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SJW Group$63.94$.941.49%

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 SJW Group Announces 2016 Annual and Fourth Quarter Financial Results
   Wednesday, February 22, 2017 6:00:11 PM ET

SJW Group (SJW ) today reported financial results for the annual and fourth quarter ended December 31, 2016. Net income was $52.8 million for the year ended December 31, 2016, compared to $37.9 million for the same period in 2015. Diluted earnings per share were $2.57 and $1.85 for the years ended December 31, 2016 and 2015, respectively.

Operating revenue was $339.7 million for the year ended December 31, 2016 compared to $305.1 million in 2015. The $34.6 million increase in revenue was primarily attributable to $28.6 million in cumulative rate increases, a net $6.8 million increase in revenue related to our 2015 California General Rate Case decision in the current year offset by true-up revenue recognized as part of the 2012 California General Rate Case decision in 2015, a $1.7 million change in the net recognition of certain balancing and memorandum accounts, $700,000 increase in Recycled water revenue, and $600,000 in revenue from new customers. These operating revenue increases were partially offset by $3.4 million lower revenue recorded in our Water Conservation Memorandum Account ("WCMA") and $300,000 in lower revenue from real estate operations.

Water production expenses for the year ended December 31, 2016 were $124.3 million compared to $110.6 million in 2015, an increase of $13.7 million. The increase in water production expenses was attributable to $17.0 million in higher per unit costs for purchased water, groundwater extraction and energy charges, partially offset by $2.5 million in lower expenses due to an increase in the use of available surface water supplies and $800,000 in lower customer water usage. Operating expenses, excluding water production costs, increased $7.8 million to $122.3 million from $114.5 million. The increase was due to $3.9 million of higher depreciation expenses, $2.5 million in higher maintenance expenses, $907,000 of higher administrative and general expenses, and $456,000 in higher property taxes and other non-income taxes.

Other expense and income in 2016 included the condemnation sale of the Company’s real estate investment property in Arizona for a pre-tax gain of approximately $10.0 million and $3.2 million pre-tax gain on the sale of 159,151 shares of California Water Service Group stock. Other expense and income during the same period in 2015 included the sale of multiple real estate properties for a gain of approximately $1.9 million.

The effective consolidated income tax rates were approximately 39% and 38% for the years ended December 31, 2016 and 2015, respectively.

Fourth Quarter Financial Results

Net income for the fourth quarter ended December 31, 2016 was $13.7 million, compared to $16.2 million in 2015. Diluted earnings per share were $0.67 and $0.79 for the quarters ended December 31, 2016 and 2015, respectively.

Operating revenue was $79.3 million in the quarter compared to $87.6 million in 2015. The $8.3 million decrease in revenue was primarily attributable to $3.0 million of 2014 WCMA revenue and $17.5 million of 2015 WCMA revenue that were recorded in the fourth quarter of 2015, offset by $4.0 million in WCMA revenue recorded in the fourth quarter of 2016. In addition, the Company recorded cumulative rate increases of $8.1 million in the fourth quarter of 2016.

Water production expenses for the fourth quarter of 2016 were $31.0 million versus $26.9 million for the same period in 2015, an increase of $4.1 million. The increase in water production expenses was primarily attributable to $4.7 million in higher per unit costs for purchased water, groundwater extraction and energy charges partially offset by $519,000 due to lower customer usage. Operating expenses, excluding water production costs, increased $2.9 million to $31.9 million from $29.0 million. The increase was primarily due to $1.6 million in higher maintenance expenses, $945,000 of higher depreciation expenses due to assets placed in service in 2015, $219,000 in property taxes and other non-income taxes, and $78,000 of higher administrative and general expenses.

Other expense and income in the fourth quarter of 2016 included the condemnation sale of the Company’s real estate investment property in Arizona for a pre-tax gain of approximately $10.0 million. No similar sale occurred in the fourth quarter of 2015.

The effective consolidated income tax rates were approximately 37% and 39% for the quarters ended December 31, 2016 and 2015, respectively.

SJW Group is a publicly traded holding company headquartered in San Jose, California. SJW Group 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 Group’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 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 reports on Form 10-K, Form 10-Q and Form 8-K filed with the Securities and Exchange Commission. 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 per share data)
                                                                                                                                                                             
                                                                                         Three months ended December 31,                                                                                  Twelve months ended December 31,
                                                         ----------------------------------------------------------------------------------------------                     --------------------------------------------------------------------------------------------
                                                                         2016                                   2015                                                    2016                                  2015
                                                         -------------------------------------                     ------------------------------------                     -----------------------------------                     ------------------------------------
OPERATING REVENUE                                              $  79,306                                87,613                            $ 339,706                               305,082  
                                                         ------- ------- --------------------                      -------------- --------------------                      ----- ------- --------------------                      -------------- --------------------
OPERATING EXPENSE:
   Production Expenses:
      Purchased water                                             20,108                                                   13,718                                                  72,971                                                   61,089
      Power                                                        1,110                                                      921                                                   6,102                                                    6,121
      Groundwater extraction charges                               6,461                                                    9,187                                                  32,088                                                   31,240
      Other production expenses                                    3,352                                 3,083                               13,167                                12,178  
                                                         ------------------------------------                      -------------- --------------------                      ----------------------------------                      -------------- --------------------
   Total production expenses                                      31,031                                                   26,909                                                 124,328                                                  110,628
   Administrative and general                                     12,348                                                   12,270                                                  48,038                                                   47,131
   Maintenance                                                     5,394                                                    3,769                                                  17,476                                                   14,956
   Property taxes and other non-income taxes                       3,008                                                    2,789                                                  12,123                                                   11,667
   Depreciation and amortization                                  11,136                                10,191                               44,625                                40,740  
                                                         ------------------------------------                      -------------- --------------------                      ----------------------------------                      -------------- --------------------
         Total operating expense                                  62,917                                55,928                              246,590                               225,122  
                                                         ------------------------------------                      -------------- --------------------                      ----------------------------------                      -------------- --------------------
OPERATING INCOME                                                  16,389                                                   31,685                                                  93,116                                                   79,960
OTHER (EXPENSE) INCOME:
Interest expense                                                  (5,508 )                                                 (5,400 )                                               (21,838 )                                                (22,186 )
Gain on sale of California Water Service Group stock      --                                           --                                                   3,197                                           --
Gain on sale of real estate investment                            10,295                                           --                                                  10,419                                                    1,886
Other, net                                                           548                                   443                                1,487                                 1,494  
                                                         ------------------------------------                      -------------- --------------------                      ----------------------------------                      -------------- --------------------
Income before income taxes                                        21,724                                                   26,728                                                  86,381                                                   61,154
Provision for income taxes                                         7,997                                10,536                               33,542                                23,272  
                                                         ------------------------------------                      -------------- --------------------                      ----------------------------------                      -------------- --------------------
NET INCOME                                                        13,727                                16,192                               52,839                                37,882  
                                                         ------------------------------------                      -------------- --------------------                      ----------------------------------                      -------------- --------------------
Other comprehensive income (loss), net                               107                                                      176                                                     955                                                     (206 )
Reclassification adjustment for gain realized on sale of  --                        --                               (1,742 )                                         --  
investments, net
                                                         --------------  --------------------                      -------------- --------------------                      ------------  --------------------                      -------------- --------------------
COMPREHENSIVE INCOME                                           $  13,834                                16,368                            $  52,052                                37,676  
                                                         ======= ======= ====================                      ============== ====================                      ===== ======= ====================                      ============== ====================
                                                                                                                                                                                                                                     
EARNINGS PER SHARE:
   Basic                                                       $    0.67                                                     0.79                                               $    2.59                                                     1.86
   Diluted                                                     $    0.67                                                     0.79                                               $    2.57                                                     1.85
DIVIDENDS PER SHARE                                            $    0.20                                                     0.20                                               $    0.81                                                     0.78
WEIGHTED AVERAGE SHARES OUTSTANDING:
   Basic                                                          20,456                                                   20,382                                                  20,440                                                   20,361
   Diluted                                                        20,614                                                   20,548                                                  20,589                                                   20,516
                                                                                                               
                                                                        SJW Group
                                                          Condensed Consolidated Balance Sheets
                                                                       (Unaudited)
                                                                     (in thousands)
                                                                                                                                    
                                                                                     December 31,                                      December 31,
                                                                                         2016                                              2015
                                                                        -----------------------------------                        --------------------
ASSETS
Utility plant:
   Land                                                                      $    17,923                                                         17,853
   Depreciable plant and equipment                                             1,554,016                                                      1,438,321
   Construction in progress                                                       70,453                                                         45,573
   Intangible assets                                                              23,989                                      22,675
                                                                        -------------------------------------                      --------------------
      Total utility plant                                                      1,666,381                                                      1,524,422
Less accumulated depreciation and amortization                                   520,018                                     487,659
                                                                        -------------------------------------                      --------------------
      Net utility plant                                                        1,146,363                                   1,036,763
                                                                        -------------------------------------                      --------------------
                                                                                                                                    
Real estate investments                                                           62,193                                                         74,461
Less accumulated depreciation and amortization                                    11,734                                      13,027
                                                                        -------------------------------------                      --------------------
      Net real estate investments                                                 50,459                                      61,434
                                                                        -------------------------------------                      --------------------
CURRENT ASSETS:
   Cash and cash equivalents                                                       6,349                                                          5,239
   Restricted cash                                                                19,001                                                 --
   Accounts receivable and accrued unbilled utility revenue                       53,795                                                         46,851
Current regulatory assets, net                                                    16,064                                                         16,542
   Other current assets                                                            4,402                                       4,744
                                                                        -------------------------------------                      --------------------
      Total current assets                                                        99,611                                      73,376
                                                                        -------------------------------------                      --------------------
OTHER ASSETS:
   Investment in California Water Service Group                                    3,390                                                          6,030
   Regulatory assets, net                                                        135,709                                                        152,021
   Other                                                                           7,844                                       7,701
                                                                        -------------------------------------                      --------------------
                                                                                 146,943                                     165,752
                                                                        -------------------------------------                      --------------------
                                                                             $ 1,443,376                                   1,337,325
                                                                        ====== ========= ====================                      ====================
                                                                                                                                    
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
   Common stock                                                              $        21                                                             21
   Additional paid-in capital                                                     81,715                                                         79,231
   Retained earnings                                                             338,386                                                        302,220
   Accumulated other comprehensive income                                          1,524                                       2,311
                                                                        -------------------------------------                      --------------------
      Total stockholders’ equity                                                 421,646                                                        383,783
   Long-term debt, less current portion                                          433,335                                     377,187
                                                                        -------------------------------------                      --------------------
      Total capitalization                                                       854,981                                     760,970
                                                                        -------------------------------------                      --------------------
CURRENT LIABILITIES:
   Line of credit                                                                 14,200                                                         34,600
   Current portion of long-term debt                                                 125                                                          3,491
   Accrued groundwater extraction charge, purchased water and purchased           10,846                                                          7,163
   power
   Accounts payable                                                               18,739                                                         16,196
   Accrued interest                                                                6,309                                                          6,193
   Other current liabilities                                                      13,354                                      11,980
                                                                        -------------------------------------                      --------------------
      Total current liabilities                                                   63,573                                      79,623
                                                                        -------------------------------------                      --------------------
                                                                                                                                    
DEFERRED INCOME TAXES                                                            205,203                                                        198,775
ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF
CONSTRUCTION                                                                     236,391                                                        217,766
POSTRETIREMENT BENEFIT PLANS                                                      70,177                                                         70,230
OTHER NONCURRENT LIABILITIES                                                      13,051                                       9,961
                                                                        -------------------------------------                      --------------------
                                                                             $ 1,443,376                                   1,337,325
                                                                        ====== ========= ====================                      ====================

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170222006663r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170222006663/en/

SOURCE: SJW Group

SJW Group 
Suzy Papazian, 408-279-7961 
General Counsel and Corporate Secretary


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