California Water Service Group Annual Report 2014

FY2014 Annual Report · California Water Service Group

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California Water Service Group
2014 Annual Report

ON PURPOSE

We believe that like good people, good
companies have a purpose. Our purpose
is to improve the quality of life for our
customers, communities, stockholders,
and employees. It’s why we get up in the
morning. It’s what motivates us to do our
very best. It’s our true north.

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Table of Contents

On Purpose 1

Highlights Review 10

Letter to Stockholders 13

Service Area Maps 22

Eight-Year Financial Review 25

Board of Directors 27

Corporate Officers 28

California Water Service Group (NYSE: CWT) is the third largest investor-owned water
utility in the United States, providing high- quality utility services to approximately
two million people in more than 100 communities through six subsidiaries: California
Water Service Company (Cal Water), Hawaii Water Service Company, Inc. (Hawaii
Water), New Mexico Water Service Company (New Mexico Water), Washington Water
Service Company (Washington Water), CWS Utility Services (CWSUS), and HWS Utility
Services (HWSUS). Cal Water, Hawaii Water, New Mexico Water, and Washington Water
provide regulated water and wastewater utility services, while CWSUS and HWSUS
conduct the Company’s non-regulated business, which includes providing billing, water
quality testing, and water and wastewater system operations and management services to
cities and other companies.

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Roadmap 2014

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Lewis Carroll’s Cheshire Cat said to Alice in Wonderland, “If you don’t know where
you’re going, any road will take you there.” This might have confused poor Alice, but
it’s crystal clear to us: the first step in getting where you need to be is knowing where
you need to be. Then, you follow the strategic roadmap that will get you there.

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ONE
WAY

Our Promise. The road to fulfilling our purpose starts with our brand promise: Quality. Service. Value. We know, it’s
pretty simple. Heck, it doesn’t even rhyme. But remember, we’re not a slick Wall Street firm with a Madison Avenue
ad agency feeding us clever slogans. Instead, we’re a company that succeeds by fulfilling our promise to deliver
quality, service, and value in everything we do. And that’s the way we like it; we don’t mind leaving the rhyming to
someone else.

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KEEP

RIGHT

Our Core Values. Pointing us in the right direction, our core values are like rules of the road. Think of your morning
commute: if your fellow drivers weren’t following the rules of the road, you might have a difficult time reaching your
destination safely. Our core values – integrity, service, value, health and safety, corporate citizenship, and respect
and collaboration – drive how we do business. Just as you wouldn’t go 75 miles per hour in a school zone, we
wouldn’t operate in a way that is inconsistent with our core values.

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PASS
WITH
CARE

Our Goals. So, we know where we’re headed, we know where to start, and we know the rules of the road. But how
do we get there? We get there by achieving our goals: affordable, excellent service; enhanced stockholder value;
high-quality water and wastewater service; outstanding reputation; and employees who are our best advocates.

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Affordable, excellent service. On Purpose. It would be easy to keep water rates low if you stopped investing
in your water systems, ignored increasingly stringent water quality standards, and hired untrained, non-certified
people to serve your customers. But that’s not what we do. Instead, we work hard to keep rates as low as possible
while making the investments necessary to provide a reliable, safe water supply and top-notch, responsive service.
In 2014, we invested in our water systems, conducted more than 440,000 water quality tests, and surpassed
customer service expectations. And we did it in nearly all of our service areas for less than a penny per gallon.

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Enhanced stockholder value. On Purpose. You’ve heard the adage, “buy low, sell high,” but that’s not really
how it works for our stockholders. Our stockholders invest over the long term because we provide an irreplaceable,
valuable service and we have a track record of deIivering reliable, steady results. In order to provide value to
stockholders, we must invest diligently in infrastructure and work effectively with our regulatory commissions to
ensure that rates accurately reflect the costs of providing service. We did both in 2014, investing $132 million in
capital projects that ensure customers receive safe and reliable water service, and working with our regulatory
commissions to obtain approval to increase rates by $45 million.

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High-quality water and wastewater. On Purpose. We’ve said it before and we’ll say it again: health and
safety are our highest priorities. That’s why our dedicated water quality team rigorously monitors the quality of
water we deliver to our customers. In addition to testing the water for the presence of more than 100 constituents
in 2014, we continued to improve our cross-connection control program, which prevents substances from the
customer’s property from entering the water system. On the wastewater side, the emphasis is on treating the water
to be discharged in a manner that is safe for the environment, and in 2014, we met or surpassed all wastewater
discharge standards.

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Outstanding reputation. On Purpose. Over the years, we have earned a reputation for being a good
corporate citizen. And we want to keep it, so we put our money where our mouth is. In 2014, we implemented a
hardship grant program for customers, introduced a scholarship program for students in our service areas, and
offered a new, activity-based conservation program to our schools. Going forward, we will continue to build our
reputation by contributing to our communities, taking care of the environment, and demonstrating leadership in
water conservation.

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Employees as our best advocates. On Purpose. Every single one of our employees plays a part in
helping us achieve our purpose. Roadblocks may present themselves, but it is our employees’ ingenuity and
dedication that enable us to navigate around them. In 2014, we conducted a company-wide survey to measure
employee engagement, and we couldn’t be more pleased with the results; we scored extremely well, outperforming
the industry benchmark in nearly every category. Even better: for the third consecutive year, we were named one of
the Top 100 Workplaces in the San Francisco Bay Area.

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Financial Highlights

Year ended December 31

2014

2013

Market price at year-end

$24.61

$23.07

2012

$18.35

2011

2010

$ 18.26

$18.64

Book value per share

$13.11

$12.54

$11.30

$10.76

$10.45

Earnings per share (diluted)

$1.19

$1.02

$1.17

Dividend per share

$0.650

$0.640

$0.630

$0.90

$0.615

$0.90

$0.595

Revenue*

Net income*

*Dollars in thousands

$ 597,499

$584,103

$559,966

$501,814

$460,399

$56,738

$47,254

$ 48,828

$ 37,712

$37,656

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Highlights 2014

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2014 Review

Cal Water implements a new injury reporting management system for employees that reduces
Total Case Incident Rate by 26%

Company finalizes its cyber-security incident response plan

Officer Paul G. Townsley testifies before two key legislative committees about affordability and
low-income customer assistance programs

Cal Water is named a Top 100 Workplace in the Bay Area by Bay Area News Group

Hawaii Water receives approval to increase rates in Waikoloa Resort system to cover increased costs

Cal Water receives top conservation honor from Kern County’s Kern Green, as well as the
Corporate Leadership Award from the Carson Chamber of Commerce

Cal Water converts last flat-rate customers in Chico and Willows to metered service to encourage water conservation

Cal Water launches scholarship and hardship grant programs

Cal Water receives approval on its 2012 General Rate Case

Company contributes $136,000 to make the holidays brighter for the needy, plus $1,000 more to replace toys
stolen from the Salvation Army in Marysville

Company provides specialized safety training to all wastewater employees

Company implements new, comprehensive IT Security Policy

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Highlights 2014

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CWT 20 -Year Total Return on Investment
(On $100 of stock purchased on December 31, 1994, with dividends reinvested)

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

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20-Year Total Return 2014

$700

$600

$500

$400

$300

$200

$100

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Dear Fellow Stockholder:

If you’ve been with us for any length of time, you know that
each year we take this opportunity to communicate highlights
of our performance, and invariably, we focus on our customers,
communities, stockholders, and employees. This, as you can
see from our strategic roadmap, is no accident.

Everything we do goes back to our purpose: to enhance the
quality of life for our customers, communities, stockholders,
and employees. We realize that may sound a bit lofty for a
water and wastewater utility, but if you think about it, doesn’t
having a clean, safe, reliable water supply delivered right to
the tap make our customers’ lives better? Whether we are
contributing to charitable community organizations that help
those in need, paying our 279th consecutive quarterly dividend
to stockholders, or supporting our employees’ professional
development, we are improving quality of life.

We are proud to have such an important purpose, and we
are pleased to report our progress in following our strategic
roadmap in 2014.

Martin A. Kropelnicki
President and Chief Executive Officer

(Right)

Peter C. Nelson
Chairman of the Board

Goal: Enhanced Stockholder Value
In 2014, net income was $56.7 million and earnings per share was $1.19. The annual dividend of $0.65 was
increased for the 47th consecutive year and paid for the 279th consecutive quarter. The share price at year-end
was $24.61.

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Our financial results were better than expected this year, primarily because we received authorization to increase
rates by $45 million in 2014, operated within budget, invested $132 million in capital projects to benefit our
communities, and continued to focus on tax planning.

These three areas are key to our success going forward: operating efficiently, investing responsibly in water system
improvements that enable us to provide safe, reliable water service to our customers, and progressively managing
regulatory affairs.

In its decision on Cal Water’s 2012 General Rate Case, the California Public Utilities Commission authorized us
to spend $449 million on projects that will improve service and reliability for our customers. Our engineering and
district personnel are working diligently to complete these important improvements on time and on budget.

We are currently preparing to file our next GRC in California, which we are required to submit in 2015 for a
scheduled decision in 2017. We have also developed rate case plans for our other subsidiaries to ensure that
rates accurately reflect the costs of providing safe, reliable water service and allow us to earn a reasonable return
on our investments in infrastructure.

And, as always, we will maintain the strong balance sheet that has earned us an A+ Stable rating from Standard &
Poor’s through prudent fiscal management, diligent risk mitigation, and a disciplined approach to growth.

Goal: Affordable, Excellent Service

Let’s begin with affordability. There’s no avoiding the fact that the costs of providing high-quality water and
wastewater utility services are increasing for myriad reasons, not the least of which include the need to invest
in water system infrastructure and meet new water quality and environmental standards. In fact, water rates
throughout the nation are increasing at a rate that significantly outpaces inflation. We recognize that this poses
difficulties for our customers. That’s why we approach the challenge from two angles: we look for ways to reduce
costs and increase efficiencies, and we provide a helping hand to those who need it most.

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First, our Continuous Improvement approach to business makes every employee responsible for improving
efficiency. Beyond the many innovative Continuous Improvement projects completed in 2014, we:

• Deployed our mobile workforce system in our East Los Angeles, Rancho Dominguez, and Bayshore Districts,

reducing windshield time and increasing the number of service calls that can be handled each day.

• Analyzed and adjusted our pumping schedules to use energy when it is least expensive.

• Pilot-tested smart-meter technology to identify additional time-of-use savings opportunities for power usage

and identify and replace less efficient pumps more quickly.

• Used correlators and data loggers to pinpoint water main leaks more precisely, thereby reducing the time and

materials required for repairs.

• Purchased analytical equipment for our state-certified water quality laboratory in San Jose that will reduce costs

of water quality testing at outside laboratories.

• Researched and identified the most cost-effective approaches for meeting the new chromium-6 standard

in California.

Despite our best efforts, some customers still have difficulty paying for water service, especially in areas where
water rates are relatively high because there are fewer customers to share the costs of securing an adequate water
supply and providing necessary treatment.

For these service areas, we provide a discount through our Rate Support Fund, which is a first in California’s
regulated water utility industry. And in 2014, we received approval from the California Public Utilities Commission
to increase this discount as part of our 2012 General Rate Case.

Customers in Lucerne, California receive this discount, but their rates are still high. So when the Lucerne system
required an investment in pumping equipment in 2014, we worked diligently to secure a grant from the State of
California. Rather than making the investment and earning a return on it, we chose to put time and effort into the
grant process in order to make the necessary modifications without impacting Lucerne customers’ rates.

Similarly, we were extremely concerned about the impact that the new chromium-6 standard would have on rates in
a few of our California districts, despite the work we had done to identify the lowest-cost treatment method. We were
thrilled to announce in February 2015 that we were successful in securing two grants that will significantly reduce
the rate impact in our Willows District. The first is a $5 million grant from the State of California, and the second is a
$175,000 grant from a nationally recognized water research foundation.

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Customer Service
Performance Measures

> o r =
9 7 %

9 9 .6 %

a
o
G
C
U
P
C

> o r =
8 0 %

a
o
G
C
U
P
C

r
e
t
a
W

a
C

92 %

r
e
t
a
W

a
C

% of accurate
bills produced

% of calls answered
in 30 seconds

9 8 .7 %

> o r =
9 5 %

a
o
G
C
U
P
C

r
e
t
a
W

a
C

% on time for
scheduled
appointments

Even in the majority of our service areas where water
rates account for a small fraction of the total household
budget, there are still customers who need help. To
complement our Low-Income Rate Assistance Program,
we introduced another program in 2014: our Cal Water
Cares Hardship Grant Program. The new program is
intended to help customers who have experienced a
catastrophe, such as loss of a job or serious illness, and
need help paying their bill.

As for service, in 2014, we surpassed all nine of the
California Public Utilities Commission’s customer service
performance measures, which set goals for customer
calls, billing, payment processing, meter reading, service
appointments, and complaints. Although the numbers
are important to us, they pale in comparison to notes
like this one from a customer in Westlake: “With Bill, you
have a real professional on your hands. His customer
service and work were excellent.” Or this one, from New
Mexico: “It is rare today to find any entity that delivers
true customer service.

Thank you for truly caring about the people in the
communities you serve.” Or this one, from Washington:
“Brian has the welfare of his customers as his top
priority, and we benefitted greatly from his prompt and
knowledgeable support.”

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But it takes more than great people to provide excellent service; in 2014, we also invested diligently in water
systems in order to deliver a reliable water supply, particularly in the face of historic drought conditions.
2014 water system improvements included:

• About 60,000 feet of new water mains

• Four new wells and rehabilitation of four existing wells

• Seven new storage tanks

• Two new water treatment facilities

• 12 emergency power generators

Although December 2014 brought significant rainfall,
California is facing a fourth year of drought. Many
believe that extended dry periods are the “new normal”
for the state. Cal Water has been working diligently
for many years to ensure that our water supplies are
reliable and that our customers use water wisely.
In fact, our customers are taking advantage of our
industry-leading water conservation programs, and in
many areas have already achieved the state goal of
20% per capita water use reduction by the year 2020.

Conservation Programs

21% Irrigation System Rebates

11% Conservation Kits

32% Sprinkler Nozzle Distribution

3% Toilet Rebates

5% Clothes Washer Rebates

28% Large Landscape Water Use
Reports and Surveys

As we look to 2015, we are closely monitoring our sources
of supply, augmenting and optimizing groundwater resources
where available, and preparing to meet mandated water use reductions if required by either state regulatory
agencies or the wholesale agencies that provide us with surface water from outside of our service areas. In the
long term, we are considering how continuing drought, climate change, and an ever-increasing population will
affect water supplies and water rates throughout the state. It is clear that all California water providers will need
to take further steps to optimize water resources, including water conservation, conjunctive use (the coordinated
management of surface and groundwater supplies), recycled water, and desalinated water, to meet future challenges.

8,619,084,801 Gallons Saved

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Goal: High-Quality Water and Wastewater Service
Really a component of excellent service, providing high-quality water and wastewater service is a foundation of our
business. As for our drinking water operations, in 2014, our San Jose laboratory once again earned certification by
the Environmental Laboratory Accreditation Program, a rigorous process that requires all of our scientists to pass
blind-study proficiency tests each year for every water quality test performed. Our state-of-the-art lab, which is
certified to conduct analyses in microbiology, inorganic chemistry, toxic chemical elements, organic chemistry, and
radio chemistry, currently tests our water supplies for 109 contaminants.

On the wastewater side of the business, we recruited an experienced, highly qualified Wastewater Manager to
oversee wastewater operations. Under his leadership, our team conducted an audit of all of our wastewater
plants, developed standard operating procedures, and prepared quick reference guides for each facility, all of which
ensures that the facilities are operated optimally.

Goal: Outstanding Reputation as a Good Corporate Citizen
Our commitment to making lives better is evidenced by our support for our communities. We have a long history
of contributing time and resources to worthwhile charitable organizations, and in 2014, we contributed more than
$550,000 to feed the hungry, comfort the sick, and care for the children in our California, Washington, Hawaii, and
New Mexico service areas. Because we are active in our communities, we are able to respond when needs arise, as
was the case when we stepped in to help renovate and reopen four parks in Marysville; offered assistance to King
City customers who lost their homes to a devastating fire; and played Santa to kids in Yuba and Sutter Counties after
thieves stole Christmas toys from the regional Salvation Army.

In addition to our ongoing efforts to support our communities, in 2014, Cal Water introduced a scholarship program
for students in its service areas. Thirty-one students were awarded scholarships ranging from $1,000 to $10,000 for
college, technical, or vocational schools, based upon their financial need, scholastic achievement, and community
service. Their response was gratifying. As one student said, “Your generosity has inspired me to help others and give
back to the community. I hope one day I will be able to help students achieve their goals just as you’ve helped me.”

Another new initiative for 2014: a five-year pledge to the Tower Foundation of San Jose State University in support of
student and faculty activities and programs of the Charles W. Davidson College of Engineering. The contribution will
allow Professor Juneseok Lee, his students, and Cal Water technical staff to work collaboratively on issues facing
the water industry. This joint effort will provide information and solutions that will improve efficiency and service to
our customers.

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Another aspect of corporate citizenship that contributes to a solid reputation: environmental stewardship and
conservation leadership. In 2014, we undertook numerous “green” initiatives, most of which relate to increasing
energy efficiency, recycling, and minimizing the impact of our operations on wildlife and air quality. Though these
are important, we make the greatest positive impact through our water supply management and conservation
efforts, particularly in light of historic drought conditions in California.

In 2014, landmark legislation was passed in California to mandate the management of groundwater basins, with
a goal of preventing overdraft. Most of the groundwater we pump comes from legally or collaboratively managed
sources. In some of our service areas, court-appointed watermasters or groundwater management authorities are
responsible for regulating pumping and managing recharge efforts. In others, we partner with other organizations
on regional groundwater recharge efforts, as is the case in both the San Francisco Bay Area and surrounding valleys.
In severe droughts, our groundwater supplies are like savings banks that help to meet our needs when surface water
supplies are limited; however, careful monitoring and recharge are critical to ensure long-term reliability.

2014 Company-wide
Contributions by Classification

2.22% Police, Fire, and Veterans
4.28% Service Organizations

39.60% Education

6.55% Community Events

4.82% Community & Environmental Health

30.02% Poverty & Hunger Alleviation

10.17% Children
1.37% Animals
0.98% Other

$ 552,000

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Recycled water use is another important part of integrated water supply management. We currently provide
recycled water to customers in our Rancho Dominguez and Westlake Districts. We also reuse treated waste-water
in Hawaii to reduce potable water demand.

Water conservation is the centerpiece of our environmental stewardship, and we’re proud of our industry- leading
program. In 2014, we:

• Provided $281,925 in rebates on high-efficiency clothes washers,

for an annual water savings of 7,846,512 gallons.

• Distributed 50,026 sprinkler nozzles, which will save 52,147,102 gallons per year.

• Provided 1,437 high-efficiency toilets through our direct-install and rebate programs,

for an annual savings of 5,222,567 gallons.

We also introduced an exciting new project-based school education program, called the Cal Water H2O Challenge,
which enables fourth- through sixth-grade classes in our service areas to complete science-based, water-related
projects and compete for an educational field trip to the Channel Islands. A companion program, Cal Water Town,
is an interactive tool on our web site that enables kids and their parents to learn about conservation.

As you can imagine, the drought has caused us to step up our outreach, and we continue to see a response from
our California customers, who saved a collective 8,619,084,801 gallons in 2014.

Goal: Employees Who Are Our Best Advocates
Employees have always been key to our success, but what do we mean when we say we want our employees to be
our best advocates? To go back to the strategic roadmap metaphor, we want them in the car, driving with us toward
our shared purpose. That means taking pride in what we stand for, living our core values, and helping us achieve
our objectives. And they’re doing just that.

In 2014, we surveyed all employees to measure engagement levels and identify any opportunities for
improvement. Overall, our results were excellent, surpassing our industry benchmark in nearly every category.
One thing that was clear from the results is that our employees care. They care about our customers. They care
about each other. And they care about doing what’s right.

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In 2014, Marty had the opportunity to hear directly from many employees as he visited nearly every district.
He continues to make it a priority to communicate with all employees, making more district visits in the first
quarter of 2015.

The company also had the opportunity to address employee concerns during the labor negotiation process.
Working with the Utility Workers Union of America and the International Federation of Professional and Technical
Engineers, we reached a six-year labor agreement in January 2015 that addressed the highest priorities of all
involved. This was the first time that Ronald D. Webb, our new Vice President of Human Resources, led the
negotiation process, and he was, in his own words, “extraordinarily impressed by the collaborative and productive
relationship the Company has with its unions.”

Ron wasn’t the only newcomer to our officer team; in December, the Board elected Shannon C. Dean as Vice
President, Corporate Communications & Community Affairs, and Michelle R. Mortensen as Corporate Secretary.
It also promoted David B. Healey to Vice President, Controller, and Lynne P. McGhee to Vice President, General
Counsel. We said goodbye to Robert R. Guzzetta, who retired as Vice President, Engineering & Water Quality
after 37 years of service, and Helen R. Del Grosso, who retired as Vice President, Human Resources after
6 years of service.

At the board level, we welcomed incoming Director Terry P. Bayer. As Chief Operating Officer of Molina Healthcare,
Inc., Terry has an excellent track record as the top operating executive at a large company, and she brings more
than 30 years of healthcare management experience to the position.

We all look forward to working together in the coming year to fulfill our purpose and improve the quality of life
for our customers, communities, employees, and stockholders. As always, we thank you for your continued
investment and wish you the very best in the coming year.

Martin A. Kropelnicki
President and Chief Executive Officer

Peter C. Nelson
Chairman of the Board

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Washington
Operations/ Customer Centers

Hawaii
Operations/ Customer Centers

Olympia (S.W. Regional Office) • Gig Harbor (N.W.Regional Office and

(Maui) Ka’anapali • (Hawaii) Waikoloa

Customer Center) • Sequim • Issaquah • Orcas Island (Field Offices)

Serving more than 425 neighborhoods and small communities

Serving the communities of Ka’anapali, Pukalani, Waikoloa,

in the counties of Clallam, Jefferson, Kitsap, Mason, Pierce, King,

and Kukio on the islands of Maui and Hawaii.

San Juan, and Thurston.

Regulated Customer Connections

16,000 2013

16,300 2014

Regulated Customer Connections

4,200 2013

4,300 2014

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Operations 2014

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New Mexico
Operations / Customer Centers

Elephant Butte • Rio Communities

California
Districts

Antelope Valley • Bakersfield • Bayshore • Bear Gulch • Chico • Commerce •
Dixon • Dominguez • East Los Angeles • Hawthorne • Hermosa-Redondo •
Kern River Valley • King City • Livermore • Los Altos • Marysville • Oroville •
Palos Verdes • Redwood Valley • Salinas • Selma • Stockton • Visalia •
Westlake • Willows

Serving the communities of Meadow Lake, Cypress Gardens,

Customer Connections*

Rio Communities, Rio Del Oro, Elephant Butte, and Sandia

Knolls in the counties of Sierra, Valencia, and Bernalillo.

Regulated Customer Connections

7,600 2013

7,600 2014

475,100 2013

477,900 2014

* Numbers include Hawthorne
and Commerce lease agreements

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Operations 2014

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California Districts & Communities

2014

2013

Antelope Valley • Fremont Valley, Lake Hughes, Lancaster & Leona Valley

Bakersfield

Bayshore • South San Francisco, Colma, Broadmoor, San Mateo & San Carlos

Bear Gulch • Atherton, Woodside, Portola Valley & a portion of Menlo Park

Chico • Hamilton City

Dixon

Dominguez • Carson & portions of Compton, Harbor City, Long Beach, Los Angeles County & Torrance

East Los Angeles • Portions of Montebello, Commerce, Monterey Park & Vernon

Hawthorne & Commerce (lease agreements)

Hermosa-Redondo • Hermosa Beach, Redondo Beach & a portion of Torrance

Kern River Valley • Bodfish, Kernville, Lakeland, Mountain Shadows, Onyx, Squirrel Valley, South Lake & Wofford Heights

King City

Livermore

Los Altos • Portions of Cupertino, Los Altos Hills, Mountain View & Sunnyvale

Marysville

Oroville

Palos Verdes • Palos Verdes Estates, Rancho Palos Verdes, Rolling Hills & Rolling Hills Estates

Redwood Valley • Lucerne & portions of Duncans Mills, Guerneville, Dillon Beach, Noel Heights & Santa Rosa

Salinas

Selma

Stockton

Visalia

Westlake • Westlake Village & a portion of Thousand Oaks

Willows

1,400

70,100

53,500

18,900

28,700

2,900

34,000

26,800

7,600

26,700

4,100

2,600

18,500

18,900

3,700

3,600

24,100

1,900

28,400

6,300

43,300

42,400

7,100

2,400

1,400

69,600

53,300

18,800

28,400

2,900

33,900

26,700

7,500

26,700

4,200

2,500

18,400

18,800

3,700

3,500

24,100

1,900

28,300

6,300

43,000

41,700

7,100

2,400

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Operations 2014

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Eight -Year Financial Review Years 2011-2014

(Dollars in thousands, except common share and other data)

2014

2013

2012

2011

Summary of Operations

Operating revenue

Operating expenses

Interest expense, other income and expenses, net

Net income

Common Share Data

Earnings per share - diluted

Dividend declared

Dividend payout ratio

Book value

Market price at year-end

Common shares outstanding at year-end (in thousands)

Return on average common stockholders’ equity

Long-term debt interest coverage

Balance Sheet Data

Net utility plant

Total assets

Long-term debt, including current portion

Capitalization ratios:

Common stockholders’ equity

Preferred stock

Long-term debt

Other Data

$597,499

$515,652

$25,109

$56,738

$584,103

$510,098

$26,751

$47,254

$559,966

$501,814

$486,123

$434,647

$25,015

$48,828

$29,455

$37,712

$1.19

$0.650

55%

$13.11

$24.61

47,806

9.3%

4.29

$1.02

$ 0.640

63%54%

$12.54

$23.07

47,741

8.8%

3.42

$1.17

$0.630

68%

$11.30

$18.35

41,908

10.6%

3.45

$0.90

$0.615

66%

$10.76

$18.26

41,817

8.5%

3.11

$1,590,431

$ 2,187,351

$425,840

$1,515,831

$1,457,056

$1,381,119

$1,959,855

$1,995,924

$1,854,587

$434,050

$481,250

$488,165

59.5%

0 .0%

40.5%

58.0%

0.0 %

42.0%

126,363

502,900

2,200

$1,161

4,401

1,125

49.6%

0.0%

50.4%

125,892

500,700

1,200

$1,118

4,187

1,131

48.0%

0.0%

52.0%

120,353

499,500

1,600

$1,005

3,925

1,132

Water production (million gallons)

118,282

Customers at year-end, including Hawthorne and Commerce

506,100

New customers added

Revenue per customer

Utility plant per customer

Employees at year-end

3,200

$1,181

4,628

1,105

Eight-Year Review 2014

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Eight -Year Financial Review Years 2007-2010 (compared to 2014)

(Dollars in thousands, except common share and other data)

2014

2010

2009

2008

2007

Summary of Operations

Operating revenue

Operating expenses

Interest expense, other income and expenses, net

Net income

Common Share Data

Earnings per share - diluted

Dividend declared

Dividend payout ratio

Book value

Market price at year-end

Common shares outstanding at year-end (in thousands)

Return on average common stockholders’ equity

Long-term debt interest coverage

Balance Sheet Data

Net utility plant

Total assets

Long-term debt, including current portion

Capitalization ratios:

Common stockholders’ equity

Preferred stock

Long-term debt

Other Data

$597,499

$515,652

$25,109

$56,738

$460,399

$449,372

$398,586

$391,253

$24,157

$37,656

$17,565

$40,554

$410,312

$352,843

$17,664

$39,805

$367,082

$322,912

$13,011

$31,159

$1.19

$0.650

55%

$13.11

$24.61

47,806

9.3%

4.29

$0.90

$0.595

66%

$10.45

$18.64

41,667

9.0%

3.59

$0.98

$0.590

61%

$10.13

$18.41

41,531

9.8%

4.04

$0.95

$0.585

62%

$9.72

$23.22

41,446

10.2%

4.72

$0.75

$0.580

77%

$9.33

$ 18.51

41,332

8.1%

3.70

$1,590,431

$ 2,187,351

$425,840

$1,294,297

$1,692,066

$481,561

$1,198,077

$1,525,581

$387,222

$1,112,367

$1,418,107

$290,316

$1,010,196

$1,184,499

$291,921

59.5%

0 .0%

40.5%

47.5%

0.0%

52.5%

121,942

497,900

3,200

$925

3,706

1,127

52.1%

0.0%

47.9%

131,558

494,700

4,207

$908

3,455

1,013

58.1%

0.0%

41.9%

137,757

490,493

2,938

$837

3,228

929

56.9%

0.5%

42.6%

141,238

487,555

3,662

$753

2,968

891

Water production (million gallons)

118,282

Customers at year-end, including Hawthorne and Commerce

506,100

New customers added

Revenue per customer

Utility plant per customer

Employees at year-end

3,200

$1,181

4,628

1,105

Eight-Year Review 2014

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Board of Directors

Martin A. Kropelnicki

Linda R. Meier

Peter C. Nelson

Terry P. Bayer

President and
Chief Executive Officer

19 months served
as a Board Member.

Member of the National Board of the
Institute of International Education

21 years served as a Board Member.

Member of the following Committees:
Audit, Organization/Compensation, and
Nominating/Corporate Governance.
t

Chairman of the Board

19 years served as
a Board Member.

Chief Operating Officer,
Molina Healthcare, Inc.

13 months served as
a Board Member.

Member of the following Committee:
Organization/Compensation
t

Edwin A. Guiles

George A. Vera

Richard P. Magnuson

Bonnie G. Hill

Thomas M. Krummel

Lester A. Snow

Former Executive
Vice President of
Corporate Development,
Sempra Energy

Former Vice President and
Chief Financial Officer,
the David and Lucile
Packard Foundation

7 years served as
a Board Member.

Member of the
following Committees:
Audit, Finance/
Risk Management,
and Organization/
Compensation.

17 years served as
a Board Member.

Member of the
following Committees:
Audit, Finance/
Risk Management,
and Nominating/
Corporate Governance.

Lead Director and Private
Venture Capital Investor

President of
B. Hill Enterprises, L.L.C.

19 years served as
a Board Member.

Member of the
following Committees:
Audit, Finance/Risk
Management, and
Nominating/Corporate
Governance.

12 years served as
a Board Member.

Member of the
following Committees:
Organization/Compensation
and Nominating/
Corporate Governance.

Directors 2014

Professor and Chair,
Surgery Department,
Stanford University
School of Medicine

5 years served as
a Board Member.

Member of the following
Committees: Organization/
Compensation and
Nominating/Corporate
Governance.

Former Director
of the California
Department of
Water Resources

4 years served as
a Board Member.

Member of the
following Committees:
Finance/Risk
Management
and Organization/
Compensation.

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Corporate Officers

Listed from left to right

David B. Healey
Vice President,
Controller

Lynne P. McGhee
Vice President,
General Counsel

Martin A. Kropelnicki
President and
Chief Executive Officer

Timothy D. Treloar
Vice President,
Operations

Michelle R. Mortensen
Corporate Secretary

Paul G. Townsley
Vice President,
Regulatory Matters and
Corporate Relations

Michael J. Rossi
Vice President,
Continuous Improvement

Ronald D. Webb
Vice President,
Human Resources

Francis S. Ferraro
Vice President,
Corporate Development

Officers 2014

Michael B. Luu
Vice President, Customer Service
and Information Technology

Shannon C. Dean
Vice President,
Corporate Communications
and Community Affairs

Thomas F. Smegal, III
Vice President,
Chief Financial Officer and Treasurer

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QUALITY
SERVICE
VALUE

AHEAD

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Corporate Information

American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, NY 11219
(800) 937-5449

To Transfer Stock
A change of ownership of shares (such as when stock is sold or gifted or
when owners are deleted from or added to stock certificates) requires
a transfer of stock. To transfer stock, the owner must complete the
assignment on the back of the certificate and sign it exactly as his or
her name appears on the front. This signature must be guaranteed
by an eligible guarantor institution (banks, stockbrokers, savings and
loan associations, and credit unions with membership in approved
signature medallion programs) pursuant to SEC Rule 17Ad -15. A notary’s
acknowledgement is not acceptable. This certificate should then be sent
to American Stock Transfer & Trust Company by registered or certified mail
with complete transfer instructions. Alternatively, the Direct Registration
System can be utilized, which allows electronic share transactions between
your broker or dealer and American Stock Transfer & Trust Company.

Bond Registrar
US Bank Trust, N.A.
One California Street
San Francisco, CA 94111-5402
(415) 273-4580

Annual Meeting
The Annual Meeting of Stockholders will be held on Wednesday,
May 27, 2015, at 9:30 a.m. at the Company’s Executive Office, located at
1720 North First Street in San Jose, California. Details of the business to be
transacted during the meeting will be contained in the proxy material, which
will be mailed to stockholders on or about April 15, 2015.

Anticipated Dividend Dates For 2015
Declaration
Quarter

Record Date

Payment Date

First

January 28 February 9 February 20

Second April 29 May 11 May 22

Third

July 29 August 10 August 21

Fourth October 28 November 9 November 20

Annual Report For 2014 On Form 10-K
A copy of the Company’s report for 2014 filed with the Securities and
Exchange Commission (SEC) on Form 10-K is available and can be
obtained by any stockholder at no charge upon written request to the
address below. The Company’s filings with the SEC can be viewed via the
link to the SEC’s EDGAR system on the Company’s web site.

Executive Office and Stockholder Information
California Water Service Group
Attn: Stockholder Relations
1720 North First Street
San Jose, CA 95112-4598
(408) 367-8200 or (800) 750-8200
www.calwatergroup.com

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California Water Service Group

1720 North First Street
San Jose, California 95112-4598
(408) 367-8200
www.calwatergroup.com

NYSE: CWT

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