What changed in this filing

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Item 1. Financial Statements

2023-10-31 compared with 2023-07-31 · 183 added, 110 removed, 405 unchanged (42% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

Three months ended June 30, Six months ended June 30,

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

2023 2022 2023 2022

16 unchanged sentences

Interest on long-term debt and other interest expense ( 16,744 ) ( 14,190 ) ( 48,913 ) ( 42,160 )

Pension non-service cost ( 102 ) 941 ( 166 ) 1,890

Pension non-service (cost) credit

( 740 ) 970 ( 906 ) 2,860

Other, net 1,661 875 7,042 2,694

3 unchanged sentences

Other comprehensive income (loss), net

318 ( 173 ) 420 ( 602 )

COMPREHENSIVE INCOME $ 36,540 24,861 $ 66,458 39,727

10 unchanged sentences

(in thousands, except share and per share data)

September 30,

2023 December 31,

7 unchanged sentences

Net utility plant 2,764,950 2,630,317

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

Nonutility properties and real estate investments

13,072 58,033

Less accumulated depreciation and amortization 192 17,158

Net real estate investments and nonutility properties 1,197 40,875

Net nonutility properties and real estate investments

12,880 40,875

CURRENT ASSETS:

1 unchanged sentence

Accounts receivable:

Customers, net of allowances for uncollectible accounts of $ 6,414 and $ 5,753 on June 30, 2023 and December 31, 2022, respectively

Customers, net of allowances for uncollectible accounts of $ 6,661 and $ 5,753 on September 30, 2023 and December 31, 2022, respectively

70,374 59,172

9 unchanged sentences

Investments 15,901 14,819

Other intangible asset

Goodwill 640,311 640,311

6 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 share s 31,731,030 on June 30, 2023 and 30,801,912 on December 31, 2022

issued and outstanding share s 31,933,003 on September 30, 2023 and 30,801,912 on December 31, 2022

Additional paid-in capital 729,740 651,004

43 unchanged sentences

Net income — — — 18,286 — 18,286

Unrealized gain on investment, net of tax of $( 37 )

Unrealized gain on investment, net of taxes of $( 37 )

Stock-based compensation — — 1,139 ( 17 ) 1,122

Issuance of restricted and deferred stock units 13,429 — ( 20 ) — — ( 20 )

Common stock issuance costs 290,477 1 22,781 — — 22,782

Common stock issuance, net of costs 290,477 1 22,781 — — 22,782

Dividends paid ($ 0.38 per share)

1 unchanged sentence

BALANCES, June 30, 2023 31,731,030 32 716,642 464,464 1,578 1,182,716

Net income — — — 36,222 — 36,222

Unrealized gain on investment, net of taxes of $ 193

— — — — 318 318

Stock-based compensation — — 1,238 ( 8 ) — 1,230

Issuance of restricted and deferred stock units 14,840 — ( 706 ) — — ( 706 )

Employee stock purchase plan 17,712 — 1,061 — — 1,061

Common stock issuance, net of costs 169,421 — 11,505 — — 11,505

Dividends paid ($ 0.38 per share)

— — — ( 12,093 ) — ( 12,093 )

BALANCES, September 30, 2023 31,933,003 $ 32 $ 729,740 $ 488,585 $ 1,896 $ 1,220,253

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)

Common Stock Additional

16 unchanged sentences

Net income — — — 11,558 — 11,558

Unrealized loss on investment, net of tax of $ 0

Unrealized loss on investment, net of taxes of $ 0

— — — — ( 248 ) ( 248 )

5 unchanged sentences

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 taxes of $ 154

— — — — ( 173 ) ( 173 )

Stock-based compensation — — 1,398 ( 23 ) — 1,375

Issuance of restricted and deferred stock units 1,316 — 13 — — 13

Employee stock purchase plan 18,667 — 1,042 — — 1,042

Common stock issuance, net of costs 47,608 — 3,107 — — 3,107

Dividends paid ($ 0.36 per share)

— — — ( 10,896 ) — ( 10,896 )

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.

2 unchanged sentences

(in thousands)

Six months ended June 30,

Nine months ended September 30,

OPERATING ACTIVITIES:

5 unchanged sentences

Allowance for equity funds used during construction ( 1,649 ) ( 1,324 )

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

Gain on sale of nonutility asset

Changes in operating assets and liabilities:

5 unchanged sentences

Regulatory assets and liabilities excluding income tax temporary differences, net and postretirement benefits 16,092 21,776

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

Other changes, net ( 4,371 ) 2,774

4 unchanged sentences

Contributions in aid of construction ( 13,604 ) ( 17,773 )

Additions to real estate investments — ( 546 )

Additions to nonutility assets

( 24,244 ) ( 610 )

Payments to retire utility plant, net of salvage ( 908 ) ( 2,432 )

Proceeds from sale of nonutility properties — 310

Payments for business acquisitions ( 7,286 ) ( 433 )

Other changes, net 238 —

22 unchanged sentences

Utility property installed by developers 1,295 976

Seller financing in asset acquisition, net of discount

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2023

SEPTEMBER 30, 2023

(in thousands, except share and per share data)

2 unchanged sentences

The Notes to Consolidated Financial Statements in SJW Group’s 2022 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 SJWTX Holdings, Inc.

SJW Group is a holding company with four wholly owned subsidiaries:

San Jose Water Company (“SJWC”), SJWTX Holdings, Inc., SJW Land Company, and SJWNE LLC.

SJWTX Holdings, Inc., is a holding company for its wholly owned subsidiaries, SJWTX, Inc., doing business as The Texas Water Company (“TWC”), Texas Water Operation Services, LLC, (“TWOS”) and Texas Water Resources, LLC (“TWR”) .

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.

(“CTWS”) whose wholly owned subsidiaries are The Connecticut Water Company (“CWC”), The Maine Water Company (“MWC”), New England Water Utility Services, Inc.

(“NEWUS”), and Chester Realty, Inc.

SJWTX Holdings, Inc.

is a holding company that was formed with the purpose of effecting a corporate reorganization of our water utility operations in Texas.

Texas Water Resources, LLC was formed as a subsidiary of SJWTX Holdings, Inc.

to hold future wholesale water supply assets.

SJWC, Connecticut Water, SJWTX, Inc.

doing business as The Texas Water Company (“Texas Water”), Maine Water and NEWUS are referred to as “Water Utility Services”.

SJWC, CWC, TWC , TWOS, TWR, MWC and NEWUS are referred to as “Water Utility Services”.

SJW Land Company and Chester Realty, Inc.

5 unchanged sentences

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

Three months ended June 30, Six months ended June 30,

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

2023 2022 2023 2022

5 unchanged sentences

$ 204,843 175,981 $ 499,025 449,324

Real Estate Investments and Nonutility Properties

The major components of real estate investments and nonutility properties as of June 30, 2023 and December 31, 2022, are as follows:

Nonutility Properties and Real Estate Investments

The major components of real estate investments and nonutility properties as of September 30, 2023 and December 31, 2022, are as follows:

September 30,

2023 December 31,

Land $ 4,137 12,615

Wholesale water supply assets

Buildings and improvements 470 45,418

6 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2023

September 30, 2023

(in thousands, except share and per share data)

7 unchanged sentences

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 June 30, 2023:

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 September 30, 2023:

September 30,

Land $ 13,170

5 unchanged sentences

Fair Value Measurement

The following instruments are not measured at fair value on SJW Group’s condensed consolidated balance sheets as of June 30, 2023, 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 September 30, 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 June 30, 2023, approximates their carrying value as reported on the condensed consolidated balance sheets.

There have been no changes in valuation techniques during the three and six months ended June 30, 2023.

The estimated fair value of such instruments as of September 30, 2023 approximates their carrying value as reported on the condensed consolidated balance sheets.

There have been no changes in valuation techniques during the three and nine months ended September 30, 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 $ 1,354,865 and $ 1,294,354 as of June 30, 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 $ 1,563,609 and $ 1,496,325 as of June 30, 2023 and December 31, 2022, respectively.

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

The fair value of SJW Group’s long-term debt was $ 1,299,114 and $ 1,294,354 as of September 30, 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 $ 1,577,233 and $ 1,496,325 as of September 30, 2023 and December 31, 2022, respectively.

Of the total fair value of long-term debt,$ 1,283,602 would be categorized as Level 2 in the fair value hierarchy and $ 15,512 would be categorized as Level 3 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 $ 2,808 and $ 2,809 as of June 30, 2023 and December 31, 2022, 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 $ 2,808 and $ 2,809 as of September 30, 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 plans, shares potentially issuable under the performance stock plans assumed through the business combination with CTWS, and shares potentially issuable under SJW Group’s employee stock purchase plans.

For the three months ended June 30, 2023 and 2022, 1,843 and 4,964 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.

For the six months ended June 30, 2023 and 2022, 10,698 and 15,824 anti-dilutive restricted common stock units were excluded from the dilutive earnings per share calculation, respectively.

For the three months ended September 30, 2023 and 2022, 1,826 and 2,416 anti-dilutive restricted common stock units were excluded from the diluted earnings per share calculation, respectively.

For the nine months ended September 30, 2023 and 2022, 12,524 and 18,240 anti-dilutive restricted common stock units were excluded from the diluted earnings per share calculation, respectively.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2023

September 30, 2023

(in thousands, except share and per share data)

Regulatory Matters

Regulatory assets, net are comprised of the following as of June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

Regulatory assets, net are comprised of the following as of September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

Regulatory assets:

22 unchanged sentences

Mandatory water conservation requirements from Santa Clara Valley Water District ended on April 11, 2023, which also ended SJWC’s Mandatory Conservation Plan, that included drought allocations and surcharges.

On October 2, 2023, the CPUC approved the continuation of WCMA and Water Conservation Expense Memorandum Account under the voluntary call for conservation effective April 20, 2023.

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 been authorized by the Connecticut Public Utilities Regulatory Authority to utilize a WRA, a decoupling mechanism, to mitigate risk with changes in demand.

CWC has been authorized by the Connecticut Public Utilities Regulatory Authority to utilize a WRA, a decoupling mechanism, to mitigate risk 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 June 30, 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 June 30, 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 $ 49,958 and $ 52,066 , respectively.

As of September 30, 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 September 30, 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 $ 48,954 and $ 52,066 , respectively.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2023

September 30, 2023

(in thousands, except share and per share data)

Capitalization

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

In March 2023, SJW Group entered into Amendment No.

1 to the equity distribution agreement (the “Equity Distribution Agreement”), dated November 17, 2021, between SJW Group 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 SJW Group increased the aggregate gross sales price of shares of SJW Group’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 and six months ended June 30, 2023, SJW Group issued and sold a total of 312,683 and 860,503 shares of common stock, respectively, with a weighted average price of $ 74.60 and $ 75.56 per share, respectively, and received $ 22,782 and $ 63,779 in net proceeds, respectively, under the Equity Distribution Agreement.

Since the inception of the Equity Distribution Agreement, SJW Group has issued and sold 1,745,354 shares of common stock with a weighted average price of $ 74.49 for a total net proceeds of $ 127,210 and has $ 109,995 remaining under the Equity Distribution Agreement to issue into shares.

For the three and nine months ended September 30, 2023, SJW Group issued and sold a total of 169,421 and 1,029,924 shares of common stock, respectively, at a weighted average price of $ 69.57 and $ 74.57 per share, respectively, and received $ 11,505 and $ 75,284 in net proceeds, respectively, under the Equity Distribution Agreement.

Since the inception of the Equity Distribution Agreement, SJW Group has issued and sold 1,914,775 shares of common stock at a weighted average price of $ 74.05 for a total net proceeds of $ 138,716 and has $ 98,209 remaining under the Equity Distribution Agreement to issue into shares.

Bank Borrowings and Long-Term Liabilities

2 unchanged sentences

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

Short-term Financing Agreements

In August 2023, SJW Group, SJWC, TWC, and CTWS entered into the First Amendment to Credit Agreement with JPMorgan Chase Bank which provided for, among other matters, an extension of the maturity date from August 2, 2027 to August 2, 2028.

The weighted-average interest rate on short-term borrowings outstanding at September 30, 2023 was 6.48 % compared to 5.40 % at December 31, 2022.

Long-term Financing Agreements

5 unchanged sentences

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

For the three and six months ended June 30, 2023, income tax benefit was $ 1,512 and $ 434 , respectively.

Income tax expense for the three and six months ended June 30, 2022, was $ 2,368 and $ 3,435 , respectively.

The effective consolidated income tax rates were ( 9 )% and 17 % for the three months ended June 30, 2023 and 2022, respectively, and ( 1 )% and 18 % for the six months ended June 30, 2023 and 2022, respectively.

The lower effective tax rate for the three and six months ended June 30, 2023, was primarily due to the partial release of an uncertain tax position reserve.

In August 2023, TWR closed on an asset acquisition from KT Water Resources L.P.

which included of an obligation for a post-closing production payment of $ 29,000 to the seller over a period of up to 29 years.

This obligation was recorded at its fair value of $ 15,400 as of the date of the acquisition.

Please see Note 10 of “Notes to Condensed Consolidated Financial Statements” for additional information about this obligation.

For the three and nine months ended September 30, 2023, income tax expense was $ 4,561 and $ 4,127 , respectively.

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

The effective consolidated income tax rates were 11 % and 1 % for the three months ended September 30, 2023 and 2022, respectively, and 6 % and 8 % for the nine months ended September 30, 2023 and 2022, respectively.

The higher effective tax rate for the three months ended September 30, 2023 was primarily due to the tax benefit relating to a tax accounting method change recorded in the third quarter 2022.

There was no such benefit recorded in the third quarter of 2023.

The lower effective tax rate for the nine months ended September 30, 2023 was primarily due to higher flow-through tax benefits.

In April 2023, the Internal Revenue Service issued additional tax guidance that has allowed the company to revisit certain historical income tax reserves.

Pursuant to the issuance of this guidance, which provided additional clarification regarding some of the uncertain tax areas, the company re-evaluated the risk relating to repair deductions.

The result of the analysis led to a partial release of an uncertain tax position reserve of $ 3,087 .

The result of the analysis led to a partial release of an uncertain tax position reserve of $ 3,087 which was recorded in the second quarter of 2023.

The release relates to repairs expenditures that are more likely than not to be sustained on audit.

SJW Group had unrecognized tax benefits, before the impact of deductions of state taxes, excluding interest and penalties, of approximately $ 5,877 and $ 9,004 as of June 30, 2023 and December 31, 2022, respectively.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2023

(in thousands, except share and per share data)

SJW Group had unrecognized tax benefits, before the impact of deductions of state taxes, excluding interest and penalties, of approximately $ 5,981 and $ 9,004 as of September 30, 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.

2 unchanged sentences

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.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2023

(in thousands, except share and per share data)

Benefit Plans

2 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.

Starting in 2023, TWC 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.

4 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 six months ended June 30, 2023 and 2022 are as follows:

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, 2023 and 2022 are as follows:

Pension Benefits Other Benefits

Three months ended June 30,

Three months ended September 30,

2023 2022 2023 2022

5 unchanged sentences

Total $ 2,565 1,477 $ 173 177

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2023

(in thousands, except share and per share data)

Pension Benefits Other Benefits

Six months ended June 30,

Nine months ended September 30,

2023 2022 2023 2022

6 unchanged sentences

In 2023, SJW Group expects to make required and discretionary cash contributions of up to $ 8,653 to the pension plans and other postretirement benefits.

For the three and six months ended June 30, 2023, SJW Group has made $ 4,060 of contributions to such plans.

For the three and nine months ended September 30, 2023, SJW Group has made $ 3,567 and $ 7,627 , respectively, of contributions to such plans.

SJW Group’s long-term incentive plans 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 subsidiary the opportunity to acquire an equity interest in SJW Group.

1 unchanged sentence

In addition, shares are issued to employees under SJW Group’s employee stock purchase plan.

As of June 30, 2023, 156,299 shares are issuable upon the vesting of outstanding

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2023

(in thousands, except share and per share data)

restricted stock units and deferred restricted stock units and an additional 1,132,390 shares are available for award issuances under the long-term incentive plans.

On April 26, 2023, SJW Group adopted the successor plans, 2023 Long-Term Incentive Plan and 2023 Employee Stock Purchase Plan, to replace the Amended and Restated Long-Term Incentive Plan (the, “Predecessor Incentive Plan”) and 2014 Employee Stock Purchase Plan (the, “Predecessor ESPP”), respectively.

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

As of September 30, 2023, 150,882 shares are issuable upon the vesting of outstanding restricted stock units and deferred restricted stock units and an additional 1,136,979 shares are available for award issuances under the long-term incentive plans.

On April 26, 2023, SJW Group adopted the successor plans, the 2023 Long-Term Incentive Plan and the 2023 Employee Stock Purchase Plan, to replace the Amended and Restated Long-Term Incentive Plan (the, “Predecessor Incentive Plan”) and the 2014 Employee Stock Purchase Plan (the, “Predecessor ESPP”), respectively.

The Predecessor Incentive Plan terminated on April 23, 2023 and the Predecessor ESPP terminated on July 31, 2023.

Each outstanding award under the Predecessor Incentive Plan will remain outstanding under the Predecessor Incentive Plan and shall be governed solely by the terms of the documents evidencing such awards.

1 unchanged sentence

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.

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 six months ended June 30, 2023 and 2022:

Three months ended June 30, Six months ended June 30,

Remaining reserves for both of the predecessor plans were terminated with the adoption of the successor plans.

A summary of compensation costs charged to income, by award type, and proceeds from the ESPP, are presented below for the three and nine months ended September 30, 2023 and 2022:

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

2023 2022 2023 2022

5 unchanged sentences

Restricted Stock and Deferred Restricted Stock

For the three months ended June 30, 2023, and 2022, SJW Group granted 9,610 and 12,604 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value per unit of $ 75.28 and $ 58.04 , respectively.

For the six months ended June 30, 2023 and 2022, SJW Group granted 37,342 and 44,003 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value per unit of $ 77.21 and $ 65.41 , respectively.

For the three months ended June 30, 2023, no performance-based or market-based restricted stock awards were granted.

For the three months ended June 30, 2022, SJW Group granted 32 target units performance-based and market-based restricted stock awards granted with a weighted-average grant date fair value per unit of $ 66.14 .

For the six months ended June 30, 2023 and 2022, SJW Group granted 31,345 and 33,653 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 June 30, 2023, the total unrecognized compensation costs related to restricted and deferred restricted stock plans was $ 7,121 .

This cost is expected to be recognized over a weighted-average period of 1.99 years.

Employee Stock Purchase Plan

SJW Group’s recorded expenses for its ESPP were $ 106 and $ 196 for the three and six months ended June 30, 2023, respectively, and $ 89 and $ 182 for the three and six months ended June 30, 2022, respectively.

The total unrecognized compensation costs related to the semi-annual offering period that ends July 31, 2023, for the employee stock purchase plan is approximately $ 34 .

This cost is expected to be recognized during the third quarter of 2023.

For the three months ended September 30, 2023 and 2022, SJW Group granted 968 and 1,723 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value per unit of $ 63.96 and $ 62.56 , respectively.

For the nine months ended September 30, 2023 and 2022, SJW Group granted 38,310 and 45,726 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value per unit of $ 76.88 and $ 65.31 , respectively.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2023

September 30, 2023

(in thousands, except share and per share data)

For the three months ended September 30, 2023, no performance-based or market-based restricted stock awards were granted.

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

For the nine months ended September 30, 2023 and 2022, SJW Group granted 31,345 and 35,846 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 $ 70.31 , respectively.

As of September 30, 2023, the total unrecognized compensation costs related to restricted and deferred restricted stock plans was $ 5,734 .

This cost is expected to be recognized over a weighted-average period of 1.81 years.

Employee Stock Purchase Plan

SJW Group’s recorded expenses for its ESPP were $ 81 and $ 277 for the three and nine months ended September 30, 2023, respectively, and $ 94 and $ 276 for the three and nine months ended September 30, 2022, respectively.

The total unrecognized compensation costs related to the semi-annual offering period that ends January 31, 2024, for the employee stock purchase plan is approximately $ 130 .

This cost is expected to be recognized during the fourth quarter 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) 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.

SJW Group is a holding company with four subsidiaries:

(i) SJWC, (ii) SJWTX Holdings, Inc., a holding company for TWC its consolidated variable interest entity, Acequia Water Supply Corporation, TWOS and TWR, (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, CWC, MWC, NEWUS and Chester Realty, Inc.

SJWC, SJWTX Holdings, Inc.

and SJWNE LLC are water utility operations with both regulated and non-tariffed businesses.

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 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 first segment provides water utility and utility-related services to its customers through SJW Group’s subsidiaries, SJWC, CWC, TWC, MWC, 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.”

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 June 30, 2023

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2023

(in thousands, except share and per share data)

For Three Months Ended September 30, 2023

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

8 unchanged sentences

Assets 3,706,359 43,872 44,560 48,637 3,706,359 137,069 3,843,428

For Three Months Ended June 30, 2022

For Three Months Ended September 30, 2022

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

8 unchanged sentences

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

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

June 30, 2023

(in thousands, except share and per share data)

For Six Months Ended June 30, 2023

For Nine Months Ended September 30, 2023

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

8 unchanged sentences

Assets 3,706,359 43,872 44,560 48,637 3,706,359 137,069 3,843,428

For Six Months Ended June 30, 2022

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2023

(in thousands, except share and per share data)

For Nine Months Ended September 30, 2022

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

9 unchanged sentences

____________________

(1) The “All Other” category for the six months ended June 30, 2023, includes the accounts of SJW Group, SJWNE LLC, CTWS and SJWTX Holdings, Inc.

(1) The “All Other” category for the three and nine months ended September 30, 2023 and 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 six months ended June 30, 2023.

For the six months ended June 30, 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 $ 56,500 , 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.

On January 13, 2023, TWC reached an agreement to acquire KT Water Development Ltd.

(“KT Water Development”) and SJWTX Holdings, Inc.

reached an agreement to acquire KT Water Resources L.P.

(“KT Water Resour ces”).

The agreement between SJWTX Holdings, Inc.

and KT Water Resources, LP, was assigned to TWR prior to closing.

KT Water Development 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 Public Utility Commission of Texas approved of the proposed KT Water Development Ltd.

acquisition on July 24, 2023.

Both transactions are expected to close in the third quarter of 2023.

is a wholesale groundwater resource supplier to KT Water Development formed to develop wholesale water supplies for the fast-growing utilities of Comal County, Texas.

T he Public Utility Commission of Texas (“PUCT”) approved the proposed KT Water Development acquisition on July 24, 2023.

The acquisition of KT Water Resources did not require PUCT approval.

Both transactions closed on August 14, 2023.

Further information regarding each of the acquisitions is set forth below.

KT Water Development

The purchase price of KT Water Development was $ 7,338 , all of which was cash, and was determined in accordance with a fair market value process defined under the Texas Water Code.

The transaction was accounted for as a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 805—“Business Combinations.” Based on the preliminary purchase price allocation, the transaction consideration was allocated to utility plant.

The final allocation will be completed within one year from the acquisition date.

Transaction costs were not material.

The results of KT Water Development are included in SJW Group’s consolidated statements of comprehensive income since the acquisition date and were not material.

Pro forma financial information has not been presented because the acquisition was not material to SJW Group’s consolidated financial statements.

KT Water Resources

The total purchase price of KT Water Resources of $ 39,891 and consisted of a $ 24,491 up-front cash payment and an obligation for a post-closing production payment with an acquisition date fair value of $ 15,400 .

Considering transaction costs of $ 170 , the total cost of the acquisition was $ 40,061 .

The KT Water Resources acquisition was accounted for as an asset acquisition in accordance with ASC Topic 805.

The total cost was allocated as follows based on the fair values of the assets acquired:

$ 28,386 to other intangible asset, $ 11,684 to nonutility property, and $ 9 to other current liabilities.

The other intangible asset represents indefinite life water rights that will not be amortized, but instead will be tested for impairment annually, or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

The nonutility property consists of wells, land, easements, and construction in progress.

The post-closing production payment represents an obligation to pay a total amount of $ 29,000 to the seller over a period up to 29 years.

The repayment schedule is based on the quantity of groundwater produced from the acquired wells, subject to certain provisions in the purchase agreement.

The fair value of the post-closing payment as of the acquisition date was determined by discounting forecasted repayments based on management’s estimates of future groundwater production.

The difference

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2023

(in thousands, except share and per share data)

between the fair value of $ 15,400 and the gross obligation of $ 29,000 is recorded as a debt discount and is being amortized as interest expense using the effective interest method over the life of the obligation.

The post-closing production payment obligation is classified as long-term debt in the condensed consolidated balance sheets.

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