Press Release

California Water Service Group Announces First Quarter 2015 Results

SAN JOSE, CA--(Marketwired - Apr 29, 2015) - California Water Service Group (NYSE: CWT) today announced net income of $1.6 million or diluted earnings per common share of $0.03 for the first quarter of 2015, compared to a net loss of $5.5 million or a $0.11 net loss per diluted common share for the first quarter of 2014. 

The increase in net income is attributable primarily to the approval of the California Water Service (Cal Water) General Rate Case (GRC), Company's largest subsidiary, during the third quarter of 2014. Increases in administrative and general, income tax, and property tax expense were partially offset by reductions in other operations, depreciation and amortization, maintenance, and net interest expense. Net other income increased $0.5 million in 2015.

Total revenue increased $11.5 million, or 10%, to $122 million for the first quarter of 2015 as compared to revenue of $110.5 million for the first quarter of 2014. Rate increases added $1.8 million, revenue decoupling mechanisms and balancing accounts added $9.1 million, and sales to new customers added an additional $0.6 million.

Total operating expenses increased $5.1 million, or 5%, to $114.5 million, for the first quarter of 2015 as compared to the prior year.

Water production expenses decreased $0.2 million, or 0.4%, to $45.2 million, due primarily to a reduction in customer water consumption associated with our water conservation programs.

Administrative and general and other operations expenses increased $2 million, or 5%, to $43.5 million, due primarily to increases in employee pension and other postretirement benefit costs of $3.8 million and employee wage increases of $1.4 million. These cost increases were partially offset by decreases in conservation program costs of $1.3 million and health care costs of $2.1 million. Conservation program costs are affected by seasonal patterns and are dependent on customer demand for our programs. Changes in employee pension and other postretirement benefits, water conservation program, and employee medical costs for regulated California operations did not affect earnings, because the Company was allowed by the California Public Utilities Commission (CPUC) to track these costs in balancing accounts for future recovery, which creates a corresponding change to operating revenue.

Maintenance expenses decreased $0.5 million, or 11%, to $4.5 million, due primarily to decreased costs for repairs of wells and transmission and distribution mains.

Depreciation and amortization expense decreased $0.7 million, or 5%, to $15.3 million, mostly due to lower 2015 California depreciation rates authorized in the GRC decision last year, which was partially offset by increases in utility plant.

Income tax expense increased $4.5 million, due primarily to an increase in pre-tax operating income during the first quarter of 2015. Income taxes charged to other income and expenses increased $0.3 million, also due to an increase in pre-tax operating income from non-regulated service agreements during the first quarter of 2015.

Property and other taxes increased $0.1 million, or 3%, to $5.4 million, due primarily to property taxes on utility plant placed in service during 2014 and an increase in payroll and franchise taxes in 2015. 

Net other income increased $0.5 million, due primarily to a reduction in lower margin service agreement activity. 

Net interest expense decreased $0.2 million, or 3%, to $6.5 million for the first quarter of 2015, compared to the same period last year. The decrease was due primarily an increase in capitalized interest charged to construction projects and a decrease in interest expense driven by decreased short-term borrowing rates partially offset by an increase in short-term borrowings during the first quarter of 2015.

In March, the Company entered into unsecured revolving credit facilities for Group and its subsidiaries totaling $450 million for a five-year term. The proceeds are expected to be used for working capital, including short-term financing of capital projects. Of the total, $300 million is available to Cal Water, and $150 million is available to Group and its other subsidiaries. The credit facilities may each be expanded by up to $50 million, or $100 million total. 

According to President and Chief Executive Officer Martin A. Kropelnicki, this quarter's results were positively impacted by rate relief realized in the 2012 GRC decision for Cal Water.

"Although our business is typically seasonal with the first quarter being the slowest, this year our bottom line benefited from the rate case increase authorized by the CPUC," he said. "We also continue to focus on operating efficiently and investing prudently in capital to deliver results for our shareholders and high-quality, reliable water service to our customers."

According to Kropelnicki, the biggest challenge for the remainder of the year will be contending with the drought. 

"We are facing unprecedented conditions in California. We continue to focus our efforts on monitoring and augmenting water supplies while helping our customers achieve reductions in their water use required by the State of California," he said.

All stockholders and interested investors are invited to listen to the first quarter 2015 conference call on April 30, 2015, at 11:00 a.m. (EDT), by dialing 1-888-438-5448 or 1-719-457-1035 and keying in ID# 9010716. A replay of the call will be available from 2:00 p.m. EDT on April 30, 2015, through June 30, 2015, at 1-888-203-1112 or 1-719-457-0820, ID# 9010716. 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, 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 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.

           
CALIFORNIA WATER SERVICE GROUP          
CONDENSED CONSOLIDATED BALANCE SHEETS          
Unaudited          
           
(In thousands, except per share data) March 31,     December 31,  
  2015     2014  
ASSETS              
Utility plant:              
  Utility plant $ 2,373,167     $ 2,342,471  
  Less accumulated depreciation and amortization   (766,545 )     (752,040 )
    Net utility plant   1,606,622       1,590,431  
               
Current assets:              
  Cash and cash equivalents   33,311       19,587  
  Receivables:              
    Customers   24,327       25,803  
    Regulatory balancing accounts   50,016       53,199  
    Other   13,349       14,136  
  Unbilled revenue   22,599       23,740  
  Materials and supplies at weighted average cost   6,158       6,041  
  Taxes, prepaid expenses, and other assets   9,495       11,618  
    Total current assets   159,255       154,124  
               
Other assets:              
  Regulatory assets   401,089       390,331  
  Goodwill   2,615       2,615  
  Other assets   51,164       49,850  
    Total other assets   454,868       442,796  
  $ 2,220,745     $ 2,187,351  
               
CAPITALIZATION AND LIABILITIES              
Capitalization:              
  Common stock, $.01 par value $ 479     $ 478  
  Additional paid-in capital   331,029       330,558  
  Retained earnings   289,158       295,590  
    Total common stockholders' equity   620,666       626,626  
  Long-term debt, less current maturities   419,014       419,233  
    Total capitalization   1,039,680       1,045,859  
               
Current liabilities:              
  Current maturities of long-term debt   6,596       6,607  
  Short-term borrowings   109,115       79,115  
  Accounts payable   57,684       59,395  
  Regulatory balancing accounts   5,580       6,126  
  Accrued interest   9,583       4,194  
  Accrued expenses and other liabilities   65,385       62,269  
    Total current liabilities   253,943       217,706  
               
Unamortized investment tax credits   2,032       2,032  
Deferred income taxes, net   214,814       214,842  
Pension and postretirement benefits other than pension   277,094       270,865  
Regulatory and other liabilities   81,499       83,279  
Advances for construction   181,553       182,284  
Contributions in aid of construction   170,130       170,484  
Commitments and contingencies   -       -  
  $ 2,220,745     $ 2,187,351  
               
               
               
CALIFORNIA WATER SERVICE GROUP          
CONDENSED CONSOLIDATED STATEMENTS OF INCOME          
Unaudited          
(In thousands, except per share data)          
           
For the Three-Months ended:          
  March 31,     March 31,  
  2015     2014  
               
Operating revenue $ 121,985     $ 110,515  
Operating expenses:              
  Operations:              
    Water production costs   45,202       45,402  
    Administrative and general   27,695       25,141  
    Other operations   15,843       16,376  
  Maintenance   4,457       5,005  
  Depreciation and amortization   15,319       16,053  
  Income taxes (benefit)   613       (3,839 )
  Property and other taxes   5,359       5,225  
    Total operating expenses   114,488       109,363  
               
    Net operating income   7,497       1,152  
               
Other income and expenses:              
  Non-regulated revenue   3,247       4,280  
  Non-regulated expenses, net   (2,243 )     (4,119 )
  Income tax (expense) on other income and expenses   (403 )     (79 )
    Net other income   601       82  
               
Interest expense:              
  Interest Expense   7,069       7,075  
  Less: capitalized interest   (546 )     (365 )
    Net interest expense   6,523       6,710  
               
Net income (loss) $ 1,575     $ (5,476 )
               
Earnings (loss) per share              
  Basic $ 0.03     $ (0.11 )
  Diluted $ 0.03     $ (0.11 )
Weighted average shares outstanding              
  Basic   47,825       47,756  
  Diluted   47,854       47,756  
Dividends per share of common stock $ 0.16750     $ 0.1625  
               

1720 North First Street
San Jose, CA 95112-4598

Contact:
Tom Smegal
(408) 367-8200 (analysts)

Shannon Dean
(310) 257-1435 (media)