SAN JOSE, Calif.--(BUSINESS WIRE)--SJW Group (NYSE: SJW) today reported financial results for the first quarter ended March 31, 2021. SJW Group net income was $2.6 million for the quarter ended March 31, 2021, compared to $2.4 million for the same period in 2020. Diluted earnings per share were $0.09 and $0.08 for the quarters ended March 31, 2021 and 2020, respectively. Diluted earnings per share in 2021 includes $0.12 per share from ongoing operations offset by non-recurring expenses related to the Texas ice storms of $0.7 million (net of tax) or $0.03 per share. Diluted earnings per share in 2020 includes $0.15 per share from ongoing operations offset by non-recurring expenses related to the Connecticut Water Service, Inc. merger and integration fees of $1.3 million (net of tax) or $0.05 per share and COVID-19 related reserves and expenses of $0.5 million (net of tax) or $0.02 per share.
Operating revenue was $114.8 million for the quarter ended March 31, 2021, compared to $115.8 million for the same period in 2020. The $1.0 million decrease in revenue was primarily attributable to $2.8 million in decreased customer usage, $0.7 million in winter storm customer credits in our Texas service area, $0.6 million in the net recognition of certain balancing and memorandum accounts, partially offset by $2.8 million in cumulative water rate increases, and $0.5 million in revenue from new customers.
Operating expenses for the quarter ended March 31, 2021, were $101.7 million, compared to $100.3 million in 2020, an increase of $1.4 million. Operating expenses include water production expenses of $43.6 million in 2021 compared to $43.8 million in 2020, a decrease of $0.2 million. The decrease in water production expenses was primarily attributable to $0.8 million in lower average per unit costs for purchased water, groundwater extraction and energy charges, offset by $0.7 million due to a decrease in surface water supply production. Operating expenses, excluding water production costs, for the quarter ended March 31, 2021, increased $1.6 million to $58.1 million from $56.5 million. The increase was primarily due to a $2.1 million increase in depreciation and amortization expenses, $0.2 million in higher maintenance expenses, partially offset by $0.4 million in lower general and administrative expenses, and $0.4 million in lower merger related expenses. No similar merger related expenses were incurred in 2021.
For the quarter ended March 31, 2021, compared to the same period in 2020, the change in other expense and income was primarily due to a decrease in pension non-service cost, and an increase in income generated from the return on retirement plan assets and higher income from contracted services.
The effective consolidated income tax rates were approximately (52%) and 15% for the quarters ended March 31, 2021 and 2020, respectively. The lower effective tax rate for the quarter ended March 31, 2021 was primarily due to excess tax benefits relating to share-based payment awards, state tax credits, and other discrete tax items.
SJW Group issued approximately 1.2 million of new shares in an offering that closed on March 16, 2021. The share issuance raised approximately $66.9 million of net proceeds. SJW Group used the proceeds to repay amounts due on bank lines of credit and other general corporate purposes.
Dividend
The Directors of SJW Group today declared a quarterly dividend on common stock of $0.34 per share. The dividend is payable on June 1, 2021, to shareholders of record on May 10, 2021. SJW Group’s annual dividend yield at the stock market closing on April 27, 2021 was 2.1%. Dividends have been paid on SJW Group’s and its predecessor’s common stock for more than 77 consecutive years and the annual dividend amount has increased in each of the past 53 years.
2021 Earnings Guidance
SJW Group is providing earnings guidance for 2021 in the range of $1.85 per diluted share to $2.05 per diluted share. The range reflects no additional surface water available from our California water treatment plants for the remainder of 2021 due to the lack of rainfall in our watershed in the Santa Cruz mountains.
Regulatory Highlights
On January 4, 2021, San Jose Water Company filed its 2021 general rate case application with the California Public Utilities Commission (“CPUC”) for new rates in 2022-2024. The application seeks an increase of nearly $88 million in revenue requirement over the three-year period, authorization for a $435 million capital budget, and requests to recover $18.5 million from balancing and memorandum accounts. It is anticipated that the CPUC’s review process will take approximately 12 months, with new rates effective in the first quarter of 2022.
On January 15, 2021, The Connecticut Water Company filed an application with the Connecticut Public Utilities Regulatory Authority to amend rates for its customers, including those of the former Avon and Heritage Village Water companies. The filing requests an increase of $20.2 million in annual revenue, which includes more than $265 million in completed infrastructure investments that are not currently in approved rates and surcharges. The filing proposes a new rate that would provide a 15% reduction in water bills for income-eligible customers, which would be the first low-income rate for a Connecticut water utility, if approved. The filing also includes a tiered block rate structure for residential water customers to promote water conservation.
On March 10, 2021, The Maine Water Company filed a general rate increase application with the Maine Public Utilities Commission for its Biddeford-Saco division, seeking an increase of approximately $6.7 million in annual revenue. The application is driven by a $60 million replacement of the 1884 vintage drinking water treatment plant. Maine Water’s application includes an innovative proposal that would spread the increase over three years, in roughly equal amounts. A decision on the rate-smoothing mechanism to authorize a customer surcharge starting in the third quarter of 2021 is expected in the second quarter of 2021, and a decision on the requested revenue increase is expected in the second quarter of 2022, in alignment with the completion of the new water treatment facility.
On April 1, 2021, a 1.1% increase in Connecticut Water’s Water Infrastructure and Conservation Adjustment became effective on customer bills. The increased surcharge was approved by the Connecticut Public Utilities Regulatory Authority and is for $8.7 million in completed infrastructure projects.
On April 9, 2021, SJWTX, Inc. executed the closing agreement to acquire the Clear Water Estates water system in Canyon Lake, Texas. This was the first water utility acquisition in Texas under the new fair-market-value regulations. The average of three market-based appraisals was used to determine the fair market price of approximately $1 million, which will be used for future rate-making purposes. Clear Water Estates is bordered by SJWTX, Inc.’s existing service area and brings 230 new service connections and additional water supply for the Company’s Texas operation.
About SJW Group
SJW Group is the second-largest investor-owned pure-play water and wastewater utility, based on estimated rate base, in the United States, providing lifesaving 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, The Connecticut Water Company in Connecticut, The 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. These forward looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict.
These forward-looking statements involve a number of risks, uncertainties and assumptions including, but not limited to, the following factors: (1) the effect of water, utility, environmental and other governmental policies and regulations, including actions concerning rates, authorized return on equity, authorized capital structures, capital expenditures and other decisions; (2) changes in demand for water and other services; (3) the impact of the Coronavirus (“COVID-19”) pandemic on our business operation and financial results; (4) unanticipated weather conditions and changes in seasonality; (5) climate change and the effects thereof; (6) unexpected costs, charges or expenses; (7) our ability to successfully evaluate investments in new business and growth initiatives; (8) contamination of our water supplies and damage or failure of our water equipment and infrastructure; (9) the risk of work stoppages, strikes and other labor-related actions; (10) catastrophic events such as fires, earthquakes, explosions, floods, ice storms, tornadoes, hurricanes, terrorist acts, physical attacks, cyber-attacks, epidemics, pandemics or similar occurrences; (11) changes in general economic, political, business and financial market conditions; (12) 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 (13) legislative and general market and economic developments. The risks, uncertainties and other factors may cause the actual results, performance or achievements of SJW Group 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 Group’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the SEC. Forward-looking statements are not guarantees of performance, and speak only as of the date made. SJW Group undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
SJW Group |
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Condensed Consolidated Statements of Comprehensive Income |
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(Unaudited) |
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(in thousands, except per share data) |
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|
Three months ended March 31, |
||||||
|
2021 |
|
2020 |
||||
REVENUE |
$ |
114,785 |
|
|
115,754 |
|
|
OPERATING EXPENSE: |
|
|
|
||||
Production Expenses: |
|
|
|
||||
Purchased water |
15,645 |
|
|
15,934 |
|
||
Power |
3,003 |
|
|
2,725 |
|
||
Groundwater extraction charges |
15,545 |
|
|
15,028 |
|
||
Other production expenses |
9,402 |
|
|
10,093 |
|
||
Total production expenses |
43,595 |
|
|
43,780 |
|
||
Administrative and general |
20,893 |
|
|
21,262 |
|
||
Maintenance |
6,265 |
|
|
6,086 |
|
||
Property taxes and other non-income taxes |
7,515 |
|
|
7,463 |
|
||
Depreciation and amortization |
23,438 |
|
|
21,382 |
|
||
Merger related expenses |
— |
|
|
354 |
|
||
Total operating expense |
101,706 |
|
|
100,327 |
|
||
OPERATING INCOME |
13,079 |
|
|
15,427 |
|
||
OTHER (EXPENSE) INCOME: |
|
|
|
||||
Interest on long-term debt and other interest expense |
(13,439) |
|
|
(13,284) |
|
||
Pension non-service cost |
326 |
|
|
(45) |
|
||
Other, net |
1,754 |
|
|
757 |
|
||
Income before income taxes |
1,720 |
|
|
2,855 |
|
||
(Benefit) provision for income taxes |
(896) |
|
|
438 |
|
||
NET INCOME |
2,616 |
|
|
2,417 |
|
||
Other comprehensive income (loss), net |
38 |
|
|
(135) |
|
||
COMPREHENSIVE INCOME |
$ |
2,654 |
|
|
2,282 |
|
|
|
|
|
|
||||
EARNINGS PER SHARE: |
|
|
|
||||
Basic |
$ |
0.09 |
|
|
0.08 |
|
|
Diluted |
$ |
0.09 |
|
|
0.08 |
|
|
DIVIDENDS PER SHARE |
$ |
0.34 |
|
|
0.32 |
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING: |
|
|
|
||||
Basic |
28,863 |
|
|
28,489 |
|
||
Diluted |
28,990 |
|
|
28,674 |
|
||
SJW Group |
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Condensed Consolidated Balance Sheets |
|||||||
(Unaudited) |
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(in thousands, except share and per share data) |
|||||||
|
March 31,
|
|
December 31,
|
||||
ASSETS |
|
|
|
||||
Utility plant: |
|
|
|
||||
Land |
$ |
38,339 |
|
|
36,845 |
|
|
Depreciable plant and equipment |
3,223,736 |
|
|
3,198,060 |
|
||
Construction in progress |
126,678 |
|
|
109,976 |
|
||
Intangible assets |
35,167 |
|
|
35,167 |
|
||
Total utility plant |
3,423,920 |
|
|
3,380,048 |
|
||
Less accumulated depreciation and amortization |
1,068,852 |
|
|
1,045,136 |
|
||
Net utility plant |
2,355,068 |
|
|
2,334,912 |
|
||
|
|
|
|
||||
Real estate investments |
58,280 |
|
|
58,129 |
|
||
Less accumulated depreciation and amortization |
15,072 |
|
|
14,783 |
|
||
Net real estate investments |
43,208 |
|
|
43,346 |
|
||
|
|
|
|
||||
CURRENT ASSETS: |
|
|
|
||||
Cash and cash equivalents: |
|
|
|
||||
Cash |
11,406 |
|
|
5,269 |
|
||
Restricted cash |
3,104 |
|
|
4,000 |
|
||
Accounts receivable |
55,709 |
|
|
58,142 |
|
||
Accrued unbilled utility revenue |
37,288 |
|
|
44,950 |
|
||
Current regulatory assets, net |
226 |
|
|
1,748 |
|
||
Prepaid expenses |
10,634 |
|
|
8,097 |
|
||
Other current assets |
5,100 |
|
|
5,125 |
|
||
Total current assets |
123,467 |
|
|
127,331 |
|
||
|
|
|
|
||||
OTHER ASSETS: |
|
|
|
||||
Regulatory assets, net |
161,392 |
|
|
156,482 |
|
||
Investments |
15,161 |
|
|
14,367 |
|
||
Goodwill |
628,144 |
|
|
628,144 |
|
||
Other |
5,702 |
|
|
6,883 |
|
||
|
810,399 |
|
|
805,876 |
|
||
|
$ |
3,332,142 |
|
|
3,311,465 |
|
|
SJW Group |
|||||||
Condensed Consolidated Balance Sheets |
|||||||
(Unaudited) |
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(in thousands, except share and per share data) |
|||||||
|
March 31,
|
|
December 31,
|
||||
CAPITALIZATION AND LIABILITIES |
|
|
|
||||
CAPITALIZATION: |
|
|
|
||||
Stockholders’ equity: |
|
|
|
||||
Common stock, $0.001 par value; authorized 70,000,000 shares; issued and outstanding shares 29,789,887 on March 31, 2021 and 28,556,605 on December 31, 2020 |
$ |
30 |
|
|
29 |
|
|
Additional paid-in capital |
578,395 |
|
|
510,158 |
|
||
Retained earnings |
400,897 |
|
|
408,037 |
|
||
Accumulated other comprehensive income |
(1,026) |
|
|
(1,064) |
|
||
Total stockholders’ equity |
978,296 |
|
|
917,160 |
|
||
Long-term debt, less current portion |
1,303,028 |
|
|
1,287,580 |
|
||
Total capitalization |
2,281,324 |
|
|
2,204,740 |
|
||
|
|
|
|
||||
CURRENT LIABILITIES: |
|
|
|
||||
Lines of credit |
121,509 |
|
|
175,094 |
|
||
Current portion of long-term debt |
76,285 |
|
|
76,241 |
|
||
Accrued groundwater extraction charges, purchased water and power |
18,144 |
|
|
19,184 |
|
||
Accounts payable |
25,636 |
|
|
34,200 |
|
||
Accrued interest |
17,102 |
|
|
12,861 |
|
||
Accrued payroll |
11,911 |
|
|
14,012 |
|
||
Other current liabilities |
19,148 |
|
|
19,203 |
|
||
Total current liabilities |
289,735 |
|
|
350,795 |
|
||
|
|
|
|
||||
DEFERRED INCOME TAXES |
189,531 |
|
|
191,415 |
|
||
ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF CONSTRUCTION |
423,357 |
|
|
421,132 |
|
||
POSTRETIREMENT BENEFIT PLANS |
124,265 |
|
|
121,597 |
|
||
OTHER NONCURRENT LIABILITIES |
23,930 |
|
|
21,786 |
|
||
COMMITMENTS AND CONTINGENCIES |
— |
|
|
— |
|
||
|
$ |
3,332,142 |
|
|
3,311,465 |
|
|
