Condensed Consolidating Financial Statements

6 Months Ended

Jun. 30, 2011

Condensed Consolidating Financial Statements

Condensed Consolidating Financial Statements

Note 12. Condensed Consolidating Financial Statements

The following tables present the condensed consolidating statements of income of California Water Service Group (Guarantor and Parent), Cal Water (issuer and wholly-owned consolidated subsidiary of California Water Service Group) and other wholly-owned subsidiaries of the Company for the three-month and six-month periods ended June 30, 2011 and 2010, the condensed consolidating statements of cash flows for the six months ended June 30, 2011 and 2010 and the condensed consolidating balance sheets as of June 30, 2011 and December 31, 2010. The information is presented utilizing the equity method of accounting for investments in consolidating subsidiaries.

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING BALANCE SHEET

As of June 30, 2011

(In thousands)

	ParentCompany			Cal Water			All OtherSubsidiaries			ConsolidatingAdjustments			Consolidated
ASSETS
Utility plant:
Utility plant	$	324		$	1,757,453		$	144,806		$	(7,199	)	$	1,895,384
Less accumulated depreciation and amortization	(23		)	(540,388		)	(28,700		)	1,323			(567,788		)
Net utility plant	301			1,217,065			116,106			(5,876		)	1,327,596
Current assets:
Cash and cash equivalents	803			30,236			1,843			—			32,882
Receivables and unbilled revenue	182			67,479			3,737			—			71,398
Receivables from affiliates	14,676			1,433			3,524			(19,633		)	—
Other current assets	123			25,992			1,216			—			27,331
Total current assets	15,784			125,140			10,320			(19,633		)	131,611
Other assets:
Regulatory assets	—			243,750			2,206			—			245,956
Investments in affiliates	436,185			—			—			(436,185		)	—
Long-term affiliate notes receivable	31,871			7,856			1,891			(41,618		)	—
Other assets	848			32,363			6,984			(205		)	39,990
Total other assets	468,904			283,969			11,081			(478,008		)	285,946
	$	484,989		$	1,626,174		$	137,507		$	(503,517	)	$	1,745,153
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stockholders’ equity	$	438,240		$	406,183		$	35,658		$	(441,841	)	$	438,240
Affiliate long-term debt	9,747			—			31,871			(41,618		)	—
Long-term debt, less current maturities	—			474,023			3,945			—			477,968
Total capitalization	447,987			880,206			71,474			(483,459		)	916,208
Current liabilities:
Current maturities of long-term debt	—			1,709			668			—			2,377
Short-term borrowings	32,760			—			—			—			32,760
Payables to affiliates	4,377			201			15,055			(19,633		)	—
Accounts payable	—			50,838			3,106			—			53,944
Accrued expenses and other liabilities	424			36,480			5,583			58			42,545
Total current liabilities	37,561			89,228			24,412			(19,575		)	131,626
Unamortized investment tax credits	—			2,244			—			—			2,244
Deferred income taxes, net	(559		)	118,749			2,339			(483		)	120,046
Pension and postretirement benefits other than pensions	—			162,439			—			—			162,439
Regulatory and other liabilities	—			62,093			8,633			—			70,726
Advances for construction	—			185,834			1,443			—			187,277
Contributions in aid of construction	—			125,381			29,206			—			154,587
	$	484,989		$	1,626,174		$	137,507		$	(503,517	)	$	1,745,153

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING BALANCE SHEET

As of December 31, 2010

(In thousands)

	ParentCompany			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
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 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

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			—			—			(14,689		)	—
Net income (loss)	$	14,909		$	15,232		$	(580	)	$	(14,652	)	$	14,909

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the three months ended June 30, 2010

(In thousands)

	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
Operating revenue	$	—		$	111,376		$	6,945		$	—		$	118,321
Operating expenses:
Operations:
Water production costs	—			39,556			2,278			—			41,834
Administrative and general	—			16,581			1,899			—			18,480
Other operations	—			12,954			2,049			(254		)	14,749
Maintenance	—			4,951			207			—			5,158
Depreciation and amortization	—			10,113			590			(65		)	10,638
Income tax (benefit) expense	(71		)	7,134			(381		)	409			7,091
Property and other taxes	—			3,567			520			—			4,087
Total operating expenses	(71		)	94,856			7,162			90			102,037
Net operating income (loss)	71			16,520			(217		)	(90		)	16,284
Other Income and Expenses:
Non-regulated revenue	290			2,313			1,560			(471		)	3,692
Non-regulated expense, net	—			(2,593		)	(1,098		)	—			(3,691		)
Income tax benefit (expense) on other income and expense	(118		)	109			(191		)	200			—
Net other income	172			(171		)	271			(271		)	1
Interest:
Interest expense	174			6,730			379			(344		)	6,939
Less: capitalized interest	—			(706		)	(329		)	—			(1,035		)
Net interest expense	174			6,024			50			(344		)	5,904
Equity earnings of subsidiaries	10,312			—			—			(10,312		)	—
Net income	$	10,381		$	10,325		$	4		$	(10,329	)	$	10,381

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF INCOME

For the six months ended June 30, 2010

(In thousands)

	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
Operating revenue	$	—		$	194,989		$	13,604		$	—		$	208,593
Operating expenses:
Operations:
Water production costs	—			68,023			4,266			—			72,289
Administrative and general	—			32,021			3,903			—			35,924
Other operations	—			24,727			3,842			(254		)	28,315
Maintenance	—			9,756			353			—			10,109
Depreciation and amortization	—			20,280			1,215			(65		)	21,430
Income tax (benefit) expense	(95		)	8,622			(437		)	409			8,499
Property and other taxes	—			6,948			1,042			—			7,990
Total operating expenses	(95		)	170,377			14,184			90			184,556
Net operating income (loss)	95			24,612			(580		)	(90		)	24,037
Other Income and Expenses:
Non-regulated revenue	530			4,772			2,714			(903		)	7,113
Non-regulated expense, net	—			(5,175		)	(2,062		)	—			(7,237		)
Gain on sale of non-utility property	—			—			—			—			—
Income tax (expense) benefit on other income and expense	(216		)	164			(270		)	382			60
Net other income (expense)	314			(239		)	382			(521		)	(64		)
Interest:
Interest expense	234			13,099			745			(650		)	13,428
Less: capitalized interest	—			(1,260		)	(594		)	—			(1,854		)
Net interest expense	234			11,839			151			(650		)	11,574
Equity earnings of subsidiaries	12,224			—			—			(12,224		)	—
Net income (loss)	$	12,399		$	12,534		$	(349	)	$	(12,185	)	$	12,399

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the six months ended June 30, 2011

(In thousands)

	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
Operating activities:
Net income (loss)	$	14,909		$	15,232		$	(580	)	$	(14,652	)	$	14,909
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity earnings of subsidiaries	(14,689		)	—			—			14,689			—
Dividends received from affiliates	12,826			—			—			(12,826		)	—
Depreciation and amortization	23			24,475			1,401			(62		)	25,837
Change in value of life insurance contracts	—			(40		)	—			—			(40		)
Gain on sale of non-utility assets	—			(62		)	—			—			(62		)
Other changes in noncurrent assets and liabilities	—			8,084			541			—			8,625
Changes in operating assets and liabilities:
Net (decrease) increase in advances to affiliates	(9,959		)	3,620			6,339			—			—
Other changes, net	864			(2,477		)	(14		)	25			(1,602		)
Net adjustments	(10,935		)	33,600			8,267			1,826			32,758
Net cash provided by operating activities	3,974			48,832			7,687			(12,826		)	47,667
Investing activities:
Utility plant expenditures	—			(46,233		)	(6,035		)	—			(52,268		)
Purchase of life insurance	—			(1,658		)	—			—			(1,658		)
Restricted cash	—			(220		)	—			—			(220		)
Proceeds from affiliate long-term debt	515			22			36			(573		)	—
Proceeds from sale of non-utility assets	—			63			—			—			63
Net cash provided by (used in) investing activities	515			(48,026		)	(5,999		)	(573		)	(54,083		)
Financing Activities:
Short-term borrowings	9,010			—			—			—			9,010
Repayment of short-term borrowings	—			—			—			—			—
Repayment of affiliate long-term borrowings	(58		)	—			(515		)	573			—
Proceeds from long-term debt	—			—			110			—			110
Repayment of long-term borrowings	—			(1,007		)	(319		)	—			(1,326		)
Advances and contributions in aid for construction	—			4,441			620			—			5,061
Refunds of advances for construction	—			(2,999		)	(9		)	—			(3,008		)
Dividends paid to non-affiliates	(12,826		)	—			—			—			(12,826		)
Dividends paid to affiliates	—			(11,451		)	(1,375		)	12,826			—
Net cash (used in) financing activities	(3,874		)	(11,016		)	(1,488		)	13,399			(2,979		)
Change in cash and cash equivalents	615			(10,210		)	200			—			(9,395		)
Cash and cash equivalents at beginning of period	188			40,446			1,643			—			42,277
Cash and cash equivalents at end of period	$	803		$	30,236		$	1,843		$	—		$	32,882

CALIFORNIA WATER SERVICE GROUP

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the six months ended June 30, 2010

(In thousands)

	Parent Company			Cal Water			All Other Subsidiaries			Consolidating Adjustments			Consolidated
Operating activities:
Net income (loss)	$	12,399		$	12,534		$	(349	)	$	(12,185	)	$	12,399
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity earnings of subsidiaries	(12,224		)	—			—			12,224			—
Dividends received from affiliates	12,367			—			—			(12,367		)	—
Depreciation and amortization	—			21,619			1,303			(65		)	22,857
Change in value of life insurance contracts	—			83			—			—			83
Other changes in noncurrent assets and liabilities	—			(753		)	(255		)	—			(1,008		)
Changes in operating assets and liabilities:
Net increase (decrease) in advances to affiliates	(10,159		)	1,761			8,398			—			—
Other changes, net	(229		)	(3,127		)	1,855			26			(1,475		)
Net adjustments	(10,245		)	19,583			11,301			(182		)	20,457
Net cash provided by operating activities	2,154			32,117			10,952			(12,367		)	32,856
Investing activities:
Utility plant expenditures	—			(50,686		)	(9,772		)	—			(60,458		)
Purchase of life insurance	—			(1,706		)	—			—			(1,706		)
Restricted cash	—			(13		)	—			—			(13		)
Proceeds from affiliates long-term debt	1,531			—			—			(1,531		)	—
Net cash provided by (used in) investing activities	1,531			(52,405		)	(9,772		)	(1,531		)	(62,177		)
Financing Activities:
Short-term borrowings	8,150			35,000			—			—			43,150
Repayment of short-term borrowings	—			—			—			—			—
Repayment of affiliate long-term borrowings	—			—			(1,531		)	1,531			—
Proceeds from long-term debt	—			5,805			2,098			—			7,903
Repayment of long-term borrowings	—			(11,083		)	(1,104		)	—			(12,187		)
Advances and contributions in aid for construction	—			1,563			57			—			1,620
Refunds of advances for construction	—			(2,999		)	(19		)	—			(3,018		)
Dividends paid to non-affiliates	(12,367		)	—			—			—			(12,367		)
Dividends paid to affiliates	—			(11,329		)	(1,038		)	12,367			—
Net cash (used in) provided by financing activities	(4,217		)	16,957			(1,537		)	13,898			25,101
Change in cash and cash equivalents	(532		)	(3,331		)	(357		)	—			(4,220		)
Cash and cash equivalents at beginning of period	532			6,000			3,334			—			9,866
Cash and cash equivalents at end of period	$	—		$	2,669		$	2,977		$	—		$	5,646