EXHIBIT 99.1


SJW GROUP ANNOUNCES 2018 THIRD QUARTER FINANCIAL RESULTS

SAN JOSE, CA, October 24, 2018 – SJW Group (NYSE: SJW) today reported financial results for the third quarter ended September 30, 2018. SJW Group net income was $15.8 million for the quarter ended September 30, 2018, compared to $19.5 million for the same period in 2017. Diluted earnings per share were $0.76 and $0.94 for the quarters ended September 30, 2018 and 2017, respectively. Diluted earnings per share includes $1.08 per share from recurring operations offset by $0.32 per share related to the company's activities around the proposed combination with Connecticut Water Service, Inc.

Operating revenue was $124.9 million for the quarter ended September 30, 2018 compared to $124.6 million in the same period in 2017. The $300,000 increase in revenue was primarily attributable to a $3.1 million increase in cumulative water rate changes, net of approximately $1.8 million rate decrease from our 2018 cost of capital proceeding and $3.2 million from the federal rate change related to the implementation of the Tax Cuts and Jobs Act (H.R.1) (the "Tax Act"), and $1.0 million increase in revenue from new customers. The increase was partially offset by a $3.1 million decrease in the net recognition of certain balancing and memorandum accounts, which includes $2.5 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, and a decrease in customer usage of $752,000.

Water production expenses for the third quarter of 2018 were $55.1 million compared to $53.3 million for the same period in 2017, an increase of $1.8 million. The increase in water production expenses was attributable to $4.9 million in higher per unit costs for purchased water, groundwater extraction and energy charges, partially offset by $2.4 million related to cost-recovery balancing and memorandum accounts and $1.0 million due to an increase in the use of available surface water supplies. Operating expenses, excluding water production costs, increased $11.8 million to $43.9 million from $32.1 million. The increase was primarily due to $8.4 million in merger expenses related to our proposed combination with Connecticut Water Service, Inc., $1.6 million of higher depreciation expenses due to assets placed in service in 2017, $935,000 in higher maintenance and property taxes and other non-income taxes, and $803,000 of higher administrative and general expenses, net of cost-recovery balancing and memorandum accounts.

The effective consolidated income tax rates were approximately 21% and 41% for the quarters ended September 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 $29.9 million, compared to $41.9 million in 2017. Diluted earnings per share were $1.45 in the first nine months of 2018, compared to $2.03 per diluted share for the same period in 2017. Diluted earnings per share includes $2.03 per share from recurring operations offset by $0.58 per share related to the company's activities around the proposed combination with Connecticut Water Service, Inc. In addition, the company's diluted earnings per share for 2017 includes $0.15 per share from real estate transactions that did not re-occur in 2018.

Year-to-date operating revenue increased by $3.3 million to $299.0 million from $295.7 million in the first nine months of 2018. The increase was attributable to $14.9 million in cumulative rate increases, net of approximately $2.8 million rate decrease from our 2018 cost of capital proceeding and $3.2 million from the federal rate change related to the implementation of the Tax Act, $7.4 million in higher customer usage, and $1.8 million in revenue from new customers. These increases were partially offset by a $20.6 million decrease in the net recognition of certain balancing and memorandum accounts, which includes $6.7 million related to the implementation of the Tax Act, $6.5 million in lower revenue recorded in our Water Conservation Memorandum Account, $4.2 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.
 

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Year-to-date water production expenses increased to $125.4 million from $118.6 million in 2017. The $6.8 million increase was attributable to $11.0 million in higher per unit costs for purchased water, groundwater extraction and energy charges and $4.6 million in higher customer water usage, offset by $5.7 million in lower expenses due to an increase in the use of available surface water supplies and $3.1 million related to cost-recovery balancing and memorandum accounts. Operating expenses, excluding water production costs, increased $23.2 million to $117.6 million from $94.4 million. The increase was primarily due to $15.0 million in merger expenses related to our proposed combination with Connecticut Water Service, Inc., $4.7 million in higher depreciation expenses, $2.1 million in higher maintenance and property taxes and other non-income taxes, and $1.4 million in higher administrative and general expenses, net of cost-recovery balancing and memorandum accounts.

Other expense and income in the first nine 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 20% and 38% for the nine-month periods ended September 30, 2018 and 2017, respectively. The effective tax rate decreased in 2018 primarily due to the change in the statutory federal income tax rate from 35% to 21% as a result of the Tax Act.

The Directors of SJW Group today declared a quarterly dividend on common stock of $0.28 per share. The dividend is payable on December 3, 2018 to shareholders of record on November 5, 2018.

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.


2



SJW Group
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands, except per share data)
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
2018
 
2017
 
2018
 
2017
REVENUE
$
124,853

 
124,578

 
$
298,981

 
295,696

OPERATING EXPENSE:
 
 
 
 
 
 
 
Production Expenses:
 
 
 
 
 
 
 
Purchased water
33,545

 
30,833

 
72,673

 
66,938

Power
1,882

 
2,500

 
4,774

 
5,491

Groundwater extraction charges
14,890

 
15,756

 
34,341

 
34,098

Other production expenses
4,836

 
4,216

 
13,674

 
12,067

Total production expenses
55,153

 
53,305

 
125,462

 
118,594

Administrative and general
12,752

 
11,949

 
36,278

 
34,909

Maintenance
4,980

 
4,607

 
14,036

 
12,991

Property taxes and other non-income taxes
4,016

 
3,454

 
11,332

 
10,260

Depreciation and amortization
13,682

 
12,065

 
40,921

 
36,217

Merger related expenses
8,442

 

 
14,994

 

Total operating expense
99,025

 
85,380

 
243,023

 
212,971

OPERATING INCOME
25,828

 
39,198

 
55,958

 
82,725

OTHER (EXPENSE) INCOME:
 
 
 
 
 
 
 
Interest expense
(6,077
)
 
(5,541
)
 
(18,213
)
 
(17,354
)
Unrealized loss on California Water Service Group stock

 

 
(527
)
 

Gain on sale of real estate investment

 

 

 
6,903

Pension non-service cost
(589
)
 
(953
)
 
(1,767
)
 
(2,860
)
Other, net
729

 
359

 
2,084

 
1,436

Income before income taxes
19,891

 
33,063

 
37,535

 
70,850

Provision for income taxes
4,103

 
13,523

 
7,591

 
27,055

NET INCOME BEFORE NONCONTROLLING INTEREST
15,788

 
19,540

 
29,944

 
43,795

Less net income attributable to the noncontrolling interest

 

 

 
1,896

SJW GROUP NET INCOME
15,788

 
19,540

 
29,944

 
41,899

Other comprehensive income, net

 
80

 

 
252

SJW GROUP COMPREHENSIVE INCOME
$
15,788

 
19,620

 
$
29,944

 
42,151

 
 
 
 
 
 
 
 
SJW GROUP EARNINGS PER SHARE:
 
 
 
 
 
 
 
Basic
$
0.77

 
0.95

 
$
1.45

 
2.04

Diluted
$
0.76

 
0.94

 
$
1.45

 
2.03

DIVIDENDS PER SHARE
$
0.28

 
0.22

 
$
0.84

 
0.65

WEIGHTED AVERAGE SHARES OUTSTANDING:
 
 
 
 
 
 
 
Basic
20,627

 
20,516

 
20,594

 
20,502

Diluted
20,732

 
20,697

 
20,722

 
20,675



3



SJW Group
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)

 
September 30,
2018
 
December 31,
2017
ASSETS
 
 
 
Utility plant:
 
 
 
Land
$
18,300

 
17,831

Depreciable plant and equipment
1,783,654

 
1,714,228

Construction in progress
79,475

 
45,851

Intangible assets
15,748

 
14,413

Total utility plant
1,897,177

 
1,792,323

Less accumulated depreciation and amortization
593,916

 
553,059

Net utility plant
1,303,261

 
1,239,264

 
 
 
 
Real estate investments
56,336

 
56,213

Less accumulated depreciation and amortization
12,029

 
11,132

Net real estate investments
44,307

 
45,081

CURRENT ASSETS:
 
 
 
Cash and cash equivalents
13,327

 
7,799

Accounts receivable and accrued unbilled utility revenue
61,518

 
54,309

Other current assets
5,522

 
4,750

Total current assets
80,367

 
66,858

OTHER ASSETS:
 
 
 
Investment in California Water Service Group

 
4,535

Regulatory assets, net
104,670

 
99,554

Other
4,263

 
2,709

 
108,933

 
106,798

 
$
1,536,868

 
1,458,001























4



SJW Group
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)

 
September 30,
2018
 
December 31,
2017
CAPITALIZATION AND LIABILITIES
 
 
 
CAPITALIZATION:
 
 
 
Common stock
$
21

 
21

Additional paid-in capital
84,045

 
84,866

Retained earnings
390,891

 
376,119

Accumulated other comprehensive income

 
2,203

Total stockholders’ equity
474,957

 
463,209

Long-term debt, less current portion
431,341

 
431,092

Total capitalization
906,298

 
894,301

CURRENT LIABILITIES:
 
 
 
Line of credit
76,000

 
25,000

Accrued groundwater extraction charge, purchased water and purchased power
22,856

 
14,382

Accounts payable
26,956

 
22,960

Accrued interest
7,402

 
6,869

Accrued payroll
4,568

 
6,011

Other current liabilities
13,898

 
9,830

Total current liabilities
151,680

 
85,052

 
 
 
 
DEFERRED INCOME TAXES
80,901

 
85,795

ADVANCES FOR CONSTRUCTION AND CONTRIBUTIONS IN AID OF
 
 
 
CONSTRUCTION
247,893

 
244,525

POSTRETIREMENT BENEFIT PLANS
75,877

 
72,841

REGULATORY LIABILITY
60,650

 
62,476

OTHER NONCURRENT LIABILITIES
13,569

 
13,011

 
$
1,536,868

 
1,458,001





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