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 SJW Group Announces 2017 Second Quarter Financial Results
   Wednesday, July 26, 2017 6:00:00 PM ET

SJW Group (SJW ) today reported financial results for the second quarter ended June 30, 2017. SJW Group net income was $18.7 million for the quarter ended June 30, 2017, compared to $16.8 million for the same period in 2016. Diluted earnings per share were $0.90 and $0.82 for the quarters ended June 30, 2017 and 2016, respectively.

Operating revenue was $102.1 million for the quarter ended June 30, 2017 compared to $86.9 million in the same period in 2016. The $15.2 million increase in revenue was primarily attributable to $15.0 million in cumulative rate increases, $4.7 million in higher revenue recorded in our Water Conservation Memorandum Account ("WCMA"), $3.2 million in higher customer usage, and a $1.1 million change in the net recognition of certain other balancing and memorandum accounts. These increases were partially offset by $8.8 million in true-up revenue recognized as a part of the decision on our 2016 California General Rate Case decision in the prior year.

Water production expenses for the second quarter of 2017 were $38.5 million compared to $27.7 million for the same period in 2016, an increase of $10.8 million. The increase in water production expenses was attributable to $5.5 million in higher per unit costs for purchased water, groundwater extraction and energy charges, $4.1 million in higher expenses due to a decrease in the use of available surface water supplies, and $1.2 million in higher customer water usage. Operating expenses, excluding water production costs, increased $3.3 million to $32.8 million from $29.5 million. The increase was primarily due to $1.9 million of higher administrative and general expenses, $846,000 of higher depreciation expenses due to assets placed in service in 2016, and $427,000 in higher property taxes and other non-income taxes.

Other expense and income in the second quarter and first six months of 2017 included a pre-tax gain of $6.3 million on the sale of 444 West Santa Clara Street Limited Partnership’s interests in the commercial building and land the partnership owned and sale of undeveloped land which SJW Land Company owned for a pre-tax gain of $580,000. Other expense and income in the second quarter and first six months of 2016 included a pre-tax gain on the sale of 159,151 shares of California Water Service Group stock for $3.2 million.

The effective consolidated income tax rates were 37% and 39% for the quarters ended June 30, 2017 and 2016, and 36% and 39% for the six-month periods ended June 30, 2017 and 2016, respectively. The change was due to inclusion of a noncontrolling interest gain on sale of 444 West Santa Clara Street Limited Partnership property in net income before income taxes with no associated income taxes on the noncontrolling interest.

Year-to-date net income was $22.4 million, compared to $20.2 million in 2016. Diluted earnings per share were $1.08 in the first six months of 2017, compared to $0.98 per diluted share for the same period in 2016.

Year-to-date operating revenue increased by $23.0 million to $171.1 million from $148.1 million in the first six months of 2017. The increase was attributable to $23.6 million in cumulative rate increases, $5.2 million in higher revenue recorded in our WCMA, $1.6 million in higher customer usage, and a $1.5 million change in the net recognition of certain other balancing and memorandum accounts. These increases were partially offset by $8.8 million in true-up revenue recognized as a part of the decision on our 2016 California General Rate Case decision in the prior year. WCMA revenue included $1.4 million related to a redistribution of certain customer accounts between residential and business customers for the year ended December 31, 2016.

Year-to-date water production expenses increased to $64.6 million from $48.3 million in 2016. The $16.3 million increase was attributable to $9.1 million in higher per unit costs for purchased water, groundwater extraction and energy charges, $6.4 million in higher expenses due to a decrease in the use of available surface water supplies, and $802,000 in higher customer water usage. Operating expenses, excluding water production costs, increased $5.5 million to $64.9 million from $59.4 million. The increase was primarily due to $2.8 million in higher administrative and general expenses, $1.8 million of higher depreciation expenses, and $904,000 in higher property taxes and other non-income taxes. The increase in administrative and general expenses was primarily due to an increase in salaries and an increase in regulatory fees due to higher usage.

The Directors of SJW Group today declared a quarterly dividend on common stock of $0.2175 per share. The dividend is payable on September 1, 2017 to shareholders of record on August 7, 2017.

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 June 30,                                                                                         Six months ended June 30,
                                                                                 ----------------------------------------------------------------------------------------------                     ----------------------------------------------------------------------------------------------
                                                                                                 2017                                   2016                                                     2017                                   2016
                                                                                 -------------------------------------                     ------------------------------------                     -------------------------------------                     ------------------------------------
OPERATING REVENUE                                                                      $ 102,073                                86,944                              $ 171,118                               148,056  
                                                                                 ------- ------- --------------------                      -------------- --------------------                      ------- ------- --------------------                      -------------- --------------------
OPERATING EXPENSE:
   Production Expenses:
      Purchased water                                                                     22,181                                                   14,485                                                    36,105                                                   24,182
      Power                                                                                1,704                                                    1,614                                                     2,991                                                    2,851
      Groundwater extraction charges                                                      10,932                                                    8,312                                                    18,342                                                   14,760
      Other production expenses                                                            3,655                                 3,272                                  7,166                                 6,504  
                                                                                 ------------------------------------                      -------------- --------------------                      ------------------------------------                      -------------- --------------------
   Total production expenses                                                              38,472                                                   27,683                                                    64,604                                                   48,297
   Administrative and general                                                             13,412                                                   11,536                                                    26,017                                                   23,241
   Maintenance                                                                             4,258                                                    4,054                                                     7,919                                                    7,865
   Property taxes and other non-income taxes                                               3,111                                                    2,684                                                     6,806                                                    5,902
   Depreciation and amortization                                                          12,033                                11,187                                 24,152                                22,370  
                                                                                 ------------------------------------                      -------------- --------------------                      ------------------------------------                      -------------- --------------------
         Total operating expense                                                          71,286                                57,144                                129,498                               107,675  
                                                                                 ------------------------------------                      -------------- --------------------                      ------------------------------------                      -------------- --------------------
OPERATING INCOME                                                                          30,787                                                   29,800                                                    41,620                                                   40,381
OTHER (EXPENSE) INCOME:
Interest expense                                                                          (5,756 )                                                 (5,469 )                                                 (11,813 )                                                (10,904 )
Gain on sale of California Water Service Group stock                              --                                                    3,197                                            --                                                    3,197
Gain on sale of real estate investment                                                     6,903                                           --                                                     6,903                                           --
Other, net                                                                                   614                                   158                                  1,077                                   512  
                                                                                 ------------------------------------                      -------------- --------------------                      ------------------------------------                      -------------- --------------------
Income before income taxes                                                                32,548                                                   27,686                                                    37,787                                                   33,186
Provision for income taxes                                                                11,964                                10,911                                 13,532                                13,033  
                                                                                 ------------------------------------                      -------------- --------------------                      ------------------------------------                      -------------- --------------------
NET INCOME BEFORE NONCONTROLLING INTEREST                                                 20,584                                                   16,775                                                    24,255                                                   20,153
Less net income attributable to the noncontrolling interest                                1,896                        --                                  1,896                        --  
                                                                                 --------------  --------------------                      -------------- --------------------                      --------------  --------------------                      -------------- --------------------
SJW GROUP NET INCOME                                                                      18,688                                                   16,775                                                    22,359                                                   20,153
Other comprehensive income, net                                                               56                                                      487                                                       172                                                    1,017
Reclassification adjustment for gain realized on sale of                          --                                (1,742 )                                          --                                (1,742 )
investments, net
                                                                                 --------------  --------------------                      -------------- --------------------                      --------------  --------------------                      -------------- --------------------
SJW GROUP COMPREHENSIVE INCOME                                                         $  18,744                                15,520                              $  22,531                                19,428  
                                                                                 ======= ======= ====================                      ============== ====================                      ======= ======= ====================                      ============== ====================
                                                                                                                                                                                                                                                               
SJW GROUP EARNINGS PER SHARE:
   Basic                                                                               $    0.91                                                     0.82                                                 $    1.09                                                     0.99
   Diluted                                                                             $    0.90                                                     0.82                                                 $    1.08                                                     0.98
DIVIDENDS PER SHARE                                                                    $    0.22                                                     0.20                                                 $    0.44                                                     0.41
WEIGHTED AVERAGE SHARES OUTSTANDING:
   Basic                                                                                  20,504                                                   20,438                                                    20,495                                                   20,426
   Diluted                                                                                20,674                                                   20,579                                                    20,665                                                   20,570
                                                                                                                                                                                                                                                                              
                                                                                                                          SJW Group
                                                                                                            Condensed Consolidated Balance Sheets
                                                                                                                         (Unaudited)
                                                                                                                       (in thousands)
                                                                                                                                                                                                
                                                                                    June 30,                             December 31,
                                                                                                                                               2017                                                                                            2016
                                                                                 -------------------------------------------------------------------------------------------------------------------------------                       --------------------
ASSETS
Utility plant:
   Land                                                                                                                                         $                                                          18,073                                    17,923
   Depreciable plant and equipment                                                                                                                                                                      1,575,892                                 1,554,016
   Construction in progress                                                                                                                                                                               110,396                                    70,453
   Intangible assets                                                                                                                                                                                       25,165                                    23,989
                                                                                 ---------------------------------------------------------------------------------------------------------------------------------                     --------------------
      Total utility plant                                                                                                                                                                               1,729,526                                 1,666,381
Less accumulated depreciation and amortization                                                                                                                                                            535,346                                   520,018
                                                                                 ---------------------------------------------------------------------------------------------------------------------------------                     --------------------
      Net utility plant                                                                                                                                                                                 1,194,180                                 1,146,363
                                                                                 ---------------------------------------------------------------------------------------------------------------------------------                     --------------------
                                                                                                                                                                                                                                        
Real estate investments                                                                                                                                                                                    56,226                                    62,193
Less accumulated depreciation and amortization                                                                                                                                                             10,545                                    11,734
                                                                                 ---------------------------------------------------------------------------------------------------------------------------------                     --------------------
     Net real estate investments                                                                                                                                                                           45,681                                    50,459
                                                                                 ---------------------------------------------------------------------------------------------------------------------------------                     --------------------
CURRENT ASSETS:
   Cash and cash equivalents                                                                                                                                                                                9,220                                     6,349
   Restricted cash                                                                                                                                                                                              8                                    19,001
   Accounts receivable and accrued unbilled utility revenue                                                                                                                                                51,813                                    53,795
   Current regulatory assets, net                                                                                                                                                                           7,672                                    16,064
   Other current assets                                                                                                                                                                                     4,179                                     4,402
                                                                                 ---------------------------------------------------------------------------------------------------------------------------------                     --------------------
      Total current assets                                                                                                                                                                                 72,892                                    99,611
                                                                                 ---------------------------------------------------------------------------------------------------------------------------------                     --------------------
OTHER ASSETS:
   Investment in California Water Service Group                                                                                                                                                             3,680                                     3,390
   Regulatory assets, net                                                                                                                                                                                 147,132                                   135,709
   Other                                                                                                                                                                                                    7,621                                     7,844
                                                                                 ---------------------------------------------------------------------------------------------------------------------------------                     --------------------
                                                                                                                                                                                                          158,433                                   146,943
                                                                                 ---------------------------------------------------------------------------------------------------------------------------------                     --------------------
                                                                                                                                                $                                                       1,471,186                                 1,443,376
                                                                                 ================================================================ ===============================================================                      ====================
                                                                                                                                                                                                                                        
                                                                                                                                SJW Group
                                                                                                                  Condensed Consolidated Balance Sheets
                                                                                                                               (Unaudited)
                                                                                                                             (in thousands)
                                                                                                                                                                                                            
                                                                                                June 30,                             December 31,
                                                                                                                                                           2017                                                                                            2016
                                                                                             -------------------------------------------------------------------------------------------------------------------------------                       --------------------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
   Common stock                                                                                                                                             $                                                              21                                        21
   Additional paid-in capital                                                                                                                                                                                          82,622                                    81,715
   Retained earnings                                                                                                                                                                                                  351,771                                   338,386
   Accumulated other comprehensive income                                                                                                                                                                               1,696                                     1,524
                                                                                             ---------------------------------------------------------------------------------------------------------------------------------                     --------------------
      Total stockholders’ equity                                                                                                                                                           436,110                                   421,646
   Long-term debt, less current portion                                                                                                                                                                               430,926                                   433,335
                                                                                             ---------------------------------------------------------------------------------------------------------------------------------                     --------------------
      Total capitalization                                                                                                                                                                                            867,036                                   854,981
                                                                                             ---------------------------------------------------------------------------------------------------------------------------------                     --------------------
CURRENT LIABILITIES:
   Line of credit                                                                                                                                                                                              --                                    14,200
   Accrued groundwater extraction charge, purchased water and purchased                                                                                                                                                18,222                                    10,846
   power
   Accounts payable                                                                                                                                                                                                    27,060                                    18,739
   Accrued interest                                                                                                                                                                                                     6,823                                     6,309
   Accrued payroll                                                                                                                                                                                                      4,540                                     4,696
   Non-refundable deposit                                                                                                                                                                                               3,000                            --
   Other current liabilities                                                                                                                                                                                           10,751                                     8,783
                                                                                             ---------------------------------------------------------------------------------------------------------------------------------                     --------------------
      Total current liabilities                                                                                                                                                                                        70,396                                    63,573
                                                                                             ---------------------------------------------------------------------------------------------------------------------------------                     --------------------
                                                                                                                                                                                                                                                    
DEFERRED INCOME TAXES                                                                                                                                                                                                 206,503                                   205,203
ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF CONSTRUCTION                                                                                                                                                    241,664                                   236,391
POSTRETIREMENT BENEFIT PLANS                                                                                                                                                                                           72,828                                    70,177
OTHER NONCURRENT LIABILITIES                                                                                                                                                                                           12,759                                    13,051
                                                                                             ---------------------------------------------------------------------------------------------------------------------------------                     --------------------
                                                                                                                                                            $                                                       1,471,186                                 1,443,376
                                                                                             ================================================================ ===============================================================                      ====================
                                                                                                                                                                                                                                                    

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170726006393r1&sid=cmtx6&distro=nx&

View source version on businesswire.com: http://www.businesswire.com/news/home/20170726006393/en/

SOURCE: SJW Group

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


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