FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1996
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, CA 95196
(Address of principal executive offices)
(Zip Code)
408-279-7810
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year changed
since last report)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Common shares outstanding as of July 1, 1996 and as of the date
of this report are 3,244,547.
PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
--------------------
SJW CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(In thousands, except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1996 1995 1996 1995
------------------ -----------------
Operating revenue $ 28,005 23,780 46,450 42,019
Operating expense:
Operation:
Purchased water 6,109 5,936 8,767 9,239
Power 1,144 934 1,878 1,531
Pump taxes 4,063 2,666 6,866 4,728
Other 4,374 4,086 8,444 9,395
Maintenance 1,740 1,553 3,378 3,254
Property and other
nonincome taxes 780 624 1,558 1,452
Depreciation 2,133 1,894 4,266 3,817
Income taxes 2,648 2,127 3,691 2,729
---------------- ----------------
22,991 19,820 38,848 36,145
---------------- ----------------
Operating income 5,014 3,960 7,602 5,874
Other income 224 223 442 259
Dividend income 286 187 572 561
Interest and other charges (1,595) (1,376) (3,207) (2,855)
---------------- ----------------
Net income $ 3,929 2,994 5,409 3,839
================ ================
Earnings per share of
common stock $ 1.21 0.92 1.67 1.18
================ ================
Dividends per share
of common stock $ 0.555 0.54 1.11 1.08
================ ================
Weighted average
outstanding common shares 3,244,547 3,250,746 3,245,847 3,250,746
=================== ===================
SJW CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(In thousands)
JUNE 30 DECEMBER 31
1996 1995
ASSETS ----------------------
Utility plant $ 332,561 324,098
Less accumulated depreciation 104,253 100,000
----------------------
Net utility plant 228,308 224,098
Nonutility property 6,568 6,624
Current assets:
Cash and equivalents 10,061 7,414
Temporary investments 3,316 4,300
Accounts receivable and accrued revenue 12,156 8,499
Prepaid expenses and other 1,386 1,238
----------------------
Total current assets 26,919 21,451
Other assets:
Investment in California Water Service Co. 19,249 18,012
Debt issuance and reacquisition costs 4,220 4,283
Regulatory asset 3,614 3,551
Goodwill 2,213 2,256
Other 395 222
----------------------
Total other assets 29,691 28,324
----------------------
$ 291,486 280,497
======================
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $ 10,139 10,159
Additional paid-in capital 21,971 22,208
Retained earnings 78,376 76,569
Unrealized gain (loss) on investment 649 (82)
----------------------
Total common shareholders' equity 111,135 108,854
Long-term debt, less current maturities 76,500 76,500
----------------------
Total capitalization 187,635 185,354
Current liabilities:
Current maturities of long-term debt 1,000 1,000
Accounts payable 691 690
Accrued interest 2,715 2,179
Accrued pump taxes and purchased water 5,693 3,742
Income taxes payable 3,517 447
Post retirement benefits 470 132
Other current liabilities 2,721 2,570
----------------------
Total current liabilities 16,807 10,760
Deferred income taxes and tax credits 16,039 15,743
Other noncurrent liabilities 2,659 2,508
Advances for and contributions in aid
of construction 68,346 66,132
----------------------
$ 291,486 280,497
======================
SJW CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In thousands)
SIX MONTHS ENDED
JUNE 30
1996 1995
Operating activities: ----------------
Net income 5,409 3,839
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 4,266 3,817
Deferred income taxes and credits (212) 184
Changes in operating assets and liabilities:
Accounts receivable and accrued revenue (3,657) (1,719)
Prepaid expenses and other (148) 2,199
Accounts payable and other
current liabilities 152 93
Accrued pump taxes and purchased water 1,951 237
Income taxes payable 3,070 2,251
Accrued interest 536 (10)
Other changes, net 218 (577)
----------------
Net cash provided by operating activities 11,585 10,314
----------------
Investing activities:
Additions to utility plant (8,866) (7,088)
Additions to nonutility property (4) (80)
Cost to retire utility plant (101) (249)
Temporary investments 984 0
Net cash proceeds from sale of machine shop 0 1,954
----------------
Net cash used in investing activities (7,987) (5,463)
----------------
Financing activities:
Dividends paid (3,602) (3,511)
Line of credit 0 (3,000)
Advances and contributions in aid of
construction 3,234 2,608
Refunds of advances (583) (599)
----------------
Net cash used in financing activities (951) (4,502)
----------------
Net change in cash and equivalents 2,647 349
----------------
Cash and equivalents, beginning of period 7,414 1,277
----------------
Cash and equivalents, end of period $ 10,061 1,626
================
Supplemental disclosures of cash flow information:
Cash paid (credited) during period for:
Interest $ 2,517 2,712
Income taxes $ 998 (1,057)
SJW CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
June 30, 1996
NOTE I - General
In the opinion of SJW Corp., the accompanying
unaudited condensed consolidated financial
statements contain all adjustments, consisting only
of normal recurring adjustments, necessary for the
fair presentation of the results for the interim
periods.
The Notes to Consolidated Financial Statements
incorporated by reference in SJW Corp.'s 1995 Annual
Report on Form 10-K should be read with the accompanying
condensed consolidated financial statements.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources:
On November 1, 1996, San Jose Water Company will redeem
in maturity Series O 6.5% First Mortgage Bonds in the
amount of $1,000,000 plus accrued interest.
San Jose Water Company has a commercial bank line of
credit that provides for unsecured borrowings of up to
$20,000,000 at rates which approximate the bank's prime
or reference rate. On June 30, 1996, San Jose Water
Company had an available unused short-term bank line
credit of $20,000,000.
San Jose Water Company's capital expenditures are
incurred in connection with normal upgrading and
expansion of existing facilities and to comply with
environmental regulations. Capital expenditures for the
next five years are likely to increase from historical
levels due to the addition of new, or expansion of
existing, water treatment and source of supply facilities
and to comply with environmental regulations. Net
capital expenditures for 1996 are estimated at
$15,204,000. For the five year period from 1996 to 2000,
San Jose Water Company's net capital expenditures are
estimated to aggregate $90,000,000. Net capital
expenditures represent gross capital expenditures less
advances and contributions in aid of construction.
General:
SJW Corp. is a holding company created in 1985 through an
agreement of merger with San Jose Water Company. SJW
Corp. has operational and financial flexibility and can
engage in nonregulated activities. SJW Corp. also owns
549,976 shares of California Water Service Company.
San Jose Water Company is a public utility in the
business of providing water service to approximately
928,000 people in the metropolitan San Jose area.
SJW Land Company, a wholly owned subsidiary, was formed
in 1985 for the purpose of real estate development. It
operates parking facilities located adjacent to the
Company's headquarters and the San Jose Arena.
Results of Operations:
Overview
SJW Corp.'s consolidated net income for the second
quarter of 1996 was $3,929,000, an increase of 31% from
$2,994,000 in the second quarter of 1995. The increase
in consolidated net income was due primarily to increased
customer usage and the availability of additional surface
water.
Operating Revenue
The change in consolidated operating revenue from the
same period in 1995 was due to the following factors:
Three months ended June 30,
Operating revenue 1996 vs. 1995
________________________
Increase/(decrease)
___________________________________________________
Utility:
Consumption $ 4,152,000 17%
New customers 133,000 1%
Parking (60,000) --
___________ ___
$ 4,225,000 18%
=========== ===
Operating expense
The change in consolidated operating expense, excluding
income taxes, from the same period in 1995 was due to the
following:
Three months ended June 30,
Operating Expense 1996 vs. 1995
_______________________
Increase/(decrease)
__________________________________________________
Operation and maintenance $ 2,255,000 13%
Depreciation 239,000 1%
General Taxes 156,000 1%
___________ ____
$ 2,650,000 15%
=========== ====
The increase in operation and maintenance expense was
primarily due to increased water production costs from
higher water consumption.
Income tax expense increased $521,000 which is 25% in
comparison to the second quarter of 1995.
Since the water business is highly seasonal in nature, a
comparison of the revenue and expense of the current
quarter with the immediate preceding quarter would not be
meaningful. Average usage per metered customer in the
second quarter of 1996 increased 23% from the second
quarter of 1995.
Water Supply
On August 1, 1996, Santa Clara Valley Water District's 10
reservoirs were 73% full with 124,562 acre feet of water
in storage -- which is above average for the past 20
years. As of August 1, 1996, the water level in the
Santa Clara groundwater basin exceeded the 30-year
average. The heavy rainfall in January and March of 1996
increased the surface water supplies to the Company.
Surface water is a less costly source of water and its
availability significantly impacts the results of
operation.
Regulatory Affairs
The Public Utilities Commission of California rendered a
rate decision on July 17, 1996, approving a .95%, 2.1%,
1.45% and 1.45% rate increase for 1996, 1997, 1998, and
1999 respectively for San Jose Water Company. These rate
increases are based on rates of return on ratebase of
9.28% and 9.25% for the years 1996 and 1997,
respectively, reflecting a return on common equity of
10.2%. The increases for 1998 and 1999 are to offset
operational and financial attrition. Included in the
rate increase is the recovery of the voluntary
conservation memorandum account for the period of March
1993 to February 1994 when San Jose Water Company
experienced residual voluntary water conservation from an
earlier water use restriction.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Valley Title Company
In October 1993, Valley Title Company and its insurer
filed a lawsuit in Santa Clara County Superior Court
naming San Jose Water Company as a defendant. Plaintiffs
claimed a fire service pipeline ruptured in October 1992,
causing water to flood the title company's basement.
In April 1995, San Jose Water Company's insurance carrier
settled with the plaintiff's insurance company for $3.5
million. Whether or not San Jose Water Company will be
compelled to contribute to the settlement is uncertain.
However, management has consistently maintained that the
pollution exclusion asserted by the insurance carrier
does not apply to this type of incident. Therefore, the
company will aggressively resist any demand for
contribution.
The jury awarded the title company $3 million for its
loss of records, and the insurance carrier for San Jose
Water Company has appealed that decision. San Jose Water
Company believes that any final award to the title
company will be within the stated limits of the company's
insurance coverage.
No governmental entity is known to have an unresolved
claim against San Jose Water Company arising from the
release of oil in this incident.
City of San Jose
On June 27, 1995, the City of San Jose passed an
ordinance imposing a franchise fee on the gross annual
receipts arising from the use, operation, or possession
of a "Potable Water Franchise." This ordinance became
effective on July 28, 1995. San Jose Water Company
maintains that it has a "constitutional franchise" dating
from at least 1891, and that the City of San Jose cannot
legally impose any new franchise or new franchise fees on
San Jose Water Company's operations. San Jose Water
Company has filed suit to challenge this new city
ordinance.
Although the company could have filed an advice letter
with the Public Utilities Commission requesting
authorization to collect the new franchise fee from its
customers, San Jose Water Company, with the concurrence
of the Division of Ratepayer Advocates, decided to ask
the Commission for permission to establish a memorandum
account for the imposed franchise fee. A Commission
decision issued on November 8, 1995, authorized San Jose
Water Company to establish such an account. San Jose
Water Company will be able to collect the franchise fee
from its customers by surcharge in the event that its
efforts to invalidate the ordinance are unsuccessful.
Trial is scheduled to begin in August 1996. San Jose
Water Company does not believe, based upon all available
information, that the outcome of this event will have a
material adverse effect on its financial position.
Item 5. OTHER INFORMATION
On July 18, 1996, the Board of Directors declared the
regular quarterly dividend of $.555 per common share.
The dividend will be paid September 1, 1996 to
shareholders of record as of the close of business on
August 1, 1996.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) Exhibits required to be filed by Item 601 of Regulation S-K.
There were no exhibits required to be filed by Item 601
of Regulation S-K for the quarter ended June 30, 1996.
(b.) Reports on Form 8-K
No reports on Form 8-K have been filed during the
quarter ended June 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto
duly authorized.
SJW Corp.
Date: August 12, 1996 By /s/
_______________________
W. R. ROTH
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 228,308
<OTHER-PROPERTY-AND-INVEST> 6,568
<TOTAL-CURRENT-ASSETS> 26,919
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 29,691
<TOTAL-ASSETS> 291,486
<COMMON> 10,139
<CAPITAL-SURPLUS-PAID-IN> 21,971
<RETAINED-EARNINGS> 79,025
<TOTAL-COMMON-STOCKHOLDERS-EQ> 111,135
0
0
<LONG-TERM-DEBT-NET> 76,500
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 102,851
<TOT-CAPITALIZATION-AND-LIAB> 291,486
<GROSS-OPERATING-REVENUE> 46,450
<INCOME-TAX-EXPENSE> 3,691
<OTHER-OPERATING-EXPENSES> 35,157
<TOTAL-OPERATING-EXPENSES> 38,848
<OPERATING-INCOME-LOSS> 7,602
<OTHER-INCOME-NET> 850
<INCOME-BEFORE-INTEREST-EXPEN> 8,452
<TOTAL-INTEREST-EXPENSE> 3,043
<NET-INCOME> 5,409
0
<EARNINGS-AVAILABLE-FOR-COMM> 5,409
<COMMON-STOCK-DIVIDENDS> 3,602
<TOTAL-INTEREST-ON-BONDS> 3,043
<CASH-FLOW-OPERATIONS> 11,585
<EPS-PRIMARY> 1.67
<EPS-DILUTED> 1.67
</TABLE>
