Exhibit 99.1
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NEWS RELEASE
CALIFORNIA WATER SERVICE
GROUP
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![(NYSE LISTED GRAPHIC)](f24811f2481101.gif) |
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1720 North First Street
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November 1, 2006 |
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San Jose, CA 95112-4598 |
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Contact:
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Martin A. Kropelnicki (408) 367-8200 (analysts)
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For Immediate Release |
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Shannon Dean (310) 257-1435 (media) |
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CAL WATER ANNOUNCES THIRD QUARTER 2006 RESULTS AND
COMPANY DECLARES 248th CONSECUTIVE QUARTERLY DIVIDEND
SAN JOSE, Calif. California Water Service Group (NYSE : CWT) today announced net income of
$12.6 million and earnings per share of $0.68 for the third quarter of 2006, compared to net income
of $13.1 million and earnings per share of $0.71 in the third quarter of 2005. On a twelve-month
basis, earnings per share were $1.35, decreasing $0.01 from last years $1.36.
Revenue for the third quarter increased $6.6 million, or 7%, to $107.8 million over the same
quarter last year. Sales to existing customers added $2.9 million to revenue, rate increases
added $2.8 million, and sales to new customers added $0.9 million.
Total operating expenses for the third quarter increased $7.1 million, or 8%, to $91.5
million over the same quarter last year. Water production costs increased $4.8 million, or 12%,
to $44 million over the same period last year, due largely to higher than budgeted customer
demand. Principal components of the greater-than-expected water production costs include an
increase in the average cost of purchased water as well as electric costs related to higher levels
of well pumping required to meet customer
demand. Other operating expenses increased $1.2 million, or 5%, due to costs associated with
employee health and pension plans as well as other benefits.
Maintenance expenses were also up in the third quarter of 2006, increasing $0.3 million, or
8%, to $4.2 million, due to costs associated with repairing and maintaining water facilities.
Depreciation increased $0.4 million, or 6%, to $7.7 million because of higher capital expenditures
in 2005. Property and other taxes were comparable to those incurred in the same quarter of 2005,
while net income taxes decreased $0.1 million due to slightly lower income for the quarter.
Other income decreased $0.6 million to $0.3 million, primarily because there were no
property sales in the third quarter of 2006, while property sales were $0.7 million in the third
quarter of 2005.
When production costs increase, as we saw this quarter, they are expensed in the current
period and the amounts not recovered in rates are recorded in our balancing accounts. For the
quarter, our balancing accounts increased from under $0.6 million to more than $2.1 million. We
typically recover these costs, at a later date, as a surcharge over a 12-month period, once
approved by the California Public Utilities Commission (CPUC). However, unanticipated increases
in corporate costs such as health care, pension, and Sarbanes Oxley have no similar recovery
mechanism other than our General Rate Case (GRC) proceeding every three years. In 2007, we have
our GRC proceedings with the CPUC for our general office, which includes all of our corporate
costs. Accordingly, we will be seeking full recovery of all reasonable costs that reflect
current market conditions, said President and Chief Executive Officer Peter C. Nelson.
During the quarter, eight of our 24 California districts completed their General Rate Case
proceedings with the CPUC. The districts are Antelope Valley, Bear Gulch, Dominguez, Hermosa
Redondo, Kern River Valley, Marysville, Palos Verdes, and Redwood Valley. As a result of the
proceedings, the commission adopted rate increases of $4.9 million in annual revenues and
increased the allowable return on equity up to
2
10.16% for the eight districts. In addition, the Washington Utilities and Transportation
Commission approved a 17% rate increase for Washington Water Service Company that is expected to
add more than $1 million to annual revenues.
At the board meeting on October 25, 2006, the Directors declared a dividend on common stock
in the amount of $0.2875, the Groups 248th consecutive quarterly dividend
declaration. It is payable on November 17, 2006, to stockholders of record on November 6, 2006.
The regular dividend on Series C preferred stock was also declared.
Investors and interested parties are invited to listen to the Companys analyst
teleconference, which is scheduled for 4:00 p.m. EST / 1:00 p.m. PST on Thursday, November 2,
2006. The call-in number is 1-866-227-1607 and the ID No. is 978720. A replay is available
through January 1, 2007, at telephone number 1-888-266-2081, pass code 978720.
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., and CWS Utility Services. Together these companies provide regulated and non-regulated
water service to more than two million people in 100 California, Washington, New Mexico, and
Hawaii communities. Groups 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 managements 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
3
than expected or anticipated include but are not limited to: governmental and regulatory commissions decisions, including decisions relating to ratemaking and also
relating to proper disposition of property; changes in regulatory commissions policies and
procedures; the timeliness of regulatory commissions actions concerning rate relief; changes in
the political landscape; changes in existing law and introduction of new legislation; changes in,
and the accuracy of, accounting valuations and estimates; the ability to satisfy requirements
related to the Sarbanes-Oxley Act and other regulations on internal controls; increases in
suppliers prices and the availability of uninterrupted supplies including water and electric
power; fluctuations in interest rates; changes in environmental compliance and water quality
requirements; acquisitions and our ability to successfully integrate acquired companies; our
success entering into new, and renewing existing, service contracts with cities, agencies and
municipal utility districts; our ability to manage growth; the ability to successfully implement
business plans; work stoppages and union issues; loss of key personnel; changes in customer water
use patterns; the impact of weather on water sales and operating results; access to sufficient
capital on satisfactory terms; natural disasters, civil disturbances or terrorist threats or acts;
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; the reliability of our
information technology; litigation with third parties; 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 other risk factors disclosed in the Companys 10Ks, 10Qs,
8-Ks and others filings made by the Company and on file with the SEC. The Company assumes no
obligation to provide public updates of forward-looking statements.
# # #
4
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
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(In thousands, except per share data) |
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September 30 |
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December 31 |
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2006 |
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2005 |
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ASSETS |
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Utility plant: |
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Utility plant |
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$ |
1,313,971 |
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$ |
1,235,090 |
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Less accumulated depreciation and amortization |
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396,090 |
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372,359 |
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Net utility plant |
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917,881 |
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862,731 |
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Current assets: |
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Cash and cash equivalents |
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4,306 |
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9,533 |
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Receivables |
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Customers |
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25,976 |
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16,061 |
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Other |
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4,573 |
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4,700 |
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Unbilled revenue |
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14,695 |
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11,445 |
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Materials and supplies at average cost |
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4,436 |
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4,182 |
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Taxes and other prepaid expenses |
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4,346 |
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6,303 |
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Total current assets |
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58,332 |
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52,224 |
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Other assets: |
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Regulatory assets |
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58,389 |
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58,213 |
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Other assets |
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25,239 |
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23,777 |
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Total other assets |
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83,628 |
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81,990 |
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$ |
1,059,841 |
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$ |
996,945 |
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CAPITALIZATION AND LIABILITIES |
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Capitalization: |
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Common stock, $.01 par value |
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$ |
184 |
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$ |
184 |
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Additional paid-in capital |
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132,456 |
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131,991 |
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Retained earnings |
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166,140 |
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162,968 |
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Accumulated other comprehensive loss |
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(1,202 |
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(1,202 |
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Total common stockholders equity |
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297,578 |
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293,941 |
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Preferred stock |
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3,475 |
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3,475 |
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Long-term debt, less current maturities |
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293,465 |
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274,142 |
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Total capitalization |
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594,518 |
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571,558 |
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Current liabilities: |
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Current maturities of long-term debt |
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1,133 |
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1,133 |
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Short-term borrowings |
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1,750 |
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Accounts payable |
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37,104 |
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36,120 |
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Accrued expenses and other liabilities |
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57,241 |
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39,563 |
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Total current liabilities |
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97,228 |
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76,816 |
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Unamortized investment tax credits |
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2,615 |
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2,615 |
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Deferred income taxes |
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65,000 |
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63,920 |
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Regulatory liabilities |
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40,505 |
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40,236 |
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Advances for construction |
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155,961 |
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141,842 |
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Contributions in aid of construction |
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104,014 |
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99,958 |
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$ |
1,059,841 |
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$ |
996,945 |
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5
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except per share data)
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For the three months ended: |
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For the three month ended: |
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For the nine month ended: |
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September 30, |
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September 30, |
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2006 |
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2005 |
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2006 |
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2005 |
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Operating revenue |
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$ |
107,755 |
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$ |
101,128 |
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$ |
254,072 |
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$ |
242,888 |
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Operating expenses: |
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Water production costs |
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43,998 |
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39,205 |
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95,637 |
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88,420 |
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Other operations |
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23,525 |
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22,307 |
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70,784 |
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66,054 |
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Maintenance |
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4,173 |
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3,877 |
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11,503 |
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11,295 |
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Depreciation and amortization |
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7,718 |
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7,287 |
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23,065 |
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21,289 |
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Income taxes |
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8,646 |
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8,378 |
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12,658 |
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13,410 |
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Property and other taxes |
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3,477 |
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3,381 |
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9,698 |
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9,438 |
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Total operating expenses |
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91,537 |
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84,435 |
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223,345 |
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209,906 |
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Net operating income |
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16,218 |
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16,693 |
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30,727 |
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32,982 |
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Other income and expenses: |
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Non-regulated income, net |
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518 |
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778 |
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1,605 |
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2,121 |
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Gain on sale of non-utility property |
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669 |
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348 |
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728 |
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Less: income taxes on other income and expenses |
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(211 |
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(590 |
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(796 |
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(1,161 |
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307 |
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857 |
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1,157 |
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1,688 |
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Interest expense: |
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Interest Expense |
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5,031 |
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4,660 |
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14,698 |
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13,959 |
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Less: capitalized interest |
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(1,125 |
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(225 |
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(1,975 |
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(675 |
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Total interest expense |
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3,906 |
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4,435 |
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12,723 |
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13,284 |
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Net income |
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$ |
12,619 |
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$ |
13,115 |
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$ |
19,161 |
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$ |
21,386 |
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Earnings per share |
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Basic |
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$ |
0.68 |
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$ |
0.71 |
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$ |
1.03 |
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$ |
1.16 |
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Diluted |
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$ |
0.68 |
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$ |
0.71 |
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$ |
1.03 |
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$ |
1.16 |
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Weighted average shares outstanding |
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Basic |
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18,407 |
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18,384 |
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18,405 |
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18,376 |
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Diluted |
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18,424 |
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18,422 |
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18,426 |
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18,412 |
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Dividends per share of common stock |
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$ |
0.28750 |
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$ |
0.28500 |
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$ |
0.8625 |
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$ |
0.8550 |
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6