Company Quick10K Filing
SJW Group
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 29 $1,706
10-Q 2019-11-01 Quarter: 2019-09-30
10-Q 2019-07-26 Quarter: 2019-06-30
10-Q 2019-04-26 Quarter: 2019-03-31
10-K 2019-02-27 Annual: 2018-12-31
10-Q 2018-10-26 Quarter: 2018-09-30
10-Q 2018-07-27 Quarter: 2018-06-30
10-Q 2018-05-08 Quarter: 2018-03-31
10-K 2018-02-27 Annual: 2017-12-31
10-Q 2017-10-30 Quarter: 2017-09-30
10-Q 2017-07-31 Quarter: 2017-06-30
10-Q 2017-05-01 Quarter: 2017-03-31
10-K 2017-02-28 Annual: 2016-12-31
10-Q 2016-10-31 Quarter: 2016-09-30
10-Q 2016-08-01 Quarter: 2016-06-30
10-Q 2016-05-02 Quarter: 2016-03-31
10-K 2016-02-26 Annual: 2015-12-31
10-Q 2015-11-02 Quarter: 2015-09-30
10-Q 2015-08-03 Quarter: 2015-06-30
10-Q 2015-05-05 Quarter: 2015-03-31
10-K 2015-02-25 Annual: 2014-12-31
10-Q 2014-11-06 Quarter: 2014-09-30
10-Q 2014-08-06 Quarter: 2014-06-30
10-Q 2014-05-07 Quarter: 2014-03-31
10-K 2014-02-28 Annual: 2013-12-31
10-Q 2013-11-06 Quarter: 2013-09-30
10-Q 2013-08-07 Quarter: 2013-06-30
10-Q 2013-05-01 Quarter: 2013-03-31
10-K 2013-02-28 Annual: 2012-12-31
10-Q 2012-10-31 Quarter: 2012-09-30
10-Q 2012-08-02 Quarter: 2012-06-30
10-Q 2012-05-04 Quarter: 2012-03-31
10-K 2012-02-29 Annual: 2011-12-31
10-Q 2011-11-02 Quarter: 2011-09-30
10-Q 2011-08-08 Quarter: 2011-06-30
10-Q 2011-05-06 Quarter: 2011-03-31
10-K 2011-03-01 Annual: 2010-12-31
10-Q 2010-11-05 Quarter: 2010-09-30
10-Q 2010-08-06 Quarter: 2010-06-30
10-Q 2010-05-07 Quarter: 2010-03-31
10-K 2010-03-05 Annual: 2009-12-31
8-K 2019-12-31 Earnings, Exhibits
8-K 2019-10-30 Earnings, Exhibits
8-K 2019-10-08 Enter Agreement, M&A, Off-BS Arrangement, Officers, Regulation FD, Exhibits
8-K 2019-10-04 Regulation FD
8-K 2019-09-27 Regulation FD
8-K 2019-09-04 Other Events
8-K 2019-07-24 Earnings, Exhibits
8-K 2019-04-24 Earnings, Amend Bylaw, Shareholder Vote, Exhibits
8-K 2019-03-28 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-02-20 Earnings, Exhibits
8-K 2018-12-03 Regulation FD, Other Events, Exhibits
8-K 2018-11-28 Enter Agreement, Exhibits
8-K 2018-11-26 Other Events, Exhibits
8-K 2018-10-24 Earnings, Exhibits
8-K 2018-08-05 Enter Agreement, Regulation FD, Exhibits
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-05-30 Enter Agreement, Regulation FD, Exhibits
8-K 2018-04-25 Earnings, Shareholder Vote, Exhibits
8-K 2018-03-22 Other Events
8-K 2018-03-14 Enter Agreement, Regulation FD, Exhibits
8-K 2018-02-21 Earnings, Exhibits
8-K 2018-02-06 Regulation FD
8-K 2018-01-04 Other Events, Exhibits
SJW 2019-09-30
Part I. Financial Information
Item 1. Financial Statements
Note 1. General
Note 2. Equity Plans
Note 3. Real Estate Investments
Note 4. Defined Benefit Plan
Note 5. Segment and Non-Tariffed Business Reporting
Note 6. Long-Term Liabilities and Bank Borrowings
Note 7. Fair Value Measurement
Note 8. Regulatory Rate Filings
Note 9. Balancing and Memorandum Accounts
Note 10. Regulatory Assets and Liabilities
Note 11. Legal Proceedings
Note 12. Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 5. Other Information
Item 6. Exhibits
EX-31.1 sjw-93019xex311.htm
EX-31.2 sjw-93019xex312.htm
EX-32.1 sjw-93019xex321.htm
EX-32.2 sjw-93019xex322.htm

SJW Group Earnings 2019-09-30

SJW 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
AWR 2,732 1,567 988 462 110 76 162 3,012 24% 18.6 5%
CWT 2,617 2,965 2,241 654 0 15 120 3,375 0% 28.1 1%
SJW 1,706 2,004 1,110 403 0 44 156 1,795 0% 11.5 2%
DY 1,672 2,328 1,475 3,315 572 60 290 2,603 17% 9.0 3%
MSEX 1,048 808 136 0 34 60 1,219 0% 20.3 4%
PRIM 1,024 1,825 1,204 3,238 343 90 231 1,382 11% 6.0 5%
CTWS 845 981 292 127 0 21 34 1,118 0% 32.9 2%
MYRG 605 807 468 1,831 179 33 91 707 10% 7.8 4%
WAAS 542 722 391 177 93 -19 26 814 53% 31.0 -3%
AEGN 513 1,015 581 1,269 250 -15 39 775 20% 20.1 -1%

Document
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________________ 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
Commission file number 1-8966
SJW GROUP
(Exact name of registrant as specified in its charter)
 
Delaware
 
77-0066628
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
 
110 West Taylor Street,
San Jose,
CA
 
95110
(Address of principal executive offices)
 
(Zip Code)
(408) 279-7800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.001 per share
 
SJW
 
New York Stock Exchange LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer                  Non-accelerated filer      
Accelerated filer                  Smaller reporting company  
Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No  x
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of October 28, 2019, there were 28,456,490 shares of the registrant’s Common Stock outstanding.
 




FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the federal securities laws relating to future events and future results of SJW Group and its subsidiaries that are based on current expectations, estimates, forecasts, and projections about SJW Group and its subsidiaries and the industries in which SJW Group and its subsidiaries operate and the beliefs and assumptions of the management of SJW Group. Some of these forward-looking statements can be identified by the use of forward-looking words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates,” “projects,” “strategy,” or “anticipates,” or the negative of those words or other comparable terminology. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict.
The accuracy of such statements is subject to a number of risks, uncertainties and assumptions including, but not limited to, the following factors:
the risk that the benefits expected from the merger of SJW Group and Connecticut Water Service, Inc. (the “Merger”) will not be realized;
the risk that the integration of Connecticut Water Service, Inc. will be more difficult, time-consuming or expensive than anticipated;
the effect of water, utility, environmental and other governmental policies and regulations, including actions concerning rates, authorized return on equity, authorized debt-to-equity ratios, capital expenditures and other decisions;
the outcome of the California Public Utilities Commission’s investigation into the Merger;
litigation, including litigation relating to the Merger;
changes in demand for water and other products and services;
unanticipated weather conditions and changes in seasonality;
climate change and the effects thereof;
catastrophic events such as fires, earthquakes, explosions, floods, ice storms, tornadoes, hurricanes, terrorist acts, physical attacks, cyber-attacks, or other similar occurrences that could adversely affect our facilities, operations, financial condition, results of operations and reputation;
unexpected costs, charges or expenses resulting from the Merger;
our ability to successfully evaluate investments in new business and growth initiatives;
the risk of work stoppages, strikes and other labor-related actions;
changes in general economic, political, business and financial market conditions;
the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, changes in interest rates, compliance with regulatory requirements, compliance with the terms and conditions of our outstanding indebtedness, and general market and economic conditions; and
legislative and economic developments.
Results for a quarter are not indicative of results for a full year due to seasonality and other factors. In addition, actual results are subject to other risks and uncertainties that relate more broadly to our overall business, including those more fully described in our filings with the SEC, including our most recent reports on Form 10-K, Form 10-Q and Form 8-K. Forward-looking statements are not guarantees of performance, and speak only as of the date made, and we undertake no obligation to update or revise any forward-looking statements except as required by law.







PART I. FINANCIAL INFORMATION
 
ITEM 1.
FINANCIAL STATEMENTS

SJW Group and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(in thousands, except share and per share data)
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
2019
 
2018
 
2019
 
2018
REVENUE
$
113,997

 
124,853

 
$
294,644

 
298,981

OPERATING EXPENSE:
 
 
 
 
 
 
 
Production Expenses:
 
 
 
 
 
 
 
Purchased water
35,583

 
33,545

 
75,626

 
72,673

Power
2,294

 
1,882

 
4,947

 
4,774

Groundwater extraction charges
13,182

 
14,890

 
29,145

 
34,341

Other production expenses
5,295

 
4,836

 
15,553

 
13,674

Total production expenses
56,354

 
55,153

 
125,271

 
125,462

Administrative and general
14,712

 
12,752

 
40,411

 
36,278

Maintenance
4,923

 
4,980

 
13,977

 
14,036

Property taxes and other non-income taxes
4,065

 
4,016

 
12,041

 
11,332

Depreciation and amortization
15,122

 
13,682

 
45,368

 
40,921

Merger related expenses
1,737

 
8,442

 
6,113

 
14,994

Total operating expense
96,913

 
99,025

 
243,181

 
243,023

OPERATING INCOME
17,084

 
25,828

 
51,463

 
55,958

OTHER (EXPENSE) INCOME:
 
 
 
 
 
 
 
Interest on long-term debt and other interest expense
(6,588
)
 
(6,077
)
 
(19,093
)
 
(18,213
)
Pension non-service cost
(921
)
 
(589
)
 
(2,749
)
 
(1,767
)
Unrealized loss on California Water Service Group stock

 

 

 
(527
)
Interest income on money market fund
2,165

 

 
6,339

 

Gain on sale of California Water Service Group stock

 
191

 

 
104

Gain on sale of real estate investments

 

 
745

 

Other, net
303

 
538

 
1,210

 
1,980

Income before income taxes
12,043

 
19,891

 
37,915

 
37,535

Provision for income taxes
2,565

 
4,103

 
8,802

 
7,591

NET INCOME BEFORE NONCONTROLLING INTEREST
9,478

 
15,788

 
29,113

 
29,944

Less net income attributable to the noncontrolling interest

 

 
224

 

SJW GROUP NET INCOME
9,478

 
15,788

 
28,889

 
29,944

SJW GROUP COMPREHENSIVE INCOME
$
9,478

 
15,788

 
$
28,889

 
29,944

SJW GROUP EARNINGS PER SHARE
 
 
 
 
 
 
 
Basic
$
0.33

 
0.77

 
$
1.02

 
1.45

Diluted
$
0.33

 
0.76

 
$
1.01

 
1.45

DIVIDENDS PER SHARE
$
0.30

 
0.28

 
$
0.90

 
0.84

WEIGHTED AVERAGE SHARES OUTSTANDING
 
 
 
 
 
 
 
Basic
28,451,811

 
20,626,654

 
28,438,521

 
20,593,570

Diluted
28,549,928

 
20,732,040

 
28,528,002

 
20,721,970




See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

3



SJW Group and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share data)
 
 
September 30,
2019
 
December 31,
2018
ASSETS
 
 
 
Utility plant:
 
 
 
Land
$
18,286

 
18,296

Depreciable plant and equipment
1,897,117

 
1,833,051

Construction in progress
109,245

 
68,765

Intangible assets
15,799

 
15,799

 
2,040,447

 
1,935,911

Less accumulated depreciation and amortization
647,841

 
607,090

 
1,392,606

 
1,328,821

Real estate investments
56,473

 
56,336

Less accumulated depreciation and amortization
13,224

 
12,327

 
43,249

 
44,009

CURRENT ASSETS:
 
 
 
Cash and cash equivalents:
 
 
 
Cash
12,702

 
8,722

Money market fund
412,000

 
412,000

Accounts receivable:
 
 
 
Customers, net of allowances for uncollectible accounts
27,965

 
19,154

Income tax
63

 
1,888

Other
2,719

 
1,203

Accrued unbilled utility revenue
38,200

 
27,974

Current regulatory assets, net
7,493

 
26,910

Other current assets
6,672

 
4,871

 
507,814

 
502,722

OTHER ASSETS:
 
 
 
Net regulatory assets, less current portion
73,780

 
76,715

Other
4,933

 
4,122

 
78,713

 
80,837

 
$
2,022,382

 
1,956,389











See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

4



SJW Group and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share data)
 
 
September 30,
2019
 
December 31,
2018
CAPITALIZATION AND LIABILITIES
 
 
 
CAPITALIZATION:
 
 
 
Stockholders’ equity:
 
 
 
Common stock, $0.001 par value; authorized 36,000,000 shares; issued and outstanding shares 28,456,490 on September 30, 2019 and 28,404,316 on December 31, 2018
$
28

 
28

Additional paid-in capital
499,377

 
495,366

Retained earnings
397,259

 
393,918

Total stockholders’ equity
896,664

 
889,312

Long-term debt, less current portion
511,076

 
431,424

 
1,407,740

 
1,320,736

CURRENT LIABILITIES:
 
 
 
Line of credit
62,000

 
100,000

Accrued groundwater extraction charges, purchased water and power
22,749

 
13,694

Accounts payable
28,193

 
24,937

Accrued interest
9,220

 
7,132

Accrued property taxes and other non-income taxes
4,220

 
1,926

Accrued payroll
5,011

 
7,181

Other current liabilities
12,914

 
9,115

 
144,307

 
163,985

DEFERRED INCOME TAXES
72,798

 
79,651

ADVANCES FOR CONSTRUCTION
84,564

 
80,610

CONTRIBUTIONS IN AID OF CONSTRUCTION
170,390

 
168,243

POSTRETIREMENT BENEFIT PLANS
73,004

 
70,490

REGULATORY LIABILITY
56,936

 
59,149

OTHER NONCURRENT LIABILITIES
12,643

 
13,525

COMMITMENTS AND CONTINGENCIES

 

 
$
2,022,382

 
1,956,389













See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

5



SJW Group and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
(in thousands, except share and per share data)
 
 
Common Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income
 
Noncontrolling Interest
 
Total
Stockholders’
Equity
Number of
Shares
 
Amount
 
BALANCES, December 31, 2018
28,404,316

 
$
28

 
$
495,366

 
$
393,918

 
$

 
$

 
$
889,312

Net income before noncontrolling interest

 

 

 
5,873

 

 

 
5,873

Cumulative effect of change in accounting principle, net of tax effect of $33

 

 

 
97

 

 

 
97

Share-based compensation

 

 
886

 
(16
)
 

 

 
870

Issuance of restricted and deferred stock units
14,312

 

 
(132
)
 

 

 

 
(132
)
Employee stock purchase plan
15,932

 

 
811

 

 

 

 
811

Common stock issuance cost

 

 
(10
)
 

 

 

 
(10
)
Dividends paid ($0.30 per share)

 

 

 
(8,528
)
 

 

 
(8,528
)
BALANCES, March 31, 2019
28,434,560

 
28

 
496,921

 
391,344

 

 

 
888,293

Net income before noncontrolling interest

 

 

 
13,538

 

 
224

 
13,762

Distribution to noncontrolling interest

 

 

 

 

 
(224
)
 
(224
)
Share-based compensation

 

 
718

 
(16
)
 

 

 
702

Issuance of restricted and deferred stock units
7,579

 

 
(6
)
 

 

 

 
(6
)
Dividends paid ($0.30 per share)

 

 

 
(8,532
)
 

 

 
(8,532
)
BALANCES, June 30, 2019
28,442,139

 
28

 
497,633

 
396,334

 

 

 
893,995

Net income before noncontrolling interest

 

 

 
9,478

 

 

 
9,478

Share-based compensation

 

 
952

 
(16
)
 

 

 
936

Issuance of restricted and deferred stock units

 

 

 

 

 

 

Employee stock purchase plan
14,351

 

 
792

 

 

 

 
792

Dividends paid ($0.30 per share)

 

 

 
(8,537
)
 

 

 
(8,537
)
BALANCES, September 30, 2019
28,456,490

 
$
28

 
$
499,377

 
$
397,259

 
$

 
$

 
$
896,664





















See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

6



SJW Group and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
(in thousands, except share and per share data)

 
Common Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income
 
Noncontrolling Interest
 
Total
Stockholders’
Equity
Number of
Shares
 
Amount
 
BALANCES, December 31, 2017
20,520,856

 
$
21

 
$
84,866

 
$
376,119

 
$
2,203

 
$

 
$
463,209

Net income before noncontrolling interest

 

 

 
1,285

 

 

 
1,285

Cumulative effect of change in accounting principle, net of tax effect of $1,507

 

 

 
2,203

 
(2,203
)
 

 

Share-based compensation

 

 
487

 
(30
)
 

 

 
457

Issuance of restricted and deferred stock units
51,442

 

 
(2,020
)
 

 

 

 
(2,020
)
Employee stock purchase plan
12,838

 

 
653

 

 

 

 
653

Dividends paid ($0.28 per share)

 

 

 
(5,754
)
 

 

 
(5,754
)
BALANCES, March 31, 2018
20,585,136

 
21

 
83,986

 
373,823

 

 

 
$
457,830

Net income before noncontrolling interest

 

 

 
12,871

 

 

 
12,871

Share-based compensation

 

 
392

 
(30
)
 

 

 
362

Issuance of restricted and deferred stock units
9,350

 

 
(3
)
 

 

 

 
(3
)
Dividends paid ($0.28 per share)

 

 

 
(5,766
)
 

 

 
(5,766
)
BALANCES, June 30, 2018
20,594,486

 
$
21

 
$
84,375

 
$
380,898

 
$

 
$

 
$
465,294

Net income before noncontrolling interest

 

 

 
15,788

 

 

 
15,788

Share-based compensation

 

 
504

 
(18
)
 

 

 
486

Issuance of restricted and deferred stock units
23,616

 

 
(1,552
)
 

 

 

 
(1,552
)
Employee stock purchase plan
13,069

 

 
718

 

 

 

 
718

Dividends paid ($0.28 per share)

 

 

 
(5,777
)
 

 

 
(5,777
)
BALANCES, September 30, 2018
20,631,171

 
$
21

 
$
84,045

 
$
390,891

 
$

 
$

 
$
474,957


























See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

7



SJW Group and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
 
Nine months ended September 30,
 
2019
 
2018
OPERATING ACTIVITIES:
 
 
 
Net income before noncontrolling interest
$
29,113

 
29,944

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
47,363

 
42,649

Deferred income taxes
(7,214
)
 
(5,445
)
Stock-based compensation
2,556

 
1,383

Gain on sale of real estate investments
(745
)
 

Loss on sale of utility property
20

 

Unrealized loss on California Water Service Group stock

 
527

Loss on sale of California Water Service Group stock

 
(104
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable and accrued unbilled utility revenue
(20,553
)
 
(15,190
)
Accounts payable and other current liabilities
4,166

 
3,493

Accrued groundwater extraction charges, purchased water and power
9,055

 
8,474

Tax payable and receivable, and other accrued taxes
4,471

 
12,482

Postretirement benefits
2,514

 
3,036

Regulatory assets and liability related to balancing and memorandum accounts
22,789

 
(4,822
)
Other changes, net
(2,258
)
 
(2,716
)
NET CASH PROVIDED BY OPERATING ACTIVITIES
91,277

 
73,711

INVESTING ACTIVITIES:
 
 
 
Additions to utility plant:
 
 
 
Company-funded
(101,120
)
 
(97,753
)
Contributions in aid of construction
(10,040
)
 
(5,908
)
Additions to real estate investments
(137
)
 
(123
)
Payments to retire utility plant, net of salvage
(4,374
)
 
(3,789
)
Proceeds from sale of real estate investments
745

 

Payments for business/asset acquisition

 
(2,496
)
Proceeds from sale of utility property
150

 

Proceeds from sale of California Water Service Group stock

 
4,112

NET CASH USED IN INVESTING ACTIVITIES
(114,776
)
 
(105,957
)
FINANCING ACTIVITIES:
 
 
 
Borrowings on line of credit
73,000

 
52,000

Repayments of line of credit
(111,000
)
 
(1,000
)
Long-term borrowings
80,000

 

Payment to noncontrolling interest
(224
)
 

Debt issuance and broker fee costs
(1,157
)
 

Dividends paid
(25,596
)
 
(17,297
)
Receipts of advances and contributions in aid of construction
13,373

 
8,968

Refunds of advances for construction
(2,295
)
 
(2,075
)
Other changes, net
1,378

 
(2,822
)
NET CASH PROVIDED BY FINANCING ACTIVITIES
27,479

 
37,774

NET CHANGE IN CASH AND CASH EQUIVALENTS
3,980

 
5,528

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
420,722

 
7,799

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
424,702

 
13,327

Cash paid during the period for:
 
 
 
Interest
$
19,821

 
19,705

Income taxes
16,286

 
5,145

Supplemental disclosure of non-cash activities:
 
 
 
Change in accrued payables for construction costs capitalized
505

 
1,221

Utility property installed by developers
(109
)
 
567



See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

8



SJW GROUP AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2019
(in thousands, except share and per share data)

Note 1.
General
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of the results for the interim periods.
The unaudited interim financial information has been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”). The Notes to Consolidated Financial Statements in SJW Group’s 2018 Annual Report on Form 10-K should be read with the accompanying unaudited condensed consolidated financial statements.
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842),” as amended, which supersedes the lease requirements in “Leases (Topic 840).” This ASU generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use assets on the Consolidated Balance Sheets and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. ASU 2016-02 also makes some changes to lessor accounting and aligns with the new revenue recognition guidance. SJW Group adopted the new standard effective January 1, 2019, on a modified retrospective basis and did not restate comparative periods. SJW Group also elected the package of practical expedients permitted under the transition guidance and combined lease and non-lease components. In addition, SJW Group kept leases with an initial term of 12 months or less off the Consolidated Balance Sheets and recognized the associated lease payments in the Consolidated Statements of Comprehensive Income on a straight-line basis over the lease term. The adoption of this standard did not have a material impact on SJW Group’s consolidated financial statements.
Revenue
Water sales are seasonal in nature and influenced by weather conditions. The timing of precipitation and climatic conditions can cause seasonal water consumption by customers to vary significantly. Due to the seasonal nature of the water business, the operating results for interim periods are not indicative of the operating results for a 12-month period. Revenue is generally higher in the warm, dry summer months when water usage and sales are greater, and lower in the winter months when cooler temperatures and increased rainfall curtail water usage and sales.
In response to the drought from 2014 to 2016 in California, the State Water Resources Control Board (the “State Water Board”) imposed mandatory water use restrictions and conservation targets. The Santa Clara Valley Water District (“Valley Water”), San Jose Water Company’s principal water supplier, also mandated water use restrictions along with conservation targets at levels higher than the State Water Board. While the Governor of California declared the drought over on April 7, 2017, the State Water Board made certain water use restrictions permanent. Further, Valley Water has maintained a conservation target of 20% compared to 2013 water usage. In 2018, Governor Edmund G. Brown signed into law Assembly Bill 1668 and Senate Bill 606. Both bills set an initial limit for indoor water use of 55 gallons per person per day by 2022 and reduced the limit further to 50 gallons per person per day by 2030.  Implementation details remain to be developed as to how local water providers will meet this mandate as well as to how the California Public Utilities Commission (“CPUC”) will direct its regulated utilities to comply.
To encourage conservation, San Jose Water Company received approval from the CPUC to implement a Mandatory Conservation Revenue Adjustment Memorandum Account in 2014. This account was subsequently replaced with a Water Conservation Memorandum Account (“WCMA”). The WCMA allows San Jose Water Company to track lost revenue, net of related water costs, associated with reduced sales due to water conservation and associated calls for water use reductions. San Jose Water Company records the lost revenue captured in the WCMA regulatory accounts once the revenue recognition requirements of FASB Accounting Standards Codification (“ASC”) Topic 980 - “Regulated Operations,” subtopic 605-25 are met. For further discussion, please see Note 8 and Note 9.

9


SJW GROUP AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2019
(in thousands, except share and per share data)


The major streams of revenue for SJW Group are as follows:
 
Three months ended September 30,
 
Nine months ended September 30,
 
2019
 
2018
 
2019
 
2018
Revenue from contracts with customers
$
130,777

 
120,007

 
$
314,003

 
294,319

Alternative revenue programs, net - WCMA
(11,912
)
 
4,193

 
(14,218
)
 
7,794

Other balancing and memorandum accounts revenue, net
(6,221
)
 
(788
)
 
(9,229
)
 
(7,235
)
Rental income
1,353

 
1,441

 
4,088

 
4,103

 
$
113,997

 
124,853

 
$
294,644

 
298,981


Earnings per Share
Basic earnings per share is calculated using income available to common stockholders, divided by the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated using income available to common stockholders divided by the weighted average number of shares of common stock including both shares outstanding and shares potentially issuable in connection with restricted common stock awards under SJW Group’s Long-Term Incentive Plan (as amended, the “Incentive Plan”) and shares potentially issuable under the Employee Stock Purchase Plan (“ESPP”). For the three months ended September 30, 2019 and 2018, 524 and 306 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively. For the nine months ended September 30, 2019 and 2018, 10,158 and 3,562 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.
Utility Plant Depreciation
A portion of depreciation expense is allocated to administrative and general expense. For the three months ended September 30, 2019 and 2018, the amounts allocated to administrative and general expense were $663 and $575, respectively. For the nine months ended September 30, 2019, and 2018, the amounts allocated to administrative and general expense were $1,995 and $1,728, respectively.

Note 2.
Equity Plans
SJW Group accounts for stock-based compensation based on the grant date fair value of awards issued to employees in accordance with FASB ASC Topic 718 - “Compensation - Stock Compensation,” which requires the measurement and recognition of compensation expense based on the estimated fair value of stock-based payment awards.
The Incentive Plan allows SJW Group to provide employees, non-employee board members or the board of directors of any parent or subsidiary, consultants, and other independent advisors who provide services to the company or any parent or subsidiary the opportunity to acquire an equity interest in SJW Group. The types of awards included in the Incentive Plan are restricted stock awards, restricted stock units, performance shares, or other share-based awards. As of September 30, 2019, 157,063 shares are issuable upon the exercise of outstanding restricted stock units and deferred restricted stock units and an additional 823,597 shares are available for award issuances under the Incentive Plan. In addition, shares are issued to employees under the company’s ESPP.

10


SJW GROUP AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
September 30, 2019
(in thousands, except share and per share data)


Stock compensation costs charged to income are recognized on a straight-line basis over the requisite service period. A summary of compensation costs charged to income, proceeds from the exercise of any stock options and similar instruments and the tax benefit realized from any stock options and similar instruments exercised, that are recorded to additional paid-in capital and common stock, by award type, are presented below for the three and nine months ended September 30, 2019, and 2018.
 
Three months ended September 30,
 
Nine months ended September 30,
 
2019
 
2018
 
2019
 
2018
Adjustments to additional paid-in capital and common stock for:
 
 
 
 
 
 
 
Compensation costs charged to income:
 
 
 
 
 
 
 
   ESPP
$
140

 
127

 
$
283

 
242

   Restricted stock and deferred restricted stock
812

 
377

 
2,273

 
1,141

Total compensation costs charged to income
$
952

 
504

 
$
2,556

 
1,383

ESPP proceeds
$
792

 
718

 
$
1,603

 
1,371


Stock, Restricted Stock and Deferred Restricted Stock
On January 2, 2019, service-based restricted stock units covering an aggregate of 17,451 shares of common stock of SJW Group were granted to certain officers of SJW Group and its subsidiaries. The units vest in three equal successive installments upon completion of each year of service with no dividend equivalent rights. Share-based compensation expense of $51.28 per unit which was based on the award grant date fair value is being recognized over the service period beginning in 2019.
On January 29, 2019, certain officers of SJW Group were granted performance-based restricted stock units covering an aggregate target number of SJW Group’s shares of common stock equal to 9,882 that will vest based on the actual attainment of specified performance goals measured in two separate tranches over the period from January 1, 2019, to December 31, 2019, and January 1, 2019, to December 31, 2020, each covering 50% of the target shares, and continued service through December 31, 2019, and December 31, 2020, respectively. The number of shares issuable under such units, ranging between 0% to 150% of the target number of shares, is based on the level of actual attainment of specified performance goals. The units do not include dividend equivalent rights. The awards allow for pro-rata vesting, based on actual performance and number of months in service over the performance period, in the event an officer’s employment terminates under specific circumstances prior to the end of the performance period. The awards have no market conditions and the stock-based compensation expense of $57.12 and $55.97 per unit for each of the two tranches which was based on the award grant date fair values are being recognized assuming the performance goals will be attained.
On January 29, 2019, certain officers of SJW Group were granted performance-based restricted stock units covering an aggregate target number of SJW Group’s shares of common stock equal to 9,043 that will vest based on the actual attainment of specified performance goals over the period from January 1, 2019, to December 31, 2021 and continued service through December 31, 2021. The number of shares issuable under such units, ranging between 0% to