Table of Contents

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2012

 

OR

 

o                   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                    to                   

 

Commission file number 1-13883

 

CALIFORNIA WATER SERVICE GROUP

(Exact name of registrant as specified in its charter)

 

Delaware

 

77-0448994

(State or other jurisdiction

 

(I.R.S. Employer identification No.)

of incorporation or organization)

 

 

 

 

 

1720 North First Street, San Jose, CA.

 

95112

(Address of principal executive offices)

 

(Zip Code)

 

408-367-8200

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act) Yes o No x

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common shares outstanding as of July 30, 2012 — 41,915,454

 

 

 



Table of Contents

 

TABLE OF CONTENTS

 

 

Page

PART I Financial Information

3

Item 1 Financial Statements

3

Condensed Consolidated Balance Sheets (unaudited) as of June 30, 2012 and December 31, 2011

3

Condensed Consolidated Statements of Income (unaudited) For the Three months Ended June 30, 2012 and 2011

4

Condensed Consolidated Statements of Income (unaudited) For the Six months Ended June 30, 2012 and 2011

5

Condensed Consolidated Statements of Cash Flows (unaudited) For the Six months Ended June 30, 2012 and 2011

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3 Quantitative and Qualitative Disclosure about Market Risk

35

Item 4 Controls and Procedures

35

PART II Other Information

 

Item 1 Legal Proceedings

35

Item 6 Exhibits

36

Signatures

37

Index to Exhibits

38

 

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Table of Contents

 

PART I FINANCIAL INFORMATION

 

Item 1.

 

FINANCIAL STATEMENTS

 

The condensed consolidated financial statements presented in this filing on Form 10-Q have been prepared by management and are unaudited.

 

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATED BALANCE SHEETS

 

Unaudited

(In thousands, except per share data)

 

 

 

June 30,
2012

 

December 31,
2011

 

ASSETS

 

 

 

 

 

Utility plant:

 

 

 

 

 

Utility plant

 

$

2,026,567

 

$

1,960,381

 

Less accumulated depreciation and amortization

 

(607,313

)

(579,262

)

Net utility plant

 

1,419,254

 

1,381,119

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

20,816

 

27,203

 

Receivables:

 

 

 

 

 

Customers

 

37,169

 

28,418

 

Regulatory balancing accounts

 

25,100

 

21,680

 

Other

 

7,888

 

6,422

 

Unbilled revenue

 

23,650

 

15,068

 

Materials and supplies at average cost

 

6,066

 

5,913

 

Taxes, prepaid expenses and other assets

 

14,213

 

9,184

 

Total current assets

 

134,902

 

113,888

 

Other assets:

 

 

 

 

 

Regulatory assets

 

323,831

 

319,898

 

Goodwill

 

2,615

 

2,615

 

Other assets

 

37,560

 

37,067

 

Total other assets

 

364,006

 

359,580

 

 

 

$

1,918,162

 

$

1,854,587

 

CAPITALIZATION AND LIABILITIES

 

 

 

 

 

Capitalization:

 

 

 

 

 

Common stock, $.01 par value— 68,000 shares authorized, 41,915 and 41,817 outstanding in 2012 and 2011, respectively

 

$

419

 

$

418

 

Additional paid-in capital

 

220,294

 

219,572

 

Retained earnings

 

230,702

 

229,839

 

Total common stockholders’ equity

 

451,415

 

449,829

 

Long-term debt, less current maturities

 

479,958

 

481,632

 

Total capitalization

 

931,373

 

931,461

 

Current liabilities:

 

 

 

 

 

Current maturities of long-term debt

 

6,684

 

6,533

 

Short-term borrowings

 

87,775

 

47,140

 

Accounts payable

 

54,610

 

48,923

 

Regulatory balancing accounts

 

4,255

 

2,655

 

Accrued interest

 

4,765

 

4,756

 

Accrued expenses and other liabilities

 

52,658

 

41,868

 

Total current liabilities

 

210,747

 

151,875

 

Unamortized investment tax credits

 

2,254

 

2,254

 

Deferred income taxes, net

 

116,340

 

116,368

 

Pension and postretirement benefits other than pensions

 

234,948

 

232,110

 

Regulatory and other liabilities

 

79,196

 

79,050

 

Advances for construction

 

188,001

 

187,278

 

Contributions in aid of construction

 

155,303

 

154,191

 

 

 

$

1,918,162

 

$

1,854,587

 

 

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

 

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Table of Contents

 

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

Unaudited

(In thousands, except per share data)

 

For the three months ended 

 

June 30,
2012

 

June 30,
2011

 

Operating revenue

 

$

143,552

 

$

131,397

 

Operating expenses:

 

 

 

 

 

Operations:

 

 

 

 

 

Water production costs

 

52,678

 

44,745

 

Administrative and general

 

22,167

 

20,554

 

Other operations

 

17,729

 

15,738

 

Maintenance

 

4,605

 

5,288

 

Depreciation and amortization

 

13,712

 

12,373

 

Income taxes

 

9,062

 

8,638

 

Property and other taxes

 

3,977

 

4,506

 

Total operating expenses

 

123,930

 

111,842

 

Net operating income

 

19,622

 

19,555

 

Other income and expenses:

 

 

 

 

 

Non-regulated revenue

 

4,051

 

3,739

 

Non-regulated expenses, net

 

(3,695

)

(3,447

)

Income tax (expense) on other income and expenses

 

(138

)

(112

)

Net other income

 

218

 

180

 

Interest expense:

 

 

 

 

 

Interest expense

 

7,821

 

8,061

 

Less: capitalized interest

 

(946

)

(516

)

Net interest expense

 

6,875

 

7,545

 

Net income

 

$

12,965

 

$

12,190

 

Earnings per share

 

 

 

 

 

Basic

 

$

0.31

 

$

0.29

 

Diluted

 

$

0.31

 

$

0.29

 

Weighted average shares outstanding

 

 

 

 

 

Basic

 

41,911

 

41,752

 

Diluted

 

41,911

 

41,768

 

Dividends declared per share of common stock

 

$

0.15750

 

$

0.15375

 

 

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

 

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CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

Unaudited

(In thousands, except per share data)

 

For the six months ended 

 

June 30,
2012

 

June 30,
2011

 

Operating revenue

 

$

260,301

 

$

229,546

 

Operating expenses:

 

 

 

 

 

Operations:

 

 

 

 

 

Water production costs

 

91,630

 

76,703

 

Administrative and general

 

45,185

 

41,056

 

Other operations

 

41,555

 

30,373

 

Maintenance

 

10,365

 

10,487

 

Depreciation and amortization

 

27,663

 

24,961

 

Income taxes

 

9,090

 

7,397

 

Property and other taxes

 

8,584

 

9,066

 

Total operating expenses

 

234,072

 

200,043

 

Net operating income

 

26,229

 

29,503

 

Other income and expenses:

 

 

 

 

 

Non-regulated revenue

 

8,187

 

8,072

 

Non-regulated expenses, net

 

(5,794

)

(6,871

)

Income tax (expense) on other income and expenses

 

(961

)

(478

)

Net other income

 

1,432

 

723

 

Interest expense:

 

 

 

 

 

Interest expense

 

15,460

 

16,549

 

Less: capitalized interest

 

(1,849

)

(1,232

)

Net interest expense

 

13,611

 

15,317

 

Net income

 

$

14,050

 

$

14,909

 

Earnings per share

 

 

 

 

 

Basic

 

$

0.34

 

$

0.36

 

Diluted

 

$

0.34

 

$

0.36

 

Weighted average shares outstanding

 

 

 

 

 

Basic

 

41,877

 

41,724

 

Diluted

 

41,877

 

41,740

 

Dividends declared per share of common stock

 

$

0.31500

 

$

0.30750

 

 

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

 

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CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Unaudited

(In thousands)

 

For the six months ended :

 

June 30,
2012

 

June 30,
2011

 

Operating activities

 

 

 

 

 

Net income

 

$

14,050

 

$

14,909

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

28,554

 

25,837

 

Change in value of life insurance contracts

 

(1,635

)

(40

)

Other changes in noncurrent assets and liabilities

 

(1,658

)

7,549

 

Changes in operating assets and liabilities:

 

 

 

 

 

Receivables

 

(20,701

)

(11,489

)

Accounts payable

 

8,879

 

10,254

 

Other current assets

 

(5,108

)

(3,088

)

Other current liabilities

 

9,716

 

3,735

 

Net adjustments

 

18,047

 

32,758

 

Net cash provided by operating activities

 

32,097

 

47,667

 

Investing activities:

 

 

 

 

 

Utility plant expenditures

 

(61,984

)

(52,268

)

Purchase of life insurance

 

(1,357

)

(1,658

)

Change in restricted cash and other changes

 

6

 

(157

)

Net cash used in investing activities

 

(63,335

)

(54,083

)

Financing activities:

 

 

 

 

 

Short-term borrowings

 

62,635

 

9,010

 

Repayment of short-term borrowings

 

(22,000

)

 

Proceeds from long-term debt

 

123

 

110

 

Repayment of long-term debt

 

(1,645

)

(1,326

)

Advances and contributions in aid of construction

 

2,760

 

5,061

 

Refunds of advances for construction

 

(3,835

)

(3,008

)

Dividends paid

 

(13,187

)

(12,826

)

Net cash provided by (used in) financing activities

 

24,851

 

(2,979

)

Change in cash and cash equivalents

 

(6,387

)

(9,395

)

Cash and cash equivalents at beginning of period

 

27,203

 

42,277

 

Cash and cash equivalents at end of period

 

$

20,816

 

$

32,882

 

Supplemental information

 

 

 

 

 

Cash paid for interest (net of amounts capitalized)

 

$

13,143

 

$

12,983

 

Cash paid for income taxes

 

$

 

$

26

 

Refund for income taxes

 

$

 

$

4,000

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

Accrued payables for investments in utility plant

 

$

8,998

 

$

6,614

 

Utility plant contribution by developers

 

$

8,710

 

$

7,746

 

 

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements

 

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CALIFORNIA WATER SERVICE GROUP

Notes to Unaudited Condensed Consolidated Financial Statements

June 30, 2012

(Amounts in thousands, except share and per share amounts)

 

Note 1. Organization and Operations and Basis of Presentation

 

California Water Service Group (the Company) is a holding company that provides water utility and other related services in California, Washington, New Mexico and Hawaii through its 100% owned subsidiaries. California Water Service Company (Cal Water), Washington Water Service Company (Washington Water), New Mexico Water Service Company (New Mexico Water), and Hawaii Water Service Company, Inc. (Hawaii Water) provide regulated utility services under the rules and regulations of their respective state’s regulatory commissions (jointly referred to herein as the Commissions). CWS Utility Services and HWS Utility Services LLC provide non-regulated water utility and utility-related services.

 

The Company operates in one reportable segment, providing water and related utility services.

 

Basis of Presentation

 

The unaudited interim financial information has been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (SEC) and therefore do not contain all of the information and footnotes required by GAAP and the SEC for annual financial statements. The condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2011, included in its annual report on Form 10-K as filed with the SEC on February 29, 2012.

 

The preparation of the Company’s condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenues and expenses for the periods presented. These include, but are not limited to, estimates and assumptions used in determining the Company’s regulatory asset and liability balances based upon probability assessments of regulatory recovery, revenues earned but not yet billed, asset retirement obligations, allowance for doubtful accounts, pension and other employee benefit plan liabilities, and income tax-related assets and liabilities.  Actual results could differ from these estimates.

 

In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals that are necessary to provide a fair presentation of the results for the periods covered. The results for interim periods are not necessarily indicative of the results for any future period.

 

Due to the seasonal nature of the water business, the results for interim periods are not indicative of the results for a 12-month period. Revenue and income are generally higher in the warm, dry summer months when water usage and sales are greater. Revenue and income are lower in the winter months when cooler temperatures and rainfall curtail water usage and sales.

 

The Company evaluated its operations through the time these financials were issued and determined there were no subsequent events requiring adjustments or disclosures as of the time these financial statements were issued.

 

Note 2. Summary of Significant Accounting Policies

 

Revenue

 

Revenue generally includes monthly cycle customer billings for regulated water and wastewater services at rates authorized by regulatory commissions (plus an estimate for water used between the customer’s last meter reading and the end of the accounting period) and billings to certain non-regulated customers at rates authorized by contract with government agencies.

 

The Company’s regulated water and waste water revenue requirements are authorized by the Commissions in the states in which it operates. The revenue requirements are intended to provide the Company a reasonable opportunity to recover its operating costs and earn a return on investments.

 

For metered customers, Cal Water recognizes revenue from rates which are designed and authorized by the California Public Utilities Commission (CPUC). Under the Water Revenue Adjustment Mechanism (WRAM), Cal Water records the adopted level

 

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of volumetric revenues, which would include recovery of cost of service and a return on investments, as established by the CPUC for metered accounts (adopted volumetric revenues). In addition to volumetric-based revenues, the revenue requirements approved by the CPUC include service charges, flat rate charges, and other items not subject to the WRAM. The adopted volumetric revenue considers the seasonality of consumption of water based upon historical averages. The variance between adopted volumetric revenues and actual billed volumetric revenues for metered accounts is recorded as a component of revenue with an offsetting entry to a regulatory asset or liability balancing account (tracked individually for each Cal Water district) subject to certain criteria under the accounting for regulated operations being met. The variance amount may be positive or negative and represents amounts that will be billed or refunded to customers in the future.

 

Cost-recovery rates are designed to permit full recovery of certain costs allowed to be recovered by the Commissions. Cost-recovery rates such as the Modified Cost Balancing Account (MCBA) provides for recovery of adopted expense levels for purchased water, purchased power and pump taxes, as established by the CPUC. In addition, cost-recovery rates include recovery of cost related to water conservation programs and certain other operation expenses adopted by the CPUC. Variances (which include the effects of changes in both rate and volume for the MCBA) between adopted and actual costs are recorded as a component of revenue, as the amount of such variances will be recovered from or refunded to our customers at a later date. There is no markup for return or profit for cost-recovery expenses and they are generally recognized when expenses are incurred.

 

The balances in the WRAM and MCBA assets and liabilities accounts will fluctuate on a monthly basis depending upon the variance between adopted and actual results. The recovery or refund of the WRAM is netted against the MCBA over- or under-recovery for the corresponding district and is interest bearing at the current 90 day commercial paper rate. Cal Water files with the CPUC to refund or collect the net WRAM and MCBA balances. As of June 30, 2012, $3.8 million of net WRAM and MCBA operating revenues and $3.1 million of associated costs were deferred because the Company concluded it would not be able to collect those amounts within 24-months of the respective reporting period.  On April 19, 2012, the CPUC issued a decision to shorten the amortization periods for Cal Water’s undercollected net WRAM and MCBA receivable balances for calendar years 2011, 2012, and 2013.  The shortened amortization periods for 2011 undercollected balances resulted in recording $9.5 million of deferred net WRAM and MCBA operating revenues and $7.7 million of associated costs during the six months ended June 30, 2012, because these amounts become collectable within 24 months.  This change increased income before income taxes by $1.8 million during the six month ended June 30, 2012.

 

The change to net WRAM and MCBA deferred balances during the six month period ended June 30, 2012 were:

 

 

 

Operating
Revenues

 

Operating
Costs

 

Income Before
Income Taxes

 

Net WRAM and MCBA deferral as of December 31, 2011

 

$

12,864

 

$

10,492

 

$

2,372

 

Less: reversal of prior deferral during the first quarter of 2012

 

(8,846

)

(7,215

)

(1,631

)

Add: net WRAM and MCBA deferral the first quarter of 2012

 

110

 

90

 

20

 

Net amount recorded during the first quarter of 2012

 

(8,736

)

(7,125

)

(1,611

)

Net WRAM and MCBA deferral as of March 31, 2012

 

4,128

 

3,367

 

761

 

Less: reversal of prior deferral during the second quarter of 2012

 

(640

)

(521

)

(119

)

Add: net WRAM and MCBA deferral the second quarter of 2012

 

352

 

287

 

65

 

Net amount recorded during the second quarter of 2012

 

(288

)

(234

)

(54

)

Net WRAM and MCBA deferral as of June 30, 2012

 

$

3,840

 

$

3,133

 

$

707

 

 

The deferred net WRAM and MCBA operating revenue and associated costs were determined using forecasts of rate payer consumption trends in future reporting periods and the timing of when the CPUC will authorize Cal Water’s filings to recover the undercollected balances. The deferred revenue and associated cost amounts will be recorded in future periods when the Company concludes it will be able to collect those amounts within 24-months of the respective reporting period.

 

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The net WRAM and MCBA under- or overcollected balances are:

 

 

 

June 30,
2012

 

December 31,
2011

 

Net short-term receivable

 

$

25,100

 

$

19,357

 

Net long-term receivable

 

28,591

 

30,268

 

Total receivable

 

$

53,691

 

$

49,625

 

Net short-term payable

 

$

120

 

$

543

 

Net long-term payable

 

361

 

145

 

Total payable

 

$

481

 

$

688

 

 

Flat rate customers are billed in advance at the beginning of the service period. The revenue is prorated so that the portion of revenue applicable to the current period is included in that period’s revenue, with the balance recorded as unearned revenue on the balance sheet and recognized as revenue when earned in the subsequent accounting period. Unearned revenue liability was $1.9 million as of June 30, 2012 and December 31, 2011. This liability is included in “accrued expenses and other liabilities” on the condensed consolidated balance sheets.

 

Note 3. Stock-based Compensation

 

Equity Incentive Plan

 

The Company’s equity incentive plan was approved by stockholders on April 27, 2005.  The Company is authorized to issue awards up to 2,000,000 shares of common stock. During the six months ended June 30, 2012 and 2011, the Company granted annual Restricted Stock Awards (RSAs) of 98,422 and 85,426 shares, respectively, of common stock to officers and directors of the Company and no RSAs were cancelled. Employee RSAs vest over 48-months, while director RSAs vest at the end of 12- months. During the first six-months of 2012 and 2011, the shares granted were valued at $17.96 and $17.44 per share, respectively, based upon the fair market value of the Company’s common stock on the date of grant.

 

The Company has recorded compensation costs for the RSAs in Operating Expense in the amount of $0.7 million for the six months ended June 30, 2012 and $0.6 million for the six months ended June 30, 2011.  Compensation costs were $0.4 million for the three months ended June 30, 2012 and $0.3 million for the three months ended June 30, 2011.

 

Note 4. Earnings Per Share Calculations

 

The computations of basic and diluted earnings per share are noted below. Basic earnings per share are computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts were exercised or converted into common stock. RSAs are included in the common shares outstanding because the shares have all the same voting and dividend rights as issued and unrestricted common stock.  The Company’s 2 for 1 stock split has been adjusted retroactively for all periods presented.

 

All RSAs are dilutive and the dilutive effect is shown in the table below.

 

 

 

Three months Ended June 30

 

 

 

2012

 

2011

 

Net income available to common stockholders

 

$

12,965

 

$

12,190

 

Weighted average common shares, basic

 

41,911

 

41,752

 

Dilutive common stock options (treasury method)

 

 

16

 

Shares used for dilutive computation

 

41,911

 

41,768

 

Net income per share - basic

 

$

0.31

 

$

0.29

 

Net income per share - diluted

 

$

0.31

 

$

0.29

 

 

 

 

Six months Ended June 30

 

 

 

2012

 

2011

 

Net income available to common stockholders

 

$

14,050

 

$

14,909

 

Weighted average common shares, basic

 

41,877

 

41,724

 

Dilutive common stock options (treasury method)

 

 

16

 

Shares used for dilutive computation

 

41,877

 

41,740

 

Net income per share - basic

 

$

0.34

 

$

0.36

 

Net income per share - diluted

 

$

0.34

 

$

0.36

 

 

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Note 5. Pension Plan and Other Postretirement Benefits

 

The Company provides a qualified, defined-benefit, non-contributory pension plan for substantially all employees. The Company makes annual contributions to fund the amounts accrued for the qualified pension plan. The Company also maintains an unfunded, non-qualified, supplemental executive retirement plan. The costs of the plans are charged to expense or are capitalized in utility plant as appropriate.

 

The Company offers medical, dental, vision, and life insurance benefits for retirees and their spouses and dependents. Participants are required to pay a premium, which offsets a portion of the cost.

 

Cash payments by the Company related to pension plans and other postretirement benefit plans were $15.8 million for the six months ended June 30, 2012 compared to $8.1 million for the six months ended June 30, 2011. The 2012 estimated cash contributions to the pension plans is $28.6 million and to the other postretirement benefit plans is $8.8 million.

 

The following table lists components of net periodic benefit costs for the pension plans and other postretirement benefits. The data listed under “pension plan” includes the qualified pension plan and the non-qualified supplemental executive retirement plan. The data listed under “other benefits” is for all other postretirement benefits.

 

 

 

Three months Ended June 30

 

 

 

Pension Plan

 

Other Benefits

 

 

 

2012

 

2011

 

2012

 

2011

 

Service cost

 

$

3,709

 

$

2,716

 

$

1,330

 

$

1,002

 

Interest cost

 

3,864

 

3,600

 

1,005

 

955

 

Expected return on plan assets

 

(2,886

)

(2,231

)

(448

)

(347

)

Recognized net initial APBO (1)

 

N/A

 

N/A

 

69

 

69

 

Amortization of prior service cost

 

1,570

 

1,579

 

29

 

29

 

Recognized net actuarial loss

 

2,075

 

955

 

822

 

583

 

Net periodic benefit cost

 

$

8,332

 

$

6,619

 

$

2,807

 

$

2,291

 

 

 

 

Six months Ended June 30

 

 

 

Pension Plan

 

Other Benefits

 

 

 

2012

 

2011

 

2012

 

2011

 

Service cost

 

$

7,725

 

$

5,857

 

$

2,747

 

$

1,981

 

Interest cost

 

7,643

 

7,342

 

1,972

 

1,788

 

Expected return on plan assets

 

(5,779

)

(4,475

)

(916

)

(688

)

Recognized net initial APBO (1)

 

N/A

 

N/A

 

138

 

138

 

Amortization of prior service cost

 

3,141

 

3,159

 

58

 

58

 

Recognized net actuarial loss

 

4,001

 

2,034

 

1,586

 

1,008

 

Net periodic benefit cost

 

$

16,731

 

$

13,917

 

$

5,585

 

$

4,285

 

 


(1)       APBO - Accumulated postretirement benefit obligation

 

Note 6. Short-term and Long-term Borrowings

 

On June 29, 2011, the Company and Cal Water entered into Syndicated Credit Facilities, which provide for unsecured revolving credit facilities of up to an initial aggregate amount of $400 million.  The Syndicated Credit Facilities amend, expand, and replace the Company’s and its subsidiaries’ existing credit facilities originally entered into on October 27, 2009.  The new credit facilities extended the terms until June 29, 2016, increased the Company’s and Cal Water’s unsecured revolving lines of credit, and lowered interest rates and fees.  The Company and subsidiaries which it designates may borrow up to $100 million under the Company’s revolving credit facility. Cal Water may borrow up to $300 million under its revolving credit facility; however, all borrowings need to be repaid within 12-months unless otherwise authorized by the CPUC.  The proceeds from the revolving credit facilities may be used for working capital purposes, including the short-term financing of capital projects.  The base loan rate may vary from LIBOR plus 72.5 basis points to LIBOR plus 95 basis points, depending on the Company’s total capitalization ratio.  Likewise, the unused commitment fee may vary from 8 basis points to 12.5 basis points based on the same ratio.

 

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Table of Contents

 

Both short-term unsecured credit agreements contain affirmative and negative covenants and events of default customary for credit facilities of this type including, among other things, limitations and prohibitions relating to additional indebtedness, liens, mergers, and asset sales. Also, these unsecured credit agreements contain financial covenants governing the Company and its subsidiaries’ consolidated total capitalization ratio and interest coverage ratio. As of June 30, 2012, the Company and Cal Water have met all borrowing covenants for both credit agreements.

 

As of June 30, 2012 and December 31, 2011, the outstanding borrowings on the Company lines of credit were $57.8 million and $47.1 million, respectively, and the outstanding borrowings on the Cal Water lines of credit were $30.0 million as of June 30, 2012 and there were no borrowings as of December 31, 2011.  For the six months ended June 30, 2012, the average borrowing rate was 1.6% compared to 2.9% for the same period last year.

 

Note 7. Income Taxes

 

The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Measurement of the deferred tax assets and liabilities is at enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

 

Effective January 1, 2012, the federal income tax repairs deduction for qualified tangible property is mandatory.  The new deduction accelerates qualified tangible property deductions for property placed into service during 2012 and prior years.  The repairs deduction is also estimated to eliminate the Company’s 2012 federal qualified U.S. production activities deductions (QPAD) which is estimated to increase the effective income tax rate for 2012 compared to the prior year.

 

The California Franchise Tax Board (FTB) is auditing the Company’s 2008 and 2009 California income tax returns. It is uncertain when the FTB will complete its audit. The Company believes that the final resolution of the FTB audit will not have a material adverse impact on its financial condition or results of operations. The Company is not under audit by any other jurisdiction.

 

Note 8. Regulatory Assets and Liabilities

 

During 2011, the CPUC issued a decision regarding the $34.2 million of litigation proceeds previously received by Cal Water during 2008 which is being used to replace infrastructure damaged by the gasoline additive Methyl tert-butyl ether (MTBE). The decision requires use of these proceeds for costs incurred as a result of MTBE contamination with any related benefits to be provided to Cal Water customers. Such usage includes transfer of the amount to contributions in aid of construction (CIAC) for remediation or replacement project costs once complete. Usage of the proceeds is reported to the CPUC through an Advice Letter or General Rate Case filing. As of December 31, 2011, $16.7 million of the proceeds was recorded as CIAC.  Cal Water did not use any of the proceeds to replace damaged infrastructure during the second quarter of 2012.  The remaining balance of $16.6 million at June 30, 2012 is recorded as other long-term liabilities.

 

During 2011, Cal Water added balancing accounts for its pension plans and conservation program. Both balancing account effective dates were January 1, 2011. The pension plans balancing account is a two-way balancing account that tracks the differences between actual expenses and adopted rate recovery which will result in either a regulatory asset or liability. The conservation program is a one-way balancing account that tracks the differences between actual expenses and adopted rate recovery which may result in a regulatory liability if actual conservation expenses are less than adopted over the three year period ending December 31, 2013. As of June 30, 2012 there was a pension regulatory asset of $1.2 million and a conservation program regulatory liability of $4.9 million compared to a $1.9 million pension regulatory liability and a conservation program regulatory liability of $4.3 million as of December 31, 2011.

 

Note 9. Commitment and Contingencies

 

Commitments

 

The Company has significant commitments to lease certain office spaces and water systems and to purchase water from water wholesalers. These commitments are described in Form 10-K for the year ended December 31, 2011.  As of June 30, 2012, there were no significant changes from December 31, 2011.

 

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Table of Contents

 

Contingencies

 

Groundwater Contamination

 

The Company has undertaken litigation against third parties to recover past and future costs related to ground water contamination in our service areas. The cost of litigation is expensed as incurred and any settlement is first offset against such costs. The Commission general policy require all proceeds from contamination litigation to be used first to pay transactional expenses, then to make ratepayers whole for water treatment costs to comply with the Commission’s water quality standards. The Commission allows for a risk-based consideration of contamination proceeds which exceed the costs of the remediation described above and may result in some sharing of proceeds with the shareholder, determined on a case by case basis. The Commission has authorized various memorandum accounts that allow the Company to track significant litigation costs to request recovery of these costs in future filings and uses of proceeds to comply with Commission’s general policy.

 

Other Legal Matters

 

From time to time, the Company is involved in various disputes and litigation matters that arise in the ordinary course of business. The status of each significant matter is reviewed and assessed for potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount of the range of loss can be estimated, a liability is accrued for the estimated loss in accordance with the accounting standards for contingencies. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on the best information available at the time. While the outcome of these disputes and litigation matters cannot be predicted with any certainty, management does not believe when taking into account existing reserves the ultimate resolution of these matters will materially affect the Company’s financial position, results of operations, or cash flows.

 

Note 10. Fair Value of Financial Assets and Liabilities

 

The accounting guidance for fair value measurements and disclosures, provides a single definition of fair value and requires certain disclosures about assets and liabilities measured at fair value. A hierarchal framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value is established by this guidance. The three levels in the hierarchy are as follows:

 

Level 1 -

 

Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices.

 

 

 

Level 2 -

 

Pricing inputs are other than quoted prices inactive markets, but are either directly or indirectly observable as of the reporting date. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, or priced with discounted cash flow or option pricing models using highly observable inputs.

 

 

 

Level 3 -

 

Significant inputs to pricing have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 are those valued with models requiring significant management judgment or estimation.

 

Specific valuation methods include the following:

 

Cash equivalents, accounts receivable and accounts payable carrying amounts approximated the fair value because of the short-term maturity of the instruments.

 

Long-term debt fair values were estimated using the published quoted market price, if available, or the discounted cash flow analysis, based on the current rates available using a risk-free rate (a U.S. Treasury securities yield curve) plus a risk premium of 1.19%.

 

12



Table of Contents

 

Advances for construction fair values were estimated using broker quotes from companies that frequently purchase these investments.

 

 

 

June 30, 2012

 

 

 

 

 

Fair Value

 

 

 

Cost

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Long -term debt, including current maturities

 

$

486,642

 

$

 

$

624,119

 

$

 

$

624,119

 

Advances for construction

 

$

188,001

 

$

 

$

67,191

 

$

 

$

67,191

 

Total

 

$

674,643

 

$

 

$

691,310

 

$

 

$

691,310

 

 

 

 

December 31, 2011

 

 

 

 

 

Fair Value

 

 

 

Cost

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Long -term debt, including current maturities

 

$

488,165

 

$

 

$

625,202

 

$

 

$

625,202

 

Advances for construction

 

$

187,278

 

$

 

$

69,959

 

$

 

$

69,959

 

Total

 

$

675,443

 

$

 

$

695,161

 

$

 

$

695,161

 

 

Note 11. Condensed Consolidating Financial Statements

 

On April 17, 2009, Cal Water issued $100 million aggregate principal amount of 5.875% First Mortgage Bonds due 2019, and on November 17, 2010, Cal Water issued $100 million aggregate principal amount of 5.500% First Mortgage Bonds due 2040, all of which are fully and unconditionally guaranteed by the Company.

 

The following tables present the condensed consolidating balance sheets as of June 30, 2012 and December 31, 2011, the condensed consolidating statements of income for the three and six months ended June 30, 2012 and 2011 and the condensed consolidating statements of cash flow for the six months ended June 30, 2012 and 2011 of (i) California Water Service Group, the guarantor of the first mortgage bonds and the parent company; (ii) California Water Service Company, the issuer of the first mortgage bonds and a 100% owned subsidiary of California Water Service Group; and (iii) the other 100% owned subsidiaries of California Water Service Group.

 

13



Table of Contents

 

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING BALANCE SHEET

As of June 30, 2012

 

(In thousands)

 

 

 

Parent
Company

 

Cal Water

 

All Other
Subsidiaries

 

Consolidating
Adjustments

 

Consolidated

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Utility plant:

 

 

 

 

 

 

 

 

 

 

 

Utility plant

 

$

476

 

$

1,867,377

 

$

165,913

 

$

(7,199

)

$

2,026,567

 

Less accumulated depreciation and amortization

 

(80

)

(577,932

)

(30,745

)

1,444

 

(607,313

)

Net utility plant

 

396

 

1,289,445

 

135,168

 

(5,755

)

1,419,254

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

1,841

 

17,914

 

1,061

 

 

20,816

 

Receivables and unbilled revenue

 

 

89,906

 

3,901

 

 

93,807

 

Receivables from affiliates

 

17,007

 

1,751

 

589

 

(19,347

)

 

Other current assets

 

163

 

19,060

 

1,056

 

 

20,279

 

Total current assets

 

19,011

 

128,631

 

6,607

 

(19,347

)

134,902

 

Other assets:

 

 

 

 

 

 

 

 

 

 

 

Regulatory assets

 

 

321,419

 

2,412

 

 

323,831

 

Investments in affiliates

 

470,721

 

 

 

(470,721

)

 

Long-term affiliate notes receivable

 

25,839

 

7,807

 

 

(33,646

)

 

Other assets

 

940

 

32,400

 

7,040

 

(205

)

40,175

 

Total other assets

 

497,500

 

361,626

 

9,452

 

(504,572

)

364,006

 

 

 

$

516,907

 

$

1,779,702

 

$

151,227

 

$

(529,674

)

$

1,918,162

 

CAPITALIZATION AND LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

 

 

 

 

 

 

Common stockholders’ equity

 

$

451,415

 

$

420,562

 

$

55,752

 

$

(476,314

)

$

451,415

 

Affiliate long-term debt

 

7,808

 

 

25,839

 

(33,647

)

 

Long-term debt, less current maturities

 

 

476,556

 

3,402

 

 

479,958

 

Total capitalization

 

459,223

 

897,118

 

84,993

 

(509,961

)

931,373

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

 

5,978

 

706

 

 

6,684

 

Short-term borrowings

 

57,775

 

30,000

 

 

 

87,775

 

Payables to affiliates

 

49

 

988

 

18,310

 

(19,347

)

 

Accounts payable

 

 

54,046

 

564

 

 

54,610

 

Accrued expenses and other liabilities

 

421

 

55,928

 

5,265

 

64

 

61,678

 

Total current liabilities

 

58,245

 

146,940

 

24,845

 

(19,283

)

210,747

 

Unamortized investment tax credits

 

 

2,254

 

 

 

2,254

 

Deferred income taxes, net

 

(561

)

113,897

 

3,434

 

(430

)

116,340

 

Pension and postretirement benefits other than pensions

 

 

234,948

 

 

 

234,948

 

Regulatory and other liabilities

 

 

71,105

 

8,091

 

 

79,196

 

Advances for construction

 

 

187,093

 

908

 

 

188,001

 

Contributions in aid of construction

 

 

126,347

 

28,956

 

 

155,303

 

 

 

$

516,907

 

$

1,779,702

 

$

151,227

 

$

(529,674

)

$

1,918,162

 

 

14



Table of Contents

 

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2011

 

(In thousands)

 

 

 

Parent
Company

 

Cal Water

 

All Other
Subsidiaries

 

Consolidating
Adjustments

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Utility plant:

 

 

 

 

 

 

 

 

 

 

 

Utility plant

 

$

324

 

$

1,808,568

 

$

158,688

 

$

(7,199

)

$

1,960,381

 

Less accumulated depreciation and amortization

 

(51

)

(551,345

)

(29,251

)

1,385

 

(579,262

)

Net utility plant

 

273

 

1,257,223

 

129,437

 

(5,814

)

1,381,119

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

89

 

18,475

 

8,639

 

 

27,203

 

Receivables

 

158

 

76,227

 

(4,797

)

 

71,588

 

Receivables from affiliates

 

7,817

 

3,446

 

5

 

(11,268

)

 

Other current assets

 

 

14,225

 

872

 

 

15,097

 

Total current assets

 

8,064

 

112,373

 

4,719

 

(11,268

)

113,888

 

Other assets:

 

 

 

 

 

 

 

 

 

 

 

Regulatory assets

 

 

317,564

 

2,334

 

 

319,898

 

Investments in affiliates

 

466,515

 

 

 

(466,515

)

 

Long-term affiliate notes receivable

 

28,921

 

7,832

 

 

(36,753

)

 

Other assets

 

1,144

 

31,662

 

7,081

 

(205

)

39,682

 

Total other assets

 

496,580

 

357,058

 

9,415

 

(503,473

)

359,580

 

 

 

$

504,917

 

$

1,726,654

 

$

143,571

 

$

(520,555

)

$

1,854,587

 

CAPITALIZATION AND LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

Capitalization:

 

 

 

 

 

 

 

 

 

 

 

Common stockholders’ equity

 

$

449,829

 

$

417,810

 

$

54,377

 

$

(472,187

)

$

449,829

 

Affiliate long-term debt

 

7,832

 

 

28,921

 

(36,753

)

 

Long-term debt, less current maturities

 

 

477,998

 

3,634

 

 

481,632

 

Total capitalization

 

457,661

 

895,808

 

86,932

 

(508,940

)

931,461

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

 

5,851

 

682

 

 

6,533

 

Short-term borrowings

 

47,140

 

 

 

 

47,140

 

Payables to affiliates

 

52

 

190

 

11,026

 

(11,268

)

 

Accounts payable

 

 

47,568

 

4,010

 

 

51,578

 

Accrued expenses and other liabilities

 

625

 

46,462

 

(547

)

84

 

46,624

 

Total current liabilities

 

47,817

 

100,071

 

15,171

 

(11,184

)

151,875

 

Unamortized investment tax credits

 

 

2,254

 

 

 

2,254

 

Deferred income taxes, net

 

(561

)

113,925

 

3,435

 

(431

)

116,368

 

Pension and postretirement benefits other than pensions

 

 

232,110

 

 

 

232,110

 

Regulatory and other liabilities

 

 

71,034

 

8,016

 

 

79,050

 

Advances for construction

 

 

185,902

 

1,376

 

 

187,278

 

Contributions in aid of construction

 

 

125,550

 

28,641

 

 

154,191

 

 

 

$

504,917

 

$

1,726,654

 

$

143,571

 

$

(520,555

)

$

1,854,587

 

 

15



Table of Contents

 

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the three months ended June 30, 2012

 

(In thousands)

 

 

 

Parent
Company

 

Cal Water

 

All Other
Subsidiaries

 

Consolidating
Adjustments

 

Consolidated

 

Operating revenue

 

$

 

$

135,291

 

$

8,261

 

$

 

$

143,552

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Operations:

 

 

 

 

 

 

 

 

 

 

 

Water production costs

 

 

50,207

 

2,471

 

 

52,678

 

Administrative and general

 

(36

)

19,752

 

2,451

 

 

22,167

 

Other operations

 

 

16,035

 

1,821

 

(127

)

17,729

 

Maintenance

 

 

4,452

 

153

 

 

4,605

 

Depreciation and amortization

 

5

 

13,042

 

694

 

(29

)

13,712

 

Income tax (benefit) expense

 

(126

)

9,016

 

(155

)

327

 

9,062

 

Property and other taxes

 

 

3,208

 

769

 

 

3,977

 

Total operating expenses

 

(157

)

115,712

 

8,204

 

171

 

123,930

 

Net operating income

 

157

 

19,579

 

57

 

(171

)

19,622

 

Other Income and Expenses:

 

 

 

 

 

 

 

 

 

 

 

Non-regulated revenue

 

484

 

3,671

 

615

 

(719

)

4,051

 

Non-regulated expense, net

 

 

(3,157

)

(538

)

 

(3,695

)

Income tax (expense) on other income and expense

 

(197

)

(210

)

(45

)

314

 

(138

)

Net other income

 

287

 

304

 

32

 

(405

)

218

 

Interest:

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

340

 

7,540

 

534

 

(593

)

7,821

 

Less: capitalized interest

 

 

(682

)

(264

)

 

(946

)

Net interest expense

 

340

 

6,858

 

270

 

(593

)

6,875

 

Equity earnings of subsidiaries

 

12,861

 

 

 

(12,861

)

 

Net income

 

$

12,965

 

$

13,025

 

$

(181

)

$

(12,844

)

$

12,965

 

 

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Table of Contents

 

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the six months ended June 30, 2012

 

(In thousands)

 

 

 

Parent
Company

 

Cal Water

 

All Other
Subsidiaries

 

Consolidating
Adjustments

 

Consolidated

 

Operating revenue

 

$

 

$

245,116

 

$

15,185

 

$

 

$

260,301

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Operations:

 

 

 

 

 

 

 

 

 

 

 

Water production costs

 

 

86,749

 

4,881

 

 

91,630

 

Administrative and general

 

 

40,404

 

4,781

 

 

45,185

 

Other operations

 

 

38,407

 

3,401

 

(253

)

41,555

 

Maintenance

 

 

10,009

 

356

 

 

10,365

 

Depreciation and amortization

 

 

26,342

 

1,380

 

(59

)

27,663

 

Income tax (benefit) expense

 

(266

)

9,263

 

(570

)

663

 

9,090

 

Property and other taxes

 

 

7,267

 

1,317

 

 

8,584

 

Total operating expenses

 

(266

)

218,441

 

15,546

 

351

 

234,072

 

Net operating income (loss)

 

266

 

26,675

 

(361

)

(351

)

26,229

 

Other Income and Expenses:

 

 

 

 

 

 

 

 

 

 

 

Non-regulated revenue

 

955

 

7,495

 

1,188

 

(1,451

)

8,187

 

Non-regulated expense, net

 

 

(4,855

)

(939

)

 

(5,794

)

Income tax (expense) on other income and expense

 

(389

)

(1,076

)

(134

)

638

 

(961

)

Net other income

 

566

 

1,564

 

115

 

(813

)

1,432

 

Interest:

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

654

 

14,946

 

1,059

 

(1,199

)

15,460

 

Less: capitalized interest

 

 

(1,280

)

(569

)

 

(1,849

)

Net interest expense

 

654

 

13,666

 

490

 

(1,199

)

13,611

 

Equity earnings of subsidiaries

 

13,872

 

 

 

(13,872

)

 

Net income (loss)

 

$

14,050

 

$

14,573

 

$

(736

)

$

(13,837

)

$

14,050

 

 

17



Table of Contents

 

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the three months ended June 30, 2011

 

(In thousands)

 

 

 

Parent
Company

 

Cal Water

 

All Other
Subsidiaries

 

Consolidating
Adjustments

 

Consolidated

 

Operating revenue

 

$

 

$

123,879

 

$

7,518

 

$

 

$

131,397

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Operations:

 

 

 

 

 

 

 

 

 

 

 

Water production costs

 

 

42,203

 

2,542

 

 

44,745

 

Administrative and general

 

 

18,679

 

1,875

 

 

20,554

 

Other operations

 

 

14,011

 

1,853

 

(126

)

15,738

 

Maintenance

 

 

5,110

 

178

 

 

5,288

 

Depreciation and amortization

 

(5

)

11,763

 

646

 

(31

)

12,373

 

Income tax (benefit) expense

 

(140

)

8,632

 

(244

)

390

 

8,638

 

Property and other taxes

 

 

3,936

 

570

 

 

4,506

 

Total operating expenses

 

(145

)

104,334

 

7,420

 

233

 

111,842

 

Net operating income

 

145

 

19,545

 

98

 

(233

)

19,555

 

Other Income and Expenses:

 

 

 

 

 

 

 

 

 

 

 

Non-regulated revenue

 

566

 

2,705

 

1,319

 

(851

)

3,739

 

Non-regulated expense, net

 

 

(2,559

)

(950

)

 

(3,509

)

Gain on sale of properties

 

 

62

 

 

 

62

 

Income tax (expense) on other income and expense

 

(231

)

(85

)

(173

)

377

 

(112

)

Net other income

 

335

 

123

 

196

 

(474

)

180

 

Interest:

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

350

 

7,814

 

622

 

(725

)

8,061

 

Less: capitalized interest

 

 

(333

)

(183

)

 

(516

)

Net interest expense

 

350

 

7,481

 

439

 

(725

)

7,545

 

Equity earnings of subsidiaries

 

12,060

 

 

 

(12,060

)

 

Net income

 

$

12,190

 

$

12,187

 

$

(145

)

$

(12,042

)

$

12,190

 

 

18



Table of Contents

 

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the six months ended June 30, 2011

 

(In thousands)

 

 

 

Parent
Company

 

Cal Water

 

All Other
Subsidiaries

 

Consolidating
Adjustments

 

Consolidated

 

Operating revenue

 

$

 

$

215,554

 

$

13,992

 

$

 

$

229,546

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Operations:

 

 

 

 

 

 

 

 

 

 

 

Water production costs

 

 

72,091

 

4,612

 

 

76,703

 

Administrative and general

 

 

37,223

 

3,833

 

 

41,056

 

Other operations

 

 

26,995

 

3,632

 

(254

)

30,373

 

Maintenance

 

 

10,150

 

337

 

 

10,487

 

Depreciation and amortization

 

 

23,692

 

1,331

 

(62

)

24,961

 

Income tax (benefit) expense

 

(292

)

7,611

 

(690

)

768

 

7,397

 

Property and other taxes

 

 

7,968

 

1,098

 

 

9,066

 

Total operating expenses

 

(292

)

185,730

 

14,153

 

452

 

200,043

 

Net operating income (loss)

 

292

 

29,824

 

(161

)

(452

)

29,503

 

Other Income and Expenses:

 

 

 

 

 

 

 

 

 

 

 

Non-regulated revenue

 

1,089

 

5,727

 

2,917

 

(1,661

)

8,072

 

Non-regulated expense, net

 

 

(4,810

)

(2,123

)

 

(6,933

)

Gain on sale on non-utility property

 

 

62

 

 

 

62

 

Income tax (expense) on other income and expense

 

(444

)

(399

)

(377

)

742

 

(478

)

Net other income

 

645

 

580

 

417

 

(919

)

723

 

Interest:

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

717

 

16,036

 

1,204

 

(1,408

)

16,549

 

Less: capitalized interest

 

 

(864

)

(368

)

 

(1,232

)

Net interest expense

 

717

 

15,172

 

836

 

(1,408

)

15,317

 

Equity earnings of subsidiaries

 

14,689