SAN JOSE, Calif. -- (Business Wire)
SJW Group (NYSE: SJW) today reported financial results for the first
quarter ended March 31, 2018. SJW Group net income was $1.3 million for
the quarter ended March 31, 2018, compared to $3.7 million for the same
period in 2017. Diluted earnings per share were $0.06 and $0.18 for the
quarters ended March 31, 2018 and 2017, respectively. Diluted earnings
per share includes $0.19 per share from recurring operations offset by
$0.13 per share related to the Company’s proposed merger with
Connecticut Water Company.
Operating revenue was $75.0 million for the quarter ended March 31, 2018
compared to $69.0 million in 2017. The $6.0 million increase in revenue
was primarily attributable to $6.3 million in higher customer usage,
$6.1 million in cumulative rate changes, and $377,000 in revenue from
new customers. The increase was partially offset by a $2.7 million
change in the net recognition of certain other balancing and memorandum
accounts primarily due to $1.2 million related to the outcome of our
cost of capital proceeding and $933,000 related to the implementation of
the Tax Act, $2.5 million in lower revenue recorded in our Water
Conservation Memorandum Account, $1.4 million related to a
redistribution of certain customer accounts between residential and
business customers for the year ended December 31, 2016 recorded in the
first quarter of 2017, and $221,000 in lower revenue from our real
estate operations.
Water production expenses for the quarter ended March 31, 2018 were
$30.4 million compared to $26.5 million in 2017, an increase of $3.9
million. The increase in water production expenses was attributable to
$2.5 million in higher customer water usage, $2.3 million in higher per
unit costs for purchased water, groundwater extraction and energy
charges, and $482,000 related to cost-recovery balancing and memorandum
accounts, partially offset by $1.4 million due to an increase in the use
of available surface water supplies. Operating expenses, excluding water
production costs, increased $6.4 million to $37.3 million from $30.9
million. The increase was primarily due to $3.8 million in various costs
related to our proposed merger of equals with Connecticut Water Service,
Inc., $1.5 million of higher depreciation expenses due to assets placed
in service in 2017, $733,000 in higher maintenance and property taxes
and other non-income taxes, and $419,000 of higher administrative and
general expenses, net of cost-recovery balancing and memorandum accounts.
Other expense and income for the quarter ended March 31, 2018 included a
pre-tax unrealized loss of $667,000 related to the change in investment
value of California Water Service group stock that was previously
recognized in other comprehensive income and now is recognized as part
of net income in accordance with Accounting Standards Update 2016-01,
“Financial Instruments - Overall.”
The effective consolidated income tax rates were approximately (82%) and
30% for the quarters ended March 31, 2018 and 2017, respectively. The
negative effective tax rate for the quarter was primarily due to low
income before income taxes generating a tax expense of $159,000, offset
by recognition of excess tax benefits of $747,000 relating to
share-based payment awards. The Company does not reasonably expect that
the recognition of excess tax benefits will have a material impact on
the anticipated effective consolidated income tax rate for the year
ended December 31, 2018. In addition, the effective tax rate decreased
due to the change in the statutory federal income tax rate from 35% to
21% as a result of the Tax Act.
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.
Forward Looking Statements
This document contains forward-looking statements within the meaning of
the Private Litigation Reform Act of 1995, as amended. Some of these
forward-looking statements can be identified by the use of
forward-looking words such as “believes,” “expects,” “may,” “will,”
“should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,”
“projects,” “strategy,” or “anticipates,” or the negative of those words
or other comparable terminology.
The accuracy of such statements is subject to a number of risks,
uncertainties and assumptions including, but not limited to, the
following factors relating to the proposed transaction with Connecticut
Water: (1) the risk that the conditions to the closing of the
transaction with Connecticut Water are not satisfied, including the risk
that required approvals from the shareholders of Connecticut Water or
the stockholders of SJW Group for the transaction are not obtained; (2)
the risk that the regulatory approvals required for the transaction are
not obtained, or that in order to obtain such regulatory approvals,
conditions are imposed that adversely affect the anticipated benefits
from the proposed transaction or cause the parties to abandon the
proposed transaction; (3) the risk that the anticipated tax treatment of
the transaction is not obtained; (4) the effect of water, utility,
environmental and other governmental policies and regulations; (5)
litigation relating to the transaction; (6) uncertainties as to the
timing of the consummation of the transaction and the ability of each
party to consummate the transaction; (7) risks that the proposed
transaction disrupts the current plans and operations of Connecticut
Water or SJW Group; (8) the ability of Connecticut Water and SJW Group
to retain and hire key personnel; (9) competitive responses to the
proposed transaction; (10) unexpected costs, charges or expenses
resulting from the transaction; (11) potential adverse reactions or
changes to business relationships resulting from the announcement or
completion of the transaction; (12) the combined companies’ ability to
achieve the growth prospects and synergies expected from the
transaction, as well as delays, challenges and expenses associated with
integrating the combined companies’ existing businesses; and (13)
legislative and economic developments. These risks, as well as other
risks associated with the proposed transaction, are more fully discussed
in the joint proxy statement/prospectus that is included in the
Registration Statement on Form S-4 that has been filed with the
Securities and Exchange Commission (“SEC”) in connection with the
proposed transaction.
In addition, actual results are subject to other risks and uncertainties
that relate more broadly to SJW Group’s overall business, including
those more fully described in SJW Group’s filings with the SEC,
including its annual report on Form 10-K for the fiscal year ended
December 31, 2017, and Connecticut Water’s overall business and
financial condition, including those more fully described in Connecticut
Water’s filings with the SEC, including its annual report on Form 10-K
for the fiscal year ended December 31, 2017. Results for a quarter are
not indicative of results for a full year due to seasonality and other
factors. Forward looking statements are not guarantees of performance,
and speak only as of the date made, and neither SJW Group or its
management nor Connecticut Water or its management undertakes any
obligation to update or revise any forward-looking statements.
Additional Information and Where to Find It
In connection with the proposed transaction between SJW Group and
Connecticut Water, on April 25, 2018, SJW Group filed with the SEC a
Registration Statement on Form S-4 that includes a joint proxy statement
of SJW Group and Connecticut Water that also constitutes a prospectus of
SJW Group. These materials are not yet final and will be amended. SJW
Group and Connecticut Water may also file other documents with the SEC
regarding the proposed transaction. This document is not a substitute
for the joint proxy statement/prospectus, Form S-4 or any other document
which SJW Group or Connecticut Water may file with the SEC. INVESTORS
AND SECURITY HOLDERS OF SJW GROUP AND CONNECTICUT WATER ARE URGED TO
READ THE REGISTRATION STATEMENT, THE JOINT PROXY STATEMENT/PROSPECTUS
AND ALL OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH
THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS,
CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN
IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION AND RELATED MATTERS.
Investors and security holders may obtain free copies of the Form S-4
and the joint proxy statement/prospectus and other documents filed with
the SEC by SJW Group and Connecticut Water through the website
maintained by the SEC at www.sec.gov.
Copies of documents filed with the SEC by SJW Group are available free
of charge on SJW Group’s investor relations website at https://sjwgroup.com/investor_relations.
Copies of documents filed with the SEC by Connecticut Water are
available free of charge on Connecticut Water’s investor relations
website at https://ir.ctwater.com/.
No Offer or Solicitation
This communication is for informational purposes only and is not
intended to and does not constitute an offer to sell, or the
solicitation of an offer to subscribe for or buy, or a solicitation of
any vote or approval in any jurisdiction, nor shall there be any sale,
issuance or transfer of securities in any jurisdiction in which such
offer, sale or solicitation would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction. No
offer of securities shall be made except by means of a prospectus
meeting the requirements of Section 10 of the Securities Act of 1933, as
amended, and otherwise in accordance with applicable law.
Participants in the Solicitation
SJW Group, Connecticut Water and certain of their respective directors
and officers, and other members of management and employees, may be
deemed to be participants in the solicitation of proxies from the
holders of SJW Group and Connecticut Water securities in respect of the
proposed transaction. Information regarding SJW Group’s directors and
officers is available in SJW Group’s annual report on Form 10-K for the
fiscal year ended December 31, 2017 and its proxy statement for its 2018
annual meeting dated March 6, 2018, which are filed with the SEC.
Information regarding Connecticut Water’s directors and officers is
available in Connecticut Water’s annual report on Form 10-K for the
fiscal year ended December 31, 2017, and its proxy statement for its
2018 annual meeting dated April 6, 2018, which are filed with the SEC.
Investors may obtain additional information regarding the interest of
such participants by reading the Form S-4 and the joint proxy
statement/prospectus and other documents filed with the SEC by SJW Group
and Connecticut Water. These documents are available free of charge from
the sources indicated above.
|
SJW Group
|
Condensed Consolidated Statements of Comprehensive Income
|
(Unaudited)
|
(in thousands, except per share data)
|
|
|
| Three months ended March 31, |
| | 2018 |
| 2017 |
REVENUE
| |
$
|
75,042
| | |
69,045
| |
OPERATING EXPENSE:
| | | | |
Production Expenses:
| | | | |
Purchased water
| |
15,416
| | |
13,924
| |
Power
| |
1,268
| | |
1,287
| |
Groundwater extraction charges
| |
9,532
| | |
7,410
| |
Other production expenses
| |
4,212
|
| |
3,859
|
|
Total production expenses
| |
30,428
| | |
26,480
| |
Administrative and general
| |
11,568
| | |
11,149
| |
Maintenance
| |
4,460
| | |
3,898
| |
Property taxes and other non-income taxes
| |
3,866
| | |
3,695
| |
Depreciation and amortization
| |
13,583
| | |
12,119
| |
Merger related cost
| |
3,806
|
| |
—
|
|
Total operating expense
| |
67,711
|
| |
57,341
|
|
OPERATING INCOME
| |
7,331
| | |
11,704
| |
OTHER (EXPENSE) INCOME:
| | | | |
Interest expense
| |
(6,052
|
)
| |
(6,057
|
)
|
Unrealized loss on California Water Service Group stock
| |
(667
|
)
| |
—
| |
Pension non-service cost
| |
(583
|
)
| |
(871
|
)
|
Other, net
| |
676
|
| |
463
|
|
Income before income taxes
| |
705
| | |
5,239
| |
Provision for income taxes
| |
(580
|
)
| |
1,568
|
|
SJW GROUP NET INCOME
| |
1,285
| | |
3,671
| |
Other comprehensive income, net
| |
—
|
| |
116
|
|
SJW GROUP COMPREHENSIVE INCOME
| |
$
|
1,285
|
| |
3,787
|
|
| | | |
|
SJW GROUP EARNINGS PER SHARE:
| | | | |
Basic
| |
$
|
0.06
| | |
0.18
| |
Diluted
| |
$
|
0.06
| | |
0.18
| |
DIVIDENDS PER SHARE
| |
$
|
0.28
| | |
0.22
| |
WEIGHTED AVERAGE SHARES OUTSTANDING:
| | | | |
Basic
| |
20,561
| | |
20,486
| |
Diluted
| |
20,701
| | |
20,655
| |
| | | | | |
|
|
SJW Group
|
Condensed Consolidated Balance Sheets
|
(Unaudited)
|
(in thousands)
|
|
|
| March 31, 2018 |
| December 31, 2017 |
ASSETS
| | | | |
Utility plant:
| | | | |
Land
| |
$
|
17,831
| | |
17,831
|
Depreciable plant and equipment
| |
1,733,449
| | |
1,714,228
|
Construction in progress
| |
54,933
| | |
45,851
|
Intangible assets
| |
15,567
|
| |
14,413
|
Total utility plant
| |
1,821,780
| | |
1,792,323
|
Less accumulated depreciation and amortization
| |
566,844
|
| |
553,059
|
Net utility plant
| |
1,254,936
|
| |
1,239,264
|
| | | |
|
Real estate investments
| |
56,213
| | |
56,213
|
Less accumulated depreciation and amortization
| |
11,431
|
| |
11,132
|
Net real estate investments
| |
44,782
|
| |
45,081
|
CURRENT ASSETS:
| | | | |
Cash and cash equivalents
| |
6,954
| | |
7,799
|
Accounts receivable and accrued unbilled utility revenue
| |
49,584
| | |
54,309
|
Other current assets
| |
4,522
|
| |
4,750
|
Total current assets
| |
61,060
|
| |
66,858
|
OTHER ASSETS:
| | | | |
Investment in California Water Service Group
| |
3,067
| | |
4,535
|
Regulatory assets, net
| |
97,293
| | |
99,554
|
Other
| |
2,736
|
| |
2,709
|
| |
103,096
|
| |
106,798
|
| |
$
|
1,463,874
|
| |
1,458,001
|
| | | | | |
|
|
SJW Group
|
Condensed Consolidated Balance Sheets
|
(Unaudited)
|
(in thousands)
|
|
|
| March 31, 2018 |
| December 31, 2017 |
CAPITALIZATION AND LIABILITIES
| | | | |
CAPITALIZATION:
| | | | |
Common stock
| |
$
|
21
| | |
21
|
Additional paid-in capital
| |
83,986
| | |
84,866
|
Retained earnings
| |
373,823
| | |
376,119
|
Accumulated other comprehensive income
| |
—
|
| |
2,203
|
Total stockholders’ equity
| |
457,830
| | |
463,209
|
Long-term debt, less current portion
| |
431,175
|
| |
431,092
|
Total capitalization
| |
889,005
|
| |
894,301
|
CURRENT LIABILITIES:
| | | | |
Line of credit
| |
39,000
| | |
25,000
|
Accrued groundwater extraction charge, purchased water and purchased
power
| |
11,692
| | |
14,382
|
Accounts payable
| |
22,482
| | |
22,960
|
Accrued interest
| |
7,400
| | |
6,869
|
Accrued payroll
| |
3,620
| | |
6,011
|
Other current liabilities
| |
11,166
|
| |
9,830
|
Total current liabilities
| |
95,360
|
| |
85,052
|
| | | |
|
DEFERRED INCOME TAXES
| |
84,442
| | |
85,795
|
ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF CONSTRUCTION
| |
245,054
| | |
244,525
|
POSTRETIREMENT BENEFIT PLANS
| |
74,735
| | |
72,841
|
REGULATORY LIABILITY
| |
62,205
| | |
62,476
|
OTHER NONCURRENT LIABILITIES
| |
13,073
|
| |
13,011
|
| |
$
|
1,463,874
|
| |
1,458,001
|
| | | | | |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20180425006840/en/
Contacts:
SJW Group
Suzy Papazian, 408-279-7961
General Counsel and
Corporate Secretary
Source: SJW Group
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