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Ocean Power Technologies’ (OPTT) CEO George Kirby on Q2 2016 Results – Earnings Call Transcript

Ocean Power Technologies, Inc. (NASDAQ: OPTT ) Q2 2016 Earnings Conference Call December 15, 2015 10:00 AM ET Executives Shawn Severson – Blueshirt Group George Kirby – CEO Mark Featherstone – CFO Analysts Operator Good day, ladies and gentlemen and welcome to the Ocean Power Technologies’ Q2 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time [Operator Instructions]. As a reminder, today’s conference is being recorded. I would now like to turn this conference call to Shawn Severson with Blueshirt Group. You may begin. Shawn Severson Thank you and good afternoon. Thank you for joining us on OPT’s conference call and webcast to discuss the financial results for the three months ended October 31, 2015. On the call with me today are George Kirby, President and CEO; and Mark Featherstone, Chief Financial Officer. George will provide an update on the Company’s highlights for the quarter, key activities, and strategies, after which Mark will review the financial results for the second quarter. Following our prepared remarks, we will open the call for questions. This call is being webcast on our Web site at www.oceanpowertechnologies.com. It will also be available for replay later today. The replay will stay on the site for on-demand review over the next several months. Yesterday, OPT issued its earnings press release and filed its quarterly report on Form 10-Q with Securities and Exchange Commission. All of our public filings can be viewed on the SEC Web site at sec.gov or you may go to the OPT Web site, www.oceanpowertechnologies.com. During the course of this conference call, management may make projections or other forward-looking statements regarding future events or financial performance of the Company within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to numerous assumptions made by management regarding the future circumstances over which the Company may have little or no control that involves risks and uncertainties and other factors that may cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. We refer you to the Company’s Form 10-K and other recent filings with the SEC for a description of these and other risk factors. And now, I would like to turn the call over to George to begin the discussion. George Kirby Thanks, Shawn. Good morning, everyone. Today, I’ll review our business operations and provide an update on key activities and developments in the quarter. Following this, Mark will briefly review our financial results. After which, Mark and I will be available to answer any questions. So, let’s begin. First, we’re excited that the Company is continuing to execute on our objectives and achieving considerable progress on both the commercial and technical fronts. As announced in late October, we redeployed the APB-350 A1 power buoy off the coast in New Jersey and resumed sea trials. We also released select performance data gathered during A1’s initial deployment as well as initial results from the accelerated live testing of this redesigned PowerTakeoff system or PTO. Our goal is to provide reliable, durable, and cost effective offshore autonomous power solutions where current power solutions are either too costly or unavailable. The deployment of A1 was a milestone in our long term strategy to achieve this goal and gives us the opportunity to further develop and validate our APB-350 technology. Consistent with our strategy pivot, we also made considerable progress toward our next generation APB-350 product which we expect will feature an enhanced electrical storage system, a higher efficiency power management system and a user friendly interface providing even more flexibility to end users. I am excited to announce that this next generation buoy has undergone its critical design review and we expect that it will achieve a maturity level through extensive in ocean and factory accelerated life testing that will allow us to proceed with the commercial product launch in 2016. As we’ve mentioned before, we strongly believe that our APB-350 represents a very appealing solution which provides a robust and cost effective alternative to incumbent solutions that utilize batteries, solar, wind, and diesel power for offshore applications. As part of our efforts to demonstrate product reliability and durability, and to accelerate toward product commercialization, the Company initiated accelerated life testing on its redesigned APB-350 PTO in the second quarter. The OPT accelerated life testing process consist of operating PTOs in tandem with accelerated operating profiles. This subjects the PTOs to various load conditions which are encountered in extreme sea states. The test simulates an equivalent three year ocean deployment within a period of six to nine months using PTOs that are identical to those of the Company’s APB-350 A1. We intent to use accelerated life testing results to improve and to validate reliability which we believe is critical to our prospective customers. Furthermore as an important component of our commercialization strategy, OPT formed a technical advisory panel during the second quarter of fiscal year 2016. The panel was formed as part of our efforts to accelerate power buoy commercialization and it plays a critical role in developing and further improving our technology and products. The main objective of the panel is to facilitate the implementation of different power buoy applications coupled with specific market requirements. As we previously communicated to you, the panel consist of select potential customers and users and technical and scientific stakeholders, including Guardline Marine services, DNVGL, as well as represented from two major oil and gas operators, a large oil and gas equipment manufacturer and a leading meteorological and oceanographic sensor manufacturer. The University of Western Australia, Centre for Offshore Foundation Systems, also participates on the panel by providing scientific advice related to marine subsea structures engineering. The panelists are reviewing and providing critical industry feedback on requirements and test protocols in order to increase our speed to market. This long term collaboration is initially focused on the APB-350 but it could also extend to future power buoy designs. Moving forward, we will continue to work closely with panel members to maximize the unique opportunities that this long term collaboration provides to us. We’re excited to continue to work with these highly acknowledged and experienced companies and we look forward to continuing to integrate industry feedback with our day to day operations. Additionally, in the second quarter we announced an agreement with Guardline Environmental to investigate the development of innovative metocean monitoring and maritime security systems together. Under this agreement, we will work closely with Guardline to investigate and then potentially develop, test, and market, advanced integrated solutions for end users in the ocean observing and defense and security markets. We are very excited about working together with Guardline who is a leader within the worldwide environmental services market. We strongly believe that Guardline’s 45 years of experience within environmental, meteorological and oceanic studies and hydrographic and geophysical surveys will leverage our technology to further develop innovative applications and solutions that offer potentially revolutionary improvement to incumbent operational practices. Lastly, given Board of Directors and shareholder approval, OPT completed a reverse stock split at a ratio of one share of newly issued common stock for every 10 shares of issued and outstanding common stock. With the stock split completed, we’re now in compliance with NASDAQ listing requirements, and we believe that there is significant untapped value in the current OPT stock price, which we’re intending to unlock through the commercialization of the APB-350. I’ll now turn it over to Mark who will review our financial results in the quarter. Mark? Mark Featherstone Thanks George and good morning everyone. I will now review results for the second quarter of 2016 before we open up the call for questions. For the three months ended October 31, 2015, OPT reported revenue of $25 million as compared to revenue of $1.7 million for the three months ended October 31, 2014. The decrease in revenues compared with the prior year was primarily related to the decreased billable cost on our project with Mitsui Engineering & Shipbuilding or MES and with our contract with the U.S. Department of Energy. The MES project is currently undergoing a stage-gate review with its project stakeholders. The net loss for the three months ended October 31, 2015 was $3.0 million compared to a net loss of $4.4 million for the three months ended October 31, 2014. The decrease in net loss is primarily due to lower selling, general and administrative expenses including reduced third party consulting, site development and patent amortization costs. During the three months ended October 31, 2015, we recovered product development costs from prior periods under our cost-sharing contract with the European Union for our WavePort project. In addition, the prior year included $0.3 million of gross loss due to a change in estimated project cost related to the MES contract. For the six months ended October 31, 2015, OPT reported revenue of $0.6 million as compared to revenue of $3.3 million for the six months ended October 31, 2014. The decrease in revenue is primarily related to decreased billable work for the DOE, WavePort and MES contracts. The net loss for the six months ended October 31, 2015 was $7.1 million, as compared to a net loss of $7.7 million for the six months ended October 31, 2014. The decrease in the Company’s net loss year-over-year primarily reflects increased estimated project costs associated with our contract with MES in the prior year period as well as reduced legal, third party consulting, site development costs and patent amortization expenses compared with the prior year period. These decreases were partially offset by higher product development costs related to our APB350 and PB40 projects. Turning now to the balance sheet. As of October 31, 2015, total cash, cash equivalents, and marketable securities were $10.4 million, down from $14.2 million as of July 31, 2015. As of October 31, 2015 and July 31, 2015, restricted cash was $0.4 million and $0.5 million, respectively. Net cash used in operating activities was $7 million during the six months ended October 31, 2015 compared to $12.1 million for the six months ended October 31, 2014. The prior year reflects the return of $4.7 million related to an advance payment received from ARENA while the current year reflects costs related to increased deployment activity. As discussed in previous conference calls, we have taken a number of steps over the last several months to reduce our cash burn rate while increasing our technical, operating and business development resources. As such, we continue to project that our operating cash burn in fiscal 2016 will be lower than that in fiscal 2015 despite increased deployment activity in fiscal 2016. We remain confident in our cash position and we expect to have sufficient cash to maintain operations into at least the third quarter — calendar quarter of 2016 and we are currently exploring alternatives to raising additional capital. With that, I’ll turn it back to George before we open up the call for questions. George Kirby Thanks Mark. Before we move on to Q&A, I want to highlight a few compelling reasons to consider OPT. One, we believe we are the technology leader in wave energy conversion for offshore applications. Our technology provides a critical offshore power solution for a number of industries. Our technology focuses on driving down cost, improving reliability and durability, as well as broadening and enabling commercial applications. Also, we currently have been continuing to develop significant intellectual property around our technologies and applications. Two, we’re targeting large addressable markets including offshore oil and gas, ocean based communication and data gathering and security and defense. We’re also garnering what we believe to be significant interest from potential customers to develop power buoy applications, which could lead to solutions demonstrations and market launch. And lastly, we consider our staff to be world class and we have a solid leadership team in place at both the executive management and Board levels. We’re executing multiple power buoy deployments in order to further advance power buoy validation, which we believe will service as a near term market catalyst as we move closer to commercialization. So thank you for your support and time today. And operator, we’re now ready to take questions. Question-and-Answer Session Operator George Kirby Well, thank you all once again for attending today’s call. If you do have any further questions, please don’t hesitate to contact us. Otherwise, we look forward to speaking with you all next quarter. Operator Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited. THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY’S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. 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Gas Natural’s (EGAS) CEO Gregory Osborne on Q3 2015 Results – Earnings Call Transcript

Gas Natural Inc (NYSEMKT: EGAS ) Q3 2015 Results Earnings Conference Call November 10, 2015, 1:00 pm ET Executives Deborah Pawlowski – Investor Relations, Chairman and Chief Executive Officer of Kei Advisors LLC Gregory Osborne – Chief Executive Officer, Director Jim Sprague – Chief Financial Officer, Vice President Analysts Operator Greetings and welcome to Gas Natural Inc. third quarter 2015 financial results conference call. At this time, all participants are in a listen-only mode. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Deborah Pawlowski, Investor Relations for Gas Natural. Thank you. You may begin. Deborah Pawlowski Thank you, Adam and good afternoon, everyone. I apologize for the delay on the call today having just telephone technical difficulties. And we are glad that you are here for our 2015 third quarter earnings conference call. I do have with me Gregory Osborne, our President and Chief Executive Officer, Jim Sprague, Vice President and Chief Financial Officer and Kevin Degenstein, our Chief Operating Officer as well as Vince Parisi, our General Counsel. So we are going to go through a quick review of the third quarter results. Gregory and Jim have some formal remarks. Unfortunately we are really short on time today as well. So we won’t be able to go into a Q&A. You are more than welcome to give me follow-up call if you have any other questions. I can be reached at 716-843-3908. You should have the financial results released after market closed yesterday, otherwise it can be found on our website at www.egas.net. So for the Safe Harbor statement, as you are aware, we may make some forward-looking statements on this call during the formal discussion. These statements apply to future events that are subject to risks and uncertainties as well as other factors that could cause actual results to differ materially from what is stated on today’s call. These risks and uncertainties and other factors are provided on our earnings release as well as with other documents that are filed by the company with the Securities and Exchange Commission. These documents can be found on the company’s website as well or at sec.gov. So with that, I am going to turn the call over to Gregory to begin. Gregory? Gregory Osborne Thank you, Deb and good morning, everyone. I appreciate your time today and your interest in Gas Natural. It’s been another quarter of continue progress for us as we have made significant headway toward resolution of regulatory items and are moving toward completion of our asset rationalization program. Let me summarize some highlights for you. On the regulatory front, the stipulation and recommendation between Ohio utilities and the Commission Staff of the Public Utilities Commission of Ohio or PUCO was filed on October 30. All stipulations are subject to review and final approval by the Commission as is the case with this settlement. We believe this stipulation addresses the issues raised by last year’s investigative regulatory audit of Ohio utilities. We made excellent progress on our asset rationalization initiatives in the third quarter. As previously announced, on July 1, the first day of the quarter, we completed the sale of our Wyoming operations. The proceeds will approximate $17 million subject to closing adjustments and this sale resulted in a $3.4 million gain after-tax in the quarter. This is recorded in discontinued operations. We followed that sale with the announcement on August 5 that we reached an agreement to sell our Kentucky utility for just under $2 million subject to normal regulatory approval. Our Pennsylvania utility is also under agreement for sale. That divestiture is moving through the normal regulatory approval process and we expect to close it this quarter. Subsequent to the quarter-end, in October we sold our former corporate headquarters building for approximately $1.4 million monetizing another non-core asset. When the sales of our Kentucky and Pennsylvania utilities are closed, we would have completed our asset rationalization program. The divestment these non-core assets enables us to focus our energies and resources on our operations which have higher growth potential. In Montana and Ohio, we can leverage scale we the already have in those markets. North Carolina and Maine are both underserved markets where demand for natural gas is growing. Overall, we continue to grow our customer base with approximate 1,000 customers added in the third quarter, driven by increases in Ohio, North Carolina and Maine. And internally we are progressing with our SAP implementation. This will facilitate our access to data for decision making and provide consistency and productivity improvements across our utilities. There was still some noise in our financial results. So let me turn it over to Jim to review those details. Jim? Jim Sprague Thank you, Gregory and good afternoon, everyone. Thank you for joining us today. Our third quarter 2015 financial results reflect lower full service distribution throughput primarily due to warmer weather in most of our markets. Because of unusual expense items that impacted our results for the quarter, so we are going to present both GAAP and adjusted non-GAAP results. For the quarter, revenue decreased to $13.1 million, down $0.5 million on an 11% decline in full service distribution throughput. Let me break down the contributing factors by segment. Revenue from our natural gas operations segment decreased $1.2 million or 9% to $11.4 million. The primary driver of the decrease was lower prices paid for natural gas in Montana, North Carolina and Ohio. Since our cost of natural gas is a direct pass-through to our customers, it is neutral to gross margin. However, on a weighted average basis, the 17% decline in heating degree days and resulting lower full service distribution throughput has a direct impact on margins. Consolidated gross margin was $6.9 million in the quarter, down about 2%. In the natural gas operations segment, it was virtually unchanged as a $0.2 million downward adjustment of the sales volume used to calculate unbilled revenue in Ohio was almost entirely offset by a $0.2 million increase in gross margin in Maine attributable to higher transportation volume. Our consolidated operating expenses for the third quarter increased by $0.5 million compared with the prior quarter to $9.9 million. The increase was primarily due to a $0.4 million recurring asset impairment charge related to our former corporate headquarters building that we be sold in October as well as other nonrecurring professional service costs. Those costs were offset by a reduction in corporate expenses resulting from operational improvement initiatives. Adjusted EBITDA was $0.5 million, down just about $0.1 million from the third quarter of 2014. Loss from continuing operations on an adjusted non-GAAP basis was $1.4 million or $0.13 per share, compared with a loss of $1.2 million or $0.11 per share in last year’s third quarter. You can find reconciliation of GAAP to non-GAAP numbers in the news release. On a GAAP basis, loss from continuing operations was $2.3 million or $0.22 per share in the third quarter. Turning to the balance sheet. We had $3.9 million of cash at the end of the quarter, up from $1.6 million at the end of December. We expect to continue to grow our cash position as we move into the winter months. Upon final resolution number of our PUCO ratio, we plan to complete refinancing of our long-term debt, which does not come due until mid-2017. Subsequent to the end of the quarter, we obtained a $3 million short-term bridge loan. The helps with providing g additional liquidity until we get to higher cash flow of funds to ensure we can support our unusual expenses. Cash provided by operating activities of continuing operations was $12.2 million in the first nine months, up 42% over the prior period. This increase was primarily due to improvements in working capital management. Capital expenditures for the first nine months of 2015 were $8.3 million, down from $16.3 million in the first nine months of 2014. Currently we expect another $1.4 million in the fourth quarter of 2015. This year’s investments have been primarily focused on adding services to install Maine in order to systematically expand our customer base primarily in our growth territories. We have established a greater amount of discipline in our project selection and management processes, focusing our resources where we can effectively drive earnings. We are currently evaluating our plans for 2016, which will help determine the timing of the decline of these unusual costs so we can redirect cash to capital expenditures. With that summary, let me turn the call back to Gregory. Gregory? Gregory Osborne Thank you, Jim. We are executing our strategy to leverage our utility management operation and investment capabilities to capture greater market penetration and earn the highest level of turns where there are growth opportunities. I would like to thank you all for joining us for 2015 third quarter earnings teleconference. This is an exciting time for Gas Natural as we continue to execute our strategy to improve our earnings power. In closing, I would like to turn it back to Deb. Deborah Pawlowski So thank you again, everyone. And I apologize for our lack of time here today, but management is more than happy to entertain follow-up calls later this week. So if you give me a call, 716-843-3908, if you would like to schedule for a follow-up, I would be more than happy to accommodate. Thanks so much. Have a great day. Question-and-Answer Session Operator Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited. THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY’S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY’S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY’S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com . Thank you!

SJW’s (SJW) CEO Richard Roth on Q3 2015 Results – Earnings Call Transcript

SJW Corp. (NYSE: SJW ) Q3 2015 Earnings Conference Call October 29, 2015 01:00 PM ET Executives Suzy Papazian – General Counsel Richard Roth – Chairman, President and CEO James Lynch – CFO Analysts Operator Good day, ladies and gentlemen and welcome to the SJW Corp. Third Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call may be recorded. I would now like to turn the conference over to Suzy Papazian, General Counsel. You may begin. Suzy Papazian Thank you, operator. Welcome to the third quarter 2015 financial results conference call for SJW Corp. Presenting today are Richard Roth, Chairman of the Board, President and Chief Executive Officer; and James Lynch, Chief Financial Officer. Before we begin today’s presentation, I would like to remind you that this presentation and related materials posted on our website may contain forward-looking statements. These statements are based on estimates and assumptions made by the company in light of its experience, historical trends, current conditions and expected future developments as well as other factors that the company believes are appropriate under the circumstances. Many factors could cause the company’s actual results and performance to differ materially from those expressed or implied by the forward-looking statements. For a description of some of the factors that could cause actual results to be different from statements in this presentation, we refer you to the press release and to our most recent Forms 10-K and 10-Q filed with the Securities and Exchange Commission, copies of which may be obtained at www.sjwcorp.com. All forward-looking statements are made as of today, and SJW Corp. disclaims any duty to update or revise such statements. You will have the opportunity to ask questions at the end of the presentation. As a reminder, this webcast is being recorded and an archive of the webcast will be available until January 25, 2016. You can access the press release and the webcast at our corporate website. I will now turn the call over to Rich. Richard Roth Thank you, Suzy. Welcome everyone and thank you for joining us. On the call with me today are Jim Lynch, our Chief Financial Officer and Palle Jensen, our Senior Vice President of Regulatory Affairs. For the first time today, we are incorporating the use of slides in our call for those who would like to follow along. Please visit our website at www.sjwcorp.com to view them. SJW’s third quarter results reflect lower usage and the regulatory delay associated with recovery of 2014 and 2015 loss sales. Despite the regulatory delay that has impacted earnings, the fundamental elements that drive our business and lead to sustain profitability remain strong. As evidence of SJW’s strong fundamentals, SJWC’s and SJWTX’s capital expenditure programs including the Montevina Water Treatment plant upgrade project are on track to add $108 million of capital improvements in 2015. To help put San Jose Water Company’s capital expenditure programs into perspective, please note that the company’s rate base has grown at a compound annual growth rate of over 8% since 2010. Looking ahead, San Jose Water Company is seeking regulatory approval in its pending general rate case to invest approximately $230 million in 2016 and 2017. SJW’s meticulous plan and capably executing capital program is essential in ensuring that our customers continue to receive high quality and reliable water service. Specifically, the renovation of the Montevina Water Treatment plant will markedly improve SJW’s ability to meet the region’s growing water supply challenges by treating a much broader spectrum of source water. While regulatory lag seems to have become the norm, the California and Texas regulatory environments remain generally constructive as evidenced by their support of rates and regulatory mechanisms that balance the need for continued investments with the need for conservation and affordability. An important example of California’s supporting regulatory regime is the California Public Utility Commission’s authorization for San Jose Water Company to record in memorandum accounts the difference between authorized and actual revenue, net of variable production costs as long as water use restrictions remain in effect. We were also encouraged that California regulators appear to be adopting sales forecasts that reflect and support our customers’ conservation efforts, thus reducing the need for additional charges to recover the difference between authorized and actual customer usage. SJWTX, Inc., our Texas Water and Waste Water Utility continues to experience robust growth in connections and revenue. Additional, SJWTX’s regional business model helps ensure that we’re able to provide high quality sustainable and reasonably priced water service as we sensibly expand our operations. I would now turn the call over to Jim, who will provide you with a detailed review and analysis of the third quarter results and other financial commentary. After Jim’s remarks, I will provide additional information on our regulatory filings, water supplies and other key operational and business matters. Jim? James Lynch Thank you, Rich. Net income for the quarter was $9.5 million or $0.46 per diluted share. This compares to $38.4 million or $1.88 per diluted share for the third quarter of 2014. Year-to-date, net income was $21.7 million or $1.06 per diluted share, compared with $46.1 million or $2.26 per diluted share for the same period in 2014. Third quarter revenue was $83 million, a 34% decrease over the third quarter of 2014. And year-to-date, 2015 revenue was $217.5 million, a 13% decrease over the first nine months of 2014. A significant portion of the change in our operating results was attributable to the decision in our 2012 general rate case decision in California that occurred in the third quarter of 2014. Recall that we recognized $46.5 million of revenue at the time the decision was received. This included true-up revenue, a revenue related to prior periods of approximately $37.7 million or $1.09 per diluted share recognized in the third quarter of 2014. Year-to-date, true up revenue and diluted per share earnings related to prior periods that were recorded in 2014 was approximately $21.9 million and $0.68 per diluted share respectively. Our 2015 quarterly and year-to-date results reflect the impact of rate increases that contributed approximately $12.4 million in new revenue or $0.38 per diluted share and $33.2 million in revenue or $1.02 per diluted share respectively. Results also reflect the impact of lower usage in our California service area due to the drought and related water conservation activities. In response to the drought, the Santa Clara Valley Water District set its 2015 water usage target at 30% below 2013 usage levels. This was followed by the CPUC’s authorization in June of 2015 to activate San Jose Water Company’s water shortage contingency plan that includes mandatory water usage reductions and the imposition of drought surcharges. As a result, we experienced a decline in customer usage of 12% in the third quarter, resulting in a $15.3 million reduction in revenue compared to the third quarter of 2014 or $0.47 per diluted share. Year-to-date, customer usage declined 11%, resulting in a $28.4 million revenue reduction or $0.87 per diluted share compared to the same period in the prior year. The revenue impact of lower usage due to water conservation is being tracked for future recovery in the company’s Mandatory Conservation Revenue Adjustment Memorandum Account or MCRAMA. During the 2015 third quarter the balance in the MCRAMA increased approximately $15.7 million to $25.6 million. In March of 2015, the company submitted a filing with the CPUC for recovery of approximately $9.6 million of the balance related to the period from April 1, 2014 to December 31, 2014. The company will recognize amounts approved by the CPUC under this filing net of any previously recognized supply balancing amounts once approval is received. We currently anticipate this will occur in the 2015 fourth quarter. Amounts accumulated in the MCRAMA for 2015 and beyond will be recognized once recovery is determined to be probable and other revenue recognition criteria have been met. We began collecting drought surcharges under our Water Shortage Contingency Plan in June of 2015. Through the third quarter of 2015 collections were $6.3 million. The collected surcharge amounts are not recorded as revenue rather they are recorded as regulatory liabilities. Once we begin recognizing the 2015 MCRAMA revenue, we will offset amounts due from customer surcharges with amounts collected in the drought surcharge liability account. In the meantime, drought surcharge collections provide the company with additional operating cash flows. The company is also tracking drought-related operational and administrative costs for future recovery in a Mandatory Conservation Memorandum Account or in MCMA. As of September 30, 2015, $5,500 was accumulated in the MCMA. The drought surcharge account, MCRAMA and MCMA will remain in effect until state water drought water restrictions are lifted. Lastly, in 2015 our year-to-date results include $1.9 million in revenue or $0.12 per diluted share related to the CPUC’s decision in the first quarter on our limited rehearing request on the effective date of our 2014 rates. Turning to water production, the lower usage we’ve experienced in both our California and Texas service areas and California due to water conservation and in Texas due to higher than normal rainfall has resulted in lower cost production. For the quarter, usage declines reduced production costs by $9.5 million or $0.29 per diluted share and year-to-date by $18.4 million or $0.57 per diluted share. This cost reduction was partially offset by the impact of increases in purchased water expenses and ground water production charges of $5.5 million or $0.17 per diluted share for the quarter and $9.3 million or $0.28 per diluted share year-to-date. Also recall that through the first nine months of 2015 we used 1.5 billion gallons of surface water compared to 230 million gallons in the same period of 2014. The use of surface water in the third quarter was not significant. However, year-to-date surface water use resulted in a $3.1 million or $0.10 per diluted share reduction in water production expenses. We do not anticipate any meaningful benefit from surface water supplies through the remainder of 2015. Non-production operating expenses included a $1.1 million increase or $0.03 per diluted share for the quarter and $2.7 million increase or $0.08 per diluted share year-to-date in pension expenses. The increase was primarily driven by changes in the underlying assumptions used to calculate periodic pension costs. In addition both the quarter and year-to-date include higher cost incurred in connection with our 2015 California general rate case and conservation activities in our California service area. Other expense and income in the third quarter of 2015 included the sale of multiple non-utility real estate properties for a gain of approximately $1.9 million or $0.06 per diluted share. Other expense and income in 2014 included a gain on the sale of California Water Service Company stock in the second quarter of $2 million or $0.06 per diluted share and sales of real estate investment properties in Texas and California in the second and third quarter respectively of approximately $300,000 each or $0.02 per diluted share. Another point of note, in the third quarter of 2014, the company recorded an income tax benefit of $4.8 million or $0.23 per diluted share related to the adoption of the Department of Treasury and Internal Revenue Service tangible property regulations. This was for the years 2013 and previous. Year-to-date the company also recorded a benefit of $880,000 or $0.04 per diluted share on the recognition of enterprise zone tax credits in 2014; similar amounts were recorded in 2015. Turning to our capital expenditure program, we added approximately $25 million in utility plant during the third quarter bringing our 2015 total to $63 million or approximately 58% of our 2015 planned utility plant capital expenditures. We anticipate completing approximately 90% of our planned utility plant capital budget amount in 2015. In addition, we have revised the timing of our planned capital expenditures on our Montevina plant retrofit project putting more of the budgeted cost in 2016 and 2017 as a result of design revisions and contract finalization. Including the Montevina plant retrofit project, we are on target to add approximately $108 million in utility plant in 2015 growing rate base in both our California and Texas service areas. From a liquidity perspective, year-to-date cash flows from operations increased by approximately $26 million or 58% due in large part to higher income and the collection of a $6 million income tax receivable that was generated at the end of 2014. In addition, we experienced a $10.6 million benefit from the collection of revenue in connection with the 2012 California rate case decision. Recall that the $46.5 million we received in the decision is being collected over a 36-month period that commenced in October 2014. At the end of the quarter we had $75.8 million available under our bank lines of credit for the short-term financing of utility planned additions and operating activities. The borrowing rate on credit line advances during the year averaged 1.3%. With that, I will stop and turn the call back over to Rich. Richard Roth Thank you Jim. In a testament to the efficacy of San Jose Water Company’s stout management plan, customers exceeded the conservation target set by the State Water Resources Control Board and the Santa Clara Valley Water District, our wholesale water supply. As a result, water levels in our local groundwater basins have rebounded, thus minimizing the existential threat of subsidence. It’s worth noting and plotting the tremendous response from our customers to the conservation mandate, their response has been enormously important in protecting the regions critical underground storage basin. San Jose Water Company’s ability to respond quickly and effectively to the vagaries of California’s water supply requires a comprehensive communications program to engage and inform customers and stakeholders. We have taken important steps to establish and maintain a web-based communication program that is the cornerstone of our efforts to effectively deliver timely and relevant customer information. Now let’s turn our attention to regulatory affairs, where San Jose Water Company’s 2015 general rate case is being processed by the California Public Utilities Commission. We anticipate the CPUC’s final decision by the end of 2015 for new rates for the years 2016, ’17, and ’18. In the event a final decision is not reached by the end of this year, San Jose Water Company will file for interim rates effective January 1st 2016. The interim rate filing is very important because it ensures that regardless of regulatory delay, new rates will be effective retroactive to January 1st 2016. San Jose Water Company’s Mandatory Conservation Revenue Adjustment Memorandum Account or MCRAMA established on March 26, 2014 allows the company to track revenue shortfalls net of production costs associated with reduced sales resulting from government mandated water restrictions. On March 26, 2015, the company filed for collection of $9.6 million associated with sales lost during the period April 1, 2014 through December 31, 2014. A decision on that filing is expected in late 2015. On September 20, San Jose Water Company received authorization to increase its revenue requirement by $274,721 via a rate base offset for planned additions related to the Montevina Water Treatment Plant upgrade project. More importantly, Montevina project will allow San Jose Water Company to maximize the use of our low-cost high-quality surface water supply for the benefit of our customers. Construction began in late September this year and the project is expected to be substantially complete by the end of 2017. When complete, the project will add a total of $62 million in utility plants and service in addition to the capital additions contained in San Jose Water Company’s general rate case proceeding. Despite the many instances of regulatory lacks, San Jose Water Company continues to constructively engage with regulators and to ensure that all filings are diligently processed. With the aforementioned strong fundamentals in place, San Jose Water Company and SJW Corp. continue to refine our business processes and strategies to effectively respond to the vicissitudes in weather, regulatory rulings, and economic conditions. Over the long haul, we remain confident in our ability to deliver sustained growth and profitability, earnings and dividends. With that I will turn the call back to the operator for questions. Question-and-Answer Session Operator James Lynch Okay, thank you operator. Before we end the call, I’d like to pull up one more slide, our earnings bridge for the quarter. The earnings bridge starts with our reported 2014 Q3 quarterly diluted earnings per share and then it reconciles the impact of activity reported quarter over quarter to get to our Q3 2015 quarterly earnings per share. We thought that that would assist you following along on the website with understanding the different components that went into driving our Q3 2015 revenue. With that Rich? Richard Roth Thank you everyone for joining us, we look forward to talking to you with our year-end results. Operator Ladies and gentlemen, thank you for participating in today’s conference. That does conclude today’s call. You may all disconnect. Have a great day everyone. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. 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