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California Water Service Group has a market cap of $736.5 million; its shares were traded at around $35.4 with a P/E ratio of 19.1 and P/S ratio of 1.7. The dividend yield of California Water Service Group stocks is 3.3%. California Water Service Group had an annual average earning growth of 3.2% over the past 10 years.CWT is in the portfolios of Kenneth Fisher of Fisher Asset Management, LLC, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:Second quarter of 2010 net income was $10.4 million equivalent to $0.50 per diluted common share compared to net income of $12.1 million or $0.58 per diluted common share in the second quarter of 2009. The decrease in net income is primarily due to a significant reduction to other income and expenses mostly from a decline in the cash surrender value of life insurance contracts associated with our benefit plans. In addition, interest expenses increased $0.6 million as a result of the issuance of $100 million of first mortgage bonds on April 17, 2009 and additional short-term borrowings of $43.2 million during 2010 on the unsecured revolving lines of credit.
Federal and state income taxes charged to operating expenses and other income and expenses decreased $0.7 million, from a provision of $7.8 million in the second quarter of 2009 to $7.1 million in the second quarter of 2010, due to a decrease in pretax income. We expect the effective tax rate to be between 38% and 40% for fiscal year 2010.
Net income for the six-month period ended June 30, 2010, was $12.4 million, or $0.60 per diluted common share compared to net income of $14.5 million or $0.70 per diluted common share for the six months ended June 30, 2009. The decrease in net income is primarily attributable to a significant reduction in other income and expenses from a decline in the cash surrender value of life insurance contracts associated with our benefit plans from a loss of $0.1 million for six months ended June 30, 2010 compared to a gain of $1.8 million in the same period last year, a non-recurring property sale of $0.7 million during the six months ended June 30, 2009, and a $0.6 million increase in new business costs incurred during the first six months of 2010 to evaluate potential acquisitions. In addition, interest expenses increased due to the issuance of $100 million first mortgage bonds on April 17, 2009, additional short-term borrowings of $43.2 million during 2010 on the unsecured revolving lines of credit, and additional other long-term debt of $7.9 million.
Other income and expense, net of income taxes, was a loss of $0.1 million for the six months ended June 30, 2010, compared to income of $2.0 million in the same period last year, which was a decrease of $2.1 million. The decrease was primarily attributable to a $0.1 million decline in the cash surrender value of life insurance contracts associated with our benefit plans during the first six months of 2010 compared to a gain of $1.8 million during the first six months of 2009. In addition, there was a non-recurring property sale of $0.7 million during the first six months of 2009 and a $0.6 million increase in new business costs incurred during the first six months of 2010 to evaluate potential acquisitions.
Net interest expense increased $1.9 million to $11.6 million for the period ended June 30, 2010 compared to the six-month period ended June 30, 2009. This increase was attributable to the additional interest on Cal Water’s first mortgage bonds, additional short-term borrowings of $43.2 million on the unsecured revolving lines of credit, and additional other long-term debt of $7.9 million during the six months ended June 30, 2010.
On July 2, 2009, Cal Water filed its required application for a general review of rates for all operating districts and general operations. The application, A.09-07-001, requests an annual increase in rates of $70.6 million on January 1, 2011, $24.8 million on January 1, 2012, and $24.8 million on January 1, 2013. The filing marks the beginning of an eighteen month review process. On June 28, 2010, Cal Water filed a settlement of most issues in the proceeding with the Commission’s Division of Ratepayer Advocates and several other parties. Based on its past practice, the Commission will consider the settlement but is not obligated to approve it. The Commission may also approve only portions of the settlement. However, if the settlement were adopted in whole, it would add $34.3 million to annual gross revenue beginning in January 2011. Cal Water expects the Commission will issue its decision in the fourth quarter of 2011. The Commission is generally required under state law to allow Cal Water interim rates and an effective date of January 1, 2011 if a decision is not rendered in the proceeding by that date.
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