- Diluted earnings of $0.37 per share, an increase of $0.25
compared to $0.12 in the same quarter last year
- $52.4 million investment in infrastructure projects in the
first quarter 2023
- 2023 guidance range of $2.40 - $2.50 per diluted share
reaffirmed
- Dividend of $0.38 per share declared
SJW Group (NYSE: SJW) today reported financial results for the
first quarter ended March, 31, 2023.
"We are pleased with our financial results for the quarter,
which demonstrate the strength of our water utility operations and
our commitment to providing high-quality and reliable water service
to our customers,” stated SJW Group Chair, CEO, and President, Eric
W. Thornburg. “We continued to deliver on our growth strategy by
investing in our water supply and infrastructure across our local
operations, securing the approval of four general rate cases in
Maine and an infrastructure surcharge in Connecticut, and advancing
the regulatory process for our Texas acquisition announced earlier
this year. Our strong operating performance and continued strategic
execution position us well for the future."
Operating Results
The quarter-over-quarter comparison between first quarter 2023
and first quarter 2022 operating results was affected by the impact
of the delay in San Jose Water Company's (SJWC) 2022 to 2024
general rate case (GRC) proceeding. As a reminder, the settlement
agreement between the Public Advocates Office and SJWC was approved
by the California Public Utilities Commission (CPUC) in the fourth
quarter of 2022. The authorized revenue increase in the GRC was
recorded in the fourth quarter 2022, but was retroactive back to
January 1, 2022. The delay in recognizing revenues authorized in
the GRC will affect quarter-over-quarter comparisons through
2023.
Net income for the quarter ended March 31, 2023 was $11.5
million, up 209% compared to $3.7 million in the same quarter last
year. The increase was primarily driven by rate filings in
California and Maine, and the delay in SJWC's 2022 GRC.
Operating revenue for the quarter ended March 31, 2023 was
$137.3 million, up 10% compared to $124.3 million for the same
quarter last year. The increase was primarily driven by $17.4
million in rate filings and customer growth of $1.0 million;
partially offset by lower customer usage of $6.6 million driven
primarily by weather conditions.
Operating expenses for the quarter ended March 31, 2023, was
$112.1 million, up 4% compared to $107.7 million for the same
quarter last year. This change in operating expenses reflects:
- A slight increase in water production expenses of $671,000, or
$47.0 million in the first quarter 2023 compared to $46.3 million
in the same quarter last year.
- A decrease in the gain on sale of nonutility properties of $5.5
million due to the recording of a non-recurring sale of non-utility
properties in the first quarter 2022, and no recorded gain on the
sale of nonutility properties in first quarter 2023.
- A decrease in depreciation and amortization of $1.3 million
primarily due to a $2.4 million one-time impact related to
amortization on certain Cupertino concession assets in the first
quarter 2022 offset by increases in depreciation related new
utility plant additions.
- A decrease in maintenance expenses of $637,000 primarily due to
timing of contract work and materials expense.
The effective consolidated income tax rates for the quarters
ended March 31, 2023 and 2022 were approximately 9% and 22%,
respectively. The lower effective tax rate was primarily due to
discrete tax items.
Capital Expenditures
During the quarter, SJW Group invested $52.4 million in
infrastructure and water supply, including the construction of a
photovoltaic system (solar power) at our Overlook pump station in
California, construction of the Hunt groundwater treatment facility
in Connecticut, two 750,000 gallon water storage tanks in Texas,
and the development of two new source wells for the Kezar Falls
division in Maine. These investments are part of our long-term
strategy to ensure the reliability and high-quality of our
essential water services.
SJW Group plans to invest more than $1.4 billion in capital over
the next 5 years to build and maintain its water and wastewater
operations, subject to regulatory approvals and availability of
funding.
Rate Activity and Regulatory Updates
California As authorized by the
CPUC in SJWC's most recent GRC, a $18.4 million annual revenue
increase went into effect on January 1, 2023.
In March, the CPUC made a decision to extend the statutory
deadline of the cost of capital proceeding for SJWC and other
California water utilities to the third quarter 2023.
On March 24, 2023, California Gov. Gavin Newsom ended some of
the state's water restrictions. On April 11, 2023, SJWC's water
wholesaler, Valley Water, approved a resolution ending the call for
mandatory conservation. In its place, Valley Water has called for a
15% voluntary water-use reduction and continued enforcement of
certain landscape irrigation rules. Our request to continue
tracking revenue and expense impacts in the Water Conservation
Memorandum Account and the Water Conservation Expense Memorandum
Account is pending before the CPUC.
Connecticut The Connecticut Public
Utilities Regulatory Authority (PURA) authorized a $3.3 million
annualized revenue increase in the Water Infrastructure and
Conservation Adjustment (WICA) that was effective on April 1, 2023.
The WICA increase was for nearly $28 million in completed
infrastructure replacement projects and eligible conservation
expenses. The cumulative WICA is now approximately 6.2%, the
cumulative cap is 10%.
Maine On January 1, 2023, nearly
$700,000 in annualized revenue increases went into effect in four
of Maine Water's divisions.
On March 31, 2023, Maine Water filed with the Maine Public
Utilities Commission (MPUC) for a $2.9 million revenue increase
over two years in its Biddeford and Saco Division to recover the
operating expenses and increased borrowing costs of the $60 million
Saco River Drinking Water Resource Center that went in-service in
June 2022. A decision is expected in the third quarter of 2023.
Texas The Texas Water Company (TWC)
filed its application to establish a System Improvement Charge
(SIC) with the PUCT on December 30, 2022. This filing will allow
TWC to add certain utility plant additions made since 2020 to its
rate base, thereby increasing revenue and avoiding the immediate
need for a general rate case. The SIC is projected to increase
TWC’s water revenue by $1.6 million and sewer revenue by $29
thousand within one year of the approval from the PUCT. The
decision on the SIC filing is expected in the third quarter of
2023.
ESG Initiatives and Recognition
Institutional Shareholder Services’ (ISS) most recent review of
the company’s ESG activities shows that among its U.S. water
utility peers, SJW Group is tied for the leading overall social
score, and tied for second in the overall environmental score. The
company has the second highest overall governance score possible,
and has been recognized with a Prime status by ISS ESG. Prime
status is awarded to those companies with an ESG performance above
the sector-specific PRIME threshold.
In 2023, as noted earlier, SJWC installed a 30 kW roof mounted
solar system at its Overlook Rd pump station and construction is
nearing completion of an additional 560 kW solar project that will
offset 100% of energy consumption at two more pump stations. Three
additional solar projects are set to begin later this year with a
total capacity of 1,209 kW.
In New England, construction is set to begin this month on a 275
kW solar project that will offset 100% of power used at the
company's New England headquarters in Connecticut as well as the
southern region work center. In Maine, a 1.1 megawatt planned solar
project will proceed when the local energy utility completes its
necessary infrastructure enhancements. We expect this project will
go online in 2024 and offset 100% of the energy needs of the Saco
River Drinking Water Resource Center.
These are among the many projects planned to help the company
meet its goal to reduce GHG emissions by 50% in 2023 compared to
2019.
Earnings Guidance Reaffirmed
In consideration of first quarter results, SJW Group reaffirms
the company’s 2023 full-year guidance:
- Net income per diluted common share of $2.40 to $2.50;
- Non-linear long-term diluted EPS growth of 5% to 7%, anchored
off of 2022 diluted EPS of $2.43; and
- Regulated infrastructure investments of approximately $255
million in 2023.
Guidance for 2023 is based on constructive outcomes in the SJWC
Cost of Capital proceeding in California that is currently in
progress, the general rate case proceeding for Maine’s
Biddeford-Saco Division filed on March 30, 2023, and usage recovery
associated with the end of mandatory water conservation combined
with the temporary decoupling mechanism in California. It further
assumes average weather conditions in Maine and Texas, and revenue
protection in Connecticut via the Water Revenue Adjustment that
reconciles actual revenues to authorized revenues.
Our guidance is also subject to risks and uncertainties,
including, without limitation, those factors outlined in the
“Forward Looking Statements” of this release and the “Risk Factors”
section of the company’s annual and quarterly reports filed with
the Securities and Exchange Commission.
Dividend
The directors of SJW Group have declared a quarterly cash
dividend on common stock of $0.38 per share, payable on June 1,
2023, to shareholders of record at the close of business on May 8,
2023. Dividends have been paid on SJW Group’s and its predecessor’s
common stock for more than 79 consecutive years. For 55 consecutive
years, SJW Group stockholders have received an increase in their
calendar year dividend without interruption or reduction, which
places it in an exclusive group of companies on the New York Stock
Exchange.
Financial Results Call Information
Eric W. Thornburg, president, chief executive officer and board
chair, and Andrew F. Walters, chief financial officer and
treasurer, will review results for the first quarter 2023 in a live
webcast presentation at 11 a.m. PT, or 2 p.m. ET on Monday, May 1,
2023.
Interested parties may access the webcast and related
presentation materials at the website www.sjwgroup.com. An archive
of the webcast will be available until July 24, 2023.
About SJW Group
SJW Group is among the largest investor-owned pure-play water
and wastewater utilities in the United States, providing
life-sustaining 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 The Texas Water 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 stockholders. 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,”
“estimates,” “anticipates,” “intends,” “seeks,” “approximately,”
“plans,” “projects,” “may,” “should,” “will,” 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
regulatory 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)
unanticipated weather conditions and changes in seasonality
including those affecting water supply and customer usage; (4) the
effect of the impact of climate change; (5) unexpected costs,
charges or expenses; (6) our ability to successfully evaluate
investments in new business and growth initiatives; (7)
contamination of our water supplies and damage or failure of our
water equipment and infrastructure; (8) the risk of work stoppages,
strikes and other labor-related actions; (9) catastrophic events
such as fires, earthquakes, explosions, floods, ice storms,
tornadoes, hurricanes, terrorist acts, physical attacks,
cyber-attacks, epidemic, or similar occurrences; (10) changes in
general economic, political, business and financial market
conditions; (11) 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 (12) 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
Condensed Consolidated Statements
of Comprehensive Income
(Unaudited)
(in thousands, except share and
per share data)
Three months ended March
31,
2023
2022
REVENUE
$
137,296
124,302
OPERATING EXPENSE:
Production Expenses:
Purchased water
22,418
19,217
Power
2,199
3,080
Groundwater extraction charges
10,359
13,928
Other production expenses
12,043
10,123
Total production expenses
47,019
46,348
Administrative and general
24,344
24,205
Maintenance
6,058
6,695
Property taxes and other non-income
taxes
8,401
8,309
Depreciation and amortization
26,296
27,606
Gain on sale of nonutility properties
—
(5,450
)
Total operating expense
112,118
107,713
OPERATING INCOME
25,178
16,589
OTHER (EXPENSE) INCOME:
Interest on long-term debt and other
interest expense
(15,772
)
(13,729
)
Pension non-service cost
(64
)
949
Other, net
3,266
995
Income before income taxes
12,608
4,804
Provision for income taxes
1,078
1,067
NET INCOME
11,530
3,737
Other comprehensive income (loss), net
93
(181
)
COMPREHENSIVE INCOME
$
11,623
3,556
EARNINGS PER SHARE
Basic
$
0.37
0.12
Diluted
$
0.37
0.12
DIVIDENDS PER SHARE
$
0.38
0.36
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic
30,936,476
30,224,135
Diluted
31,040,897
30,335,974
SJW Group
Condensed Consolidated Balance
Sheets
(Unaudited)
(in thousands, except share and
per share data)
March 31, 2023
December 31,
2022
ASSETS
Utility plant:
Land
$
40,820
39,982
Depreciable plant and equipment
3,706,176
3,661,285
Construction in progress
121,309
116,851
Intangible assets
35,947
35,959
Total utility plant
3,904,252
3,854,077
Less accumulated depreciation and
amortization
1,250,101
1,223,760
Net utility plant
2,654,151
2,630,317
Real estate investments and nonutility
properties
1,388
58,033
Less accumulated depreciation and
amortization
190
17,158
Net real estate investments and nonutility
properties
1,198
40,875
CURRENT ASSETS:
Cash and cash equivalents:
Cash
23,333
12,344
Accounts receivable:
Customers, net of allowances for
uncollectible accounts of $5,851 and $5,753 on March 31, 2023 and
December 31, 2022, respectively
56,468
59,172
Other
5,145
5,560
Accrued unbilled utility revenue
40,437
45,722
Assets held for sale
40,850
—
Prepaid expenses
11,380
9,753
Current regulatory assets, net
10,019
16,068
Other current assets
6,216
6,095
193,848
154,714
OTHER ASSETS:
Net regulatory assets, less current
portion
127,339
127,275
Investments
15,923
14,819
Goodwill
640,311
640,311
Other
19,728
24,313
803,301
806,718
$
3,652,498
3,632,624
SJW Group
Condensed Consolidated Balance
Sheets
(Unaudited)
(in thousands, except share and
per share data)
March 31, 2023
December 31,
2022
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Stockholders’ equity:
Common stock, $0.001 par value; authorized
70,000,000 shares; issued and outstanding shares 31,427,124 on
March 31, 2023 and 30,801,912 on December 31, 2022
$
31
31
Additional paid-in capital
692,742
651,004
Retained earnings
458,142
458,356
Accumulated other comprehensive income
1,570
1,477
Total stockholders’ equity
1,152,485
1,110,868
Long-term debt, less current portion
1,520,362
1,491,965
2,672,847
2,602,833
CURRENT LIABILITIES:
Lines of credit
72,433
159,578
Current portion of long-term debt
44,274
4,360
Accrued groundwater extraction charges,
purchased water and power
11,739
19,707
Accounts payable
25,974
29,581
Accrued interest
19,071
13,907
Accrued payroll
9,076
11,908
Income tax payable
4,608
2,696
Other current liabilities
25,790
22,913
212,965
264,650
DEFERRED INCOME TAXES
220,111
218,155
ADVANCES FOR CONSTRUCTION
137,668
137,696
CONTRIBUTIONS IN AID OF CONSTRUCTION
327,016
323,668
POSTRETIREMENT BENEFIT PLANS
55,914
59,738
OTHER NONCURRENT LIABILITIES
25,977
25,884
COMMITMENTS AND CONTINGENCIES
$
3,652,498
3,632,624
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230501005239/en/
SJW Group Contacts:
Andrew F. Walters Chief Financial Officer and Treasurer
408-279-7818 Andrew.Walters@sjwater.com
Daniel J. Meaney, APR Director of Corporate and External
Communications 860.664.6016 Daniel.Meaney@ctwater.com
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