FILE NO. __________
FORM U-3A-2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
STATEMENT BY HOLDING COMPANY CLAIMING EXEMPTION UNDER
RULE U-2 FROM THE PROVISIONS OF THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
TO BE FILED ANNUALLY PRIOR TO MARCH 1
SOUTH JERSEY INDUSTRIES, INC.
hereby files with the Securities and Exchange Commission, pursuant
to Rule U-2, its statement claiming exemption as a holding company
from the provisions of the Public Utility Holding Company Act of
1935. In support of such claim for exemption, the following
information is submitted:
1. Name, state of organization, location and nature of
business of claimant and every subsidiary thereof other than any
exempt wholesale generator (EWG) or foreign utility company in
which claimant directly or indirectly holds an interest.
The claimant, South Jersey Industries, Inc.
(the Company), was organized under the laws of the
State of New Jersey; its principal location is
Number One South Jersey Plaza, Route 54, Folsom,
New Jersey 08037. The Company is not a public
utility company. It is primarily engaged in the
business of owning and holding a majority interest
in other business enterprises.
The Company owns all of the outstanding common
stock of South Jersey Gas Company (Gas Company or
SJG), which was organized under the laws of the
State of New Jersey. Gas Company's principal
location is Number One South Jersey Plaza, Route
54, Folsom, New Jersey 08037. Gas Company is a
public utility company engaged in the purchase,
transmission and sale of natural gas for
residential, commercial, and industrial use in an
area of approximately 2,500 square miles in the
southern part of New Jersey. SJG also makes off-
system sales of natural gas on a wholesale basis to
various customers on the interstate pipeline system
and transports natural gas purchased directly from
producers or suppliers for its own sales and for
some of its customers. SJG also assigns or buys
capacity for the purchase or transportation of
natural gas.
<PAGE>
The Company owns all of the outstanding common
stock of Energy & Minerals, Inc. (EMI), which was
organized under the laws of the State of New
Jersey. EMI's principal location is Number One
South Jersey Plaza, Route 54, Folsom, New Jersey
08037. EMI is not a public utility company. It is
primarily engaged in owning and holding the stock
of certain nonutility subsidiaries of the Company.
The Company owns all of the outstanding
common stock of South Jersey Energy Company (Energy
Company), which was organized under the laws of the
State of New Jersey. Energy Company's principal
location is Number One South Jersey Plaza, Route
54, Folsom, New Jersey 08037. Energy Company is
not a public utility company. Energy Company
provides services for the acquisition, sale and
transportation of natural gas for industrial and
commercial users.
The Company owns all of the outstanding stock
of R & T Group, Inc. (R & T), which was organized
under the laws of the State of New Jersey. R & T's
principal location is Number One South Jersey
Plaza, Route 54, Folsom, New Jersey 08037. R & T
is not a public utility company. It is primarily
engaged in owning and holding the stock of certain
nonutility subsidiaries of the Company.
EMI owned all of the outstanding common stock
of The Morie Company, Inc. (Morie), which was
organized under the laws of the State of New
Jersey. Morie's principal location was 1201
N. High Street, Millville, N.J. 08332. Morie,
which was engaged in the mining, processing, and
marketing of commercial and industrial sands and
gravels, was sold in December 1996.
EMI owns all of the outstanding common stock
of South Jersey Fuel, Inc. (Fuel Company), which
was organized under the laws of the State of New
Jersey. Fuel Company's principal location is
Number One South Jersey Plaza, Route 54, Folsom,
New Jersey 08037. Fuel Company is not a public
utility company. Fuel Company provides natural gas
services in the wholesale market, either directly
or through its fifty percent owned affiliate, South
Jersey Resources Group, LLC, to other marketers,
local distribution companies, electric generators
and large industrial users. Such services may
include supply, storage, peaking and transportation
capacity in New Jersey and surrounding states.
-2-
<PAGE>
R & T owns all of the outstanding common stock
of R and T Castellini Company, Inc. (Castellini
Company), which was organized under the laws of the
State of New Jersey. Castellini Company's
principal location is 805 Sheridan Avenue,
Vineland, N.J. 08360. Castellini Company is not a
public utility company. It is engaged in the
installation of gas, water and sewer lines, and
plant maintenance and site work. Castellini
Company's assets are being held for sale under a
plan for disposition adopted in 1996. A non-
binding letter of intent to sell certain assets of
Castellini Company was signed in February 1997.
R & T owns all of the outstanding common stock
of R & T Castellini Construction Company, Inc.
(Castellini Construction), which was organized
under the laws of the State of Delaware.
Castellini Construction's principal location is
3865 Lincoln Avenue, Vineland, N.J. 08360.
Castellini Construction Company is not a public
utility company. It was engaged in the
installation of gas, water and sewer lines, plant
maintenance and site work, and environmental
cleanup and remediation. The assets of Castellini
Construction were sold in January 1997 and it is
now an inactive company.
R & T owns all of the outstanding common stock
of S.W. Downer, Jr. Company, Inc. (Downer Company),
which was organized under the laws of the State of
New Jersey. Downer Company's principal location is
Ellis & Sewell Streets, Glassboro, N.J. 08028.
Downer Company is not a public utility company. It
is engaged in the installation of gas, water and
sewer lines, and plant maintenance and site work.
Downer Company's assets are being held for sale
under a plan for disposition adopted in 1996. A
non-binding letter of intent to sell certain assets
of Downer Company was signed in February 1997.
R & T owns all of the outstanding common stock
of Onshore Construction Company, Inc. (Onshore),
which was organized under the laws of the State of
New Jersey. Onshore's principal location is Ellis
& Sewell Streets, Glassboro, N.J. 08028. Onshore
is not a public utility company. It is engaged in
the installation of large diameter pipe, sewerage
plants, bridges, dams and other heavy construction
projects. Onshore's assets are being held for sale
under a plan for disposition adopted in 1996. A
non-binding letter of intent to sell certain assets
of Onshore was signed in February 1997.
-3-
<PAGE>
R & T owns all of the outstanding common stock
of Cape Atlantic Crane Co., Inc. (Cape Atlantic),
which was organized under the laws of the State of
New Jersey. Cape Atlantic's principal location is
Ellis & Sewell Streets, Glassboro, N.J. 08028.
Cape Atlantic is not a public utility company. It
was principally engaged in the rental of cranes.
Cape Atlantic sold its cranes in 1996 and is now an
inactive company.
Neither the claimant or any of its
subsidiaries is an EWG nor do they hold a direct or
indirect interest in a foreign utility company.
2. A brief description of the properties of claimant
and each of its subsidiary public utility companies used for the
generation, transmission, and distribution of electric energy for
sale, or for the production, transmission, and distribution of
natural or manufactured gas, indicating the location of principal
generating plants, transmission lines, producing fields, gas
manufacturing plants, and electric and gas distribution
facilities, including all such properties which are outside the
State in which claimant and its subsidiaries are organized and all
transmission or pipelines which deliver or receive electric energy
or gas at the borders of such State.
The Company does not own directly any
properties used for the production, transmission,
and distribution of natural or manufactured gas or
electric energy.
The properties of Gas Company used for the
production, transmission, and distribution of
natural or manufactured gas include mains, service
connections and meters, supplemental gas storage
facilities, three liquefied propane plants, and an
LNG storage and vaporization facility, all of which
are located in the State of New Jersey (except that
certain gas owned by Gas Company is stored outside
the State and transported when needed). There are
4,598 miles of distribution mains. There are 343
miles of mains in the transmission system. No
pipelines of Gas Company deliver or receive gas at
the borders of the State of New Jersey.
3. The following information for the last calendar
year with respect to claimant and each of its subsidiary public
utility companies:
(a) Number of kwh. of electric energy sold
(at retail or wholesale) and Mcf. of natural or
manufactured gas distributed at retail.
-4-
<PAGE>
During 1996, Gas Company distributed at
retail to residential, commercial and industrial
customers 39,852,000 Mcf. of natural or
manufactured gas and transported 18,391,000 Mcf. of
natural gas purchased directly by its industrial
and commercial customers. Gas Company also sold
319,200 Mcf. of natural gas at wholesale for resale
within the State of New Jersey.
(b) Number of kwh. of electric energy and
Mcf. of natural or manufactured gas distributed at
retail outside the State in which each company is
organized.
None
(c) Number of kwh. of electric energy and Mcf. of
natural or manufactured gas sold at wholesale outside
the State in which each such company is organized, or at
the State line.
During 1996, Gas Company sold 8,252,200 Mcf.
of natural gas at wholesale to customers outside the
borders of the State of New Jersey.
Also, throughput related to capacity release
and storage amounted to 25,460,000 Mcf. in 1996.
(d) Number of kwh. of electric energy and Mcf. of
natural or manufactured gas purchased outside the State
in which each such company is organized or at the State
line.
During 1996, Gas Company purchased
approximately 50,615,595 Mcf. of natural gas from out-
of-state sources.
During 1996, Gas Company purchased and had
delivered to it approximately 307,640 Mcf. of liquefied
natural gas for transport by over-the-road truck
transport to Gas Company's LNG Storage and Vaporization
facility at McKee City, Atlantic County, New Jersey.
4. The following information for the reporting period
with respect to claimant and each interest it holds directly or
indirectly in an EWG or a foreign utility company stating monetary
amounts in United States dollars:
a) Name, location, business address and
description of the facilities used by the EWG or foreign
utility company for the generation, transmission and
distribution of electric energy for sale or for the
distribution at retail of natural or manufactured gas.
-5-
<PAGE>
The claimant has no direct or indirect
interest or investment of any kind in, or has any sales,
service or construction contracts of any kind with, an
EWG or a foreign utility company.
b) Name of each system company that holds an
interest in such EWG or foreign utility company; and
description of the interest held.
No system company holds any direct or indirect
interest in an EWG or foreign utility company.
c) Type and amount of capital invested, directly
or indirectly, by the holding company claiming exemption; any
direct or indirect guarantee of the security of the EWG or
foreign utility company by the holding company claiming
exemption; and any debt or other financial obligation for
which there is recourse, directly or indirectly, to the
holding company claiming exemption or another system company,
other than the EWG or foreign utility company.
The claimant holding company has no capital
invested, directly or indirectly; nor does it directly
or indirectly guarantee any security debt of an EWG or
foreign utility company; nor debt or other financial
obligation for which there is recourse, directly or
indirectly, to the holding company claiming exemption on
another system company.
d) Capitalization and earnings of the EWG or
foreign utility company during the reporting period.
None
e) Identify any service, sales or construction
contract(s) between the EWG or foreign utility company and a
system company, and describe the services to be rendered or
goods sold and fees or revenues under such agreement(s).
None
-6-
<PAGE>
EXHIBIT A
A consolidating statement of income and retained
earnings of the claimant and its subsidiary companies for the last
calendar year, together with a consolidating balance sheet of
claimant and its subsidiary companies as of the close of such
calendar year.
The above-named claimant has caused this statement to be
duly executed on its behalf by its authorized officer on this 27th
day of February 1997.
SOUTH JERSEY INDUSTRIES, INC.
By /s/ Gerald S. Levitt
---------------------------
GERALD S. LEVITT
Vice President
CORPORATE SEAL
ATTEST:
/s/ GEORGE L. BAULIG
- ---------------------------------
GEORGE L. BAULIG
Secretary and Treasurer
Name, title and address of officer to whom notices and
correspondence concerning this statement should be addressed:
George L. Baulig, Secretary and Treasurer
South Jersey Industries, Inc.
Number One South Jersey Plaza
Route 54
Folsom, New Jersey 08037
-7-
<PAGE>
EXHIBIT B
FINANCIAL DATA SCHEDULE
Consolidated Financial Data Schedule filed via EDGAR as part
of this report on Form U-3A-2.
-8(a)-
<PAGE>
EXHIBIT C
EWG ORGANIZATIONAL CHART
Not Applicable - See response to Item 4.
-8(b)-
<PAGE>
<TABLE>
SOUTH JERSEY INDUSTRIES, INC.
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(In Thousands)
<CAPTION>
South South Energy & South R & T
Jersey Jersey Minerals, Jersey Group, Elim.
Industries, Gas Inc. Energy Inc. & Consd.
Inc. Company Consd. Company Consd. Total Adjust. Total
----------- --------- ---------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Utility $0 $330,334 $0 $0 $0 $330,334 [C] ($1,039) $329,295
Nonutility 317 0 6,422 20,497 0 27,236 [C] (1,073) 26,163
----------- --------- ---------- -------- --------- --------- --------- ---------
Total Operating Revenues 317 330,334 6,422 20,497 0 357,570 (2,112) 355,458
----------- --------- ---------- -------- --------- --------- --------- ---------
OPERATING EXPENSE:
Gas Purchased for Resale 0 186,141 0 0 0 186,141 [C] (1,003) 185,138
Operation - Utility 0 40,653 0 0 0 40,653 [C] (36) 40,617
Operation - Nonutility 1,123 0 5,775 20,644 0 27,542 [C] (791) 26,751
Maintenance 21 5,406 0 7 0 5,434 0 5,434
Depreciation 3 14,839 10 13 0 14,865 [D] (1) 14,864
Current Federal Income Taxes (1,088) 639 (188) (43) 0 (680) 0 (680)
Def. and Non-Curr. Fed. Income Taxes 476 9,987 396 (24) 0 10,835 0 10,835
Gross Receipts & Franchise Taxes 0 31,417 0 0 0 31,417 0 31,417
Other Taxes 70 2,403 43 7 0 2,523 0 2,523
----------- --------- ---------- -------- --------- --------- --------- ---------
Total Operating Expenses 605 291,485 6,036 20,604 0 318,730 (1,831) 316,899
----------- --------- ---------- -------- --------- --------- --------- ---------
Operating Income (288) 38,849 386 (107) 0 38,840 (281) 38,559
OTHER INCOME:
Dividends from Subsidiaries 15,880 0 0 0 0 15,880 [A] (15,880) 0
Equity in Undistrib. Earnings of Subs 3,556 0 0 0 0 3,556 [A] (3,556) 0
----------- --------- ---------- -------- --------- --------- --------- ---------
Income Before Interest Charges 19,148 38,849 386 (107) 0 58,276 (19,717) 38,559
----------- --------- ---------- -------- --------- --------- --------- ---------
INTEREST CHARGES:
Long-Term Debt 481 13,636 0 0 0 14,117 0 14,117
Short-Term Debt 375 5,382 47 11 0 5,815 [C] (282) 5,533
Other 28 442 0 0 0 470 [E] 174 644
----------- --------- ---------- -------- --------- --------- --------- ---------
Total Interest Charges 884 19,460 47 11 0 20,402 (108) 20,294
----------- --------- ---------- -------- --------- --------- --------- ---------
Income from Continuing Operations Before Pref
Stock Dividend Requirements of Sub 18,264 19,389 339 (118) 0 37,874 (19,609) 18,265
Pref Stock Dividend Requirements of Sub 0 174 0 0 0 174 [E] (174) 0
----------- --------- ---------- -------- --------- --------- --------- ---------
Income from Continuing Operations 18,264 19,215 339 (118) 0 37,700 (19,435) 18,265
Equity in Undistributed Earnings
of Discontinued Subsidiaries 12,232 0 0 0 0 12,232 [A] (12,232) 0
Income(Loss) from Disc. Operations - Net 0 0 600 0 (1,007) (407) 0 (407)
Net Gain(Loss) on Disposal of Disc. Oper 0 0 15,032 0 (2,392) 12,640 0 12,640
----------- --------- ---------- -------- --------- --------- --------- ---------
Net Inc(Loss) Applicable to Common Stock $30,496 $19,215 $15,971 ($118) ($3,399) $62,165 ($31,667) $30,498
=========== ========= ========== ======== ========= ========= ========= =========
-9-
<PAGE>
SOUTH JERSEY INDUSTRIES, INC.
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1996
(In Thousands)
South South Energy & South R & T
Jersey Jersey Minerals, Jersey Group, Elim.
Industries, Gas Inc. Energy Inc. & Consd.
Inc. Company Consd. Company Consd. Total Adjust. Total
----------- --------- ---------- -------- --------- --------- --------- ---------
Balance at Beginning of Period $33,775 $47,364 $10,539 $384 ($3,057) $89,005 [B] ($55,300) $33,705
Net Income Applicable to Common Stock 30,496 19,215 15,971 (118) (3,399) 62,165 (31,667) 30,498
----------- --------- ---------- -------- --------- --------- --------- ---------
64,271 66,579 26,510 266 (6,456) 151,170 (86,967) 64,203
Dividends Declared - Cash 15,460 15,057 730 93 0 31,340 [A] (15,880) 15,460
----------- --------- ---------- -------- --------- --------- --------- ---------
Balance at End of Period $48,811 $51,522 $25,780 $173 ($6,456) $119,830 ($71,087) $48,743
=========== ========= ========== ======== ========= ========= ========= =========
-10-
<PAGE>
</TABLE>
<TABLE>
SOUTH JERSEY INDUSTRIES, INC.
CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1996
(In Thousands)
<S> <C> <C>
[A] Dividends from Subsidiaries $15,880
Equity in Undistributed Earnings
of Subsidiaries 3,556
Equity in Undistributed Earnings
of Discontinued Subsidiaries 12,232
Retained Earnings - Dividends Paid - Cash $15,880
Investment in Subsidiaries 15,788
To eliminate intercompany dividends paid and
equity in undistributed earnings recorded by
South Jersey Industries, Inc.
[B] Retained Earnings - 1/1/96 $55,300
Deferred Federal Income Taxes 60
Accumulated Depreciation & Depletion - 1/1/96 14
Investment in Subsidiaries $55,230
Non-Utility Property 144
To eliminate prior inter-company gain and
retained earnings of subsidiaries at 1/1/96
previously recorded by South Jersey Industries,
Inc. under the equity method of accounting.
[C] Operating Revenues - Utility $1,039
Operating Revenues - Nonutility 1,073
Gas Purchased for Resale $1,003
Operating Expense - Utility 36
Operating Expense - Nonutility 791
Interest Expense - Short-Term Debt 282
To eliminate intercompany revenue and expense.
[D] Accumulated Depreciation & Depletion $1
Depreciation Expense $1
To eliminate South Jersey Industries, Inc.
depreciation on Millville property gain.
[E] Other Interest Expense $174
Preferred Stock Dividend $174
To reclassify Preferred Stock Dividend
requirement of subsidiary.
-11-
<PAGE>
</TABLE>
<TABLE>
SOUTH JERSEY INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1996
(In Thousands)
<CAPTION>
South South Energy & South R & T
Jersey Jersey Minerals, Jersey Group Elim.
Industries, Gas Inc. Energy Inc. & Consd.
Inc. Company Consd. Company Consd. Total Adjust. Total
----------- --------- ---------- -------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
PROPERTY, PLANT & EQUIPMENT:
Utility Plant, original cost $0 $575,982 $0 $0 $0 $575,982 $0 $575,982
Gas Plant Acq Adjustment 0 2,000 0 0 0 2,000 0 2,000
Gas Stored Underground 0 1,322 0 0 0 1,322 0 1,322
Accum Depre & Amortization 0 (157,682) 0 0 0 (157,682) 0 (157,682)
Nonutil Prop & Equip., at cost 1,629 0 1,808 49 0 3,486 [4] (144) 3,342
Accum Depre & Depletion (156) 0 (881) (39) 0 (1,076) [5] 16 (1,060)
----------- --------- ---------- -------- --------- --------- ---------- ---------
Prop, Plant & Equip - Net 1,473 421,622 927 10 0 424,032 (128) 423,904
----------- --------- ---------- -------- --------- --------- ---------- ---------
INVESTMENTS:
Investments in Subsidiaries 177,778 0 0 0 0 177,778 [1] (177,778) 0
Investment in Affiliate 0 0 1,286 0 0 1,286 0 1,286
----------- --------- ---------- -------- --------- --------- ---------- ---------
Total Investment 177,820 0 1,821 0 0 179,641 (177,778) 1,863
----------- --------- ---------- -------- --------- --------- ---------- ---------
CURRENT ASSETS:
Cash & Temp Cash Investments 339 7,469 38,785 87 225 46,905 0 46,905
Notes Rec - Assoc Companies 9,673 0 13,110 400 0 23,183 [3] (23,183) 0
Notes Rec - LLC 0 0 2,800 0 0 2,800 0 2,800
Accounts Receivable 573 31,416 987 2,977 2,820 38,773 [8] (59) 38,714
Unbilled Revenues 0 17,855 0 0 0 17,855 0 17,855
Provisions for Uncollectibles 0 (1,032) 0 (63) (330) (1,425) 0 (1,425)
Accts Rec - Assoc Companies 1,053 86 82 32 1,450 2,703 [2] (2,703) 0
Nat Gas in Storage, Avg Cost 0 22,638 0 0 0 22,638 0 22,638
Mat & Supplies, Avg Cost 0 4,055 0 0 59 4,114 0 4,114
Assets Held for Disposal 0 0 0 0 4,966 4,966 0 4,966
Accum. Deferred Income Taxes 4 833 1 16 55 909 [6] (909) 0
Prep Gross Recpts & Franchise Tax 0 1,602 0 0 0 1,602 0 1,602
Other Prepay and Current Assets 56 1,562 5 16 134 1,773 0 1,773
----------- --------- ---------- -------- --------- --------- ---------- ---------
Total Current Assets 11,698 86,484 55,770 3,465 9,379 166,796 (26,854) 139,942
----------- --------- ---------- -------- --------- --------- ---------- ---------
NONCURRENT ACCTS REC - Merch 0 1,999 0 0 0 1,999 0 1,999
----------- --------- ---------- -------- --------- --------- ---------- ---------
NONCURRENT ASSETS:
Gross Recpts & Franchise Taxes 0 4,468 0 0 0 4,468 0 4,468
Environmental Remediation Costs 0 57,266 0 0 0 57,266 0 57,266
Accum. Deferred Income Taxes 425 6,232 1,227 28 1,610 9,522 [7] (9,522) 0
Deprec. Flowthrough Pre-1976 0 14,977 0 0 0 14,977 0 14,977
Deferred Fuel Costs - Net 0 404 0 0 0 404 0 404
Def. Postretirement Benefit Costs 0 5,153 0 0 0 5,153 0 5,153
Other 1 8,388 577 0 16 8,982 0 8,982
----------- --------- ---------- -------- --------- --------- ---------- ---------
Total Noncurrent Assets 426 96,888 1,804 28 1,626 100,772 (9,522) 91,250
----------- --------- ---------- -------- --------- --------- ---------- ---------
Total $191,375 $606,993 $59,787 $3,503 $11,005 $872,663 ($214,282) $658,381
=========== ========= ========== ======== ========= ========= ========== =========
-12-
<PAGE>
SOUTH JERSEY INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1996
(In Thousands)
South South Energy & South R & T
Jersey Jersey Minerals, Jersey Group Elim.
Industries, Gas Inc. Energy Inc. & Consd.
Inc. Company Consd. Company Consd. Total Adjust. Total
----------- --------- ---------- -------- --------- --------- ------- ---------- ---------
CAPITALIZATION AND LIABILITIES
COMMON EQUITY:
Common Stock SJI
Par Value $1.25 a share
Authorized - 20,000,000 shares
Outstanding - 10,756,679
10,722,171 $13,446 $0 $0 $0 $0 $13,446 $0 $13,446
Common Stock - Subsidiaries 0 5,848 13,283 50 1,000 20,181 [1] (20,181) 0
Premium on Common Stock 110,542 77,194 1,584 0 7,800 197,120 [1] (86,578) 110,542
Retained Earnings 48,811 51,522 25,780 173 (6,456) 119,830 [1,4,5] (71,087) 48,743
----------- --------- ---------- -------- --------- --------- ---------- ---------
Total Common Equity 172,799 134,564 40,647 223 2,344 350,577 (177,846) 172,731
----------- --------- ---------- -------- --------- --------- ---------- ---------
CUMULATIVE PREFERRED STOCK:
SJG - Par Value $100 a share
Authorized - 48,204 shares
Outstanding:
Series A, 4.70% - 3,900 shares 0 390 0 0 0 390 0 390
Series B, 8% - 19,242 shares 0 1,924 0 0 0 1,924 0 1,924
----------- --------- ---------- -------- --------- --------- ---------- ---------
Total Preferred Stock 0 2,314 0 0 0 2,314 0 2,314
----------- --------- ---------- -------- --------- --------- ---------- ---------
L-T-D (less current maturities
& sinking fund requirements) 0 149,736 0 0 0 149,736 0 149,736
----------- --------- ---------- -------- --------- --------- ---------- ---------
CURRENT LIABILITIES:
Notes Payable to Banks 0 108,300 0 0 0 108,300 0 108,300
Current Maturities of L-T-D 0 6,603 0 0 0 6,603 0 6,603
Notes Pay - Assoc Companies 13,510 0 3,440 0 6,233 23,183 [3] (23,183) 0
Accounts Payable 481 48,018 0 3,227 320 52,046 [2,8] (1,745) 50,301
Accts Pay to Assoc Companies 130 287 477 12 111 1,017 [2] (1,017) 0
Customer Deposits 0 6,050 0 0 0 6,050 0 6,050
Accum. Deferred Income Taxes 4 5,388 1 2 54 5,449 [6,9] (5,449) 0
Environmental Remediation Costs 0 9,377 0 0 0 9,377 0 9,377
Interest Accrued 0 3,747 0 0 0 3,747 0 3,747
Dividends Declared 3,872 43 0 0 0 3,915 0 3,915
Provision for Loss on Sale 0 0 0 0 1,266 1,266 0 1,266
Other Current Liabilities (615) (1,586) 11,709 (34) (292) 9,182 0 9,182
----------- --------- ---------- -------- --------- --------- ---------- ---------
Total Current Liabilities 17,382 186,227 15,627 3,207 7,692 230,135 (31,394) 198,741
----------- --------- ---------- -------- --------- --------- ---------- ---------
DEF CR & NON-CURRENT LIABILITIES:
Pension and Other Post-
Retirement Benefits Reserve 201 9,551 388 78 0 10,218 0 10,218
Accum. Deferred Income Taxes 102 80,093 295 (5) 378 80,863 [4,7,9] (5,042) (75,821)
Investment Tax Credit 0 6,025 0 0 0 6,025 0 6,025
Environmental Remediation Costs 0 32,323 2,030 0 0 34,353 0 34,353
Other 891 6,160 800 0 591 8,442 0 8,442
----------- --------- ---------- -------- --------- --------- ---------- ---------
Total Def Cr & Non-Cur Liab 1,194 134,152 3,513 73 969 139,901 (5,042) 134,859
----------- --------- ---------- -------- --------- --------- ---------- ---------
Total $191,375 $606,993 $59,787 $3,503 $11,005 $872,663 ($214,282) $658,381
=========== ========= ========== ======== ========= ========= ========== =========
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<PAGE>
</TABLE>
<TABLE>
SOUTH JERSEY INDUSTRIES, INC.
CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS
BALANCE SHEET - DECEMBER 31, 1996
(In Thousands)
<S> <C> <C>
[1] Common Stock - Subsidiaries $20,181
Premium on Common Stock 86,578
Retained Earnings 71,019
Investment in Subsidiaries $177,778
To eliminate South Jersey Industries, Inc. investment in subsidiaries
which is maintained on the equity method of accounting.
[2] Accounts Payable - Associated Companies $1,017
Accounts Payable 1,686
Accounts Receivable - Associated Companies $2,703
To eliminate intercompany accounts receivable and payable.
[3] Notes Payable - Associated Companies $23,183
Notes Receivable - Associated Companies $23,183
To eliminate intercompany short-term notes between
South Jersey Industries, Inc. and Subsidiaries
[4] Retained Earnings $84
Accumulated Deferred Income Taxes - Noncurrent Liability 60
Non-Utility Property $144
To eliminate South Jersey Gas Company gain and related deferred
taxes on sale of Millville property to South Jersey Industries, Inc.
[5] Accumulated Depreciation & Depletion $16
Retained Earnings $16
To eliminate South Jersey Industries, Inc. depreciation on Millville property
gain.
[6] Accumulated Deferred Income Taxes - Current Liability $909
Accumulated Deferred Income Taxes - Current Asset $909
To net current accumulated DFIT asset and Liability
[7] Accumulated Deferred Income Taxes - Noncurrent Liability $9,522
Accumulated Deferred Income Taxes - Noncurrent Asset $9,522
To net noncurrent accumulated DFIT asset and Liability
[8] Accounts Payable $59
Accounts Receivable $59
To eliminate intercompany gas receivable and payable between
South Jersey Gas Company and South Jersey Energy Company.
[9] Accumulated Deferred Income Taxes - Current Liability $4,540
Accumulated Deferred Income Taxes - Noncurrent Liability $4,540
To net current and noncurrent DFIT liability.
-14-
<PAGE>
</TABLE>
<TABLE>
R & T GROUP, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1996
(In Thousands)
<CAPTION>
S. W. CAPE R & T
R & T DOWNER R AND T ONSHORE ATLANTIC CASTELLINI
GROUP, JR. CO., CASTELLINI CONSTRUCT CRANE CONSTRUCT
INC. INC. CO., INC. CO., INC. CO., INC. CO., INC. TOTAL ELIMIN. TOTAL
-------- -------- ---------- ---------- --------- ---------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Nonutility $507 $5,954 $4,503 $801 $215 $5,127 $17,107 [C] ($26) $17,081
-------- -------- ---------- ---------- --------- ---------- --------- -------- --------
OPERATING EXPENSES:
Operation - Nonutility 1,268 5,862 3,306 2,214 16 4,811 17,477 0 17,477
Maintenance 0 263 226 23 22 242 776 0 776
Depreciation 0 850 583 171 4 504 2,112 0 2,112
Current Federal Income Taxes (517) 203 206 (550) 80 (101) (679) 0 (679)
Deferred Federal Income Taxes (32) (682) (152) (70) (27) (149) (1,112) 0 (1,112)
Other Taxes 12 346 223 95 18 173 867 0 867
-------- -------- ---------- ---------- --------- ---------- --------- -------- --------
Total Operating Expenses 731 6,842 4,392 1,883 113 5,480 19,441 0 19,441
-------- -------- ---------- ---------- --------- ---------- --------- -------- --------
Operating Income (Loss) (224) (888) 111 (1,082) 102 (353) (2,334) (26) (2,360)
OTHER INCOME (LOSS):
Dividends from Subsidiaries 1,109 0 0 0 0 0 1,109 [A] (1,109) 0
Equity in Net Undistributed
Losses of Subsidiaries (3,484) 0 0 0 0 0 (3,484) [A] 3,484 0
-------- -------- ---------- ---------- --------- ---------- --------- -------- --------
Income (Loss) Before
Interest Charges (2,599) (888) 111 (1,082) 102 (353) (4,709) 2,349 (2,360)
-------- -------- ---------- ---------- --------- ---------- --------- -------- --------
INTEREST CHARGES:
Long-Term Debt 702 0 0 0 0 0 702 0 702
Short-Term Debt 98 5 2 97 0 161 363 [C] (26) 337
-------- -------- ---------- ---------- --------- ---------- --------- -------- --------
Total Interest Charges 800 5 2 97 0 161 1,065 (26) 1,039
-------- -------- ---------- ---------- --------- ---------- --------- -------- --------
Net Income (Loss) Applicable
to Common Stock (3,399) (893) 109 (1,179) 102 (514) (5,774) 2,375 (3,399)
Retained Earnings (Deficit) at
Beginning of Period (3,057) 444 436 (2,920) (310) (358) (5,765) [B] 2,708 (3,057)
Dividends Declared - Cash 0 150 599 0 360 0 1,109 [A] (1,109) 0
-------- -------- ---------- ---------- --------- ---------- --------- -------- --------
Retained Earnings (Deficit) at
End of Period ($6,456) ($599) ($54) ($4,099) ($568) ($872) ($12,648) $6,192 ($6,456)
======== ======== ========== ========== ========= ========== ========= ======== ========
-15-
<PAGE>
</TABLE>
<TABLE>
R & T GROUP, INC. AND SUBSIDIARIES
CONSOLIDATING ADJUSTMENTS & ELIMINATIONS
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1996
(In Thousands)
<S> <C> <C>
[A] Dividends from Subsidiaries $1,109
Investments in Subsidiaries 3,484
Equity in Undistributed Earnings of Subsidiaries $3,484
Dividends Declared - Cash 1,109
To eliminate inter-company dividends and undistributed
earnings of subsidiaries.
[B] Investment in Subsidiaries $2,708
Deficit - January 1, 1996 $2,708
To eliminate the deficit of subsidiaries at 1/1/96
previously recorded by R&T Group, Inc. under the equity
method of accounting.
[C] Operating Revenues - Nonutility $26
Interest Expense - Short-Term Debt $26
To eliminate inter-company revenue and interest expense.
-16-
<PAGE>
</TABLE>
<TABLE>
R & T GROUP, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1996
(In Thousands)
<CAPTION>
S. W. CAPE R & T
R & T DOWNER R AND T ONSHORE ATLANTIC CASTELLINI
GROUP, JR. CO., CASTELLINI CONSTRUCT CRANE CONSTRUCT
INC. INC. CO., INC. CO., INC. CO., INC. CO., INC. TOTAL ELIMIN. TOTAL
-------- -------- ---------- ---------- --------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
NONUTILITY PROPERTY, PLANT
& EQUIPMENT AT COST:
Land and Improvements $0 $313 $53 $255 $0 $0 $621 $0 $621
Building and Improvements 0 278 481 0 0 1 760 0 760
Machinery and Equipment 0 3,290 2,368 1,603 18 2,926 10,205 0 10,205
-------- -------- ---------- ---------- --------- ---------- -------- -------- --------
Total 0 3,881 2,902 1,858 18 2,927 11,586 0 11,586
Accumulated Depreciation 0 (2,317) (1,939) (1,180) (18) (1,166) (6,620) 0 (6,620)
-------- -------- ---------- ---------- --------- ---------- -------- -------- --------
Property, Plant &
Equipment - Net 0 1,564 963 678 0 1,761 4,966 0 4,966
-------- -------- ---------- ---------- --------- ---------- -------- -------- --------
INVESTMENT IN SUBSIDIARIES 4,217 0 0 0 0 0 4,217 [B] (4,217) 0
-------- -------- ---------- ---------- --------- ---------- -------- -------- --------
CURRENT ASSETS:
Cash and Cash Equivalents 27 52 10 91 3 42 225 0 225
Accounts Receivable 0 629 1,296 350 11 534 2,820 0 2,820
Provision for Uncollectibles 0 (168) (10) (120) (7) (25) (330) 0 (330)
Accts Rec - Assoc Companies 42 990 630 105 0 11 1,778 [A] (328) 1,450
Notes Rec - Assoc Companies 4,468 0 0 0 35 0 4,503 [C] (4,503) 0
Materials and Supplies 0 29 0 6 0 24 59 0 59
Accum. Deferred Income Taxes 0 49 0 0 0 6 55 0 55
Prepayments & Other 2 44 30 25 0 33 134 0 134
-------- -------- ---------- ---------- --------- ---------- -------- -------- --------
Total Current Assets 4,539 1,625 1,956 457 42 625 9,244 (4,831) 4,413
-------- -------- ---------- ---------- --------- ---------- -------- -------- --------
NONCURRENT ASSETS:
Accumulated Def Income Taxes 363 449 90 392 74 242 1,610 0 1,610
Other 0 0 3 1 0 12 16 0 16
-------- -------- ---------- ---------- --------- ---------- -------- -------- --------
Total Noncurrent Assets 363 449 93 393 74 254 1,626 0 1,626
-------- -------- ---------- ---------- --------- ---------- -------- -------- --------
Total $9,119 $3,638 $3,012 $1,528 $116 $2,640 $20,053 ($9,048) $11,005
======== ======== ========== ========== ========= ========== ======== ======== ========
-17-
<PAGE>
R & T GROUP, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1996
(In Thousands)
S. W. CAPE R & T
R & T DOWNER R AND T ONSHORE ATLANTIC CASTELLINI
GROUP, JR. CO., CASTELLINI CONSTRUCT CRANE CONSTRUCT
INC. INC. CO., INC. CO., INC. CO., INC. CO., INC. TOTAL ELIMIN. TOTAL
-------- -------- ---------- ---------- --------- ---------- -------- -------- --------
CAPITALIZATION AND LIABILITIES
COMMON EQUITY:
Common Stock - R&T Group, Inc.
No Par Value
Authorized 1,000 shares
Outstanding 500 shares $1,000 $0 $0 $0 $0 $0 $1,000 $0 $1,000
Common Stock - Subsidiaries 0 3,639 2,576 1,387 502 0 8,104 [B] (8,104) 0
Paid in Capital - R&T Group, Inc. 7,800 0 0 0 0 0 7,800 0 7,800
Paid in Capital - Subsidiaries 0 0 0 2,015 90 200 2,305 [B] (2,305) 0
Retained Earnings (Deficit) (6,456) (599) (54) (4,099) (568) (872) (12,648) [B] 6,192 (6,456)
-------- -------- ---------- ---------- --------- ---------- -------- -------- --------
Total Common Equity 2,344 3,040 2,522 (697) 24 (672) 6,561 (4,217) 2,344
-------- -------- ---------- ---------- --------- ---------- -------- -------- --------
CURRENT LIABILITIES:
Notes Payable - Associated
Company 6,268 75 115 1,950 0 2,328 10,736 [C] (4,503) 6,233
Accounts Payable 0 71 33 93 0 123 320 0 320
Accounts Payable to Associated
Companies 67 40 164 37 0 131 439 [A] (328) 111
Accum. Deferred Income Taxes 1 15 10 14 1 13 54 0 54
Provision for Loss on Sale 728 0 0 0 0 538 1,266 0 1,266
Other (413) 410 94 (356) 42 (69) (292) 0 (292)
-------- -------- ---------- ---------- --------- ---------- -------- -------- --------
Total Current Liabilities 6,651 611 416 1,738 43 3,064 12,523 (4,831) 7,692
-------- -------- ---------- ---------- --------- ---------- -------- -------- --------
DEF CR & NON-CURRENT LIABILITIES
Accumulated Deferred Income Taxes (55) (13) 74 102 49 221 378 0 378
Other 179 0 0 385 0 27 591 0 591
-------- -------- ---------- ---------- --------- ---------- -------- -------- --------
Total Def Cr & Non-Cur Liab 124 (13) 74 487 49 248 969 0 969
-------- -------- ---------- ---------- --------- ---------- -------- -------- --------
Total $9,119 $3,638 $3,012 $1,528 $116 $2,640 $20,053 ($9,048) $11,005
======== ======== ========== ========== ========= ========== ======== ======== ========
-18-
<PAGE>
</TABLE>
<TABLE>
R & T GROUP, INC. AND SUBSIDIARIES
CONSOLIDATING ADJUSTMENTS & ELIMINATIONS
BALANCE SHEET
AS OF DECEMBER 31, 1996
(In Thousands)
<S> <C> <C>
[A] Accounts Payable - Associated Companies $328
Accounts Receivable - Associated Companies $328
To eliminate inter-company accounts receivable
and accounts payable.
[B] Common Stock - Subsidiaries $8,104
Paid in Capital - Subsidiaries 2,305
Deficit $6,192
Investment in Subsidiaries 4,217
To eliminate R&T Group, Inc. investment in subsidiaries
which is maintained on the equity method of accounting.
[C] Long-Term Note Receivable - Associated Companies $4,503
Notes Receivable - Associated Companies $4,503
To reclassify note of South Jersey Industries, Inc. (SJI)
(eliminated in consolidation at SJI level).
-19-
<PAGE>
</TABLE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATING FINANCIAL STATEMENTS
1. Summary of Significant Accounting Practices:
Consolidation - The consolidated financial statements
include the accounts of South Jersey Industries, Inc. (SJI
or the Company) and all of its subsidiaries. Certain
intercompany transactions, amounting to approximately $7.3
million in 1996, were not required to be eliminated. Those
amounts were capitalized to utility plant or environmental
remediation costs on the South Jersey Gas Company (SJG)
books of account and are recoverable through the rate-making
process (See Note 13). 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.
Estimates and Assumptions - The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the amounts reported in the
financial statements and related disclosures. Therefore,
actual results could differ from those estimates.
Regulation - SJG is subject to the rules and regulations of
the New Jersey Board of Public Utilities (BPU) and maintains
its accounts in accordance with the prescribed Uniform
System of Accounts of that Board (See Notes 4 & 14).
Utility Revenues - SJG bills most of its customers on a
monthly cycle basis, although certain commercial and
industrial customers are billed at or near the end of each
month. An accrual is made to recognize the unbilled revenues
from the date of the last bill to the end of period.
In accordance with a BPU order, SJG is allowed to recover
the excess cost of gas sold over the cost included in base
rates through the Levelized Gas Adjustment Clause (LGAC).
This collection is made on a forecasted basis upon BPU
order. Under-recoveries and over-recoveries of gas costs
are deferred and included in the determination of the
following year's LGAC. Interest is paid on overcollected
LGAC balances based on SJG's return on rate base as
determined in its base rate proceedings.
SJG's tariff also includes a Temperature Adjustment Clause
(TAC) and a Remediation Adjustment Clause (RAC). These
clauses are designed to 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, respectively. TAC adjustments affect
-20-
<PAGE>
revenue, income and cash flows since extremely cold weather
can generate credits to customers, while extremely warm
weather during the winter season can result in additional
billings to customers (See Note 14). RAC adjustments do not
directly affect earnings because costs are deferred and
recovered through rates over 7-year amortization periods
(See Note 13).
Property, Plant & Equipment - Utility plant is stated at
original cost as defined for regulatory purposes; nonutility
plant is stated at cost. The cost of additions, replacements
and renewals of property is charged to the appropriate plant
account.
New Accounting Pronouncements - 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. It requires that long-lived assets
be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset
may not be recoverable. The resultant impairment was
included in discontinued operations (See Note 8 for
discussion of FASB No. 123).
Depreciation and Amortization - Depreciation of utility
plant is provided on a straight-line basis over the
estimated remaining lives of the various classes of
property. These estimates are periodically reviewed and
adjustments are made as required after BPU approval. The
composite rate per annum for all depreciable utility
property was approximately 2.8 percent in 1996. Generally,
with the exception of extraordinary retirements, accumulated
depreciation is charged with the cost of depreciable utility
property retired, together with removal costs less salvage.
The gas plant acquisition adjustment is being amortized on a
straight-line basis over a 40-year period. The unamortized
balance amounting to $2.0 million at December 31, 1996, is
not included in rate base. Depreciation of nonutility
property is computed generally on a straight-line basis over
the estimated useful lives of the property, ranging up to 45
years. Any gain or loss realized upon the disposition of
nonutility property is recognized in determining net income.
Federal Income and Other Taxes - Deferred Income Taxes are
provided for all significant temporary differences between
book and taxable income (See Notes 5 & 7).
Statements of Cash Flows - For purposes of reporting cash
flows, all highly liquid investments with original
maturities of three months or less are considered cash
equivalents.
-21-
<PAGE>
2. Divestitures and Affiliations:
Divestitures - On December 3, 1996, Energy & Minerals, Inc.
(EMI), a subsidiary of SJI, sold the common stock of The
Morie Company, Inc. (Morie), its sand mining and processing
subsidiary, in a cash transaction for approximately $55.3
million. The sale price is subject to customary post-closing
adjustments to be determined after the sale. The net book
value of assets sold was approximately $27.9 million. Cash,
certain real estate and other miscellaneous assets, along
with certain liabilities, remaining after the sale were
transferred to the books of EMI (See Note 13). The gain on
the sale of $15.0 million, net of applicable income taxes of
$11.3 million and selling costs of $1.1 million, is included
in the consolidated income statement under the caption "Net
Gain on the Disposal of Discontinued Operations".
In December 1996, the Company developed a formal plan to
discontinue the operations of its construction and
environmental services operations, R & T Group, Inc. (R & T)
and its five subsidiaries. As a result, the Company
recognized a net loss of $2.4 million, net of applicable
income tax credits of $1.3 million, on the planned
disposition of R & T's assets. This loss is reflected in the
consolidated income statement under the caption "Net Gain on
the Disposal of Discontinued Operations".
Summarized operating results of the discontinued operations
for 1996 were (in thousands):
Operating Revenues:
Sand Mining $ 30,054
Construction 17,081
--------
Total Operating Revenues $ 47,135
========
Income (Loss) before Income Taxes:
Sand Mining $ 68
Construction (1,348)
Income Tax Credits 873
--------
Loss from Discontinued Operations $ (407)
========
Loss per Common Share
from Discontinued Operations $ (0.04)
========
Affiliations - On April 1, 1996, South Jersey Fuel, Inc.
(SJF), a subsidiary of EMI, and Union Pacific Fuels, Inc.
joined efforts in the formation of South Jersey Resources
Group LLC, to provide natural gas storage, peaking services
and transportation capacity for wholesale customers in New
Jersey and surrounding states. SJF holds a 50 percent non-
controlling interest in this affiliation and, accordingly,
accounts for the investment under the equity method.
-22-
<PAGE>
3. Segments of Business:
Information about the Company's operations in different
industry segments for 1996 is presented below (in
thousands):
Operating Revenues:
Gas Utility Operations $330,334
Other Industries 27,237
--------
Total 357,571
Intersegment Sales (2,113)
--------
Consolidated Operating Revenues $355,458
========
Operating Income:
Gas Utility Operations $ 49,476
Other Industries 327
--------
Total 49,803
Federal Income Taxes (10,155)
General Corporate Expense (1,089)
--------
Total Operating Income $ 38,559
========
Depreciation, Depletion and Amortization:
Gas Utility Operations $ 17,540
Other Industries 35
Discontinued Operations 3,887
--------
Total $ 21,462
========
Property Additions:
Gas Utility Operations $ 39,384
Other Industries 6
Discontinued Operations 2,841
--------
Total $ 42,231
========
Identifiable Assets:
Gas Utility Operations $599,926
Other Industries 8,041
Discontinued Operations 9,341
--------
Total 617,308
Corporate Assets 67,018
Intersegment Assets (25,945)
--------
Total Assets $658,381
========
-23-
<PAGE>
Gas utility operations consist primarily of natural gas
distribution to residential, commercial and industrial
customers. Other industries include the natural gas
acquisition and transportation service companies (See Note
2).
Total operating revenues by industry segment include both
sales to unaffiliated customers, as reported in the
Company's statements of consolidated income, and
intercompany sales, which are accounted for generally at the
fair market value of the goods or services rendered.
Operating income is total revenues less operating expenses,
Federal Income Taxes, and general corporate expenses, as
shown on the statements of consolidated income.
Identifiable assets are those assets that are used in each
segment of the Company's operations. Corporate assets are
principally cash and cash equivalents, and land, buildings
and equipment held for corporate use.
4. Recent Regulatory Actions:
On December 14, 1994, the BPU granted SJG a rate increase of
$12.1 million based on a 9.51 percent rate of return on rate
base, which included an 11.5 percent return on equity.
Nearly the entire amount of the increase comes from the
residential, commercial and small industrial customer
classes. In addition, SJG is allowed to retain the first
$4.0 million of pre-tax interruptible and off-system margins
combined and 20 percent of margins above that level. As part
of the tariff changes approved, SJG also implemented tariffs
which give large industrial and commercial customers more
opportunities to manage their own gas supplies. These
changes do not have a negative impact on SJG's net income.
On April 10, 1996, SJG received approval from the BPU to
increase its rates by approximately $8.0 million, or 2.9
percent, 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 13).
-24-
<PAGE>
5. Federal Income Taxes:
Income tax expense applicable to operations for 1996 differs
from the tax that would have resulted by applying the
statutory rate to income from operations before Federal
Income Tax for the following reasons (in thousands):
Tax at Statutory Rate $ 9,947
Increase (Decrease) Resulting from:
Amortization of Investment Tax Credits (ITC) (390)
Liberalized Depreciation Under Book
Depreciation on Utility Plant 664
Other - Net (66)
-------
Federal Income Taxes as reported on the
Statements of Consolidated Income 10,155
Tax Associated with Discontinued Operations 5,887
-------
Net Federal Income Taxes $16,042
=======
The provision for Federal Income Taxes for 1996 is comprised
of the following (in thousands):
Current $ (709)
-------
Deferred:
Excess of Tax Depreciation Over
Book Depreciation - Net 4,610
Deferred Fuel Costs 3,340
Environmental Remediation Costs - Net 1,214
Amortization of Gross Receipts Taxes (140)
Alternative Minimum Tax 2,939
Other - Net (709)
-------
Total Deferred 11,254
-------
ITC (390)
-------
Federal Income Taxes as reported on the
on the Statements of 10,155
Tax Associated with Discontinued Operations 5,887
-------
Net Federal Income Taxes $16,042
=======
Deferred income taxes reflect the net tax effect of
temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant components
-25-
<PAGE>
of the Company's net deferred tax liability at December 31,
1996, are as follows (in thousands):
Deferred Tax Liabilities:
Tax Depreciation Over Book Depreciation $60,527
Difference Between Book and Tax
Basis of Property 5,215
Deferred Fuel Costs 4,720
Deferred Regulatory Costs 1,189
Environmental Remediation Costs 5,332
Excess Protected 3,550
Gross Receipts Taxes 1,564
Other 2,351
-------
Total Deferred Tax Liabilities 84,448
-------
Deferred Tax Assets:
Alternative Minimum Tax 1,102
ITC Basis Gross Up 3,207
Other 4,318
-------
Total Deferred Tax Assets 8,627
-------
Net Deferred Tax Liability $75,821
=======
6. Redeemable Cumulative Preferred Stock:
SJG is required to offer annually to purchase 900 and 1,500
shares of its Cumulative Preferred Stock, Series A and
Series B, respectively, at par value, plus accrued
dividends.
The preferred stock dividend requirements of SJG amounting
to approximately $0.2 million for the year 1996 has been
included in the Company's statements of consolidated income
under the caption "Interest and Other Charges".
If preferred stock dividends are in arrears, no dividends
may be declared or paid, or other distribution made on the
SJG Common Stock. If four or more quarterly dividends are in
arrears, the Preferred Shareholders may elect a majority of
the SJG directors.
The Company has 2,500,000 authorized shares of Preference
Stock, no par value, none of which has been issued. The
Company has registered and reserved for the issuance of
15,000 shares of Series A Junior Participating Cumulative
Preferred Stock (Series A Stock) in connection with the
adoption of the Company's Shareholder Rights Plan (See Note
8).
-26-
<PAGE>
7. Deferred Debits and Credits - Federal and Other Taxes:
The primary asset created as a result of adopting FASB No.
109, "Accounting for Income Taxes", was income taxes -
flowthrough depreciation in the amount of $17.6 million as
of January 1, 1993. This amount represented the recording of
the net tax effect of excess liberalized depreciation over
book depreciation on utility plant because of temporary
differences for which, prior to FASB No. 109, deferred taxes
had not previously been provided. These tax benefits were
previously flowed through in rates. As a result of positions
taken in the 1994 rate case, the amortization of the asset
is being recovered through rates over an 18-year period
which began in December 1994.
The ITC attributable to SJG were deferred and continue to be
amortized at the annual rate of 3 percent, which
approximates the life of the related assets.
Effective March 1, 1978, SJG began and continued to accrue
through 1991 for Gross Receipts and Franchise Taxes (GRAFT)
on current revenues rather than on the previous basis of
prior period revenues. The one-time increase resulting from
this change has been deferred and is being amortized on a
straight-line basis to operations over a 30-year period. In
June 1991, New Jersey adopted GRAFT legislation accelerating
tax payments, the carrying costs on which are being
recovered from ratepayers. The legislation also changed the
basis to gas volumes rather than percentage of revenue.
8. Common Stock:
The Company has 20,000,000 shares of Common Stock authorized
of which the following shares were issued and outstanding:
Beginning of Year 10,722,171
New Issues During Year:
Employees' Stock Ownership Plan 5,945
Stock Option & Stock Appreciation
Rights Plan 14,163
Directors' Restricted Stock Plan 14,400
----------
End of Year 10,756,679
==========
The average shares of Common Stock outstanding for 1996 were
10,732,397.
The par value ($1.25 per share) of the stock issued in 1996
has been credited to common stock and the net excess over
par value of approximately $0.4 million has been credited to
Premium on Common Stock.
Effective January 1, 1996, the Company adopted FASB No. 123,
"Accounting for Stock-Based Compensation". This statement
-27-
<PAGE>
defines a fair value based method of accounting for stock-
based compensation. However, the Company has elected, as
permitted by the statement, to continue to measure
compensation costs using the intrinsic value based method of
accounting prescribed by APB Opinion No. 25, "Accounting for
Stock Issued to Employees". Accordingly, there was no
impact from the adoption of FASB No. 123 on the Company's
financial statements. The Company has determined that the
pro forma effect of adoption of the fair value based method
of accounting on net income and earnings per share would be
immaterial for the year ended December 31, 1996.
Stock Option and Stock Appreciation Rights Plan - Under this
plan, 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, 2007.
At December 31, 1996, the Company had 34,990 options
outstanding, exercisable at prices from $17.16 to $24.69 per
share. During 1996, 14,550 options were exercised at a price
of $17.89 per share. No options were granted in 1996. No
stock appreciation rights have been issued under the plan.
The stock options outstanding at December 31, 1996, did not
have a material effect on the earnings per share
calculations.
Dividend Reinvestment and Stock Purchase Plan (DRP) and
Employees' Stock Ownership Plan (ESOP) - Shares of common
stock offered through the DRP are currently purchased in the
open market. Prior to 1995, shares offered pursuant to the
DRP were purchased directly from the Company. All shares
offered through the ESOP are issued directly by the Company.
As of December 31, 1996, 399,093 and 40,141 shares of
authorized, but unissued, Common Stock were reserved for
future issuance to the DRP and ESOP, respectively.
Directors' Restricted Stock Plan - On September 20, 1996,
the Board of Directors adopted a restricted stock plan.
Under this plan, an initial award of 13,800 shares was
granted on December 4, 1996, at a market value of $24.00 per
share. The plan also provides for annual awards and, on
December 5, 1996, 600 additional shares were granted at a
market value of $24.125 per share. Initial awards will vest
over a five-year period, with 20 percent of such awards
vesting per year. Annual awards will vest on the third
anniversary of each award. Shares issued as restricted stock
are held by the Company until the attached restrictions
lapse. The market value of the stock on the date granted is
recorded as compensation expense over the applicable vesting
period.
Shareholder Rights Plan - On September 20, 1996, the Board
of Directors adopted a shareholder rights plan that provides
for the distribution of one right for each share of common
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stock outstanding on October 11, 1996. Each right entitles
its holder to purchase 1/1000 of one share of Series A Stock
at an exercise price of $90 (See Note 6).
The rights plan provides that when a person or group
acquires 10 percent or more of the Company's common stock,
each of the rights (except for those held by the 10 percent
holder) becomes the right upon payment of the exercise price
to receive that number of shares of the Company's common
stock, or common stock of the acquiring company, which have
a market value equal to two times the exercise price.
The rights may be redeemed by the Company for $.001 per
right at any time prior to the time the acquiring person or
group reaches the 10 percent threshold. If the rights are
not exercised or redeemed by September 20, 2006, they will
expire.
9. Retirement Benefit Plans:
Pensions - SJI and its subsidiaries have several defined
benefit retirement plans that provide annuity payments to
substantially all full-time regular employees upon
retirement. The companies pay the entire cost of the plans.
Approximately 60 percent of the plans' assets are invested
in securities which provide for fixed income and a return of
principal. The remaining assets are invested in
professionally managed common stock portfolios. Net periodic
pension cost for 1996, including the amortization of the
cost of past service benefits over a period of approximately
30 years, included the following components (in thousands):
Service cost - benefits earned
during the period $ 1,916
Interest cost on projected benefit obligation 3,481
Actual return on plan assets (3,336)
Net amortization and deferral 525
-------
Net periodic pension cost $ 2,586
=======
Assumptions as of December 31 were:
Discount rate 7.25%-7.50%
Rate of increase in compensation levels 4.6%
Expected long-term rate of return on assets 8.5%
The following table sets forth the plans' funded status at
December 31, 1996.
Actuarial present value of benefit obligation (in
thousands):
Vested benefit obligation $(39,078)
========
Accumulated benefit obligation $(39,392)
========
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Projected benefit obligation $(50,735)
Plan assets at fair value 40,335
--------
Projected benefit obligation in excess
of plan assets (10,400)
Unrecognized net loss 5,297
Prior service cost not yet recognized
in net periodic pension cost 2,113
Unrecognized net obligation at January 1 502
--------
Pension liability recognized in
the consolidated balance sheet $ (2,488)
========
Postretirement Benefits Other Than Pensions - The Company
and its subsidiaries provide postretirement health care and
life insurance benefits to certain retired employees.
Effective January 1, 1993, the Company adopted FASB No. 106,
"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 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 BPU also approved recovery of
previously deferred 1993 and 1994 service costs over a 5-
year period beginning in December 1994. Beginning in 1995,
an external trust was established to fund a portion of the
obligation recovered from ratepayers as a part of the BPU
settlement. Gross contributions to this trust totaled $2.1
million in 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 $5.2 million at December 31, 1996, is being
addressed in SJG's current base rate case proceeding and a
BPU generic proceeding. It is expected that the regulatory
asset will be recovered from ratepayers (See Note 14). Net
postretirement benefit cost consisted of the following
components (in thousands):
Service cost - benefits earned during the period $ 930
Actual return on plan assets (164)
Interest cost on accumulated
postretirement benefit obligation 1,432
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Amortization of transition obligation 796
-------
Net postretirement benefit costs as reported
in the Consolidated Financial Statements $ 2,994
=======
The amount expensed in 1996 was $1.7 million.
The following table sets forth the life and health care
plans' funded status at December 31, 1996.
Actuarial present value of accumulated postretirement
benefit obligations (in thousands):
Retirees $ (4,933)
Other active plan participants (16,744)
--------
Accumulated postretirement benefit obligation (21,677)
Fair value of plan assets 2,835
--------
Accumulated postretirement benefit
obligation in excess of plan assets (18,842)
Unrecognized net loss 242
Unrecognized transition obligation 12,743
--------
Postretirement benefit liability recognized
in the consolidated balance sheet $ (5,857)
========
The assumed health care cost trend rates used in measuring
the accumulated postretirement benefit obligation as of
December 31, 1996, are as follows: Medical and Drug - 7.55
percent for participants age 65 or older and 10.55 percent
for participants under age 65 in 1996, both grading to 5.75
percent in 2008. Dental - 7.69 percent in 1996, grading to
5.75 percent in 2003. If the health care cost trend rate
assumptions were increased by 1 percent, the accumulated
postretirement benefit obligation as of December 31, 1996,
would be increased by $3.1 million. The effect of this
change on the sum of the service cost and interest cost
would be an increase of $0.4 million. An assumed discount
rate of 7.5 percent and an expected return on plan assets of
8.5 percent were used in determining the accumulated
postretirement benefit obligation as of December 31, 1996.
10. Financial Instruments:
Long-Term Debt - The fair value of the Company's long-term
debt, including current maturities, as of December 31, 1996,
is estimated to be $166.6 million (carrying amount $156.3
million). This is estimated based on the interest rates
available to the Company at year end for debt with similar
terms and remaining maturities. The Company retires higher
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<PAGE>
cost debt whenever it is cost effective to do so within the
constraints of the respective debt covenants.
Other Financial Instruments - The carrying amounts of the
Company's other financial instruments approximate their fair
values at December 31, 1996.
11. Unused Lines of Credit and Compensating Balances:
Unused lines of credit available at December 31, 1996, were
approximately $43.7 million. Borrowings under these lines of
credit are at market rates which approximated 5.85 percent
at December 31, 1996. Demand deposits are maintained with
lending banks on an informal basis and do not constitute
compensating balances.
12. Retained Earnings:
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 SJG. As of December
31, 1996, SJG's restrictions do not affect the amount that
may be distributed from SJI's retained earnings.
13. Commitments and Contingencies:
Construction Commitments - The estimated cost of
construction and environmental remediation programs of SJI
and its subsidiaries for the year 1997 aggregates $59.6
million and, in connection therewith, certain commitments
have been made.
Gas Supply Contracts - SJG, in the normal course of
conducting business, has entered into long-term contracts
for natural gas supplies, firm transportation, and gas
storage service. The earliest expiration of any of the gas
supply contracts is 1998. All of the transportation and
storage service agreements between SJG and its interstate
pipeline suppliers are provided under Federal Energy
Regulatory Commission (FERC) approved tariffs. SJG's
cumulative obligation for demand charges paid to its
suppliers for all of these services is approximately $5.3
million per month which is recovered on a current basis
through the LGAC.
Pending Litigation - The Company is subject to claims which
arise in the ordinary course of its business and other legal
proceedings. A group of Atlantic City casinos filed a
petition with the BPU on January 16, 1996, alleging
overcharges of over $10.0 million including interest.
Management believes that the ultimate liability with respect
to these actions will not materially affect the Company's
financial position or results of operations.
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<PAGE>
Environmental Remediation Costs - The Company has incurred
and recorded certain costs for environmental remediation of
sites where SJG or predecessor companies operated gas
manufacturing plants. Manufactured gas operations were
terminated at all SJG sites more than 30 years ago. Certain
of SJI's nonutility subsidiaries have also recorded costs
for environmental remediation of sites where SJF previously
operated a fuel oil business and Morie maintained equipment
fueling stations and storage.
Since the early 1980s, the Company has recorded
environmental remediation costs of $73.6 million, of which
$29.9 million has been expended as of December 31, 1996. The
Company, with the assistance of an outside consulting firm,
estimates that total future expenditures to remediate SJG's
sites will range from $41.7 million to $150.2 million. The
lower end of this range has been recorded as a liability and
is reflected on the consolidated balance sheet under the
captions "Current Liabilities" and "Deferred Credits and
Other Non-Current Liabilities". Recorded environmental
remediation costs of SJG do not directly affect earnings
because those costs are deferred and, when expended,
recovered through rates over 7-year amortization periods.
Amounts accrued for future expenditures have not been
adjusted for future insurance recoveries, which management
is pursuing. SJG has received $4.2 million of insurance
recoveries as of December 31, 1996. These proceeds were
first used to offset legal fees incurred in connection with
those recoveries and the excess was used to reduce the
balance of deferred environmental remediation costs.
Recorded amounts include estimated costs to be incurred
based on projected investigation and remediation work plans
using existing technologies. Actual expenditures could
differ from the estimates due to the long-term nature of the
projects and changing technology, government regulations and
site specific requirements.
The major portion of the recorded environmental remediation
costs relate to the remediation of SJG's former gas
manufacturing sites. SJG has recorded $70.8 million for the
remediation of these sites, of which $29.1 million has been
expended through December 31, 1996. SJG has established a
regulatory asset for these costs and is recovering amounts
expended over 7-year amortization periods, as authorized by
the BPU. As of December 31, 1996, SJG has unamortized
remediation expenditures of $15.6 million which are
reflected on the consolidated balance sheet under the
caption "Deferred Debits". Since BPU approval of the RAC
mechanism in August 1992, SJG has recovered $9.3 million
through rates as of December 31, 1996.
With Morie's sale, EMI assumed responsibility for
environmental liabilities which are estimated to range
between $2.0 million and $4.0 million. The information
available on these sites was sufficient only to establish a
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<PAGE>
range of probable liability and no point within the range is
more likely than any other, therefore, EMI accrued the lower
end of the range.
14. Subsequent Events:
On January 27, 1997, the BPU granted SJG a rate increase of
$6.0 million based on a 9.62 percent rate of return on rate
base, which included an 11.25 percent return on equity. The
majority of this increase will come from residential and
small commercial customers. As part of this rate increase,
SJG now retains the first $5.0 million of pre-tax margins
generated by interruptible and off-system sales and
transportation, as well as 20 percent of pre-tax margins
above that level. In 1997 and 1998, this $5.0 million
threshold will be increased by the annual revenue
requirement associated with specified major construction
projects. In 1997, SJG will file to recover additional
postretirement benefit costs of approximately $1.1 million
annually. This recovery is expected to begin in 1998 (See
Note 9).
As part of the tariff changes approved, SJG further expanded
the choices available to commercial and industrial
customers. During 1997, SJG will also implement a firm
transportation pilot program for up to 10,000 residential
customers. This program will have no impact on net income.
In addition to the rate increase, the BPU approved a revenue
reduction in SJG's Temperature Adjustment Clause, a
mechanism designed to reduce the impact of extreme
fluctuations in temperature on SJG and its customers. For
the period ended May 31, 1996, weather in SJG's service area
was significantly colder than the 20-year average resulting
in a $2.5 million credit due to customers' bills which is
already reflected in the 1996 results of operations.
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<PAGE>
South Jersey Industries, Inc.
Index to Exhibits
Exhibit
Number Description
- ------- -----------
27 Financial Data Schedule (Exhibit B)
(Submitted only in electronic format to the
Securities and Exchange Commission).
-35-
<TABLE> <S> <C>
<ARTICLE> OPUR3
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-ASSETS> 658,381
<TOTAL-OPERATING-REVENUES> 355,458
<NET-INCOME> 30,498
</TABLE>
