What changed in this filing

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Item 1. Financial Statements

2023-05-01 compared with 2022-10-28 · 120 added, 263 removed, 319 unchanged (55% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

Three months ended March 31,

REVENUE $ 137,296 124,302

16 unchanged sentences

Pension non-service cost ( 64 ) 949

Gain on sale of Texas Water Alliance — — — 3,000

Other, net 3,266 995

2 unchanged sentences

NET INCOME 11,530 3,737

Other comprehensive (loss) income, net ( 173 ) ( 12 ) ( 602 ) 133

Other comprehensive income (loss), net 93 ( 181 )

COMPREHENSIVE INCOME $ 11,623 3,556

10 unchanged sentences

(in thousands, except share and per share data)

September 30,

2023 December 31,

4 unchanged sentences

Intangible assets 35,947 35,959

3,799,571 3,633,615

Total utility plant 3,904,252 3,854,077

Less accumulated depreciation and amortization 1,250,101 1,223,760

2,592,881 2,497,499

Net utility plant 2,654,151 2,630,317

Real estate investments and nonutility properties 1,388 58,033

Less accumulated depreciation and amortization 190 17,158

41,157 41,681

Net real estate investments and nonutility properties 1,198 40,875

CURRENT ASSETS:

1 unchanged sentence

Cash 23,333 12,344

Restricted cash — 1,211

Accounts receivable:

Customers, net of allowances for uncollectible accounts of $ 5,665 and $ 4,600 on September 30, 2022 and December 31, 2021, respectively

Customers, net of allowances for uncollectible accounts of $ 5,851 and $ 5,753 on March 31, 2023 and December 31, 2022, respectively

56,468 59,172

Income tax — 2,308

Other 5,145 5,560

Accrued unbilled utility revenue 40,437 45,722

Assets held for sale 40,850 —

Prepaid expenses 11,380 9,753

13 unchanged sentences

(in thousands, except share and per share data)

September 30,

2023 December 31,

4 unchanged sentences

authorized 70,000,000 shares;

issued and outstanding shares 30,315,265 on September 30, 2022 and 30,181,348 on December 31, 2021

issued and outstanding share s 31,427,124 on March 31, 2023 and 30,801,912 on December 31, 2022

Additional paid-in capital 692,742 651,004

5 unchanged sentences

CURRENT LIABILITIES:

Line of credit 199,170 62,996

Lines of credit 72,433 159,578

Current portion of long-term debt 44,274 4,360

25 unchanged sentences

Net income — — — 11,530 — 11,530

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

Net income — — — 11,558 — 11,558

Unrealized loss on investment, net of tax of $ 0

— — — — ( 248 ) ( 248 )

Stock-based compensation — — 1,041 ( 23 ) 1,018

Issuance of restricted and deferred stock units 10,529 — ( 6 ) — — ( 6 )

Common stock issuance costs — — ( 6 ) — — ( 6 )

Dividends paid ($ 0.36 per share)

— — — ( 10,889 ) — ( 10,889 )

BALANCES, June 30, 2022 30,247,674 30 608,666 421,741 ( 592 ) 1,029,845

Net income — — — 25,034 — 25,034

Unrealized loss on investment, net of tax benefit of $ 154

Unrealized gain on investment, net of taxes of $ 0

— — — — 93 93

5 unchanged sentences

— — — ( 11,722 ) — ( 11,722 )

BALANCES, September 30, 2022 30,315,265 $ 30 $ 614,226 $ 435,856 $ ( 765 ) $ 1,049,347

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)

BALANCES, March 31, 2023 31,427,124 $ 31 $ 692,742 $ 458,142 $ 1,570 $ 1,152,485

Common Stock Additional

6 unchanged sentences

Net income — — — 3,737 — 3,737

Unrealized income on investment, net of taxes of $ 14

Unrealized loss on investment, net of taxes of $ 67

— — — — ( 181 ) ( 181 )

6 unchanged sentences

BALANCES, March 31, 2022 30,237,145 $ 30 $ 607,637 $ 421,095 $ ( 344 ) $ 1,028,418

Net income — — — 20,775 — 20,775

Unrealized gain on investment, net of tax of $ 39

— — — — 107 107

Stock-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

Net income — — — 19,068 — 19,068

Unrealized loss on investment, net of tax benefit of $ 4

— — — — ( 12 ) ( 12 )

Stock-based compensation — — 1,130 ( 29 ) — 1,101

Issuance of restricted and deferred stock units 186 — 14 — — 14

Employee stock purchase plan 17,069 — 1,000 — — 1,000

Dividends paid ($ 0.34 per share)

— — — ( 10,139 ) — ( 10,139 )

BALANCES, September 30, 2021 29,822,182 $ 30 $ 581,201 $ 420,411 $ ( 931 ) $ 1,000,711

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands)

Nine months ended September 30,

Three months ended March 31,

OPERATING ACTIVITIES:

5 unchanged sentences

Allowance for equity funds used during construction ( 180 ) ( 510 )

Gain on sale of nonutility properties and Texas Water Alliance ( 5,532 ) ( 3,000 )

Gain on sale of nonutility property — ( 5,450 )

Changes in operating assets and liabilities:

5 unchanged sentences

Regulatory assets and liabilities excluding income tax temporary differences, net and postretirement benefits 8,367 5,124

Up-front service concession payment ( 1,600 ) —

Other changes, net ( 1,156 ) 3,315

4 unchanged sentences

Contributions in aid of construction ( 2,703 ) ( 4,782 )

Additions to real estate investments ( 610 ) ( 606 )

Payments to retire utility plant, net of salvage ( 167 ) ( 1,087 )

Proceeds from sale of nonutility properties and Texas Water Alliance 310 3,000

Payments for business acquisitions ( 433 ) —

Other changes, net 225 154

NET CASH USED IN INVESTING ACTIVITIES ( 55,029 ) ( 49,442 )

24 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

MARCH 31, 2023

(in thousands, except share and per share data)

8 unchanged sentences

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.

doing business as The Texas Water Company (“Texas Water”), 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.”

4 unchanged sentences

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

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

Three months ended March 31,

Revenue from contracts with customers $ 135,836 121,777

5 unchanged sentences

Real Estate Investments and Nonutility Properties

The major components of real estate investments and nonutility properties as of September 30, 2022, and December 31, 2021, are as follows:

September 30,

The major components of real estate investments and nonutility properties as of March 31, 2023, and December 31, 2022, are as follows:

2023 December 31,

4 unchanged sentences

Total $ 1,198 40,875

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 California Public Utilities

In March 2023, SJW Land Company entered into a broker agreement to sell its warehouse buildings and land property located in Knoxville, Tennessee.

The company reclassified the Tennessee properties from held-and-used to held-for-sale at March 31, 2023.

The company’s intention is to complete the sale of these assets within a twelve month period.

The company recorded the Tennessee properties at the lower of their carrying value or estimated fair value less cost to sell, and also stopped recording

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2022

March 31, 2023

(in thousands, except share and per share data)

Commission (“CPUC”) review for the year ended December 31, 2021.

On February 15, 2022, the CPUC review was completed and $ 5,442 was recognized as gain on sale of the second nonutility property.

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 .

depreciation on assets held for sale.

The company's broker provided the estimated fair value of the Tennessee properties and we subtracted the estimated costs to sell from that calculated fair value.

The resulting net fair value of the Tennessee properties exceeded their carrying value, and accordingly no impairment was recorded.

The sale of the Tennessee properties does not represent a strategic shift that has or will have a major effect on SJW Group;

therefore, the sale does not qualify for treatment as a discontinued operation.

The Tennessee warehouse buildings and land property is included in SJW Group’s “Real Estate Services” reportable segment in Note 9 , “Segment and Non-Tariffed Business Reporting.” The following represents the major components of the Tennessee warehouse building and land property recorded in assets held-for-sale on the condensed consolidated balance sheets as of March 31, 2023:

Land $ 13,170

Buildings and improvements 44,950

Subtotal 58,120

accumulated depreciation and amortization 17,270

Total $ 40,850

On February 15, 2022, the California Public Utilities Commission (“CPUC”) review on a SJWC nonutility property sold in October 2021 was completed and the deferred gain of $ 5,442 was recognized as gain on sale in the first quarter of 2022.

Fair Value Measurement

The following instruments are not measured at fair value on SJW Group’s condensed consolidated balance sheets as of September 30, 2022, but require disclosure of their fair values:

The following instruments are not measured at fair value on SJW Group’s condensed consolidated balance sheets as of March 31, 2023, 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, 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 and nine months ended September 30, 2022.

The estimated fair value of such instruments as of March 31, 2023, approximates their carrying value as reported on the condensed consolidated balance sheets.

There have been no changes in valuation techniques during the three months ended March 31, 2023.

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 $ 1,247,530 and $ 1,651,825 as of September 30, 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 $ 1,458,088 and $ 1,532,041 as of September 30, 2022, and December 31, 2021, respectively.

The fair value of SJW Group’s long-term debt was approximately $ 1,383,468 and $ 1,294,354 as of March 31, 2023, and December 31, 2022, 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 $ 1,564,636 and $ 1,496,325 as of March 31, 2023, and December 31, 2022, 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 $ 2,790 and $ 3,797 as of September 30, 2022, and December 31, 2021, respectively, and are categorized as Level 1 in the fair value hierarchy.

The fair value of the money market funds, mutual funds and fixed income investments in the Rabbi Trust was $ 2,848 and $ 2,809 as of March 31, 2023, and December 31, 2022, respectively, and are categorized as Level 1 in the fair value hierarchy.

Earnings per Share

1 unchanged sentence

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 September 30, 2022 and 2021, 2,416 and 1,558 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.

For the nine months ended September 30, 2022 and 2021, 18,240 and 14,441 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.

For the three months ended March 31, 2023 and 2022, 8,855 and 10,860 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2022

March 31, 2023

(in thousands, except share and per share data)

Regulatory Matters

Regulatory assets, net are comprised of the following as of September 30, 2022, and December 31, 2021:

September 30, 2022 December 31, 2021

Regulatory assets, net are comprised of the following as of March 31, 2023, and December 31, 2022:

March 31, 2023 December 31, 2022

Regulatory assets:

2 unchanged sentences

Business combinations debt premium, net 16,761 17,396

Balancing and memorandum accounts, net 22,583 38,334

Water Rate Adjustment ( 2,800 ) 2,588

Monterey Water Revenue Adjustment Mechanism (“MWRAM”)

14,171 10,864

Water Conservation Memorandum Account (“WCMA”)

( 7,150 ) ( 5,039 )

2022 General Rate Case Interim Memorandum Account 18,716 20,650

Cost recovery accounts 11,308 16,545

All other balancing and memorandum accounts 3,267 2,749

Water Revenue Adjustment (“WRA”) ( 7,283 ) ( 4,488 )

Other, net 9,946 9,739

2 unchanged sentences

Total regulatory assets, net, less current portion $ 127,339 127,275

As of September 30, 2022, and December 31, 2021, SJW Group’s regulatory assets, net, not earning a return primarily included postretirement pensions and the unfunded amount of other medical benefits, and business combination debt premiums, net.

The total amount of regulatory assets, net not earning a return at September 30, 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 $ 86,113 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.

In 2022, SJWC’s general rate case decision approved the use of the Full Cost Balancing Account to track the water supply costs and energy consumption.

The MWRAM balancing account 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.

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.

The 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 are used to offset the revenue losses tracked in the WCMA.

On October 11, 2022, the CPUC issued General Rate Case Decision No.

22-10-005, which approved a recovery of $ 18,174 in balancing and memorandum accounts from customers.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2022

(in thousands, except share and per share data)

Balancing and memorandum accounts recorded to regulatory assets, net for the three and nine months ended September 30, 2022, and 2021 are as follows:

Three months ended September 30, 2022 Three months ended September 30, 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 $ 21,096 1,381 — 22,477 $ 15,278 363 — 15,641

WCMA ( 14,961 ) 3,868 ( 8,708 ) ( 19,801 ) 668 — — 668

Cost of capital memorandum account ( 1,568 ) ( 8 ) — ( 1,576 ) ( 1,562 ) — — ( 1,562 )

All others 417 590 — 1,007 ( 1,164 ) 397 — ( 767 )

Total revenue accounts 4,984 5,831 ( 8,708 ) 2,107 13,220 760 — 13,980

Cost-recovery accounts:

Water supply costs 11,111 391 — 11,502 9,895 388 — 10,283

Pension 5,069 59 — 5,128 4,210 366 — 4,576

Hydro Generation Research, Development and Demonstration Memorandum Account (“PRVMA”)

543 3 ( 106 ) 440 928 — ( 121 ) 807

COVID-19 Catastrophic Event Memorandum Account (“CEMA”) 2,586 420 — 3,006 2,618 567 — 3,185

All others 479 ( 79 ) — 400 446 — — 446

Total cost-recovery accounts 19,788 794 ( 106 ) 20,476 18,097 1,321 ( 121 ) 19,297

Total $ 24,772 6,625 ( 8,814 ) 22,583 $ 31,317 2,081 ( 121 ) 33,277

Nine months ended September 30, 2022 Nine months ended September 30, 2021

Revenue accounts:

MWRAM $ 16,866 5,610 1 22,477 $ 12,077 3,563 1 15,641

WCMA 3,534 2,768 ( 26,103 ) ( 19,801 ) 666 — 2 668

Cost of capital memorandum account ( 1,563 ) ( 13 ) — ( 1,576 ) ( 1,561 ) ( 1 ) — ( 1,562 )

All others ( 386 ) 1,392 1 1,007 ( 1,139 ) 369 3 ( 767 )

Total revenue accounts 18,451 9,757 ( 26,101 ) 2,107 10,043 3,931 6 13,980

Cost-recovery accounts:

Water supply costs 10,545 957 — 11,502 8,123 2,159 1 10,283

Pension 4,941 187 — 5,128 3,478 1,098 — 4,576

707 5 ( 272 ) 440 1,108 — ( 301 ) 807

CEMA 3,245 ( 239 ) — 3,006 2,266 919 — 3,185

All others 445 ( 45 ) — 400 445 1 — 446

Total cost-recovery accounts 19,883 865 ( 272 ) 20,476 15,420 4,177 ( 300 ) 19,297

Total $ 38,334 10,622 ( 26,373 ) 22,583 $ 25,463 8,108 ( 294 ) 33,277

All balancing accounts and memorandum 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.

Connecticut Water has established WRA, a decoupling mechanism, to mitigate risk associated with changes in demand.

The WRA is used to reconcile actual water demands with the demands projected in the most recent general rate case and allows the company to implement a surcharge or surcredit as necessary to recover or refund the revenues approved in the general rate case.

The WRA allows the company to defer, as a regulatory asset or liability, the amount by which actual revenues deviate from the revenues allowed in the most recent general rate proceedings.

As of March 31, 2023, and December 31, 2022, SJW Group’s regulatory assets, net, not earning a return primarily included postretirement pensions and the unfunded amount of other medical benefits, and business combination debt premiums, net.

The total amount of regulatory assets, net not earning a return at March 31, 2023, and December 31, 2022, either by interest on the regulatory asset/liability or as a component of rate base at the allowed rate of return was $ 51,002 and $ 52,066 , respectively.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2022

March 31, 2023

(in thousands, except share and per share data)

Capitalization

On November 17, 2021, SJW Group entered into an equity distribution agreement (the “Equity Distribution Agreement”) with J.P.

Morgan Securities LLC, Janney Montgomery Scott LLC, RBC Capital Markets, LLC and Wells Fargo Securities, LLC, pursuant to which the company may offer and sell shares of its common stock, $ 0.001 par value per share, from time to time in “at-the-market” offerings, having an aggregate gross sales price of up to $ 100,000 .

For the three and nine months ended September 30, 2022, SJW Group issued and sold a total of 47,608 shares of common stock with a weighted average price of $ 66.26 per share and received approximately $ 3,107 in net proceeds under the Equity Distribution Agreement.

Since the inception of the Equity Distribution Agreement, SJW Group has issued and sold 402,723 shares of common stock with a weighted average price of $ 69.91 for a total net proceeds of $ 27,360 and has a remaining $ 71,845 under the Equity Distribution Agreement to issue into shares.

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.

In March 2023, SJW Group entered into an Amendment No.

1 to the equity distribution agreement (the “Equity Distribution Agreement”), dated November 17, 2021, between the Company and J.P.

Morgan Securities LLC, Janney Montgomery Scott LLC, RBC Capital Markets, LLC and Wells Fargo Securities, LLC (each a “Sales Agent” and, collectively, the “Sales Agents”), pursuant to which the Company increased the aggregate gross sales price of shares of the Company’s common stock, $ 0.001 par value per share, that may be sold under the Equity Distribution Agreement from $ 100,000 to $ 240,000 .

For the three months ended March 31, 2023, SJW Group issued and sold a total of 547,820 shares of common stock with a weighted average price of $ 76.10 per share and received approximately $ 40,997 in net proceeds under the Equity Distribution Agreement.

Since the inception of the Equity Distribution Agreement, SJW Group has issued and sold 1,432,671 shares of common stock with a weighted average price of $ 74.46 for a total net proceeds of $ 104,429 and has $ 133,323 remaining under the Equity Distribution Agreement to issue into shares.

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 has received advance deposit payments from its customers on certain construction projects.

Water Utility Services has received advance deposit payments from its customers and developers on certain construction projects.

The refunds of the advance deposit payments constitute an obligation of the respective entities.

Short-term Financing Agreements

On August 2, 2022, SJW Group, SJWC, SJWTX, Inc., and CTWS entered into a $ 300,000 syndicated line of credit agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as Administrative Agent (“JP Morgan”), Wells Fargo Bank, National Association, as Documentation Agent, and a syndicate of banks.

Proceeds of borrowings under the Credit Agreement will be used for refinancing existing debt, working capital, and general corporate purposes.

The Credit Agreement has a maturity date of August 2, 2027.

Under the terms of the Credit Agreement, each of SJW Group, SJWC, SJWTX, Inc., and CTWS is a borrower with several and not joint liability.

Each borrower has an initial borrowing entitlement, or sublimit, which can be periodically adjusted from time to time as set forth in the Credit Agreement.

The initial sublimit of each borrower is as follows:

Initial Sublimit

SJW Group $ 50,000

Borrowings under the Credit Agreement bear interest at either the Alternative Base Rate (as defined in the Credit Agreement and hereinafter referred to as “ABR”) or the Adjusted Term Secured Overnight Financing Rate (as defined in the Credit Agreement and hereinafter referred to as “SOFR”).

ABR borrowings (which are borrowings bearing interest at a rate determined by reference to ABR) will bear interest at a rate per annum equal to ABR plus the applicable rate.

SOFR borrowings (which are borrowings bearing interest at a rate determined by reference to SOFR) will bear interest at a rate per

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2022

(in thousands, except share and per share data)

annum equal to SOFR plus the applicable rate.

The applicable rate and pricing is variable depending on the credit ratings of the borrower.

The Credit Agreement contains customary representations, warranties and events of default, as well as certain restrictive covenants customary for facilities of this type, including restrictions on indebtedness, liens, asset sales, and fundamental changes.

The Credit Agreement also includes a financial covenant that requires each of the borrowers to maintain its funded debt to capitalization ratio at or below 70 %.

This Credit Agreement replaces the existing $ 140,000 credit agreement, dated April 23, 2021, between SJWC and JP Morgan and the existing $ 5,000 credit agreement, dated April 23, 2021, between SJWTX and JP Morgan, with SJW Group as guarantor, both of which were terminated upon entering into the Credit Agreement and were set to mature on December 31, 2023.

In addition, on August 2, 2022, CTWS and Citizens Bank, National Association, entered into a fourth modification to the amended and restated revolving credit facility, dated December 18, 2019, as amended, pursuant to which the credit commitment was reduced from $ 75,000 to $ 10,000 .

Long-term Financing Agreements

On April 6, 2022, 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 $ 15,000 at a fixed interest rate of 4.54 %, due May 31, 2042.

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 May 13, 2022.

On June 28, 2022, Connecticut Water entered into a note purchase agreement with certain affiliates of New York Life Insurance Company, pursuant to which Connecticut Water sold an aggregate principal amount of $ 25,000 of its 4.71 % Senior Notes, Series 2022, due 2052.

The closing of the note purchase agreement is expected to occur on December 15, 2022, and is subject to customary closing conditions.

The Series 2022 Notes are unsecured obligations of Connecticut Water.

Interest is payable semi-annually in arrears on June 15th and December 15th of each year.

The note purchase agreement contains customary representations and warranties.

Connecticut Water has agreed to customary affirmative and negative covenants for as long as the Series 2022 Notes are outstanding.

The Series 2022 Notes are also subject to customary events of default, the occurrence of which may result in all of the Series 2022 Notes then outstanding becoming immediately due and payable.

On July 14, 2022, SJWC entered into a note purchase agreement with certain affiliates of New York Life Insurance, Metropolitan Life Insurance, Northwestern Mutual Life Insurance, and John Hancock Life Insurance (collectively the “Purchasers”), pursuant to which the company will sell an aggregate principal amount of $ 70,000 of its 4.85 % Senior Notes, Series P (“Series P Notes”) to the Purchasers.

In July 2022, SJWC entered into a note purchase agreement with certain affiliates of New York Life Insurance, Metropolitan Life Insurance, Northwestern Mutual Life Insurance, and John Hancock Life Insurance (collectively the “Purchasers”), pursuant to which the company will sell an aggregate principal amount of $ 70,000 of its 4.85 % Senior Notes, Series P (“Series P Notes”) to the Purchasers.

The Series P Notes are unsecured obligations of SJWC and are due on February 1, 2053.

2 unchanged sentences

The Series P Notes are also subject to customary events of default.

The closing is expected to occur in January 2023 upon satisfaction of customary closing conditions.

For the three and nine months ended September 30, 2022, income tax expense was $ 223 and $ 3,658 , respectively.

Income tax expense for the three and nine months ended September 30, 2021, was $ 2,749 and $ 5,159 , respectively.

The effective consolidated income tax rates were 1 % and 13 % for the three months ended September 30, 2022 and 2021, respectively, and 8 % and 11 % for the nine months ended September 30, 2022, and 2021, respectively.

The lower effective tax rate for the three and nine months ended September 30, 2022, was primarily due to a tax accounting method change at CTWS regarding the non-network asset repairs deduction.

SJW Group unrecognized tax benefits, before the impact of deductions of state taxes, excluding interest and penalties, of approximately $ 8,937 and $ 7,961 as of September 30, 2022, and December 31, 2021, respectively.

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

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2022

(in thousands, except share and per share data)

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was signed into law.

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

The closing of the note purchase agreement occurred on January 25, 2023.

For the three months ended March 31, 2023, and 2022, income tax expense was $ 1,078 and $ 1,067 , respectively.

The effective consolidated income tax rates were 9 % and 22 % for the three months ended March 31, 2023 and 2022, respectively.

The lower effective tax rate for the three months ended March 31, 2023, was primarily due to discrete tax items.

SJW Group unrecognized tax benefits, before the impact of deductions of state taxes, excluding interest and penalties, of approximately $ 9,203 and $ 9,004 as of March 31, 2023, and December 31, 2022, respectively.

SJW Group currently does not expect uncertain tax positions to change significantly over the next 12 months, except in the case of a lapse of the statute of limitations.

Commitments and Contingencies

5 unchanged sentences

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.

Starting in 2023, Texas Water employees are also eligible to participate under SJWC’s cash balance plan.

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.

1 unchanged sentence

SJW Group does not have multi-employer plans.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

March 31, 2023

(in thousands, except share and per share data)

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.

2 unchanged sentences

SJW Group also provides health care and life insurance benefits for retired employees under employer-sponsored postretirement benefits that are not 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, 2022, and 2021 are as follows:

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

The components of net periodic benefit costs for the defined benefit plans and other postretirement benefits for the three months ended March 31, 2023, and 2022 are as follows:

Three months ended March 31,

Service cost $ 2,052 2,652

5 unchanged sentences

In 2023, SJW Group expects to make required and discretionary cash contributions of up to $ 8,120 to the pension plans and other postretirement benefits.

For the three and nine months ended September 30, 2022, SJW Group has made $ 2,577 and $ 4,538 , respectively, contributions to such plans.

For the three months ended March 31, 2023, SJW Group has made no contributions to such 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.

SJW Group also maintains stock plans in connection with its acquisition of CTWS which are no longer granting new stock awards.

As of September 30, 2022, 179,848 shares are issuable upon the vesting of outstanding restricted stock units and deferred restricted stock units and an additional 612,738 shares are available for award issuances under the Incentive Plan.

In addition, shares are issued to employees under the ESPP that was approved by SJW Group stockholders.

As of March 31, 2023, 160,381 shares are issuable upon the vesting of outstanding restricted stock units and deferred restricted stock units and an additional 573,558 shares are available for award issuances under the Incentive Plan.

On April 26, 2023, SJW Group adopted the successor plans for the Incentive Plan and ESPP (collectively, the “Predecessor Plans”) to replace the Predecessor Plans.

The Incentive Plan terminated on April 23, 2023 and ESPP will terminate on July 31, 2023.

The 2023 Long-Term Incentive Plan reserves for a total of 1,142,000 shares of SJW Group’s common stock for issuance to 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 SJW Group and its subsidiaries.

The 2023 Employee Stock Purchase Plan reserves for a total of 500,000 shares of SJW Group’s common stock for issuance for eligible employees to purchase common stock at a discount through accumulated payroll deductions.

Remaining reserves for both of the Predecessor Plans will be terminated with the adoption of the successor plans.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2022

March 31, 2023

(in thousands, except share and per share data)

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 and nine months ended September 30, 2022, and 2021:

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

Three months ended March 31,

Compensation costs charged to income:

4 unchanged sentences

Restricted Stock and Deferred Restricted Stock

For the three months ended September 30, 2022, and 2021, SJW Group granted under the Incentive Plan 1,723 and 1,134 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value of $ 62.56 and $ 69.20 , respectively, per unit.

For the nine months ended September 30, 2022, and 2021, SJW Group granted under the Incentive Plan 45,726 and 46,567 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value of $ 65.31 and $ 64.65 , respectively, per unit.

For the three months ended September 30, 2022, and 2021, SJW Group granted under the Incentive Plan 2,193 and 0 target units, respectively, performance-based and market-based restricted stock awards with a weighted-average grant date fair value of $ 69.70 and $ 0.00 , respectively, per unit.

For the nine months ended September 30, 2022, and 2021, SJW Group granted under the Incentive Plan 35,846 and 30,641 target units, respectively, performance-based and market-based restricted stock awards granted with a weighted-average grant date fair value of $ 70.31 and $ 66.33 , respectively, per unit.

For the three months ended March 31, 2023, and 2022, SJW Group granted under the Incentive Plan 27,732 and 31,399 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value per unit of $ 77.88 and $ 68.37 , respectively.

For the three months ended March 31, 2023, and 2022, SJW Group granted under the Incentive Plan 31,345 and 33,621 target units, respectively, performance-based and market-based restricted stock awards granted with a weighted-average grant date fair value per unit of $ 80.05 and $ 70.35 , respectively.

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 September 30, 2022, the total unrecognized compensation costs related to restricted and deferred restricted stock plans amounted to $ 5,660 .

As of March 31, 2023, the total unrecognized compensation costs related to restricted and deferred restricted stock plans was $ 7,537 .

This cost is expected to be recognized over a weighted-average period of 2.26 years.

Employee Stock Purchase Plan

SJW Group’s recorded expenses for its ESPP were $ 94 and $ 276 for the three and nine months ended September 30, 2022, respectively, and $ 91 and $ 265 for the three and nine months ended September 30, 2021, respectively.

The total unrecognized compensation costs related to the semi-annual offering period that ends January 31, 2023, for the ESPP is approximately $ 131 .

This cost is expected to be recognized during the fourth quarter of 2022 and first quarter of 2023.

SJW Group’s recorded expenses for its ESPP were $ 90 and $ 93 for the three months ended March 31, 2023 and 2022, respectively.

The total unrecognized compensation costs related to the semi-annual offering period that ends July 31, 2023, for the ESPP is approximately $ 133 .

This cost is expected to be recognized during the second and third quarters of 2023.

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.

(i) SJWC, a water utility operation with both regulated and non-tariffed businesses, (ii) Texas Water, a regulated water and non-tariffed wastewater 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, Connecticut Water, Maine Water, NEWUS 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 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 first segment provides water utility and utility-related services to its customers through SJW Group’s subsidiaries, SJWC, Connecticut Water, Texas Water, Maine Water, and NEWUS together referred to as “Water Utility Services”.

The second segment consists of 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)

September 30, 2022

March 31, 2023

(in thousands, except share and per share data)

2 unchanged sentences

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

For Three Months Ended September 30, 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 $ 171,044 3,463 1,474 — 171,044 4,937 175,981

Operating expense 134,739 2,092 975 573 134,739 3,640 138,379

Operating income (loss) 36,305 1,371 499 ( 573 ) 36,305 1,297 37,602

Net income (loss) 29,176 ( 10 ) 367 ( 4,499 ) 29,176 ( 4,142 ) 25,034

Depreciation and amortization 24,919 84 302 224 24,919 610 25,529

Interest on long-term debt and other interest expense 9,111 — — 5,079 9,111 5,079 14,190

Provision (benefit) for income taxes 103 392 128 ( 400 ) 103 120 223

Assets $ 3,498,396 5,302 43,017 57,989 3,498,396 106,308 3,604,704

For Three Months Ended September 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 $ 162,352 3,168 1,403 — 162,352 4,571 166,923

Operating expense 129,915 2,156 956 122 129,915 3,234 133,149

Operating income (loss) 32,437 1,012 447 ( 122 ) 32,437 1,337 33,774

Net income (loss) 20,625 879 294 ( 2,730 ) 20,625 ( 1,557 ) 19,068

Depreciation and amortization 23,209 113 292 223 23,209 628 23,837

Interest on long-term debt and other interest expense 8,805 — — 4,730 8,805 4,730 13,535

Provision (benefit) for income taxes 3,537 280 100 ( 1,168 ) 3,537 ( 788 ) 2,749

Assets $ 3,352,976 7,141 44,629 64,995 3,352,976 116,765 3,469,741

For Nine Months Ended September 30, 2022

For Three Months Ended March 31, 2023

Water Utility Services Real Estate Services All Other (1) SJW Group

8 unchanged sentences

Assets $ 3,552,767 3,967 43,660 52,104 3,552,767 99,731 3,652,498

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2022

(in thousands, except share and per share data)

For Nine Months Ended September 30, 2021

For Three Months Ended March 31, 2022

Water Utility Services Real Estate Services All Other (1) SJW Group

9 unchanged sentences

____________________

(1) The “All Other” category for the nine months ended September 30, 2022, includes the accounts of SJW Group, SJWNE LLC, CTWS and SJWTX Holdings, Inc.

(1) The “All Other” category for the three months ended March 31, 2023, 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 nine months ended September 30, 2022 .

For the nine months ended September 30, 2021, “All Other” category includes the accounts of SJW Group, SJWNE LLC and CTWS on a stand-alone basis.

(2) As of September 30, 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.

Subsequent Event

The CPUC approved the settlement of SJWC’s General Rate Case Application No.

21-01-003 (“2022 GRC”) on October 6, 2022 and issued Decision No.

22-10-005 (“2022 GRC Decision”) on October 11, 2022.

SJWC received authority for an increase of $ 25,074 or 6.03 % in 2022, $ 12,955 or 2.94 % in 2023, and $ 16,102 or 3.56 % in 2024.

The application included requests to recover $ 18,174 from balancing and memorandum accounts and authorization for a $ 350,000 capital budget.

Additionally, it further aligns authorized and actual consumption, particularly for business customers, addresses the water supply mix variability, and provides greater revenue recovery in the fixed charge.

The 2022 approved revenue increase is effective retrospectively to January 1, 2022.

SJWC will be filing advice letters to implement new rates and to recover interim revenue and balancing and memorandum accounts in accordance with the 2022 GRC Decision.

had no activity for the three months ended March 31, 2023.

For the three months ended March 31, 2022, “All Other” category includes the accounts of SJW Group, SJWNE LLC and CTWS on a stand-alone basis.

On January 13, 2023, Texas Water reached agreements to acquire KT Water Development Ltd.

and KT Water Resource L.P.

for the purchase price of $ 7,338 and $ 53,500 , respectively.

KT Water Development Ltd.

is an investor-owned water utility providing water to approximately 1,725 people through over 570 service connections in the Rockwall Ranch subdivision in southern Comal County, Texas.

KT Water Resources L.P.

is a privately-held company formed to develop wholesale water supplies for the fast-growing utilities of Comal County, Texas.

The transaction is expected to close in the third quarter of 2023, pending the Public Utility Commission of Texas approval of the KT Water Development Ltd.

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