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SJW Group Announces 2016 Annual and Fourth Quarter Financial Results

SAN JOSE, Calif.--(BUSINESS WIRE)--

SJW Group (SJW) today reported financial results for the annual and fourth quarter ended December 31, 2016. Net income was $52.8 million for the year ended December 31, 2016, compared to $37.9 million for the same period in 2015. Diluted earnings per share were $2.57 and $1.85 for the years ended December 31, 2016 and 2015, respectively.

Operating revenue was $339.7 million for the year ended December 31, 2016 compared to $305.1 million in 2015. The $34.6 million increase in revenue was primarily attributable to $28.6 million in cumulative rate increases, a net $6.8 million increase in revenue related to our 2015 California General Rate Case decision in the current year offset by true-up revenue recognized as part of the 2012 California General Rate Case decision in 2015, a $1.7 million change in the net recognition of certain balancing and memorandum accounts, $700,000 increase in Recycled water revenue, and $600,000 in revenue from new customers. These operating revenue increases were partially offset by $3.4 million lower revenue recorded in our Water Conservation Memorandum Account ("WCMA") and $300,000 in lower revenue from real estate operations.

Water production expenses for the year ended December 31, 2016 were $124.3 million compared to $110.6 million in 2015, an increase of $13.7 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, partially offset by $2.5 million in lower expenses due to an increase in the use of available surface water supplies and $800,000 in lower customer water usage. Operating expenses, excluding water production costs, increased $7.8 million to $122.3 million from $114.5 million. The increase was due to $3.9 million of higher depreciation expenses, $2.5 million in higher maintenance expenses, $907,000 of higher administrative and general expenses, and $456,000 in higher property taxes and other non-income taxes.

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 $3.2 million pre-tax gain on the sale of 159,151 shares of California Water Service Group stock. Other expense and income during the same period in 2015 included the sale of multiple real estate properties for a gain of approximately $1.9 million.

The effective consolidated income tax rates were approximately 39% and 38% for the years ended December 31, 2016 and 2015, respectively.

Fourth Quarter Financial Results

Net income for the fourth quarter ended December 31, 2016 was $13.7 million, compared to $16.2 million in 2015. Diluted earnings per share were $0.67 and $0.79 for the quarters ended December 31, 2016 and 2015, respectively.

Operating revenue was $79.3 million in the quarter compared to $87.6 million in 2015. The $8.3 million decrease in revenue was primarily attributable to $3.0 million of 2014 WCMA revenue and $17.5 million of 2015 WCMA revenue that were recorded in the fourth quarter of 2015, offset by $4.0 million in WCMA revenue recorded in the fourth quarter of 2016. In addition, the Company recorded cumulative rate increases of $8.1 million in the fourth quarter of 2016.

Water production expenses for the fourth quarter of 2016 were $31.0 million versus $26.9 million for the same period in 2015, an increase of $4.1 million. The increase in water production expenses was primarily attributable to $4.7 million in higher per unit costs for purchased water, groundwater extraction and energy charges partially offset by $519,000 due to lower customer usage. Operating expenses, excluding water production costs, increased $2.9 million to $31.9 million from $29.0 million. The increase was primarily due to $1.6 million in higher maintenance expenses, $945,000 of higher depreciation expenses due to assets placed in service in 2015, $219,000 in property taxes and other non-income taxes, and $78,000 of higher administrative and general expenses.

Other expense and income in the fourth quarter of 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. No similar sale occurred in the fourth quarter of 2015.

The effective consolidated income tax rates were approximately 37% and 39% for the quarters ended December 31, 2016 and 2015, respectively.

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 December 31, Twelve months ended December 31,
2016   2015 2016   2015
OPERATING REVENUE $ 79,306   87,613   $ 339,706   305,082  
OPERATING EXPENSE:
Production Expenses:
Purchased water 20,108 13,718 72,971 61,089
Power 1,110 921 6,102 6,121
Groundwater extraction charges 6,461 9,187 32,088 31,240
Other production expenses 3,352   3,083   13,167   12,178  
Total production expenses 31,031 26,909 124,328 110,628
Administrative and general 12,348 12,270 48,038 47,131
Maintenance 5,394 3,769 17,476 14,956
Property taxes and other non-income taxes 3,008 2,789 12,123 11,667
Depreciation and amortization 11,136   10,191   44,625   40,740  
Total operating expense 62,917   55,928   246,590   225,122  
OPERATING INCOME 16,389 31,685 93,116 79,960
OTHER (EXPENSE) INCOME:
Interest expense (5,508 ) (5,400 ) (21,838 ) (22,186 )
Gain on sale of California Water Service Group stock 3,197
Gain on sale of real estate investment 10,295 10,419 1,886
Other, net 548   443   1,487   1,494  
Income before income taxes 21,724 26,728 86,381 61,154
Provision for income taxes 7,997   10,536   33,542   23,272  
NET INCOME 13,727   16,192   52,839   37,882  
Other comprehensive income (loss), net 107 176 955 (206 )
Reclassification adjustment for gain realized on sale of investments, net     (1,742 )  
COMPREHENSIVE INCOME $ 13,834   16,368   $ 52,052   37,676  
 
EARNINGS PER SHARE:
Basic $ 0.67 0.79 $ 2.59 1.86
Diluted $ 0.67 0.79 $ 2.57 1.85
DIVIDENDS PER SHARE $ 0.20 0.20 $ 0.81 0.78
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 20,456 20,382 20,440 20,361
Diluted 20,614 20,548 20,589 20,516
 

SJW Group

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands)

 
December 31,
2016
December 31,
2015
ASSETS
Utility plant:
Land $ 17,923 17,853
Depreciable plant and equipment 1,554,016 1,438,321
Construction in progress 70,453 45,573
Intangible assets 23,989   22,675
Total utility plant 1,666,381 1,524,422
Less accumulated depreciation and amortization 520,018   487,659
Net utility plant 1,146,363   1,036,763
 
Real estate investments 62,193 74,461
Less accumulated depreciation and amortization 11,734   13,027
Net real estate investments 50,459   61,434
CURRENT ASSETS:
Cash and cash equivalents 6,349 5,239
Restricted cash 19,001
Accounts receivable and accrued unbilled utility revenue 53,795 46,851
Current regulatory assets, net 16,064 16,542
Other current assets 4,402   4,744
Total current assets 99,611   73,376
OTHER ASSETS:
Investment in California Water Service Group 3,390 6,030
Regulatory assets, net 135,709 152,021
Other 7,844   7,701
146,943   165,752
$ 1,443,376   1,337,325
 
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock $ 21 21
Additional paid-in capital 81,715 79,231
Retained earnings 338,386 302,220
Accumulated other comprehensive income 1,524   2,311
Total stockholders' equity 421,646 383,783
Long-term debt, less current portion 433,335   377,187
Total capitalization 854,981   760,970
CURRENT LIABILITIES:
Line of credit 14,200 34,600
Current portion of long-term debt 125 3,491
Accrued groundwater extraction charge, purchased water and purchased power 10,846 7,163
Accounts payable 18,739 16,196
Accrued interest 6,309 6,193
Other current liabilities 13,354   11,980
Total current liabilities 63,573   79,623
 
DEFERRED INCOME TAXES 205,203 198,775
ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF
CONSTRUCTION 236,391 217,766
POSTRETIREMENT BENEFIT PLANS 70,177 70,230
OTHER NONCURRENT LIABILITIES 13,051   9,961
$ 1,443,376   1,337,325

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