StockSelector.com
  Research, Select, & Monitor Saturday, August 17, 2019 4:48:04 PM ET  
Trade Ideas The Market Industries Stocks Portfolio

 
Ticker Lookup
California Water Service Group$55.84$.761.38%

  Quote | Ranking | Chart | Valuations | Sentiment | Industry | News | Earnings | Analysts | More...

Your Target?

 California Water Service Group Announces 2017 Earnings for Year and Fourth Quarter
   Thursday, March 01, 2018 9:01:19 AM ET

California Water Service Group (Company) (CWT ) today announced net income of $67.2 million and diluted earnings per share of $1.40 for 2017, compared to net income of $48.7 million and diluted earnings per share of $1.01 in 2016.

The $18.5 million increase in net income was primarily the result of rate changes authorized in California Water Service Company’s (Cal Water’s) 2015 General Rate Case (GRC) decision. Net income also increased due to the adoption of allowance for equity funds used during construction (equity AFUDC) in 2017, an increase in accrued unbilled revenue, an increase in unrealized gains on certain benefit insurance investments, and decreases in incremental drought, other operations, and maintenance expenses over the same period last year. These factors were partially offset by increases in administrative and general, depreciation and amortization, and interest expenses.

According to President and Chief Executive Officer Martin A. Kropelnicki, a number of factors aligned for the Company in 2017, including the effect of the 2015 California GRC decision, execution of the Company’s program to renew critical infrastructure, and a transition out of California’s recent drought.

"I am proud of the work our team did operating efficiently and providing top-notch service to our customers. We invested a record $259.2 million to maintain and improve our water systems to fulfill our promise to provide customers with quality, service, and value, and won $56.0 million of litigation proceeds to reimburse a portion of the costs associated with the Company’s compliance with the new water quality standard for 1,2,3-Trichloropropane (TCP), which will reduce the rate impact to customers," he said.

Looking ahead to 2018, the Company expects some challenges as the California Public Utilities Commission prepares to issue a final decision on the Cal Water Cost of Capital filing and we begin the process of implementing customer rates, which reflect the changes to federal tax laws that became effective in December 2017.

"The Proposed Decision in the Cost of Capital filing fails to strike the right balance between protecting the interests of ratepayers, stockholders, and the continuing need to replace critical water infrastructure. If adopted, it will harm both customers and stockholders by hindering our ability to make critical and necessary improvements to our water systems. Our main focus now is participating in the regulatory process to advocate for fair and reasonable decisions on the cost of capital proceeding and implementation of new federal tax law, both of which could have a significant impact on our earnings and cash flows," Kropelnicki said.

Additional Financial Results for 2017

Total revenue increased 9.4% to $666.9 million in 2017 compared to $609.4 million in 2016, primarily due to rate increases. Rate increases added $54.9 million, $10.7 million of which was related to increased water costs. Accrued unbilled revenue added $2.5 million.

Total operating expenses increased $39.1 million, or 7.3%, to $572.3 million in 2017 compared to the prior year.

Water production expenses increased $21.9 million, or 9.9%, to $241.9 million in 2017, primarily due to increases in purchased water quantities and higher wholesale water rates. As designed, the California revenue decoupling mechanisms record an increase to revenue equal to the increase in California water production costs.

Administrative and general and other operations expenses decreased $1.2 million to $177.4 million in 2017, primarily due to decreases in incremental drought and other conservation program expenses, a decrease in costs associated with the deferral of operating revenue, and reduced expensing of previously capitalized items through regulatory action in 2017 as compared to 2016. These decreases were partially offset by employee wage and benefit cost increases and uninsured loss cost increases. Changes in employee pension benefits, employee and retiree medical costs, and water conservation program costs for regulated California operations generally do not affect earnings, as Cal Water is allowed by the CPUC to record these costs in balancing accounts for future recovery, creating a corresponding change to revenue.

Maintenance expenses decreased $0.5 million, or 2.0%, to $22.5 million in 2017, due to decreased costs for repairs of transmission and distribution mains and services.

Income taxes increased $4.1 million, or 16.6%, to $28.9 million in 2017, due to an increase in operating income which was partially offset by an increase in the tax benefit from the flow through method of accounting for "repairs" deductions on state corporate income tax filings. The Company’s current estimated effective combined income tax rate for 2018 is 24%, which reflects the change in the federal corporate income tax rate from 35% to 21% beginning on January 1, 2018.

Other income, net of income taxes, increased $3.5 million in 2017, due primarily to the implementation of equity AFUDC in 2017 and an increase in unrealized gains on certain benefit plan investments.

Fourth Quarter 2017 Results

For the fourth quarter of 2017, net income decreased $1.4 million, or 9.4%, to $13.7 million, and diluted earnings per share decreased $0.02, or 6.5%, to $0.29 per diluted share compared to the fourth quarter of 2016. The decrease in net income was due primarily to increases in administrative and general, depreciation and amortization, and interest expenses. The decrease was partially offset by 2017 rate changes authorized in the December 2016 California GRC decision.

Revenue for the fourth quarter increased $11.1 million, or 7.3%, to $162.0 million mostly due to rate increases. Total operating expenses for the quarter increased $12.3 million, or 9.5%, to $141.9 million. Water production expenses increased $9.2 million mostly due to increases in purchased water quantities and wholesale water rates. Administrative and general and other operations expenses increased $2.0 million, or 4.4%, to $47.8 million mostly due to the recovery in 2016 of incremental drought costs of $2.9 million for the years 2015 and 2014, an increase in employee wage and benefit costs, and uninsured loss cost increases. These increases were partially offset by a decrease in conservation program costs in 2017 and a decrease in costs associated with the recognition of operating revenue that was deferred in prior years. Maintenance expense increased $0.2 million, or 3.7%, to $5.7 million. Other income, net of income taxes, increased $0.6 million, or 34.6%, to $2.2 million mostly due to the equity AFUDC. Net interest expense increased $0.8 million, or 9.7%, to $8.6 million.

The under-collected net receivable balance in the Water Revenue Adjustment Mechanism and Modified Cost Balancing Accounts (WRAM and MCBA) was $69.1 million as of December 31, 2017, an increase of 86.2%, or $32.0 million, from the balance of $37.1 million as of December 31, 2016. Cal Water has a Sales Reconciliation Mechanism (SRM) in place for the second and third years of a GRC that allows it to adjust the adopted sales forecast if actual sales vary from adopted sales by more than 5.0% in the prior year.

Regulatory Update

As a part of the 2015 GRC decision, Cal Water was authorized to request annual escalation rate increases for 2018 for those districts that passed an earnings test. In November of 2017, Cal Water requested escalation rate increases in all of its regulated districts. The annual adopted gross revenue associated with the November 2017 filing was $15.9 million. The new rates became effective on January 1, 2018.

On February 6, 2018, the CPUC issued a proposed decision on Cal Water’s cost of capital filings authorized return of equity for 2018 through 2020 by the assigned administrative law judge. The proposed decision would lower Cal Water’s authorized return on equity from 9.43% to 8.22%. If the proposed decision were adopted without changes, Cal Water would be required to reduce its rates collected from California customers by approximately $13.0 million. This reduction in revenue would reduce Cal Water’s net income and cash flows from operations beginning in 2018. A proposed decision must be approved by the full Commission to go into effect. The Commission could modify or reject the proposed decision and will first consider the matter at its meeting on March 22, 2018.

On December 20, 2017, Cal Water entered into a settlement agreement and release of claims for TCP contamination with the potentially responsible parties (PRP). The proceeds from the settlement, after payment of legal fees, was $56.0 million and will be used to reimburse a portion of the costs associated with Cal Water’s remediation efforts related to such alleged TCP contamination. Under the terms of the Agreement, the PRPs are released from all claims regarding 47 of the 57 total claimed wells, and Cal Water agrees to file a dismissal with prejudice of the lawsuit. The PRPs are also released from future claims regarding TCP contamination of any other wells, unless and until Cal Water has installed granular activated carbon filtration systems or other then-approved State treatment technology for TCP on, or replaced, 36 wells due to TCP contamination.

On December 22, 2017, the CPUC sent a letter to all Class A and B water and sewer utilities, which include Cal Water, on the subject of "Changes in Federal Tax Rates for 2018." The CPUC required Cal Water to establish a tax accounting memorandum account (TAMA) to track the impact of the changes to federal tax law. The TAMA will track the revenue requirement impact of the changes to federal tax law not otherwise reflected in rates from January 1, 2018 until the effective date of the revenue requirement changes adopted in Cal Water’s next GRC. The Hawaii, Washington, and New Mexico commissions have similar requirements to track the impact of the changes to federal tax law.

Other Information

All stockholders and interested investors are invited to listen to the 2017 year-end and fourth quarter conference call on March 1, 2018 at 8:00 a.m. PST (11:00 a.m. EST) by dialing 1-833-832-5130 or 1-509-844-0151 and keying in ID #6675698. A replay of the call will be available from 11:00 a.m. PST (2:00 p.m. EST) on March 1, 2018 through May 1, 2018, at 1-855-859-2056 or 1-404-537-3406, ID #6675698. The replay will also be available under the investor relations tab at www.calwatergroup.com. Prior to the call, the Company will post a slide presentation on its website. The presentation can be found at www.calwatergroup.com/docs/2017q4slides.pdf after 6:00 a.m. PDT. The call will be hosted by President and Chief Executive Officer Martin A. Kropelnicki, Vice President and Chief Financial Officer Thomas F. Smegal III, Vice President of Rates and Regulatory Matters Paul G. Townsley, and Vice President and Corporate Controller David B. Healey.

California Water Service Group is the parent company of California Water Service, Washington Water Service, New Mexico Water Service, Hawaii Water Service, 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." Additional information is available online at www.calwatergroup.com.

This news release contains forward-looking statements within the meaning established by the Private Securities Litigation Reform Act of 1995 ("Act"). The forward-looking statements are intended to qualify under provisions of the federal securities laws for "safe harbor" treatment established by the Act. Forward-looking statements are based on currently available information, expectations, estimates, assumptions and projections, and management’s judgment about the Company, the water utility industry and general economic conditions. Such words as would, expects, intends, plans, believes, estimates, assumes, anticipates, projects, predicts, forecasts or variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not guarantees of future performance. They are subject to uncertainty and changes in circumstances. Actual results may vary materially from what is contained in a forward-looking statement. Factors that may cause a result different than expected or anticipated include, but are not limited to: governmental and regulatory commissions’ decisions; consequences of eminent domain actions relating to our water systems; changes in regulatory commissions’ policies and procedures; the timeliness of regulatory commissions’ actions concerning rate relief; inability to renew leases to operate city water systems on beneficial terms; changes in California State Water Resources Control Board water quality standards; changes in environmental compliance and water quality requirements; electric power interruptions; changes in customer water use patterns and the effects of conservation; the impact of weather and climate on water availability, water sales and operating results; the unknown impact of contagious diseases, on the Company’s operations; civil disturbances or terrorist threats or acts, or apprehension about the possible future occurrences of acts of this type; labor relations matters as we negotiate with the unions; 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. 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)                                                                      December 31,         December 31,
                                                                                                                2017                 2016
ASSETS
Utility plant:
                   Utility plant                                                                           $    2,970,179       $    2,717,339
                   Less accumulated depreciation and amortization                                               (922,214  )          (858,062  )
                                                               Net utility plant                                2,047,965            1,859,277
Current assets:
                   Cash and cash equivalents                                                                    94,776               25,492
                   Receivables: net of allowance for doubtful accounts of $773 for 2017 and $830 for 2016
                                                               Customers                                        32,451               30,305
                                                               Regulatory balancing accounts                    36,783               30,332
                                                               Other                                            16,464               17,158
                   Unbilled revenue                                                                             29,756               25,228
                   Materials and supplies at weighted average cost                                              6,463                6,292
                   Taxes, prepaid expenses, and other assets                                                    11,180               7,262
                                                               Total current assets                             227,873              142,069
Other assets:
                   Regulatory assets                                                                            401,147              355,930
                   Goodwill                                                                                     2,615                2,615
                   Other                                                                                        60,775               51,854
                                                               Total other assets                               464,537              410,399
TOTAL ASSETS                                                                                               $    2,740,375       $    2,411,745
CAPITALIZATION AND LIABILITIES
Capitalization:
                   Common stock, $.01 par value                                                            $    480             $    480
                   Additional paid-in capital                                                                   336,229              334,856
                   Retained earnings                                                                            356,753              324,135
                                                               Total common stockholders’ equity                693,462              659,471
                   Long-term debt, less current maturities                                                      515,793              531,745
                                                               Total capitalization                             1,209,255            1,191,216
Current liabilities:
                   Current maturities of long-term debt                                                         15,920               26,208
                   Short-term borrowings                                                                        275,100              97,100
                   Accounts payable                                                                             93,955               77,813
                   Regulatory balancing accounts                                                                59,303               4,759
                   Accrued interest                                                                             6,122                5,661
                   Accrued expenses and other liabilities                                                       40,559               38,689
                                                               Total current liabilities                        490,959              250,230
Unamortized investment tax credits                                                                              1,724                1,798
Deferred income taxes                                                                                           192,946              298,924
Pension and post-retirement benefits other than pensions                                                        252,141              222,691
Regulatory and other liabilities                                                                                224,127              83,648
Advances for construction                                                                                       182,502              182,448
Contributions in aid of construction                                                                            186,721              180,790
Commitments and contingencies
TOTAL CAPITALIZATION AND LIABILITIES                                                                       $    2,740,375       $    2,411,745
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except per share data)
For the Three-Months ended:
                                                                     December 31,       December 31,
                                                                          2017               2016
Operating revenue                                                    $    161,991       $    150,930
Operating expenses:
               Operations:
                                          Water production costs          60,407             51,160
                                          Administrative and General      28,983             23,437
                                          Other operations                18,788             22,316
               Maintenance                                                5,653              5,451
               Depreciation and amortization                              19,133             15,827
               Income taxes                                               2,829              5,612
               Property and other taxes                                   6,080              5,792
                                          Total operating expenses        141,873            129,595
                                          Net operating income            20,118             21,335
Other income and expenses:
               Non-regulated revenue                                      5,155              5,996
               Non-regulated expenses                                     (2,483  )          (3,285  )
               Allowance for equity funds used during construction        987                -
               Income tax expense on other income and expenses            (1,488  )          (1,098  )
                                          Net other income                2,171              1,613
Interest expense:
               Interest expense                                           9,215              8,482
               Allowance for borrowed funds used during construction      (595    )          (624    )
                                          Net interest expense            8,620              7,858
Net income                                                           $    13,669        $    15,090
Earnings per share
               Basic                                                 $    0.29          $    0.31
               Diluted                                               $    0.29          $    0.31
Weighted average shares outstanding
               Basic                                                      48,014             47,966
               Diluted                                                    48,014             47,969
Dividends per share of common stock                                  $    0.1800        $    0.1725
CALIFORNIA WATER SERVICE GROUP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(In thousands, except per share data)
For the Twelve-Months ended:
                                                                     December 31,       December 31,
                                                                          2017               2016
Operating revenue                                                    $    666,890       $    609,370
Operating expenses:
               Operations:
                                          Water production costs          241,867            219,993
                                          Administrative and General      102,914            98,474
                                          Other operations                74,448             80,082
               Maintenance                                                22,530             22,993
               Depreciation and amortization                              76,783             63,599
               Income taxes                                               28,928             24,804
               Property and other taxes                                   24,797             23,231
                                          Total operating expenses        572,267            533,176
                                          Net operating income            94,623             76,194
Other income and expenses:
               Non-regulated revenue                                      15,898             16,585
               Non-regulated expenses                                     (8,727  )          (11,591 )
               Allowance for equity funds used during construction        3,750              -
               Income tax expense on other income and expenses            (4,435  )          (2,012  )
                                          Net other income                6,486              2,982
Interest expense:
               Interest expense                                           36,288             33,466
               Allowance for borrowed funds used during construction      (2,360  )          (2,965  )
                                          Net interest expense            33,928             30,501
Net income                                                           $    67,181        $    48,675
Earnings per share
               Basic                                                 $    1.40          $    1.02
               Diluted                                               $    1.40          $    1.01
Weighted average shares outstanding
               Basic                                                      48,009             47,953
               Diluted                                                    48,009             47,956
Dividends per share of common stock                                  $    0.7200        $    0.6900

/> <p>Contact:

Contact:

Tom Smega

(408) 367-8200 (analysts)

Shannon Dean

(408) 367-8243 (media)

https://resource.globenewswire.com/Resource/Download/89321404-3ffb-4af3-90f8-f2eb573f4d78?size=1

<img src="http://www.globenewswire.com/newsroom/ti?ndecode=MTUwIzcxNjM1Mzk=" alt="" width="1" height="1"/>



Register |  Password |  Feedback |  Copyright |  Usage Agreement |  Privacy Policy |  Advertising |  About Us |  Contact Us |  FAQ 

Past performance is not indicative of future results

StockSelector.com, the StockSelector.com logo, and News Selects are trademarks of StockSelector.com.
Copyright © 1998 - 2019 StockSelector.com. All rights reserved.