SJW GROUP ANNOUNCES 2018 SECOND QUARTER FINANCIAL RESULTS
SAN JOSE, CA, July 25, 2018 – SJW Group (NYSE: SJW) today reported financial results for the second quarter ended June 30, 2018. SJW Group net income was $12.9 million for the quarter ended June 30, 2018, compared to $18.7 million for the same period in 2017. Diluted earnings per share were $0.62 and $0.90 for the quarters ended June 30, 2018 and 2017, respectively. Diluted earnings per share includes $0.72 per share from recurring operations offset by $0.10 per share related to the Company’s activities around the proposed merger with Connecticut Water Service, Inc.
Operating revenue was $99.1 million for the quarter ended June 30, 2018 compared to $102.1 million in the same period in 2017. The $3.0 million decrease in revenue was primarily attributable to a $10.9 million decrease in the net recognition of certain balancing and memorandum accounts, including $4.8 million related to the implementation of the Tax Cuts and Jobs Act (H.R. 1) (the "Tax Act"), $4.3 million in lower revenue recorded in our Water Conservation Memorandum Account, and $1.6 million in cost-recovery accounts that were recorded in revenue in 2017 which upon adoption of Topic 606, "Revenue from Contracts with Customers" on January 1, 2018 are now recorded as capitalized costs until recovery is approved by the California Public Utilities Commission. The decrease was partially offset by a $5.7 million increase in cumulative water rate changes, net of approximately $1.0 million rate decrease from our 2018 cost of capital proceeding, $1.8 million in higher customer usage, and $415,000 in revenue from new customers.
Water production expenses for the second quarter of 2018 were $39.9 million compared to $38.8 million for the same period in 2017, an increase of $1.1 million. The increase in water production expenses was attributable to $3.8 million in higher per unit costs for purchased water, groundwater extraction and energy charges and $1.7 million in higher customer water usage, partially offset by $3.3 million due to an increase in the use of available surface water supplies and $1.2 million related to cost-recovery balancing and memorandum accounts. Operating expenses, excluding water production costs, increased $5.0 million to $36.4 million from $31.4 million. The increase was primarily due to $2.7 million in various costs related to our proposed merger with Connecticut Water Service, Inc., $1.6 million of higher depreciation expenses due to assets placed in service in 2017, $448,000 in higher maintenance and property taxes and other non-income taxes, and $143,000 of higher administrative and general expenses, net of cost-recovery balancing and memorandum accounts.
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.
The effective consolidated income tax rates were approximately 24% and 37% for the quarters ended June 30, 2018 and 2017, respectively. The effective tax rate decreased primarily due to the change in the statutory federal income tax rate from 35% to 21% as a result of the Tax Act.
Year-to-date net income was $14.2 million, compared to $22.4 million in 2017. Diluted earnings per share were $0.68 in the first six months of 2018, compared to $1.08 per diluted share for the same period in 2017.
Year-to-date operating revenue increased by $3.0 million to $174.1 million from $171.1 million in the first six months of 2018. The increase was attributable to $11.8 million in cumulative rate increases, net of approximately $1.0 million rate decrease from our 2018 cost of capital proceeding, $8.1 million in higher customer usage, and $792,000 in revenue from new customers. These increases were partially offset by a $17.4 million decrease in the net recognition of certain balancing and memorandum accounts, primarily due to $6.7 million in lower revenue recorded in our Water Conservation Memorandum Account, $5.9 million related to the implementation of the Tax Act, $1.7 million related to cost-recovery accounts, an additional $1.4 million related to the outcome of our cost of capital proceeding, and $1.4 million related to a redistribution of certain customer accounts between residential and business customers for the year ended December 31, 2016 that was recorded in the 2017 first quarter. In addition, revenue from our real estate operations was $229,000 lower.
The following information was filed by Sjw Group (SJW) on Thursday, July 26, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.