CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

12 Months Ended

Dec. 31, 2011

CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

16 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 California Water Service Group (Parent Company). The following tables present the condensed consolidating statements of income of California Water Service Group (Guarantor and Parent), Cal Water (issuer and 100% owned consolidated subsidiary of California Water Service Group) and other 100% owned subsidiaries of the Company for the years ended December 31, 2011, 2010 and 2009, the condensed consolidating statements of cash flows for the 12-months ended December 31, 2011, 2010 and 2009, and the condensed consolidating balance sheets as of December 31, 2011 and 2010.

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2011

	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
	(In thousands)
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

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2010

	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
	(In thousands)
ASSETS
Utility plant:
Utility plant	$	324		$	1,710,213		$	140,428		$	(7,199	)	$	1,843,766
Less accumulated depreciation and amortization		—			(522,486	)		(28,244	)		1,261			(549,469	)
Net utility plant		324			1,187,727			112,184			(5,938	)		1,294,297
Current assets:
Cash and cash equivalents		188			40,446			1,643			—			42,277
Receivables		—			56,068			3,840			—			59,908
Receivables from affiliates		3,478			4,907			3,621			(12,006	)		—
Other current assets		181			22,842			1,002			—			24,025
Total current assets		3,847			124,263			10,106			(12,006	)		126,210
Other assets:
Regulatory assets		—			227,440			2,137			—			229,577
Investments in affiliates		434,322			—			—			(434,322	)		—
Long-term affiliate notes receivable		34,517			7,880			1,928			(44,325	)		—
Other assets		848			34,153			7,186			(205	)		41,982
Total other assets		469,687			269,473			11,251			(478,852	)		271,559
	$	473,858		$	1,581,463		$	133,541		$	(496,796	)	$	1,692,066
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stockholders' equity	$	435,527		$	402,402		$	37,611		$	(440,014	)	$	435,526
Affiliate long-term debt		9,808			—			34,517			(44,325	)		—
Long-term debt, less current maturities		—			475,030			4,151			—			479,181
Total capitalization		445,335			877,432			76,279			(484,339	)		914,707
Current liabilities:
Current maturities of long-term debt		—			1,709			671			—			2,380
Short-term borrowings		23,750			—			—			—			23,750
Payables to affiliates		5,265			56			6,685			(12,006	)		—
Accounts payable		—			38,204			4,326			—			42,530
Accrued expenses and other liabilities		67			34,444			4,145			32			38,688
Total current liabilities		29,082			74,413			15,827			(11,974	)		107,348
Unamortized investment tax credits		—			2,244			—			—			2,244
Deferred income taxes, net		(559	)		105,786			2,340			(483	)		107,084
Pension and postretirement benefits other than pensions		—			155,224			—			—			155,224
Regulatory and other liabilities		—			74,057			8,147			—			82,204
Advances for construction		—			185,332			1,567			—			186,899
Contributions in aid of construction		—			106,975			29,381			—			136,356
	$	473,858		$	1,581,463		$	133,541		$	(496,796	)	$	1,692,066

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 2011

	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
	(In thousands)
Operating revenue	$	—		$	472,150		$	29,664		$	—		$	501,814
Operating expenses:
Operations:
Purchased water		—			142,355			215			—			142,570
Purchased power		—			20,719			9,334			—			30,053
Pump taxes		—			8,764			366			—			9,130
Administrative and general		—			77,622			8,136			—			85,758
Other		—			47,800			7,401			(505	)		54,696
Maintenance		—			19,916			782			—			20,698
Depreciation and amortization		—			47,872			2,637			(124	)		50,385
Income taxes (benefits)		(580	)		23,727			(1,727	)		1,605			23,025
Taxes other than income taxes		—			15,908			2,424			—			18,332
Total operating expenses (income)		(580	)		404,683			29,568			976			434,647
Net operating income		580			67,467			96			(976	)		67,167
Other Income and Expenses:
Non-regulated revenue		2,248			12,972			4,322			(3,382	)		16,160
Non-regulated expense		—			(12,287	)		(3,535	)		—			(15,822	)
Gain on sale on non-utility property		—			62			—			—			62
Income tax benefit (expense) on other income and expense		(916	)		(304	)		(422	)		1,501			(141	)
Net other income (expense)		1,332			443			365			(1,881	)		259
Interest:
Interest expense		1,422			31,421			2,489			(2,877	)		32,455
Less: capitalized interest		—			(1,844	)		(897	)		—			(2,741	)
Net interest expense		1,422			29,577			1,592			(2,877	)		29,714
Equity earnings of subsidiaries		37,222			—			—			(37,222	)		—
Net income	$	37,712		$	38,333		$	(1,131	)	$	(37,202	)	$	37,712

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 2010

	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
	(In thousands)
Operating revenue	$	—		$	430,988		$	29,411		$	—		$	460,399
Operating expenses:
Operations:
Purchased water		—			125,749			181			—			125,930
Purchased power		—			21,616			7,961			—			29,577
Pump taxes		—			8,017			583			—			8,600
Administrative and general		—			67,536			7,740			—			75,276
Other		—			49,356			7,667			(505	)		56,518
Maintenance		—			18,998			687			—			19,685
Depreciation and amortization		—			40,349			2,610			(131	)		42,828
Income taxes (benefits)		(843	)		23,812			(229	)		329			23,069
Taxes other than income taxes		—			14,904			2,199			—			17,103
Total operating expenses (income)		(843	)		370,337			29,399			(307	)		398,586
Net operating income		843			60,651			12			307			61,813
Other Income and Expenses:
Non-regulated revenue		1,220			10,064			6,670			(1,961	)		15,993
Non-regulated expense		—			(7,954	)		(4,358	)		—			(12,312	)
Gain on sale on non-utility property		—			22			—			—			22
Income tax benefit (expense) on other income and expense		(497	)		(869	)		(1,027	)		906			(1,487	)
Net other income (expense)		723			1,263			1,285			(1,055	)		2,216
Interest:
Interest expense		698			27,059			1,635			(1,456	)		27,936
Less: capitalized interest		—			(1,085	)		(478	)		—			(1,563	)
Net interest expense		698			25,974			1,157			(1,456	)		26,373
Equity earnings of subsidiaries		36,788			—			—			(36,788	)		—
Net income	$	37,656		$	35,940		$	140		$	(36,080	)	$	37,656

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 2009

	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
	(In thousands)
Operating revenue	$	—		$	420,412		$	28,960		$	—		$	449,372
Operating expenses:
Operations:
Purchased water		—			121,360			335			—			121,695
Purchased power		—			21,254			6,998			—			28,252
Pump taxes		—			8,982			555			—			9,537
Administrative and general		—			68,103			7,140			—			75,243
Other		—			49,560			7,477			(460	)		56,577
Maintenance		—			17,918			619			—			18,537
Depreciation and amortization		—			37,740			2,176			(138	)		39,778
Income taxes		(222	)		23,919			398			717			24,812
Taxes other than income taxes		—			14,727			2,095			—			16,822
Total operating expenses (income)		(222	)		363,563			27,793			119			391,253
Net operating income		222			56,849			1,167			(119	)		58,119
Other Income and Expenses:
Non-regulated revenue		901			12,408			6,379			(1,498	)		18,190
Non-regulated expense		—			(7,972	)		(4,480	)		—			(12,452	)
Gain on sale on non-utility property		—			560			—			—			560
Income tax benefit (expense) on other income and expense		(367	)		(2,036	)		(808	)		661			(2,550	)
Net other income (expense)		534			2,960			1,091			(837	)		3,748
Interest:
Interest expense		505			23,719			1,207			(1,037	)		24,394
Less: capitalized interest		—			(2,359	)		(722	)		—			(3,081	)
Net interest expense		505			21,360			485			(1,037	)		21,313
Equity earnings of subsidiaries		40,303			—			—			(40,303	)		—
Net income	$	40,554		$	38,449		$	1,773		$	(40,222	)	$	40,554

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2011

	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
	(In thousands)
Operating activities:
Net income	$	37,712		$	38,333		$	(1,131	)	$	(37,202	)	$	37,712
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity earnings of subsidiaries		(37,222	)		—			—			37,222			—
Dividends received from affiliates		25,674			—			—			(25,674	)		—
Depreciation and amortization		51			49,283			2,771			(124	)		51,981
Change in value of life insurance contracts		—			1,876			—			—			1,876
Gain on sale of non-utility property		—			(62	)		—			—			(62	)
Other changes in noncurrent assets and liabilities		(299	)		5,973			684			53			6,411
Changes in operating assets and liabilities:
Other changes, net		1,882			8,367			3,054			51			13,354
Net adjustments		(9,914	)		65,437			6,509			11,528			73,560
Net cash provided by operating activities		27,798			103,770			5,378			(25,674	)		111,272
Investing activities:
Utility plant expenditures		—			(98,410	)		(20,136	)		—			(118,546	)
Proceeds from sale of non-utility assets		—			64			—			—			64
Affiliate advances		(25,495	)		1,597			—			23,898			—
Reduction of loans to affiliates		962			45			2,000			(3,007	)		—
Purchase of life insurance		—			(1,744	)		—			—			(1,744	)
Restricted cash		—			(3,042	)		—			—			(3,042	)
Net cash (used in) investing activities		(24,533	)		(101,490	)		(18,136	)		20,891			(123,268	)
Financing Activities:
Short-term borrowings		23,390			—			—			—			23,390
Affiliate advances		—			—			23,898			(23,898	)		—
Reduction of affiliate long-term borrowings		(2,045	)		—			(962	)		3,007			—
Proceeds from long-term debt, net of issuance cost of $1,857		—			—			178			—			178
Retirement of long-term debt		—			(2,279	)		(684	)		—			(2,963	)
Advances and contributions in aid for construction		—			7,082			149			—			7,231
Refunds of advances for construction		—			(6,129	)		(76	)		—			(6,205	)
Dividends paid to non-affiliates		(25,674	)		—			—			—			(25,674	)
Dividends paid to affiliates		—			(22,925	)		(2,749	)		25,674			—
Issuance of common stock		965			—			—			—			965
Net cash (used in) provided by financing activities		(3,364	)		(24,251	)		19,754			4,783			(3,078	)
Change in cash and cash equivalents		(99	)		(21,971	)		6,996			—			(15,074	)
Cash and cash equivalents at beginning of year		188			40,446			1,643			—			42,277
Cash and cash equivalents at end of year	$	89		$	18,475		$	8,639		$	—		$	27,203

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2010

	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
	(In thousands)
Operating activities:
Net income	$	37,656		$	35,940		$	140		$	(36,080	)	$	37,656
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity earnings of subsidiaries		(36,788	)		—			—			36,788			—
Dividends received from affiliates		24,753			—			—			(24,753	)		—
Depreciation and amortization		—			42,680			2,716			(131	)		45,265
Other changes in noncurrent assets and liabilities		—			7,435			(2,133	)		(598	)		4,704
Change in value of life insurance contracts		—			(2,641	)		—			—			(2,641	)
Gain on sale of non-utility property		—			(22	)		—			—			(22	)
Changes in operating assets and liabilities:
Other changes, net		(825	)		(9,312	)		664			21			(9,452	)
Net adjustments		(12,860	)		38,140			1,247			11,327			37,854
Net cash provided by operating activities		24,796			74,080			1,387			(24,753	)		75,510
Investing activities:
Utility plant expenditures		(324	)		(108,990	)		(14,612	)		—			(123,926	)
Proceeds from sale of non-utility assets		—			34			—			—			34
Affiliate advances		(14,579	)		85			—			14,494			—
Reduction of loans to affiliates		1,854			—			—			(1,854	)		—
Purchase of life insurance		—			(1,891	)		—			—			(1,891	)
Restricted cash decrease		—			3,169			—			—			3,169
Net cash (used in) investing activities		(13,049	)		(107,593	)		(14,612	)		12,640			(122,614	)
Financing Activities:
Short-term borrowings		16,750			69,000			—			—			85,750
Repayment of short-term borrowings		(5,000	)		(69,000	)		—			—			(74,000	)
Affiliate advances		—			—			14,494			(14,494	)		—
Reduction of affiliate note payable		—			—			(1,854	)		1,854			—
Proceeds from long-term debt, net of issuance cost of $1,857		—			103,947			2,226			—			106,173
Retirement of long-term debt		—			(12,212	)		(1,480	)		—			(13,692	)
Advances and contributions in aid for construction		—			4,962			351			—			5,313
Refunds of advances for construction		—			(6,104	)		(84	)		—			(6,188	)
Dividends paid to non-affiliates		(24,753	)		—			—			—			(24,753	)
Dividends paid to affiliates		—			(22,634	)		(2,119	)		24,753			—
Issuance of common stock		912			—			—			—			912
Net cash (used in) provided by financing activities		(12,091	)		67,959			11,534			12,113			79,515
Change in cash and cash equivalents		(344	)		34,446			(1,691	)		—			32,411
Cash and cash equivalents at beginning of year		532			6,000			3,334			—			9,866
Cash and cash equivalents at end of year	$	188		$	40,446		$	1,643		$	—		$	42,277

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2009

	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
	(In thousands)
Operating activities:
Net income	$	40,554		$	38,449		$	1,773		$	(40,222	)	$	40,554
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity earnings of subsidiaries		(40,303	)		—			—			40,303			—
Dividends received from affiliates		24,476			—			—			(24,476	)		—
Depreciation and amortization		—			39,649			2,132			(138	)		41,643
Amortization of debt premium and expense		—			970			—			—			970
Other changes in noncurrent assets and liabilities		(1,491	)		4,602			532			45			3,688
Change in value of life insurance contracts		—			(4,107	)		—			—			(4,107	)
Gain on sale of non-utility property		—			(560	)		—			—			(560	)
Changes in operating assets and liabilities:
Other changes, net		476			(11,161	)		909			12			(9,764	)
Net adjustments		(16,842	)		29,393			3,573			15,746			31,870
Net cash provided by operating activities		23,712			67,842			5,346			(24,476	)		72,424
Investing activities:
Utility plant expenditures		—			(100,182	)		(10,426	)		—			(110,608	)
Proceeds from sale of non-utility assets		—			810			—			—			810
Affiliate advances		(160	)		(1,039	)		—			1,199			—
Reduction of loans to affiliates		415			—			—			(415	)		—
Purchase of life insurance		—			(1,813	)		—			—			(1,813	)
Restricted cash increase		—			(3,104	)		—			—			(3,104	)
Net cash provided by (used in) investing activities		255			(105,328	)		(10,426	)		784			(114,715	)
Financing Activities:
Short-term borrowings		—			20,000			—			—			20,000
Repayment of short-term borrowings		—			(48,000	)		—			—			(48,000	)
Affiliate advances		—			—			1,199			(1,199	)		—
Reduction of affiliate note payable		—			—			(415	)		415			—
Proceeds from long-term debt, net of issuance cost of $3,390		—			97,884			96			—			97,980
Retirement of long-term debt		—			(5,938	)		(834	)		—			(6,772	)
Advances and contributions in aid for construction		—			4,981			—			—			4,981
Refunds of advances for construction		—			(5,968	)		(71	)		—			(6,039	)
Dividends paid to non-affiliates		(24,476	)		—			—			—			(24,476	)
Dividends paid to affiliates		—			(22,498	)		(1,978	)		24,476			—
Issuance of common stock		614			—			—			—			614
Net cash (used in) provided by financing activities		(23,862	)		40,461			(2,003	)		23,692			38,288
Change in cash and cash equivalents		105			2,975			(7,083	)		—			(4,003	)
Cash and cash equivalents at beginning of year		427			3,025			10,417			—			13,869
Cash and cash equivalents at end of year	$	532		$	6,000		$	3,334		$	—		$	9,866

        Subsequent to the issuance of the 2010 financial statements management determined that within the condensed consolidating statement of cash flows the Company presented affiliate advances as operating activities. These intercompany payables and receivables transactions between Parent Company, Cal Water, and the other 100% owned subsidiaries have been corrected in the above condensed consolidating statement of cash flows for the year ended December 31, 2010 and 2009 to be presented within investing and financing activities. This correction has no impact on the consolidated statement of cash flows for the years ended December 31, 2010 and 2009. The corrections are summarized as follows:

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments
	(In thousands)
For the Year Ended December 31, 2010
Net cash provided by operating activities as previously reported	$	10,217		$	74,165		$	15,881		$	(24,753	)
Net cash provided by operating activities as corrected		24,796			74,080			1,387			(24,753	)
Net cash provided by (used in) investing activities as previously reported		1,530			(107,678	)		(14,612	)		(1,854	)
Net cash provided by (used in) investing activities as corrected		(13,049	)		(107,593	)		(14,612	)		12,640
Net cash (used in) provided by financing activities as previously reported		(12,091	)		67,959			(2,960	)		26,607
Net cash (used in) provided by financing activities as corrected		(12,091	)		67,959			11,534			12,113
For the Year Ended December 31, 2009
Net cash provided by operating activities as previously reported		23,552			66,803			6,545			(24,476	)
Net cash provided by operating activities as corrected		23,712			67,842			5,346			(24,476	)
Net cash provided by (used in) investing activities as previously reported		415			(104,289	)		(10,426	)		(415	)
Net cash provided by (used in) investing activities as corrected		255			(105,328	)		(10,426	)		784
Net cash (used in) provided by financing activities as previously reported		(23,862	)		40,461			(3,202	)		24,891
Net cash (used in) provided by financing activities as corrected		(23,862	)		40,461			(2,003	)		23,692