Oct 26, 2017   SOURCE: BusinessWire

SJW Group Announces 2017 Third Quarter Financial Results

SJW Group (NYSE: SJW) today reported financial results for the third quarter ended September 30, 2017. SJW Group net income was $19.5 million for the quarter ended September 30, 2017, compared to $19.0 million for the same period in 2016. Diluted earnings per share were $0.94 and $0.92 for the quarters ended September 30, 2017 and 2016, respectively.

Operating revenue was $124.6 million for the quarter ended September 30, 2017 compared to $112.3 million in the same period in 2016. The $12.3 million increase in revenue was primarily attributable to $10.6 million in cumulative rate increases and $4.5 million in higher customer usage. These increases were partially offset by $2.6 million in lower revenue recorded in our Water Conservation Memorandum Account ("WCMA").

Water production expenses for the third quarter of 2017 were $53.0 million compared to $45.0 million for the same period in 2016, an increase of $8.0 million. The increase in water production expenses was attributable to $4.3 million in higher per unit costs for purchased water, groundwater extraction and energy charges and $4.0 million in higher customer water usage, which were partially offset by $339,000 due to an increase in the use of available surface water supplies. Operating expenses, excluding water production costs, increased $2.4 million to $33.4 million from $31.0 million. The increase was primarily due to $1.0 million of higher administrative and general expenses, $946,000 of higher depreciation expenses due to assets placed in service in 2016, and $398,000 in higher maintenance and property taxes and other non-income taxes.

The effective consolidated income tax rates were 41% and 40% for the quarters ended September 30, 2017 and 2016, respectively.

Year-to-date net income was $41.9 million, compared to $39.1 million in 2016. Diluted earnings per share were $2.03 in the first nine months of 2017, compared to $1.90 per diluted share for the same period in 2016.

Year-to-date operating revenue increased by $35.3 million to $295.7 million from $260.4 million in the first nine months of 2017. The increase was attributable to $34.2 million in cumulative rate increases, $6.1 million in higher customer usage, $2.6 million in higher revenue recorded in our WCMA, and a $1.3 million change in the net recognition of certain other balancing and memorandum accounts. These increases were partially offset by $8.8 million in true-up revenue recognized as a part of our 2016 California General Rate Case decision in the prior year.

Year-to-date water production expenses increased to $117.6 million from $93.3 million in 2016. The $24.3 million increase was attributable to $13.4 million in higher per unit costs for purchased water, groundwater extraction and energy charges, $6.0 million in higher expenses due to a decrease in the use of available surface water supplies, and $4.8 million in higher customer water usage. Operating expenses, excluding water production costs, increased $7.9 million to $98.3 million from $90.4 million. The increase was primarily due to $3.8 million in higher administrative and general expenses, $2.7 million of higher depreciation expenses, and $1.4 million in higher maintenance and property taxes and other non-income taxes. The increase in administrative and general expenses was primarily due to an increase in salaries and an increase in regulatory fees due to higher usage.

Other expense and income in the first nine months of 2017 included a pre-tax gain of $6.3 million on the sale of 444 West Santa Clara Street Limited Partnership's interests in the commercial building and land the partnership owned and sale of undeveloped land which SJW Land Company owned for a pre-tax gain of $580,000. Other expense and income in the first nine months of 2016 included a pre-tax gain on the sale of 159,151 shares of California Water Service Group stock for $3.2 million.

The effective consolidated income tax rates were 39% and 40% for the nine-month periods ended September 30, 2017 and 2016, respectively.

The Directors of SJW Group today declared a quarterly dividend on common stock of $0.2175 per share. The dividend is payable on December 1, 2017 to stockholders of record on November 6, 2017.

SJW Group is a publicly traded holding company headquartered in San Jose, California. SJW Group is the parent company of San Jose Water Company, SJWTX, Inc., Texas Water Alliance Limited, and SJW Land Company. Together, San Jose Water Company and SJWTX, Inc. provide water service to more than one million people in San Jose, California and nearby communities and in Canyon Lake, Texas and nearby communities. SJW Land Company owns and operates commercial real estate investments.

This press release may contain certain forward-looking statements including, but not limited to, statements relating to SJW Group's plans, strategies, objectives, expectations and intentions, which are made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of SJW Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Results for a quarter are not indicative of results for a full year due to seasonality and other factors. Other factors that may cause actual results, performance or achievements to materially differ are described in SJW Group's most recent reports on Form 10-K, Form 10-Q and Form 8-K filed with the Securities and Exchange Commission. SJW Group undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

   

SJW Group

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(in thousands, except per share data)

 
Three months ended September 30, Nine months ended September 30,
2017   2016 2017   2016
OPERATING REVENUE $ 124,578   112,344   $ 295,696   260,400  
OPERATING EXPENSE:
Production Expenses:
Purchased water 30,833 28,681 66,938 52,863
Power 2,500 2,141 5,491 4,992
Groundwater extraction charges 15,756 10,867 34,098 25,627
Other production expenses 3,874   3,311   11,040   9,815  
Total production expenses 52,963 45,000 117,567 93,297
Administrative and general 13,477 12,449 39,494 35,690
Maintenance 4,374 4,217 12,293 12,082
Property taxes and other non-income taxes 3,454 3,213 10,260 9,115
Depreciation and amortization 12,065   11,119   36,217   33,489  
Total operating expense 86,333   75,998   215,831   183,673  
OPERATING INCOME 38,245 36,346 79,865 76,727
OTHER (EXPENSE) INCOME:
Interest expense (5,541 ) (5,426 ) (17,354 ) (16,330 )
Gain on sale of California Water Service Group stock — — — 3,197
Gain on sale of real estate investment — 124 6,903 124
Other, net 359   427   1,436   939  
Income before income taxes 33,063 31,471 70,850 64,657
Provision for income taxes 13,523   12,512   27,055   25,545  
NET INCOME BEFORE NONCONTROLLING INTEREST 19,540 18,959 43,795 39,112
Less net income attributable to the noncontrolling interest —   —   1,896   —  
SJW GROUP NET INCOME 19,540 18,959 41,899 39,112
Other comprehensive income, net 80 (169 ) 252 848
Reclassification adjustment for gain realized on sale of investments, net —   —   —   (1,742 )
SJW GROUP COMPREHENSIVE INCOME $ 19,620   18,790   $ 42,151   38,218  
 
SJW GROUP EARNINGS PER SHARE:
Basic $ 0.95 0.93 $ 2.04 1.91
Diluted $ 0.94 0.92 $ 2.03 1.90
DIVIDENDS PER SHARE $ 0.22 0.20 $ 0.65 0.61
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 20,516 20,452 20,502 20,434
Diluted 20,697 20,602 20,675 20,581
 
   

SJW Group

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)

 
September 30,
2017 		December 31,
2016
ASSETS
Utility plant:
Land $ 18,237 17,923
Depreciable plant and equipment 1,614,139 1,554,016
Construction in progress 111,935 70,453
Intangible assets 25,164   23,989
Total utility plant 1,769,475 1,666,381
Less accumulated depreciation and amortization 542,890   520,018
Net utility plant 1,226,585   1,146,363
 
Real estate investments 56,224 62,193
Less accumulated depreciation and amortization 10,844   11,734
Net real estate investments 45,380   50,459
CURRENT ASSETS:
Cash and cash equivalents 7,569 6,349
Restricted cash — 19,001
Accounts receivable and accrued unbilled utility revenue 62,961 53,795
Current regulatory assets, net 11,368 16,064
Other current assets 5,223   4,402
Total current assets 87,121   99,611
OTHER ASSETS:
Investment in California Water Service Group 3,815 3,390
Regulatory assets, net 140,911 135,709
Other 7,758   7,844
152,484   146,943
$ 1,511,570   1,443,376
 
   

SJW Group

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)

 
September 30,
2017 		December 31,
2016
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock $ 21 21
Additional paid-in capital 83,856 81,715
Retained earnings 366,818 338,386
Accumulated other comprehensive income 1,776   1,524
Total stockholders’ equity 452,471 421,646
Long-term debt, less current portion 431,009   433,335
Total capitalization 883,480   854,981
CURRENT LIABILITIES:
Line of credit 13,000 14,200
Accrued groundwater extraction charge, purchased water and purchased power 21,696 10,846
Accounts payable 30,658 18,739
Accrued interest 7,247 6,309
Accrued payroll 3,695 4,696
Accrued property taxes and other non-income taxes 3,635 1,681
Non-refundable deposit 3,000 —
Other current liabilities 10,487   7,102
Total current liabilities 93,418   63,573
 
DEFERRED INCOME TAXES 206,343 205,203

ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF CONSTRUCTION

241,944 236,391
POSTRETIREMENT BENEFIT PLANS 73,532 70,177
OTHER NONCURRENT LIABILITIES 12,853   13,051
$ 1,511,570   1,443,376