sjw-20220331

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 March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

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,

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 April 25, 2022, there were 30,237,145 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 effect of water, utility, environmental and other governmental policies and regulations, including actions concerning rates, authorized return on equity, authorized capital structures, capital expenditures and other decisions;

•changes in demand for water and other services;

•the impact of the Coronavirus (“COVID-19”) pandemic on our business operation and financial results;

•unanticipated weather conditions and changes in seasonality including those affecting water supply and customer usage;

•climate change and the effects thereof;

•unexpected costs, charges or expenses;

•our ability to successfully evaluate investments in new business and growth initiatives;

•contamination of our water supplies and damage or failure of our water equipment and infrastructure;

•the risk of work stoppages, strikes and other labor-related actions;

•catastrophic events such as fires, earthquakes, explosions, floods, ice storms, tornadoes, hurricanes, terrorist acts, physical attacks, cyber-attacks, epidemic or other similar occurrences;

•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 general market 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 March 31,
		2022		2021
REVENUE		$	124,302	114,785
OPERATING EXPENSE:
Production Expenses:
Purchased water		19,217		15,645
Power		3,080		3,003
Groundwater extraction charges		13,928		15,545
Other production expenses		10,123		9,402
Total production expenses		46,348		43,595
Administrative and general		24,205		20,893
Maintenance		6,695		6,265
Property taxes and other non-income taxes		8,309		7,515
Depreciation and amortization		27,606		23,438
Gain on sale of nonutility properties		(5,450)		—
Total operating expense		107,713		101,706
OPERATING INCOME		16,589		13,079
OTHER (EXPENSE) INCOME:
Interest on long-term debt and other interest expense		(13,729)		(13,439)
Pension non-service cost		949		326


Other, net		995		1,754
Income before income taxes		4,804		1,720
Provision (benefit) for income taxes		1,067		(896)
NET INCOME		3,737		2,616
Other comprehensive (loss) income, net		(181)		38
COMPREHENSIVE INCOME		$	3,556	2,654
EARNINGS PER SHARE
Basic		$	0.12	0.09
Diluted		$	0.12	0.09
DIVIDENDS PER SHARE		$	0.36	0.34
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		30,224,135		28,862,882
Diluted		30,335,974		28,990,203

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)


	March 31, 2022		December 31, 2021
ASSETS
Utility plant:
Land	$	39,900	39,004
Depreciable plant and equipment	3,420,850		3,381,908
Construction in progress	180,961		176,427
Intangible assets	36,290		36,276
	3,678,001		3,633,615
Less accumulated depreciation and amortization	1,160,758		1,136,116
	2,517,243		2,497,499
Real estate investments and nonutility properties	57,673		57,632
Less accumulated depreciation and amortization	16,251		15,951
	41,422		41,681
CURRENT ASSETS:
Cash and cash equivalents:
Cash	17,487		10,908
Restricted cash	602		1,211
Accounts receivable:
Customers, net of allowances for uncollectible accounts of $5,113 and $4,600 on March 31, 2022 and December 31, 2021, respectively	53,942		53,699
Income tax	2,267		2,308
Other	4,470		4,735
Accrued unbilled utility revenue	39,506		44,026
Prepaid expenses	11,270		9,667
Current regulatory assets, net	4,370		2,629
Other current assets	4,021		4,902
	137,935		134,085
OTHER ASSETS:
Net regulatory assets, less current portion	147,566		151,992
Investments	15,866		15,784
Goodwill	640,311		640,471
Other	11,533		10,883
	815,276		819,130
	$	3,511,876	3,492,395

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)


	March 31, 2022		December 31, 2021
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Stockholders’ equity:
Common stock, $0.001 par value; authorized 70,000,000 shares; issued and outstanding shares 30,237,145 on March 31, 2022 and 30,181,348 on December 31, 2021	$	30	30
Additional paid-in capital	607,637		606,392
Retained earnings	421,095		428,260
Accumulated other comprehensive income	(344)		(163)
Total stockholders’ equity	1,028,418		1,034,519
Long-term debt, less current portion	1,491,556		1,492,935
	2,519,974		2,527,454
CURRENT LIABILITIES:
Line of credit	75,997		62,996
Current portion of long-term debt	38,919		39,106
Accrued groundwater extraction charges, purchased water and power	19,340		17,200
Accounts payable	28,367		30,391
Accrued interest	18,500		14,174

Accrued payroll	8,746		11,583

Other current liabilities	27,984		27,821
	217,853		203,271
DEFERRED INCOME TAXES	203,186		200,451
ADVANCES FOR CONSTRUCTION	137,436		130,693
CONTRIBUTIONS IN AID OF CONSTRUCTION	317,494		316,479
POSTRETIREMENT BENEFIT PLANS	92,069		89,998

OTHER NONCURRENT LIABILITIES	23,864		24,049
COMMITMENTS AND CONTINGENCIES
	$	3,511,876	3,492,395

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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		Total Stockholders’ Equity
	Number of Shares	Amount
BALANCES, December 31, 2021	30,181,348	$	30	$	606,392	$	428,260	$	(163)	$	1,034,519
Net income	—	—		—		3,737		—		3,737
Unrealized loss on investment, net of tax benefit of $67	—	—		—		—		(181)		(181)
Stock-based compensation	—	—		1,552		(20)		—		1,532
Issuance of restricted and deferred stock units	37,879	—		(1,269)		—		—		(1,269)
Employee stock purchase plan	17,918	—		1,049		—		—		1,049
Common stock issuance costs	—	—		(87)		—		—		(87)
Dividends paid ($0.36 per share)	—	—		—		(10,882)		—		(10,882)
BALANCES, March 31, 2022	30,237,145	$	30	$	607,637	$	421,095	$	(344)	$	1,028,418


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Number of Shares	Amount
BALANCES, December 31, 2020	28,556,605	$	29	$	510,158	$	408,037	$	(1,064)	$	917,160
Net income	—	—		—		2,616		—		2,616
Unrealized income on investment, net of taxes of $14	—	—		—		—		38		38
Stock-based compensation	—	—		1,280		(32)		—		1,248
Issuance of restricted and deferred stock units	30,547	—		(964)		—		—		(964)
Employee stock purchase plan	18,235	—		1,026		—		—		1,026
Common stock issuance, net of costs	1,184,500	1		66,895		—		—		66,896
Dividends paid ($0.34 per share)	—	—		—		(9,724)		—		(9,724)
BALANCES, March 31, 2021	29,789,887	$	30	$	578,395	$	400,897	$	(1,026)	$	978,296

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Three months ended March 31,
	2022		2021
OPERATING ACTIVITIES:
Net income	$	3,737	2,616
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	28,081		23,931
Deferred income taxes	2,264		(762)
Stock-based compensation	1,552		1,280
Allowance for equity funds used during construction	(510)		(402)

Gain on sale of nonutility properties	(5,450)		—
Changes in operating assets and liabilities:
Accounts receivable and accrued unbilled utility revenue

SEC Form 10-Q filed by SJW Group