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 September 30, 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 November 12, 1996, there were 10,738,439 shares of the
registrant's common stock outstanding.
Exhibit Index on page 26
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements -- See Pages 3 through 13
- 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
September 30,
---------------------------
1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C>
Operating Revenues:
Utility. . . . . . . . . . . . . . . . . . . . . $40,264 $43,228
Nonutility . . . . . . . . . . . . . . . . . . . 8,767 8,998
----------- -----------
Total Operating Revenues . . . . . . . . . . 49,031 52,226
----------- -----------
Operating Expenses:
Gas Purchased for Resale . . . . . . . . . . . . 22,280 25,712
Operations - Utility . . . . . . . . . . . . . . 9,948 10,046
Nonutility. . . . . . . . . . . . . 8,192 7,939
Maintenance. . . . . . . . . . . . . . . . . . . 1,482 1,457
Depreciation . . . . . . . . . . . . . . . . . . 4,112 3,833
Federal Income Taxes . . . . . . . . . . . . . . (1,951) (1,756)
Gross Receipts & Franchise Taxes . . . . . . . . 2,925 2,668
Other Taxes. . . . . . . . . . . . . . . . . . . 677 780
----------- -----------
Total Operating Expenses . . . . . . . . . . 47,665 50,679
----------- -----------
Operating Income . . . . . . . . . . . . . . . . . 1,366 1,547
Interest and Other Charges . . . . . . . . . . . . 5,132 5,204
----------- -----------
Loss from Continuing Operations. . . . . . . . . . (3,766) (3,657)
----------- -----------
Discontinued Operations, Net of Taxes:
Income from Discontinued Operations. . . . . . . 1,412 808
----------- -----------
Net Loss Applicable to Common Stock. . . . . . . . ($2,354) ($2,849)
=========== ===========
Average Shares of Common Stock Outstanding . . . . 10,732,205 10,720,244
=========== ===========
Earnings(Loss) Per Common Share:
Continuing Operations. . . . . . . . . . . . . . ($0.35) ($0.34)
Discontinued Operations. . . . . . . . . . . . . 0.13 0.07
----------- -----------
Loss Per Common Share . . . . . . . . . . . . ($0.22) ($0.27)
=========== ===========
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 STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
- -----------------------------------------------------------------------------------
(In Thousands Except for Share Data)
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C>
Operating Revenues:
Utility. . . . . . . . . . . . . . . . . . . . . $233,140 $185,031
Nonutility . . . . . . . . . . . . . . . . . . . 32,254 29,564
----------- -----------
Total Operating Revenues . . . . . . . . . . 265,394 214,595
----------- -----------
Operating Expenses:
Gas Purchased for Resale . . . . . . . . . . . . 131,311 91,094
Operations - Utility . . . . . . . . . . . . . . 29,796 30,061
Nonutility. . . . . . . . . . . . . 31,899 27,355
Maintenance. . . . . . . . . . . . . . . . . . . 4,435 4,433
Depreciation . . . . . . . . . . . . . . . . . . 12,161 11,242
Federal Income Taxes . . . . . . . . . . . . . . 5,720 4,903
Gross Receipts & Franchise Taxes . . . . . . . . 22,295 19,497
Other Taxes. . . . . . . . . . . . . . . . . . . 2,548 2,610
----------- -----------
Total Operating Expenses . . . . . . . . . . 240,165 191,195
----------- -----------
Operating Income . . . . . . . . . . . . . . . . . 25,229 23,400
Interest and Other Charges . . . . . . . . . . . . 15,208 15,420
----------- -----------
Income from Continuing Operations. . . . . . . . . 10,021 7,980
----------- -----------
Discontinued Operations, Net of Taxes:
Income from Discontinued Operations. . . . . . . 2,084 2,230
----------- -----------
Net Income Applicable to Common Stock. . . . . . . $12,105 $10,210
=========== ===========
Average Shares of Common Stock Outstanding . . . . 10,728,299 10,718,863
=========== ===========
Earnings Per Common Share:
Continuing Operations. . . . . . . . . . . . . . $0.93 $0.74
Discontinued Operations. . . . . . . . . . . . . 0.20 0.21
----------- -----------
Earnings Per Common Share . . . . . . . . . . $1.13 $0.95
=========== ===========
Dividends Declared Per Common Share. . . . . . . . $1.08 $1.08
=========== ===========
See notes to condensed consolidated financial statements.
- 4 -
<PAGE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
- ----------------------------------------------------------------------------------------------------
(In Thousands)
<CAPTION>
(Unaudited)
September 30, December 31,
-------------------------- ------------
1996 1995 1995
- ------------------------------------------------------------------------------------ ------------
<S> <C> <C> <C>
ASSETS
- ------
Property, Plant & Equipment:
Utility Plant, at original cost. . . . . . . . . . . $567,251 $537,098 $542,724
Accumulated Depreciation & Amortization. . . . . . (154,594) (143,416) (145,954)
Nonutility Property & Equipment, at cost . . . . . . 14,027 60,948 60,665
Accumulated Depreciation & Depletion . . . . . . . (5,963) (33,976) (34,736)
----------- ----------- ------------
Property, Plant & Equipment - Net. . . . . . . 420,721 420,654 422,699
----------- ----------- ------------
Investments:
Available-for-Sale Securities. . . . . . . . . . . . 42 830 830
Investment in Limited Liability Company. . . . . . . 1080 0 0
----------- ----------- ------------
Total Investments. . . . . . . . . . . . . . . 1,122 830 830
----------- ----------- ------------
Current Assets:
Cash and Cash Equivalents. . . . . . . . . . . . . . 4,069 1,543 5,587
Notes Receivable - Limited Liability Company . . . . 1,600 0 0
Accounts Receivable. . . . . . . . . . . . . . . . . 20,963 18,272 44,909
Unbilled Revenues. . . . . . . . . . . . . . . . . . 4,690 4,233 20,860
Provision for Uncollectibles . . . . . . . . . . . . (1,106) (977) (982)
Natural Gas in Storage, average cost . . . . . . . . 24,777 20,056 14,763
Materials and Supplies, average cost . . . . . . . . 4,594 11,585 12,017
Assets Held for Disposal . . . . . . . . . . . . . . 27,518 0 0
Prepaid Gross Receipts & Franchise Taxes . . . . . . 10,445 12,977 3,649
Prepayments and Other Current Assets . . . . . . . . 2,433 3,331 3,054
----------- ----------- ------------
Total Current Assets . . . . . . . . . . . . . 99,983 71,020 103,857
----------- ----------- ------------
Accounts Receivable - Merchandise. . . . . . . . . . . 2,066 2,147 2,305
----------- ----------- ------------
Deferred Debits:
Gross Receipts and Franchise Taxes . . . . . . . . . 4,568 4,968 4,868
Environmental Remediation Costs:
Expended - Net . . . . . . . . . . . . . . . . . . 15,045 11,421 11,773
Liability for Future Expenditures. . . . . . . . . 23,099 23,440 24,823
Income Taxes - Flowthrough Depreciation. . . . . . . 15,221 16,199 15,955
Deferred Postretirement Benefit Costs. . . . . . . . 5,119 7,188 4,726
Other. . . . . . . . . . . . . . . . . . . . . . . . 8,760 10,074 12,473
----------- ----------- ------------
Total Deferred Debits. . . . . . . . . . . . . 71,812 73,290 74,618
----------- ----------- ------------
Total. . . . . . . . . . . . . . . . . . $595,704 $567,941 $604,309
=========== =========== ============
See notes to condensed consolidated financial statements.
- 5 -
<PAGE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
- ----------------------------------------------------------------------------------------------------
(In Thousands)
<CAPTION>
(Unaudited)
September 30, December 31,
-------------------------- ------------
1996 1995 1995
- ------------------------------------------------------------------------------------ ------------
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
- ------------------------------
Common Equity:
Common Stock . . . . . . . . . . . . . . . . . . . . $13,418 $13,402 $13,403
Premium on Common Stock. . . . . . . . . . . . . . . 110,415 110,182 110,189
Retained Earnings. . . . . . . . . . . . . . . . . . 34,223 30,131 33,705
----------- ----------- ------------
Total Common Equity. . . . . . . . . . . . . . 158,056 153,715 157,297
----------- ----------- ------------
Redeemable Cumulative Preferred Stock:
South Jersey Gas Company, Par Value
$100 a share:
Authorized - 48,204, 49,104
and 49,104 shares
Outstanding -
Series A, 4.70% -- 3,900, 4,800
and 4,800 shares. . . . . . . 390 480 480
Series B, 8.00% -- 19,242 shares . . . . . . . . 1,924 1,924 1,924
----------- ----------- ------------
Total Preferred Stock. . . . . . . . . . . . . 2,314 2,404 2,404
----------- ----------- ------------
Long-Term Debt . . . . . . . . . . . . . . . . . . . . 152,400 174,107 168,721
----------- ----------- ------------
Current Liabilities:
Notes Payable to Banks . . . . . . . . . . . . . . . 97,400 55,700 76,300
Current Maturities of Long-Term Debt . . . . . . . . 18,499 11,305 14,532
Accounts Payable . . . . . . . . . . . . . . . . . . 35,486 31,925 44,472
Customer Deposits. . . . . . . . . . . . . . . . . . 5,647 5,415 5,707
Environmental Remediation Costs. . . . . . . . . . . 6,996 8,068 7,032
Interest Accrued and
Other Current Liabilities . . . . . . . . . . . . . 9,344 6,563 11,433
----------- ----------- ------------
Total Current Liabilities. . . . . . . . . . . 173,372 118,976 159,476
----------- ----------- ------------
Deferred Credits and Other Non-Current Liabilities:
Pension and Other Postretirement Benefits. . . . . . 9,795 11,886 9,293
Accumulated Deferred Income Taxes - Net. . . . . . . 69,613 67,299 68,353
Investment Tax Credits . . . . . . . . . . . . . . . 6,124 6,514 6,417
Deferred Revenues:
Customer Refund Obligation. . . . . . . . . . . . . 0 4,837 0
Other Deferred Revenues . . . . . . . . . . . . . . 509 4,181 7,315
Environmental Remediation Costs. . . . . . . . . . . 16,103 15,385 17,798
Other. . . . . . . . . . . . . . . . . . . . . . . . 7,418 8,637 7,235
----------- ----------- ------------
Total Deferred Credits
and Other Non-Current Liabilities. . . . . . 109,562 118,739 116,411
----------- ----------- ------------
Commitments and Contingencies (Note 5)
Total. . . . . . . . . . . . . . . . . . $595,704 $567,941 $604,309
=========== =========== ============
See notes to condensed consolidated financial statements.
- 6 -
<PAGE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
- -----------------------------------------------------------------------------------------
(In Thousands)
<CAPTION>
Nine Months Ended
September 30,
---------------------
1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income Applicable to Common Stock. . . . . . . . . . . 12,105 10,210
Adjustments to Reconcile Net Income to Cash Flows:
Depreciation, Depletion and Amortization . . . . . . . . 14,324 15,393
Provision for Losses on Accounts Receivable. . . . . . . 1,186 885
Revenues and Fuel Costs Deferred - Net . . . . . . . . . (6,806) (3,820)
Deferred and Non-Current Federal Income Taxes
and Credits - Net . . . . . . . . . . . . . . . . . . . 1,011 2,867
Environmental Remediation Costs - Net. . . . . . . . . . (3,279) 1,902
Write-Down of Impaired Asset . . . . . . . . . . . . . . 1,291 0
Changes in:
Accounts Receivable. . . . . . . . . . . . . . . . . . 34,000 26,963
Inventories. . . . . . . . . . . . . . . . . . . . . . (10,752) (2,564)
Prepayments and Other Current Assets . . . . . . . . . (683) (422)
Gross Receipts & Franchise Taxes . . . . . . . . . . . (6,796) (13,173)
Accounts Payable and Other Accrued Liabilities . . . . (7,477) (9,454)
Assets Held for Disposal . . . . . . . . . . . . . . . 593 0
Other - Net. . . . . . . . . . . . . . . . . . . . . . . 2,419 4,051
-------- --------
Net Cash Provided by Operating Activities . . . . . . . . . . 31,136 32,838
-------- --------
Cash Flows from Investing Activities:
Investment in Limited Liability Company. . . . . . . . . . (1,000) 0
Proceeds from Sale of Available-for-Sale Securities. . . . 795 0
Loan to Limited Liability Company. . . . . . . . . . . . . (1,600) 0
Capital Expenditures, Cost of Removal and Salvage. . . . . (27,838) (32,252)
-------- --------
Net Cash Used in Investing Activities . . . . . . . . . . . . (29,643) (32,252)
-------- --------
Cash Flows from Financing Activities:
Proceeds from Sale of Long-Term Debt . . . . . . . . . . . 0 30,000
Net Borrowings from (Repayments of) Lines of Credit. . . . 21,100 (24,500)
Principal Repayments of Long-Term Debt . . . . . . . . . . (12,675) (7,194)
Dividends on Common Stock. . . . . . . . . . . . . . . . . (11,587) (11,576)
Proceeds from Sale of Common Stock . . . . . . . . . . . . 241 109
Repurchase of Preferred Stock. . . . . . . . . . . . . . . (90) (90)
-------- --------
Net Cash Used in Financing Activities . . . . . . . . . . . . (3,011) (13,251)
-------- --------
Net Decrease in Cash and Cash Equivalents . . . . . . . . . . (1,518) (12,665)
Cash and Cash Equivalents at Beginning of Period. . . . . . . 5,587 14,208
-------- --------
Cash and Cash Equivalents at End of Period. . . . . . . . . . $4,069 $1,543
======== ========
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
During 1996 and 1995, a capital lease obligation of $321 and $65, respectively
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.
- 7 -
</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 $1.8 million for the
three-month periods and $4.4 million and $5.5 million for the
nine-month periods ended September 30, 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 Notes 5 & 6). 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.
On July 10, 1996, the Company entered into a non-binding
letter of intent to sell its sand mining and processing
subsidiary, The Morie Company, Inc. (Morie). At this time,
negotiations for the sale are in process and no binding
agreement is in place. The Company is reporting Morie as a
discontinued operation in accordance with Accounting
Principles Board (APB) Opinion No. 30, "Reporting the
Results of Operations - Reporting the Results of Disposal of
a Segment of a Business and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions".
Accordingly, the condensed consolidated financial statements
have been reclassified to report separately the operating
results and net assets of Morie. The Company's prior year
operating results have been reclassified to reflect
continuing operations.
The assets held for sale, net of applicable liabilities,
have been reclassified as "Assets Held for Disposal" in the
current asset section of the condensed consolidated balance
sheet. These net assets consist primarily of net working
capital and net property, plant and equipment. Also, the
sale of Morie will accelerate the payment of the long-term
- 8 -
<PAGE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
Note 1. (Continued)
debt of Energy & Minerals, Inc. (EMI), Morie's parent
company, and the senior notes of R & T Group, Inc.
Accordingly, long-term debt of approximately $11.0 million
has been reclassified to current debt in the condensed
consolidated balance sheet.
Operating results of the discontinued operation were as
follows (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
------- ------- ------- -------
Total Revenues $ 8,401 $ 8,099 $24,034 $25,051
------- ------- ------- -------
Income before Taxes 1,918 1,068 2,764 2,944
Income Taxes 506 260 680 714
------- ------- ------- -------
Income from
Operations $ 1,412 $ 808 $ 2,084 $ 2,230
======= ======= ======= =======
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 wrote
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 amounted to $1.3 million, and is included in the
Company's condensed consolidated statement of income as a
component of operation expense, nonutility for the nine-month
period ended September 30, 1996. 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.
- 9 -
<PAGE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
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 5,945 6,635
Stock Option & Stock
Appreciation Rights Plan 6,120 0
---------- ----------
Ending Balance September 30, 10,734,236 10,721,846
========== ==========
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 $225,894 and $100,966 received for such
stock for the nine months ended September 30, 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 September 30, 1996 and 1995, the
Company had 44,440 and 50,560 options outstanding,
respectively, exercisable at prices from $17.16 to $24.69 per
share. During the nine-month period ended September 30,
1996, 6,120 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
September 30, 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.
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.
- 10 -
<PAGE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
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
$34.2 million at September 30, 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
and nine-month periods ended September 30, 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
$3.7 million as of September 30, 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 regulatory asset amounted to approximately
$5.1 million at September 30, 1996. SJG was initially
seeking recovery of this asset in its current base rate
proceedings; however, the BPU initiated a generic proceeding
to address the recovery of such costs by all utilities in the
State. SJG expects that full recovery will be included in
future base rates.
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
- 11 -
<PAGE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
Note 5. (Continued)
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 or 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 $51.7 million, of which
$28.6 million has been expended as of September 30, 1996.
Management's estimate of the remaining liability of
approximately $23.1 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
September 30, 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.
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 $50.8 million and $27.8 million, respectively,
- 12 -
<PAGE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)
Note 5. (Continued)
through September 30, 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 $8.6 million through rates as of September
30, 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 costs associated with
increased expenditures for construction and operations. SJG
is also seeking to modify the existing sharing formula for
pre-tax interruptible and off-system margins.
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 weather that was 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.
On June 20, 1996, SJG received approval from the BPU to
recover environmental remediation costs incurred during the
two-year period ended July 31, 1995 totaling $1.5 million,
net of insurance recoveries (See Note 5).
On September 6, 1996, SJG made its annual LGAC and
Temperature Adjustment Clause (TAC) filings with the BPU.
SJG proposed a credit of $2.5 million resulting from the TAC
and a decrease of the LGAC of $1.4 million. On that same
date, the Company filed with the BPU an update to its
Remediation Adjustment Clause (RAC), proposing an increase of
approximately $655,000.
Note 7.
On January 31, 1996, SJG redeemed $1,998,000 of its
8 1/4% Series First Mortgage Bonds due 1996, without premium,
and $3,260,000 of its 8 1/4% Series First Mortgage Bonds due
1998, with a premium of $22,168.
On April 1, 1996, SJG redeemed $2,666,668 of its 9.2%
Series First Mortgage Bonds due 1998, with a premium of
$62,874.
- 13 -
<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 250,401 customers at September 30, 1996 compared to
245,062 customers at September 30, 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). SJE provides
services for the acquisition and transportation of natural gas for
industrial and commercial users. R & T companies are engaged in
utility construction and environmental remediation through four
operating subsidiaries.
On July 10, 1996, the Company entered into a non-binding
letter of intent to sell its sand mining and processing
subsidiary, The Morie Company, Inc. (Morie). At this time,
negotiations for the sale are in process and no binding agreement
is in place. The accompanying financial statements, in accordance
with Accounting Principles Board Opinion No. 30, report assets and
results of operations under the classification of discontinued
operations. Should such sale be consummated, the proceeds to be
received are expected to exceed the net carrying value of the
assets to be sold (See Note 1).
The Company is exploring the potential fair market value of
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 to 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 wrote down a
portion of the value of goodwill associated with the original
purchase of R & T by SJI in the first quarter of 1996. The
goodwill was established based on the market conditions at the
time SJI purchased R & T. The write down amounted to $1.3 million
and is included in the Company's condensed consolidated statement
of income as a component of operation expense, nonutility for the
nine-month period ended September 30, 1996. If it is determined
that a sale is feasible, the resulting gain or loss from such sale
will be recorded at that time. The write down of the carrying
value of assets did not impact cash flow. R & T's results of
operations are not significant to the Company's results of
operations.
- 14 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Overview (Continued)
SJG comprised the following percentages of SJI's assets and
revenues:
1996 1995
Assets at September 30 94% 93%
Revenues:
Three month period ended September 30 82% 83%
Nine month period ended September 30 88% 87%
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.
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 aimed at increasing its operations in
the areas of non-jurisdictional gas and electric energy sales in
what has proved to be a highly competitive 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
- 15 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Energy Adjustment Clauses (Continued)
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 decreased $3.0 million for the three month period
ended September 30, 1996 compared to the same period in 1995 and
increased $48.1 million for the nine month period ended September
30, 1996 compared to the corresponding period in 1995. The sales
volume changes that underlie these changes for the three and nine
month periods ended September 30 are as follows (in dekatherms
[dt]):
Period Ended September 30,
---------------------------------
Three Months Nine Months
1996 vs. 1995 1996 vs. 1995
------------- -------------
Firm Sales:
Residential 71,454 2,609,593
Commercial 70,106 1,311,974
Other 1,061,966 1,355,090
Interruptible (249,452) (362,819)
Transportation (1,283,926) (2,706,841)
Nonjurisdictional Sales (2,489,420) (298,281)
---------- ----------
(2,819,272) 1,908,716
========== ==========
The effect on revenues resulting from decreased gas volumes
sold in the three-month period ended September 30, 1996, was
partially offset by the effect of an LGAC increase in April 1996
and the impact of higher commodity costs as described below.
- 16 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Operating Revenues - Utility (Continued)
Utility revenue changes also reflect the impact of commodity
prices for purchased gas as implemented through the LGAC. Average
commodity prices in 1996 and 1995 were as follows (per dt):
1996 1995
----- -----
Three month period ended September 30 $2.57 $1.63
Nine month period ended September 30 $2.76 $1.71
The increases in firm volumes sold in the 1996 three month
period was principally due to an approximate increase of 5,400
customers. The increases in firm volumes sold for the nine-month
period ended September 30, 1996 was principally due to weather
which was 14.5% colder than the same period in 1995.
Operating Revenues - Nonutility
Revenues decreased by approximately $0.2 million in the
third quarter of 1996 compared to the same period in 1995 as a
result of lower volume sales by R & T and SJE, partially offset by
increased sales by SJF. Revenues increased by $2.7 million for
the nine months ended September 30, 1996 compared to the same
period in 1995 principally due to increased energy related sales
by SJF, partially offset by lower R & T and SJE sales.
Gas Purchased for Resale
Gas supply costs decreased approximately $3.4 million
for the three months ended September 30, 1996 over the same period
in 1995, and increased $40.2 million for the nine-month period
ended September 30, 1996, compared to the same 1995 period. The
principal causes for such changes 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
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.
- 17 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Operations - Utility
A summary of net changes in operation expense for the three
and nine month periods ended September 30, 1996 compared to the
same periods in 1995 is as follows (in thousands):
Three Months Nine Months
1996 vs. 1995 1996 vs. 1995
------------- -------------
Other Production Expense $ 3 $ 27
Transmission 11 20
Distribution 99 191
Customer Accounts and Services 116 267
Sales (28) (102)
Administration and General (217) (526)
Other (82) (142)
------ ------
$ (98) $(265)
====== ======
The 1996 changes principally reflect decreases in
administrative and general salaries and decreases in employee
welfare costs, partially offset by an increase in distribution
labor cost and an increase in the provision for uncollectible
accounts.
Other Operating Expenses
A summary of principal changes in other consolidated expenses
for the three and nine month periods ended September 30, 1996
compared to the same periods in 1995 is as follows (in thousands):
Three Months Nine Months
1996 vs. 1995 1996 vs. 1995
------------- -------------
Operations - Nonutility $253 $4,544
Depreciation and Depletion 279 919
Federal Income Taxes (195) 817
Gross Receipts and
Franchise Taxes 257 2,798
Nonutility operations expense increased in the three month
period ended September 30, 1996 due to higher product costs
related to SJE sales. Nonutility operations expense increased in
the nine month period ended September 30, 1996 due to higher
product sales by SJF and SJE and the effect of the write down of
R & T's goodwill amounting to $1.3 million (see "Overview").
Depreciation and Depletion is higher principally due to
increased investment in property, plant and equipment by SJG.
Federal Income Tax changes reflect the impact of changes in
net income from continuing operations.
- 18 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Other Operating Expenses (Continued)
The changes in Gross Receipts and Franchise Taxes are due to
changes in volumes of gas sold, which are subject to such taxes.
Interest and Other Charges
Interest charges decreased by $72,000 and $212,000 for the
three and nine month periods ended September 30, 1996 compared to
the same periods in 1995, respectively. The decreases are
principally due to lower levels of long-term debt outstanding and
lower levels of LGAC overcollections, partially offset by the
effects of higher levels of short-term debt outstanding.
Income from Discontinued Operations
As discussed under the caption "Overview", Morie's operating
results are reported as discontinued operations. Morie's net
income increased $604,000 for the three month period ended
September 30, 1996 and decreased $146,000 for the nine month
period ended September 30, 1996 compared to the same periods in
1995. The third quarter increase was due to increased product
sales while the decrease for the nine month period was due to a
decrease in sales resulting from inclement weather conditions
earlier in the year.
Net Income
A summary of changes in net income for the three and nine
month periods ended September 30, 1996 compared to the same periods
in 1995 is as follows (in thousands):
Three Months Nine Months
1996 vs. 1995 1996 vs. 1995
------------- -------------
Net Income Increase $ 495 $1,895
====== ======
The details affecting net income are discussed under the
appropriate captions above. The increase in net income for the
three month period ended September 30, 1996 is principally due to
increased operating results from nonutility operations, including
Morie. The increase in net income for the nine month period ended
September 30, 1996 is principally due to increased utility
revenues from firm sales, partially offset by a decrease in
R & T's net income (see "Overview").
Liquidity
The changes in cash flows from operating activities for the
nine month period ended September 30, 1996 compared to the same
period in 1995 is as follows (in thousands):
- 19 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Liquidity (Continued)
Nine Months
1996 vs. 1995
-------------
Increases/(Decreases)
Net Income $ 1,895
Depreciation, Depletion and Amortization (1,069)
Write Down of Impaired Assets 1,291
Provision for Losses on Accounts Receivable 301
Revenues and Fuel Costs Deferred (2,986)
Deferred and Non-Current Federal Income Taxes (1,856)
Environmental Remediation Costs - Net (5,181)
Accounts Receivable 7,037
Inventories (8,188)
Prepayments and Other Current Assets (261)
Gross Receipts & Franchise Taxes 6,377
Accounts Payable and Other Accrued Liabilities 1,977
Assets Held for Disposal 593
Other - Net (1,632)
--------
$ (1,702)
========
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 such balances being higher during the winter months
and lower in other months. 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 for the 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.
- 20 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Liquidity (Continued)
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,
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 recognized 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.
Working capital is expected to increase in 1996 should the
sale of Morie be consummated.
Short-Term Lines of Credit
Short-term bank lines of credit aggregate $155.0 million of
which $57.6 million was unused at September 30, 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
obligation over a 20-year period which began in 1993. The
majority of the postretirement benefit costs apply to SJG, which
- 21 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Regulatory Assets (Continued)
had previously recovered these costs through rates on a pay-as-
you-go basis. A December 1994 BPU order provides for partial
recovery of costs associated with FASB No. 106 and prescribes
continued deferral of unrecovered costs amounting to $5.1 million
at September 30, 1996. SJG was initially seeking recovery of this
asset in its current rate proceedings; however, the BPU initiated
a generic proceeding to address the recovery of such costs by all
utilities in the State. SJG expects that full recovery will be
included in future base rates (See Note 4). Also, beginning in
1995, an external trust was established for the purpose of
contributing costs recovered from ratepayers resulting from a
settlement with the BPU. Gross contributions to the trust were
$3.7 million as of September 30, 1996. It is estimated that an
additional $0.5 million will be contributed to the trust in 1996.
Since the early 1980's, the company has recorded
environmental remediation costs of $51.7 million, of which $28.6
million has been expended as of September 30, 1996. The remaining
liability of approximately $23.1 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 $50.8 million and $27.8 million,
respectively, through September 30, 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 $8.6 million through rates as of September 30, 1996.
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 or results of operations of the Company.
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 $39.2 million and the
- 22 -
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Capital Resources (Continued)
Company expended approximately $27.8 million for the nine months
ended September 30, 1996. Construction expenditures for 1997 and
1998 are estimated at approximately $51.0 million and $57.8
million, respectively. Such investments are expected to be funded
from 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. Part of the proceeds
from the expected sale of Morie will be used to pay off the
balance of senior notes of EMI and R & T and an EMI bank loan.
The balance of such outstanding debt amounted to approximately
$11.0 million at September 30, 1996, which amount is included in
the balance sheet under the caption "Current Maturities of Long-
Term Debt".
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
costs associated with its increased expenditures for construction
and operations (See Note 6). SJG is also seeking to modify the
existing sharing formula for pre-tax interruptible and off-system
margins.
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 First Mortgage Bonds 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.
- 23 -
<PAGE>
PART II -- OTHER INFORMATION
Item l. Legal Proceedings
Information required by this Item is incorporated by
reference to Part I, Item 1, as follows: Note 5, on pages 12
and 13 regarding contingent liabilities related to remediation and
clean-up of certain sites which included manufactured gas
operations and a petition filed by a group of casinos with the BPU
on January 16, 1996 alleging overcharges of over $10.0 million,
including interest; and Note 6 on page 13 regarding SJG's petition
for a rate increase filed on January 16, 1996.
Item 5. Other Information
The Company continues to explore the potential fair market
value of its utility construction and environmental remediation
subsidiary, R & T Group, Inc. and, 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 (See Note 1, page 9). SJI has reached an agreement in
principle for the sale of Morie (See Note 1 on pages 8 and 9 and
Item 2., Management's Discussion and Analysis of Results of
Operations and Financial Condition, including: "Overview", page
14 and "Capital Resources", page 23).
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - Exhibit 27 - Financial Data Schedule.
b. A report on Form 8-K was filed with the SEC on October 9,
1996, reporting, under Item 5 - Other Events, a dividend declared by
the Board of Directors on September 20, 1996 of one stock purchase
right (the "Rights") for each share of the Company's Common Stock,
par value $1.25 per share (the "Common Stock"), to be paid on
October 11, 1996 (the "Record Date") to shareholders of record of
the Common Stock issued and outstanding on the Record Date. Each
Right entitles the registered holder to purchase from the Company
one one-thousandth of a share of the Company's Series A Junior
Participating Preference stock, without par value (the "Series A
Preference Stock"). The description and terms of the Rights are set
forth in a Rights Agreement (the "Rights Agreement") between the
Company and The Farmers & Merchants National Bank of Bridgeton, the
Rights Agent.
No financial statements were required in said filing,
however, the following Exhibits were included therein:
Exhibit No. Description
99.1 Rights Agreement dated as of September 20, 1996
between South Jersey Industries, Inc. and The
Farmers & Merchants National Bank of Bridgeton,
which includes the resolutions establishing the
terms of the preference stock as Exhibit A, the form
of Right Certificate as Exhibit B and the Summary of
Rights to Purchase Common Shares as Exhibit C.
99.2 Press Release dated September 20, 1996 of SJI.
- 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 INDUSTRIES, INC.
(Registrant)
Dated: November 12, 1996 By: /s/ Gerald S. Levitt
-------------------------------
Gerald S. Levitt
Vice President and
Chief Financial Officer
Dated: November 12, 1996 By: /s/ William J. Smethurst, Jr.
-------------------------------
William J. Smethurst, Jr.
Assistant Treasurer and Acting
Chief Accounting Officer
- 25 -
<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).
- 26 -
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 412,657
<OTHER-PROPERTY-AND-INVEST> 9,186
<TOTAL-CURRENT-ASSETS> 99,983
<TOTAL-DEFERRED-CHARGES> 71,812
<OTHER-ASSETS> 2,066
<TOTAL-ASSETS> 595,704
<COMMON> 13,418
<CAPITAL-SURPLUS-PAID-IN> 110,415
<RETAINED-EARNINGS> 34,223
<TOTAL-COMMON-STOCKHOLDERS-EQ> 158,056
0
2,314
<LONG-TERM-DEBT-NET> 152,400
<SHORT-TERM-NOTES> 97,400
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 18,499
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 167,035
<TOT-CAPITALIZATION-AND-LIAB> 595,704
<GROSS-OPERATING-REVENUE> 265,394
<INCOME-TAX-EXPENSE> 5,720
<OTHER-OPERATING-EXPENSES> 234,445
<TOTAL-OPERATING-EXPENSES> 240,165
<OPERATING-INCOME-LOSS> 25,229
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 25,229
<TOTAL-INTEREST-EXPENSE> 15,208
<NET-INCOME> 10,021
0
<EARNINGS-AVAILABLE-FOR-COMM> 12,105
<COMMON-STOCK-DIVIDENDS> 11,587
<TOTAL-INTEREST-ON-BONDS> 10,244
<CASH-FLOW-OPERATIONS> 31,136
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 1.13
</TABLE>
