AMERICAN STATES WATER CO

AMERICAN STATES WATER COMPANY AND SUBSIDIARIES

AND

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 —Summary of Significant Accounting Policies

Nature of Operations: American States Water Company (“AWR”) is the parent company of Golden State Water Company (“GSWC”), Bear Valley Electric Service, Inc. (“BVES”), and American States Utility Services, Inc. (“ASUS”) (and its subsidiaries, Fort Bliss Water Services Company (“FBWS”), Old Dominion Utility Services, Inc. (“ODUS”), Terrapin Utility Services, Inc. (“TUS”), Palmetto State Utility Services, Inc. (“PSUS”), Old North Utility Services, Inc. (“ONUS”), Emerald Coast Utility Services, Inc. (“ECUS”), Fort Riley Utility Services, Inc. (“FRUS”), Bay State Utility Services LLC (“BSUS”), and Patuxent River Utility Services LLC (“PRUS”)). AWR and its subsidiaries may be collectively referred to as “the Company.” AWR, through its wholly owned subsidiaries, serves overone million people inten states.

GSWC and BVES are both California public utilities. GSWC engages in the purchase, production, distribution and sale of water throughout California serving approximately 265,600 customer connections. BVES distributes electricity in several San Bernardino County mountain communities in California serving approximately 24,900 customer connections. The California Public Utilities Commission (“CPUC”) regulates GSWC’s and BVES’s businesses in matters including properties, rates, services, facilities, and transactions between GSWC, BVES, and their affiliates.

ASUS, through its wholly owned subsidiaries, operates, maintains and performs construction activities (including renewal and replacement capital work) on water and/or wastewater systems at various U.S. military bases pursuant to initial 50-year firm fixed-price contracts with the U.S. government andone 15-year contract with the U.S. government. These contracts are subject to annual economic price adjustments and modifications for changes in circumstances, changes in laws and regulations, and additions to the contract value for new construction of facilities at the military bases. ASUS also from time to time performs construction services on military bases as a subcontractor.

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

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

The consolidated financial statements included herein have been prepared by Registrant, without audit, pursuant to the rules and regulations of the SEC. The December 31, 2025 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. In the opinion of management, all adjustments consisting of normal, recurring items, and estimates necessary for a fair statement of the results for the interim periods have been made. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Form 10-K for the year ended December 31, 2025 filed with the SEC.

Related Party and Intercompany Transactions: GSWC, BVES and ASUS provide and/or receive various support services to and from their parent, AWR, and among themselves. GSWC allocates certain corporate office administrative and general costs to its affiliates, BVES and ASUS, using allocation factors approved by the CPUC. GSWC allocated corporate office administrative and general costs to BVES of $0.9 million and$0.8 million during the three month periods ended September 30, 2026 and 2025, respectively, and$2.8 million and$2.7 million during the nine month periods ended September 30, 2026 and 2025, respectively. GSWC also allocated corporate office administrative and general costs to ASUS of $1.3 million and $1.2 million during the three month periods ended September 30, 2026 and 2025, respectively, and $4.2 million and $4.0 million during the nine month periods ended September 30, 2026 and 2025, respectively.

When necessary, AWR will make capital contributions to its regulated utilities in order to maintain the CPUC-authorized capital structure.

Liquidity and Financing Activities: As of September 30, 2026, GSWC’s 5.5% unsecured private placement notes totaling $65.0 million are scheduled to mature on June 5, 2027. Consequently, this balance has been classified within current liabilities in the accompanying balance sheets. It is management's current intention to refinance this obligation prior to its maturity date either through the issuance of new long-term debt, an equity contribution by AWR parent, or a combination of the two. While GSWC will actively evaluate long-term financing alternatives and participate in discussions with potential lenders, no formal commitment or refinancing agreement has been executed as of the date these financial statements were issued.

Recent Accounting Pronouncements Not Yet Adopted:

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, (Disaggregation of Income Statement Expenses) requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. The guidance will be effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. Registrant is currently evaluating the impact of adopting this standard.

In September 2025, the FASB issued ASU 2025-06, (Targeted Improvements to the Accounting for Internal-Use Software) removing references to prescriptive and sequential software development stages. This ASU requires entities to begin capitalizing software costs when management has authorized and committed to funding the software project and it is probable that the project will be completed and the software will be used for the function intended. ASU 2025-06 is effective for annual periods beginning January 1, 2028, with early adoption permitted. Registrant is currently evaluating the impact of adopting this standard.

In December 2025, the FASB issued ASU No. 2025-10, (Accounting for Government Grants Received by Business Entities). The ASU establishes guidance on the recognition, measurement, and presentation of government grants received by business entities. The guidance is effective for annual and interim periods beginning January 1, 2029 with early adoption permitted. Adoption of this ASU can be applied on a modified prospective basis, a modified retrospective basis, or a full retrospective basis. Registrant is currently evaluating the impact of this new guidance.

In May 2026, the FASB issued ASU No. 2026-02, (Environmental Credits and Environmental Credit Obligations). The ASU establishes guidance for the recognition, measurement, presentation and disclosure requirements of environmental credits and environmental credit obligations. The guidance is effective for annual and interim periods beginning January 1, 2028 with early adoption permitted. Registrant is currently evaluating the impact of this new guidance.

Note 2 —Revenues

Most of Registrant’s revenues are derived from contracts with customers, including tariff-based revenues from its regulated utilities at GSWC and BVES. ASUS’s initial firm fixed-price long-term contracts with the U.S. government are considered service concession arrangements under ASC 853, Service Conce ssion Arrangements. ASUS’s military base contracts consist primarily of 50-year contracts andone 15-year contract with the U.S. government. Accordingly, the services under these contracts are accounted for under Topic 606—Revenue from Contracts with Customers, and the water and/or wastewater systems are not recorded as Property, Plant and Equipment on Registrant’s balance sheets.

Although GSWC and BVES have a diversified customer base of residential, commercial, industrial, and other customers, revenues derived from residential and commercial customers generally account for approximately 90% of total water and electric revenues. Most of ASUS’s revenues are derived from the U.S. government.

For the three and nine months ended September 30, 2026 and 2025, disaggregated revenues from contracts with customers by segment were as follows:

The opening and closing balances of the receivable from the U.S. government, contract assets, and contract liabilities from contracts with customers, which are related entirely to ASUS, are as follows:

Unbilled receivables and Receivable from the U.S. government represent receivables where the right to payment is conditional only by the passage of time.

Contract Assets - Contract assets are assets of ASUS and its subsidiaries and consist of unbilled revenues recognized from work-in-progress construction projects, where the right to payment is conditional on something other than the passage of time. The classification of this asset as current or noncurrent is based on the timing of when ASUS expects to bill these amounts.

Contract Liabilities - Contract liabilities are liabilities of ASUS and consist of billings in excess of revenue recognized. The classification of this liability as current or noncurrent is based on the timing of when ASUS expects to recognize revenue. Contracted services revenues recognized during the three and nine months ended September 30, 2026, which were included in contract liabilities at the beginning of each respective period, July 1, 2026, and January 1, 2026, were $3.1 million and $8.6 million, respectively. Contracted services revenues recognized during the three and nine months ended September 30, 2026 from performance obligations satisfied in previous periods were not material.

As of September 30, 2026, AWR’s aggregate remaining performance obligations, which are entirely from the contracted services segment, were $4.2 billion. ASUS expects to recognize revenue on these remaining performance obligations over the remaining term of each of thecontracts, which range from 13 to 48 years. Each of the 50-year contracts with the U.S. government is subject to termination, in whole or in part, prior to the end of its contract term for convenience of the U.S. government. The 50-year contracts provide that, in such an event, the U.S. government would be entitled to repurchase the utility systems and ASUS would be entitled to recover any unrecovered investments under the contracts’ termination and other provisions at the time of termination.

Note 3 —Regulatory Matters

In accordance with accounting principles for rate-regulated enterprises, GSWC and BVES record regulatory assets, which represent probable future recovery of incurred costs from customers through the ratemaking process, and regulatory liabilities, which represent probable future refunds that are to be credited to customers through the ratemaking process. At September 30, 2026, GSWC and BVES had $25.0 million of net regulatory liabilities on the balance sheets, which included $105.6 million of regulatory assets net of $130.6 million of regulatory liabilities. As authorized by the CPUC, the majority of the regulatory assets and liabilities accrue interest at the current 90-day commercial-paper rate. There are $44.8 million of regulatory assets not accruing a carrying cost, which included $29.3 million related to flowed-through deferred income taxes including the gross-up portion on the deferred tax resulting from the excess deferred income tax regulatory liability, and $12.0 million related to memorandum accounts authorized by the CPUC to track unrealized gains and losses on BVES’s purchase power contracts over the term of the contracts. The remaining $3.5 million relates to other regulatory assets that do not provide for a carrying cost. Furthermore, there are $106.9 million of regulatory liabilities not accruing interest that consisted of $66.7 million related to excess deferred income taxes arising from the lower federal income tax rate under the Tax Cuts and Jobs Act enacted in December 2017 that are being refunded to customers, and $40.2 million related to the net over funded positions in Registrant’s pension and other retirement obligations (not including the two-way pension balancing accounts, which accrue interest).

Regulatory assets represent costs incurred by GSWC and/or BVES for which they have received or expect to receive rate recovery in the future. In determining the probability of costs being recognized in other periods, GSWC and BVES consider regulatory rules and decisions, past practices, and other facts or circumstances that would indicate if recovery is probable. If the CPUC determines that a portion of either GSWC’s or BVES’s regulatory assets are not recoverable in customer rates, the applicable utility must determine if it has suffered an asset impairment that requires it to write down the asset’s value. Regulatory assets are offset against regulatory liabilities within each ratemaking area. Amounts expected to be collected or refunded in the next twelve months have been classified as current assets and current liabilities by ratemaking area.

Regulatory assets, less regulatory liabilities, included in the consolidated balance sheets are as follows:

Regulatory matters are discussed in the consolidated financial statements and the notes thereto included in the Company’s Form 10-K for the year ended December 31, 2025 filed with the SEC. There were no significant changes during the nine months ended September 30, 2026 except for routine and recurring activity, including the recovery of regulatory assets through surcharges currently in place.

PFAS Contamination Litigation Proceeds Memorandum Account:

GSWC has been a class member in various class action lawsuits related to PFAS contamination affecting public water systems. A class settlement agreement among Tyco Fire Products LP (“Tyco”) and the class of eligible public water systems was entered into on April 12, 2024 that resolved any claims for PFAS contamination with Tyco. The class settlement agreement between the parties was approved by an order issued by the Federal District Court of South Carolina on November 22, 2024. As a result of the settlement, GSWC received from Tyco $2.2 million, net of legal and other fees, during the second quarter of 2026.

In addition to the class settlement with Tyco, in June 2026, GSWC received a settlement payment of $0.9 million, net of legal and other fees, from BASF Corporation (“BASF”) pursuant to a class settlement agreement entered into on May 20, 2024 that resolved any claims for PFAS contamination with BASF. Furthermore, in connection with GSWC’s class settlement agreement entered into with 3M Company in 2023, GSWC received the scheduled third legal settlement payment of $3.3 million, net of legal and other fees, from 3M Company in July 2026. The proceeds received from each of the settlement agreements have been included in the PFAS contamination litigation proceeds memorandum account and are reflected as regulatory liabilities as of September 30, 2026.

Settlement proceeds received by GSWC have been and may be used for future capital investments or operations and maintenance expenses related to PFAS water contamination to its water systems or any PFAS related litigation against its water systems, which benefit GSWC’s customers. The CPUC has authorized GSWC to track in a memorandum account the settlement payments received by GSWC from lawsuits related to PFAS contamination in its water systems, which include the proceeds received for participation in class action lawsuits. The amounts in the memorandum account have been recorded as a regulatory liability and have been used, and will continue to be used in the future, to offset the incremental investments in replacement and treatment of property, as well as operations and maintenance expenses and other direct expenses related to PFAS contamination.

Note 4 —Earnings per Share/Capital Stock

In accordance with the accounting guidance for participating securities and earnings per share (“EPS”), Registrant uses the “two-class” method of computing EPS. The “two-class” method is an earnings allocation formula that determines EPS for each class of common stock and participating security. AWR has participating securities related to restricted stock units that earn dividend equivalents on an equal basis with the Common Shares, and that have been issued under AWR’s stock incentive plans for employees and the non-employee directors stock plans. In applying the “two-class” method, undistributed earnings are allocated to both Common Shares and participating securities.

The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding used to calculate basic EPS:

Diluted EPS is based upon the weighted average number of Common Shares, including both outstanding shares and shares potentially issuable in connection with restricted stock units granted under AWR’s stock incentive plans for employees and directors, and net income. The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding used to calculate diluted EPS:

(1) In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in calculating diluted EPS,156,974 and 154,489 restricted stock units, including performance awards to officers of the Company at September 30, 2026 and 2025, respectively, were deemed to be outstanding and included in the calculation of diluted EPS.

On February 27, 2024, AWR entered into an equity distribution agreement with third-party sales agents, which was subsequently amended on February 20, 2026 (the “Equity Distribution Agreement”), under which AWR could offer and sell its Common Shares, from time to time at its sole discretion, through an at-the-market (“ATM”) offering program having an aggregate gross offering price of up to $200 million over athree-year period and pursuant to AWR’s effective shelf registration statement on Form S-3. AWR used the net proceeds from these sales, after deducting commissions on such sales and offering expenses, for general corporate purposes, including, but not limited to, repayment of debt and equity contributions to its subsidiaries. On June 12, 2026, AWR successfully completed the ATM offering program, reaching the maximum aggregate offering capacity of$200.0 million in gross proceeds raised. In total, AWR sold 2,575,947 Common Shares through the ATM offering program, and no further sales of Common Shares will be made under this program.

There wereno Common Shares issued during the three months ended September 30, 2026. During the three months ended September 30, 2025, AWR sold 201,212 Common Shares, through its ATM offering program and raised proceeds of $14.7 million, net of $0.2 million in commissions paid under the terms of the Equity Distribution Agreement. AWR also incurred $0.1 million of other expenses during the three months ended September 30, 2025, which included primarily legal and other costs to support this ATM offering program. During the nine months ended September 30, 2026 and 2025, AWR sold 526,959 and 535,760 Common Shares, respectively, through the ATM offering program and raised proceeds of $40.1 million, net of $0.6 million in commissions paid, and $40.5 million, net of $0.6 million in commissions paid, respectively. AWR also incurred$0.2 million and$0.3 millionof other expenses during the nine months ended September 30, 2026 and 2025, respectively, which was primarily legal and other costs.

During the nine months ended September 30, 2026 and 2025, AWR also issued 30,538 and 27,639 Common Shares, respectively, related to restricted stock units, pursuant to stock-based compensation plans.

During the nine months ended September 30, 2026 and 2025, AWR paid $1.4 million and $1.3 million, respectively, to taxing authorities on employees’ behalf for shares withheld related to net share settlements. During the nine months ended September 30, 2026 and 2025, GSWC paid $1.2 million in each period to taxing authorities on employees’ behalf for shares withheld related to net share settlements. These payments are included in the stock-based compensation caption of the statements of equity.

During the three months ended September 30, 2026 and 2025, AWR paid quarterly dividends to shareholders of approximately $21.6 million, or $0.5455 per share, and $19.4 million, or $0.5040 per share, respectively. During thenine months ended September 30, 2026 and 2025, AWR paid quarterly dividends of$61.1 million, or $1.5535 per share, and $55.1 million, or $1.4350 pershare, respectively.

During the three andnine months ended September 30, 2026, GSWC paid dividends of $8.0 million and$39.5 million, respectively, to AWR. During thethree andnine months ended September 30, 2025, GSWC paid dividends of$19.5 million and $37.5 million, respectively, to AWR. During the three andnine months ended September 30, 2026, ASUS paid dividends of $13.7 million and $21.7 million, respectively, to AWR. ASUS paid dividends of$6.0 million to AWR during the three and nine months ended September 30, 2025.

Note 5 —Derivative Instruments

In May 2025, the CPUC approved a new power purchase contract between BVES and a third party. The contract provides for the purchase of electricity during a delivery period from June 1, 2025 through December 31, 2028 and is subject to the accounting guidance for derivatives and requires mark-to-market accounting. In addition, BVES continues to procure renewable portfolio standard eligible energy and renewable energy credits as a bundled product through a contract that delivers through December 31, 2035. Under this contract, there is an embedded derivative that also requires mark-to-market accounting.

The CPUC authorized the use of regulatory asset and liability memorandum accounts to offset the mark-to-market entries required by the accounting guidance. Accordingly, all unrealized gains and losses generated from derivative instruments in the purchase power contracts are deferred on a monthly basis into a non-interest-bearing regulatory memorandum account that tracks the changes in fair value of the derivatives throughout the terms of the contracts. As a result, these unrealized gains and losses do not impact Registrant’s earnings. As of September 30, 2026, the fair value of the derivative liability was $12.0 million for the power purchase contracts, with a corresponding regulatory asset recorded in the derivative instrument memorandum account as a result of overall fixed prices under BVES’s purchase power contract being higher than future energy prices. The notional volume of obligations remaining under these long-term contracts as of September 30, 2026 was 700,721 megawatt hours.

The accounting guidance for fair value measurements applies to all financial assets and financial liabilities that are measured and reported on a fair value basis. Under the accounting guidance, Registrant has made fair value measurements that are classified and disclosed in one of the following three categories:

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

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

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

To value the derivatives in the purchase power contracts, BVES utilizes various inputs that include quoted market prices for energy over the duration of its contracts. The market prices used to determine the fair value for the derivative instruments were estimated based on independent sources such as broker quotes and publications that are not observable in or corroborated by the market. When such inputs have a significant impact on the measurement of fair value, the instruments are categorized as Level 3. Accordingly, the valuation of the derivatives within BVES’s purchase power contracts have been classified as Level 3 for all periods presented. The changes in fair values were due to changes in forward market energy prices as of September 30, 2026 and 2025. The following table presents changes in the fair value of the Level 3 derivatives for the three andnine months ended September 30, 2026 and 2025:

Note 6 —Fair Value of Financial Instruments

For cash and cash equivalents, accounts receivable, accounts payable and short-term debt, the carrying amount is assumed to approximate fair value due to the short-term nature of these items.

Investments held in a Rabbi Trust for the supplemental executive retirement plan (“SERP”) are measured at fair value and totaled $51.5 million asof September 30, 2026 and$48.4 million as of December 31, 2025. All equity investments in the Rabbi Trust are Level 1 investments in mutual funds. The investments held in the Rabbi Trust are included in “Other Property and Investments” on Registrant’s balance sheets.

The table below estimates the fair value of long-term debt held by AWR and GSWC, respectively. The fair values as of September 30, 2026 and December 31, 2025 were determined using rates for similar financial instruments of the same duration utilizing Level 2 methods and assumptions. Changes in the assumptions will produce different results.

(1) Excludes debt issuance costs of approximately$2.9 million and $3.4 million as of September 30, 2026 and December 31, 2025, respectively.

(2) Excludes debt issuance costs of approximately$2.6 million and $3.0 million as of September 30, 2026 and December 31, 2025, respectively.

Note 7 —Income Taxes

AWR’s effective income tax rate (“ETR”) was 25.9% and 23.9% for thethree months ended September 30, 2026 and 2025, respectively, and was 25.3% and 23.7% for the nine months ended September 30, 2026 and 2025, respectively. GSWC’s ETR was 26.8% and 24.6% for thethree months ended September 30, 2026 and 2025, respectively, and was 26.2% and 24.6% for the nine months ended September 30, 2026 and 2025, respectively.

The AWR and GSWC ETRs differed from the federal corporate statutory tax rate of 21% primarily due to (i) state taxes; (ii) permanent differences, including certain tax effects from stock compensation; (iii) the ongoing amortization of the excess deferred income tax liability; and (iv) differences between book and taxable income that are treated as flowed-through adjustments in accordance with regulatory requirements (principally from plant, rate-case, and compensation-related items). As regulated utilities, GSWC and BVES treat certain temporary differences as flowed-through to customers in computing their income tax expense consistent with the income tax method used in their CPUC-jurisdiction rate making. Flowed-through items either increase or decrease tax expense and the ETR.

Note 8 —Employee Benefit Plans

The components of net periodic benefit costs for Registrant’s pension plan, postretirement medical benefit plan and SERP for thethree andnine months ended September 30, 2026 and 2025 were as follows:

Registrant did not contribute to its pension plan in 2026 given its current overfunded status. Registrant’s policy is to fund the plans annually at a level which is deductible for income tax purposes and is consistent with amounts recovered in customer rates while also complying with ERISA’s funding requirements.

As authorized by the CPUC in the water and electric general rate case decisions, GSWC and BVES each utilize two-way balancing accounts to track differences between the forecasted annual pension expenses in rates, or expected to be in rates, andthe actual annual expense recorded in accordance with the accounting guidance for pension costs. During the three months ended September 30, 2026 and 2025, GSWC’s actual pension expense was lower than the amounts included in water customer rates by$0.9 million and $0.4 million, respectively, and $2.7 million and $1.2 million during thenine months ended September 30, 2026 and 2025, respectively. As of September 30, 2026, GSWC has a $4.9 million over-collection in its two-way balancing account, which is included as part of regulatory liabilities in Registrant’s balance sheets (Note 3).

BVES’s actual expense was lower than the amounts included in electric customer rates for all periods presented. As a result of receiving a final decision in its electric general rate case in the fourth quarter of 2024, BVES’s actual pension expense approximates the amounts included in electric rates, resulting in an insignificant balance in its pension balancing account as of September 30, 2026.

Note 9 —Contingencies

Environmental Clean-Up and Remediation at GSWC:

GSWC has been involved in environmental remediation and cleanup atone of its plant sites that contained an underground storage tank, which was used to store gasoline for its vehicles. This tank was removed from the ground in July 1990 along with the dispenser and ancillary piping. Since then, GSWC has been involved in various remediation activities at this site.

As of September 30, 2026, the total amount spent to clean-up and remediate the plant site, since inception of the remediation period, amounted to approximately $7.0 million, of which $1.5 million has been paid by the State of California Underground Storage Tank Fund. Amounts paid by GSWC have been included in rate base and approved by the CPUC for recovery. As of September 30, 2026, GSWC has a regulatory asset and an accrued liability for the estimated remaining cost of $1.3 million to complete the clean-up at the site. The estimate includes costs for continued activities of groundwater cleanup and monitoring, future soil treatment and site-closure-related activities. The ultimate cost may vary as there are many unknowns in remediation of underground gasoline spills and this is an estimate based on currently available information. Management believes it is probable that the estimated additional costs will continue to be approved in rate base by the CPUC as approved historically.

Other Litigation:

Registrant is also subject to other ordinary routine litigation incidental to its business, some of which may include claims for compensatory and punitive damages. Management believes that rate recovery, proper insurance coverage and reserves are in place to insure against, among other things, property, general liability, employment, and workers’ compensation claims incurred in the ordinary course of business. Insurance coverage may not cover certain claims involving punitive damages. Registrant does not believe the outcome from any pending suits or administrative proceedings will have a material effect on Registrant’s consolidated results of operations, financial position, or cash flows.

Note 10 —Business Segments

AWR hasthree reportable segments: water, electric and contracted services. GSWC hasone segment, water. On a stand-alone basis, AWR has no material assets or liabilities other than its equity investments in its subsidiaries, notes payable to banks, deferred taxes and a note receivable from an affiliate.

GSWC and BVES are CPUC regulated public utilities with business activities conducted in California. Activities of ASUS and its subsidiaries are conducted in California, Florida, Kansas, Maryland, Massachusetts, New Mexico, North Carolina, South Carolina, Texas and Virginia. Some of ASUS’s wholly owned subsidiaries are regulated by the state in which the subsidiary primarily conducts water and/or wastewater operations. Fees charged for operations and maintenance and renewal and replacement services are based upon the terms of the contracts with the U.S. government, which have been filed, as appropriate, with the commissions in the states in which ASUS’s subsidiaries are incorporated.

Registrant evaluates the performance of its reportable segments based on segment net income (loss). Registrant’s chief operating decision maker is the chief executive officer. The chief operating decision maker uses segment net income (loss) as a financial measure as part of the annual operating budget and forecasting process to monitor monthly financial activities of its segments. This financial information is reviewed and evaluated by the chief operating decision maker in making segment operating, capital, and business decisions.

The following tables present information by reportable segment and AWR (parent) that reconcile segment net income (loss) to total consolidated net income (loss) and segment assets to total consolidated assets. The utility plant balances are net of respective accumulated provisions for depreciation. The net property, plant and equipment of the electric segment is presented net of Contributions in Aid of Construction (“CIAC”). Capital additions reflect capital expenditures paid in cash and exclude U.S. government-funded and third-party prime funded capital expenditures for ASUS’s subsidiaries and property installed by developers and conveyed to GSWC and BVES.

(1) Depreciation computed on regulated utilities’ transportation equipment is recorded in other operating expenses and totaled $0.3 million and $0.2 million for the three months ended September 30, 2026 and 2025, respectively, and totaled$0.9 million and $0.7 million for the nine months ended September 30, 2026 and 2025, respectively.

(2) Other segment items primarily consist of a) non-service cost components related to Registrant’s benefit plans, and b) AFUDC (equity) on certain BVES capital projects while under construction.

(3) Capital additions reflect capital expenditures paid in cash and exclude U.S. government-funded and third-party prime funded capital expenditures for ASUS’s subsidiaries and property installed by developers and conveyed to GSWC and BVES.

The following tables reconcile segment net property, plant and equipment to total consolidated assets (in thousands):

(4) The utility plant balances are net of respective accumulated provisions for depreciation.