Segment and Non-Tariffed Businesses Reporting

SJW Group is a holding company with four subsidiaries: (i) San Jose Water Company, a water utility operation with both regulated and non-tariffed businesses, (ii) SJWTX, Inc. which is doing business as Canyon Lake Water Service Company, 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 commercial building rentals, 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 CTWS merger (see discussion on the proposed merger at Note 12). In November 2017, SJW Group sold its equity interest in its wholly-owned subsidiary TWA, a non-tariffed water utility operation that was undertaking activities that developed 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, Canyon Lake Water Service Company and, up to the date of the sale, Texas Water Alliance Limited, 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 year ended December 31, 2018
	Water Utility Services		Real Estate Services	All Other (1)		SJW Group
	Regulated	Non- tariffed	Non- tariffed	Non- tariffed		Regulated	Non- tariffed		Total
Operating revenue	384,639	7,578	5,482	—		384,639	13,060		397,699
Operating expense	294,536	5,012	3,539	21,172		294,536	29,723		324,259
Operating income (loss)	90,103	2,566	1,943	(21,172	)	90,103	(16,663	)	73,440
Net income (loss)	53,181	1,848	885	(17,147	)	53,181	(14,414	)	38,767
Depreciation and amortization	53,067	338	1,196	—		53,067	1,534		54,601
Senior note and other interest expense	22,157	—	—	2,175		22,157	2,175		24,332
Income tax expense (benefit) in net income	14,826	719	903	(6,383	)	14,826	(4,761	)	10,065
Assets	1,492,954	4,489	46,517	412,429		1,492,954	463,435		1,956,389



	For year ended December 31, 2017
	Water Utility Services		Real Estate Services	All Other (1)		SJW Group
	Regulated	Non- tariffed	Non- tariffed	Non- tariffed		Regulated	Non- tariffed	Total
Operating revenue	376,104	7,419	5,702	—		376,104	13,121	389,225
Operating expense	276,061	4,855	3,688	2,770		276,061	11,313	287,374
Operating income (loss)	100,043	2,564	2,014	(2,770	)	100,043	1,808	101,851
Net income before noncontrolling interest	47,736	1,137	8,089	4,138		47,736	13,364	61,100
Depreciation and amortization	46,500	572	1,220	—		46,500	1,792	48,292
Senior note, mortgage and other interest expense	20,670	—	60	2,199		20,670	2,259	22,929
Income tax expense in net income	30,127	993	644	3,629		30,127	5,266	35,393
Assets	1,406,221	4,471	47,668	(359	)	1,406,221	51,780	1,458,001



	For year ended December 31, 2016
	Water Utility Services		Real Estate Services	All Other (1)		SJW Group
	Regulated	Non- tariffed	Non- tariffed	Non- tariffed		Regulated	Non- tariffed	Total
Operating revenue	326,547	6,442	6,717	—		326,547	13,159	339,706
Operating expense	232,138	4,257	4,074	1,800		232,138	10,131	242,269
Operating income (loss)	94,409	2,185	2,643	(1,800	)	94,409	3,028	97,437
Net income (loss)	45,594	954	7,406	(1,115	)	45,594	7,245	52,839
Depreciation and amortization	42,709	480	1,436	—		42,709	1,916	44,625
Senior note, mortgage and other interest expense	18,667	—	912	2,259		18,667	3,171	21,838
Income tax expense in net income	27,902	750	4,235	655		27,902	5,640	33,542
Assets	1,368,886	17,794	54,818	1,878		1,368,886	74,490	1,443,376

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(1) The “All Other” category includes the accounts of SJW Group and Hydro Sub, Inc. on a stand-alone basis. For the year ended December 31, 2018, Hydro Sub, Inc. had no recorded revenue or expenses and as of December 31, 2018, held no assets and incurred no liabilities. For the years ended, December 31, 2017 and 2016, the “All Other” category includes the accounts of SJW Group on a stand-alone basis.