SEC Filing Summary: SJW Corp. (10-K)
Business Context and Reporting Period
Company: SJW Corp. (Parent of San Jose Water Company, Canyon Lake Water Service Company, SJW Land Company, and Texas Water Alliance Limited).
Reporting Period: Fiscal year ended December 31, 2010.
Business Overview: SJW Corp. operates as a holding company for regulated water utilities in California and Texas, non-regulated water services, and a real estate portfolio. The primary revenue driver is San Jose Water Company, serving approximately 226,000 connections in the San Jose metropolitan area. Canyon Lake Water Service Company serves approximately 9,200 connections in Texas. SJW Land Company manages commercial properties and undeveloped land across multiple states.
Key Financial Metrics (Year Ended Dec 31, 2010)
| Metric | 2010 Value | 2009 Value |
|---|---|---|
| Operating Revenue | $215.6 million | $216.1 million |
| Operating Income | $29.1 million | $29.4 million |
| Net Income | $24.4 million | $15.2 million |
| Earnings Per Share (Basic) | $1.32 | $0.82 |
| Dividends Paid | $12.6 million ($0.68/share) | $12.2 million ($0.66/share) |
| Cash Flow from Operations | $37.2 million | $54.5 million |
| Total Assets | $935.4 million | $878.5 million |
| Long-Term Debt | $295.7 million | $246.9 million |
| Shareholders' Equity | $255.0 million | $252.8 million |
Liquidity: The company maintained $1.7 million in cash and cash equivalents as of year-end. It has access to $95 million in unsecured bank lines of credit, with $88 million available and unused as of December 31, 2010.
Material Changes vs. Prior Period
- Net Income Increase: Net income rose 61% to $24.4 million, primarily driven by a net gain of $11.2 million from the sale of California Water Service Group stock and lower production costs due to increased surface water availability.
- Revenue Decline: Operating revenue decreased slightly by $0.5 million. This was due to a $5.5 million decrease in water consumption, partially offset by $5.0 million in rate increases and $0.4 million from new customers.
- Real Estate Impairment: The company recorded a pre-tax impairment charge of $3.6 million related to a distribution facility in Tennessee, following a change in circumstances regarding a sale option.
- Debt Issuance: Long-term debt increased by approximately $49 million due to the issuance of $50 million in California Pollution Control Financing Authority revenue bonds to fund capital improvements.
- Operating Expenses: Total operating expenses remained relatively flat ($186.5 million vs. $186.7 million), with decreases in water production costs offset by increases in depreciation, administrative expenses (pension costs), and the real estate impairment.
Guidance, Outlook, and Risks
- Capital Expenditures: The company plans to spend approximately $70 million in 2011 and $469 million over the next five years, primarily for main replacements and infrastructure upgrades.
- Regulatory Outlook: San Jose Water Company received CPUC approval for a 2011 general rate increase of 3.32% effective January 1, 2011. A cost of capital application for 2012-2014 is pending. The company is seeking rate recovery for a $73.7 million Montevina Water Treatment Plant upgrade project.
- Water Supply Risks: Operations are sensitive to weather conditions and drought. While 2010 saw above-average rainfall, long-term supply challenges in California (Delta smelt restrictions) and Texas remain significant risks. The company relies on purchased water, groundwater, and surface water.
- Real Estate Risks: The real estate segment faces risks related to vacancy rates and economic downturns, highlighted by the 2010 impairment charge on Tennessee properties.
- Unusual Items: The 2010 results were significantly boosted by the one-time gain on the sale of California Water Service Group stock. Excluding this gain, core operating performance was more modest.
Investor Verification Checklist
- Rate Case Approvals: Verify the final approval status and effective dates of the Montevina Treatment Plant upgrade rate recovery and the 2012 general rate case.
- Water Supply Contracts: Review the terms and pricing stability of the master contract with Santa Clara Valley Water District (SCVWD) and the Guadalupe-Blanco River Authority (GBRA).
- Real Estate Portfolio: Assess the impact of the Tennessee property impairment on future real estate segment profitability and the status of the terminated sale option.
- Debt Covenants: Confirm continued compliance with debt covenants, specifically the funded debt to total capitalization ratio (currently 54%) and interest coverage ratios.
- Pension Obligations: Monitor the funded status of the pension plan and the impact of changing actuarial assumptions on future administrative expenses.