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SJW Group$65.99($.02)(.03%)

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 SJW Group Announces 2017 Annual and Fourth Quarter Financial Results
   Wednesday, February 21, 2018 6:00:10 PM ET

SJW Group (SJW ) today reported financial results for the annual and fourth quarter ended December 31, 2017. SJW Group net income was $59.2 million for the year ended December 31, 2017, compared to $52.8 million for the same period in 2016. Diluted earnings per share were $2.86 and $2.57 for the years ended December 31, 2017 and 2016, respectively.

Operating revenue was $389.2 million for the year ended December 31, 2017 compared to $339.7 million in 2016. The $49.5 million increase in revenue was primarily attributable to $41.1 million in cumulative rate changes, $15.4 million in higher customer usage, $1.2 million in revenue from new customers, $885,000 change in the net recognition of certain other balancing and memorandum accounts, $515,000 increase in recycled water revenue, and $179,000 in higher revenue recorded in our Water Conservation Memorandum Account ("WCMA"). 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 and $1.0 million in lower revenue from our real estate operations.

Water production expenses for the year ended December 31, 2017 were $156.8 million compared to $124.3 million in 2016, an increase of $32.5 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, $9.6 million in higher customer water usage, and $5.9 million due to a decrease in the use of available surface water supplies. Operating expenses, excluding water production costs, increased $12.1 million to $134.4 million from $122.3 million. The increase was primarily due to $7.0 million of higher administrative and general expenses, $3.6 million of higher depreciation expenses due to assets placed in service in 2016, and $1.5 million in higher maintenance and property taxes and other non-income taxes.

Other expense and income in 2017 included a pre-tax gain of $12.5 million related to the sale of Texas Water Alliance Limited to the Guadalupe-Blanco River Authority, $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 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 a $3.2 million pre-tax gain on the sale of 159,151 shares of California Water Service Group stock.

The effective consolidated income tax rates were approximately 37% and 39% for the years ended December 31, 2017 and 2016, respectively.

Fourth Quarter Financial Results

Net income for the fourth quarter ended December 31, 2017 was $17.3 million, compared to $13.7 million in 2016. Diluted earnings per share were $0.84 and $0.67 for the quarters ended December 31, 2017 and 2016, respectively.

Operating revenue was $93.5 million in the quarter compared to $79.3 million in 2016. The $14.2 million increase in revenue was attributable to $9.2 million in higher customer usage, $7.5 million in cumulative rate changes, and $416,000 in revenue from new customers. These increases were partially offset by $2.5 million in lower revenue recorded in our WCMA and a $382,000 change in the net recognition of certain other balancing and memorandum accounts.

Water production expenses for the fourth quarter of 2017 were $39.2 million versus $31.0 million for the same period in 2016, an increase of $8.2 million. The increase in water production expenses was primarily attributable to $4.8 million in higher customer water usage and $3.5 million in higher per unit costs for purchased water, groundwater extraction and energy charges. Operating expenses, excluding water production costs, increased $4.2 million to $36.1 million from $31.9 million. The increase was primarily due to $3.2 million in higher administrative and general expenses, $939,000 of higher depreciation expenses, and $374,000 in higher property taxes and other non-income taxes. These increases were partially offset by $257,000 of lower maintenance expenses.

Other expense and income in the fourth quarter of 2017 included a pre-tax gain of $12.5 million related to the sale of Texas Water Alliance Limited to the Guadalupe-Blanco River Authority compared to the condemnation sale of the Company’s real estate investment property in Arizona for a pre-tax gain of approximately $10.0 million in the same period of 2016.

The effective consolidated income tax rates were 33% and 37% for the quarters ended December 31, 2017 and 2016, respectively. The change is primarily due to the tax benefit related to the revaluation of deferred tax assets and liabilities due to the reduction in the federal statutory income tax rate arising from the Tax Cuts and Jobs Act of 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., 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,
                                                                                 ----------------------------------------------------------------------------------------                           ----------------------------------------------------------------------------------------
                                                                                                 2017                                   2016                                                     2017                                   2016
                                                                                 -------------------------------------                     ------------------------------------                     -------------------------------------                     ------------------------------------
OPERATING REVENUE                                                                      $  93,529                                79,306                              $ 389,225                               339,706  
                                                                                 ------- ------- --------------------                      -------------- --------------------                      ------- ------- --------------------                      -------------- --------------------
OPERATING EXPENSE:
   Production Expenses:
      Purchased water                                                                     19,518                                                   20,108                                                    86,456                                                   72,971
      Power                                                                                1,804                                                    1,110                                                     7,295                                                    6,102
      Groundwater extraction charges                                                      13,719                                                    6,461                                                    47,817                                                   32,088
      Other production expenses                                                            4,163                                 3,352                                 15,203                                13,167  
                                                                                 ------------------------------------                      -------------- --------------------                      ------------------------------------                      -------------- --------------------
   Total production expenses                                                              39,204                                                   31,031                                                   156,771                                                  124,328
   Administrative and general                                                             15,517                                                   12,348                                                    55,011                                                   48,038
   Maintenance                                                                             5,137                                                    5,394                                                    17,430                                                   17,476
   Property taxes and other non-income taxes                                               3,382                                                    3,008                                                    13,642                                                   12,123
   Depreciation and amortization                                                          12,075                                11,136                                 48,292                                44,625  
                                                                                 ------------------------------------                      -------------- --------------------                      ------------------------------------                      -------------- --------------------
         Total operating expense                                                          75,315                                62,917                                291,146                               246,590  
                                                                                 ------------------------------------                      -------------- --------------------                      ------------------------------------                      -------------- --------------------
OPERATING INCOME                                                                          18,214                                                   16,389                                                    98,079                                                   93,116
OTHER (EXPENSE) INCOME:
Interest expense                                                                          (5,575 )                                                 (5,508 )                                                 (22,929 )                                                (21,838 )
Gain on sale of California Water Service Group stock                              --                                           --                                            --                                                    3,197
Gain on sale of real estate investment                                            --                                                   10,295                                                     6,903                                                   10,419
Gain on sale of utility property                                                          12,499                                           --                                                    12,499                                           --
Other, net                                                                                   505                                   548                                  1,941                                 1,487  
                                                                                 ------------------------------------                      -------------- --------------------                      ------------------------------------                      -------------- --------------------
Income before income taxes                                                                25,643                                                   21,724                                                    96,493                                                   86,381
Provision for income taxes                                                                 8,338                                 7,997                                 35,393                                33,542  
                                                                                 ------------------------------------                      -------------- --------------------                      ------------------------------------                      -------------- --------------------
NET INCOME BEFORE NONCONTROLLING INTEREST                                                 17,305                                                   13,727                                                    61,100                                                   52,839
Less net income attributable to the noncontrolling interest                       --                        --                                  1,896                        --  
                                                                                 ------------------------------------                      -------------- --------------------                      ------------------------------------                      -------------- --------------------
SJW GROUP NET INCOME                                                                      17,305                                                   13,727                                                    59,204                                                   52,839
Other comprehensive income, net                                                              427                                                      107                                                       679                                                      955
Reclassification adjustment for gain realized on sale of                          --                        --                         --                                (1,742 )
investments, net
                                                                                 --------------  --------------------                      -------------- --------------------                      --------------  --------------------                      -------------- --------------------
SJW GROUP COMPREHENSIVE INCOME                                                         $  17,732                                13,834                              $  59,883                                52,052  
                                                                                 ======= ======= ====================                      ============== ====================                      ======= ======= ====================                      ============== ====================
                                                                                                                                                                                                                                                               
SJW GROUP EARNINGS PER SHARE:
   Basic                                                                               $    0.84                                                     0.67                                                 $    2.89                                                     2.59
   Diluted                                                                             $    0.84                                                     0.67                                                 $    2.86                                                     2.57
DIVIDENDS PER SHARE                                                                    $    0.39                                                     0.20                                                 $    1.04                                                     0.81
WEIGHTED AVERAGE SHARES OUTSTANDING:
   Basic                                                                                  20,521                                                   20,456                                                    20,507                                                   20,440
   Diluted                                                                                20,714                                                   20,614                                                    20,685                                                   20,589
                                                                                                      
                                                                             SJW Group
                                                               Condensed Consolidated Balance Sheets
                                                                            (Unaudited)
                                                                          (in thousands)
                                                                                                                                              
                                                                                              December 31,                                       December 31,
                                                                                                  2017                                               2016
                                                                                 ------------------------------------                        --------------------
ASSETS
Utility plant:
   Land                                                                                $    17,831                                                         17,923
   Depreciable plant and equipment                                                       1,714,228                                                      1,554,016
   Construction in progress                                                                 45,851                                                         70,453
   Intangible assets                                                                        14,413                                      23,989
                                                                                 --------------------------------------                      --------------------
      Total utility plant                                                                1,792,323                                                      1,666,381
Less accumulated depreciation and amortization                                             553,059                                     520,018
                                                                                 --------------------------------------                      --------------------
      Net utility plant                                                                  1,239,264                                   1,146,363
                                                                                 --------------------------------------                      --------------------
                                                                                                                                              
Real estate investments                                                                     56,213                                                         62,193
Less accumulated depreciation and amortization                                              11,132                                      11,734
                                                                                 --------------------------------------                      --------------------
      Net real estate investments                                                           45,081                                      50,459
                                                                                 --------------------------------------                      --------------------
CURRENT ASSETS:
   Cash and cash equivalents                                                                 7,799                                                          6,349
   Restricted cash                                                                  --                                                         19,001
   Accounts receivable and accrued unbilled utility revenue                                 54,309                                                         53,795
   Current regulatory assets, net                                                   --                                                         16,064
   Other current assets                                                                      4,750                                       4,402
                                                                                 --------------------------------------                      --------------------
      Total current assets                                                                  66,858                                      99,611
                                                                                 --------------------------------------                      --------------------
OTHER ASSETS:
   Investment in California Water Service Group                                              4,535                                                          3,390
   Regulatory assets, net                                                                   99,554                                                        135,709
   Other                                                                                     2,709                                       7,844
                                                                                 --------------------------------------                      --------------------
                                                                                           106,798                                     146,943
                                                                                 --------------------------------------                      --------------------
                                                                                       $ 1,458,001                                   1,443,376
                                                                                 ======= ========= ====================                      ====================
                                                                                                                
                                                                                  SJW Group
                                                                    Condensed Consolidated Balance Sheets
                                                                                 (Unaudited)
                                                                               (in thousands)
                                                                                                                                                        
                                                                                                         December 31,                                      December 31,
                                                                                                             2017                                              2016
                                                                                             ----------------------------------                        --------------------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
   Common stock                                                                                  $        21                                                             21
   Additional paid-in capital                                                                         84,866                                                         81,715
   Retained earnings                                                                                 376,119                                                        338,386
   Accumulated other comprehensive income                                                              2,203                                       1,524
                                                                                             ------------------------------------                      --------------------
      Total stockholders’ equity                                          463,209                                                        421,646
   Long-term debt, less current portion                                                              431,092                                     433,335
                                                                                             ------------------------------------                      --------------------
      Total capitalization                                                                           894,301                                     854,981
                                                                                             ------------------------------------                      --------------------
CURRENT LIABILITIES:
   Line of credit                                                                                     25,000                                                         14,200
   Accrued groundwater extraction charge, purchased water and purchased                               14,382                                                         10,846
   power
   Accounts payable                                                                                   22,960                                                         18,739
   Accrued interest                                                                                    6,869                                                          6,309
   Accrued payroll                                                                                     6,011                                                          4,696
   Other current liabilities                                                                           9,830                                       8,783
                                                                                             ------------------------------------                      --------------------
      Total current liabilities                                                                       85,052                                      63,573
                                                                                             ------------------------------------                      --------------------
                                                                                                                                                        
DEFERRED INCOME TAXES                                                                                 85,795                                                        205,203
ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF CONSTRUCTION                                   244,525                                                        236,391
POSTRETIREMENT BENEFIT PLANS                                                                          72,841                                                         70,177
REGULATORY LIABILITY                                                                                  62,476                                                 --
OTHER NONCURRENT LIABILITIES                                                                          13,011                                      13,051
                                                                                             ------------------------------------                      --------------------
                                                                                                 $ 1,458,001                                   1,443,376
                                                                                             ===== ========= ====================                      ====================

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20180221006471r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20180221006471/en/

SOURCE: SJW Group

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


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