California Water Service Group Announces Results for the 3rd Quarter of 2012
by Marketwire
SAN JOSE, CA -- (Marketwire) -- 11/06/12 -- 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
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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)