SOUTH JERSEY INDUSTRIES INC, 10-Q, 1996-05-15

SOUTH JERSEY INDUSTRIES INC
10-Q, 1996-05-15
NATURAL GAS DISTRIBUTION

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Page 1 of 23

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, 1996

Commission File Number 1-6364
------
SOUTH JERSEY INDUSTRIES, INC.
- ------------------------------------------------------------------

(Exact name of registrant as specified in its charter)

New Jersey 22-1901645
- ------------------------------------------------------------------
(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, 1996, there were 10,727,784 shares of the
registrant's common stock outstanding.

Exhibit Index on page 23

<PAGE>
PART I - FINANCIAL INFORMATION
--------------------------------

Item 1. Financial Statements -- See Pages 3 through 6
---------------------

- 2 -
<PAGE>

<TABLE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
- -------------------------------------------------------------------------------
(In Thousands Except for Share Data)

<CAPTION>
Three Months Ended
March 31,
-------------------------
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Operating Revenues:
Utility. . . . . . . . . . . . . . . . . . . . . $139,338 $92,537
Nonutility . . . . . . . . . . . . . . . . . . . 20,250 17,919
----------- -----------
Total Operating Revenues . . . . . . . . . . 159,588 110,456
----------- -----------
Operating Expenses:
Gas Purchased for Resale . . . . . . . . . . . . 78,757 39,473
Operations - Utility . . . . . . . . . . . . . . 9,618 9,827
Nonutility. . . . . . . . . . . . . 19,982 15,378
Maintenance. . . . . . . . . . . . . . . . . . . 2,231 2,224
Depreciation and Depletion . . . . . . . . . . . 4,635 4,309
Federal Income Taxes . . . . . . . . . . . . . . 8,318 7,234
Gross Receipts & Franchise Taxes . . . . . . . . 14,473 12,384
Other Taxes. . . . . . . . . . . . . . . . . . . 1,238 1,292
----------- -----------
Total Operating Expenses . . . . . . . . . . 139,252 92,121
----------- -----------
Operating Income . . . . . . . . . . . . . . . . . 20,336 18,335

Interest and Other Charges . . . . . . . . . . . . 5,110 5,118
----------- -----------

Net Income Applicable to Common Stock. . . . . . . $15,226 $13,217
=========== ===========
Average Shares of Common Stock Outstanding . . . . 10,724,398 10,717,632
=========== ===========
Earnings Per Common Share. . . . . . . . . . . . . $1.42 $1.23
=========== ===========
Dividends Declared Per Common Share. . . . . . . . $0.36 $0.36
=========== ===========

See notes to condensed consolidated financial statements.

- 3 -

<PAGE>

SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
- -----------------------------------------------------------------------------------------------
(In Thousands)
<CAPTION>
March 31, December 31,
--------------------------------------
1996 1995 1995
- --------------------------------------------------------------------------------- ------------
<S> <C> <C> <C>
ASSETS

Property, Plant & Equipment:
Utility Plant, at original cost. . . . . . . . . . . $549,057 $514,269 $542,724
Accumulated Depreciation & Amortization. . . . . . (148,727) (138,600) (145,954)
Nonutility Property & Equipment, at cost . . . . . . 60,448 64,436 60,665
Accumulated Depreciation & Depletion . . . . . . . (35,240) (32,587) (34,736)
----------- ----------- ------------
Property, Plant & Equipment - Net. . . . . . . 425,538 407,518 422,699
----------- ----------- ------------
Available-for-Sale Securities. . . . . . . . . . . . . 42 830 830
----------- ----------- ------------
Current Assets:
Cash and Cash Equivalents. . . . . . . . . . . . . . 4,270 4,452 5,587
Accounts Receivable. . . . . . . . . . . . . . . . . 76,754 49,098 44,909
Unbilled Revenues. . . . . . . . . . . . . . . . . . 15,049 11,547 20,860
Provision for Uncollectibles . . . . . . . . . . . . (988) (997) (982)
Natural Gas in Storage, average cost . . . . . . . . 2,094 2,356 14,763
Materials and Supplies, average cost . . . . . . . . 11,382 11,276 12,017
Prepaid Gross Receipts & Franchise Taxes . . . . . . 0 0 3,649
Prepayments and Other Current Assets . . . . . . . . 2,707 2,392 3,054
----------- ----------- ------------
Total Current Assets . . . . . . . . . . . . . 111,268 80,124 103,857
----------- ----------- ------------
Accounts Receivable - Merchandise. . . . . . . . . . . 2,597 2,552 2,305
----------- ----------- ------------
Deferred Debits:
Gross Receipts and Franchise Taxes . . . . . . . . . 4,768 5,168 4,868
Environmental Remediation Costs:
Expended - Net . . . . . . . . . . . . . . . . . . 12,062 12,116 11,773
Liability for Future Expenditures. . . . . . . . . 21,830 17,598 24,823
Income Taxes - Flowthrough Depreciation. . . . . . . 15,710 16,688 15,955
Deferred Postretirement Benefit Costs. . . . . . . . 4,848 7,221 4,726
Other. . . . . . . . . . . . . . . . . . . . . . . . 9,776 10,939 12,473
----------- ----------- ------------
Total Deferred Debits. . . . . . . . . . . . . 68,994 69,730 74,618
----------- ----------- ------------
Total. . . . . . . . . . . . . . . . . . $608,439 $560,754 $604,309
=========== =========== ============

See notes to condensed consolidated financial statements.

- 4 -

<PAGE>

Common Equity:
Common Stock . . . . . . . . . . . . . . . . . . . . $13,408 $13,399 $13,403
Premium on Common Stock. . . . . . . . . . . . . . . 110,272 110,122 110,189
Retained Earnings. . . . . . . . . . . . . . . . . . 45,070 40,857 33,705
----------- ----------- ------------
Total Common Equity. . . . . . . . . . . . . . 168,750 164,378 157,297
----------- ----------- ------------
Redeemable Cumulative Preferred Stock:
South Jersey Gas Company, Par Value
$100 a share:
Authorized - 49,104, 50,004
and 49,104 shares
Outstanding -
Series A, 4.70% -- 4,800, 5,700
and 4,800 shares. . . . . . . 480 570 480
Series B, 8.00% -- 19,242 shares . . . . . . . . 1,924 1,924 1,924
----------- ----------- ------------
Total Preferred Stock. . . . . . . . . . . . . 2,404 2,494 2,404
----------- ----------- ------------
Long-Term Debt . . . . . . . . . . . . . . . . . . . . 166,354 180,857 168,721
----------- ----------- ------------
Current Liabilities:
Notes Payable to Banks . . . . . . . . . . . . . . . 65,275 11,100 76,300
Current Maturities of Long-Term Debt . . . . . . . . 9,360 9,429 14,532
Accounts Payable . . . . . . . . . . . . . . . . . . 41,909 19,498 44,472
Customer Deposits. . . . . . . . . . . . . . . . . . 5,684 5,898 5,707
Gross Receipts & Franchise Taxes Accrued . . . . . . 10,474 12,282 0
Environmental Remediation Costs. . . . . . . . . . . 6,895 6,130 7,032
Interest Accrued and
Other Current Liabilities . . . . . . . . . . . . . 15,637 15,588 11,433
----------- ----------- ------------
Total Current Liabilities. . . . . . . . . . . 155,234 79,925 159,476
----------- ----------- ------------
Deferred Credits and Other Non-Current Liabilities:
Pension and Other Postretirement Benefits. . . . . . 9,880 11,854 9,293
Accumulated Deferred Income Taxes - Net. . . . . . . 68,364 64,717 68,353
Investment Tax Credits . . . . . . . . . . . . . . . 6,319 6,710 6,417
Deferred Revenues:
Customer Refund Obligation . . . . . . . . . . . . 0 3,500 0
Other Deferred Revenues. . . . . . . . . . . . . . 9,119 27,877 7,315
Environmental Remediation Costs. . . . . . . . . . . 14,942 11,493 17,798
Other. . . . . . . . . . . . . . . . . . . . . . . . 7,073 6,949 7,235
----------- ----------- ------------
Total Deferred Credits
and Other Non-Current Liabilities. . . . . . 115,697 133,100 116,411
----------- ----------- ------------
Commitments and Contingencies (Note 5)

Total. . . . . . . . . . . . . . . . . . $608,439 $560,754 $604,309
=========== =========== ============

See notes to condensed consolidated financial statements.

- 5 -

<PAGE>

SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
- -------------------------------------------------------------------------------------
(In Thousands)
<CAPTION>
Three Months Ended
March 31,
-------------------
1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:

Net Income Applicable to Common Stock. . . . . . . . . . . 15,226 13,217
Adjustments to Reconcile Net Income to Cash Flows:
Depreciation, Depletion and Amortization . . . . . . . . 5,377 5,013
Provision for Losses on Accounts Receivable. . . . . . . 138 173
Revenues and Fuel Costs Deferred - Net . . . . . . . . . 1,804 18,539
Deferred and Non-Current Federal Income Taxes
and Credits - Net . . . . . . . . . . . . . . . . . . . 41 969
Environmental Remediation Costs - Net. . . . . . . . . . (289) 1,219
Write-Down of Impaired Asset . . . . . . . . . . . . . . 1,291 0
Changes in:
Accounts Receivable. . . . . . . . . . . . . . . . . . (26,166) (10,445)
Inventories. . . . . . . . . . . . . . . . . . . . . . 13,304 15,445
Prepayments and Other Current Assets . . . . . . . . . 347 178
Gross Receipts & Franchise Taxes . . . . . . . . . . . 14,123 12,086
Accounts Payable and Other Accrued Liabilities . . . . 1,618 (12,177)
Other - Net. . . . . . . . . . . . . . . . . . . . . . . 1,480 812
-------- --------
Net Cash Provided by Operating Activities . . . . . . . . . . 28,294 45,029
-------- --------
Cash Flows from Investing Activities:

Proceeds from Sale of Available-for-Sale Securities. . . . 795 0
Capital Expenditures, Cost of Removal and Salvage. . . . . (8,069) (9,573)
-------- --------
Net Cash Used in Investing Activities . . . . . . . . . . . . (7,274) (9,573)
-------- --------
Cash Flows from Financing Activities:

Proceeds from Sale of Long-Term Debt . . . . . . . . . . . 0 30,000
Net Repayments of Lines of Credit. . . . . . . . . . . . . (11,025) (69,100)
Principal Repayments of Long-Term Debt . . . . . . . . . . (7,539) (2,301)
Dividends on Common Stock. . . . . . . . . . . . . . . . . (3,861) (3,857)
Proceeds from Sale of Common Stock . . . . . . . . . . . . 88 46
-------- --------
Net Cash Used in Financing Activities . . . . . . . . . . . . (22,337) (45,212)
-------- --------
Net Decrease in Cash and Cash Equivalents . . . . . . . . . . (1,317) (9,756)
Cash and Cash Equivalents at Beginning of Period. . . . . . . 5,587 14,208
-------- --------
Cash and Cash Equivalents at End of Period. . . . . . . . . . $4,270 $4,452
======== ========

Supplemental Disclosures of Non-Cash Investing and Financing Activities:
During the first quarter of 1995, a capital lease obligation of $46 was incurred
by R & T Group, Inc. in connection with its Master Lease Agreement for various
items of construction equipment.

See notes to condensed consolidated financial statements.

- 6 -

</TABLE>
<PAGE>

SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1.
The condensed consolidated financial statements include
the accounts of South Jersey Industries, Inc. (the Company
or SJI) and all of its subsidiaries. Certain intercompany
transactions, amounting to approximately $1.0 million and
$1.8 million for the three-month periods ended March 31, 1996
and 1995, respectively, were not required to be eliminated.
Such amounts were capitalized to utility plant or
environmental remediation costs on the South Jersey Gas
Company (SJG) books of account and are recoverable by SJG
through the rate-making process (See Note 5). All other
significant intercompany accounts and transactions have been
eliminated. Certain reclassifications have been made of
previously reported amounts to conform with classifications
used in the current year. In the opinion of management, the
condensed consolidated 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 businesses of the Company are 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.

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 and, therefore, actual results could differ from
those estimates.

In March 1995, the Financial Accounting Standards Board
(FASB) issued FASB No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". The Company adopted this statement in 1996. There was
no cumulative effect of its adoption on the financial
statements of the Company.

The Company is exploring the potential fair market value
of its utility construction and environmental remediation
subsidiary, R & T Group, Inc. (R & T). At this time, no
definite plan for disposal is in place. Management may
develop a formal plan if the results of this process produce
a potential purchase at a price considered adequate by the
management and Board of Directors of the Company. The
Company is required by the adoption of FASB 121 to review the
carrying value of its assets. As a result, R & T is required
to write down a portion of the value of goodwill associated
with the original purchase by SJI. The goodwill was
established based on the market conditions at the time of
purchase. The write down amounts to $1.3 million and is
included in the Company's condensed consolidated statement of
income as a component of operation expense, nonutility. If
it is determined that a sale is feasible, the resulting gain

- 7 -

<PAGE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)

Note 1. (Continued)

or loss from such sale will be recorded at that time.
R & T's results of operations are not significant to the
Company's results of operations.

Note 2.
The Company has 20,000,000 shares of Common Stock
authorized of which the following shares were issued and
outstanding:
1996 1995
---- ----
Beginning Balance January 1, 10,722,171 10,715,211
Issued during period:
Employees' Stock Ownership Plan 3,083 3,501
Stock Option & Stock
Appreciation Rights Plan 1,000 0
---------- ----------
Ending Balance March 31, 10,726,254 10,718,712
========== ==========

The par value ($1.25 share) of the stock issued in 1996
and 1995 has been credited to Common Stock and the net excess
over par value of $83,167 and $41,288 received for such stock
for the three months ended March 31, 1996 and 1995,
respectively, has been credited to Premium on Common Stock.

The Company has a Stock Option and Stock Appreciation
Rights Plan under which not more than 306,000 shares in the
aggregate may be issued to officers and other key employees
of the Company and its subsidiaries. No options or stock
appreciation rights may be granted under the plan after
January 23, 1997. At March 31, 1996 and 1995, the Company
had 49,560 and 50,560 options outstanding, respectively,
exercisable at prices from $17.16 to $24.69 per share.
During the three-month period ended March 31, 1996, 1,000
options were exercised at a price of $17.89 per share. No
options were exercised in 1995. No options were granted in
1996 or 1995. No stock appreciation rights have been issued
under the plan. The stock options outstanding at March 31,
1996 and 1995 did not have a material effect on the earnings
per share calculations.

Effective January 1, 1996, the Company adopted FASB
No. 123, "Accounting for Stock-Based Compensation". FASB No.
123 includes certain elective provisions which, if followed,
would significantly change the way the Company measures
compensation under its stock based compensation plans.
However, the Company has elected to continue to measure
compensation using the method prescribed by APB Opinion No.
25, "Accounting for Stock Issued to Employees". Accordingly,
there was no impact of the adoption of FASB No. 123 on the
Company's financial position or results of operations.

- 8 -

<PAGE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)

Note 2. (Continued)

The Company also has a Dividend Reinvestment and Stock
Purchase Plan and an Employees' Stock Ownership Plan. Shares
of common stock offered through the Plan are currently
purchased in the open market.

Note 3.
There are certain restrictions under various loan
agreements as to the amount of cash dividends or other
distributions that may be paid on the common stock of certain
subsidiaries. At the consolidated level, however, there were
no restrictions on the Company's aggregate equity in its
subsidiaries' retained earnings which totaled approximately
$45.1 million at March 31, 1996.

Note 4.
The Company and its subsidiaries provide postretirement
health care and life insurance benefits to certain retired
employees. The aggregate amounts paid during the three-month
periods ended March 31, 1996 and 1995 were not material.

In 1993, the Company adopted FASB No. 106, entitled
"Employers' Accounting for Postretirement Benefits Other Than
Pensions". This statement requires the Company to accrue the
estimated cost of retiree benefit payments during the years
the employee provides services. The Company previously
expensed the cost of these benefits, which are principally
health care, on a pay-as-you-go (PAYGO) basis. The Company
has elected to recognize the unfunded transition obligation
over a period of 20 years.

The majority of the Company's costs apply to its utility
subsidiary, SJG, which has previously recovered these costs
on a PAYGO basis through its rates. As part of SJG's 1994
base rate case settlement, SJG was granted full recovery of
the current service cost component of the annual cost in
addition to continued recovery of PAYGO costs. The Board of
Public Utilities (BPU) also approved recovery of previously
deferred 1993 and 1994 service costs over a 5-year period
beginning December 1994. Beginning in 1995, an external
trust was established for the purpose of contributing costs
recovered from the ratepayers as a result of the settlement
with the BPU. Gross contributions to this trust totaled
$2.6 million as of March 31, 1996. SJG is also authorized to
continue recording a regulatory asset for the amount by which
the cost exceeds the current level recovered in rates. The
recovery of this regulatory asset, which amounted to
approximately $4.8 million at March 31, 1996, is being
addressed in SJG's current base rate case proceeding and it
is expected that the recovery will be included in base rates.

- 9 -

<PAGE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)

Note 5.
SJG, in the normal course of conducting business, has
entered into long-term contracts for the supply of natural
gas, firm transportation, and long-term 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 $4.9 million per month
which is recovered on a current basis through the Levelized
Gas Adjustment Clause (LGAC).

The Company is subject to claims which arise in the
ordinary course of its business and other legal proceedings.
Included therewith, 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 the ultimate liability with respect
to these actions, including the situation set forth above,
will not materially affect the financial position of results
of operations of the Company.

The Company has incurred and recorded certain costs for
environmental remediation of sites where SJG or predecessor
companies operated gas manufacturing plants or a nonutility
subsidiary previously operated a fuel oil business.
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 $46.3 million, of which
$24.5 million has been expended as of March 31, 1996.
Management's estimate of the remaining liability of
approximately $21.8 million is reflected on the consolidated
balance sheet under the captions "Current Liabilities" and
"Deferred Credits and Other Non-Current Liabilities". Such
amounts have not been adjusted for future insurance
recoveries, which management is pursuing. Insurance
recoveries amounting to $4.2 million were received through
March 31, 1996. These proceeds were first used to offset
legal fees incurred in connection with such recovery and the
excess was used to reduce the balance of deferred
environmental remediation costs. Recorded amounts include
estimated costs to be incurred over the next three years
based on projected investigation and remediation work plans
using existing technologies. Estimates beyond this time
cannot be made on a reliable basis due to changing
technology, government regulations and site specific
requirements and, therefore, have not be recorded. The total
costs to be incurred after this 3-year period may be
substantial.

- 10 -

<PAGE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)

Note 5. (Continued)

The major portion of the recorded environmental
remediation costs relate to the remediation of former gas
manufacturing sites of SJG which has recorded and expended
amounts of $45.4 million and $23.7 million, respectively,
through March 31, 1996. SJG has established a regulatory
asset for these costs and is recovering its costs as expended
over 7-year amortization periods, as authorized by the BPU.
SJG has recovered $7.5 million through rates as of
March 31, 1996.

Note 6.
On January 16, 1996, SJG petitioned the BPU for a
general base rate increase of approximately $26.5 million
based on a proposed rate of return of 10.4 percent, including
a 13.0 percent return on equity. As part of this petition,
SJG is seeking recovery of its increased expenditures for
construction and the additional cost of providing
postretirement benefits other than pensions. SJG is also
seeking to modify the existing sharing formula for pre-tax
interruptible and off-system margins.

Note 7.
On January 31, 1996, SJG redeemed $1,998,000 of the
8 1/4% Series due 1996, without premium, and $3,260,000 of
the 8 1/2% Series due 1998, with a premium of $22,168.

Note 8.
On April 1, 1996, SJG redeemed $2,666,668 of the 9.2%
Series due 1998, with a premium of $62,874.

On April 10, 1996, SJG received approval from the BPU to
increase its rates by approximately $8.0 million or 2.9%,
through its LGAC. The primary reason for the LGAC increase
was higher natural gas costs incurred by the Company during
November and December 1995 due to temperatures that were
colder than normal. The BPU also approved an agreement among
the parties to the case that the renegotiations of its gas
supply agreements were reasonable and that the parties will
not challenge the reasonableness or prudence of the
agreements as originally made or as renegotiated.

- 11 -

<PAGE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis of Results of
--------------------------------------------------
Operations and Financial Condition
----------------------------------
Overview
- --------
South Jersey Industries has direct ownership of four wholly
owned subsidiaries, South Jersey Gas Company (SJG), Energy &
Minerals, Inc. (EMI), South Jersey Energy Company (SJE) and R & T
Group, Inc. (R & T). SJG is a natural gas distribution company
serving 249,348 customers at March 31, 1996 compared to 243,285
customers at March 31, 1995. EMI is a holding company engaged in
the mining and processing of industrial and commercial sands
through its principal subsidiary, The Morie Company, Inc. (Morie)
and the wholesale marketing of gas through its energy service
subsidiary, South Jersey Fuel, Inc. (SJF). R & T companies are
engaged in utility construction and environmental remediation
through five operating subsidiaries.

The Company is exploring the potential fair market value of
R & T. At this time, no plan for disposal is in place.
Management may develop a formal plan if the results of this
process produce a potential purchase at a price considered
adequate to the management and Board of Directors of the Company.
The Company, as required by the adoption of FASB 121, must review
the carrying value of its assets. As a result, R & T wrote down
the value of goodwill associated with the original purchase by
SJI. The goodwill was established based on the market conditions
at the time SJI purchased R & T. The write down amounts to $1.3
million and is included in the Company's condensed consolidated
statement of income as a component of operation expense,
nonutility. If it is determined that a sale is feasible, the
resulting gain or loss from such sale will be recorded at that
time. R & T's results of operations are not significant to the
Company's results of operations (see Note 1 and Item 5). The
measurement of the carrying value of assets did not impact cash
flow.

As of March 31, 1996 and 1995, SJG comprised approximately
93% of SJI's assets and, respectively, 88% and 85% of SJI's
revenues for the three month periods then ended.

Seasonal aspects affect reported revenues, operating expenses
and cash flows of SJI's subsidiaries. Utility operations are
usually greater during the first and fourth quarters of the year,
while sand mining operations are usually greater during the second
and third quarters of the year.

Competition
- -----------
SJG franchises are non-exclusive and none of its service
territory is presently served by any other natural gas public
utility. Competition does exist, however, from suppliers of oil
propane and electricity for residential, commercial and industrial
users. Also, the market for natural gas services is becoming
increasingly subject to competition due to the unbundling of
industry services, as well as policies by federal and state
agencies designed to promote competition and reduce regulation.

- 12 -

<PAGE>
Item 2. Management's Discussion and Analysis of Results of
--------------------------------------------------
Operations and Financial Condition
----------------------------------
Competition (Continued)
- -----------
SJG believes it has been a leader in addressing the changing
marketplace and maintains its focus on being a lower-cost provider
of natural gas in retail distribution of gas and energy services.
At the same time, SJI has increased its operations in the area of
non-jurisdictional gas sales and has been competing effectively in
this relatively new marketplace. SJG, SJE and SJF are each active
participants in arranging energy services. The SJI companies will
continue to develop creative initiatives and propose meaningful
regulatory and tax reforms designed to benefit customers and its
shareholders.

Morie competes with a number of other sand and gravel mining
companies in the eastern part of the United States. Competition,
transportation costs and the economic conditions affecting its
customers are each matters that impact Morie's financial results.
Accordingly, Morie, through its top quality product lines, cost
controls and strategic planning, maintains its ability to compete
effectively in this marketplace. In addition, Morie continues to
develop new quality commercial and recreational product lines
designed to generate additional revenues.

Energy Adjustment Clauses
- -------------------------
SJG's tariff structure 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 over seven-year periods. Under the
clauses, if actual costs differ from the costs recovered or if
temperatures are below or above the standards as determined in the
rate tariff structure, amounts are deferred for pass-through to
the customers, normally over projected twelve-month periods, as
approved by the Board of Public Utilities (BPU). LGAC and RAC
adjustments do not directly affect earnings because such costs are
adjusted to match corresponding amounts recovered through
revenues. TAC adjustments may affect revenue and income since
extremely cold weather can generate credits to customers, while
extremely warm weather during the winter season can result in
additional billings to customers.

Results of Operations:
- ---------------------
Operating Revenues - Utility
- ----------------------------
Revenues increased $46.8 million for the first quarter of
1996 compared to the same period in 1995. The sales volumes that
underlie this change are as follows (in dekatherms [dt]):

- 13 -

Firm Sales:
Residential 2,008,461
Commercial 1,045,002
Other 306,768

Interruptible (270,679)

Transportation (1,090,169)

Nonjurisdictional Sales 3,425,184
---------
5,424,567
=========

The utility revenue increase in 1996 also reflects higher
purchased gas costs i.e., approximately $3.46 average cost per dt
compared to $2.46 in 1995.

The increase in volumes sold in 1996 was principally due to
weather which was approximately 14% colder than 1995.

Total utility customers on March 31, 1996 was approximately
6,100 higher than 1995.

Operating Revenues - Nonutility
- -------------------------------
Revenues increased approximately $2.3 million in the first
quarter of 1996 compared to the same period in 1995. This
increase reflects increased energy related sales by SJF, partially
offset by lower Morie and R & T sales. Morie sales were
negatively impacted by adverse weather in 1996.

Gas Purchased for Resale
- ------------------------
Gas supply costs for the first quarter of 1996 increased
approximately $39.3 over the same period in 1995. The principal
causes for such increase are based on price and volume changes as
described under "Operating Revenues - Utility".

SJG is responsible for securing and maintaining its own gas
supplies from producers and other suppliers which are necessary to
provide base volumes necessary to serve its customers and provide
other services in the conduct of its business.

SJG has entered into long-term contracts for the supply of
natural gas, firm transportation, and long-term 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

- 14 -

<PAGE>
Item 2. Management's Discussion and Analysis of Results of
--------------------------------------------------
Operations and Financial Condition
----------------------------------
Gas Purchased for Resale (Continued)
- ------------------------
Commission. SJG's cumulative obligations for demand charges for
all of these services is approximately $4.9 million per month
which is recovered on a current basis through its LGAC.

Certain supply agreements are entered into with third parties
under which SJG has no responsibility except to store natural gas
and permit withdrawals by such third parties. A fee is charged
for this service by SJG; however, SJG may, at its option, withdraw
gas for its own use at pre-defined amounts and unit rates.

Operations - Utility
- --------------------
A summary of net changes in operation expense for the
quarter ended March 31, 1996, compared to the same period in 1995,
is as follows (in thousands):

1996 vs. 1995
-------------

Other Production Expense $ 15
Transmission 5
Distribution 50
Accounts and Services (34)
Sales (40)
Administration and General (205)
------
$(209)
======

The 1996 decrease principally reflects lower delinquencies,
advertising, salary and salary related costs partially offset by
increased regulatory and outside consulting costs.

Other Operating Expenses
- ------------------------
A summary of principal changes in other operating expenses
for the first quarter of 1996, compared to the first quarter of
1995, is as follows (in thousands):

1996 vs. 1995
-------------

Operations - Nonutility $4,604
Depreciation and Depletion 326
Federal Income Taxes 1,084
Gross Receipts and
Franchise Taxes 2,089

Operations - Nonutility increased in 1996 due to the effect
of the writedown of R & T's goodwill (see "Overview") and higher
product costs related to increased sales by SJF, partially offset
by the effect of lower product costs due to lower sales by Morie
and R & T.

- 15 -

<PAGE>
Item 2. Management's Discussion and Analysis of Results of
--------------------------------------------------
Operations and Financial Condition
----------------------------------
Other Operating Expenses (Continued)
- ------------------------
Depreciation and Depletion is higher principally due to
increased investment in property, plant and equipment by SJG.

Federal Income Taxes are higher due to the increase in net
income.

The changes in Gross Receipts and Franchise Taxes is due to
changes in volumes of gas sold, the principal basis for this tax.

Interest and Other Charges
- --------------------------
Interest charges decreased by $8,000 for the quarter ended
March 31, 1996, compared to the quarter ended March 31, 1995. The
decrease in 1996 is principally due to lower levels of long-term
debt outstanding and lower levels of LGAC overcollections,
partially offset by the effects of a higher level of short-term
debt outstanding and higher short-term interest rates.

Net Income
- ----------
A summary of changes in net income and average shares of
common stock outstanding for the first quarter of 1996, compared
to the first quarter of 1995, is as follows:

1996 vs. 1995
-------------

Net Income (in thousands) $2,009
======
Average Shares of Common
Stock Outstanding 6,766
======

The details affecting net income are discussed under the
appropriate captions above. The increase in net income in 1996 is
principally due to higher revenues and increased margins from
utility operations resulting from increased sales. Morie and
R & T had losses in 1996 which were partially offset by higher
earnings of SJF. SJF was an inactive company during the first
quarter of 1995.

- 16 -

<PAGE>
Item 2. Management's Discussion and Analysis of Results of
--------------------------------------------------
Operations and Financial Condition
----------------------------------
Liquidity
- ---------
The changes in cash flows from operating activities are as
follows:
Quarter Ended
March 31,
-------------
1996 vs. 1995
-------------
Increases/(Decreases)
Net Income $ 2,009
Depreciation, Depletion and
Amortization 364
Writedown of Impaired Assets 1,291
Revenues and Fuel Costs Deferred (16,735)
Deferred and Non-Current Federal
Income Taxes (928)
Environmental Remediation Costs - Net (1,508)
Accounts Receivable (15,721)
Inventories (2,141)
Gross Receipts & Franchise Taxes 2,037
Accounts Payable and Other Accrued
Liabilities 13,795
Other - Net 802
--------
$(16,735)
========

Depreciation, depletion and amortization are non-cash charges
to income and therefore do not impact cash flow.

Increases in Revenues and Fuel Costs Deferred reflect the
impact of overcollection of fuel costs while decreases reflect the
impact of payments or credits to customers for amounts previously
overcollected and the undercollection of fuel costs resulting from
increases in natural gas costs.

Increases in Deferred and Non-Current Federal Income Taxes
reflect the impact of the excess of taxes accrued over amounts
paid while decreases reflect the impact of taxes paid in excess of
amounts accrued.

Changes in Environmental Remediation Costs - Net represent
the impact of the difference between amounts collected under the
RAC clause and through insurance recoveries, and remediation
expenditures.

Changes in Accounts Receivable balances are generally weather
related with Accounts Receivable being higher during the winter
months and lower in other months. Such increases generate cash
flows when collected in subsequent periods.

Changes in inventory levels reflect the impact of seasonal
requirements and price changes. SJG gas inventory levels are
usually built up in anticipation of winter season requirements
while Morie inventory levels are usually built up during the

- 17 -

<PAGE>
Item 2. Management's Discussion and Analysis of Results of
--------------------------------------------------
Operations and Financial Condition
----------------------------------
Liquidity (Continued)
- ---------
winter months in order to service customers during the months when
sand mining operations are curtailed. Increases in inventory
accounts reflect the outlays for inventory build up while
decreases reflect the recovery of such costs through sales.

Changes in Gross Receipts & Franchise Taxes reflect the
impact of the excess of taxes accrued over taxes paid. 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,
generally on the basis of gas volumes sold. SJG uses short-term
borrowings to make such tax payments and, accordingly, this
results in a temporary increase in the level of short-term debt.
The carrying costs for such timing differences are recovered in
base utility rates.

Changes in Accounts Payable and Other Current Liabilities
reflect the impact of timing differences between when costs are
incurred and accrued and when they are paid. Accounts Payable
balances are generally higher during the first and last quarters
of the year principally reflecting the impact of increased gas
purchases related to winter sales. Accounts Payable balances and
cash flows are also influenced by construction expenditures.
Decreases in Accounts Payable balances represent cash outlays
towards amounts previously accrued.

Cash flow from nonutility operations is generally retained in
the nonutility companies with amounts in excess of cash
requirements being passed up to the company either as dividends or
as temporary short-term loans. Such activities are not considered
material in relation to the financial statements taken as a whole.

Short-Term Lines of Credit
- --------------------------
Short-term bank lines of credit aggregate $155.0 million of
which $89.725 million was unused at March 31, 1996. The credit
lines are uncommitted and unsecured, with borrowings thereunder
being effected for various terms of less than one year at interest
rates below the prime rate of interest, in effect at the time of
borrowing.

Regulatory Assets
- -----------------
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 the amortization of the
asset occurs, it will be recovered through rates over an 18-year
period. Also, FASB No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", adopted by the
company in 1993, requires an accrual basis of accounting for
retiree benefit payments during the years of employment. The
actuarially computed unfunded transition obligation, as measured
in accordance with the statement, is estimated at $15.9 million.
The company has elected to recognize the unfunded transition

- 18 -

<PAGE>
Item 2. Management's Discussion and Analysis of Results of
--------------------------------------------------
Operations and Financial Condition
----------------------------------
Regulatory Assets (Continued)
- -----------------
obligation over a 20-year period which began in 1993. The
majority of the postretirement benefit costs apply to SJG, which
had previously recovered these costs through rates on a pay-as-
you-go basis. The BPU order of December 1994 provides for partial
recovery of costs associated with FASB No. 106 and prescribes
continued deferral of unrecovered costs amounting to $4.8 million
at March 31, 1996. Any remaining balance is being addressed in
SJG's pending rate case (See Note 4). Also, beginning in 1995, an
external trust was established for the purpose of contributing
costs recovered from ratepayers resulting from the settlement with
the BPU. Gross contributions to the trust were $2.6 million as of
March 31, 1996. It is estimated that an additional $1.6 million
will be contributed to the trust in 1996.

Since the early 1980's, the company has recorded
environmental remediation costs of $46.3 million, of which $24.5
million has been expended as of March 31, 1996. The remaining
liability of approximately $21.8 million is reflected in the
balance sheet under the captions "Current Liabilities" and
"Deferred Credits and Other Non-Current Liabilities". Such
amounts have not been adjusted for future insurance recoveries,
which management is pursuing. SJG has realized insurance
recoveries of $4.2 million which were offset against legal costs
and deferred remediation costs. Recorded amounts include
estimated costs to be incurred over the next three years based on
projected investigation and remediation work plans using existing
technologies. Estimates beyond this time cannot be made on a
reliable basis due to changing technology, government regulations
and site-specific requirements and, therefore, have not been
recorded; however, the total costs to be incurred may be
substantial. The major portion of such costs relate to the
remediation of former gas manufacturing sites of SJG, which has
recorded and expended amount of $45.4 million and $23.7 million,
respectively, through March 31, 1996. SJG has established a
regulatory asset for these costs and is recovering such costs over
seven-year amortization periods, as authorized by the BPU. SJG
has recovered $7.5 million through rates as of March 31, 1996.

A group of Atlantic City casinos filed a petition with the
BPU on January 16, 1996 alleging overcharges of over $10 million,
including interest. Management believes its charges were made in
accordance with its approved tariff, and, as such, it will prevail
in this litigation.

Capital Resources
- -----------------
The company has a continuing need for cash resources and
capital, primarily to invest in new and replacement equipment and
facilities for its utility subsidiary. Total construction
expenditures for 1996 are estimated at $48.9 million and the
company expended approximately $8.1 million for the three months
ended March 31, 1996. Construction expenditures for 1997 and 1998
are estimated at approximately $53.5 million and $50.3 million,
respectively. Such investments are expected to be funded from

- 19 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
--------------------------------------------------
Operations and Financial Condition
----------------------------------
Capital Resources (Continued)
- -----------------
several sources, including cash generated by operations, temporary
use of short-term debt, sale of first mortgage bonds, sale of
common stock and capital leases.

On January 16, 1996, SJG petitioned the BPU for a general
base rate increase of approximately $26.5 million based on an
overall rate of return of 10.4 percent and a 13.0 percent return
on equity. As part of this petition, SJG is seeking recovery of
its increased expenditures for construction and the additional
cost of providing postretirement benefits other than pensions (see
Note 6).

On January 31, 1996, SJG redeemed a total of $5,258,000 of
its 8 1/4% Series First Mortgage Bonds maturing in 1996 and 1998
(see Note 7). On April 1, 1996, SJG redeemed the remaining
balance of its 9.20% Series due 1998, amounting to $2,667,000.

In January 1995, SJG issued $30.0 million of 8.6% Debenture
Notes maturing February 1, 2010.

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
carefully.

- 20 -

<PAGE>
PART II -- OTHER INFORMATION
------------------------------

Item l. Legal Proceedings
-----------------
Information required by this Item is incorporated by
reference to Part I, Item 1, Note 5, on pages 10 and 11
regarding contingent liabilities related to remediation and
clean-up of certain sites which included manufactured gas
operations.

Item 5. Other Information
-----------------
The Company is exploring the potential fair market value
of its utility construction and environmental remediation
subsidiary, R & T Group, Inc., and its sand mining and
distribution subsidiary, The Morie Company, Inc. At this
time, no plan for disposal is in place. Management may
develop a formal plan if the results of this process produce
a potential purchase at a price considered adequate to the
management and Board of Directors of the Company.

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.

- 21 -

<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 INDUSTRIES, INC.
(Registrant)

Dated: May 13, 1996 By: /s/ Gerald S. Levitt
-------------------------------
Gerald S. Levitt
Vice President and
Chief Financial Officer

Dated: May 13, 1996 By: /s/ Richard B. Tonielli
-------------------------------
Richard B. Tonielli
Treasurer

- 22 -

<PAGE>
SOUTH JERSEY INDUSTRIES, INC.

Index to Exhibits

Exhibit
Number Description
------- -----------

27 Financial Data Schedule

(Submitted only in electronic format to the
Securities and Exchange Commission).

- 23 -

<ARTICLE> UT
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 400,330
<OTHER-PROPERTY-AND-INVEST> 25,208
<TOTAL-CURRENT-ASSETS> 111,268
<TOTAL-DEFERRED-CHARGES> 68,994
<OTHER-ASSETS> 2,639
<TOTAL-ASSETS> 608,439
<COMMON> 13,408
<CAPITAL-SURPLUS-PAID-IN> 110,272
<RETAINED-EARNINGS> 45,070
<TOTAL-COMMON-STOCKHOLDERS-EQ> 168,750
0
2,404
<LONG-TERM-DEBT-NET> 166,354
<SHORT-TERM-NOTES> 65,275
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 9,360
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 196,296
<TOT-CAPITALIZATION-AND-LIAB> 608,439
<GROSS-OPERATING-REVENUE> 159,588
<INCOME-TAX-EXPENSE> 8,318
<OTHER-OPERATING-EXPENSES> 130,934
<TOTAL-OPERATING-EXPENSES> 139,252
<OPERATING-INCOME-LOSS> 20,336
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 20,336
<TOTAL-INTEREST-EXPENSE> 5,110
<NET-INCOME> 15,226
0
<EARNINGS-AVAILABLE-FOR-COMM> 15,226
<COMMON-STOCK-DIVIDENDS> 3,861
<TOTAL-INTEREST-ON-BONDS> 3,817
<CASH-FLOW-OPERATIONS> 28,294
<EPS-PRIMARY> 1.42
<EPS-DILUTED> 1.42

</TABLE>