SJW Corp. (NYSE: SJW) today reported financial results for the second quarter ended June 30, 2014. Operating revenue was $70.4 million in the quarter compared to $74.2 million in 2013. The $3.8 million decrease in revenue was attributable to $8 million in lower customer water usage, offset by $2.3 million in cumulative rate increases, an increase in the net recognition of certain balancing and memorandum accounts and the Texas general rate case refund of $800,000 and $500,000 in revenue from new customers. In addition, the Company earned $600,000 in higher revenue from real estate operations.
Water production expenses for the second quarter of 2014 were $33.1 million versus $32.5 million for the same period in 2013, an increase of $600,000. The increase in water production expenses was attributable to $2.7 million in higher per unit costs for purchased water, groundwater extraction and energy charges and $800,000 in higher expenses due to a decrease in the availability of surface water supply. These increases were offset by $2.9 million in lower customer water usage. Operating expenses, excluding water production expenses, increased $400,000 to $25.2 million from $24.8 million. The increase was due to $800,000 of higher depreciation expense, $200,000 in higher taxes other than income taxes and maintenance expenses, partially offset by $600,000 in 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 a sale of real estate investment property in Texas of approximately $300,000. No similar sales occurred in 2013.
The effective consolidated income tax rates were 31% and 41% for the quarters ended June 30, 2014 and 2013, respectively. The change in effective consolidated income tax rate for the quarter ended June 30, 2014 compared to the same period in 2013 was due to a credit of $880,000 related to State of California enterprise zone sales and use tax credits.
Net income was $6.8 million for the quarter ended June 30, 2014, compared to $7.4 million for the same period in 2013. Diluted earnings per share were $0.34 for the quarter ended June 30, 2014, compared to $0.37 per diluted share for the same period in 2013.
Year-to-date operating revenue increased by $600,000 to $125.0 million from $124.4 million in the first six months of 2014. The increase was attributable to $4.9 million in cumulative rate increases and $800,000 in revenue from new customers, offset by $4.7 million in lower customer water usage and a net decrease in certain balancing and memorandum accounts and the Texas general rate case refund of $1.5 million. In addition, the Company earned $1.1 million in higher revenue from real estate operations.
Year-to-date water production expenses increased to $56.6 million from $50.8 million in 2013. The $5.8 million increase was attributable to $4.3 million in higher per unit costs for purchased water, groundwater extraction and energy charges and $3.4 million in higher expenses due to a decrease in the availability of surface water supply. These increases were offset by $1.9 million in lower customer water usage. Operating expenses, excluding water production costs, decreased $700,000 to $50.2 million from $50.9 million. The decrease was due to $2.6 million of lower administrative and general expenses, offset by $1.4 million of higher depreciation expenses, $300,000 in higher taxes other than income taxes and $200,000 in higher maintenance 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 a sale of real estate investment property in Texas of approximately $300,000 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 32% and 41% for the six-month periods ended June 30, 2014 and 2013, respectively. The change in effective consolidated income tax rate for the six-month period ended June 30, 2014 compared to the same period in 2013 was due to a credit of $880,000 related to State of California enterprise zone sales and use tax credits.
Year-to-date net income was $7.8 million, compared to $8.8 million in 2013. Diluted earnings per share were $0.38 in the first six months of 2014, compared to $0.45 per diluted share for the same period in 2013.
On July 11, 2014, the California Public Utilities Commission issued a proposed decision on the San Jose Water Company's 2013 general rate case. Comments on the proposed decision are due on July 31, 2014.
The Directors of SJW Corp. today declared a quarterly dividend on common stock of $0.1875 per share. The dividend is payable on September 2, 2014 to shareholders of record on August 11, 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 June 30, | Six months ended June 30, | |||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||
| OPERATING REVENUE | $ | 70,356 | 74,230 | $ | 124,952 | 124,369 | ||||||||
| OPERATING EXPENSE: | ||||||||||||||
| Production Expenses: | ||||||||||||||
| Purchased water | 11,942 | 18,314 | 21,672 | 28,433 | ||||||||||
| Power | 2,623 | 1,777 | 4,112 | 2,662 | ||||||||||
| Groundwater extraction charges | 15,516 | 9,525 | 24,964 | 14,115 | ||||||||||
| Other production expenses | 3,001 | 2,882 | 5,863 | 5,595 | ||||||||||
| Total production expenses | 33,082 | 32,498 | 56,611 | 50,805 | ||||||||||
| Administrative and general | 9,510 | 10,085 | 18,960 | 21,579 | ||||||||||
| Maintenance | 3,573 | 3,433 | 6,847 | 6,633 | ||||||||||
| Property taxes and other non-income taxes | 2,575 | 2,534 | 5,379 | 5,083 | ||||||||||
| Depreciation and amortization | 9,495 | 8,743 | 18,980 | 17,559 | ||||||||||
| Total operating expense | 58,235 | 57,293 | 106,777 | 101,659 | ||||||||||
| OPERATING INCOME | 12,121 | 16,937 | 18,175 | 22,710 | ||||||||||
| OTHER (EXPENSE) INCOME: | ||||||||||||||
| Interest expense | (4,954 | ) | (4,956 | ) | (9,824 | ) | (9,978 | ) | ||||||
| Gain on sale of California Water Service Group stock | 2,017 | — | 2,017 | — | ||||||||||
| Other, net | 754 | 650 | 1,037 | 2,146 | ||||||||||
| Income before income taxes | 9,938 | 12,631 | 11,405 | 14,878 | ||||||||||
| Provision for income taxes | 3,092 | 5,191 | 3,653 | 6,121 | ||||||||||
| NET INCOME | 6,846 | 7,440 | 7,752 | 8,757 | ||||||||||
| Other comprehensive income (loss), net | 41 | (89 | ) | 239 | 265 | |||||||||
| Reclassification adjustment for gain realized on sale of investments, net | (1,171 | ) | — | (1,171 | ) | — | ||||||||
| COMPREHENSIVE INCOME | $ | 5,716 | 7,351 | $ | 6,820 | 9,022 | ||||||||
| EARNINGS PER SHARE | ||||||||||||||
| Basic | $ | 0.34 | 0.37 | $ | 0.38 | 0.45 | ||||||||
| Diluted | $ | 0.34 | 0.37 | $ | 0.38 | 0.45 | ||||||||
| DIVIDENDS PER SHARE | $ | 0.19 | 0.18 | $ | 0.38 | 0.37 | ||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING | ||||||||||||||
| Basic | 20,214 | 20,073 | 20,205 | 19,385 | ||||||||||
| Diluted | 20,398 | 20,266 | 20,392 | 19,582 | ||||||||||
SJW Corp. Condensed Consolidated Balance Sheets (Unaudited) (in thousands) | ||||||
| June 30, 2014 | December 31, 2013 | |||||
| ASSETS | ||||||
| Utility plant: | ||||||
| Land | $ | 10,844 | 10,418 | |||
| Depreciable plant and equipment | 1,301,143 | 1,254,586 | ||||
| Construction in progress | 36,817 | 30,846 | ||||
| Intangible assets | 19,149 | 18,341 | ||||
| Total utility plant | 1,367,953 | 1,314,191 | ||||
| Less accumulated depreciation and amortization | 433,841 | 415,453 | ||||
| Net utility plant | 934,112 | 898,738 | ||||
| Real estate investments | 73,794 | 78,477 | ||||
| Less accumulated depreciation and amortization | 10,807 | 10,658 | ||||
| Net real estate investments | 62,987 | 67,819 | ||||
| CURRENT ASSETS: | ||||||
| Cash and cash equivalents | 6,023 | 2,299 | ||||
| Accounts receivable and accrued unbilled utility revenue | 37,653 | 34,189 | ||||
| Prepaid expenses and other | 3,331 | 3,164 | ||||
| Total current assets | 47,007 | 39,652 | ||||
| OTHER ASSETS: | ||||||
| Investment in California Water Service Group | 6,271 | 8,885 | ||||
| Debt issuance costs and other, net of accumulated amortization | 5,438 | 5,176 | ||||
| Regulatory assets, net | 84,831 | 83,543 | ||||
| Other | 6,376 | 6,173 | ||||
| 102,916 | 103,777 | |||||
| $ | 1,147,022 | 1,109,986 | ||||
| CAPITALIZATION AND LIABILITIES | ||||||
| CAPITALIZATION: | ||||||
| Common stock | $ | 10,531 | 10,505 | |||
| Additional paid-in capital | 64,178 | 63,017 | ||||
| Retained earnings | 244,377 | 244,266 | ||||
| Accumulated other comprehensive income | 2,454 | 3,387 | ||||
| Total shareholders' equity | 321,540 | 321,175 | ||||
| Long-term debt, less current portion | 334,684 | 334,997 | ||||
| Total capitalization | 656,224 | 656,172 | ||||
| CURRENT LIABILITIES: | ||||||
| Line of credit | 52,000 | 22,400 | ||||
| Current portion of long-term debt | 569 | 554 | ||||
| Accrued groundwater extraction charge, purchased water and purchased power | 11,898 | 7,781 | ||||
| Accounts payable | 12,589 | 12,587 | ||||
| Accrued interest | 5,368 | 5,369 | ||||
| Other current liabilities | 9,633 | 10,504 | ||||
| Total current liabilities | 92,057 | 59,195 | ||||
| DEFERRED INCOME TAXES AND CREDITS | 141,416 | 142,111 | ||||
| ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF | ||||||
| CONSTRUCTION | 205,917 | 202,303 | ||||
| POSTRETIREMENT BENEFIT PLANS | 44,663 | 43,496 | ||||
| OTHER NONCURRENT LIABILITIES | 6,745 | 6,709 | ||||
| $ | 1,147,022 | 1,109,986 | ||||
Contacts:
Suzy Papazian, 408-279-7961
General Counsel and
Corporate Secretary
