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SJW Corp. Announces 2016 Third Quarter Financial Results

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October 26, 2016 6:00 PM EDT

SAN JOSE, Calif.--(BUSINESS WIRE)-- SJW Corp. (NYSE: SJW) today reported financial results for the third quarter ended September 30, 2016. Net income was $19 million for the quarter ended September 30, 2016, compared to $9.5 million for the same period in 2015. Diluted earnings per share were $0.92 and $0.46 for the quarters ended September 30, 2016 and 2015, respectively.

Operating revenue was $112.3 million in the quarter compared to $83 million in 2015. The $29.3 million increase in revenue was primarily attributable to $12.4 million in cumulative rate increases, $9.5 million in higher customer usage, $6.6 million related to revenue tracked in our Water Conservation Memorandum Account and a $700,000 change in the net recognition of certain other balancing and memorandum accounts.

Water production expenses for the third quarter of 2016 were $45 million versus $35.5 million for the same period in 2015, an increase of $9.5 million. The increase in water production expenses was primarily attributable to $5.7 million in higher per unit costs for purchased water, groundwater extraction and energy charges, $3.5 million due to higher customer usage and $300,000 in higher expenses due to a decrease in the use of available surface water supply. Operating expenses, excluding water production costs, increased $1.8 million to $31 million from $29.2 million. The increase was primarily due to $931,000 of higher depreciation expenses due to assets placed in service in 2015, $348,000 of higher administrative and general expenses, $320,000 in property taxes and other non-income taxes and $242,000 in higher maintenance expenses due primarily to main repairs.

The effective consolidated income tax rates were approximately 40% and 37% for the quarters ended September 30, 2016 and 2015, respectively.

Year-to-date net income was $39.1 million, compared to $21.7 million in 2015. Diluted earnings per share were $1.90 in the first nine months of 2016, compared to $1.06 per diluted share for the same period in 2015.

Year-to-date 2016 operating revenue increased by $42.9 million to $260.4 million from $217.5 million in the first nine months of 2015. The increase was attributable to $20.5 million in cumulative rate increases, $13.1 million related to revenue tracked in our Water Conservation Memorandum Account, a net $6.8 million due to true-up revenue recognized as a part of the decision on our 2015 California General Rate Case application in the current year offset by true-up revenue recognized as part of the 2012 California General Rate Case decision in the prior year and a $1.6 million change in the net recognition of certain other balancing and memorandum accounts.

Year-to-date water production expenses increased to $93.3 million from $83.7 million in 2015. The $9.6 million increase was primarily attributable to $12.3 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 supply. Operating expenses, excluding water production costs, increased $4.9 million to $90.4 million from $85.5 million. The increase was primarily due to $2.9 million of higher depreciation expenses, $895,000 in higher maintenance expenses, $829,000 in higher administrative and general expenses and $237,000 in higher property taxes and other non-income taxes. The increase in administrative and general expenses was due to an increase in salaries, partially offset by a decrease in pension expense and a decrease in regulatory fees due to lower usage.

Year-to-date other expense and income for 2016 included a pre-tax gain on the sale of 159,151 shares of California Water Service Group stock for $3.2 million. No similar sale occurred in 2015.

The effective consolidated income tax rates were approximately 40% and 37% for the nine-month periods ended September 30, 2016 and 2015, respectively.

The Directors of SJW Corp. today declared a quarterly dividend on common stock of $0.2025 per share. The dividend is payable on December 1, 2016 to shareholders of record on November 7, 2016.

SJW Corp. is a publicly traded holding company headquartered in San Jose, California. SJW Corp. is the parent company of San Jose Water Company, SJWTX, Inc., Texas Water Alliance Limited, SJW Land Company, and SJW Group, Inc. 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 Corp.'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 Corp. 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 Corp.'s most recent reports on Form 10-K, Form 10-Q and Form 8-K filed with the Securities and Exchange Commission. SJW Corp. undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

 
SJW Corp.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands, except per share data)
 
  Three months ended  

 Nine months ended

September 30, September 30,
2016   2015 2016   2015
OPERATING REVENUE $ 112,344   82,955   $ 260,400   217,469  
OPERATING EXPENSE:
Production Expenses:
Purchased water 28,681 22,085 52,863 47,371
Power 2,141 2,500 4,992 5,200
Groundwater extraction charges 10,867 7,920 25,627 22,053
Other production expenses 3,311   3,033   9,815   9,095  
Total production expenses 45,000 35,538 93,297 83,719
Administrative and general 12,449 12,101 35,690 34,861
Maintenance 4,217 3,975 12,082 11,187
Property taxes and other non-income taxes 3,213 2,893 9,115 8,878
Depreciation and amortization 11,119   10,188   33,489   30,549  
Total operating expense 75,998   64,695   183,673   169,194  
OPERATING INCOME 36,346 18,260 76,727 48,275
OTHER (EXPENSE) INCOME:
Interest expense (5,426 ) (5,516 ) (16,330 ) (16,786 )
Gain on sale of California Water Service Group stock — — 3,197 —
Gain on sale of real estate investment 124 1,886 124 1,886
Other, net 427   441   939   1,051  
Income before income taxes 31,471 15,071 64,657 34,426
Provision for income taxes 12,512   5,537   25,545   12,736  
NET INCOME 18,959   9,534   39,112   21,690  
Other comprehensive income (loss), net (169 ) (112 ) 848 (382 )
Reclassification adjustment for gain realized on sale of investments, net —   —   (1,742 ) —  
COMPREHENSIVE INCOME $ 18,790   9,422   $ 38,218   21,308  
 
EARNINGS PER SHARE
Basic $ 0.93 0.47 $ 1.91 1.07
Diluted $ 0.92 0.46 $ 1.90 1.06
DIVIDENDS PER SHARE $ 0.20 0.20 $ 0.61 0.59
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 20,452 20,376 20,434 20,353
Diluted 20,602 20,532 20,581 20,505
 
SJW Corp.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
 
  September 30,  

 December 31,

2016 2015
ASSETS
Utility plant:
Land $ 17,885 17,853
Depreciable plant and equipment 1,535,986 1,438,321
Construction in progress 65,101 45,573
Intangible assets 23,811 22,675
Total utility plant 1,642,783 1,524,422
Less accumulated depreciation and amortization 517,314 487,659
Net utility plant 1,125,469 1,036,763
 
Real estate investments 62,127 74,641
Less accumulated depreciation and amortization 11,412 13,207
Net real estate investments 50,715 61,434
CURRENT ASSETS:
Cash and cash equivalents 17,663 5,239
Accounts receivable and accrued unbilled utility revenue 75,063 46,851
Current regulatory assets, net 25,661 16,542
Long-lived asset held-for-sale 9,907 —
Other current assets 5,045 4,744
Total current assets 133,339 73,376
OTHER ASSETS:
Investment in California Water Service Group 3,209 6,030
Regulatory assets, net 133,663 152,021
Other 7,946 7,701
144,818 165,752
$ 1,454,341 1,337,325
 
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock $ 10,655 10,616
Additional paid-in capital 70,706 68,636
Retained earnings 328,829 302,220
Accumulated other comprehensive income 1,418 2,311
Total shareholders' equity 411,608 383,783
Long-term debt, less current portion 364,229 377,187
Total capitalization 775,837 760,970
CURRENT LIABILITIES:
Line of credit 63,900 34,600
Current portion of long-term debt 11,554 3,491
Accrued groundwater extraction charge, purchased water and purchased power 13,697 7,163
Accounts payable 21,673 16,196
Accrued interest 5,775 6,193
Deposit, long-lived asset held-for-sale 20,000 —
Other current liabilities 14,528 11,980
Total current liabilities 151,127 79,623
 
DEFERRED INCOME TAXES 214,633 198,775
ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF
CONSTRUCTION 228,603 217,766
POSTRETIREMENT BENEFIT PLANS 73,068 70,230
OTHER NONCURRENT LIABILITIES 11,073 9,961
$ 1,454,341 1,337,325

SJW Corp.
Suzy Papazian, 408-279-7961
General Counsel and Corporate Secretary

Source: SJW Corp.


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