EXHIBIT 99.1
SJW GROUP ANNOUNCES 2019 THIRD QUARTER FINANCIAL RESULTS
SAN JOSE, CA, October 30, 2019 – SJW Group (NYSE: SJW) today reported financial results for the third quarter ended September 30, 2019. SJW Group net income was $9.5 million for the quarter ended September 30, 2019, compared to $15.8 million for the same period in 2018. Diluted earnings per share were $0.33 and $0.76 for the quarters ended September 30, 2019 and 2018, respectively. Diluted earnings per share in 2019 includes $0.67 per share from recurring operations offset by $0.29 per share related to a reserve recorded against our 2018 and 2019 Water Conservation Memorandum Account ("WCMA") balances as we determined we no longer met the requirements for revenue recognition, and $0.05 per share related to the company's merger with Connecticut Water Service, Inc. ("CTWS"). Diluted earnings per share in 2018 includes $1.08 per share from recurring operations offset by $0.32 per share related to the merger.
On October 9, 2019, SJW Group completed its merger with CTWS, a holding company whose subsidiaries are primarily public utilities providing water service to approximately 138,000 service connections that serve a population of approximately 450,000 people in 80 municipalities with a service area of approximately 269 square miles throughout Connecticut and Maine and 3,000 wastewater connections in Southbury, Connecticut.
Operating revenue was $114.0 million for the quarter ended September 30, 2019, compared to $124.9 million in 2018. The $10.9 million decrease in revenue was primarily attributable to a $13.7 million change in the WCMA, partially offset by a $1.3 million change in cumulative water rates, $900,000 related to new customers, and a $800,000 change in the net recognition of certain balancing and memorandum accounts.
Water production expenses for the quarter ended September 30, 2019 were $56.4 million, compared to $55.2 million in 2018, an increase of $1.2 million. The increase in water production expenses was primarily attributable to $3.9 million in higher per unit costs for purchased water, groundwater extraction and energy charges, $1.3 million in cost recovery balancing and memorandum accounts, and $700,000 in higher customer water usage, partially offset by a $4.6 million reduction due to an increase in the use of available surface water supplies. Operating expenses, excluding water production costs, decreased $3.3 million to $40.6 million from $43.9 million. The decrease was primarily due to a change of $6.7 million in merger expenses related to our merger transaction with CTWS, partially offset by an increase of $2.0 million in higher general and administrative expenses, related to increased integration and compensation costs, and $1.4 million in higher depreciation expenses due to assets placed in service in 2018.
Other expense and income in the third quarter of 2019 included $2.2 million of interest income earned on money market fund investments from the proceeds of our December 2018 equity offering.
The effective consolidated income tax rates were approximately 21% for each of the quarters ended September 30, 2019 and 2018.
Year-to-date net income was $28.9 million, compared to $29.9 million in 2018. Diluted earnings per share were $1.01 in the first nine months of 2019, compared to $1.45 for the same period in 2018. Diluted earnings per share in 2019 includes $1.51 per share from recurring operations offset by $0.28 per share related to a reserve recorded against our 2018 and 2019 WCMA balances, $0.16 per share related to the company's merger with CTWS, and $0.06 per share related to a settlement of the company's Order Instituting Investigation proceeding with the California Public Utilities Commission over customer billing practices. Diluted earnings per share in 2018 includes $2.03 per share from recurring operations offset by $0.58 per share related to the merger.
Year-to-date operating revenue decreased by $4.4 million to $294.6 million from $299.0 million in the first nine months of 2019. The decrease was attributable to a $17.2 million change in the WCMA, $6.0 million decrease in customer usage, and $2.1 million in customer rate credits related to the OII settlement with the CPUC's CPED, partially offset by a $10.4 million change in the net recognition of certain balancing and memorandum accounts, an $8.0 million change in cumulative water rates, and $2.6 million related to new customers.
Year-to-date water production expenses decreased to $125.3 million from $125.5 million in 2018. The $200,000 decrease was attributable to a $11.9 million increase in the use of available surface water supplies and a $2.3 million in decreased customer usage, partially offset by $10.2 million in higher per unit costs for purchased water, groundwater extraction and energy charges and a $3.8 million increase in cost recovery balancing and memorandum accounts. Operating expenses, excluding water production costs, increased $300,000 to $117.9 million from $117.6 million. The increase was primarily due to $4.4 million in higher depreciation expenses, $4.2 million in higher general and administrative expenses and $700,000 in higher taxes other than income taxes, partially offset by a decrease of $8.9 million in merger expenses related to our CTWS merger transaction.
Other expense and income year-to-date for 2019 included $6.3 million of interest income earned on money market fund investments from the proceeds of the company's December 2018 equity offering.
The effective consolidated income tax rates were approximately 23% and 20% for the nine-month periods ended September 30, 2019 and 2018, respectively.
In December of 2018, the company issued approximately 7.8 million of shares of common stock, the proceeds of which were used to partially finance the CTWS merger. Such shares are included in shares outstanding during the three and nine month periods ended September 30, 2019.
The Directors of SJW Group today declared a quarterly dividend on common stock of $0.30 per share. The dividend is payable on December 2, 2019, to shareholders of record on November 11, 2019.
About SJW Group
SJW Group is the third largest investor-owned pure play water and wastewater utility based on rate base in the United States, providing life-saving and high-quality water service to nearly 1.5 million people. SJW Group's locally led and operated water utilities - San Jose Water Company in California; Connecticut Water Company, Avon Water Company and Heritage Village Water Company in Connecticut; Maine Water Company in Maine; and SJWTX, Inc. (dba Canyon Lake Water Service Company) in Texas - possess the financial strength, operational expertise and technological innovation to safeguard the environment, deliver outstanding service to customers and provide opportunities to employees. SJW Group remains focused on investing in its operations, remaining actively engaged in its local communities and delivering continued sustainable value to its shareholders. For more information about SJW Group, please visit www.sjwgroup.com.
Forward-Looking Statements
This release contains forward-looking statements within the meaning of the Private Securities 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: (1) the risk that the benefits expected from the merger of SJW Group and Connecticut Water Service, Inc. (the "Merger") will not be realized; (2) the risk that the integration of Connecticut Water Service, Inc. will be more difficult, time-consuming or expensive than anticipated; (3) the effect of water, utility, environmental and other governmental policies and regulations, including actions concerning rates, authorized return on equity, authorized debt-to-equity ratios, capital expenditures and other decisions; (4) the outcome of the California Public Utilities Commission's investigation into the Merger; (5) litigation, including litigation relating to the Merger; (6) changes in demand for water and other products and services; (7) unanticipated weather conditions and changes in seasonality; (8) climate change and the effects thereof; (9) catastrophic events such as fires, earthquakes,
explosions, floods, ice storms, tornadoes, hurricanes, terrorist acts, physical attacks, cyber-attacks, or other similar occurrences that could adversely affect our facilities, operations, financial condition, results of operations and reputation; (10) unexpected costs, charges or expenses resulting from the Merger; (11) our ability to successfully evaluate investments in new business and growth initiatives; (12) the risk of work stoppages, strikes and other labor-related actions; (13) changes in general economic, political, business and financial market conditions; (14) the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, changes in interest rates, compliance with regulatory requirements, compliance with the terms and conditions of our outstanding indebtedness, and general market and economic conditions; and (15) legislative and economic developments.
Results for a quarter are not indicative of results for a full year due to seasonality and other factors. In addition, actual results are subject to other risks and uncertainties that relate more broadly to our overall business, including those more fully described in our filings with the SEC, including our most recent reports on Form 10-K, Form 10-Q and Form 8-K. Forward-looking statements are not guarantees of performance, and speak only as of the date made, and we undertake no obligation to update or revise any forward-looking statements except as required by law.
SJW Group
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands, except per share data)
|
| | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, |
| | 2019 | | 2018 | | 2019 | | 2018 |
| REVENUE | $ | 113,997 |
| | 124,853 |
| | $ | 294,644 |
| | 298,981 |
|
| OPERATING EXPENSE: | | | | | | | |
| Production Expenses: | | | | | | | |
| Purchased water | 35,583 |
| | 33,545 |
| | 75,626 |
| | 72,673 |
|
| Power | 2,294 |
| | 1,882 |
| | 4,947 |
| | 4,774 |
|
| Groundwater extraction charges | 13,182 |
| | 14,890 |
| | 29,145 |
| | 34,341 |
|
| Other production expenses | 5,295 |
| | 4,836 |
| | 15,553 |
| | 13,674 |
|
| Total production expenses | 56,354 |
| | 55,153 |
| | 125,271 |
| | 125,462 |
|
| Administrative and general | 14,712 |
| | 12,752 |
| | 40,411 |
| | 36,278 |
|
| Maintenance | 4,923 |
| | 4,980 |
| | 13,977 |
| | 14,036 |
|
| Property taxes and other non-income taxes | 4,065 |
| | 4,016 |
| | 12,041 |
| | 11,332 |
|
| Depreciation and amortization | 15,122 |
| | 13,682 |
| | 45,368 |
| | 40,921 |
|
| Merger related expenses | 1,737 |
| | 8,442 |
| | 6,113 |
| | 14,994 |
|
| Total operating expense | 96,913 |
| | 99,025 |
| | 243,181 |
| | 243,023 |
|
| OPERATING INCOME | 17,084 |
| | 25,828 |
| | 51,463 |
| | 55,958 |
|
| OTHER (EXPENSE) INCOME: | | | | | | | |
| Interest expense | (6,588 | ) | | (6,077 | ) | | (19,093 | ) | | (18,213 | ) |
| Unrealized loss on California Water Service Group stock | — |
| | — |
| | — |
| | (527 | ) |
| Interest income on Money Market Fund | 2,165 |
| | — |
| | 6,339 |
| | — |
|
| Gain on sale of real estate investment | — |
| | — |
| | 745 |
| | — |
|
| Pension non-service cost | (921 | ) | | (589 | ) | | (2,749 | ) | | (1,767 | ) |
| Other, net | 303 |
| | 729 |
| | 1,210 |
| | 2,084 |
|
| Income before income taxes | 12,043 |
| | 19,891 |
| | 37,915 |
| | 37,535 |
|
| Provision for income taxes | 2,565 |
| | 4,103 |
| | 8,802 |
| | 7,591 |
|
| NET INCOME BEFORE NONCONTROLLING INTEREST | 9,478 |
| | 15,788 |
| | 29,113 |
| | 29,944 |
|
| Less net income attributable to noncontrolling interest | — |
| | — |
| | 224 |
| | — |
|
| SJW GROUP NET INCOME | 9,478 |
| | 15,788 |
| | 28,889 |
| | 29,944 |
|
| COMPREHENSIVE INCOME | $ | 9,478 |
| | 15,788 |
| | $ | 28,889 |
| | 29,944 |
|
| | | | | | | | |
| EARNINGS PER SHARE: | | | | | | | |
| Basic | $ | 0.33 |
| | 0.77 |
| | $ | 1.02 |
| | 1.45 |
|
| Diluted | $ | 0.33 |
| | 0.76 |
| | $ | 1.01 |
| | 1.45 |
|
| DIVIDENDS PER SHARE | $ | 0.30 |
| | 0.28 |
| | $ | 0.90 |
| | 0.84 |
|
| WEIGHTED AVERAGE SHARES OUTSTANDING: | | | | | | | |
| Basic | 28,452 |
| | 20,627 |
| | 28,439 |
| | 20,594 |
|
| Diluted | 28,550 |
| | 20,732 |
| | 28,528 |
| | 20,722 |
|
SJW Group
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
|
| | | | | | |
| | September 30,
2019 | | December 31,
2018 |
| ASSETS | | | |
| Utility plant: | | | |
| Land | $ | 18,286 |
| | 18,296 |
|
| Depreciable plant and equipment | 1,897,117 |
| | 1,833,051 |
|
| Construction in progress | 109,245 |
| | 68,765 |
|
| Intangible assets | 15,799 |
| | 15,799 |
|
| Total utility plant | 2,040,447 |
| | 1,935,911 |
|
| Less accumulated depreciation and amortization | 647,841 |
| | 607,090 |
|
| Net utility plant | 1,392,606 |
| | 1,328,821 |
|
| | | | |
| Real estate investments | 56,473 |
| | 56,336 |
|
| Less accumulated depreciation and amortization | 13,224 |
| | 12,327 |
|
| Net real estate investments | 43,249 |
| | 44,009 |
|
| CURRENT ASSETS: | | | |
| Cash and cash equivalents: | | | |
| Cash | 12,702 |
| | 8,722 |
|
| Money market fund | 412,000 |
| | 412,000 |
|
| Accounts receivable and accrued unbilled utility revenue | 68,947 |
| | 50,219 |
|
| Current regulatory assets, net | 7,493 |
| | 26,910 |
|
| Other current assets | 6,672 |
| | 4,871 |
|
| Total current assets | 507,814 |
| | 502,722 |
|
| OTHER ASSETS: | | | |
| Regulatory assets, net | 73,780 |
| | 76,715 |
|
| Other | 4,933 |
| | 4,122 |
|
| | 78,713 |
| | 80,837 |
|
| | $ | 2,022,382 |
| | 1,956,389 |
|
SJW Group
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
|
| | | | | | |
| | September 30,
2019 | | December 31,
2018 |
| CAPITALIZATION AND LIABILITIES | | | |
| CAPITALIZATION: | | | |
| Common stock | $ | 28 |
| | 28 |
|
| Additional paid-in capital | 499,377 |
| | 495,366 |
|
| Retained earnings | 397,259 |
| | 393,918 |
|
| Total stockholders' equity | 896,664 |
| | 889,312 |
|
| Long-term debt, less current portion | 511,076 |
| | 431,424 |
|
| Total capitalization | 1,407,740 |
| | 1,320,736 |
|
| CURRENT LIABILITIES: | | | |
| Lines of credit | 62,000 |
| | 100,000 |
|
| Accrued groundwater extraction charges, purchased water and power | 22,749 |
| | 13,694 |
|
| Accounts payable | 28,193 |
| | 24,937 |
|
| Accrued interest | 9,220 |
| | 7,132 |
|
| Accrued payroll | 5,011 |
| | 7,181 |
|
| Other current liabilities | 17,134 |
| | 11,041 |
|
| Total current liabilities | 144,307 |
| | 163,985 |
|
| | | | |
| DEFERRED INCOME TAXES | 72,798 |
| | 79,651 |
|
| ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF | | | |
| CONSTRUCTION | 254,954 |
| | 248,853 |
|
| POSTRETIREMENT BENEFIT PLANS | 73,004 |
| | 70,490 |
|
| REGULATORY LIABILITY | 56,936 |
| | 59,149 |
|
| OTHER NONCURRENT LIABILITIES | 12,643 |
| | 13,525 |
|
| | $ | 2,022,382 |
| | 1,956,389 |
|
