SJW (US:SJW)2021-05-01 20:11Financial Data and Key Metrics Changes - First quarter revenue was $114.8 million, a 1% increase over the first quarter of 2020 [20] - Net income for the quarter was $2.6 million or $0.09 per diluted share, an 8% increase over net income of $2.4 million or $0.08 per diluted share reported in the first quarter of 2020 [20] - The increase in diluted earnings per share was primarily due to cumulative rate increases of $0.08 per share, cumulative cost savings of $0.04 per share, a tax benefit of $0.04 per share, and an increase in nonregulated income of $0.03 per share [20] Business Line Data and Key Metrics Changes - The revenue decrease was a result of $2.8 million in decreased customer usage, customer credits in Texas reduced revenue by $700,000, and net changes in certain balancing and memorandum accounts reduced revenue by $600,000 [22] - Total 2021 first quarter water production costs were slightly lower compared to the first quarter of 2020, primarily due to $800,000 in lower average per unit cost for purchased water, groundwater extraction, and energy charges [23] Market Data and Key Metrics Changes - The rainfall season in California has been lower than normal for the second consecutive year, impacting available surface water supplies [12] - The total groundwater storage at the end of the first quarter remained at Stage 1 or normal of Valley Water's water shortage contingency plan [14] Company Strategy and Development Direction - The company continues to execute on its core growth strategy of investing in high-quality water systems to provide safe and reliable water service to customers and communities [33] - The company is updating its strategic water supply plan to evaluate current and future supply reliability and resiliency [18] - The company has filed general rate cases for both San Jose Water and Connecticut Water, with significant capital programs proposed [34][36] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the return to normal operations post-COVID-19 and emphasized the importance of delivering high-quality water and exceptional service [7][10] - The company anticipates increases in operating costs due to reliance on purchased water to meet customer needs in 2021 [17] Other Important Information - The company has continuously paid a dividend for over 77 years and increased the annual dividend in each of the last 53 years [19] - The company issued approximately 1.2 million new shares in March 2021, raising net proceeds of approximately $66.9 million [29] Q&A Session Summary Question: Insights on California GRC and supply mix adjustments - Management indicated that the timing is ideal for hearings in the California general rate case and that recent experiences provide compelling evidence to support a proposal to reduce the mix of company-owned surface water supply in the overall cost structure [50][51] Question: Credit implications due to low earnings and cash flows - Management does not foresee credit implications, as creditors typically look at the company's ability to recalibrate within a 3-year period during a rate case [64] Question: Changes in usage patterns and guidance for 2021 - Management noted that they set guidance assuming a return to normal usage, balancing residential and business customer usage [65] Question: Impact of local restrictions or conservation calls on sales - Management stated that conditions reducing surface water benefits could drive higher sales if no drought is declared with mandatory conservation [67] Question: Current water availability in California watershed - Management reported that there is very little impounded water available, with about 150 million gallons available to treat [79] Question: Tax rate expectations for the remainder of the year - Management expects a more normalized tax rate for the remainder of the year, as the first quarter typically has the lowest income-producing results [86] Question: Risk on ROE in Connecticut rate case - Management believes that the Connecticut regulators understand the importance of drinking water investments and that the recent ruling on electric utilities should not impact their case [90]