California Water Service Group Announces Second Quarter 2012 Results

SAN JOSE, CA--(Marketwire - Jul 25, 2012) -  California Water Service Group (NYSE: CWT) today announced net income of $13.0 million and earnings per share of $0.31 for the second quarter of 2012, compared to net income of $12.2 million and earnings per share of $0.29 for the second quarter of 2011. 

Revenue for the second quarter increased $12.2 million, or 9.3%, to $143.6 million compared to the second quarter of 2011. Sales to new customers added $0.2 million, general rate increases added $3.0 million, offset rate increases to recover increases in purchased water costs added $5.9 million, and increased usage by existing customers and other activities added $3.1 million.

Total operating expenses for the second quarter of 2012 increased $12.1 million, or 10.8%, to $123.9 million. Water production costs increased $7.9 million, or 17.7%, to $52.7 million, due primarily to increases wholesaler water prices and increases in the quantity of water produced. Administrative costs increased $1.6 million, or 7.9%, to $22.2 million, due primarily to increases in wages and benefits. Increases in pension costs do not affect earnings because in California, the company is allowed by the California Public Utilities Commission (CPUC) to track pension cost increases in a balancing account for future recovery. Other operations expenses increased $2.0 million, or 12.6%, to $17.7 million, primarily due to increases in expenses for water treatment, water quality, and conservation programs. Conservation program expense increases are also tracked in a balancing account for future recovery. 

Maintenance expense decreased $0.7 million, or 12.9%, to $4.6 million, compared to $5.3 million in the same period last year. Depreciation expense increased $1.3 million, or 10.8%, to $13.7 million, due to increases in utility plant. 

Other income, net of income taxes, remained unchanged at $0.2 million. Interest expense decreased $0.7 million, or 8.9%, to $6.9 million due to increased capitalized interest and decreased short-term interest rates.

"Results for the second quarter are in line with our expectations," said Pete Nelson, Chairman and Chief Executive Officer. "As we move into our busy season where we see significant increases in demand, the Company will stay focused on serving our customers and operating as efficiently as possible," added Nelson.

In addition, the Company filed its 2012 General Rate Case (GRC) for California Water Service Company, its largest subsidiary. In its application, California Water Service Company is requesting authorization from the CPUC to increase rates to add revenues of $92.7 million in 2014, $17.2 million in 2015, and $16.9 million in 2016.

The filing, which begins an 18-month review process by the CPUC, reflects higher costs of providing water service, lower forecasted sales, and funding for necessary capital projects for 2014 through 2016. The CPUC requires a GRC filing every three years to ensure that rates reflect the actual costs of providing service while allowing the Company a reasonable return on investment in water system infrastructure.

"The 2012 GRC represents the second time we have filed all of the California operations in one rate case," said Nelson. "We expect a decision by December of 2013," he added.

In addition, on July 12, 2012, the CPUC approved the Cost of Capital decision that establishes an authorized return on equity of 9.99% and cost of debt of 6.24%, with a capital structure of 46.60% long-term debt and 53.40% common equity. It sets the authorized return on rate base at 8.24%. In addition, the proposed decision authorizes continuation of a Cost of Capital Adjustment Mechanism (CCAM), which provides for an adjustment in the return on equity in 2013 and 2014 if the cost of long-term debt, as defined by an index of utility debt rates, varies from the most recent index by 100 basis points or more.

All stockholders and interested investors are invited to listen to the 2012 second quarter conference call on Thursday, July 26, 2012, at 11:00 a.m. (EDT), by dialing 1-877-681-3372 and keying in ID# 4684903. A replay of the call will be available from 2:00 p.m. EDT on July 26, 2012, through September 23, 2012, at 1-888-203-1112, ID# 4684903. The call, which will be hosted by Chairman and Chief Executive Officer Peter C. Nelson and Vice President and Chief Financial Officer Martin A. Kropelnicki, will also be webcast under the investor relations tab at www.calwatergroup.com.

California Water Service Group is the parent company of California Water Service Company, Washington Water Service Company, New Mexico Water Service Company, Hawaii Water Service Company, Inc., CWS Utility Services, and HWS Utility Services. Together these companies provide regulated and non-regulated water service to nearly 2 million people in 100 California, Washington, New Mexico, and Hawaii communities. Group's common stock trades on the New York Stock Exchange under the symbol "CWT." 

This news release contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995 ("Act"). The forward-looking statements are intended to qualify under provisions of the federal securities laws for "safe harbor" treatment established by the Act. Forward-looking statements are based on currently available information, expectations, estimates, assumptions and projections, and management's judgment about the Company, the water utility industry and general economic conditions. Such words as expects, intends, plans, believes, estimates, assumes, anticipates, projects, predicts, forecasts or variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not guarantees of future performance. They are subject to uncertainty and changes in circumstances. Actual results may vary materially from what is contained in a forward-looking statement. Factors that may cause a result different than expected or anticipated include, but are not limited to: governmental and regulatory commissions' decisions; changes in regulatory commissions' policies and procedures; the timeliness of regulatory commissions' actions concerning rate relief; new legislation; electric power interruptions; increases in suppliers' prices and the availability of supplies including water and power; fluctuations in interest rates; changes in environmental compliance and water quality requirements; acquisitions and our ability to successfully integrate acquired companies; the ability to successfully implement business plans; changes in customer water use patterns; the impact of weather on water sales and operating results; access to sufficient capital on satisfactory terms; civil disturbances or terrorist threats or acts, or apprehension about the possible future occurrences of acts of this type; the involvement of the United States in war or other hostilities; restrictive covenants in or changes to the credit ratings on our current or future debt that could increase our financing costs or affect our ability to borrow, make payments on debt or pay dividends; and, other risks and unforeseen events. When considering forward-looking statements, you should keep in mind the cautionary statements included in this paragraph, as well as the annual 10-K, Quarterly 10-Q, and other reports filed from time-to-time with the Securities and Exchange Commission (SEC). The Company assumes no obligation to provide public updates of forward-looking statements.

Additional information is available at our Web site at www.calwatergroup.com.

1720 North First Street
San Jose, CA 95112-4598

CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands, except per share data)				June 30,				December 31,
				2012				2011
ASSETS
Utility plant:
	Utility plant			$	2,026,567			$	1,960,381
	Less accumulated depreciation and amortization				(607,313	)			(579,262	)
		Net utility plant			1,419,254				1,381,119
Current assets:
	Cash and cash equivalents				20,816				27,203
	Receivables
		Customers			37,169				28,418
		Regulatory balancing accounts			25,100				21,680
		Other			7,888				6,422
	Unbilled revenue				23,650				15,068
	Materials and supplies at average cost				6,066				5,913
	Taxes, prepaid expense, and other assets				14,213				9,184
		Total current assets			134,902				113,888
Other assets:
	Regulatory assets				323,831				319,898
	Goodwill				2,615				2,615
	Other assets				37,560				37,067
		Total other assets			364,006				359,580
				$	1,918,162			$	1,854,587
CAPITALIZATION AND LIABILITIES
Capitalization:
	Common stock, $.01 par value; 68,000 shares authorized, 41,915 and 41,817, outstanding in 2012 and 2011, respectively			$	419			$	418
	Additional paid-in capital				220,294				219,572
	Retained earnings				230,702				229,839
		Total common stockholders' equity			451,415				449,829
	Long-term debt, less current maturities				479,958				481,632
		Total capitalization			931,373				931,461
Current liabilities:
	Current maturities of long-term debt				6,684				6,533
	Short-term borrowings				87,775				47,140
	Accounts payable				54,610				48,923
	Regulatory balancing accounts				4,255				2,655
	Accrued interest				4,765				4,756
	Accrued expenses and other liabilities				52,658				41,868
		Total current liabilities			210,747				151,875
Unamortized investment tax credits					2,254				2,254
Deferred income taxes, net					116,340				116,368
Pension and postretirement benefits other than pensions					234,948				232,110
Regulatory liability and Other					79,196				79,050
Advances for construction					188,001				187,278
Contributions in aid of construction					155,303				154,191
				$	1,918,162			$	1,854,587

CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except per share data)
For the Three-Months ended:
				June 30,				June 30,
				2012				2011
Operating revenue				$	143,552			$	131,397
Operating expenses:
	Operations:
		Water production costs			52,678				44,745
		Administrative and General			22,167				20,554
		Other operations			17,729				15,738
	Maintenance				4,605				5,288
	Depreciation and amortization				13,712				12,373
	Income taxes				9,062				8,638
	Property and other taxes				3,977				4,506
		Total operating expenses			123,930				111,842
		Net operating income			19,622				19,555
Other income and expenses:
	Non-regulated revenue				4,051				3,739
	Non-regulated expenses, net				(3,695	)			(3,447	)
	Income tax (expense) on other income and expenses				(138	)			(112	)
		Net other income			218				180
Interest expense:
	Interest Expense				7,821				8,061
	Less: capitalized interest				(946	)			(516	)
		Net interest expense			6,875				7,545
Net income				$	12,965			$	12,190
Earnings per share
	Basic			$	0.31			$	0.29
	Diluted			$	0.31			$	0.29
Weighted average shares outstanding
	Basic				41,911				41,752
	Diluted				41,911				41,768
Dividends per share of common stock				$	0.15750			$	0.15375

For the Six-Months ended:
						June 30,				June 30,
						2012				2011
Operating revenue					$	260,301			$	229,546
Operating expenses:
	Operations:
		Water production costs				91,630				76,703
		Administrative and General				45,185				41,056
		Other operations				41,555				30,373
	Maintenance					10,365				10,487
	Depreciation and amortization					27,663				24,961
	Income taxes					9,090				7,397
	Property and other taxes					8,584				9,066
		Total operating expenses				234,072				200,043
		Net operating income				26,229				29,503
Other income and expenses:
	Non-regulated revenue					8,187				8,072
	Non-regulated expenses, net					(5,794	)			(6,871	)
	Income tax (expense) on other income and expenses					(961	)			(478	)
		Net other income				1,432				723
Interest expense:
	Interest Expense					15,460				16,549
	Less: capitalized interest					(1,849	)			(1,232	)
		Net interest expense				13,611				15,317
Net income					$	14,050			$	14,909
Earnings per share
	Basic				$	0.34			$	0.36
	Diluted				$	0.34			$	0.36
Weighted average shares outstanding
	Basic					41,877				41,724
	Diluted					41,877				41,740
Dividends per share of common stock					$	0.31500			$	0.30750