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SJW Corp. Announces Third Quarter Financial Results

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SJW Corp. (NYSE:SJW) today reported financial results for the third quarter ended September 30, 2014. Operating revenue was $125.4 million in the quarter compared to $85.2 million in 2013. The $40.2 million increase in revenue was attributable to $46.5 million related to the recognition of balances in the Company’s 2013 General Rate Case Interim Rates Memorandum Account, $5.1 million in cumulative rate increases, and $500,000 in revenue from new customers, offset by a decrease of $6.3 million in the recognition of certain balancing and memorandum accounts and $5.9 million in lower customer water usage. In addition, the Company earned $300,000 in higher revenue from real estate operations.

Water production expenses for the third quarter of 2014 were $39.4 million versus $40.4 million for the same period in 2013. The $1 million decrease was primarily attributable to $4.4 million in lower customer water usage. This decrease was partially offset by $2.3 million in higher per unit costs for purchased water, groundwater extraction and energy charges and $1.1 million in higher expenses due to a decrease in the availability of surface water supply. Operating expenses, excluding water production expenses increased to $26.9 million from $25.5 million. The $1.4 million increase was due to $700,000 of higher depreciation expense, $600,000 in higher maintenance expenses, and $200,000 in higher taxes other than income taxes, partially offset by $100,000 in lower administrative and general expenses.

The effective consolidated income tax rates were 29% and 39% for the quarters ended September 30, 2014 and 2013, respectively. The change in the quarterly effective consolidated income tax rate was primarily due a state income tax benefit of $5.7 million related to the adoption of new Department of Treasury and Internal Revenue Service Tangible Property Regulations.

Net income was $38.4 million for the quarter ended September 30, 2014, compared to $9 million for the same period in 2013. Diluted earnings per share were $1.88 for the quarter ended September 30, 2014, compared to $0.44 per diluted share for the same period in 2013.

Year-to-date operating revenue increased by $40.8 million to $250.4 million from $209.6 million in the first nine months of 2014. The increase was attributable to $46.5 million related to the recognition of balances in the Company’s 2013 General Rate Case Interim Rates Memorandum Account, $10.1 million in cumulative rate increases and $1.3 million in revenue from new customers, offset by $10.7 million in lower customer water usage, and a net decrease in certain balancing and memorandum accounts and the Texas general rate case refund of $7.8 million. In addition, the Company earned $1.4 million in higher revenue from real estate operations.

Year-to-date water production expenses increased to $96 million from $91.2 million in 2013. The $4.8 million increase was attributable to $6.6 million in higher per unit costs for purchased water, groundwater extraction and energy charges and $4.5 million in higher expenses due to a decrease in the availability of surface water supply. These increases were partially offset by $6.3 million in lower customer water usage. Operating expenses, excluding water production costs, increased to $77.1 million from $76.4 million. The $700,000 increase was due to $2.1 million of higher depreciation expenses, $900,000 in higher maintenance expenses and $500,000 in higher taxes other than income taxes. These increases were partially offset by $2.8 million of lower administrative and general expenses.

Other expense and income in 2014 included a pre-tax gain on the sale of 125,969 shares of California Water Service Group stock of $2 million and sales of real estate investment properties in Texas and California of approximately $300,000 each compared to a pre-tax gain on the sale of a real estate investment property in Connecticut of approximately $1.1 million in 2013.

The effective consolidated income tax rates were 30% and 40% for the nine-month periods ended September 30, 2014 and 2013, respectively. The change in effective consolidated income tax rate was primarily due to a state income tax benefit of $5.7 million related to adoption of new Department of Treasury and Internal Revenue Service Tangible Property Regulations and a credit of $880,000 related to State of California enterprise zone sales and use tax credits.

Year-to-date net income was $46.1 million, compared to $17.7 million in 2013. Diluted earnings per share were $2.26 in the first nine months of 2014, compared to $0.89 per diluted share for the same period in 2013.

The Directors of SJW Corp. today declared a quarterly dividend on common stock of $0.1875 per share. The dividend is payable on December 1, 2014 to shareholders of record on November 10, 2014.

SJW Corp. is a publicly traded holding company headquartered in San Jose, California. SJW Corp. is the parent company of San Jose Water Company, SJWTX, Inc., Texas Water Alliance Limited, 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.

This press release may contain certain forward-looking statements including but not limited to statements relating to SJW Corp.’s plans, strategies, objectives, expectations and intentions, which are made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of SJW Corp. 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 Corp.’s most recent reports on Form 10-K, Form 10-Q and Form 8-K filed with the Securities and Exchange Commission. SJW Corp. undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

SJW Corp.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands, except per share data)
Three months ended September 30, Nine months ended September 30,
2014 2013 2014 2013
OPERATING REVENUE $ 125,430 85,238 $ 250,382 209,607
OPERATING EXPENSE:
Production Expenses:
Purchased water 15,616 21,092 37,288 49,525
Power 3,453 3,074 7,565 5,736
Groundwater extraction charges 17,286 13,142 42,250 27,257
Other production expenses 3,073 3,080 8,936 8,675
Total production expenses 39,428 40,388 96,039 91,193
Administrative and general 10,574 10,706 29,534 32,285
Maintenance 3,975 3,325 10,822 9,958
Property taxes and other non-income taxes 2,872 2,686 8,251 7,769
Depreciation and amortization 9,467 8,787 28,447 26,346
Total operating expense 66,316 65,892 173,093 167,551
OPERATING INCOME 59,114 19,346 77,289 42,056
OTHER (EXPENSE) INCOME:
Interest expense (5,397 ) (5,009 ) (15,221 ) (14,987 )
Gain on sale of California Water Service Group stock 2,017
Other, net 380 416 1,417 2,562
Income before income taxes 54,097 14,753 65,502 29,631
Provision for income taxes 15,731 5,803 19,384 11,924
NET INCOME 38,366 8,950 46,118 17,707
Other comprehensive income (loss), net (271 ) 185 (32 ) 450
Reclassification adjustment for gain realized on sale of investments, net (1,171 )
COMPREHENSIVE INCOME $ 38,095 9,135 $ 44,915 18,157
EARNINGS PER SHARE
Basic $ 1.90 0.44 $ 2.28 0.90
Diluted $ 1.88 0.44 $ 2.26 0.89
DIVIDENDS PER SHARE $ 0.19 0.18 $ 0.56 0.55
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 20,231 20,152 20,214 19,643
Diluted 20,424 20,347 20,403 19,839
SJW Corp.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
September 30, December 31,
2014 2013
ASSETS
Utility plant:
Land $ 10,867 10,418
Depreciable plant and equipment 1,327,949 1,254,586
Construction in progress 34,319 30,846
Intangible assets 19,149 18,341

Total utility plant

1,392,284 1,314,191
Less accumulated depreciation and amortization 442,429 415,453
Net utility plant 949,855 898,738
Real estate investments 73,790 78,477
Less accumulated depreciation and amortization 11,201 10,658
Net real estate investments 62,589 67,819
CURRENT ASSETS:
Cash and cash equivalents 5,599 2,299
Accounts receivable and accrued unbilled utility revenue 43,370 34,189
Current regulatory assets, net 17,308
Prepaid expenses and other 4,251 3,164
Total current assets 70,528 39,652
OTHER ASSETS:
Investment in California Water Service Group 5,815 8,885
Debt issuance costs and other, net of accumulated amortization 5,343 5,176
Regulatory assets, net 109,537 83,543
Other 6,437 6,173
127,132 103,777
$ 1,210,104 1,109,986
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock $ 10,541 10,505
Additional paid-in capital 64,919 63,017
Retained earnings 278,918 244,266
Accumulated other comprehensive income 2,184 3,387
Total shareholders’ equity 356,562 321,175
Long-term debt, less current portion 384,514 334,997
Total capitalization 741,076 656,172
CURRENT LIABILITIES:
Line of credit 8,200 22,400
Current portion of long-term debt 624 554
Accrued groundwater extraction charge, purchased water and purchased power 11,641 7,781
Accounts payable 12,311 12,587
Accrued interest 5,914 5,369
Other current liabilities 13,063 10,504
Total current liabilities 51,753 59,195
DEFERRED INCOME TAXES AND CREDITS 159,150 142,111

ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF CONSTRUCTION

206,910 202,303
POSTRETIREMENT BENEFIT PLANS 44,329 43,496
OTHER NONCURRENT LIABILITIES 6,886 6,709
$ 1,210,104 1,109,986

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