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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal Year Ended DECEMBER 31, 1996 Commission file number 0-1121
SOUTHERN CALIFORNIA WATER COMPANY
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(Exact Name of Registrant as specified in its charter)
CALIFORNIA 95-1243678
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
630 EAST FOOTHILL BOULEVARD, SAN DIMAS, CALIFORNIA 91773
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (909) 394-3600
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange On Which Registered
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Common Shares, $2.50 Par Value New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: NONE
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 [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ]
The aggregate market value of the total voting stock held by non-affiliates of
the Registrant was approximately $185,271,000 on March 17, 1997. The closing
price per Common Share on that date, as quoted in the Western Edition of The
Wall Street Journal, was $20.625. Voting Preferred Shares, for which there is no
established market, were valued on March 17, 1997 at $1,283,000 based on a yield
of 6.60%. As of March 17, 1997, the number of the Registrant's Common Shares,
$2.50 Par Value, outstanding was 8,957,671.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Annual Report to Shareholders for the year
ended December 31, 1996 as to Part I, Items 1 and 2, and Part
II, Items 5, 6, 7 and 8, in each case, as specifically
referenced herein.
(2) Portions of the Proxy Statement filed with the Securities and
Exchange Commission on or about March 20, 1997 as to Part III,
Items 10, 11, 12 and 13, in each case as specifically
referenced herein.
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SOUTHERN CALIFORNIA WATER COMPANY
INDEX
Page No.
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PART I
Item 1: Business 1 - 6
Item 2: Properties 7 - 9
Item 3: Legal Proceedings 9
Item 4: Submission of Matters to a Vote of Security Holders 9
PART II
Item 5: Market for Registrant's Common Equity and Related Stockholder Matters 9 - 10
Item 6: Selected Financial Data 10
Item 7: Management's Discussion and Analysis of Financial Condition and
Results of Operation 10
Item 8: Financial Statements and Supplementary Data 10
Item 9: Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 10
PART III
Item 10: Directors and Executive Officers of the Registrant 11
Item 11: Executive Compensation 11
Item 12: Security Ownership of Certain Beneficial Owners and Management 11
Item 13: Certain Relationships and Related Transactions 11
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K 11
Exhibit Index 12 - 14
Signatures 15
i.
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PART I
ITEM 1. BUSINESS
GENERAL
Southern California Water Company, hereinafter referred to as
Registrant, is a utility company engaged principally in the purchase,
production, distribution and sale of water (SIC No. 4941). Registrant also
distributes electricity in one community (SIC No. 4911). Registrant, regulated
by the California Public Utilities Commission, hereinafter referred to as the
CPUC, was incorporated in 1929 under the laws of the State of California as
American States Water Services Company of California as the result of the
consolidation of 20 water utility companies. From time to time, additional water
companies and municipal water districts have been acquired and properties in
limited service areas have been sold or been the subject of condemnation
proceedings. Registrant's present name was adopted in 1936.
At December 31, 1996, Registrant was organized into three regions
operating within 75 communities in 10 counties located throughout the State of
California and provided water service in 21 separate customer service areas and
one electric customer service area. The total population of these service areas
on that date was approximately 1 million persons. For each of the years ended
December 31, 1996, 1995 and 1994, about 73% of Registrant's water customers were
located in the greater metropolitan areas of Los Angeles and Orange Counties.
Registrant provides electric service to the City of Big Bear Lake and
surrounding areas in San Bernardino County. Beginning in June, 1996, all
electric energy sold by Registrant to customers in its Bear Valley Electric
customer service area was purchased under an energy brokerage contract with
ENOVA Energy Management, Inc. Prior to June, 1996, all energy sold was purchased
from the Southern California Edison Company subsidiary of Edison International.
Registrant served 240,498 water customers and 20,546 electric customers
at December 31, 1996, or a total of 261,044 customers, compared with 259,437
total customers at December 31, 1995 and 258,236 total customers at December 31,
1994. For the years ended December 31, 1996, 1995 and 1994, approximately 92% of
Registrant's operating revenues were derived from water sales and approximately
8% were derived from the sale of electricity. Operating income before taxes on
income of the electric district was approximately 9%, 8% and 7% of Registrant's
total operating income before taxes for the years ended December 31, 1996, 1995
and 1994, respectively. The material contained in Note 11 Business Segments - of
the Notes to Financial Statements in the 1996 Annual Report to Shareholders
provides additional information on business segments while Note 12 - Selected
Quarterly Financial Data (Unaudited) - of the Notes to Financial Statements in
the 1996 Annual Report to Shareholders provides information regarding the
seasonal nature of Registrant's business. The Notes to Financial Statements
contained in the 1996 Annual Report to Shareholders are included herein by
reference.
During 1996, Registrant supplied, from all sources, a total of 194,397
acre-feet of water compared to 183,108 acre-feet supplied in 1995 and 185,490
acre-feet in 1994. Of the total water supplied in 1996, approximately 43% was
purchased from others, principally from member agencies of the Metropolitan
Water District of Southern California ("MWD"). The remaining amount was
furnished by the Bureau of Reclamation under contract, at no cost, to
Registrant's Arden-Cordova customer service area and to Registrant's Clearlake
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customer service area by prescriptive rights to water extracted from Clear Lake.
The remainder of water supplied was produced from Registrant's owned wells.
MWD is organized to deliver imported water to areas within
its jurisdiction. Registrant has 52 connections to the water distribution
facilities of MWD and other municipal water agencies. MWD imports water from two
principal sources: the Colorado River and the State Water Project ("SWP").
Available water supplies from the Colorado River and the SWP have historically
been sufficient to meet most of MWD's requirements and MWD's supplies from these
sources are anticipated to remain adequate through 1997. MWD's import of water
from the Colorado River is expected to decrease in future years due to the
requirements of the Central Arizona Project in the State of Arizona. In
response, MWD has taken steps to secure additional storage capacity and increase
available water supplies, including effecting transfers of water rights from
other sources.
The recent storms during the 1996-1997 winter period provided
precipitation adequate to fill most of the state's reservoirs to near capacity
and the outlook for water supply in 1997 is favorable. In those districts of
Registrant which pump groundwater, overall groundwater conditions remain at
adequate levels, allowing Registrant to use groundwater in its resource mix and
decrease its dependence on increasingly expensive purchased water. Registrant
believes that its water supplies from all sources are adequate to meet current
year projected demands.
COMPETITION
The business of Registrant is substantially free from direct and
indirect competition with other public utilities, municipalities and other
public agencies.
WATER-RELATED OPPORTUNITIES
Registrant continues to pursue strategic opportunities related to the
operation of municipally-owned water systems. Registrant has pursued and
continues to pursue opportunities to bid on long-term leases and operation
contracts on a stand-alone basis or as part of a joint venture.
In December, 1996, Registrant and U.S. Water, L.L.C., a limited
liability company owned by United Infrastructure Company, a general partnership
formed by the Bechtel and Peter Kiewet organizations, and by Northwest Water
Holdings, Inc., a subsidiary of United Utilities PLC, a water and electric
utility based in the United Kingdom, formed Golden State Water Company LLC
("GSWC") for the purpose of pursuing potential opportunities to lease, or
operate and maintain, municipally owned retail water supply and distribution
systems and water treatment, wastewater collection and wastewater treatment
facilities in California. GSWC has submitted a bid to the City of Garden Grove
("Garden Grove") to operate and maintain its water system. The bid remains
subject to approval by Garden Grove. No assurance can be given that Garden Grove
will approve GSWC's bid or that GSWC will ultimately be retained to operate and
maintain the city's water system or perform any other services for Garden Grove.
There can be no assurance that any such other opportunities will materialize or
that, if they do, Registrant (either jointly with GSWC or alone) would be
successful in consummating any such lease and/or maintenance and operation
arrangements.
RATES AND REGULATION
Registrant is subject to regulation by the CPUC as to its water and
electric business and properties. The CPUC has broad powers to regulate public
utilities with respect to service and facilities, rates, classifications of
accounts, valuation of properties and the purchase, disposition and mortgaging
of properties necessary or useful in rendering public utility service. The CPUC
also has authority over the issuance of securities, the granting of certificates
of convenience and necessity as to the extension of services and facilities and
various other matters.
The 22 customer service areas of Registrant are grouped into 16 water
districts and one electric district for ratemaking purposes. Registrant's water
rates vary among the 16 ratemaking districts due to differences in operating
conditions and costs. Registrant continuously monitors operations in each of
these districts so that it may file applications for rate changes, when
warranted, on a district-by-district basis, in accordance with the CPUC's
procedure. Under the CPUC's practices, rates may be increased by three methods:
general rate increases, offsets for certain expense increases and advice letter
filings related to certain plant additions.
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General rate increases typically are for three-year periods and include
"step" and "attrition" increases in rates for the second and third years,
respectively. General rate increases are established by formal proceedings in
which overall rate structure, expenses and rate base of the district are
examined. Rates are based on estimated expenses and capital costs for a
prospective two-year period. The attrition mechanism is to set rates applicable
to the third of the three-year test cycle, which assumes that the costs and
expenses for the third year of the cycle will change in the same proportion over
the second year as the change projected for the second year over the first year.
Step and attrition rate increases for the second and third years, respectively,
are allowed to compensate for projected cost changes, but are subject to the
satisfaction of certain tests, including a demonstration that earnings levels in
the district did not exceed the latest rate of return authorized for Registrant.
General rate proceedings typically take about 12 months from the filing of an
application to the authorization of new rates.
Rate increases to offset increases in certain expenses, such as costs
of purchased water, energy costs to pump water, costs of power purchased for
resale and groundwater production assessments, are accomplished through an
abbreviated "offset" procedure that typically takes about two months. The CPUC's
regulations require utilities to maintain balancing accounts that reflect
differences between specific offset cost increases and the rate increases
authorized to offset those costs. The balancing accounts are subject to
amortization through the offset procedure or through general rate decisions.
An advice letter, or rate base offset, proceeding is generally
undertaken on an order of the CPUC in a general rate proceeding and provides for
the delayed inclusion of certain projected plant facilities in future rates,
pending notification that such facilities have actually been placed in service.
The advice letter provides the required notification and, after CPUC approval,
permits Registrant to include the costs associated with the facilities in rates.
During each of 1996, 1995 and 1994, Registrant's rates for most of its
water ratemaking districts were changed, among other reasons, to directly offset
changes in certain expenses (principally purchased water) and for increased
levels of capital improvements. Rates in Registrant's Bear Valley Electric
customer service area were adjusted in 1996. The following table lists
information on estimated rate changes, by major type, for the last three years:
SUPPLY BALANCING GENERAL AND STEP RATE BASE
COST ACCOUNT RATE OFFSET
YEAR OFFSET AMORTIZATION INCREASES AND OTHERS TOTAL
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1996 $ 102,500 $ (757,700) $16,804,100 $ 2,305,100 $18,297,800
1995 $ 1,780,000 $ (102,900) $ 1,426,800 $ 256,500 $ 3,360,400
1994 $ 9,439,800 $ 2,847,700 $ 3,084,600 $(2,070,800) $13,301,300
In January, 1996, new rates were effective in six of Registrant's
rate-making districts which, among other things, authorized a rate of return on
common equity of 10.40%, increased depreciation rates, authorized recovery of
postretirement medical benefit costs, increased current recovery of labor and
labor-related expenses and resulted in an increase in annual water operating
revenues of approximately $15 million. Water rates in two additional ratemaking
districts were increased on January 1, 1997 to recover costs associated with
1996 and 1997 capital projects in those areas.
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Registrant filed notices of intent to increase water rates in four
ratemaking districts in January, 1997. Registrant is unable to predict if the
CPUC will authorize all or any of the proposed increases. However, it is not
anticipated that new rates, if approved, would be effective before January,
1998.
New rates were effective in May, 1996 in Registrant's Bear Valley
Electric customer service area. An additional step increase was effective in
January, 1997.
In November, 1996, Registrant filed an application with the CPUC
seeking recovery through rates of costs associated with its participation in the
coastal aqueduct extension of the State Water Project. Registrant is currently
unable to predict if the CPUC will authorize recovery of all or any of the costs
associated with its participation in the Project.
EMPLOYEE RELATIONS
Registrant had 463 employees as of December 31, 1996. Seventeen
employees in Registrant's Bear Valley Electric customer service area were
members of the International Brotherhood of Electrical Workers, hereinafter
referred to as the IBEW. Registrant's bargaining unit agreement with the IBEW
expired on December 1, 1996 but was extended until March 31, 1997. Registrant
and the IBEW are negotiating a new contract, but Registrant is unable at this
time to predict the final result of those negotiations. Fifty-three of
Registrant's water utility employees in its Metropolitan ratemaking district are
members of the Utility Workers of America, hereinafter referred to as the UWA.
The collective bargaining agreement with the UWA expires in March, 2001.
Registrant has no other unionized employees.
ENVIRONMENTAL MATTERS
1996 Amendments to Federal Safe Drinking Water Act
On August 6, 1996, amendments (the "1996 SDWA amendments") to the
federal Safe Drinking Water Act (the "SDWA") were signed into law. The 1996 SDWA
amendments amount to a rewrite of the law that the United States Environmental
Protection Agency (the "EPA") has been trying to implement for almost 10 years.
The amendments were developed with significant contributions from water
purveyors and regulators. The California Department of Health Services, acting
on behalf of the EPA, administers the EPA's program in California.
The 1996 SDWA amendments revise the 1986 amendments to the SDWA, which
required that the EPA set 25 new contaminant standards every three years, with a
new process for selecting and regulating contaminants. The EPA can only regulate
contaminants that may have adverse health effects, are known or likely to occur
at levels of public health concern, and the regulation of which will provide "a
meaningful opportunity for health risk reduction." The EPA must, within 18
months of the time that the 1996 SDWA amendments were signed into law, publish a
list of contaminants for possible regulation and must update that list every
five years. In addition, every five years, the EPA must select at least five
contaminants on that list and determine whether to regulate them. The new law
allows the EPA to bypass the selection process and adopt interim regulations for
contaminants in order to address urgent health threats. Current standards for
contaminants, however, remain in place and are not subject to the new
standard-setting provisions.
The 1996 SDWA amendments allow the EPA for the first time to base
primary drinking water regulations on risk assessment and cost/benefit
considerations and on minimizing overall risk. The EPA must base regulations on
best available, peer-reviewed science and data from best available methods. For
proposed regulations that involve the setting of maximum contaminant levels
("MCLs"), the EPA must use, and seek public comment on, an analysis of
quantifiable and non-quantifiable risk-reduction benefits and cost for each
such MCL.
Registrant currently tests its wells and water systems for more than 90
contaminants, covering all contaminants listed in the SDWA. Water from wells
found to contain levels of contaminants above the established MCL's is either
treated or blended before it is delivered to customers.
Since the SDWA became effective, Registrant has experienced increased
operating costs for testing to determine the levels, if any, of the contaminants
in Registrant's sources of supply and additional expense to lower the level of
any contaminants in order to meet the MCL standards. Such costs and the costs of
controlling any other contaminants may cause Registrant to experience additional
capital costs as well as increased operating costs.
Registrant is currently unable to predict the ultimate impact that the
1996 SDWA amendments might have on its financial position or its results of
operation. The ratemaking process provides Registrant with the opportunity to
recover prudently incurred capital and operating costs associated with water
quality. Management believes that such incurred costs will be authorized for
recovery by the CPUC.
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Proposed Enhanced Surface Water Treatment Rule
On July 29, 1994, the EPA proposed an Enhanced Surface Water Treatment
Rule ("ESWTR"), which would require increased surface-water treatment to
decrease the risk of microbial contamination. The EPA has proposed several
different versions of the ESWTR for promulgation. The version selected for
promulgation will be determined based on data collected by certain water
suppliers and forwarded to the EPA pursuant to the EPA's Information Collection
Rule, which requires such water suppliers to monitor certain microbial and other
contaminants in their water supplies and to conduct certain tests in respect of
such contaminants. The EPA must adopt interim and final rules pertaining to
enhanced surface water treatment according to a negotiated schedule or as soon
as practicable. The ESWTR, in any of the forms currently proposed, would
apply to each of Registrant's five surface water treatment plants. However,
because it is impossible to predict the version of the ESWTR that will be
promulgated, the Company is unable to predict what additional costs, if any,
will be incurred to comply with the ESWTR.
Regulation of Disinfection/Disinfection By-Products
Registrant will also be subject to new regulations concerning
disinfection/disinfection by-products ("DBPs"), Stage I of which regulations are
expected to become effective in June, 1998. These regulations will require
reduction of tri-halomethane contaminants from 100 micrograms per liter to 80
micrograms per liter and are expected to affect two of Registrant's systems.
The EPA must adopt Stage II rules pertaining to DBPs according to a
negotiated schedule or as soon as practicable. The EPA is not allowed to utilize
the new cost/benefit analysis provided for in the 1996 SDWA amendments for
establishing the Stage II rules applicable to DBPs but may utilize the
regulatory negotiating process provided for in the 1996 SDWA amendments to
develop the Stage II rule.
Ground Water Disinfection Rule
By December, 1998, the EPA is scheduled to propose regulations
requiring disinfection of certain groundwater systems and provide guidance on
determining which systems must provide disinfection facilities. The EPA may
utilize the cost/benefit analysis provided in the 1996 SDWA amendments to
establish such regulations. It is anticipated that the regulations will apply to
several of Registrant's systems using groundwater supplies. While no assurance
can be given as to the nature and cost of any additional compliance measures, if
any, that will ultimately be necessitated by implementation of the proposed
regulations, Registrant does not believe that such regulations will impose
significant additional compliance costs, since Registrant already currently
engages in disinfection of its groundwater systems.
Regulation of Radon and Arsenic
Registrant will be subject to new regulations regarding radon and
arsenic. EPA must propose an arsenic rule by January 1, 2001 and adopt a rule
one year later. EPA has 180 days after enactment of the 1996 SDWA amendments to
develop a plan to study ways to reduce arsenic health risk uncertainties and is
authorized to enter into cooperative agreements to carry out the study.
Depending on the MCL eventually established for arsenic, compliance could
require Registrant to implement costly well-head remedies such as ion exchange
or, alternatively, to purchase additional and more expensive water supplies
already in compliance for blending with well sources.
The EPA must withdraw its proposed radon rule and arrange for the
National Academy of Sciences to conduct a risk assessment and a study of
risk-reduction benefits associated with various mitigation measures. EPA has 30
months from enactment of the 1996 SDWA amendments in which to seek comment on a
risk-reduction and cost analysis for potential radon standards, six more months
to propose a standard, and another year to adopt a standard. Although Registrant
is unable to predict what the standard for radon might eventually be, Registrant
itself is currently conducting studies to determine the best treatment for
affected wells, which treatment could range from simple aeration to filtration
through granular activated carbon.
Voluntary Efforts to Exceed Surface Water Treatment Standards
Registrant is a voluntary member of the "Partnership for Safe Water", a
national program to further protection of the public from diseases caused by
cryptosporidium and other microscopic organisms. As a volunteer in the program,
Registrant has committed to exceed current regulations governing surface water
treatment to ensure that its surface treatment facilities are performing as
efficiently as possible.
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Fluoridation of Water Supplies
Registrant is subject to State of California Assembly Bill 733 which
requires fluoridation of water supplies for public water systems serving more
than 10,000 service connections. Although the bill requires affected systems to
install treatment facilities only when public funds have been made available to
cover capital and operating costs, the bill requires the CPUC to authorize cost
recovery through rates should public funds for operation of the facilities, once
installed, become unavailable in future years.
Matters Relating to Arden-Cordova System
Three of the 27 wells in Registrant's Arden-Codova system have, for
several years, been subject to contamination by trichloroethylene. GenCorp
Aerojet has, by court decree, been responsible for all costs related to the
provision of well-head treatment. Although a 10-year agreement with Aerojet
Corporation expired in 1996, Aerojet Corporation has agreed to reimburse
Registrant for the costs of backwash system modification at all three wells.
In January, 1997, Registrant was notified that ammonium perchlorate
had been detected in three of its wells in its Arden-Cordova system. GenCorp
Aerojet has, in the past, used ammonium perchlorate in their processing as an
oxidizer of rocket fuels. Although neither the EPA nor the DOHS has established
a drinking water standard for ammonium perchlorate, Registrant has notified
customers in its Arden-Cordova customer service area of detection of ammonium
perchlorate. Registrant and GenCorp Aerojet are in negotiations on matters
related to procedures to address cleanup of the contaminated wells as well as
costs associated with the cleanup. Registrant is unable to predict when the
negotiations will be completed or the likely outcome of such negotiations.
Matters Relating to Culver City System
The compound methyl tertiary butyl ether (MTBE) has been detected in
the Charnock Basin located in the City of Santa Monica and Culver City, which
lie within Registrant's service area. MTBE is an oxygenate used in reformulated
fuels. At the request of the Regional Water Quality Control Board, the City of
Santa Monica and the California Environmental Protection Agency, Registrant
removed two of its wells in the Culver City system from service in November 1996
to help in efforts to avoid further spread of the MTBE contamination plume.
Neither these wells nor any of Registrant's other wells have been found to be
contaminated with MTBE. Registrant is purchasing water from the Metropolitan
Water District at an increased cost to replace the water supply formerly pumped
from the two wells removed from service.
Several studies are under way to determine the possible sources and
causes of the MTBE contamination. The federal EPA is pursuing an enforcement
effort to reach a settlement with the potentially responsible parties on matters
relating to the cleanup of the contamination as well as to obtain reimbursement
from such parties for increased costs incurred by the Company in purchasing
replacement water. Registrant is unable to predict the outcome of the EPA's
enforcement effort, and no assurance can be given as to whether the Company will
obtain reimbursement for the increased costs of purchasing water to replace the
water formerly pumped from the affected wells in the Culver City system.
Bear Valley Electric
There have been no environmental matters that have materially affected
or are currently materially affecting Registrant's Bear Valley Electric Service
area.
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ITEM 2 - PROPERTIES
FRANCHISES, COMPETITION, ACQUISITIONS AND CONDEMNATION OF PROPERTIES
Registrant holds all necessary franchises from the incorporated
communities and the counties which it serves. Registrant holds certificates of
public convenience and necessity granted by the CPUC in each of the ratemaking
districts it serves. Registrant's certificates, franchises and similar rights
are subject to alteration, suspension or repeal by the respective governmental
authorities having jurisdiction.
The laws of the State of California provide for the acquisition of
public utility property by governmental agencies through their power of eminent
domain, also known as condemnation. Within the last three years, Registrant has
been involved in activities related to the condemnation of its Bay Point water
district by the Contra Costa Water District. Registrant and the Contra Costa
Water District have settled all matters related to this action.
WATER PROPERTIES
As of December 31, 1996, Registrant's physical properties consisted of
water transmission and distribution systems which included 2,603 miles of
pipeline together with services, meters and fire hydrants and 437 parcels of
land, generally less than one acre each, on which are located wells, pumping
plants, reservoirs and other water utility facilities including five surface
water treatment plants. Registrant's 41 water systems and operating properties
have been maintained and improved in the ordinary course of business.
As of December 31, 1996, Registrant owned and operated 292 active wells
equipped with pumps with an aggregate capacity of approximately 180 million
gallons per day. Registrant has 52 connections to the water distribution
facilities of the MWD and other municipal water agencies. Registrant's storage
reservoirs and tanks have an aggregate capacity of approximately 94 million
gallons. Registrant owns no dams in its customer service areas. The table on the
following page sets forth, in greater detail, a listing of selected water
utility plant by ratemaking district.
ELECTRIC PROPERTIES
Registrant's electric properties are all located in the Big Bear area
of San Bernardino County. As of December 31, 1996, Registrant operated 28.7
miles of overhead 34.5 KV transmission lines, 0.6 miles of underground 34.5 KV
transmission lines, 172.4 miles of 4.16 KV or 2.4 KV distribution lines, 39.5
miles of underground cable and 14 sub-stations. There are no generating plants
in Registrant's system.
OFFICE BUILDINGS
Registrant's general offices are housed in a single-story office
building located in San Dimas, California. The land and the building, which was
completed and occupied in early 1990, are owned by Registrant. The Registrant
also owns and occupies certain facilities housing regional, district and
customer service offices while other such facilities are housed in leased
premises.
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PUMPS DISTRIBUTION FACILITIES RESERVOIRS
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DISTRICT WELL BOOSTER MAINS (FT) METERS SERVICES HYDRANTS TANKS CAPACITY
- ----------------------------------------------------------------------------------------------------------------------
Arden-Cordova 27 15 455,364 2,868 7,637 1,125 2 2,000
Barstow 27 33 840,855 12,497 10,676 975 13 5,025
Bay Point 1 15 133,008 4,607 2,963 289 7 4,046
Calipatria 0 9 134,878 1,036 1,663 69 2 200
Claremont 26 36 706,912 13,907 10,818 1,148 18 17,367
Clearlake 0 14 188,068 2,544 818 72 4 867
Desert 19 24 744,998 6,853 4,520 563 12 1,500
Los Osos 10 11 195,811 3,639 1,371 149 8 1,423
Metropolitan 76 82 4,653,663 136,898 105,385 6,925 41 25,067
Ojai 5 13 234,001 5,004 3,408 348 6 1,536
Orange County 30 37 2,098,429 47,760 38,665 9,697 17 12,153
San Dimas 11 38 1,180,508 18,878 7,269 818 14 10,143
San Gabriel 22 10 546,192 12,071 12,576 769 3 1,520
Santa Maria 29 25 948,833 19,644 7,184 756 8 3,238
Simi Valley 1 19 468,754 13,680 9,453 811 6 6,210
Wrightwood 8 6 215,028 5,403 629 71 7 1,546
- ----------------------------------------------------------------------------------------------------------------------
Total 292 387 13,745,302 307,289 225,035 24,585 168 93,841
- ----------------------------------------------------------------------------------------------------------------------
Capacity is measured in thousands of gallons
MORTGAGE AND OTHER LIENS
As of December 31, 1996, Registrant had no mortgage debt outstanding,
and its properties were free of any encumbrances or liens securing indebtedness.
FINANCING OF CAPITAL EXPENDITURES
Registrant's construction program is designed to ensure its customers
high quality service. Registrant maintains an ongoing distribution main
replacement program throughout its customer service areas, based on the priority
of leaks detected, fire protection enhancement and a reflection of the
underlying replacement schedule. In addition, Registrant upgrades its electric
and water supply facilities and is aggressively scheduling meter replacements
that conform with CPUC requirements.
Registrant's Board of Directors has approved anticipated net capital
expenditures of approximately $27,500,000 in 1997. Registrant anticipates
capital expenditures of approximately $32,000,000 and $33,000,000 in 1998 and
1999, respectively, although such expenditures are subject to final approval by
Registrant's Board of Directors. Registrant anticipates that net capital
expenditures in excess of its internally generated cash will continue to be
financed through a combination of long-term debt and sales of additional Common
Shares.
Registrant issued 1,000,000 Common Shares in December, 1996 and an
additional 71,500 Common Shares in January, 1997 for aggregate net proceeds of
$22,062,000. Also during 1996, Registrant issued approximately 41,000 Common
Shares through its Dividend Reinvestment and Common Share Purchase and 401(k)
Plans for additional aggregate proceeds of approximately $904,000.
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In December, 1996, Registrant sold $8 million in tax-exempt debt that
was issued through the California Pollution Control Financing Authority. The
funds were deposited with a trustee and will be used to finance water main
replacements in several of Registrant's customer service areas.
FORWARD-LOOKING INFORMATION
Certain matters discussed in this Report (including the documents
incorporated herein by reference) are forward-looking statements intended to
qualify for the safe harbors from liability established by the Private
Securities Litigation Reform Act of 1995. These forward-looking statements can
generally be identified as such because the context of the statement will
include words such as the Company "believes," "anticipates," "expects" or words
of similar import. Similarly, statements that describe the Company's future
plans, objectives, estimates or goals are also forward-looking statements. Such
statements address future events and conditions concerning capital
expenditures, earnings, litigation, rate and other regulatory matters, adequacy
of water supplies, liquidity and capital resources, and accounting matters.
Actual results in each case could differ materially from those currently
anticipated in such statements, by reason of factors such as utility
restructuring, including ongoing state and federal activities; future economic
conditions, including changes in customer demand; future climatic conditions;
legislative, regulatory and competitive developments in markets in which the
Company operates; and other circumstances affecting anticipated revenues and
costs.
ITEM 3. LEGAL PROCEEDINGS
Registrant is subject to ordinary course litigation incidental to its
business. No legal proceedings are pending (except such incidental litigation)
to which Registrant is a party or to which any of its properties is subject
which are believed by Registrant to be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders through the solicitation of
proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) MARKET INFORMATION RELATING TO COMMON SHARES -
Information responding to Item 201(a) of Regulation S-K is
included in the 1996 Annual Report to Shareholders under the
caption "Stock Listing" located on page 36 thereof, filed by
Registrant with the Commission pursuant to Regulation 14A, and
is incorporated herein by reference pursuant to General
Instruction G(2).
(b) APPROXIMATE NUMBER OF HOLDERS OF COMMON SHARES -
As of March 17, 1997, there were 4,078 holders of record
of Common Shares.
(c) FREQUENCY AND AMOUNT OF ANY DIVIDENDS DECLARED AND DIVIDEND
RESTRICTIONS
Information responding to Item 201(c) of Regulation S-K is
included in the 1996 Annual Report to Shareholders, under the
caption "Stock Listing" and located on page 36, filed by
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Registrant with the Commission pursuant to Regulation 14A, and
is incorporated herein by reference pursuant to General
Instruction G(2). For each of the last three years,
Registrant has paid dividends on its Common Shares on
March 1, June 1, September 1 and December 1.
Additional information responding to Item 201(c) of
Regulation S-K with respect to dividend restrictions is
included in the 1996 Annual Report to Shareholders, under Note
2 captioned "Capital Stock" located on pages 28 and 29 of the
Notes to Financial Statements, filed by Registrant with the
Commission pursuant to Regulation 14A, and is incorporated
herein by reference pursuant to General Instruction G(2).
ITEM 6. SELECTED FINANCIAL DATA
Information responding to Item 6 is included in the 1996 Annual Report
to Shareholders, under the caption entitled "Selected Financial Data" located on
page 1, filed by Registrant with the Commission pursuant to Regulation 14A, and
is incorporated herein by reference pursuant to General Instruction G(2).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Information responding to Item 7 is included in the 1996 Annual Report
to Shareholders, under the caption entitled "Management's Discussion and
Analysis" located on pages 19 through 22, filed by Registrant with the
Commission pursuant to Regulation 14A, and is incorporated herein by reference
pursuant to General Instruction G(2).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information responding to Item 8 is included on pages 23 through 33 of
the 1996 Annual Report to Shareholders under the captions listed below, which
Report was filed by Registrant with the Commission pursuant to Regulation 14A,
and is incorporated herein by reference pursuant to General Instruction G(2).
Report of Independent Public Accountants
Balance Sheets - December 31, 1996 and 1995
Statements of Capitalization - December 31, 1996 and 1995
Statements of Income - for the years ended December 31, 1996, 1995 and
1994
Statements of Changes in Common Shareholders' Equity - for the years
ended December 31, 1996, 1995 and 1994
Statements of Cash Flows - for the years ended December 31, 1996, 1995
and 1994
Notes to Financial Statements
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information responding to Item 10 is included in the definitive Proxy
Statement, filed by Registrant with the Commission on or about March 20, 1997
pursuant to Regulation 14A, under the captions entitled "Election of Directors,"
"Section 16(a) Beneficial Ownership Reporting Compliance," and "Executive
Officers - Experience, Security Ownership and Compensation," and is incorporated
herein by reference pursuant to General Instruction G(3).
ITEM 11. EXECUTIVE COMPENSATION
Information responding to Item 11 is included in the definitive Proxy
Statement, filed by Registrant with the Commission on or about March 20, 1997
pursuant to Regulation 14A, under the captions entitled "Election of Directors,"
"Executive Officers - Experience, Security Ownership and Compensation," "Pension
Plan," "Deferred Compensation Plan for Directors and Executives," "Compensation
Committee Interlocks and Inside Participation," "Report on Executive
Compensation," and "Performance Graph," and is incorporated herein by reference
pursuant to General Instruction G(3).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information responding to Item 12 is included in the definitive Proxy
Statement, filed by Registrant with the Commission on or about March 20, 1997
pursuant to Regulation 14A, under the captions entitled "Election of Directors"
and "Executive Officers - Experience, Security Ownership and Compensation" and
is incorporated herein by reference pursuant to General Instruction G(3).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information responding to Item 13 is included in the definitive Proxy
Statement, filed by Registrant with the Commission on or about March 20, 1997
pursuant to Regulation 14A, under the caption entitled "Certain Relationships
and Related Transactions" and is incorporated herein by reference pursuant to
General Instruction G(3).
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Reference is made to the Financial Statements incorporated
herein by reference to Item 8 hereof.
2. Schedules I, III, IV, and V are omitted as they are not
applicable. All other required schedules may be found in
Exhibit 13 filed herewith.
3. See (c) below.
(b) The Company filed a Current Report on Form 8-K dated December 9,
1996 relating to the Company's formation, together with U.S.
Water, L.L.C., of Golden State Water Company LLC. The Company
also filed a Current Report on Form 8-K dated December 16, 1996
to report that the Company entered into an Underwriting
Agreement, the form of which was attached as an exhibit to such
report.
(c) Exhibits -
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3.1 By-Laws as Amended to April 26, 1994*
3.2.1 Restated Articles of Incorporation as Amended to December 4,
1990 incorporated herein by reference to Registrant's Form 10-K
with respect to the year ended December 31, 1990. Commission
File No. 0-1121
3.2.2 Certificate of Amendment of Articles of Incorporation dated
December 3, 1992 incorporated herein by reference to
Registrant's Form 10-K with respect to the year ended December
31, 1992. Commission File No. 0-1121.
3.2.3 Certificate of Amendment of Articles of Incorporation dated
February 17, 1994 incorporated herein by reference to
Registrant's Form 10-K with respect to the year ended December
31, 1993. Commission File No. 0-1121.
3.3 Certificate of Ownership dated August 10, 1978 incorporated
herein by reference to Registrant's Form 10-K with respect to
the year ended December 31, 1990. Commission File No. 0-1121
4.1 Indenture, dated September 1, 1993 between Registrant and
Chemical Trust Company of California, as trustee, relating to
Registrant's Medium Term Notes, Series A, incorporated herein by
reference to Registrant's Form 8-K. Commission File No.
33-62832.
10.1 Deferred Compensation Plan for Directors and Executives
incorporated herein by reference to Registrant's Registration
Statement on Form S-2 (Registration No. 33-5151).
10.2 Reimbursement Agreement dated November 1, 1984 between
Registrant and Barclays Bank International Limited incorporated
herein by reference to Registrant's Registration Statement on
Form S-2 (Registration No. 33-5151).
10.3 First Amendment to Reimbursement Agreement dated January 1, 1986
between Registrant and Barclays Bank PLC (formerly Barclays Bank
International Limited) incorporated herein by reference to
Registrant's Registration Statement on Form S-2 (Registration
No. 33-5151).
10.4 Second Amendment to Reimbursement Agreement dated April 9, 1987
between Registrant and Barclays Bank PLC incorporated herein by
reference to Registrant's Form 10-K with respect to the year
ended December 31, 1990. Commission File No. 0-1121.
10.5 Third Amendment to Reimbursement Agreement dated September 14,
1987 between Registrant and Barclays Bank PLC incorporated
herein by reference to Registrant's Form 10-K with respect to
the year ended December 31, 1990. Commission File No. 0-1121.
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10.6 Fourth Amendment to Reimbursement Agreement dated September 22,
1988 between Registrant and Barclays Bank PLC incorporated
herein by reference to Registrant's Form 10-K with respect to
the year ended December 31, 1990. Commission File No. 0-1121.
10.7 Fifth Amendment to Reimbursement Agreement dated March 9, 1990
between Registrant and Barclays Bank PLC incorporated herein by
reference to Registrant's Form 10-K with respect to the year
ended December 31, 1990. Commission File No. 0-1121.
10.8 Sixth Amendment to Reimbursement Agreement dated November 29,
1990 between Registrant and Barclays Bank PLC incorporated
herein by reference to Registrant's Form 10-K with respect to
the year ended December 31, 1990. Commission File No. 0-1121.
10.9 Second Sublease dated October 5, 1984 between Registrant and
Three Valleys Municipal Water District incorporated herein by
reference to Registrant's Registration Statement on Form S-2
(Registration No. 33-5151).
10.10 Note Agreement dated as of February 1, 1989 between Registrant
and First Colony Life Insurance incorporated herein by reference
to Registrant's Form 10-K with respect to the year ended
December 31, 1990. Commission File No. 0-1121.
10.11 Schedule of omitted Note Agreements incorporated herein by
reference to Registrant's Form 10-K with respect to the year
ended December 31, 1990. Commission File No. 0-1121.
10.12 Note Agreement dated as of May 15, 1991 between Registrant and
Transamerica Occidental Life Insurance Company incorporated
herein by reference to Registrant's Form 10-Q with respect to
the quarter ended June 30, 1991. Commission File No. 0-1121.
10.13 Schedule of omitted Note Agreements incorporated herein by
reference to Registrant's Form 10-Q with respect to the quarter
ended June 30, 1991. Commission File No. 0-1121.
10.14 Agreement for Financing Capital Improvement dated as of June 2,
1992 between Registrant and Three Valleys Municipal Water
District incorporated herein by reference to Registrant's Form
10-K with respect to the year ended December 31, 1992.
Commission File No. 0-1121.
10.15 Water Supply Agreement dated as of June 1, 1994 between
Registrant and Central Coast Water Authority incorporated herein
by reference to Registrant's Form 10-K with respect to the year
ended December 31, 1994. Commission File No. 0-1121.
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10.16 Retirement Plan for Non-Employee Directors of Southern
California Water Company, as amended, January 25, 1995
incorporated herein by reference to Registrant's Form 10-K with
respect to the year ended December 31, 1994. Commission File No.
0-1121.
10.17 Dividend Reinvestment and Common Share Purchase Plan
incorporated herein by reference to Registrant's Post-Effective
Amendment No. 1 to Form S-3 (Registration No. 33-42218).
10.18 Key Executive Long-Term Incentive Plan incorporated herein by
reference to Registrant's 1995 Proxy Statement, Commission File
No. 0-1121.
10.19 Energy Management Services Agreement between Registrant and
Enova Energy, Inc.
13. Portions of the Annual Report to Shareholders for the year
ended December 31, 1996 which are expressly incorporated herein
by reference.*
21. Subsidiaries of Registrant - Exhibit not included as
subsidiaries in the aggregate are not significant.
23. Consent of Independent Public Accountants.*
27. Schedule UT.*
(d) None.
- ---------------------
*Filed concurrently herewith
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SOUTHERN CALIFORNIA WATER COMPANY
By: /s/ JAMES B. GALLAGHER.
----------------------------------
James B. Gallagher
Vice President - Finance,
Chief Financial Officer and Secretary
Date: March 14, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
Registrant and in the capacities and on the dates indicated.
/s/ W. V. CAVENEY . Date: March 14, 1997
- -------------------------------------------
W. V. Caveney
Chairman of the Board and Director
/s/ FLOYD E. WICKS . March 14, 1997
- -------------------------------------------
Floyd E. Wicks
Principal Executive Officer;
President, CEO and Director
/s/ JAMES B. GALLAGHER . March 14, 1997
- -------------------------------------------
James B. Gallagher
Principal Financial and Accounting Officer;
Vice President - Finance, CFO and Secretary
/s/ JEAN E. AUER . March 14, 1997
- -------------------------------------------
Jean E. Auer, Director
/s/ R. BRADBURY CLARK . March 14, 1997
- -------------------------------------------
R. Bradbury Clark, Director
/s/ N. P. DODGE, JR. . March 14, 1997
- -------------------------------------------
N. P. Dodge, Jr., Director
/s/ ROBERT F. KATHOL . March 14, 1997
- -------------------------------------------
Robert F. Kathol, Director
/s/ LLOYD E. ROSS . March 14, 1997
- -------------------------------------------
Lloyd E. Ross, Director
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