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Exhibit 99.1

 

 

NEWS RELEASE
CALIFORNIA WATER SERVICE GROUP

 

 

 

 

1720 North First Street
San Jose, CA 95112-4598

 

July 30, 2014
For Immediate Release

 

 

 

 

 

Contact:

 

Tom Smegal (408) 367-8200 (analysts)
Shannon Dean (310) 257-1435 (media)

 

 

 

CALIFORNIA WATER SERVICE GROUP ANNOUNCES

 

SECOND QUARTER 2014 RESULTS

 

SAN JOSE, CA — California Water Service Group (NYSE: CWT) today announced net income of $17.2 million or $0.36 per diluted common share for the second quarter of 2014, compared to net income of $13.5 million or $0.28 per diluted common share for the second quarter of 2013.  Included in the second quarter of 2014 operating results is a $2.5 million (or $0.05 per diluted common share) non-recurring tax benefit.

 

Revenue for the second quarter of 2014 was $158.4 million, compared to revenue of $154.6 million in second quarter 2013, in part due to higher estimated unbilled revenue.  The unbilled revenue increase resulted from higher consumption at the end of the quarter which is not included in the water revenue adjustment mechanism (WRAM).

 

Total operating expenses for the second quarter of 2014 increased $1.4 million, or 1%, to $135.1 million. Increases in water production costs, primarily purchased water cost increases, were partially offset by decreases in other operating expenses, income taxes, and property and other taxes. Maintenance expense increased $0.8 million, or 19%, to $5.0 million, while depreciation expense increased $1.6 million, or 11%, to $16.1 million due to 2014 capital additions.

 

Other income, net of income taxes, increased $0.7 million in the second quarter of 2014, primarily due to an increase in unrealized gains on our benefit plan insurance investments.  Interest expense decreased $0.4 million, or 6%, to $6.9 million due to the Company’s repayment of long-term debt in 2013.

 



 

A delay in the decision on the Company’s largest subsidiary’s General Rate Case, filed with the California Public Utilities Commission (CPUC) in 2012, continued to impact results for the quarter.  On July 21, 2014, the CPUC issued a Proposed Decision on California Water Service Company’s (Cal Water) General Rate Case.  The Proposed Decision will not become effective until it has been reviewed and approved by the CPUC. The Commission may adopt the proposed decision, modify it, or reject it.

 

Until the Proposed Decision is adopted, Cal Water will continue to track the difference between approved interim rates and new rates that are eventually adopted in a memorandum account.  After new rates are implemented, the memorandum account balance will be collected through customer surcharges over 12, 24, or 36 months.  Had the Commission approved the settlement proposed by the parties effective January 1, 2014, the new rates would have increased pre-tax income $10.2 million for the six month period ended June 30, 2014.  The proposed new rates would have added the following to the Company’s results in 2014:  $16.1 million of pre-tax income for service charges, flat rate, and fire protection rate increases, $1.6 million of pre-tax income from the proposed new health care balancing account, and a $7.5 million reduction to WRAM pre-tax income.

 

“We are pleased to have a Proposed Decision in Cal Water’s General Rate Case.  We are looking forward to receiving a final decision that will allow us to recover prudently incurred costs of providing a safe, reliable water supply and earn a reasonable return on critical infrastructure investments,” said President and Chief Executive Officer Martin A. Kropelnicki.

 



 

“Having this lengthy proceeding behind us will enable us to focus all of our attention on meeting our customers’ need for a reliable supply of high quality water in the midst of one of the most serious droughts in the state’s history,” he said.

 

All stockholders and interested investors are invited to listen to the teleconference. The 2014 second quarter conference call may be accessed by dialing 1-888-572-7033 or 1-719-325-2491 and keying in ID# 3765528. A replay of the call will be available from 2:00 p.m. ET on Thursday, July 31, 2014 through September 30, 2014, at 1-888-203-1112 or 1-719-457-0820, ID# 3765528. The call, which will be hosted by President and Chief Executive Officer Martin A. Kropelnicki and Vice President and Chief Financial Officer Thomas F. Smegal, 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 approximately 2 million people in more than 100 California, Washington, New Mexico, and Hawaii communities.  Group’s common stock trades on the New York Stock Exchange under the symbol “CWT.” Additional information is available at our web site at www.calwatergroup.com.

 



 

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 would, 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; changes in the capital markets and access to sufficient capital on satisfactory terms; new legislation; changes in California Department of Public Health water quality standards; changes in environmental compliance and water quality requirements; changes in accounting valuations and estimates; changes in accounting treatment for regulated companies, including adoption of International Financial Reporting Standards, if required; electric power interruptions; increases in suppliers’ prices and the availability of supplies including water and power; fluctuations in interest rates; litigation that may result in damages or costs not recoverable from third parties;  acquisitions and our ability to successfully integrate acquired companies;  the ability to successfully implement business plans; 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; our ability to attract and retain qualified employees; labor relations matters as we negotiate with the unions; federal health care law changes that could result in increases to Company health care costs and additional income tax expenses in future years; changes in federal and state income tax regulations and treatment of such by regulatory commissions; implementation of new information technology systems; changes in operations that result in an impairment to acquisition goodwill; restrictive covenants in or changes to the credit ratings on current or future debt that could increase financing costs or affect the ability to borrow, make payments on debt, or pay dividends; general economic conditions, including changes in customer growth patterns and our ability to collect billed revenue from customers; changes in customer water use patterns and the effects of conservation; the impact of weather and climate on water availability, water sales and operating results; the ability to satisfy requirements related to the Sarbanes-Oxley and Dodd-Frank Acts and other regulations on internal controls;  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.

 

###

 



 

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(In thousands, except per share data)

 

 

 

June 30,

 

December 31,

 

 

 

2014

 

2013

 

ASSETS

 

 

 

 

 

Utility plant:

 

 

 

 

 

Utility plant

 

$

2,269,779

 

$

2,213,328

 

Less accumulated depreciation and amortization

 

(730,266

)

(697,497

)

Net utility plant

 

1,539,513

 

1,515,831

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

29,706

 

27,506

 

Receivables:

 

 

 

 

 

Customers

 

34,278

 

31,468

 

Regulatory balancing accounts

 

26,978

 

30,887

 

Other

 

13,825

 

18,700

 

Unbilled revenue

 

28,055

 

17,034

 

Materials and supplies at weighted average cost

 

5,952

 

5,571

 

Taxes, prepaid expenses and other assets

 

12,014

 

8,324

 

Total current assets

 

150,808

 

139,490

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

Regulatory assets

 

264,245

 

251,681

 

Goodwill

 

2,615

 

2,615

 

Other assets

 

53,003

 

50,238

 

Total other assets

 

319,863

 

304,534

 

 

 

$

2,010,184

 

$

1,959,855

 

 

 

 

 

 

 

CAPITALIZATION AND LIABILITIES

 

 

 

 

 

Capitalization:

 

 

 

 

 

Common stock, $.01 par value

 

$

478

 

$

477

 

Additional paid-in capital

 

329,332

 

328,364

 

Retained earnings

 

266,082

 

269,915

 

Total common stockholders’ equity

 

595,892

 

598,756

 

Long-term debt, less current maturities

 

423,334

 

426,142

 

Total capitalization

 

1,019,226

 

1,024,898

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Current maturities of long-term debt

 

6,550

 

7,908

 

Short-term borrowings

 

81,215

 

46,815

 

Accounts payable

 

70,906

 

55,087

 

Regulatory balancing accounts

 

6,603

 

1,827

 

Accrued interest

 

4,240

 

4,245

 

Accrued expenses and other liabilities

 

52,560

 

50,702

 

Total current liabilities

 

222,074

 

166,584

 

 

 

 

 

 

 

Unamortized investment tax credits

 

2,106

 

2,106

 

Deferred income taxes, net

 

180,956

 

183,245

 

Pension and postretirement benefits other than pensions

 

145,426

 

145,451

 

Regulatory and other liabilities

 

90,134

 

86,455

 

Advances for construction

 

181,443

 

183,393

 

Contributions in aid of construction

 

168,819

 

167,723

 

 

 

$

2,010,184

 

$

1,959,855

 

 



 

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

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Operating revenue

 

$

158,416

 

$

154,555

 

Operating expenses:

 

 

 

 

 

Operations:

 

 

 

 

 

Water production costs

 

61,915

 

59,645

 

Administrative and general

 

23,796

 

23,155

 

Other operations

 

16,004

 

17,030

 

Maintenance

 

4,988

 

4,188

 

Depreciation and amortization

 

16,087

 

14,491

 

Income taxes

 

7,190

 

9,548

 

Property and other taxes

 

5,144

 

5,715

 

Total operating expenses

 

135,124

 

133,772

 

 

 

 

 

 

 

Net operating income

 

23,292

 

20,783

 

 

 

 

 

 

 

Other income and expenses:

 

 

 

 

 

Non-regulated revenue

 

3,474

 

3,215

 

Non-regulated expenses, net

 

(2,253

)

(3,240

)

Income tax (expense) benefit on other income and expense

 

(481

)

16

 

Net other income (loss)

 

740

 

(9

)

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

Interest expense

 

7,077

 

7,803

 

Less: capitalized interest

 

(215

)

(539

)

Net interest expense

 

6,862

 

7,264

 

 

 

 

 

 

 

Net income

 

$

17,170

 

$

13,510

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

Basic

 

$

0.36

 

$

0.28

 

Diluted

 

$

0.36

 

$

0.28

 

Weighted average shares outstanding

 

 

 

 

 

Basic

 

47,804

 

47,729

 

Diluted

 

47,837

 

47,760

 

Dividends declared per share of common stock

 

$

0.1625

 

$

0.1600

 

 



 

For the Six-Months ended:

 

 

 

June 30

 

June 30

 

 

 

2014

 

2013

 

 

 

 

 

 

 

Operating revenue

 

$

268,931

 

$

265,999

 

Operating expenses:

 

 

 

 

 

Operations:

 

 

 

 

 

Water production costs

 

107,317

 

101,342

 

Administrative and general

 

48,937

 

48,436

 

Other operations

 

32,380

 

32,675

 

Maintenance

 

9,993

 

8,321

 

Depreciation and amortization

 

32,140

 

29,120

 

Income taxes

 

3,351

 

8,402

 

Property and other taxes

 

10,369

 

11,150

 

Total operating expenses

 

244,487

 

239,446

 

 

 

 

 

 

 

Net operating income

 

24,444

 

26,553

 

 

 

 

 

 

 

Other income and expenses:

 

 

 

 

 

Non-regulated revenue

 

7,754

 

6,737

 

Non-regulated expenses, net

 

(6,372

)

(5,657

)

Income tax (expense) on other income and expense

 

(560

)

(435

)

Net other income

 

822

 

645

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

Interest expense

 

14,152

 

15,840

 

Less: capitalized interest

 

(580

)

(1,079

)

Net interest expense

 

13,572

 

14,761

 

 

 

 

 

 

 

Net income

 

$

11,694

 

$

12,437

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

Basic

 

$

0.24

 

$

0.28

 

Diluted

 

$

0.24

 

$

0.28

 

Weighted average shares outstanding

 

 

 

 

 

Basic

 

47,780

 

45,004

 

Diluted

 

47,818

 

45,034

 

Dividends declared per share of common stock

 

$

0.3250

 

$

0.3200