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 its then wholly-owned subsidiary 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 September 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	$	121,009	2,403	1,441	—		121,009	3,844		124,853
Operating expense	87,230		1,623	934	9,238		87,230	11,795		99,025
Operating income (loss)	33,779		780	507	(9,238	)	33,779	(7,951	)	25,828
Net income (loss) before noncontrolling interest	22,333		561	359	(7,465	)	22,333	(6,545	)	15,788
Depreciation and amortization	13,298		85	299	—		13,298	384		13,682
Senior note and other interest expense	5,534		—	—	543		5,534	543		6,077
Income tax expense (benefit) in net income	5,910		218	113	(2,138	)	5,910	(1,807	)	4,103
Assets	$	1,480,726	4,577	47,469	4,096		1,480,726	56,142		1,536,868



	For Three Months Ended September 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	$	120,727	2,460	1,391		—		120,727	3,851		124,578
Operating expense	82,135		1,511	875		859		82,135	3,245		85,380
Operating income (loss)	38,592		949	516		(859	)	38,592	606		39,198
Net income (loss) before noncontrolling interest	19,866		473	305		(1,104	)	19,866	(326	)	19,540
Depreciation and amortization	11,623		143	299		—		11,623	442		12,065
Senior note, mortgage and other interest expense	4,999		—	(2	)	544		4,999	542		5,541
Income tax expense (benefit) in net income	13,242		340	178		(237	)	13,242	281		13,523
Assets	$	1,438,433	20,239	48,917		3,981		1,438,433	73,137		1,511,570



	For Nine Months Ended September 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	$	289,160	5,718	4,103	—		289,160	9,821		298,981
Operating expense	219,573		3,789	2,674	16,987		219,573	23,450		243,023
Operating income (loss)	69,587		1,929	1,429	(16,987	)	69,587	(13,629	)	55,958
Net income (loss)	42,150		1,389	1,011	(14,606	)	42,150	(12,206	)	29,944
Depreciation and amortization	39,771		253	897	—		39,771	1,150		40,921
Senior note and other interest expense	16,582		—	—	1,631		16,582	1,631		18,213
Income tax expense (benefit) in net income	11,052		540	299	(4,300	)	11,052	(3,461	)	7,591
Assets	$	1,480,726	4,577	47,469	4,096		1,480,726	56,142		1,536,868



	For Nine Months Ended September 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	$	285,781	5,634	4,281	—		285,781	9,915	295,696
Operating expense	204,166		3,565	2,765	2,475		204,166	8,805	212,971
Operating income (loss)	81,615		2,069	1,516	(2,475	)	81,615	1,110	82,725
Net income (loss)	39,895		965	5,986	(3,051	)	39,895	3,900	43,795
Depreciation and amortization	34,875		421	921	—		34,875	1,342	36,217
Senior note, mortgage and other interest expense	15,639		—	60	1,655		15,639	1,715	17,354
Income tax expense (benefit) in net income	24,943		713	2,294	(895	)	24,943	2,112	27,055
Assets	$	1,438,433	20,239	48,917	3,981		1,438,433	73,137	1,511,570

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