Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
SJW GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(in thousands, except share and per share data)
Three months ended March 31,
2022 2021
REVENUE $ 124,302 114,785
OPERATING EXPENSE:
Production Expenses:
Purchased water 19,217 15,645
Power 3,080 3,003
Groundwater extraction charges 13,928 15,545
Other production expenses 10,123 9,402
Total production expenses 46,348 43,595
Administrative and general 24,205 20,893
Maintenance 6,695 6,265
Property taxes and other non-income taxes 8,309 7,515
Depreciation and amortization 27,606 23,438
Gain on sale of nonutility properties ( 5,450 ) —
Total operating expense 107,713 101,706
OPERATING INCOME 16,589 13,079
OTHER (EXPENSE) INCOME:
Interest on long-term debt and other interest expense ( 13,729 ) ( 13,439 )
Pension non-service cost 949 326
Other, net 995 1,754
Income before income taxes 4,804 1,720
Provision (benefit) for income taxes 1,067 ( 896 )
NET INCOME 3,737 2,616
Other comprehensive (loss) income, net ( 181 ) 38
COMPREHENSIVE INCOME $ 3,556 2,654
EARNINGS PER SHARE
Basic $ 0.12 0.09
Diluted $ 0.12 0.09
DIVIDENDS PER SHARE $ 0.36 0.34
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 30,224,135 28,862,882
Diluted 30,335,974 28,990,203
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
3
SJW GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share data)
March 31,
2022 December 31,
2021
ASSETS
Utility plant:
Land $ 39,900 39,004
Depreciable plant and equipment 3,420,850 3,381,908
Construction in progress 180,961 176,427
Intangible assets 36,290 36,276
3,678,001 3,633,615
Less accumulated depreciation and amortization 1,160,758 1,136,116
2,517,243 2,497,499
Real estate investments and nonutility properties 57,673 57,632
Less accumulated depreciation and amortization 16,251 15,951
41,422 41,681
CURRENT ASSETS:
Cash and cash equivalents:
Cash 17,487 10,908
Restricted cash 602 1,211
Accounts receivable:
Customers, net of allowances for uncollectible accounts of $ 5,113 and $ 4,600 on March 31, 2022 and December 31, 2021, respectively
53,942 53,699
Income tax 2,267 2,308
Other 4,470 4,735
Accrued unbilled utility revenue 39,506 44,026
Prepaid expenses 11,270 9,667
Current regulatory assets, net 4,370 2,629
Other current assets 4,021 4,902
137,935 134,085
OTHER ASSETS:
Net regulatory assets, less current portion 147,566 151,992
Investments 15,866 15,784
Goodwill 640,311 640,471
Other 11,533 10,883
815,276 819,130
$ 3,511,876 3,492,395
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
4
SJW GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and per share data)
March 31,
2022 December 31,
2021
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Stockholders’ equity:
Common stock, $ 0.001 par value; authorized 70,000,000 shares; issued and outstanding shares 30,237,145 on March 31, 2022 and 30,181,348 on December 31, 2021
$ 30 30
Additional paid-in capital 607,637 606,392
Retained earnings 421,095 428,260
Accumulated other comprehensive income ( 344 ) ( 163 )
Total stockholders’ equity 1,028,418 1,034,519
Long-term debt, less current portion 1,491,556 1,492,935
2,519,974 2,527,454
CURRENT LIABILITIES:
Line of credit 75,997 62,996
Current portion of long-term debt 38,919 39,106
Accrued groundwater extraction charges, purchased water and power 19,340 17,200
Accounts payable 28,367 30,391
Accrued interest 18,500 14,174
Accrued payroll 8,746 11,583
Other current liabilities 27,984 27,821
217,853 203,271
DEFERRED INCOME TAXES 203,186 200,451
ADVANCES FOR CONSTRUCTION 137,436 130,693
CONTRIBUTIONS IN AID OF CONSTRUCTION 317,494 316,479
POSTRETIREMENT BENEFIT PLANS 92,069 89,998
OTHER NONCURRENT LIABILITIES 23,864 24,049
COMMITMENTS AND CONTINGENCIES
$ 3,511,876 3,492,395
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
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, 2021 30,181,348 $ 30 $ 606,392 $ 428,260 $ ( 163 ) $ 1,034,519
Net income — — — 3,737 — 3,737
Unrealized loss on investment, net of tax benefit of $ 67
— — — — ( 181 ) ( 181 )
Stock-based compensation — — 1,552 ( 20 ) — 1,532
Issuance of restricted and deferred stock units 37,879 — ( 1,269 ) — — ( 1,269 )
Employee stock purchase plan 17,918 — 1,049 — — 1,049
Common stock issuance costs — — ( 87 ) — — ( 87 )
Dividends paid ($ 0.36 per share)
— — — ( 10,882 ) — ( 10,882 )
BALANCES, March 31, 2022 30,237,145 $ 30 $ 607,637 $ 421,095 $ ( 344 ) $ 1,028,418
Common Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income Total
Stockholders’
Equity
Number of
Shares Amount
BALANCES, December 31, 2020 28,556,605 $ 29 $ 510,158 $ 408,037 $ ( 1,064 ) $ 917,160
Net income — — — 2,616 — 2,616
Unrealized income on investment, net of taxes of $ 14
— — — — 38 38
Stock-based compensation — — 1,280 ( 32 ) — 1,248
Issuance of restricted and deferred stock units 30,547 — ( 964 ) — — ( 964 )
Employee stock purchase plan 18,235 — 1,026 — — 1,026
Common stock issuance, net of costs 1,184,500 1 66,895 — — 66,896
Dividends paid ($ 0.34 per share)
— — — ( 9,724 ) — ( 9,724 )
BALANCES, March 31, 2021 29,789,887 $ 30 $ 578,395 $ 400,897 $ ( 1,026 ) $ 978,296
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
6
SJW GROUP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Three months ended March 31,
2022 2021
OPERATING ACTIVITIES:
Net income $ 3,737 2,616
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 28,081 23,931
Deferred income taxes 2,264 ( 762 )
Stock-based compensation 1,552 1,280
Allowance for equity funds used during construction ( 510 ) ( 402 )
Gain on sale of nonutility properties ( 5,450 ) —
Changes in operating assets and liabilities:
Accounts receivable and accrued unbilled utility revenue 4,311 7,725
Accounts payable and other current liabilities ( 1,635 ) ( 3,719 )
Accrued groundwater extraction charges, purchased water and power 2,140 ( 1,040 )
Tax receivable and payable, and other accrued taxes 1,135 3,333
Postretirement benefits 1,230 1,649
Regulatory assets and liabilities excluding income tax temporary differences, net and postretirement benefits 5,124 ( 1,750 )
Other changes, net 3,315 515
NET CASH PROVIDED BY OPERATING ACTIVITIES 45,294 33,376
INVESTING ACTIVITIES:
Additions to utility plant:
Company-funded ( 43,727 ) ( 46,674 )
Contributions in aid of construction ( 4,782 ) ( 4,653 )
Additions to real estate investments ( 40 ) ( 152 )
Payments to retire utility plant, net of salvage ( 1,087 ) ( 461 )
Proceeds from sale of nonutility properties 227 —
Payments for business acquisitions ( 33 ) —
NET CASH USED IN INVESTING ACTIVITIES ( 49,442 ) ( 51,940 )
FINANCING ACTIVITIES:
Borrowings on line of credit 15,377 28,637
Repayments on line of credit ( 2,375 ) ( 82,222 )
Long-term borrowings — 17,000
Repayments of long-term borrowings ( 1,172 ) ( 1,159 )
Issuance of common stock, net of issuance costs — 67,249
Dividends paid ( 10,882 ) ( 9,724 )
Receipts of advances and contributions in aid of construction 10,044 4,687
Refunds of advances for construction ( 595 ) ( 583 )
Other changes, net ( 279 ) ( 80 )
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,118 23,805
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 5,970 5,241
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD 12,119 9,269
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD 18,089 14,510
LESS RESTRICTED CASH, END OF PERIOD 602 3,104
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 17,487 11,406
Cash paid during the period for:
Interest $ 11,127 9,516
Income taxes 165 158
Supplemental disclosure of non-cash activities:
Accrued payables for additions to utility plant $ 20,472 16,720
Utility property installed by developers 546 202
Accrued additional common stock issuance costs — 353
See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
7
SJW GROUP AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2022
(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 2021 Annual Report on Form 10-K should be read with the accompanying unaudited condensed consolidated financial statements.
SJW Group is a holding company with five wholly-owned subsidiaries: San Jose Water Company (“SJWC”), SJWNE LLC, SJWTX, Inc., SJW Land Company, and SJW Holdings, Inc. SJWNE LLC is the holding company for Connecticut Water Service, Inc. (“CTWS”) whose wholly-subsidiaries are The Connecticut Water Company (“Connecticut Water”), The Maine Water Company (“Maine Water”), New England Water Utility Services, Inc. (“NEWUS”), and Chester Realty, Inc. SJWC, Connecticut Water, SJWTX, Inc. doing business as Canyon Lake Water Service Company (“CLWSC”), Maine Water and NEWUS are referred to as “Water Utility Services.” SJW Land Company and Chester Realty, Inc. are collectively referred to as “Real Estate Services.”
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 March 31,
2022 2021
Revenue from contracts with customers $ 121,777 112,238
Alternative revenue programs, net ( 1,927 ) 112
Other balancing and memorandum accounts, net 2,430 1,521
Other regulatory mechanisms, net 666 ( 430 )
Rental income 1,356 1,344
$ 124,302 114,785
Real Estate Investments and Nonutility Properties
The major components of real estate investments and nonutility properties as of March 31, 2022, and December 31, 2021, are as follows:
March 31,
2022 December 31,
2021
Land $ 12,615 12,615
Buildings and improvements 45,058 45,017
Subtotal 57,673 57,632
Less: accumulated depreciation and amortization 16,251 15,951
Total $ 41,422 41,681
On October 29, 2021, SJWC sold two nonutility properties located in San Jose, California for $ 13,150 . SJW Group recognized a pre-tax gain on the sale of nonutility properties of $ 7,230 , after selling expenses of $ 277 for one of the properties sold, and a gain of $ 5,442 , after selling expenses of $ 178 , was deferred on the other nonutility property pending CPUC review for the year
8
SJW GROUP AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2022
(in thousands, except share and per share data)
ended December 31, 2021. On February 15, 2022, the California Public Utilities Commission (“CPUC”) review was completed and $ 5,442 was recognized as gain on sale of nonutility properties.
Fair Value Measurement
The following instruments are not measured at fair value on SJW Group’s condensed consolidated balance sheets as of March 31, 2022, 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 March 31, 2022, approximates their carrying value as reported on the condensed consolidated balance sheets. The estimated fair value of such financial instruments were 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 months ended March 31, 2022. 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 $ 1,493,425 and $ 1,651,825 as of March 31, 2022, and December 31, 2021, 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 $ 1,530,475 and $ 1,532,041 as of March 31, 2022, and December 31, 2021, respectively. The fair value of long-term debt would be categorized as Level 2 in the fair value hierarchy.
Connecticut Water Service, Inc.’s (“CTWS”) 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 $ 3,469 and $ 3,797 as of March 31, 2022, and December 31, 2021, respectively, and are categorized as Level 1 in the fair value hierarchy.
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 CTWS, and shares potentially issuable under the Employee Stock Purchase Plan (“ESPP”). For the three months ended March 31, 2022 and 2021, 10,860 and 8,579 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.
Note 2. Regulatory Matters
Regulatory assets, net are comprised of the following as of March 31, 2022, and December 31, 2021:
March 31, 2022 December 31, 2021
Regulatory assets:
Income tax temporary differences, net $ 24,309 22,420
Postretirement pensions and other postretirement benefits 63,126 62,197
Business combinations debt premium, net 19,302 19,937
Balancing and memorandum accounts, net 33,800 38,334
Water Rate Adjustment 1,512 2,588
Other, net 9,887 9,145
Total regulatory assets, net in Condensed Consolidated Balance Sheets 151,936 154,621
Less: current regulatory assets, net 4,370 2,629
Total regulatory assets, net, less current portion $ 147,566 151,992
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SJW GROUP AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2022
(in thousands, except share and per share data)
As of March 31, 2022, and December 31, 2021, SJW Group’s regulatory assets, net not earning a return primarily included postretirement pensions and other medical benefits unfunded amount, and business combination debt premiums, net. The total amount of regulatory assets, net not earning a return at March 31, 2022, and December 31, 2021, either by interest on the regulatory asset/liability or as a component of rate base at the allowed rate of return was $ 85,446 and $ 84,887 , respectively.
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 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 (“MWRAM”) 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. The Water Conservation Memorandum Account (“WCMA”) allows SJWC to track lost revenue, net of related water costs, associated with reduced sales due to water conservation and associated calls for water use reductions. SJWC records the lost revenue captured in the WCMA balancing accounts. Drought surcharges collected will be used to offset the revenue losses tracked in the WCMA.
Balancing and memorandum accounts recorded to regulatory assets, net for the three months ended March 31, 2022, and 2021 as follows:
Three months ended March 31, 2022 Three months ended March 31, 2021
Beginning Balance Regulatory Asset Increase (Decrease) Refunds (Collections) Adjustments Ending Balance Beginning Balance Regulatory Asset Increase (Decrease) Refunds (Collections) Adjustments Ending Balance
Revenue accounts:
MWRAM $ 16,866 2,193 1 19,060 $ 12,077 1,776 — 13,853
WCMA 3,534 ( 100 ) ( 6,495 ) ( 3,061 ) 666 — — 666
Cost of capital memorandum account ( 1,563 ) ( 1 ) — ( 1,564 ) ( 1,561 ) — — ( 1,561 )
All others ( 386 ) 312 1 ( 73 ) ( 1,139 ) ( 175 ) 1 ( 1,313 )
Total revenue accounts $ 18,451 2,404 ( 6,493 ) 14,362 $ 10,043 1,601 1 11,645
Cost-recovery accounts:
Water supply costs 10,545 244 — 10,789 8,123 787 — 8,910
Pension 4,941 65 — 5,006 3,478 366 — 3,844
PRVMA
707 1 ( 76 ) 632 1,108 — ( 81 ) 1,027
CEMA 3,245 ( 807 ) — 2,438 2,266 — — 2,266
All others 445 128 — 573 445 — — 445
Total cost-recovery accounts $ 19,883 ( 369 ) ( 76 ) 19,438 $ 15,420 1,153 ( 81 ) 16,492
Total $ 38,334 2,035 ( 6,569 ) 33,800 $ 25,463 2,754 ( 80 ) 28,137
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 3. 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. The refunds of the advance deposit payments constitute an obligation of the respective subsidiaries.
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SJW GROUP AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2022
(in thousands, except share and per share data)
Note 4. Income Taxes
Income tax expense (benefit) for the three months ended March 31, 2022, and 2021, was $ 1,067 and $( 896 ), respectively. The effective consolidated income tax rates were 22 % and ( 52 )% for the three months ended March 31, 2022, and 2021, respectively. The higher effective tax rate for the three months ended March 31, 2022, was primarily due to discrete tax expense items.
SJW Group had unrecognized tax benefits, before the impact of deductions of state taxes, excluding interest and penalties of approximately $ 8,014 and $ 7,961 as of March 31, 2022, and December 31, 2021, respectively. SJW Group does not expect its unrecognized tax benefits to change significantly within the next 12 months.
Note 5. 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.
Note 6. 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.
The components of net periodic benefit costs for the defined benefit plans and other postretirement benefits for the three months ended March 31, 2022, and 2021 are as follows:
Three months ended March 31,
2022 2021
Service cost $ 2,652 2,735
Interest cost 2,860 2,580
Expected return on assets ( 5,043 ) ( 4,752 )
Unrecognized actuarial loss 1,164 1,780
Amortization of prior service cost 4 12
Total $ 1,637 2,355
In 2022, SJW Group expects to make required and discretionary cash contributions of up to $ 7,842 to the pension plans and other postretirement benefits. For the three months ended March 31, 2022, SJW Group has made no contributions to the plans.
Note 7. 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
11
SJW GROUP AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2022
(in thousands, except share and per share data)
subsidiary the opportunity to acquire an equity interest in SJW Group. SJW Group also maintains stock plans in connection with its acquisition of CTWS which are no longer granting new awards under the plan. As of March 31, 2022, 179,833 shares are issuable upon the vesting of outstanding restricted stock units and deferred restricted stock units and an additional 625,071 shares are available for award issuances under the Incentive Plan.
A summary of compensation costs charged to income and proceeds from the exercise of 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 months ended March 31, 2022, and 2021:
Three months ended March 31,
2022 2021
Compensation costs charged to income:
ESPP $ 185 181
Restricted stock and deferred restricted stock 1,367 1,099
Total compensation costs charged to income $ 1,552 1,280
ESPP proceeds $ 1,049 1,026
Restricted Stock and Deferred Restricted Stock
For the three months ended March 31, 2022, and 2021, SJW Group granted under the Incentive Plan 31,399 and 33,701 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value of $ 68.37 and $ 64.22 , respectively, per unit.
For the three months ended March 31, 2022, and 2021, SJW Group granted under the Incentive Plan 33,621 and 29,459 target units, respectively, performance-based and market-based restricted stock awards granted with a weighted-average grant date fair value of $ 70.35 and $ 66.35 , 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 March 31, 2022, the total unrecognized compensation costs related to restricted and deferred restricted stock plans amounted to $ 7,618 . This cost is expected to be recognized over a weighted-average period of 2.14 years.
Employee Stock Purchase Plan
SJW Group’s recorded expenses were $ 93 and $ 88 for the three months ended March 31, 2022 and 2021, respectively, related to the ESPP. The total unrecognized compensation costs related to the semi-annual offering period that ends July 29, 2022, for the ESPP is approximately $ 132 . This cost is expected to be recognized during the second and third quarters of 2022.
Note 8. Segment and Non-Tariffed Business Reporting
SJW Group is a holding company with five 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, (iv) SJWNE LLC a holding company for CTWS and its subsidiaries, The Connecticut Water Company, The Maine Water Company, New England Water Utility Services, Inc. and Chester Realty, Inc., and (v) SJWTX Holdings, Inc. which was formed for the purpose of effecting a corporate reorganization of the water utility operations in Texas. 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.”
12
SJW GROUP AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
March 31, 2022
(in thousands, except share and per share data)
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 March 31, 2022
Water Utility Services Real Estate Services All Other (1) SJW Group
Regulated Non-tariffed Non-tariffed Non-tariffed Regulated Non-tariffed Total
Operating revenue $ 120,518 2,428 1,356 — 120,518 3,784 124,302
Operating expense 101,451 3,979 909 1,374 101,451 6,262 107,713
Operating income (loss) 19,067 ( 1,551 ) 447 ( 1,374 ) 19,067 ( 2,478 ) 16,589
Net income (loss) 9,715 ( 1,317 ) 308 ( 4,969 ) 9,715 ( 5,978 ) 3,737
Depreciation and amortization 24,511 2,572 300 223 24,511 3,095 27,606
Interest on long-term debt and other interest expense 8,763 — — 4,966 8,763 4,966 13,729
Provision (benefit) for income taxes 2,020 ( 437 ) 103 ( 619 ) 2,020 ( 953 ) 1,067
Assets $ 3,403,006 4,139 44,361 60,370 3,403,006 108,870 3,511,876
For Three Months Ended March 31, 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 $ 111,396 2,045 1,344 — 111,396 3,389 114,785
Operating expense 98,478 1,369 881 978 98,478 3,228 101,706
Operating income (loss) 12,918 676 463 ( 978 ) 12,918 161 13,079
Net income (loss) 5,699 722 323 ( 4,128 ) 5,699 ( 3,083 ) 2,616
Depreciation and amortization 22,817 109 289 223 22,817 621 23,438
Interest on long-term debt and other interest expense 8,171 — — 5,268 8,171 5,268 13,439
Provision (benefit) for income taxes ( 116 ) 182 109 ( 1,071 ) ( 116 ) ( 780 ) ( 896 )
Assets $ 3,218,536 7,625 44,763 61,218 3,218,536 113,606 3,332,142
____________________
(1) The “All Other” category for the three months ended March 31, 2022, includes the accounts of SJW Group, SJWNE LLC, CTWS and SJWTX Holdings, Inc. on a stand-alone basis. SJWTX Holdings, Inc. had no activity for the three months ended March 31, 2022 . For the three months ended March 31, 2021, “All Other” category includes the accounts of SJW Group, SJWNE LLC and CTWS on a stand-alone basis.
(2) As of March 31, 2022 and December 31, 2021, 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.
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