H2O AMERICA 10-Q

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 June 30, Six months ended June 30, 2021 2020 2021 2020 REVENUE $ 152,241 147,209 $ 267,026 262,963 OPERATING EXPENSE: Production Expenses: Purchased water 27,668 25,889 43,313 41,823 Power 3,391 3,426 6,394 6,151 Groundwater extraction charges 20,138 18,583 35,683 33,611 Other production expenses 9,831 10,280 19,233 20,373 Total production expenses 61,028 58,178 104,623 101,958 Administrative and general 21,326 17,772 42,219 39,388 Maintenance 6,587 5,334 12,852 11,420 Property taxes and other non-income taxes 7,149 7,102 14,664 14,565 Depreciation and amortization 23,512 22,753 46,950 44,135 Total operating expense 119,602 111,139 221,308 211,466 OPERATING INCOME 32,639 36,070 45,718 51,497 OTHER (EXPENSE) INCOME: Interest on long-term debt and other interest expense ( 13,681 ) ( 13,180 ) ( 27,120 ) ( 26,464 ) Pension non-service cost 339 ( 7 ) 665 ( 52 ) Gain on sale of Texas Water Alliance 3,000 — 3,000 — Other, net 1,784 1,048 3,538 1,805 Income before income taxes 24,081 23,931 25,801 26,786 Provision for income taxes 3,306 4,210 2,410 4,648 NET INCOME 20,775 19,721 23,391 22,138 Other comprehensive income (loss), net 107 10 145 ( 125 ) COMPREHENSIVE INCOME $ 20,882 19,731 $ 23,536 22,013 EARNINGS PER SHARE Basic $ 0.70 0.69 $ 0.80 0.78 Diluted $ 0.69 0.69 $ 0.79 0.77 DIVIDENDS PER SHARE $ 0.34 0.32 $ 0.68 0.64 WEIGHTED AVERAGE SHARES OUTSTANDING Basic 29,799,499 28,507,940 29,333,776 28,498,649 Diluted 29,924,191 28,683,208 29,459,782 28,678,715 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) June 30, 2021 December 31, 2020 ASSETS Utility plant: Land $ 38,352 36,845 Depreciable plant and equipment 3,269,984 3,198,060 Construction in progress 145,039 109,976 Intangible assets 35,357 35,167 3,488,732 3,380,048 Less accumulated depreciation and amortization 1,092,337 1,045,136 2,396,395 2,334,912 Real estate investments 58,389 58,129 Less accumulated depreciation and amortization 15,363 14,783 43,026 43,346 CURRENT ASSETS: Cash and cash equivalents: Cash 25,442 5,269 Restricted cash 2,659 4,000 Accounts receivable: Customers, net of allowances for uncollectible accounts of $ 3,866 and $ 3,891 on June 30, 2021 and December 31, 2020, respectively 50,825 46,832 Income tax — 7,041 Other 4,054 4,269 Accrued unbilled utility revenue 48,984 44,950 Prepaid expenses 8,471 8,097 Current regulatory assets, net 1,075 1,748 Other current assets 5,348 5,125 146,858 127,331 OTHER ASSETS: Net regulatory assets, less current portion 172,312 156,482 Investments 15,163 14,367 Goodwill 628,144 628,144 Other 7,624 6,883 823,243 805,876 $ 3,409,522 3,311,465 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) June 30, 2021 December 31, 2020 CAPITALIZATION AND LIABILITIES CAPITALIZATION: Stockholders’ equity: Common stock, $ 0.001 par value; authorized 70,000,000 shares; issued and outstanding shares 29,804,927 on June 30, 2021 and 28,556,605 on December 31, 2020 $ 30 29 Additional paid-in capital 579,057 510,158 Retained earnings 411,511 408,037 Accumulated other comprehensive income ( 919 ) ( 1,064 ) Total stockholders’ equity 989,679 917,160 Long-term debt, less current portion 1,372,126 1,287,580 2,361,805 2,204,740 CURRENT LIABILITIES: Line of credit 138,541 175,094 Current portion of long-term debt 26,270 76,241 Accrued groundwater extraction charges, purchased water and power 26,290 19,184 Accounts payable 39,546 34,200 Accrued interest 13,035 12,861 Accrued payroll 13,895 14,012 Income tax payable 246 — Other current liabilities 16,608 19,203 274,431 350,795 DEFERRED INCOME TAXES 191,376 191,415 ADVANCES FOR CONSTRUCTION 128,855 125,027 CONTRIBUTIONS IN AID OF CONSTRUCTION 302,503 296,105 POSTRETIREMENT BENEFIT PLANS 125,594 121,597 REGULATORY LIABILITIES — — OTHER NONCURRENT LIABILITIES 24,958 21,786 COMMITMENTS AND CONTINGENCIES (See Note 12) $ 3,409,522 3,311,465 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 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 gain on investment, net of tax of $ 14 — — — — 38 38 Share-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 Net income — — — 20,775 — 20,775 Unrealized gain on investment, net of tax of $ 39 — — — — 107 107 Share-based compensation — — 791 ( 28 ) — 763 Issuance of restricted and deferred stock units 15,040 — ( 9 ) — — ( 9 ) Common stock issuance, net of costs — — ( 120 ) — — ( 120 ) Dividends paid ($ 0.34 per share) — — — ( 10,133 ) — ( 10,133 ) BALANCES, June 30, 2021 29,804,927 $ 30 $ 579,057 $ 411,511 $ ( 919 ) $ 989,679 Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income Total Stockholders’ Equity Number of Shares Amount BALANCES, December 31, 2019 28,456,508 $ 28 $ 506,639 $ 383,191 $ 126 $ 889,984 Net income — — — 2,417 — 2,417 Unrealized loss on investment, net of tax of $( 50 ) — — — — ( 135 ) ( 135 ) Share-based compensation — — 251 ( 43 ) — 208 Issuance of restricted and deferred stock units 25,781 — ( 785 ) — — ( 785 ) Employee stock purchase plan 15,552 — 970 — — 970 Dividends paid ($ 0.32 per share) — — — ( 9,118 ) — ( 9,118 ) BALANCES, March 31, 2020 28,497,841 28 507,075 376,447 ( 9 ) 883,541 Net income — — — 19,721 — 19,721 Unrealized gain on investment, net of tax of $ 4 — — — — 10 10 Share-based compensation — — 1,009 ( 43 ) — 966 Issuance of restricted and deferred stock units 18,864 1 14 — — 15 Dividends paid ($ 0.32 per share) — — — ( 9,122 ) — ( 9,122 ) BALANCES, June 30, 2020 28,516,705 $ 29 $ 508,098 $ 387,003 $ 1 $ 895,131 See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 6 SJW GROUP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) Six months ended June 30, 2021 2020 OPERATING ACTIVITIES: Net income $ 23,391 22,138 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 48,406 45,608 Deferred income taxes 903 ( 977 ) Stock-based compensation 2,071 1,260 Allowance for equity funds used during construction ( 916 ) — Gain on sale of Texas Water Alliance ( 3,000 ) — Changes in operating assets and liabilities: Accounts receivable and accrued unbilled utility revenue ( 7,812 ) ( 23,081 ) Accounts payable and other current liabilities 553 ( 9,012 ) Accrued groundwater extraction charges, purchased water and power 7,106 9,403 Tax receivable and payable, and other accrued taxes 2,647 5,734 Postretirement benefits 1,955 4,295 Regulatory assets and liabilities excluding income tax temporary differences, net and postretirement benefits. ( 8,231 ) ( 13,903 ) Up-front service concession payment — ( 5,000 ) Other changes, net 23 ( 4,125 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 67,096 32,340 INVESTING ACTIVITIES: Additions to utility plant: Company-funded ( 100,057 ) ( 74,081 ) Contributions in aid of construction ( 7,357 ) ( 5,044 ) Additions to real estate investments ( 230 ) ( 324 ) Payments to retire utility plant, net of salvage ( 909 ) ( 1,649 ) Proceeds from sale of Texas Water Alliance 3,000 — Payment for asset acquisition ( 1,452 ) — NET CASH USED IN INVESTING ACTIVITIES ( 107,005 ) ( 81,098 ) FINANCING ACTIVITIES: Borrowings on line of credit 45,669 89,196 Repayments on line of credit ( 82,222 ) ( 59,734 ) Long-term borrowings 87,000 35,000 Repayments of long-term borrowings ( 51,617 ) ( 1,706 ) Issuance of common stock, net of issuance costs 66,775 — Debt issuance costs ( 296 ) ( 214 ) Dividends paid ( 19,857 ) ( 18,240 ) Receipts of advances and contributions in aid of construction 14,673 11,064 Refunds of advances for construction ( 1,363 ) ( 1,326 ) Other changes, net ( 21 ) 91 NET CASH PROVIDED BY FINANCING ACTIVITIES 58,741 54,131 NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 18,832 5,373 CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD 9,269 17,944 CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD 28,101 23,317 LESS RESTRICTED CASH, END OF PERIOD 2,659 — CASH AND CASH EQUIVALENTS, END OF PERIOD $ 25,442 23,317 Cash paid during the period for: Interest $ 29,266 30,030 Income taxes 1,020 5 Supplemental disclosure of non-cash activities: Accrued payables for additions to utility plant $ 29,123 18,006 Change in accrued payables for construction costs capitalized 3,391 ( 4,166 ) Utility property installed by developers 1,230 3,154 See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 7 SJW GROUP AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021 (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 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 Notes to Consolidated Financial Statements in SJW Group’s 2020 Annual Report on Form 10-K should be read with the accompanying unaudited condensed consolidated financial statements. Recently Adopted Accounting Principles In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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. ASU 2019-12 was effective for SJW Group in the first quarter of fiscal 2021. The adoption of ASU 2019-12 did not have a material impact on the 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 precipitation curtail water usage resulting in lower sales. The major streams of revenue for SJW Group are as follows: Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020 Revenue from contracts with customers $ 147,204 142,163 $ 259,442 247,299 Alternative revenue programs, net 2,656 3,049 2,768 3,553 Other balancing and memorandum accounts, net 1,477 1,629 2,998 10,211 Other regulatory mechanisms, net ( 416 ) ( 1,076 ) ( 846 ) ( 914 ) Rental income 1,320 1,444 2,664 2,814 $ 152,241 147,209 $ 267,026 262,963 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”), shares potentially issuable under the performance stock plans assumed through the business combination with Connecticut Water Service, Inc. (“CTWS”), and shares potentially issuable under the Employee Stock Purchase Plan (“ESPP”). For the three months ended June 30, 2021 and 2020, 4,304 and 9,397 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively. For the six months ended June 30, 2021 and 2020, 12,883 and 19,191 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, 2021 and 2020, the amounts allocated to administrative and general expense were $ 120 and $ 370 , respectively. For the six months 8 SJW GROUP AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) June 30, 2021 (in thousands, except share and per share data) ended June 30, 2021, and 2020, the amounts allocated to administrative and general expense were $ 1,456 and $ 1,469 , respectively. Real Estate Investments The major components of real estate investments as of June 30, 2021, and December 31, 2020, are as follows: June 30, 2021 December 31, 2020 Land $ 14,198 14,168 Buildings and improvements 44,191 43,961 Subtotal 58,389 58,129 Less: accumulated depreciation and amortization 15,363 14,783 Total $ 43,026 43,346 A former wholly owned subsidiary of SJW Group, Texas Water Alliance Limited was sold to Guadalupe-Blanco River Authority (“GBRA”) in 2017. The sales agreement with GBRA included a holdback amount of $ 3,000 to be paid to SJW Group on June 30, 2021, subject to reduction under certain conditions. SJW Group received the holdback amount without reduction from the GBRA on June 29, 2021 and recognized a pre-tax gain on sale of $ 3,000 . Note 2. Regulatory Rate Filings California Regulatory Affairs On March 17, 2020, the California Public Utilities Commission (“CPUC”) ordered its regulated water utilities to halt customer disconnection activities in connection with the COVID-19 pandemic. On April 2, 2020, California Governor Gavin Newsom issued Executive Order N-42-20 suspending customer disconnection activities 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. This resolution was effective for up to one year, or April 15, 2021, with the option to extend. On February 11, 2021, the CPUC approved Resolution M-4849 extending customer protections required in Resolution M-4842 through June 30, 2021. The resolution also requires water utilities to develop a transition plan regarding shutoffs and terminations with customers once the moratorium ends. On April 1, 2021, San Jose Water Company (“SJWC”) filed Advice Letter 560 which includes such plan and the filing was approved on June 16, 2021. On June 11, 2021, Governor Newsom issued Executive Order N-08-21 which ends the suspension on customer disconnection activities on September 30, 2021. On June 16, 2021, the CPUC directed its regulated water utilities to extend the suspension on customer disconnection activities through September 30, 2021, in response to the Governor’s order. On June 23, 2021, SJWC filed Advice Letter 565 to extend Resolution M-4849’s emergency customer protections through September 30, 2021. This advice was approved on July 1, 2021. SJWC filed Advice Letter 556 on November 16, 2020, with the CPUC requesting authorization to increase its revenue requirement by 11,750 or 3.04 % in 2021 for the final escalation year authorized in our 2018 General Rate Case Decision 18-011-025 which established rates for 2019, 2020, and 2021. This advice letter was approved on December 17, 2020, and new rates became effective January 1, 2021. On January 4, 2021, SJWC filed General Rate Case Application No. 21-01-003 requesting authority for an increase of revenue of $ 51,585 or 13.35 % in 2022, $ 16,932 or 3.88 % in 2023, and $ 19,195 or 4.24 % in 2024. The application also includes requests to recover $ 18,499 from balancing and memorandum accounts, authorization for a $ 435,000 capital budget, further alignment between actual and authorized usage, and a shift to greater revenue collection in the service charge. The application will undergo a year-long review process and new rates, if approved, are expected to be effective in the second quarter of 2022. On May 3, 2021, SJWC filed Application No. 21-05-004 requesting authority to adjust its cost of capital for the period from January 1, 2022 through December 31, 2024. The request seeks a revenue increase of $ 6,418 or 1.61 % in 2022. The application also proposes a rate of return of 8.11 % from the current rate of 7.64 %, a decrease in the average cost of debt rate from 6.20 % to 5.48 %, and a return of equity of 10.30 % from the current rate of 8.90 %. In addition, the request seeks to adjust SJWC’s currently authorized capital structure of approximately 47 % debt and 53 % equity to approximately 45 % debt and 55 % equity. If approved, rates are expected to be effective on January 1, 2022. 9 SJW GROUP AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) June 30, 2021 (in thousands, except share and per share data) On May 27, 2021, SJWC filed Advice Letter No. 561/561A with the CPUC requesting authorization to increase revenue by $ 17,262 or 4.34 % to recover the increases to purchased potable water charges, the groundwater extraction fee, and purchased recycled water charges implemented by Santa Clara Valley Water District (“Valley Water”) and South Bay Water Recycling effective July 1, 2021. This advice letter was approved with an effective date of July 1, 2021. On June 9, 2021, Valley Water declared a water shortage emergency and asked its retailers to reduce consumption by 15% based on 2019’s volume. On June 18, 2021, SJWC filed Advice Letter 563 with the CPUC to activate Stage 3 of its Rule 14.1, Water Shortage Contingency Plan, in response to Valley Water’s declaration of drought emergency and call for 15% mandatory conservation. Advice Letter 564 was also filed on June 9, 2021, to establish a Water Conservation Memorandum Account to track the revenue impact of authorized vs actual water consumption and the incremental expenses required to implement our mandatory water conservation plan. Similar memorandum accounts were authorized during the previous drought. On July 20, 2021, Advice Letter 564 was approved. Advice Letter 563 is pending with the CPUC. Connecticut Regulatory Affairs On October 28, 2020, The Connecticut Water Company (“Connecticut Water”) filed a Water Infrastructure Conservation Adjustment (“WICA”) application representing an additional 1.11 % surcharge or approximately $ 956 increase in revenues, for a cumulative WICA surcharge of 6.94 %. The Public Utilities Regulatory Authority of Connecticut (“PURA”) approved the requested increase with an April 1, 2021 effective date. Additionally, on February 1, 2021, Connecticut Water filed its annual WICA reconciliation which called for a 0.09 % increase of the WICA surcharge. On March 3, 2021, PURA approved the reconciliation, resulting in a net cumulative 7.03 % surcharge for Connecticut Water which became effective on customers’ bills on April 1, 2021. As of June 30, 2021, WICA surcharges for Connecticut Water and its Avon Water division were 7.03 % and 8.51 %, respectively. The Heritage Village Water division does not have an approved WICA surcharge. On January 15, 2021, Connecticut Water filed an application with PURA to amend rates for its customers, including the divisions of Avon and Heritage Village. The filing requests an increase of $ 20,206 in annual revenues that includes more than $ 265,514 in completed infrastructure investments that are not currently in approved rates and surcharges. The filing proposes a new rate that would provide a 15 % reduction in water bills for income-eligible customers, which would be the first low-income rate for a Connecticut water utility, if approved. The filing also includes a tiered block rate structure for residential water customers to promote water conservation. The proposed increase will be applied across the company but may differ by rate divisions, meter size and between customer rate categories. The application also reflects the costs of operating and maintaining the utility, including expenditures on power and treatment additives that have increased since the company’s last general rate case decision in 2010. PURA has 200 days from the filing date to review the application, and the approved rates will go into effect soon thereafter. On July 28, 2021, Connecticut Water received the final decision approving an increase of $ 5,208 in annual revenues, a return on equity of 9.0 %, with new rates effective July 28, 2021. The final decision also approved the low-income rate, tiered block rate structure for residential water customers and the cost of debt and equity percentage as requested. The final decision did not include all of the requested proforma plant in service due to the timing of its completion. However, no plant was disallowed. Connecticut Water will seek recovery for the projects in the future, including a portion of plant which is eligible for recovery through WICA. In addition, the final decision reset WICA, which was approaching its statutory cap to zero . Long-term debt issuances for Connecticut Water require regulatory authorization which is typically obtained for a specified amount of debt to be issued during a specified period of time. On March 16, 2021, Connecticut Water filed for PURA approval for the issuance of up to $ 100,000 of long-term borrowings in 2021. Connecticut Water anticipates to use the proceeds to pay down line of credit borrowings and payoff maturing debt, as well as general working capital needs. Connecticut Water received approval of the financings from PURA on June 9, 2021. Texas Regulatory Affairs On January 29, 2021, SJWTX, Inc., doing business as Canyon Lake Water Service Company (“CLWSC”) submitted its Water Pass-Through Charge (“WPC”) true-up report for the Canyon Lake area water systems’ 2020 purchased water costs. The WPC is the annual filing to change the monthly per thousand gallons charge for changes in purchased water costs since the last annual true-up report. The 2020 WPC true-up report resulted in a reduction of the WPC usage rate from $ 0.95 dollars to $ 0.7 dollars per thousand gallons which became effective on March 1, 2021. The Deer Creek Ranch water system has a separate WPC. A WPC filing for Deer Creek Ranch is required only when there is a change in purchased water costs. The WPC true-up report for this system was submitted December 1, 2020, which resulted in a decrease in the usage charge from $ 2.02 to $ 1.84 10 SJW GROUP AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) June 30, 2021 (in thousands, except share and per share data) dollars per thousand gallons, and an increase in the monthly base charge of $ 0.51 dollars per residential account. The Deer Creek Ranch WPC rate changes became effective February 25, 2021. A disaster declaration was declared on February 12, 2021 by the Public Utilities Commission of Texas (“PUCT”) because of severe winter weather. The PUCT issued orders under Docket No. 51812-6 which prohibited disconnections for non-payment, suspended the rules for late fees and interest, and allowed for estimated billing for the duration of the disaster declaration. On March 5, 2021, the PUCT reinstituted the utilities’ ability to resume charging late fees, and on June 15, 2021, removed the prohibition on disconnections for non-payment. On June 28, 2021, CLWSC announced that it reached an agreement to acquire the Kendall West and Bandera East utilities in Bandera and Medina counties in Texas and that change in ownership applications had been filed with the PUCT. The acquisition, pending approval by the PUCT, would grow CLWSC by 1,400 service connections that serve an estimated 4,000 county residences. A decision by the PUCT is expected in the fourth quarter of 2021. Maine Regulatory Affairs On June 17, 2020, the Maine Public Utilities Commission (“MPUC”) approved a general rate increase for Skowhegan Division customers allowing $ 198 in additional revenue. 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. The combined rate increase is 13.31 %. On November 23, 2020, The Maine Water Company (“Maine Water”) filed Water Infrastructure Surcharge (“WISC”) applications with the MPUC in five divisions requesting an increase between 1.1 % and 5 %, representing approximately $ 304 in additional revenues. The WISC applications were approved on December 15, 2020, and December 22, 2020 and the surcharges became effective January 1, 2021. On March 10, 2021, Maine Water filed a general rate increase application for the Biddeford Saco Division seeking approximately $ 6,659 , or 77.5 %, in additional revenue. The application has proposed a multi-year rate plan that is designed to ease the transition to higher water bills over the period from July 2021 to July 2023. The primary driver for the increase in rates is the support for a new drinking water treatment facility on the Saco River, a $ 60,000 project to replace the existing facility that is expected to be in service in the second quarter of 2022. On June 23, 2021, the MPUC approved the first step in the plan adopting the proposed rate smoothing mechanism and implementing a temporary 22.65 % surcharge on all customer bills. The surcharge will be in effect for one year while the MPUC reviews and acts on the requested increase in base rates. A decision on the requested revenue increase is expected in the second quarter of 2022, in alignment with the completion of the new water treatment facility. Note 3. Regulatory Assets, Net Regulatory assets, net are comprised of the following as of June 30, 2021, and December 31, 2020: June 30, 2021 December 31, 2020 Regulatory assets: Income tax temporary differences, net $ 11,880 6,230 Postretirement pensions and other medical benefits 98,009 95,559 Business combinations debt premium, net 21,208 22,479 Balancing and memorandum accounts, net 31,317 25,463 Water Rate Adjustment 3,033 323 Other, net 7,940 8,176 Total regulatory assets, net in Condensed Consolidated Balance Sheets 173,387 158,230 Less: current regulatory assets, net 1,075 1,748 Total regulatory assets, net, less current portion $ 172,312 156,482 11 SJW GROUP AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) June 30, 2021 (in thousands, except share and per share data) At June 30, 2021 and December 31, 2020, SJW Group’s regulatory assets, net not earning a return primarily included the postretirement pensions and other medical benefits unfunded amount, and the business combinations debt premium, net. The total amount of regulatory assets, net not earning a return at June 30, 2021, and December 31, 2020, either by interest on the regulatory asset/liability or as a component of rate base at the allowed rate of return was $ 120,482 and $ 119,236 , respectively. Note 4. Balancing and Memorandum Accounts SJWC has established balancing accounts for the purpose of tracking the under-collection or over-collection associated with expense changes and the revenue authorized by the CPUC to offset those expense changes. SJWC also maintains memorandum accounts to track revenue impacts due to catastrophic events, certain unforeseen water quality expenses related to new federal and state water quality standards, energy efficiency, water conservation, water tariffs, and other approved activities or as directed by the CPUC. The Monterey Water Revenue Adjustment Mechanism (“WRAM”) tracks the difference between the revenue received for actual metered sales through the tiered volumetric rate and the revenue that would have been received with the same actual metered sales if a uniform rate would have been in effect. Balancing and memorandum accounts recorded to regulatory assets, net for the three and six months ended June 30, 2021 and 2020 as follows: Three months ended June 30, 2021 Three months ended June 30, 2020 Beginning Balance Regulatory Asset Increase (Decrease) Refunds (Collections) Adjustments Ending Balance Beginning Balance Regulatory Asset Increase (Decrease) Refunds (Collections) Adjustments Ending Balance Revenue accounts: Monterey WRAM $ 13,853 1,424 1 15,278 $ 8,958 1,591 — 10,549 Cost of capital memorandum account ( 1,561 ) ( 1 ) — ( 1,562 ) ( 1,558 ) ( 2 ) — ( 1,560 ) Tax memorandum account 333 — — 333 332 — — 332 All others ( 980 ) 147 4 ( 829 ) ( 1,074 ) 40 — ( 1,034 ) Total revenue accounts $ 11,645 1,570 5 13,220 $ 6,658 1,629 — 8,287 Cost-recovery accounts: Water supply costs 8,910 984 1 9,895 5,061 838 — 5,899 Pension 3,844 366 — 4,210 2,886 99 — 2,985 Hydro Generation Research, Development and Demonstration Memorandum Account (“PRVMA”) 1,027 — ( 99 ) 928 — — — — COVID-19 Catastrophic Event Memorandum Account (“CEMA”) 2,266 352 — 2,618 — — — — All others 445 1 — 446 443 1 — 444 Total cost-recovery accounts $ 16,492 1,703 ( 98 ) 18,097 $ 8,390 938 — 9,328 Total $ 28,137 3,273 ( 93 ) 31,317 $ 15,048 2,567 — 17,615 12 SJW GROUP AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) June 30, 2021 (in thousands, except share and per share data) Six months ended June 30, 2021 Six months ended June 30, 2020 Beginning Balance Regulatory Asset Increase (Decrease) Refunds (Collections) Adjustments Ending Balance Beginning Balance Regulatory Asset Increase (Decrease) Refunds (Collections) Adjustments Ending Balance Revenue accounts: Monterey WRAM $ 12,077 3,200 1 15,278 $ 7,015 3,561 ( 27 ) 10,549 Cost of capital memorandum account ( 1,561 ) ( 1 ) — ( 1,562 ) ( 1,553 ) ( 7 ) — ( 1,560 ) Tax memorandum account 333 — — 333 ( 6,643 ) ( 3 ) 6,978 332 All others ( 806 ) ( 28 ) 5 ( 829 ) ( 759 ) ( 165 ) ( 110 ) ( 1,034 ) Total revenue accounts $ 10,043 3,171 6 13,220 $ ( 1,940 ) 3,386 6,841 8,287 Cost-recovery accounts: Water supply costs 8,123 1,771 1 9,895 4,328 1,605 ( 34 ) 5,899 Pension 3,478 732 — 4,210 2,449 514 22 2,985 PRVMA 1,108 — ( 180 ) 928 — — — — CEMA 2,266 352 — 2,618 — — — — All others 445 1 — 446 446 2 ( 4 ) 444 Total cost-recovery accounts $ 15,420 2,856 ( 179 ) 18,097 $ 7,223 2,121 ( 16 ) 9,328 Total $ 25,463 6,027 ( 173 ) 31,317 $ 5,283 5,507 6,825 17,615 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. Note 5. Capitalization On March 8, 2021, SJW Group entered into an underwriting agreement with J.P. Morgan Securities LLC, as the representative of the several underwriters named therein (the “Underwriters”), which provided for the issuance and sale by SJW Group to the Underwriters 1,030,000 shares of our common stock, par value $ 0.001 per share, in an underwritten public offering (the “Offering”). The shares in the Offering were sold at a public offering price of $ 59.00 per share. SJW Group also granted the Underwriters an option to purchase up to 154,500 additional shares of common stock, which was exercised in full. The Offering closed on March 11, 2021 and the offering of option shares closed on March 16, 2021. SJW Group received net proceeds of approximately $ 66,775 from the Offering and the sale of option shares, after deducting the underwriting discounts and commissions and offering expenses. SJW Group used the proceeds from the offerings to pay down a bank line of credit agreement, dated as of June 1, 2016, between SJWC and JPMorgan Chase Bank, N.A. and for general corporate purposes, which included, among other things, financing infrastructure improvements and other capital expenditures, repayment of debt or other corporate obligations and working capital. Note 6. Equity Plans 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. As of June 30, 2021, 174,489 shares are issuable upon the vesting of outstanding restricted stock units and deferred restricted stock units and an additional 685,578 shares are available for award issuances under the Incentive Plan. 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: the CTWS 2014 Performance Stock Program, the CTWS 2004 Performance Stock Program and the CTWS 1994 Performance Stock Program (collectively, the “CTWS Plans”). As of June 30, 2021, approximately 56,056 shares are issuable upon the exercise of outstanding restricted stock units and deferred restricted stock units under the CTWS Plans. 13 SJW GROUP AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) June 30, 2021 (in thousands, except share and per share data) 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, 2021, and 2020. Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020 Adjustments to additional paid-in capital and common stock for: Compensation costs charged to income: ESPP $ — — $ 181 171 Restricted stock and deferred restricted stock 791 1,009 1,890 1,089 Total compensation costs charged to income $ 791 1,009 $ 2,071 1,260 ESPP proceeds $ — — $ 1,026 970 Restricted Stock and Deferred Restricted Stock For the three months ended June 30, 2021, and 2020, SJW Group granted under the Incentive Plan 11,732 and 14,346 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value of $ 65.43 and $ 60.17 , respectively, per unit. For the six months ended June 30, 2021, and 2020, SJW Group granted under the Incentive Plan 45,433 and 42,713 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value of $ 64.53 and $ 63.97 , respectively, per unit. For the three months ended June 30, 2021, and 2020, SJW Group granted under the Incentive Plan 1,182 and 138 target units, respectively, performance-based and market-based restricted stock awards with a weighted-average grant date fair value of $ 65.70 and $ 66.99 , respectively, per unit. For the six months ended June 30, 2021, and 2020, SJW Group granted under the Incentive Plan 30,641 and 24,719 target units, respectively, performance-based and market-based restricted stock awards granted with a weighted-average grant date fair value of $ 66.33 and $ 72.01 , 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, 2021, the total unrecognized compensation costs related to restricted and deferred restricted stock plans amounted to $ 6,528 . This cost is expected to be recognized over a weighted-average period of 1.91 years. Employee Stock Purchase Plan SJW Group’s recorded expenses were $ 86 and $ 174 for the three and six months ended June 30, 2021, respectively, and $ 74 and $ 160 for the three and six months ended June 30, 2020, respectively, related to the ESPP. The total unrecognized compensation costs related to the semi-annual offering period that ends July 30, 2021, for the ESPP is approximately $ 30 . This cost is expected to be recognized during the third quarter of 2021. Note 7. Bank Borrowings and Long-Term Liabilities SJW Group’s contractual obligations and commitments include senior notes, bank term loans, revenue bonds, state revolving fund loans and other obligations. Water Utility Services have received advance deposit payments from its customers on certain construction projects and the refunds of the advance deposit payments constitute an obligation of the respective subsidiaries. Lines of Credit On April 23, 2021, SJWC closed its $ 140,000 line of credit agreement which was set to mature on June 1, 2021, and entered into a new $ 140,000 credit agreement (“SJWC Credit Agreement”) with JPMorgan Chase Bank, N.A., as the lender (the “Lender”). The SJWC Credit Agreement provides an unsecured credit facility with a letter of credit sublimit of $ 15,000 . Proceeds of borrowings under the SJWC Credit Agreement may be used to refinance existing debt, for working capital, and for general corporate purposes. The new SJWC Credit Agreement has a maturity date of December 31, 2023. The line of credit bears interest at variable rates. The SJWC Credit Agreement contains customary representations, warranties and events of default, as well as restrictive covenants customary for facilities of this type. The SJWC Credit Agreement also includes certain customary financial covenants such as a funded debt to capitalization ratio. 14 SJW GROUP AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) June 30, 2021 (in thousands, except share and per share data) Also on April 23, 2021, SJW Group, as guarantor, and CLWSC closed its $ 5,000 line of credit agreement which was set to mature on June 1, 2021, and entered into a new $ 5,000 credit agreement (“SJWTX Credit Agreement”) with the Lender. The SJWTX Credit Agreement provides an unsecured credit facility with a letter of credit sublimit of $ 1,000 . The new SJWTX Credit Agreement has a maturity date of December 31, 2023. Long-Term Debt On March 2, 2021, Maine Water entered into a credit agreement with a commercial bank, pursuant to an existing master loan agreement under which the commercial bank issued Maine Water a promissory note on the same date with an aggregate principal amount of $ 17,000 and a fixed interest rate of 3.89 %, due March 1, 2041. The notes are unsecured obligations of Maine Water. Interest is payable quarterly in arrears on the 20th day of January, April, July and October of each year. The promissory note contains customary representations and warranties. Under the promissory note, Maine Water 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. Proceeds from the borrowing were received on March 18, 2021. On May 13, 2021, CLWSC entered into a master credit agreement and promissory note with a commercial bank under which it entered into a borrowing agreement for an aggregate principal amount not to exceed $ 30,000 , of which $ 20,000 was advanced at the closing date. The borrowing carries a fixed interest rate of 4.01 % due on March 20, 2041. The remaining aggregate principal amount of the promissory note is to be advanced at the discretion of CLWSC before the maturity date. The notes are unsecured obligations of CLWSC. Interest is payable quarterly in arrears on the 20th day of January, April, July and October of each year. The promissory note contains customary representations and warranties. Under the promissory note, CLWSC 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. On June 25, 2021, SJWC entered into a note purchase agreement with certain affiliates of New York Life Insurance (collectively the “Purchasers”), pursuant to which the company sold an aggregate principal amount of $ 50,000 of its 3.00 % Senior Notes, Series N (“Series N Notes”) to the Purchasers. The Series N Notes are unsecured obligations of SJWC and are due on June 25, 2051. Interest is payable semi-annually in arrears on January 1st and July 1st of each year. The note purchase agreement contains customary affirmative and negative covenants for as long as the Series N Notes are outstanding. The Series N Notes are also subject to customary events of default, the occurrence of which may result in all of the Series N Notes then outstanding becoming immediately due and payable. The closing occurred simultaneously with the signing of the note purchase agreement. Note 8. Benefit Plans SJW Group maintains noncontributory defined benefit pension plans for its eligible employees. SJWC and CTWS employees hired before March 31, 2008, and January 1, 2009, respectively, are entitled to benefits under the pension plans based on the employee’s years of service and compensation. For SJWC employees, hired on or after March 31, 2008, benefits are determined using a cash balance formula based upon compensation credits and interest credits for each employee. Certain CTWS employees hired before March 1, 2012, and covered by a plan merged into the CTWS plan in 2013 are also entitled to benefits based on the employee’s years of service and compensation. CTWS employees hired on or after January 1, 2009, are entitled to an additional 1.5 % of eligible compensation to their company sponsored savings plan. SJW Group does not have multi-employer plans. In addition, senior management hired before March 31, 2008, for SJWC and January 1, 2009, for CTWS are eligible to receive additional retirement benefits under supplemental executive retirement plans and retirement contracts. SJWC’s senior management hired on or after March 31, 2008, are eligible to receive additional retirement benefits under SJWC’s Cash Balance Executive Supplemental Retirement Plan. The supplemental retirement plans and Cash Balance Executive Supplemental Retirement Plan are non-qualified plans in which only senior management and other designated members of management may participate. SJW Group also provides health care and life insurance benefits for retired employees under employer-sponsored postretirement benefits other than pension plans. 15 SJW GROUP AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) June 30, 2021 (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, 2021, and 2020 are as follows: Three months ended June 30, Six months ended June 30, 2021 2020 2021 2020 Service cost $ 2,688 2,337 $ 5,423 4,780 Interest cost 2,530 2,816 5,110 5,720 Expected return on assets ( 4,742 ) ( 4,183 ) ( 9,494 ) ( 8,303 ) Unrecognized actuarial loss 1,794 1,834 3,574 2,592 Amortization of prior service cost 13 ( 665 ) 25 76 Total $ 2,283 2,139 $ 4,638 4,865 In 2021, SJW Group expects to make required and discretionary cash contributions of up to $ 9,043 to the pension plans and other postretirement benefits. For the three and six months ended June 30, 2021, SJW Group has made $ 1,480 contributions to such plans. Note 9. Income Taxes For the three and six months ended June 30, 2021, income tax expense was $ 3,306 and $ 2,410 , respectively. Income tax expense for the three and six months ended June 30, 2020, was $ 4,210 and $ 4,648 , respectively. The effective consolidated income tax rates were 14 % and 18 % for the three months ended June 30, 2021 and 2020, respectively, and 9 % and 17 % for the six months ended June 30, 2021, and 2020, respectively. The lower effective rates for the three and six months ended June 30, 2021, were primarily due to flow-through tax benefits. In addition, discrete tax benefits recorded in the first quarter of 2021 resulted in a lower effective tax rate for the six months ended June 30, 2021. SJW Group had unrecognized tax benefits, before the impact of deductions of state taxes, excluding interest and penalties of approximately $ 6,882 and $ 6,468 as of June 30, 2021 and December 31, 2020, respectively. SJW Group does not expect its unrecognized tax benefits to change significantly within the next 12 months. On March 11, 2021, the American Rescue Plan Act (the “Act”) was signed into law. SJW Group has considered the income tax implications of the Act in its estimated tax provision and does not believe it will materially impact the company’s year-end tax rate. Note 10. Fair Value Measurement The following instruments are not measured at fair value on SJW Group’s condensed consolidated balance sheets as of June 30, 2021, 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, 2021, 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, 2021. 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 SJW Group’s long-term debt was approximately $ 1,546,640 and $ 1,570,727 as of June 30, 2021, and December 31, 2020, 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 long-term debt was $ 1,398,396 and $ 1,363,821 as of June 30, 2021, and December 31, 2020, respectively. The fair value of long-term debt would be categorized as Level 2 in the fair value hierarchy. CTWS’s additional retirement benefits under the supplemental executive retirement plans and retirement contracts are funded by investment assets held by a Rabbi Trust. The fair value of the money market funds, mutual funds and fixed income investments in the Rabbi Trust was $ 3,078 and $ 3,014 as of June 30, 2021, and December 31, 2020, respectively, and are categorized as Level 1 in the fair value hierarchy. 16 SJW GROUP AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) June 30, 2021 (in thousands, except share and per share data) Note 11. Segment and Non-Tariffed Business Reporting SJW Group is a holding company with four subsidiaries: (i) SJWC, a water utility operation with both regulated and non-tariffed businesses, (ii) 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) SJWNE LLC a holding company for CTWS and its subsidiaries, Connecticut Water, Maine Water, New England Water Utility Services, Inc. (“NEWUS”) and Chester Realty, Inc. 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 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.” 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, 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, 2021 Water Utility Services Real Estate Services All Other (1) SJW Group Regulated Non-tariffed Non-tariffed Non-tariffed Regulated Non-tariffed Total Operating revenue $ 148,237 2,684 1,320 — 148,237 4,004 152,241 Operating expense 115,572 1,942 881 1,207 115,572 4,030 119,602 Operating income (loss) 32,665 742 439 ( 1,207 ) 32,665 ( 26 ) 32,639 Net income (loss) 20,585 677 296 ( 783 ) 20,585 190 20,775 Depreciation and amortization 22,887 110 291 224 22,887 625 23,512 Interest on long-term debt and other interest expense 8,347 — — 5,334 8,347 5,334 13,681 Provision (benefit) for income taxes 4,580 203 96 ( 1,573 ) 4,580 ( 1,274 ) 3,306 Assets $ 3,300,414 8,248 45,090 55,770 3,300,414 109,108 3,409,522 For Three Months Ended June 30, 2020 Water Utility Services Real Estate Services All Other (1) SJW Group Regulated Non-tariffed Non-tariffed Non-tariffed Regulated Non-tariffed Total Operating revenue $ 143,072 2,693 1,444 — 143,072 4,137 147,209 Operating expense 107,185 1,759 850 1,345 107,185 3,954 111,139 Operating income (loss) 35,887 934 594 ( 1,345 ) 35,887 183 36,070 Net income (loss) 22,236 881 443 ( 3,839 ) 22,236 ( 2,515 ) 19,721 Depreciation and amortization 22,123 108 298 224 22,123 630 22,753 Interest on long-term debt and other interest expense 8,289 — — 4,891 8,289 4,891 13,180 Provision (benefit) for income taxes 5,449 260 124 ( 1,623 ) 5,449 ( 1,239 ) 4,210 Assets $ 3,079,118 9,913 44,889 76,057 3,079,118 130,859 3,209,977 17 SJW GROUP AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued) June 30, 2021 (in thousands, except share and per share data) For Six Months Ended June 30, 2021 Water Utility Services Real Estate Services All Other (1) SJW Group Regulated Non-tariffed Non-tariffed Non-tariffed Regulated Non-tariffed Total Operating revenue $ 259,633 4,729 2,664 — 259,633 7,393 267,026 Operating expense 214,050 3,311 1,762 2,185 214,050 7,258 221,308 Operating income (loss) 45,583 1,418 902 ( 2,185 ) 45,583 135 45,718 Net income (loss) 26,284 1,399 619 ( 4,911 ) 26,284 ( 2,893 ) 23,391 Depreciation and amortization 45,704 219 580 447 45,704 1,246 46,950 Interest on long-term debt and other interest expense 16,518 — — 10,602 16,518 10,602 27,120 Provision (benefit) for income taxes 4,464 385 205 ( 2,644 ) 4,464 ( 2,054 ) 2,410 Assets $ 3,300,414 8,248 45,090 55,770 3,300,414 109,108 3,409,522 For Six Months Ended June 30, 2020 Water Utility Services Real Estate Services All Other (1) SJW Group Regulated Non-tariffed Non-tariffed Non-tariffed Regulated Non-tariffed Total Operating revenue $ 254,439 5,710 2,814 — 254,439 8,524 262,963 Operating expense 203,202 3,120 1,681 3,463 203,202 8,264 211,466 Operating income (loss) 51,237 2,590 1,133 ( 3,463 ) 51,237 260 51,497 Net income (loss) 28,064 2,351 831 ( 9,108 ) 28,064 ( 5,926 ) 22,138 Depreciation and amortization 42,872 216 600 447 42,872 1,263 44,135 Interest on long-term debt and other interest expense 16,463 — — 10,001 16,463 10,001 26,464 Provision (benefit) for income taxes 6,651 730 256 ( 2,989 ) 6,651 ( 2,003 ) 4,648 Assets $ 3,079,118 9,913 44,889 76,057 3,079,118 130,859 3,209,977 ____________________ (1) The “All Other” category for the six months ended June 30, 2021 and June 30, 2020, includes the accounts of SJW Group, SJWNE LLC and CTWS on a stand-alone basis. (2) As of June 30, 2021 and December 31, 2020, the Company has performed an allocation of goodwill associated with the acquisition of CTWS to two reporting units, Connecticut and Maine, which are both aggregated within the Regulated Water Utility Services reportable segment. Note 12. Commitments and Contingencies SJW Group is subject to ordinary routine litigation incidental to its business. There are no pending legal proceedings to which SJW Group or any of its subsidiaries is a party, or to which any of its properties is the subject, that are expected to have a material effect on SJW Group’s business, financial position, results of operations or cash flows. 18