California Water Service Group Announces Results for the 3rd Quarter of 2012

Marketwired

SAN JOSE, CA--(Marketwire - Nov 6, 2012) - California Water Service Group (NYSE: CWT) today announced net income of $29.8 million and earnings per share of $0.71 for the third quarter of 2012, compared to net income of $20.9 million and earnings per share of $0.50 in the third quarter of 2011. Included in earnings per share was a $0.15 nonrecurring income tax benefit related to 2011 and prior years due to required tax regulation changes.

Operating revenue for the third quarter increased $8.9 million, or 5.2%, to $178.1 million compared to the third quarter of 2011. Sales to new customers added $0.3 million, general rate increases added $4.3 million, offset rate increases to recover increases in purchased water costs added $4.1 million, and increased usage by existing customers and other activities added $0.2 million.

Total operating expenses for the third quarter of 2012 increased $2.6 million, or 1.9%, to $141.8 million. Water production costs increased $4.9 million, or 7.9%, to $66.5 million, primarily due to wholesale water rate increases. Administrative costs increased $2.3 million, or 10.5%, to $23.9 million, due primarily to labor and benefit expenses. Changes in pension costs for regulated California operations do not affect earnings because the Company is allowed by the California Public Utilities Commission (CPUC) to track pension cost changes in a balancing account for future recovery which creates a corresponding change to operating revenues. Other operations expenses increased $0.2 million, or 0.9%, to $17.7 million, due primarily to increases in conservation, water treatment and water quality expenses. Conservation program expenses in California do not affect earnings because they are tracked in a balancing account for future recovery which creates a corresponding change to operating revenues.

Maintenance expense decreased $0.3 million, or 5.9%, to $4.4 million. Depreciation expense increased $1.0 million, or 7.8% to $13.7 million, due to increases in utility plant. Income taxes charged to operating expenses and other income and expenses decreased $3.8 million due to a nonrecurring income tax benefit related to 2011 and prior years for repairs costs previously capitalized for book and income tax purposes. Effective January 1, 2012, the corporate federal income tax repairs and maintenance deduction for qualified tangible property became mandatory for property placed into service during 2012 and prior years. The new tax regulations require the Company to deduct a significant amount of costs previously capitalized for book and tax purposes. The amount of the Company's 2011 and prior years repairs and maintenance deduction was finalized and recorded during the third quarter of 2012. 

Other income, net of income taxes, increased $2.4 million to $0.6 million, due primarily to an unrealized mark-to-market gain associated with the change in value of long-term assets held by the Company's non-qualified retirement plans. Interest expense decreased $0.1 million, or 1.5% to $7.2 million due to lower interest rates on short-term borrowings.

"Our third quarter earnings are in line with our expectations, given the impact of the new tax rule and positive mark-to-market adjustment. More important for the long term is our continued success in operating within our budget and obtaining timely recovery of prudently incurred costs in water rates. Our team continues to focus on these key areas," said Peter C. Nelson, Chairman of the Board and CEO. 

Other Information
All stockholders and interested investors are invited to listen to the 2012 third quarter conference call on 11 a.m. ET on Wednesday, November 7, 2012, which can be accessed by dialing 1-888-539-3696 and keying in ID# 6942093. A replay of the call will be available from 2:00 p.m. ET on Wednesday, November 7, 2012, through January 6, 2013, at 888-203-1112, ID# 6942093. The call, which will be hosted by Chairman and Chief Executive Officer Peter C. Nelson, President and Chief Operating Officer Martin A. Kropelnicki, and Vice President, Chief Financial Officer and Treasurer 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 nearly 2 million people in California, Washington, New Mexico, and Hawaii. California Water Service 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 website 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)   September 30,     December 31,  
    2012     2011  
ASSETS                
Utility plant:                
  Utility plant   $ 2,065,679     $ 1,960,381  
  Less accumulated depreciation and amortization     (622,553 )     (579,262 )
    Net utility plant     1,443,126       1,381,119  
Current assets:                
  Cash and cash equivalents     16,971       27,203  
  Receivables                
    Customers     48,087       28,418  
    Regulatory balancing accounts     33,171       21,680  
    Other     12,277       6,422  
  Unbilled revenue     23,474       15,068  
  Materials and supplies at average cost     6,029       5,913  
  Taxes, prepaid expense, and other assets     10,089       9,184  
    Total current assets     150,098       113,888  
Other assets:                
  Regulatory assets     334,000       319,898  
  Goodwill     2,615       2,615  
  Other assets     45,994       37,067  
    Total other assets     382,609       359,580  
    $ 1,975,833     $ 1,854,587  
                 
CAPITALIZATION AND LIABILITIES                
Capitalization:                
  Common stock, $.01 par value; 68,000 shares authorized, 41,905 and 41,817, outstanding in 2012 and 2011, respectively   $ 419     $ 418  
  Additional paid-in capital     220,642       219,572  
  Retained earnings     253,875       229,839  
    Total common stockholders' equity     474,936       449,829  
  Long-term debt, less current maturities     479,460       481,632  
    Total capitalization     954,396       931,461  
Current liabilities:                
  Current maturities of long-term debt     6,677       6,533  
  Short-term borrowings     60,675       47,140  
  Accounts payable     58,839       48,923  
  Regulatory balancing accounts     5,533       2,655  
  Accrued interest     11,046       4,756  
  Accrued expenses and other liabilities     47,464       41,868  
    Total current liabilities     190,234       151,875  
Unamortized investment tax credits     2,254       2,254  
Deferred income taxes, net     164,245       116,368  
Pension and postretirement benefits other than pensions     234,432       232,110  
Regulatory liability and Other     87,037       79,050  
Advances for construction     188,249       187,278  
Contributions in aid of construction     154,986       154,191  
    $ 1,975,833     $ 1,854,587  
             
             
CALIFORNIA WATER SERVICE GROUP  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  
Unaudited  
(In thousands, except per share data)  
             
For the Three-Months ended:            
    September 30,     September 30,  
    2012     2011  
                 
Operating revenue   $ 178,135     $ 169,254  
Operating expenses:                
  Operations:                
    Water production costs     66,489       61,593  
    Administrative and General     23,925       21,646  
    Other operations     17,658       17,506  
  Maintenance     4,377       4,651  
  Depreciation and amortization     13,720       12,729  
  Income taxes     10,387       15,881  
  Property and other taxes     5,218       5,170  
    Total operating expenses     141,774       139,176  
                     
    Net operating income     36,361       30,078  
                 
Other income and expenses:                
  Non-regulated revenue     3,756       3,425  
  Non-regulated expenses, net     (2,697 )     (6,489 )
  Income tax (expense) benefit on other income and expenses     (422 )     1,254  
    Net other income     637       (1,810 )
                 
Interest expense:                
  Interest Expense     8,024       8,007  
  Less: capitalized interest     (798 )     (674 )
    Net interest expense     7,226       7,333  
                 
Net income   $ 29,772     $ 20,935  
                 
Earnings per share                
  Basic   $ 0.71     $ 0.50  
  Diluted   $ 0.71     $ 0.50  
Weighted average shares outstanding                
  Basic     41,905       41,780  
  Diluted     41,905       41,789  
Dividends per share of common stock   $ 0.15750     $ 0.15375  
             
             
CALIFORNIA WATER SERVICE GROUP  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME  
Unaudited  
(In thousands, except per share data)  
             
For the Nine-Months ended:            
    September 30,     September 30,  
    2012     2011  
                 
Operating revenue   $ 438,436     $ 398,800  
Operating expenses:                
  Operations:                
    Water production costs     158,119       138,296  
    Administrative and General     69,110       62,702  
    Other operations     59,213       47,879  
  Maintenance     14,742       15,138  
  Depreciation and amortization     41,383       37,690  
  Income taxes     19,477       23,278  
  Property and other taxes     13,802       14,236  
    Total operating expenses     375,846       339,219  
                   
    Net operating income     62,590       59,581  
                 
Other income and expenses:                
  Non-regulated revenue     11,943       11,497  
  Non-regulated expenses, net     (8,491 )     (13,360 )
  Income tax (expense) benefit on other income and expenses     (1,383 )     776  
    Net other income     2,069       (1,087 )
                 
Interest expense:                
  Interest Expense     23,484       24,556  
  Less: capitalized interest     (2,647 )     (1,906 )
    Net interest expense     20,837       22,650  
                 
Net income   $ 43,822     $ 35,844  
                 
Earnings per share                
  Basic   $ 1.05     $ 0.86  
  Diluted   $ 1.05     $ 0.86  
Weighted average shares outstanding                
  Basic     41,886       41,743  
  Diluted     41,886       41,756  
Dividends per share of common stock   $ 0.47250     $ 0.46125  
Contact:

Tom Smegal
(408) 367-8200 (analysts)

Shannon Dean
(310) 257-1435 (media)
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