What changed in this filing

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Item 1. Financial Statements

2020-11-06 compared with 2020-08-10 · 252 added, 160 removed, 505 unchanged (45% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

OPERATING EXPENSE:

29 unchanged sentences

(in thousands, except share and per share data)

September 30,

Utility plant:

19 unchanged sentences

(in thousands, except share and per share data)

September 30,

CAPITALIZATION AND LIABILITIES

3 unchanged sentences

authorized 70,000,000 shares;

issued and outstanding shares 28,516,705 on June 30, 2020 and 28,456,508 on December 31, 2019

issued and outstanding shares 28,552,177 on September 30, 2020 and 28,456,508 on December 31, 2019

Additional paid-in capital

36 unchanged sentences

BALANCES, June 30, 2020

Unrealized gain on investment, net of tax of $28

Share-based compensation

Issuance of restricted and deferred stock units

Employee stock purchase plan

Dividends paid ($0.32 per share)

BALANCES, September 30, 2020

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW GROUP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share and per share data)

Comprehensive

15 unchanged sentences

BALANCES, June 30, 2019

Net income before noncontrolling interest

Share-based compensation

Employee stock purchase plan

Dividends paid ($0.30 per share)

BALANCES, September 30, 2019

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands)

Six months ended June 30,

Nine months ended September 30,

OPERATING ACTIVITIES:

4 unchanged sentences

Gain on sale of real estate investments

Loss on sale of utility property

Changes in operating assets and liabilities:

2 unchanged sentences

Accrued groundwater extraction charges, purchased water and power

Tax payable and receivable, and other accrued taxes

Tax receivable and payable, and other accrued taxes

Postretirement benefits

1 unchanged sentence

Up-front service concession payment

Other noncurrent assets and noncurrent liabilities

Other changes, net

7 unchanged sentences

Proceeds from sale of real estate investments

Proceeds from sale of utility property

NET CASH USED IN INVESTING ACTIVITIES

11 unchanged sentences

NET CHANGE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS, END OF PERIOD

6 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2020

SEPTEMBER 30, 2020

(in thousands, except share and per share data)

7 unchanged sentences

ASU 2016-13 was effective for SJW Group in the first quarter of fiscal 2020.

The adoption of ASU 2016-13 did not have a material impact on the consolidated financial statements.

The adoption of ASU 2016-13 did not have a material impact on the condensed consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20:

“Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans,” which aims to improve the overall usefulness of disclosure to financial statement users and reduce unnecessary costs to companies when preparing defined benefit plan disclosures.

This update is effective for SJW Group’s Form 10-K for the year ending December 31, 2020.

Retrospective adoption is required and early adoption is permitted.

Management is currently evaluating the effect that the new standard will have on its defined benefit plan disclosures.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes”, which simplifies the accounting for income taxes, eliminates certain exceptions within Topic 740, “Income Taxes”, and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

This update is effective for fiscal years beginning after December 15, 2021.

Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

Management is currently evaluating the impacts of the provisions of ASU 2019-12 on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting”.

ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by the expected transition away from reference rates that are expected to be discontinued, such as LIBOR.

ASU 2020-04 was effective upon issuance.

Companies may elect to apply the guidance prospectively through December 31, 2022.

Management is evaluating the effect that the new standard will have on its consolidated financial statements.

Water sales are seasonal in nature and influenced by weather conditions.

2 unchanged sentences

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 precipitation curtail water usage and sales.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

(in thousands, except share and per share data)

The major streams of revenue for SJW Group are as follows:

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Revenue from contracts with customers

6 unchanged sentences

(“CTWS”), and shares potentially issuable under the Employee Stock Purchase Plan (“ESPP”).

For the three months ended June 30, 2020 and 2019 , 9,397 and 2,217 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.

For the six months ended June 30, 2020 and 2019 , 19,191 and 9,634 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.

For the three months ended September 30, 2020 and 2019 , 1,029 and 524 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.

For the nine months ended September 30, 2020 and 2019 , 20,220 and 10,158 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 June 30, 2020 and 2019 , the amounts allocated to administrative and general expense were $ 370 and $ 673 , respectively.

For the six months ended June 30, 2020 , and 2019 , the amounts allocated to administrative and general expense were $ 1,469 and $ 1,330 , respectively.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2020

(in thousands, except share and per share data)

For the three months ended September 30, 2020 and 2019 , the amounts allocated to administrative and general expense were $ 658 and $ 663 , respectively.

For the nine months ended September 30, 2020 , and 2019 , the amounts allocated to administrative and general expense were $ 2,128 and $ 1,995 , respectively.

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.

1 unchanged sentence

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 June 30, 2020 , 179,913 shares are issuable upon the exercise of outstanding restricted stock units and deferred restricted stock units and an additional 745,492 shares are available for award issuances under the Incentive Plan.

As of September 30, 2020 , 182,367 shares are issuable upon the exercise of outstanding restricted stock units and deferred restricted stock units and an additional 743,038 shares are available for award issuances under the Incentive Plan.

In addition, shares are issued to employees under the company’s ESPP.

In connection with the merger with CTWS on October 9, 2019, SJW Group assumed outstanding awards of restricted stock units and deferred share units under the following stock plans:

CTWS 2014 Performance Stock Program, CTWS 2004 Performance Stock Program and CTWS 1994 Performance Stock Program (collectively, the “CTWS Plan”).

As of June 30, 2020 , approximately 101,711 shares are issuable upon the exercise of outstanding restricted stock units and deferred restricted stock units under the CTWS Plan.

CTWS 2014 Performance Stock Program, CTWS 2004 Performance Stock Program and CTWS 1994 Performance Stock Program (collectively, the “CTWS Plans”).

As of September 30, 2020 , approximately 66,430 shares are issuable upon the exercise of outstanding restricted stock units and deferred restricted stock units under the CTWS Plans.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

(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 and proceeds from the exercise of any restricted stock and similar instruments that are recorded to additional paid-in capital and common stock, by award type, are presented below for the three and six months ended June 30, 2020 , and 2019 .

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Adjustments to additional paid-in capital and common stock for:

4 unchanged sentences

Stock, Restricted Stock and Deferred Restricted Stock

For the three months ended June 30, 2020 , and 2019 , SJW Group granted under the Incentive Plan 14,346 and 9,114 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value of $ 60.17 and $ 51.69 , respectively, per unit.

For the six months ended June 30, 2020 , and 2019 , SJW Group granted under the Incentive Plan 42,713 and 26,565 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value of $ 63.97 and $ 51.42 , respectively, per unit.

Performance-based and market-based restricted stock awards granted for the three months ended June 30, 2020 , and 2019 were 138 and 0 target units, respectively, with a weighted-average grant date fair value of $ 66.99 and $ 0 respectively, per unit.

Performance-based and market-based restricted stock awards granted for the six months ended June 30, 2020 , and 2019 were 24,719 and 30,401 target units, respectively, with a weighted-average grant date fair value of $ 72.01 and $ 60.46 , respectively, per unit.

For the three months ended September 30, 2020 , and 2019 , SJW Group granted under the Incentive Plan 761 and 0 , respectively, three year service-based restricted stock awards with a weighted-average grant date fair value of $ 58.63 and $ 0 , respectively, per unit.

For the nine months ended September 30, 2020 , and 2019 , SJW Group granted under the Incentive Plan 43,474 and 26,565 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value of $ 63.87 and $ 51.42 , respectively, per unit.

Performance-based and market-based restricted stock awards granted for the three months ended September 30, 2020 , and 2019 were 58 and 0 target units, respectively, with a weighted-average grant date fair value of $ 62.95 and $ 0 respectively, per unit.

Performance-based and market-based restricted stock awards granted for the nine months ended September 30, 2020 , and 2019 were 24,777 and 30,401 target units, respectively, with a weighted-average grant date fair value of $ 65.02 and $ 60.46 , respectively, per unit.

Based upon actual attainment relative to the target performance metric, the number of shares issuable can range between 0 % to 150 % of the target number of shares for performance-based restricted stock awards, or between 0 % and 200 % of the target number of shares for market-based restricted stock awards.

As of June 30, 2020 , the total unrecognized compensation costs related to restricted and deferred restricted stock plans amounted to $ 6,050 .

As of September 30, 2020 , the total unrecognized compensation costs related to restricted and deferred restricted stock plans amounted to $ 4,987 .

This cost is expected to be recognized over a weighted-average period of 1.86 years.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2020

(in thousands, except share and per share data)

Employee Stock Purchase Plan

2 unchanged sentences

A total of 400,000 shares of common stock have been reserved for issuance under the ESPP.

SJW Group’s recorded expenses were $ 74 and $ 160 for the three and six months ended June 30, 2020 , respectively, and $ 65 and $ 141 for the three and six months ended June 30, 2019 , respectively, related to the ESPP.

The total unrecognized compensation costs related to the semi-annual offering period that ends July 31, 2020 , for the ESPP is approximately $ 25 .

This cost is expected to be recognized during the third quarter of 2020.

SJW Group’s recorded expenses were $ 85 and $ 244 for the three and nine months ended September 30, 2020 , respectively, and $ 82 and $ 223 for the three and nine months ended September 30, 2019 , respectively, related to the ESPP.

The total unrecognized compensation costs related to the semi-annual offering period that ends January 29, 2021 , for the ESPP is approximately $ 116 .

This cost is expected to be recognized during the fourth quarter of 2020 and first quarter of 2021.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

(in thousands, except share and per share data)

Real Estate Investments

The major components of real estate investments as of June 30, 2020 , and December 31, 2019 , are as follows:

The major components of real estate investments as of September 30, 2020 , and December 31, 2019 , are as follows:

September 30,

Buildings and improvements

2 unchanged sentences

Substantially all of the real estate investments relate to assets that are currently subject to operating leases.

On September 28, 2020, San Jose Water Company sold six nonutility properties located in Los Gatos, California for $ 1,075 .

SJW Group recognized a pre-tax gain on the sale of real estate investments of $ 1,048 , after selling expenses of $ 22 .

On April 6, 2017, 444 West Santa Clara Street, L.P.

15 unchanged sentences

SJW Group also provides health care and life insurance benefits for retired employees under employer-sponsored postretirement benefits other than pension plans.

The components of net periodic benefit costs for the defined benefit plans and other postretirement benefits for the three and nine months ended September 30, 2020 , and 2019 are as follows:

Three months ended September 30,

Nine months ended September 30,

Interest cost

Expected return on assets

Unrecognized actuarial loss

Amortization of prior service cost

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2020

September 30, 2020

(in thousands, except share and per share data)

The components of net periodic benefit costs for the defined benefit plans and other postretirement benefits for the three and six months ended June 30, 2020 , and 2019 are as follows:

Three months ended June 30,

Six months ended June 30,

Interest cost

Expected return on assets

The following tables summarize the fair values of plan assets by major categories as of June 30, 2020 , and December 31, 2019 :

Fair Value Measurements at June 30, 2020

The following tables summarize the fair values of plan assets by major categories as of September 30, 2020 , and December 31, 2019 :

Fair Value Measurements at September 30, 2020

Asset Category

14 unchanged sentences

In 2020 , SJW Group expects to make required and discretionary cash contributions of up to $ 14,594 to the pension plans and Social Welfare Plan.

For the three and six months ended June 30, 2020 , SJW Group has made no contributions to such plans.

For the three and nine months ended September 30, 2020 , SJW Group has made $ 9,360 contributions to such plans.

Segment and Non-Tariffed Business Reporting

1 unchanged sentence

(i) SJWC, a water utility operation with both regulated and non-tariffed businesses, (ii) SJWTX, Inc.

which is doing business as Canyon Lake Water Service Company (“CLWSC”), a regulated water utility located in Canyon Lake, Texas, and its consolidated non-tariffed variable interest entity, Acequia Water Supply Corporation, (iii) SJW Land Company and its consolidated variable interest entity, 444 West Santa Clara Street, L.P., which operated commercial building rentals, and (iv) as of October 9, 2019, SJWNE LLC a holding company for CTWS and its subsidiaries, The Connecticut Water Company (“Connecticut Water”), The Maine Water Company (“Maine Water”), The Heritage Village Water Company (“HVWC”), The Avon Water Company (“Avon Water”), New England Water Utility Services, Inc.

(“NEWUS”) and Chester Realty, Inc.

On September 30, 2020 , Avon Water and HVWC merged into Connecticut Water after receiving merger approval from the Connecticut Public Utilities Regulatory Authority (“PURA”).

In accordance with FASB ASC Topic 280 - “Segment Reporting,” SJW Group’s reportable segments have been determined based on information used by the chief operating decision maker.

SJW Group’s chief operating decision maker includes the Chairman, President and Chief Executive Officer, and his executive staff.

The first segment is that of providing water utility and utility-related services to its customers through SJW Group’s subsidiaries, SJWC, Connecticut Water, CLWSC, Maine Water, and NEWUS together referred to as “Water Utility Services.” The second segment is property management and investment activity conducted by SJW Land Company and Chester Realty, Inc., referred to as “Real Estate Services.”

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2020

September 30, 2020

(in thousands, except share and per share data)

subsidiaries, The Connecticut Water Company (“Connecticut Water”), The Maine Water Company (“Maine Water”), The Heritage Village Water Company (“HVWC”), The Avon Water Company (“Avon Water”), New England Water Utility Services, Inc.

(“NEWUS”) and Chester Realty, Inc.

In accordance with FASB ASC Topic 280 - “Segment Reporting,” The chief operating decision maker of SJW Group has determined that it has two reportable business segments.

The first segment is that of providing water utility and utility-related services to its customers through SJW Group’s subsidiaries, SJWC, Connecticut Water, CLWSC, Maine Water, HVWC, Avon Water, and NEWUS together referred to as “Water Utility Services.” The second segment is property management and investment activity conducted by SJW Land Company and Chester Realty, Inc., referred to as “Real Estate Services.”

SJW Group’s reportable segments have been determined based on information used by the chief operating decision maker.

SJW Group’s chief operating decision maker includes the Chairman, President and Chief Executive Officer, and his executive staff.

The following tables set forth information relating to SJW Group’s reportable segments and distribution of regulated and non-tariffed business activities within the reportable segments.

Certain allocated assets, such as goodwill, and revenue and expenses have been included in the reportable segment amounts.

Certain allocated assets, such as goodwill, revenue and expenses have been included in the reportable segment amounts.

Other business activity of SJW Group not included in the reportable segments is included in the “All Other” category.

For Three Months Ended June 30, 2020

For Three Months Ended September 30, 2020

Water Utility Services

5 unchanged sentences

Depreciation and amortization

Senior note and other interest expense

Income tax expense (benefit) in net income

For Three Months Ended June 30, 2019

Interest on long-term debt and other interest expense

Provision for income taxes

For Three Months Ended September 30, 2019

Water Utility Services

5 unchanged sentences

Depreciation and amortization

Senior note, mortgage and other interest expense

Income tax expense (benefit) in net income

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2020

(in thousands, except share and per share data)

For Six Months Ended June 30, 2020

Interest on long-term debt and other interest expense

Provision for income taxes

For Nine Months Ended September 30, 2020

Water Utility Services

5 unchanged sentences

Depreciation and amortization

Senior note and other interest expense

Income tax expense (benefit) in net income

For Six Months Ended June 30, 2019

Interest on long-term debt and other interest expense

Provision for income taxes

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

(in thousands, except share and per share data)

For Nine Months Ended September 30, 2019

Water Utility Services

5 unchanged sentences

Depreciation and amortization

Senior note and other interest expense

Income tax expense (benefit) in net income

* The “All Other” category for the six months ended June 30, 2020 , includes the accounts of SJW Group, SJWNE LLC and CTWS on a stand-alone basis.

For the three months ended June 30, 2019 , the “All Other” category includes the accounts of SJW Group and Hydro Sub, Inc.

Interest on long-term debt and other interest expense

Provision for income taxes

* The “All Other” category for the nine months ended September 30, 2020 , includes the accounts of SJW Group, SJWNE LLC and CTWS on a stand-alone basis.

For the three months ended September 30, 2019 , the “All Other” category includes the accounts of SJW Group and Hydro Sub, Inc.

on a stand-alone basis.

For the three months ended June 30, 2019 , Hydro Sub, Inc.

had no recorded revenue or expenses and as of June 30, 2019 held no assets and incurred no liabilities.

For the three months ended September 30, 2019 , Hydro Sub, Inc.

had no recorded revenue or expenses and as of September 30, 2019 held no assets and incurred no liabilities.

was a subsidiary created solely to facilitate the merger with CTWS and was dissolved following the completion of merger in October 2019.

4 unchanged sentences

On April 24, 2020, SJW Group and SJW Land Company entered into a Termination and Payoff agreement with JPMorgan Chase Bank, N.A.

as the lender (the “Lender”) to terminate the SJW Group and SJW Land Company $ 15,000 credit agreement, effective as of April 29, 2020.

as the lender (the “Lender”) to terminate the SJW Group and SJW Land Company $ 15,000 credit agreement.

On May 11, 2020, the SJWC entered into a Second Amendment (the “Second Amendment”) to SJWC’s existing $ 125,000 credit agreement, dated as of June 1, 2016, with the Lender, as amended by the First Amendment, dated January 12, 2018, (collectively, the “Existing SJWC Credit Agreement”), with the Lender.

3 unchanged sentences

The New SJWC Credit Agreement has a maturity date of November 11, 2020.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2020

(in thousands, except share and per share data)

Borrowings under the New SJWC Credit Agreement bear interest at either the Alternate Base Rate (“ABR”) or the LIBOR (as defined in the New SJWC Credit Agreement) rate.

3 unchanged sentences

The New SJWC Credit Agreement also includes certain financial covenants that require SJWC to maintain a maximum funded debt to capitalization ratio and a minimum interest coverage ratio and to limit SJWC’s maximum consolidated cash balance.

On May 29, 2020, the CTWS entered into a Second Amendment to the CTWS’s existing $ 15,000 credit agreement, dated as of August 6, 2014, with the CoBank, ACB (“CoBank), as amended by the First Amendment, dated October 28, 2015.

The Second Amendment amends the prior agreement to, among other things, increase the total commitment by $ 25,000 , from $ 15,000 to $ 40,000 and extended the maturity date to May 15, 2025.

On May 29, 2020, CTWS entered into a Second Amendment to the CTWS’s existing $ 15,000 credit agreement, dated as of August 6, 2014, with CoBank, ACB (“CoBank), as amended by the First Amendment, dated October 28, 2015.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

(in thousands, except share and per share data)

Amendment amends the prior agreement to, among other things, increase the total commitment by $ 25,000 , from $ 15,000 to $ 40,000 and extend the maturity date to May 15, 2025.

Long-Term Debt

7 unchanged sentences

The note purchase agreement also requires Connecticut Water to maintain a debt to capitalization ratio of not more than 60 % and an interest coverage ratio at each fiscal quarter end of no less than three-to-one.

As of June 30, 2020 , Connecticut Water was in compliance with all financial ratio and operational covenants under this note purchase agreement.

As of September 30, 2020 , Connecticut Water was in compliance with all financial ratio and operational covenants under this note purchase agreement.

On December 19, 2019, Maine Water issued $ 5,000 of Series S First Mortgage Bonds to the Maine Municipal Bond Bank through the State Safe Drinking Water Revolving Loan Fund.

1 unchanged sentence

The Series S First Mortgage Bond covenants are the same as all other First Mortgage Bonds.

The proceeds were held as restricted cash by a trustee to be used for pre-approved projects primarily related to preliminary engineering and design work of a water treatment plant in Maine Water’s Biddeford and Saco division.

Proceeds were held by a trustee for the bond and until conditions were met.

The proceeds were held as restricted cash by a trustee to be used for pre-approved projects primarily related to preliminary engineering and design work of a new water treatment plant in Maine Water’s Biddeford and Saco division.

Proceeds were held by a trustee for the bond until conditions were met.

On February 3, 2020, and March 11, 2020, the trustee released proceeds of $ 4,114 and $ 886 , respectively, from the bond.

The associated bond indentures and loan agreements contain customary affirmative and negative covenants, including a prohibition on the issuance of indebtedness secured by assets or revenue of Maine Water where the lien is senior to the lien of the bond trustee under the above bonds except as permitted by the bond indentures and related loan and security agreements, a requirement to maintain a debt to capitalization ratio of not more than 65 % , required compliance with various financial and operational covenants, and a provision for maturity acceleration upon the occurrence of stated events of default.

Fair Value Measurement

The following instruments are not measured at fair value on SJW Group’s condensed consolidated balance sheets as of June 30, 2020 , but require disclosure of their fair values:

cash and cash equivalents, accounts receivable and accounts payable.

The estimated fair value of such instruments as of June 30, 2020 , approximates their carrying value as reported on the condensed consolidated balance sheets.

The fair value of such financial instruments are determined using the income approach based on the present value of estimated future cash flows.

There have been no changes in valuation techniques during the three and six months ended June 30, 2020 .

The fair value of these instruments would be categorized as Level 2 in the fair value hierarchy,

On August 11, 2020, SJW Group entered into a note purchase agreement with the purchasers listed in the agreement, pursuant to which SJW Group sold an aggregate principal amount of $ 50,000 of its 2.47 % Senior Notes, Series 2020, due August 1, 2030.

The notes are unsecured obligations of the Company.

Interest is payable semi-annually in arrears on February 1st and August 1st of each year.

The note purchase agreement contains customary representations and warranties.

Under the note purchase agreement, SJW Group is required to comply with certain customary affirmative and negative covenants for as long as the notes are outstanding.

The notes are also subject to customary events of default, the occurrence of which may result in all of the notes then outstanding becoming immediately due and payable.

For the three and nine months ended September 30, 2020 , income tax expense was $ 4,578 and $ 9,226 , respectively.

Income tax expense for the three and nine months ended September 30, 2019 , was $ 2,565 and $ 8,802 , respectively.

The effective consolidated income tax rates were 15 % and 21 % for the three months ended September 30, 2020 and 2019 , respectively, and 16 % and 23 % for the nine months ended September 30, 2020 , and 2019 , respectively.

The lower effective rates for the three and nine months ended September 30, 2020 , were primarily due to flow-through tax benefits.

SJW Group had unrecognized tax benefits of approximately $ 6,594 and $ 3,834 as of September 30, 2020 and December 31, 2019 , respectively.

SJW Group does not expect its unrecognized tax benefits to change significantly within the next 12 months.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law.

The CARES Act includes, among other items, measures concerning income taxes.

SJW Group has considered the income tax implications of the CARES Act in its estimated tax provision and does not believe it will materially impact the company’s year-end tax rate.

The Internal Revenue Service has issued guidance that will determine the final disposition of the excess deferred taxes and other impacts of the Tax Cuts and Jobs Act (H.R.

At this time, the company has applied a reasonable interpretation of the Tax Act and continues to work with the state utility regulators to determine the final methodology for disposition of excess deferred taxes.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2020

September 30, 2020

(in thousands, except share and per share data)

with the exception of cash and cash equivalents, which would be categorized as Level 1.

Fair Value Measurement

The following instruments are not measured at fair value on SJW Group’s condensed consolidated balance sheets as of September 30, 2020 , but require disclosure of their fair values:

cash and cash equivalents, accounts receivable and accounts payable.

The estimated fair value of such instruments as of September 30, 2020 , approximates their carrying value as reported on the condensed consolidated balance sheets.

The fair value of such financial instruments are determined using the income approach based on the present value of estimated future cash flows.

There have been no changes in valuation techniques during the three and nine months ended September 30, 2020 .

The fair value of these instruments would be categorized as Level 2 in the fair value hierarchy, with the exception of cash and cash equivalents, which would be categorized as Level 1.

The fair value of pension plan assets is discussed in Note 4.

1 unchanged sentence

These contracts are based principally on a referenced pool of investment funds that actively redeem shares, are observable and measurable, and are presented in “Investments” on SJW Group’s consolidated balance sheets.

As of June 30, 2020 , the value of the company owned life insurance was $ 7,282 of which $ 3,739 was related to assets to fund CTWS’s supplemental retirement plan agreements.

As of September 30, 2020 , the value of the company owned life insurance was $ 7,497 of which $ 3,913 was related to assets to fund CTWS’s supplemental retirement plan agreements.

As of December 31, 2019 , the value of the company owned life insurance was $ 7,086 of which $ 3,829 was related to assets to fund CTWS’s supplemental retirement plan agreements.

In addition to life insurance contracts, CTWS’s supplemental retirement plan agreements are also funded with a Rabbi Trust.

The following tables summarize the fair values of the Rabbi Trust investment assets to fund CTWS’s additional retirement benefits under the supplemental executive retirement plans and retirement contracts by major categories as of June 30, 2020 , and December 31, 2019 :

Fair Value Measurements at June 30, 2020

Fair Value Measurements at September 30, 2020

Asset Category

3 unchanged sentences

Money market funds

The fair value of SJW Group’s long-term debt was approximately $ 1,516,139 and $ 1,396,205 as of June 30, 2020 , and December 31, 2019 , respectively, and was determined using a discounted cash flow analysis, based on the current rates for similar financial instruments of the same duration and creditworthiness of the company.

The book value of the long-term debt was $ 1,338,333 and $ 1,305,869 as of June 30, 2020 , and December 31, 2019 , respectively.

The fair value of SJW Group’s long-term debt was approximately $ 1,575,067 and $ 1,396,205 as of September 30, 2020 , and December 31, 2019 , respectively, and was determined using a discounted cash flow analysis, based on the current rates for similar financial instruments of the same duration and creditworthiness of the company.

The book value of the long-term debt was $ 1,379,555 and $ 1,305,869 as of September 30, 2020 , and December 31, 2019 , respectively.

The fair value of long-term debt would be categorized as Level 2 in the fair value hierarchy.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

(in thousands, except share and per share data)

Regulatory Rate Filings

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A Public Participation Hearing was held on January 31, 2019.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2020

(in thousands, except share and per share data)

March 4, 2019, the CPUC suspended this proceeding due to SJW Group’s announcement of its intention to file a new merger approval application with the Connecticut Public Utilities Regulatory Authority (“PURA”).

On March 4, 2019, the CPUC suspended this proceeding due to SJW Group’s announcement of its intention to file a new merger approval application with the PURA.

On April 3, 2019, SJW Group and CTWS jointly filed a new merger application with PURA.

After securing the required approvals from both PURA and the Maine Public Utilities Commission (“MPUC”), SJW Group announced the close of the merger on October 9, 2019, and notified the CPUC accordingly.

As of June 30, 2020, the OII is still pending with the CPUC.

On August 31, 2020, the CPUC issued Decision 20-08-036 dismissing the OII and closing the proceeding.

The OII is officially concluded as no application for rehearing was filed within 30 days of decision issuance.

On September 14, 2018, the CPUC issued OII No.

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545 was filed on March 13, 2020, requesting authorization to provide refunds to customers.

For a typical residential customer with a 3/4-inch meter, the one-time refund will be $ 5.52 dollars .

For a typical residential customer with a 3/4-inch meter, the one-time refund was $ 5.52 dollars .

This advice letter was approved effective April 12, 2020, and SJWC completed issuing refunds in mid-June 2020.

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SJWC filed Advice Letter No.

534 on August 1, 2019, to recover the $ 1,243 balance as of September 30, 2017, via a surcharge over a three-year period.

534 on August 1, 2019, to recover the $ 1,243 Hydro Generation Memorandum Account balance as of September 30, 2017, via a surcharge over a three-year period.

The CPUC rejected the advice letter on October 10, 2019, citing an error in the name of the memorandum account and recommended a correction and a new filing for recovery.

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The adjustment in the memorandum account balance reflected project costs incurred after September 30, 2016, which are not allowable per Decision 19-06-010.

This request is pending before the CPUC.

Per Resolution W-5228 approved on August 27, 2020 by the CPUC, further adjustments were made to the memorandum account balance resulting in an approved recovery of $ 1,219 which was recognized in the company’s regulatory assets as of September 30, 2020 .

The recovery was approved in Advice Letter 548A effective August 31, 2020.

SJWC filed Advice Letter No.

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On December 3, 2019, Advice Letter 537-A was filed to refund the balance via a one-time surcredit.

For a typical residential customer with a 3/4-inch meter, the one-time refund will be $ 20.84 dollars per customer.

This advice letter was approved effective January 21, 2020, and refunds to customers began on January 27, 2020.

For a typical residential customer with a 3/4-inch meter, the

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

(in thousands, except share and per share data)

one-time refund will be $ 20.84 dollars per customer.

This advice letter was approved effective January 21, 2020, and refunds to customers began and completed in January 2020.

SJWC filed Advice Letter No.

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On January 22, 2020, SJWC, along with three other California water utilities, filed a joint request for a one-year deferment on the Cost of Capital filings which would otherwise be due on May 1, 2020.

Postponing the filing one year would alleviate administrative processing costs on the utilities as well as the CPUC staff, and provide relief for both CPUC and utility resources

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June 30, 2020

(in thousands, except share and per share data)

already strained by numerous other proceedings.

Postponing the filing one year would alleviate administrative processing costs on the utilities as well as the CPUC staff, and provide relief for both CPUC and utility resources already strained by numerous other proceedings.

The request was conditioned on no changes to the current Water Cost of Capital Mechanism in place during the one-year deferment.

On March 11, 2020, the CPUC approved the request.

On March 16, 2020, the CPUC ordered its regulated water utilities to halt customer disconnection activities in connection with the COVID-19 pandemic.

On April 16, 2020, the CPUC issued Executive Order N-42-20 suspending customer disconnection activities.

The CPUC’s and Governor’s orders will remain in effect until further notice.

On April 16, 2020, the CPUC issued Resolution M-4842 directing utilities to implement emergency customer protections to assist customers such as waiving reconnection deposits, offering payment arrangements, and suspending disconnections for nonpayment, to assist customers.

This resolution is effective for up to one year, or April 16, 2021, with the option to extend.

On March 19, 2020, SJWC filed Advice Letter 546 to extend customer protections listed in the company’s Disaster Relief Customer Protections and Outreach Plan as required by the CPUC in response to the COVID-19 pandemic.

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SJWC anticipates requesting recovery of the COVID-19 pandemic response costs in a future general rate case or other filings.

SJWC filed Advice Letter No.

552 with the CPUC requesting authorization to establish a Polyfluoroalkyl Substances Memorandum Account (“PFAS MA”) on August 18, 2020.

The advice letter was approved retroactive to March 1, 2019.

SJWC will track in this account incremental expenses related to PFAS monitoring, sampling, and customer outreach activities for potential future recovery.

Connecticut Regulatory Affairs

As of June 30, 2020, Water Infrastructure Conservation Adjustment (“WICA”) surcharges for Connecticut Water and Avon Water were 5.75 % and 9.31 % , respectively.

HVWC does not currently have an approved WICA surcharge.

As of September 30, 2020 , Water Infrastructure Conservation Adjustment (“WICA”) surcharges for Connecticut Water and Avon Water were 5.75 % and 9.31 % , respectively.

HVWC did not have an approved WICA surcharge.

On January 28, 2020, Connecticut Water filed a WICA application representing an additional 2.6 % surcharge, for a cumulative WICA surcharge of 5.84 % .

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On March 25, 2020, PURA approved a net cumulative 5.75 % surcharge for Connecticut Water which became effective on customers’ bills on April 1, 2020.

On October 28, 2020, Connecticut Water filed a WICA application representing an additional 1.11 % surcharge or approximately $ 956 increase in revenues, for a cumulative WICA surcharge of 6.85 % which is scheduled to become effective January 1, 2021.

On March 3, 2020, Connecticut Water filed an application, Docket No.

20-03-04, with PURA to merge Avon Water and HVWC with and into Connecticut Water.

The application is to streamline borrowings, regulatory filings and internal administrative tasks associated with maintaining separate corporate entities.

The company has responded to several interrogatories and has attended a hearing on the merger application.

Connecticut Water anticipates a final decision on the proceeding in the third quarter of 2020.

The application was made to streamline borrowings, regulatory filings and internal administrative tasks associated with maintaining separate corporate entities and was approved by PURA on September 16, 2020.

The merger became effective on September 30, 2020 .

After the approval and prior to the completion of the merger, the outstanding debt balances held at Avon Water and HVWC were repaid in full.

On March 12, 2020, PURA issued Docket No.

20-03-15 to establish a State of Emergency Utility Shut-off Moratorium for the COVID-19 pandemic.

The moratorium ordered regulated utility companies to refrain from terminating utility service to residential customers, except for safety reasons until August 1, 2020, or until such other time as determined by the PURA.

The moratorium ordered regulated utility companies to refrain from terminating utility service to

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

(in thousands, except share and per share data)

residential customers, except for safety reasons until August 1, 2020, or until such other time as determined by the PURA.

The moratorium was extended through October 1, 2020 at which time the company may resume standard collection practices until or unless there is further action by PURA.

In the same docket, PURA further directed the public service companies to maintain a detailed record of costs incurred and revenues lost as a result of implementing its orders in the docket and may establish a regulatory asset to track incurred costs.

Approval for recovery of additional costs incurred and/or revenues lost relating to the COVID-19 pandemic would be considered for recovery in the Connecticut Water’s next general rate case proceeding.

Legislation was recently passed in Connecticut that made changes to the PURA statutes for utility regulation.

The most notable changes that affect water companies were adjustments to extend the timelines for adjudication of various regulatory proceedings.

In particular, the following proceeding timelines were increased:

general rate case from 150 days with 30 day extension (180 days maximum) to 200 days, change in control from 120 days with 30 day extension (150 days maximum) to 200 days with an opportunity for a 30 day extension (230 days maximum), and financing from 30 days to 60 days.

In addition, there is a new requirement that any future change in control or merger approvals would require the composition of the board of directors of the holding company to include a proportional percentage of Connecticut-based directors.

The law also authorizes, but does not require, the PURA to consider adoption of a framework for performance-based regulation of private water companies.

Texas Regulatory Affairs

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Maine Regulatory Affairs

On December 20, 2019, Maine Water filed for a general a rate increase for their Skowhegan Division seeking approximately $ 221 , or 14.7 % , in additional revenue with the MPUC.

On December 20, 2019, Maine Water filed for a general rate increase for their Skowhegan Division seeking approximately $ 221 , or 14.7 % , in additional revenue with the MPUC.

On June 17, 2020, the MPUC approved a general rate increase for Skowhegan Division customers allowing $ 198 in additional revenue.

Per the MPUC decision, the increase will be implemented

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2020

(in thousands, except share and per share data)

in two steps:

Per the MPUC decision, the increase will be implemented in two steps:

an initial 9.80 % rate increase effective June 15, 2020, and a 3.51 % rate increase effective July 1, 2021.

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Maine Water is tracking COVID-19 related costs for potential future recovery in rates charged to customers.

On September 17, 2020, the MPUC issued an order lifting the moratorium on utility disconnections in Maine effective November 1, 2020.

The Order requires specific notifications by utilities to their customers prior to resuming disconnection activities and requires a waiver of late payment fess for customers who enter into payment arrangements on or before December 31, 2020.

MWC is processing customer notices as required with the intention of resuming utility disconnections in November, 2020.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

(in thousands, except share and per share data)

On October 9, 2020, Maine Water filed a request for approval of a special rate contract between Maine Water and the Kennebec Water District (“KWD”).

Maine Water has purchased water from KWD under a special rate contract approved by the MPUC since November 2000.

The filing seeks to continue the existing relationship between the two water utilities and requests extension of the expiring 20 year agreement for an additional 20 years.

Balancing and Memorandum Accounts

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This reserve is based on an estimate of actual usage over the recovery period.

In assessing the probability criteria for balancing and memorandum accounts between general rate cases, SJWC considers evidence that may exist prior to CPUC authorization that would satisfy ASC Topic 980 subtopic 340-25 recognition criteria.

Such evidence may include regulatory rules and decisions, past practices, and other facts and circumstances that would indicate that recovery or refund is probable.

When such evidence provides sufficient support, the balances are recorded in SJW Group’s consolidated financial statements.

On December 19, 2019, the CPUC denied the recovery of the 2018 WCMA in Advice Letter No.

When such evidence provides sufficient support, the balances are recorded in SJW Group’s condensed consolidated financial statements.

CPUC approved Advice Letter No.

548A for the recovery of the Hydro Generation Research, Development and Demonstration Memorandum Account (“PRVMA”) on August 27, 2020.

In 2016, the Company determined recovery at the time was not probable and recorded a reserve for the costs related to the project.

Advice Letter No.

548A allowed recovery of $ 1,219 which was recognized as a regulatory asset for the three and nine months ended September 30, 2020 , and the reserve previously recognized was reversed.

The amounts have been reflected in the PRVMA balances shown in the table below.

On December 19, 2019, the CPUC denied the recovery of SJWC’s 2018 WCMA in Advice Letter No.

532 and no longer approved the tracking of WCMA balances.

Due to the decision, SJWC believes WCMA tracking no longer meets the probability criteria under ASC Topic 980-605-25.

For the three and six months ended June 30, 2019 , SJWC recognized regulatory assets of $ 1,320 and $ 568 , respectively, due to lost revenues accumulated in the 2019 WCMA account net of a reserve of $ 11 for the estimated amount that will not be collected within the 24-month period, as required by the guidance.

2018 WCMA activity for the three and six months ended June 30, 2019 , represents interest and reserve activity on the accumulated balance.

For the three and six months ended June 30, 2019 , a reserve of $94 and $ 174 , respectively, was recorded.

The amounts have been reflected in the 2018 WCMA and 2019 WCMA balances shown in the table below.

As a result of conflicting CPUC proposed decisions issued in October 2019 on recovery of the 2018 WCMA balance, SJWC determined that it no longer met the probability criteria for recognition under ASC Topic 980-605-25 and fully reserved the 2019 and 2018 WCMA balances as of September 30, 2019.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2020

September 30, 2020

(in thousands, except share and per share data)

Three months ended June 30, 2020

Three months ended June 30, 2019

Three months ended September 30, 2020

Three months ended September 30, 2019

Beginning Balance

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Total cost-recovery accounts

Six months ended June 30, 2020

Six months ended June 30, 2019

Nine months ended September 30, 2020

Nine months ended September 30, 2019

Beginning Balance

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Total cost-recovery accounts

As of June 30, 2020 , the total balance in SJWC’s balancing and memorandum accounts combined, including interest, that has not been recorded into the financial statements was a net under-collection of $ 1,759 .

All balancing accounts and memorandum-type accounts not included for recovery or refund in the current general rate case will be reviewed by the CPUC in SJWC’s next

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2020

September 30, 2020

(in thousands, except share and per share data)

general rate case or at the time an individual account balance reaches a threshold of 2 % of authorized revenue, whichever occurs first.

As of September 30, 2020 , the total balance in SJWC’s balancing and memorandum accounts combined, including interest, that have not been recorded into the financial statements was a net under-collection of $ 2,245 .

All balancing accounts and memorandum-type accounts not included for recovery or refund in the current general rate case will be reviewed by the CPUC in SJWC’s next general rate case or at the time an individual account balance reaches a threshold of 2 % of authorized revenue, whichever occurs first.

Regulatory Assets

Regulatory assets are comprised of the following as of June 30, 2020 , and December 31, 2019 :

June 30, 2020

Regulatory assets are comprised of the following as of September 30, 2020 , and December 31, 2019 :

September 30, 2020

December 31, 2019

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Business Combination

On October 9, 2019, SJW Group completed its previously announced acquisition of CTWS pursuant to the terms of the Second Amended and Restated Agreement and Plan of Merger, dated as of August 5, 2018, by and among SJW Group, Hydro Sub, Inc., a Connecticut corporation and a wholly-owned subsidiary of SJW Group, and CTWS.

CTWS provides water service to approximately 138,000 connections that serve a population of approximately 480,000 people in 80 municipalities throughout Connecticut and Maine and more than 3,000 wastewater connections in Southbury, Connecticut.

On October 9, 2019, SJW Group completed the merger with CTWS, a company that provides water service throughout Connecticut and Maine.

In addition, CTWS has a real estate company in Connecticut which provides property management services.

1 unchanged sentence

The total cash purchase price was approximately $ 838,476 , less cash received of $ 3,011 , and approximately $ 6,384 related to outstanding awards of restricted stock units and deferred share units assumed in connection with the merger.

SJW Group financed the acquisition with net proceeds from its December 2018 sale of 7,762,000 shares of common stock of approximately $ 411,077 , and the October 2019 issuance of $ 427,398 in new fixed rate term loans.

SJW Group raised an additional $ 18,463 in the debt financing to partially finance transaction costs incurred in connection with the CTWS acquisition.

Along with the acquisition debt financing, SJW Group raised $ 60,000 of new proceeds used to partially refinance certain CTWS short-term borrowings on its existing lines of credit after the CTWS acquisition closed.

Management estimated the preliminary fair values of net tangible and intangible assets acquired and the excess of the consideration transferred over the aggregate of such fair values was recorded as goodwill.

The preliminary value of the acquired deferred tax assets and deferred tax liabilities are based on a preliminary analysis, and our estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date).

In addition, management is still gathering information necessary to complete the recognition and measurement of the opening balance sheet.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2020

September 30, 2020

(in thousands, except share and per share data)

The following table summarizes the estimated preliminary fair value of assets acquired and liabilities assumed as of June 30, 2020 .

The following table summarizes the purchase price and recording of fair values of assets acquired and liabilities assumed as of the acquisition date and subsequent adjustments as of September 30, 2020 .

Amounts Previously Recognized as of Acquisition Date (a)

Measurement Period Adjustments

Amounts Recognized as of Acquisition Date (as Adjusted)

Assets acquired:

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Assumed equity

______________________________________

As previously reported in the SJW Group’s 10-K for the period ended December 31, 2019.

Other intangible assets primarily consists of customer relationships.

1 unchanged sentence

We do not expect the goodwill recognized in connection with the transaction will be deductible for income tax purposes.

Goodwill is not amortized but is tested for impairment annually, or more frequently if an event occurs or circumstances change that would more likely than not, reduce the fair value of a reporting unit below its carrying amount.

The company analyzed and revalued the acquired opening deferred tax asset and liability balances within the measurement period which resulted in a decrease to goodwill of $ 1,222 during the third quarter of 2020.

There was no impact associated with the measurement period adjustments to the condensed consolidated statement of comprehensive income for the nine months ended September 30, 2020 .

Goodwill is not amortized but is tested for impairment annually, as of the first day of the fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not, reduce the fair value of a reporting unit below its carrying amount.

SJW Group first performs a qualitative assessment to determine whether it is necessary to perform the quantitative impairment test.

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If SJW Group determines that as a result of the qualitative assessment it is more likely than not (> 50% likelihood) that the fair value is less than carrying amount, then a quantitative test is performed.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2020

(in thousands, except share and per share data)

Legal Proceedings

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements