Edgar Filing: SJW CORP

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Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

Commission file number 1-8966

SJW Corp.

(Exact name of registrant as specified in its charter)

California

77-0066628

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)


110 West Taylor Street, San Jose, CA		95110
(Address of principal executive offices)		(Zip Code)

408-279-7800

(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 ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

Common shares outstanding as of July 20, 2009 are 18,484,831.

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

SJW Corp. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(in thousands, except share and per share data)


	THREE MONTHS ENDED JUNE 30					SIX MONTHS ENDED JUNE 30
	2009			2008		2009			2008
OPERATING REVENUE	$	58,194		60,058		$	98,215		101,311
OPERATING EXPENSE:
Operation:
Purchased water		12,601		14,176			20,390		21,172
Power		1,817		2,010			2,577		3,076
Groundwater extraction charges		9,480		9,417			14,532		14,833

Total production costs		23,898		25,603			37,499		39,081

Administrative and general		6,897		5,648			14,027		11,487
Other		4,547		4,069			8,524		7,752
Maintenance		3,216		3,272			6,132		6,316
Property taxes and other nonincome taxes		2,392		1,641			4,682		3,231
Depreciation and amortization		6,238		5,984			12,789		12,047
Income taxes		2,975		4,309			3,076		6,095

Total operating expense		50,163		50,526			86,729		86,009

OPERATING INCOME		8,031		9,532			11,486		15,302
OTHER (EXPENSE) INCOME:
Interest on senior notes		(3,488	)	(3,117	)		(6,747	)	(6,169	)
Mortgage and other interest expense		(500	)	(566	)		(1,029	)	(1,141	)
Dividends		325		321			649		643
Other, net		50		108			175		361

NET INCOME		4,418		6,278			4,534		8,996

Other comprehensive loss:
Unrealized loss on investment		(5,522	)	(5,917	)		(10,549	)	(4,675	)
Less: income taxes related to other comprehensive loss		2,264		2,426			4,325		1,917

Other comprehensive loss, net		(3,258	)	(3,491	)		(6,224	)	(2,758	)

COMPREHENSIVE INCOME/(LOSS)	$	1,160		2,787		$	(1,690	)	6,238

EARNINGS PER SHARE
Basic	$	0.24		0.34		$	0.25		0.49
Diluted	$	0.23		0.34		$	0.24		0.48

DIVIDENDS PER SHARE	$	0.17		0.16		$	0.33		0.32

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		18,482,670		18,403,322			18,476,307		18,390,407
Diluted		18,670,057		18,596,276			18,664,299		18,594,329

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW Corp. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)


	JUNE 30, 2009		DECEMBER 31, 2008
ASSETS
Utility plant:
Land	$	8,404	8,134
Depreciable plant and equipment		878,703	855,427
Construction in progress		15,380	7,142
Intangible assets		10,790	8,040

		913,277	878,743
Less accumulated depreciation and amortization		285,693	272,562

		627,584	606,181

Real estate investment		88,000	88,000
Less accumulated depreciation and amortization		6,350	5,511

		81,650	82,489

CURRENT ASSETS:
Cash and cash equivalents		4,771	3,406
Accounts receivable:
Customers, net of allowances for uncollectible accounts		14,611	11,622
Income tax		2,518	657
Other		538	1,154
Accrued unbilled utility revenue		16,630	12,896
Materials and supplies		947	933
Prepaid expenses		1,511	1,293

		41,526	31,961

OTHER ASSETS:
Investment in California Water Service Group		40,522	51,071
Debt issuance costs, net of accumulated amortization		3,195	3,162
Regulatory assets		73,518	73,778
Other		2,360	2,235

		119,595	130,246

	$	870,355	850,877

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW Corp. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)


	JUNE 30, 2009		DECEMBER 31, 2008
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Shareholders’ equity:
Common stock, $0.521 par value; authorized 36,000,000 shares; issued and outstanding 18,484,831 shares on June 30, 2009 and 18,416,758 on June 30, 2008	$	9,628	9,611
Additional paid-in capital		21,358	20,548
Retained earnings		203,417	204,744
Accumulated other comprehensive income		13,200	19,423

Total shareholders’ equity		247,603	254,326
Long-term debt, less current portion		246,221	216,613

		493,824	470,939

CURRENT LIABILITIES:
Line of credit		3,000	18,400
Current portion of long-term debt		728	705
Accrued groundwater extraction charges and purchased water		8,112	5,256
Purchased power		1,300	563
Accounts payable		10,350	5,758
Accrued interest		4,984	4,567
Accrued taxes		1,325	855
Accrued payroll		3,310	3,325
Other current liabilities		3,894	3,894

		37,003	43,323

DEFERRED INCOME TAXES		97,003	97,038
UNAMORTIZED INVESTMENT TAX CREDITS		1,645	1,675
ADVANCES FOR CONSTRUCTION		71,873	74,787
CONTRIBUTIONS IN AID OF CONSTRUCTION		118,053	114,082
DEFERRED REVENUE		1,234	1,247
POSTRETIREMENT BENEFIT PLANS		44,178	42,331
OTHER NONCURRENT LIABILITIES		5,542	5,455
COMMITMENTS AND CONTINGENCIES		—	—

	$	870,355	850,877

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW Corp. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	SIX MONTHS ENDED JUNE 30,
	2009			2008
OPERATING ACTIVITIES:
Net income	$	4,534		8,996
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		12,789		12,047
Deferred income taxes		4,514		1,036
Share-based compensation		402		292
Changes in operating assets and liabilities:
Accounts receivable and accrued unbilled utility revenue		(6,106	)	(9,948	)
Accounts payable, purchased power and other current liabilities		1,756		381
Accrued groundwater extraction charges and purchased water		2,856		3,469
Accrued taxes		(1,391	)	1,131
Accrued interest		417		45
Accrued payroll		(14	)	264
Postretirement benefits		2,218		1,520
Other changes, net		303		3,586

NET CASH PROVIDED BY OPERATING ACTIVITIES		22,278		22,819

INVESTING ACTIVITIES:
Additions to utility plant		(26,148	)	(33,654	)
Payments for business acquisition		(3,720	)	—
Cost to retire utility plant, net of salvage		(125	)	(44	)

NET CASH USED IN INVESTING ACTIVITIES		(29,993	)	(33,698	)

FINANCING ACTIVITIES:
Borrowings from line of credit		8,300		14,450
Repayments of line of credit		(23,700	)	(3,950	)
Long-term borrowings		30,000		1,069
Repayments of long-term borrowings		(369	)	(327	)
Dividends paid		(6,097	)	(5,934	)
Exercise of stock options and similar instruments		346		428
Tax benefits realized from share options exercised		80		324
Receipts of advances and contributions in aid of construction		1,582		5,233
Refunds of advances for construction		(1,062	)	(932	)

NET CASH PROVIDED BY FINANCING ACTIVITIES		9,080		10,361

NET CHANGE IN CASH AND CASH EQUIVALENTS		1,365		(518	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		3,406		2,354

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	4,771		1,836


Cash paid during the period for:
Interest	$	7,523		7,555
Income taxes		191		1,015
Supplemental disclosure of non-cash activities:
Change in accrued payables for additions to utility plant		3,514		(2,260	)
Utility property installed by developers		1,153		1,152
Amortization of debt issuance costs		94		93

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

SJW CORP. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2009

(in thousands, except share and per share data)

Note 1. General

In the opinion of SJW Corp., the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary for the fair presentation of the results for the interim periods. These adjustments consist only of normal recurring adjustments.

The unaudited interim financial information has been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the instructions for Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”). The Notes to Consolidated Financial Statements in SJW Corp.’s 2008 Annual Report on Form 10-K should be read with the accompanying condensed consolidated financial statements.

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. Due to the seasonal nature of the water business, the operating results for interim periods are not indicative of the operating results for a 12-month period. Revenue is generally higher in the warm, dry summer months when water usage and sales are greater and lower in the winter months when cooler temperatures and increased rainfall curtail water usage and sales.

Basic earnings per share is calculated using income available to common shareholders, divided by the weighted average number of shares outstanding during the period. Diluted earnings per share is calculated using income available to common shareholders divided by the weighted average number of common shares including both shares outstanding and shares potentially issued in connection with stock options, deferred restricted common stock awards under SJW Corp.’s Long-Term Incentive Plan (as amended, the “Incentive Plan”) and shares potentially issued under the Employee Stock Purchase Plan.

For the three months ended June 30, 2009 and 2008, the basic weighted average number of common shares was 18,482,670 and 18,403,322, respectively. For the six months ended June 30, 2009 and 2008, the basic weighted average number of common shares was 18,476,307 and 18,390,407, respectively. For the three months ended June 30, 2009 and 2008, the diluted weighted average number of common shares was 18,670,057 and 18,596,276, respectively. For the six months ended June 30, 2009 and 2008, the diluted weighted average number of common shares was 18,664,299 and 18,594,329, respectively. For the three months ended June 30, 2009 and 2008, anti-dilutive common stock units of 1,885 and 0, respectively, were excluded from the dilutive earnings per share calculations. For the six months ending June 30, 2009 and 2008, anti-dilutive common stock units of 3,780 and 13,011 respectively, were excluded from the dilutive earnings per share calculations.

SJW Corp. has evaluated subsequent events through August 5, 2009. Financial statements are expected to be filed with the Securities and Exchange Commission on August 7, 2009.

Note 2. Long-Term Incentive Plan and Share-Based Payments

Common Shares

SJW Corp. accounts for stock-based compensation based on the grant date fair value of the awards issued to employees in accordance with Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” (“SFAS 123R”), which requires the measurement and recognition of compensation expense based on the estimated fair value for all share-based payment awards.

At June 30, 2009, the Incentive Plan allows non-employee directors of SJW Corp. to receive awards, authorizes the plan administrator to grant stock appreciation rights, and lists the performance criteria for performance shares. In addition, the Incentive Plan allows SJW Corp. to provide employees, including officers, and non-employee directors, the opportunity to acquire an equity interest in SJW Corp. The types of awards included in the Incentive Plan are stock options, dividend units, performance shares, rights to acquire restricted stock and stock bonuses. In addition, shares are issued under the Employee Stock Purchase Plan (“ESPP”). The remaining shares available for issuance under the Incentive Plan are 1,268,889. As of June 30, 2009, 353,910 shares are issuable upon the exercise of outstanding options, restricted stock units and deferred stock units.

The total compensation cost charged to income under the Incentive Plan for the three and six months ended June 30, 2009 was $208 and $402, respectively, and for the three and six months ended June 30, 2008 was $154 and $292, respectively. The compensation costs charged to income was recognized on a straight-line basis over the requisite service period. A summary of compensation costs charged to income, proceeds from the exercise of stock options and similar instruments and the tax benefit realized from share options exercised, by award type, are presented below for the six months ended June 30, 2009 and 2008.


	Six months ended June 30,
	2009		2008
Compensation costs charged to income:
Stock options	$	9	29
Restricted stock and deferred restricted stock		393	263

Total compensation costs charged to income	$	402	292

Tax benefits realized from share options exercised and stock issuance:
Stock options	$	3	19
Restricted stock and deferred restricted stock		77	305

Total tax benefits realized from share options exercised and stock issuance	$	80	324

Proceeds from the exercise of stock options and similar instruments:
Stock options	$	29	50
ESPP		294	244
Restricted stock and deferred restricted stock		23	134

Total exercise of stock options and similar instruments	$	346	428

Stock Options

No options were granted during the three months ended June 30, 2009 and 2008.

For the six months ended June 30, 2009, after taking into consideration the relevant facts and circumstances, SJW Corp. does not project any foreseeable terminations which could lead to forfeiture of unvested options. As of June 30, 2009, total unrecognized compensation costs related to stock options amounted to $2. These costs are expected to be recognized over a weighted average period of 0.08 year.

SFAS 123R requires the cash flows resulting from the tax benefits for deductions in excess of the compensation expense recorded for those options (excess tax benefits) to be classified as cash from financing activities. For the three and six months ended June 30, 2009, total cash received on exercise of options amounted to $35, and the excess tax benefits realized from stock options exercised amounted to $3. For the three and six months ended June 30, 2008, total cash received on exercise of options amounted to $71 and the excess tax benefits realized from stock options exercised amounted to $19.

Deferred Restricted Stock and Deferral Election Programs and Restricted Stock Awards

Under SJW Corp.’s Amended and Restated Deferred Restricted Stock Program (the “Deferred Restricted Stock Program”), SJW Corp. granted deferred restricted stock units to non-employee Board members. This program was amended effective January 1, 2008. As a result of that amendment, no new awards of deferred restricted stock units will be made under the Deferred Restricted Stock Program with respect to Board service after December 31, 2007. In addition, SJW Corp.’s Deferral Election Program (as amended, the “Deferral Program”) includes retainer fees and meeting fees earned for the calendar year 2007 to be deferred into deferred restricted stock units. Prior to 2007, only retainer fees were allowed to be converted under the Deferral Program. The retainer fees and meeting fees are collectively referred to as the “Annual Service Fees.” For any post-2007 calendar year, the Annual Service Fees that are deferred will be credited as a dollar amount to a deferred liability account, and will no longer be deferred into deferred restricted stock units.

On April 27, 2009, a total of 7,562 shares of common stock were distributed to a retired member of SJW Corp.’s Board of Directors. The excess tax benefits realized from the distribution of such shares of common stock to the retired Board member amounted to $42.

As of June 30, 2009, a total of 21,000 restricted and deferred restricted stock units were awarded to a key executive of SJW Corp., which includes 7,000 performance-based restricted stock units that will convert into shares of SJW Corp.’s common stock upon vesting at the end of a three year period if specific performance goals are attained. These units do not include dividend equivalent rights. The fair value of the performance-based restricted award was estimated using the fair value of SJW Corp.’s common stock with the effect of market conditions and no dividend yield on the date of grant, and assumes the performance goals will be attained. Share-based compensation expense is recognized over three years at $13.57 per unit for performance-based stock units and $25.24 per unit for the remaining 14,000 restricted and deferred restricted stock units. If such goals are not met and requisite service is not rendered, no compensation cost will be recognized and any recognized compensation cost will be reversed.

Additionally, as of June 30, 2009, 13,569 restricted stock units were awarded to several executives of SJW Corp. and its subsidiaries, which includes 11,730 units that will vest in four equal successive installments upon completion of each year of service and 1,839 restricted stock units that will vest in three equal successive installments upon completion of each year of service. These units do include dividend equivalent rights. Share-based compensation expense is being recognized at grant date fair values of $26.83 and $25.24 per unit, respectively, over the vesting periods beginning in 2009.

As of June 30, 2009, the total unrecognized compensation costs were $1,365. These costs are expected to be recognized over a weighted average period of 1.68 years.

Dividend Equivalent Rights

Under the Incentive Plan, holders of options, restricted stock and deferred restricted stock awards may have the right to receive dividend equivalent rights (“DERs”) each time a dividend is paid on common shares after the grant date. Stock compensation on DERs is recognized as a liability and recorded against retained earnings on the date dividends are issued. For the three and six months ended June 30, 2009, $30 and $62, respectively, related to DERs were recorded against retained earnings and were accrued as a liability. For the three and six months ended June 30, 2008, $41 and $88, respectively, related to DERs were recorded against retained earnings and were accrued as a liability.

SJW Corp.’s Deferred Restricted Stock and Deferral Election Programs for non-employee Board members were amended effective January 1, 2008, to allow the DERs with respect to the deferred shares to remain in effect only through December 31, 2017. Accordingly, the last DERs conversion into deferred restricted stock units will occur on the first business day in January 2018. Previously, no such time limitation was placed in the Deferred Restricted Stock and Deferral Election Programs.

Employee Stock Purchase Plan

The ESPP allows eligible employees to purchase shares of SJW Corp.’s common stock at 85% of the fair market value of shares on the purchase date. Under the ESPP, employees can designate up to a maximum of 10% of their base compensation for the purchase of shares of common stock, subject to certain restrictions. A total of 270,400 shares of common stock have been reserved for issuance under the ESPP.

After considering the estimated employee terminations or withdrawals from the plan before the purchase date, SJW Corp.’s ESPP expenses were $22 and $36 for the three and six months ended June 30, 2009, respectively, and $15 and $33 for the three and six months ended June 30, 2008, respectively, related to the ESPP.

The total unrecognized compensation costs related to the semi-annual offering period that ends July 31, 2009 for the ESPP is approximately $7. This cost is expected to be recognized during the third quarter of 2009.

Note 3. Real Estate Investments

The major components of real estate investments as of June 30, 2009 and December 31, 2008 are as follows:


	June 30, 2009		December 31, 2008
Land	$	22,381	22,381
Buildings and improvements		65,388	65,388
Intangibles		231	231

Subtotal		88,000	88,000
Less: accumulated depreciation and amortization		6,350	5,511

Total	$	81,650	82,489

Depreciation is computed using the straight-line method over the estimated service lives of the assets, ranging from 5 to 39 years.

Note 4. Employee Benefit Plans

The components of net periodic benefit costs for San Jose Water Company’s pension plan, its Executive Supplemental Retirement Plan and other postretirement benefit plan for the three and six months ended June 30, 2009 and 2008 are as follows:


	Three Months Ended June 30					Six Months Ended June 30
	2009			2008		2009			2008
Service cost	$	678		557		$	1,356		1,114
Interest cost		1,238		1,150			2,476		2,300
Other cost		642		266			1,284		532
Expected return on assets		(765	)	(944	)		(1,530	)	(1,887	)

	$	1,793		1,029		$	3,586		2,059

In 2009, San Jose Water Company has made a contribution of $1,100 to the pension plan and expects to make a contribution of approximately $470 to the other postretirement benefit plan. San Jose Water Company is evaluating the impact of changes to the Pension Protection Act of 2006 that governs San Jose Water Company’s cash contribution requirement.

The accounting for pensions and other postretirement benefits requires the extensive use of assumptions about the discount rate, expected return on plan assets, the rate of future compensation increases received by the employees, mortality, turnover, and medical costs to determine the present value of the benefit obligation and the fair value of plan assets at the end of the year. With the current market conditions, the funded status of the pension plans and the contributions could change due to fluctuations on the expected return on plan assets as well as the present value of the benefit obligation. Further, required plan contributions by San Jose Water Company may increase and payout restrictions on benefit payments from the pension plan could result from declining asset values and a decreased expectation of return on assets. SJW Corp. will review the assumptions on the measurement date of December 31, 2009 to determine any change in the present value of the benefit obligation and the fair value of plan assets.

Note 5. Segment and Nonregulated Business Reporting

SJW Corp. is a holding company with four subsidiaries: (i) San Jose Water Company, a water utility operation with both regulated and nonregulated businesses, (ii) SJW Land Company and its consolidated variable interest entity, 444 West Santa Clara Street, L.P., which operates commercial building rentals (“Real Estate Services”), (iii) SJWTX, Inc. which is doing business as Canyon Lake Water Service Company, a regulated water utility located in Canyon Lake, Texas and (iv) Texas Water Alliance Limited, which is seeking to develop wholesale water supplies in Texas. In accordance with Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information,” SJW Corp. 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 Corp.’s subsidiaries, San Jose Water Company and Canyon Lake Water Service Company, together referred to as the “Water Utility Services.” The second segment is property management and investment activity conducted by SJW Land Company, the “Real Estate Services.”

SJW Corp.’s reportable segments have been determined based on information used by the chief operating decision maker. SJW Corp.’s chief operating decision maker is its President and Chief Executive Officer (“CEO”). The CEO 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 tables below set forth information relating to SJW Corp.’s reportable segments and distribution of regulated and nonregulated 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 Corp. not included in the reportable segments is included in the “All Other” category.


	For Three Months Ended June 30, 2009
	Water Utility Services			Real Estate Services		All Other*		SJW Corp.
	Regulated		Non regulated	Non regulated		Non regulated		Regulated	Non regulated		Total
Operating revenue	$	56,099	1,247	848		—		56,099	2,095		58,194
Operating expense		47,700	1,023	1,054		386		47,700	2,463		50,163
Operating income (loss)		8,399	224	(206	)	(386	)	8,399	(368	)	8,031
Net income (loss)		5,069	224	(674	)	(201	)	5,069	(651	)	4,418
Depreciation and amortization		5,733	85	420		—		5,733	505		6,238
Interest expense		3,514	—	463		11		3,514	474		3,988
Income tax expense (benefit) in operating income		3,514	152	(497	)	(194	)	3,514	(539	)	2,975
Assets	$	740,253	5,384	82,977		41,741		740,253	130,102		870,355


	For Three Months Ended June 30, 2008
	Water Utility Services			Real Estate Services	All Other*		SJW Corp.
	Regulated		Non regulated	Non regulated	Non regulated		Regulated	Non regulated	Total
Operating revenue	$	57,075	1,286	1,697	—		57,075	2,983	60,058
Operating expense		48,422	1,065	824	215		48,422	2,104	50,526
Operating income (loss)		8,653	221	873	(215	)	8,653	879	9,532
Net income		5,705	199	345	29		5,705	573	6,278
Depreciation and amortization		5,484	81	419	—		5,484	500	5,984
Interest expense		3,083	51	510	39		3,083	600	3,683
Income tax expense (benefit) in operating income		4,049	137	212	(89	)	4,049	260	4,309
Assets	$	660,327	6,695	84,686	36,238		660,327	127,619	787,946


	For Six Months Ended June 30, 2009
	Water Utility Services			Real Estate Services		All Other*		SJW Corp.
	Regulated		Non regulated	Non regulated		Non regulated		Regulated	Non regulated		Total
Operating revenue	$	93,974	2,043	2,198		—		93,974	4,241		98,215
Operating expense		82,320	1,680	1,987		742		82,320	4,409		86,729
Operating income (loss)		11,654	363	211		(742	)	11,654	(168	)	11,486
Net income (loss)		5,183	362	(746	)	(265	)	5,183	(649	)	4,534
Depreciation and amortization		11,779	171	839		—		11,779	1,010		12,789
Interest expense		6,817	—	933		26		6,817	959		7,776
Income tax expense (benefit) in operating income		3,610	246	(543	)	(237	)	3,610	(534	)	3,076
Assets	$	740,253	5,384	82,977		41,741		740,253	130,102		870,355


	For Six Months Ended June 30, 2008
	Water Utility Services			Real Estate Services	All Other*		SJW Corp.
	Regulated		Non regulated	Non regulated	Non regulated		Regulated	Non regulated	Total
Operating revenue	$	95,791	2,146	3,374	—		95,791	5,520	101,311
Operating expense		82,290	1,735	1,572	412		82,290	3,719	86,009
Operating income (loss)		13,501	411	1,802	(412	)	13,501	1,801	15,302
Net income		7,786	360	747	103		7,786	1,210	8,996
Depreciation and amortization		11,047	161	839	—		11,047	1,000	12,047
Interest expense		6,087	102	1,037	84		6,087	1,223	7,310
Income tax expense (benefit) in operating income		5,552	247	465	(169	)	5,552	543	6,095
Assets	$	660,327	6,695	84,686	36,238		660,327	127,619	787,946

*	The “All Other” category includes SJW Corp. without regard to its subsidiaries. Please refer to Notes to Consolidated Financial Statements in SJW Corp.’s 2008 Annual Report on Form 10-K.

Note 6. Long-Term Liabilities

SJW Corp.’s contractual obligations and commitments include senior notes, mortgages and other obligations. San Jose Water Company, a subsidiary of SJW Corp., has received advance deposit payments from its customers on construction projects. Refunds of the advance deposit payments constitute an obligation of San Jose Water Company solely.

On February 2, 2009, San Jose Water Company issued $10,000 of unsecured Series J Senior Notes, with an interest rate of 6.54% and interest only payments until maturity, which is February 2, 2024. Senior Note Series J has terms and conditions that restrict San Jose Water Company from issuing additional funded debt if (1) the funded debt would exceed 66-2/3% of total capitalization, and (2) net income available for interest charges for the trailing twelve calendar month period would be less than 175% of interest charges. Proceeds from the sale of Series J Senior Notes were used to repay a portion of outstanding short-term borrowings.

On March 30, 2009, SJW Corp. increased its unsecured lines of credit by $20,000 for an aggregate short-term borrowing amount of up to $55,000 with interest rates that approximate the bank’s reference rate plus 1.75%. The line of credit will expire on June 1, 2010.

On May 15, 2009, San Jose Water Company issued $20,000 of unsecured Series K Senior Notes, with an interest rate of 6.75% and interest only payments until maturity, which is May 15, 2039. Senior Note Series K has terms and conditions that restrict San Jose Water Company from issuing additional funded debt if (1) the funded debt would exceed 66-2/3% of total capitalization, and (2) net income available for interest charges for the trailing twelve calendar month period would be less than 175% of interest charges. A portion of the proceeds from the sale of Series K Senior Notes were used to repay short-term borrowings.

Note 7. Fair Value Measurement

The following table summarizes the assets and liabilities measured at fair value on a recurring basis as required by SFAS 157, as of June 30, 2009:


	Balance as of June 30, 2009		Level 1		Level 2	Level 3
Assets:
Investment in California Water Service Group	$	40,522	$	40,522	—	—

The FASB has also issued FASB Staff Positions (“FSP”) 157-1 and 157-2. FSP 157-1 amends SFAS 157 to exclude SFAS No. 13 “Accounting for Leases,” and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement. FSP 157-2 defers the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Nonfinancial assets and nonfinancial liabilities would include all assets and liabilities other than those meeting the definition of a financial asset or financial liability as defined in paragraph 6 of SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SJW Corp.’s adoption of SFAS 157 and FSP 157-2 did not have a material impact on SJW Corp.’s financial position, results of operations or cash flows.

Note 8. Bankruptcy of Real Estate Tenant

On January 13, 2009, SJW Land Company was informed that one of its tenants filed a Chapter 11 bankruptcy proceeding and intended to liquidate its operations through the United States bankruptcy court in Delaware. The tenant leased a 148,000 square foot office building and a 346,000 square foot distribution building from SJW Land Company in Knoxville, Tennessee under triple net leases. The tenant vacated the buildings on May 31, 2009. SJW Land Company is incurring all holding costs and is actively seeking to re-lease the property. SJW Corp. has reviewed the Tennessee properties for impairment in accordance with the requirements of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Based upon our review, the carrying amount of the Tennessee properties does not exceed its fair value and as a result, no adjustment has been made to the carrying value.

Note 9. Acquisition

On February 6, 2009, SJWTX, Inc. acquired from the City of Bulverde, Texas (“City”) and the Guadalupe-Blanco River Authority (“GBRA”), the right and obligation to provide water service within the retail water service area of the City, certain areas outside the City and substantially all of the retail water service assets of the GBRA associated with the GBRA’s existing facilities located within such service area. The agreements by which the GBRA had a long-term right to construct and operate a retail water system within such service area were also terminated. The purchase price for the assets was approximately $3,700 with approximately $2,800 and $900 being paid to the GBRA and City, respectively. The GBRA assets acquired are being accounted for under the acquisition method of accounting in accordance with Statement of Financial Accounting Standards No. 141R, “Business Combinations.” Accordingly, the results of the subject GBRA assets are included in the consolidated financial statements of SJW Corp. from the acquisition date. Unaudited pro forma results of operations for this acquisition have not been presented since the impact of the purchase on providing current water services provided by SJWTX, Inc. was not significant.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(in thousands, except share and per share data)

The information in this Item 2 should be read in conjunction with the financial information and the notes thereto included in Item 1 of this Form 10-Q and the consolidated financial statements and notes thereto and the related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in SJW Corp.’s Annual Report on Form 10-K for the year ended December 31, 2008.

This report contains forward-looking statements within the meaning of the federal securities laws relating to future events and future results of SJW Corp. and its subsidiaries that are based on current expectations, estimates, forecasts, and projections about SJW Corp. and the industries in which SJW Corp. operates and the beliefs and assumptions of the management of SJW Corp. Such forward-looking statements are identified by words including “expect,” “estimate,” “anticipate,” “intends,” “plans,” “may,” “should,” “will,” and similar expressions. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Important factors that could cause or contribute to such differences include, but are not limited to, those discussed in this report and our most recent Form 10-K filed with the Securities and Exchange Commission (the “SEC”) under the item entitled “Risk Factors,” and in other reports SJW Corp. files with the SEC, specifically the most recent reports on Form 10-Q and Form 8-K, each as it may be amended from time to time. SJW Corp. undertakes no obligation to update the information contained in this report, including the forward-looking statements to reflect any event or circumstance that may arise after the date of this report.

General:

SJW Corp. is a holding company with four subsidiaries.

San Jose Water Company, a wholly owned subsidiary of SJW Corp., is a public utility in the business of providing water service to approximately 226,000 connections that serve a population of approximately one million people in an area comprising approximately 138 square miles in the metropolitan San Jose, California area.

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 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. San Jose Water Company distributes water to customers in accordance with accepted water utility methods which include pumping from storage and gravity feed from high elevation reservoirs. San Jose Water Company also provides nonregulated water related services under agreements with municipalities. These nonregulated services include full water system operations and billing and cash remittance services.

San Jose Water Company has utility property including land held in fee, impounding reservoirs, diversion facilities, wells, distribution storage and all water facilities and other property necessary to provide utility service to its customers. Under Section 851 of the California Public Utilities Code, properties currently used and useful in providing utilities services cannot be disposed of unless California Public Utilities Commission (“CPUC”) approval is obtained.

San Jose Water Company also has approximately 1,500 acres of nonutility property which has been identified as no longer used and useful in providing utility services. Approximately 15 acres of the nonutility property are located in the vicinity of the San Jose metropolitan area. The remaining properties are located in the hillside area adjacent to San Jose Water Company’s watershed properties.

SJW Land Company, a wholly owned subsidiary of SJW Corp., owns the following properties:


Description	Location	Acreage	Square Footage	Percentage of SJW Land Company Revenue as of June 30, 2009
2 Commercial buildings	San Jose, California	2	28,000	20%
Warehouse building	Windsor, Connecticut	17	170,000	17%
Warehouse building	Orlando, Florida	8	147,000	10%
Retail building	El Paso, Texas	2	14,000	7%
Warehouse building	Phoenix, Arizona	11	176,000	19%
Warehouse building	Knoxville, Tennessee	29	346,000	17%
Commercial building	Knoxville, Tennessee	15	148,000	10%
Undeveloped land	Knoxville, Tennessee	10	N/A	N/A
Undeveloped land	San Jose, California	5	N/A	N/A

The California properties listed above include properties held by 444 West Santa Clara Street, L.P., in which SJW Corp. has a 70% limited partnership interest. The limited partnership has been determined to be a variable interest entity within the scope of FASB Interpretation No. 46R (“FIN46R”), “Consolidation of Variable Interest Entities” with SJW Land Company as the primary beneficiary, and as a result, it has been consolidated with SJW Land Company.

SJWTX, Inc., doing business as Canyon Lake Water Service Company (“CLWSC”), provides water utility service to approximately 8,900 connections that serve approximately 36,000 residents in a service area comprising more than 250 square miles in the growing region between San Antonio and Austin, Texas.

Texas Water Alliance Limited, a wholly owned subsidiary of SJW Corp., is seeking to develop wholesale water supplies in Texas.

SJW Corp. also owns 1,099,952 shares of California Water Service Group, which represents approximately 5% of that company’s outstanding shares as of June 30, 2009.

Business Strategy:

SJW Corp. focuses its business initiatives in four strategic areas:

(1)

Regional regulated water utility operations.

(2)

Regional nonregulated water utility related services provided in accordance with the guidelines established by the CPUC.

(3)

Out-of-region water and utility related services, primarily in the Western United States.

(4)

Real estate investment activities in SJW Land Company.

Regional Regulated Activities

SJW Corp.’s regulated utility operation is conducted through San Jose Water Company, a wholly owned water utility subsidiary that provides water service to the greater metropolitan San Jose area, and CLWSC, a wholly owned regulated utility subsidiary in the State of Texas. SJW Corp. plans and applies a diligent and disciplined approach to maintaining and improving its water system infrastructure. It also seeks to acquire regulated water systems adjacent to or near its existing service territory.

Regional Nonregulated Activities

Operating in accordance with guidelines established by the CPUC, San Jose Water Company provides nonregulated water services under agreements with municipalities and other utilities. Nonregulated services include water system operations, billing and cash remittance processing, maintenance services, and telecommunication antenna leasing.

San Jose Water Company also seeks appropriate nonregulated business opportunities that complement its existing operations or that allow it to extend its core competencies beyond existing operations. San Jose Water Company seeks opportunities to fully utilize its capabilities and existing capacity by providing services to other regional water systems, benefiting its existing regional customers through increased efficiencies.

Real Estate Investment

SJW Land Company’s real estate investments diversify SJW Corp.’s asset base and balances SJW Corp.’s concentration in regulated assets. SJW Land Company implements its real estate investment strategy by exchanging selected real estate assets for investments with a capital structure and risk and return profile that is consistent with SJW Corp.’s consolidated capital structure and risk and return profile.

Out-of-Region Opportunities

SJW Corp. also from time to time pursues opportunities to participate in out-of-region water and utility related services, particularly regulated water businesses, primarily in the Western United States. SJW Corp. evaluates out-of-region and out-of-state opportunities that meet SJW Corp.’s risk and return profile.

The factors SJW Corp. considers in evaluating such opportunities include:

•

regulatory environment;

•

synergy potential;

•

general economic conditions;

•

potential profitability;

•

additional growth opportunities within the region;

•

water supply, water quality and environmental issues; and

•

capital requirements.

SJW Corp. cannot be certain it will be successful in consummating any transactions relating to such opportunities. In addition, any transaction could involve numerous risks. Some of the risks include the possibility of paying more than the value derived from the acquisition, the assumption of certain known and unknown liabilities related to the acquired assets, the risk of diverting management’s attention from normal daily operations of the business, the potential for a negative impact to SJW Corp.’s financial position and operating results, the risks of entering markets in which SJW Corp. has no or limited direct prior experience and the potential loss of key employees of any acquired company. SJW Corp. cannot be certain that any transaction will be successful and will not materially harm its operating results or financial condition.

Critical Accounting Policies:

SJW Corp. has identified the accounting policies delineated below as the policies critical to its business operations and the understanding of the results of operations. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. SJW Corp. bases its estimates on historical experience and other assumptions that are believed to be reasonable under the circumstances. The impact and any associated risks related to these policies on SJW Corp.’s business operations are discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” where such policies affect SJW Corp.’s reported and expected financial results. SJW Corp.’s critical accounting policies are as follows:

Revenue Recognition

SJW Corp. recognizes its regulated and nonregulated revenue when services have been rendered, in accordance with SEC Staff Accounting Bulletin 104, “Revenue Recognition.”

Metered revenue of San Jose Water Company and CLWSC (together referred to as the “Water Utility Services”) includes billing to customers based on meter readings plus an estimate of water used between the customers’ last meter reading and the end of the accounting period. The Water Utility Services read the majority of its customers’ meters on a bi-monthly basis and records its revenue based on its meter reading results. Unbilled revenue from the last meter reading date to the end of the accounting period is estimated based on the most recent usage patterns, production records and the effective tariff rates. Actual results could differ from those estimates, which would result in adjusting the operating revenue in the period which the revision to the Water Utility Services’ estimates are determined. As of June 30, 2009 and December 31, 2008, accrued unbilled revenue was $16,630 and $12,896, respectively. Unaccounted-for water on a 12 month-to-date basis for June 30, 2009 and 2008 approximated 7.97% and 7.02%, respectively, as a percentage of production. The unaccounted-for water estimate is based on the results of past experience, the trend and efforts in reducing the Water Utility Services’ unaccounted-for water through customer conservation, main replacements and lost water reduction programs.

Revenues also include a surcharge collected from regulated customers that is paid to the CPUC. This surcharge is recorded in operating revenues, with related expenses charged to administrative and general expenses. For the six months ended June 30, 2009 and 2008, the surcharge was $1,393 and $1,286, respectively.

SJW Corp. recognizes its nonregulated revenue based on the nature of the nonregulated business activities. Revenue from San Jose Water Company’s nonregulated utility operations and billing or maintenance agreements are recognized when services have been rendered. Revenue from SJW Land Company properties is generally recognized ratably over the terms of the leases.

Recognition of Regulatory Assets and Liabilities

Generally accepted accounting principles for water utilities include the recognition of regulatory assets and liabilities as permitted by Statement of Financial Accounting Standards (“SFAS”) No. 71, “Accounting for the Effects of Certain Types of Regulation.” In accordance with SFAS No. 71, the Water Utility Services, to the extent applicable, record deferred costs and credits on the balance sheet as regulatory assets and liabilities when it is probable that these costs and credits will be recognized in the ratemaking process in a period different from when the costs and credits are incurred. Accounting for such costs and credits is based on management’s judgment and prior historical ratemaking practices, and it occurs when management determines that it is probable that these costs and credits will be recognized in the future revenue of the Water Utility Services through the ratemaking process. The regulatory assets and liabilities recorded by the Water Utility Services, in particular San Jose Water Company, primarily relate to the recognition of deferred income taxes for ratemaking versus tax accounting purposes and the postretirement pension benefits, medical costs, accrued benefits for vacation and asset retirement obligations that have not been passed through rates. The disallowance of any asset in future ratemaking, including deferred regulatory assets, would require San Jose Water Company to immediately recognize the impact of the costs for financial reporting purposes. No disallowance was recognized as of June 30, 2009 and December 31, 2008, or for any periods presented. The net regulatory assets recorded by San Jose Water Company as of June 30, 2009 and December 31, 2008 was $73,518 and $73,778, respectively.

Pension Accounting

San Jose Water Company offers a defined benefit plan, an Executive Supplemental Retirement Plan and certain postretirement benefits other than pensions to employees retiring with a minimum level of service. Accounting for pensions and other postretirement benefits requires an extensive use of assumptions about the discount rate applied to expected benefit obligations, expected return on plan assets, the rate of future compensation increases received by the employees, mortality, turnover, and medical costs.

The pension plan is administered by a committee that is composed of an equal number of Company and Union representatives (the “Committee”). Investment decisions have been delegated by the Committee to an Investment Manager, presently Wachovia Securities, LLC. Investment guidelines provided to the Investment Manager require that at least 25% of the plan assets be invested in bonds or cash. As of December 31, 2008, the plan assets consist of approximately 45% bonds, 3% cash and 52% equities. Furthermore, equities are to be diversified by industry groups and selected to achieve preservation of capital coupled with long-term growth through capital appreciation and income. They may not invest in commodities and futures contracts, private placements, options, letter stock, speculative securities, or hold more than 5% of assets in any one private corporation. They may only invest in bonds, commercial paper, money market funds with acceptable ratings by Moody’s or Standard & Poor’s. The Investment Manager is reviewed regularly regarding performance by the Investment Consultant who provides quarterly reports to the Committee for review.

The market values of the plan assets are marked to market at the measurement date. The investment trust assets incur unrealized market gains or losses from time to time. Both unrealized market gains and losses on pension assets are amortized over 13.25 years for actuarial expense calculation purposes.

Income Taxes

SJW Corp. estimates its federal and state income taxes as part of the process of preparing the financial statements. The process involves estimating the actual current tax exposure together with assessing temporary differences resulting from different treatment of items for tax and accounting purposes, including the evaluation of the treatment acceptable in the water utility industry and regulatory environment. These differences result in deferred tax assets and liabilities, which are included on the balance sheet. If actual results, due to changes in the regulatory treatment, or significant changes in tax-related estimates or assumptions or changes in law, differ materially from these estimates, the provision for income taxes will be materially impacted.

Balancing Account

Pursuant to Section 792.5 of the California Public Utilities Code, a balancing account must be maintained for each expense item for which revenue offsets have been authorized. 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.

A separate balancing account must be maintained for each offset expense item (e.g., purchased water, purchased power and groundwater extraction charges). The balancing account balance varies with the seasonality of the water utility business such that, during the summer months when the demand for water is at its peak, the account tends to reflect an under-collection while, during the winter months when demand for water is relatively lower, the account tends to reflect an over-collection. Since the balances have to be approved by the CPUC before they can be incorporated into rates, San Jose Water Company does not recognize the balancing account in its revenue until the CPUC authorizes the change in customers’ rates. However, had the balancing account been recognized in San Jose Water Company’s financial statements, San Jose Water Company’s retained earnings would be decreased by the amount of the account over-collection or increased by the amount of the account under-collection, less applicable taxes.

Recognition of Gain/Loss on Utility, Nonutility Property and Real Estate Investments

In conformity with generally accepted accounting principles for rate-regulated public utilities, the cost of retired utility plant, including retirement costs (less salvage), is charged to accumulated depreciation. No gain or loss is recognized for utility plant used and useful in providing water utility services to customers.

Utility property in the Water Utility Services is property that is used and useful in providing water utility services to customers and is included in rate base for rate-setting purposes. In California, real estate type utility property is subject to California Public Utilities Code Section 851, which states any gain recognized will be divided with two-thirds going to the customers (in the form of rate reduction) and one-third to the shareholders. Net gains or losses from the sale of utility property are recorded as a component of other (expense) income in the consolidated statement of income and comprehensive income.

Nonutility property in the Water Utility Services is property that is neither used nor useful in providing water utility services to customers and is excluded from the rate base for rate-setting purposes. San Jose Water Company recognizes gain/loss on disposition of nonutility property in accordance with California Public Utilities Code Section 790.

SJW Land Company owns real estate investment property, which consists primarily of land and buildings. Net gains and losses from the sale of real estate investments are recorded as a component of other (expense) income in the consolidated statement of income and comprehensive income.

Recent Accounting Pronouncements:

In June 2009, FASB issued Statement of Financial Accounting Standards No. 168 (“SFAS 168”), “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles.” SFAS 168 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles. SFAS replaces SFAS 162 and establishes the FASB Accounting Standards Codification (“Codification”) as the source of authoritative accounting principles recognized by FASB. SFAS 168 is effective for interim and annual periods ending after September 15, 2009, except for SEC rules and interpretive releases, which are also authoritative generally accepted accounting principles for SEC registrants.

Liquidity and Capital Resources:

Cash Flow from Operations

As of June 30, 2009, SJW Corp. generated cash flow from operations of approximately $22,300, compared to $22,800 for the same period in 2008. Cash flow from operations is primarily generated by net income adjusted for non-cash expenses such as depreciation and amortization, deferred income taxes, offset by working capital changes. The decrease in June 30, 2009 cash flow from operations of approximately $500 resulted from a decrease of approximately $200 in net income adjusted for non-cash items and approximately a $300 decrease in working capital items. This decrease is primarily related to a decrease in estimated tax payments and a federal tax refund received in the first quarter of 2008, working capital uses due to changes in various accruals and an increase in pension expense from the second quarter of 2008 to 2009.

Cash Flow from Investing Activities

As of June 30, 2009, SJW Corp. used approximately $26,100 of cash for company funded capital expenditures. In February 2009, SJWTX, Inc. paid approximately $3,700 for the right and obligation to provide water service within the retail water service areas of the City of Bulverde, Texas.

Water Utility Services’ budgeted capital expenditures for 2009, exclusive of capital expenditures financed by customer contributions and advances, are $71,414, of which approximately $28,000 will be spent to replace Water Utility Services mains in 2009.

Capital expenditures for Water Utility Services are incurred in connection with normal upgrading and expansion of existing facilities and to comply with environmental regulations. Over the next five years, the Water Utility Services expects to incur approximately $386,885 in capital expenditures, which includes replacement of pipes and mains, and maintaining water systems. The actual capital expenditures for Water Utility Services may vary from its projections due to changes in the expected demand for services, weather patterns, actions by governmental agencies and general economic conditions. Total additions to utility plant normally exceed company-financed additions as a result of new facilities construction funded with advances from developers and contributions in aid of construction.

A substantial portion of San Jose Water Company’s distribution system was constructed during the period from 1945 to 1980. 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. In most cases, replacement cost will significantly exceed the original installation cost of the retired assets due to increases in the costs of goods and services. San Jose Water Company also expects to realize an increase in net salvage cost.

Historically, the Water Utility Services’ write-offs for uncollectible accounts represent less than 1% of its total revenue. Management believes it can continue to collect its accounts receivable balances at its historical collection rate. However, continued recessionary factors in the economy could increase the probability that more of our customers would default on their accounts.

Cash Flow from Financing Activities

As of June 30, 2009, borrowings on the line of credit were lower and repayments on the line of credit were higher than the activity experienced during the same period in 2008. In February 2009, San Jose Water Company issued $10,000 of unsecured Senior Notes Series J, with an interest rate of 6.54% and interest only payments until maturity, which is February 2024. In May 2009, San Jose Water Company issued $20,000 of unsecured Senior Notes Series K, with an interest rate of 6.75% and interest only payments until maturity, which is May 2039. In addition, receipts of advances and contributions in aid of construction were lower by approximately $3,700 as of June 30, 2009, compared to the same period in 2008.

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.

San Jose Water Company’s financing activity is designed to achieve a capital structure consistent with regulatory guidelines of approximately 50% funded debt and 50% equity (book value). As of June 30, 2009, San Jose Water Company’s funded debt and equity were approximately 52% and 48%, respectively.

Historically, San Jose Water Company’s internally-generated funds, which include allowances for depreciation and deferred income taxes, have provided approximately 50% of the future cash requirements for San Jose Water Company’s capital expenditures. Funding for its future capital expenditure program is expected to be provided primarily through internally-generated funds and long-term debt and will be consistent with the regulatory guidelines.

San Jose Water Company’s unsecured senior note agreements generally have terms and conditions that restrict San Jose Water Company from issuing additional funded debt if (1) the funded debt would exceed 66-2/3% of total capitalization, and (2) net income available for interest charges for the trailing 12-calendar-month period would be less than 175% of interest charges. As of June 30, 2009, San Jose Water Company’s net income available for interest charges was 340% of interest charges. As of June 30, 2009, San Jose Water Company does not face any restrictions in issuing future indebtedness as a result of these terms and conditions.

SJWTX, Inc.’s unsecured senior note agreement has SJW Corp. as a guarantor of the senior note which has terms and conditions that restrict SJW Corp. from issuing additional funded debt if (1) the funded consolidated debt would exceed 66-2/3% of total capitalization, and (2) the minimum net worth of SJW Corp. becomes less than $125,000 plus 30% of the Water Utility Services cumulative net income, since December 31, 2005. As of June 30, 2009, SJW Corp. does not face any restrictions in issuing future indebtedness as a result of these terms and conditions.

SJW Corp. and its subsidiaries have unsecured lines of credit available allowing aggregate short-term borrowings of up to $55,000 at rates that approximate the bank’s reference rate plus 1.75%. At June 30, 2009, SJW Corp. and its subsidiaries had available unused short-term bank lines of credit of $49,000. Cost of borrowing averaged 1.64% for the first six months of 2009. The lines of credit will expire on June 1, 2010.

SJW Corp.’s ability to secure capital financing at a reasonable cost is dependent on a number of factors, including the condition of the capital markets. With the current turbulence in the capital markets, there can be no assurance that new capital will be available at the time SJW Corp. goes to market for new financing. Further, if such capital is available, there can be no assurance that its cost will be in the range of historical borrowing rates.

Results of Operations:

Overview

SJW Corp.’s consolidated net income for the three months ended June 30, 2009 was $4,418, a decrease of $1,860, or approximately 30%, from $6,278 in the second quarter of 2008. For the six months ended June 30, 2009, consolidated net income was $4,534, a decrease of $4,462, or approximately 50%, from $8,996 for the same period in 2008.

Operating Revenue


	Operating Revenue by Segment
	Three Months Ended June 30,			Six Months Ended June 30,
	2009		2008	2009		2008
Water Utility Services	$	57,346	58,361	$	96,017	97,937
Real Estate Services		848	1,697		2,198	3,374

	$	58,194	60,058	$	98,215	101,311

The change in operating revenue for the same period in 2008 was due to the following factors:


	Three Months Ended June 30, 2009 vs. 2008					Six Months Ended June 30, 2009 vs. 2008
	Increase/(decrease)					Increase/(decrease)
Water Utility Services:
Consumption changes	$	(4,577	)	(8	)%	$	(7,570	)	(7	)%
New customers increase		58		—			125		—
Rate increases		3,504		6	%		5,525		5	%
Real Estate Services		(849	)	(1	)%		(1,176	)	(1	)%

	$	(1,864	)	(3	)%	$	(3,096	)	(3	)%

Operating Expense


	Operating Expense by Segment
	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2009		2008	2009		2008
Water Utility Services	$	48,723	49,487	$	84,000	84,025
Real Estate Services		1,054	824		1,987	1,572
All Other		386	215		742	412

	$	50,163	50,526	$	86,729	86,009

The change in operating expenses for the same period in 2008 was due to the following factors:


	Three Months Ended June 30, 2009 vs. 2008					Six Months Ended June 30, 2009 vs. 2008
	Increase/(decrease)					Increase/(decrease)
Water production costs:
Change in surface water supply	$	(744	)	(1	)%	$	(191	)	—
Change in usage and new customers		(2,794	)	(6	)%		(4,018	)	(5	)%
Purchased water and groundwater extraction charge and energy price increase		1,833		4	%		2,627		3	%

Total water production costs		(1,705	)	(3	)%		(1,582	)	(2	)%


Nonwater production costs:
Administrative and general		1,249		2	%		2,540		3	%
Other operating expense		478		1	%		772		1	%
Maintenance		(56	)	—			(184	)	—
Property taxes and other nonincome taxes		751		1	%		1,451		2	%
Depreciation and amortization		254		1	%		742		1	%

Total nonwater production costs		2,676		5	%		5,321		7	%


Income taxes		(1,334	)	(3	)%		(3,019	)	(4	)%

Total operating expenses	$	(363	)	(1	)%	$	720		1	%

San Jose Water Company’s water supply consists of groundwater from wells, surface water from watershed run off and diversion, and imported water purchased from Santa Clara Valley Water District (“SCVWD”). Surface water is the least expensive source of water and its availability significantly impacts the water production costs of San Jose Water Company.

Water production costs decreased $1,705 and $1,582 for the second quarter and year-to-date of 2009, respectively, compared to the corresponding periods in the prior year. The decrease was primarily attributable to lower customer demand, which decreased water production costs by $2,794 and $4,018 for the second quarter and year-to-date, respectively. The decreases were partially offset by $1,833 and $2,627 for the quarter and year-to-date, respectively, of increased purchased water, groundwater extraction and energy costs.

CLWSC’s primary supply is water pumped from Canyon Lake at two lake intakes. This supply is supplemented by groundwater pumped from wells.

The change in Water Utility Services’ source of supply mix was as follows: (in million gallons)


	Three Months Ended June 30,		Increase/ (decrease)		% Change		Six Months Ended June 30,
	2009	2008	Increase/ (decrease)		% Change		2009	2008	Increase/ (decrease)		% Change
Purchased water	6,532	8,059	(1,527	)	(10	)%	10,672	12,029	(1,357	)	(6	)%
Groundwater	6,073	6,582	(509	)	(3	)%	9,334	10,390	(1,056	)	(4	)%
Surface water	944	520	424		3	%	1,634	1,532	102		—
Reclaimed water	155	135	20		—		168	169	(1	)	—

	13,704	15,296	(1,592	)	(10	)%	21,808	24,120	(2,312	)	(10	)%

The changes in the source of supply mix were consistent with the changes in the water production costs.

Quarterly nonwater production costs increased $2,676 for the second quarter ended June 30, 2009. The increase was primarily attributable to an increase of $1,249 in administrative and general expenses due to increased pension and retirement costs, increased salaries and wages and higher worker’s compensation costs due to refunds received in 2008 that have not occurred in 2009, $751 in property taxes and other nonincome tax expense due to property taxes for the Tennessee properties that previously had been borne by the tenant under triple net leases, $478 in other operating expenses and $198 in all other expenses. Income tax expense decreased for the second quarter of 2009, as a result of lower pretax income. Future quarters in 2009 will continue to see an impact on nonwater production costs attributable to the holding costs incurred by SJW Land Company as it seeks to re-lease its office and distribution facility buildings located in Knoxville, Tennessee.

Year-to-date nonwater production costs increased $5,321 compared to 2008. The increase was primarily attributable to an increase of $2,540 in administrative and general expenses due to increased pension and retirement costs, increased salaries and wages and legal fees incurred in connection with the acquisition of the right and obligation to provide water service within the retail water service area of the City of Bulverde, Texas, $1,451 in property taxes and other nonincome tax expense due to property taxes for the Tennessee properties that previously had been borne by the tenant under triple net leases, $772 in other operating expenses, and $742 in depreciation and amortization expense, partially offset by a decrease of $184 in maintenance expenses.

The change in comprehensive income for the three and six months ended June 30, 2009 and 2008 was due to the decrease in fair value of the investment in California Water Service Group.

Water Supply and Energy Resources

San Jose Water Company’s water supply is obtained from groundwater from wells, local surface water from watershed run off and diversion, and the purchase of imported treated water from SCVWD under the terms of a master contract with SCVWD expiring in 2051.

On June 30, 2009, SCVWD’s 10 reservoirs were approximately 56% full with 94,851 acre-feet of water in storage. The rainfall from July 1, 2008 to June 30, 2009 was approximately 80% of the historical season average.

As of June 30, 2009, rainfall at San Jose Water Company’s Lake Elsman was measured at 39.58 inches for the season commencing July 1, 2008 through June 30, 2009, which is approximately 90% of the five-year average. Local surface water is a less costly source of water than groundwater or purchased water and its availability significantly impacts San Jose Water Company’s results of operations.

The continuing dry weather in California and concerns about the San Joaquin-Sacramento River Delta prompted Governor Schwarzenegger on June 3, 2008 to issue an Executive Order (S-06-08) declaring a state-wide water emergency. The order directed state agencies to take immediate action to address drought conditions and water delivery reductions that may exist by expediting grant programs, technical assistance, and water conservation outreach. The order did not mandate water use restrictions or reductions.

On December 15, 2008, the U.S. Fish and Wildlife Service issued a new Biological Opinion (“BiOp”) and Incidental Take Statement for the Central Valley Project (“CVP”) and the State Water Project (“SWP”) on the Delta smelt. The operating requirements of BiOp immediately replace the interim remedy ordered by Federal Judge Oliver Wanger in December 2007. The BiOp prescribes a range of operational criteria that are determined based on hydrology, fish distribution, abundance, and other factors. Under a “most likely” scenario, the California Department of Water Resources (“DWR”) and United States Bureau of Reclamation (“USBR”) estimate that SWP and CVP supplies to SCVWD could be reduced by approximately 17 to 18% of the supply amount they currently receive. Under a “worst case” BiOp scenario, SWP and CVP supplies to SCVWD could be reduced by approximately 32 to 33% of the current supply amount they receive. In addition, while there is some overlap with the California Fish & Game Commission’s restrictions to protect longfin smelt, the longfin pumping restrictions, if triggered, could cause significant supply impacts beyond those estimated to comply with Delta smelt requirements.

On March 24, 2009, the SCVWD board of directors unanimously passed a resolution declaring a mandatory 15% reduction in water use. To effect mandatory water restrictions, SCVWD must work with other political subdivisions that possess the authority to enact and enforce drought ordinances in order to effect such restrictions. Additionally, water distributors subject to the jurisdiction of the CPUC must receive approval from the CPUC for changes in tariffs and other matters related to the implementation of water restrictions.

San Jose Water Company believes that its various sources of water supply, including an increased reliance on groundwater, are sufficient to meet customer demand for the remainder of 2009.

To the extent that San Jose Water Company has to pump water from wells during peak periods to satisfy customer demand when imported water is insufficient, higher energy costs are expected to be incurred. Currently, the CPUC has no established procedure for water utilities to recover the additional costs incurred due to such unanticipated changes in water supply mix. There can be no assurance that such costs will be recovered in full or in part.

CLWSC has long-term contracts with the Guadalupe-Blanco River Authority (“GBRA”). The terms of the agreements expire in 2040, 2044 and 2050. The agreements provide CLWSC with 6,400 acre-feet of water annually from Canyon Lake at prices to be adjusted periodically by the GBRA.

Regulatory Affairs

Almost all of the operating revenue of San Jose Water Company results from the sale of water at rates authorized by the CPUC. The CPUC sets rates that are intended to provide revenue sufficient to recover operating expenses and produce a specified return on common equity. The timing of rate decisions could have an impact on the results of operations.

On November 11, 2006, the CPUC issued San Jose Water Company’s most recent General Rate Case decision. The decision authorized San Jose Water Company rate increases of approximately $3,500, or 2.0%, for 2007, $5,400, or 3.0%, for 2008, and $4,000, or 2.2%, for 2009. The rate increases for 2008 and 2009 are subject to adjustments based upon the inflation escalation factors realized at the time of the increase. The decision also authorizes additional rate recoveries to be phased in as capital projects are completed over the three-year period and the recovery of approximately $450 from San Jose Water Company’s balancing and memorandum accounts. These rate increases are designed to produce a return on common equity of 10.13%, which is comparable with recent authorized returns for water utilities in California.

On November 25, 2008, San Jose Water Company filed for a revenue increase for 2009 with the CPUC, and was subsequently granted a revenue increase of $4,985 effective January 1, 2009.

On November 17, 2008, CLWSC filed a request for a general rate increase for Canyon Lake with the Texas Commission on Environmental Quality (“TCEQ”). The filing contains a request for an increase in revenue of approximately $775, or about 14%. The rates became effective subject to refund on January 16, 2009. A preliminary hearing of the matter has been scheduled for August 26, 2009 and a final resolution is expected by the end of 2009.

On December 24, 2008, San Jose Water Company filed an application with the CPUC seeking authority to issue and sell debt securities not exceeding an aggregate amount of $90,000 over the next three years. This application is required by the CPUC rules and authority must be granted before additional debt can be issued. The authority was granted by the CPUC effective May 11, 2009.

On January 21, 2009, San Jose Water Company filed an application with the CPUC requesting general rate increases of $36,207, or 18.4% in 2010, $15,171, or 6.5% in 2011, and $19,899, or 8.1% in 2012. San Jose Water Company is proposing this rate increase due to escalating operating expenses as well as significant system infrastructure replacement requirements over the next several years. The capital budgets for the years noted above are also increasing due to significantly higher construction costs. The infrastructure improvements, such as water main and well replacements, improvements to pumping stations, well fields, water tanks and pipeline replacements are necessary in order to maintain safe and reliable water service to customers. The application is currently under review by the CPUC and a decision on the request is expected in late 2009, with new rates, if approved, becoming effective January 1, 2010.

On April 14, 2009, San Jose Water Company filed an advice letter to seek authority to establish: (1) a Mandatory Conservation Memorandum Account (“MCMA”) to track additional administrative costs and operating costs not recoverable through the existing memorandum type balancing accounts and (2) a Mandatory Conservation Revenue Adjustment Memorandum Account (“MCRAM”) to track the revenue impact of mandatory conservation. The filing is pending before the CPUC.

On April 29, 2009, San Jose Water Company filed an advice letter with the CPUC requesting the implementation of a revenue increase of $1,300 via a rate base offset for plant additions previously authorized in D.06-11-015. The rate increase became effective on June 1, 2009.

Balancing Account Recovery Procedures

As of June 30, 2009 and December 31, 2008, the total accrued balance in San Jose Water Company’s balancing account was an over-collection of $1,574 and $1,977, respectively, including interest. All the memorandum type balancing accounts are reviewed by the CPUC in San Jose Water Company’s general rate cases.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

SJW Corp. is subject to market risks in the normal course of business, including changes in interest rates and equity prices. The exposure to changes in interest rates is a result of financings through the issuance of fixed-rate, long-term debt and short-term funds obtained through the variable rate line of credit. SJW Corp. also owns 1,099,952 shares of California Water Service Group and is exposed to the risk of changes in equity prices.

SJW Corp. has no material derivative financial instruments, financial instruments with significant off-balance sheet risks, or financial instruments with concentrations of credit risk. There is no material sensitivity to change in market rates and prices.

ITEM 4.

CONTROLS AND PROCEDURES

SJW Corp.’s management, with the participation of SJW Corp.’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of SJW Corp.’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that SJW Corp.’s disclosure controls and procedures

(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or “the Act”) as of the end of the period covered by this report have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by SJW Corp. in the reports that it files or submits under the Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. SJW Corp. believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

There has been no change in internal control over financial reporting during the second fiscal quarter of 2009 that has materially affected, or is reasonably likely to materially affect, the internal controls over financial reporting of SJW Corp.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

SJW Corp. is subject to ordinary routine litigation incidental to its business. There are no pending legal proceedings to which SJW Corp. or any of its subsidiaries is a party, or to which any of its properties is the subject, that are expected to have a material effect on SJW Corp.’s business, financial position, results of operations or cash flows.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At the 2009 Annual Meeting of Shareholders of SJW Corp. held on May 6, 2009, the ten individuals listed below were elected to the Board of Directors and the appointment of KPMG LLP as independent auditors for 2009 was ratified by the following votes:

Proposal 1: Election of Directors:


Name of Director	In Favor	Withheld
Katharine Armstrong	16,579,089	136,062
Mark L. Cali	15,578,154	1,136,997
J. Philip DiNapoli	16,543,210	171,941
Douglas R. King	15,582,924	1,132,227
Norman Y. Mineta	16,513,786	201,365
George E. Moss	16,410,847	304,304
W. Richard Roth	16,547,062	168,089
Charles J. Toeniskoetter	16,296,940	418,211
Frederick R. Ulrich, Jr.	15,572,095	1,143,056
Robert A. Van Valer	14,973,996	1,741,155

Proposal 2: Ratification of Appointment of Independent Registered Accounting Firm:


In Favor	Against	Abstain	Broker Non-Votes
16,536,790	142,796	35,563	—

ITEM 5.

OTHER INFORMATION

On July 29, 2009, the Board of Directors of SJW Corp. declared the regular quarterly dividend of $0.165 per common share. The dividend will be paid September 1, 2009 to shareholders of record as of the close of business on August 10, 2009.

ITEM 6.

EXHIBITS

See Exhibit Index located immediately following the Certification of this document, which is incorporated herein by reference as required to be filed by Item 601 of Regulation S-K for the quarter ended on June 30, 2009.

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 7, 2009	By	/s/ DAVID A. GREEN
		David A. Green
		Chief Financial Officer and Treasurer
		(Principal financial officer)

EXHIBIT INDEX


Exhibit No.		Description of Document
3.1		By-laws of SJW Corp., as amended on May 6, 2009. Incorporated by reference to Exhibit 3.1 to Form 8-K filed on May 7, 2009.

10.1		Performance Goals for the Chief Executive Officer 2009 Fiscal Year Bonus. Incorporated by reference to Exhibit 10.1 to Form 10-Q for the quarter ended March 31, 2009. (2)

31.1		Certification Pursuant to Rule 13a-14(a)/15d-14(a) by President and Chief Executive Officer. (1)

31.2		Certification Pursuant to Rule 13a-14(a)/15d-14(a) by Chief Financial Officer and Treasurer. (1)

32.1		Certification Pursuant to 18 U.S.C. Section 1350 by President and Chief Executive Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)

32.2		Certification Pursuant to 18 U.S.C. Section 1350 by Chief Financial Officer and Treasurer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)

(1)	Filed currently herewith.

(2)	Management contract or compensatory plan or agreement.