

299,839

 

Total capitalization

 

705,875

 

658,134

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Long-term debt — current

 

392

 

376

 

Accounts payable

 

48,013

 

25,463

 

Inter-company payable

 

5,706

 

34,575

 

Accrued employee expenses

 

7,827

 

7,212

 

Accrued interest

 

3,900

 

3,251

 

Unrealized loss on purchased power contracts

 

7,475

 

6,850

 

Other

 

14,215

 

16,032

 

Total current liabilities

 

87,528

 

93,759

 

 

 

 

 

 

 

Other Credits

 

 

 

 

 

Advances for construction

 

75,900

 

78,325

 

Contributions in aid of construction — net

 

97,976

 

95,460

 

Deferred income taxes

 

101,214

 

101,474

 

Unamortized investment tax credits

 

2,018

 

2,063

 

Accrued pension and other postretirement benefits

 

44,809

 

42,152

 

Other

 

7,063

 

7,111

 

Total other credits

 

328,980

 

326,585

 

 

 

 

 

 

 

Commitments and Contingencies (Note 9)

 

 

 

 

 

 

 

 

 

Total Capitalization and Liabilities

 

$

1,122,383

 

$

1,078,478

 

 

The accompanying notes are an integral part of these financial statements

 

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Table of Contents

 

GOLDEN STATE WATER COMPANY

STATEMENTS OF INCOME

FOR THE THREE MONTHS

ENDED JUNE 30, 2011 AND 2010

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

(in thousands)

 

2011

 

2010

 

Operating Revenues

 

 

 

 

 

Water

 

$

80,151

 

$

72,816

 

Electric

 

7,710

 

7,845

 

Total operating revenues

 

87,861

 

80,661

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

Water purchased

 

12,924

 

13,564

 

Power purchased for pumping

 

2,165

 

2,047

 

Groundwater production assessment

 

3,886

 

2,664

 

Power purchased for resale

 

2,854

 

2,876

 

Supply cost balancing accounts

 

4,245

 

4,686

 

Other operating expenses

 

5,842

 

6,369

 

Administrative and general expenses

 

14,922

 

13,476

 

Depreciation and amortization

 

9,321

 

8,181

 

Maintenance

 

4,006

 

4,001

 

Property and other taxes

 

3,113

 

3,013

 

Net (gain) loss on sale of property

 

(128

)

5

 

Total operating expenses

 

63,150

 

60,882

 

 

 

 

 

 

 

Operating Income

 

24,711

 

19,779

 

 

 

 

 

 

 

Other Income and Expenses

 

 

 

 

 

Interest expense

 

(6,685

)

(5,752

)

Interest income

 

155

 

156

 

Other

 

(477

)

(65

)

Total other income and expenses

 

(7,007

)

(5,661

)

 

 

 

 

 

 

Income from operations before income tax expense

 

17,704

 

14,118

 

 

 

 

 

 

 

Income tax expense

 

7,699

 

6,024

 

 

 

 

 

 

 

Net Income

 

$

10,005

 

$

8,094

 

 

The accompanying notes are an integral part of these financial statements

 

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Table of Contents

 

GOLDEN STATE WATER COMPANY

STATEMENTS OF INCOME

FOR THE SIX MONTHS

ENDED JUNE 30, 2011 AND 2010

(Unaudited)

 

 

 

Six Months Ended
June 30,

 

(in thousands)

 

2011

 

2010

 

Operating Revenues

 

 

 

 

 

Water

 

$

144,477

 

$

128,873

 

Electric

 

18,434

 

18,824

 

Total operating revenues

 

162,911

 

147,697

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

Water purchased

 

21,585

 

21,566

 

Power purchased for pumping

 

3,701

 

3,603

 

Groundwater production assessment

 

6,512

 

5,286

 

Power purchased for resale

 

6,729

 

6,545

 

Supply cost balancing accounts

 

9,324

 

8,501

 

Other operating expenses

 

11,556

 

12,258

 

Administrative and general expenses

 

29,784

 

28,373

 

Depreciation and amortization

 

18,837

 

16,363

 

Maintenance

 

6,990

 

7,599

 

Property and other taxes

 

6,272

 

6,160

 

Net (gain) loss on sale of property

 

(128

)

5

 

Total operating expenses

 

121,162

 

116,259

 

 

 

 

 

 

 

Operating Income

 

41,749

 

31,438

 

 

 

 

 

 

 

Other Income and Expenses

 

 

 

 

 

Interest expense

 

(12,298

)

(11,332

)

Interest income

 

290

 

306

 

Other

 

(399

)

(8

)

Total other income and expenses

 

(12,407

)

(11,034

)

 

 

 

 

 

 

Income from operations before income tax expense

 

29,342

 

20,404

 

 

 

 

 

 

 

Income tax expense

 

12,935

 

8,746

 

 

 

 

 

 

 

Net Income

 

$

16,407

 

$

11,658

 

 

The accompanying notes are an integral part of these financial statements

 

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GOLDEN STATE WATER COMPANY

STATEMENTS OF CASH FLOW

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(Unaudited)

 

 

 

Six Months Ended
June 30,

 

(in thousands)

 

2011

 

2010

 

Cash Flows From Operating Activities:

 

 

 

 

 

Net income

 

$

16,407

 

$

11,658

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

18,837

 

16,363

 

(Gain) loss on sale of property

 

(128

)

5

 

Provision for doubtful accounts

 

498

 

526

 

Deferred income taxes and investment tax credits

 

(65

)

(948

)

Stock-based compensation expense

 

853

 

690

 

Other — net

 

704

 

900

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable — customers

 

(6,318

)

(84

)

Unbilled revenue

 

(3,484

)

(8,287

)

Other accounts receivable

 

673

 

1,907

 

Materials and supplies

 

(102

)

(226

)

Prepayments and other current assets

 

860

 

1,393

 

Regulatory assets — supply cost balancing accounts

 

9,324

 

8,501

 

Other assets (including other regulatory assets)

 

(12,127

)

(10,564

)

Accounts payable

 

10,316

 

2,924

 

Inter-company receivable/payable

 

(840

)

51

 

Income taxes receivable/payable from/to Parent

 

(4,115

)

838

 

Accrued pension and other postretirement benefits

 

1,745

 

2,743

 

Other liabilities

 

24

 

(7,349

)

Net cash provided

 

33,062

 

21,041

 

 

 

 

 

 

 

Cash Flows From Investing Activities:

 

 

 

 

 

Construction expenditures

 

(36,715

)

(37,451

)

Proceeds from sale of property

 

144

 

83

 

Net cash used

 

(36,571

)

(37,368

)

 

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

 

Proceeds from issuance of Common Shares to Parent

 

 

20,000

 

Receipt of advances for and contributions in aid of construction

 

3,497

 

2,601

 

Refunds on advances for construction

 

(2,351

)

(2,653

)

Proceeds from the issuance of long-term debt, net of issuance costs

 

61,914

 

 

Repayments of long-term debt

 

(22,279

)

(283

)

Net change in inter-company borrowings

 

(26,000

)

5,400

 

Dividends paid

 

(10,000

)

(9,600

)

Other — net

 

(237

)

(87

)

Net cash provided

 

4,544

 

15,378

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

1,035

 

(949

)

Cash and cash equivalents, beginning of period

 

1,541

 

1,096

 

Cash and cash equivalents, end of period

 

$

2,576

 

$

147

 

 

The accompanying notes are an integral part of these financial statements

 

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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”) and American States Utility Services, Inc. (“ASUS”) (and its subsidiaries, Fort Bliss Water Services Company (“FBWS”), Terrapin Utility Services, Inc. (“TUS”), Old Dominion Utility Services, Inc. (“ODUS”), Palmetto State Utility Services, Inc. (“PSUS”) and Old North Utility Services, Inc. (“ONUS”)).  The subsidiaries of ASUS may be collectively referred to herein as the “Military Utility Privatization Subsidiaries.” Through May 31, 2011, AWR was also the parent company of Chaparral City Water Company (“CCWC”).

 

GSWC is a public utility engaged principally in the purchase, production, distribution and sale of water in California serving approximately 256,000 customers. GSWC also distributes electricity in several San Bernardino Mountain communities serving approximately 23,000 customers. The California Public Utilities Commission (“CPUC”) regulates GSWC’s water and electric businesses, including properties, rates, services, facilities and other matters.  AWR’s assets and operating income are primarily those of GSWC.

 

ASUS performs water and wastewater services and operations on a contract basis. Through its wholly owned subsidiaries, ASUS operates and maintains the water and/or wastewater systems at various military bases pursuant to 50-year fixed price contracts, which are subject to periodic price redeterminations and modifications for changes in circumstances, changes in laws and regulations and changes in wages and fringe benefits to the extent provided in each of the contracts. There is no direct regulatory oversight by the CPUC over AWR or the operation, rates or services provided by ASUS or any of its wholly owned subsidiaries.

 

As more fully described in Note 10, on June 7, 2010, AWR entered into a stock purchase agreement with EPCOR Water (USA) Inc. to sell all of the common shares of CCWC for an initial purchase price of $34.7 million, including the assumption of approximately $5.6 million of long-term debt.  The sale was approved by the Arizona Corporation Commission in April 2011 and the transaction closed on May 31, 2011.  At closing, $29.0 million in cash was paid to AWR, which was used primarily to pay down short-term borrowings.

 

Basis of Presentation: The consolidated financial statements and notes thereto are being presented in a combined report being filed by two separate Registrants: AWR and GSWC. References in this report to “Registrant” are to AWR and GSWC, collectively, unless otherwise specified.

 

The consolidated financial statements of AWR include the accounts of AWR and its subsidiaries, all of which are wholly owned. These financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. Inter-company transactions and balances have been eliminated in the AWR consolidated financial statements. The assets and liabilities of CCWC have been classified as current assets and liabilities held for sale as of December 31, 2010.  The operational results for the periods presented and the gain on disposal of CCWC are reported in discontinued operations, net of transaction costs.  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”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America for annual financial statements have been condensed or omitted pursuant to such rules and regulations. 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 those 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, 2010 filed with the SEC.

 

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GSWC’s Related Party Transactions: GSWC and other subsidiaries provide and receive various services to and from their parent, AWR, and among themselves. In addition, AWR has a $100 million syndicated credit facility. AWR borrows under this facility and provides funds to its subsidiaries, including GSWC, in support of their operations. Amounts owed to AWR for borrowings under this facility are included in inter-company payables on GSWC’s balance sheets as of June 30, 2011 and December 31, 2010. The interest rate charged to GSWC and other affiliates is sufficient to cover AWR’s interest cost under the credit facility. GSWC also allocates certain corporate office administrative and general costs to its affiliates using allocation factors mandated by the CPUC.

 

Long-Term Debt:  On April 14, 2011 GSWC sold $62.0 million in aggregate principal amount of its 6% Notes (“the Notes”). The Notes will mature on April 15, 2041. Interest on the Notes is payable semi-annually in arrears on April 15 and October 15, at the rate of 6% per annum. The Notes are unsecured and unsubordinated and rank equally with all of GSWC’s unsecured and unsubordinated debt. A portion of the proceeds were used in May 2011 to redeem $22.0 million of GSWC’s 7.65% Medium-Term Notes, Series B and to pay a redemption premium of $421,000.    The remainder of the proceeds was used to pay down short-term borrowings from AWR and to fund capital expenditures.

 

Sales and Use Taxes:  GSWC bills certain sales and use taxes levied by state or local governments to its customers. Included in these sales and use taxes are franchise fees, which GSWC pays to various municipalities (based on ordinances adopted by these municipalities) in order to use public right of way for utility purposes. GSWC bills these franchise fees to its customers based on a CPUC-authorized rate. These franchise fees, which are required to be paid regardless of GSWC’s ability to collect from the customer, are accounted for on a gross basis. GSWC’s franchise fees billed to customers and recorded as operating revenue were approximately $764,000 and $715,000 for the three months ended June 30, 2011 and 2010, respectively, and $1,464,000 and $1,400,000 for the six months ended June 30, 2011 and 2010, respectively. When GSWC acts as an agent, and the tax is not required to be remitted if it is not collected from the customer, the taxes are accounted for on a net basis.

 

Depending on the state in which the operations are conducted, ASUS and its subsidiaries are also subject to certain state non-income tax assessments generally computed on a “gross receipts” or “gross revenues” basis.  These non-income tax assessments are required to be paid regardless of whether the subsidiary is reimbursed by the U.S. government for these assessments under its 50-year contracts with the U.S. government.  The non-income tax assessments are accounted for on a gross basis and totaled $171,000 and $144,000 during the three months ended June 30, 2011 and 2010, respectively, and $365,000 and $439,000 for the six months ended June 30, 2011 and 2010, respectively.

 

Recently Adopted Accounting PronouncementsIn October 2009, the Financial Accounting Standards Board (“FASB”) issued an update to the accounting standards and provided amendments to the criteria of Accounting Standards Codification Topic 605, “Revenue Recognition,” for separately recognizing consideration in multiple-deliverable arrangements. The amendments establish a selling price hierarchy for determining the selling price of a deliverable.  This guidance was effective for the Registrant beginning January 1, 2011 and did not have any impact on its consolidated financial statements.

 

In January 2010, the FASB issued an update to the accounting standards and amended the disclosure guidance with respect to fair value measurements. Specifically, the new guidance requires disclosure of amounts transferred in and out of Levels 1 and 2 fair value measurements, a reconciliation presented on a gross basis rather than a net basis of activity in Level 3 fair value measurements, greater disaggregation of the assets and liabilities for which fair value measurements are presented and more robust disclosure of the valuation techniques and inputs used to measure Level 2 and 3 fair value measurements. The adoption of this guidance had no impact on Registrant’s consolidated financial statements.

 

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on Registrant’s consolidated financial statements upon adoption.

 

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Table of Contents

 

Note 2 — Regulatory Matters:

 

In accordance with accounting principles for rate-regulated enterprises, Registrant records regulatory assets, which represent probable future revenue associated with certain costs that will be recovered from customers through the ratemaking process, and regulatory liabilities, which represent probable future reductions in revenue associated with amounts that are to be credited to customers through the ratemaking process. At June 30, 2011, Registrant had approximately $34.7 million of regulatory assets not accruing carrying costs. Of this amount, $29.4 million relates to the underfunded positions of the pension and other post-retirement obligations, $3.6 million relates to deferred income taxes representing accelerated tax benefits flowed through to ratepayers, which will be included in rates concurrently with recognition of the associated future tax expense, and $7.5 million relates to a memorandum account authorized by the CPUC to track unrealized gains and losses on GSWC’s purchase power contracts over the life of the contract.  The remainder relates to other items that do not provide for or incur carrying costs that Registrant expects to be reflected in rates over a short period.  Regulatory assets, less regulatory liabilities, included in the consolidated balance sheets for continuing operations are as follows:

 

(dollars in thousands) 

 

June 30,
2011

 

December 31,
2010

 

GSWC

 

 

 

 

 

Electric supply cost balancing account

 

$

8,906

 

$

10,305

 

Water supply cost balancing accounts

 

1,810

 

3,374

 

Water Revenue Adjustment Mechanism, net of Modified Cost Balancing Account

 

37,188

 

30,890

 

Base Revenue Requirement Adjustment Mechanism

 

3,170

 

1,889

 

Water Conservation Memorandum Account

 

1,129

 

1,435

 

Costs deferred for future recovery on Aerojet case

 

17,868

 

18,309

 

Pensions and other post-retirement obligations

 

31,509

 

32,191

 

Derivative unrealized loss (Note 4)

 

7,475

 

6,850

 

Flow-through taxes, net

 

3,627

 

4,270

 

Electric transmission line abandonment costs

 

2,535

 

2,638

 

Asset retirement obligations

 

2,818

 

2,711

 

Low income rate assistance balancing accounts

 

4,580

 

4,657

 

General rate case memorandum accounts

 

17,430

 

20,404

 

Santa Maria adjudication memorandum accounts

 

3,744

 

3,737

 

Bay Point balancing account

 

4,889

 

 

Other regulatory assets, net

 

6,198

 

6,754

 

Various refunds to customers

 

(14,245

)

(14,461

)

Total

 

$

140,631

 

$

135,953

 

 

Regulatory matters are discussed in detail in the consolidated financial statements and the notes thereto included in the Form 10-K for the year ended December 31, 2010 filed with the SEC.  The discussion below focuses on significant matters and changes since December 31, 2010.

 

Electric Supply Cost Balancing Accounts:

 

Electric power costs incurred by GSWC’s Bear Valley Electric Service (“BVES”) division continue to be charged to its electric supply cost balancing account. The under-collection in the electric supply cost balancing account is $8.9 million at June 30, 2011.  During the six months ended June 30, 2011, the under-collection decreased by approximately $1.4 million primarily as a result of a payment of a surcharge by its customers of 2.2¢ per kilowatt hour.  In addition, BVES is only allowed to include its actual recorded purchased energy costs up to a weighted annual average cost of $77 per megawatt-hour (“MWh”) through August 2011 in its electric supply cost balancing account.

 

GSWC’s current power contract provides for 13 megawatts (“MW”) of electric energy at a fixed price of $67.75 per MWh during 2011 as compared to the $77 per MWh included in rates.  The reduction in the actual price of purchased power helps decrease the under-collection balance in the electric supply cost balancing account.  To the extent that the actual weighted average annual cost for power purchased exceeds the $77 per MWh amount prior to September 1, 2011, GSWC will not be able to include these amounts in its balancing account and

 

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Table of Contents

 

such amounts will be expensed.  There were no amounts expensed over the $77 per MWh cap during the three and six months ended June 30, 2011 and 2010.

 

As of June 30, 2011, the electric supply cost balancing account consists of $4.5 million for costs of abandonment of a transmission line upgrade and $4.4 million for changes in purchased energy and power system delivery costs.

 

Water Supply Cost Balancing Accounts:

 

Prior to the implementation of the Modified Cost Balancing Account (“MCBA”) further discussed below, Registrant maintained water supply cost balancing accounts for GSWC to account for under-collections and over-collections of revenues designed to recover such costs.  These supply cost balancing accounts tracked differences between the current cost for supply items (water, power and pump taxes) charged by GSWC’s suppliers and the cost for those items incorporated into GSWC’s rates. Under-collections (recorded as regulatory assets) occurred when the current cost exceeded the amount in rates for these items and, conversely, over-collections (recorded as regulatory liabilities) occurred when the current cost of these items were less than the amount in rates.  Typically, under-collections or over-collections, when they occurred, were tracked in the supply cost balancing accounts for future recovery or refund through a surcharge (in the event of an under-collection) or through a surcredit (in the event of an over-collection) on customers’ bills.  Registrant accrues interest on its supply cost balancing accounts at the rate prevailing for 90-day commercial paper.

 

As of June 30, 2011, there is a $1.8 million net under-collection remaining in the water supply cost balancing accounts relating to GSWC’s Region I.  Currently, there are surcharges in place to recover these under-collections.  When these surcharges expire, any unrecovered balances will be included for recovery in a future filing.

 

The MCBA account replaces the water supply cost balancing account.  Under the MCBA, GSWC is permitted to recover supply costs related to changes in water supply mix in addition to rate changes by GSWC’s suppliers.

 

Water Revenue Adjustment Mechanism (“WRAM”) and Modified Cost Balancing Account (“MCBA”):

 

GSWC records the difference between what it bills its water customers and that which is authorized by the CPUC using the WRAM and MCBA accounts approved by the CPUC.

 

Under the WRAM, GSWC records the adopted level of volumetric revenues as authorized by the CPUC for metered accounts (adopted volumetric revenues).  The adopted volumetric revenues consider the seasonality of consumption of water based upon historical averages. The variance between adopted volumetric revenues and actual billed volumetric revenues for metered accounts is recorded as a component of revenue with an offsetting entry to an asset or liability balancing account (tracked individually for each rate making area). The variance amount may be positive or negative and represents amounts that will be billed or refunded to customers in the future.  The WRAM only applies to customer classes with conservation rates in place.  Currently, the majority of GSWC’s water customers have conservation tiered rate billing structures.

 

Under the MCBA, GSWC began tracking adopted and actual expense levels for purchased water, purchased power and pump taxes, as established by the CPUC. GSWC records the variances (which include the effects of changes in both rate and volume) between adopted and actual purchased water, purchased power and pump tax expenses. GSWC recovers from or refunds to customers the amount of such variances at a later date. GSWC tracks these variances individually for each rate-making area.  Unlike the WRAM, the MCBA applies to all customer classes.

 

The balances in the WRAM and MCBA assets and liabilities accounts will fluctuate on a monthly basis depending upon the variance between adopted and actual results. The recovery or refund of the WRAM is netted against the MCBA over- or under-collection for each rate-making area.  Balances in these accounts bear interest at the current 90-day commercial paper rate.

 

GSWC intends to seek approval from the CPUC to refund or collect the balance in these accounts when the net amount at the end of the calendar year for Regions II and III and any ratemaking area in Region I achieves a pre-determined level (i.e., at least 2.5 percent over- or under-recovery of the approved revenue requirement).

 

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In March 2010, surcharges were put in place to recover $18.3 million of amounts accumulated, as of December 31, 2009, in Regions II and III’s WRAM, net of MCBA and supply cost balancing accounts.  During 2010, surcharges were implemented for recovery of $2.1 million of the Region I WRAM accounts, net of the MCBA.

 

In March 2011, GSWC filed for recovery of its 2010 WRAM and MCBA balances for a total of $19.6 million.  Surcharges have been put in place to recover this amount.  Included in this amount is approximately $1.2 million representing balances from the water supply cost balancing accounts. Based on CPUC guidelines, recovery periods relating to the 2010 balances will range between 12 and 36 months.  In September 2010, GSWC, along with other California water utilities, filed an application with the CPUC to modify the recovery period of the WRAM and MCBA accounts to 24 months or less.  A decision on this application is expected in 2011.

 

For the three and six months ended June 30, 2011, surcharges of approximately $4.0 million and $5.6 million, respectively, were billed to customers to collect previously incurred under-collections in the WRAM, net of MCBA balancing accounts. As of June 30, 2011, GSWC had a net aggregated regulatory asset of $37.2 million which is comprised of a $58.4 million under-collection in the WRAM accounts and a $21.2 million over-collection in the MCBA accounts.

 

Aerojet Litigation Memorandum Account:

 

On July 21, 2005, the CPUC authorized GSWC to collect approximately $21.3 million of the Aerojet litigation memorandum account, through a rate surcharge, which will continue for no longer than 20 years. Beginning in October 2005, new rates went into effect to begin amortizing the memorandum account over a 20-year period.  A rate surcharge generating approximately $264,000 and $211,000 was billed to customers during the three months ended June 30, 2011 and 2010, respectively, and approximately $459,000 and $392,000 for the six months ended June 30, 2011 and 2010, respectively. GSWC will keep the Aerojet memorandum account open until the earlier of full amortization of the balance or 20 years.  However, no costs will be added to the memorandum account, other than on-going interest charges approved by the CPUC decision.

 

Aerojet has also agreed to reimburse GSWC $17.5 million, plus interest accruing from January 1, 2004, for GSWC’s past legal and expert costs, which is included in the Aerojet litigation memorandum account. The reimbursement of the $17.5 million is contingent upon the issuance of land use approvals for development in a defined area within Aerojet property in Eastern Sacramento County and the receipt of certain fees in connection with such development.

 

At this time, management believes the full balance of the Aerojet litigation memorandum account will be collected either from customers or Aerojet.

 

General Rate Case Memorandum Accounts:

 

The balance in the general rate case memorandum accounts represents the revenue differences between interim rates and final rates authorized by the CPUC due to delays in receiving decisions on various general rate case applications.  As of June 30, 2011, there is an aggregate $17.4 million in the general rate case memorandum accounts.  The majority of this amount relates to the final decision issued by the CPUC in November 2010 on the Region II, Region III and general office rate case for rates in years 2010, 2011 and 2012. Due to delays in issuing a decision on this rate case, interim rates for Region II and Region III were established effective January 1, 2010.  The final decision approved rate increases retroactive to January 1, 2010.  Accordingly, in November 2010 GSWC recorded a $19.5 million regulatory asset representing the difference between interim rates and the final rates authorized by the CPUC. Effective January 1, 2011, a twenty-four month surcharge went into effect to collect the $19.5 million retroactive portion of the revenue increase.   During the three and six months ended June 30, 2011, approximately $2.0 million and $3.0 million, respectively, have been collected from customers. If GSWC has not fully recovered the amount of this under-collection at the end of the twenty-four month period, GSWC will seek recovery of any amounts not recovered through this surcharge.

 

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Excess Usage Charges - Refund to Customers:

 

In July 2009, GSWC began receiving reduced water allocations from member agencies of the Metropolitan Water District of Southern California (“MWD”). As a result, in July 2009, GSWC began implementing water rationing, restrictions, and excess usage charges to its customers in several of its service areas. The excess usage charges were being collected in the event that penalties were required to be paid to MWD for exceeding GSWC’s water allocations.  Because GSWC was able to comply with the reduced water allocations from MWD, it will not have to remit to MWD these excess usage charges collected from its customers. In May 2011, GSWC ended water rationing to its customers. As of June 30, 2011, GSWC has excess usage charges totaling $2.8 million recorded as a regulatory liability.  In July 2011, GSWC filed advice letters with the CPUC seeking authorization to refund these amounts to customers in the service areas which had water rationing.  If approved, GSWC will refund the excess usage charges through a two month surcredit.

 

Bay Point Balancing Account:

 

In August 2009, GSWC filed an application with the CPUC requesting authorization to implement corrective measures to address water quality problems in its Bay Point water system.  These corrective measures include: (i) retiring an existing water treatment plant and purchasing water from Contra Costa Water District (“CCWD”); (ii) entering into an agreement with CCWD for a capacity right to 4.4 million gallons per day of treated water for a one-time price of $4.7 million; (iii) recovering costs associated with the purchase of additional treated water to replace purchased raw water; and (iv) amending tariffs to appropriately charge GSWC’s Bay Point customers for the cost of the asset lease agreement with CCWD.  In June 2011, the CPUC issued a resolution in this matter which approved the contract with CCWD and authorized GSWC to establish a balancing account to record and recover from customers the $4.7 million payment for use of CCWD’s treatment plant.  As of June 30, 2011, GSWC has established a regulatory asset for the one-time payment to CCWD totaling $4.9 million (as adjusted for cost index escalation), which will be recovered in future rates from customers.  In July 2011, the CPUC issued a proposed decision on the ratemaking treatment for the abandoned water treatment plant and the agreement with CCWD. The CPUC has authorized GSWC to amortize both the un-depreciated value of the retired treatment plant and the agreement with CCWD over a six year period and to earn the projected cost of incremental debt used in GSWC’s 2008 cost of capital filing of 8.3%.

 

Other Regulatory Matters:

 

Bear Valley Electric Service:

 

GSWC’s BVES division has been regularly filing compliance reports with the CPUC regarding its purchases of energy from renewable energy resources. The filings have indicated that BVES has not achieved interim target purchase levels of renewable energy resources and thus, on its face, might be subject to a potential penalty. However, BVES expects that the CPUC will waive any potential fines in accordance with the CPUC’s flexible compliance rules.  Accordingly, no provision for loss has been recorded in the financial statements as of June 30, 2011.  BVES is continuing its efforts to procure renewable resources.

 

In September 2009, GSWC entered into a ten-year contract with the Los Angeles County Sanitation District (“LACSD”) to purchase renewable energy created from landfill gas.  In June 2010, GSWC filed an application with the CPUC for approval.  In February 2011, GSWC was notified that the landfill gas-generated energy contract with the LACSD could potentially be terminated should LACSD determine to shut down the landfill gas generator.  GSWC informed the CPUC of the potential termination of this contract.  The contract was approved by the CPUC in June 2011.

 

In July 2011, GSWC and LACSD entered into a settlement agreement to modify the contract.  Pursuant to the settlement agreement, LACSD will provide GSWC with renewable energy from the landfill gas generator through September 30, 2011, the date at which LACSD intends to cease operation of the generator.  In addition, LACSD will also sell to GSWC renewable energy credits (“REC”) at $30 per REC.  GSWC intends to file for approval with CPUC for the purchase of these RECs.

 

In November 2010, the contracted bioenergy vendor for the purchase of biogas advised GSWC that the biogas production will be suspended due to financial constraints.   As a result of the suspension, BVES has negotiated a Biogas Option Agreement with this vendor for the purchase of future production of biogas.  In March, 2011, GSWC and the Division of Ratepayer Advocates reached a settlement agreement on this Biogas Option Agreement.  In June 2011, the settlement agreement was approved by the CPUC.

 

BVES believes that it will not be subject to fines under the CPUC’s flexible compliance rules for not meeting interim targets due to its efforts to procure renewable energy resources.

 

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New Tax Law:

 

The Small Business Jobs Act of 2010 and the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (“Tax Relief Act”) extended 50% bonus depreciation for qualifying property through 2012 and created a new 100% bonus depreciation for qualifying property placed in service between September 9, 2010 and December 31, 2011.

 

In June 2011, the CPUC adopted a resolution that requires water utilities to file advice letters implementing a one-way memorandum account to track the revenue effects associated with the Tax Relief Act, which may reduce revenue requirements in future rate case proceedings.   The effective date of the memorandum account established by the resolution is April 14, 2011.  More specifically, the memorandum account established by the resolution will track on a CPUC-jurisdictional, revenue requirement basis: (a) decreases in each impacted utility’s revenue requirement resulting from increases in its deferred tax reserve; and (b) other direct changes in the revenue requirement resulting from taking advantage of the Tax Relief Act. This resolution also authorizes impacted utilities to use savings from this new tax law to invest in certain additional, needed utility infrastructure, not otherwise funded in rates, within a time frame shorter than would be practicable through the formal application or advice letter processes. The establishment of a memorandum account does not change rates, nor guarantee that rates will be changed in the future. This mechanism simply allows the CPUC to determine at a future date whether rates should be changed.  GSWC has evaluated the potential impact of this resolution and does not expect it to have a material impact on its consolidated financial statement in 2011.

 

Pending Regulatory Matters:

 

Registrant records loss contingencies when an unfavorable outcome of a matter is deemed to be probable and the loss is reasonably estimable.  Registrant will accrue the most likely amount when such an amount can be reasonably estimated or, at least the minimum of the range of probable loss when a range of probable loss can be estimated.  Management determines the likelihood of an unfavorable outcome based on many factors such as the nature of the matter, available defenses, progress of the matter, views and opinions of legal counsel and other advisors, among others.

 

On February 15, 2007, the CPUC issued a subpoena to GSWC in connection with an investigation of certain work orders and charges paid to a specific contractor used previously by GSWC for numerous construction projects estimated to total $24.0 million over a period of 14 years. The CPUC’s investigation focused on whether GSWC was overcharged for these construction projects and whether these overcharges, if any, were included in customer rates.  The construction projects completed by this specific contractor related primarily to work on water treatment and pumping plants which have been placed in service and are used and useful.  In June 2007, GSWC received notification from the CPUC that it was instituting an audit to examine for the period 1994 to the present, GSWC’s policies, procedures, and practices regarding the granting or awarding of construction contracts or jobs.

 

On June 27, 2011, GSWC executed a settlement agreement with the Division of Water and Audits (“DWA”) of the CPUC that, if approved by the CPUC, would resolve the investigation.  Also on June 27, 2011, GSWC and DWA jointly filed this settlement agreement for CPUC approval.  A decision by the CPUC is expected later this year.  Among other things, the settlement agreement resolves all disputes and disagreements between GSWC and DWA and, upon CPUC approval, the CPUC will generally release GSWC from any claim, known or unknown, foreseen or unforeseen, that arose or may have arisen as a result of the CPUC staff’s investigation into GSWC’s procurement practices as they related to contracts with this specific contractor.

 

Upon approval by the CPUC, the settlement provides for refunds to customers totaling $9.5 million to be made over a period of 12-36 months, as well as a reduction in rate-base and other rate adjustments totaling $3.0 million.   In addition, a penalty of $1.0 million will be paid by GSWC based on a concern that GSWC should have, but failed to, disclose the issues to the CPUC.  GSWC recorded a loss contingency reserve in 2010 for this matter in anticipation of this settlement agreement.  Therefore, no further change to the reserve was required during the three and six months ended June 30, 2011. Management does not expect future increases in the reserve related to this specific contractor.

 

Finally, as part of the settlement agreement, GSWC agreed to be subject to three separate independent audits of its procurement practices over a period of ten years from the date the settlement is approved by the CPUC.   The audits will cover GSWC’s procurement practices from 1994 forward and could result in further disallowances of costs.  The cost of the audits will be borne by shareholders and may not be recovered by GSWC in rates to customers. At this time, management cannot predict the outcome or costs of these audits.

 

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Note 3 — Earnings per Share/Capital Stock:

 

In accordance with the accounting guidance for participating securities and earnings per share (“EPS”), Registrant uses the “two-class” method of computing EPS. The “two-class” method is an earnings allocation formula that determines EPS for each class of common stock and participating security. AWR has participating securities related to stock options and restricted stock units that earn dividend equivalents on an equal basis with AWR’s Common Shares (the “Common Shares”) that have been issued under AWR’s 2000 and 2008 Employee Plans and the 2003 Directors Plan. In applying the “two-class” method, undistributed earnings are allocated to both common shares and participating securities. The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding for calculating basic net income per share:

 

Basic

 

For The Three Months
Ended June 30,

 

For The Six Months
Ended June 30,

 

(in thousands, except per share amounts)

 

2011

 

2010

 

2011

 

2010

 

Net income from continuing operations

 

$

12,728

 

$

8,870

 

$

19,683

 

$

17,160

 

Net income from discontinued operations

 

3,234

 

105

 

3,868

 

305

 

Total net income

 

15,962

 

8,975

 

23,551

 

17,465

 

Less: (a)

Distributed earnings to common shareholders

 

5,227

 

4,830

 

10,075

 

9,652

 

 

Distributed earnings to participating securities

 

36

 

26

 

64

 

48

 

Undistributed earnings

 

10,699

 

4,119

 

13,412

 

7,765

 

 

 

 

 

 

 

 

 

 

 

(b)

Undistributed earnings allocated to common shareholders

 

10,625

 

4,098

 

13,327

 

7,727

 

 

Undistributed earnings allocated to participating securities

 

74

 

21

 

85

 

38

 

 

 

 

 

 

 

 

 

 

 

Total income available to common shareholders, basic (a)+(b)

 

$

15,852

 

$

8,928

 

$

23,402

 

$

17,379

 

 

 

 

 

 

 

 

 

 

 

Weighted average Common Shares outstanding, basic

 

18,668

 

18,576

 

18,658

 

18,561

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per Common Share:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.68

 

$

0.47

 

$

1.05

 

$

0.92

 

Income from discontinued operations

 

0.17

 

0.01

 

0.20

 

0.02

 

Net Income

 

$

0.85

 

$

0.48

 

$

1.25

 

$

0.94

 

 

Diluted EPS is based upon the weighted average number of Common Shares, including both outstanding shares and shares potentially issuable in connection with stock options granted under Registrant’s 2000 and 2008 Employee Plans, and the 2003 Directors Plan, and net income. At June 30, 2011 and 2010, there were 708,345 and 742,387 options outstanding, respectively, under these Plans. At June 30, 2011 and 2010, there were also 135,611 and 104,498 restricted stock units outstanding, respectively.

 

The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding for calculating diluted net income per share:

 

Diluted

 

For The Three Months
Ended June 30,

 

For The Six Months
Ended June 30,

 

(in thousands, except per share amounts)

 

2011

 

2010

 

2011

 

2010

 

Common shareholders earnings, basic

 

$

15,852

 

$

8,928

 

$

23,402

 

$

17,379

 

Undistributed earnings for dilutive stock options

 

74

 

21

 

85

 

38

 

Total common shareholders earnings, diluted

 

$

15,926

 

$

8,949

 

$

23,487

 

$

17,417

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, basic

 

18,668

 

18,576

 

18,658

 

18,561

 

Stock-based compensation (1)

 

70

 

144

 

139

 

134

 

Weighted average common shares outstanding, diluted

 

18,738

 

18,720

 

18,797

 

18,695

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per Common Share:

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.68

 

$

0.47

 

$

1.05

 

$

0.91

 

Income from discontinued operations

 

0.17

 

0.01

 

0.20

 

0.02

 

Net Income

 

$

0.85

 

$

0.48

 

$

1.25

 

$

0.93

 

 


(1)          In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in the calculation of diluted EPS, 465,824 and 395,833 stock options at June 30, 2011 and

 

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2010, respectively, were deemed to be outstanding in accordance with accounting guidance on earnings per share.  All of the 135,611 and 104,498 restricted stock units at June 30, 2011 and 2010, respectively, were included in the calculation of diluted EPS for the six months ended June 30, 2011 and 2010.

 

Stock options of 241,921 and 112,026 were outstanding at June 30, 2011 and 2010, respectively, but not included in the computation of diluted EPS because the related option exercise price was greater than the average market price of AWR’s Common Shares for the six months ended June 30, 2011 and 2010.  Stock options of 600 and 234,528 were outstanding at June 30, 2011 and 2010, respectively, but not included in the computation of diluted EPS because they were anti-dilutive.

 

During the six months ended June 30, 2011 and 2010, Registrant issued 49,456 and 57,299 Common Shares, for approximately $953,000 and $1,316,000, respectively, under Registrant’s Common Share Purchase and Dividend Reinvestment Plan, the 401(k) Plan, and the stock incentive plans. In addition, Registrant purchased 159,383 and 67,241 Common Shares on the open market during the six months ended June 30, 2011 and 2010, respectively, under Registrant’s 401(k) Plan and the Common Share Purchase and Dividend Reinvestment Plan. The Common Shares purchased by Registrant were used to satisfy the requirements of these plans.

 

During the three months ended June 30, 2011 and 2010, AWR paid quarterly dividends of approximately $5.2 million, or $0.28 per share, and $4.8 million, or $0.26 per share, respectively.  During the six months ended June 30, 2011 and 2010, AWR paid quarterly dividends to shareholders of approximately $10.1 million, or $0.54 per share, and $9.7 million, or $0.52 per share.

 

Note 4 — Derivative Instruments:

 

In October 2008, GSWC executed a purchased power contract that permits GSWC to purchase power at a fixed cost over three and five year terms depending on the amount of power and the period during which the power is purchased under the contract.  The contract is subject to the accounting guidance for derivatives and requires mark-to-market derivative accounting.   GSWC began receiving power under this contract on January 1, 2009.  In May 2009, the CPUC issued a final decision approving the contract and authorized GSWC to establish a regulatory asset and liability memorandum account to offset the entries required by the accounting guidance.  Accordingly, all unrealized gains and losses generated from the new purchased power contract will be deferred on a monthly basis into a non-interest bearing regulatory memorandum account that will track the changes in fair value of the derivative throughout the term of the contract.   As of June 30, 2011 there was a $7.5 million cumulative unrealized loss which has been included in the memorandum account.  This memorandum account does not impact GSWC’s earnings.

 

Registrant adopted accounting guidance for fair value measurements effective January 1, 2008 for financial assets and liabilities measured on a recurring basis.  This guidance applies to all financial assets and financial liabilities that are being measured and reported on a fair value basis. There was no impact in the adoption of this accounting guidance to the consolidated financial statements. However, the accounting guidance requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The guidance requires fair value measurements to be classified and disclosed in one of the following three categories:

 

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

 

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability, or

 

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

 

Registrant’s valuation model utilizes various inputs that include quoted market prices for energy over the duration of the contract. The market prices used to determine the fair value for this derivative instrument were estimated based on independent sources such as broker quotes and publications that are not observable in or corroborated by the market.  Registrant receives one broker quote to determine the fair value of its derivative instrument.  When such inputs have a significant impact on the measurement of fair value, the instrument is categorized in Level 3. Accordingly, the valuation of the derivative on Registrant’s new purchased power contract has been classified as Level 3 for all periods presented.

 

The following table presents changes in the fair value of the derivative for the three and six months ended

 

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June 30, 2011 and 2010.

 

 

 

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

 

(dollars in thousands)

 

2011

 

2010

 

2011

 

2010

 

Balance, at beginning of the period

 

$

(6,874

)

$

(10,038

)

$

(6,850

)

$

(7,338

)

Unrealized gain (loss) on purchased power contracts

 

(601

)

486

 

(625

)

(2,214

)

Balance, at end of the period

 

$

(7,475

)

$

(9,552

)

$

(7,475

)

$

(9,552

)

 

For the three and six months ended June 30, 2011 and 2010, the unrealized gains and losses were included in regulatory assets due to regulatory mechanisms in place effective January 1, 2009.

 

Note 5 — Fair Value of Financial Instruments:

 

For cash and cash equivalents, accounts receivable, accounts payable and short-term debt, the carrying amount is assumed to approximate fair value due to the short-term nature of the amounts. The table below estimates the fair value of long-term debt held by GSWC. Rates available to GSWC at June 30, 2011 and December 31, 2010 for debt with similar terms and remaining maturities were used to estimate fair value for long-term debt. Changes in the assumptions will produce differing results.

 

 

 

June 30, 2011

 

December 31, 2010

 

(dollars in thousands)

 

Carrying Amount

 

Fair Value

 

Carrying Amount

 

Fair Value

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

Long-term debt—GSWC

 

$

340,787

 

$

388,560

 

$

300,215

 

$

356,005

 

 

Note 6 — Military Privatization:

 

ASUS, through its wholly-owned subsidiaries, has entered into agreements with the U.S. government to operate and maintain the water and/or wastewater systems at various military bases pursuant to 50-year, firm fixed price contracts, subject to periodic prospective price redeterminations and modifications for changes in circumstances, changes in laws and regulations, and changes in wages and fringe benefits to the extent provided in each of the contracts.

 

The amounts charged by the Military Utility Privatization Subsidiaries for water and/or wastewater services at the respective military bases are based upon the terms of the 50-year contracts between ASUS or its subsidiaries and the U.S. government and include a monthly net fixed price for operation and maintenance, and for an amount to cover renewals and replacements for the first two years of the contract.  Under the terms of each of these contracts, prices are to be redetermined at the end of the initial two year period and every three years thereafter, unless otherwise agreed to by the parties to a contract.  In addition, prices may be equitably adjusted for changes in law and other circumstances.  These adjustments can be retrospective and/or prospective.  ASUS has experienced delays in obtaining readjustment of prices and equitable adjustments as required by the terms of these contracts.  However, in the first quarter of 2010, ASUS recorded $5.6 million in additional revenues (approximately $5.3 million of which was retroactive through December 31, 2009) for two contract modifications approved by the U.S. government for requests for equitable adjustment regarding inventory levels at Fort Bragg and Fort Bliss.

 

Revenues from firm, fixed-price construction contracts are recognized based on the percentage-of-completion method of accounting.  In accordance with generally accepted accounting principles, revenue recognition under the percentage-of-completion method requires ASUS to estimate the progress toward completion on a contract in terms of efforts (costs incurred) or in terms of results achieved (such as units constructed). Construction costs include all direct material and labor costs charged by subcontractors and those indirect costs related to contract performance, such as indirect labor, supplies, and tools.

 

Revisions in estimated contract profits are made in the period in which circumstances requiring the revision become known. During the second quarter of 2011, a change in estimated costs to complete a water and wastewater pipe replacement project at Fort Bragg was made as a result of successful negotiations with contractors providing construction services to reduce the estimated cost to complete the pipeline replacement work. The effect of the change in cost estimates resulted in an increase in pretax operating income of $2.9 million for work previously performed by ONUS on this project. The project is scheduled to be completed by early 2014.

 

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Note 7 — Income Taxes:

 

As a regulated utility, GSWC treats certain temporary differences as flow-through adjustments in computing its income tax provision consistent with the income tax approach approved by the CPUC for ratemaking purposes. Flow-through adjustments increase or decrease tax expense in one period, with an offsetting increase or decrease occurring in another period. Giving effect to these temporary differences as flow-through adjustments typically results in a greater variance between the effective tax rate (“ETR”) and the statutory federal income tax rate in any given period than would otherwise exist if GSWC were not required to account for its income taxes as a regulated enterprise.  The GSWC ETRs for the three months ended June 30, 2011 and 2010 were 43.5% and 42.7%, respectively.  The GSWC ETRs for the six months ended June 30, 2011 and 2010 were 44.1% and 42.9%, respectively. The GSWC ETRs deviated from the statutory rate primarily due to state taxes and differences between book and taxable income that are treated as flow-through adjustments in accordance with regulatory requirements (principally plant-, rate-case- and compensation-related items).

 

GSWC continues to compute its state tax provision as if GSWC were autonomous and not a member of AWR’s unitary group.  This approach is consistent with the methodology used for ratemaking purposes.  Since all of GSWC’s activities are conducted within California, GSWC’s state tax provision does not reflect apportionment of its income.

 

Changes in Tax Law:

 

The Small Business Jobs Act of 2010 and the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (“Tax Relief Act”) extended 50% bonus depreciation for qualifying property through 2012 and created a new 100% bonus depreciation for qualifying property placed in service between September 9, 2010 and December 31, 2011.  As a result of these law changes, Registrant’s current tax expense for 2010 and 2011 reflect benefits from the Tax Relief Act. Although these law changes reduce AWR’s current taxes payable, they do not reduce its total income tax expense or effective tax rate.

 

Note 8 — Employee Benefit Plans:

 

The components of net periodic benefit costs, before allocation to the overhead pool, for Registrant’s pension plan, postretirement plan, and Supplemental Executive Retirement Plan (“SERP”) for the three and six months ended June 30, 2011 and 2010 are as follows:

 

 

 

For The Three Months Ended June 30,

 

 

 

Pension Benefits

 

Other
Postretirement
Benefits

 

SERP

 

(dollars in thousands)

 

2011

 

2010

 

2011

 

2010

 

2011

 

2010

 

Components of Net Periodic Benefits Cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

1,429

 

$

1,199

 

$

107

 

$

102

 

$

150

 

$

108

 

Interest cost

 

1,639

 

1,526

 

153

 

159

 

116

 

89

 

Expected return on plan assets

 

(1,588

)

(1,313

)

(74

)

(63

)

 

 

Amortization of transition

 

 

 

105

 

105

 

 

 

Amortization of prior service cost (benefit)

 

30

 

30

 

(50

)

(50

)

40

 

40

 

Amortization of actuarial loss

 

322

 

293

 

 

 

34

 

 

 

Net periodic pension cost under accounting standards

 

1,832

 

1,735

 

241

 

253

 

340

 

237

 

Regulatory adjustment — deferred

 

(161

)

 

 

 

 

 

Total expense recognized, before allocation to overhead pool

 

$

1,671

 

$

1,735

 

$

241

 

$

253

 

$

340

 

$

237

 

 

22



Table of Contents

 

 

 

For The Six Months Ended June 30,

 

 

 

Pension Benefits

 

Other
Postretirement
Benefits

 

SERP

 

(dollars in thousands)

 

2011

 

2010

 

2011

 

2010

 

2011

 

2010

 

Components of Net Periodic Benefits Cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

2,812

 

$

2,398

 

$

214

 

$

204

 

$

300

 

$

216

 

Interest cost

 

3,262

 

3,052

 

306

 

318

 

232

 

178

 

Expected return on plan assets

 

(3,174

)

(2,626

)

(147

)

(126

)

 

 

Amortization of transition

 

 

 

210

 

210

 

 

 

Amortization of prior service cost (benefit)

 

59

 

60

 

(100

)

(100

)

81

 

80

 

Amortization of actuarial loss

 

621

 

586

 

 

 

67

 

 

Net periodic pension cost under accounting standards

 

3,580

 

3,470

 

483

 

$

506

 

680

 

474

 

Regulatory adjustment — deferred

 

(253

)

 

 

 

 

 

Total expense recognized, before allocation to overhead pool

 

$

3,327

 

$

3,470

 

$

483

 

$

506

 

$