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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period to
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Commission file number 1-8966
SJW CORP.
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(Exact name of registrant as specified in its charter)
California 77-0066628
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
374 West Santa Clara Street, San Jose, California 95196
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 408-279-7800
SECURITIES REGISTERED PURSUANT TO SECTION 12(b)OF THE ACT:
Title of each class Name of each exchange
on which registered
Common Stock, Par Value $3.125 American Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-
affiliates of the registrant - $154,030,184 on March 6, 2001.
Shares of common stock outstanding on March 6, 2001 - 3,045,147.
EXHIBIT INDEX
The Exhibit Index to this Form 10-K is located in Part IV, Item
14 of this document.
TABLE OF CONTENTS
PART I Page
- ------ ----
FORWARD-LOOKING STATEMENTS 5
Item 1. BUSINESS 6
a. General Development of Business 7
b. Financial Information about Industry Segments 8
c. Narrative Description of Business 9
General 9
Water Supply 9
Franchises 10
Seasonal Factors 10
Competition and Condemnation 10
Environmental Matters 11
Employees 11
Financial Information about Foreign and
Domestic Operations and Export Sales 11
Item 2. PROPERTIES 12
Item 3. LEGAL PROCEEDINGS 12
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 13
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS 13
a. Market Information 13
b. Holders 13
c. Dividends 13
Item 6. SELECTED FINANCIAL DATA 13
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 15
Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 21
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 21
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 40
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT 40
Item 11. EXECUTIVE COMPENSATION 45
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 49
Item 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 50
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K 50
EXHIBIT INDEX 51
SIGNATURES 55
PART I
FORWARD-LOOKING STATEMENTS
- --------------------------
This report contains forward-looking statements relating to
future events and financial performance of SJW Corp. Such
forward-looking statements are identified by words including
"expect", "estimate", "anticipate" and similar expressions. SJW
Corp.'s actual results could differ materially from those
discussed in such forward-looking statements. Important factors
that could cause or contribute to such differences are included
below.
The California Public Utilities Commission's (CPUC) policy and
regulations can adversely affect San Jose Water Company's
operating results through the availability, timeliness and amount
of rate relief. The CPUC's willingness to allow San Jose Water
Company to recover its capital expenditures, to offset its
incremental production and operating costs increase, and to
provide financial and operational flexibility to engage in
nonregulated operations can also affect San Jose Water Company's
operating results.
San Jose Water Company's sales and therefore its operating
results could be adversely affected by several events:
Difficulties in obtaining a secured high-quality
water supply from the Santa Clara Valley Water
District (SCVWD) which receives its allotment from
the state and federal water projects could prevent
the company from satisfying its customer demand
within its service area;
Fluctuation of customer sales due to lifestyle or weather;
Availability of recycled water and its acceptance by
customers as a substitute to potable water; and
Economic development and growth in San Jose Water
Company's service area.
The expenses of SJW Corp. and its subsidiaries and therefore the
operating results of SJW Corp. could be adversely affected by the
following:
Fluctuation of high-quality surface water
availability from San Jose Water Company's Santa Cruz
Mountain Watershed, which produces a less costly
water supply, could result in the need to procure
more costly water from other sources;
The availability of affordable and efficient energy
resources to extract and boost water from the
groundwater basin to the distribution system, and to
operate equipment and machinery necessary in
providing water service to the customers could
increase operating expenses;
Stringent environmental and water quality regulations
could increase San Jose Water Company's water quality
compliance costs and hamper San Jose Water Company's
available water supplies;
Consequences from pollution and contamination of San
Jose Water Company's wells and source of supply could
result in the need to procure more costly water from
other sources;
The level of labor and non-labor operating and
maintenance expenses as affected by inflationary
forces and collective bargaining power could
adversely affect the operating and maintenance
expenses of SJW Corp.;
Cost and other effects of lawsuits against SJW Corp.
or its subsidiaries, whether civil, environmental,
product-related or liability-related could increase
SJW Corp.'s legal, liability and insurance costs.
The City of Cupertino's lease operation could be adversely
affected by the capital requirements, the ability of San Jose
Water Company to raise rates through the Cupertino City Council
and the level of operating and maintenance expenses.
SJW Land Company's expenses and operating results also could be
adversely affected by the parking lot activities, the San Jose
Arena events, ongoing local, state and federal land use
development activities and regulations, future economic
conditions, and the development and fluctuations in the sale of
the undeveloped properties.
See also the heading "Factors That May Adversely Affect Future
Operation Results" under Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
SJW Corp. undertakes no obligation to update the information
contained in this report, including the forward-looking
statements.
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. 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. LEGAL PROCEEDINGS
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
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. SELECTED FINANCIAL DATA
FIVE YEAR STATISTICAL REVIEW
SJW CORP. AND SUBSIDIARIES
2000 1999 1998 1997 1996
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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
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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. 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. 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. 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. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
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. 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. 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. 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. 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
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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.
4