Page 1 of 26
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1997
Commission File Number 1-12899
SOUTH JERSEY GAS COMPANY
- - -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-0398330
- - -----------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer's
incorporation of organization) Identification No.)
Number One South Jersey Plaza, Route 54, Folsom, NJ 08037
- - -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(609) 561-9000
- - -----------------------------------------------------------------
(Registrant's telephone number, including area code)
- - -----------------------------------------------------------------
Former name, former address, and former fiscal year, if 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
----- -----
As of May 13, 1997, there were 2,339,139 shares of the
registrant's common stock outstanding. All common shares are
owned by South Jersey Industries, Inc., the parent company of
South Jersey Gas Company.
Exhibit Index on page 26
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements -- See Pages 3 through 6
- 2 -
<PAGE>
<TABLE>
SOUTH JERSEY GAS COMPANY
STATEMENTS OF INCOME AND RETAINED EARNINGS
- - ----------------------------------------------------------------------------------------
(In Thousands Except for Share Data)
<CAPTION>
Three Months Ended
March 31,
---------------------------
1997 1996
- - ----------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING REVENUES:
Utility . . . . . . . . . . . . . . . . . . . . . . . . $ 120,078 $ 139,514
Other . . . . . . . . . . . . . . . . . . . . . . . . . 521 692
------------ ------------
Total Operating Revenues . . . . . . . . . . . . . . 120,599 140,206
------------ ------------
OPERATING EXPENSES:
Gas Purchased for Resale. . . . . . . . . . . . . . . . 63,882 79,616
Operation - Utility . . . . . . . . . . . . . . . . . . 9,380 9,103
- Other . . . . . . . . . . . . . . . . . . . 435 524
Maintenance . . . . . . . . . . . . . . . . . . . . . . 1,467 1,254
Depreciation. . . . . . . . . . . . . . . . . . . . . . 3,885 3,626
Federal Income Taxes. . . . . . . . . . . . . . . . . . 7,678 8,722
Deferred and Non-current Federal Income Taxes . . . . . 847 591
Investment Tax Credit Deferred - Net. . . . . . . . . . (99) (98)
Gross Receipts and Franchise Taxes. . . . . . . . . . . 12,381 14,473
Other Taxes . . . . . . . . . . . . . . . . . . . . . . 751 751
------------ ------------
Total Operating Expenses . . . . . . . . . . . . . . 100,607 118,562
------------ ------------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . 19,992 21,644
INTEREST CHARGES . . . . . . . . . . . . . . . . . . . . . 4,825 4,722
------------ ------------
Income Before Preferred Stock Dividend Requirements. . . . 15,167 16,922
Preferred Stock Dividend Requirements. . . . . . . . . . . 43 44
------------ ------------
Net Income Applicable to Common Stock. . . . . . . . . . . 15,124 16,878
RETAINED EARNINGS AT BEGINNING OF PERIOD . . . . . . . . . 51,522 47,364
------------ ------------
TOTAL. . . . . . . . . . . . . . . . . . . . . . . . 66,646 64,242
COMMON STOCK DIVIDENDS DECLARED. . . . . . . . . . . . . . 3,825 3,750
------------ ------------
RETAINED EARNINGS AT END OF PERIOD . . . . . . . . . . . . $ 62,821 $ 60,492
============ ============
AVERAGE SHARES OF COMMON STOCK OUTSTANDING . . . . . . . . 2,339,139 2,339,139
EARNINGS PER COMMON SHARE. . . . . . . . . . . . . . . . . $ 6.47 $ 7.22
============ ============
DIVIDENDS PAID PER COMMON SHARE. . . . . . . . . . . . . . $ 1.635 $ 1.603
============ ============
The accompanying notes to the financial statements are an integral
part of these statements.
- 3 -
<PAGE>
SOUTH JERSEY GAS COMPANY
BALANCE SHEET
- - --------------------------------------------------------------------------------------------
(In Thousands)
<CAPTION>
March 31, December 31,
--------------------------------
1997 1996 1996
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT:
Utility Plant, at original cost . . . . . . . . . . . . $ 587,273 $ 547,001 $ 577,304
Accumulated Depreciation . . . . . . . . . . . . . . (160,755) (148,727) (157,682)
Gas Plant Acquisition Adjustment - Net. . . . . . . . . 1,982 2,056 2,000
---------- ---------- ----------
Property, Plant and Equipment - Net. . . . . . . 428,500 400,330 421,622
---------- ---------- ----------
CURRENT ASSETS:
Cash & Cash Equivalents . . . . . . . . . . . . . . . . 7,700 2,850 7,469
Accounts Receivable:
Customers. . . . . . . . . . . . . . . . . . . . . . 47,392 57,331 28,733
Unbilled Revenues. . . . . . . . . . . . . . . . . . 13,052 15,049 17,855
Merchandise. . . . . . . . . . . . . . . . . . . . . 2,250 2,229 2,260
Other. . . . . . . . . . . . . . . . . . . . . . . . 1,102 4,067 508
Provision for Uncollectibles . . . . . . . . . . . . (1,032) (737) (1,032)
Natural Gas in Storage, average cost. . . . . . . . . . 6,403 2,094 22,638
Materials and Supplies, average cost. . . . . . . . . . 4,056 3,731 4,055
Prepaid Gross Recpts and Franchise Taxes. . . . . . . . 0 0 1,602
Prepayments and Other . . . . . . . . . . . . . . . . . 1,303 1,274 1,562
---------- ---------- ----------
Total Current Assets . . . . . . . . . . . . . . 82,226 87,888 85,650
---------- ---------- ----------
ACCOUNTS RECEIVABLE - Merchandise. . . . . . . . . . . . . 1,804 2,597 1,999
---------- ---------- ----------
DEFERRED DEBITS:
Environmental Remediation Costs:
Expended - Net. . . . . . . . . . . . . . . . . . . . 15,864 12,062 15,566
Liability for Future Expenditures . . . . . . . . . . 41,700 21,830 41,700
Gross Receipts and Franchise Taxes. . . . . . . . . . . 4,361 4,768 4,468
Income Taxes - Flowthrough Depreciation . . . . . . . . 14,732 15,710 14,977
Deferred Postretirement Benefit Costs . . . . . . . . . 5,354 4,848 5,153
Deferred Fuel Costs . . . . . . . . . . . . . . . . . . 0 0 404
Other . . . . . . . . . . . . . . . . . . . . . . . . . 7,476 8,311 8,387
---------- ---------- ----------
Total Deferred Debits. . . . . . . . . . . . . . 89,487 67,529 90,655
---------- ---------- ----------
TOTAL . . . . . . . . . . . . . . . . . . . $ 602,017 $ 558,344 $ 599,926
========== ========== ==========
The accompanying notes to the financial statements are an integral
part of these statements.
- 4 -
<PAGE>
SOUTH JERSEY GAS COMPANY
BALANCE SHEET
- - --------------------------------------------------------------------------------------------
(In Thousands Except for Share Data)
<CAPTION>
March 31, December 31,
--------------------------------
1997 1996 1996
- - --------------------------------------------------------------------------------- ----------
<S> <C> <C> <C>
SHAREHOLDER'S EQUITY AND LIABILITIES
- - ------------------------------------
COMMON EQUITY:
Common Stock, Par Value $2.50 a share:
Authorized - 4,000,000 shares
Outstanding - 2,339,139 shares . . . . . . . . . . . $ 5,848 $ 5,848 $ 5,848
Other Paid-In Capital and Premium on
Common Stock . . . . . . . . . . . . . . . . . . . . 102,817 77,194 77,194
Retained Earnings . . . . . . . . . . . . . . . . . . . 62,821 60,492 51,522
---------- ---------- ----------
Total Common Equity. . . . . . . . . . . . . . . 171,486 143,534 134,564
---------- ---------- ----------
REDEEMABLE CUMULATIVE PREFERRED STOCK:
Par Value $100 a share,
Authorized 48,204 and 49,104 shares, respectively
Outstanding:
Series A, 4.70% - 3,900 and 4,800 shares . . . . . 390 480 390
Series B, 8.00% - 19,242 shares. . . . . . . . . . . 1,924 1,924 1,924
---------- ---------- ----------
Total Preferred Stock. . . . . . . . . . . . . . 2,314 2,404 2,314
---------- ---------- ----------
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . 182,548 154,596 149,736
---------- ---------- ----------
CURRENT LIABILITIES:
Notes Payable to Banks. . . . . . . . . . . . . . . . . 37,200 64,600 108,300
Current Maturities of Long-Term Debt. . . . . . . . . . 6,603 6,553 6,603
Accounts Payable. . . . . . . . . . . . . . . . . . . . 28,494 36,191 48,347
Customer Deposits . . . . . . . . . . . . . . . . . . . 5,932 5,684 6,050
Gross Recpts and Franchise Taxes Accrued. . . . . . . . 10,475 10,474 0
Environmental Remediation Costs . . . . . . . . . . . . 9,377 6,888 9,377
Interest and Other Accrued Current Liabilities. . . . . 11,390 13,486 2,161
---------- ---------- ----------
Total Current Liabilities. . . . . . . . . . . . 109,471 143,876 180,838
---------- ---------- ----------
DEFERRED CREDITS AND OTHER NON-CURRENT LIABILITIES:
Deferred Income Taxes - Net . . . . . . . . . . . . . . 78,967 68,406 78,415
Investment Tax Credits. . . . . . . . . . . . . . . . . 5,926 6,319 6,025
Deferred Revenues . . . . . . . . . . . . . . . . . . . 3,391 9,119 0
Pension and Other Postretirement Benefits . . . . . . . 9,844 8,617 9,551
Environmental Remediation Costs . . . . . . . . . . . . 32,323 14,942 32,323
Other . . . . . . . . . . . . . . . . . . . . . . . . . 5,747 6,531 6,160
---------- ---------- ----------
Total Deferred Credits
and Other Non-Current Liabilities. . . . . . . 136,198 113,934 132,474
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES
TOTAL . . . . . . . . . . . . . . . . . . . $ 602,017 $ 558,344 $ 599,926
========== ========== ==========
The accompanying notes to the financial statements are an integral
part of these statements.
- 5 -
<PAGE>
SOUTH JERSEY GAS COMPANY
STATEMENTS OF CASH FLOWS
- - ------------------------------------------------------------------------------------
(In Thousands)
Three Months Ended
March 31,
----------------------
1997 1996
- - ------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income Applicable to Common Stock. . . . . . . . . . . . $ 15,124 $ 16,878
Adjustments to Reconcile Net Income to Cash Flows
Provided by Operating Activities:
Depreciation and Amortization. . . . . . . . . . . . . . . 4,356 4,346
Provision for Losses on Accounts Receivable. . . . . . . . 190 132
Revenues and Fuel Costs Deferred - Net . . . . . . . . . . 3,795 1,804
Deferred and Non-Current Federal Income Taxes
and Credits - Net . . . . . . . . . . . . . . . . . . . . 748 493
Environmental Remediation Costs - Net. . . . . . . . . . . (298) (289)
Changes in:
Accounts Receivable. . . . . . . . . . . . . . . . . . . (14,630) (25,192)
Inventories. . . . . . . . . . . . . . . . . . . . . . . 16,234 12,780
Prepayments and Other Current Assets . . . . . . . . . . 259 738
Accounts Payable and Other Accrued Liabilities . . . . . (10,742) 4,788
Gross Receipts and Franchise Taxes Accrued . . . . . . . 12,077 14,123
Other - Net. . . . . . . . . . . . . . . . . . . . . . . . 845 304
--------- ---------
Net Cash Provided by Operating Activities. . . . . . . . . . 27,958 30,905
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures, Cost of Removal & Salvage. . . . . . . (11,237) (7,352)
--------- ---------
Net Cash Used in Investing Activities. . . . . . . . . . . . (11,237) (7,352)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Repayments of Lines of Credit. . . . . . . . . . . . . . (71,100) (11,700)
Principal Repayments of Long-Term Debt . . . . . . . . . . . (2,188) (7,446)
Dividends of Common Stock. . . . . . . . . . . . . . . . . . (3,825) (3,750)
Proceeds from Sale of Bonds. . . . . . . . . . . . . . . . . 35,000 0
Additional Investment by Shareholder . . . . . . . . . . . . 25,623 0
--------- ---------
Net Cash Used in Financing Activities. . . . . . . . . . . . (16,490) (22,896)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . 231 657
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD . . . . . . 7,469 2,193
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . $ 7,700 $ 2,850
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (Net of Amounts Applicable to LGAC
Overcollections and Amounts Capitalized). . . . . . . . $ 5,545 $ 5,420
Income Taxes (Net of Refunds). . . . . . . . . . . . . . $ (751) $ 0
The accompanying notes to the financial statements are an integral
part of these statements.
- 6 -
</TABLE>
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Entity - These financial statements present the
accounts of South Jersey Gas Company (the Company or SJG).
South Jersey Industries, Inc. (Industries) owns all of the
outstanding common stock of SJG. Certain reclassifications have
been made of previously reported amounts to conform with
classifications used in the current year. In the opinion
of management, the financial statements reflect all adjustments
(which include only normal recurring adjustments and the
adjustments described below) necessary for a fair presentation of
the financial position and operating results of the Company at
the dates and for the periods presented. The business of the
Company is subject to seasonal fluctuations and, accordingly,
this interim financial information should not be considered a
basis for estimating the results of operations for the full year.
Estimates and Assumptions - The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and related disclosures. Therefore, actual
results could differ from those estimates.
New Accounting Pronouncement - In February 1997, the
Financial Accounting Standards Board issued FASB No. 128,
"Earnings per Share", which is effective for financial
statements for periods ending after December 15, 1997. FASB
No. 128 supersedes previous reporting requirements on
Earnings per Share (EPS) and replaces the presentation of
primary EPS with a presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with a complex
capital structure. The adoption of FASB No. 128 will have no
impact on the EPS of the Company.
2. RECENT REGULATORY ACTIONS:
On January 27, 1997, the New Jersey Board of Public
Utilities (BPU) granted SJG a rate increase of $6.0 million based
on a 9.62% rate of return on rate base, which included an 11.25%
return on equity. Revenue requirements for ratemaking purposes
are established on the basis of firm and interruptible sales
projections. The majority of this increase will come from
residential and small commercial customers. As part of this rate
increase, SJG is allowed to retain the first $5.0 million of pre-
tax margins generated by interruptible and off-system sales and
transportation and 20% of pre-tax margins above that level.
In 1997 and 1998, this $5.0 million threshold will be
increased by the annual revenue requirement associated with
specified major construction projects.
- 7 -
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
2. RECENT REGULATORY ACTIONS: (Continued)
These sharing formula improvements are expected to
result in additional rate relief of approximately $1.4
million in 1997 and $1.8 million in 1998. In May 1997, SJG
filed to recover additional post-retirement benefit costs of
approximately $1.2 million annually. This recovery is
expected to begin in 1998. In addition, part of the increase
will be recovered from customers through new service fees
which charge specific customers for costs which they cause
SJG to incur.
In addition to the rate increase, the BPU approved a
revenue reduction in SJG's Temperature Adjustment Clause, a
mechanism designed to reduce the impact of extreme
fluctuations in temperatures on SJG and its customers. For
the period ended May 31, 1996, weather in SJG's service area
was significantly colder than the 20-year average, resulting
in a $2.5 million credit due to customers' bills which is
reflected in the 1996 results of operations.
As part of the tariff changes approved, SJG initiated
its BPU approved pilot program in April 1997 to give
residential customers a choice of gas supplier. The program
will be open to the first 10,000 residential customers who
apply for this service and is designed to run until June 30,
1998, or later if approved by the BPU. Under the applicable
rate schedule, amounts billed to participants in the program
will be reduced for cost of gas charges and applicable gross
receipts taxes. This decrease in revenues will be offset by
a corresponding decrease in SJG's gas costs and taxes under
SJG's BPU-approved fuel clause. Accordingly, SJG believes
that the program will not affect its net income, financial
condition or margins. In addition, because the program
affects only 4% of SJG's residential customers, and not all
of those customers may elect to purchase gas from other
suppliers, SJG believes that any reduction in revenue will
not be material. SJG further expanded the choices available
to commercial and industrial customers.
3. RELATED PARTY TRANSACTIONS:
SJG has contracted with R & T Group, Inc., a wholly
owned subsidiary of Industries, for general utility
construction and environmental remediation services costing
approximately $1,825,900 and $969,900 for the three months
ended March 31, 1997 and 1996, respectively. Amounts payable
to R & T Group, Inc. relating to these services were $919,300
and $837,800 at March 31, 1997 and 1996, respectively.
- 8 -
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
3. RELATED PARTY TRANSACTIONS: (Continued)
SJG engages in sales of natural gas for resale pursuant
to Section 284.402 of the Regulations of the Federal Energy
Regulatory Commission which included sales to South Jersey
Energy Company (SJE) and South Jersey Fuel Company (SJF),
affiliates by common ownership of Industries. Sales to SJE
approximated $-0- and $184,700 for the three months ended
March 31, 1997 and 1996, respectively. The amount due from SJE
relating to these sales was $14,500 at March 31, 1996. Sales
to SJF approximated $663,800 for the three months ended
March 31, 1996. There have been no sales to SJF during the
three months ended March 31, 1997.
4. FEDERAL INCOME TAXES:
SJG is included in the consolidated Federal Income tax
return filed by Industries. The aggregate amounts of current
and deferred tax expense for the three months ended
March 31, 1997 and 1996 are shown below (in thousands):
Three Months Ended
March 31,
1997 1996
------- -------
Current $ 7,678 $ 8,722
Deferred 748 493
------- -------
Net Federal
Income Taxes $ 8,426 $ 9,215
======= =======
As of March 31, 1997 and 1996, income taxes due to
Industries were approximately $6,041,000 and $8,231,800,
respectively.
The actual taxes, including credits, are allocated by
Industries to its subsidiaries generally on a separate return
basis. Federal Income Taxes differ from taxes that would
result from applying statutory rates in 1997 and 1996 due
primarily to the BPU ordered flow back of excess deferred
Federal Income Taxes and previously deferred expense, and the
amortization of Investment Tax Credits (ITC) (See Note 6).
Deferred income taxes reflect the net tax effect of
temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant components
of SJG's net deferred tax liability at March 31, 1997 and
1996, are as follows (in thousands):
- 9 -
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
4. FEDERAL INCOME TAXES: (Continued)
1997 1996
Deferred Tax Liabilities: ------- -------
Tax Depreciation over
Book Depreciation $61,011 $57,892
Difference between Book and
Tax Basis of Property 5,286 4,809
Deferred Fuel Costs 3,892 1,035
Deferred Regulatory Costs 1,131 1,270
Environmental Remediation Costs 5,836 4,166
Excess Protected 3,534 3,616
Gross Receipts Taxes 1,529 1,669
Other 3,763 3,782
------- -------
Total Deferred
Tax Liabilities 85,982 78,239
------- -------
Deferred Tax Assets:
Alternative Minimum Tax 694 3,192
ITC Basis Gross Up 3,156 3,358
Other 3,165 3,283
------- -------
Total Deferred Tax Assets 7,015 9,833
------- -------
Net Deferred Tax Liability $78,967 $68,406
======= =======
5. LONG-TERM DEBT:
Principal Outstanding
March 31,
(In Thousands)
-------------------
1997 1996
First Mortgage Bonds: -------- --------
9.2% Series due 1998. . . . . . $ 0 $ 2,667
8.19% Series due 2007. . . . . . 25,000 25,000
10 1/4% Series due 2008. . . . . . 25,000 25,000
9% Series due 2010. . . . . . 28,437 30,625
6.95% Series due 2013. . . . . . 35,000 35,000
7.7% Series due 2027 (A). . . . 35,000 0
- 10 -
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
5. LONG-TERM DEBT: (Continued)
Unsecured Notes:
Term Note, 8.47% due 2001. . . . . 10,714 12,857
Debenture Notes, 8.6% due 2010 . . 30,000 30,000
-------- --------
Total Long-Term Debt Outstanding . . 189,151 161,149
Less Current Maturities. . . . . . . 6,603 6,553
-------- --------
Long-Term Debt . . . . . . . . . . . $182,548 $154,596
======== ========
(A) On March 21, 1997, SJG sold $35,000,000 of its 7.7%
Series First Mortgage Bonds due 2027.
6. RETAINED EARNINGS:
SJG is restricted under its First Mortgage Indenture, as
supplemented, as to the amount of cash dividends or other
distributions that may be paid on its common stock. SJG had
retained earnings free of such restriction of approximately
$60.8 million at March 31, 1997.
7. COMMITMENTS AND CONTINGENCIES:
Construction Commitments - The estimated cost of
construction and environmental remediation programs of SJG
for the year 1997 aggregates $57.7 million and, in connection
therewith, certain commitments have been made.
Gas Supply Contracts - SJG, in the normal course of
conducting business, has entered into long-term contracts for
natural gas supplies, firm transportation, and firm gas
storage service. The earliest expiration of any of the gas
supply contracts is 1998. All of the transportation and
storage service agreements between SJG and its interstate
pipeline suppliers are provided under Federal Energy
Regulatory Commission (FERC) approved tariffs. SJG's
cumulative obligation for demand charges paid to its
suppliers for all of these services is approximately $5.2
million per month which is recovered on a current basis
through the LGAC.
Pending Litigation - The Company is subject to claims
which arise in the ordinary course of its business and other
legal proceedings. A group of Atlantic City casinos filed a
petition with the BPU on January 16, 1996, alleging
overcharges of over $10.0 million, including interest.
Management believes that charges to the casinos were based on
applicable tariffs and that the casinos were not qualified
under less expensive rate schedules, as claimed. Management
believes that the ultimate impact of these actions will not
- 11 -
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
7. COMMITMENTS AND CONTINGENCIES: (Continued)
materially affect SJG's financial position, results of
operations or liquidity.
Environmental Remediation Costs - SJG has incurred and
recorded certain costs for environmental remediation of sites
where SJG or predecessor companies operated gas manufacturing
plants. Manufactured gas operations were terminated at all
SJG sites more than 30 years ago.
Since the early 1980s, SJG has recorded environmental
remediation costs of $71.9 million, of which $30.2 million
has been expended as of March 31, 1997. SJG, with the
assistance of an outside consulting firm, estimates that
total future expenditures to remediate the sites will range
from $41.7 million to $150.2 million. The lower end of this
range has been recorded as a liability and is reflected on
the balance sheet under the captions "Current Liabilities"
and "Deferred Credits and Other Non-Current Liabilities".
Recorded environmental remediation costs do not directly
affect earnings because those costs are deferred and, when
expended, recovered through rates over 7-year amortization
periods as authorized by the BPU. Amounts accrued for future
expenditures have not been adjusted for future insurance
recoveries, which management is pursuing. SJG has received
$4.2 million of insurance recoveries as of March 31, 1997.
These proceeds were first used to offset legal fees incurred
in connection with those recoveries and the excess was used
to reduce the balance of deferred environmental remediation
costs. Recorded amounts include estimated costs to be
incurred based on projected investigation and remediation
work plans using existing technologies. Actual expenditures
could differ from the estimates due to the long-term nature
of the projects and changing technology, government
regulations and site specific requirements.
As a result of the 7-year recovery mechanism, SJG does
not expense environmental costs for former gas manufacturing
sites when incurred and defers costs to be recovered. SJG
has two regulatory assets associated with environmental cost.
The first regulatory asset is titled "Environmental
Remediation Cost: Expended -Net". These expenditures
represent actual cost incurred to remediate former gas
manufacturing plant sites. These costs meet the requirements
of FASB No. 71, "Accounting for the Effects of Certain Types
of Regulation". The BPU has allowed recovery of these
expenditures through July 1995 and a petition to recover
these costs through July 1996 is pending before the BPU.
The other regulatory asset titled "Environmental
Remediation Cost: Liability for Future Expenditures" relates
to estimated future expenditures determined under the
guidance of FASB No. 5, "Accounting for Contingencies". This
- 12 -
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
7. COMMITMENTS AND CONTINGENCIES: (Continued)
amount, which relates to former manufactured gas plant sites
has been recorded as a deferred debit with the corresponding
amount reflected in Current Liabilities and Deferred Credits
and Other Non-Current Liabilities, as appropriate. The
deferred debit is a regulatory asset under FASB No. 71
because the BPU's intent, as evidenced by its current
practice, is to provide recovery sufficient in amount to
recover the deferred costs after they have been expended.
SJG makes annual filings with the BPU to recover these
costs in rates. The BPU has consistently allowed the full
recovery over such 7-year periods, and SJG believes the BPU
will continue to do so. As of March 31, 1997, SJG has
unamortized remediation expenditures of $15.9 million which
are reflected on the balance sheet under the caption
"Deferred Debits". Since BPU approval of the RAC mechanism
in August 1992, SJG has recovered $10.1 million through rates
as of March 31, 1997.
8. COMMON EQUITY:
On March 26, 1997, SJG received $25.6 million as a
contribution of capital from Industries. Contributions of
capital are credited to Other Paid-In Capital and Premium on
Common Stock.
9. SUBSEQUENT EVENTS:
On May 2, 1997, SJG's statutory trust subsidiary, SJG
Capital Trust (Trust), established in the State of Delaware
on March 24, 1997, sold $35.0 million of 8.35% SJG-obligated
Mandatorily Redeemable Preferred Securities. The Trust
solely holds as an asset the 8.35% Deferrable Interest
Subordinated Debentures issued by SJG which mature on April
30, 2037, the maturity date of the Preferred Securities. The
Debentures and Preferred Securities are redeemable at the
option of SJG at a redemption price equal to 100% of the
principal amount thereof at any time on or after April 30,
2002. Future financial statements will reflect the
consolidated balances and activity of both SJG and the Trust.
- 13 -
<PAGE>
SOUTH JERSEY GAS COMPANY
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Overview
SJG is a natural gas distribution company serving 255,900
customers at March 31, 1997, compared with 249,300 customers at
March 31, 1996. Seasonal aspects affect SJG's reported revenues,
inventories, receivables, operating expenses and cash flows, which
are usually greater during the first and fourth quarters of the
year.
Competition
SJG franchises are non-exclusive. However, currently no
other utility is providing retail gas distribution services within
its territory. SJG does not expect any other utilities to do so
in the foreseeable future because of the extensive investment
required for utility plant and related costs. SJG competes with
oil, propane and electricity suppliers for residential, commercial
and industrial users. The market for natural gas sales is subject
to competition as a result of deregulation. SJG has enhanced its
competitive position while maintaining its margins through its
initiative in obtaining an unbundled tariff which isolates the
variable cost of the gas commodity component within SJG's rate
structure. Under this tariff, substantially all of SJG's profits
are derived from the transportation rather than the sale of the
commodity since SJG does not generally add a profit mark-up to the
cost of the commodity. Therefore, SJG is able to offer its
commercial and industrial customers flexibility regarding choice
of gas supply while SJG continues to recover its cost of service
and fixed gas costs while providing and charging for
transportation service. In April 1997, SJG initiated its
BPU-approved pilot program to give certain of its residential
customers a choice of gas suppliers (See "Operating Revenues"). In
all of these respects, SJG has been a leader in addressing the
changing marketplace while maintaining its focus on being a low-cost
provider of natural gas and energy services.
Energy Adjustment Clauses
SJG's tariff includes a Levelized Gas Adjustment Clause
("LGAC"), a Temperature Adjustment Clause ("TAC") and a
Remediation Adjustment Clause ("RAC"). Such clauses are designed
to permit adjustments for changes in gas supply costs, reduce the
impact of extreme fluctuations in temperatures on SJG and its
customers, and recover costs incurred in the remediation of former
gas manufacturing plants. The BPU approved LGAC and RAC
adjustments do not directly affect earnings because revenues are
adjusted to match costs. The Company's base rates are designed
based on twenty-year normal temperatures. When actual
temperatures are colder than the twenty-year average, the Company
sells more gas than was anticipated generating higher revenues and
net income. Conversely, when actual temperatures are warmer than
normal, the Company sells less gas and revenues and net income are
lower than projected.
- 14 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Energy Adjustment Clauses (Continued)
The TAC dampens the effect of these peaks and valleys (and
thus moderates the effect of weather extremes on SJG's revenues)
by giving customers a credit against higher usage in colder
weather and giving SJG a surcharge on lower usage in warmer
weather. TAC adjustments therefore affect revenue, income and
cash flows.
Results of Operations - First Quarter Ended March 31, 1997
Compared to First Quarter Ended March 31, 1996
Operating Revenues
In 1997, revenues decreased $19.6 million from 1996. The
revenue decrease is principally due to lower volume firm and
off-system sales resulting from weather which was approximately
14.2 percent warmer than 1996. The impact of lower volume sales
was partially offset by capacity release revenue, an average net
increase of approximately 6,400 customers and an increase in rates
effective January 27, 1997. Total sales margin (revenues less
cost of gas, gross receipts and income taxes) decreased in 1997
principally due to the decreased firm revenues.
In April 1997, SJG initiated its BPU approved pilot program
to give residential customers a choice of gas supplier. The
program will be open to the first 10,000 residential customers who
apply for this service and is designed to run until June 30, 1998,
or later if approved by the BPU. Under the applicable rate
schedule, amounts billed to participants in the program will be
reduced for cost of gas charges and applicable gross receipts
taxes. This decrease in revenues will be offset by a
corresponding decrease in SJG's gas costs and taxes under SJG's
BPU-approved fuel clause. Accordingly, SJG believes that the
program will not affect its net income, financial condition or
margins. In addition, because the program affects only 4% of
SJG's residential customers, and not all of those customers may
elect to purchase gas from other suppliers, SJG believes that any
reduction in revenue will not be material.
The following is a summary of changes in operating revenue
and throughput by major category for the 1997 quarter compared
with 1996:
- 15 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Operating Revenues (Continued)
1997 vs. 1996
-------------
Operating Revenues (Thousands):
Firm
Residential $ (6,179)
Commercial (4,027)
Industrial (647)
Cogeneration & Electric Generation (3,290)
Firm Transportation 69
------------
Total Firm (14,074)
Interruptible 542
Interruptible Transportation 413
Off-System (8,406)
Capacity Release & Storage 1,703
Other 215
------------
Total Operating Revenues $(19,607)
============
Throughput (MMcf):
Firm
Residential (1,420)
Commercial (849)
Industrial (119)
Cogeneration & Electric Generation (1,105)
Firm Transportation 1,526
------------
Total Firm Throughput (1,967)
Interruptible 94
Interruptible Transportation 777
Off-System (1,597)
Capacity Release & Storage 7,062
------------
Total Throughput 4,369
============
Gas Purchased for Resale
Gas purchased for resale decreased $15.7 million in 1997
compared with 1996 due principally to lower volume sales. Sources
of gas supply include both contract and open-market purchases.
SJG is responsible for securing and maintaining its own gas
supplies to serve its customers.
SJG has entered into long-term contracts for natural gas
supplies, firm transportation, and firm gas storage service. The
earliest expiration of any of these contracts is 1998. All of the
transportation and storage service agreements between SJG and its
interstate pipeline suppliers are provided under tariffs approved
by the Federal Energy Regulatory Commission. SJG's cumulative
obligation for demand charges for all of these services is
approximately $5.2 million per month which is recovered on a
current basis through its LGAC.
- 16 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Operations
A summary of net changes in utility operations for the 1997
quarter compared with the year preceding is as follows (in
thousands):
1997 vs. 1996
-------------
Other Production Expense $ (19)
Transmission (8)
Distribution 54
Customer Accounts and Services 20
Sales 50
Administrative and General 180
------
$ 277
======
Administrative and General costs increased in 1997
principally due to increased salary and employee benefit costs,
partially offset by decreases in outside service costs.
Other Operating Expenses
A summary of principal changes in other expenses for the 1997
quarter compared with the same quarter in the preceding year is as
follows (in thousands):
1997 vs. 1996
-------------
Maintenance $ 213
Depreciation 259
Federal Income Taxes - Net (788)
Gross Receipts & Franchise
and Other Taxes (2,092)
The increase in maintenance expense is principally due to
increased utility production plant maintenance. Depreciation is
higher in 1997 principally due to increased investment in
property, plant and equipment by SJG. Federal Income Tax changes
reflect the impact of changes in pre-tax income. The changes in
Gross Receipts & Franchise Taxes in 1997 are due to changes in
volumes of gas sold, which are subject to those taxes.
Interest
Interest charges increased slightly in 1997 compared with
1996. The increase is principally due to the effects of increased
levels of short-term debt outstanding, partially offset by lower
levels of long-term debt outstanding.
- 17 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Net Income Applicable to Common Stock
Net income (in thousands) and earnings per common share
reflect the following changes:
1997 vs. 1996
-------------
Net Income Decrease $(1,754)
=======
Earnings per Share Decrease $(0.75)
=======
The details affecting the decrease in net income and earnings
per share are discussed under the appropriate captions above.
Liquidity
The seasonal nature of gas operations, the timing of
construction and remediation expenditures and related permanent
financing, as well as mandated tax and sinking fund payment dates
require large short-term cash requirements. These are generally
met by cash from operations and short-term lines of credit. The
Company maintains short-term lines of credit with a number of
banks, aggregating $144.0 million of which $106.8 million was
available at March 31, 1997. The credit lines are uncommitted and
unsecured with interest rates below the prime rate.
The changes in cash flows from operating activities are as
follows:
Quarter Ended
March 31,
-------------
1997 vs. 1996
-------------
Increases/(Decreases):
Net Income $ (1,754)
Depreciation 10
Revenues and Fuel Costs Deferred - Net 1,991
Deferred and Non-Current Federal
Income Taxes - Net 255
Environmental Remediation Costs-Net (9)
Accounts Receivable 10,562
Inventories 3,454
Gross Receipts & Franchise Taxes (2,046)
Accounts Payable and Other Accrued
Liabilities (15,530)
Other - Net 120
--------
$ (2,947)
========
Depreciation and Amortization are non-cash charges to income
and do not impact cash flow. Changes in depreciation cost reflect
the effect of additions and reductions to fixed assets.
- 18 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Liquidity (Continued)
Increases in Revenues and Fuel Costs Deferred - Net reflect
the impact of overcollection of fuel costs or the recovery of
previously deferred fuel costs. Decreases reflect the impact of
payments or credits to customers for amounts previously
overcollected or the undercollection of fuel costs resulting from
increases in natural gas costs.
Increases in Deferred and Non-Current Federal Income Taxes
and Credits - Net represent the excess of taxes accrued over
amounts paid. Decreases reflect the impact of taxes paid in
excess of amounts accrued. Generally, deferred income taxes
related to deferred fuel costs will be paid in the next year.
Changes in Environmental Remediation Costs - Net represent
the difference between amounts collected under the RAC and through
insurance recoveries and remediation expenditures.
Changes in Accounts Receivable are generally weather and
price related. Increases generate cash flows when collected in
subsequent periods.
Changes in Inventory reflect the impact of seasonal
requirements, temperatures and price changes.
Changes in Accounts Payable and Other Current Liabilities
reflect the impact of timing differences between the accrual and
payment of costs.
Changes in Gross Receipts & Franchise Taxes reflect the impact
of the excess of taxes paid over taxes accrued. However, there
are significant timing differences in cash flows during the year
since SJG must pay the full year's tax on April 1 of each year and
amortize any prepaid tax over the remainder of the year, on the
basis of gas volumes sold. SJG uses short-term borrowings to make
these tax payments and, accordingly, this results in a temporary
increase in the short-term debt level. The carrying costs for
these timing differences are recognized in base utility rates.
Regulatory Matters
On January 27, 1997, the BPU granted SJG a rate increase of
$6.0 million based on a 9.62 percent rate of return on rate base,
which included an 11.25 percent return on equity. Revenue
requirements for ratemaking purposes are established on the basis
of firm and interruptible sales projections. The majority of this
increase will come from residential and small commercial
customers. As part of this rate increase, SJG is allowed to retain
the first $5.0 million of pre-tax margins generated by
interruptible and off-system sales and transportation and 20
percent of pre-tax margins above that level. In 1997 and 1998,
this $5.0 million threshold will be increased by the annual
revenue requirement associated with specified major construction
projects. These sharing formula improvements are expected to
result in additional rate relief of approximately $1.4 million in
- 19 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Regulatory Matters (Continued)
1997 and $1.8 million in 1998. In May 1997, SJG filed to recover
additional post-retirement benefit costs of approximately $1.2
million annually. This recovery is expected to begin in 1998. In
addition, part of the increase will be recovered from customers
through new service fees which charge specific customers for costs
which they cause SJG to incur.
Rates of return are calculated by weighting SJG's individual
capital cost rates by the proportion of each respective type of
capital. This requires the selection of appropriate capital
structure ratios and a determination of the cost rate for each
capital component which are determined in each rate proceeding.
In setting a rate of return, the BPU must provide a utility
and its investors with a return that is commensurate with the risk
to which the invested capital is exposed so that the utility has
access to the capital required to meet its public service
responsibility.
Also on January 27, 1997, the BPU approved SJG's request for
a $2.5 million revenue reduction through the TAC, which is the
standard BPU procedure used to credit customers with excess
revenues, previously collected from customers, which were in
excess of allowed revenues determined under the TAC. See Energy
Adjustment Clauses. This revenue reduction reflects the normal
operation of the TAC, as does the BPU's confirmation of the
decrease.
In April 1996, SJG received BPU approval to increase its
rates to recover approximately $8.0 million of increased natural
gas costs through the LGAC.
The adoption of FASB No. 109, "Accounting for Income Taxes"
in 1993 primarily resulted in the creation of a regulatory asset
and a deferred income tax liability. As a result of positions
taken in the 1994 rate case, the amortization of the asset is
being recovered through rates over an 18-year period which began
in December 1994. Also, FASB No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", adopted by SJG in
1993, requires an accrual basis of accounting for retiree benefit
payments during the years of employment. SJG has elected to
recognize the unfunded transition obligation over a 20-year period
which began in 1993. SJG had previously recovered these costs
through rates on a pay-as-you-go basis. A December 1994 BPU order
provided for partial recovery of costs associated with FASB No.
106 and prescribes continued deferral of unrecovered costs. SJG
was initially seeking recovery of this asset in its recently
completed rate proceeding; however, the BPU initiated a generic
proceeding to address the recovery of these costs by all utilities
in the State. Phase I of the generic proceeding was completed in
January 1997 and SJG has made a prescribed filing with the
BPU to recover additional postretirement benefit costs of
approximately $1.2 million annually, beginning in 1998. Also,
beginning in 1995, an external trust was established towards
- 20 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Regulatory Matters (Continued)
funding postretirement benefit costs for the purpose of
contributing costs recovered from ratepayers as authorized by the
BPU. Rate recovery in excess of SJG's pay-as-you-go requirement
is contributed to the trust and provides no operating benefit to
SJG except to the extent that trust income would reduce future net
periodic cost. Contributions to the trust amounted to $2.1
million in 1996. The balance of this regulatory asset amounted to
$5.4 million at March 31, 1997.
SJG has incurred and recorded certain costs for environmental
remediation of sites where SJG or predecessor companies operated
gas manufacturing plants. Manufactured gas operations were
terminated at all SJG sites more than 30 years ago.
Since the early 1980's, the Company has recorded
environmental remediation costs of $74.8 million, of which $31.0
million has been expended as of March 31, 1997. SJG, with the
assistance of an outside consulting firm, estimates that total
future expenditures to remediate the sites will range from $41.7
million to $150.2 million. The lower end of this range has been
recorded as a liability and is reflected on the balance sheet
under the captions "Current Liabilities" and "Deferred Credits and
Other Non-Current Liabilities". Recorded environmental
remediation costs of SJG do not directly affect earnings because
those costs are deferred and, when expended, recovered through
rates over 7-year amortization periods as authorized by the BPU.
Amounts accrued for future expenditures have not been adjusted for
future insurance recoveries, which management is pursuing. SJG
has received $4.2 million of insurance recoveries as of March 31,
1997. These proceeds were first used to offset legal fees
incurred in connection with those recoveries and the excess was
used to reduce the balance of deferred environmental remediation
costs. Recorded amounts include estimated costs to be incurred
based on projected investigation and remediation work plans using
existing technologies. Actual expenditures could differ from the
estimates due to the long-term nature of the projects and changing
technology, government regulations and site specific requirements.
The major portion of the recorded environmental remediation
costs relate to the remediation of SJG's former gas manufacturing
sites. SJG has recorded $71.9 million for the remediation of
these sites, of which $30.2 million has been expended through
March 31, 1997. As a result of the 7-year recovery mechanism, SJG
does not expense environmental costs for former gas manufacturing
sites when incurred and defers costs to be recovered. SJG has two
regulatory assets associated with environmental cost. The first
regulatory asset is titled "Environmental Remediation Cost:
Expended - Net". These expenditures represent actual costs
incurred to remediate former gas manufacturing plant sites. These
costs meet the requirements of FASB No. 71, "Accounting for the
Effects of Certain Types of Regulation". The BPU has allowed
recovery of these expenditures through July 1995 and a petition to
recover these costs through July 1996 is pending before the BPU.
- 21 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Regulatory Matters (Continued)
The other regulatory asset titled "Environmental Remediation
Cost: Liability for Future Expenditures" relates to estimated
future expenditures determined under the guidance of FAS 5
"Accounting for Contingencies". This amount, which relates to
former manufactured gas plant sites has been recorded as a
deferred debit with the corresponding amount reflected in Current
Liabilities and Deferred Credits and Other Non-Current
Liabilities, as appropriate. The deferred debit is a regulatory
asset under FAS 71 because the BPU's intent, as evidenced by its
current practice, is to provide recovery sufficient in amount to
recover the deferred costs after they have been expended.
SJG makes annual filings with the BPU to recover expended
remediation costs in rates. The BPU has consistently allowed the
full recovery over such seven-year periods, and SJG believes the
BPU will continue to do so. As of March 31, 1997, SJG has
unamortized remediation expenditures of $15.9 million which are
reflected on the balance sheet under the caption "Deferred
Debits." Since BPU approval of the RAC mechanism in August 1992,
SJG has recovered $10.1 million through rates as of March 31,
1997.
SJG is subject to claims which arise in the ordinary course
of its business and other legal proceedings. A group of Atlantic
City casinos filed a petition with the BPU on January 16, 1996
alleging overcharges of over $10.0 million, including interest.
Management believes that charges to the casinos were based on
applicable tariffs and that the casinos were not qualified under
less expensive rate schedules as claimed. Management believes
that the ultimate impact of these actions will not materially
affect SJG's financial position or results of operations.
Capital Resources
SJG has a continuing need for cash resources and capital,
primarily to invest in new and replacement facilities and
equipment for the remediation of former coal gas manufacturing
sites. Total construction and remediation expenditures for 1997
are estimated at $57.7 million, of which $12.3 million was
expended through March 31, 1997. The costs for 1998 and 1999 are
estimated at approximately $65.0 million and $58.9 million,
respectively. These investments are expected to be funded from
several sources, which may include cash generated by operations,
temporary use of short-term debt, sale of first mortgage bonds and
capital leases.
On March 21, 1997, SJG sold $35.0 million of its First
Mortgage Bonds, 7.7% Series due 2027.
On May 2, 1997, SJG's statutory trust subsidiary, SJG Capital
Trust, established in the State of Delaware on March 24, 1997,
sold $35.0 million of 8.35% SJG-obligated Mandatorily Redeemable
Preferred Securities maturing on April 30, 2037. The Trust solely
holds as an asset the 8.35% Deferrable Interest Subordinated
- 22 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Capital Resources (Continued)
Debentures issued by SJG which mature on April 30, 2037. The
Debentures and Preferred Securities are redeemable at the option
of SJG at a redemption price equal to 100% of the principal amount
thereof at any time on or after April 30, 2002.
In January 1996, SJG redeemed a total of $5,258,000 of its
8-1/4% Series First Mortgage Bonds maturing in 1996 and 1998. In
April 1996, SJG redeemed the remaining balance of its 9.2% Series
First Mortgage Bonds due 1998 amounting to $2,667,000.
Inflation
The ratemaking process provides that only the original cost
of utility plant is recoverable in revenues as depreciation.
Therefore, the excess cost of utility plant, stated in terms of
current cost over the original cost of utility plant, is not
presently recoverable. While the ratemaking process gives no
recognition to the current cost of replacing utility plant, based
on past practices, SJG believes it will be allowed to earn on the
increased cost of its net investment as replacement of facilities
actually occurs.
Summary
The company is confident it will have sufficient cash flow to
meet its operating, capital and dividend needs and is taking and
will take such actions necessary to employ its resources effectively.
- 23 -
<PAGE>
PART II -- OTHER INFORMATION
Item l. Legal Proceedings
Information required by this Item is incorporated by
reference to Part I, Item 1, Note 7, on pages 11 through 13,
excluding the first two paragraphs, regarding contingencies,
including pending litigation and the remediation and clean-up of
certain sites which included manufactured gas operations.
Item 6. Exhibits and Reports on Form 8-K
b. No reports on Form 8-K were filed during the quarter for
which this report is filed.
- 24 -
<PAGE>
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.
SOUTH JERSEY GAS COMPANY
(Registrant)
Dated: May 13, 1997 By: /s/ William J. Smethurst, Jr.
-----------------------------
William J. Smethurst, Jr.
Vice President & Treasurer
Dated: May 13, 1997 By: /s/ George L. Baulig
-----------------------------
George L. Baulig
Secretary
- 25 -
<PAGE>
SOUTH JERSEY GAS COMPANY
Index to Exhibits
Exhibit
Number Description
------- -----------
27 Financial Data Schedule
(Submitted only in electronic format to the
Securities and Exchange Commission).
- 26 -
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 428,500
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 82,226
<TOTAL-DEFERRED-CHARGES> 89,487
<OTHER-ASSETS> 1,804
<TOTAL-ASSETS> 602,017
<COMMON> 5,848
<CAPITAL-SURPLUS-PAID-IN> 102,817
<RETAINED-EARNINGS> 62,281
<TOTAL-COMMON-STOCKHOLDERS-EQ> 171,486
0
2,314
<LONG-TERM-DEBT-NET> 182,548
<SHORT-TERM-NOTES> 37,200
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 6,603
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 201,866
<TOT-CAPITALIZATION-AND-LIAB> 602,017
<GROSS-OPERATING-REVENUE> 120,599
<INCOME-TAX-EXPENSE> 8,426
<OTHER-OPERATING-EXPENSES> 92,181
<TOTAL-OPERATING-EXPENSES> 100,607
<OPERATING-INCOME-LOSS> 19,992
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 19,992
<TOTAL-INTEREST-EXPENSE> 4,825
<NET-INCOME> 15,167
43
<EARNINGS-AVAILABLE-FOR-COMM> 15,124
<COMMON-STOCK-DIVIDENDS> 3,825
<TOTAL-INTEREST-ON-BONDS> 3,374
<CASH-FLOW-OPERATIONS> 27,958
<EPS-PRIMARY> 6.47
<EPS-DILUTED> 6.47
</TABLE>
