CALIFORNIA WATER SERVICE GROUP

Previous wording

This quarterly report, including all documents incorporated by reference, contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995 (the PSLRA). The forward-looking statements are intended to qualify under provisions of the federal securities laws for “safe harbor” treatment established by the PSLRA. Forward-looking statements in this quarterly report are based on currently available information, expectations, estimates, assumptions and projections, and our management’s beliefs, assumptions, judgments and expectations about us, the water utility industry and general economic conditions. These statements are not statements of historical fact. When used in our documents, statements that are not historical in nature, including words like “will,” “would,” “expects,” “intends,” “plans,” “believes,” “may,” “could,” “estimates,” “assumes,” “anticipates,” “projects,” “progress,” “predicts,” “hopes,” “targets,” “forecasts,” “should,” “seeks,” “indicates,” or variations of these words or similar expressions are intended to identify forward-looking statements. Examples of forward-looking statements in this quarterly report include, but are not limited to, statements describing our intention, indication or expectation regarding dividends or targeted payout ratio, our expectations, anticipations or beliefs regarding governmental, legislative, judicial, administrative or regulatory timelines, regulatory compliance, decisions, approvals, authorizations, requirements or other actions, including California Water Service Company’s (Cal Water) general rate case (GRC) filed on July 8, 2024 (2024 GRC), rate amounts, cost recovery or refunds, certain per- and polyfluoroalkyl substances (PFAS) regulations, and associated impacts, such as our expected or estimated revenue, our intentions regarding recovery billing, our expectations regarding regulatory asset and operating revenue recognition, sources of funding or capital requirements, estimates of, or expectations regarding, capital expenditures, funding needs or other capital requirements, obligations, contingencies or commitments, our expectations regarding water sources, our beliefs regarding adequacy of water supplies, estimates relating to our significant accounting policies, such as deferred revenue or assets or refund of advances, our expectations regarding stock-based compensation and estimated contributions to our pension plans and other postretirement benefit plans, our estimated annual effective tax rate and expectations regarding tax benefits, our expectations regarding funds received from the Extended Program, our intentions regarding use of net proceeds from any future equity or debt issuances or borrowings or our intentions or anticipations regarding our sources of funding, capital structure or capital allocation plans. The forward-looking statements are not guarantees of future performance. They are based on numerous assumptions that we be…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This quarterly report, including all documents incorporated by reference, contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995 (the PSLRA). The forward-looking statements are intended to qualify under provisions of the federal securities laws for “safe harbor” treatment established by the PSLRA. Forward-looking statements in this quarterly report are based on currently available information, expectations, estimates, assumptions and projections, and our management’s beliefs, assumptions, judgments and expectations about us, the water utility industry and general economic conditions. These statements are not statements of historical fact. When used in our documents, statements that are not historical in nature, including words like “will,” “would,” “expects,” “intends,” “plans,” “believes,” “may,” “could,” “estimates,” “assumes,” “anticipates,” “projects,” “progress,” “predicts,” “hopes,” “targets,” “forecasts,” “should,” “seeks,” “indicates,” or variations of these words or similar expressions are intended to identify forward-looking statements. Examples of forward-looking statements in this quarterly report include, but are not limited to, statements describing our intention, indication or expectation regarding our financial performance, dividends or targeted payout ratio, our expectations, anticipations or beliefs regarding governmental, legislative, judicial, administrative or regulatory timelines, regulatory compliance, decisions, approvals, authorizations, requirements or other actions, including plans and proposals pursuant to and timing of the California Water Service Company (Cal Water)’s general rate case (GRC) filed on July 8, 2024 (2024 GRC), rate amounts, cost recovery or refunds, certain per- and polyfluoralkyl substances (PFAS) regulations, and associated impacts, such as our expected or estimated revenue, our intentions regarding recovery billing, our expectations regarding regulatory asset and operating revenue recognition, sources of funding or capital requirements, estimates of, or expectations regarding, capital expenditures, funding needs or other capital requirements, obligations, contingencies or commitments, our expectations regarding water sources, our beliefs regarding adequacy of water supplies, estimates and assumptions relating to our significant accounting policies, such as deferred revenue or assets or refund of advances, our expectations or assumptions regarding employee benefit plans and stock-based compensation and estimated contributions to our pension plans and other postretirement benefit plans, our estimated annual effective tax rate and expectations regarding tax benefits, our intentions regarding use of net proceeds from any future equity or debt issuances or borrowings, our expectations, intentions or anticipations regarding our sources of funding, capital structure, including authorized return on equity, cost of debt and rate of return, o…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

•governmental and regulatory commissions’ decisions, including decisions on proper disposition of property;

Current wording

•Federal governmental and state regulatory commissions’ decisions, including decisions on proper disposition of property;

Previous wording

•changes in regulatory commissions’ policies and procedures, such as the California Public Utilities Commission (CPUC)’s decision in 2020 to preclude companies from proposing fully decoupled Water Revenue Adjustment Mechanisms (WRAM) (which impacted Cal Water’s GRC decision (the 2021 GRC) and its most recent 2024 GRC filing);

Current wording

•changes in state regulatory commissions’ policies and procedures, such as the California Public Utilities Commission (CPUC)’s decision in 2020 to preclude companies from proposing full decoupling (which impacted our 2021 GRC);

Previous wording

•changes in environmental compliance and water quality requirements;

Current wording

•changes in environmental compliance and water quality requirements, such as the United States Environmental Protection Agency’s (EPA) finalization of a National Primary Drinking Water Regulation establishing legally enforceable maximum contaminant levels (MCL) for six PFAS in drinking water in 2024;

Previous wording

•the impact of weather, climate change, natural disasters, and actual or threatened public health emergencies, including disease outbreaks, on our operations, water quality, water availability, water sales and operating results and the adequacy of our emergency preparedness;

Current wording

•the impact of weather, climate change, natural disasters, including wildfires and landslides, and actual or threatened public health emergencies, including disease outbreaks, on our operations, water quality, water availability, water sales and operating results and the adequacy of our emergency preparedness;

Previous wording

•increased risk of inverse condemnation losses as a result of climate change, drought, and land movement;

Current wording

•increased risk of inverse condemnation losses as a result of the impact of weather, climate change, and natural disasters, including wildfires and landslides;

Previous wording

•the impact of stagnating or worsening business and economic conditions, including inflationary pressures, general economic slowdown or a recession, the interest rate environment, instability of certain financial institutions, changes in monetary policy, adverse capital markets activity or macroeconomic conditions as a result of geopolitical conflicts, and the prospect of a shutdown of the U.S. federal government;

Current wording

•the impact of stagnating or worsening business and economic conditions, including inflationary pressures, general economic slowdown or a recession, changes in tariff policy and uncertainty regarding tariffs and other retaliatory trade measures, the interest rate environment, changes in monetary policy, adverse capital markets activity or macroeconomic conditions as a result of geopolitical conflicts, and the prospect of a shutdown of the U.S. federal government;

Previous wording

•the impact of weather and timing of meter reads on our accrued and unbilled revenue;

Current wording

•the impact of weather and timing of meter reads on our accrued unbilled revenue;

Previous wording

•the impact of evolving legal and regulatory requirements, including emerging environmental, social and governance requirements; and

Current wording

•the impact of evolving legal and regulatory requirements, including emerging environmental, social and governance requirements;

Previous wording

•pensions, which include the supplemental executive retirement plan (SERP) and the postretirement health care benefit plan.

Current wording

•pensions, which include the supplemental executive retirement plan, and the postretirement health care benefit plan.

Previous wording

For the nine months ended September 30, 2024, besides the change noted below there were no other changes in the methodology for computing critical accounting estimates, no additional accounting estimates met the standards for critical accounting policies, and there were no material changes to the important assumptions underlying the critical accounting estimates.

Current wording

For the three months ended March 31, 2025, there were no material changes in the methodology for computing critical accounting estimates, no additional accounting estimates met the standards for critical accounting policies, and there were no material changes to the important assumptions underlying the critical accounting estimates.

Previous wording

Net income attributable to California Water Service Group for the nine months ended September 30, 2024 was $171.1 million or $2.93 earnings per diluted common share, compared to net income of $21.8 million or $0.38 earnings per diluted common share for the nine months ended September 30, 2023. The $149.4 million increase in net income was primarily due to an increase in operating revenue of $234.5 million primarily as a result of the cumulative adjustment for the impacts of the 2021 GRC, retroactive to January 1, 2023. The revenue increase was partially offset by an increase in total operating expenses of $83.6 million. The total operating expense increase was primarily due to an increase in water production costs of $18.7 million, increases in other operations expenses of $11.4 million, an increase in income tax expense of $41.1 million, and an increase in depreciation and amortization expenses of $9.3 million. Additionally net other income increased by $3.5 million while net interest expense increased by $5.2 million.

Current wording

Net income attributable to California Water Service Group for the three months ended March 31, 2025 was $13.3 million or $0.22 earnings per diluted common share, compared to net income of $69.9 million or $1.21 earnings per diluted common share for the three months ended March 31, 2024. The $56.6 million decrease in net income was primarily due to a decrease in operating revenue of $66.7 million primarily as a result of the cumulative adjustment in first three months of 2024 for the impacts of the 2021 GRC delayed approval, partially offset by rate increases and an increase in customer usage. Additionally, total operating expenses decreased $11.3 million. The total operating expense decrease was primarily due to a decrease in income tax expense of $14.5 million, which was partially offset by an increase in depreciation and amortization expenses of $3.1 million.

Previous wording

For the three months ended September 30, 2024, operating revenue increased $44.6 million, or 17.5%, to $299.6 million as compared to the three months ended September 30, 2023.

Current wording

For the three months ended March 31, 2025, operating revenue decreased $66.7 million, or 24.7%, to $204.0 million as compared to $270.7 million for the three months ended March 31, 2024.

Previous wording

The net change due to rate changes, usage, and other for the three months ended September 30, 2024 was primarily due to rate increases of $42.2 million and an increase in consumption and new customers of $9.6 million. For the nine months ended September 30, 2024, the net change due to rate changes, usage, and other was primarily driven by rate increases of $74.1 million, an increase in consumption and new customers of $14.1 million, and an increase in accrued and unbilled revenue of $6.7 million due to increases in rates and unbilled days.

Current wording

The net change due to rate changes, usage, and other for the three months ended March 31, 2025 was primarily due to rate increases of $21.4 million, recognition of Palos Verdes Pipeline Memorandum Account related revenue of $3.8 million (see “Palos Verdes Peninsula Water Reliability Project” in Regulatory Matters below for more details), an increase in customer usage of $1.6 million, and an increase in accrued and unbilled revenue of $3.5 million due to increases in rates and unbilled days. This was partially offset by $2.4 million of other 2023 revenue recorded in the first three months of 2024 as a result of the resolution of the 2021 GRC that did not recur in the first quarter of 2025.

Previous wording

Due to the delay in the resolution of the 2021 GRC, the CPUC authorized Cal Water to track in an IRMA the variances between actual customer billings and those that would have been billed assuming the 2021 GRC had been effective January 1, 2023. Such variances are recorded as regulatory balancing account revenue. The 2021 GRC was approved in March of 2024 and final rates for the 2021 GRC were implemented on May 31, 2024. Cal Water recorded IRMA revenue of $88.6 million for the nine months ended September 30, 2024, of which $67.6 million is attributable to 2023, including $25.2 million and $53.7 million that was attributable to the three and nine months ended September 30, 2023, respectively.

Current wording

Due to the delay in the resolution of the 2021 GRC, the CPUC authorized Cal Water to track in an IRMA the variances between actual customer billings and those that would have been billed assuming the 2021 GRC had been effective January 1, 2023. Such variances were recorded as regulatory balancing account revenue. The 2021 GRC was approved in March of 2024 and final rates for the 2021 GRC were implemented on May 31, 2024; as a result, Cal Water recorded IRMA revenue of $80.7 million in March of 2024 of which $70.3 million was attributable to 2023.

Previous wording

MWRAM revenue is the variance between actual metered sales billed through the tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a uniform rate had been in effect. In March of 2024, Cal Water received approval of the 2021 GRC which authorized the use of the MWRAM effective January 1, 2023. As a result, Cal Water recorded a reduction to MWRAM revenue of $9.4 million for the three months ended September 30, 2024. For the nine months ended September 30, 2024, Cal Water recorded MWRAM revenue of $29.8 million of which $17.4 million is attributable to 2023, including a $6.1 million reduction to MWRAM revenue and a $11.7 million increase to MWRAM revenue that was attributable to the three and nine months ended September 30, 2023, respectively.

Current wording

MWRAM revenue is the variance between actual metered sales billed through the tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a uniform rate had been in effect. In March of 2024, Cal Water received approval of the 2021 GRC which authorized the use of the MWRAM effective January 1, 2023. For the three months ended March 31, 2025 and 2024 Cal Water recorded MWRAM revenue of $14.8 million and $31.1 million, respectively. Of the $31.1 million recorded MWRAM revenue for the three months ended March 31, 2024, $17.6 million was attributable to 2023.

Previous wording

Deferred revenue consists of amounts that are expected to be collected from customers beyond 24 months following the end of the accounting period in which the sales transaction has already occurred. Deferred revenue for the nine months ended September 30, 2024 decreased as we applied $46.0 million from the Extended Program against certain eligible WRAM receivables during the first nine months of 2024.

Current wording

Deferred revenue consists of amounts that are expected to be collected from customers beyond 24 months following the end of the accounting period in which the sales transaction occurred. Deferred revenue for the three months ended March 31, 2025 decreased and revenue increased by $1.8 million due to a change in the amount expected to be collected beyond 24 months.

Previous wording

Depreciation and amortization expense increased $3.2 million and $9.3 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The increases were primarily due to utility plant placed in service in 2023.

Current wording

Depreciation and amortization expense increased $3.1 million for the three months ended March 31, 2025, as compared to the same period in 2024. The increase was primarily due to utility plant placed in service in 2024.

Previous wording

Income tax expense increased $11.5 million and $41.1 million for the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The increases in income tax expense were primarily due to an increase in pre-tax operating income for the three and nine months ended September 30, 2024 compared to the same periods in 2023 attributable to the recognition of income related to the 2021 GRC decision in 2024.

Current wording

Income tax expense decreased $14.5 million for the three months ended March 31, 2025, as compared to the same period in 2024. The decrease in income tax expense was primarily due to a decrease in pre-tax operating income for the three months ended March 31, 2025, compared to the same period in 2024.

Previous wording

On July 8, 2024, Cal Water submitted Infrastructure Improvement Plans (the Plans) for its California districts from 2025-2027 in its 2024 GRC application with the CPUC. The application also proposes a Low-Use Water Equity Program, that would, if approved as filed, decouple revenue from water sales, to assist low-water-using, lower-income customers.

Current wording

On July 8, 2024, Cal Water submitted Infrastructure Improvement Plans (the Plans) for its California districts for the period of 2025 to 2027 in its 2024 GRC application with the CPUC. The application also proposes a Low-Use Water Equity Program, that would, if approved as filed, decouple revenue from water sales, to assist low-water-using, lower-income customers.

Previous wording

The required, triennial filing begins an approximately 18-month review process by the CPUC, which will analyze the Plans, operating budget proposals, and the Low-Use Water Equity Program to establish water rates for 2026-2028 that reflect the actual cost of providing safe, reliable water service. Associated rates set by the CPUC would become effective no sooner than January 2026. Cal Water has concluded an initial pre-hearing conference and an administrative law judge and Commissioner have been assigned to the case.

Current wording

The required, triennial filing begins an approximately 18-month review process by the CPUC, which will analyze the Plans, operating budget proposals, and the Low-Use Water Equity Program to establish water rates for 2026 to 2028 that reflect the cost of providing safe, reliable water service. Associated rates set by the CPUC would become effective no sooner than January 2026. Cal Water has concluded an initial pre-hearing conference and an administrative law judge and Commissioner have been assigned to the case. The Commissioner issued the Scoping Memo and Ruling in November 2024 identifying the issues to be addressed and setting the schedule for the proceeding. At the start of 2025, public participation hearings were conducted and Cal Water received California Public Advocate’s testimony responding to the 2024 GRC application. Cal Water submitted rebuttal testimony in late March 2025. The Assigned Commissioner also issued an Amended Scoping Memo and Ruling on March 13, 2025 granting in part Cal Water’s request to modify the ex-parte rules, and denying Cal Water’s request to modify the issues within the scope of the proceeding. Settlement discussions took place during April 2025, and hearings before the Administrative Law Judge are expected to occur in May 2025.

Previous wording

Cal Water’s proposed Low-Use Water Equity Program would, if approved as filed, decouple revenue from water sales across its regulated service areas. The program is designed to work in conjunction with Cal Water’s proposed four-tier rate design and sales forecast proposals to enhance affordability—particularly for low-use and low-income customers—plus reinforce conservation goals, while providing the utility an opportunity to recover its authorized revenue requirement in a timely manner.

Current wording

Cal Water’s proposed Low-Use Water Equity Program would, if approved as filed, decouple revenue from water sales across its regulated service areas. The program is designed to work in conjunction with Cal Water’s proposed four-tier rate design and sales forecast proposals to enhance affordability—particularly for low-use and low-income customers—plus reinforce conservation goals, while providing the utility an opportunity to recover the authorized revenue requirement associated with water consumption in a timely manner.

Previous wording

For construction projects authorized in the 2021 GRC as advice letter projects, Cal Water is allowed to request rate base offsets to increase revenues after the project goes into service. In March of 2024, Cal Water submitted a $39.1 million rate base offset advice letter to recover $5.8 million of annual revenue increases in all of its regulated districts. The new rates were implemented on May 31, 2024, as discussed above.

Current wording

For construction projects authorized in the 2021 GRC as advice letter projects, Cal Water is allowed to request rate base offsets to increase revenues after the project goes into service. In October of 2024, Cal Water submitted a $5.7 million rate base offset advice letter to recover $0.9 million of annual revenue increases in 9 of its regulated districts. The new rates were approved and subsequently implemented on January 1, 2025.

Previous wording

During the nine months ended September 30, 2024, we generated cash flow from operations of $222.8 million compared to $143.5 million for the same period in 2023. The increase in the first nine months of 2024 as compared to the same period in 2023 is primarily due to the net receipt of $57.9 million from the Extended Program, as discussed above. Cash generated by operations varies during the year due to customer billings, and timing of collections and contributions to our benefit plans.

Current wording

During the three months ended March 31, 2025, we generated cash flow from operations of $38.4 million compared to $26.5 million for the same period in 2024. Cash generated by operations varies during the year due to customer billings, and timing of collections and contributions to our benefit plans.

Previous wording

The increase in net income for the nine months ended September 30, 2024 as compared to the same period from prior year was primarily due to the recording of $118.4 million of operating revenue for the MWRAM and IRMA during the first nine months of 2024 due to the resolution of the 2021 GRC. There was an associated increase to regulatory assets related to MWRAM and IRMA operating revenue. The Company has started billing for the recovery of these regulatory assets in the fourth quarter of 2024.

Current wording

The decrease in net income for the three months ended March 31, 2025 as compared to the same period from prior year was primarily due to the recording of $111.8 million of operating revenue for the MWRAM and IRMA during the first three months of 2024 due to the resolution of the 2021 GRC. There was an associated increase to regulatory assets related to MWRAM and IRMA operating revenue. The Company started billing for the recovery of these regulatory assets in the fourth quarter of 2024.

Previous wording

During the nine months ended September 30, 2024, we made cash contributions of $0.4 million to our employee pension plan and did not make any cash contribution to our other postretirement benefit plans. During the nine months ended September 30, 2023, we made cash contributions of $2.9 million and $0.2 million, respectively, to our pension plans and to our other postretirement benefit plans. The 2024 estimated cash contribution to the pension plans and other postretirement benefits plans are expected to be approximately $0.7 million and $0.2 million, respectively.

Current wording

During the three months ended March 31, 2025, we made cash contributions of $2.3 million to our employee pension plan and did not make any cash contribution to our other postretirement benefit plans. During the three months ended March 31, 2024, we did not make any cash contributions to our employee pension plan or to our other postretirement benefit plans. The 2025 estimated cash contribution to the employee pension plan is expected to be approximately $5.2 million and no cash contributions are expected to be made for the other postretirement benefits plans.

Previous wording

The water business is seasonal. Billed revenue is lower in the cool, wet winter months when less water is used compared to the warm, dry summer months when water use is highest. This seasonality results in the possible need for short-term borrowings under our bank lines of credit in the event cash is not sufficient to cover operating costs during the winter period. The increase in cash flow during the summer allows for a pay down of short-term borrowings. Customer water usage can be lower than normal in years when more than normal precipitation falls in our service areas or temperatures are lower than normal, especially in the summer months. The reduction in water usage reduces cash flow from operations and increases the need for short-term bank borrowings.

Current wording

The water business is seasonal. Billed revenue is lower in the cool, wet winter months when less water is typically used compared to the warm, dry summer months when water use is typically the highest. This seasonality results in the possible need for short-term borrowings under our bank lines of credit in the event cash is not sufficient to cover operating costs during the winter period. The increase in cash flow during the summer allows for a pay down of short-term borrowings. Customer water usage can be lower than normal in years when more than normal precipitation falls in our service areas or temperatures are lower than normal, especially in the summer months. The reduction in water usage reduces cash flow from operations and increases the need for short-term bank borrowings.

Previous wording

During the nine months ended September 30, 2024 and 2023, we used $332.2 million and $274.1 million, respectively, of cash for Company-funded and developer-funded utility capital expenditures. Cash used in investing activities fluctuates each year largely due to the availability of construction resources and our ability to obtain construction permits in a timely manner. For 2024, our utility capital expenditures are estimated to be $365.0 million, which excludes an estimated $20.0 million of developer-funded capital expenditures.

Current wording

During the three months ended March 31, 2025 and 2024, we used $110.1 million and $109.8 million, respectively, of cash for Company-funded and developer-funded utility capital expenditures. Cash used in investing activities fluctuates each year largely due to the availability of construction resources and our ability to obtain construction permits in a timely manner. For 2025, our utility capital expenditures are estimated to be between $450.0 million and $550.0 million based on the 2024 GRC in California and expected capital needs in the other subsidiaries.

Previous wording

Net cash provided by financing activities for the nine months ended September 30, 2024 was $132.3 million compared to $120.1 million for the same period in 2023. For 2024, this includes issuance of $86.5 million of Company common stock through our at-the-market equity program and $1.9 million through our employee stock purchase plan. For 2023, this includes issuance of $112.7 million of Company common stock through our at-the-market equity program and $1.8 million through our employee stock purchase plan.

Current wording

Net cash provided by financing activities for the three months ended March 31, 2025 was $65.9 million compared to $86.6 million for the same period in 2024. For the three months ended March 31, 2025 and 2024, we paid dividends of $20.2 million and $16.2 million, respectively. For the three months ended March 31, 2025 and 2024, we issued $0.7 million and $0.8 million, respectively, of Company common stock through our employee stock purchase plan.

Previous wording

During the nine months ended September 30, 2024 and 2023, we borrowed $370.0 million and $165.0 million, respectively, on our unsecured revolving credit facilities. We made repayments on our unsecured revolving credit facilities of $290.0 million and $120.0 million during the nine months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 2023, we also paid $1.6 million in issuance costs for the Company and Cal Water facilities entered into on March 31, 2023.

Current wording

For each of the three months ended March 31, 2025 and 2024, we borrowed $170.0 million, on our unsecured revolving credit facilities. We made repayments on our unsecured revolving credit facilities of $90.0 million and $70.0 million during the three months ended March 31, 2025 and 2024, respectively.

Previous wording

The net IRMA, MWRAM, WRAM and Modified Cost Balancing Account receivable balances were $116.7 million and $75.2 million as of September 30, 2024 and 2023, respectively. The receivable balances were primarily financed by Cal Water using short-term financing arrangements to meet operational cash requirements. Interest on the receivable balances, which represents the interest recoverable from customers, is limited to the then-current 90-day commercial paper rates, which typically are significantly lower than Cal Water’s short-term financing rates.

Current wording

The net IRMA, MWRAM, Water Revenue Adjustment Mechanism and Modified Cost Balancing Account receivable balances were $121.7 million and $57.9 million as of March 31, 2025 and 2024, respectively. The receivable balances were primarily financed by Cal Water using short-term financing arrangements to meet operational cash requirements. Interest on the receivable balances, which represents the interest recoverable from customers, is limited to the then-current 90-day commercial paper rates, which typically are significantly lower than Cal Water’s short-term financing rates.

Previous wording

During the nine months ended September 30, 2024, we utilized cash generated from operations and temporary borrowings on our unsecured revolving credit facilities to fund operations and capital investments.

Current wording

During the three months ended March 31, 2025, we utilized cash generated from operations and temporary borrowings on our unsecured revolving credit facilities to fund operations and investments.

Previous wording

Short-term liquidity is provided by the Company and Cal Water facilities and internally generated funds. Long-term financing is accomplished through the use of both debt and equity. The Company and subsidiaries that it designates may borrow up to $200.0 million under the Company facility. Cal Water may borrow up to $400.0 million under the Cal Water facility; however, all borrowings must be repaid within 24 months as authorized by the CPUC. The proceeds from the Company and Cal Water facilities may be used for working capital purposes.

Current wording

Short-term liquidity is provided by the Company’s revolving credit facility (the Company facility) and the Cal Water revolving credit facility (the Cal Water facility) and internally generated funds. Long-term financing is accomplished through the use of both debt and equity. The Company and subsidiaries that it designates may borrow up to $200.0 million under the Company facility. Cal Water may borrow up to $400.0 million under the Cal Water facility; however, all of Cal Water’s borrowings under the Cal Water facility must be repaid within 24 months as authorized by the CPUC. The proceeds from the Company and Cal Water facilities may be used for working capital or other business purposes.

Previous wording

As of September 30, 2024 and December 31, 2023, short-term borrowings of $260.0 million and $180.0 million, respectively, were outstanding on the Company and Cal Water facilities.

Current wording

As of March 31, 2025 and December 31, 2024, short-term borrowings of $285.0 million and $205.0 million, respectively, were outstanding on the Company and Cal Water facilities.

Previous wording

The Company and Cal Water facilities 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, the Company and Cal Water facilities contain financial covenants that require the Company and its subsidiaries’ consolidated total capitalization ratio not to exceed 66.7% and an interest coverage ratio of three or more. As of September 30, 2024, we are in compliance with all of the covenant requirements and are eligible to use the full amount of the undrawn portion of the Company and Cal Water facilities.

Current wording

The Company and Cal Water facilities 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, the Company and Cal Water facilities contain financial covenants that require the Company and its subsidiaries’ debt portion of the Company’s consolidated total capitalization ratio not to exceed 66.7% and an interest coverage ratio of three or more to one (each as defined in the respective credit agreements). As of March 31, 2025, we are in compliance with all of the covenant requirements and are eligible to use the full amount of the undrawn portion of the Company and Cal Water facilities.

Previous wording

Long-term financing, which includes First Mortgage Bonds, other debt securities, and common stock, has typically been used to replace short-term borrowings and fund utility plant expenditures. Internally generated funds, after making dividend payments, provide positive cash flow, but have not been at a level to meet the needs of our utility plant expenditure requirements. Management expects this trend to continue given our planned utility plant expenditures for the next five years. Some utility plant expenditures are funded by payments received from developers for contributions in aid of construction or advances for construction. Funds received for contributions in aid of construction are non-refundable, whereas funds classified as advances for construction are generally refundable over 40 years. Management believes long-term financing is available to meet our cash flow needs through issuances of both debt and equity instruments.

Current wording

Long-term financing, which includes First Mortgage Bonds, other debt securities, and common stock, has typically been used to replace short-term borrowings and fund capital expenditures. Internally generated funds, after making dividend payments, provide positive cash flow, but have not been at a level to meet the needs of our capital expenditure requirements. Management expects this trend to continue given our capital expenditure plans for the next five years. Some capital expenditures are funded by payments received from developers for contributions in aid of construction or advances for construction. Funds received for contributions in aid of construction are non-refundable, whereas funds classified as advances in construction are refundable. Management believes long-term financing is available to meet our cash flow needs through issuances of both debt and equity instruments.

Previous wording

On April 17, 2009, Cal Water (Issuer) 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 (Guarantor). Certain subsidiaries of the Company do not guarantee the security and are referred to as Non-guarantors. The Guarantor fully, absolutely, irrevocably and unconditionally guarantees the punctual payment when due, whether at stated maturity, by acceleration, by notice of prepayment or otherwise, of the principal, premium, if any, and interest on the bonds. The bonds rank equally among Cal Water’s other First Mortgage Bonds.

Current wording

On April 17, 2009, Cal Water (Issuer) issued $100.0 million aggregate principal amount of 5.5% First Mortgage Bonds due 2040, all of which are fully and unconditionally guaranteed by the Company (Guarantor). Certain subsidiaries of the Company do not guarantee the security and are referred to as Non-guarantors. The Guarantor fully, absolutely, irrevocably and unconditionally guarantees the due and punctual payment when due, whether at stated maturity, by acceleration, by notice of prepayment or otherwise, of the principal of, premium, if any, and interest on the bonds. The bonds rank equally among Cal Water’s other First Mortgage Bonds.

Previous wording

The following tables present summarized financial information of the Issuer subsidiary and the Guarantor. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis. In presenting the summarized financial statements, the equity method of accounting has been applied to the Guarantor interests in the Issuer. The summarized information excludes financial information of the Non-guarantors, including earnings from and investments in these entities.

Current wording

The following tables present summarized financial information of the Issuer and the Guarantor. The information presented below excludes eliminations necessary to arrive at the information on a consolidated basis. In presenting the summarized financial statements, the equity method of accounting has been applied to the Guarantor interests in the Issuer. The summarized information excludes financial information of the Non-issuers, including earnings from and investments in these entities.

Previous wording

During the nine months ended September 30, 2024, our quarterly common stock dividend payments were $0.84 per share compared to $0.78 per share for the nine months ended September 30, 2023. For the full year 2023, the payout ratio was 113.8% of net income. On a long-term basis, our goal is to achieve a dividend payout ratio of 60% of net income.

Current wording

During the three months ended March 31, 2025, our quarterly common stock dividend payment was $0.34 per share, which includes a one-time special dividend in the amount of $0.04 per share, compared to $0.28 per share for the three months ended March 31, 2024. For the full year 2024, the payout ratio was 34.3% of net income. On a long-term basis, our goal is to achieve a dividend payout ratio of 60% of net income.

Previous wording

At the October 30, 2024 meeting, the Company’s Board of Directors declared the fourth quarter dividend of $0.28 per share payable on November 22, 2024, to stockholders of record on November 12, 2024. This was our 319th consecutive quarterly dividend.

Current wording

At the April 30, 2025 meeting, the Company’s Board of Directors declared the second quarter dividend of $0.30 per share payable on May 23, 2025, to stockholders of record on May 12, 2025. This was our 321st consecutive quarterly dividend.