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, 2000
-------------
OR
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
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CALIFORNIA WATER SERVICE GROUP
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(Exact name of registrant as specified in its charter)
Delaware 77-0448994
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(Sate or other jurisdiction (I.R.S. Employer identification No.)
of incorporation or organization)
1720 North First Street, San Jose, CA. 95112
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(Address of principal executive offices) (Zip Code)
1-408-367-8200
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(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
---
APPLICABLE ONLY TO ISSURERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
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 27, 2000 - 15,145,866. This form 10-Q contains a total of 13 pages.
<PAGE>
PART I FINANCIAL INFORMATION
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
This Form 10-Q filing of California Water Service Group (Company)
contains forward looking statements. The forward looking statements are intended
to qualify for the "safe harbor" established by the Private Securities
Litigation Reform Act of 1995. Forward looking statements generally contain
words or phrases such as anticipates, assumes, believes, expects, estimates,
projects and based on management's judgement. Statements that describe goals,
objectives, plans or expectations are also forward looking. Actual results may
vary materially from what is contained in a forward looking statement. Factors
which may cause a different than expected or anticipated result include
regulatory commission decisions, new legislation, litigation settlements,
increases in supplier prices, the adequacy of water supplies, changes in
environmental compliance requirements, acquisitions, changes in customer water
use patterns and the impact of weather on operating results.
PRESENTATION
Prior period financial and operating amounts have been restated to give
retroactive effect to the Company's merger with Dominguez Services Corporation
(Dominguez) which was completed in the current quarter and the two Washington
state mergers that were completed in the quarter ended December 31, 1999. Each
of the mergers was completed under pooling-of-interest accounting rules.
DOMINGUEZ MERGER
The merger between the Company and Dominguez was completed on May 25,
2000 after receiving California Public Utilities Commission (Commission)
approval. Dominguez shareholders received 1.38 Company common shares for each
Dominguez share owned. A total of 2,210,254 new common shares were issued to
complete the transaction. For 1999, Dominguez reported net income of $2,052,000
on revenue of $28,497,000 from approximately 40,000 customers. At December 31,
1999, Dominguez' total assets were $57,889,000.
At the time of the merger, Dominguez became a district of California
Water Service Company (Cal Water). A team consisting of representatives from the
two companies worked to accomplish a smooth transition. To maximize operating
efficiencies, the Company is moving forward to consolidate the Dominguez,
Hermosa-Redondo and Palos Verdes district operations at a single location.
RESULTS OF SECOND QUARTER OPERATIONS
Second quarter net income was $5,753,000, equivalent to $0.38 per
common share. This represents a $0.02 decrease from the $0.40 earned in last
year's second quarter.
Operating results for the current quarter in comparison to last year's
second quarter were negatively impacted by Dominguez merger transaction
expenditures and the lack of gains from real estate sales this year. Combined
these two items accounted for $0.09 per share in lower earnings. The Dominguez
merger expenses incurred in the current quarter had a negative impact of $0.07
per share. In the second quarter of 1999, real estate sales contributed $0.02
per share to earnings. Both of these items are discussed in more detail below.
Operating revenue increased $6,731,000 to $65,963,000. There was little
rainfall in either year, however, somewhat warmer weather this year caused an
increase in customer usage throughout the service territories. Average revenue
per customer increased $13.65 or 10%. 5,200 new customers were added in the last
twelve months. A breakdown of the increase in operating revenue is presented in
the following table:
<PAGE>
Increased consumption $5,787,000
Rate increases 457,000
Usage by new customers 487,000
----------
Net revenue increase $6,731,000
==========
Total operating expenses were $56,986,000 in 2000 versus $50,792,000 in
1999, a 12% increase.
Water production costs, which are the largest components of total
operating expenses, include purchased water, purchased power and pump taxes.
They accounted for 46% of total operating expenses and increased 15% compared to
last year. Well production provided 53% of the supply with 46% purchased from
wholesale suppliers and the remaining 1% obtained from the San Francisco
Peninsula watershed. The components of water production costs for the second
quarter and the changes from last year are shown in the table below:
2000 Cost Change
--------- ------
Purchased water $20,331,000 $2,950,000
Purchased power 3,940,000 389,000
Pump taxes 2,063,000 110,000
----------- ----------
Total $26,334,000 $3,449,000
=========== ==========
The purchased water increase was primarily attributable to wholesale
water suppliers' rates increases and the increase in water production to supply
customer usage. The three San Francisco Peninsula districts which obtain most of
their supply from the San Francisco Water Department experienced a 37% rate
increase effective for water purchased in June 1999. Five other districts were
impacted by wholesaler water rate increases ranging from 2% to 7% since last
year's second quarter. Purchased water cost increases are generally passed on to
retail customers through the balancing account procedures. Purchased power and
pump taxes increased in response to additional pumping to meet customers' water
usage.
Other operations expense categories increased $2,239,000. The impact
of a general wage increase, which was effective at the start of the year,
additional hours worked and increases in related employee benefits expenses were
significant factors in the increase. During the quarter, $1,776,000 in Dominguez
merger expenses was paid compared to $331,000 last year. Included in the
expenses were success fees paid to the investment bankers that represented the
Company and Dominguez in the transaction, severance payments to certain
Dominguez employees who choose not to continue employment with the Company, and
legal and accounting fees.
Depreciation and amortization expense increased $478,000 mainly due to
increased depreciation expense authorized by the California Public Utilities
Commission (Commission) in rate case decisions and a greater depreciable plant
investment. The additional expense is reflected in customer rates. Federal and
state income taxes decreased $270,000 because of lower taxable income.
Other income and expenses was $623,000 compared to $1,279,000 last
year. Other income in 1999 included $596,000 in gains from the sales of two real
estate parcels as part of the Company's ongoing real estate program. Work
continues on completing other sales of non-operating property late this year or
early next year.
RESULTS FOR THE SIX MONTHS
Net income for the six months ending June 30, 2000 was $7,286,000,
equivalent to $0.48 per common share compared to the $0.59 earned for the same
period last year. As discussed below, the earnings comparison was impacted by
Dominguez merger costs and last year's gains from the real estate program.
Operating revenue increased $7,799,000 to $112,689,000. The higher
revenue was primarily due to increased customer usage during the second quarter.
Since January 1, 2000, 1,466 new customers have been added. Average consumption
per metered customer increased 9% from last year and average revenue per
customer increased $14.84 or 6%. A breakdown of the increase in operating
revenue is accounted for in the following table:
<PAGE>
Increased consumption 5,960,000
Rate increases 934,000
Usage by new customers 905,000
----------
Net revenue increase $7,799,000
==========
Total operating expenses increased 8%.
Water production was 8% more than last year. Well production provided
51% of the supply with 48% purchased from wholesale suppliers and 1% produced
through a local watershed. Because of the increase in production, water
production costs that include purchased water, purchased power and pump taxes
were up $3,799,000. The components of water production expense and the changes
from last year are shown in the table below:
Year to Date
------------
2000 Cost Change
--------- ------
Purchased water $33,015,000 $3,311,000
Purchased power 5,996,000 457,000
Pump taxes 3,168,000 31,000
----------- ----------
Total $42,179,000 $3,799,000
=========== ==========
In addition to water production costs, other operations expense
categories increased $3,374,000. The impact of the 3.0% general wage increase,
which was effective at the start of the year, additional hours worked and
increases in related employee benefits increased operating expenses. During
2000, $1,980,000 in expenses related to the Dominguez merger were recorded.
Included in the expenses were success fees paid to the investment bankers that
represented the Company and Dominguez in the transaction, severance payments to
certain Dominguez employees who choose not to continue employment with the
Company, and legal and accounting fees. Legal fees also increased due to
expenses incurred for the Delaware reincorporation. The CPUC reimbursement fee
increased because of higher customer billings.
Maintenance expense were higher due to work at pump stations and more
main repairs.
Depreciation and amortization expense increased due to increased
depreciation expense authorized by the Commission in rate case decisions and a
greater depreciable plant investment. The additional expense is reflected in
customer rates.
Federal and state income taxes lower due to a decline in taxable
income.
Net other income was $952,000 compared to $2,498,000 last year. Other
income in 2000 included $1,144,000 from nonregulated operations. Netted against
other income was $191,000 of other expenses, which included contributions and
the costs of operating and maintaining nonregulated properties. In 1999, other
income included approximately $1,200,000 in gains from the sales of
non-operating properties. There were no corresponding property sales completed
this year.
REGULATORY MATTERS
After several public sessions, the City of Hawthorne city council
approved a rate increase for the Hawthorne water system that the Company
operates under a long-term lease. The new rates, which will be effective in
early August 2000, will add $210,000 in annual revenue in the first year. Step
rate increases of $238,000 each will be effective on July 1, 2001 and 2002.
Additionally, there will be a surcharge added to customer bills for a two-year
period starting in August 2001 designed to produce $448,000 in annual revenue
annually.
Effective in August 2000, offset rate increases to recover increases in
water production expenses will be effective in four Cal Water districts. The
rate increases will generate an estimated $1.1 million in additional 2000
revenue and $2.8 million on an annualized basis.
<PAGE>
Prior to its merger with the Company, Dominguez had filed a general
rate increase application with the Commission. The application was unrelated to
the merger. A Commission decision is expected in this year's third quarter. If
the application is approved as submitted, the new rates are estimated to
increase revenue by about $1.1 million over the first twelve month period. A
total of $800,000 in additional revenue is expected from step rate increases
that will be effective in the two years following the decision.
The Company's regulatory staff has completed a review of the 15 Cal
Water districts that are eligible for general rate filings this year. Based on
current earnings levels, projected expense increases and expected capital
expenditures, applications will be filed for three districts representing about
25% of total Cal Water customers. The requested increase would provide an
estimated $4,642,000 in new revenue in 2001 and $4,336,000 in 2002. The
applications, which request a return on common equity of 10.75%, were filed in
July and decisions are expected during the second quarter 2001.
Washington Water Service Company will be filing general rate
applications requesting $400,000 in additional revenue for its two districts
during the third quarter.
LIQUIDITY
Interest expense on long-term debt decreased by $102,000 for the second
quarter as compared to 1999's second quarter. The decrease resulted from a
reduction in outstanding first mortgage bonds due to sinking fund payments made
in November 1999.
Short-term interest expense increased $319,000 because of increased
borrowings this year. In March 1999, the Series B senior notes were issued. The
proceeds were used to reduce short-term bank borrowings and as a result also
reduced short-term interest expense. At June 30, 2000, $23.2 million was
outstanding under short-term borrowing arrangements at an effective interest
rate of 8%. At June 30, 1999, short-term borrowings were $8.1 million.
The second quarter common dividend was paid on May 15, 2000 at $0.275
per share. The $0.275 represents a $0.00375 or 1.4% increase in the quarterly
dividend rate from last year as approved by the Board of Directors at their
January meeting. Annualized, the 2000 dividend rate is $1.10 per common share
compared to $1.085 in 1999. Based on the 12-month earnings per share at June 30,
2000, the dividend payout ratio is 83%. At their July 19, 2000 meeting,
Directors declared the third quarter dividend payable August 15, 2000.
Preferred dividends were paid in the second quarter on May 15, 2000.
The regular third quarter dividend was declared by the Board, payable August 15,
2000.
Book value per common share was $12.84 at June 30, 2000 compared to
$12.53 a year earlier.
During the quarter, utility plant expenditures totaled $11,831,000 for
additions to and replacements of utility plant. The 2000 Company construction
budget is $38,000,000.
NONQUALIFIED STOCK OPTIONS
The Long Term Incentive Plan (Plan) was approved by stockholders at
their 2000 annual meeting. Options were granted at the board's June 28, 2000
meeting. The options, which were granted at the New York Stock Exchange's
closing price on the date of grant of $23-1/16, are for a ten-year term and vest
25% per year during their first four years. A total of 53,500 options were
granted as follows: 12,500 to the chief executive officer; 8,000 to the
chairman; and, 3,000 each to 11 other officers of the Company.
WATER SUPPLY
The Company believes that its various sources of water supply are
sufficient to meet customer demand for the remainder of the year. Historically,
roughly half of the water source is purchased from wholesale suppliers with the
other half pumped from wells. A small portion is developed through local runoff
on the San Francisco Peninsula.
Storage in California reservoirs was 118% of historic average as of
April 25, 2000. Groundwater levels in all districts remain adequate. An abundant
mountain snowpack provides runoff to streams and reservoirs as it melts during
the summer months.
ACCOUNTING PRONOUNCEMENTS
No accounting pronouncements were issued or effective during the period
that would have a significant impact on the Company.
<PAGE>
MARKET RISK
The Company does not hold, trade in or issue derivative financial
instruments and therefore is not exposed to risks these instruments present.
The Company's market risk to interest rate exposure is limited because
the cost of long-term financing, including interest costs, are covered in
consumer water rates as approved by the Commission. The Company does not have
foreign operations, therefore, it does not have a foreign currency exchange
risk.
The Company's sensitivity to commodity prices is most affected by
changes in purchased water and purchased power costs. Through the Commission's
balancing account procedures, increases in purchased water and purchased power
costs can be passed on to consumers. The Company manages other commodity price
exposure through the duration and terms of its vendor contracts.
<PAGE>
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to the stockholders that have not been
previously reported. Results of stockholder voting at the April 19, 2000 annual
meeting were reported in the first quarter 10Q.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K.
Exhibit 27, Financial Data Schedule for the quarter ended June 30, 2000
(b) An 8K was filed on June 8, 2000 to report that the merger between the
Company and Dominguez Services Corporation was completed on that date.
To complete the merger, the Company issued 2,210,254 shares of its
common stock to Dominguez shareholders.
As a result of the merger of the Company and Dominguez effective on May
25, 2000, an 8K-A, Amendment #1, was filed on August 4, 2000 to present
the Company's audited supplemental consolidated balance sheet as of
December 31, 1999 and 1998, and related supplemental consolidated
statements of income, common stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1999,
along with the notes to the supplemental consolidated financial
statements and independent auditors' report.
As a result of the merger of the Company and Dominguez effective on May
25, 2000, an 8K-A, Amendment #2, was filed on August 7, 2000 presenting
unaudited pro forma condensed combined financial information for the
years ended December 31, 1999, 1998 and 1997 and for the quarter ended
March 31, 2000.
SIGNATURES
Pursuant to the requirement of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the authorized undersigned.
CALIFORNIA WATER SERVICE GROUP
------------------------------
Registrant
August 7, 2000
/s/ Gerald F. Feeney
Gerald F. Feeney
Vice President, Chief Financial Officer
and Treasurer
<PAGE>
CALIFORNIA WATER SERVICE GROUP
CONSOLIDATED BALANCE SHEET
(In thousands) June 30, December 31,
2000 1999
---- ----
ASSETS
Utility plant:
Utility plant $ 831,979 $ 812,686
Less depreciation and amortization 259,491 248,296
--------- ---------
Net utility plant 572,488 564,390
--------- ---------
Current assets:
Cash and cash equivalents 2,906 2,379
Receivables 21,139 19,110
Unbilled revenue 9,387 8,199
Materials and supplies at average cost 2,983 2,247
Taxes and other prepaid expenses 5,093 6,416
--------- ---------
Total current assets 41,508 38,351
--------- ---------
Other assets:
Regulatory assets 37,536 37,441
Other deferred assets 5,353 5,325
--------- ---------
Total other assets 42,889 42,766
--------- ---------
$ 656,885 $ 645,507
========= =========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock, $.01 par value $ 151 $ 151
Additional paid-in capital 49,984 49,340
Retained earnings 144,914 145,610
Accumulated other comprehensive loss (517) (517)
--------- ---------
Total common stockholders' equity 194,532 194,584
Preferred stock 3,475 3,475
Long-term debt, less current maturities 169,472 168,866
--------- ---------
Total capitalization 367,479 366,925
--------- ---------
Current liabilities:
Current maturities of long-term debt 2,651 2,747
Short-term borrowings 23,195 13,999
Accounts payable 27,537 26,748
Accrued expenses and other liabilities 18,881 19,217
--------- ---------
Total current liabilities 72,264 62,711
Unamortized investment tax credits 3,089 3,096
Deferred income taxes 26,457 25,796
Regulatory and other liabilities 22,797 22,544
Advances for construction 105,949 105,556
Contributions in aid of construction 58,850 58,879
--------- ---------
$ 656,885 $ 645,507
========= =========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
For the three months ended: June 30, June 30,
2000 1999
---- ----
Operating revenue $65,963 $59,232
------- -------
Operating expenses:
Operations 44,019 38,331
Maintenance 2,392 2,403
Depreciation and amortization 4,742 4,264
Income taxes 3,387 3,657
Property and other taxes 2,446 2,137
------- -------
Total operating expenses 56,986 50,792
------- -------
Net operating income 8,977 8,440
Other income and expenses, net 623 1,279
------- -------
Income before interest expense 9,600 9,719
------- -------
Interest expense:
Long-term debt interest 3,313 3,415
Other interest 534 215
------- -------
Total interest expense 3,847 3,630
------- -------
Net income $ 5,753 $ 6,089
======= =======
Basic and diluted earnings per share
of common stock $ 0.38 $ 0.40
======= =======
Average number of common shares
outstanding - basic 15,118 15,090
======= =======
- diluted 15,149 15,092
======= =======
Dividends per share of common stock $0.2750 $0.2713
======= =======
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CALIFORNIA WATER SERVICE GROUP
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
For the six months ended: June 30, June 30,
2000 1999
---- ----
Operating revenue $112,689 $104,890
-------- --------
Operating expenses:
Operations 75,411 68,237
Maintenance 5,144 4,744
Depreciation and amortization 9,213 8,726
Income taxes 4,338 5,194
Property and other taxes 4,705 4,348
-------- --------
Total operating expenses 98,811 91,249
-------- --------
Net operating income 13,878 13,641
Other income and expenses, net 952 2,498
-------- --------
Income before interest expense 14,830 16,139
-------- --------
Interest expense:
Long-term debt interest 6,630 6,487
Other interest 914 695
-------- --------
Total interest expense 7,544 7,182
-------- --------
Net income $ 7,286 $ 8,957
======== ========
Basic and diluted earnings per share
of common stock $ 0.48 $ 0.59
======== ========
Average number of common shares
outstanding - basic 15,106 15,089
======== ========
- diluted 15,148 15,094
======== ========
Dividends per share of common stock $ 0.5500 $ 0.5425
======== ========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CALIFORNIA WATER SERVICE GROUP
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
For the twelve months ended: June 30, June 30,
2000 1999
---- ----
Operating revenue $242,736 $227,017
-------- --------
Operating expenses:
Operations 160,080 145,166
Maintenance 9,909 9,545
Depreciation and amortization 17,733 16,901
Income taxes 12,659 13,334
Property and other taxes 9,496 8,865
-------- --------
Total operating expenses 209,877 193,811
-------- --------
Net operating income 32,859 33,206
Other income and expenses, net 1,967 3,534
-------- --------
Income before interest expense 34,826 36,740
-------- --------
Interest expense:
Long-term debt interest 13,226 12,504
Other interest 1,300 1,417
-------- --------
Total interest expense 14,526 13,921
-------- --------
Net income $ 20,300 $ 22,819
======== ========
Basic and diluted earnings per share
of common stock $ 1.33 $ 1.51
======== ========
Average number of common shares
outstanding - basic 15,098 15,051
======== ========
- diluted 15,150 15,060
======== ========
Dividends per share of common stock $ 1.0925 $ 1.0775
======== ========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CALIFORNIA WATER SERVICE GROUP
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended
(In thousands)
June 30, June 30,
2000 1999
---- ----
Operating activities
Net income $ 7,286 $ 8,957
-------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,213 8,726
Deferred income taxes, investment tax credits
regulatory assets and liabilities, net 812 2,757
Changes in operating assets and liabilities:
Receivables (2,029) (3,660)
Unbilled revenue (1,188) (2,067)
Accounts payable 789 7,194
Other current liabilities (336) (1,100)
Other changes, net 42 30
-------- --------
Net adjustments 7,303 11,880
-------- --------
Net cash provided by operating activities 14,589 20,837
-------- --------
Investing activities:
Utility plant expenditures (18,006) (17,539)
-------- --------
Financing activities:
Net short-term borrowings 9,196 (14,852)
Net long-term debt 510 19,959
Issuance of common stock 644 --
Advances for construction 2,827 3,293
Refunds of advances for construction (2,016) (2,000)
Contributions in aid of construction 765 1,279
Dividends paid (7,982) (7,671)
-------- --------
Net cash provided by financing activities 3,944 8
-------- --------
Change in cash and cash equivalents 527 3,306
Cash and cash equivalents at beginning of period 2,379 1,760
-------- --------
Cash and cash equivalents at end of period $ 2,906 $ 5,066
======== ========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Notes to Condensed Consolidated Financial Statements
1. The Merger between California Water Service Group (Company) and Dominguez
Services Corporation (Dominguez) was completed on May 25, 2000. Dominguez'
primary operations are as a regulated water utility. The merger was
accounted for as a pooling of interests. Accordingly, the Company's interim
financial statements and footnotes presented in this report have been
restated to include the accounts and results of Dominguez as if the merger
had been completed as of the beginning of the earliest period presented.
Certain reclassifications were made to the historic financial statements of
the companies to conform presentation.
<TABLE>
2. To complete the Merger with Dominguez, the Company issued 2,210,254 shares
of its common stock to Dominguez shareholders. There were no intercompany
transactions as a result of the Merger. For the periods indicated below,
the Company and Dominguez reported the following items:
<CAPTION>
Unaudited - In Thousands
------------------------
3 months 3 months 6 months 6 months 12 months 12 months
Ended Ended Ended Ended Ended Ended
6-30-00 6-30-99 6-30-00 6-30-99 6-30-00 6-30-99
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Company $57,962 $52,111 $98,457 $91,965 $212,932 $200,428
Dominguez 8,001 7,121 14,232 12,925 29,804 26,589
-------- -------- -------- -------- -------- --------
$65,963 $59,232 $112,689 $104,890 $242,736 $227,017
Net income:
Company $4,936 $5,649 $6,139 $8,271 $17,787 $21,858
Dominguez 817 440 1,147 686 2,513 961
-------- -------- ------- -------- --------- ----------
$5,753 $6,089 $7,286 $8,957 $20,300 $22,819
</TABLE>
Dominguez previously reported the net of tax extraordinary items
related to merger transaction expenses. For reporting purposes, the Company
reclassified the extraordinary items into "Operating expenses" under
"Operations" in the financial statements filed as part of this 10Q report.
The reclassified amounts were for the: three months ended June 30, 1999,
$91,000; six months ended June 30, 2000, $167,000; six months ended June
30, 1999, $114,000; twelve months ended June 30, 2000, $334,000; twelve
months ended June 30, 1999, $0.
No adjustments were made to the Dominguez net assets to adopt the same
accounting practices of the Company. Dominguez previously reported
$1,542,000 of common stock that was reclassified by the Company to paid in
capital in accordance with the Company's financial statement presentation.
The Company and Dominguez each had December 31 year-ends, therefore no
adjustment was required to retained earnings due to a change in fiscal
year-ends.
3. Due to the seasonal nature of the water business, the results for interim
periods are not indicative of the results for a twelve month period.
4. The interim financial statements are unaudited. In the opinion of
management, the accompanying financial statements reflect all adjustments
which are necessary to provide a fair statement of the results for the
periods covered. The adjustments consist only of normal recurring
adjustments.
5. Basic earnings per share is calculated by dividing income available to
common stockholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is calculated by
dividing income available to common stockholders by the weighted average
number of common shares outstanding and potentially dilutive shares.
6. Refer to 1999 Annual Report on Form 10-K for a summary of significant
accounting policies and detailed information regarding the financial
statements.
7. The Company operates primarily in one business segment providing water
utility services.
