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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
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)
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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 - $75,256,878 on March 1, 1995.
Shares of common stock outstanding on March 1, 1995 - 3,250,746
DOCUMENTS INCORPORATED BY REFERENCE
None
EXHIBIT INDEX
The Exhibit Index to this Form 10-K is on pages 38 through 39.
TABLE OF CONTENTS
Page
PART I
Item 1. Business....................................... 3
a. General Development of Business................ 3
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..................................... 7
Item 3. Legal Proceedings.............................. 7
Item 4. Submission of Matters to a
Vote of Security Holders....................... 8
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PART II Page
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters............... 8
a. Market Information............................. 8
b. Holders........................................ 9
c. Dividends...................................... 9
Item 6. Selected Financial Data........................ 10
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations................................. 11
Item 8. Financial Statements and
Supplementary Data............................ 15
Item 9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure................................... 29
PART III
Item 10. Directors and Executive Officers
of the Registrant............................ 29
Compliance With Section 16(a) of the
Exchange Act................................. 32
Item 11. Executive Compensation......................... 33
Item 12. Security Ownership of Certain
Beneficial Owners and
Management................................... 35
Item 13. Certain Relationships and Related
Transactions................................. 35
PART IV.
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K....................... 36
Signatures .................................................. 37
Exhibit Index ............................................... 38-39
PART I
Item 1. Business.
(a) General Development of Business.
SJW Corp., incorporated in California on February 8, 1985, is a holding company
with three wholly-owned subsidiaries, San Jose Water Company, SJW Land Company
and Western Precision, Inc.
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San Jose 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. San Jose Water
Company is a public utility in the business of providing water service to a
population of approximately 921,000 in an area comprising about 134 square miles
in the metropolitan San Jose area.
SJW Land Company was incorporated in October, 1985.
Western Precision, Inc. was acquired on December 31, 1992 through an exchange of
stock between SJW Corp. and the shareholders of Western Precision, Inc.,
formerly Roscoe Moss Company. Roscoe Moss Company was incorporated on March 22,
1927. At December 31, 1994, Western Precision, Inc. held 549,976 shares, or
approximately 8.8%, of the outstanding common stock of California Water Service
Company. Western Precision, Inc. also operates a precision mechanical parts
manufacturing facility located in Sunnyvale, California, and Austin, Texas.
The precision mechanical parts manufacturing facility of Western Precision, Inc.
was sold as of February 28, 1995 to a group of employees from the manufacturing
facility. The sale price was $2,000,000. Pursuant to the terms of the
transaction, all employees related to the business sold were transferred to the
purchaser. The sale will have no material impact on the consolidated operating
results of SJW Corp. The only remaining asset of Western Precision, Inc. is
549,976 shares of California Water Service Company.
Regulation and Rates.
San Jose 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, 1994 the balancing
account had a net under-collected balance to be offset of $577,000.
(b) Financial Information about Industry Segments.
San Jose Water Company generated 94%, 95% and 100% of SJW Corp.'s consolidated
revenue, and 86%, 92% and 99% of SJW Corp.'s consolidated income for the years
ended December 31, 1994, 1993 and 1992, respectively. There were no significant
changes in 1994 in the type of products produced or services rendered by San
Jose Water Company, or in its markets or methods of distribution. Western
Precision, Inc.'s mechanical parts manufacturing operation generated 6% and 5%
of SJW Corp.'s consolidated revenue for the years 1994 and 1993, respectively.
Including the dividend income from California Water Service, Western Precision,
Inc. generated 14% and 7% of consolidated income for the years 1994 and 1993,
respectively.
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(c) Narrative Description of Business.
(1) (i) General.
The principal business of San Jose Water Company consists of the production,
purchase, storage, purification, distribution and retail sale of water. San
Jose Water Company provides water service to customers in portions of the cities
of Cupertino and San Jose and in the cities of Campbell, Monte Sereno, Saratoga
and the Town of Los Gatos, and adjacent unincorporated territory, all in the
County of Santa Clara in the State of California. It distributes water to
customers in accordance with accepted water utility methods, which include
pumping from storage and gravity feed from high elevation reservoirs.
(1) (iii) Water Supply.
San Jose Water Company's water supply is obtained from wells, surface run-off or
diversion and by purchases from the Santa Clara Valley Water District ("SCVWD").
Surface supplies, which during a year of normal rainfall satisfy about 6% to 8%
of San Jose 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 run-off and diversion, and the
corresponding increase in purchased and pumped water increases production costs
substantially.
San Jose Water Company implemented various mandatory water rationing programs
throughout the period of 1989-1993. Effective March 14, 1993 San Jose Water
Company terminated its mandatory water rationing plan and instituted a voluntary
conservation plan intended to reduce usage 15% from 1987 levels. Effective
February 16, 1994, San Jose Water Company discontinued its voluntary
conservation plan.
Groundwater levels in 1994 climbed to their highest level in 7 years reflecting
the impact of the last rainfall season. SCVWD's reservoir storage of 131,000
acre feet (77% of capacity) was reported on February 8, 1995.
Until 1989, San Jose Water Company had never found it necessary to impose
mandatory water rationing. Except in a few isolated cases when service had been
interrupted or curtailed because of power or equipment failures, construction
shutdowns or other operating difficulties, San Jose Water Company had not at any
prior time in its history interrupted or imposed mandatory curtailment of
service to any type or class of customer.
(1) (iv) Franchises.
San Jose Water Company holds such franchises or permits in the communities it
serves as it judges necessary to operate and maintain its facilities in the
public streets.
(1) (v) Seasonal Factors.
Water sales are seasonal in nature. The demand for water, especially by
residential customers, is generally influenced by weather conditions. The
timing of precipitation and climatic conditions can cause seasonal water
consumption by residential customers to vary significantly.
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(1) (x) Competition and Condemnation.
San Jose Water Company is a public utility regulated by the CPUC and operates
within a service area approved by the CPUC. The laws of the State of California
provide that no other investor owned public utility may operate in San Jose
Water Company's service area without first obtaining from the CPUC a certificate
of public convenience and necessity. Past experience shows such a certificate
will be issued only after demonstrating San Jose Water Company's service in such
area is inadequate.
California law also provides that whenever a public agency constructs facilities
to extend utility service to the service area of a privately owned public
utility (like San Jose Water Company), such an act constitutes the taking of
property and is conditioned upon payment of just compensation to the private
utility.
Under the constitution and statutes of the State of California, municipalities,
water districts and other public agencies have been authorized to engage in the
ownership and operation of water systems. Such agencies are empowered to
condemn properties operated by privately owned public utilities upon payment of
just compensation and are further authorized to issue bonds (including revenue
bonds) for the purpose of acquiring or constructing water systems. To the
Company's knowledge, no municipality, water district or other public agency has
pending any action to condemn any part of San Jose Water Company's system.
Western Precision, Inc., which manufactures high-precision mechanical parts, is
not protected by any rate regulation for customer and market share.
(1) (xii) Environmental Matters.
San Jose Water Company maintains procedures to produce potable water in
accordance with all applicable county, state and federal environmental rules and
regulations. Additionally, San Jose Water Company is subject to
environmental regulation by various other governmental authorities. (See Part
II, Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations.")
(1) (xiii) Employees
As of December 31, 1994, San Jose Water Company had 281 employees, of whom 56
were executive, administrative or supervisory personnel, and of whom 225 were
members of unions. San Jose Water Company reached a two-year collective
bargaining agreement with the Utility Workers of America, representing the
majority of employees and the International Union of Operating Engineers,
representing certain employees in the engineering department covering the years
1995 and 1996. Both groups are affiliated with the AFL-CIO.
(d) Financial Information about Foreign and Domestic Operations and Export
Sales.
Substantially all of SJW Corp.'s revenue and expense are derived from operations
located in the County of Santa Clara in the State of California.
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Item 2. Properties.
The properties of San Jose Water Company consist of a unified system of water
production, storage, purification and distribution located in the County of
Santa Clara in the State of California. In general, the property is comprised
of franchise rights, water rights, necessary rights-of-way, approximately 7,000
acres of land held in fee (which is primarily 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.
San Jose Water Company maintains all of its properties in good operating
condition in accordance with customary proper practice for a water utility. San
Jose Water Company's well pumping stations have a production capacity of
approximately 257 million gallons per day and the present capacity for taking
purchased water is approximately 169 million gallons per day. The gravity water
collection system has a physical delivery capacity of approximately 25 million
gallons per day. During 1994, a maximum and average of 197 million gallons and
121 million gallons of water per day, respectively, were delivered to the
system.
San Jose Water Company holds all its principal properties in fee, subject to
current tax and assessment liens, rights-of-way, easements, and certain minor
clouds or defects in title which do not materially affect their use and to the
lien of the indenture securing its first mortgage bonds, of which there were
outstanding at December 31, 1994, $4,000,000 (including current maturities) in
principal amount.
SJW Land Company owns approximately 8 acres of property adjacent to San Jose
Water Company's general office facilities and another approximately 36
undeveloped acres in the San Jose Metropolitan area. The 8 acres adjacent to
San Jose Water Company are used as surface parking facilities and generate
substantially all SJW Land Company's revenue.
Western Precision, Inc. leases the facilities in which it operates and does not
own any real estate.
Item 3. Legal Proceedings.
In October, 1993, the San Jose Water Company was named as a defendant by Valley
Title Company and its insurer in a lawsuit filed in Santa Clara County Superior
Court in San Jose, California. Plaintiffs claim a fire service pipeline
ruptured in October, 1992, causing water to flood the title company's basement.
The suit seeks reimbursement for cleanup costs, damages for lost title records,
business related damages and lost rents. San Jose Water Company has denied
liability, claiming it did not own the portion of the water line that failed.
The title company had an unsealed heating oil tank in its basement which flooded
and contributed to much of the loss. San Jose Water Company has taken the
position that to the extent the damage to the building and its contents was
caused or increased by oil mixed with the water, that increase in damage is
solely the responsibility of the title company.
Trial began in January, 1995 and is scheduled to end by March 31, 1995.
Plaintiff's insurance carrier claims expenditures in excess of $5.4 million.
The title company has reduced its demand for lost title files from $21 million
to $14 million.
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San Jose Water Company's insurance carrier is defending the case under a
reservation of rights. The insurance carrier has stated that to the extent the
damage was caused or enhanced by the presence of oil, it has no duty to
indemnify the San Jose Water Company due to exclusions in the insurance policy.
Because of the uncertainties of liability and insurance coverage issues, the
company has no certain measure on the size of loss, if any, to the company. If
a judgment is found against the company, it is believed that the award would be
within the limits of the company's insurance coverages, but that some or all of
the company's insurers may deny the resulting duty to indemnify, leading to
insurance coverage litigation.
No governmental entity is known to have an unresolved claim against the San Jose
Water Company arising from the release of oil in this incident.
Item 4. Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of Shareholders of SJW Corp. held on April 21, 1994, SJW
Corp.'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 LLP
as independent auditors of the company for 1994.
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 21, 1994
ANNUAL MEETING
FOR WITHHELD ABSTAIN BROKER NON-
VOTES
M. L. CALI 2,883,436 12,108 0 0
J. D. DINAPOLI 2,886,307 9,237 0 0
D. GIBSON 2,886,781 8,763 0 0
R. R. JAMES 2,886,997 8,547 0 0
G. E. MOSS 2,888,554 6,990 0 0
R. MOSS 2,888,554 6,990 0 0
C. J. TOENISKOETTER 2,886,219 9,325 0 0
J. W. WEINHARDT 2,887,339 8,205 0 0
BROKER NON-
FOR AGAINST ABSTAIN VOTES
AUDITORS 2,870,442 4,890 20,212 0
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
(a) Market Information.
(1) (i) Exchange
SJW Corp.'s common stock is traded on the American Stock Exchange under the
symbol SJW.
(1) (ii) High and Low Sales Prices
The information required by this item as to the high and low sales prices for
the Company's common stock for each quarter in the 1994 and 1993 fiscal years is
contained in the section captioned "Market price range of stock" in the tables
set forth in Note 10 of "Notes to Consolidated Financial Statements" in Part II,
Item 8.
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(b) Holders.
There were 1,537 record holders of SJW Corp.'s common stock on February 21, 1995
(record date for the 1995 annual meeting).
(c) Dividends.
Quarterly dividends have been paid on SJW Corp.'s and its predecessor's common
stock for 205 consecutive quarters and the quarterly rate has been increased
during each of the last 27 years. The information required by this item as to
the cash dividends paid on common stock in 1994 and 1993 is contained in the
section captioned "Dividends per share" in the tables set forth in Note 10 of
"Notes to consolidated Financial Statements" in Part II, Item 8.
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Item 6. Selected Financial Data.
FIVE YEAR STATISTICAL REVIEW
1994 1993 1992 1991 1990
CONSOLIDATED RESULTS ----- ------ ------ ------ ------
OF OPERATIONS (In thousands)
Operating revenue $ 99,422 95,045 89,109 76,281 70,458
Operating expense:
Operation 62,648 57,016 54,184 45,897 41,626
Maintenance 6,289 5,417 4,397 3,778 3,963
Taxes 9,426 10,829 10,252 8,681 8,033
Depreciation 7,292 6,823 6,153 5,773 5,249
------ ------ ------ ------ ------
Total operating expense 85,655 80,085 74,986 64,129 58,871
------ ------ ------ ------ ------
Operating income 13,767 14,960 14,123 12,152 11,587
Interest expense,
other income and
deductions 3,865 3,193 3,896 3,704 3,048
------ ------ ------ ------ ------
Net income 9,902 11,767 10,227 8,448 8,539
Dividends paid 6,826 6,637 6,044 5,449 5,304
------ ------ ------ ----- -----
Invested in the
business 3,076 5,130 4,183 2,999 3,235
CONSOLIDATED PER COMMON SHARE DATA
Net income $ 3.05 3.64 3.60 2.98 3.00
Dividends paid 2.10 2.04 2.13 1.92 1.86
Shareholders' equity
at year-end 32.02 31.86 29.70 27.27 26.21
CONSOLIDATED BALANCE SHEET (In thousands)
Utility plant $ 308,515 293,683 272,999 255,325 244,068
Less accumulated
depreciation and
amortization 95,083 90,030 84,158 78,675 73,405
------- ------- ------ ------- -------
Net utility plant 213,432 203,653 188,841 176,650 170,663
------- ------- ------ ------- -------
Nonutility property 7,178 6,775 5,465 4,974 4,990
Total assets 262,530 256,851 230,198 197,094 188,313
Capitalization:
Common shareholders'
equity 104,098 103,130 96,155 77,373 74,373
Long-term
debt(includes current
maturities) 64,000 66,000 61,248 45,193 38,138
------- ------ ------- ------ ------
Total capitalization $ 168,098 169,130 157,403 122,566 112,511
======= ======= ======= ======= =======
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Description of the Business
SJW Corp. is a holding company with three wholly owned subsidiaries: San Jose
Water Company, SJW Land Company and Western Precision, Inc. San Jose Water
Company is a public utility in the business of providing water service to a
population of approximately 921,000 in an area comprising about 134 square miles
in the metropolitan San Jose area. SJW Land Company owns and operates a 900-
space surface parking facility adjacent to the San Jose Arena and also owns
several undeveloped real estate parcels in San Jose Water Company's service
area. Western Precision, Inc. owns 549,976 shares of California Water Service
Company, and owns and operates a precision mechanical parts manufacturing
facility, which was sold on February 28, 1995.
Results of Operations
Consolidated results of operations for the years ended December 31, 1994 and
1993 include the results of Western Precision, Inc. (formerly Roscoe Moss
Company) which was acquired on December 31, 1992.
CONSOLIDATED OPERATING REVENUE (in thousands)
1994 1993 1992
San Jose Water Company $ 92,963 90,496 89,051
Western Precision, Inc. 5,968 4,292 -
SJW Land Company 491 257 58
------ ------ ------
$ 99,422 95,045 89,109
Consolidated operating revenue for 1994 increased $4,377,000 or 5% over 1993 due
to increased revenue from Western Precision, Inc. and a 5% increase in metered
usage by San Jose Water Company customers. Western Precision, Inc.'s operating
revenue increased due to an improving economy in the high technology sector and
the resulting increased sales to its primary customer. Consolidated operating
revenue for 1993 increased $5,936,000 or 7% over 1992 due to the inclusion of
Western Precision, Inc. operating revenue of $4,292,000, and to a lesser extent
due to an increase in usage by San Jose Water Company customers.
CONSOLIDATED OPERATING EXPENSE (in thousands)
1994 1993 1992
San Jose Water Company $ 79,529 75,398 74,731
Western Precision, Inc. 5,547 4,370 -
SJW Land Company 395 113 61
SJW Corp. 184 204 194
------ ------ ------
$ 85,655 80,085 74,986
In 1994, consolidated operating expense increased 7%, or $5,570,000. The
majority of this increase is attributable to the increased cost of water supply
in San Jose Water Company. A 3.5 billion gallon decrease in surface water in
1994 from 1993, due to reduced rainfall and run off in the Santa Cruz Mountain
watershed, caused increased production needs to be satisfied by more costly
ground water.
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SOURCES OF SUPPLY (million gallons)
1994 1993 1992
Purchased water 19,161 20,313 18,826
Ground water 23,605 17,314 18,225
Surface water 1,663 5,198 3,234
------ ------ ------
44,429 42,825 40,285
Consolidated operating expense for 1993 increased $5,099,000 or 7% over 1992 due
to the inclusion of Western Precision, Inc. operating expense of $4,370,000 and,
to a lesser extent, increased water production in San Jose Water Company.
The effective income tax rates for 1994, 1993 and 1992 were 39%, 41% and 43%,
respectively. See Note No. 5 of the Notes To Consolidated Financial Statements
for the reconciliation of income tax expense to the amount computed by applying
the federal statutory rate to income before income taxes.
OTHER INCOME AND EXPENSE
Dividend income increased $33,000, or 3%, over 1993 due to a $.06 per share
increase in the California Water Service Company annual dividend rate. The
California Water Service Company shares were acquired on December 31, 1992.
San Jose Water Company's interest expense on long-term debt in 1994, including
capitalized interest, decreased $73,000 or 1%, from 1993 due to a lower average
amount of long-term debt outstanding. Interest expense on long-term debt in
1993, including capitalized interest, increased $848,000 or 19%, over 1992 due
to the issuance of Series A and B senior notes. San Jose Water Company's
weighted average cost of long-term debt, including amortization of debt issuance
costs, was 8.34%, 8.23% and 8.88% as of December 31, 1994, 1993 and 1992,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL REQUIREMENTS
San Jose Water Company's 1995 and 1994 budgeted capital expenditures, exclusive
of capital expenditures financed by customer contributions and advances, are as
follows:
1995 1994
(in thousands) Amount % Amount %
Source of supply $ 251 2% - -
Reservoirs and tanks 1,436 9% 1,111 11%
Pump stations and equipment 1,959 12% 1,717 17%
Distribution system 9,242 58% 5,859 58%
Equipment and other 3,019 19% 1,414 14%
------ --- ------ ---
$ 15,907 100% 10,101 100%
The $5,806,000, or 57%, increase in 1995 budgeted capital expenditures over 1994
is primarily due to two large programs: $3,402,000 increase in main replacements
and related services; and $1,503,000 to implement the first phase of a
geographical information and mapping system.
San Jose Water Company expects to spend approximately $80,000,000 on capital
expenditures over the next five years. San Jose Water 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.
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Most of San Jose Water 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
San Jose Water Company's ability to finance future construction programs and
sustain dividend payments depends on its ability to attract external financing
and maintain or increase internally generated funds. The level of future
earnings and the related cash flow from operations is dependent, in large part,
upon the timing and outcome of regulatory proceedings.
Over the past five years SJW Corp. has paid to its shareholders, in the form of
dividends, an average of 62% of its net income. The remaining earnings have
been reinvested. Capital requirements not funded by earnings are expected to be
funded through external financing in the form of unsecured senior notes or a
commercial bank line of credit. As of December 31, 1994, San Jose Water Company
had $10,200,000 of unused line of credit and over $50,000,000 of borrowing
capacity under the terms of the senior note agreements.
San Jose Water Company's financing activity is designed to achieve a capital
structure consistent with regulatory guidelines - approximately 50% debt and 50%
equity.
In 1994, San Jose Water Company redeemed its $2,000,000 Series M 4.65% first
mortgage bonds at maturity. In 1993, San Jose Water Company redeemed, prior to
maturity, various series of first mortgage bonds at principal plus redemption
premium. To fund the redemption, $30,000,000 of Series B unsecured 30-year
senior notes were issued. San Jose Water Company intends to retire all
remaining first mortgage bonds by 1998 and satisfy all future long-term
financing needs with senior notes.
Factors That May Affect Future Results
The results of operations of San Jose Water Company generally depend on the
following factors: (1) the availability of rate relief due to regulation, (2)
the level of surface water supply, and (3) the level of operation and
maintenance expense.
REGULATION
Principally all the operating revenue of San Jose Water 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.
San Jose Water Company's most recent general rate case decision authorized it to
earn a return on common equity of 11.75% in 1992, 1993 and 1994. San Jose Water
Company deferred the filing of a general rate application from January 1994, to
July 1995, and expects to receive new rates in the second quarter of 1996.
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.
San Jose Water Company implemented step rate increases on January 1, 1994, and
1993, which were designed to produce revenue increases of $293,000 and $213,000,
respectively. Both step rate increases were authorized in San Jose Water
Company's general rate case granted in December 1991 and were designed to
maintain a rate of return on common equity at authorized levels.
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On March 14, 1994, San Jose Water Company implemented a special rate increase in
the amount of $892,000 offsetting construction costs of the Austrian Dam
Spillway in excess of those previously approved in rates.
SURFACE WATER SUPPLY
The level of surface water available in each year depends on the amount of
rainfall and run-off collected in San Jose Water Company's Santa Cruz Mountain
reservoirs. In a normal year, surface supply provides 6-8% of the total water
supply of the system. Surface water is a less costly source of water and its
availability may significantly impact the results of operations.
OPERATION AND MAINTENANCE EXPENSE
San Jose Water Company reached an agreement with its unionized personnel
covering 1995 and 1996. The agreement includes a 3.5% wage increase each year
and minor benefit modifications.
ENVIRONMENTAL MATTERS
San Jose Water Company's operations are subject to water quality and pollution
control regulations issued by the United States Environmental Protection Agency
(EPA), the California Department of Health Services and the California Regional
Water Quality Control Board. The company is also subject to environmental laws
and regulations administered by other state and local regulatory agencies.
Under the federal Safe Drinking Water Act (SDWA), San Jose Water Company is
subject to regulation by the EPA of the quality of water it sells and treatment
techniques it uses to make the water potable. The EPA promulgates nationally
applicable maximum contaminant levels (MCLs) for "contaminants" found in
drinking water. San Jose Water Company is currently in compliance with all of
the 84 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 to promulgate MCLs for over 180 contaminants by the
year 2000. San Jose Water Company has implemented monitoring activities and
installed specific water treatment improvements enabling it to comply with
existing MCLs and plan for compliance with future drinking water regulations.
Of all of the regulations being considered under the current SDWA, the proposed
Disinfectants-Disinfection By-Products Rule is anticipated to have the most
significant impact on water utilities. Due to be promulgated in December 1996,
this rule would 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 San Jose Water Company's supply, projects that compliance
with this regulation could, by the year 2000, cost over $100,000,000 in capital
improvements and an additional $3,000,000 per year in operating expenses. If
incurred, most costs would be passed along to San Jose Water Company and other
water retailers in the form of higher rates for purchased water and pump taxes.
San Jose Water 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 four to five years. To date, five of the
company's nineteen key groundwater production stations have been equipped with
hypochlorinators, with five more installations planned in 1995. The EPA is
expected to mandate disinfection of all groundwater supplies by 1999.
In addition to SDWA, other environmental regulations are becoming increasingly
important. 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. During 1994, San Jose Water Company replaced the chlorine gas
disinfection systems at its two water treatment plants with hypochlorinators
which accomplish disinfection with liquid sodium hypochlorite. These facilities
are currently operational and in compliance with all local hazardous materials
storage regulations.
14
<PAGE>
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. San Jose Water 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.
Future drinking water regulations will most likely require increased monitoring,
and may mandate disinfection or other treatment of underground water supplies,
more stringent performance standards for treatment plants and procedures to
reduce levels of disinfection by-products. San Jose Water Company continues to
seek to establish mechanisms for recovery of government-mandated environmental
compliance costs. However, 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
As described above in Part I, Item 1(a), the high precision mechanical parts
manufacturing business of Western Precision, Inc. was sold on February 28, 1995.
The sale is anticipated to result in a reduction of consolidated operating
revenue and expense in 1995. However, its impact on consolidated net income is
not anticipated to be material. Western Precision, Inc.'s investment in
California Water Service Company is expected to produce 1995 pre-tax dividend
income and cash flow of approximately $1,100,000. SJW Land Company's surface
parking facilities are largely dependent upon the level of events and activities
at the San Jose Arena which is located adjacent to its parking facility.
Item 8. Financial Statements and Supplementary Data.
Financial Statements:
Independent Auditors' Report
----------------------------
To the Shareholders and Board of Directors
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 also have audited the financial
statement schedule as listed in the accompanying index. These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with 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.
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, 1994 and 1993, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1994, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
15
<PAGE>
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.
KPMG Peat Marwick LLP
San Jose, California
January 20, 1995
SJW CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(December 31,dollars in thousands, except share data)
ASSETS
1994 1993
------ ------
Utility plant $ 308,515 293,683
Less accumulated depreciation 95,083 90,030
------- -------
213,432 203,653
------- -------
Nonutility property 7,178 6,775
Current assets:
Cash and equivalents 1,277 2,558
Accounts receivable:
Customers 5,513 5,211
Other 327 214
Accrued utility revenue 2,700 2,600
Materials and supplies, at
average cost 1,711 1,026
Prepaid expenses 1,978 2,073
------- -------
13,506 13,682
------- -------
Other assets:
Investment in California Water
Service Company 17,599 21,999
Unamortized debt issuance and
reacquisition costs 4,262 4,389
Goodwill 2,341 1,906
Regulatory asset 3,672 4,060
Other 540 387
------- -------
28,414 32,741
------- -------
$ 262,530 256,851
======= =======
See accompanying notes to consolidated financial statements.
16
<PAGE>
CONSOLIDATED BALANCE SHEET (Continued)
CAPITALIZATION AND LIABILITIES 1994 1993
------- -------
Capitalization:
Common shareholders' equity:
Common stock, $3.125 par value;
authorized 6,000,000 shares; issued
3,250,746 shares in 1994 and 1993 $ 10,159 10,116
Additional paid-in capital 22,208 21,763
Retained earnings 72,056 68,980
Cumulative change in market value of investment (325) 2,271
------- -------
104,098 103,130
Long-term debt, less current maturities 62,500 64,000
------- -------
166,598 167,130
------- -------
Current liabilities:
Current maturities of long-term debt 1,500 2,000
Line of credit 4,800 -
Accrued pump taxes and purchased water 3,203 3,264
Accounts payable 967 421
Accrued interest 2,173 1,431
Accrued taxes other than income taxes 285 262
Other current liabilities 2,314 2,032
------- -------
15,242 9,410
------- -------
Deferred income taxes 12,809 14,414
Unamortized investment tax credits 2,469 2,523
Advances for construction 33,555 32,616
Contributions in aid of construction 29,252 28,164
Deferred revenue 951 954
Other nonconcurrent liabilities 1,654 1,640
Commitments and contingency
------- -------
$ 262,530 256,851
======= =======
17
<PAGE>
SJW CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Years ended December 31, dollars in thousands, except share data)
1994 1993 1992
------ ------ ------
Operating revenue $ 99,422 95,045 89,109
Operating expense:
Operation:
Purchased water 18,229 20,001 19,181
Power 5,470 4,164 4,123
Pump taxes 17,356 13,095 14,628
Other 21,593 19,756 16,252
Maintenance 6,289 5,417 4,397
Property taxes and other nonincome taxes 3,039 2,758 2,633
Depreciation 7,292 6,823 6,153
Income taxes 6,387 8,071 7,619
-------- -------- --------
85,655 80,085 74,986
--------- --------- --------
Operating income 13,767 14,960 14,123
Other (expense) income:
Interest on long-term debt (5,082) (4,489) (4,002)
Dividends 1,089 1,056 -
Other 128 240 106
--------- --------- ---------
Net income $ 9,902 11,767 10,227
========= ========= =========
Earnings per share $ 3.05 3.64 3.60
========= ========= =========
Weighted average shares outstanding 3,250,746 3,236,992 2,837,788
========= ========= =========
See accompanying notes to consolidated financial statements.
18
<PAGE>
SJW CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
COMMON SHAREHOLDERS' EQUITY
(dollars in thousands) Cumulative
Additional Change in Total Common
Common Paid-in Retained Market Value Shareholders'
Stock Capital Earnings of investment Equity
------- ------- ------- ----------- -----------
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
Purchase price
adjustment 43 445 - - 488
Net income - - 9,902 - 9,902
Dividends paid - - (6,826) - (6,826)
Change in market
value of investment,
net of tax effect
of $1,804 - - - (2,596) (2,596)
------ ------ ------ ------ ------
Balances,
December 31 1994 $ 10,159 22,208 72,056 (325) 104,098
====== ====== ====== ====== =======
See accompanying notes to consolidated financial statements.
19
<PAGE>
SJW CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Years ended December 31
(dollars in thousands) 1994 1993 1992
------ ------ ------
Operating activities:
Net income $ 9,902 11,767 10,227
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 7,292 6,823 6,153
Deferred income taxes and credits 144 1,813 621
Changes in operating assets and liabilities:
Accounts receivable and accrued utility revenue (515) 525 3,482
Accounts payable and other current liabilities 828 (654) 707
Accrued pump taxes and purchased water (61) 1,074 (148)
Conservation fees - (1,477) 1,477
Income taxes payable - - (4,275)
Other changes, net 864 (561) 740
------- ------ -----
Net cash provided by operating activities 18,454 19,310 18,984
------ ------ ------
Investing activities:
Additions to utility plant (17,350) (22,134)(19,083)
Cost to retire utility plant, net of salvage (572) (251) (174)
Acquisition costs, net of cash acquired - - (291)
Additions to nonutility property (611) (1,497) -
Temporary investments - 3,600 (3,600)
------ ------- -------
Net cash used in investing activities (18,533) (20,282)(23,148)
------- ------ ------
Financing activities:
Dividends paid (6,826) (6,637) (6,044)
Repayment of line of credit (2,400) (1,675)(12,800)
Borrowings from line of credit 7,200 - 10,100
Advances and contributions in aid of
construction 4,393 6,501 3,269
Refunds of advances (1,569) (1,610) (1,722)
Proceeds from issuance of long-term debt - 30,000 20,000
Principal payments of long-term debt (2,000) (28,665) (3,945)
------ ------ ------
Net cash provided by (used in)
financing activities (1,202) (2,086) 8,858
------ ----- -----
Net change in cash and equivalents (1,281) (3,058) 4,694
Cash and equivalents, beginning of year 2,558 5,616 922
------ ------ -----
Cash and equivalents, end of year $ 1,277 2,558 5,616
====== ====== =====
See accompanying notes to consolidated financial statements.
20
<PAGE>
SJW CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1994, 1993 and 1992
(Dollars in thousands, except share data)
Note 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts of SJW
Corp. and its wholly owned subsidiaries. Intercompany transactions and balances
have been eliminated.
SJW Corp.'s principal subsidiary, San Jose Water Company, is a regulated
California water utility. San Jose Water Company's accounting policies comply
with the applicable uniform system of accounts prescribed by the California
Public Utilities Commission (CPUC) and conform to generally accepted accounting
principles for rate regulated public utilities.
Utility Plant - The cost of additions, replacements and betterments to utility
plant is capitalized. The amount of interest capitalized in 1994, 1993 and 1992
was $103, $769 and $407, respectively. Construction in progress was $2,658 in
1994 and $3,233 in 1993.
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 - Cash equivalents include certain highly liquid
investments with a maturity of three months or less when purchased. Cash
equivalents are stated at cost plus accrued interest, which approximates fair
value.
Investment in California Water Service Company- Effective December 31, 1993,
SJW Corp. adopted Statement of Financial Accounting Standards (SFAS) No. 115 --
"Accounting for Certain Investments in Debt and Equity Securities". Under this
Statement SJW Corp.'s investment in California Water Service Company is reported
at quoted market price, with the unrealized gain or loss excluded from earnings
and reported as a separate component of common shareholders' equity. The
adoption of SFAS 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, 1993.
The fair value of SJW Corp.'s investment in California Water Service Company
approximated $17,599 and $21,999 as of December 31, 1994 and 1993, respectively.
The reduction in fair value, $4,400, net of the related tax effect, $1,804, is
partially offset by the unrealized gain of $2,271 at December 31, 1993, and
resulted in a net unrealized loss on investment of $325 as of December 31, 1994.
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
<PAGE>
Income Taxes - Effective January 1, 1993 SJW Corp. adopted SFAS No. 109,
"Accounting for Income Taxes". Prior year financial statements have not been
restated to apply the provisions of SFAS No. 109 which require a change from the
deferred method to the asset and liability method. Under SFAS No. 109, deferred
tax assets and liabilities are recognized for the effect of temporary
differences between financial and tax reporting. Deferred tax assets and
liabilities are measured using enacted tax rates applicable to future years.
The adoption of SFAS No. 109 had the effect of increasing net deferred tax
liabilities by $8,500 and of effecting corresponding $5,000 and $3,500 increases
in investment in California Water Service Company and regulatory asset at
January 1, 1993. Management believes the increase in net deferred tax
liabilities recorded as a result of adopting SFAS 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.
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 1995 are $1,400.
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, advances and contributions are also included in state taxable income.
Taxes paid relating to advances and contributions are recorded as deferred tax
assets for financial reporting purposes and amortized over 40 years for
advances, and over the tax depreciable life of the related asset for
contributions.
Revenue - Revenue of San Jose Water Company 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. Western Precision, Inc. records revenue as
orders are shipped.
Included in 1993 operating revenue is $1,200 relating to the recovery of prior
years' conservation expenses. Operating revenue also includes $327 in 1993 and
$1,900 in 1992 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 and 1992, contingently returnable shares.
22
<PAGE>
Note 2
CAPITALIZATION
In connection with the acquisition of Roscoe Moss Company (subsequently
renamed Western Precision, Inc.), 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. As of December 31,
1994, there were no contingently returnable shares outstanding. Additionally,
5,020 shares of common stock were returned to SJW Corp. in 1993 as the result of
a purchased price adjustment of the acquired entity.
At December 31, 1994, 1993 and 1992, 176,407 shares of preferred stock were
authorized and unissued.
Note 3
LINE OF CREDIT
San Jose Water Company has available 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.
Note 4
LONG-TERM DEBT
Long-term debt as of December 31 was as follows:
Description Due 1994 1993
First mortgage bonds:
M 4.65% 1994 $ - 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
-----------------------------------------
4,000 6,000
Senior Notes:
A 8.58% 2022 20,000 20,000
B 7.37% 2024 30,000 30,000
C 9.45% 2020 10,000 10,000
----------------------------------------
64,000 66,000
Less current maturities 1,500 2,000
----------------------------------------
$62,500 64,000
In 1993, San Jose Water Company issued $30,000 in Series B senior notes and
retired, ahead of scheduled maturity dates, various series of first mortgage
bonds 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 San Jose Water
Company. Maturities of long-term debt, including sinking fund requirements,
amount to $1,500 in 1995, $1,000 in 1996, and $1,500 in 1997.
23
<PAGE>
Substantially all utility plant is pledged as collateral for first mortgage
bonds. Senior notes are unsecured. All of San Jose Water Company's debt is
privately placed. The fair value of long-term debt, including current
maturities, as of December 31, 1994 was approximately $66,200 based on the
amount of essentially risk-free assets the company would have to place in trust
to extinguish these obligations.
Note 5
INCOME TAXES
The following table reconciles income tax expense to the amount computed by
applying the federal statutory rate to income before income taxes:
1994 1993 1992
Computed "expected" federal
income tax at the
statutory rate $ 5,701 6,943 6,068
Increase (decrease) in taxes
attributable to:
Utility plant basis 448 464 414
State taxes, net of federal
income tax benefit 985 1,199 1,092
Dividend received deduction (267) (259) -
Other items, net (480) (276) 45
----- ----- -----
$6,387 8,071 7,619
===== ===== =====
The components of income tax expense were:
1994 1993 1992
Current:
Federal $4,276 4,729 5,003
State 1,683 1,775 1,940
Deferred:
Advances and contributions (1,361) (1,641) (837)
Depreciation 1,655 1,535 1,802
Other 134 1,673 (289)
----- ----- -----
$6,387 8,071 7,619
===== ===== =====
The components of the net deferred tax liability as of December 31
were as follows:
1994 1993
Deferred tax assets:
Advances and contributions $ 9,751 8,599
Unamortized investment tax credit 1,359 1,366
Pensions and postretirement
benefits 693 619
California franchise tax 420 462
Other 104 164
------ ------
Total deferred tax assets 12,327 11,210
------ ------
Deferred tax liabilities:
Utility plant 18,424 17,111
Investment 4,961 6,765
Debt reacquisition costs 1,456 1,506
Other 295 242
------ ------
Total deferred tax liabilities 25,136 25,624
------ ------
Net deferred tax liabilities $ 12,809 14,414
====== ======
24
<PAGE>
Note 6
EMPLOYEE BENEFIT PLANS
Pension Plans - San Jose Water Company sponsors noncontributory defined
benefit pension plans. Benefits under the plans are based on an employee's
years of service and highest consecutive three years of compensation. San Jose
Water Company's policy is to contribute the net periodic pension cost calculated
under generally accepted accounting principles to the extent it is tax
deductible.
San Jose Water Company has a Supplemental Executive Retirement Plan which is a
defined benefit plan under which the company will pay supplemental pension
benefits to key executives in addition to 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 $928 and $887 as of December 31,
1994 and 1993, respectively, and net periodic pension cost of $152, $139 and $7
for 1994, 1993 and 1992, respectively.
Net periodic pension cost for defined benefit plans was as follows:
1994 1993 1992
Service cost-benefits earned
during the period $ 637 572 666
Interest cost on projected
benefit obligation 1,290 1,256 1,047
Actual return on plan assets 347 (1,368) (1,000)
Net amortization and deferral (1,802) (69) (556)
----- ----- -----
$ 472 391 157
===== ===== =====
The actuarial present value of benefit obligations and the funded status of
San Jose Water Company's defined benefit pension plans as of December 31 were as
follows:
1994 1993
Actuarial present value of
accumulated benefit obligation,
including vested benefits of
$11,821 and $13,518 $12,717 13,842
====== ======
Projected benefit obligation (16,095) (17,883)
Plan assets at fair value 18,159 18,786
------ ------
Plan assets in excess
of projected benefit obligation 2,064 903
Unrecognized net gain (4,657) (3,533)
Prior service cost not recognized
in net periodic pension cost 1,502 1,633
Unrecognized net obligation at
January 1, 1987 and 1992 being
recognized over 15 and 13.7 years 226 230
----- -----
Accrued pension cost included
in other current liabilities $(865) (767)
===== =====
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 14.9 years for 1994 and 15.1 years for 1993.
25
<PAGE>
In determining net periodic pension cost for 1994, 1993 and 1992 the following
assumptions were used: weighted average discount rate, 7.0%, 8.0% and 8.0%,
respectively; compensation growth rate, 5.0%, 6.0% and 6.0%, respectively; and
rate of return on plan assets, 8.0% for all years. In determining accrued
pension cost as of December 31, 1994 and 1993, the following assumptions were
used: weighted average discount rate, 8.5% and 7.0%, respectively; and
compensation growth rate, 5.0% for both years.
Savings Plans - San Jose Water 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 $266, $241 and $232 in 1994, 1993 and 1992,
respectively.
Other Postretirement Benefits - In addition to providing pension and savings
benefits, San Jose Water Company provides health care and life insurance
benefits for retired employees. The Plan 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:
1994 1993 1992
Service cost - benefits earned
during the period $ 40 43 89
Interest cost on benefit obligation 89 102 182
Amortization of transition
obligation over 20 years 50 59 116
--- --- ---
$ 179 204 387
Expense recognized in 1994, 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
$72, $70, and $71 in 1994, 1993 and 1992, respectively.
The Plan's combined funded status and the related accrual as of December 31
were as follows:
1994 1993
Accumulated postretirement
benefit obligation:
Retirees $ (593) (690)
Active plan participants:
Fully eligible (112) (176)
Other (390) (753)
----- -----
(1,095) (1,619)
Plan assets 139 62
----- -----
Accumulated postretirement
obligation in excess of plan assets (956) (1,557)
Unrecognized net gain from
past experience and changes in
assumptions (480) 92
Unrecognized net transition
obligation 1,004 1,064
----- -----
Accrued postretirement benefit cost
included in other current liabilities $ (432) (401)
26
<PAGE>
For measurement purposes, an 8.5% annual increase in the per capita cost of
covered health care benefits was assumed for 1995; this increase was assumed to
decrease gradually to 5% by 2002 and remain at that level thereafter. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8.5% for 1994 and 7% for 1993. In
determining the net periodic postretirement benefit cost, 7% and 8% discount
rates were used respectively for 1994 and 1993.
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, 1994 by $61 and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for 1994 by $15.
Note 7
COMMITMENTS
San Jose Water 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.
San Jose Water 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, San Jose Water Company expects
to purchase at least $18,000 of water from SCVWD in each contract year ending
June 30, 1995 through 1996.
San Jose Water Company and Western Precision, Inc. have combined operating lease
commitments amounting to approximately $268 for 1995, $156 for 1996, and $85 for
1997 through 1999.
Note 8
SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental information on cash flows and noncash transaction is as follows:
1994 1993 1992
Cash paid during the year for:
Interest $4,482 4,998 4,041
Income taxes 5,760 8,028 11,485
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 488 (426) -
27
<PAGE>
Note 9
CONTINGENCY
In October, 1993 San Jose Water Company was named as a defendant in a lawsuit
filed in San Jose, California, seeking damages resulting from the flooding of a
local title company's basement. In 1992, a large diameter water line providing
standby fire protection service to the title company ruptured, filling the
basement and an abandoned oil cistern in that basement with water, damaging the
real property and the title company's records. The company maintains that the
failed pipeline was the property of the building owner and that the company is
not liable for any damage.
Due to the impact of the oil, San Jose Water Company's insurer has reserved
its rights to deny coverage, but is providing the defense. Trial began in
January 1995, and certain legal issues may generate appeals. Because of the
uncertainties of liability and insurance coverage issues, the company at this
time has no certain measure on the size of loss, if any, to the company. If a
judgment is found against the company, it is believed that the award would be
within the limits of the company's insurance coverages, but that some or all of
the company's insurers may deny the resulting duty to indemnify, leading to
further insurance coverage litigation.
NOTE 10
UNAUDITED QUARTERLY FINANCIAL DATA
Summarized quarterly financial data is as follows:
1994 Quarter Ended
March June September December
Operating revenue $ 18,991 26,715 31,888 21,828
Operating income 1,786 4,086 4,895 3,000
Net income 824 3,137 3,923 2,018
Earnings per share .25 .97 1.21 .62
Market price range of
stock:
High 42 1/2 39 1/8 36 1/8 36
Low 37 7/8 35 1/2 34 1/2 31 3/4
Dividends per share .525 .525 .525 .525
1993 Quarter Ended
March June September December
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 . 43 .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 share .51 .51 .51 .51
28
<PAGE>
Schedule II
SJW CORP. -------------
Valuation and Qualifying Accounts and Reserves
Years ended December 31, 1994, 1993 and 1992
Description 1994 1993 1992
----------- ------ ------ ------
Allowance for
doubtful accounts
Balance, beginning of period $ 50,000 50,000 50,000
Charged to expense 188,171 203,854 223,345
Accounts written off (226,962) (249,036) (264,105)
Recoveries of accounts
written off 38,791 45,182 40,760
------- ------- -------
Balance, ending of period 50,000 50,000 50,000
======= ======= =======
Reserve for self insurance
Balance, beginning of period 456,191 447,734 150,000
Charged to expense 200,000 110,000 365,000
Payments (346,724) (101,543) (67,266)
------- ------- -------
Balance, ending of period $ 309,467 456,191 447,734
======= ======= =======
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 SJW Corp. (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, Mr. Cali who has served since 1992 and Mr. Roth who was elected to
the Board on October 20, 1994. All nominees are also directors of San Jose
Water Company, a wholly-owned public utility water corporation subsidiary of the
Corporation and SJW Land Company, a wholly owned real estate development company
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 and SJW Land Company for a concurrent term.
MARK L. CALI, Attorney at Law, with the firm, Bledsoe, Cathcart, Diestel,
Livingston and Pedersen. Formerly he was with the firm Jencks & Hunt from May
1994 through October 1994 and prior to that with Ropers, Majeski, Kohn, Bentley,
Wagner and Kane from October 1990 through May 1994. Before his employment as an
attorney, Mr. Cali attended Santa Clara University Law School. Mr. Cali, age
29, has served as a director of San Jose Water Company since 1992.
29
<PAGE>
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 55, 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 52, 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 66, 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 63, is a
member of the Compensation Committee and has served as a director of San Jose
Water Company since 1984. Mr. Moss also serves as a director of Western
Precision, Inc.
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
65, is a member of the Corporation's Executive and Compensation Committees. Mr.
Moss has served as a director of San Jose Water Company since 1980. Mr. Moss
also serves as a director of Western Precision, Inc.
W.R. ROTH, Vice President since April 1992 and Chief Financial Officer and
Treasurer of the Corporation since January 1990. He has been President and
Chief Operating Officer of San Jose Water Company since October 1994. He was
Vice President of San Jose Water Company from April 1992 until July 1994 and
Senior Vice President from July 1994 until October 1994. He served as Chief
Financial Officer and Treasurer from January 1990 until October 1994. Prior to
January 1990, Mr. Roth was employed as a Senior Manager with KPMG Peat Marwick.
Mr. Roth, age 42, was elected as a director of San Jose Water Company and SJW
Land Company on October 20, 1994.
CHARLES J. TOENISKOETTER, President of Toeniskoetter & Breeding Inc.
(construction and real estate development company). Mr. Toeniskoetter, age 50,
is a member of the Audit Committee and has served as a director of San Jose
Water Company since 1991.
30
<PAGE>
J.W. WEINHARDT, President and Chief Executive Officer of the Corporation;
Chairman of the Board and Chief Executive Officer of San Jose Water Company.
Prior to his election to Chairman of the Board in October 1994, he was President
of the San Jose Water Company. Mr. Weinhardt, age 64, is a member of the
Corporation's Executive Committee and has served as a director of San Jose Water
Company since 1975 and Western Precision Inc., since 1992. Mr. Weinhardt also
serves as a director of California Water Service Company, 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 or other organization that is a
parent, subsidiary, or other affiliate of the corporation, 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.
No nominee is or has been employed in his principal occupation or employment
during the past 5 years by a corporation or other organization that is a parent,
subsidiary, or other affiliate of the Corporation, other than Mr. Weinhardt and
Mr. Roth 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 $3,000 and $13,200, respectively. In addition, all
directors of the Corporation and San Jose Water Company are paid $700 for each
Board or committee meeting attended. SJW Land Company directors are paid $250
for each Board 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 1994, there were 4 regular
meetings of the Board of Directors and 3 regular meetings of the Audit Committee
and 2 meetings of the Executive Compensation Committee. All directors attended
at least 75% of all Board and applicable committee meetings.
31
<PAGE>
Executive Officers of the Registrant.
Name Age Offices and Experience
J. W. Weinhardt 64 SJW Corp. - President, Chief Executive Officer,
Director and Member of the Executive Committee
of the Board of Directors since 1985.
San Jose Water Company - Chairman of the Board
since October 1994, President, Chief Executive
Officer, Director and Member of the Executive
Committee of the Board of Directors since 1974.
Mr. Weinhardt has been with San Jose Water Company
since 1963.
W. R. Roth 42 SJW Corp. - Vice President, Chief Financial
Officer and Treasurer since April 1992, Chief
Financial Officer and Treasurer since January 1990.
San Jose Water Company - President and Chief
Operating Officer since October 1994. Senior
Vice President since July 1994, 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 55 San Jose Water Company - Vice President,
Regulatory Affairs since January 1990. Vice
President, Finance since 1984 and Chief Financial
Officer and Treasurer from 1978 to January 1990.
P. J. Schreiber 57 San Jose Water Company - Vice President,
Operations since March 1984 and Directing Manager
of Operations since 1978. Mr. Schreiber has been
with San Jose Water Company since 1962.
R. J. Balocco 45 San Jose Water Company - Vice President,
Administration since March 1992, Manager of
Customer Service since January 1985. Mr. Balocco
has been with San Jose Water Company since December
1982.
B. Y. Nilsen 53 SJW Corp., Secretary since 1985.
San Jose Water Company - Secretary since 1983.
Ms. Nilsen has been with San Jose Water Company
since 1964.
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 SJW Corp. 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 Corporation's
executive officers and directors, and persons who own more than ten percent of a
registered class of the Corporation'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 Corporation
with copies of all Section 16(a) forms they file.
32
<PAGE>
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 1994, SJW Corp. believes that during 1994 all officers,
directors and greater than ten percent beneficial owners were in compliance with
all Section 16(a) filing requirements.
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 four other executive officers whose total annual salary
and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
Annual Compensation(1) Long Term Compensation(1)
--------------------- -------------------------
Awards Payouts
Other ------ --------
Name and Annual Restricted All Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Award(s) SAR's Payouts sation
------------- ---- ----- ----- ------ ------ ----- ------ ------
($) ($) ($) ($) ($) ($) ($)
J.W. Weinhardt 1994 268,750 8,858(2)
President 1993 253,750 90,000 9,297(2)
and Chief 1992 238,750 11,564(2)
Executive Officer
SJW Corp., Chairman and
Chief Executive
Officer San Jose
Water Company
W.R. Roth 1994 134,304 3,961(3)
Vice President 1993 114,416 3,190(3)
SJW Corp., 1992 98,300 2,950(3)
President San
Jose Water Company
and Vice President
Western Precision,
Inc.
F.R. Meyer 1994 130,500 3,915(3)
Vice President 1993 124,500 3,735(3)
San Jose Water 1992 118,417 3,553(3)
Company
P.J. Schreiber 1994 117,542 3,494(3)
Vice President 1993 112,042 3,361(3)
San Jose Water 1992 106,542 3,196(3)
Company
R.J. Balocco 1994 103,125 3,075(3)
Vice President 1993 98,583 2,957(3)
San Jose Water 1992 92,833 2,785(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 $4,500 for 1994, $4,497 for 1993 and $4,364 for
1992, the balance are amounts received for Directors fees.
(3) Represents matching contributions paid by the San Jose Water Company under
its Salary Deferral Plan.
33
<PAGE>
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 San Jose Water Company. It is
intended that the SERP in combination with the Retirement Plan will provide the
covered executives and officers with a total retirement benefit commensurate
with executives and officers of other comparable private water utilities. A
minimum of 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) $37,500(7) $ 77,000 $ 86,625 $ 96,250 $ 96,250
$200,000(6) $37,500(7) $121,700 $132,700 $143,700 $149,000
$225,000(6) $37,500(7) $136,900 $149,200 $161,600 $167,600
$250,000(6) $37,500(7) $152,100 $165,800 $179,600 $186,200
$275,000(6) $37,500(7) $167,300 $182,400 $197,500 $204,800
$300,000(6) $37,500(7) $182,500 $199,000 $215,500 $223,400
$325,000(6) $37,500(7) $197,700 $215,600 $233,400 $242,100
$350,000(6) $37,500(7) $212,900 $232,200 $251,400 $260,700
(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, 1994 is for Mr. Weinhardt, 31, $268,750; Mr. Meyer, 16, $130,500; Mr. Roth,
4, $134,304; Mr. Schreiber, 32, $117,542; Mr. Balocco, 12, $103,125.
(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 $150,000 in 1994 for the Retirement Plan.
34
<PAGE>
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
Corporation or any of its subsidiaries.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following sets forth, as of January 1, 1995, 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,
each officer listed in the summary compensation table 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 2,159 *
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)
W.R. Roth Common 100 *
Charles J. Toeniskoetter Common 100 *
J.W. Weinhardt Common 5,150 *
Executive Officers:
Fred R. Meyer Common 900 *
P.J. Schreiber Common 1,162 *
R.J. Balocco Common 186 *
All directors and executive officers
as a group (14 individuals) Common 1,061,455 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 1994. The Gibson Speno Company was paid $125,000 for consulting services
and reimbursed $75,606 for reimbursement of subcontractor costs.
35
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) Financial Statements
Page
Independent Auditors' Report, January 20, 1995 15
Consolidated Balance Sheet as of December 31, 1994 and 1993 16
Consolidated Statement of Income for the years ended
December 31, 1994, 1993 and 1992 18
Consolidated Statement of Changes in Common Shareholders' Equity
for the years ended December 31, 1994, 1993 and 1992 19
Consolidated Statement of Cash Flow for the years ended
December 31, 1994, 1993 and 1992 20
Notes to Consolidated Financial Statements 21
(2) Financial Statement Schedule:
Schedule
Number
II Valuation and Qualifying Accounts and
Reserves, Years ended December 31,
1994, 1993 and 1992 29
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 38 through 39 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.
There have been no reports filed on Form 8-K during the last quarter of
the period covered by this report.
36
<PAGE>
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, 1995 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, 1995 By /s/ J. W. Weinhardt
J. W. WEINHARDT, President,
Chief Executive Officer and
Member, Board of Directors
Date: January 26, 1995 By /s/ W. R. Roth
W. R. ROTH, Vice President,
Finance and Chief Financial
Officer and Member, Board
of Directors
Date: January 26, 1995 By /s/ G. W. Clements
G. W. CLEMENTS, Controller
Date: January 26, 1995 By /s/ Mark L. Cali
MARK L. CALI
Member, Board of Directors
Date: January 26, 1995 By /s/J. Philip DiNapoli
J. PHILIP DINAPOLI
Member, Board of Directors
Date: January 26, 1995 By /s/Drew Gibson
DREW GIBSON
Member, Board of Directors
Date: January 26, 1995 By /s/Ronald R. James
RONALD R. JAMES
Member, Board of Directors
Date: January 26, 1995 By /s/George E. Moss
GEORGE E. MOSS
Member, Board of Directors
Date: January 26, 1995 By /s/Roscoe Moss, Jr.
ROSCOE MOSS, JR.
Member, Board of Directors
Date: January 26, 1995 By /s/Charles J. Toeniskoetter
CHARLES J. TOENISKOETTER
Member, Board of Directors
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.
37
<PAGE>
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
38
<PAGE>
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
21 Subsidiaries of the Registrant. Filed as an Exhibit
to Annual Report on Form 10-K for the year ended December 31, 1992.
S.E.C. File No. 1-8966. NA
99 Additional Exhibits: None
39
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<ARTICLE> UT
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 213,432
<OTHER-PROPERTY-AND-INVEST> 7,178
<TOTAL-CURRENT-ASSETS> 13,506
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0
0
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0
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0
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</TABLE>
