Sjw Group (SJW) 10-Q Quarterly Report October 2018

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.

The following information was filed by Sjw Group (SJW) on Thursday, October 25, 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.

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Inside Sjw Group's 10-Q Quarterly Report:

M & A - Other Highlight
The increase was primarily attributable to an increase of $8,442 in merger related expenses incurred in connection with the companys proposed merger with CTWS, an increase of $1,617 in depreciation and amortization expense due to increases in utility plant, an increase of $964 in administrative and general expenses primarily due to increases in uninsured losses, annual wage increases, and rate case filing expenses, an increase in property and other non-income taxes of $562 primarily due to an increase in utility plant additions and annual assessments, and an increase of $373 in maintenance expenses due to annual wage increases.

M & A - Other Highlight
The increase was primarily attributable to an increase of $14,994 in merger related expenses incurred in connection with the companys proposed merger with CTWS, an increase of $4,704 in depreciation and amortization expense due to increases in utility plant, an increase of $1,853 in administrative and general expenses primarily due to increases in the cost of capital and rate case filing expenses and group insurance costs, an increase in property and other non-income taxes of $1,072 primarily due to an increase in utility plant additions and annual assessments, and an increase of $1,045 in maintenance expenses due to annual wage increases and paving costs as a result of increased leak repairs.
Financial - Expense Highlight
Water Production Expenses The increase in water production expenses for the three and nine months ended September 30, 2018, compared to the same periods in 2017, was primarily attributable to an increase in usage and higher per unit costs for purchased water, groundwater extraction and energy charges, partially offset by an increased use of surface water and cost-recovery balancing and memorandum accounts.
Financial - Income Highlight
The federal statutory income tax rate decreased from 35% to 21% effective January 1, 2018 thus reducing the income tax expense and the effective consolidated income tax rate in 2018.
Other - Other Highlight
Important factors that could cause or contribute to such differences include, but are not limited to, those discussed in this report and our most recent Form 10-K filed with the Securities and Exchange Commission (the "SEC") under the items entitled "Risk Factors," and in other reports SJW Group files with the SEC, specifically the most recent reports on Form 10-Q and Form 8-K, each as it may be amended from time to time.
Other - Other
Business Strategy for Water Utility...Read more
Financial - Earnings
This decrease was the result...Read more
Other - Other
In July 2018, the FASB...Read more
M & A - Other
Any businesses we acquire may...Read more
Other - Other
Capital expenditures have the effect...Read more
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Pursuant to the terms of...Read more
Financial - Expense
Other Operating Expenses Operating expenses,...Read more
M & A - Other
As noted above, the company...Read more
Financial - Income
Provision for Income Taxes For...Read more
Financial - Expense
Operating expenses, excluding water production...Read more
Financial - Income
The effective consolidated income tax...Read more
Financial - Expense
Balancing and memorandum accounts are...Read more
Other - Other
CLWSC fully expects to meet...Read more
Financial - Income
With the CPUC approval of...Read more
Financial - Expense
We expect to incur costs...Read more
M & A - Other
SJW Group anticipates incurring additional...Read more
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In addition, the execution of...Read more
Financial - Income
The decrease in income tax...Read more
Financial - Expense
SJW Group used approximately: (1)...Read more
Financial - Earnings
The decrease in net income...Read more
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The customer is charged both...Read more
Financial - Income
Other Comprehensive Income (Loss) The...Read more
Financial - Cash Flow
Cash flow from operations decreased...Read more
M & A - Other
On August 5, 2018, SJW...Read more
Other - Other
This ASU will be effective...Read more
Financial - Expense
Other (Expense) Income For the...Read more
Financial - Expense
These increases were offset partially...Read more
Financial - Expense
These increases were offset partially...Read more
Other - Other
SJW Group intends to update...Read more
Revenue - Geography
For a description of certain...Read more
Other - Other
SJWTX, Inc., doing business as...Read more
Financial - Expense
In most cases, the replacement...Read more
Revenue - Geography
San Jose Water Company?s loan...Read more
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The estimated reversal of excess...Read more
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The limited partnership has been...Read more
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Sources of Capital: San Jose...Read more
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According to SCVWD, the projected...Read more
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Effective both July 1, 2017...Read more
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San Jose Water Company believes...Read more

Financial Statements, Disclosures and Schedules

Inside this 10-Q Quarterly Report

Material Contracts, Statements, Certifications & more

Sjw Group provided additional information to their SEC Filing as exhibits

Exhibit 31.1: Certification Pursuant To Rule 13A-14(A)/15D-14(A) By Chairman, President &Amp; Ceo

Exhibit 31.2: Certification Pursuant To Rule 13A-14(A)/15D-14(A) By Cfo And Treasurer

Exhibit 32.1: Certification Pursuant To 18 U.S.C. Section 1350 By Chairman, President &Amp; Ceo

Exhibit 32.2: Certification Pursuant To 18 U.S.C. Section 1350 By Cfo And Treasurer

Ticker: SJW
CIK: 766829
Form Type: 10-Q Quarterly Report
Accession Number: 0000766829-18-000131
Submitted to the SEC: Fri Oct 26 2018 12:50:53 PM EST
Accepted by the SEC: Fri Oct 26 2018
Period: Sunday, September 30, 2018
Industry: Water Supply