Exhibit
EXHIBIT 99.1
SJW GROUP ANNOUNCES 2017 ANNUAL AND FOURTH QUARTER FINANCIAL RESULTS
SAN JOSE, CA, February 21, 2018 – 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 |
|