SJW (SJW) - 2022 Q3 - Quarterly Report

FORWARD-LOOKING STATEMENTS This report contains forward-looking statements subject to significant risks and uncertainties - This report contains forward-looking statements that are subject to various risks, uncertainties, and assumptions, meaning actual results may differ materially from current expectations[7][8] - Key risk factors include governmental policies and regulations, changes in water demand, the impact of the COVID-19 pandemic, climate change, and general economic conditions[8] PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements for the period ended September 30, 2022 Condensed Consolidated Statements of Comprehensive Income Condensed Consolidated Statements of Comprehensive Income (Unaudited) - Three Months Ended September 30, 2022 vs. 2021 (in thousands, except per share data) | Metric | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $175,981 | $166,923 | $9,058 | 5.43% | | Total operating expense | $138,379 | $133,149 | $5,230 | 3.93% | | Operating income | $37,602 | $33,774 | $3,828 | 11.33% | | Income before income taxes | $25,257 | $21,817 | $3,440 | 15.77% | | Provision for income taxes | $223 | $2,749 | $(2,526) | -91.89% | | NET INCOME | $25,034 | $19,068 | $5,966 | 31.29% | | Comprehensive income | $24,861 | $19,056 | $5,805 | 30.46% | | Basic EPS | $0.83 | $0.64 | $0.19 | 29.69% | | Diluted EPS | $0.82 | $0.64 | $0.18 | 28.13% | | Dividends per share | $0.36 | $0.34 | $0.02 | 5.88% | Condensed Consolidated Statements of Comprehensive Income (Unaudited) - Nine Months Ended September 30, 2022 vs. 2021 (in thousands, except per share data) | Metric | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $449,324 | $433,949 | $15,375 | 3.54% | | Total operating expense | $368,731 | $354,457 | $14,274 | 4.03% | | Operating income | $80,593 | $79,492 | $1,101 | 1.39% | | Income before income taxes | $43,987 | $47,618 | $(3,631) | -7.62% | | Provision for income taxes | $3,658 | $5,159 | $(1,501) | -29.10% | | NET INCOME | $40,329 | $42,459 | $(2,130) | -5.02% | | Comprehensive income | $39,727 | $42,592 | $(2,865) | -6.73% | | Basic EPS | $1.33 | $1.44 | $(0.11) | -7.64% | | Diluted EPS | $1.33 | $1.43 | $(0.10) | -6.99% | | Dividends per share | $1.08 | $1.02 | $0.06 | 5.88% | Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (Unaudited) - As of September 30, 2022 vs. December 31, 2021 (in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | ASSETS | | | | | | Total Utility plant (net) | $2,592,881 | $2,497,499 | $95,382 | 3.82% | | Real estate investments and nonutility properties (net) | $41,157 | $41,681 | $(524) | -1.26% | | Total Current Assets | $157,900 | $134,085 | $23,815 | 17.76% | | Total Other Assets | $812,766 | $819,130 | $(6,364) | -0.78% | | TOTAL ASSETS | $3,604,704 | $3,492,395 | $112,309 | 3.22% | | LIABILITIES & EQUITY | | | | | | Total Stockholders' Equity | $1,049,347 | $1,034,519 | $14,828 | 1.43% | | Long-term debt, less current portion | $1,453,748 | $1,492,935 | $(39,187) | -2.62% | | Total Current Liabilities | $318,710 | $203,271 | $115,439 | 56.89% | | Deferred income taxes | $208,130 | $200,451 | $7,679 | 3.83% | | Advances for construction | $140,842 | $130,693 | $10,149 | 7.77% | | Contributions in aid of construction | $319,866 | $316,479 | $3,387 | 1.07% | | Postretirement benefit plans | $89,610 | $89,998 | $(388) | -0.43% | | Other noncurrent liabilities | $24,451 | $24,049 | $402 | 1.67% | | TOTAL CAPITALIZATION AND LIABILITIES | $3,604,704 | $3,492,395 | $112,309 | 3.22% | Condensed Consolidated Statements of Changes in Stockholders' Equity Changes in Stockholders' Equity (Unaudited) - Nine Months Ended September 30, 2022 (in thousands) | Metric | Dec 31, 2021 Balance | Net Income | Stock-based Compensation | Dividends Paid | Other Changes | Sep 30, 2022 Balance | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Common Stock (Amount) | $30 | $0 | $0 | $0 | $0 | $30 | | Additional Paid-in Capital | $606,392 | $0 | $3,991 | $0 | $3,843 | $614,226 | | Retained Earnings | $428,260 | $40,329 | $(66) | $(32,667) | $0 | $435,856 | | Accumulated Other Comprehensive Income | $(163) | $0 | $0 | $0 | $(602) | $(765) | | Total Stockholders' Equity | $1,034,519 | $40,329 | $3,925 | $(32,667) | $3,241 | $1,049,347 | Changes in Stockholders' Equity (Unaudited) - Nine Months Ended September 30, 2021 (in thousands) | Metric | Dec 31, 2020 Balance | Net Income | Stock-based Compensation | Dividends Paid | Other Changes | Sep 30, 2021 Balance | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Common Stock (Amount) | $29 | $0 | $0 | $0 | $1 | $30 | | Additional Paid-in Capital | $510,158 | $0 | $3,141 | $0 | $67,902 | $581,201 | | Retained Earnings | $408,037 | $42,459 | $(89) | $(29,996) | $0 | $420,411 | | Accumulated Other Comprehensive Income | $(1,064) | $0 | $0 | $0 | $133 | $(931) | | Total Stockholders' Equity | $917,160 | $42,459 | $3,052 | $(29,996) | $68,036 | $1,000,711 | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended September 30, 2022 vs. 2021 (in thousands) | Activity | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $129,349 | $100,255 | $29,094 | | Net cash used in investing activities | $(181,453) | $(182,899) | $1,446 | | Net cash provided by financing activities | $53,175 | $89,596 | $(36,421) | | Net change in cash, cash equivalents and restricted cash | $1,071 | $6,952 | $(5,881) | | Cash and cash equivalents, end of period | $13,190 | $14,019 | $(829) | Notes to Unaudited Condensed Consolidated Financial Statements Note 1. General - 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[33] - Water sales are seasonal, with higher revenue in warm, dry summer months, meaning interim results are not indicative of full-year performance[34][96] Revenue Streams (in thousands) | Revenue Stream | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue from contracts with customers | $169,972 | $163,103 | $440,406 | $422,545 | | Alternative revenue programs, net | $3,172 | $2,216 | $(1,737) | $4,984 | | Other balancing and memorandum accounts, net | $1,857 | $639 | $6,719 | $3,637 | | Other regulatory mechanisms, net | $(494) | $(438) | $(260) | $(1,284) | | Rental income | $1,474 | $1,403 | $4,196 | $4,067 | | Total Revenue | $175,981 | $166,923 | $449,324 | $433,949 | - A pre-tax gain of $5.4 million from the sale of a nonutility property was recognized on February 15, 2022[37] - The fair value of long-term debt was approximately $1.25 billion as of September 30, 2022, compared to a book value of $1.46 billion[40] Note 2. Regulatory Matters Regulatory Assets, Net (in thousands) | Regulatory Asset | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Income tax temporary differences, net | $33,811 | $22,420 | | Postretirement pensions and other postretirement benefits | $64,934 | $62,197 | | Business combinations debt premium, net | $18,031 | $19,937 | | Balancing and memorandum accounts, net | $22,583 | $38,334 | | Water Rate Adjustment | $(2,800) | $2,588 | | Other, net | $10,124 | $9,145 | | Total regulatory assets, net | $146,683 | $154,621 | | Less: current regulatory assets, net | $738 | $2,629 | | Total regulatory assets, net, less current portion | $145,945 | $151,992 | - SJWC uses balancing and memorandum accounts to track expense and revenue variances and impacts from catastrophic events[45] - On October 11, 2022, the CPUC approved a recovery of $18.2 million in balancing and memorandum accounts from customers[45] Note 3. Capitalization - For the nine months ended September 30, 2022, SJW Group issued 47,608 shares of common stock, generating approximately $3.1 million in net proceeds[49] - Since November 17, 2021, SJW Group has issued 402,723 shares, receiving $27.4 million in net proceeds, with $71.8 million remaining available for issuance[49] - In March 2021, SJW Group completed a public offering of 1,184,500 shares, generating approximately $66.8 million in net proceeds[50] Note 4. Bank Borrowings and Long-Term Liabilities - On August 2, 2022, SJW Group entered into a new $300 million syndicated line of credit agreement maturing August 2, 2027[52][146] - The new credit agreement replaces previous agreements and reduced CTWS's revolving credit facility from $75 million to $10 million[56][150] - Maine Water entered into a credit agreement on April 6, 2022, for $15 million at a fixed interest rate of 4.54%, due May 31, 2042[57][154] - Connecticut Water sold $25 million of 4.71% Senior Notes, Series 2022, due 2052[58][155] - SJWC will sell $70 million of 4.85% Senior Notes, Series P, due February 1, 2053[59][156] Note 5. Income Taxes Income Tax Expense and Effective Rates (in thousands) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Income tax expense | $223 | $2,749 | $3,658 | $5,159 | | Effective consolidated income tax rate | 1% | 13% | 8% | 11% | - The lower effective tax rate for 2022 was primarily due to a tax accounting method change at CTWS regarding non-network asset repairs deduction[60][117] - SJW Group does not expect the Inflation Reduction Act of 2022 to materially impact its year-end tax rate[62][118] Note 6. Commitments and Contingencies - No pending legal proceedings are expected to have a material effect on the company's business, financial position, or cash flows[63][166] Note 7. Benefit Plans - SJW Group maintains noncontributory defined benefit pension plans and provides health care and life insurance benefits for retired employees[64][65] Net Periodic Benefit Costs (in thousands) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Service cost | $2,652 | $2,711 | $7,956 | $8,134 | | Interest cost | $2,860 | $2,556 | $8,581 | $7,666 | | Expected return on assets | $(5,044) | $(4,748) | $(15,132) | $(14,242) | | Unrecognized actuarial loss | $1,182 | $1,788 | $3,546 | $5,362 | | Amortization of prior service cost | $4 | $12 | $12 | $37 | | Total | $1,654 | $2,319 | $4,963 | $6,957 | - SJW Group expects to make cash contributions of up to $7.8 million to pension plans and other postretirement benefits in 2022[66] Note 8. Equity Plans - As of September 30, 2022, 179,848 shares are issuable upon vesting of restricted stock units, and 612,738 shares are available for future awards[67] Compensation Costs Charged to Income (in thousands) | Award Type | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | ESPP | $184 | $176 | $369 | $357 | | Restricted stock and deferred restricted stock | $1,214 | $954 | $3,622 | $2,844 | | Total compensation costs charged to income | $1,398 | $1,130 | $3,991 | $3,201 | - Total unrecognized compensation costs related to restricted stock plans amounted to $5.7 million as of September 30, 2022[71] Note 9. Segment and Non-Tariffed Business Reporting - SJW Group operates in two reportable segments: Water Utility Services and Real Estate Services[73] Operating Revenue by Segment (in thousands) - Three Months Ended September 30, 2022 vs. 2021 | Segment | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Water Utility Services (Regulated) | $171,044 | $162,352 | $8,692 | 5.35% | | Water Utility Services (Non-tariffed) | $3,463 | $3,168 | $295 | 9.31% | | Real Estate Services (Non-tariffed) | $1,474 | $1,403 | $71 | 5.06% | | All Other (Non-tariffed) | $0 | $0 | $0 | 0.00% | | Total SJW Group | $175,981 | $166,923 | $9,058 | 5.43% | Operating Income (Loss) by Segment (in thousands) - Three Months Ended September 30, 2022 vs. 2021 | Segment | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Water Utility Services (Regulated) | $36,305 | $32,437 | $3,868 | 11.93% | | Water Utility Services (Non-tariffed) | $1,371 | $1,012 | $359 | 35.47% | | Real Estate Services (Non-tariffed) | $499 | $447 | $52 | 11.63% | | All Other (Non-tariffed) | $(573) | $(122) | $(451) | 369.67% | | Total SJW Group | $37,602 | $33,774 | $3,828 | 11.33% | Total Assets by Segment (in thousands) - As of September 30, 2022 vs. September 30, 2021 | Segment | Sep 30, 2022 | Sep 30, 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Water Utility Services (Regulated) | $3,498,396 | $3,352,976 | $145,420 | 4.34% | | Water Utility Services (Non-tariffed) | $5,302 | $7,141 | $(1,839) | -25.75% | | Real Estate Services (Non-tariffed) | $43,017 | $44,629 | $(1,612) | -3.61% | | All Other (Non-tariffed) | $57,989 | $64,995 | $(7,006) | -10.78% | | Total SJW Group | $3,604,704 | $3,469,741 | $134,963 | 3.89% | Note 10. Subsequent Event - On October 6, 2022, the CPUC approved SJWC's General Rate Case, authorizing a revenue increase of $25.1 million (6.03%) in 2022[79] - The 2022 GRC also approved recovery of $18.2 million from balancing and memorandum accounts and a $350 million capital budget[79] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section analyzes financial condition and operational results for the period ended September 30, 2022 General Business Overview - SJW Group is a holding company with five wholly-owned subsidiaries operating in California, Connecticut, Maine, and Texas[82][86][88] - SJWC provides water service to approximately 232,000 connections in the San Jose metropolitan area[83] - CTWS subsidiaries provide water service to approximately 141,000 connections in Connecticut and Maine[86] - SJW Land Company and Chester Realty, Inc manage undeveloped land and commercial buildings[90][92] - The business strategy focuses on regional regulated water utility operations and potential acquisitions[91][93] Results of Operations Overview Consolidated Net Income (in thousands) | Period | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended Sep 30 | $25,034 | $19,068 | $5,966 | 31.29% | | Nine months ended Sep 30 | $40,329 | $42,459 | $(2,130) | -5.02% | - The three-month net income increase includes a one-time impact of $355 thousand related to settlement expenses[97] - The nine-month net income decrease is influenced by a $5.1 million gain on a property sale, offset by $2.2 million in depreciation and other expenses[97] Operating Revenue Consolidated Operating Revenue (in thousands) | Period | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended Sep 30 | $175,981 | $166,923 | $9,058 | 5.43% | | Nine months ended Sep 30 | $449,324 | $433,949 | $15,375 | 3.54% | Factors Affecting Operating Revenue Change (in thousands) | Factor | 3 Months Ended Sep 30, 2022 vs. 2021 (Increase/(decrease)) | 9 Months Ended Sep 30, 2022 vs. 2021 (Increase/(decrease)) | | :--- | :--- | :--- | | Consumption changes (including unbilled utility revenue) | $(4,256) | $(9,085) | | Increase in customers | $842 | $3,723 | | Rate increases | $9,485 | $22,172 | | Texas winter storm customer credits | $838 | $838 | | Balancing and memorandum accounts (MWRAM) | $1,019 | $2,047 | | Balancing and memorandum accounts (WCMA) | $3,868 | $2,768 | | Other regulatory mechanisms | $(2,967) | $(8,466) | | Real Estate Services | $71 | $128 | | Total Increase/(decrease) | $9,058 | $15,375 | Operating Expense Consolidated Operating Expense (in thousands) | Period | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended Sep 30 | $138,379 | $133,149 | $5,230 | 3.93% | | Nine months ended Sep 30 | $368,731 | $354,457 | $14,274 | 4.03% | Factors Affecting Operating Expense Change (in thousands) | Factor | 3 Months Ended Sep 30, 2022 vs. 2021 (Increase/(decrease)) | 9 Months Ended Sep 30, 2022 vs. 2021 (Increase/(decrease)) | | :--- | :--- | :--- | | Total water production expenses | $1,499 | $2,926 | | Administrative and general | $756 | $4,387 | | Balance and memorandum account cost recovery | $440 | $2,055 | | Maintenance | $696 | $1,430 | | Property taxes and other non-income taxes | $229 | $1,453 | | Depreciation and amortization | $1,692 | $7,555 | | Gain on sale of nonutility properties | $(82) | $(5,532) | | Total Increase/(decrease) | $5,230 | $14,274 | Sources of Water Supply - SJWC's water supply consists of imported water, groundwater, surface water, and reclaimed water[100] - California is experiencing a severe drought, with Valley Water's reservoirs at approximately 17% of total capacity as of October 1, 2022[101] - A water shortage emergency led SJWC to activate Stage 3 of its Water Shortage Contingency Plan, imposing restrictions on outdoor water usage[103] Change in Sources of Water Supply (in million gallons) - Water Utility Services (Three Months Ended Sep 30) | Source | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Purchased water | 7,098 | 5,703 | 1,395 | 24.46% | | Groundwater | 4,870 | 6,283 | (1,413) | -22.49% | | Surface water | 2,866 | 3,113 | (247) | -7.93% | | Reclaimed water | 322 | 341 | (19) | -5.57% | | Total | 15,156 | 15,440 | (284) | -1.84% | Change in Sources of Water Supply (in million gallons) - Water Utility Services (Nine Months Ended Sep 30) | Source | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Purchased water | 16,136 | 15,601 | 535 | 3.43% | | Groundwater | 13,790 | 16,850 | (3,060) | -18.16% | | Surface water | 8,153 | 6,947 | 1,206 | 17.36% | | Reclaimed water | 694 | 669 | 25 | 3.74% | | Total | 38,773 | 40,067 | (1,294) | -3.23% | Water Production Expenses - Water production expenses increased due to higher average per unit costs for purchased water, groundwater extraction, and energy charges[110][111] - Effective July 1, 2022, Valley Water increased the unit price of purchased water by ~14% and the groundwater extraction charge by ~15%[111] Other Operating Expenses - Other operating expenses increased by $3.7 million for the three months ended September 30, 2022, driven by higher depreciation, administrative, and maintenance costs[112] - For the nine months ended September 30, 2022, these expenses increased by $11.3 million, primarily due to higher depreciation and administrative costs[113] Other (Expense) Income - For the three months ended September 30, 2022, other expense was impacted by increased interest on lines of credit[114] - For the nine months ended September 30, 2022, the change was mainly due to a $3.0 million pre-tax gain from a prior year sale[115] Provision for Income Taxes Income Tax Expense (in thousands) | Period | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended Sep 30 | $223 | $2,749 | $(2,526) | -91.89% | | Nine months ended Sep 30 | $3,658 | $5,159 | $(1,501) | -29.10% | - The decrease in income tax expense was primarily due to discrete tax items and a tax accounting method change at CTWS[116][117] - The Inflation Reduction Act of 2022 is not expected to materially impact the company's year-end tax rate[118] Regulation and Rates California Regulatory Affairs - The CPUC approved SJWC's 2022 GRC settlement, authorizing revenue increases of $25.1 million (6.03%) in 2022, $13.0 million (2.94%) in 2023, and $16.1 million (3.56%) in 2024[121][79] - The 2022 GRC also approved a $350 million capital budget and recovery of $18.2 million from balancing and memorandum accounts[121][79] - SJWC filed advice letters to recover $18.2 million and refund $19.9 million, resulting in a net refund of $1.7 million to customers[125][126] - SJWC filed to implement new water rates effective November 1, 2022, in accordance with the 2022 GRC Decision[127] Connecticut Regulatory Affairs - PURA approved a WICA surcharge of 2.44% for Connecticut Water customers, effective January 1, 2022, expected to generate $2.6 million in revenue[128] - The cumulative WICA charge reached 3.26% as of July 1, 2022, after further project approvals[128][130] - A 2.85% surcharge was imposed on customer bills, effective April 1, 2022, to collect the 2021 revenue shortfall[129] - PURA approved Connecticut Water's application to issue $25 million in unsecured notes at 4.71% interest[131] Texas Regulatory Affairs - The PUCT increased CLWSC's Water Pass Through Charge usage rate from $0.70 to $0.90 per thousand gallons for its Canyon Lake system[133] - For the Kendall West system, CLWSC's WPC increased from $2.39 to $2.56 per thousand gallons, effective October 1, 2022[134] Maine Regulatory Affairs - A rate increase of $6.3 million (72.5%) for the Biddeford Saco division went into effect on July 1, 2022[135] - Maine Water filed for general rate increases in four divisions totaling $532 thousand in new revenue[136] Liquidity and Capital Resources Cash Flow from Operating Activities Net Cash Provided by Operating Activities (in thousands) | Period | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Nine months ended Sep 30 | $129,349 | $100,255 | $29,094 | 29.02% | - The increase in operating cash flow was driven by changes in regulatory assets and general working capital[137] - SJWC received $9.8 million through a state arrearages payment program to relieve customer payment delinquencies[138] Cash Flow from Investing Activities Net Cash Used in Investing Activities (in thousands) | Period | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Nine months ended Sep 30 | $(181,453) | $(182,899) | $1,446 | -0.79% | - Cash used in investing activities included $160.5 million for company-funded capital expenditures[139] - Water Utility Services' budgeted capital expenditures for 2022 are approximately $223 million, with 72% invested as of September 30, 2022[140] - Over the next five years, Water Utility Services expects to incur approximately $1.3 billion in capital expenditures[141][143] Cash Flow from Financing Activities Net Cash Provided by Financing Activities (in thousands) | Period | 2022 | 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Nine months ended Sep 30 | $53,175 | $89,596 | $(36,421) | -40.65% | - The decrease in net cash from financing was due to lower proceeds from long-term debt and equity offerings, partially offset by increased borrowings on lines of credit[144] Sources of Capital - Future financing depends on internally generated funds and the ability to attract external financing, with earnings dependent on regulatory proceedings[145] Line of Credit Agreements as of September 30, 2022 (in thousands) | Borrower | Maturity Date | Line Limit | Outstanding | Unused Portion | | :--- | :--- | :--- | :--- | :--- | | SJW Group (Syndicated) | Aug 2, 2027 | $50,000 | $0 | $50,000 | | SJWC (Syndicated) | Aug 2, 2027 | $140,000 | $95,000 | $45,000 | | CTWS (Syndicated) | Aug 2, 2027 | $90,000 | $56,000 | $34,000 | | SJWTX, Inc (Syndicated) | Aug 2, 2027 | $20,000 | $1,500 | $18,500 | | CTWS (Citizens Bank) | Dec 14, 2023 | $10,000 | $6,670 | $3,330 | | CTWS (Citizens Bank) | May 15, 2025 | $40,000 | $40,000 | $0 | | Total | | $350,000 | $199,170 | $150,830 | - The average cost of borrowing on lines of credit increased to 2.79% for the nine months ended September 30, 2022, from 1.34% in 2021[151] - The company was in compliance with all debt covenants as of September 30, 2022[152][157] - Under an equity distribution agreement, $71.8 million remains available to issue into shares[159] - The current Standard & Poor's rating for SJW Group is A- with a stable outlook[160] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company is exposed to market risks from interest rate changes and pension plan asset values - Market risks include changes in interest rates, pension plan asset values, and equity prices[161] - Pension costs are affected by discount rates, mortality rates, and investment returns on plan assets[161] - SJW Group has no derivative financial instruments or significant off-balance sheet risks[162] ITEM 4. CONTROLS AND PROCEDURES Management concluded that disclosure controls and procedures were effective as of September 30, 2022 - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2022[163] - No material changes in internal control over financial reporting occurred during the third fiscal quarter of 2022[164] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS No pending legal proceedings are expected to have a material impact on the company's financial position - No pending legal proceedings are expected to materially affect SJW Group's business, financial position, results of operations, or cash flows[166] ITEM 1A. RISK FACTORS This section refers to risk factors disclosed in the company's Form 10-K and other public filings - No material changes from risk factors previously disclosed in SJW Group's Form 10-K for the year ended December 31, 2021[167] ITEM 5. OTHER INFORMATION The company declared a regular quarterly dividend of $0.36 per share - A regular quarterly dividend of $0.36 per share was declared on October 26, 2022, payable December 1, 2022[168] - SJW Group posts operating and financial performance information on its websites[169] ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including agreements and certifications - Exhibits include the Credit Agreement dated August 2, 2022, amendments to employment agreements, and certifications from the CEO and CFO[171] SIGNATURES The report was formally signed by the Chief Financial Officer and Treasurer on October 28, 2022 - The report was signed by Andrew F Walters, Chief Financial Officer and Treasurer, on October 28, 2022[176]