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EX-32 - EXHIBIT 32 - CALIFORNIA WATER SERVICE GROUPcws-03312017xex32.htm
EX-31.2 - EXHIBIT 31.2 - CALIFORNIA WATER SERVICE GROUPcws-03312017xex312.htm
EX-31.1 - EXHIBIT 31.1 - CALIFORNIA WATER SERVICE GROUPcws-03312017xex311.htm


 
UNITED STATES
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 March 31, 2017
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 1-13883
CALIFORNIA WATER SERVICE GROUP
(Exact name of registrant as specified in its charter)
Delaware
 
77-0448994
(State or other jurisdiction
 
(I.R.S. Employer identification No.)
of incorporation or organization)
 
 
1720 North First Street, San Jose, CA.
 
95112
(Address of principal executive offices)
 
(Zip Code)
408-367-8200
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý  No o
Indicate by check mark whether the registrant has submitted electronically 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated Filer x
 
Accelerated filer o
 
 
 
Non-accelerated filer o
 
Smaller reporting company o
(Do not check if a smaller reporting company)
 
Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o  

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act) Yes o  No o
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common shares outstanding as of March 31, 2017 — 48,021,704
 




TABLE OF CONTENTS
 


2



PART I FINANCIAL INFORMATION
 
Item 1.
 
FINANCIAL STATEMENTS
 
The condensed consolidated financial statements presented in this filing on Form 10-Q have been prepared by management and are unaudited.

CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited (In thousands, except per share data)
 
March 31,
2017
 
December 31,
2016
ASSETS
 

 
 

Utility plant:
 

 
 

Utility plant
$
2,766,232

 
$
2,717,339

Less accumulated depreciation and amortization
(878,227
)
 
(858,062
)
Net utility plant
1,888,005

 
1,859,277

Current assets:
 

 
 

Cash and cash equivalents
11,990

 
25,492

Receivables:
 

 
 

Customers
24,685

 
30,305

Regulatory balancing accounts
30,661

 
30,332

Other
17,394

 
17,158

Unbilled revenue
24,303

 
25,228

Materials and supplies at weighted average cost
6,405

 
6,292

Taxes, prepaid expenses, and other assets
12,767

 
7,262

Total current assets
128,205

 
142,069

Other assets:
 

 
 

Regulatory assets
367,476

 
355,930

Goodwill
2,615

 
2,615

Other assets
53,997

 
51,854

Total other assets
424,088

 
410,399

TOTAL ASSETS
$
2,440,298

 
$
2,411,745

CAPITALIZATION AND LIABILITIES
 

 
 

Capitalization:
 

 
 

Common stock, $0.01 par value; 68,000 shares authorized, 48,022 and 47,965 outstanding in 2017 and 2016, respectively
$
480

 
$
480

Additional paid-in capital
334,220

 
334,856

Retained earnings
316,633

 
324,135

Total common stockholders’ equity
651,333

 
659,471

Long-term debt, less current maturities
521,715

 
531,745

Total capitalization
1,173,048

 
1,191,216

Current liabilities:
 

 
 

Current maturities of long-term debt
36,139

 
26,208

Short-term borrowings
130,100

 
97,100

Accounts payable
69,276

 
77,813

Regulatory balancing accounts
8,197

 
4,759

Accrued interest
12,583

 
5,661

Accrued expenses and other liabilities
37,078

 
38,689

Total current liabilities
293,373

 
250,230

Unamortized investment tax credits
1,798

 
1,798

Deferred income taxes
299,464

 
298,924

Pension and postretirement benefits other than pensions
224,851

 
222,691

Regulatory liabilities and other
84,318

 
83,648

Advances for construction
182,815

 
182,448

Contributions in aid of construction
180,631

 
180,790

Commitments and contingencies (Note 10)


 


TOTAL CAPITALIZATION AND LIABILITIES
$
2,440,298

 
$
2,411,745

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

3



CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Unaudited (In thousands, except per share data)
For the three months ended
 
March 31,
2017
 
March 31,
2016
Operating revenue
 
$
122,036

 
$
121,727

Operating expenses:
 
 

 
 

Operations:
 
 

 
 

Water production costs
 
42,068

 
41,069

Administrative and general
 
25,249

 
27,827

Other operations
 
16,124

 
19,302

Maintenance
 
6,112

 
6,063

Depreciation and amortization
 
19,201

 
16,046

Income tax benefit
 
(884
)
 
(925
)
Property and other taxes
 
6,116

 
6,075

Total operating expenses
 
113,986

 
115,457

Net operating income
 
8,050

 
6,270

Other income and expenses:
 
 

 
 

Non-regulated revenue
 
3,462

 
3,428

Non-regulated expenses
 
(2,054
)
 
(2,980
)
Allowance for equity funds used during construction (Note 2)
 
779

 

Income tax expense on other income and expenses
 
(889
)
 
(181
)
Net other income
 
1,298

 
267

Interest expense:
 
 

 
 

Interest expense
 
8,710

 
8,065

Allowance for borrowed funds used during construction (Note 2)
 
(494
)
 
(730
)
Net interest expense
 
8,216

 
7,335

Net income (loss)
 
$
1,132

 
$
(798
)
Earnings (loss) per share:
 
 

 
 

Basic
 
$
0.02

 
$
(0.02
)
Diluted
 
0.02

 
(0.02
)
Weighted average shares outstanding:
 
 

 
 

Basic
 
47,984

 
47,905

Diluted
 
47,984

 
47,905

Dividends declared per share of common stock
 
$
0.1800

 
$
0.1725

 See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements


4



CALIFORNIA WATER SER VICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited (In thousands)
For the three months ended:
 
March 31,
2017
 
March 31,
2016
Operating activities:
 
 

 
 

Net income (loss)
 
$
1,132

 
$
(798
)
Adjustments to reconcile net income (loss) to net cash:
 
 

 
 

Depreciation and amortization
 
19,658

 
16,454

Change in value of life insurance contracts
 
(319
)
 
43

Allowance for equity funds used during construction
 
(779
)
 

Changes in operating assets and liabilities:
 
 

 
 

Receivables and unbilled revenue
 
(4,564
)
 
7,127

Accounts payable
 
(5,535
)
 
(5,129
)
Other current assets
 
(5,359
)
 
(1,728
)
Other current liabilities
 
5,084

 
10,453

Other changes in noncurrent assets and liabilities
 
4,979

 
5,070

Net cash provided by operating activities
 
14,297

 
31,492

Investing activities:
 
 

 
 

Utility plant expenditures
 
(51,853
)
 
(56,463
)
Life insurance proceeds
 
450

 
495

Purchase of life insurance contracts
 
(836
)
 
(960
)
Change in restricted cash
 
(260
)
 
(465
)
Net cash used in investing activities
 
(52,499
)
 
(57,393
)
Financing activities:
 
 

 
 

Short-term borrowings
 
35,000

 
54,500

Repayment of short-term borrowings
 
(2,000
)
 
(53,615
)
Proceeds from long-term debt, net of expenses of $0 for 2017, $177 for 2016
 

 
50,039

Repayment of long-term debt
 
(286
)
 
(254
)
Advances and contributions in aid of construction
 
3,975

 
7,608

Refunds of advances for construction
 
(2,236
)
 
(1,612
)
Repurchase of common stock
 
(1,119
)
 
(466
)
Dividends paid
 
(8,634
)
 
(8,258
)
Net cash provided by financing activities
 
24,700

 
47,942

Change in cash and cash equivalents
 
(13,502
)
 
22,041

Cash and cash equivalents at beginning of period
 
25,492

 
8,837

Cash and cash equivalents at end of period
 
$
11,990

 
$
30,878

Supplemental information:
 
 

 
 

Cash paid for interest (net of amounts capitalized)
 
$
994

 
$
481

Supplemental disclosure of non-cash activities:
 
 

 
 

Accrued payables for investments in utility plant
 
$
24,191

 
$
22,904

Utility plant contribution by developers
 
3,481

 
2,490

 See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements


5



CALIFORNIA WATER SERVICE GROUP
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2017
Dollar amounts in thousands unless otherwise stated
 
Note 1. Organization and Operations and Basis of Presentation
 
California Water Service Group (the Company) is a holding company that provides water utility and other related services in California, Washington, New Mexico and Hawaii through its wholly-owned subsidiaries. California Water Service Company (Cal Water), Washington Water Service Company (Washington Water), New Mexico Water Service Company (New Mexico Water), and Hawaii Water Service Company, Inc. (Hawaii Water) provide regulated utility services under the rules and regulations of their respective state’s regulatory commissions (jointly referred to herein as the Commissions). CWS Utility Services and HWS Utility Services LLC provide non-regulated water utility and utility-related services.
 
The Company operates in one reportable segment, providing water and related utility services.
 
Basis of Presentation
 
The unaudited condensed consolidated interim financial information has been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (SEC) and therefore do not contain all of the information and footnotes required by GAAP and the SEC for annual financial statements. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2016, included in its annual report on Form 10-K as filed with the SEC on February 23, 2017.
 
The preparation of the Company’s unaudited condensed consolidated interim financial statements in accordance with GAAP 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 balance sheet dates and the reported amounts of revenues and expenses for the periods presented. These include, but are not limited to, estimates and assumptions used in determining the Company’s regulatory asset and liability balances based upon probability assessments of regulatory recovery, revenues earned but not yet billed, asset retirement obligations, allowance for doubtful accounts, pension and other employee benefit plan liabilities, and income tax-related assets and liabilities.  Actual results could differ from these estimates.
 
In the opinion of management, the accompanying unaudited condensed consolidated interim financial statements reflect all adjustments, consisting of normal recurring transactions that are necessary to provide a fair presentation of the results for the periods covered. The results for interim periods are not necessarily indicative of the results for any future period.
 
Due to the seasonal nature of the water business, the results for interim periods are not indicative of the results for a 12-month period. Revenue and income are generally higher in the warm, dry summer months when water usage and sales are greater. Revenue and income are generally lower in the winter months when cooler temperatures and rainfall curtail water usage and sales.
 
Note 2. Summary of Significant Accounting Policies
 
Revenue
 
Revenue generally includes monthly cycle customer billings for regulated water and wastewater services at rates authorized by the Commissions (plus an estimate for water used between the customer's last meter reading and the end of the accounting period) and billings to certain non-regulated customers at rates authorized by contract with government agencies.
 
The Company’s regulated water and wastewater revenue requirements are authorized by the Commissions in the states in which they operate. The revenue requirements are intended to provide the Company a reasonable opportunity to recover its operating costs and earn a return on investments.
 
For metered customers, Cal Water recognizes revenue from rates which are designed and authorized by the California Public Utilities Commission (CPUC). Under the Water Revenue Adjustment Mechanism (WRAM), Cal Water records the adopted level of volumetric revenues, which would include recovery of cost of service and a return on investments, as

6



established by the CPUC for metered accounts. The adopted volumetric revenue considers 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 a regulatory asset or liability balancing account (tracked individually for each Cal Water district) subject to certain criteria under the accounting guidance for regulated operations. The variance amount represents amounts that will be billed or refunded to customers in the future. In addition to volumetric revenues, the revenue requirements approved by the CPUC include service charges, flat rate charges, and other items not subject to the WRAM.

Cost-recovery rates are designed to permit full recovery of certain costs allowed to be recovered by the Commissions. Cost-recovery rates such as the Modified Cost Balancing Account (MCBA) provide for recovery of adopted expense levels for purchased water, purchased power and pump taxes, as established by the CPUC. In addition, cost-recovery rates include recovery of costs related to water conservation programs and certain other operating expenses adopted by the CPUC. Variances (which include the effects of changes in both rates and volumes for the MCBA) between adopted and actual costs are recorded as a component of revenue, as the amount of such variances will be recovered from or refunded to customers in the future. Cost-recovery expenses are generally recognized when expenses are incurred with no markup for return on investments or profit.

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-recovery for the corresponding district and the deferred net balances are interest bearing at the current 90 day commercial paper rate. Subsequent to calendar year-end, Cal Water files with the CPUC to refund or collect the balance in the accounts. The majority of under-collected net WRAM and MCBA receivable balances are collected over 12 and 18 months. Cal Water defers net WRAM and MCBA operating revenues and associated costs whenever the net receivable balances are estimated to be collected more than 24 months after the respective reporting period in which it was recorded. The deferred net WRAM and MCBA revenue and associated costs were determined using forecasts of customer consumption trends in future reporting periods and the estimated timing of when the CPUC will authorize Cal Water's filings to recover unbilled balances. Deferred revenues and associated costs are recorded in the periods when the collection is within 24 months of the respective reporting period.

Customers' meter reads occur on various business days throughout the month. As a result, there are unmetered or unbilled customer usage each month. The estimated unbilled revenue for monthly unmetered customer usage is recorded using the number of unbilled days for that month and average daily customer billing rate for the previous month. The average daily customer billing rate for the previous month fluctuates depending on customer usage. Estimated unbilled revenue is not included in the WRAM until it is billed.
 
Flat rate customers are billed in advance at the beginning of the service period. The revenue is prorated so that the portion of revenue applicable to the current period is included in that period’s revenue, with the balance recorded as unearned revenue on the balance sheet and recognized as revenue when earned in the subsequent accounting period. The unearned revenue liability was $0.8 million as of March 31, 2017 and December 31, 2016, respectively. This liability is included in “accrued expenses and other liabilities” on the condensed consolidated balance sheets.

Allowance for Funds Used During Construction
 
The allowance for funds used during construction (AFUDC) represents the capitalized cost of funds used to finance the construction of utility plant. In general, AFUDC is applied to Cal Water construction projects requiring more than one month to complete. No AFUDC is applied to projects funded by customer advances for construction, contributions in aid of construction, or applicable state-revolving fund loans. AFUDC includes the net cost of borrowed funds and a rate of return on other funds when used, and is recovered through water rates as the utility plant is depreciated. Cal Water was authorized by the CPUC to record AFUDC on construction work in progress effective January 1, 2017. Prior to January 1, 2017, the CPUC authorized Cal Water to only record capitalized interest on borrowed funds. Cal Water previously reported the amounts authorized as capitalized interest and a reduced interest expense. The amount of AFUDC related to equity funds during the three months ended March 31, 2017 was $0.8 million and there was $0 million for the three months ended March 31, 2016. The amount of AFUDC related to borrowed funds for the three months ended March 31, 2017 was $0.5 million and the equivalent amount of capitalized interest on borrowed funds was $0.7 million for the three months ended March 31, 2016.
  




7



Adoption of New Accounting Standard

In March 2016, the Financial Accounting Standards Board (FASB) issued updated accounting guidance on simplifying the accounting for share-based payments (ASU 2016-09), which includes the accounting for share-based payment transactions, the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company adopted and implemented the changes to accounting for share-based payments on January 1, 2017 and applied the requirements retrospectively on the statement of cash flows for all periods presented. The Company's forfeiture policy did not change and the Company continues to account for forfeitures when they occur. For the three month period ended March 31, 2017, the Company recorded $0.5 million of income tax benefits in excess compensation costs for share-based compensation which reduced the effective tax rate. The tax-related cash flows resulting from share-based payments were reported as operating activities and the associated cash paid by the company for employee tax withholding transactions were reported as financing activities on the consolidated statement of cash flows.

The following table shows the effect of the accounting change to the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2016:
 
Three Months Ended March 31, 2016
Cash Flow Classification
As Reported on Form 10-Q
 
Adjusted Balance on Form 10-Q
 
Increase (Decrease) from Retrospective Adoption
Other changes in noncurrent assets and liabilities
$
4,604

 
$
5,070

 
$
466

Net cash provided by operating activities
31,026

 
31,492

 
466

Repurchase of common stock

 
(466
)
 
(466
)
Net cash provided by financing activities
48,408

 
47,942

 
(466
)

New Accounting Standards
 
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which amends the existing revenue recognition guidance.  In August 2015, the FASB deferred the effective date of this amendment for public companies by one year to January 1, 2018, with early adoption permitted as of the original effective date of January 1, 2017. The Company expects to adopt the new revenue standard using the modified retrospective method and does not expect the ASU to materially impact the timing or recognition of revenue related to the sale and delivery of water to their customers, which is a significant percentage of the Company's revenue. The Company is still evaluating the impact the ASU has on the related revenue disclosures.
 
In February 2016, the FASB issued ASU 2016-02, Leases. This update changes the accounting treatment of operating leases for lessees and related disclosure requirements. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018 and early adoption is permitted. The Company will adopt the standard using the modified retrospective method for its existing leases and is currently evaluating the impact of adopting the new lease standard on its consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments. This update adds and clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017 and early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial statements and related disclosures.

In March 2017, the FASB issued Accounting Standards Update No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”). The update requires employers to present the service cost component of the net periodic benefit cost in the same income statement line item as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost, including interest cost, expected return on plan assets, amortization of prior service cost/credit and actuarial gain/loss, and settlement and curtailment effects, are to be presented as non-operating items. Employers will have to disclose the line(s) used to present the other components of net periodic benefit cost, if the components are not presented separately in the income statementThe standard only allows the service cost component to be eligible for capitalization. ASU 2017-07 is effective for annual periods after December 15, 2017, and early adoption is permitted. The Company is currently evaluating the impact on its consolidated financial statements and related disclosures. The adoption of this guidance will change the

8



Company's financial statement presentation of net benefit costs. However, based on current regulatory authorization, the changes required by the standard are not expected to materially impact the results of operations.

Note 3. Stock-based Compensation
 
Equity Incentive Plan
 
During the three months ended March 31, 2017 and 2016, the Company granted annual Restricted Stock Awards (RSAs) of 48,717 and 72,317, respectively, to officers and directors of the Company. During those same periods, 10,902 and 7,731 RSAs were canceled, respectively. Employee RSAs granted in 2017 and 2016 vest over 36 months. Director RSAs generally vest at the end of 12 months. During the first three months of 2017 and 2016, the RSAs granted were valued at $36.75 and $25.17 per share, respectively, based upon the fair market value of the Company’s common stock on the date of grant.

During the three months ended March 31, 2017 and 2016, the Company granted 31,389 and 43,659 performance-based Restricted Stock Unit Awards (RSUs), respectively, to officers. During those same periods, the Company issued 38,709 and 28,424 RSUs and canceled 19,735 and 6,602 RSUs, respectively. Each RSU award reflects a target number of shares that may be issued to the award recipient. The 2017 and 2016 awards may be earned upon the completion of the three-year performance period and are recognized as expense ratably over the three-year performance period using a fair market value of $36.75 per share and $25.17 per share, respectively, and an estimate of RSUs earned during the performance period. The Company has recorded compensation costs for the RSAs and RSUs in administrative and general operating expenses in the amount of $0.7 million for the three months ended March 31, 2017 and March 31, 2016.

Note 4. Equity
 
The Company’s changes in total common stockholders’ equity for the three months ended March 31, 2017 were as follows:
 
 
Total Common
Stockholders’ Equity
Balance at December 31, 2016
$
659,471

Common stock issued

Share-based compensation expense
483

Repurchase of common stock
(1,119
)
Common stock dividends declared
(8,634
)
Net income
1,132

Balance at March 31, 2017
$
651,333


The repurchase of common stock represents vesting shares of common stock which employees elected to surrender to the Company in order to pay withholding taxes owed upon vesting of stock grants.

Note 5. Earnings Per Share
 
The computations of basic and diluted earnings per share are noted below. Basic earnings per share is computed by dividing the net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts were exercised or converted into common stock. RSAs are included in the weighted average common shares outstanding because the shares have all the same voting and dividend rights as issued and unrestricted common stock. RSUs are not included in diluted shares for financial reporting until authorized by the Compensation & Organization Committee of the Board of Directors.
 
There were no shares of Stock Appreciation Rights (SARs) outstanding as of March 31, 2017 and as of March 31, 2016.
 

9



 
Three Months Ended March 31
 
2017
 
2016
 
(In thousands, except per share data)
Net income (loss) available to common stockholders
$
1,132

 
$
(798
)
Weighted average common shares outstanding, basic
47,984

 
47,905

Dilutive SARs (treasury method)

 

Weighted average common shares outstanding, dilutive
47,984

 
47,905

Earnings (loss) per share - basic
$
0.02

 
$
(0.02
)
Earnings (loss) per share - diluted
$
0.02

 
$
(0.02
)
 
Note 6. Pension Plan and Other Postretirement Benefits
 
The Company provides a qualified, defined-benefit, non-contributory pension plan for substantially all employees. The Company makes annual contributions to fund the amounts accrued for in the qualified pension plan. The Company also maintains an unfunded, non-qualified, supplemental executive retirement plan. The costs of the plans are charged to expense or are capitalized in utility plant as appropriate.
 
The Company offers medical, dental, vision, and life insurance benefits for retirees and their spouses and dependents. Participants are required to pay a premium, which offsets a portion of the cost.
 
Cash contributions by the Company related to pension plans were $7.5 million and $7.3 million for the three months ended March 31, 2017 and March 31, 2016, respectively. There were no contributions made to the other postretirement benefit plans during the first three months of 2017 and 2016. The 2017 estimated cash contribution to the pension plans is $29.5 million and to the other postretirement benefit plans is $9.3 million.
 
The following table lists components of net periodic benefit costs for the pension plans and other postretirement benefits. The data listed under “pension plan” includes the qualified pension plan and the non-qualified supplemental executive retirement plan. The data listed under “other benefits” is for all other postretirement benefits.
 
 
Three Months Ended March 31
 
Pension Plan
 
Other Benefits
 
2017
 
2016
 
2017
 
2016
Service cost
$
5,865

 
$
5,067

 
$
2,019

 
$
2,304

Interest cost
5,791

 
5,453

 
1,491

 
1,800

Expected return on plan assets
(6,029
)
 
(5,454
)
 
(1,218
)
 
(1,046
)
Amortization of prior service cost
1,445

 
1,555

 
11

 
11

Recognized net actuarial loss
1,752

 
1,293

 
649

 
1,261

Net periodic benefit cost
$
8,824

 
$
7,914

 
$
2,952

 
$
4,330


The decrease in other benefits was due to reductions in health care claim payments in 2016.

Note 7. Short-term and Long-term Borrowings
 
In March 2016, Cal Water issued $50.0 million of First Mortgage Bonds, consisting of $40.0 million of 4.41% series SSS maturing April 16, 2046 and $10.0 million of 4.61% series TTT maturing April 14, 2056. Cash proceeds of approximately $49.7 million, net of $0.3 million debt issuance costs, were received. Cal Water used a portion of the net proceeds from the offering to repay outstanding borrowings on the Company and Cal Water lines of credit of $48.6 million.

Both short-term unsecured credit agreements contain affirmative and negative covenants and events of default customary for credit facilities of this type including, among other things, limitations and prohibitions relating to additional indebtedness, liens, mergers, and asset sales. Also, these unsecured credit agreements contain financial covenants governing the Company and its subsidiaries’ consolidated total capitalization ratio and interest coverage ratio.
 
The outstanding borrowings on the Company lines of credit were $55.1 million as of March 31, 2017 and $57.1 million as of December 31, 2016. There were $75.0 million and $40.0 million of borrowings on the Cal Water lines of credit as of

10



March 31, 2017 and December 31, 2016, respectively.  The average borrowing rate for borrowings on the Company and Cal Water lines of credit during the three months ended March 31, 2017 was 1.6% compared to 1.27% for the same period last year.

Note 8. Income Taxes
The Company accounts for income taxes under the provisions of ASC 740, Accounting for Income Taxes. The Company adjusts its effective tax rate each quarter to be consistent with the estimated annual effective tax rate. The Company also records the tax effect of unusual or infrequently occurring discrete items.
The provision for income taxes consists of the following:
 
Three Months Ended March 31
 
2017
 
2016
Income tax provision (benefit)
$
5

 
$
(744
)
The increase in the income tax provision for 2017 from 2016 was due primarily to an increase in the Company’s earnings for the three months ended March 31, 2017, which was partially offset by a $0.5 million tax benefit associated with the settlement of equity awards. The Company’s fiscal year 2017 effective tax rate is estimated to be 37%.

During the month of April 2017, the Franchise Tax Board of California completed an audit of the Company's State of California EZ credit filing for years 2008-2012. The completed audit will not have a material impact on the Company's 2017 consolidated financial statements.
 
As of March 31, 2017 and December 31, 2016, the Company had unrecognized tax benefits of approximately $10.5 million. Included in the balance of unrecognized tax benefits as of March 31, 2017 and December 31, 2016 is approximately $2.3 million of tax benefits that, if recognized, would result in an adjustment to the Company’s effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly within the next 12 months.


11



Note 9. Regulatory Assets and Liabilities
 
Regulatory assets and liabilities were comprised of the following as of March 31, 2017 and December 31, 2016:
 
 
March 31, 2017
 
December 31, 2016
Regulatory Assets
 

 
 

Pension and retiree group health
$
188,715

 
$
188,880

Property-related temporary differences (tax benefits flowed through to customers)
92,676

 
92,099

Other accrued benefits
26,456

 
27,503

Net WRAM and MCBA long-term accounts receivable
27,300

 
16,148

Asset retirement obligations, net
16,148

 
15,812

Interim rates long-term accounts receivable
4,597

 
4,605

Tank coating
8,922

 
8,452

Health care balancing account
96

 
1,000

Pension cost balancing account
510

 

Other regulatory assets
2,056

 
1,431

Total Regulatory Assets
$
367,476

 
$
355,930

 
 
 
 
Regulatory Liabilities
 

 
 

Future tax benefits due to customers
$
33,271

 
$
33,231

Conservation program
1,034

 
584

Pension balancing account
82

 
695

Net WRAM and MCBA long-term payable
566

 
611

Other regulatory liabilities
2,992

 
3,614

Total Regulatory Liabilities
$
37,945

 
$
38,735

 
Short-term regulatory assets and liabilities are excluded from the above table. The short-term regulatory assets were $30.7 million as of March 31, 2017 and $30.3 million as of December 31, 2016. The short-term regulatory assets were primarily net WRAM and MCBA accounts receivable, 2012 General Rate Case (GRC) health cost balancing account receivable, 2014-2015 drought recovery, interim rate memorandum account receivable, and East LA memorandum accounts receivable as of March 31, 2017 and December 31, 2016. The short-term portions of regulatory liabilities were $8.2 million as of March 31, 2017 and $4.8 million as of December 31, 2016. As of March 31, 2017, the short-term regulatory liabilities were primarily net WRAM and MCBA liability balances, refund balance from an interim rates true up authorized prior to 2009 GRC, net refund balances to customers for the pension and conservation programs from the 2012 GRC. As of December 31, 2016, the short-term regulatory liabilities were primarily net WRAM and MCBA liability balances and net refund balances to customers for the pension and conservation programs from the 2012 GRC

Note 10. Commitments and Contingencies
 
Commitments
 
The Company has significant commitments to lease certain office spaces and water systems and to purchase water from water wholesalers. These commitments are described in Form 10-K for the year ended December 31, 2016.  As of March 31, 2017, there were no significant changes from December 31, 2016.


12



Contingencies
 
Groundwater Contamination
 
The Company has undertaken litigation against third parties to recover past and anticipated costs related to groundwater contamination in our service areas. The cost of litigation is expensed as incurred and any settlement is first offset against such costs. The CPUC’s general policy requires all proceeds from groundwater contamination litigation to be used first to pay transactional expenses, then to make ratepayers whole for water treatment costs to comply with the CPUC’s water quality standards. The CPUC allows for a risk-based consideration of contamination proceeds which exceed the costs of the remediation described above and may result in some sharing of proceeds with the shareholder, determined on a case by case basis. The CPUC has authorized various memorandum accounts that allow the Company to track significant litigation costs to request recovery of these costs in future filings and uses of proceeds to comply with CPUC’s general policy. 

Other Legal Matters
  
From time to time, the Company is involved in various disputes and litigation matters that arise in the ordinary course of business. The status of each significant matter is reviewed and assessed for potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount of the range of loss can be estimated, a liability is accrued for the estimated loss in accordance with the accounting standards for contingencies. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. While the outcome of these disputes and litigation matters cannot be predicted with any certainty, management does not believe when taking into account existing reserves the ultimate resolution of these matters will materially affect the Company’s financial position, results of operations, or cash flows.  As of March 31, 2017 and December 31, 2016, the Company recognized a liability of $6.4 million and $6.0 million, respectively, for known legal matters. The cost of litigation is expensed as incurred and any settlement is first offset against such costs. Any settlement in excess of the cost to litigate is accounted for on a case by case basis, dependent on the nature of the settlement.
 
Note 11. Fair Value of Financial Assets and Liabilities
 
The accounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires certain disclosures about assets and liabilities measured at fair value. A hierarchical framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value is established by this guidance. The three levels in the hierarchy are as follows:
 
Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.
 
Level 2 - Inputs to the valuation methodology include:
Quoted market prices for similar assets or liabilities in active markets;
Quoted prices for identical or similar assets or liabilities in inactive markets;
Inputs other than quoted prices that are observable for the asset or liability; and
Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
 
Specific valuation methods include the following:
 
Accounts receivable and accounts payable carrying amounts approximated the fair value because of the short-term maturity of the instruments.
 
Long-term debt fair values were estimated using the published quoted market price, if available, or the discounted cash flow analysis, based on the current rates available using a risk-free rate (a U.S. Treasury securities yield curve) plus a risk premium of 1.70%.

13



 
Advances for construction fair values were estimated using broker quotes from companies that frequently purchase these investments.
 
 
March 31, 2017
 
 
 
Fair Value
 
Cost
 
Level 1
 
Level 2
 
Level 3
 
Total
Long-term debt, including current maturities
$
557,854

 


 
$
633,901

 


 
$
633,901

Advances for construction
182,815

 


 
76,346

 


 
76,346

Total
$
740,669

 
$

 
$
710,247

 
$

 
$
710,247

 
 
December 31, 2016
 
 
 
Fair Value
 
Cost
 
Level 1
 
Level 2
 
Level 3
 
Total
Long-term debt, including current maturities
$
557,953

 


 
$
630,510

 


 
$
630,510

Advances for construction
182,448

 


 
74,460

 


 
74,460

Total
$
740,401

 

 
$
704,970

 
$

 
$
704,970

 
Note 12. Condensed Consolidating Financial Statements
 
On April 17, 2009, Cal Water issued $100.0 million aggregate principal amount of 5.875% First Mortgage Bonds due 2019, and on November 17, 2010, Cal Water issued $100.0 million aggregate principal amount of 5.500% First Mortgage Bonds due 2040, all of which are fully and unconditionally guaranteed by the Company. As a result of these guarantee arrangements, the Company is required to present the following condensed consolidating financial information. The investments in affiliates are accounted for and presented using the “equity method” of accounting.
 
The following tables present the condensed consolidating balance sheets as of March 31, 2017 and December 31, 2016, the condensed consolidating statements of income (loss) for the three months ended March 31, 2017 and 2016, and the condensed consolidating statements of cash flows for the three months ended March 31, 2017 and 2016 of (i) California Water Service Group, the guarantor of the First Mortgage Bonds and the parent company; (ii) California Water Service Company, the issuer of the First Mortgage Bonds and a 100% owned consolidated subsidiary of California Water Service Group; and (iii) the other 100% owned non-guarantor consolidated subsidiaries of California Water Service Group. No other subsidiary of the Company guarantees the securities. The condensed consolidating statement of cash flows for the three months ended March 31, 2016 reflects the retrospective adoption of ASU 2016-09 (refer to Note 2 Summary of Significant Accounting Policies for more details).



14



CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING BALANCE SHEET
As of March 31, 2017
(In thousands)
 
 
Parent
Company
 
Cal Water
 
All Other
Subsidiaries
 
Consolidating
Adjustments
 
Consolidated
ASSETS
 

 
 

 
 

 
 

 
 

Utility plant:
 

 
 

 
 

 
 

 
 

Utility plant
$
1,318

 
$
2,567,142

 
$
204,969

 
$
(7,197
)
 
$
2,766,232

Less accumulated depreciation and amortization
(849
)
 
(824,791
)
 
(54,529
)
 
1,942

 
(878,227
)
Net utility plant
469

 
1,742,351

 
150,440

 
(5,255
)
 
1,888,005

Current assets:
 
 
 
 
 

 
 
 
 
Cash and cash equivalents
3,985

 
2,618

 
5,387

 

 
11,990

Receivables and unbilled revenue

 
93,155

 
3,888

 

 
97,043

Receivables from affiliates
19,317

 
2,653

 
186

 
(22,156
)
 

Other current assets
395

 
17,743

 
1,034

 

 
19,172

Total current assets
23,697

 
116,169

 
10,495

 
(22,156
)
 
128,205

Other assets:
 
 
 
 
 

 
 
 
 
Regulatory assets

 
363,672

 
3,804

 

 
367,476

Investments in affiliates
658,889

 

 

 
(658,889
)
 

Long-term affiliate notes receivable
25,393

 

 

 
(25,393
)
 

Other assets
274

 
52,636

 
3,744

 
(42
)
 
56,612

Total other assets
684,556

 
416,308

 
7,548

 
(684,324
)
 
424,088

TOTAL ASSETS
$
708,722

 
$
2,274,828

 
$
168,483

 
$
(711,735
)
 
$
2,440,298

CAPITALIZATION AND LIABILITIES
 

 
 

 
 

 
 

 
 

Capitalization:
 

 
 

 
 

 
 

 
 

Common stockholders’ equity
$
651,333

 
$
587,853

 
$
76,333

 
$
(664,186
)
 
$
651,333

Affiliate long-term debt

 

 
25,393

 
(25,393
)
 

Long-term debt, less current maturities

 
520,815

 
900

 

 
521,715

Total capitalization
651,333

 
1,108,668

 
102,626

 
(689,579
)
 
1,173,048

Current liabilities:
 

 
 

 
 

 
 

 
 

Current maturities of long-term debt

 
35,636

 
503

 

 
36,139

Short-term borrowings
55,100

 
75,000

 

 

 
130,100

Payables to affiliates
715

 
64

 
21,377

 
(22,156
)
 

Accounts payable

 
66,254

 
3,022

 

 
69,276

Accrued expenses and other liabilities
141

 
55,368

 
2,349

 

 
57,858

Total current liabilities
55,956

 
232,322

 
27,251

 
(22,156
)
 
293,373

Unamortized investment tax credits

 
1,798

 

 

 
1,798

Deferred income taxes
1,433

 
297,254

 
777

 

 
299,464

Pension and postretirement benefits other than pensions

 
224,851

 

 

 
224,851

Regulatory liabilities and other

 
81,129

 
3,189

 

 
84,318

Advances for construction

 
182,268

 
547

 

 
182,815

Contributions in aid of construction

 
146,538

 
34,093

 

 
180,631

TOTAL CAPITALIZATION AND LIABILITIES
$
708,722

 
$
2,274,828

 
$
168,483

 
$
(711,735
)
 
$
2,440,298


15



CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2016
(In thousands)
 
 
Parent
Company
 
Cal Water
 
All Other
Subsidiaries
 
Consolidating
Adjustments
 
Consolidated
ASSETS
 

 
 

 
 

 
 

 
 

Utility plant:
 

 
 

 
 

 
 

 
 

Utility plant
$
1,318

 
$
2,519,785

 
$
203,433

 
$
(7,197
)
 
$
2,717,339

Less accumulated depreciation and amortization
(826
)
 
(805,992
)
 
(53,163
)
 
1,919

 
(858,062
)
Net utility plant
492

 
1,713,793

 
150,270

 
(5,278
)
 
1,859,277

Current assets:
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
5,216

 
13,215

 
7,061

 

 
25,492

Receivables and unbilled revenue

 
98,850

 
4,173

 

 
103,023

Receivables from affiliates
19,566

 
3,608

 
8

 
(23,182
)
 

Other current assets
80

 
12,442

 
1,032

 

 
13,554

Total current assets
24,862

 
128,115

 
12,274

 
(23,182
)
 
142,069

Other assets:
 

 
 

 
 

 
 

 
 

Regulatory assets

 
352,139

 
3,791

 

 
355,930

Investments in affiliates
666,525

 

 

 
(666,525
)
 

Long-term affiliate notes receivable
25,744

 

 

 
(25,744
)
 

Other assets
376

 
50,361

 
3,765

 
(33
)
 
54,469

Total other assets
692,645

 
402,500

 
7,556

 
(692,302
)
 
410,399

TOTAL ASSETS
$
717,999

 
$
2,244,408

 
$
170,100

 
$
(720,762
)
 
$
2,411,745

CAPITALIZATION AND LIABILITIES
 

 
 

 
 

 
 

 
 

Capitalization:
 

 
 

 
 

 
 

 
 

Common stockholders’ equity
$
659,471

 
$
595,003

 
76,833

 
$
(671,836
)
 
$
659,471

Affiliate long-term debt

 

 
25,744

 
(25,744
)
 

Long-term debt, less current maturities

 
530,850

 
895

 

 
531,745

Total capitalization
659,471

 
1,125,853

 
103,472

 
(697,580
)
 
1,191,216

Current liabilities:
 

 
 

 
 

 
 

 
 

Current maturities of long-term debt

 
25,657

 
551

 

 
26,208

Short-term borrowings
57,100

 
40,000

 

 

 
97,100

Payables to affiliates

 
539

 
22,643

 
(23,182
)
 

Accounts payable

 
74,998

 
2,815

 

 
77,813

Accrued expenses and other liabilities
88

 
47,232

 
1,789

 

 
49,109

Total current liabilities
57,188

 
188,426

 
27,798

 
(23,182
)
 
250,230

Unamortized investment tax credits

 
1,798

 

 

 
1,798

Deferred income taxes
1,340

 
296,781

 
803

 

 
298,924

Pension and postretirement benefits other than pensions

 
222,691

 

 

 
222,691

Regulatory and other liabilities

 
80,518

 
3,130

 

 
83,648

Advances for construction

 
181,907

 
541

 

 
182,448

Contributions in aid of construction

 
146,434

 
34,356

 

 
180,790

TOTAL CAPITALIZATION AND LIABILITIES
$
717,999

 
$
2,244,408

 
$
170,100

 
$
(720,762
)
 
$
2,411,745



16



CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)
For the three months ended March 31, 2017
(In thousands)
 
 
Parent
Company
 
Cal Water
 
All Other
Subsidiaries
 
Consolidating
Adjustments
 
Consolidated
Operating revenue
$

 
$
113,342

 
$
8,694

 
$

 
$
122,036

Operating expenses:
 

 
 

 
 

 
 

 
 

Operations:
 

 
 

 
 

 
 

 
 

Water production costs

 
40,189

 
1,879

 

 
42,068

Administrative and general

 
22,476

 
2,773

 

 
25,249

Other operations

 
14,400

 
1,850

 
(126
)
 
16,124

Maintenance

 
5,906

 
206

 

 
6,112

Depreciation and amortization
23

 
18,111

 
1,090

 
(23
)
 
19,201

Income tax benefit
(103
)
 
(946
)
 
(92
)
 
257

 
(884
)
Property and other taxes
(4
)
 
5,412

 
708

 

 
6,116

Total operating (income) expenses
(84
)
 
105,548

 
8,414

 
108

 
113,986

Net operating income
84

 
7,794

 
280

 
(108
)
 
8,050

Other income and expenses:
 

 
 

 
 

 
 

 
 

Non-regulated revenue
481

 
3,135

 
454

 
(608
)
 
3,462

Non-regulated expenses

 
(1,747
)
 
(307
)
 

 
(2,054
)
Allowance for equity funds used during construction (Note 2)

 
779

 

 

 
779

Income tax expense on other income and expenses
(196
)
 
(883
)
 
(58
)
 
248

 
(889
)
Total other income
285

 
1,284

 
89

 
(360
)
 
1,298

Interest:
 

 
 

 
 

 
 

 
 

Interest expense
235

 
8,470

 
486

 
(481
)
 
8,710

Allowance for borrowed funds used during construction (Note 2)

 
(476
)
 
(18
)
 

 
(494
)
Net interest expense
235

 
7,994

 
468

 
(481
)
 
8,216

Equity earnings of subsidiaries
998

 

 

 
(998
)
 

Net income (loss)
$
1,132

 
$
1,084

 
$
(99
)
 
$
(985
)
 
$
1,132


17



CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING STATEMENT OF INCOME (LOSS)
For the three months ended March 31, 2016
(In thousands)
 
 
Parent
Company
 
Cal Water
 
All Other
Subsidiaries
 
Consolidating
Adjustments
 
Consolidated
Operating revenue
$

 
$
113,027

 
$
8,700

 
$

 
$
121,727

Operating expenses:
 

 
 

 
 

 
 

 
 

Operations:
 

 
 

 
 

 
 

 
 

Water production costs

 
39,245

 
1,824

 

 
41,069

Administrative and general

 
24,943

 
2,884

 

 
27,827

Other operations

 
17,726

 
1,702

 
(126
)
 
19,302

Maintenance

 
5,840

 
223

 

 
6,063

Depreciation and amortization
57

 
14,915

 
1,098

 
(24
)
 
16,046

Income tax (benefit) expense
(94
)
 
(1,037
)
 
(51
)
 
257

 
(925
)
Property and other taxes

 
5,390

 
685

 

 
6,075

Total operating (income) expenses
(37
)
 
107,022

 
8,365

 
107

 
115,457

Net operating income
37

 
6,005

 
335

 
(107
)
 
6,270

Other income and expenses:
 

 
 

 
 

 
 

 
 

Non-regulated revenue
464

 
3,196

 
374

 
(606
)
 
3,428

Non-regulated expenses

 
(2,705
)
 
(275
)
 

 
(2,980
)
Income tax (expense) benefit on other income and expenses
(189
)
 
(200
)
 
(39
)
 
247

 
(181
)
Total other income
275

 
291

 
60

 
(359
)
 
267

Interest:
 
 
 
 
 

 
 
 
 
Interest expense
173

 
7,899

 
473

 
(480
)
 
8,065

Less: capitalized interest

 
(714
)
 
(16
)
 

 
(730
)
Net interest expense
173

 
7,185

 
457

 
(480
)
 
7,335

Equity earnings of subsidiaries
(937
)
 

 

 
937

 

Net loss
$
(798
)
 
$
(889
)
 
$
(62
)
 
$
951

 
$
(798
)


18



CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the three months ended March 31, 2017
(In thousands)
 
 
Parent
Company
 
Cal Water
 
All Other
Subsidiaries
 
Consolidating
Adjustments
 
Consolidated
Operating activities:
 

 
 

 
 

 
 

 
 

Net income (loss)
$
1,132

 
$
1,084

 
$
(99
)
 
$
(985
)
 
$
1,132

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 

 
 

 
 

 
 

 
 

Equity earnings of subsidiaries
(998
)
 

 

 
998

 

Dividends received from affiliates
8,634

 

 

 
(8,634
)
 

Depreciation and amortization
23

 
18,542

 
1,116

 
(23
)
 
19,658

Allowance for equity funds used during construction

 
(779
)
 

 

 
(779
)
Changes in value of life insurance contracts

 
(319
)
 

 

 
(319
)
Changes in operating assets and liabilities
(67
)
 
(11,003
)
 
696

 

 
(10,374
)
Other changes in noncurrent assets and liabilities
483

 
4,241

 
245

 
10

 
4,979

Net cash provided by operating activities
9,207

 
11,766

 
1,958

 
(8,634
)
 
14,297

Investing activities:
 
 
 
 
 

 
 
 
 
Utility plant expenditures

 
(50,509
)
 
(1,344
)
 

 
(51,853
)
Changes in affiliate advances
593

 
955

 
(175
)
 
(1,373
)
 

Issuance of affiliate short-term borrowings
(325
)
 
 
 

 
325

 

Reduction of affiliates long-term debt
332

 

 

 
(332
)
 

Life insurance proceeds

 
450

 

 

 
450

Purchase of life insurance contracts

 
(836
)
 

 

 
(836
)
Changes in restricted cash

 
(260
)
 

 

 
(260
)
Net cash provided by (used in) investing activities
600

 
(50,200
)
 
(1,519
)
 
(1,380
)
 
(52,499
)
Financing Activities:
 

 
 

 
 

 
 

 
 

Short-term borrowings

 
35,000

 

 

 
35,000

Repayment of short-term borrowings
(2,000
)
 

 

 

 
(2,000
)
Changes in affiliate advances
715

 
(475
)
 
(1,613
)
 
1,373

 

Proceeds from affiliate short-term borrowings

 

 
325

 
(325
)
 

Repayment of affiliate long-term borrowings

 

 
(332
)
 
332

 

Repayment of long-term debt

 
(170
)
 
(116
)
 

 
(286
)
Advances and contributions in aid of construction

 
3,952

 
23

 

 
3,975

Refunds of advances for construction

 
(2,236
)
 

 

 
(2,236
)
Repurchase of common stock
(1,119
)
 

 

 

 
(1,119
)
Dividends paid to non-affiliates
(8,634
)
 

 

 

 
(8,634
)
Dividends paid to affiliates

 
(8,234
)
 
(400
)
 
8,634

 

Net cash (used in) provided by financing activities
(11,038
)
 
27,837

 
(2,113
)
 
10,014

 
24,700

Change in cash and cash equivalents
(1,231
)
 
(10,597
)
 
(1,674
)
 

 
(13,502
)
Cash and cash equivalents at beginning of period
5,216

 
13,215

 
7,061

 

 
25,492

Cash and cash equivalents at end of period
$
3,985

 
$
2,618

 
$
5,387

 
$

 
$
11,990


19



CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the three months ended March 31, 2016
(In thousands)
 
 
Parent
Company
 
Cal Water
 
All Other
Subsidiaries
 
Consolidating
Adjustments
 
Consolidated
Operating activities:
 

 
 

 
 

 
 

 
 

Net loss
$
(798
)
 
$
(889
)
 
$
(62
)
 
$
951

 
$
(798
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 

 
 

 
 

 
 

 
 

Equity earnings of subsidiaries
937

 

 

 
(937
)
 

Dividends received from affiliates
8,258

 

 

 
(8,258
)
 

Depreciation and amortization
57

 
15,277

 
1,144

 
(24
)
 
16,454

Change in value of life insurance contracts

 
43

 

 

 
43

Changes in operating assets and liabilities
(280
)
 
9,414

 
1,589

 

 
10,723

Other changes in noncurrent assets and liabilities
621

 
4,432

 
7

 
10

 
5,070

Net cash provided by operating activities
8,795

 
28,277

 
2,678

 
(8,258
)
 
31,492

Investing activities:
 

 
 

 
 

 
 

 
 

Utility plant expenditures

 
(54,944
)
 
(1,519
)