FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 2002
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Commission file number 1-8966
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SJW Corp.
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(Exact name of registrant as specified in its charter)
California 77-0066628
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
374 West Santa Clara Street, San Jose, CA 95196
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(Address of principal executive offices) (Zip Code)
408-279-7800
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Common shares outstanding as of May 1, 2002 and as of the date of
this report are 3,045,147.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SJW CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(UNAUDITED)
(In thousands, except share and per share data)
THREE MONTHS ENDED
MARCH 31
2002 2001
------- -------
OPERATING REVENUE $27,718 $24,245
OPERATING EXPENSES:
Operation:
Purchased water 5,687 5,787
Power 1,340 718
Pump taxes 3,617 2,922
Other 5,953 6,309
Maintenance 1,991 1,567
Property taxes and other nonincome taxes 1,150 1,106
Depreciation and amortization 3,506 3,298
Income taxes 1,102 326
------- -------
Total operating expense 24,346 22,033
------- -------
OPERATING INCOME 3,372 2,212
Other income 260 198
Dividend income 308 307
Interest expense and other (2,191) (2,039)
------- -------
NET INCOME $ 1,749 $ 678
======= =======
Other comprehensive income (loss):
Unrealized gain (loss) on investment $ (164) $ 1,760
Income taxes related to other
comprehensive income (loss) 67 (722)
------- -------
Other comprehensive income (loss), net (97) 1,038
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COMPREHENSIVE INCOME $ 1,652 $ 1,716
======= =======
BASIC EARNINGS PER SHARE $0.57 $0.22
===== =====
COMPREHENSIVE INCOME PER SHARE $0.54 $0.56
===== =====
DIVIDENDS PER SHARE $0.69 $0.615
===== ======
WEIGHTED AVERAGE SHARES OUTSTANDING 3,045,147 3,045,147
========= =========
See accompanying Notes to Condensed Consolidated Financial
Statements.
SJW CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands)
ASSETS MARCH 31 DECEMBER 31
2002 2001
-------- -----------
UTILITY PLANT $518,636 $507,227
Less accumulated depreciation
and amortization 153,280 149,721
-------- --------
Net utility plant 365,356 357,506
NONUTILITY PROPERTY 11,791 11,666
Less accumulated depreciation 1,419 1,357
and amortization ------ ------
Net nonutility property 10,372 10,309
CURRENT ASSETS:
Cash and equivalents 2,039 5,021
Accounts receivable and accrued utility
revenue 14,793 14,098
Prepaid expenses and other 1,113 1,308
-------- --------
Total current assets 17,945 20,427
OTHER ASSETS:
Investment in California Water Service Group 28,159 28,324
Investment in joint venture 1,207 1,199
Unamortized debt issuance and reacquisition
costs 3,616 3,658
Goodwill 1,744 1,744
Regulatory assets 5,630 5,567
Other 2,659 2,283
------- --------
Total other assets 43,015 42,775
------- --------
$436,688 $431,017
======== ========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock $ 9,516 $ 9,516
Additional paid-in capital 12,357 12,357
Retained earnings 122,063 122,415
Accumulated other comprehensive income 4,969 5,066
------- --------
Shareholders' equity 148,905 149,354
Long-term debt 110,000 110,000
-------- --------
Total capitalization 258,905 259,354
CURRENT LIABILITIES:
Line of credit 6,300 11,500
Accrued pump taxes and purchased water 4,601 3,091
Accounts payable 4,414 422
Accrued interest 2,104 3,136
Accrued taxes 2,797 1,182
Other current liabilities 4,377 4,828
------- --------
Total current liabilities 24,593 24,159
DEFERRED INCOME TAXES AND CREDITS 26,746 26,706
ADVANCES FOR AND CONTRIBUTIONS IN AID OF
CONSTRUCTION 119,825 114,519
OTHER NONCURRENT LIABILITIES 6,619 6,279
-------- --------
$436,688 $431,017
======== ========
See accompanying Notes to Condensed Consolidated Financial
Statements.
SJW CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
THREE MONTHS ENDED
MARCH 31
2002 2001
OPERATING ACTIVITIES: ------ ------
Net income $1,749 $ 678
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,506 3,298
Deferred income taxes and credits 40 2,320
Changes in operating assets and liabilities:
Accounts receivable and accrued utility revenue (695) 308
Accounts payable and other current liabilities 3,541 1,501
Accrued pump taxes and purchased water 1,510 (1,686)
Accrued taxes 1,615 (677)
Accrued interest (1,032) (769)
Other changes, net 337 (172)
------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 10,571 4,801
INVESTING ACTIVITIES:
Additions to utility plant (11,702) (9,315)
Additions to nonutility property (103) (82)
Cost to retire utility plant, net of salvage (98) (31)
Investment in affiliates (10) 51
------ ------
NET CASH USED IN INVESTING ACTIVITIES (11,913) (9,377)
FINANCING ACTIVITIES:
Borrowings from line of credit, net of
repayment (5,200) 4,200
Dividends paid (2,101) (1,873)
Advances and contributions
in aid of construction 5,896 2,974
Refunds of advances (235) (238)
------ ------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (1,640) 5,063
------ ------
NET CHANGE IN CASH AND EQUIVALENTS (2,982) 487
------ ------
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 5,021 783
------ ------
CASH AND EQUIVALENTS, END OF PERIOD $2,039 $1,270
====== ======
Cash paid during the period for:
Interest $3,182 $2,732
See accompanying Notes to Condensed Consolidated Financial
Statements.
SJW CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
March 31, 2002
Note 1. General
- ---------------
In the opinion of SJW Corp., the accompanying unaudited condensed
consolidated financial statements contain all adjustments,
consisting only of normal recurring adjustments, necessary for
the fair presentation of the results for the interim periods.
The Notes to Consolidated Financial Statements incorporated by
reference in SJW Corp.'s 2001 Annual Report on Form 10-K should
be read with the accompanying condensed consolidated financial
statements.
Basic earnings per share and comprehensive income per share are
calculated using income available to common shareholders and
comprehensive income, respectively, divided by the weighted
average number of shares outstanding during the year. SJW Corp.
has no dilutive securities, and accordingly, diluted earnings per
share are not shown.
SJW Corp. and its subsidiaries operate predominantly in one
reportable business segment of providing water utility service to
its customers. Nonutility revenue, assets, and net income do not
have a material effect on SJW Corp.'s financial condition and
results of operations.
Note 2. Long-Term Incentive Plan
- --------------------------------
At the 2002 Annual Meeting of Shareholders of SJW Corp. held on
April 18, 2002, the shareholders approved the adoption of the
Long-Term Incentive Plan (Incentive Plan) under which 300,000
shares of common stock will initially be reserved for issuance.
The Incentive Plan will allow SJW Corp. to provide key employees,
including officers and directors, the opportunity to acquire a
meaningful equity interest in the corporation as an incentive for
them to remain in employment. In no event may any one
participant in the Incentive Plan receive awards under the
Incentive Plan in any calendar year covering an aggregate of more
than 100,000 shares of the common stock. Additionally, awards
granted under the Incentive Plan may be conditioned upon the
attainment of specified performance goals. The types of awards
included in the Incentive Plan are stock options, dividend units,
performance shares, rights to acquire restricted stock and stock
bonuses. As of March 31, 2002, no award has been granted under
the Incentive Plan.
Note 3. Goodwill
- ----------------
SJW Corp. adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 142 "Goodwill and Other
Intangible Assets" regarding goodwill amortization effective
January 1, 2002. Accordingly, the company no longer amortizes
goodwill from business acquisitions. On a pro-forma basis, if
the company had applied SFAS No. 142 during the corresponding
quarter a year ago, amortization of goodwill and other intangible
assets would be as follows:
Three months Three months
ended March 31, ended March 31,
2002 2001
--------------- --------------
Reported net income $1,749 $678
Add: Goodwill
amortization, net of tax - 12
------ ----
Adjusted net income $1,749 $690
====== ====
Basic earnings per share remain unchanged at $0.57 and $0.22 for
the three months ended March 31, 2002 and 2001, respectively.
Note 4. Impact of Recent Accounting Pronouncements
- --------------------------------------------------
In August 2001, the Financial Accounting Standards Board (FASB)
issued SFAS No. 143, "Accounting for Asset Retirement
Obligations", which applies to legal obligations that are
associated with the retirement of long-lived assets and the
associated asset retirement costs. The statement is effective
for financial statements issued for fiscal years beginning after
June 15, 2002. SJW Corp. does not anticipate that the adoption
of SFAS No.143 will have a material effect on SJW Corp.'s
financial condition and results of operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-lived Assets". This statement
addresses financial accounting and reporting for the impairment
or disposal of long-lived assets and superceded SFAS No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-
lived Assets to be Disposed Of". SJW Corp. adopted
SFAS No. 144 beginning January 1, 2002. The adoption of SFAS No.
144 did not have a material impact on SJW Corp.'s financial
condition and results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except
share and per share data)
This report contains forward-looking statements within the
meaning of the federal securities laws relating to future events
and financial performance of SJW Corp. and its subsidiaries.
Such forward-looking statements are identified by words including
"expect", "estimate", "anticipate" and similar expressions. SJW
Corp.'s actual results could differ materially from those
discussed in such forward-looking statements.
General:
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SJW Corp. was incorporated in California on February 8, 1985.
SJW Corp. is a holding company with three subsidiaries.
San Jose Water Company, a wholly owned subsidiary, with
headquarters at 374 West Santa Clara Street, San Jose, California
95196, was reorganized under the laws of the State of California
in 1931, succeeding a business founded in 1866. San Jose Water
Company is a public utility in the business of providing water
service to a population of approximately 988,000 people in an
area comprising about 138 square miles in the metropolitan San
Jose area. San Jose Water Company's web site can be accessed via
the Internet at http://www.sjwater.com.
The principal business of San Jose Water Company consists of the
production, purchase, storage, purification, distribution and
retail sale of water. San Jose Water Company provides water
service to customers in portions of the cities of Cupertino and
San Jose and in the cities of Campbell, Monte Sereno, Saratoga
and the Town of Los Gatos, and adjacent unincorporated territory,
all in the County of Santa Clara in the State of California. It
distributes water to customers in accordance with accepted water
utility methods, which include pumping from storage and gravity
feed from high elevation reservoirs.
SJW Land Company, a wholly owned subsidiary, was incorporated in
1985. SJW Land Company owns and operates parking facilities
adjacent to the company's headquarters and the San Jose Compaq
Center. SJW Land Company also owns commercial buildings and
other undeveloped land in the San Jose Metropolitan area, and a
70% limited partnership interest in 444 West Santa Clara Street,
L.P.
Crystal Choice Water Service LLC, a 75% owned limited liability
subsidiary formed in January 2001, engages in the sale and rental
of water conditioning equipment.
SJW Corp. also owns 1,099,952 shares of California Water Service
Group.
Critical Accounting Policies:
- -----------------------------
SJW Corp. has identified accounting policies below as the
policies more critical to the business operations and the
understanding of the results of operations. The preparation of
financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, and revenues and expenses. SJW Corp. bases its
estimates on historical experience and on various other
assumptions that are believed to be reasonable under the
circumstances. The impact and any associated risks related to
these policies on our business operations is discussed throughout
Management's Discussion and Analysis of Financial Condition and
Results of Operations where such policies affect our reported and
expected financial results. Our critical accounting policies are
as follows:
Recognition of Balancing Account-The California Public Utilities
Commission (CPUC) establishes a balancing account mechanism
within its regulatory regime. A separate balancing account must
be maintained for each offset expense item (e.g. purchased water,
purchased power and pump tax). The purpose of a balancing
account is to track the under-collection or over-collection
associated with expense changes and the revenue authorized by the
CPUC to offset those expense changes. In the past ten years, San
Jose Water Company's balancing account showed an average under-
collected balance of $834. Since balances are being tracked and
have to be approved by the CPUC before they could be affected
into rates, SJW Corp. has not been recognizing the balancing
account in its consolidated financial statements. Had the
balancing account under-collection been recognized in San Jose
Water Company's financial statements, San Jose Water Company's
earnings would be increased by the amount of balancing account
revenue under-collected. At March 31, 2002, the Balancing
Account had a net under-collected balance of $422.
Accrued unbilled revenue-San Jose Water Company reads its
customer meters on a cyclical basis and records its revenue based
on its meter reading results. Revenues from the meter-reading
date to the end of the accounting period are estimated based on
historical usage patterns, production records, and the effective
tariff rates. The estimate of the unbilled revenue is a
management estimate utilizing certain sets of assumptions and
conditions. Actual results could differ from those estimates.
Liquidity and Capital Resources:
- -------------------------------
San Jose Water Company's capital expenditures are incurred in
connection with normal upgrading and expansion of existing
facilities and to comply with environmental regulations. San
Jose Water Company expects to incur approximately $130,000
exclusive of customer contributions and advances, in capital
expenditures over the next five years. The company's actual
capital expenditures may vary from its projection due to changes
in the expected demand for services, weather patterns, and
actions by governmental agencies and general economic conditions.
Total additions to utility plant normally exceed company-financed
additions by several million dollars because certain new
facilities are constructed using advances from developers and
contributions in aid of construction.
Most of San Jose Water Company's distribution system has been
constructed over the last 40 years. Expenditure levels for
renewal and modernization of this part of the system will grow at
an increasing rate as these components reach the end of their
useful lives. Additionally, in most cases, replacement cost will
significantly exceed the original installation cost of the
retired assets due to increases in the costs of goods and
services.
In 2002, SJW Corp. expects to invest $550 in Crystal Choice Water
Service LLC for its 75% share of capital investment. The capital
is invested primarily in rental equipment used by the company in
its rental operation. As of March 31, 2002, $237 has been
funded.
Sources of Capital
- ------------------
San Jose Water Company's ability to finance future construction
programs and sustain dividend payments depends on its ability to
attract external financing and maintain or increase internally
generated funds. The level of future earnings and the related
cash flow from operations is dependent, in large part, upon the
timing and outcome of regulatory proceedings.
San Jose Water Company has outstanding $110,000 of various series
of unsecured senior notes as of March 31, 2002. The senior note
agreements of San Jose Water Company generally have terms and
conditions that restrict the company to issue additional funded
debt that (1) does not exceed 66-2/3% of total capitalization and
(2) that net income available for interest charges for the
trailing twelve consecutive calendar months period shall be equal
to or exceed 175% of interest charges.
San Jose Water Company's financing activity is designed to
achieve a capital structure consistent with regulatory guidelines
of approximately 50% debt and 50% equity. As of March 31, 2002,
the San Jose Water Company's funded debt is 47.8% of total
capitalization and the net income for preceding twelve months is
410% of interest charges.
SJW Corp. and its subsidiaries have unsecured lines of credit
available allowing aggregate short-term borrowings of up to
$30,000 at rates that approximate the bank's prime or reference
rate. At March 31, 2002, SJW Corp. and its subsidiaries had
available unused short-term bank lines of credit of $23,700.
Results of Operations
- ---------------------
Overview
- --------
SJW Corp.'s consolidated net income for the first quarter of 2002
was $1,749, an increase of $1,071 or 158% from $678 in the first
quarter of 2001. Consolidated operating revenue increased $3,473
or 14.3% in first quarter of 2002 in comparison to the same
period in 2001. The higher revenue was a result of three rate
increases during the period from April 2001 through January 2002.
Operating expenses increased $1,537 or 7.1% in first quarter of
2002 in comparison to the same period in 2001. The increase in
operating expenses was due to an increase in production costs,
wage increases for the bargaining units and administrative
employees, maintenance costs and depreciation.
Operating Revenue
- -----------------
Three months
Consolidated Operating Revenue ended March 31,
(in thousands) 2002 2001
- ------------------------------------------------------------
San Jose Water Company $27,018 $23,657
SJW Land Company 544 557
Crystal Choice Water Service 156 31
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$27,718 $24,245
======= =======
The change in consolidated operating revenue from the same period
in 2001 was due to the following factors:
Three months ended
Consolidated Operating Revenue March 31, 2002 vs. 2001
(in thousands) Increase/(decrease)
- ----------------------------------------------------------------
Utility:
Consumption $ (199) (0.8%)
New customers (6) -
Rate increases 3,566 14.7%
Parking and rental (13) (0.1%)
Crystal Choice Water Service 125 0.5%
------ ------
$3,473 14.3%
====== ======
Operating Expense
- -----------------
Three months
Consolidated Operating Expense ended March 31,
Excluding Income Taxes (in thousands) 2002 2001
- ------------------------------------------------------------
San Jose Water Company $22,659 $20,252
SJW Land Company 174 172
Crystal Choice Water Service 282 132
SJW Corp 129 1,151
------- -------
$23,244 $21,707
======= ========
The change in consolidated operating expenses, excluding income
taxes, from the same period in 2001 was due to the following
factors:
Three months ended
Consolidated Operating Expense March 31, 2002 vs. 2001
Excluding Income Taxes (in thousands) Increase/(decrease)
- ---------------------------------------------------------------
Production costs:
Reduced surface water supply $ 295 1.3%
Usage and new customers (177) (0.8%)
Pump tax and
purchased water price increase 585 2.7%
Energy price increase 514 2.4%
----- ----
Total production costs 1,217 5.6%
Operation and maintenance 68 0.3%
Depreciation and amortization 208 1.0%
General taxes 44 0.2%
------ -----
$1,537 7.1%
====== =====
The increase in production costs was due primarily to reduced
surface water supply, Santa Clara Valley Water District (SCVWD)
production costs (pump tax and purchased water) increase in July
2001 and energy costs increase in April, 2001. San Jose Water
Company's water supply is obtained from wells, surface run-off
and diversion and by purchases from the SCVWD. Surface water
supply is the least expensive source of water and the
availability of a higher surface water supply reduced water
production costs in the first quarter of 2001. Additional energy
costs were also incurred due to the scheduled maintenance of a
SCVWD treatment plant that altered the company's distribution mix
and optimal pumping pattern.
The change in San Jose Water Company's source of supply mix was
as follows:
Three months ended
March 31, 2002 vs. 2001
Increase/(decrease)
-----------------------
(million gallons)
Purchased water (395) (4.4%)
Ground water 499 5.6%
Surface water (251) (2.8%)
Reclaimed water 0 0%
----- ------
(147) (1.6%)
===== ======
The changes in the source of supply mix were consistent with the
changes in the water production costs and customer consumption.
The increase in other operating expenses, excluding income taxes,
was due to increases in wages and benefits for bargaining unit
and administrative employees, maintenance costs, and depreciation
expense on added utility plant, which were partially offset by
the lower administrative costs in 2002. In the first quarter of
2001, over $900 of administrative and compensation costs were
incurred in conjunction with the proposed merger of SJW Corp.
with American Water Works Company, Inc. (American Water), which
was terminated on March 1, 2001.
Income tax expense increased $776, or 238%, in comparison to the
first quarter of 2001 due to higher earnings in 2002. The
deductibility of the merger-related expenses in 2001 incurred in
association with the proposed merger of SJW Corp. with American
Water reduced income tax expense in 2001. The effective income
tax rates for the first quarter of 2002 and 2001 approximated 39%
and 33%, respectively.
Interest expense increased $358, or 21%, due to issuance of
Series F senior notes in September 2001.
Since the water business is highly seasonal in nature, a
comparison of the revenue and expense of the current quarter with
the immediately preceding quarter would not be meaningful. The
first quarter is normally the quarter with the lowest average
usage per metered customer and is not indicative of the results
for the calendar year. The average usage per metered customer in
the first quarter of 2002 was very similar to the first quarter
of 2001.
Other comprehensive loss for the three months ended March 31,
2002 was $97, net of tax, due to the unrealized loss on the
investment in California Water Service Group. In contrast, the
three months ended March 31, 2001 resulted in other comprehensive
income of $1,038, net of tax, due to the unrealized gain on the
same investment.
Water Supply and Energy resources
- ---------------------------------
Groundwater in 2002 remained at an average level. On April 22,
2002, the SCVWD's 10 reservoirs were 47% full with 169,415 acre-
feet of water in storage. The rainfall in the winter of 2002 was
slightly below average. SJW Corp. believes that its various
sources of water supply are sufficient to meet customer demand
for the remainder of the year. Surface water is a less costly
source of water and its availability significantly impacts the
results of operations.
The pumps and motors at San Jose Water Company's groundwater
production facilities are propelled by electrical power. Over
the last few years, San Jose Water Company has installed standby
power generators at eighteen of its strategic water production
sites. In addition, the commercial office and operations control
centers are equipped with standby generators that allow critical
distribution and customer service operations to continue during a
power outage. The SCVWD informed San Jose Water Company that its
filter plants, which deliver imported water to the San Jose Water
Company, are also equipped with standby generators. In the event
of a power outage, San Jose Water Company believes it will be
able to prevent an interruption of service to customers for a
limited period through pumping water with its standby generators
and through the imported water from SCVWD.
San Jose Water Company has begun the implementation of a
comprehensive security upgrade program for production and storage
facilities, pump stations and company buildings. San Jose Water
Company also coordinates security and planning information with
SCVWD and various governmental and law enforcement agencies.
San Jose Water Company is in the process of conducting a system-
wide vulnerability assessment in compliance with federal
regulations imposed on all water utilities. This assessment is
required to be completed by December 31, 2002. San Jose Water
Company has also actively participated in the security
vulnerability assessment training offered by the American Water
Works Association Research Foundation and the Environmental
Protection Agency.
Regulatory Affairs
- ------------------
Principally all the operating revenue of San Jose Water Company
results from the sale of water at rates authorized by the CPUC.
The CPUC sets rates that are intended to provide revenue
sufficient to recover operating expenses and produce a reasonable
return on common equity. The company's most recent rate
decision, approved in April 2001, authorized it to earn a return
on common equity of 9.95% in 2001, 2002 and 2003, which is within
the range of recent rates of return authorized by the CPUC for
water utilities. As scheduled, San Jose Water Company received a
3% step rate increase on January 1, 2002.
Pursuant to Section 792.5 of the California Public Utilities
Code, a balancing account is to be kept for all expense items for
which revenue offsets have been authorized. A separate balancing
account must be maintained for each offset expense item (e.g.,
purchased water, purchased power and pump tax). The purpose of a
balancing account is to track the under-collection or over-
collection associated with expense changes and the revenue
authorized by the CPUC to offset those expense changes. At March
31, 2002, the balancing account had a net under-collected balance
of $422.
On November 29, 2001, the CPUC issued Resolution W-4294
(Resolution) implementing significant changes in the long
established offset rate increase and balancing account procedures
of water utilities, which could have a significant impact on the
risk profile of the industry. Specifically, the Resolution
provides that (1) the CPUC will open an Order Instituting
Rulemaking (OIR) to evaluate existing balancing account and
offset rate practices and policies, (2) all water companies with
existing balancing accounts shall, effective as of the date of
the Resolution, suspend such balancing accounts pending the
outcome of the OIR, and (3) water utilities can request future
offset rate increases provided they pass a pro-forma summary of
earnings test. It is uncertain how the future CPUC regulation
will affect San Jose Water Company's ability to continue to
collect the Balancing Account under-collection and to receive
future offset rate relief.
To the extent that San Jose Water Company has to pump water
during peak periods to satisfy customer demand when imported
water is not available, higher energy cost will be incurred.
Currently, the CPUC has no established procedure for water
utilities to recover additional costs incurred due to such
unanticipated changes in supply mix.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the 2002 Annual Meeting of Shareholders of the Corporation
held on April 18, 2002, ten directors were re-elected to the
Board of Directors, the appointment of KPMG LLP as independent
auditors for 2002 and the adoption of Long-Term Incentive Plan
were ratified by the following votes:
Name of Director In Favor Against
- ---------------- -------- -------
Mark L. Cali 2,536,572 20,115
J. Philip DiNapoli 2,536,872 19,815
Drew Gibson 2,536,769 19,918
Ronald R. James 2,534,569 22,118
George Moss 2,468,161 88,526
Roscoe Moss, Jr. 2,461,057 95,630
W. Richard Roth 2,504,912 51,775
Charles J. Toeniskoetter 2,529,969 26,718
Frederick R. Ulrich 2,533,491 23,216
J.W. Weinhardt 2,498,396 58,291
Ratification of appointment of independent auditors for 2002:
In Favor Against Abstain
-------- ------- -------
2,530,466 13,369 12,852
Ratification of adoption of the Long-Term Incentive Plan:
Broker
In Favor Against Abstain Non-Votes
-------- ------- ------- ---------
1,813,792 229,627 56,364 456,904
ITEM 5. OTHER INFORMATION
On April 18, 2002, the Board of Directors of the Corporation
declared the regular quarterly dividend of $.69 per common share.
The dividend will be paid June 1, 2002, to shareholders of record
as of the close of business on May 1, 2002.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) Exhibits required to be filed by Item 601 of Regulation
S-K.
There were no exhibits required to be filed by Item 601
of Regulation S-K for the quarter ended March 31, 2002.
(b.) Reports on Form 8-K
No reports on Form 8-K have been filed during the
quarter ended March 31, 2002.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
SJW Corp. is subject to market risks in the normal course of
business, including changes in interest rates and equity prices.
The exposure to changes in interest rates is a result of
financings through the issuance of fixed-rate, long-term debt and
short-term funds obtained through the variable rate line of
credit. SJW Corp. also owns 1,099,952 shares of California Water
Service Group and is exposed to the risk of changes in equity
prices.
The Corporation has no derivative financial instruments,
financial instruments with significant off-balance sheet risks,
or financial instruments with concentrations of credit risk.
There is no material sensitivity to change in market rates and
prices.
SIGNATURES
Pursuant to the requirements 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: May 8,2002 By /s/
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ANGELA YIP
Chief Financial Officer & Treasurer
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