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Forward-Looking Statements |
This annual report,
including the Letter to Stockholders and Management’s Discussion and
Analysis, (including, but not limited to, the section entitled “Critical
Accounting Policies and Estimates” found below, and the section entitled
“Risk Factors” in Item 1A on Form 10-K filed with the Securities and
Exchange Commission), 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, projections, and management’s judgment about the
Company, the water utility industry, and general economic conditions.
Such words as 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: governmental and regulatory commissions’ decisions, including
decisions on proper disposition of property and collection of regulatory
assets; changes in regulatory commissions’ policies and procedures; the
timeliness of regulatory commissions’ actions concerning rate relief;
new legislation; changes in accounting valuations and estimates; the
ability to satisfy requirements related to the Sarbanes-Oxley Act and
other regulations on internal controls; electric power interruptions;
increases in suppliers’ prices and the availability of supplies,
including water and power; fluctuations in interest rates; changes in
environmental compliance and water quality requirements; acquisitions
and the ability to successfully integrate acquired companies; the
ability to successfully implement business plans; changes in customer
water use patterns; the impact of weather on water sales and operating
results; access to sufficient capital on satisfactory terms; civil
disturbances or terrorist threats or acts, or apprehension about the
possible future occurrences of acts of this type; the involvement of the
United States in war or other hostilities; restrictive covenants in or
changes to the credit ratings on current or future debt that could
increase financing costs or affect the ability to borrow, make payments
on debt, or pay dividends; and other risks and unforeseen events. When
considering forward-looking statements, the reader should keep in mind
the cautionary statements included in this paragraph. The Company
assumes no obligation to provide public updates on forward-looking
statements. |
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Overview |
California Water Service
Group (Company) provides water utility services to customers in
California, Washington, New Mexico, and Hawaii. The majority of the
business is regulated by the respective state’s public utility
commission. The Company’s California water utility service operations
comprise the majority of the business and contributed 96% of revenues
and 95% of net income in 2005. The Company also has a regulated
wastewater business in New Mexico. Non-regulated activities relate
primarily to the water utility business and include operating,
maintenance, billing, meter reading, water testing services, and a new
Extended Service Protection (ESP) Program covering repairs to the
customer water line between the meter and the home. Further information
on the Company’s operations may be found in the Company’s Form 10-K
filed with the Securities and Exchange Commission (SEC). See page 68 of
this Annual Report for information on how to obtain a copy of Form 10-K.
The state regulatory entities governing the Company’s regulated
operations are referred to as “Commission(s)” in this report. Revenues,
income, and cash flows are earned primarily through delivering potable
water through pipes to homes, businesses, industries, and public
authorities. Rates charged to customers for the regulated business are
determined by the Commissions, which also set operating and customer
service standards. The rates are intended to allow recovery of operating
costs and a reasonable rate of return on invested capital.
Major risk factors affecting the financial performance of the Company
are: extensive regulation, decisions by state regulatory commissions,
and changes in laws and regulations; increased costs, such as
electricity, not recoverable from ratepayers; operating costs affected
by increased environmental regulations; lack of control over water
supply; inability to finance capital expenditures; acquisitions,
divestitures, or restructuring; failure and circumvention of controls
and procedures; and judgments and estimates regarding financial and
accounting matters. For additional information on “Risk Factors,” see
Item 1A of the Form 10-K on file with the SEC. See page 68 of this
Annual Report for information on how to obtain Form 10-K.
The most significant risk and challenge to the business during the past
several years has been obtaining timely rate relief to cover increased
costs and investments. The Company addresses this risk by having an
experienced team dedicated solely to pursuing rate increases and
managing Commission issues. |
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