SJW (US:SJW)2024-04-26 21:27Forward-Looking Statements This report contains forward-looking statements concerning future events and results for SJW Group, subject to various risks and uncertainties detailed in SEC filings - The report identifies several risk factors that could cause actual results to differ from forward-looking statements, including governmental policies, changes in water demand, weather impacts, unexpected costs, and financing availability8 PART I. FINANCIAL INFORMATION Financial Statements This section presents SJW Group's unaudited condensed consolidated financial statements for the quarter ended March 31, 2024, including income, balance, and cash flow statements Condensed Consolidated Statements of Comprehensive Income For Q1 2024, SJW Group reported operating revenue of $149.4 million and net income of $11.7 million, with diluted EPS of $0.36 Q1 2024 vs Q1 2023 Income Statement Highlights (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Operating revenue | $149,382 | $137,296 | | Operating income | $27,913 | $25,178 | | Net income | $11,699 | $11,530 | | Diluted EPS | $0.36 | $0.37 | | Dividends per share | $0.40 | $0.38 | Condensed Consolidated Balance Sheets As of March 31, 2024, SJW Group's total assets were $4.37 billion, with total stockholders' equity at $1.24 billion Balance Sheet Highlights (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $4,367,512 | $4,345,067 | | Net Utility Plant | $3,208,847 | $3,170,654 | | Total Current Assets | $178,082 | $198,389 | | Total Liabilities | $3,127,261 | $3,111,670 | | Long-Term Debt | $1,550,298 | $1,526,699 | | Total Stockholders' Equity | $1,240,251 | $1,233,397 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities was $51.2 million in Q1 2024, while net cash used in investing activities increased to $74.3 million Cash Flow Summary (in thousands) | Activity | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $51,216 | $50,607 | | Net cash used in investing activities | ($74,273) | ($55,029) | | Net cash provided by financing activities | $17,876 | $15,411 | | Net change in cash and cash equivalents | ($5,181) | $10,989 | Notes to Financial Statements The notes detail accounting policies, regulatory matters, and recent events, including a post-quarter warehouse sale and ongoing rate cases - In April 2024, SJW Land Company completed the sale of a warehouse in Tennessee for $27.0 million, expecting an estimated pre-tax gain of $7.0 million33 - The company's effective income tax rate for Q1 2024 was 16%, significantly higher than 9% in Q1 2023, primarily due to tax deficiencies for share-based payments55 - The Water Utility Services segment generated $147.6 million in revenue and $14.6 million in regulated net income for Q1 2024, while Real Estate Services generated $1.8 million in revenue and $0.8 million in net income6567 Management's Discussion and Analysis (MD&A) Management discusses Q1 2024 financial performance, noting a slight net income increase driven by rate adjustments and usage, partially offset by higher expenses Results of Operations Consolidated net income for Q1 2024 increased by 1% to $11.7 million, driven by $12.1 million higher revenue from rate increases and customer usage Change in Operating Revenue (Q1 2024 vs. Q1 2023, in thousands) | Factor | Increase/(Decrease) | | :--- | :--- | | Rate increases | $9,960 | | Consumption changes | $1,797 | | Increase in customers | $791 | | Regulatory mechanisms | ($790) | | Real Estate Services | $328 | | Total Change | $12,086 | Change in Operating Expense (Q1 2024 vs. Q1 2023, in thousands) | Factor | Increase/(Decrease) | | :--- | :--- | | Water production expenses | $4,775 | | Depreciation and amortization | $2,074 | | Administrative and general | $1,444 | | Maintenance | $629 | | Property taxes and other non-income taxes | $429 | | Total Change | $9,351 | - The mix of water supply shifted in Q1 2024, with groundwater usage increasing by 1.8 billion gallons and purchased water decreasing by 1.3 billion gallons compared to Q1 2023104 Regulation and Rates SJW Group is engaged in multiple regulatory proceedings, including rate case filings in California and Connecticut, and new PFAS regulations - California: SJWC filed a General Rate Case application for 2025-2027, requesting a revenue increase of $55.2 million (11.1%) in 2025117 - Connecticut: CWC filed for a rate adjustment to increase annual revenues by $21.4 million (18.1%), with a final decision expected by June 28, 2024118 - Maine: MWC received approval for a $2.6 million (17.6%) increase in annual revenue, effective January 1, 2024125 - The U.S. EPA issued new regulations for six PFAS chemicals, requiring compliance by 2029, with SJW Group estimating capital expenditures of approximately $230 million for necessary treatment127128 Liquidity and Capital Resources SJW Group maintains liquidity through operating cash flows and credit facilities, planning $332 million in 2024 utility capital expenditures - The company plans to invest approximately $332 million in utility capital expenditures in 2024 and $1.62 billion over the next five years132133 Lines of Credit Summary (as of March 31, 2024, in thousands) | Entity/Agreement | Line Limit | Outstanding | Unused Portion | | :--- | :--- | :--- | :--- | | Syndicated Credit Agreement | $300,000 | $162,000 | $138,000 | | Other CTWS Agreements | $50,000 | $48,748 | $1,252 | | Total | $350,000 | $210,748 | $139,252 | - Standard & Poor's placed SJW Group, CTWS, and CWC on a negative outlook in September 2023 due to regulatory and legislative developments in Connecticut, while maintaining their A- and A ratings143144 Quantitative and Qualitative Disclosures About Market Risk SJW Group's primary market risks stem from interest rate changes affecting variable-rate debt and the impact of market factors on pension plans - The company's primary market risks are related to interest rate changes on variable-rate debt and the impact of market factors on its pension and post-retirement plans145 - SJW Group confirms it has no derivative financial instruments, financial instruments with significant off-balance sheet risks, or financial instruments with concentrations of credit risk146 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures are effective in ensuring timely recording, processing, and reporting of information for SEC reports147 - No changes occurred in internal control over financial reporting during Q1 2024 that have materially affected, or are reasonably likely to materially affect, these controls148 PART II. OTHER INFORMATION Legal Proceedings The company is subject to routine litigation, including a class action lawsuit against The Connecticut Water Company alleging water contamination - A class action lawsuit was filed against The Connecticut Water Company in October 2023, alleging the water it provided contained contaminants, which the company plans to vigorously defend against150 Risk Factors There have been no material changes to the risk factors previously disclosed in SJW Group's Annual Report on Form 10-K for the year ended December 31, 2023 - The company reports no material changes from the risk factors disclosed in its 2023 Form 10-K151 Other Information On April 24, 2024, the Board of Directors declared a quarterly dividend of $0.40 per share of common stock - A quarterly dividend of $0.40 per share was declared by the Board of Directors on April 24, 2024152 Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files