SJW - Earnings call transcript Q4 2017

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Operator

Good day, ladies and gentlemen, and welcome to the SJW Group Q4 2017 Financial Results Conference Call. [Operator Instructions]. And I would now like to introduce your host for today's conference, Ms. Suzy Papazian, General Counsel.

You may begin.

Suzy Papazian

Operator. you, Thank Full Conference the Fourth XXXX Quarter Welcome for Year SJW Results Call Group. Financial to and Presenting today are and Eric Thornburg, President and Chief Officer. James Chief Financial Lynch, Executive Officer;

these to For would website follow remarks are along, at those www.sjwgroup.com. available like slides who our on accompanying

and current and today's contain the other presentation differ to Many light forward-looking actual believes statement. estimates statements forward-looking based materials under trends, conditions as we company's statements. expected that well begin by performance to and you circumstances. our historical experience, factors are materially on by future its as in I from These of the presentation, factors development Before posted the the and company could assumptions those cause that like expressed on would remind the results implied this related may company appropriate made website or are

Securities could different we For factors most the a results that to and XX-K, to this duty recent with revise statements. presentation, actual statements of in our of and are and as Commission, disclaims which may copies the or Forms be be XX-Q All some obtained description refer press made filed release X-K statements today Group and SJW forward-looking cause to to the you of of update at any www.sjwgroup.com. Exchange such from

at of presentation. the questions end to the have ask opportunity You'll the

the webcast available As a be of reminder, this recorded. will archive webcast is April an XX, being until XXXX. And

release over Eric. I now call will You and to webcast website. corporate turn can the access the at press our the

Eric Thornburg

pleased be Lynch, as and Eric Thornburg, I'm Group. for you honor CEO Thank am of Chief and I to of and Water serve SJW people you, very my and Suzy. thank SJW of with. everyone, Officer Jim and XXX to Jose us. Welcome, it SJW with here Executive by Financial President is serve joining for been I've the member I team impressed Jensen, now have San Company, been the today. a Vice President about of Group; Palle very days

now SJW results addition for accomplishments were a that number and In to a the Authority; Guadalupe-Blanco further environmental another addition review out, year and plant River the record business and sensible of to of $XXX the year, San will and Water's utility commissioning turn enhancements meeting other After key water who operational, in address of and our matters. Treatment over regulations, I there Texas of call our public delivered program; health the stakeholder Jim, of strong Plant Jose to commitment to financial the significant our Water and results. regulatory Montevina will Jim's million startup Jim? on stewardship. I customer program; to project; through the of environmental infrastructure and retrofit our all drinking our to Limited stand Water remarks, investment and financial systematic sale interest communications Alliance will successful delivering

James Lynch

Eric. you, Thank

Eric rate Authority, sales Our results usage, wholly the over Water XX% Fourth quarter mentioned, year-end property sale fourth as our of rate water customer increase in SJW case an quarter Land the reflect expenditure-related and capital and and interest, operating Texas increases, Guadalupe-Blanco the our revenue XXXX. in fourth quarter or owned of $XX.X an increase which River or subsidiary, to is TWA, million, Alliance, was GBRA. general

per with XXXX. compares fourth quarter compared or million, XXXX. $X.XX to diluted For increase This share. $XX.X was the million $X.XX or of diluted share is XX% million $XXX.X income quarter year, revenue $XX.X was a for the Net per which the for

Conversation per share in net the water primarily quarter per the general production per of a $X.XX $X.XX usage, administrative of to customer increases sale was partially prior sale in in reduction the income by same TWA. per quarter. the expenses or increases in year. $X.XX per revenue These increase of earnings the was of diluted our per track increase of or per investments increase share. in per $X.XX year, $X.XX $X.XX share the the The due per share $X.XX share net share share; share; of $X.XX the were $X.XX estate quarter $X.XX The that real contributed diluted higher $X.XX in primarily of a to increases TWA per was compared increases did share And fourth many for XXXX per net per year to our the and expenses $X.XX of was share impact and Memorandum per and by not customer $XX.X Water was rate share. offset per Account, in and diluted from the $X.XX XXXX. $X.XX WCMA, sale million share; driven in diluted share. $XX.X share factors rate of or attributable The of earnings as For million usage for in Customer recur the

offset increases, per limited XXXX These partially of production in customer $X.XX higher in of lower-cost purchased $X.XX share sales included increase cost were per share. an water of diluted that share. per $X.XX In expenses availability of contributed per usage share surface in increases water by share water $X.XX addition, and per property $X.XX

the ongoing quarter conservation $X.X Customer year, additional initiatives. in for due authorized usage X.X% the continue these the million our in million recognized contributing revenue per to sales usage property In $X.XX use and year per case, addition, respectively. Despite increases, general share for to water GRC, from and in recur which or water and to California, increased And rate $X.XX we administrative expenses general $X.XX prior the in revenue, did X.X% related not restrictions increased our true-up $XX.X respectively, lag company XXXX and and share. and XXXX.

allowed activities. that the resulted recover us $XX.X to million in California year WCMA mechanism million during ongoing revenue Our and lost during conservation from the $X.X quarter

increase to our higher increase imported for and as result surface our the our X.XX% both related our to X% As customer The expected, of cost the the These XXXX. in are and directly were of year, and, escalation water Clara water a production revenue area due partial customers. usage of a pump Treatment midyear additions purchased Montevina California from we increase a increase passed Water Water increase increases in recovery. district; the of of customer service water in expenses quarter X.XX% the Santa to in by lower groundwater XX% district-related XXXX third of received lower Water was a cost and year increases volume wholesale is or the Rate increase X.X% the beginning WCMA for the a Valley tax XXXX Plant. to produced the a quarter due costs also District, for through that usage to watershed. the California rate included XXXX the GRC; part offset

the in water of increase and in quarter, water during contracted paid in revenue-based also at XXXX. TWA For The to XXXX. to in Jose In due retrofit an develop city $XX.X increased XXXX. production Limited of to expenses is plant the end salaries pretax XXXX to Water work And and Treatment commenced of of water our wages, resulted increased production supply taxes full to and offline an higher retrofit all recycled of of plant project paid we scheduled XXXX. CPUC XXXX, program. our San related the TWA of undertaking Plant in sale Revenue-based fees the regulatory at due on fourth utility was our quarter the quarter primarily activities final Administrative in the project. Texas. substantially in sale to to Montevina the was a of construction gain the the to general phase begin a GBRA. first recognized million fourth increase

in million. and income the partnership which attributable the to XXXX. XXXX. the partnership December sold XXX land was act, corporate addition, pretax owned before undeveloped XXXX, to was tax Street, from Clara in XXXX for rate XXXX These a The reduction L.P. into XX%. law income $X.X transactions a primarily building In tax The XX% commercial beginning tax signed The resulted and in of the interest rate that compared of to was lowered due gain act noncontrolling XX% XX% in tax the effective to the rate Santa in amounts land California. its sold in two company's interest company in

the for the in treatment since related benefit to our the year-end. recorded deferred of to revalued XXXX the million revaluation another adding assets million utility deferred plant This fourth liabilities. regulatory spent the approximately we tax We $XX.X reinvestment, nonregulated our XXXX project. of quarter in includes $X.X in was liabilities In year deferred tax fourth reclassified XXXX, operations. our rates to infrastructure in and as XXXX, was benefit tax million of related to However, Montevina act new tax regulated of the A company-funded passed $XX.X of plant in a taxes taxes our the reflect million in completed revaluation on $XXX.X in quarter and we million successful retrofit $XX operations year. of of

of noncash that, of XXXX were in plant flows I'll I'll of million; and general items of the previously partially and assets accounts in The available attributable credit of noncurrent for decrease back change on over net invoiced short-term $X of and working These Eric. $XX.X our our million; million. liabilities $X.X end $X.X million. to line it receivable and the collection accrued a But the lines averaged At to collection balancing bank advances over a Turning other stop, adjusted taxes to cash financing XXXX. which was operations of decreased million; and from liquidity. activities. collection XX.X% on of during borrowing X.XX% XXXX, operating and memorandum and primarily of with the had of additions turn million, deferred and of by year, income for net previously utility and payments of rate credit accrued of $X.X the capital offset $XXX million receivables we of $X.X decreases taxes amounts billed noncurrent

Eric Thornburg

met that owing to the lower-than-average State the and early in dry their bank the to call signifying their normal outlook Santa part water. weather year. water managers supply available state's baseline compared water favorable, case continues XX% precipitation the Santa Thank Usage to Valley you, XXXX Water the store range, to Water target in wholesale The in remain Jim. Valley Clara excess the reductions set XXXX date, District, Control water supply XXXX. by maintain in our the Clara Locally, in record Clara remains when is full agency, of the to Valley a California's District Board water precipitation for the levels allowed Resources Santa groundwater Despite persists conservation. the XXXX in Water

and state's the SJ a was allowing transparent and timely there core With nice capability drought and of February San important, in comprehensive the stakeholders. ensure our XXXX affected effective, competency to initiate mandated in to San have a Clearly, for efforts Water's that April is with termination to need the rebound conservation year. difficult, surcharges are the effective albeit a the engagement usage communication XXXX, elimination us in all challenges customers. Water's California on our increasing of with supply, supply of be of conservation Jose The long-term Greater challenges requirement issues water address awareness environmental rates and and engagement our the as Water. recent restrictions water as region. public structural conversations facing previous well we and with water supply customers as will compared water drought needed underscores customer Jose and stakeholders

have SJW's California regulatory accordingly million need $X enabled continued communities we for systems that more to have recognized billion has serve. marked make Both investments water the investments. investments. and especially water and decade, in utilities capital now the In utility little our Utilities a to It's historically affairs. record been and Texas regulated water exceeded plant infrastructure noteworthy year program invested system Public for Commissions a over and those the $XXX than XXXX consolidated a in Turning

Water which Jose the watershed program its Cruz water Importantly, Water project, the in of use Plant supply our included capital to maximize retrofit from Mountains. our Santa Treatment high-quality the local Montevina allows San

to track and rates drought XXXX the On Over the reflects new and Water amount in rate is case X, generate increase increases SJW's seeks The million On a service conservation now the at our review year-long life Effective long to other through reliable term, San revenue value. X.X% X.X%. the that high-quality or in X.X% $XX.X rates, X.X% February a general shareholders XXXX case. in to submitted to rates January its and degree by opportunity restrictions and these application place, the regulatory effective California. Water of environment be or investments ability costs. owing received also and escalation enhance fixed process. application. million million expected of XXXX application January $XX will in provide year application approximately the The water mandated to of or XXXX. must capital the regulatory XXXX, recover revenue XXXX XXXX, high new its X, a Water increase XXXX if Jose general authorized approved, deliver XXXX. assurance to $XX.X in in of XXXX. are to continue will decision And utilities previous have Utilities or cost increase Commission. and in proposed currently The is due X, Jose San X, to lost million constructive in decision safe, Conservation rate on new as for shareholder of San And $XX.X they a realistic California benefit effective Jose their customers, remain mechanisms way a a recover January commission receive communities Public intended

the proposes return and to authorized on reported, X.XX% X.XX% base San to return rate to overall draft reduction its equity a Water's decision from from Jose X.XX%. on As X.X%

We are the conclusions in disappointed with draft decision. the outlined

We final has than XXXX. that supply, at decision SJWTX, optimistic continued a is are acquisition supply XX,XXX regional reconsider the growth. customer the utility, businesses and the impact size Inc., full investment this about wastewater a excellent diverse for and water commission along through of for we corridor be for the that than in a and growing of to prospects remain connections more will portfolio acquisitions, business to March portfolio platform to currently meeting water renders our proposal residents, more hopeful XXXX I-XX a and With growth outstanding scheduled robust from drawing to its and wastewater economy SJWTX SJWTX. owing Texas doubled it proving water jobs. base strong XX, before is and additions Since organic in XXXX, its commission an the

Limited supply capability its to As Guadalupe-Blanco on previously economic in dividend dividend The us and payout dividends and total share. Both interest water completed dividend SJW's X.X% Alliance of actions a in late XXXX, heels significantly XXXX. This the to Water November further River reported, the region's as increased share share brought a SJW Authority Texas dividend board agreement the and $X.XX in quality total January target the dividend follows our to per of the life. of sector payout our the XXXX, XXXX. earnings sale line in of XXXX declared increase between of per with XX% to the per to $X.XX compared all public vitality strong XXXX sustain consummation demonstrates In commitment collaborate authorized XX% to take to projects recurring the help complex the increase which shareholders. in ratio, the more demonstrate company's in paid on of bringing SJW's $X.XX of with the special dividend and

values, annual dividend Reflecting to years. dividend last years. That now proud And is say first record I'm on the XX to a days, has a XXX fostering years XX are proud be mission set trust based already more and shared organizational moving on our yet now of mission a in taking have and building a on history. vision. XXX our enduring forward, an great past Honoring than revitalized builds each of for the have track we of. increased continuously over We my paid strides in of culture

core teamwork, professionals protecting to embraced trusted and the customers and water compassion. have this are respect, a fair and return our delivering service integrity, employees shareholders. service, providing We environment mission, transparency accomplish quality To while values exceptional to of trust, and the communities

the the the shareholders values, reach serve to will for that, customers, we With levels. As vision employees, to our to at world-class back and more like communities, I'd call we these turn environment fully live questions. operator

Operator

Janney we from Instructions]. the with a of have [Operator question line And Gaugler Michael Montgomery.

Michael Gaugler

of upward couple the Jim, guys. through usage below of here, authorized. been I that much track you 'XX But the had A of was believe year. questions in mentioned

this So out wondering, then you do now where what's and are your you at And in delta plays that think 'XX? point, between I'm here authorized? that what's how

James Lynch

Michael. Yes,

were somewhat usage conservation you in embedded, in in our a customers. the will, habits a recover where of of drought But to continue terms of lot the of and if lot we practices height here from So the California. the became we at of response

San seen we Jose -- further what hope is we'll as more reduction that usage the that to we've reflect level So about business returns to of forward. I at we some see from in lowest case, would in on an increase upon the we said our rate in additional we weather if seeking accurately X% customers. think going general here you're call, the current recovery. And are or depending looking see cooperates think the authorized But residential

Michael Gaugler

looks at Okay. And being months. mentioned snowpack here previously state? below could I'm that you the thinking in that I are your still steady then of maybe I things supply we normal get as talked potential utilization wondering your the mean, just normal has own Jim supplies a evolved like as and a little Eric, perhaps bank we of or beyond out turn the own through now And how season into looking for in water it the your something comments, you bit greater and about come least change had supplies. couple is at summer year. a

Eric Thornburg

Thank you, Michael.

snowfall You're outstanding supplies groundwater have said, than the for. absolutely in would really Sierras in and less just is brimming the being are And is feel right. supply, about Treatment surface what groundwater we And we surface our with our own retrofit water good our hoped that much full. The But Plant, use to high-quality ability basin really Water of the the shape. Montevina supply.

really near we're think for term. in shape good I the So

Michael Gaugler

guys. one that's last Okay, one, helpful. And

rates on ROE with rate moving decision, the draft higher for the moving be and CPUC that the here throughout higher case the side? 'XX, what's going the to and reduction, rationale On

Eric Thornburg

question there. Mike, appreciate your

Just which a proceeding. you've on to is cost us comments. capital separate of And got due schedule doing rate proceeding And opportunity Monday. provide to case The draft right decision, be with are for clear, the an there's general are those so. we from on

we thoughts do some in opportunity the record. that provide take have out the point our point to stock in out While commission and this disappointed facts and we the we're and other observations draft, to do

to all comment necessarily address -- on we're So me to decision we can that it wouldn't doing the speculate or findings. be proper or forecast that but and for final

March earliest this it has that So decision report for not would be a final at But XX. officially point, been out. scheduled

Michael Gaugler

Okay, a better little that, could've had welcome Eric. than

Eric Thornburg

Well, it is important, on hard it. but we're

Operator

this Instructions]. at I'm showing [Operator And questions further time. no

I'd call Eric closing So return to to for Mr. any like the Thornburg remarks.

Eric Thornburg

go And to forward. all your Thank proud your We're chat. out look to continue please really much. of on company. Thank you'd reach interest call your for in Thank very you us earn and you our Thank never you our the to you, Sandra. organization we people. as you, if appreciate hesitate of And trust very to its attention. today. we to We like

Operator

conference. you today's gentlemen, day. does participating may conclude thank have and for This Ladies all and disconnect. in a the great program, you Everyone,

SJW (SJW) 22 Feb 182017 Q4 Earnings call transcript