Item 1. BUSINESS a. General Development of Business
SJW Corp. was incorporated in California on February 8, 1985. SJW Corp. is a holding company with two wholly owned subsidiaries, San Jose Water Company and SJW Land Company.
San Jose Water Company, with headquarters at 374 West Santa Clara Street, San Jose, California 95196, was reorganized under the laws of the State of California in 1931, succeeding a business founded in 1866. San Jose Water Company is a public utility in the business of providing water service to a population of approximately 985,000 people in an area comprising about 138 square miles in the metropolitan San Jose area. San Jose Water Company's web site can be accessed via the Internet at http://www.sjwater.com.
SJW Land Company was incorporated in October, 1985. SJW Land Company owns and operates parking facilities adjacent to the company's headquarters and the San Jose Arena. SJW Land Company also owns commercial buildings in San Jose and a 70% limited partnership interest in 444 West Santa Clara Street, L.P.
SJW Corp. also owns 1,099,952 shares of California Water Service Group.
In January 2001, SJW Corp. formed Crystal Choice Water Service LLC, a limited liability company, with Kinetico, Incorporated, a leading water conditioning equipment manufacturer. SJW Corp. owns 75% of the joint venture. Crystal Choice Water Service LLC engages in the water conditioning business. The Crystal Choice Water Service LLC operation is not expected to be material to the overall financial position and operating results of SJW Corp.
The Merger - ---------- On October 28, 1999, SJW Corp. and American Water Works Company, Inc. (American Water) entered into an Agreement and Plan of Merger (Merger Agreement). SJW Corp. and American Water filed a joint application with the California Public Utilities Commission (CPUC), requesting approval to complete the transaction. The Merger Agreement set April 28, 2001 as the date after which either party could terminate the agreement if CPUC approval is not obtained.
In August 2000, the CPUC established a schedule for consideration of the proposed merger that contemplated a decision in April, 2001. In October, 2000 the CPUC Office of Ratepayer Advocates issued a report opposing the merger and questioning the benefits to ratepayers. Hearings started in November 2000, and have extended beyond the scheduled completion date. On February 20, 2001, the CPUC revised its ruling scheduling further hearing dates in March and April of 2001, and contemplating a CPUC meeting to consider the proposed decision in September 2001. Following the ruling setting forth the new schedule, American Water announced that it would terminate the Merger Agreement on April 28, 2001, because of regulatory uncertainties and delays, and offered to consent to mutual termination of the agreement.
On March 1, 2001, SJW Corp.'s Board of Directors decided that it would be in the best interest of the company to terminate the Merger Agreement, and accepted American Water's offer for mutual termination.
Regulation and Rates - -------------------- San Jose Water Company's rates, service and other matters affecting its business are subject to regulation by the California Public Utilities Commission (CPUC).
Ordinarily, there are two types of rate increases, general and offset. The purpose of the latter is generally to compensate utilities for increases in specific expenses, such as those for purchased water, pump tax or power.
General rate case decisions usually authorize an initial rate increase followed by two annual step increases designed to maintain the authorized return on equity over a three-year period. General rate applications are normally filed and processed during the last year covered by the most recent rate case in an attempt to avoid regulatory lag.
Pursuant to Section 792.5 of the California Public Utilities Code, a balancing account is to be kept for all expense items for which revenue offsets have been authorized. A separate balancing account must be maintained for each offset expense item (e.g. purchased water, purchased power and pump tax). The purpose of a balancing account is to track the under-collection or over- collection associated with expense changes and the revenue authorized by the CPUC to offset those expense changes. At December 31, 2000, the balancing account had a net over-collected balance to be refunded of $944,000.
(b) Financial Information about Industry Segments.
San Jose Water Company generated 99% of SJW Corp.'s consolidated revenue for the years ended December 31, 2000, 1999, and 1998. There were no significant changes in 2000 in the type of products produced or services rendered by San Jose Water Company, or in its markets or methods of distribution.
SJW Land Company contributed 1% to SJW Corp.'s consolidated revenue in 2000, 1999, and 1998. In 1999 and 1998, SJW Land Company sold non utility properties and contributed a higher net income percentage to SJW Corp.'s consolidated income for those respective years.
Dividend income from California Water Service Group generated 11%, 7% and 7% of consolidated income for the years 2000, 1999, and 1998, respectively.
(c) Narrative Description of Business.
(1) (i) General
The principal business of San Jose Water Company consists of the production, purchase, storage, purification, distribution and retail sale of water. San Jose Water Company provides water service to customers in portions of the cities of Cupertino and San Jose and in the cities of Campbell, Monte Sereno, Saratoga and the Town of Los Gatos, and adjacent unincorporated territory, all in the County of Santa Clara in the State of California. It distributes water to customers in accordance with accepted water utility methods, which include pumping from storage and gravity feed from high elevation reservoirs.
In October 1997, San Jose Water Company commenced operation of the City of Cupertino Municipal water system under terms of a 25- year lease. The system is adjacent to the existing San Jose Water Company Service area and has 4,200 service connections. Under terms of the lease, San Jose Water Company made an up-front $6.8 million lease payment to the City which will be amortized over the lease term. The company is responsible for all aspects of system operation including capital improvements.
(1) (iii) Water Supply
San Jose Water Company's water supply is obtained from wells, surface run-off or diversion and by purchases from the Santa Clara Valley Water District (SCVWD). Under terms of a master contract with SCVWD expiring in 2051, purchased water provides approximately 40% to 45% of San Jose Water Company's annual production. Surface supplies, which during a year of normal rainfall satisfy about 6% to 8% of San Jose Water Company's current annual needs, provide approximately 1% of its water supply in a dry year and approximately 14% in a wet year. In dry years the decrease in water from surface run-off and diversion, and the corresponding increase in purchased and pumped water, increases production costs substantially.
Groundwater levels in 2001 remained at an average level reflecting the impact of the last rainfall season. SCVWD's reservoir storage of approximately 93,643 acre-feet (55% of capacity) was reported on March 7, 2001.
The pumps and motors at San Jose Water Company's groundwater production facilities are propelled by electric power. Over the last few years San Jose Water Company has installed standby power generators at eighteen of its strategic water production sites. In addition, the commercial office and operations control centers are also equipped with standby generators that allow critical distribution and customer service operations to continue during a power outage. The SCVWD also informed San Jose Water Company that its filter plants, which deliver imported water to San Jose Water Company, are also equipped with standby generators. In the event of a power outage, San Jose Water Company believes it will be able to prevent an interruption of service to customers for a limited period through pumping water with its standby generators and through the imported water from SCVWD.
Until 1989, San Jose Water Company had never found it necessary to impose mandatory water rationing. Except in a few isolated cases when service had been interrupted or curtailed because of power or equipment failures, construction shutdowns or other operating difficulties, San Jose Water Company had not at any prior time in its history interrupted or imposed mandatory curtailment of service to any type or class of customer. During the summer of 1989 through March 1993, rationing was imposed intermittently, to all customers based on request from SCVWD.
(1) (iv) Franchises
San Jose Water Company holds such franchises or permits in the communities it serves as it judges necessary to operate and maintain its facilities in the public streets.
(1) (v) Seasonal Factors
Water sales are seasonal in nature. The demand for water, especially by residential customers, is generally influenced by weather conditions. The timing of precipitation and climatic conditions can cause seasonal water consumption by residential customers to vary significantly.
(1) (x) Competition and Condemnation
San Jose Water Company is a public utility regulated by the CPUC and operates within a service area approved by the CPUC. The laws of the State of California provide that no other investor owned public utility may operate in San Jose Water Company's service area without first obtaining from the CPUC a certificate of public convenience and necessity. Past experience shows such a certificate will be issued only after demonstrating San Jose Water Company's service in such area is inadequate.
California law also provides that whenever a public agency constructs facilities to extend utility service to the service area of a privately owned public utility (like San Jose Water Company), such an act constitutes the taking of property and is conditioned upon payment of just compensation to the private utility.
Under the constitution and statutes of the State of California, municipalities, water districts and other public agencies have been authorized to engage in the ownership and operation of water systems. Such agencies are empowered to condemn properties operated by privately owned public utilities upon payment of just compensation and are further authorized to issue bonds (including revenue bonds) for the purpose of acquiring or constructing water systems. To the Company's knowledge, no municipality, water district or other public agency has pending any action to condemn any part of San Jose Water Company's system.
(1) (xii) Environmental Matters
San Jose Water Company maintains procedures to produce potable water in accordance with all applicable county, state and federal environmental rules and regulations. Additionally, San Jose Water Company is subject to environmental regulation by various other governmental authorities. See Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."
(1) (xiii) Employees
As of December 31, 2000, San Jose Water Company had 277 employees, of whom 62 were executive, administrative or supervisory personnel, and of whom 215 were members of unions. San Jose Water Company reached a three-year collective bargaining agreement with the Utility Workers of America, representing the majority of employees and the International Union of Operating Engineers, representing certain employees in the engineering department covering the years 2001 through 2003. Both groups are affiliated with the AFL-CIO.
(d) Financial Information about Foreign and Domestic Operations and Export Sales.
Substantially all of SJW Corp.'s revenue and expense are derived from operations located in the County of Santa Clara in the State of California.
Item 2.
Item 2. PROPERTIES
The properties of San Jose Water Company consist of a unified system of water production, storage, purification and distribution located in the County of Santa Clara in the State of California. In general, the property is comprised of franchise rights, water rights, necessary rights-of-way, approximately 7,000 acres of land held in fee (which is primarily non- developable watershed), impounding reservoirs with a capacity of approximately 2.256 billion gallons, diversion facilities, wells, distribution storage of approximately 240 million gallons and all water facilities, equipment and other property necessary to supply its customers.
San Jose Water Company maintains all of its properties in good operating condition in accordance with customary proper practice for a water utility. San Jose Water Company's well pumping stations have a production capacity of approximately 264 million gallons per day and the present capacity for taking purchased water is approximately 172 million gallons per day. The gravity water collection system has a physical delivery capacity of approximately 25 million gallons per day. During 2000, a maximum and average of 217 million gallons and 138 million gallons of water per day, respectively, were delivered to the system.
San Jose Water Company holds all its principal properties in fee, subject to current tax and assessment liens, rights-of-way, easements, and certain minor clouds or defects in title which do not materially affect their use.
SJW Land Company owns approximately eight acres of property adjacent to San Jose Water Company's general office facilities, approximately five undeveloped acres of land and commercial properties in the metropolitan San Jose area. The majority of the land adjacent to San Jose Water Company are used as surface parking facilities and generate over 50% of SJW Land Company's revenue. Under a ten-year long term lease, San Jose Water Company leased half of the office space from SJW Land Company's 1265 Bascom Avenue building as its engineering headquarters. Approximately 23% of SJW Land Company's revenue is generated from this commercial building. SJW Land Company also owns a 70% limited partnership interest in 444 West Santa Clara, L.P., a real estate limited partnership that owns and operates an office building.
Item 3.
Item 3. LEGAL PROCEEDINGS None
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None
PART II
Item 5.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information (1) (i) Exchange
SJW Corp.'s common stock is traded on the American Stock Exchange under the symbol "SJW".
(1) (ii) High and Low Sales Prices.
The information required by this item as to the high and low sales prices for SJW Corp.'s common stock for each quarter in the 2000 and 1999 fiscal years is contained in the section captioned "Market price range of stock" in the tables set forth in Note 11 of "Notes to Consolidated Financial Statements" in Part II, Item 8.
(b) Holders.
There were 856 record holders of SJW Corp.'s common stock on December 31, 2000.
(c) Dividends.
Quarterly dividends have been paid on SJW Corp.'s and its predecessor's common stock for 229 consecutive quarters and the quarterly rate has been increased during each of the last 33 years. The information required by this item as to the cash dividends paid on common stock in 2000 and 1999 is contained in the section captioned "Dividends per share" in the tables set forth in Note 11 of "Notes to Consolidated Financial Statements" in Part II, Item 8. Future dividends will be determined by the Board of Directors after consideration of various financial, economic and business factors.
Item 6.
Item 6. SELECTED FINANCIAL DATA
FIVE YEAR STATISTICAL REVIEW SJW CORP. AND SUBSIDIARIES 2000 1999 1998 1997 1996 - ----------------------------------------------------------------- CONSOLIDATED RESULTS OF OPERATIONS (in thousands) Operating revenue $123,157 117,001 106,010 110,084 102,593 Operating expense: Operation 75,008 67,676 57,454 61,382 57,231 Maintenance 6,881 6,638 6,909 7,087 6,851 Taxes 11,496 12,713 13,206 13,454 12,234 Depreciation and amortization 11,847 10,235 9,594 8,847 8,671 - ----------------------------------------------------------------- Total operating expense 105,232 97,262 87,163 90,770 84,987 - ----------------------------------------------------------------- Operating income 17,925 19,739 18,847 19,314 17,606 Interest expense, other income and deductions 7,260 3,855 2,829 4,098 (954) - ---------------------------------------------------------------- Net income 10,665 15,884 16,018 15,216 18,560 Dividends paid 7,491 7,379 7,419 7,228 7,163 - ---------------------------------------------------------------- Invested in the business $3,174 8,505 8,599 7,988 11,397 ================================================================= CONSOLIDATED PER SHARE DATA
Net income $3.50 5.20 5.05 4.80 5.75 Dividends paid $2.46 2.40 2.34 2.28 2.22 Shareholders' equity at year-end $47.40 47.25 45.19 42.13 37.86 =================================================================
CONSOLIDATED BALANCE SHEET (in thousands)
Utility plant $462,892 432,262 403,227 371,200 342,368 Less accumulated depreciation and amortization 139,396 129,828 122,809 114,851 107,584 - ----------------------------------------------------------------- Net utility plant 323,496 302,434 280,418 256,349 234,784 - ----------------------------------------------------------------- Nonutility property 9,979 10,133 11,360 7,301 7,287
Total assets 391,930 372,427 359,380 323,223 296,536 Capitalization: Shareholders' equity 144,325 143,894 143,149 133,553 120,028 Long-term debt (includes current maturities) 90,000 90,000 90,000 75,000 76,500 - ----------------------------------------------------------------- Total capitalization $234,325 233,894 233,149 208,553 196,528 =================================================================
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DESCRIPTION OF THE BUSINESS
SJW Corp. is a holding company with two wholly owned subsidiaries: San Jose Water Company and SJW Land Company. San Jose Water Company is a public utility in the business of providing water service to a population of approximately 985,000 in an area comprising about 138 square miles in the metropolitan San Jose area. SJW Land Company owns and operates a 900-space surface parking facility located adjacent to the San Jose Arena and also owns commercial buildings and several undeveloped real estate parcels in San Jose. SJW Corp. owns 1,099,952 shares of California Water Service Group.
THE MERGER
On October 28, 1999, SJW Corp. and American Water Works Company, Inc. (American Water) entered into an Agreement and Plan of Merger (Merger Agreement). SJW Corp. and American Water filed a joint application with the California Public Utilities Commission (CPUC), requesting approval to complete the transaction. The Merger Agreement set April 28, 2001 as the date after which either party could terminate the agreement if CPUC approval is not obtained.
In August 2000, the CPUC established a schedule for consideration of the proposed merger that contemplated a decision in April, 2001. In October, 2000 the CPUC Office of Ratepayer Advocates issued a report opposing the merger and questioning the benefits to ratepayers. Hearings started in November 2000 and have extended beyond the scheduled completion date. On February 20, 2001, the CPUC revised its ruling scheduling further hearing dates in March and April of 2001, and contemplating a CPUC meeting to consider the proposed decision in September 2001. Following the ruling setting forth the new schedule, American Water announced that it would terminate the Merger Agreement on April 28, 2001, because of regulatory uncertainties and delays, and offered to consent to mutual termination of the agreement.
On March 1, 2001, SJW Corp. Board of Directors decided that it would be in the best interest of the company to terminate the Merger Agreement, and accepted American Water's offer for mutual termination.
RESULTS OF OPERATIONS
CONSOLIDATED OPERATING REVENUE (in thousands) - ------------------------------ 2000 1999 1998 --------------------------------------------------------- San Jose Water Company $121,339 115,689 105,025 SJW Land Company 1,818 1,312 985 --------------------------------------------------------- $123,157 117,001 106,010 =========================================================
Consolidated operating revenue for 2000 increased $6,156,000 or 5% over 1999 mainly due to a 3% increase in water consumption, which contributed $2,638,000 to revenue. Rate increases and new customers contributed $3,306,000 and $778,000, respectively, to 2000 revenue. Included in the 2000 revenue was a provision of $1,072,000 for a refund due to customers. The refund reflected a regulatory adjustment on previously capitalized interest on utility plant under construction, which was disallowed by the CPUC. SJW Land Company's revenue improved due to increased parking lot and office rental activities.
Consolidated operating revenue for 1999 increased $10,991,000, or 10%, from 1998 mainly due to a 4% increase in water consumption and increased office rental activities. Rate increases and new customers contributed $6,048,000 and $752,000, respectively, to 1999's revenue.
CONSOLIDATED OPERATING EXPENSE (in thousands) - ------------------------------ 2000 1999 1998 ----------------------------------------------------- San Jose Water Company $94,174 86,276 76,559 SJW Land Company 713 944 566 SJW Corp. 2,936 1,168 353 ----------------------------------------------------- $97,823 88,388 77,478 =====================================================
Consolidated operating expense in 2000, excluding income taxes, increased $9,435,000, or 11%, in comparison with 1999 due to higher purchased water and pump tax rates, increased water consumption and additional administrative compensation accrued in conjunction with the proposed merger. Consolidated operating expense also included a regulatory adjustment of $621,000 of previously capitalized interest on utility plant under construction, which was disallowed by the CPUC.
Consolidated operating expense in 1999, excluding income taxes, increased 14% in comparison with 1998 due to increased water production.
SOURCES OF SUPPLY (million gallons) - ----------------- 2000 1999 1998 ------------------------------------------------ Purchased water 27,494 27,195 25,436 Ground water 19,788 18,438 16,379 Surface water 4,381 5,232 6,246 Reclaimed water 358 301 79 ------------------------------------------------ 52,021 51,166 48,140 ================================================
Water production in 2000 increased 855 million gallons, or 2%, from 1999. Water production in 1999 increased 3,105 million gallons, or 6%, over 1998. The changes are consistent with the related operating expenses.
The effective consolidated income tax rates for 2000, 1999 and 1998 were 41%, 41% and 40%, respectively. Refer to Note No. 6 of the "Notes to Consolidated Financial Statements" for the reconciliation of income tax expense to the amount computed by applying the federal statutory rate to income before income taxes.
OTHER INCOME AND EXPENSE
The 2000 dividend income increased $17,000, or 1%, over 1999 due to a $.01 per share increase in the California Water Service Group annual dividend.
San Jose Water Company's interest cost on long-term debt in 2000, including capitalized interest, remained consistent with 1999. San Jose Water Company's weighted average cost of long-term debt, including amortization of debt issuance costs, was 8.04% for the years ended December 31, 2000, 1999 and 1998.
In association with SJW Corp.'s proposed merger with American Water Works Company, Inc., certain merger-related expenses in the amount of $1,614,000 and $1,588,000 were incurred in 2000 and 1999, respectively.
Other income in 1999 and 1998 included gains on sale of nonutility properties to affiliated and non-affiliated parties.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL REQUIREMENTS
San Jose Water Company's budgeted capital expenditures for 2001 compared to 2000, exclusive of capital expenditures financed by customer contributions and advances, are as follows:
BUDGETED CAPITAL EXPENDITURES (in thousands) - ----------------------------- 2001 2000 -------------------------------------------------------- Source of supply $157 1% $ 72 -% Reservoirs and tanks 4,817 20% 3,470 14% Pump stations and equipment 2,258 9% 1,391 6% Distribution system 14,987 62% 15,286 62% Equipment and other 1,778 8% 4,332 18% -------------------------------------------------------- $23,997 100% $24,551 100% ========================================================
The 2001 capital budget is concentrated in main replacements and facility relocation. Approximately $15 million will be spent to systematically renew San Jose Water Company's aging infrastructure and $2.6 million in upgrading the company's water treatment facilities.
San Jose Water Company expects to incur approximately $120 million, exclusive of customer contributions and advances, in capital expenditures over the next five years. The company's actual capital expenditures may vary from its projection due to changes in the expected demand for services, weather patterns, actions by governmental agencies and general economic conditions. Total additions to utility plant normally exceed company-financed additions by several million dollars because certain new facilities are constructed using advances from developers and contributions in aid of construction.
Most of San Jose Water Company's distribution system has been constructed over the last 40 years. Expenditure levels for renewal and modernization of this part of the system will grow at an increasing rate as these components reach the end of their useful lives. Additionally, in most cases, replacement cost will significantly exceed the original installation cost of the retired asset due to increases in the cost of goods and services.
SOURCES OF CAPITAL
San Jose Water Company's ability to finance future construction programs and sustain dividend payments depends on its ability to attract external financing and maintain or increase internally generated funds. The level of future earnings and the related cash flow from operations is dependent, in large part, upon the timing and outcome of regulatory proceedings.
Over the past five years, SJW Corp. has paid its shareholders, in the form of dividends, an average of 50% of its net income. The remaining earnings have been reinvested. Capital requirements not funded by earnings are expected to be funded through external financing in the form of unsecured senior notes or a commercial bank line of credit. As of December 31, 2000, SJW Corp. and its subsidiaries had $28.8 million of unused line of credit and over $50 million of borrowing capacity under the terms of the senior note agreements.
San Jose Water Company's financing activity is designed to achieve a capital structure consistent with regulatory guidelines of approximately 50% debt and 50% equity.
In 1998, San Jose Water Company issued $15 million in a Series E unsecured 30-year senior note.
FACTORS THAT MAY AFFECT FUTURE RESULTS
REGULATED OPERATIONS
The results of operations of San Jose Water Company generally depend on the following factors: (1) regulation, (2) surface water supply and (3) operation and maintenance expense.
REGULATION
Principally all the operating revenue of San Jose Water Company results from the sale of water at rates authorized by the CPUC. The CPUC sets rates that are intended to provide revenue sufficient to recover operating expenses and produce a reasonable return on common equity. The company's most recent rate case was filed in January 2000. Hearings were completed in the summer of 2000 and the administrative law judge rendered a proposed decision in November 2000. The company is expected to receive the Commission's final decision on the rate increase in the spring of 2001.
In December 2000, San Jose Water Company received a CPUC decision requiring the company to reduce its utility plant by $621,000 of previously capitalized interest on utility plant under construction. San Jose Water Company also accrued $1,072,000 as a refund due to customers as a result of the utility plant reduction. This decision settled the capitalized interest in dispute and the regulatory mechanism regarding capitalized interest in the future.
SURFACE WATER SUPPLY
The level of surface water available in each year depends on the amount of rainfall and run-off collected in San Jose Water Company's Santa Cruz Mountains reservoirs. In a normal year, surface supply provides 6-8% of the total water supply of the system. Surface water is a less costly source of water and its availability may significantly impact the results of operations.
OPERATION AND MAINTENANCE EXPENSE
San Jose Water Company reached an agreement with its unionized personnel covering 2001 through 2003. The agreement includes a 4% wage increase for both years and minor benefit modifications.
ENVIRONMENTAL MATTERS
San Jose Water Company's operations are subject to water quality and pollution control regulations issued by the United States Environmental Protection Agency (EPA), the California Department of Health Services (DHS) and the California Regional Water Quality Control Board. The company is also subject to environmental laws and regulations administered by other state and local regulatory agencies.
Under the federal Safe Drinking Water Act (SDWA), San Jose Water Company is subject to regulation by the EPA of the quality of water it sells and treatment techniques it uses to make the water potable. The EPA promulgates nationally applicable maximum contaminant levels (MCLs) for drinking water. San Jose Water Company is currently in compliance with all of the 87 primary MCLs promulgated to date. However, the EPA and DHS have continuing authority to issue additional regulations under the SDWA. San Jose Water Company has implemented monitoring activities and installed specific water treatment improvements enabling it to comply with all existing MCLs and plan for compliance with future drinking water regulations. On January 22, 2001, the EPA finalized new regulations revising the primary standard for arsenic from 50 parts per billion (ppb) down to 10 ppb. San Jose Water Company has monitored its water supply sources for arsenic and is in compliance with the new regulations.
Other state and local environmental regulations apply to San Jose Water Company's operations and facilities. These regulations relate primarily to the handling, storage and disposal of hazardous materials. San Jose Water Company is currently in compliance with state and local regulations governing hazardous materials, point and non-point source discharges and the warning provisions of the California Safe Drinking Water and Toxic Enforcement Act of 1986.
Future drinking water regulations may require increased monitoring, additional treatment of underground water supplies, fluoridation of all supplies, more stringent performance standards for treatment plants and procedures to reduce levels of disinfection by-products. San Jose Water Company continues to seek to establish mechanisms for recovery of government-mandated environmental compliance costs. However, currently, there are limited regulatory mechanisms and procedures available to the company for the recovery of such costs and there can be no assurance that such costs will be fully recovered.
NONREGULATED OPERATIONS
The investment in California Water Service Group is expected to produce 2001 pre-tax dividend income and cash flow of approximately $1.2 million. SJW Land Company's parking revenue is largely dependent upon the level of events and activities at the San Jose Arena which is located adjacent to its parking facility. SJW Land Company's commercial property and the property developed by the limited partnership, of which SJW Land Company owns a 70% limited interest, are fully leased.
The operating results of the City of Cupertino lease are largely dependent on the level of operation, maintenance and capital costs incurred. In January 2000, San Jose Water Company completed its phase-in of its regular water service rates within the City of Cupertino. Further changes in water service rates will be subject to the approval of the Cupertino City Council.
Item 7A.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
SJW Corp. has no derivative financial instruments, financial instruments with significant off-balance sheet risks, or financial instruments with concentrations of credit risk. There is no material sensitivity to changes in market rates and prices.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial Statements:
Independent Auditors' Report - ---------------------------- The Shareholders and Board of Directors SJW Corp.
We have audited the accompanying consolidated balance sheets of SJW Corp. and subsidiaries (the Company) as of December 31, 2000 and 1999, and the related consolidated statements of income and comprehensive income, changes in shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2000. In connection with our audits of the consolidated financial statements, we also have audited the accompanying financial statement schedule. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SJW Corp. and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
KPMG LLP Mountain View, California January 22, 2001 except as to Note No. 10, which is as of March 1, 2001
CONSOLIDATED BALANCE SHEETS SJW CORP. AND SUBSIDIARIES December 31, (in thousands, except share and per share data)
ASSETS 2000 1999 - --------------------------------------------------------------- Utility plant $455,051 424,421 Intangible assets 7,841 7,841 - --------------------------------------------------------------- 462,892 432,262 Less accumulated depreciation and amortization 139,396 129,828 - ---------------------------------------------------------------
323,496 302,434 - --------------------------------------------------------------- Nonutility property 9,979 10,133
Current assets: Cash and equivalents 783 124 Accounts receivable: Customers 6,064 5,858 Other 361 215 Accrued utility revenue 6,700 6,507 Materials and supplies, at average cost 430 382 Prepaid expenses 914 714 - --------------------------------------------------------------- 15,252 13,800 - --------------------------------------------------------------- Other assets: Investment in California Water Service Group 29,699 33,342 Investment in joint venture 1,237 1,210 Unamortized debt issuance and reacquisition costs 3,719 3,880 Goodwill 1,829 1,914 Regulatory assets 5,256 5,177 Other 1,463 537 - --------------------------------------------------------------- 43,203 46,060 - --------------------------------------------------------------- $391,930 372,427 ===============================================================
CONSOLIDATED BALANCE SHEETS (Continued) SJW CORP. AND SUBSIDIARIES December 31, (in thousands, except share and per share data)
CAPITALIZATION AND LIABILITIES 2000 1999 - --------------------------------------------------------------- CAPITALIZATION: Shareholders' equity: Common stock, $3.125 par value; authorized 6,000,000 shares; issued 3,045,147 shares in 2000 and 1999 $9,516 9,516 Additional paid-in capital 12,357 12,357 Retained earnings 116,232 113,058 Accumulated other comprehensive income 6,220 8,963 - --------------------------------------------------------------- 144,325 143,894 Long-term debt 90,000 90,000 - --------------------------------------------------------------- 234,325 233,894 - --------------------------------------------------------------- CURRENT LIABILITIES: Line of credit 11,200 3,300 Accrued pump taxes and purchased water 4,629 3,072 Accounts payable 351 476 Accrued interest 2,789 2,751 Accrued taxes 266 3,849 Accrued employee compensation 3,024 620 Refund due to customers 1,072 - Other current liabilities 3,411 2,774 - --------------------------------------------------------------- 26,742 16,842 - --------------------------------------------------------------- DEFERRED INCOME TAXES 22,563 25,947 UNAMORTIZED INVESTMENT TAX CREDITS 2,150 2,205 ADVANCES FOR CONSTRUCTION 54,260 50,076 CONTRIBUTIONS IN AID OF CONSTRUCTION 45,962 40,669 DEFERRED REVENUE 1,519 1,397 OTHER NONCURRENT LIABILITIES 4,409 1,397 COMMITMENTS - --------------------------------------------------------------- $391,930 372,427 =============================================================== See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME SJW CORP. AND SUBSIDIARIES Years ended December 31, (In thousands, except share and per share data) 2000 1999 1998 - ---------------------------------------------------------------- OPERATING REVENUE $123,157 117,001 106,010 OPERATING EXPENSE: Operation: Purchased water $29,709 27,987 24,124 Power 4,121 3,756 3,259 Pump taxes 18,140 15,502 12,661 Other 23,038 20,431 17,410 Maintenance 6,881 6,638 6,909 Property taxes and other nonincome taxes 4,087 3,839 3,521 Depreciation and amortization 11,847 10,235 9,594 Income taxes 7,409 8,874 9,685 - ---------------------------------------------------------------- 105,232 97,262 87,163 - ---------------------------------------------------------------- OPERATING INCOME 17,925 19,739 18,847
OTHER (EXPENSE) INCOME: Interest on long-term debt (6,434) (6,552) (5,629) Merger related costs (1,614) (1,588) - Gain on sale of nonutility property, net - 3,064 1,629 Dividends 1,210 1,193 1,177 Other (422) 28 (6) - ---------------------------------------------------------------- NET INCOME $10,665 15,884 16,018 ================================================================ OTHER COMPREHENSIVE INCOME: Unrealized gain (loss) on investment, net of taxes of $1,493 in 2000, $451 in 1999, and $804 in 1998 (2,150) (649) 1,155 Minimum pension liability, adjustment net of taxes of $407 (593) - - - ---------------------------------------------------------------- Other comprehensive income (loss), net (2,743) (649) 1,155 - ---------------------------------------------------------------- COMPREHENSIVE INCOME $7,922 15,235 17,173 ================================================================ BASIC EARNINGS PER SHARE $3.50 5.20 5.05 ================================================================ COMPREHENSIVE INCOME PER SHARE $2.60 4.99 5.42 ================================================================ WEIGHTED AVERAGE SHARES OUTSTANDING 3,045,147 3,054,980 3,169,839 ================================================================ See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY SJW CORP. AND SUBSIDIARIES (in thousands) Accumulated Total Additional Other Com- Share- Common Paid-in Retained prehensive holders' Stock Capital Earnings Income Equity - ----------------------------------------------------------------- BALANCES, DECEMBER 31, 1997 $9,907 19,235 95,954 8,457 133,553 Net income - - 16,018 - 16,018 Other comprehensive income - unrealized gain on investment, net of tax effect of $804 - - - 1,155 1,155 ------ Comprehensive income 17,173 Purchase and retirement of common stock (8) (150) - - (158) Dividends paid - - (7,419) - (7,419) - ----------------------------------------------------------------- BALANCES, DECEMBER 31, 1998 $9,899 19,085 104,553 9,612 143,149 Net income - - 15,884 - 15,884 Other comprehensive loss - unrealized loss on investment, net of tax effect of $451 - - - (649) (649) ------ Comprehensive Income 15,235 Purchase and retirement of common stock (383) (6,728) - - (7,111) Dividends paid - - (7,379) - (7,379) - ----------------------------------------------------------------- BALANCES, DECEMBER 31, 1999 $9,516 12,357 113,058 8,963 143,894 Net income - - 10,665 - 10,665 Other comprehensive loss - unrealized loss on investment, net of tax effect of $1,493 - - - (2,150) (2,150) Minimum pension liability adjustment, net of tax effect of $407 - - - (593) (593) ------- Comprehensive Income 7,922 Dividends paid - - (7,491) - (7,491) - ----------------------------------------------------------------- BALANCES, DECEMBER 31, 2000 $9,516 12,357 116,232 6,220 144,325 ================================================================= See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS SJW CORP. AND SUBSIDIARIES
Years ended December 31, (in thousands) 2000 1999 1998 - ---------------------------------------------------------------- OPERATING ACTIVITIES: Net income $10,665 15,884 16,018 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,847 10,235 9,594 Deferred income taxes and credits (1,538) 813 1,648 Gain on sale of nonutility property, net - (3,064) (1,629) Changes in operating assets and liabilities: Accounts receivable and accrued utility revenue (545) (670) (1,115) Accounts payable and other current liabilities 512 (2,008) 1,628 Accrued employee compensation 2,404 620 - Refund due to customers 1,072 - - Accrued pump taxes and purchased water 1,557 649 351 Accrued taxes (3,583) 389 772 Other changes, net 1,643 732 (333) - ---------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 24,034 23,580 26,934 - ---------------------------------------------------------------- INVESTING ACTIVITIES: Additions to utility plant (33,671) (32,294) (34,356) Cost to retire utility plant, net of salvage (678) (1,233) (485) Additions to nonutility property (94) (68) (4,360) Proceeds from sale of nonutility property - 5,230 3,073 - ---------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (34,443) (28,365) (36,128) - ---------------------------------------------------------------- FINANCING ACTIVITIES: Dividends paid (7,491) (7,379) (7,419) Repayment of line of credit (11,500) (4,500) (12,900) Borrowings from line of credit 19,400 7,800 12,900 Advances and contributions in aid of construction 12,276 9,655 7,477 Refunds of advances (1,617) (1,622) (1,472) Proceeds from issuance of long-term debt - - 15,000 Purchase and retirement of common stock - (7,111) (158) - ---------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 11,068 (3,157) 13,428 - ---------------------------------------------------------------- NET CHANGE IN CASH AND EQUIVALENTS 659 (7,942) 4,234 CASH AND EQUIVALENTS, BEGINNING OF YEAR 124 8,066 3,832 - ---------------------------------------------------------------- CASH AND EQUIVALENTS, END OF YEAR $783 124 8,066 ================================================================ Cash paid during the year for: Interest $ 7,413 7,099 6,005 Income taxes $12,838 8,027 8,238
See accompanying Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2000, 1999, and 1998. (Dollars in thousands, except share data)
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts of SJW Corp. and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated. SJW Corp.'s principal subsidiary, San Jose Water Company, is a regulated California water utility providing water service to the greater metropolitan San Jose area. San Jose Water Company's accounting policies comply with the applicable uniform system of accounts prescribed by the California Public Utilities Commission (CPUC) and conform to generally accepted accounting principles for rate-regulated public utilities. More than 90% of San Jose Water Company's revenue is derived from the sale of water to residential and business customers.
SJW Land Company owns and operates a 900-space surface parking facility adjacent to the San Jose Arena, commercial properties in San Jose, a 70% limited partnership interest in 444 West Santa Clara Street, L.P., and several undeveloped real estate parcels in San Jose.
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Utility Plant - ------------- The cost of additions, replacements and betterments to utility plant is capitalized. The amount of interest capitalized in 2000, 1999, and 1998 was $532, $414, and $378, respectively. Construction in progress was $5,921, $3,602, and $4,631 at December 31, 2000, 1999, and 1998, respectively.
Depreciation is computed using the straight-line method over the estimated service lives of the assets, ranging from 5 to 75 years. The cost of utility plant retired, including retirement costs (less salvage), is charged to accumulated depreciation and no gain or loss is recognized.
Rate-regulated enterprises are required to charge a regulatory asset to earnings if and when that asset no longer meets the criteria for being recorded as a regulatory asset. In 2000, San Jose Water Company included in its operating expense a regulatory adjustment of $621 of previously capitalized interest on utility plant under construction which was disallowed by the CPUC.
Intangible Assets - ----------------- Intangible assets consist of leasehold acquisition costs for the City of Cupertino municipal water system and other intangibles associated with the operation of San Jose Water Company. All intangible assets are recorded at cost and are amortized using the straight-line method over the legal or estimated economic life of the asset, whichever is shorter, not to exceed 40 years.
Nonutility Property - ------------------- Nonutility property is recorded at cost and consists primarily of land, buildings and parking facilities. Depreciation is computed using accelerated depreciation methods over the estimated useful lives of the assets, ranging from 5 to 39 years.
Cash and Equivalents - -------------------- Cash and equivalents include certain highly liquid investments with remaining maturities of three months or less when purchased. Cash equivalents are stated at cost plus accrued interest, which approximates fair value.
Financial Instruments - --------------------- The carrying amount of SJW Corp.'s current assets and liabilities that are considered financial instruments approximates their fair value as of dates presented due to the short maturity of these instruments.
Investment in California Water Service Group - -------------------------------------------- SJW Corp.'s investment in California Water Service Group is reported at quoted market price, with the unrealized gain or loss reported as other comprehensive income.
Comprehensive Income - -------------------- The accumulated balance of other comprehensive income is reported in the equity section of the financial statements and includes the unrealized gain or loss on the California Water Service Group investment, and an additional minimum pension liability adjustment.
Other Assets - ------------ Debt reacquisition costs are amortized over the term of the new debt. Debt issuance costs are amortized over the life of each issue. The excess cost over fair market value of net assets acquired is recorded as goodwill and amortized over the periods estimated to be benefited, not exceeding 40 years. Management periodically evaluates the recoverability of goodwill by assessing whether the amortization of the balance over the remaining life can be recovered through expected and undiscounted future cash flows to determine if an impairment has occurred.
Income Taxes - ------------ Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the effect of temporary differences between financial and tax reporting. Deferred tax assets and liabilities are measured using enacted tax rates applicable to future years.
To the extent that the tax benefits of the temporary differences have previously been passed through to customers through lower water rates, management anticipates that the payment of the future tax liabilities resulting from the reversal of the temporary differences will be recoverable through rates. Therefore, a regulatory asset has been recorded for the portion of net deferred tax liabilities which are expected to be recovered through future rates. Although realization is not assured, management believes it is more likely than not that all of the regulatory asset will be realized.
To the extent permitted by the CPUC, investment tax credits resulting from utility plant additions are deferred and amortized over the estimated useful lives of the related property.
Advances for Construction and Contributions in Aid of Construction - ------------- Advances for construction received after 1981 are being refunded ratably over 40 years. Prior customer advances are refunded based on 22% of related revenues. Estimated refunds for 2001 are $1,690.
Contributions in aid of construction represent funds received from developers that are not refundable under CPUC regulations. Depreciation applicable to utility plant constructed with these contributions is charged to contributions in aid of construction.
Customer advances and contributions in aid of construction received subsequent to 1986 and prior to June 12, 1996 generally must be included in federal taxable income. Taxes paid relating to advances and contributions are recorded as deferred tax assets for financial reporting purposes and are amortized over 40 years for advances, and over the tax depreciable life of the related asset for contributions. Receipts subsequent to June 12, 1996 are generally exempt from federal taxable income.
Advances and contributions received subsequent to 1991 and prior to 1997 are included in state taxable income.
Revenue - ------- Revenue of San Jose Water Company includes amounts billed to customers and unbilled amounts based on estimated usage from the latest meter reading to the end of the year. 2000, 1999 and 1998 operating revenue include $2,706, $2,392 and $2,078, respectively, from the lease operation of the City of Cupertino. 2000 revenue also included a provision of $1,072 for a refund due to customers. The refund reflected a regulatory adjustment on previously capitalized interest on utility plant under construction that was disallowed by the CPUC.
Earnings Per Share - ------------------ Basic earnings per share and comprehensive income per share are calculated using income available to common shareholders and comprehensive income, respectively, divided by the weighted average number of shares outstanding during the year. SJW Corp. has no dilutive securities, and accordingly, diluted earnings per share is not shown.
Business Segment Information - ---------------------------- SJW Corp. and its subsidiaries operate predominantly in one reportable business segment of providing water utility service to its customers. Nonutility revenue, assets and net income do not have a material effect on SJW Corp.'s financial condition and results of operations.
NOTE 2
CAPITALIZATION
At December 31, 2000 and 1999, 176,407 shares of $25 par value preferred stock were authorized and unissued.
In 1999 and 1998, SJW Corp. repurchased 122,400 and 2,800 shares, respectively, of its outstanding common stock at the prevailing market price in the open market at an aggregate cost of $7,111 and $158, respectively. All repurchased shares have been canceled and are considered authorized and unissued.
NOTE 3
LINE OF CREDIT
SJW Corp. and its subsidiaries have available an unsecured bank line of credit, allowing aggregate short-term borrowings of up to $40,000. This line of credit bears interest at variable rates and expires on May 31, 2001. The following table represents borrowings under these bank lines of credits:
2000 1999 1998 ----------------------------------------------------------- Maximum short term borrowing $11,200 3,400 4,700 Average amount outstanding 5,847 2,708 947 Weighted average interest rate 7.6% 6.1% 6.4% Interest rate at December 31 7.4% 7.1% - -----------------------------------------------------------
NOTE 4
GAIN ON SALE OF NONUTILITY PROPERTY
In December 1999, SJW Land Company sold nonutility property to a company partially owned by a director of SJW Corp., receiving consideration of $5,250 in cash. The transaction resulted in a gain of $3,064, net of income tax expense of $2,107. The transaction was negotiated at arms length supported by independent appraisals.
In June 1998, SJW Corp. recognized a gain of $1,629, net of income taxes of $1,132, from the sale of nonutility property, receiving as consideration a nonutility investment property with a fair value of $3,595.
NOTE 5
LONG-TERM DEBT
Long-term debt as of December 31 was as follows:
Description Due Date 2000 1999 ------------------------------------------ Senior notes: A 8.58% 2022 $20,000 20,000 B 7.37% 2024 30,000 30,000 C 9.45% 2020 10,000 10,000 D 7.15% 2026 15,000 15,000 E 6.81% 2028 15,000 15,000 ------------------------------------------ Total long-term debt $90,000 90,000 ==========================================
Senior notes held by institutional investors are unsecured obligations of San Jose Water Company and require interest-only payments until maturity. To minimize issuance costs, all of the company's debt has historically been privately placed. The fair value of long-term debt as of December 31, 2000 and 1999 was approximately $115,298 and $100,707, respectively, based on the amount of essentially risk-free assets that would have to be placed in trust to extinguish these obligations.
NOTE 6
INCOME TAXES
The following table reconciles income tax expense to the amount computed by applying the federal statutory rate of 35% to income before income taxes: 2000 1999 1998 - ---------------------------------------------------------------- "Expected" federal income tax $6,326 9,402 9,392 Increase (decrease) in taxes attributable to: Utility plant basis (69) (6) 224 State taxes, net of federal income tax benefit 1,039 1,544 1,542 Dividend received deduction (296) (292) (288) Other items, net 409 333 (53) - ---------------------------------------------------------------- $7,409 10,981 10,817 ================================================================ The components of income tax expense were: 2000 1999 1998 - ---------------------------------------------------------------- Current: Federal $7,070 7,931 6,611 State 2,131 2,417 2,124
Deferred: Federal (1,264) 686 1,885 State (528) (53) 197 - ---------------------------------------------------------------- $7,409 10,981 10,817 ================================================================ Income taxes included in operating expense $7,409 8,874 9,685 Income taxes included in gain on sale of nonutility property - 2,107 1,132 - ---------------------------------------------------------------- $7,409 10,981 10,817 ================================================================ The components of the net deferred tax liability as of December 31 were as follows: 2000 1999 - ---------------------------------------------------------------- Deferred tax assets: Advances and contributions $14,429 13,994 Unamortized investment tax credit 1,157 1,187 Pensions and postretirement benefits 993 154 California franchise tax 792 766 Other 2,207 595 - ---------------------------------------------------------------- Total deferred tax assets 19,578 16,696 - ---------------------------------------------------------------- Deferred tax liabilities: Utility plant 28,819 27,827 Investment 9,922 11,415 Debt reacquisition costs 1,140 1,190 Other 2,260 2,211 - ---------------------------------------------------------------- Total deferred tax liabilities 42,141 42,643 Net deferred tax liabilities $22,563 25,947 ================================================================
Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not SJW Corp. will realize the benefits of these deductible differences.
NOTE 7
COMMITMENTS
San Jose Water Company purchases water from Santa Clara Valley Water District (SCVWD). Delivery schedules for purchased water are based on a contract year beginning July 1, and are negotiated every three years under terms of a master contract with SCVWD expiring in 2051. Based on current prices and estimated deliveries, San Jose Water Company expects to purchase a minimum of 90% of the delivery schedule, or 19,400 million gallons ($22,600) of water, from SCVWD in the contract year ending June 30, 2001.
In 1997, San Jose Water Company entered into a 25-year lease agreement with the City of Cupertino to operate the City's municipal water system. Under the terms of the lease agreement, San Jose Water Company assumed responsibility for all maintenance, operating and capital costs, while receiving all payments for water service. Water service rates are subject to approval by the Cupertino City Council.
NOTE 8
JOINT VENTURE
In September, 1999, SJW Land Company formed 444 West Santa Clara Street, L.P., a limited partnership, with a real estate development firm whereby SJW Land contributed real property in exchange for a 70% limited partnership interest. The real estate development firm is partially owned by an individual who also serves as a director of SJW Corp. A commercial building is constructed on the partnership property and is leased to an international real estate firm under a twelve-year long-term lease. The partnership is being accounted for under the equity method of accounting. Included in the consolidated statements of income and comprehensive income is SJW Land's share of the partnership earnings of $96 in 2000.
NOTE 9
EMPLOYEE BENEFIT PLANS
Pension Plans - ------------- San Jose Water Company sponsors noncontributory defined benefit pension plans. Benefits under the plans are based on an employee's years of service and highest consecutive three years of compensation. Company policy is to contribute the net periodic pension cost to the extent it is tax deductible.
San Jose Water Company has a Supplemental Executive Retirement Plan, which is a defined benefit plan under which the company will pay supplemental pension benefits to key executives in addition to the amounts received under the retirement plan. The annual cost of this plan has been included in the determination of the net periodic benefit cost shown below. The plan, which is unfunded, had a projected benefit obligation of $9,651, $2,120, $1,721 and as of December 31, 2000, 1999 and 1998, respectively, and net periodic pension cost of $1,818, $290 and $196, for 2000, 1999 and 1998, respectively.
Deferral Plan - ------------- San Jose Water Company sponsors a salary deferral plan that allows employees to defer and contribute a portion of their earnings to the plan. Contributions, not to exceed set limits, are matched by the company. Company contributions were $607, $596 and $433, in 2000, 1999 and 1998, respectively.
Other Postretirement Benefits - -----------------------------
In addition to providing pension and savings benefits, San Jose Water Company provides health care and life insurance benefits for retired employees. The plan is a flat dollar plan which is unaffected by variations in health care costs.
Net periodic cost for the defined benefit plans and other postretirement benefits was:
PENSION BENEFITS OTHER BENEFITS - ----------------------------------------------------------------- 2000 1999 1998 2000 1999 1998 - -----------------------------------------------------------------
Weighted-Average % % % % % % Assumptions as of Dec. 31 Discount rate 7.75 8.00 6.75 7.75 8.00 6.75 Expected return on plan assets 8.00 8.00 8.00 8.00 8.00 8.00 Rate of compensation increase 4.00 4.00 4.00 n.a. n.a. n.a. - ---------------------------------------------------------------- Components of Net Periodic Benefit Cost Service cost $ 950 1,105 875 $ 38 46 36 Interest cost $2,591 1,966 1,731 114 103 91 Expected return on assets (2,834) (2,584) (2,386) (31) (27) (25) Amortization of transition obligation 3 3 3 56 56 56 Amortization of prior service cost 258 219 190 16 16 - Recognized actuarial gain 244 (188) (274) (13) (3) (9) - ---------------------------------------------------------------- Net periodic benefit cost $1,212 521 139 $180 191 149 ================================================================= The actuarial present value of benefit obligations and the funded status of San Jose Water Company's defined benefit pension and other postretirement plans as of December 31 were as follows:
PENSION BENEFITS OTHER BENEFITS - ----------------------------------------------------------------- 2000 1999 1998 2000 1999 1998 Change in Benefit Obligation Benefit obligation at beginning of year $26,749 27,912 25,625 $1,258 1,536 1,437 Service cost 950 1,105 875 38 46 36 Interest cost 2,591 1,966 1,731 114 103 91 Amendments - 629 863 - - 101 Actuarial (gain) loss 7,943 (3,553) 56 258 (335) (50) Benefits paid (1,848) (1,310) (1,238) (99) (92) (79) - ----------------------------------------------------------------- Benefit obligation at end of year $36,385 26,749 27,912 $1,569 1,258 1,536 ================================================================= 2000 1999 1998 2000 1999 1998 - ----------------------------------------------------------------- Change in Plan Assets Fair value of assets at beginning of year $36,088 32,880 30,336 $439 391 350 Actual return on plan assets 3,016 3,378 3,618 22 18 16 Employer contributions 166 1,140 - 101 108 92 Benefits paid (1,848) (1,310) (1,074) (79) (78) (67) - ----------------------------------------------------------------- Fair value of assets at end of year $37,422 36,088 32,880 $ 483 439 391 ================================================================= Funded Status Plan assets less benefit obligation $1,038 9,339 4,968 $(1,086) (819)(1,145) Unrecognized transition obligation 209 212 215 622 679 735 Unamortized prior service cost 2,370 2,628 2,219 70 86 101 Unrecognized actuarial gain (4,078)(11,595) (7,436) (235) (583) (246) - ----------------------------------------------------------------- Prepaid (accrued) benefit cost $(461) 584 (34) $(629) (637) (555) ================================================================
NOTE 10
The Merger
On October 28, 1999, SJW Corp. and American Water Works Company, Inc. (American Water) entered into an Agreement and Plan of Merger (Merger Agreement). SJW Corp. and American Water filed a joint application with the CPUC requesting its approval to complete the transaction.
On February 20, 2000, the CPUC issued a revised schedule for consideration of the proposed merger that would allow for a decision in September 2001. Following the ruling setting forth the new schedule, American Water announced that it would terminate the Merger Agreement on April 28, 2001, the date after which either party has the right to terminate the Merger Agreement, because of regulatory uncertainties and delays, and offered to consent to mutual termination of the agreement. On March 1, 2001, SJW Corp's Board of Directors decided that it would be in the best interest of the company to terminate the Merger Agreement, and accepted American Water's offer for mutual termination. NOTE 11
UNAUDITED QUARTERLY FINANCIAL DATA
Summarized quarterly financial data is as follows:
2000 Quarter ended - ----------------------------------------------------------------- March June September December - ----------------------------------------------------------------- Operating revenue $23,537 33,064 39,181 27,375 Operating income 2,981 5,632 6,448 2,864 Net income 1,327 2,722 4,960 1,656 Comprehensive income (loss) (3,540) 3,655 6,582 1,225 Basic earnings per share 0.44 0.89 1.63 0.54 Comprehensive income (loss) per share (1.16) 1.20 2.16 0.40 Market price range of stock: High 119.75 119.38 121.94 119.81 Low 108.00 113.00 117.25 95.00 Dividends per share .615 .615 .615 .615
1999 Quarter ended - ----------------------------------------------------------------- March June September December - ----------------------------------------------------------------- Operating revenue $21,067 30,188 37,661 28,085 Operating income 3,158 5,548 6,790 4,243 Net income 1,781 4,075 5,409 4,619 Comprehensive income (loss) (2,640) 5,130 6,220 6,525 Basic earnings per share 0.58 1.34 1.78 1.52 Comprehensive income (loss) per share (0.86) 1.68 2.04 2.14 Market price range of stock: High 65.00 81.50 93.50 121.00 Low 57.25 60.38 75.50 87.75 Dividends per share .60 .60 .60 .60
FINANCIAL STATEMENT SCHEDULE SJW CORP. Schedule II ----------- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Description 2000 1999 1998 - ---------------------------------------------------------------- Allowance for doubtful accounts Balance, beginning of period $100,000 100,000 100,000 Charged to expense 180,480 120,145 131,464 Accounts written off (215,570) (155,022) (169,646) Recoveries of accounts written off 35,090 34,877 38,182 - ---------------------------------------------------------------- Balance, end of period $100,000 100,000 100,000 ================================================================ Reserve for self insurance Balance, beginning of period $707,025 707,100 589,702 Charged to expense 80,000 320,000 240,000 Payments (125,778) (320,075) (122,602) - ---------------------------------------------------------------- Balance, end of period $661,247 707,025 707,100 ================================================================
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS
Directors of the Registrant
A brief biography of each director (including the director's business experience during the past 5 years) is set forth below. All directors are also directors of San Jose Water Company and of SJW Land Company.
Mark L. Cali, Attorney at Law, with the firm Clark, Cali and Negranti, LLP since December 1996. Formerly, he was with the firm Bledsoe, Cathcart, Diestel, Livingston, and Pedersen from October 1994 through November 1996 and with Jencks & Hunt from May 1994 through October 1994. Mr. Cali, age 35, has served as a director of SJW Corp., San Jose Water Company and SJW Land Company since 1992.
J. Philip DiNapoli, Attorney at Law, Chairman of Comerica California Inc. (California bank holding company). He serves as a director of Comerica, Inc. (bank holding company) and Comerica Bank-California (bank). He served as Chairman of Citation Insurance Company (Workers Compensation specialty carrier) until November 20, 1996. He is also the owner of DiNapoli Development Company (real estate development company). Mr. DiNapoli, age 61, is a member of the Audit Committee and has served as a director of SJW Corp., San Jose Water Company and SJW Land Company since 1989.
Drew Gibson, Principal of Gibson Speno LLC (real estate development and investment company) and Chairman of the Board of the Gibson Speno Management Company (real estate management company). He has served as a director of Comerica Bank- California (California bank holding company) and is currently a Director of Celluphone, Inc. (Los Angeles based cellular agent). Mr. Gibson, age 58, is a member of the Audit and Executive Compensation Committees and has served as a director of SJW Corp., San Jose Water Company and SJW Land Company since 1986.
Ronald R. James, President Emeritus of the San Jose Chamber of Commerce (business promotion organization), formerly President and Chief Executive Officer of the Chamber. Mr. James, age 72, is a member of the Audit and Executive Compensation Committees and has served as a director of San Jose Water Company since 1974, and of SJW Corp. and SJW Land Company since 1985.
George E. Moss, Vice Chairman of the Board of Roscoe Moss Manufacturing Company (manufacturer of steel water pipe and well casing). Mr. Moss was formerly President of the Roscoe Moss Company (holding company). Mr. Moss, age 69, is a member of the Executive Compensation Committee and has served as a director of San Jose Water Company since 1984, and of SJW Corp. and SJW Land Company since 1985.
Roscoe Moss, Jr., Chairman of the Board of Roscoe Moss Manufacturing Company (manufacturer of steel water pipe and well casing). Mr. Moss was formerly Chairman of the Board of Roscoe Moss Company (holding company). Mr. Moss, age 71, is a member of the Executive and Executive Compensation Committees and has served as a director of San Jose Water Company since 1980, and of SJW Corp. and SJW Land Company since 1985.
W.R. Roth, President and Chief Executive Officer of SJW Corp. Prior to becoming Chief Executive Officer in 1999, he was President since October 1996, Vice President from April 1992 until October 1996 and Chief Financial Officer and Treasurer of SJW Corp. from January 1990 until October 1996. He has been President of San Jose Water Company since October 1994. He has been Chief Executive Officer since October 1996. Prior to that he was Chief Operating Officer from October 1994 until October 1996. He was Senior Vice President of San Jose Water Company from July 1994 until October 1994. Mr. Roth, age 48, has served as a director of SJW Corp., San Jose Water Company and SJW Land Company since 1994. Mr. Roth has been with San Jose Water Company since 1990.
Charles J. Toeniskoetter, President of Toeniskoetter & Breeding, Inc. (construction and real estate development company). He also serves as a director of Redwood Trust, Inc. (real estate investment trust). Mr. Toeniskoetter, age 56, serves as a member of the Audit Committee and has served as a director of SJW Corp., San Jose Water Company and SJW Land Company since 1991.
J.W. Weinhardt, Chairman of SJW Corp. Prior to becoming Chairman in October 1996 he was President and Chairman of the Board of San Jose Water Company. Prior to his election as Chairman of the Board in October 1994, he was President of the San Jose Water Company. He also served as Chief Executive Officer of the San Jose Water Company until October 1996. Mr. Weinhardt, age 70, is a member of the Executive Committee and has served as a director of San Jose Water Company since 1975, and of SJW Corp. and SJW Land Company since 1985. Mr. Weinhardt has been with San Jose Water Company since 1963.
Directors Roscoe Moss, Jr. and George Moss are brothers. Other than the family relationship described in the preceding sentence, no director has any family relationship with any other director or with any executive officer.
No director has been employed in his principal occupation or employment during the past 5 years by a corporation or other organization that is a parent, subsidiary or other affiliate of SJW Corp., other than Mr. Weinhardt and Mr. Roth whose employment relationship with San Jose Water Company is described above.
Executive Officers of the Registrant
Name Age Offices and Experience
J.W. Weinhardt 70 SJW Corp. - Chairman of the Board.
See description at "Directors of the Registrant".
W.R. Roth 48 SJW Corp. - President and Chief Executive Officer of SJW Corp. since October 1999.
See description at "Directors of the Registrant".
R.J. Balocco 51 San Jose Water Company - Vice President - Corporate Communications since October 1995. He was Vice President, Administration from April 1992 until October 1995. Mr. Balocco has been with San Jose Water Company since 1982.
G.J. Belhumeur 55 San Jose Water Company - Vice President - Operations since April 1996. Prior to April 1996 he was Operations & Maintenance Manager. Mr. Belhumeur has been with San Jose Water Company since 1970.
D. Drysdale 45 San Jose Water Company - Vice President - Information Services since January 1999. Prior to that, he was Director of Information Services from March 1998 to January 1999. Prior to March 1998 he was Data Processing Manager since 1994. Mr. Drysdale joined San Jose Water Company in 1992.
J. Johansson 55 San Jose Water Company - Vice President - Human Resources since January 1999. Prior to that, he was Director of Human Resources from March 1998 to January 1999. Prior to March 1998 he was Personnel Manager. Mr. Johansson has been with San Jose Water Company since 1976.
R.J. Pardini 55 San Jose Water Company - Vice President - Chief Engineer since April 1996. Prior to April 1996 he was Chief Engineer. Mr. Pardini has been with San Jose Water Company since 1987.
A. Yip 47 SJW Corp., Chief Financial Officer and Treasurer since October 1996.
San Jose Water Company - Vice President - Finance since January 1999, Chief Financial Officer and Treasurer since October 1994. Ms. Yip has been with the San Jose Water Company since 1986.
R.S. Yoo 50 San Jose Water Company - Vice President - Water Quality since April 1996. Prior to April 1996 he was Water Quality Manager. He has been with San Jose Water Company since 1985.
R.A. Loehr 54 SJW Corp. and San Jose Water Company, Secretary since March 1, 1998. Mr. Loehr also serves as an attorney and has been with San Jose Water Company since 1987.
A.J. Elliott 37 San Jose Water Company, Controller since January 1995. Ms. Elliott has been with San Jose Water Company since 1990.
No executive officer has any family relationship to any other executive officer or director. No executive officer is appointed for any set term. Officers of SJW Corp. serve at the discretion of the Board of Directors and there are no agreements or understandings between any executive officer and any other person pursuant to which he was selected as an officer.
Item 11.
Item 11. EXECUTIVE COMPENSATION
The following table contains certain summary information regarding the cash compensation, paid by SJW Corp. and its subsidiaries for each of its last three completed fiscal years, to the Chief Executive Officer and to the four other executive officers whose total annual salary and bonus exceeded $100,000.
Annual Compensation Long Term Compensation(1) --------------------- ---------------------------- Other Awards Payouts All Annual ----------- ------- Other Name and Com- Restricted LTIP Com- Principal pensa- Stock Options/ Pay- pensa- Position Year Salary Bonus tion Award(s) SAR's outs tion - --------------------------------------------------------------------- W.R. Roth 2000 $395,000 17,569(2) President and CEO of SJW Corp., 1999 $347,596 19,900(2) San Jose 1998 $324,038 7,800(2) Water Company and SJW Land Company G.J. Belhumeur 2000 $170,500 6,800(3) Vice- 1999 $158,557 6,342(3) President 1998 $148,558 4,289(3) San Jose Water Company R.J. Pardini 2000 $160,500 6,420(3) Vice- 1999 $148,558 5,942(3) President 1998 $138,577 4,002(3) San Jose Water Company R.S. Yoo 2000 $160,500 6,420(3) Vice- 1999 $148,077 5,923(3) President 1998 $133,654 3,860(3) San Jose Water Company R.J. Balocco 2000 $159,450 6,131(3) Vice- 1999 $148,558 5,942(3) President 1998 $138,173 4,145(3) San Jose Water Company
(1) Long Term Compensation Award or Payout Plans are not provided to employees of SJW Corp. or its subsidiaries. (2) Represents matching contributions paid by the San Jose Water Company to Mr. Roth under its Salary Deferral Plan of $4,800 in 1998, $6,400 in 1999 and $6,569 in 2000. The balances are amounts received for Directors fees. (3) Represents matching contributions paid by the San Jose Water Company under its Salary Deferral Plan.
The foregoing table does not include benefits provided under San Jose Water Company's Retirement Plan (the "Retirement Plan"), Supplemental Executive Retirement Plan (SERP), or Executive Severance Plan.
All employees of San Jose Water Company participate in the Retirement Plan. Although subject to adjustment to comply with Internal Revenue Code requirements, the regular benefit formula of the plan provides for a monthly retirement benefit equal to 1.6% of the employee's average monthly compensation for each year of credited service. Compensation means the employee's regular salary prior to reduction under the Deferral Plan. The plan also contains a minimum benefit formula which, although also subject to adjustment, provides for a monthly retirement benefit equal to up to 55% of the employee's average compensation for the highest 36 consecutive months of compensation, less 50% of primary social security benefits. This minimum monthly benefit is reduced by 1/30th for each year of credited service less than 30 years. Benefits vest after 5 years of service or at age 65 and there are provisions for early retirement.
In 1992 the Board of Directors of San Jose Water Company adopted a nonqualified, unfunded Supplemental Executive Retirement Plan (SERP) for certain executives and officers of the San Jose Water Company. It is intended that the SERP in combination with the Retirement Plan will provide the covered executives and officers with a total retirement benefit commensurate with executives and officers of other comparable private water utilities. A minimum of ten years of service is required for vesting in the SERP. The amounts contributed to the Retirement Plan by San Jose Water Company to fund retirement benefits with respect to any individual employee cannot be readily ascertained. The following table sets forth combined estimated retirement benefits, payable as a straight life annuity, assuming retirement at age 65 using the minimum benefit formula and the SERP:
PENSION PLAN TABLE Years of Service Average Compensation 15 Years 20 Years 25 Years 30 Years 35 Years - --------------------------------------------------------------- $150,000 $ 49,500 $ 66,000 $ 78,000 $ 90,000 $ 90,000 175,000 57,750 77,000 91,000 105,000 105,000 200,000 66,000 88,000 104,000 120,000 120,000 225,000 74,250 99,000 117,000 135,000 135,000 250,000 82,500 110,000 130,000 150,000 150,000 275,000 90,750 121,000 143,000 165,000 165,000 300,000(1) 165,000 165,000 165,000 180,000 180,000 325,000(1) 178,750 178,750 178,750 195,000 195,000 350,000(1) 192,500 192,500 192,500 210,000 210,000 375,000(1) 206,250 206,250 206,250 225,000 225,000 400,000(1) 220,000 220,000 220,000 240,000 240,000 425,000(1) 233,750 233,750 233,750 255,000 255,000
- ------------------------ Note (1) describes the annual benefit payable to Mr. Roth only beginning at the later of age 55 or retirement.
Annual retirement benefits payable commencing at age 65 under the SERP shall be equal to the following: two and two-tenths percent (2.2%) of the final average compensation of such officer, which is the highest consecutive thirty-six months average compensation, multiplied by the officer's years of service (not to exceed twenty (20) years) plus one and six-tenth percent (1.6%) of the final average compensation of an officer multiplied by the officer's years of service in excess of 20 years (not to exceed an additional ten (10) years) up to a total not to exceed sixty percent(60%) of final average compensation; less benefits payable to the officer from the Retirement Plan. Mr. Roth alone is entitled to a Retirement Benefit at the later of his attainment of fifty-five (55) years of age or his actual retirement in an amount equal to the greater of (i) the benefit to which he would otherwise be entitled under the SERP or (ii) fifty-five percent (55%) of the final average compensation less benefits payable to him from the Retirement Plan.
The number of years of credited service and covered compensation at December 31, 2000 is for Mr. Roth, 11 years, $395,000; Mr. Belhumeur, 30 years, $170,500; Mr. Pardini, 13 years, $160,500; Mr. Yoo, 15 years, $160,500 and Mr. Balocco, 18 years, $159,450. No additional benefits are accrued at the present time.
Under the SJW Corp. Executive Severance Plan and the SERP (collectively, "Plans"), a Change in Control shall affect any officer of SJW Corp., San Jose Water Company or SJW Land Company who has been elected as such by the Board of Directors of such company and is serving as such upon a Change in Control. In the event of a Change in Control under the Plans, if such officers' employment is terminated within two years of such Change in Control by the employer for any reason other than Good Cause (as defined in such Plans) or by such officers for Good Reason (as defined in such Plans) or, with respect to Mr. Roth, any voluntary termination by Mr. Roth during the sixty (60) day period beginning on the one year anniversary of a Change in Control, such officers (i) will be entitled, among other things, to benefits consisting of three years' annual base salary and (ii) shall be deemed to be three (3) years of age older at the time of retirement and be given three (3) additional Years of Service (as defined in the SERP) for consideration of Retirement Benefits (as defined in the SERP) (in the case of Mr. Roth, Mr. Roth will be entitled to a minimum Retirement Benefit). Under the Executive Severance Plan, such officers and their eligible dependents would also be entitled to continued medical, dental, vision and life insurance coverage pursuant to COBRA for up to three years.
If any payment made in connection with the termination of the employment would be subject to excise tax under Section 4999 of the Code (the "Excise Tax"), then the aggregate present value measured at the date of the payments and benefits to which the officer is entitled shall be limited as specified in the Executive Severance Plan (except in the case of Mr. Roth for whom if any payment made in connection with benefits under the Executive Severance Plan is subject to Excise Tax or constitutes an excess parachute payment under Section 280G of the Code, then such payment will be grossed up to ensure that Mr. Roth does not incur any out-of-pocket cost with respect to such Excise Tax or that Mr. Roth receives the same net after-tax benefit he would have received if such Section 280G had not been applicable).
SJW Corp., San Jose Water Company and SJW Land Company pay their non-employee directors annual retainers of $6,000, $16,000 and $5,000 respectively. In addition, all directors of SJW Corp. and San Jose Water Company are paid $1,000 for each Board or committee meeting attended. SJW Land Company directors are paid $500 for each Board meeting attended.
Upon ceasing to serve as a director of SJW Corp., San Jose Water Company and SJW Land Company, as the case may be, directors or their estate are currently entitled to receive from the respective corporation a benefit equal to the annual retainer paid to its directors. This benefit will be paid for the number of years the director served on the board up to a maximum of 10 years.
The Board of Directors has an Executive Committee, an Executive Compensation Committee and an Audit Committee. During 2000, there were 4 regular meetings of the Board of Directors, 3 regular meetings of the Audit Committee and 1 meeting of the Executive Compensation Committee. The Executive Compensation Committee reviews and recommends to the Board of Directors compensation for executive officers of SJW Corp. There is no standing nominating committee. All directors attended 100% of all Board and applicable committee meetings, except that Roscoe Moss, Jr. missed one set of Board meetings, J. Philip DiNapoli missed two sets of Board meetings and Drew Gibson missed one Audit Committee meeting.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Executive Compensation Committee was at any time during the 2000 fiscal year or at any other time an officer or employee of SJW Corp. or any of its subsidiaries. No executive officer of SJW Corp. serves as a member of the Board of Directors or Executive Compensation Committee of any entity that has one or more executive officers serving as a member of SJW Corp.'s board of directors or compensation committee. The following non- employee directors served on the Executive Compensation Committee during fiscal 2000: Drew Gibson, Ronald R. James, Roscoe Moss, Jr. and George E. Moss.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 2000, certain information concerning ownership of shares of SJW Corp. Common Stock by each director of SJW Corp., each of the Chief Executive Officer and the four most highly compensated executive officers of SJW Corp. for the year ended December 31, 2000 and all directors and executive officers of SJW Corp. as a group. Unless otherwise indicated, the beneficial ownership consists of sole voting and investment power with respect to the shares indicated, except to the extent that authority is shared by spouses under applicable law.
Shares Beneficially Owned Directly Percent NAME or Indirectly of Class - --------------------------------------------------------------- Directors: Mark L. Cali 4,321 * J. Philip DiNapoli 600 * Drew Gibson 1,000 * Ronald R. James 200 * George E. Moss (1)(2) 497,812 16.3% Roscoe Moss, Jr.(2) 523,878 17.2% W.R. Roth 6,350 * Charles J. Toeniskoetter 300 * J.W. Weinhardt 7,250 * Officers: * G.J. Belhumeur 918 * R.J. Balocco 762 * R.J. Pardini 514 * All directors and executive officers as a group (18 individuals) 1,044,755 34.3%
- -------------------- (1) Includes 119,139 shares held by the John Kimberly Moss Trust for which Mr. George Moss is trustee or co-trustee, and (2) the address for George Moss and Roscoe Moss, Jr. is 4360 Worth Street, Los Angeles, CA 90063. Information with respect to beneficial ownership is based upon reports furnished by the officers and directors.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Charles J. Toeniskoetter, President and Chief Executive Officer of Toeniskoetter and Breeding, Inc., serves as a member of the Audit Committee and has served as a director of SJW Corp., San Jose Water Company and SJW Land Company since 1991. Mr. Toeniskoetter has an ownership interest in excess of 10% of Toeniskoetter and Breeding, Inc., a construction and real estate development company. In 1999, SJW Land Company and Toeniskoetter & Breeding, Inc. formed a limited partnership whose sole purpose is to construct and manage a new office building at 450 West Santa Clara Street in San Jose, California. The building, which consists of 22,080 square feet of office space, was completed in June 2000 and was subsequently leased to an international real estate firm. The partnership engaged Toeniskoetter & Breeding, Inc. Construction, to construct the building shell for approximately $2,300,000. The partnership also paid Toeniskoetter & Breeding, Inc. a developer fee of $133,000 in 2000 in connection with the construction.
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(1) Financial Statements Page ----
Independent Auditors' Report 21
Consolidated Balance Sheets as of December 31, 2000 and 1999 22
Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2000, 1999, and 1998 24
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2000, 1999, and 1998 25
Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999, and 1998 26
Notes to Consolidated Financial Statements 28
(2) Financial Statement Schedule
Schedule Number
II Valuation and Qualifying Accounts and Reserves, Years ended December 31, 2000, 1999, and 1998 40
All other schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.
(3) Exhibits required to be filed by Item 601 of Regulation S-K
See Exhibit Index located immediately following paragraph (b) of this Item 14.
The exhibits filed herewith are attached hereto (except as noted) and those indicated on the Exhibit Index which are not filed herewith were previously filed with the Securities and Exchange Commission as indicated.
(b) Report on Form 8-K. There have been no reports filed on Form 8-K during the last quarter of the period covered by this report.
EXHIBIT INDEX - -------------- Location in Sequentially Exhibit Numbered No. Description Copy
2 Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession:
2.1 Stock Exchange Agreement dated as of August 20, 1992 (as amended October 21, 1992). Filed as Appendix A to Proxy Statement/Prospectus dated November 11, 1992. S.E.C. File No. 1-8966. NA
2.2 Registration Rights Agreement entered into as of December 31, 1992 among SJW Corp., Roscoe Moss, Jr. and George E. Moss. Filed as Exhibit 4.1 to Form 8-K January 11, 1993. S.E.C. File No. 1-8966. NA
2.3 Affiliates Agreement entered into as of December 31, 1992 among SJW Corp., Roscoe Moss, Jr. and George E. Moss. Filed as Exhibit 4.2 to Form 8-K January 11, 1993. S.E.C. File No. 1-8966. NA
2.4 Affiliates Agreement entered into as December 31, 1992 among SJW Corp., Roscoe Moss Company and Roscoe Moss, Jr. Filed as Exhibit 4.3 to Form 8-K January 11, 1993. S.E.C. File No. 1-8966. NA
2.5 Agreement and Plan of Merger dated as of October 28, 1999 among American Water Works Company, Inc., SJW Acquisition Corporation and SJW Corp. Filed as an Exhibit to 10Q for the period ending September 30, 1999. S.E.C. File No. 1-8966. NA
3 Articles of Incorporation and By-Laws:
3.1 Restated Articles of Incorporation and By-Laws of SJW Corp., defining the rights of holders of the equity securities of SJW Corp. Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1991. S.E.C. File No. 1-8966. NA
4 Instruments Defining the Rights of Security Holders, including Indentures:
No current issue of the registrant's long-term debt exceeds 10 percent of its total assets. SJW Corp. hereby agrees to furnish upon request to the Commission a copy of each instrument defining the rights of holders of unregistered senior and subordinated debt of the company. NA
10 Material Contracts:
10.1 Water Supply Contract dated January 27, 1981 between San Jose Water Works and the Santa Clara Valley Water District,as amended. Filed as an Exhibit to Annual Report Form 10-K for the year ended December 31, 1991. S.E.C. File No. 1-8966. NA
Executive Compensation Plans and Arrangements:
10.2 Resolutions for Directors' Retirement Plan adopted by SJW Corp. Board of Directors, as amended. Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1991. S.E.C. File No. 1-8966. NA
10.3 Resolutions for Directors' Retirement Plan adopted by San Jose Water Company Board of Directors, as amended. Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1991. S.E.C. File No. 1-8966. NA
10.4 Ninth amendment to San Jose Water Company Retirement Plan as amended. Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1996. S.E.C. File No. 1-8966. NA
10.5 San Jose Water Company Executive Supplemental Retirement Plan adopted by San Jose Water Company Board of Directors. Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1992. S.E.C. File No. 1-8966. NA
10.6 First Amendment to San Jose Water Company Executive Supplemental Retirement Plan adopted by San Jose Water Company Board of Directors. Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1992. S.E.C. File No. 1-8966. NA
10.7 Second Amendment to San Jose Water Company Executive Supplemental Retirement Plan adopted by San Jose Water Company Board of Directors. Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1998. S.E.C. File No. 1-8966. NA
10.8 Third Amendment to San Jose Water Company Executive Supplemental Retirement Plan adopted by San Jose Water Company Board of Directors. Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1998. S.E.C. File No. 1-8966. NA
10.9 Fourth Amendment to San Jose Water Company Executive Supplemental Retirement Plan adopted by San Jose Water Company Board of Directors. Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1998. S.E.C. File No. 1-8966. NA
10.10 Fifth Amendment to San Jose Water Company Executive Supplemental Retirement Plan adopted by San Jose Water Company Board of Directors. Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1998. S.E.C. File No. 1-8966. NA
10.11 SJW Corp. Executive Severance Plan adopted by SJW Corp. Board of Directors. Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1998. S.E.C. File No. 1-8966. NA
10.12 Sixth Amendment to San Jose Water Company's Executive Supplemental Retirement Plan. Filed as an Exhibit to 10Q for the period ending September 30, 1999. S.E.C. File No. 1-8966. NA
10.13 Amendment to SJW Corp.'s Executive Severance Plan. Filed as an Exhibit to 10Q for the period ending September 30, 1999. S.E.C. File No. 1-8966. NA
10.14 SJW Corp.'s Transaction Incentive and Retention Program for Key Employees. Filed as an Exhibit to 10Q for the period ending September 30, 1999. S.E.C. File No. 1-8966. NA
10.15 Resolution for Directors' Retirement Plan adopted by SJW Corp. Board of Directors as amended on September 22, 1999. Filed as an Exhibit to 10Q for the period ending September 30, 1999. S.E.C. File No. 1-8966. NA
10.16 Resolution for Directors' Retirement Plan adopted by San Jose Water Company's Board of Directors as amended on September 22, 1999. Filed as an Exhibit to 10Q for the period ending September 30, 1999. S.E.C. File No. 1-8966. NA
10.17 Resolution for Directors' Retirement Plan adopted by SJW Land Company Board of Directors on September 22, 1999. Filed as an Exhibit to 10Q for the period ending September 30, 1999. S.E.C. File No. 1-8966. NA
10.18 Limited Partnership Agreement of 444 West Santa Clara Street, L. P. executed between SJW Land Company and Toeniskoetter & Breeding, Inc. Development. Filed as an Exhibit to 10Q for the period ending September 30, 1999. S.E.C. File No. 1-8966. NA
21 Subsidiaries of the Registrant. Filed as an Exhibit to Annual Report on Form 10-K for the year ended December 31, 1992. S.E.C. File No. 1-8966. NA
99 Additional Exhibits: None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SJW CORP.
Date: March 15, 2001 By /s/ J.W. WEINHARDT Chairman, Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: March 15, 2001 By /s/ J.W. WEINHARDT Chairman, Board of Directors
Date: March 15, 2001 By /s/ W. RICHARD ROTH Chief Executive Officer and Member Board of Directors
Date: March 15, 2001 By /s/ ANGELA YIP Chief Financial Officer
Date: March 15, 2001 By /s/ ANDREA ELLIOTT Chief Accounting Officer
Date: March 15, 2001 By /s/ MARK L. CALI Member, Board of Directors
Date: March 15, 2001 By /s/ J. PHILIP DINAPOLI Member, Board of Directors
Date: March 15, 2001 By /s/ DREW GIBSON Member, Board of Directors
Date: March 15, 2001 By /s/ RONALD R. JAMES Member, Board of Directors
Date: March 15, 2001 By s/s GEORGE E. MOSS Member, Board of Directors
Date: March 15, 2001 By /s/ ROSCOE MOSS, JR. Member, Board of Directors
Date: March 15, 2001 By /s/ CHARLES J. TOENISKOETTER Member, Board of Directors
In accordance with the Securities and Exchange Commission's requirements, SJW Corp. will furnish copies of any exhibit upon payment of a 30 cents per page fee.
To order any exhibit(s), please advise the Secretary, SJW Corp., 374 West Santa Clara Street, San Jose, CA 95196, as to the exhibit(s) desired.
On receipt of your request, the Secretary will provide to you the cost of the specific exhibit(s). The Secretary will forward the requested exhibits upon receipt of the required fee.