CWT - Earnings call transcript Q2 2018 | California Water Service Group

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Operator

Good day, ladies and gentlemen. And welcome to the California Water Service Group Second Quarter 2018 Earnings Results Announcement and Teleconference. At this time, all participants are in a listen-only mode. Later, there will be a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. to and conference Corporate like Healy, to now President Vice Controller. would turn over the David I Sir, you may begin

David Healy

for earnings issued earnings – Thank you, President be earnings results With call quarter found can and is and today. Martin Smegal, for XXXX the Service this release Kropelnicki, in will call until me earnings our today and Shannon. Welcome call – our everyone call – Vice be to Chief California was Financial September Group. Officer. Replay Water CEO; President release, second Thomas our replay The XX, quarterly our earlier dial-in year-end which information available in XXXX. results

the this company's website a is deck The slide has the slide a accompany morning available furnished at this www.calwatergroup.com. As begin, deck an with and quarter. before was reminder, this X-K company the we at to earnings call

moments a forward-looking looking statements. like to Before take results, we'd the to cover at few quarter's

Securities other to and as Exchange reports found on Commission. risks filed to in over certain company begin. current understand time well and and and parties actual to carefully strongly releases During the are of current uncertainties, Because pass the various and course differ it make events, from interested time uncertainties risks future deal all subject company of because the XX-Q, I'm this, expectations. to Form they our and read company's results advises the the may with statements press with the shareholders these from Marty forward-looking as disclosures going Form to company's the materially to call, XX-K, could statements

Martin Kropelnicki

morning. good everyone, you, Thank

reaffirm March just Jose going on to of You put about X this have that the San off I'm to Page commitment XX start the briefly for our we deck. talking year. Water offer to going to

we're offer forth and all the our superior that sets in value SJW First foremost, confident for stockholders.

XXXX of is without last out, to compete and a launched we point this approval do shares. in that SJW's tender of first June to changed collaboration year, SJW since offer order things offer cannot on things foremost, X the of of our tender CPUC for we the and has meeting that. One couple A need complete – we

had Connecticut and thing second with offer. tender positive tender calling light their XX we've had the in we San meeting is unwillingness cooperate in to Water to Jose offer said Having delay extend the The our to in that, deal. deadline Water's process regulatory us the on on of to the vote special feedback September

of in days I to final we typically will quarter. this Tom? and confident made shares with and are seen as that, for yet, shareholders Having otherwise am will combination turn the and to I haven't remain a of once a close. in been that's regulatory significant said that, offer an in, shares clearance reality number shares. have coming mean, the but tender are ready in will of significant We haven't to because we move seen coming number the stockholders going and very the Water update Jose value will give our we Water results commonsense for create And financial planned. both over in Cal significant forward it us offer on the tender San to the the believe Tom with it we

Thomas Smegal

Thanks, Marty.

the brief to quarter the on go Slide in results of our results. second just So X, over table

from $XXX.X million. $XXX.X Our was up, million, operating up revenue it's

quarter of is million. quarter $XX.X net in down year, same in the $XX However, the income million last

quarter in the last the Our current quarter year. comparable earnings share $X.XX per and $X.XX for

we'll are the investments up capital Our in about that $XX.X a in talk little and million to bit quarter.

down, $XXX.X is year-to-date up, it’s income, on period it's in million Again, on Net last $XXX million the million to for in year-to-date to-date a X compared compared year-to-date. the $XXX.X earnings $XX.X XXXX. $X.XX year. Slide period to year share period Looking And in the as down revenue a – as compared $XX.X per however, to to million $X.XX year operating this basis similarly year-to-date in in also basis year-to-date million XXXX.

you the the see on discussed last that the Slide in business decrease, for did our the cost involved capital million focus from in that, financial offer of decision, So development on revenue our quarter We quarter highlights. reduction costs is of the things costs the The the X, the development $X.X major to business $X.X revenue quarter. the primarily call, if all a looking and decrease factors earnings that million, bulk recall, SJW of of for second to surrounding there. California we

of as for revenue wages, also and also is from increases. to which We to in in years rate typical expenses in expect the increases increase over to of what in see million related $X.X more maintenance amortization us investment general you in from are by pretty that quarter CapEx. costs industry expense, and would had increase the interest capital Those are partially changes in depreciation due our increase offset the our

anticipate XXXX. to we be the and in Those reminder Case you other Rate rate million of little And going which unrealized as compared year. a insurance have our Other bit We year at that's million year-to-date, for of million If by year Case. down the results And and what indicative year I spending did may XXXX still the this our of XX.X% the quarters be $XXX in proceeds. benefit and entire increase, receive as revenue, offset the see $XXX factors, front-loaded because of investment million our unbilled California. results in our we between $XXX,XXX benefit outside CapEx $X.X consider was increase capital be CapEx the not from $X.X second investments, reduction in a General that that income include beginning last of for immediate of to XXXX. is the we Rate of did you'll recall life a authorization control, million just from company-owned we we reduction year, plan probably mentioned, our in $XXX.X are step a to General California an

spending capital of both XXXX in lot XXXX. a and had we So

have covered I and charts rate take XX I'm going the that Marty, away. and net XX, into to income. case. are to And bar jump So the it changes XX there right skip on the

Martin Kropelnicki

the Great. on requesting quarter the miles the of to the through that take capital that to request big a is California XXXX. the General XX% for that XXXX represents Case replacements states XXXX on for few our requests, X, other to front which approximately we the Really I'm $XXX had X,XXX million next XXXX main Rate update for utility in. news pumps, the in Rate in July capital within breakout our filed couple approximately covered treatments replacement period in we a state increase rate This includes on XX% going schedule minutes our our main was program; approximately the General on operate wells we to here happening routine slides case a related Case. for In capital the about operate four the within XX% infrastructure, of we that go what's XX%. and through and everyone of the represent approximately

one of main main, and approximately going standards. have we we step each miles main to is main XXX-year the to cycle main lot meeting replaced replacement largest a to we continue up AWWA cycle, want to where of replacement with to we’re program of X,XXX and down of get the case the up a things that in main increase step from XXX-year the this being year or amount With rate replacement piece, we've requested the program replacement

In a In typical addition, this if increase vary in rate the established stays of on the of increase rate with standpoint. would XXXX, customer average The State district. by does those schedule, to case specifically covers this district approximately it a rate X, take effect, of California, from significantly districts is number tariffs everything but January X%, for This districts. each districts. we

high you've variability. degree got a So of

did new in a it here. something from about talked dollar we the update So basis. We

cost flat General we up really we our of So California noteworthy capital customer as XXXX. try corporate $X programs. area, to or capital XX% of that are typical would hold a the Rate increase have the bill our also as to on customers continue to ramp It's overheads costs month their noncapital-related XX% in driving XX% the a less Case for beginning a service related in and

and Rate waiting for the request off now the the and of ORA with So The the other Case test next XXXX. a XXXX, multipliers details. complete in to being subject increases And in GRC associated moving would and out, $XXX up is of we the capital in our again, under $XX.X as to part a point $XX.X General revenue of into are million step and start on the are proposed with a in details advocate time, million inflation page, million, ability on our million A or to $XX schedule, couple as potential XXXX capital this step well earnings I want revenue increases. on it these to be review. that the

of case, reforms. in included deferred tax nine-year million requested amortization generated addition, $XXX the In taxes in by rate change income we

eliminate tax rate And as see base rate slides. your to so rate increase about the a offset later the So you'll in corresponding that it this that, we you'll as about Tom base. talk deferred see you on as base down comes talk

how very That's a little how mechanism. mechanisms sales our down. pleased by mechanism, will and and been of we have usefulness of sales sales And cover addition, XXX% driven we've the request mechanisms reconciliation In been really as go RAM. to Tom actually continue later, performed the with reconciliation couple our bit

continue that. request we to So

to districts. In conservation rate proposing medical the certain addition, more the and of this proximity number continuation key We other. are of case. balancing close we for which In each accounts consolidate we And pension, corporate such a are and as we're in case, rate Stockton Dixon, consolidate items in that request two did expenses. that we proposing we consolidations last

In addition, fixed, Mandate, increase the split. a XX% service we State the to from XX% charge in are to proposing with variable XX%-XX% a split; XX/XX keeping

bringing XX% down to up moving to the charge from from So XX%. fixed the variable XX% and XX%

rate also So includes that is the case.

a the cash specifically reemphasize of just happened Moving on and to the XX, that's of cost the couple capital changes on want impact, impact Slide on to to recap flow.

on – cost quarter, adjustments effective affects reduction return debt $X.X As in annual be does reported equity the that's that that the will revenue from to first Tom mentioned, the bottom was total adjustment million the the line. capital that previously again of

In Tax also, revenue quarter, $XX.X a million corresponding the Jobs addition, the we reported and be by offset had to the approximately of anticipated tax Cuts Act that in first in the liability. reduction we reduction

net will So see impact the Jobs an Act. with real on revenue. impact on income there's But no you

two has California been annually. reduction $XX it X California, rate So combine together, things took the million approved when in those approximately you July for in effect is

the with associated So Utility. you'll million California see a approximately in billings of reduction $XX

regulatory given We the continue the three we other starting in anticipate above, XXXX. paying to work states through taxes and in process approximately income the federal

NOLs as We are books current our Tom, off deductions. amortizing cover to tax some still accounts? the and other few balancing a you regulatory the want of

Thomas Smegal

Marty. Thanks, Yes.

So and the our adjustment our revenue in big account water the every that's mechanism This balancing quarter balancing cost about decoupling account. WRAM, is we is California. talk that MCBA, mechanism modified

California, adopted are our of So that, the in XX% year-to-date great on we news a estimated is sales. basis at

are is very one change close sales or so reconciliation had triggering that better sales every allows receivable to sales the a below to almost due prior, the mechanism. to in WRAM XX% from year, or end year quarter. balance We more for our $XX.X five close probably adopted last of at adopted adopted much districts our the has we're were in And X%. true-up sales that $XX.X the Part than at more the million come our last that year-end that are of adopted, by our above by annual years. the current every million six below So than closer and adopted in when reason to of district, triggered the because than last sales that's second we're sales we down

to process. million recover our filed on of customers. that surcharges In recovery $XX.X balance annual addition, April, In we continue our through we

rate bringing you'll XX, talk the of and course down a Slide that that in over that XXXX. And balance other And the cutting did making again so make WRAM XXXX. we're you balance just about in to want up last on Marty, we see to graphically down process do filings? year spiked drought

Martin Kropelnicki

Sure.

process. a in have other filings number we So are of that rate

increases the of Waikoloa our rate December that $X.X filed million. ongoing case requesting a and will of year-end. is which On we the Island Big about Hawaii, anticipate commission proceedings are decision XXXX of on before revenue have Those

up we from the in million Washington Rate General of our and of to the a historical filed quick the date. before then Water process – Washington and California capital a Hawaii post for meaning are fairly In State of State $X.X addition, years on of requesting the July anticipate spend or versus a of Hawaii of year-end the effective case year, Xnd additional past Case the and the for the we Washington has relief this Washington. decision Both State State revenue. subsidiary apply dollars for Washington we have forecasted rate spent

a little apply where we see and then spend of on put the for bit you'll lag money it the subsidiaries rate service have first So relief. to go in

projects not to once they that July the of incremental the additional rate revenue And projects go approved were These and completed. annual that These case, of out this rest Xst in revenue $XX million away Commission at Utilities included million. of XXXX, to totaling through of rate million, amount Xst component the approved. of filed relief an Public that July million Of will part through that $X.X were million but continue $XX of advice California number XXXX. the are addition, $X.X chip we projects was were letter are capital as authorized of year. are $X.X letter up In advice for we of effective additional we

on to Tom? update capital, want You

Thomas Smegal

Thanks.

quarter, the So field out have and our the projected capital able project showing the Because than in we're to rate investment case, the rate further are deck we California slide in on we past. base. we projected

projections, three anticipated the added the rate of They're in Rate in addition in our we've years XX and request which borrowers These uncertain. And made investment are so expected General XX, three are Slides again, projections. the other we've highly on in see you'll that base to subsidiaries. the Case the California

was thing as proposed CapEx in the General about the is to increase filed so of is growing think what here Rate Case. said, that And XX% important Marty XXXX our over

XXXX of the projects You period. we're do in do CapEx see starting with. the has certainty through to for projects, And a bit again XXXX be of of a to frontloading that with of more the that commissioned XXXX going

again, highlight – so growth growth which And a CapEx. you want I is Slide the base slide, in on rate expected see XX. to

has been part base. basis, significant increase production company a overall as the the due of compound the the of and a capital the haven't bonus XX away tax seen the With over spending as our through reason done that more on accelerated of deferred a taxes past depreciation increase annual increasing well year. in has And growth XX% that for CapEx taken depreciation reform that has last years, by – repairs rate rate to rate last been our you the than lot very in the

of that rate what so California acceleration new base rate and see CapEx the expect an growth. at relative as well as And we the to states CapEx growth CapEx with is other in should case to see you

of to requested rate commission, you is again, see this as you projection. in the projection the as the percentage a base much but higher see bulk increase relative here, so And CapEx the California

over that, summary. So Marty, it to with I'll you turn for

Martin Kropelnicki

Great.

the thing making emphasize was one Just on Tom to just spending. point the on

on to that with were we Just value analysis a everyone, lot we to capital remind increases. table leaving change the as we associated – step lot strategically we of frontload because the of the internally, made a did

down increases. by how that’s be by point we and will it proof design of well step the the XXXX, at look you our and when so And XXXX perform that's really

step of effect fall of to year. So that this XX% year, about increase the the we this the achieved total step in took XX%

January do our good I as And think, increase on step increase based than on if the for better that did We preliminary what we take will effect will XXXX. step will we not X, XXXX. estimates, on apply for

it's that change emphasize execution So helping achieve the was increases. step us of associated important a our is in business strategic value we the believe plan our made I and to with and it really maximum

XX. Page at Looking

of are we the rate the what for brief the Case. is focus on are rest California of Rate go during Utilities Just the Thousands and hours burnt this a General into thousands Commission. Public with the obviously working hours process summary, case XXXX year, prepare on of

will remain key for it rest the focus of our So year. this

company mentioned, on between our to XXXX, which customers. infrastructure Area, enables Bay that during track in Area to employees around we're area. the San people for of from service on creates serve and combination and with water we We customers economies pursuing the service SJW combined acquisition. to approximately the invest continues $XXX water believe $XXX to the in opportunities benefit the scale that As Bay million XXX,XXX reliable we Tom provide lastly, that's our million commonsense Water And all from the customers then serve would us centers committed we remain safe, stockholders, Jose

here a of our to So economies growth great access scale we large that there and drive we are think have being greater capital strategy. helps

had our the ratepayers In addition, is our also cost, accretive would we well. of two growth for growth public per there's audits the reduction all transaction share of companies, we synergies be to and our be key public as of being investment dividend. able that believe drive this long-term earnings there increase and their Directors, base of to deliver which a of a supports cost the beneficial that earnings to rate long two dividend, teams, continued in which two will through Boards history two we've again, cost And company expect a officer corporate sets meaningful savings would

please. we up that questions, are it with Shannon, So open for going to

Operator

question Instructions] Thank with a from have David [Operator Katter Baird. We you.

line open. is Your

David Katter

Thanks morning, the taking guys. question. for Good

Thomas Smegal

David. morning, Good

David Katter

side on balance think of any or First should modeling that that year? on we Do the the the about biz quarter. the in moving debt how have for you forward costs

Thomas Smegal

go about proxy bulk probably offering. kind had it's is here if tender I obviously, in million. to with cycle had process associated would a this now, $X cost filings, we it to anticipate a modify of we and of the we Right that statement cost file The SEC for

events So that like time. legal a needs of lot

consummate depends enough steps with to engage San cheaper, a got it to warm, we be it’s get we point sooner just where strong longer-term the can on us. a the going that next it's term go Water to willingness are as Jose transaction. keep it on on with So their and to to where we the ready And because get side,

we now, year. would about right So the anticipate for million $X total probably

David Katter

talking And for kind process, that should the of developments we the about as what us next might Understood. give now, how the clarity process dates will are long entire you're take? look next on more

Thomas Smegal

Yes.

it morning I think and think, we get the That be, have thing merger. the date, it haven't Connecticut the watch as outcome to shareholders the on Jose for have shoot do this to that approved vote will San And going not we is that least, big the merger, what's vote. or for to look for does shareholder that down. called Water a be at they seen of I of

would think what could is But out watch our capital I so SJW in from Connecticut see I September, of be speculation pretty my market don't perspective. the it you do August October, want part. a control, for think to But month you a and That happens slow and purely merger. so. And clearly August. on that's could is be

Martin Kropelnicki

here to looking is in between with scheduled at mention the is San whether go San an that Jose the recent starting Connecticut California The David, asked that, at merger Commission thing should August. the to was and investigation weigh they in And Commission. Public participate development the forward in is Utilities other Jose on to

that you points suspect. of would see And will to interest start some line the case, of I so along

David Katter

cycle one maybe you, gives what more up That’s guys into rate that the last those Understood. to confidence went in the decision be case you filed. you gives one? What me on the then more CapEx maybe than what I they from targets. know targets were elevated helpful. that that stepped And in you commission this might receptive and

Martin Kropelnicki

planning years you project a on started good that rate case think changes submit program the improving probably question. was ago, which capital our XX the back some That’s management. And go we actually if to process, I very working everything in of And the at are level.

essentially, as sight X,XXX projects program. X,XXX So many kind the of that the gets submitted you to And you of projects case. are sight the there individual part the will rate forest tend from in so lose trees. process, that lose of that to There be

our our us cases, the allowed we've And our last keenly our to dollars. focused I what's as meter program. overall replacement So replacement, of cycle cycle the program, needs. that's of we've rate focused like secure replacement kind And process position asset main been couple gone program, to the on think well on through the to enabled exchange capital rehabilitation with us that's commission better life

good is of main are XX X,XXX program the And rate that. State Association program. can't a California. case think Water we I or XXX-year Works on replacement cycles, replace a We two or miles in to of main The XXX-plus-year main in main replacement example standards American the three or of we program. are going were even replacement one

embarked of piece case we number that down of case. rate moving process piece, kind a by So by rate upon

down last down filed, take to in over And trying XXX the moved to X.X. we it about case. next it XXX the in so XXX we're we're to to asset And rate rate it X.X. bring case rate we trying this just to In to from case

you So we is believe by a the targets just our as hitting we're really We're discussion capital that on how our making understand need they of justifying capital. the hitting commission sure engineering for sitting program. and execute our on our year, that the with ability question we are this budgets, and see it's just – for fire best the prepared to department probably capital our

have the side how more actually I'm General the planning Tom, it. Tom. us together Case to the I of gets Rate relationship, cynic well Rate optimistic of about think good came as probably both happy I'm pretty with Case. a than very in more CFO, feeling but General in So see generally the been a very,

Thomas Smegal

David. agree, would actually I

cases be the thing had about was this if rate your Rates be capital, And that we I or because rate last was you're Engineering of was four proved ratepayer – here to going Operations we authorization really and we're the of and The isn’t the as not role. more. do over is that to we and any know, advocate you for argument you years, we prior I the in that fact have and of what to to it three us in able to think arguments you the Rates I The advocate taken able we’ve in put capital we've in Department, block many feel we're stumbling been complete execution to use key VP really before that Manager that of do execution. going well, give going saying, Department, the if know to say the build sure away. case don’t able going I really kind key feel

this as at optimistic as point. I'm Marty So

Martin Kropelnicki

about. agree, always is is our know why Tom, I relationship which

major think I State drought acceptable. a to I'd the that in add of not David went we as through are names California,

have in of has resiliency fifth state largest of drive assets become Long-term continue that water, important of the now water in really as the territories out them economy. of are water supply so help lot service is a this the economy to and key state to are sustainability ran order We parts the planning really world. long-term

David Katter

That’s But I’ve good and helpful. all Got got. for That was congratulations Thank it. you color. super luck. the

Martin Kropelnicki

Thanks David.

Operator

I'd I'm to currently further for turn time. the [Operator call this to Marty Instructions] like back showing remarks. questions at no closing you. Thank over And

Martin Kropelnicki

in, reporting Great. On the heard today, companies I Bloomberg that on XX there reporting S&P companies were way today. XXX

I any to questions, So us. with day today releases. look have And We'll sticking free a us we quarter. today with feel time will here for everyone, to earnings I you call. sharing your you think our results other for calls. busy third it's thank, of forward a give want the doing Should to be and

are The our quarter the third of quarters year. always busiest

our So into and going General move it's hedge year-end. and pretty into be Rate Case will we this be and the down busy things quarter, the We're between busiest quarter quarter. through racing getting SJW as to third

So your for we quarter. thank next to will you continued support Bye-bye. and you talk

Operator

Have your this gentlemen, wonderful and you day. for Thank Ladies participation. a concludes conference. today's

California Water Service (CWT) 26 Jul 182018 Q2 Earnings call transcript