American States Water pany(AWR) - 2020 Q4 - Annual Report

Customer Base and Revenue - AWR's regulated utilities served a total of 286,341 customers as of December 31, 2020, an increase from 285,128 customers in 2019, with 261,796 water customers and 24,545 electric customers[11] - Revenues from commercial and residential customers accounted for approximately 90% of total water and electric revenues for the years ended December 31, 2020, 2019, and 2018[11] - GSWC serves approximately 261,800 customers in California, while BVESI serves around 24,500 customers in San Bernardino County[265] - Nearly 90% of total water and electric revenues are derived from residential and commercial customers[274] Financial Performance - Total operating revenues for 2020 were $488,243,000, an increase of 3.0% from $473,869,000 in 2019[242] - Net income for 2020 was $86,425,000, compared to $84,342,000 in 2019, reflecting a growth of 2.5%[242] - Basic earnings per share increased to $2.34 in 2020 from $2.28 in 2019, representing a rise of 2.6%[242] - Common shareholders' equity rose to $641,673,000 in 2020, up from $601,530,000 in 2019, marking a growth of 6.7%[238] - Long-term debt increased significantly to $440,348,000 in 2020 from $280,996,000 in 2019, a rise of 56.8%[238] - Operating income for 2020 was $130,499,000, compared to $127,073,000 in 2019, indicating a growth of 1.9%[242] - Total current liabilities were $118,572,000 in 2020, slightly up from $115,998,000 in 2019, an increase of 2.2%[235] - The company paid dividends of $1.28 per common share in 2020, up from $1.16 in 2019, reflecting a growth of 10.3%[242] Capital Expenditures and Investments - AWR's regulated utilities expect to spend approximately $22.9 million in 2021 for capital expenditures on environmental control facilities, up from $20.6 million in 2020[15] - Capital expenditures for 2020 were $130,423,000, a decrease from $151,940,000 in 2019[248] - AWR invested $60 million in equity into GSWC during Q4 2020 to enable the subsidiary to pay down intercompany borrowings, satisfying CPUC requirements[265] Regulatory and Compliance Issues - GSWC and BVESI's revenues are significantly influenced by the rates and charges permitted by the CPUC, with potential delays in cost recovery impacting financial performance[26] - Regulatory decisions can lead to impairment charges and customer refunds, with GSWC's next general rate case application expected in 2023 for rates covering 2025-2027[30] - Increased costs associated with compliance to franchise agreements and local regulations are impacting the ability to recover costs in rates[35] - The company is subject to operational and compliance risks related to contracts with the U.S. government, including potential audits and disputes that could affect profits and cash flows[64] Environmental and Safety Concerns - AWR's subsidiaries are subject to extensive environmental regulations, including safe drinking water requirements and greenhouse gas emissions regulations[15] - The company anticipates increased capital expenditures for wildfire mitigation projects due to compliance with California's wildfire regulations[16] - Wildfires pose a significant risk, potentially leading to increased costs for safety measures and capital expenditures, as well as reduced demand due to property damage[39] Employee and Workforce Management - AWR had a total of 841 employees as of December 31, 2020, with GSWC employing 525 and BVESI employing 43[18] - 28% of AWR's employees are eligible for retirement in the next five years, prompting a focus on succession planning and knowledge transfer[22] - Approximately 28% of the company's employees will be eligible to retire in the next five years, posing a risk to attracting and retaining key staff[77] Impact of COVID-19 - The COVID-19 pandemic has led to increased allowances for doubtful accounts and the suspension of service disconnections for nonpayment[17] - The company faces potential financial losses due to increased costs from emergency measures and delayed payments from customers affected by the pandemic[43] - GSWC and BVESI recorded approximately $4.4 million in COVID-19-related memorandum accounts as regulatory assets, believed to be probable of recovery[266] - COVID-19-related incremental costs recorded as regulatory assets were $4.1 million for GSWC and $295,000 for BVESI as of December 31, 2020[282] Debt and Financing - The fair value of the company's long-term debt was $559.8 million as of December 31, 2020, with a hypothetical 10% decrease in market interest rates resulting in a $13.5 million increase in fair value[213] - AWR's credit facility was reduced to $200 million as of December 31, 2020, with $134.2 million outstanding and an interest rate of 1.19% to 1.90%[300][302] - GSWC issued unsecured private placement notes totaling $160 million in July 2020, with coupon rates of 2.17% and 2.90% for Series A and Series B notes, respectively[304] Taxation and Deferred Taxes - AWR's total current tax expense for 2020 was $25,954,000, an increase from $18,047,000 in 2019, reflecting a growth of 43.5%[311] - GSWC's total income tax expense for 2020 was $21,704,000, compared to $20,177,000 in 2019, representing a year-over-year increase of 7.6%[313] - The effective income tax rate for AWR in 2020 was 24.6%, up from 22.6% in 2019, indicating a rise of 2 percentage points[312] - AWR's accumulated deferred income taxes (net) as of December 31, 2020, were $(131,172,000), compared to $(125,304,000) in 2019, showing an increase in deferred tax liabilities[308] Pension and Retirement Obligations - The projected benefit obligation at the end of 2020 for the pension plan was $272,786,000, an increase from $231,852,000 in 2019, representing an increase of approximately 17.6%[317] - The net amount recognized as accrued pension cost increased to $(59,639,000) in 2020 from $(39,375,000) in 2019, reflecting a deterioration in the funded status of the pension plan[318] - The actuarial loss for the pension plan in 2020 was $35,453,000, compared to a loss of $29,784,000 in 2019, representing an increase of approximately 19.1%[317]