Exhibit 99.1

 

NEWS RELEASE CALIFORNIA WATER SERVICE GROUP

 

	1720 North First Street San Jose, CA 95112-4598	October 29, 2014 For Immediate Release
Contact:	Tom Smegal (408) 367-8200 (analysts) Shannon Dean (310) 257-1435 (media)

 

CALIFORNIA WATER SERVICE GROUP ANNOUNCES

 

THIRD QUARTER 2014 RESULTS

 

SAN JOSE, Calif.  —  California Water Service Group (NYSE: CWT) today announced net income of $33.7 million or $0.70 per diluted common share for the third quarter of 2014, compared to net income of $29.2 million or $0.61 per diluted common share for the third quarter of 2013.

 

Revenue for the third quarter of 2014 was $191.2 million, compared to revenue of $184.4 million in third quarter of 2013.  The largest driver of the $6.8 million revenue increase was the recognition of interim revenue associated with the California Water Service Company (Cal Water) General Rate Case (GRC) decision on August 14, 2014. During the third quarter of 2014, the delayed GRC decision resulted in the recognition of $21.6 million of interim rate revenue which was partially offset by a $15.0 million decrease in adopted Water Rate Adjustment Mechanism (WRAM) and Modified Cost Balancing Account Mechanism (MCBA) revenue due to a 13% decrease in the adopted sales volume.  WRAM revenue also decreased due to the GRC decision which changed Cal Water’s revenue mix to increase fixed rate charge revenue and decrease quantity based revenue.   As a result of the authorized rate design changes in the new GRC, the Company expects

 

 

to realize more of its annual revenue during the first and fourth quarters as compared to the prior GRC.

 

Total operating expenses for the third quarter of 2014 increased $1.8 million, or 1%, to $150.4 million.  Reduced expenses in water production, administrative and general, other operations, and property taxes were offset by increases in income taxes, maintenance, and depreciation expenses.  Water production expenses decreased $3.6 million, or 5%, to $67.0 million mostly due to a decrease in customer consumption during the third quarter of 2014.  Administrative & general and other operations expenses decreased $2.9 million, or 7%, to $39.5 million mostly due to a decrease in pension benefit and conservation program expenses. Cal Water’s water production, pension benefit, conservation program, and medical costs are subject to balancing account treatment so that changes in these costs are offset by revenue adjustments.   Income taxes increased $8.1 million, or 72%, to $19.2 million due to an increase in pre-tax operating income and a reduction in tax benefits during the third quarter of 2014.  Tax benefits were $2.3 million during the third quarter of 2014 compared to $4.1 million during the third quarter of 2013.  Maintenance expense increased $0.2 million, or 5%, to $4.8 million, while depreciation expense increased $0.1 million, or 1%, to $14.6 million.

 

Net other income was a loss of $0.2 million during the third quarter of 2014 compared to income of $0.5 million during the third quarter of 2013.  The $0.7 million decrease was primarily due to an increase in corporate development costs recognized during the third quarter of 2014.

 

 

Net interest expense decreased $0.2 million, or 3%, to $7.0 million due to a reduction in long-term debt.

 

On August 14, 2014, the California Public Utilities Commission adopted the proposed GRC settlement.  The decision authorizes Cal Water to increase rates by $45.3 million, or 9.2%, in 2014; and by $10.1 million, or 1.9%, in 2015; and $10.0 million, or 1.8%, in 2016 subject to the Commission’s escalation earnings test.  In addition, the decision authorizes Cal Water to invest $449.4 million in new capital throughout California over the three-year period from January 1, 2013 through December 31, 2015.  Included in the $449.4 million in water system infrastructure improvements is $128.7 million that would be recovered through the Commission’s advice letter procedure upon completion of qualified projects, which is estimated to provide an additional $19.0 million in revenue.

 

New rates, in association with the GRC, went into effect on customer bills on August 29, 2014.  On September 25, 2014, Cal Water filed an advice letter and received approval to begin recovering the interim rates receivable balance over up to 36 months.

 

“We are pleased with the operating results this quarter, which included the revenue increases authorized in the Cal Water GRC decision.  The decision clears the way for us to focus on infrastructure improvement and managing through the serious drought affecting California,” said President and Chief Executive Officer Martin A. Kropelnicki.

 

“The Commission’s decision upholds the hard work Cal Water and consumer groups went through to achieve settlement. It will bring ratepayer benefits not only from continued investment, but from strong conservation programs, low income assistance, and a revamped rate support mechanism for high cost areas. All of these programs make our

 

 

continued drive for quality, service, and value that much more achievable,” Kropelnicki said.

 

All stockholders and interested investors are invited to listen to the earnings teleconference. The 2014 third quarter conference call may be accessed by dialing 1-888-505-4375 or 1-719-457-1512 and keying in ID# 1202555.  A replay of the call will be available from 2:00 p.m. ET on Thursday, Oct. 30, 2014 through Dec. 30, 2014, at 1-888-203-1112 or 1-719-457-0820, ID# 1202555. The call, which will be hosted by President and Chief Executive Officer Martin A. Kropelnicki and Vice President, 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; new legislation; 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; changes in environmental compliance and water quality requirements; 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; changes in customer water use patterns; the impact of weather and climate 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; 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 our current or future debt that could increase our financing costs or affect our 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; 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.

 

Attachments (2).

 

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CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

 

(In thousands, except per share data)

 

		September 30,			December 31,
		2014			2013
ASSETS
Utility plant:
Utility plant		$	2,306,427		$	2,213,328
Less accumulated depreciation and amortization		(745,742		)	(697,497		)
Net utility plant		1,560,685			1,515,831
Current assets:
Cash and cash equivalents		29,485			27,506
Receivables:
Customers		37,070			31,468
Regulatory balancing accounts		45,073			30,887
Other		15,759			18,700
Unbilled revenue		29,489			17,034
Materials and supplies at weighted average cost		5,912			5,571
Taxes, prepaid expenses and other assets		14,490			8,324
Total current assets		177,278			139,490
Other assets:
Regulatory assets		277,476			251,681
Goodwill		2,615			2,615
Other assets		51,026			50,238
Total other assets		331,117			304,534
		$	2,069,080		$	1,959,855
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock, $.01 par value		$	478		$	477
Additional paid-in capital		329,840			328,364
Retained earnings		291,964			269,915
Total common stockholders’ equity		622,282			598,756
Long-term debt, less current maturities		422,825			426,142
Total capitalization		1,045,107			1,024,898
Current liabilities:
Current maturities of long-term debt		6,619			7,908
Short-term borrowings		61,715			46,815
Accounts payable		71,867			55,087
Regulatory balancing accounts		6,791			1,827
Accrued interest		9,748			4,245
Accrued expenses and other liabilities		58,674			50,702
Total current liabilities		215,414			166,584
Unamortized investment tax credits		2,106			2,106
Deferred income taxes, net		210,357			183,245
Pension and postretirement benefits other than pensions		153,085			145,451
Regulatory and other liabilities		91,713			86,455
Advances for construction		182,172			183,393
Contributions in aid of construction		169,126			167,723
		$	2,069,080		$	1,959,855

 

 

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,
		2014			2013
Operating revenue		$	191,184		$	184,404
Operating expenses:
Operations:
Water production costs		66,980			70,614
Administrative and general		23,765			24,670
Other operations		15,692			17,657
Maintenance		4,800			4,575
Depreciation and amortization		14,648			14,505
Income taxes		19,233			11,165
Property and other taxes		5,232			5,414
Total operating expenses		150,350			148,600
Net operating income		40,834			35,804
Other income and expenses:
Non-regulated revenue		4,409			3,649
Non-regulated expenses, net		(4,812		)	(2,825		)
Income tax benefit (expense) on other income and expenses		169			(330		)
Net other (loss) income		(234		)	494
Interest expense:
Interest expense		7,221			7,687
Less: capitalized interest		(271		)	(540		)
Net interest expense		6,950			7,147
Net income		$	33,650		$	29,151
Earnings per share
Basic		$	0.70		$	0.61
Diluted		$	0.70		$	0.61
Weighted average shares outstanding
Basic		47,803			47,737
Diluted		47,840			47,770
Dividends declared per share of common stock		$	0.1625		$	0.1600

 

 

For the Nine-Months ended:

 

		September 30,			September 30,
		2014			2013
Operating revenue		$	460,115		$	450,403
Operating expenses:
Operations:
Water production costs		174,297			171,956
Administrative and general		72,702			73,106
Other operations		48,072			50,332
Maintenance		14,793			12,896
Depreciation and amortization		46,788			43,625
Income taxes		22,584			19,567
Property and other taxes		15,601			16,564
Total operating expenses		394,837			388,046
Net operating income		65,278			62,357
Other income and expenses:
Non-regulated revenue		12,163			10,386
Non-regulated expenses, net		(11,184		)	(8,482		)
Income tax (expense) on other income and expenses		(391		)	(765		)
Net other income		588			1,139
Interest expense:
Interest expense		21,373			23,527
Less: capitalized interest		(851		)	(1,619		)
Net interest expense		20,522			21,908
Net income		$	45,344		$	41,588
Earnings per share
Basic		$	0.95		$	0.91
Diluted		$	0.95		$	0.90
Weighted average shares outstanding
Basic		47,787			45,927
Diluted		47,825			45,957
Dividends declared per share of common stock		$	0.4875		$	0.4800