SJW (SJW) - 2021 Q2 - Quarterly Report

Financial Performance - SJW Group's consolidated net income for Q2 2021 was $20,775, an increase of approximately 5% from $19,721 in Q2 2020[104] - For the six months ended June 30, 2021, consolidated net income was $23,391, up about 6% from $22,138 in the same period of 2020[104] - Revenue for Q2 2021 increased by $5,032 or 3% due to higher cumulative water rates and increased customer usage[104] - For the six months ended June 30, 2021, revenue rose by $4,063 or 2% driven by cumulative water rate increases and new customers[104] - Operating revenue from Water Utility Services for Q2 2021 was $150,921, compared to $145,765 in Q2 2020[106] - Real Estate Services revenue for Q2 2021 was $1,320, down from $1,444 in Q2 2020[106] - Consolidated operating revenues increased by $5,032 million (3%) for the three months ended June 30, 2021, compared to the same period in 2020, driven by rate increases of $3,561 million (2%) and an increase in customers by 672[107] Operating Expenses - Operating expenses rose to $119,602 million for the three months ended June 30, 2021, an increase of $8,463 million (8%) compared to the same period in 2020, primarily due to increases in administrative and general expenses[107] - Water production expenses increased by $2,850 million (3%) for the three months ended June 30, 2021, attributed to changes in surface water use and increased customer usage[118] Water Supply and Production - Unaccounted-for water for SJWC was approximately 7.1% of total production for the twelve months ended June 30, 2021, compared to 6.4% for the same period in 2020[116] - Valley Water's reservoirs were at approximately 14% of total capacity as of July 1, 2021, with 7,719 million gallons in storage, significantly below the twenty-year average[109] - The total dependable yield from Connecticut Water's infrastructure is approximately 65 million gallons per day, with 72% sourced from wells and 28% from surface water supplies[112] - SJWC's Lake Elsman contained 247 million gallons of water as of July 1, 2021, representing only 17% of the five-year average due to low winter rainfall[110] - The company anticipates that its various water supply sources will be sufficient to meet customer demand through the remainder of 2021 despite current drought conditions[113] - The change in sources of water supply for Water Utility Services showed a total increase of 597 million gallons (4%) for the three months ended June 30, 2021, compared to the same period in 2020[115] Cash Flow and Investments - SJW Group generated cash flows from operations of approximately $67,100 for the six months ended June 30, 2021, an increase of approximately $34,800 compared to $32,300 for the same period in 2020[126] - Cash flows used in investing activities were approximately $107,000 for the six months ended June 30, 2021, compared to $81,100 for the same period in 2020[128] - Budgeted capital expenditures for Water Utility Services in 2021 are anticipated to be approximately $238,800, with 42% or $100,100 already invested as of June 30, 2021[129] - Over the next five years, Water Utility Services expects to incur approximately $1,400,000 in capital expenditures, subject to regulatory approval[130] Financing Activities - Net cash provided by financing activities increased by approximately $4,600, primarily due to an increase in net proceeds from a common stock equity offering of $66,800[132] - As of June 30, 2021, SJWC's funded debt and equity were approximately 49% and 51%, respectively, aiming for a capital structure of approximately 47% debt and 53% equity[136] - SJW Group had available unused short-term bank lines of credit totaling $121,459 as of June 30, 2021[150] - On March 8, 2021, SJW Group issued 1,030,000 shares of common stock at a public offering price of $59.00 per share, raising significant capital[152] - SJW Group received net proceeds of approximately $66.775 million from the Offering and the sale of option shares[153] - Proceeds from the offerings were used to pay down a bank line of credit and for general corporate purposes, including infrastructure improvements and capital expenditures[153] Market Risks and Ratings - SJW Group's ability to draw on lines of credit and issue long-term debt may be impacted by the condition of capital and credit markets[154] - The company has an A- rating from Standard & Poor's Ratings Service, with a stable outlook[154] - SJW Group is exposed to market risks including changes in interest rates and pension plan asset values[155] - The company sponsors noncontributory pension plans, with costs affected by discount rates and investment returns[155] - SJW Group has no derivative financial instruments or significant off-balance sheet risks[156] Strategic Initiatives - SJW Group recorded a $3,000 pre-tax gain on the sale of utility property related to the Texas Water Alliance Limited transaction[104] - The company has identified approximately 237 acres of non-utility property that is no longer used for utility services[92] - SJW Group's business strategy includes pursuing acquisitions and expanding into new markets, although risks are associated with such strategies[98] - The impact of COVID-19 has led to higher uncollectible accounts receivables and increased costs, with regulators approving mechanisms for recovery of related expenses[105]