Segment and Non-Tariffed Business Reporting

SJW Group is a holding company with four subsidiaries: (i) San Jose Water Company, a water utility which operates both regulated and non-tariffed businesses, (ii) SJWTX, Inc. which is doing business as Canyon Lake Water Service Company (“CLWSC”), a regulated water utility located in Canyon Lake, Texas, and its consolidated non-tariffed variable interest entity, Acequia Water Supply Corporation, (iii) SJW Land Company and its consolidated variable interest entity, 444 West Santa Clara Street, L.P., which operated a commercial building rental that was sold in April 2017, and (iv) Hydro Sub, Inc., a Connecticut corporation that was formed on March 9, 2018 for the sole purpose of effecting the SJW Group and Connecticut Water Service, Inc. (“CTWS”) proposed merger (see discussion on the proposed merger at Note 12). In November 2017, SJW Group sold all its equity interest in Texas Water Alliance Limited, a non-tariffed water utility operation which had acquired permits and leases necessary to develop a water supply project in Texas. In accordance with FASB ASC Topic 280 - “Segment Reporting,” SJW Group has determined that it has two reportable business segments. The first segment is that of providing water utility and utility-related services to its customers through SJW Group’s subsidiaries, San Jose Water Company, CLWSC, and Texas Water Alliance Limited (up to November 2017), together referred to as “Water Utility Services.” The second segment is property management and investment activity conducted by SJW Land Company, referred to as “Real Estate Services.”

SJW Group’s reportable segments have been determined based on information used by the chief operating decision maker. SJW Group’s chief operating decision maker includes the Chairman, President and Chief Executive Officer, and his senior staff. The senior staff reviews financial information presented on a consolidated basis that is accompanied by disaggregated information about operating revenue, net income and total assets, by subsidiaries.

The following tables set forth information relating to SJW Group’s reportable segments and distribution of regulated and non-tariffed business activities within the reportable segments. Certain allocated assets, revenue and expenses have been included in the reportable segment amounts. Other business activity of SJW Group not included in the reportable segments is included in the “All Other” category.



	For Three Months Ended June 30, 2018
	Water Utility Services			Real Estate Services	All Other*		SJW Group
	Regulated		Non-tariffed	Non-tariffed	Non-tariffed		Regulated	Non-tariffed		Total
Operating revenue	$	95,798	1,967	1,321	—		95,798	3,288		99,086
Operating expense	70,642		1,278	891	3,476		70,642	5,645		76,287
Operating income (loss)	25,156		689	430	(3,476	)	25,156	(2,357	)	22,799
Net income (loss) before noncontrolling interest	15,022		497	296	(2,944	)	15,022	(2,151	)	12,871
Depreciation and amortization	13,272		85	299	—		13,272	384		13,656
Senior note and other interest expense	5,540		—	—	544		5,540	544		6,084
Income tax expense (benefit) in net income	4,650		193	92	(867	)	4,650	(582	)	4,068
Assets	$	1,449,714	3,768	46,756	(117	)	1,449,714	50,407		1,500,121



	For Three Months Ended June 30, 2017
	Water Utility Services			Real Estate Services		All Other*		SJW Group
	Regulated		Non-tariffed	Non-tariffed		Non-tariffed		Regulated	Non-tariffed	Total
Operating revenue	$	98,836	1,910	1,327		—		98,836	3,237	102,073
Operating expense	67,285		1,223	942		804		67,285	2,969	70,254
Operating income (loss)	31,551		687	385		(804	)	31,551	268	31,819
Net income (loss) before noncontrolling interest	16,080		320	5,321		(1,137	)	16,080	4,504	20,584
Depreciation and amortization	11,592		142	299		—		11,592	441	12,033
Senior note, mortgage and other interest expense	5,215		—	(3	)	544		5,215	541	5,756
Income tax expense (benefit) in net income	9,908		236	1,988		(168	)	9,908	2,056	11,964
Assets	$	1,398,567	19,358	49,337		3,924		1,398,567	72,619	1,471,186



	For Six Months Ended June 30, 2018
	Water Utility Services			Real Estate Services	All Other*		SJW Group
	Regulated		Non-tariffed	Non-tariffed	Non-tariffed		Regulated	Non-tariffed		Total
Operating revenue	$	168,151	3,315	2,662	—		168,151	5,977		174,128
Operating expense	132,343		2,166	1,740	7,749		132,343	11,655		143,998
Operating income (loss)	35,808		1,149	922	(7,749	)	35,808	(5,678	)	30,130
Net income (loss)	19,817		828	652	(7,141	)	19,817	(5,661	)	14,156
Depreciation and amortization	26,473		168	598	—		26,473	766		27,239
Senior note and other interest expense	11,048		—	—	1,088		11,048	1,088		12,136
Income tax expense (benefit) in net income	5,142		322	186	(2,162	)	5,142	(1,654	)	3,488
Assets	$	1,449,714	3,768	46,756	(117	)	1,449,714	50,407		1,500,121



	For Six Months Ended June 30, 2017
	Water Utility Services			Real Estate Services	All Other*		SJW Group
	Regulated		Non-tariffed	Non-tariffed	Non-tariffed		Regulated	Non-tariffed	Total
Operating revenue	$	165,054	3,174	2,890	—		165,054	6,064	171,118
Operating expense	122,031		2,054	1,890	1,616		122,031	5,560	127,591
Operating income (loss)	43,023		1,120	1,000	(1,616	)	43,023	504	43,527
Net income (loss)	20,029		492	5,681	(1,947	)	20,029	4,226	24,255
Depreciation and amortization	23,252		278	622	—		23,252	900	24,152
Senior note, mortgage and other interest expense	10,640		—	62	1,111		10,640	1,173	11,813
Income tax expense (benefit) in net income	11,701		373	2,116	(658	)	11,701	1,831	13,532
Assets	$	1,398,567	19,358	49,337	3,924		1,398,567	72,619	1,471,186

* The “All Other” category includes the accounts of SJW Group and Hydro Sub, Inc. on a stand-alone basis. For the six months ended June 30, 2018, Hydro Sub, Inc. had no recorded revenue or expenses and as of June 30, 2018, held no assets and had incurred no liabilities. For the six months ended June 30, 2017, the “All Other” category includes the accounts of SJW Group on a stand-alone basis.