Press Release

California Water Service Group Announces Results for the 2nd Quarter of 2011

SAN JOSE, CA, Aug 03, 2011 (MARKETWIRE via COMTEX) -- California Water Service Group (NYSE: CWT) today announced net income of $12.2 million and earnings per common share (EPS) of $0.29 for the second quarter of 2011, compared to net income of $10.4 million and EPS of $0.25 for the second quarter of 2010. Per share amounts reflect the June 10, 2011, two-for-one stock split.

For the quarter, total revenue increased 11%, or $13.1 million, to $131.4 million. Rate increases added $12.0 million and revenue from sales to new customers added $0.8 million. Water usage by existing customers and other charges decreased revenue by $2.4 million. During the quarter, the net effect of the water revenue adjustment mechanism (WRAM) and the modified cost balancing account (MCBA) was an increase of $2.7 million to revenue. The WRAM is a ratemaking mechanism that decouples water sales from revenues and the MCBA is an account that allows California Water Service Company (Cal Water) to track and recover or refund changes in water production costs.

Total operating expenses were up 10%, or $9.8 million, to $111.8 million. Water production costs increased by 7%, or $2.9 million, to $44.7 million, primarily due to increases in the cost of purchased water costs and pump taxes; these increases were partially offset by a reduction in purchased water quantities. Administrative costs increased $2.1 million, or 11%, to $20.6 million, due primarily to increases in wage and benefit expenses. Other operations expenses increased $1.0 million, or 7%, to $15.7 million, due to increased conservation and water quality expenses.

Maintenance expense increased 3%, or $0.1 million, to $5.3 million, compared to $5.2 million for the same period last year. Depreciation expense increased $1.7 million, or 16%, to $12.4 million due to 2010 capital additions and updated depreciations rates adopted by the California Public Utilities Commission effective January 1, 2011. Income taxes increased $1.5 million, or 22%, to $8.6 million.

Other income, net of income taxes, increased by $0.2 million to $0.2 million. Interest expense increased $1.6 million, or 28%, to $7.5 million, due to increased interest expense resulting from the November 2010 long-term debt offering.

For the twelve months ended June 30, 2010, net income was $40.2 million and diluted earnings per share were $0.96, compared to net income of $38.4 million and diluted earnings per share of $0.92 for the same period in the prior year. Revenues for the trailing twelve months were $481 million, compared to $455 million for the same period last year.

On June 29, 2011, the company announced that it had expanded its unsecured revolving credit facilities to $400 million and extended the term for five years. The proceeds from credit facilities may be used for working capital purposes, including the short-term financing of capital projects. Also in the second quarter, Standard & Poor's reaffirmed Cal Water's general credit rating of A+ stable and AA- for Cal Water's First Mortgage Bonds.

Finally, at their annual meeting on May 24, 2011, stockholders authorized an increase in shares to allow the two-for-one stock split announced by the Company on April 5, 2011. The stock split was effective June 10, 2011.

"We are pleased with our second quarter performance and continue to see improvements in rate relief from the 2009 General Rate Case that took effect January 1, 2011. The rate relief follows our customers' consumption patterns and as a result, more rate relief is achieved during late spring and summer," said President and Chief Executive Officer Peter C. Nelson. "In addition, Standard & Poor's affirmation of our credit rating and the Company's expansion of our unsecured lines of credit reflect the strength of our balance sheet and our ability to continue to make prudent investments in infrastructure," Nelson added.

Rate-Related Matters

On May 1, 2011, California Water Service Company (Cal Water) filed its Cost of Capital (COC) application seeking to increase its return on equity from 10.2 percent to 11.25 percent. The Company cannot predict the outcome of this application, but it expects to receive a decision from the CPUC by the end of the year.

Other News

On May 17, 2011, Hawaii Water Service Company (Hawaii Water), a wholly owned subsidiary of California Water Service Group, celebrated the completion of a $9.5 million upgrade at its Pukalani Wastewater Treatment Plant with an opening ceremony attended by employees, neighbors, and government dignitaries. The plant is the first in the state to use state-of-the-art membrane-bioreactor filtration technology, which treats the effluent to a higher quality without increasing the footprint of the facility.

2nd Quarter Teleconference Information

All stockholders and interested investors are invited to listen to the 2011 second quarter teleconference on Thursday, August 4, 2011, at 11 a.m. (EDT) by dialing 1-866-871-4881 and keying in ID #: 1538142. A replay of the call will be available from 2:00 p.m. (EDT) on August 4, 2011, through October 3, 2011, at 1-888-266-2081, passcode 1538142. The call, which will be hosted by President 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 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.

CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited

(In thousands, except per share data)             June 30,     December 31,
                                                    2011           2010
                                               -------------  -------------
ASSETS
Utility plant:
   Utility plant                               $   1,895,384  $   1,843,766
   Less accumulated depreciation and
    amortization                                    (567,788)      (549,469)
                                               -------------  -------------
      Net utility plant                            1,327,596      1,294,297
                                               -------------  -------------
Current assets:
   Cash and cash equivalents                          32,882         42,277
   Receivables
      Customers                                       30,620         25,813
      Regulatory balancing accounts                   13,085         14,784
      Other                                            6,148          5,386
   Unbilled revenue                                   21,545         13,925
   Materials and supplies at average cost              6,064          6,058
   Taxes, prepaid expense, and other assets           21,267         17,967
                                               -------------  -------------
      Total current assets                           131,611        126,210
                                               -------------  -------------
Other assets:
   Regulatory assets                                 245,956        229,577
   Goodwill                                            2,615          2,615
   Other assets                                       37,375         39,367
                                               -------------  -------------
Total other assets                                   285,946        271,559
                                               -------------  -------------
                                               $   1,745,153  $   1,692,066
                                               =============  =============

CAPITALIZATION AND LIABILITIES
Capitalization:
   Common stock, $.01 par value-68,000 shares
    authorized, 41,752 and 41,667 outstanding
    in 2011 and 2010, respectively             $         418  $         417
   Additional paid-in capital                        217,937        217,308
   Retained earnings                                 219,885        217,801
                                               -------------  -------------
      Total common stockholders' equity              438,240        435,526
   Long-term debt, less current maturities           477,968        479,181
                                               -------------  -------------
      Total capitalization                           916,208        914,707
                                               -------------  -------------
Current liabilities:
   Current maturities of long-term debt                2,377          2,380
   Short-term borrowings                              32,760         23,750
   Accounts payble                                    51,647         39,505
   Regulatory balancing accounts                       2,297          3,025
   Accrued interest                                    4,689          4,651
   Accrued expenses and other liabilities             37,856         34,037
                                               -------------  -------------
      Total current liabilities                      131,626        107,348
Unamortized investment tax credits                     2,244          2,244
Deferred income taxes, net                           120,046        107,084
Pension and postretirement benefits other than
 pensions                                            162,439        155,224
Regulatory liability and Other                        70,726         82,204
Advances for construction                            187,277        186,899
Contributions in aid of construction                 154,587        136,356

                                               -------------  -------------
                                               $   1,745,153  $   1,692,066
                                               =============  =============


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,
                                                        2011        2010
                                                     ----------  ----------

Operating revenue                                    $  131,397  $  118,321
                                                     ----------  ----------
Operating expenses:
   Operations:
      Water production costs                             44,745      41,834
      Administrative and General                         20,554      18,480
      Other operations                                   15,738      14,749
   Maintenance                                            5,288       5,158
   Depreciation and amortization                         12,373      10,638
   Income taxes                                           8,638       7,091
   Property and other taxes                               4,506       4,087
                                                     ----------  ----------
      Total operating expenses                          111,842     102,037
                                                     ----------  ----------

      Net operating income                               19,555      16,284
                                                     ----------  ----------

Other income and expenses:
   Non-regulated revenue                                  3,739       3,692
   Non-regulated expenses, net                           (3,509)     (3,691)
   Gain on sale of non-utility property                      62           -
   Income tax (expense) on other income and expenses       (112)          -
                                                     ----------  ----------
      Net other income                                      180           1
                                                     ----------  ----------

Interest expense:
   Interest Expense                                       8,061       6,939
   Less: capitalized interest                              (516)     (1,035)
                                                     ----------  ----------
      Net interest expense                                7,545       5,904
                                                     ----------  ----------

Net income                                           $   12,190  $   10,381
                                                     ==========  ==========

Earnings per share
   Basic                                             $     0.29  $     0.25
                                                     ==========  ==========
   Diluted                                           $     0.29  $     0.25
                                                     ==========  ==========
Weighted average shares outstanding
   Basic                                                 41,752      41,606
                                                     ==========  ==========
   Diluted                                               41,768      41,636
                                                     ==========  ==========
Dividends per share of common stock                  $  0.15375  $  0.14875
                                                     ==========  ==========



CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except per share data)


For the Six Months ended:
                                                       June 30,   June 30,
                                                         2011       2010
                                                      ---------- ----------

Operating revenue                                     $  229,546 $  208,593
                                                      ---------- ----------
Operating expenses:
  Operations:
    Water production costs                                76,703     72,289
    Administrative and General                            41,056     35,924
    Other operations                                      30,373     28,315
  Maintenance                                             10,487     10,109
  Depreciation and amortization                           24,961     21,430
  Income taxes                                             7,397      8,499
  Property and other taxes                                 9,066      7,990
                                                      ---------- ----------
    Total operating expenses                             200,043    184,556
                                                      ---------- ----------

    Net operating income                                  29,503     24,037
                                                      ---------- ----------

Other income and expenses:
  Non-regulated revenue                                    8,072      7,113
  Non-regulated expenses, net                             (6,933)    (7,237)
  Gain on sale of non-utility property                        62          -
  Income tax (expense) benefit on other income and
   expenses                                                 (478)        60
                                                      ---------- ----------
    Net other income (expense)                               723        (64)
                                                      ---------- ----------

Interest expense:
  Interest Expense                                        16,549     13,428
  Less: capitalized interest                              (1,232)    (1,854)
                                                      ---------- ----------
    Net interest expense                                  15,317     11,574
                                                      ---------- ----------

Net income                                            $   14,909 $   12,399
                                                      ========== ==========

Earnings per share
  Basic                                               $     0.36 $     0.30
                                                      ========== ==========
  Diluted                                             $     0.36 $     0.30
                                                      ========== ==========
Weighted average shares outstanding
  Basic                                                   41,724     41,582
                                                      ========== ==========
  Diluted                                                 41,740     41,612
                                                      ========== ==========
Dividends per share of common stock                   $  0.30750 $  0.29750
                                                      ========== ==========

1720 North First Street San Jose, CA 95112-4598


    
Contact: Marty Kropelnicki (408) 367-8200 (analysts) Shannon Dean (310) 257-1435 (media)

SOURCE: California Water Service Group