Q1 2020 Earnings Call
Ladies and gentlemen, todays conference is scheduled to begin shortly please continued standby. Thank you for your patience.
[music].
This time, all participants are in the listen only mode.
The speaker presentation, there will be a question and answer session to ask a question during the session you'll need to press star one on your telephone.
Please be advised that todays conference is being recorded.
If you're acquiring it further assistance. Please press Star then zero and I like to handle conference over to you speaking today Mr., David Healy Vice President corporate controller. Thank you. Please go ahead.
Thank you Jamie.
Welcome everyone to the 2021st quarter results call for California Water Service group.
With me today, Martin Kropelnicki, our president and CEO and Thomas Smegal, Our Vice President Chief Financial Officer.
Replay dial in information for this call can be found in or first quarter.
Results release, which was issued earlier today the replay will be available until June Thirtyth 2020.
As a reminder, before we begin.
The company has the slide deck to company the earnings call. This quarter. The slide deck was furnished with an 8-K. This morning and is also available on the company's website at Www Cal water group Dot com.
Before looking at the first quarter results.
I could take a few moments to cover forward looking statements. During the course the called the company may make certain forward looking statements. Because these statements deal with future events, there are subject to various risks and uncertainties and actual results could differ materially from the company's current expectation.
Okay.
Because of this.
The company strongly advisors, all current shareholders as well as interested parties it carefully read and understand the company's disclosures on risk and uncertainties found in our form 10-K.
Form 10-Q press releases and other reports filed from time to time with the Securities and Exchange Commission.
No I'm going to pass it over to Tom to begin.
Thank you, Dave and good morning, everyone I'm going to start to presentation going through the slide deck and so if you can find out on our website or attached to the the press release. This morning that will be helpful to you I'm Gonna start on slide six where we have a table of our financial results for the first.
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As you probably have seen already our.
Net loss for the quarter was 20.3 million or 42 cents and that is larger net loss them and the same quarter last year, where the loss was 7.6 million or 16 cents per share.
We had flat operating revenue and our operating expenses were up a one note here and we'll talk about this in greater detail later is our capital improvements were better than they were in the first quarter or 29 team I'm flipping to slide seven our Q1 financial highlights and.
Really what we're mainly going to be talking about today is the effects on the quarter of the California General rate case, which as we've talked about before the decision has been delayed.
And that delay is has meant that we cannot record it the rate increase that we expect due to the settlement and we cannot determine whether the commission will grant us regulatory mechanisms that we have had for many years by which has been litigated in this case and we're not part of the settlement. So.
We estimate that 15.4 million of pretax income.
Whatever resulted from a timely favorable resolution of the California, GRC and that breaks down as follows 7.9 million represent delayed pre tax income that result would result from the approval of the settlement and would be accruing to the benefit of the company regardless.
Whether the disputed items were granted in the company's favor.
Then in addition to that 7.5 million in the quarter represents a income that that would've been booked had the regulatory mechanisms been active in the quarter and then as I mentioned we.
We're not booking the regulatory mechanisms that as we have in past a in past years. The other things that are affecting the quarter or the other one other large one is that our benefit plan investments. These are the nonqualified Oh benefit plans, we had a loss.
In the quarter due to the stock market and that was a 7 million dollar lower result than in the first quarter 2019.
Or a couple of other points, we had a decrease in unbilled revenue accrual that's largely because that was a very negative number in 2019. It came kinda back to normal due to dry weather increased demand and then more general increases in costs depreciation expense.
And maintenance expense and a 1.1 million decrease to our operating income from deferral of Ram revenues, which I think we'll talk about in detail in a little bit.
So flipping to slide eight I'm going to.
Okay take a pause on the quarter just to give everyone a full update on the expectations for the general rate case for the year that is the top a bullet on this slide and there's a table there that shows if the settlement has adopted a which the company anticipates that the settlement will be adopted.
What we see is an increase in topline revenue, which is not very large about 12 million in the best case, and minus 12 million in the worst case and lower case, rather add to this the reason that the company feels that the rate cases successful even though this topic.
I had revenue growth is.
Not very large is that it represents a reduction in water sales quantity estimated and so you see a large reduction in the adopted production cost.
And you also see that the rates in the rate case incorporate the give back can be accessed deferred tax as a result from the tax cuts and job back and so that 9.4 million is in the topline rates of the customer and then is also backed out as a reduction in expense and so if you look at the bar.
Some of that the table on page eight you'll see that we anticipate that if the settlement is adopted.
The net increase to 2020 pretax operating income.
About 40 million in either the high scenario or the low scenario and the difference between the high scenario Ntelos scenario is primarily a dispute over depreciation expense and so you get lower revenue with lower depreciation and those a wash one another out.
The result is the impact on the first quarter and so we estimate in the first quarter as we said before or that the revenue gain in the first quarter would be 7.9 million in high case 3.5 million in a low case, but remember in the low case, we're getting a lower depreciation expense so those.
Neutralize one another.
Flipping to slide nine and talking in detail about the disputed GRC items.
As we mentioned above the depreciation is that a pass through that's a disputed items.
We do have a dispute over the decoupling mechanism mechanism, which we call the Ram and the MCB, a and just as a reminder, or this mechanism is designed to make the company indifferent to water sales and that allows the company to promote water conservation it's been a really Dave.
Verbal mechanism for the state's policy goals last 11 years that the company gets out it and we do anticipate that that that is continued continues to be needed and in other words. The other states still has conservation policy goals and we are we really hope that the commission.
Continues to adopt that mechanism.
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In the quarter the the recognition of the Ram any MCB a would have added about 4.5 million of additional revenue.
The third bullet here on slide nine has to do with the pension and medical cost balancing accounts and there is approximately $3 million that would have been credited here at we'd recognize these accounts our pension costs were higher because the discount rate used to value the future liabilities of the pension was quite a bit lower as measured this year.
And our medical costs actually were down so they offset one another slightly and again. These are balancing account mechanisms have been in place for the company offer three rate case cycles, and they're very standard across the industry and again, we're very hopeful that the commission adopt these but in both of these cases, we did not.
Feel that are we met the criteria for booking these.
Regulatory assets and liabilities at present time.
The company is highly confident that pass the mountains properly recorded and balancing accounts continued to be recoverable from customers and so that's the WRAM balance that we have from prior periods and the other balances that we have any other balancing accounts.
Other disputed items from the rate case include a small number of capital projects.
Construction financing costs and working capital requirements. We don't believe those would have a had a significant impact in the quarter, regardless of the direction that the commission takes in those disputes.
On Slide 10 is just the summary earnings per share bridge, which you can see and those are the factors. So we've been talking about.
And I'm going to turn it over to Marty to talk about God.
Alright, Thanks, Tom Hi, Good morning, everyone. Thanks for joining us during these unprecedented times.
I'll just take a moment to call everyone's attention to our logo on the front pages five the slides and solidarity with our customers who are shelter and in place we've changed our logo or the states have been saw what states, we've broken those into Dodd with.
Well the note that says even though were six feet apart. We're all in this together so.
And I think that is kind of moral the story what the what this what this first quarter.
I want to talk about our pandemic response, a as many of you know Washington start off because as the early kinda epicenter for co bed and as a result, California and on Washington took steps early on to limit.
Public activity to help call what they call blunt the curve.
We had planned for Pandemics, among other things and part of our emergency response.
Protocols that we follow in fact in 2016, we published our emergency response manuals.
That every employee has a copy of the N. and that manual is a full section on pandemics and how to handle pandemics in flu outbreaks. So we continue with that we actually did all of our updated pandemic training in the last week of January in early February and we formed a task force in.
In February to monitor and figure out our next steps with the Corona virus.
We also opened up our emergency operations Center and it's been an operation since March 9th.
So we were at we think a little bit ahead of the game in terms of preparing for our response, our primary objectives were really simple keep our employees healthy.
And provide uninterrupted water supply to our customers and so far we've only had two employee exposures.
Dick tested positive for Cobot 19.
And it was contracted when they were on vacation and they did not come back to work.
We took a number of steps to protect our employee starting in February including travel restrictions were placed social distancing use a personal protective equipment P P and and a higher frequency of cleaning, including wiping down vehicles wiping down common workplaces desktops.
Et cetera.
We received excellent support from the utility workers of American or safety program. We have an excellent safety program and I want to give us a shout out to them for their excellent support working with us.
Our pandemic response, we also retain a nationally recognized infectious diseases expert from Stanford University, who has been advising us on our employee protocols. The protocols, we take to screen employees when they have an illness at home and how we look at their transition in and out of the workplace when they have someone sick.
At home.
You may begin protecting our customers in March by doing four major things one we suspended all collection activities on delinquent accounts to we closed our customer walk in centers and three we started to manage our rate filings to defer any rate increases during the year up 2020.
And then for we've been managing our construction activity. So we do not disrupt a hot water supply for neighborhoods that are at home shelter in a place. We've also set up a program or a matching employee contributions donating $500000.
To local charities in the service areas that we support staff provide pandemic type of relief, so food banks meals on wheels et cetera. So our hearts go out to our customers who have suffered a job Boston had been stuck at home and we're doing everything that we can to help them get through this pembina crisis, turning the page.
I want to talk about the business impacts from cobot 19 in the pandemic.
As I mentioned, we suspended or collection activities.
In March so it's still too early to tell what the impact is going to be.
But one thing that is noteworthy as we learned and need downturn in the recession of away no nine financial crisis that our bad debt expense typically runs about 25 basis points of revenue during the last economic downturn and went up about 20 basis points to 0.4 or 5% of revenue so obvious.
Actually this is a different situation with so many people unemployed basin unemployment.
Numbers came out this morning, So you have new claims in excess and total in excess of over 30 million claims in the U.S. So I will watch this can see but we know based on what we see in the past people continue to pay their water bills.
In addition, because it was a nationally declared emergency in a state declared emergency our California utility Cal water was able to activate it kind of catastrophic event memorandum account. This is standard protocol in the state of California for catastrophic events and this account allows us to record the incremental costs.
Associated with the crisis.
And well we expense it during the period, we can apply for collection had a at a future date. So so far in the first quarter. We did not have a lot of expenses that we incurred but I anticipate as anyone in the second quarter. Those expenses will start to show up in particular, the extra P.P.E. the extra sanitizers things like that that we had.
Sure.
In addition, a increases uncollectible expenses and the potential lost revenue can be recorded a memorandum account for recovery a at a future date.
Liquidity as of March 31st remains strong we had $140 million a catch up from $42 million at yearend and we had additional capacity under our lines of credit in excess of 200 $100 million, Tom I'm going to turn over back to you to talk about the general rate case.
Thanks, Marty So just a couple of other quick updates related to the general rate case, which I talked about extensively at the top of the call.
But from a procedural standpoint, the parties and that would be a cal water and the public advocates office jointly Mets on April 9th will decide commissioners office and ask.
Asked them to expedite the processing of the general rate case at that time, and we think that there are benefits both for customers and for the company from getting a resolution of of the rate case as you probably saw a in a press release yesterday on Monday, we issued.
A motion in the case or actually a combination and series of motions, which asked the commission to delay the rate increase component of the rate case until January 1st at 2021, and we believe that we are covered by the interim rate memorandum account, which means that we're tracking the.
He lost revenue that would be associated with the rate case for 2020 and that we don't want the commission to be raising rates during 2020, and so that's why we ask for that delayed as a reminder that are that the cash. If you will is estimated at between 12 million.
And negative 12 million in terms of the.
Overall rate increase the would accrue to the company, but within that there are big differences in certain customer classes and different types of customers and that's because we're not changing our rate design, a little bit to better enhance conservation and.
And so really we don't want that surprise for many customers, saying why is my build gone up 10% or why.
Why is my Bill a changing during this crisis and so we elected to make that motion to the commission. We do you have to support of the ratepayer advocate in making that motion. However, we don't know if the commission will adopt that approach. They they may choose to adopt that approach will reject that approach.
I mentioned earlier and I wanted to add here that we did the for a portion of our annual Ram surcharge filing and that's what resulted in a reduction in net.
In income of 1.1 million and that again has to do with the idea that we only want it to file for the surcharges that would continue rates at their same level and we did not want to raise rates by adding surcharges. During this period and so the expectation that we have is we would file for those rates surcharges in 2021.
That's a normal time, but by deferring that our accounting recognition of those revenue amounts is delayed and and therefore is reduced for the current period.
That is.
Sorry, I did want to add one thing and it wasn't on here.
But earlier in the quarter, we did get permission from the commission to delay the filing of our cost of capital proceeding.
Which was scheduled to be filed on May 1st and is now scheduled to be filed on May onest of 2021, and so what that means as the authorized cost to capital and capital structure for the company for this is for California water Service company.
We will remain the same throughout the year 20, or 21 and will be adjudicated.
During that year with an effective date of 2022, so from a standpoint of a risk for the customer and for the company that that's good news for US there I'm going to turn it back over to Marty to give an update on capital investment.
Thanks, Tom.
As you saw in the press release our investments.
And the first quarter increased 9% from the first quarter of two up 29 teams will be completed $65.3 million a capital in the first quarter.
Really one of the big things that was working to our advantage as the weather rather mild winter that we experienced in California that allowed us to to continue working on projects that may have been shut down and different weather conditions. If we had a lot of bad weather.
As we previously announced we think our range is 260 to 290 million in 2020 that main move around a little bit based on the current pandemic that we're going through.
And there there is good and bad and associated with that first and foremost.
Water employees are deemed as essential services and plays and so that's enabled us to continue working on things like our main replacement project.
As we get ready for fire season things that include Fireflies et cetera, we've been able to continue to move forward on track be completed 28000 feet up name in the first quarter, which is about 5.3 miles and humane and the first quarter.
We may have to shift some of the work around again to deal with water supply for people that are at home sheltering and place obviously with a pandemic and the need to constantly be washing your hands your clothes et cetera, we do not want to have any of our customers go without water at home.
We've had to adjust some of our processes on our construction projects to deal with social distancing and the increased use of P.P. acne and again big kudos for the union for helping us with that and some cities is flat I close down system, the permits and for many processes have taken a little bit longer and some of the areas that we serve however, having said all day.
That traffic has been very light and we've had a city is also say hey, now's a good time to do more things and on the largest project that we have in our company's history, three which is the Power's earnings pipeline replacement project, we've been able to speed that up a little bit due to the low flow of traffic so capital spending more to come on that first quarter strong.
Looking to see what the impacts are gonna be during that during the second quarter, but overall, we're staying focused on our infrastructure improvement plan, especially projects that help prepare us for a fire season going into the fall on the next page I want to take a moment to talk about our business development, what's been happening there.
On March 27.
Washington Utilities Transportation Commission also known as a U T C approved or act acquisition I Rainier be water company. So we are finalizing the transaction and transition plans, we anticipate this closing.
Sometime.
Late in the second quarter during the month of June So right every water has approximately 18000 surface connections and they sort of about 30 to 35000 people near our existing franchises and the state of Washington said, almost double the size of Washington for us from a customer connection perspective.
This is the largest transaction we've done in the company's since 2000, and we look forward to closing this transaction in June.
Tom I had already on the capital investment history in the projections.
Great. Thanks, Marty. So these are again relatively unchanged charts.
On slide 16, which is our capital investment history, it's just marking the the capex that we've done in the quarter and the midpoint of our estimate of 275 million for the year and they are regulated rate base has not changed and again the uncertainty with respect to the rate case is still there and we should hopefully get some resolution on that.
Yeah.
And with that I'll turn it over to Marty for wrap up.
Great. Thanks, Tom.
In closing I, just want to take a minute to recognize the unprecedented times that we're living in.
And a particular the role that we play as an essential service employee.
Excuse me as it's essential in service utility with a special service employees will the regulatory compact has never perfect in the short run we know that the process does correct itself and I have confidence and <unk> and the intermediate and long run the process works.
Given a pandemic crisis. We're currently facing staying focused on our customers now more than ever is the right thing to do and I'm certain our regulators would agree with that.
As I move into the second quarter, we look forward to helping our customers transition from a shelter in place order back to work and hopefully back to somewhat of a normal life. Likewise, we look forward to working with the California Public Utilities Commission on wrapping up our general rate case, and moving forward with our infrastructure improvement plans and getting.
And ready for fire season.
So this coupled with closing right interviews gonna be our focus of the quarter. After the second quarter and went that Jimmy we're going to handed over to you to start to when a please.
Thank you as a reminder to ask a question you will need to press Star then one on your Touchstone telephone to withdraw your question press the pound key lease them by will be compiled the Q and a roster.
And our first question comes from their cash trapped pro with Evercore ISI. Your line is now.
Hey, good morning, Thank you declared a.
Yeah. Thanks, Thanks for all the color today appreciate it I.
I just wanted to I've, a couple of questions and I wanted to start with just a quick clarification.
Do you do you guys as it relates to your deferral find you guys have interim rates in place in the first quarter no.
So we do technically have interim rates in place, but the interim rates are set as the existing rates. So there's there was no actual increase upon filing for interim rates.
Got it got it makes sense perfect and then maybe you know obviously this the and dispute is a big one pretty material.
And you know that the rate case timing is uncertain here so in light of those.
Elements can you comment on your capital markets need needs for this year. How are you. How are you thinking about liquidity position and then you know your your capital markets need for 2020.
Certainly so we have a great team and finance customer service.
He and accounting that is looking very carefully at any changes to our customer collections and cash position. We're looking at that on a very regular basis.
Probably to some extent everyday as we see the cash collections coming in and we monitor delinquencies. We currently don't anticipate a critical need for new capital for the company. Other lines of credit are adequate to meet the need or even even with a decline in our cash collection.
And now if that cash collection need gets more severe than obviously, we'll take additional actions.
But from what we're seeing right now, we don't anticipate that being a need.
As far as long term financing I think there's an expectation that with the capital program that we have a in a reminder of about 275 million. This year in about 285 million next year.
There is going to it'd be a need for additional capital to support the capital program and that's regardless of the cobot pandemic and other things going on so Oh, we do expect we're currently running the ATM program.
And we currently expect to have debt debt offerings sometime in the period, the timing of which is uncertain at this point.
Got it. Thank you and then just in terms of and this my last question in terms of timing I know you said you were communicating with the commission, but what does it.
Could we see a decision sometime here in the second or third quarter. This year as it relates to the general rate case, and some of the disputed items or any any color that you can share with us on timing would be helpful. And I understand you you probably don't have all the answers, but appreciate any color.
Yeah, we're going to find out when everyone else finds out exactly when that proposed decision comes comes out in public our communication with the commission is frankly that they have set for themselves to July 1st deadline.
That's the statutory deadline, which they extended the late last year to July 1st.
There's I think some indications that they're working on it I think we're feeling though as though they are writing that decision and so it's not as though it's on a backburner or that the people working on it or not working because of the cobot pandemic.
Definitely being worked on <unk>.
I just don't think we have a good a good sense I think we would love to see a proposed decision in the second quarter.
And that would certainly give us a lot more confidence in understanding where the commission's going with the regulatory mechanisms in a disputed items, but but no guarantees at this point obviously.
And that that it to life first off 2020. The date that you just yes, correct correct, yes, okay perfect. Thank you guys. Appreciate it thanks for gosh I appreciate it thank you.
Thank you want to next question comes from David Kantor with Baird. Your line is now open.
Hey, guys. Thanks for taking the question. So I guess first of all the clarification question is do you guys. She's a delay in the rate cases, primarily rate related to the disputed items that you outlined here is your sense, there's something else kind of driving to slow decision.
I think that if you go back and look at the the way the California has been regulating the water utilities, our case that we that we got the 2015 general rate case, which had a decision.
At the very end of 2016 was about the only Ontime decision that the commission has rendered in a water utility case, maybe there's been one or two others generally speaking even though these cases are largely settled the commission is taking extra time to ER to finalize the the work on proposed.
Decisions and decisions in these cases.
Obviously, if we'd had a complete a full settlement in the case that would've made it considerably easier for the judge we did indicate that the judge what the disputed issues were in September of 2019, we filed the settlement in October of 2019. So there's a lot of processes that go on behind the scenes, there and I don't want to throw anyone under the bus soda.
Speak, but theres administrative process that it could be held up in a variety of places within the commission's administrative framework. So that's the judge the at the people that review the judges work in the in that area. The commissioners offices the industry divisions.
The California Commission is about 1000 people.
And and so they do have a bureaucracy there that are really checks their work I guess I'd say and.
They're not always known for being the Speediest.
Understood and maybe a little bit related you touched on this on your comment, but why do you think kind of the Ram and other accounts a issues are dispute now when they weren't historically.
Do you have any sense of what kind of changing in the attitude there.
There's probably a booked right about that but to be honest. The ratepayer advocates has been taking that position really since a few months after their settlement with us in 2008 or that they didn't like the.
The decoupling mechanisms that that they had agreed with us that we should be putting in place to promote conservation and.
So ever since then they've been taking a negative position on those items in our rate cases. It just happens that we were able to settle with them for a variety of reasons and settlements or are confidential of course in their involved give or take a lot of different items.
In this case, we were unable to reach a settlement with them.
If you look to other cases for other water utilities with decoupling mechanisms.
Even in the last couple of years or we have found in some cases they had no dispute with that company at all in other cases the commission.
<unk> said that it was not a it was not shouldn't be the subject of a general rate case. So in California Americans are most recent rate case, the judge and the assigned commissioner actually through that issue out of the case and said that would be something that the commission should decide on an industry basis, but at the same time, one of our peers, which does not have a de couple.
Full decoupling mechanism has been asking several times over the course of the last several years for a decoupling mechanism and there's been actually commission rulings against them and so in maybe a change in the attitude of the rate here advocate or maybe there just weren't enough things to trade and the rate case to get to that but but they've been opposed to it.
For some time.
And again, they've not been winning on that issue for sometime.
Yeah, David it's probably noteworthy to that that.
Decoupling has been around since the seventies in California, and it's been very effective on the electric and gas side and likewise I think we'd argue it's been very effective on the water side.
In terms of promoting conservation and even with that with what the mild winter. This year you are starting to see publications talking about drought conditions in California et cetera. So from a from a policy standpoint and price signal standpoint, we feel pretty strongly it's the right on policy for the state of California pick.
You know you got almost 40 million people know state and that's growing and water is a very scare supply. Likewise, we also know when for properly recorded balances and balancing accounts. There has never been a problem in the state of California, what the recovery of those items historically, so it's really kind of Apollo.
The decision on the front side with the advocate that we think from a drought preparedness Conservation management you know, what's the right thing to do in the state water resources control Board has been doing a lot of work on drought preparedness and everything that they are doing lines up quite well with what decoupling does in terms of price signals. So that's a per.
Interesting debate.
Between the advocates in us so we I just have to wait and see now the connection is going to rule on it.
Makes sense. Thank you very much of the color guys. That's all I've got.
Thanks, David.
Thank you and our next question comes from Jonathan Reeder with Wells Fargo. Your line is now open.
Hey, good morning.
Good morning, Johnny.
He just wanted to make sure to Canada Stroppy, a memorandum account so that covers the bat like any bad debt expense increase above that 0.25% that's embedded in your rates right.
Correct.
And that's all those other items. So what is what do you kind of expected.
Your 2020 headwind might be.
You know our cost me a lot is unknown, but just wondering if you're able to kind of oh parking at all because I'm, assuming you aren't going to be for recovery until 2020 Oh.
Oh.
Right.
<unk> <unk> ingar, Yeah, Martina Marty has been leading the emergency response, he Marty I don't know if you have a sense yet of the the cost of the extra P.P.E. and the extra sort of safety precautions that we've been taking that would probably be the biggest driver at this point as I mentioned earlier today, the Oh I think.
And earlier that the uncollectible expenses really hard to tell at this point.
We were just about six weeks into it and in terms of customers billing cycle and so it's very difficult to predict where that's going and obviously something doesn't necessarily become uncollectible, even if it's a delayed payment.
Because the customers might pay later, so that's something to factor in as well.
Yeah, I think what what I would add Thomas from.
Preparedness standpoint, the company was very well prepared we had plenty of P.P.E., we had plenty a sanitizer we had plenty of wipes. We had you know the training was all done earlier early in the process. We have I think some you know we we have an outstanding Vice president of emergency preparedness for emergency response Jelled Simon It was a fire chief.
As far as whole career and tight retired and joined us.
So from a based on perspective, we are very well prepared it gets a little more challenging when you have to replenish that stock given the surge in demand that you've seen for P. E. Now again, we had we had very healthy supply stocks built up from our lessons learned during the fires. So we have not run out a.
<unk>, but I think as we get in the summer months than we have to replenish that pp, that's where we'll start seeing those cost and from what were seeing them from what we've had with discussions with FEMA, you're seeing more P.P. supply stocks doctoral land so that should bring the prices down, but you clearly out as a price shock happened for like and.
85 masks and Luckily, we didnt have to participate in any of that because we had plenty of supply stock on had about 95 masks.
Hi.
Yeah.
The commentary and all that but in terms of like try to quantify it there's really no way.
To kind of at this juncture I mean, I know, you're saying based on the financial crisis. The spike in the bad debt expense was really relatively modest I mean, I think it's kinda.
<unk>.
Right no actual headwind there.
[music].
There's really no way on your end to even kinda to frame at this juncture.
[noise], Jonathan I apologize, it's just too it's just too early to know that again, we haven't we haven't really recorded those costs. So much in March.
Will definitely have a lot more information at the end of the second quarter.
I know that doesn't help right now.
Do you think Tom that.
Offsetting one m. expenses.
Potentially you know cancel out that I know a lot of companies with employees work on home notes.
Kind of stuff like that they're seeing some areas there as well as you know searching to find some other or some other areas in the budgets, where there may be all flux. It can offset that is that and not Cal water's gone through too.
I think you'll see that as well I know that we canceled the all travel really very early in a in a pandemic crisis and I normally would have traveled to bed as well as many others. So.
I suspect that we'll have some difference, but I guess the I just don't know the relative magnitude, you'll probably see deferred training costs. For example, because if we'd had no. If we had planned to have people come on site and do training, that's not happening Weve had to do virtual training and things like that.
Our bill for Zoom, I imagine, it's a bit higher but I'm not that I think zooms pretty at cost effective so.
It is I think it's also not worthy Jonathan that 90 plus percent of our employees are actively working every day. So while we have some corporate employees that can work remotely and some engineering staff that can work remotely.
All of our front line employees are at work every day.
And you know there they're anchor in their cost they would normally occur in the ordinary course of business.
Which is what we want to keep the water flowing at all cost to keep people keep people healthy. So as Tom said, we'll have more visibility in the second quarter on that as some of this cost start to roll them.
Alright, great. Thanks for a sort of color.
Hi, Thanks, Jonathan.
Thank you and I'm showing no further questions in the queue at this time I'd like to turn the call back to Marty Kropelnicki for any closing remarks.
Okay. Thanks, Jimmy Thanks, everyone for going through our results for the quarter first quarter for US typically is not a quarter, we get too excited about and typically we do have a loss in the first quarter, obviously that was compounded by the delay in the general rate case, but we're working on it we're working our way through that.
Staying focused on the customer getting through the pandemic and again right now the most important thing we can do is help our customers out as we get through these unprecedented times. If we're successful at doing that we think the regulator will be successful at getting the rate case wrapped up to a fair and equitable position for for all parties involved so what that we're going to wrap it up thank you for.
Your support during the quarter and we'll look forward to talking to you in July.
Thanks, everyone.
Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your programming you may now disconnect.
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