Back to GetFilings.com
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, 1993 Commission file number 1-8966
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period ______________to_____________
Commission file number 1-8966
SJW CORP.
(Exact name of registrant as specified in its charter)
California 77-0066628
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
374 West Santa Clara Street, San Jose, California 95196
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 408-279-7810
SECURITIES REGISTERED PURSUANT TO SECTION 12(b)
OF THE ACT:
Name of each
exchange on
Title of each class 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)
1
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, 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. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant - $86,246,803 on March 1, 1994.
Shares of common stock outstanding on March 1, 1994 - 3,250,746
DOCUMENTS INCORPORATED BY REFERENCE
None
EXHIBIT INDEX
The Exhibit Index to this Form 10-K is on pages 46 through 47.
TABLE OF CONTENTS
Page
PART I
Item 1. Business....................................... 4
a. General Development of Business................ 4
Regulation and Rates.......................... 4
b. Financial Information about
Industry Segments............................. 4
c. Narrative Description of Business.............. 5
General....................................... 5
Water Supply.................................. 5
Franchises.................................... 5
Seasonal Factors.............................. 5
Competition and Condemnation.................. 6
Environmental Matters......................... 6
Employees..................................... 6
d. Financial Information about
Foreign and Domestic Operations
and Export Sales.............................. 6
Item 2. Properties..................................... 6
Item 3. Legal Proceedings.............................. 7
Item 4. Submission of Matters to a
Vote of Security Holders....................... 7
2
PART II Page
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters............... 8
a. Market Information............................. 8
b. Holders........................................ 8
c. Dividends...................................... 8
Item 6. Selected Financial Data........................ 9
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations................................. 10
Item 8. Financial Statements and
Supplementary Data............................ 14
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure................................... 35
PART III
Item 10. Directors and Executive Officers
of the Registrant............................ 35
Item 11. Executive Compensation......................... 39
Item 12. Security Ownership of Certain
Beneficial Owners and
Management................................... 41
Item 13. Certain Relationships and Related
Transactions................................. 41
Compliance With Section 16(a) of the
Exchange Act................................. 38
PART IV.
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K....................... 42
Signatures .................................................. 43
Exhibit Index ............................................... 45-46
3
PART I
Item 1. Business.
(a) General Development of Business.
SJW Corp. (the "Company"), incorporated in California on February 8, 1985, is a
holding company with three wholly-owned subsidiaries, San Jose Water Company
("Water Company"), SJW Land Company and Western Precision, Inc. ("WP").
The Water Company, with headquarters at 374 West Santa Clara Street, San Jose,
California 95196, was incorporated under the laws of the State of California in
1931, succeeding a business founded in 1866. The Water Company is a public
utility in the business of providing water service to a population of
approximately 913,000 in an area comprising about 134 square miles in the
metropolitan San Jose area.
SJW Land Company was incorporated in October, 1985.
WP was acquired on December 31, 1992 through an exchange of stock between the
Company and the shareholders of WP, formerly the Roscoe Moss Company. Roscoe
Moss Company was incorporated on March 22, 1927. At December 31, 1993, WP held
549,976 shares, or approximately 9.7%, of common stock of California Water
Service Company. WP also operates a precision mechanical parts manufacturing
facility located in Sunnyvale, California, and Austin, Texas.
Regulation and Rates.
The Water Company's rates, service and other matters affecting its business are
subject to regulation by the Public Utilities Commission of the State of
California ("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 or power.
The most recent general rate case decision authorized an initial 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 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.
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, 1993 the balancing
account had a net under collected balance to be offset of $734,000. (See
Part II, Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations").
(b) Financial Information about Industry Segments.
For the years ended December 31, 1993, 1992 and 1991 the Company had only one
business segment. Approximately 95% of the Company's revenue and 92% of the
Company's net income in 1993 were generated by the Water Company. There were no
significant changes in 1993 in the type of products produced or services
rendered by the Water Company, or in its markets or methods of distribution.
4
(c) Narrative Description of Business.
(1) (i) General.
The principal business of the Water Company consists of the production,
purchase, storage, purification, distribution and retail sale of water. The
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.
(1) (iii) Water Supply.
The Water Company's water supply is obtained from wells, surface runoff or
diversion and by purchases from the Santa Clara Valley Water District (the
"District"). Surface supplies, which during a year of normal rainfall satisfy
about 8% of the Water Company's current annual needs, provide from approximately
1% of its water supply in a dry year to approximately 14% in a wet year. In dry
years the decrease in water from surface runoff and diversion and the
corresponding increase in purchased and pumped water increases production costs
substantially.
From April 1, 1990, and continuing through March 14, 1993, the Water Company
implemented mandatory water rationing programs. From April 1, 1990 through
April 28, 1991, the objective was a 20% reduction in usage from comparable
periods in 1987. From April 29, 1991 through April 30, 1992, the objective was
a 25% reduction in usage from 1987 levels. From May 1, 1992 through March 14,
1993 the objective was a 15% reduction in usage from 1987 levels. Effective
March 14, 1993 the Water Company terminated its mandatory water rationing plan
and instituted a voluntary conservation plan intended to reduce usage 15% from
1987 levels. The Water Company has notified the CPUC of its intention to
establish a memorandum account to record revenue lost due to voluntary
conservation programs.
Groundwater levels in 1993 climbed to their highest level in 6 years reflecting
the impact of the last rainfall season. Santa Clara Valley Water District's
reservoir storage of 102,000 acre feet (60% of capacity) was reported on January
11, 1994. (See Part II, Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations.")
Until 1989, the 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, the 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.
(1) (iv) Franchises.
The 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.
5
(1) (x) Competition and Condemnation.
The 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 the 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 the 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 the 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 the Water Company's system.
(1) (xii) Environmental Matters.
The Water Company maintains procedures to produce potable water in accordance
with all applicable county, state and federal environmental rules and
regulations. Additionally, the 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, 1993, the Water Company had 274 employees, of whom 53 were
executive, administrative or supervisory personnel, and of whom 221 were members
of unions. The Water Company has two-year collective bargaining agreements
expiring December 31, 1994 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. Both groups are
affiliated with the AFL-CIO.
As of December 31, 1993, WP had 50 nonunion employees.
(d) Financial Information about Foreign and Domestic Operations and
Export Sales.
Substantially all of the Company'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 the 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 nondevelopable 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.
6
The Water Company maintains all of its properties in good operating condition
in accordance with customary proper practice for a water utility. The Water
Company's well pumping stations have a production capacity of approximately
226.7 million gallons per day and the present capacity for taking purchased
water is approximately 105 million gallons per day. The gravity water
collection system has a physical delivery capacity of approximately 25 million
gallons per day. During 1993, a maximum and average of 189 million gallons and
117 million gallons of water per day, respectively, were delivered to the
system.
The 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 and to the lien of the
indenture securing its first mortgage bonds, of which there were outstanding at
December 31, 1993, $6,000,000 (including current maturities) in principal
amount.
SJW Land Company owns approximately 8 acres of property adjacent to the Water
Company's general office facilities and another approximately 36 undeveloped
acres in the San Jose Metropolitan area. The 8 acres adjacent to the Water
Company are used as surface parking facilities and generate substantially all
SJW Land Company's revenue.
WP leases the facilities in which it operates and does not own any real estate.
Item 3. Legal Proceedings.
The Company has been named as a defendant in a lawsuit filed in Superior Court
in Santa Clara County, California, seeking unspecified damages and other relief
resulting from water entering a customer's premises. In 1992, a large standby
fire service pipeline ruptured, flooding a title company's basement. The
Company maintains the failed pipeline was the property of the building owner and
that the Company is not liable for any damage. The case is in the preliminary
stages of discovery and the Company intends to defend its position vigorously.
The Company's insurer has reserved its rights to deny coverage, but is defending
the Company. The outcome of this litigation cannot be predicted.
Other than the matter described above, there are no material legal proceedings
pending or known to be contemplated to which the Company is a party or to which
any of its properties is subject, other than ordinary routine litigation
incidental to the business conducted by the Company. For a description
of CPUC proceedings see the section entitled "Regulation and Rates" in Item 1.
Item 4. Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of Shareholders of the Company held on April 15, 1993, the
Company's shareholders voted in favor of: (i) the election of eight directors to
the Company's Board of Directors and (ii) the approval of KPMG Peat Marwick as
independent auditors of the Company for 1993.
7
The number of votes for, against, as well as the number of abstentions and
broker nonvotes as to each matter approved at the Annual Meeting of the
Shareholders were as follows:
APRIL 15, 1993
ANNUAL MEETING
FOR WITHHELD ABSTAIN BROKER NON-
VOTES
M. L. CALI 2,910,980 19,583 0 0
J. D. DINAPOLI 2,910,971 19,592 0 0
D. GIBSON 2,912,687 17,876 0 0
R. R. JAMES 2,912,587 17,976 0 0
G. E. MOSS 2,909,668 20,895 0 0
R. MOSS 2,909,668 20,895 0 0
C. J. TOENISKOETTER 2,911,071 19,492 0 0
J. W. WEINHARDT 2,913,382 17,181 0 0
FOR AGAINST
AUDITORS 2,900,369 11,511 18,683 0
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
(a) Market Information.
(1) (i) Exchange
The Company'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
the Company's common stock for each quarter in the 1993 and 1992 fiscal years is
contained in the section captioned "Market price range of stock" in the tables
set forth in Note 12 of "Notes to Consolidated Financial Statements" in Part II,
Item 8.
(b) Holders.
There were 1,663 record holders of the Company's common stock on February 6,
1994 (record date for the first quarter 1994 dividend).
(c) Dividends.
Quarterly dividends have been paid on the Company's and its predecessor's common
stock for 201 consecutive quarters and the quarterly rate has been increased
during each of the last 26 years. The information required by this item as to
the cash dividends paid on common stock in 1993 and 1992 is contained in the
section captioned "Dividends per share" in the tables set forth in Note 12 of
"Notes to consolidated Financial Statements" in Part II, Item 8.
8
Item 6. Selected Financial Data.
FIVE YEAR STATISTICAL REVIEW
1993 1992 1991 1990 1989
CONSOLIDATED RESULTS ------ ------ ------ ------ ------
OF OPERATIONS (In
thousands)
Operating revenue $ 95,045 89,109 76,281 70,458 56,044
Operating expense:
Operation 57,016 54,184 45,897 41,626 35,822
Maintenance 5,417 4,397 3,778 3,963 3,098
Taxes 10,829 10,252 8,681 8,033 5,331
Depreciation 6,823 6,153 5,773 5,249 5,019
------ ------ ------ ------ ------
Total operating expense 80,085 74,986 64,129 58,871 49,270
------ ------ ------ ------ ------
Operating income 14,960 14,123 12,152 11,587 6,774
Interest expense,
other income and
deductions 3,193 3,896 3,704 3,048 2,467
------ ------ ------ ------ ------
Net income 11,767 10,227 8,448 8,539 4,307
Dividends paid 6,637 6,044 5,449 5,304 5,211
------ ------ ----- ----- -----
Invested in the
business 5,130 4,183 2,999 3,235 (904)
CONSOLIDATED PER COMMON SHARE DATA
Net income $ 3.64 3.60 2.98 3.00 1.50
Dividends paid 2.04 2.13 1.92 1.86 1.82
Shareholders' equity
at year-end 31.86 29.70 27.27 26.21 25.08
CONSOLIDATED BALANCE SHEET (In thousands)
Utility plant $ 293,683 272,999 255,325 244,068 233,010
Less accumulated
depreciation and
amortization 90,030 84,158 78,675 73,405 69,118
------- ------ ------- ------- --------
Net utility plant 203,653 188,841 176,650 170,663 163,892
------- ------ ------- ------- -------
Nonutility property 6,775 5,465 4,974 4,990 4,870
Total assets 256,851 230,198 197,094 188,313 185,542
Capitalization:
Common shareholders'
equity 103,130 96,155 77,373 74,373 71,179
Preferred stock,
nonredeemable - - - - 805
Preferred stock,
redeemable (includes
current maturities) - - - - 480
Long-term
debt(includes current
maturities) 66,000 61,248 45,193 38,138 42,583
------- ------- ------- ------- -------
Total capitalization $ 169,130 157,403 122,566 112,511 115,047
======= ======= ======= ======= =======
9
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
CAPITAL REQUIREMENTS
The Company's 1994 and 1993 budgeted capital expenditures, exclusive of
capital expenditures financed by customer contributions and advances, are as
follows:
1994 1993
Amount % Amount %
Source of supply $ - - 8,328,000 46%
Reservoirs and tanks 1,111,000 11% 724,000 4%
Pump stations and 1,717,000 17% 1,629,000 9%
equipment
Distribution system 5,859,000 58% 5,975,000 33%
Equipment and other 1,414,000 14% 1,449,000 8%
---------- ----------
$ 10,101,000 100% 18,105,000 100%
========== ==== ========== ====
The 1993 source of supply expenditures relate to spillway relocation and
filter plant modernization, and represent items which are nonrecurring in
nature.
The Company expects to spend approximately $60 million on capital
expenditures over the next five years. The Company's actual capital
expenditures may vary from projected due to changes in the expected demand for
services, weather patterns, actions by governmental agencies and general
economic conditions. Annual 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 the Company's distribution system has been constructed over the
last forty 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 cost of the retired asset due to increases in the cost
of goods and services.
SOURCES OF CAPITAL
The 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.
10
Over the past five years the Company has paid to its shareholders, in the
form of dividends, an average of 66% of its net income. The remaining earnings
have been invested in the Company. Capital requirements not funded by the
reinvested 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, 1993, the Company had available $15 million of unused short-term
bank line of credit, $2.6 million of cash, cash equivalents and short-term
investments and over $50 million of borrowing capacity under the terms of the
first mortgage bond trust indentures and senior note agreements.
The Company expects to fund future capital requirements from the same
sources and in the same relative proportions as in recent years. The Company's
financing activity is designed to achieve a capital structure consistent with
regulatory guidelines - approximately 50% debt and 50% equity.
In 1993, the Company redeemed its $2,500,000 Series L, 4.625% first
mortgage bond at maturity and made sinking fund payments on other series
totaling $245,000. The Company also redeemed, prior to maturity, Series Q, R,
S, T, U, V, Y and Z first mortgage bonds at principal. To fund the redemption,
$30,000,000 of Series B unsecured 30-year senior notes were issued. As a result
of this financing the Company's weighted average cost of debt is 8.23%. The
Company intends to retire all remaining first mortgage bonds by 1998 and satisfy
all future long-term financing needs with senior notes.
Results of Operations
1993 COMPARED WITH 1992
The consolidated results of operations for the year ended December 31,
1993, include, for the first time, the results of Western Precision, Inc.
(formerly the Roscoe Moss Company) which was acquired on December 31, 1992.
Operating revenue for 1993 increased $5,936,000 or 7% over 1992 due to:(1)
the inclusion of Western Precision, Inc. operating revenue, $4,292,000; (2)
decreased rates and revenue adjustments of ($3,133,000); (3) increased usage,
$4,251,000; (4) increased customers, $328,000; and (5) SJW Land Company
increased parking revenue, $198,000.
Operation expense increased $5,099,000 or 7% over 1992 due to the inclusion
of Western Precision, Inc. operating expense of $4,370,000 and increased
production. The operating expense increase associated with increased production
was largely offset by increased production of lower cost surface water.
Dividend income in 1993 results from the acquisition on December 31, 1992,
of 549,976 common shares of California Water Service Company.
The effective income tax rate for 1993 was 41% compared to 43% in 1992.
See Note 6 of the Notes To Consolidated Financial Statements for the
reconciliation of the book income tax provision to the amount computed by
applying the federal statutory rate to income before income taxes.
Interest on long-term debt, including capitalized interest, increased
$848,000 or approximately 19% over 1992 due primarily to the issuance of
Series A and B senior notes.
Total water delivered to the system in 1993 was 43 billion gallons, up 3
billion gallons, or 7%, from 1992. The sources of supply in 1993 and 1992,
respectively, were: 48% and 47% for purchased water; 40% and 45% for well water;
and 12% and 8% for surface water.
11
1992 COMPARED WITH 1991
Operating revenue for 1992 increased $12,828,000 or 17% over 1991. The
increase is attributable to: (1) increased rates, $14,576,000; (2) water
conservation revenue adjustments of ($7,066,000); (3) increased usage,
$5,184,000; and (4) increased customers, $134,000. For the year ended December
31, 1992, the Company recorded revenues of $1,857,000 related to a CPUC order
authorizing the Company to recover sales lost due to mandatory water rationing.
Operation expenses increased $8,287,000 or 18% over 1991 due primarily to
increases in the rates for pump taxes and purchased water and increased
production. Higher production costs associated with increased production were
partially offset by increased supplies of lower cost surface water.
The effective income tax rate for 1992 was 43% compared to 42% in 1991.
See Note 6 of the Notes To Consolidated Financial Statements for the
reconciliation of the book income tax provision to the amount computed by
applying the federal statutory rate to income before income taxes.
Interest on long-term debt, including capitalized interest, increased
$496,000 or approximately 13 % over 1991 due primarily to the issuance of Series
A senior notes and Series AA first mortgage bonds.
Total water delivered to the system in 1992 was 40 billion gallons, up 4
billion gallons, or 7%, from 1991. The sources of supply in 1992 and 1991,
respectively, were: 47% and 56% for purchased water; 45% and 38% for well water;
and 8% and 6% for surface water.
Factors That May Affect Future Results
REGULATION
Principally all the operating revenue of the Company results from the sale
of water at rates approved by the California Public Utilities Commission (CPUC).
The CPUC sets rates that are intended to provide revenue sufficient to recover
operating expense and produce a reasonable return on common equity.
The Company's most recent rate case decision authorizes the Company to earn
a return on common equity of 11.75% in 1992, 1993 and 1994. In recent general
rate case proceedings, the CPUC staff has recommended rates of return on common
equity lower than 11%. The Company elected to defer, from January 1, 1994 to
July 1, 1995, the filing of its next general rate application. If the
application is filed on July 1, 1995, the Company should receive a decision in
early 1996.
The Company implemented its step rate increase on January 1, 1993, which
was designed to produce a $213,000 increase in revenue. An advice letter was
filed in November, 1993 for the 1994 step rate increase in the amount of
$293,000, to be effective January 1, 1994. Both step rate increases were
authorized in the Company's general rate case granted in December 1991 and were
designed to maintain the Company's rate of return on common equity at the 11.75%
authorized level. Because the Company elected to defer filing of its general
rate case application it will not receive additional step rate increases until
the next general rate case decision is rendered.
The recovery of revenue lost due to voluntary water conservation subsequent
to the termination of mandatory rationing on March 14, 1993, has not been
recorded by the Company due to uncertainty of collection. Recovery of voluntary
water conservation revenue losses will be determined in the next general rate
case.
12
The Company filed an advice letter in November 1993 requesting a rate
increase in the amount of $892,000 for construction costs of the Austrian Dam
Spillway in excess of those previously approved in rates. The Company expects
to receive this special rate increase in 1994.
ENVIRONMENTAL MATTERS
The Company's operations are subject to pollution control and water quality
control regulations issued by the United States Environmental Protection Agency
(EPA), the California Department of Health Services and the California Regional
Water Quality Control Board. Additionally, the Company is subject to
environmental laws and regulations administered by other state and local
regulatory agencies.
Under the federal Safe Drinking Water Act (SDWA), the 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 "contaminants" found in drinking water.
The Company is currently in compliance with all MCLs promulgated to date. The
EPA has continuing authority, however, to issue additional regulations under the
SDWA, and Congress amended the SDWA in July 1986 to require the EPA, within a
three-year period, to promulgate MCLs for over 80 chemicals. The EPA has been
unable to meet the three-year deadline, but has established MCLs for many of
these chemicals and has proposed additional MCLs. The Company has implemented
monitoring activities and installed specific water treatment improvements
enabling it to comply with existing MCLs.
Of all of the regulations being considered under the current SDWA, the
Disinfection By-Product Rule is anticipated to have the most significant impact
on water utilities. Due to be released for public comment in March 1994, this
rule will impose more stringent monitoring requirements and drinking water
standards for by-products formed during the disinfection of water. The Santa
Clara Valley Water District, whose imported surface water represents
approximately 45% of the Company's supply, projects that compliance with this
regulation could, by the year 2000, cost over $100 million in capital
improvements and an additional $3 million per year in operating expenses.
If incurred, these costs would be passed along to the Company in the
form of higher rates for purchased water and pump taxes. The Company would seek
a rate increase, via an advice letter filing, to recover the additional costs.
The Company's surface and groundwater sources are generally of a higher quality
than the imported water supplies and are not expected to require extensive
modifications of existing treatment processes.
To comply with the State Total Coliform Regulation, disinfection of Company
wells is being phased in over the next five years. Three of the Company's key
groundwater production stations were equipped with hypochlorinators during 1993,
with six more installations planned in 1994. The EPA is expected to mandate
disinfection of all groundwater supplies by 1999.
In addition to SDWA, other environmental regulations are becoming
increasingly important in water system operations. The Santa Clara County Toxic
Gas Ordinance became effective in 1993 requiring the elimination of chlorine gas
disinfection systems or the installation of complete containment systems to
control accidental chlorine gas discharges. The Company has begun to replace
existing chlorine gas disinfection systems at its water treatment plants with
hypochlorinators which accomplish disinfection with liquid sodium hypochlorite.
These facilities are scheduled for completion in early 1994.
Other state and local environmental regulations apply to Company operations
and facilities. These regulations relate primarily to the handling, storage and
disposal of hazardous materials. The Company is currently in compliance with
state and local regulations governing underground storage tanks, disposal of
hazardous wastes, non-point source discharges, and the warning provisions of the
California Safe Drinking Water and Toxic Enforcement Act of 1986.
13
Future regulation may require increased monitoring, disinfection of
underground water supplies, more stringent performance standards for treatment
plants, aeration of Company wells and procedures to reduce levels of
disinfection by-products. The Company is actively participating in proceedings
currently before the CPUC which seek to establish mechanisms for recovery of
government-mandated environmental compliance costs. 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 SUBSIDIARIES
Western Precision, Inc. (formerly the Roscoe Moss Company), acquired on
December 31, 1992, operates a high-precision mechanical parts manufacturing
operation and owns 549,976 shares of California Water Service Company. The
manufacturing operation is not expected to materially impact cash flow or the
consolidated results of operations. The investment in California Water Service
Company is expected to produce 1994 pre-tax dividend income and cash flow of
approximately $1 million. SJW Land Company constructed surface parking
facilities to serve the 20,000 seat San Jose Arena which is located adjacent
to the parking facilities. The Company expects the machine shop operation
and the parking facilities to account for less than 5% of consolidated net
income in 1994.
The impact of inflation on the Company's operating and construction costs
has been moderate during the five year period ended December 31, 1993. For
rate-making purposes depreciation expense and rate of return calculations are
based on the historical cost of investments in utility plant. Historically,
the cost of replacing utility plant has been included in rate base when the
expenditure was made. The Water Company expects to continue to earn on the
historical cost of utility plant, as adjusted for rate of return calculations.
Item 8. Financial Statements and Supplementary Data.
Financial Statements:
Independent Auditors' Report
- ----------------------------
To the Shareholders and Board of Directors of
SJW Corp.:
We have audited the consolidated financial statements of SJW Corp.
and subsidiaries as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we have also
audited the financial statement schedules as listed in the accompanying
index. These consolidated financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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.
14
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, 1993 and 1992, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1993, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedules,
when considered in relation to the basic consolidated financial statements
taken as a whole, present fairly, in all material respects, the information
set forth therein.
As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993 to adopt the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes" and changed
its method of accounting for investments to adopt the provisions of SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities" at
December 31, 1993. As discussed in Note 7, the Company adopted the provisions
of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions" in 1992.
KPMG Peat Marwick
San Jose, California
January 21, 1994
15
SJW CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
December 31
(In thousands, except share data)
1993 1992
------- -------
Utility plant $ 272,999 293,683
Less accumulated depreciation 90,030 84,158
--------- ---------
203,653 188,841
--------- ---------
Nonutility property 6,775 5,465
Current assets
Cash and equivalents 2,363 5,616
Temporary investments 195 3,600
Accounts receivable
Customers 5,211 5,681
Other 214 169
Accrued utility revenue 2,600 2,700
Materials and supplies, at
average cost 1,026 1,085
Prepaid expenses 2,073 597
--------- ---------
13,682 19,448
--------- ---------
Other assets:
Investment in California Water
Service Company 21,999 13,090
Unamortized debt issuance and
reacquisition costs 4,389 639
Goodwill 1,906 1,513
Regulatory asset 4,060 129
Other 387 1,073
--------- ---------
32,741 16,444
--------- ---------
$ 230,198 256,851
========= =========
See accompanying notes to consolidated financial statements.
16
CAPITALIZATION AND LIABILITIES
1993 1992
------- ------
Capitalization
Common shareholders' equity:
Common stock, $3.125 par value;
authorized 6,000,000 shares; issued
3,250,746 shares in 1993 and 3,255,766 in 1992 $ 10,116 10,108
Additional paid-in capital 21,763 22,197
Retained earnings 68,980 63,850
Unrealized gain on investment 2,271 -
--------- --------
103,130 96,155
Long-term debt, less current maturities 64,000 58,503
--------- ---------
167,130 154,658
--------- ---------
Current liabilities:
Current maturities of long-term debt 2,000 2,745
Line of credit - 1,675
Accrued pump taxes and purchased water 3,264 2,190
Conservation fees - 1,477
Accounts payable 421 595
Accrued interest 1,431 1,160
Accrued taxes other than income taxes 262 238
Other current liabilities 2,693 2,512
--------- ---------
10,071 12,592
--------- ---------
Deferred income 14,414 2,171
Unamortized investment tax credits 2,523 2,579
Advances for construction 32,616 31,746
Contributions in aid of construction 28,164 24,857
Deferred revenue 954 841
Other nonconcurrent liabilities 979 754
Commitments and contingency - -
--------- ---------
$ 256,851 230,198
========= =========
17
SJW CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Years ended December 31
(In thousands, except share data)
1993 1992 1991
--------- --------- --------
Operating revenue $ 89,109 76,281 95,045
--------- --------- --------
Operating expense:
Operation:
Purchased water 20,001 19,181 18,507
Power pump 4,164 4,123 3,177
Pump taxes 13,095 14,628 9,523
Other 19,756 16,252 14,690
Maintenance 5,417 4,397 3,778
Property taxes and other nonincome taxes 2,758 2,633 2,558
Depreciation 6,823 6,153 5,773
Income taxes 8,071 7,619 6,123
--------- --------- --------
80,085 74,986 64,129
--------- --------- --------
Operating income 14,960 14,123 12,152
Other (expense) income:
Interest on long-term debt (4,489) (4,002) (3,865)
Dividends 1,056 - -
Other 240 106 161
--------- --------- ---------
Net income $ 10,227 8,448 11,767
========= ========= =========
Earnings per share $ 3.60 2.98 3.64
========= ========= =========
Weighted average shares outstanding 3,236,992 2,837,788 2,837,788
========= ========= =========
See accompanying notes to consolidated financial statements.
18
SJW CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
COMMON SHAREHOLDERS' EQUITY
(In thousands)
Additional Unrealized Total Common
Common Paid-in Retained Gain On Shareholders'
Stock Capital Earnings Investment Equity
------- ------- ------- ----- ------
Balances, December 31,
1990 $ 8,868 8,839 56,667 - 74,374
Net income - - 8,448 - 8,448
Dividends paid - - (5,448) - (5,448)
------- ------- ------- ----- ------
Balances, December 31,
1991 8,868 8,839 59,667 - 77,374
Net income - - 10,227 - 10,227
Dividends paid - - (6,044) - (6,044)
Common stock issued 1,240 13,358 - - 14,598
------- ------- ------- ----- ------
Balances, December 31,
1992 10,108 22,197 63,850 - 96,155
Purchase price adjustment 8 (434) - - (426)
Net income - - 11,767 - 11,767
Dividends paid - - (6,637) - (6,637)
Implementation of change in
accounting for investment
net of tax
effect of $1,579 - - - 2,271 2,271
------- ------- ------- ------ ------
Balances, December 31,
1993 $ 10,116 21,763 68,980 2,271 103,130
======= ====== ====== ====== =======
See accompanying notes to consolidated financial statements.
19
SJW CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Years ended December 31
(In thousands)
1993 1992 1991
------- -------- ------
Operating activities
Net income $ 11,767 10,227 8,448
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 6,823 6,153 5,773
Deferred income taxes and credits 1,813 621 (76)
Changes in operating assets and liabilities:
Accounts receivable and accrued utility revenue 525 3,482 (4,532)
Accounts payable and other current liabilities 7 707 238
Accrued pump taxes and purchased water 1,074 (148) (4,573)
Conservation fees (1,477) 1,477 (1,623)
Income taxes payable - (4,275) 3,939
Other changes, net (1,222) 740 101
------- --------- ---------
Net cash provided by operating activities 19,310 18,984 7,695
------- --------- ---------
Investing activities:
Additions to utility plant (22,134) (19,083) (12,611)
Cost to retire utility plant, net of salvage (251) (174) 4
Acquisition costs, net of cash acquired - (291) -
Additions to nonutility property (1,497) - -
------- --------- ---------
Net cash used in investing activities (20,477) (23,148) (11,697)
------- --------- ---------
Financing activities:
Dividends paid (6,637) (6,044) (5,448)
Repayment of line of credit (1,675) (12,800) (2,968)
Borrowings from line of credit - 10,100 2,700
Advances and contributions in aid of
construction 6,501 3,269 3,173
Refunds of advances (1,610) (1,722) (1,650)
Proceeds from issuance of long-term debt 30,000 20,000 10,000
Principal payments on long-term debt (28,665) (3,945) (2,945)
------- --------- --------
Net cash provided by (used in)
financing activities (2,086) 8,858 2,862
------- --------- ---------
Net change in cash and equivalents (3,253) 4,694 (1,140)
Cash and equivalents, beginning of year 5,616 922 2,062
------- --------- ---------
Cash and equivalents, end of year $ 2,363 5,616 922
======= ========= =========
See accompanying notes to consolidated financial statements.
20
SJW CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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 (the Company). Intercompany
transactions and balances have been eliminated.
The Company's principal subsidiary, San Jose Water Company (the Water
Company), is a regulated California water utility. The 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.
Utility Plant - The cost of additions, replacements and betterments to utility
plant is capitalized. The amount of interest capitalized in 1993, 1992 and 1991
was $769, $407 and $50, respectively. Construction in progress was $3,233 in
1993 and $9,689 in 1992.
Depreciation is computed using the straight-line method over the estimated
service lives of the assets. The cost of utility plant retired, including
retirement costs (less salvage), is charged to accumulated depreciation, and no
gain or loss is recognized.
Nonutility Property - Nonutility property is recorded at cost and consists
primarily of land, parking facilities and machine shop equipment.
Cash and Equivalents - Substantially all of the Company's cash is invested in
interest bearing debt instruments. The Company considers certain highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.
Cash equivalents are stated at cost plus accrued interest, which approximates
fair value. Selected investments are considered temporary investments rather
than cash equivalents based on their intended use.
Investment in California Water Service Company - The Company adopted Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" effective December 31, 1993. Under this
Statement the Company's investment in California Water Service Company is
reported at quoted market price, with the unrealized gain excluded from
earnings and reported as a separate component of shareholders' equity. The
adoption of Statement No. 115 resulted in increases in: Investment in
California Water Service Company, $3,850; Deferred income taxes, $1,579; and
common shareholders' equity, $2,271. At December 31, 1992, the Company's
investment in California Water Service Company was reported at cost.
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.
21
Income Taxes - Effective January 1, 1993 the Company adopted Statement of
Financial Accounting Standards No. 109. "Accounting for Income Taxes." Prior
year financial statements have not been restated to apply the provisions of
Statement No. 109, which require a change from the deferred method of accounting
for income taxes to the asset and liability method of accounting for income
taxes. Under Statement No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of assets and liabilities and their
respective tax bases, and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled.
The adoption of Statement No. 109 had the effect of increasing net deferred
tax liabilities by $8.5 million and of effecting corresponding $5.0 million and
$3.5 million increases in investment in California Water Service Company and
regulatory asset at January 1, 1993. Management believes the increase is net
deferred tax liabilities recorded as a result of adopting Statement No. 109 will
be recovered through future rates and has recorded a regulatory asset for this
probable future revenue. As a result of recording a net regulatory asset, there
was no material effect on the consolidated results of operations. Prior to the
adoption of Statement No. 109 the company accounted for income taxes using the
deferral method.
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 1994 are $1,500.
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 generally must be included in federal taxable income. Beginning in
1992, contributions and advances were also included in state taxable income.
Taxes paid relating to contributions and advances are recorded as deferred tax
assets for financial reporting purposes and amortized over 40 years for
advances, and over the life of the related asset for contributions.
Revenue - Revenue includes amounts billed to customers, unbilled amounts based
on estimated usage from the latest meter reading to the end of the year and
recoverable net revenue losses resulting from water conservation programs.
Conservation fees are amounts billed to customers whose actual water usage
exceeded their allocated usage under the water conservation programs. To the
extent authorized by the CPUC, the Company has used conservation fees to offset
revenue lost and expenses incurred relating to conservation programs. Included
in 1993 operating revenue is $1,200 relating to the recovery of prior years'
conservation expenses.
Operating revenue includes $327 in 1993, $1,900 in 1992 and $8,900 in 1991
related to recoverable net revenue lost due to conservation programs.
Earnings Per Share - Per share data are calculated using net income divided by
the weighted average number of shares outstanding during the year, excluding in
1993, contingently returnable shares.
22
NOTE 2.
TEMPORARY INVESTMENTS
Temporary investments consist primarily of variable rate tax-exempt bonds and
are stated at cost plus accrued interest that approximates fair value.
Included in other income for 1993, 1992 and 1991 was $181, $401 and $151,
respectively, of interest income.
NOTE 3.
CAPITALIZATION
The Company is authorized to issue 176,407 shares of preferred stock.
In connection with the acquisition described in Note 9, the sellers agreed to
return a portion of the common shares received in the transaction in the event
the acquired enterprise does not achieve a three-year earnings target. Shares
of common stock issued and outstanding include 13,754 and 21,181 shares
contingently returnable to the Company as of December 31, 1993 and 1992,
respectively.
Additionally, 5,020 shares of common stock were returned to the Company in
1993 as the result of a purchase price adjustment of the acquired entity.
NOTE 4.
LINE OF CREDIT
The Water Company has an unsecured bank line of credit allowing aggregate
short-term borrowings of up to $15,000. This line of credit bears interest at
variable rates and expires April 30, 1995.
23
NOTE 5.
CAPTION>
LONG-TERM DEBT
Long-term debt as of December 31 was as follows:
Description Due Date 1993 1992
First mortgage bonds:
L 4.625% 1993 $ - 2,500
M 4.65% 1994 2,000 2,000
N 4.85% 1995 1,500 1,500
O 6.5% 1996 1,000 1,000
P 6.5% 1997 1,500 1,500
Q 9.5% 1999 - 1,500
R 9.5% 2000 - 3,000
S 8.5% 2003 - 3,500
T 9.75% 2000 - 1,310
U 8.5% 2001 - 1,688
V 9.25% 2003 - 1,750
Y 10.94% 2007 - 6,000
Z 10.0% 2008 - 4,000
AA 9.45% 2020 - 10,000
____________________
6,000 41,248
____________________
Senior Notes:
A 8.58% 2022 20,000 20,000
B 7.37% 2024 30,000 -
C 9.45% 2020 10,000 -
____________________
- - 66,000 61,248
Less current maturities 2,000 2,745
___________________
___________________
$ 64,000 58,503
___________________
During 1993, the Company issued $30,000 in Series B senior notes and retired,
ahead of scheduled maturity dates, first mortgage bonds Series Q, R, S, T, U, V,
Y and Z totaling $22,503. Additionally, the Company exchanged Series C senior
notes for $10,000 of Series AA first mortgage bonds.
First mortgage bonds and senior notes are obligations of the Water Company.
Maturities of long-term debt, including sinking fund requirements, amount to
$2,000 in 1994, $1,500 in 1995, $1,000 in 1996, and $1,500 in 1997.
Substantially all utility plant is pledged as collateral for first mortgage
bonds. Senior notes are unsecured. All of the Company's debt is privately
placed. The fair value of long-term debt, including current maturities, as of
December 31, 1993, was approximately $78,500 based on the amount of essentially
risk-free assets the Company would have to place in trust to extinguish these
obligations.
24
NOTE 6.
INCOME TAXES
The following table reconciles income tax expense to the amount computed by
applying the federal statutory rate to income before income taxes:
1993 1992 1991
Computed "expected" federal
income tax at the
statutory rate $ 6,943 6,068 4,954
Increase (decrease) in taxes
attributable to:
Utility plant basis 464 414 378
State taxes, net of federal
income tax benefit 1,199 1,092 890
Dividend received deduction (259) - -
Other items, net (276) 45 (99)
________________________________
$ 8,071 7,619 6,123
================================
The components of income tax expense were:
1993 1992 1991
Current:
Federal $ 4,729 5,003 4,760
State 1,775 1,940 1,390
Deferred:
Advances and contributions (1,641) (837) (671)
Depreciation 1,535 1,802 526
Other 1,673 (289) 118
_______________________________
$ 8,071 7,619 6,123
===============================
The components of the net deferred tax liability as of December 31 were as
follows:
1993
Deferred tax assets:
Advances and contributions $ 8,599
Unamortized ITC 1,366
Pensions and postretirement
benefits 619
California franchise tax 462
Other 164
______
Total deferred tax assets 11,210
______
Deferred tax liabilities:
Utility plant 17,111
Investment 6,765
Other 1,748
______
Total deferred tax liabilities 25,624
______
Net deferred tax liabilities $ 14,414
=======
25
NOTE 7.
EMPLOYEE BENEFIT PLANS
Pension Plans - The 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. The Company's policy is to
contribute the net periodic pension cost calculated under generally accepted
accounting principles to the extent it is tax deductible.
The 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 amounts received under the Company's retirement
plans. The annual cost of this plan has been included in the determination of
the net periodic pension cost shown below. The plan, which is unfunded, had a
projected benefit obligation of $887 and $599 as of December 31, 1993, and 1992,
respectively, and net periodic pension cost of $139 and $7 for 1993 and 1992,
respectively.
Net periodic pension cost for defined benefit plans was as follows:
1993 1992 1991
Service cost-benefits earned
during the period $ 572 666 594
Interest cost on projected
benefit obligation 1,256 1,047 928
Actual return on plan assets (1,368) (1,000) (3,752)
Net amortization and deferral (69) (556) 2,564
_________________________________
$ 391 157 334
=================================
The actuarial present value of benefit obligations and the funded status of
the Company's defined benefit pension plans as of December 31 were as follows:
1993 1992
Actuarial present value of
accumulated benefit obligation,
including vested benefits of
$13,518 and $10,708 $ 13,842 10,979
==================
Projected benefit obligation (17,883) (13,858)
Plan assets at fair value 18,786 17,421
__________________
Plan assets in excess
of projected benefit obligation 903 3,563
Unrecognized net gain (3,533) (4,926)
Prior service cost not recognized
in net periodic pension cost 1,633 1,107
Unrecognized net obligation (assets)
at January 1, 1987 and 1992 being
recognized over 15 and 13.7 years 230 (495)
_________________
Accrued pension cost included
in other current liabilities $ (767) (751)
=================
26
The plans invest primarily in listed stocks, bonds, government securities and
cash and use the projected unit credit actuarial cost method. Average remaining
service lives were 15.1 years for 1993 and 15.6 years for 1992.
In determining net periodic pension cost for 1993, 1992 and 1991 and accrued
pension cost for 1992 the following assumptions were used: weighted average
discount rate, 8.0%; compensation growth rate, 6.0% and; rate of return on plan
assets, 8.0%. In determining accrued pension cost as of December 31, 1993, the
following assumptions were used: weighted average discount rate, 7.0%;
compensation growth rate, 5.0% and; rate of return on plan assets, 7.0%.
Savings Plans - The Company sponsors savings plans which allow employees to
defer and contribute a portion of their earnings to the plans. Contributions,
not to exceed set limits, are matched 50% by the Company. Company contributions
were $241, $232 and $206 in 1993, 1992, and 1991, respectively.
Other Postretirement Benefits - In addition to providing pension and savings
benefits, the Company provides health care and life insurance benefits for
retired employees. In 1992, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions" which requires the use of the accrual method
of accounting for health and life insurance benefits for retired employees.
The Plan was amended in 1993 to reduce benefits and increase eligibility
requirements. The changes reduced the 1993 net periodic postretirement
benefit cost by approximately 50%.
Net periodic postretirement benefit cost was as follows:
1993 1992
Service cost - benefits earned
during the period $ 43 89
Interest cost on benefit obligation 102 182
Amortization of transition
obligation over 20 years 59 116
___________________
$ 204 387
===================
Expense recognized in 1993 and 1992 amounted to $200. The difference between
the net periodic postretirement benefit cost shown above and the amount
recognized in the accompanying consolidated financial statements is recoverable
in future rates and has been recorded as a regulatory asset. Benefits paid were
$70, $71 and $67 in 1993, 1992 and 1991, respectively. Expense recognized in
1991 equaled benefits paid.
27
The Plan's combined funded status and the related accrual as of December 31
was as follows:
1993 1992
Accumulated postretirement
benefit obligation:
Retirees $ (690) (1,156)
Active plan participants:
Fully eligible (176) (422)
Other (753) (944)
___________________
(1,619) (2,522)
Plan assets 62 -
Accumulated postretirement
obligation in excess of plan assets (1,557) (2,522)
Unrecognized net gain from
past experience and changes in
assumptions 92 (6)
Unrecognized net transition
obligation 1,064 2,199
____________________
Accrued postretirement benefit cost
included in other current liabilities $ (401) (329)
=====================
For measurement purposes, a 12% annual increase in the per capita cost of
covered health care benefits was assumed for 1994; this increase was assumed to
decrease gradually to 6% by 2008 and remain at that level thereafter. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7% for 1993 and 8% for 1992. In
determining the net periodic postretirement benefit cost an 8% discount rate was
used for all years presented.
The health care cost trend rate assumption has a significant effect on the
amounts reported. Increasing the assumed health care cost trend rates by 1%
each year would increase the accumulated postretirement benefit obligation as of
December 31, 1993 by $160 and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for 1993 by $18.
NOTE 8.
COMMITMENTS
The Company purchases water from the 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.
The Company is obligated to purchase a minimum of 90% of the delivery schedule.
The amount of water purchased in any year may not be less than 95% of the
highest amount agreed to be purchased in any year of the current three-year
schedule.
Based on current prices and estimated deliveries, the Company expects to
purchase at least $18,000 of water from SCVWD in each contract year ending June
30, 1994, through 1996. The Company also has operating lease commitments
amounting to approximately $170 each year through 1996.
28
NOTE 9.
ACQUISITION
On December 31, 1992, the Company acquired Roscoe Moss Company (subsequently
renamed Western Precision, Inc.) through the exchange of shares of Company stock
for all of the shares of the Roscoe Moss Company. The Roscoe Moss Company was
the Company's principal stockholder, and as a result of the exchange, the
Company acquired a high-precision mechanical parts manufacturing operation and
549,976 shares of California Water Service Company (CWS). The former Roscoe
Moss Company shareholders received Company shares issued in the exchange.
The acquisition was accounted for as a purchase for financial reporting
purposes and the investment in CWS was included in the 1992 consolidated balance
sheet at fair value net of taxes. The fair value of the investment in CWS at
December 31, 1992, was $18,200.
The following unaudited proforma summary presents the consolidated results of
operations as if the acquisition had occurred at the beginning of the period and
does not purport to be indicative of results that may occur in the future:
1992 1991
Operating revenues $92,381 79,176
Net income 10,671 8,974
Earnings per share 3.30 2.77
Weighted average
shares outstanding 3,234 3,234
==============
NOTE 10.
SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental information on cash flows and noncash transactions
is as follows:
1993 1992 1991
Interest paid during the year $4,998 4,041 3,892
Income taxes paid during
the year 8,028 11,485 2,371
Noncash investing and financing
activities
Fair value of assets
acquired - 16,450 -
Liabilities assumed - 1,752 -
Stock issued (net) - 14,698 -
Series C senior notes exchanged
for Series AA first mortgage
Bonds 10,000 - -
Adjustments to purchase price 426 - -
29
NOTE 11.
CONTINGENCY
The Company has been named as a defendant in a lawsuit filed in Superior Court
in Santa Clara County, California, seeking unspecified damages and other relief
resulting from water entering a customer's premises. In 1992, a large standby
fire service pipeline ruptured, flooding a title company's basement. The
Company maintains the failed pipeline was the property of the building owner and
that the Company is not liable for any damage.
Plaintiffs are seeking unspecified damages. The case is in the preliminary
stages of discovery and the Company intends to defend its position vigorously.
The Company's insurer has reserved its rights to deny coverage, but is defending
the Company. The outcome of this litigation cannot be predicted.
NOTE 12.
UNAUDITED QUARTERLY FINANCIAL DATA
Summarized quarterly financial data is as follows:
1993 Quarter Ended
March June Sept. Dec.
Operating revenue $ 17,176 23,847 31,469 22,553
Operating income 2,308 3,372 5,673 3,607
Net income 1,391 2,397 4,695 3,284
Earnings per
share 0.43 0.74 1.45 1.02
Market price range of
stock:
High 41 39 5/8 39 40 1/4
Low 34 3/4 35 7/8 36 1/4 35 3/4
Dividends per common share 0.51 0.51 0.51 0.51
========================================
1992 Quarter Ended
March June Sept. Dec.
Operating revenue $ 16,488 24,901 27,834 19,886
Operating income 2,380 4,450 4,941 2,351
Net income 1,380 3,641 3,855 1,352
Earnings per
share 0.49 1.28 1.36 0.47
Market price range of
stock:
High 32 1/8 34 1/2 35 5/8 36
Low 28 1/4 31 32 31 5/8
Dividends per common share 0.495 0.495 0.495 0.645
============================================
30
Schedule V
----------
SJW CORP.
Property, Plant and Equipment
Years ended December 31, 1993, 1992 and 1991
Balance at Balance at
beginning of Additions end of
Classification period at cost Retirements period
- -------------- ----------- ---------- ----------- ------------
1993
- ----
Utility plant:
Land and land rights $ 1,842,323 100,376 (10,115) 1,932,584
Source of supply plant 10,587,107 9,590,354 (29,774) 20,147,687
Pumping plant 15,645,929 1,203,711 (105,373) 16,744,267
Water treatment plant 2,716,721 3,465,184 (89,155) 6,092,750
Transmission and
distribution plant 219,417,405 12,892,294 (783,498) 231,526,201
General plant 12,330,753 1,343,503 (438,802) 13,235,454
Construction work in
progress 9,689,449 (6,456,762)(2) - 3,232,687
----------- ---------- ---------- ----------
$ 272,229,687 22,138,660 (1,456,717) 292,911,630
=========== =========== =========== ===========
Nonutility property $ 7,329,243 1,601,812 (215,047) 8,716,008
=========== =========== =========== ===========
1992
- ----
Utility plant:
Land and land rights $ 1,837,548 4,775 - 1,842,323
Source of supply plant 10,474,710 246,184 (133,787) 10,587,107
Pumping plant 14,566,070 1,166,692 (86,833) 15,645,929
Water treatment plant 2,610,749 106,972 (1,000) 2,716,721
Transmission and
distribution plant 211,603,910 8,695,500 (882,005) 219,417,405
General plant 9,806,679 2,837,716 (313,642) 12,330,753
Construction work in
progress 3,655,971 6,033,478(2) - 9,689,449
------------ --------- ---------- ----------
$ 254,555,637 19,091,317 (1,417,267) 272,229,687
============ ========== =========== ==========
Nonutility property $ 5,145,332 2,183,911(3) - 7,329,243
============ ========== =========== =========
1991
- ----
Utility plant:
Land and land rights $ 1,832,143 5,960 (555) 1,837,548
Source of supply
plant 10,398,122 237,317 (160,729) 10,474,710
Pumping plant 12,419,229 2,193,414 (46,573) 14,566,070
Water treatment plant 2,577,955 38,385 (5,591) 2,610,749
Transmission and
distribution plant 204,783,120 7,667,832 (847,042) 211,603,910
General plant 9,370,523 758,556 (322,400) 9,806,679
Construction work in
progress 1,917,276 1,738,695(2) - 3,655,971
---------- --------- ---------- ----------
$ 243,298,368 12,640,159 (1,382,890) 254,555,637
=========== ========== =========== ===========
Nonutility property $ 5,145,332 - - 5,145,332
========== ========= =========== ===========
31
SJW CORP.
Property, Plant and Equipment
Years ended December 31, 1993, 1992, and 1991
Notes:
(1) See Note 1 of the Notes to Consolidated Financial Statements for a
summary of the Company's significant utility plant and depreciation accounting
policies. As to columns omitted, the answer is "None." The provisions for
depreciation in 1993, 1992 and 1991 were equivalent to 2.5%, 2.4% and 2.4%,
respectively, of the average depreciable utility plant in service.
Depreciation of plant and equipment was recorded in the amount of $7,558,565
for 1993, $7,055,555 for 1992 and $6,608,717 for 1991 excluding $10,621 of
amortization of intangibles. In conformity with the Uniform System of Accounts
for Water Utilities prescribed by the CPUC, contributions in aid of construction
has been charged with depreciation of $715,140 in 1993, $685,062 in 1992 and
$633,320 in 1991; and the transportation clearing account has been charged
$271,271 in 1993, $264,839 in 1992 and $250,969 in 1991. Amounts charged
initially to the transportation clearing account have been distributed to the
appropriate operating, administrative, maintenance, utility plant and other
accounts.
(2) Represents difference between net additions to construction work in
progress and amounts transferred upon completion to classified fixed capital
accounts in the same column.
(3) Nonutility property acquired through stock exchange with Roscoe Moss
Company.
32
Schedule VI
SJW CORP. -----------
Accumulated Depreciation of Property, Plant and Equipment
Years ended December 31, 1993, 1992 and 1991
Additions Retirements,
Balance charged renewals & Additions Balance
at to costs replace- charged at
beginning and ments to other end of
Description of period expenses (1) accounts period
- ----------- --------- --------- ---------- --------- -------
1993
- ----
Utility plant:
Source of supply
plant $ 4,850,531 214,319 (48,635) 7,298 5,023,513
Pumping plant 7,060,780 827,563 (163,062) 8,224 7,733,505
Water treatment
plant 1,490,138 74,281 (115,375) 46 1,449,090
Transmission and
distribution plant 68,155,127 4,912,383 (981,029) 699,555 72,786,036
General plant 2,480,347 814,879 (389,868) 17 2,905,375
-------- --------- --------- ---------- ----------
$ 84,036,923 6,843,425 (1,697,969) 715,140 89,897,519
========== ========= =========== ========== ==========
Nonutility property 1,864,150 218,974 (103,780) (38,036) 1,941,308
========== ========= =========== ========== ==========
1992
- ----
Utility plant:
Source of supply
plant $ 4,792,780 204,438 (154,131) 7,444 4,850,531
Pumping plant 6,444,753 725,624 (118,140) 8,543 7,060,780
Water treatment
plant 1,421,486 70,352 (1,747) 47 1,490,138
Transmission and
distribution plant 63,727,640 4,787,192 (1,028,716) 669,011 68,155,127
General plant 2,177,538 582,887 (280,095) 17 2,480,347
---------- --------- ---------- ---------- ----------
$ 78,564,197 6,370,493 (1,582,829) 685,062 84,036,923
========== ========= =========== ========== ==========
Nonutility property 171,007 15,438 - 1,677,705 1,864,150
========== ========= =========== ========== ==========
1991
- ----
Utility plant:
Source of supply
plant $ 4,762,805 192,927 (170,581) 7,629 4,792,780
Pumping plant 5,987,239 506,239 (49,997) 1,272 6,444,753
Water treatment
plant 1,360,945 70,430 (9,937) 48 1,421,486
Transmission and
distribution plant 59,269,548 4,667,543 (833,805) 624,354 63,727,640
General plant 1,923,923 538,258 (284,660) 17 2,177,538
---------- --------- --------- -------- ----------
$ 73,304,460 5,975,397 (1,348,980) 633,320 78,564,197
========== ========= =========== ========= ==========
Nonutility property 154,962 16,045 - - 171,007
========== ========= =========== ========== ==========
Note:(1) Amounts shown in this column are net, after deduction of $95,637
in 1993, $83,739 in 1992, and $120,580 in 1991 for salvage credits.
33
Schedule VIII
SJW CORP. -------------
Valuation and Qualifying Accounts and Reserves
Years ended December 31, 1993, 1992 and 1991
Description 1993 1992 1991
- ----------- ------- ------- -------
Allowance for
doubtful accounts
Balance, beginning of period $ 50,000 50,000 25,000
Charged to expense 203,854 223,345 195,449
Accounts written off (249,036) (264,105) (207,580)
Recoveries of accounts
written off 45,182 40,760 37,131
------- ------- -------
Balance, ending of period 50,000 50,000 50,000
======= ======= =======
Reserve for self insurance
Balance, beginning of period 447,734 150,000 205,911
Charged to expense 110,000 365,000 (32,086)
Payments (101,543) (67,266) (23,825)
------- ------- -------
Balance, ending of period $ 447,734 150,000 456,191
======= ======= =======
Schedule IX
-----------
SJW CORP.
Short-term Borrowings
Years ended December 31, 1993, 1992 and 1991
Weighted Max. Amt. Avg. Amt. Weighted Avg.
Category of Aggregate Bal. at Avg. Outstndg. Outstndg. Int. Rate
Short-term End of Interest During the During the During the
Borrowings (1) Period Rate Period Period (2) Period (3)
_____________________ ______ ________ __________ __________ ___________
1993
- ----
Bank line of credit $ 0 6.00% 1,675,000 188,151 5.80%
========= ========= ==========
1992
- ----
Bank line of credit $1,675,000 3.30% 9,000,000 4,657,081 3.31%
========= ========= ==========
Notes:(1) Generally, all borrowings were advances under a bankers acceptance
facility at a fixed annual interest rate with no compensating balance
requirement.
(2) Total daily balances divided by days outstanding.
(3) Interest cost divided by average outstanding balance in (2).
34
Schedule X
----------
SJW CORP.
Supplementary Income Statement Information
Years ended December 31, 1993, 1992 and 1991
1993 1992 1991
----- ----- -----
Taxes, other than income
taxes:
City and county real
and personal property $1,745,614 1,684,760 1,674,213
Other taxes 1,012,153 948,566 883,967
--------- --------- ---------
$2,757,767 2,633,326 2,558,180
========= ========= ==========
Note 1. All charges for maintenance and repairs, depreciation, and
amortization are shown separately in the statement of income.
Amounts for advertising costs and royalties are inapplicable.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
DIRECTORS OF THE REGISTRANT
A brief biography of each nominee (including the nominee's business experience
during the past 5 years) is set forth below. All nominees are currently
directors of the Corporation and have served in such capacity since the
Corporation was organized in 1985, except Mr. Gibson who has served since 1986,
Mr. DiNapoli who has served since 1989, Mr. Toeniskoetter who has served since
1991 and Mr. Cali who has served since 1992. All nominees are also directors of
San Jose Water Company, a wholly-owned public utility water corporation
subsidiary of the Corporation. It is the Corporation's intention to appoint all
persons elected as directors of the Corporation at the annual meeting to be
directors of San Jose Water Company for a concurrent term.
MARK L. CALI, Attorney at Law, with the firm, Ropers, Majeski, Kohn, Bentley,
Wagner and Kane. Prior to his present employment Mr. Cali attended Santa Clara
University Law School. Mr. Cali, age 28, has served as a director of San Jose
Water Company since 1992.
35
J. PHILIP DiNAPOLI, Attorney at Law, Chairman of Citation Insurance Company
(Worker's Compensation specialty carrier) and Comerica California Inc.
(California bank holding company); he serves as a director of Comerica, Inc.
(bank holding company) and Comerica Bank-California (bank); he is also the owner
of DiNapoli Development Company (real estate development company). Mr.
DiNapoli, age 54, is a member of the Audit Committee and has served as a
director of the San Jose Water Company since 1989. Mr. DiNapoli is a general
partner of a partnership which owned, through another general partnership,
certain real estate in San Jose, California. In 1993, a nonrecourse loan to
the partnership secured by the real estate was declared in default and the
lender put the property in receivership and foreclosed on the property. This
property was only one of many real estate investments of Mr. DiNapoli and was
not material in relation to his total net worth.
DREW GIBSON, President of the Gibson Speno Company (real estate development and
investment company) and President of the Gibson Speno Management Company
(management company). He also serves as a director of Comerica California Inc.
(California bank holding company) and its subsidiary Comerica Bank-California
(bank). Mr. Gibson, age 51, is a member of the Audit and Compensation
Committees and has served as a director of San Jose Water 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 65, is a member of the Executive, Audit
and Compensation Committees and has served as a director of San Jose Water
Company since 1974.
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 62, is a
member of the Compensation Committee and has served as a director of San Jose
Water Company since 1984.
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
64, is a member of the Corporation's Executive and Compensation Committees. Mr.
Moss serves as a director of California Water Service Company and has served as
a director of San Jose Water Company since 1980.
CHARLES J. TOENISKOETTER, President of Toeniskoetter & Breeding Inc.
(construction and real estate development company). Mr. Toeniskoetter, age 49,
is a member of the Audit Committee and has served as a director of San Jose
Water Company since 1991.
J.W. WEINHARDT, President and Chief Executive Officer of the Corporation;
President and Chief Executive Officer of San Jose Water Company. Mr. Weinhardt,
age 62, is a member of the Corporation's Executive Committee and has served as a
director of San Jose Water Company since 1975. Mr. Weinhardt also serves as a
director of SJNB Financial Corp. and its subsidiary San Jose National Bank.
Nominees Roscoe Moss, Jr. and George Moss are brothers. Other than the family
relationship described in the preceding sentence, no nominee has any family
relationship with any other nominee or with any executive officer.
In the unanticipated event that a nominee is unable or declines to serve as a
director at the time of the annual meeting, proxies will be voted for any
nominee named by the present Board of Directors to fill the vacancy. As of the
date of this Proxy Statement, the Corporation is not aware of any nominee who is
unable or will decline to serve as a director.
36
No nominee is or has been employed in his principal occupation or employment
during the past 5 years by a corporation, other than Mr. Weinhardt whose
employment relationship with San Jose Water Company is described above and
Mr. George Moss and Mr. Roscoe Moss, Jr. whose former employment
relationship with the Roscoe Moss Company (now Western Precision, Inc.), a
subsidiary of the corporation is described above.
The Corporation and San Jose Water Company pay their non-employee directors
annual retainers of $2,400 and $12,000, respectively. In addition, all
directors of the Corporation and San Jose Water Company are paid $600 for each
Board or committee meeting attended.
Upon ceasing to serve as a director of the Corporation or San Jose Water
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. The Audit Committee reviews the results of
the annual audit, the financial statements, any supplemental management
information submitted by the auditors, and internal accounting and control
procedures. It also recommends the selection of auditors to the Corporation's
shareholders. The Compensation Committee reviews and recommends to the Board of
Directors appropriate compensation for executive officers of the corporation.
There is no standing nominating committee. During 1993, there were 4 regular
meetings of the Board of Directors and 3 regular meetings of the Audit Committee
and 1 meeting of the Executive Compensation Committee. All directors attended
at least 75% of all Board and applicable committee meetings.
Executive Officers of the Registrant.
Name Age Offices and Experience
J. W. Weinhardt 63 SJW Corp. - President, Chief Executive Officer,
Director and Member of the Executive Committee
of the Board of Directors since 1985.
San Jose Water Company - President and Chief Executive
Officer since 1974. Director and Member of the Executive
Committee of the Board of Directors. Mr. Weinhardt has
been with the Water Company since 1963.
W. R. Roth 41 SJW Corp. - Vice President, Finance since April 1992,
Chief Financial Officer and Treasurer since January 1990.
San Jose Water Company - Vice President, Finance since
April 1992, Chief Financial Officer and Treasurer since
January 1990. For the nine consecutive years preceding
January 1990 Mr. Roth was employed by KPMG Peat Marwick,
the last three years as a Senior Manager.
F. R. Meyer 54 San Jose Water Company - Vice President, Regulatory
Affairs since January 1990. Vice President since 1984
and Chief Financial Officer and Treasurer from 1978 to
January 1990.
P. J. Schreiber 56 San Jose Water Company - Vice President, Operations since
March 1984 and Directing Manager of Operations since 1978.
Mr. Schreiber has been with the Water Company since 1962.
R. J. Balocco 44 San Jose Water Company - Vice President, Administration
since March 1992, Manager of Customer Service since
January 1985. Mr. Balocco has been with the Water
Company since December 1982.
B. Y. Nilsen 52 SJW Corp., Secretary since 1985.
San Jose Water Company - Secretary since 1983. Ms. Nilsen
has been with the Company since 1964.
37
No executive officer has any family relationship to any other executive officer
or director. No executive officer is appointed for any set term. There are no
agreements or understandings between any executive officer and any other person
pursuant to which he was selected as an officer, other than those with directors
or officers of the Company acting solely in their capacities as such.
Compliance With Section 16(a) of the Exchange Act.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and the American Stock Exchange. Officers, directors and greater than ten
percent shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such reports received by it, or
written representations from certain reporting persons that no other reports
were required during 1993, the Company believes that during 1993 all officers,
directors and greater than ten percent beneficial owners were in compliance with
all Section 16(a) filing requirements, except that one report, covering a
purchase of 500 shares, was filed late by Mr. DiNapoli.
38
Item 11. Executive Compensation.
The following table contains certain summary information regarding the cash
compensation paid by the Corporation and its subsidiaries for each of the
corporations last three completed fiscal years to the President and Chief
Executive Officer and to each other executive officer whose total annual salary
and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
Annual Compensation(1) Long Term Compensation(1)
--------------------- -------------------------
Other Awards Payouts
Annual ------ --------
Restricted All Other
Compen- Stock Options/LTIP Compen-
Name and Principal Year Salary Bonus sation Award(s) SAR's Payouts sation
Position
- ----------------- ---- ----- ------ ------- ------- ------ ------- -------
($) ($) ($) ($) ($) ($) ($)
J.W. Weinhardt 1993 $253,750 $90,000 $ 9,297(2)
President and 1992 $238,750 $11,564(2)
Chief Executive 1991 $222,833 $ 9,638(2)
Officer SJW Corp.
and San Jose Water
Company
F.R. Meyer 1993 $124,500 $ 3,735(3)
Vice President 1992 $118,417 $ 3,553(3)
San Jose Water 1991 $111,000 $ 3,330(3)
Company
W.R. Roth 1993 $114,416 $ 3,190(3)
Vice President 1992 $ 98,300 $ 2,950(3)
SJW Corp. and 1991 $ 89,000 $ 2,670(3)
San Jose Water
Company
P.J. Schreiber 1993 $112,042 $ 3,361(3)
Vice President 1992 $106,542 $ 3,196(3)
San Jose Water 1991 $100,583 $ 3,018(3)
Company
__________
(1) Long Term Compensation Award or Payout Plans are not provided to employees
of the corporation or its subsidiaries.
(2) Represents matching contributions paid by the San Jose Water Company under
its Salary Deferral Plan of $4,497 for 1993, $4,364 for 1992 and $4,238 for
1991, the balance are amounts received for Directors fees.
(3) Represents matching contributions paid by the San Jose Water Company under
its Salary Deferral Plan.
39
The foregoing table does not include benefits provided under San Jose Water
Company's Retirement Plan (The "Retirement Plan") or Supplemental Executive
Retirement Plan (SERP).
All employees of San Jose Water Company participate in the Retirement Plan.
Although subject to adjustment to comply with Internal Revenue Code
requirements, the plan's regular benefit formula 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 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; there are provisions for early
retirement. In addition, 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 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 twenty 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(1)(2)(3)(4)
Average
compensation 15 Years 20 Years 25 Years 30 Years 35 Years
$100,000(5) $25,000 $ 44,000 $ 49,500 $ 55,000 $ 55,000
$125,000(5) $31,250 $ 55,000 $ 61,875 $ 68,750 $ 68,750
$150,000(5) $37,500 $ 66,000 $ 74,250 $ 82,500 $ 82,500
$175,000(5) $43,750 $ 77,000 $ 86,625 $ 96,250 $ 96,250
$200,000(6) $50,000 $120,000 $131,000 $142,000 $150,260
$225,000(6) $56,250 $135,000 $147,375 $159,750 $169,043
$250,000(6) $58,960(7) $150,000 $163,750 $177,500 $187,825
$275,000(6) $58,960(7) $165,000 $180,125 $195,250 $206,607
$300,000(6) $58,960(7) $180,000 $196,500 $213,000 $225,390
$325,000(6) $58,960(7) $195,000 $212,875 $230,750 $244,173
$350,000(6) $58,960(7) $210,000 $229,250 $248,500 $262,955
(1) The benefits listed in the table under the 15 years column are subject to
deduction of 50% of the participant's social security benefits at age 65.
(2) The number of years of credited service and covered compensation at December
31, 1993 is for Mr. Weinhardt, 30, $343,750; Mr. Meyer, 15, $124,500; Mr. Roth,
3,
$114,417; Mr. Schreiber, 31, $112,042.
(3) Applicable laws and regulations limit the amounts which may be paid.
(4) No additional benefits are accrued at the present time.
(5) Range of benefits apply to Messers, Meyer, Roth and Schreiber only.
(6) Range of benefits apply to Mr. Weinhardt only.
(7) Compensation is limited to $235,840 in 1993 for the Retirement Plan.
40
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Drew Gibson, a director and member of the Corporation's Compensation
Committee is a partner in the Gibson Speno Company which was compensated for
consulting services as disclosed under Transactions with Management. No
member of the Compensation Committee is a former or current officer or employee
of the Company or any of its subsidiaries.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following sets forth, as of January 1, 1994, the beneficial ownership of
shares of the outstanding Common Stock of the Corporation by each director or
nominee to the Board, each beneficial owner of more than 5% of the common stock,
the four most highly compensated executive officers and the executive officers
of the Corporation as a group. Each nominee has sole voting and sole investment
power with respect to the shares of the Corporation's stock listed below (or
shares such powers with his spouse).
Amount and Percent of
Nature of class
Class of beneficial beneficially
Name stock ownership owned
____ ________ _________ ____________
Directors:
Mark L. Cali Common 2,145 *
J. Philip DiNapoli Common 600 *
Drew Gibson Common 500 *
Ronald R. James Common 200 *
George E. Moss Common 527,156(1) 16.2%(2)
Roscoe Moss, Jr. Common 521,878 16.1%(2)
Charles J. Toeniskoetter Common 100 *
J.W. Weinhardt Common 4,060 *
Executive Officers:
Fred R. Meyer Common 900 *
W.R. Roth Common 100 *
P.J. Schreiber Common 1,162 *
All directors and executive officers
as a group (13 individuals) Common 1,060,351 32.6%
*Denotes an amount less than 1%.
(1) Mr. Moss disclaims beneficial ownership as to 148,483 shares.
(2) The address for Mr. George E. Moss and Mr. Roscoe Moss, Jr. is 4360 Worth
Street, Los Angeles, CA 90063.
Item 13. Certain Relationships and Related Transactions.
Transactions with Management
SJW Land Company and San Jose Water Company, subsidiaries of the Corporation,
retained Gibson Speno Company, of which Mr. Gibson a director of the
Corporation, is a partner, to perform certain consulting services during the
year 1993. The Gibson Speno Company was paid $44,039 for consulting services
and reimbursed $73,171 for actual costs related to construction of facilities
for SJW Land Company.
41
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) Financial Statements
Page
Independent Auditors' Report, January 21, 1994 14
Consolidated Balance Sheet as of December 31, 1993 and 1992 16
Consolidated Statement of Income for the years ended
December 31, 1993, 1992 and 1991 18
Consolidated Statements of Changes in Common Shareholders' Equity
for the years ended December 31, 1993, 1992 and 1991 19
Consolidated Statements of Cash Flow for the years ended
December 31, 1993, 1992 and 1991 20
Notes to Consolidated Financial Statements 21
(2) Financial Statement Schedules:
Schedule
Number
Page
V Property, Plant and Equipment, Years ended
December 31, 1993, 1992 and 1991. 31
VI Accumulated Depreciation of Property,
Plant, and Equipment, Years ended
December 31, 1993, 1992 and 1991. 33
VIII Valuation and Qualifying Accounts and
Reserves, Years ended December 31,
1993, 1992 and 1991. 34
IX Short-Term Borrowings, Years ended
December 31, 1993, 1992 and 1991. 34
X Supplementary Income Statement
Information, Years ended December 31,
1993, 1992 and 1991. 35
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 on pages 45 through 46 of this document.
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.
Current Report on Form 8-K filed on January 11, 1993 responding to Item 5, Other
Events (related to the Company's acquisition of Roscoe Moss Company on December
31, 1992).
42
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: January 26, 1994 By /s/ J. W. Weinhardt
J. W. WEINHARDT, President,
Chief Executive Officer and
Member, 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: January 26, 1994 By /s/ J. W. Weinhardt
J. W. WEINHARDT, President,
Chief Executive Officer and
Member, Board of Directors
Date: January 26, 1994 By /s/ W. R. Roth
W. R. ROTH, Vice President,
Finance and Chief Financial
Officer
Date: January 26, 1994 By /s/ G. W. Clements
G. W. CLEMENTS, Controller
Date: January 26, 1994 By /s/ Mark L. Cali
MARK L. CALI
Member, Board of Directors
Date: January 26, 1994 By /s/J. Philip DiNapoli
J. PHILIP DINAPOLI
Member, Board of Directors
Date: January 26, 1994 By /s/Drew Gibson
DREW GIBSON
Member, Board of Directors
Date: January 26, 1994 By /s/Ronald R. James
RONALD R. JAMES
Member, Board of Directors
Date: January 26, 1994 By /s/George E. Moss
GEORGE E. MOSS
Member, Board of Directors
Date: January 26, 1994 By /s/Roscoe Moss, Jr.
ROSCOE MOSS, JR.
Member, Board of Directors
Date: January 26, 1994 By /s/Charles J. Toeniskoetter
CHARLES J. TOENISKOETTER
Member, Board of Directors
43
In accordance with the Securities and Exchange Commission's requirements,
the Company 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.
44
EXHIBIT INDEX
Location in
Sequentially
Exhibit Numbered
No. Description Copy
2 Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession.
2.1 Stock Exchange Agreement dated as of August 20, 1992
(as amended October 21, 1992). Filed as Appendix A to
Proxy Statement/Prospectus dated November 11, 1992. 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. 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. 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. 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. SEC 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 the total assets of the Company. The Company 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 on Form 10-K
for the year ended December 31, 1991. 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
45
Location in
Sequentially
Exhibit Numbered
No. Description Copy
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 and Restated effective January 1. 1981). 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
10.5 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
22 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
28 Additional Exhibits: None
46