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SJW Corp. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: February 29, 2012 03:24PM
SJW Corp. (SJW) filed Annual Report for the period ended 2011-12-31. Sjw Corp has a market cap of $455.1 million; its shares were traded at around $24 with a P/E ratio of 26.3 and P/S ratio of 1.9. The dividend yield of Sjw Corp stocks is 2.9%. Sjw Corp had an annual average earning growth of 7.6% over the past 10 years. GuruFocus rated Sjw Corp the business predictability rank of 3-star.
Highlight of Business Operations:On November 20, 2009, the CPUC approved the most recent general rate increase for San Jose Water Company. In summary, the decision authorizes a rate increase designed to increase revenue by $18.6 million, or 9.24%, in 2010. In accordance with CPUC rules, the subsequent increases for the years 2011 and 2012 are based upon the consumer price indices published in October of the preceding year. The CPUC approved a 2011 general rate increase of $7.3 million, or 3.32%, and a 2012 general rate increase of $10.7 million, or 4.53%. These rate changes, which were designed to produce a return on common equity of 10.20%, became effective on January 1, 2011 and 2012, respectively. The stated revenue increases for 2011 and 2012 do not include additional authorized increases associated with scheduled expense and rate base offset filings, rate recovery of planned upgrades to the Montevina Treatment Plant, and the potential supplemental filings for rate recovery for investments in alternative energy projects.
SJW Corp. s consolidated net income for the year ended December 31, 2011 was $20,878, compared to $24,406 for the same period in 2010. This represents a decrease of $3,528, or 14%, from 2010. The decrease is primarily attributable to the gain on sale of California Water Service Group stock that occurred in 2010 that did not reoccur in 2011, offset by our 2010 real estate impairment loss. This decrease was further offset by higher revenues in 2011 due to cumulative rate increases and the recognition of our MCRAM account recovery for $5,740. In addition, the Company experienced an increase in depreciation expense due to increased depreciable assets and an increase in interest expense due to the issuance of a $50,000 SJW Corp. senior note in June 2011 and a full year of interest expense on our California Pollution Control Financing Authority revenue bonds which were issued in June 2010.
Interest expense, including interest on long-term debt and mortgages, increased $1,992, or 11%, in 2011 compared to 2010. In June 2011, SJW Corp. entered into a note agreement with the Prudential Insurance Company of America, pursuant to which the Company sold an aggregate principal amount of $50,000 of its 4.35% senior notes. In addition, San Jose Water Company incurred a full year of interest on its California Pollution Control Financing Authority revenue bonds which were issued in June 2010.
Interest expense, including interest on long-term debt and mortgages, increased $1,713, or 11%, in 2010 compared to 2009. In June 2010, San Jose Water Company entered into a loan agreement with the California Pollution Control Financing Authority, under which the proceeds from the issuance by the California Pollution Control Financing Authority of its 5.10% fixed rate revenue bonds in an aggregate principal amount of $50,000 have been loaned to San Jose Water Company. In addition, San Jose Water Company incurred a full year of interest on Series J and Series K senior notes which were issued in February 2009 and May 2009, respectively.
In 2011, SJW Corp. generated cash flow from operations of approximately $64,200, compared to $37,200 in 2010 and $54,500 in 2009. Cash flow from operations is primarily generated by net income from its revenue producing activities, adjusted for non-cash expenses for depreciation and amortization, deferred income taxes, gains on the sale of assets, impairment on real estate investments and changes in working capital. Cash flow from operations increased in 2011 by approximately $27,000. This increase was caused by a combination of the following factors: (1) net income adjusted for non-cash items and gains and losses from asset activity increased $23,000, (2) net collection of taxes receivable was $7,400 more than the prior year, (3) net payments for postretirement benefits drove an increase of $2,500, (4) other current asset representing the MCRAM unbilled revenue drove a decrease of 5,700 and (5) general working capital changes caused a $200 decrease. The decrease in 2010 of cash flow from operations of approximately $17,300 was affected by a combination of the following factors: (1) net income adjusted for non-cash items and gains and losses from asset activity decreased $1,700, (2) general working capital changes caused a $4,400 increase, (3) an increase in rates which resulted in a higher accounts receivable balance drove a decrease in working capital of $3,900, (4) taxes paid were $10,500 greater than the prior year and (5) net payments for postretirement benefits drove a decrease of $5,600.
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