What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-04-26 compared with 2023-10-31 · 224 added, 259 removed, 329 unchanged (59% 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,

Three months ended March 31,

Operating revenue

$ 149,382 137,296

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

Operating expense:

9 unchanged sentences

Depreciation and amortization 28,370 26,296

Gain on sale of nonutility property — ( 82 ) — ( 5,532 )

Total operating expense 121,469 112,118

Operating income

27,913 25,178

Other (expense) income:

Interest on long-term debt and other interest expense ( 17,584 ) ( 15,772 )

Pension non-service (cost) credit

( 740 ) 970 ( 906 ) 2,860

Pension non-service credit (cost)

Other, net 2,651 3,266

1 unchanged sentence

Provision for income taxes 2,231 1,078

NET INCOME 36,222 25,034 66,038 40,329

Other comprehensive income (loss), net

11,699 11,530

Other comprehensive (loss) income, net ( 442 ) 93

Comprehensive income

$ 11,257 11,623

Earnings per share

9 unchanged sentences

(in thousands, except share and per share data)

September 30,

2024 December 31,

2 unchanged sentences

Depreciable plant and equipment 4,005,195 3,967,911

Construction in progress 113,204 116,851

Construction work in progress

133,369 106,980

Intangible assets 35,946 35,946

3 unchanged sentences

Nonutility properties and real estate investments 13,377 13,350

13,072 58,033

Less accumulated depreciation and amortization 195 194

4 unchanged sentences

Accounts receivable:

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

Customers, net of allowances for uncollectible accounts of $ 6,198 and $ 6,551 on March 31, 2024 and December 31, 2023, respectively

62,649 67,870

Income tax 2,911 5,187

Other 2,199 3,684

2 unchanged sentences

Prepaid expenses 12,822 11,110

Current regulatory assets, net 8,573 16,068

Current regulatory assets

Other current assets 5,914 6,146

228,771 154,714

Total current assets 178,082 198,389

Other assets:

Net regulatory assets, less current portion 131,420 127,275

Regulatory assets, less current portion 238,842 235,910

Investments 17,435 16,411

Postretirement benefit plans

34,244 33,794

Other intangible asset

28,386 28,386

Goodwill 640,311 640,311

Other 8,183 8,056

836,827 806,718

Total other assets 967,401 962,868

$ 4,367,512 4,345,067

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

2024 December 31,

4 unchanged sentences

authorized 70,000,000 shares;

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

issued and outstanding share s 32,201,216 on March 31, 2024 and 32,023,004 on December 31, 2023

Additional paid-in capital 744,621 736,191

3 unchanged sentences

Long-term debt, less current portion 1,550,298 1,526,699

2,754,022 2,602,833

Total capitalization 2,790,549 2,760,096

Current liabilities:

5 unchanged sentences

Accrued payroll 8,818 12,229

Income tax payable 11,809 2,696

Current regulatory liabilities 2,480 3,059

Other current liabilities 21,554 20,795

308,116 264,650

Total current liabilities 323,260 342,974

Deferred income taxes

239,960 238,528

Advances for construction

141,431 146,582

Contributions in aid of construction

331,869 326,451

Postretirement benefit plans

47,323 46,836

Regulatory liabilities, less current portion

469,953 461,108

Other noncurrent liabilities

23,167 22,492

Commitments and contingencies

Total capitalization and liabilities

$ 4,367,512 4,345,067

10 unchanged sentences

Balances, December 31, 2023

32,023,004 $ 32 736,191 495,383 1,791 1,233,397

Net income — — — 11,699 — 11,699

Unrealized gain on investment, net of taxes of $ 0

Unrealized loss on investment, net of tax of $ 163

— — — — ( 442 ) ( 442 )

6 unchanged sentences

Balances, March 31, 2024

Net income — — — 18,286 — 18,286

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, net of costs 290,477 1 22,781 — — 22,782

Dividends paid ($ 0.38 per share)

32,201,216 $ 32 744,621 494,249 1,349 1,240,251

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

5 unchanged sentences

Balances, December 31, 2022

30,801,912 $ 31 651,004 458,356 1,477 1,110,868

Net income — — — 11,530 — 11,530

Unrealized loss on investment, net of taxes of $ 67

Unrealized gain on investment, net of taxes of $ 0

— — — — 93 93

6 unchanged sentences

Balances, March 31, 2023

Net income — — — 11,558 — 11,558

Unrealized loss on investment, net of taxes of $ 0

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

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

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

Common stock issuance, net of 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 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)

Nine months ended September 30,

Three months ended March 31,

Operating activities:

5 unchanged sentences

Allowance for equity funds used during construction ( 528 ) ( 180 )

Gain on sale of nonutility asset

Changes in operating assets and liabilities:

4 unchanged sentences

Postretirement benefits 260 1,667

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

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

Regulatory assets and liabilities excluding cost of removal, income tax temporary differences, and postretirement benefits

Other changes, net ( 1,702 ) ( 1,156 )

Net cash provided by operating activities

51,216 50,607

Investing activities:

2 unchanged sentences

Contributions in aid of construction ( 4,632 ) ( 2,703 )

Additions to nonutility assets

Cost to retire utility plant, net of salvage

( 744 ) ( 167 )

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 ( 18 ) 225

Net cash used in investing activities

( 74,273 ) ( 55,029 )

Financing activities:

9 unchanged sentences

Net cash provided by financing activities

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 8,723 1,071

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD 12,344 12,119

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD 21,067 13,190

LESS RESTRICTED CASH, END OF PERIOD — —

17,876 15,411

Net change in cash and cash equivalents

( 5,181 ) 10,989

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

$ 4,542 23,333

Cash paid during the period for:

4 unchanged sentences

Utility property installed by developers $ 107 656

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

SEPTEMBER 30, 2023

MARCH 31, 2024

(in thousands, except share and per share data)

1 unchanged sentence

The unaudited interim financial information has been prepared in accordance with accounting principles generally accepted in the United States of America and in accordance with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission.

The Notes to Consolidated Financial Statements in SJW Group’s 2022 Annual Report on Form 10-K should be read with the accompanying unaudited condensed consolidated financial statements.

The Notes to Consolidated Financial Statements in SJW Group’s 2023 Annual Report on Form 10-K should be read in conjunction with the accompanying unaudited condensed consolidated financial statements.

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

4 unchanged sentences

(“NEWUS”), and Chester Realty, Inc.

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

SJW Land Company and Chester Realty, Inc.

SJWC, CWC, TWC , TWOS, TWR, MWC and NEWUS are referred to as “Water Utility Services.” SJW Land Company and Chester Realty, Inc.

are collectively referred to as “Real Estate Services.”

3 unchanged sentences

Revenue is generally higher in the warm, dry summer months when water usage and sales are greater, and lower in the winter months when cooler temperatures and increased precipitation curtail water usage resulting in lower sales.

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

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

2023 2022 2023 2022

SJW Group’s revenue components are as follows:

Three months ended March 31,

Revenue from contracts with customers $ 150,008 135,836

Alternative revenue programs, net ( 1,837 ) ( 1,391 )

Other balancing and memorandum accounts, net ( 8,742 ) 1,857 ( 8,564 ) 6,719

Other regulatory mechanisms, net ( 518 ) ( 494 ) ( 1,342 ) ( 260 )

Other balancing and memorandum accounts and regulatory mechanisms, net ( 564 ) 1,404

Rental income 1,775 1,447

1 unchanged sentence

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,

The major components of real estate investments and nonutility properties as of March 31, 2024 and December 31, 2023, are as follows:

2024 December 31,

5 unchanged sentences

Total $ 13,182 13,156

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

In March 2023, SJW Land Company entered into a broker agreement to sell its warehouse, office 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 the next twelve months.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2023

March 31, 2024

(in thousands, except share and per share data)

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 depreciation on assets held for sale.

The company's broker provided the estimated fair value of the Tennessee properties.

The estimated costs to sell was subtracted to estimate the fair value.

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

records the Tennessee properties at the lower of their carrying value or estimated fair value less cost to sell, and also stopped recording depreciation on assets held for sale.

SJW Group's broker provides the estimated fair value of the Tennessee properties.

No impairment has been recorded as the estimated fair value less cost to sell exceeds carrying value.

The property is classified as part of the Real Estate Services reportable segment.

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 September 30, 2023:

September 30,

In April 2024, SJW Land Company completed the sale of a warehouse building of the Tennessee properties for $ 27,000 .

The estimated pre-tax gain on the sale is $ 7,000 .

The following represents the major components of the Tennessee warehouse buildings and land property recorded in assets held-for-sale on the condensed consolidated balance sheets as of March 31, 2024:

Land $ 13,170

3 unchanged sentences

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, 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 March 31, 2024, 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, 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 estimated fair value of such instruments as of March 31, 2024 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, 2024.

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 $ 1,299,114 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.

The fair value of SJW Group’s long-term debt was $ 1,355,609 and $ 1,394,412 as of March 31, 2024 and December 31, 2023, 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.

Of the total fair value of long-term debt at March 31, 2024 and December 31, 2023, $ 1,339,659 and $ 1,378,683 , respectively, would be categorized as Level 2 in the fair value hierarchy and $ 15,950 and $ 15,729 , respectively, 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 September 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 $ 2,890 and $ 2,833 as of March 31, 2024 and December 31, 2023, 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 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.

For the three months ended March 31, 2024 and 2023, 12,221 and 8,855 anti-dilutive restricted common stock units were excluded from the diluted earnings per share calculation, respectively.

New Accounting Standards

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, “Improvements to Reportable Segment Disclosures.” (“ASU 2023-07”).

Among other changes, the ASU requires disclosure of significant segment expenses and extends certain annual disclosures to interim periods.

The ASU is effective for SJW Group beginning with its annual financial

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2023

March 31, 2024

(in thousands, except share and per share data)

statements for the year ending December 31, 2024.

Early adoption is permitted.

SJW Group is currently evaluating the requirements of ASU 2023-07.

In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures.” The ASU amends certain income tax disclosure requirements, including adding requirements to present the reconciliation of income tax expense computed at the statutory rate to actual income tax expense using both percentages and amounts and providing a disaggregation of income taxes paid.

Further, certain disclosures are eliminated, including the current requirement to disclose information on changes in unrecognized tax benefits in the next 12 months.

The ASU is effective for SJW Group beginning with its annual financial statements for the year ending December 31, 2025.

Early adoption is permitted.

SJW Group is currently evaluating the requirements of ASU 2023-09.

Regulatory Matters

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 and liabilities are comprised of the following as of March 31, 2024 and December 31, 2023:

March 31, 2024 December 31, 2023

Regulatory assets:

Income tax temporary differences, net $ 62,745 43,434

Postretirement pensions and other postretirement benefits 30,076 31,493

Business combinations debt premium, net 15,490 17,396

Monterey Water Revenue Adjustment Mechanism (“MWRAM”)

Income tax temporary differences (a)

$ 158,793 157,669

Water Conservation Memorandum Account (“WCMA”)

Unrecognized pensions and other postretirement benefits (b)

24,593 24,593

2022 General Rate Case Interim Memorandum Account 9,513 20,650

Cost recovery balancing and memorandum accounts 8,267 16,545

All other balancing and memorandum accounts 4,344 2,749

Water Revenue Adjustment (“WRA”) ( 5,428 ) ( 4,488 )

Other, net 10,507 9,739

Total regulatory assets, net in Condensed Consolidated Balance Sheets 139,993 143,343

current regulatory assets, net 8,573 16,068

Total regulatory assets, net, less current portion $ 131,420 127,275

Business combinations debt premium (c)

14,219 14,855

Employee benefit costs (d)

Monterey Water Revenue Adjustment Mechanism (“MWRAM”) (e)

Customer Assistance Program (“CAP”) balancing account (f)

Catastrophic event memorandum accounts (“CEMA”) (g)

2022 general rate case interim memorandum account (h)

Water supply costs (i)

Total regulatory assets

240,692 240,186

current regulatory assets (k)

Total regulatory assets, less current portion

$ 238,842 235,910

Regulatory liabilities:

Cost of removal (l)

$ 350,369 346,418

Future income tax benefits due to customers (m)

87,908 88,610

Unrecognized pensions and other postretirement benefits (b)

20,303 20,196

Revenue adjustment mechanisms (n)

Water supply costs (i)

Total regulatory liabilities

472,433 464,167

current regulatory liabilities (p)

Total regulatory liabilities, less current portion

$ 469,953 461,108

___________________________________

(a) Consists primarily of temporary income tax differences that are flowed through to customers, which will be recovered in future rates as these temporary differences reverse.

The company expects to recover regulatory assets related to plant depreciation income tax temporary differences over the lives of the plant assets, which are between 4 to 100 years.

(b) Represents actuarial losses and gains and prior service cost that have not yet been recognized as components of net periodic benefit cost for certain pension and other postretirement benefit plans.

(c) Consists of debt fair value adjustments recognized through purchase accounting for the completed merger with CTWS in 2019.

(d) Includes deferrals of pension and other postretirement benefit expense and cost of accrued benefits for vacation.

(e) MWRAM is described in the following section.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

March 31, 2024

(in thousands, except share and per share data)

(f) Represents costs associated with SJWC’s CAP.

(g) Primarily related to increased bad debt expenses associated with SJWC’s response to COVID-19.

The California Public Utilities Commission (“CPUC”) has authorized water utilities to activate CEMA accounts in order to track savings and costs related to SJWC’s response to catastrophic events, which includes external labor and materials, increases in bad debt from suspension of shutoffs for non-payment, waived deposits and reconnection fees, and divergence from actual versus authorized usage.

(h) Represents the difference between revenues collected in interim rates in effect as of January 1, 2022 and revenues that would result from rates authorized in SJWC’s 2022 general rate case retroactive to January 1, 2022.

(i) Reflects differences in actual water supply costs compared to amounts assumed in base rates, including applicable changes and variations in costs and quantities that affect the overall mix of the water supply.

(j) Other includes other balancing and memorandum accounts and regulatory mechanisms, deferred costs for certain information technology activities, asset retirement obligations and rate case expenses.

(k) As of March 31, 2024 and December 31, 2023, primarily relates to the current portion of MWRAM.

(l) Represents amounts collected in rates from customers for estimated costs to retire assets at the end of their expected useful lives before the costs are incurred.

(m) On December 22, 2017 the Tax Act was signed into law.

The Tax Act included a reduction in the federal income tax rate from 35% to 21%.

The rate reduction was effective on January 1, 2018 and resulted in a regulatory liability for the excess deferred income taxes.

The benefit of amortization of excess deferred income taxes flows back to the customers under current normalization rules and agreed upon methods with the commissions.

(n) Consists of Water Rate Adjustment mechanism (“WRA”) and WCMA, which are described in the following section.

(o) Other includes other balancing and memorandum accounts, other regulatory mechanisms and accrued tank painting costs.

(p) As of March 31, 2024 and December 31, 2023, primarily relates to the current portion of WRA.

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.

1 unchanged sentence

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.

SJWC also maintains memorandum accounts to track 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 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.

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.

Applicable drought surcharges collected are used to offset the revenue losses tracked in the WCMA.

Mandatory water conservation requirements from Santa Clara Valley Water District (“Valley Water”) 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.

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.

CWC has been authorized by the Connecticut Public Utilities Regulatory Authority (“PURA”) to utilize a Water Revenue Adjustment mechanism (“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 sur-credit 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 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)

September 30, 2023

(in thousands, except share and per share data)

As of March 31, 2024 and December 31, 2023, SJW Group’s regulatory assets not earning a return primarily included unrecognized pensions and other postretirement benefits and business combination debt premiums.

The total amount of regulatory assets not earning a return at March 31, 2024 and December 31, 2023, either by interest on the regulatory asset or as a component of rate base at the allowed rate of return, was $ 42,598 and $ 43,141 , respectively.

Capitalization

1 unchanged sentence

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 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

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 and developers on certain construction projects.

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

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 SJWC 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.

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

The note purchase agreement contains customary affirmative and negative covenants for as long as the Series P Notes are outstanding.

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

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

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 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.

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 $ 240,000 .

For the three months ended March 31, 2024, SJW Group issued and sold a total of 126,025 shares of

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2023

March 31, 2024

(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.

common stock with a weighted average price of $ 57.13 per share and received $ 7,006 in net proceeds under the Equity Distribution Agreement.

Since the inception of the Equity Distribution Agreement, SJW Group has issued and sold 2,130,682 shares of common stock at a weighted average price of $ 72.60 for a total net proceeds of $ 151,004 and has $ 85,309 remaining under the Equity Distribution Agreement to issue into shares.

Lines of Credit 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.

Lines of Credit

The weighted-average interest rate on short-term borrowings outstanding at March 31, 2024, was 6.42 % compared to 6.48 % at December 31, 2023.

Long-term Financing Agreements

On November 15, 2023, CWC entered into a note purchase agreement with certain affiliates of American United Life Insurance, The State Life Insurance, Mutual of Omaha Insurance, and United of Omaha Life Insurance, pursuant to which the company sold an aggregate principal amount of $ 25,000 of its 6.46 % Senior Notes, Series 2023 (“Series 2023 Notes”).

The Series 2023 Notes are unsecured obligations of CWC and are due on January 1, 2054.

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

The closing of the notes purchase agreement occurred in January 2024.

Income tax expense for the three months ended March 31, 2024 and 2023 was $ 2,231 and $ 1,078 , respectively.

The effective consolidated income tax rates were 16 % and 9 % for the three months ended March 31, 2024 and 2023, respectively.

The higher effective tax rate for the three months ended March 31, 2024 was primarily due to the tax deficiencies recorded in the first quarter of 2024 for share-based payments and other discrete tax items.

SJW Group had unrecognized tax benefits, before the impact of deductions of state taxes, excluding interest and penalties, of approximately $ 4,488 and $ 4,511 as of March 31, 2024 and December 31, 2023, 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.

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SJW Group maintains noncontributory defined benefit pension plans for its eligible employees.

SJWC and CTWS employees hired before March 31, 2008, and January 1, 2009, respectively, are entitled to benefits under the pension plans based on the employee’s years of service and compensation.

SJWC employees hired before March 31, 2008 and CWC and MWC employees hired before January 1, 2009 are entitled to benefits under the pension plans based on the employee’s years of service and compensation.

For SJWC employees hired on or after March 31, 2008, benefits are determined using a cash balance formula based upon compensation credits and interest credits for each employee.

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.

Certain employees hired before March 1, 2012, and covered by a plan merged into the CWC plan in 2013 are also entitled to benefits based on the employee’s years of service and compensation.

CTWS employees hired on or after January 1, 2009, are entitled to an additional 1.5 % of eligible compensation to their company sponsored savings plan.

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.

SJW Group does not have multi-employer plans.

In addition, senior management hired before March 31, 2008, for SJWC and January 1, 2009 for CWC, are eligible to receive additional retirement benefits under supplemental executive retirement plans and retirement contracts.

SJWC’s senior management hired on or after March 31, 2008, are eligible to receive additional retirement benefits under SJWC’s Cash Balance Executive Supplemental Retirement Plan.

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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, 2023 and 2022 are as follows:

Pension Benefits Other Benefits

Three months ended September 30,

2023 2022 2023 2022

Service cost $ 1,892 2,397 $ 160 255

Interest cost 3,557 2,642 317 218

Expected return on assets ( 3,442 ) ( 4,823 ) ( 217 ) ( 221 )

Unrecognized actuarial loss 554 1,257 ( 87 ) ( 75 )

Amortization of prior service cost 4 4 — —

Total $ 2,565 1,477 $ 173 177

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2023

March 31, 2024

(in thousands, except share and per share data)

The components of net periodic benefit costs for the defined benefit plans and other postretirement benefits for the three months ended March 31, 2024 and 2023 are as follows:

Pension Benefits Other Benefits

Nine months ended September 30,

Three months ended March 31,

2024 2023 2024 2023

2 unchanged sentences

Expected return on assets ( 4,463 ) ( 4,069 ) ( 267 ) ( 217 )

Unrecognized actuarial loss 1,662 3,772 ( 263 ) ( 226 )

Amortization of actuarial loss (gain)

( 18 ) 554 ( 160 ) ( 88 )

Amortization of prior service cost 4 4 — —

1 unchanged sentence

In 2024, SJW Group expects to make required and discretionary cash contributions of up to $ 4,515 to the pension plans and other postretirement benefits.

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.

For the three months ended March 31, 2024, SJW Group has made no 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.

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

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

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.

The 2023 Long-Term Incentive Plan reserves 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 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

In addition, shares are issued to employees under SJW Group’s employee stock purchase plan (“ESPP”).

As of March 31, 2024, 181,280 shares are issuable upon the vesting of outstanding restricted stock units and deferred restricted stock units and an additional 1,055,383 shares are available for award issuances under the long-term incentive plans.

A summary of compensation costs charged to income, by award type, and proceeds from the ESPP, are presented below for the three months ended March 31, 2024 and 2023:

Three months ended March 31,

Compensation costs charged to income:

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Restricted Stock and Deferred Restricted Stock

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.

For the three months ended March 31, 2024 and 2023, SJW Group granted 37,520 and 27,732 , respectively, one year and three year service-based restricted stock awards with a weighted-average grant date fair value per unit of $ 61.10 and $ 77.88 , respectively.

For the three months ended March 31, 2024 and 2023, SJW Group granted 44,433 and 31,345 target units, respectively, of performance-based and market-based restricted stock awards with a weighted-average grant date fair value per unit of $ 53.69 and $ 80.05 , 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 March 31, 2024, the total unrecognized compensation costs related to restricted and deferred restricted stock plans was $ 8,149 .

This cost is expected to be recognized over a weighted-average period of 2.17 years.

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2023

March 31, 2024

(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.

SJW Group’s recorded expenses for its ESPP were $ 97 and $ 90 for the three months ended March 31, 2024 and 2023, respectively.

The total unrecognized compensation costs related to the semi-annual offering period that ends July 31, 2024, for the employee stock purchase plan is approximately $ 141 .

This cost is expected to be recognized during the second and third quarters of 2024.

Segment and Non-Tariffed Business Reporting

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.

(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 (iv) SJWNE LLC, a holding company for CTWS and its subsidiaries, CWC, MWC, NEWUS and Chester Realty, Inc.

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.” Water Utility Services’ activities are water utility operations with both regulated and non-tariffed businesses.

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’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 second segment consists of property management and investment activity conducted by SJW Land Company and Chester Realty, Inc., referred to as “Real Estate Services.”

The executive staff reviews financial information presented on a consolidated basis that is accompanied by disaggregated information about operating revenue, net income and total assets, by subsidiary.

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

1 unchanged sentence

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

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

Regulated Non-tariffed Non-tariffed Non-tariffed Regulated Non-tariffed Total

Operating revenue $ 199,537 3,876 1,430 — 199,537 5,306 204,843

Operating expense 144,102 2,337 691 1,107 144,102 4,135 148,237

Operating income (loss) 55,435 1,539 739 ( 1,107 ) 55,435 1,171 56,606

Net income (loss) 37,545 2,198 563 ( 4,084 ) 37,545 ( 1,323 ) 36,222

Depreciation and amortization 26,147 84 1 223 26,147 308 26,455

Interest on long-term debt and other interest expense 10,839 112 — 5,793 10,839 5,905 16,744

Provision (benefit) for income taxes 5,933 428 196 ( 1,996 ) 5,933 ( 1,372 ) 4,561

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

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 Nine Months Ended September 30, 2023

For Three Months Ended March 31, 2024

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

7 unchanged sentences

Provision (benefit) for income taxes 3,696 318 266 ( 2,049 ) 3,696 ( 1,465 ) 2,231

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

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

September 30, 2023

March 31, 2024

(in thousands, except share and per share data)

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

7 unchanged sentences

Provision (benefit) for income taxes 2,724 323 142 ( 2,111 ) 2,724 ( 1,646 ) 1,078

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

____________________

(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.

(1) The “All Other” category for the three months ended March 31, 2024 and 2023, includes the accounts of SJW Group, SJWNE LLC, CTWS and SJWTX Holdings, Inc.

on a stand-alone basis.

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

SJW Group’s assets by segment are as follows:

March 31, 2024

December 31, 2023

Water Utility Services:

$ 4,228,675 4,199,172

42,437 43,532

Total water utility services

4,271,112 4,242,704

Real Estate Services

43,506 44,222

52,894 58,141

$ 4,367,512 4,345,067

Regulated $ 4,228,675 4,199,172

Non-tariffed 138,837 145,895

Total assets $ 4,367,512 4,345,067

In January 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”).

(“KT Water Resources”).

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 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.

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

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

The 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.

3 unchanged sentences

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.

The transaction was accounted for as a business combination in accordance with Accounting Standards Codification (“ASC”) Topic 805—“Business Combinations.” The transaction

SJW GROUP AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

March 31, 2024

(in thousands, except share and per share data)

consideration was allocated to utility plant.

The final purchase price allocation was completed during the quarter ended March 31, 2024, with no change from the preliminary purchase price allocation.

Transaction costs were not material.

7 unchanged sentences

$ 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 other intangible asset represents indefinite life water rights.

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

1 unchanged sentence

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 difference between the fair value of $ 15,400 and the gross obligation of $ 29,000 was 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