Feb 22, 2018   SOURCE: BusinessWire

SJW Group Announces 2017 Annual and Fourth Quarter Financial Results

SJW Group (NYSE: SJW) today reported financial results for the annual and fourth quarter ended December 31, 2017. SJW Group net income was $59.2 million for the year ended December 31, 2017, compared to $52.8 million for the same period in 2016. Diluted earnings per share were $2.86 and $2.57 for the years ended December 31, 2017 and 2016, respectively.

Operating revenue was $389.2 million for the year ended December 31, 2017 compared to $339.7 million in 2016. The $49.5 million increase in revenue was primarily attributable to $41.1 million in cumulative rate changes, $15.4 million in higher customer usage, $1.2 million in revenue from new customers, $885,000 change in the net recognition of certain other balancing and memorandum accounts, $515,000 increase in recycled water revenue, and $179,000 in higher revenue recorded in our Water Conservation Memorandum Account ("WCMA"). These increases were partially offset by $8.8 million in true-up revenue recognized as a part of the decision on our 2016 California General Rate Case decision in the prior year and $1.0 million in lower revenue from our real estate operations.

Water production expenses for the year ended December 31, 2017 were $156.8 million compared to $124.3 million in 2016, an increase of $32.5 million. The increase in water production expenses was attributable to $17.0 million in higher per unit costs for purchased water, groundwater extraction and energy charges, $9.6 million in higher customer water usage, and $5.9 million due to a decrease in the use of available surface water supplies. Operating expenses, excluding water production costs, increased $12.1 million to $134.4 million from $122.3 million. The increase was primarily due to $7.0 million of higher administrative and general expenses, $3.6 million of higher depreciation expenses due to assets placed in service in 2016, and $1.5 million in higher maintenance and property taxes and other non-income taxes.

Other expense and income in 2017 included a pre-tax gain of $12.5 million related to the sale of Texas Water Alliance Limited to the Guadalupe-Blanco River Authority, $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 2016 included the condemnation sale of the Company's real estate investment property in Arizona for a pre-tax gain of approximately $10.0 million and a $3.2 million pre-tax gain on the sale of 159,151 shares of California Water Service Group stock.

The effective consolidated income tax rates were approximately 37% and 39% for the years ended December 31, 2017 and 2016, respectively.

Fourth Quarter Financial Results

Net income for the fourth quarter ended December 31, 2017 was $17.3 million, compared to $13.7 million in 2016. Diluted earnings per share were $0.84 and $0.67 for the quarters ended December 31, 2017 and 2016, respectively.

Operating revenue was $93.5 million in the quarter compared to $79.3 million in 2016. The $14.2 million increase in revenue was attributable to $9.2 million in higher customer usage, $7.5 million in cumulative rate changes, and $416,000 in revenue from new customers. These increases were partially offset by $2.5 million in lower revenue recorded in our WCMA and a $382,000 change in the net recognition of certain other balancing and memorandum accounts.

Water production expenses for the fourth quarter of 2017 were $39.2 million versus $31.0 million for the same period in 2016, an increase of $8.2 million. The increase in water production expenses was primarily attributable to $4.8 million in higher customer water usage and $3.5 million in higher per unit costs for purchased water, groundwater extraction and energy charges. Operating expenses, excluding water production costs, increased $4.2 million to $36.1 million from $31.9 million. The increase was primarily due to $3.2 million in higher administrative and general expenses, $939,000 of higher depreciation expenses, and $374,000 in higher property taxes and other non-income taxes. These increases were partially offset by $257,000 of lower maintenance expenses.

Other expense and income in the fourth quarter of 2017 included a pre-tax gain of $12.5 million related to the sale of Texas Water Alliance Limited to the Guadalupe-Blanco River Authority compared to the condemnation sale of the Company's real estate investment property in Arizona for a pre-tax gain of approximately $10.0 million in the same period of 2016.

The effective consolidated income tax rates were 33% and 37% for the quarters ended December 31, 2017 and 2016, respectively. The change is primarily due to the tax benefit related to the revaluation of deferred tax assets and liabilities due to the reduction in the federal statutory income tax rate arising from the Tax Cuts and Jobs Act of 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., 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 December 31,

Twelve months ended December 31,
2017   2016 2017   2016
OPERATING REVENUE $ 93,529   79,306   $ 389,225   339,706  
OPERATING EXPENSE:
Production Expenses:
Purchased water 19,518 20,108 86,456 72,971
Power 1,804 1,110 7,295 6,102
Groundwater extraction charges 13,719 6,461 47,817 32,088
Other production expenses 4,163   3,352   15,203   13,167  
Total production expenses 39,204 31,031 156,771 124,328
Administrative and general 15,517 12,348 55,011 48,038
Maintenance 5,137 5,394 17,430 17,476
Property taxes and other non-income taxes 3,382 3,008 13,642 12,123
Depreciation and amortization 12,075   11,136   48,292   44,625  
Total operating expense 75,315   62,917   291,146   246,590  
OPERATING INCOME 18,214 16,389 98,079 93,116
OTHER (EXPENSE) INCOME:
Interest expense (5,575 ) (5,508 ) (22,929 ) (21,838 )
Gain on sale of California Water Service Group stock — — — 3,197
Gain on sale of real estate investment — 10,295 6,903 10,419
Gain on sale of utility property 12,499 — 12,499 —
Other, net 505   548   1,941   1,487  
Income before income taxes 25,643 21,724 96,493 86,381
Provision for income taxes 8,338   7,997   35,393   33,542  
NET INCOME BEFORE NONCONTROLLING INTEREST 17,305 13,727 61,100 52,839
Less net income attributable to the noncontrolling interest —   —   1,896   —  
SJW GROUP NET INCOME 17,305 13,727 59,204 52,839
Other comprehensive income, net 427 107 679 955
Reclassification adjustment for gain realized on sale of investments, net —   —   —   (1,742 )
SJW GROUP COMPREHENSIVE INCOME $ 17,732   13,834   $ 59,883   52,052  
 
SJW GROUP EARNINGS PER SHARE:
Basic $ 0.84 0.67 $ 2.89 2.59
Diluted $ 0.84 0.67 $ 2.86 2.57
DIVIDENDS PER SHARE $ 0.39 0.20 $ 1.04 0.81
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 20,521 20,456 20,507 20,440
Diluted 20,714 20,614 20,685 20,589
   

SJW Group

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)

 
December 31,
2017 		December 31,
2016
ASSETS
Utility plant:
Land $ 17,831 17,923
Depreciable plant and equipment 1,714,228 1,554,016
Construction in progress 45,851 70,453
Intangible assets 14,413   23,989
Total utility plant 1,792,323 1,666,381
Less accumulated depreciation and amortization 553,059   520,018
Net utility plant 1,239,264   1,146,363
 
Real estate investments 56,213 62,193
Less accumulated depreciation and amortization 11,132   11,734
Net real estate investments 45,081   50,459
CURRENT ASSETS:
Cash and cash equivalents 7,799 6,349
Restricted cash — 19,001
Accounts receivable and accrued unbilled utility revenue 54,309 53,795
Current regulatory assets, net — 16,064
Other current assets 4,750   4,402
Total current assets 66,858   99,611
OTHER ASSETS:
Investment in California Water Service Group 4,535 3,390
Regulatory assets, net 99,554 135,709
Other 2,709   7,844
106,798   146,943
$ 1,458,001   1,443,376
   

SJW Group

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)

 
December 31,
2017 		December 31,
2016
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock $ 21 21
Additional paid-in capital 84,866 81,715
Retained earnings 376,119 338,386
Accumulated other comprehensive income 2,203   1,524
Total stockholders’ equity 463,209 421,646
Long-term debt, less current portion 431,092   433,335
Total capitalization 894,301   854,981
CURRENT LIABILITIES:
Line of credit 25,000 14,200
Accrued groundwater extraction charge, purchased water and purchased power 14,382 10,846
Accounts payable 22,960 18,739
Accrued interest 6,869 6,309
Accrued payroll 6,011 4,696
Other current liabilities 9,830   8,783
Total current liabilities 85,052   63,573
 
DEFERRED INCOME TAXES 85,795 205,203

ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF CONSTRUCTION

244,525 236,391
POSTRETIREMENT BENEFIT PLANS 72,841 70,177
REGULATORY LIABILITY 62,476 —
OTHER NONCURRENT LIABILITIES 13,011   13,051
$ 1,458,001   1,443,376