SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission File Number 1-6364
SOUTH JERSEY INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1901645
(State of incorporation) (IRS employer identification no.)
Number One South Jersey Plaza, Route 54, Folsom, New Jersey 08037
(Address of principal executive offices, including zip code)
(609) 561-9000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock New York Stock Exchange
($1.25 par value per share) Philadelphia Stock Exchange
(Title of each class) (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
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 [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of approximately 9,209,759 shares of
voting stock held by non-affiliates of the registrant as of
March 2, 1998 was $276,294,000. As of March 2, 1998, there were
10,773,888 shares of the registrant's common stock outstanding.
Documents Incorporated by Reference:
In Part I of Form 10-K: Pages 11, 18, 20, 21, 23 and 25 of 1997
Annual Report to Shareholders
In Part II of Form 10-K: Page 1 and Pages 10 through 24 of 1997
Annual Report to Shareholders
In Part III of Form 10-K: Pages 2 through 6, 8 and 10 of the
Proxy Statement dated March 13, 1998 for
the 1998 Annual Meeting of Shareholders
- Title Page -
PART I
Item 1. Business
General
The registrant, South Jersey Industries, Inc. (the Company),
a New Jersey corporation, was formed in 1969 for the purpose of
owning and holding all of the outstanding common stock of South
Jersey Gas Company (South Jersey Gas or SJG), a public utility,
and acquiring and developing nonutility lines of business.
South Jersey Energy Company (SJE), a wholly-owned subsidiary of
the Company, provides services for the acquisition and
transportation of natural gas and electricity for commercial,
industrial and residential users. SJ EnerTrade, Inc.
(EnerTrade), a wholly-owned subsidiary of the Company formed in
1997, provides services for the sale of natural gas to energy
marketers, electric and gas utilities, and other wholesale users
in the mid-Atlantic and southern regions of the country. Energy
& Minerals, Inc. (EMI), a wholly-owned subsidiary of the
Company, principally manages temporary cash investments and owns
the stock of South Jersey Fuel, Inc. (SJF), an inactive
nonutility subsidiary.
Financial Information About Industry Segments
Information regarding Industry Segments is incorporated by
reference to Note 7 on page 21 of the Company's Annual Report to
Shareholders for the year ended December 31, 1997 which is
attached to this report. See Item 14(c)(13).
Description of Business
The Company is engaged in the business of operating, through
subsidiaries, various business enterprises. The Company's most
significant subsidiary is SJG.
South Jersey Gas Company, a New Jersey corporation, is an
operating 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 by
some of its customers.
SJG's service territory includes 112 municipalities throughout
Atlantic, Cape May, Cumberland and Salem Counties and portions
of Burlington, Camden and Gloucester Counties, with an estimated
permanent population of 1.1 million.
SJG serves 260,567 residential, commercial and industrial
customers (at December 31, 1997) in southern New Jersey. Gas
sales and transportation for 1997 amounted to approximately
73,574,000 Mcf (thousand cubic feet), of which approximately
50,181,000 Mcf was firm sales and transportation, 8,931,000 Mcf
was interruptible sales and transportation and 14,462,000 Mcf
was off-system sales. The breakdown of firm sales includes
39.8% residential, 16.1% commercial, 2.5% cogeneration and
electric generation, 1.4% industrial and 40.2% transportation.
At year-end 1997, SJG served 242,132 residential customers,
18,037 commercial customers and 398 industrial customers. This
includes 1997 net additions of 6,124 residential customers, 568
commercial customers and one industrial customer.
Under an agreement with Atlantic Electric, an electric utility
serving southern New Jersey, SJG supplies natural gas to several
electric generation facilities. This gas service is provided
under the terms of a firm electric service tariff approved by
the New Jersey Board of Public Utilities (BPU) on a
demand/commodity basis. In 1997, 1.97 Bcf (billion cubic feet)
was delivered under this agreement.
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SJG serviced 7 cogeneration facilities in 1997. Combined sales
and transportation of natural gas to such customers amounted to
approximately 9.5 Bcf in 1997.
SJG makes wholesale gas sales for resale to gas marketers for
ultimate delivery to end users. These "off-system" sales are
made possible through the issuance by the Federal Energy
Regulatory Commission (FERC) of Orders No. 547 and 636. Order
No. 547 issued a blanket certificate of public convenience and
necessity authorizing all parties, which are not interstate
pipelines, to make FERC jurisdictional gas sales for resale at
negotiated rates, while Order No. 636 allowed SJG to deliver gas
at delivery points on the interstate pipeline system other than
its own city gate stations and release excess pipeline capacity
to third parties. During 1997, off-system sales amounted to
14.5 Bcf. Also in 1997, capacity release and storage throughput
amounted to 36.4 Bcf.
Supplies of natural gas available to SJG that are in excess of
the quantity required by those customers who use gas as their
sole source of fuel (firm customers) make possible the sale and
transportation of gas on an interruptible basis to commercial
and industrial customers whose equipment is capable of using
natural gas or other fuels, such as fuel oil and propane. The
term "interruptible" is used in the sense that deliveries of
natural gas may be terminated by SJG at any time if this action
is necessary to meet the needs of higher priority customers as
described in SJG's tariffs. Usage by interruptible customers,
excluding off-system customers, in 1997 amounted to
approximately 8.9 Bcf, approximately 8.1 percent of the total
throughput.
No material part of SJG's business is dependent upon a single
customer or a few customers.
Service Territory
The majority of the SJG's residential customers reside in the
northern and western portions of its service territory in
Burlington, Camden, Salem and Gloucester counties. A majority
of new customers reside in this section of the service
territory, which includes the residential suburbs of Wilmington
and Philadelphia. The franchise area to the east is centered on
Atlantic City and the neighboring resort communities in Atlantic
and Cape May counties, which experience large population
increases in the summer months. The impact of the casino gaming
industry on the Atlantic City area has resulted in the creation
of new jobs and the expansion of the residential and commercial
infrastructure necessary to support a developing year-round
economy. Atlantic City is experiencing a second wave of
development as a result of casino gaming. The centerpiece of
this development is the recently completed multipurpose
convention center, accompanied by planned major hotel and
entertainment complexes. These facilities will be used to
attract large conventions as well as making Atlantic City into a
family resort on a year-round basis.
Manufacturers or processors of sand, glass, farm products,
paints, chemicals and petroleum products are located in the
western and southern sectors of the service territory. New
commercial establishments and high technology industrial parks
and complexes are part of the economic growth of this area.
SJG's service area includes parts of the Pinelands region, a
largely undeveloped area in the heart of southern New Jersey.
Future construction in this area is expected to be limited by
statute and by a master plan adopted by the New Jersey Pinelands
Commission; however, in terms of potential growth, significant
portions of SJG's service area are not affected by these
limitations.
Rates and Regulation
As a public utility, SJG is subject to regulation by the BPU.
Additionally, the Natural Gas Policy Act, which was enacted in
November 1978, contains provisions for Federal regulation of
certain aspects of SJG's business. SJG is affected by Federal
regulation with respect to transportation and pricing policies
applicable to its pipeline capacity from Transcontinental Gas
Pipeline Corporation (Transco), SJG's major supplier, Columbia
Gas Transmission Corporation (Columbia), CNG Transmission
Corporation (CNG) and Equitrans, Inc. (Equitrans), since such
services are provided under rates and terms established under
the jurisdiction of the FERC.
SJI-3
Retail sales by SJG are made under rate schedules within a
tariff filed with and subject to the jurisdiction of the BPU.
These rate schedules provide primarily for either block rates or
demand/commodity rate structures. The tariff contains
provisions permitting SJG to pass on to customers increases and
decreases in the cost of purchased gas supplies. The tariff
also contains provisions permitting the recovery of
environmental remediation costs associated with former
manufactured gas plant sites and for the adjustment of revenues
due to the impact of "temperature" fluctuations as prescribed in
SJG's tariff.
In August 1997, SJG initiated its BPU approved pilot program to
give residential customers a choice of gas supplier. The
program includes approximately 13,000 residential customers.
SJG continues to deliver the natural gas through its
distribution system with no loss of margins.
Revenue requirements for ratemaking purposes are established
on the basis of firm sales projections. On January 27, 1997, the BPU
granted SJG a rate increase of $6.0 million based on an overall rate
of return of 9.62% including an 11.25% return on equity. The majority
of this increase impacted residential and small commercial customers.
In addition, part of the increase will be recovered from customers
through new service fees which charge specific customers for costs
which they cause SJG to incur. Also, as part of this rate increase,
SJG is allowed to retain the first $5.5 million of pre-tax margins
generated by interruptible and off-system sales and transportation and
20% of pre-tax margins generated by such sales above that level. In
1997 and 1998, this $5.5 million threshold will be increased by the
annual revenue requirement associated with specified major
construction projects. These sharing formula improvements are
expected to result in additional rate relief of approximately $0.3
million in 1998 and $1.8 million in 1999. In 1997, SJG filed to
recover additional post-retirement benefit costs of approximately $1.3
million annually and this recovery was approved effective January 1,
1998. Additional information on regulatory affairs is incorporated by
reference to Note 1 on page 18, Note 6 on page 20, Note 9 on page 21
and Note 13 on page 23 of the Company's Annual Report to Shareholders
for the year ended December 31, 1997 which is attached to this report.
See Item 14(c)(13).
SJE, a New Jersey corporation, is a wholly owned non-regulated
subsidiary of the Company and is engaged in providing services
for the acquisition and transportation of natural gas and
electricity for industrial, commercial and residential users. SJE is
also engaged in trading activities in the electric wholesale market.
EMI, a New Jersey corporation, is a holding company that owns
all of the outstanding common stock of SJF. SJF became inactive
in 1997 and its business of providing wholesale energy services
was continued by SJ EnerTrade, a new subsidiary established by
the Company in 1997.
EnerTrade, a New Jersey corporation, is a wholly owned
non-regulated subsidiary of the Company and is engaged in
providing services for the sale of natural gas to energy
marketers, electric and gas utilities and other wholesale users
in the mid-Atlantic and southern regions of the country.
R&T Group, Inc. (R&T), a New Jersey corporation, was a holding
company that owned all the common stock of several construction
subsidiaries. Operations of the construction companies ended in
1997, or prior thereto, and the subsidiaries were merged into
R&T. The financial statements include R&T as a discontinued
operation (see Note 2 on page 18 of the Company's Annual Report
to Shareholders for the year ended December 31, 1997 which is
attached to this report). See Item 14(c)(13).
In 1997, the Company made no public announcement of, or
otherwise made public information about, a new product or
industry segment that would require the investment of a material
amount of the assets of the Company or which otherwise was
material.
SJI-4
Raw Materials
South Jersey Gas
Supply Contracts and Storage
SJG has direct connections to two interstate pipeline
companies, Transco and Columbia. It also secures firm
transportation and other long term services from four additional
pipelines upstream of the Transco and Columbia systems. They
include: Columbia Gulf Transmission Company (Columbia Gulf),
CNG, Texas Gas Transmission Corporation (Texas Gas) and
Equitrans. Services provided by these upstream pipelines are
utilized to deliver gas into either the Transco or Columbia
systems for ultimate delivery to SJG. Services provided by all
of the above mentioned pipelines are subject to changes as
directed by FERC Order No. 636.
Transco
Transco is SJG's largest supplier of long term gas transmission
services. These services include five year-round and one
seasonal firm transportation (FT) service arrangement. When
combined, these services enable SJG to purchase from third
parties and have delivered to its city gate stations by Transco
a total of 163,741 Thousand Cubic Feet of gas per day ("Mcf/d").
The terms of the year-round agreements extend for various
periods from 2002 to 2010 while the term of the seasonal
agreement extends to 2011.
SJG also has seven long-term gas storage service agreements
with Transco that, when combined, are capable of storing
approximately 10.1 Bcf. Through these services, SJG can inject
gas into storage during periods of low demand and withdraw gas
at a rate of up to 86,972 Mcf per day during periods of high
demand. The terms of the storage service agreements extend for
various periods from 1998 to 2008.
Transco renders a merchant service to SJG under its Rate
Schedule FS (defined below). Williams Energy Services Company
(WESCO), an affiliate of Transco, has assumed Transco's natural
gas merchant function under which the maximum purchase quantity
amounts to 51,769 Mcf per day. FS is a no-notice swing service
which allows SJG to take between zero and its full contract
quantities (51,769 Mcf/d) on any day of the year. This
flexibility enables SJG to respond to changes in its
requirements for gas due to weather and market conditions. The
initial term of the FS agreement extends through March 31, 2001.
In addition to FS service, SJG has also secured a second
merchant service from Transco under Transco's Rate Schedule NS.
NS service is also provided by WESCO acting as agent for
Transco. Under this service, SJG can purchase up to 30,000 Mcf
per day of NS gas with 24 hours advance notice.
SJG has a long term gas purchase agreement with Vastar Gas
Marketing (Vastar) which provides for the delivery of up to
14,618 Mcf/d to SJG's service area on a year round basis by way
of Transco FT service. The initial term of the gas purchase
agreement with Vastar extends through March 31, 2000.
SJG also has a winter season firm transportation service on the
Transco system which is available for the period December 1
through the last day of February of each year. SJG's maximum
entitlement under this service is 2,900 Mcf/d. SJG has
contracted with Amerada Hess Corporation (Hess) to provide the
gas supply to fill this transportation capacity during each
winter season through October 31, 2007.
SJG may deliver up to 24,700 Mcf per day of gas under a firm
transportation agreement as part of Transco's Texas
Gas-CNG-Transco FT project. This project was developed to
provide additional firm pipeline capacity which would deliver
gas to the US Northeast via a bundled service provided by
Transco under its Rate Schedule FT-NT. SJG has also contracted
with Hess for a 15 year gas supply service to fill this capacity
which extends through October 31, 2007.
SJI-5
CNG
SJG has entered into separate gas sales and capacity management
agreements with CNG Energy Services Corporation (CNGES), a
non-jurisdictional affiliate of CNG, through which SJG has
assigned to CNGES its pipeline FT and storage entitlements on
the CNG system to provide SJG with up to 9,662 Mcf per day of
gas during the period November 16 through March 31 of each year.
Columbia
SJG has three firm transportation agreements with Columbia
which, when combined, provide for 43,500 Mcf/d of firm
deliverability.
SJG has four long term gas purchase agreements, for periods
ranging from 1999 to 2003, with major non-jurisdictional
producer/suppliers for gas delivered into the Columbia pipeline
system which, in aggregate, provide SJG with up to 43,500 Mcf/d
via the Columbia pipeline system during the winter season. Such
agreements also provide for delivery in non-winter months at
lower quantities.
SJG also subscribes to a firm storage service from Columbia, to
March 31, 2009, which provides a maximum withdrawal quantity of
19,807 Mcf/d during the winter season with an associated
1,121,095 Mcf of storage capacity.
As part of addressing future winter season requirements, SJG
has entered into an agreement with Columbia to subscribe to an
incremental 31,296 Mcf per day of storage deliverability with an
additional 2,234,482 Mcf of storage capacity to become available
April 1, 1998. The term of the agreement expires October 31,
2013. The FERC has approved Columbia's arrangements to provide
such services.
Equitrans
SJG has a long term storage service provided by Equitrans, to
April 1, 2002, under which up to 500,000 Mcf of gas may be
stored during the summer season and up to 4,783 Mcf/d may be
withdrawn during the winter season. The gas is delivered to SJG
under firm transportation agreements with Equitrans, CNG and
Transco.
Supplemental Gas Supplies
SJG has a long term LNG purchase agreement with Distrigas of
Massachusetts Corporation (DOMAC) which extends through October
31, 2000. For the 1997-98 contract year, SJG's annual contract
quantity under the DOMAC agreement is 186,047 Mcf. LNG
purchases from DOMAC are transported to SJG's LNG storage
facility in McKee City, New Jersey via over-the-road trucks.
SJG operates peaking facilities which can store and vaporize
both LNG and propane for injection into its distribution system.
SJG's LNG facility has a storage capacity equivalent to 404,000
Mcf of natural gas and has an installed capacity to vaporize up
to 90,000 Mcf of LNG per day for injection into its distribution
system.
SJG also maintains two propane-air plants that are located in
Middle Township and Ocean City, New Jersey. The combined
maximum storage capacity of these plants is 150,000 gallons of
liquefied propane or the equivalent of approximately 11,364 Mcf
of natural gas.
SJG also operates a high pressure pipe storage field at its
McKee City facility which is capable of storing 12,000 Mcf of
gas and injecting up to 10,000 Mcf of gas per day into SJG's
distribution system.
SJG has a LNG peaking service agreement with the Philadelphia
Gas Works (PGW) which provides up to 250,000 Mcf per year of
peaking service gas on a firm basis at a rate of up to 25,000
Mcf per day when taken as vapor and delivered through the
Transco pipeline system or up to twelve truckloads per day
SJI-6
(approximately 10,200 Mcf) when taken as liquid and trucked to
SJG's LNG storage facility in McKee City, New Jersey. The term
of this agreement extends through the 1998-99 winter season,
however it may be extended by mutual agreement of the parties.
Peak-Day Supply
SJG plans for a winter season peak-day demand on the basis of
an average daily temperature of 2 degrees F. Gas demand on such
a design day was estimated for the 1997-98 winter season to be
387,293 Mcf versus a design day supply of 416,308 Mcf. On
January 19, 1994, SJG experienced its highest peak-day demand of
370,582 Mcf with an average temperature of 2.68 degrees F. In
1997, SJG experienced a peak-day demand of 352,259 Mcf with an
average temperature of 12.5 degrees F.
Gas Prices
During 1997, SJG purchased and had delivered approximately 46.8
Bcf of natural gas for distribution to both on-system and
off-system customers. Of this total, 31.9 Bcf was transported
on the Transco pipeline system and 14.9 Bcf was transported on
the Columbia pipeline system.
SJG's average commodity cost of gas purchased in 1997 was $2.60
per Mcf.
EnerTrade and SJE
Access to gas suppliers and cost of gas are significant to
EnerTrade's and SJE's operations. No material part of the
business of these companies is dependent upon a single customer
or a few customers.
Patents and Franchises
SJG holds nonexclusive franchises granted by municipalities in
the seven county area of southern New Jersey that it serves. No
other natural gas public utility presently serves the territory
covered by SJG's franchises. Otherwise, patents, trademarks,
licenses, franchises and concessions are not material to the
business of the Company or any of its subsidiaries.
Seasonal Aspects
SJG experiences seasonal fluctuations in sales when selling
natural gas for heating purposes. SJG meets this seasonal
fluctuation in demand from its firm customers by buying and
storing gas during the summer months, and by drawing from
storage and purchasing supplemental supplies during the heating
season. As a result of this seasonality, SJG experiences
reductions of revenues and net income during the second and
third quarters of the year.
Working Capital Practices
As stated under Seasonal Aspects, SJG buys and stores natural
gas during the summer months. These purchases are financed by
short-term loans which are substantially paid down during the
winter months when gas revenues are higher. Reference is also
made to "Liquidity" on page 11 of the Company's Annual Report to
Shareholders for the year ended December 31, 1997 which is
attached to this report. See Item 14(c)(13).
Customers
No material part of the Company's business or that of any of
its subsidiaries is dependent upon a single customer or a few
customers, the loss of which would have a material adverse
effect on any such business. See pages 3 and 7.
SJI-7
Backlog
Backlog is not material to an understanding of the Company's
business or that of any of its subsidiaries.
Government Contracts
No material portion of the business of the Company or any of
its subsidiaries is subject to renegotiation of profits or
termination of contracts or subcontracts at the election of any
government.
Competition
SJG's franchises are non-exclusive, however, currently no other
utility is providing service within its territory. SJG competes
with oil, propane and electricity suppliers for residential,
commercial and industrial users. The market for natural gas
sales is subject to competition as a result of deregulation.
Through its tariff, SJG has promoted competition while
maintaining its margins. Substantially all of SJG's profits are
from the transportation rather than the sale of the commodity.
SJG believes it has been a leader in addressing the changing
marketplace. It maintains its focus on being a low-cost provider
of natural gas and energy services.
EnerTrade and SJE compete with a number of other
marketers/brokers in the selling of wholesale natural gas and
electricity, respectively. Competition includes SJG, other utilities
and alliances which include other utility companies.
Research
During the last three fiscal years, neither the Company nor any
of its subsidiaries engaged in research activities to any
material extent.
Environmental Matters
Information on environmental matters for SJI and its
subsidiaries is incorporated by reference to Note 2 on page 18
and Note 13 on page 23 of the Company's Annual Report to
Shareholders for the year ended December 31, 1997 which is
attached to this report. See Item 14(c)(13).
Employees
The Company and its subsidiaries had a total of 675 employees
as of December 31, 1997.
Financial Information About Foreign and Domestic Operations and
Export Sales
The Company has no foreign operations and export sales have not
been a significant part of the Company's business.
Item 2. Properties
The principal property of SJG consists of its gas transmission
and distribution systems that include mains, service connections
and meters. The transmission facilities carry the gas from the
connections with Transco and Columbia to SJG's distribution
systems for delivery to customers. As of December 31, 1997,
there were approximately 343 miles of mains in the transmission
systems and 4,652 miles of mains in the distribution systems.
SJG owns office and service buildings, including its corporate
headquarters, at eight locations in the territory, a liquefied
natural gas storage and vaporization facility, and two
propane-air vaporization plants.
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As of December 31, 1997, the SJG utility plant had a gross book
value of $619,489,213 and a net book value, after accumulated
depreciation, of $452,313,245. In 1997, $48,533,132 was spent
on additions to utility plant and there were retirements of
property having an aggregate gross book cost of $6,347,794. SJG
construction and remediation expenditures for 1998 are currently
expected to approximate $61.8 million.
Virtually all of the SJG transmission pipeline, distribution
mains and service connections are in streets or highways or on
the property of others. The SJG transmission and distribution
systems are maintained under franchises or permits or
rights-of-way, many of which are perpetual. The SJG properties
(other than property specifically excluded) are subject to a
lien of mortgage under which its first mortgage bonds are
outstanding. Such properties are well maintained and in good
operating condition.
EMI owns commercial real estate in Millville, New Jersey and
235 acres of land in Vineland, New Jersey.
SJE, an inactive subsidiary, owns real estate in Deptford
Township and Upper Township, New Jersey.
R&T, an inactive subsidiary, owns land and buildings in
Vineland, New Jersey and real estate in Pleasantville, New
Jersey.
The Company owns approximately 139 acres of land in Folsom, New
Jersey and approximately 9.29 acres of land in Linwood, New
Jersey.
Item 3. Legal Proceedings
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 have filed a
petition with the BPU alleging overcharges of over $10 million,
including interest. Management of the Company believes that any
pending or potential legal proceedings will not materially
affect its operations, consolidated financial position or cash
flow. Reference is made under Commitments and Contingencies in
Note 13 on page 23 of the Company's Annual Report to
Shareholders for the year ended December 31, 1997 which is
attached to this report. See Item 14(c)(13).
Item 4. Submission Of Matters To A Vote of Security Holders
No matter was submitted to a vote of security holders during
the fourth quarter of the 1997 fiscal year.
Item 4-A. Executive Officers (Other Than Directors) of the
Registrant
Name Age Positions with the Company
Charles Biscieglia 53 Vice President
David A. Kindlick 43 Vice President
Joseph E. McCullough 55 Vice President
George L. Baulig 56 Secretary and Treasurer
There is no family relationship among the officers of the
registrant.
Charles Biscieglia was elected Assistant Vice President of SJG
effective May 1, 1981, Vice President effective November 1,
1983, Senior Vice President effective May 1, 1987, Executive
Vice President, Chief Operating Officer effective May 1, 1991
and President effective March 20, 1998. Mr. Biscieglia was
elected Vice President of the Company effective April 17, 1997.
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David A. Kindlick was elected Assistant Vice President, Revenue
Requirements of SJG effective October 1, 1989, Vice President,
Revenue Requirements effective April 23, 1992 and Vice
President, Rates and Budgeting effective April 20, 1995. Mr.
Kindlick was elected Vice President of the Company effective
June 20, 1997.
Joseph E. McCullough was elected Vice President, Marketing and
Public Affairs of SJG effective November 1, 1984, Senior Vice
President, Marketing, Corporate Affairs and Employee Relations
effective May 1, 1987, Senior Vice President, Marketing
effective April 22, 1993 and Senior Vice President effective
April 20, 1995. Mr. McCullough was elected President of SJE
effective October 1, 1986. Mr. McCullough was elected Vice
President of the Company effective June 20, 1997.
George L. Baulig was elected Secretary and Assistant Treasurer
of the Company, SJG and EMI effective November 1, 1980. Mr.
Baulig also serves as Secretary of R&T and SJE, effective
October 1989 to date. Mr. Baulig was elected Treasurer of the
Company, effective October 1, 1996.
Executive officers of the Company are elected annually and
serve at the pleasure of the Board of Directors.
SJI-10
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters
Information required by this item is incorporated by reference
to Note 4 on page 19 and the bottom of page 24 of the Company's
Annual Report to Shareholders for the year ended December 31,
1997 which is attached to this report. See Item 14(c)(13).
Item 6. Selected Financial Data
Information required by this item is incorporated by reference
to page 1 of the Company's Annual Report to Shareholders for the
year ended December 31, 1997 which is attached to this report.
See Item 14(c)(13).
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Information required by this item is incorporated by reference
to pages 10, 11, 12 and 13 of the Company's Annual Report to
Shareholders for the year ended December 31, 1997 which is
attached to this report. See Item 14(c)(13).
Item 8. Financial Statements and Supplementary Data
Information required by this item is incorporated by reference
to pages 13 through 23 and the top of page 24 of the Company's
Annual Report to Shareholders for the year ended December 31,
1997 which is attached to this report. See Item 14(c)(13).
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
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PART III
Item 10. Directors and Executive Officers of the Registrant
Information required by this item relating to the directors of
the Company is incorporated by reference to pages 2 through 6 of
the Company's definitive Proxy Statement, dated March 13, 1998,
filed with the Commission, File number 1-6364, in connection
with the Company's 1998 Annual Meeting of Shareholders.
Information required by this item relating to the executive
officers (other than Directors) of the Company is set forth in
Item 4-A of this report.
Item 11. Executive Compensation
Information required by this item is incorporated by reference
to pages 8 through 10 of the Company's definitive Proxy
Statement, dated March 13, 1998, filed with the Commission, File
number 1-6364, in connection with the Company's 1998 Annual
Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information required by this item is incorporated by reference
to pages 2 through 5 of the Company's definitive Proxy
Statement, dated March 13, 1998, filed with the Commission, File
number 1-6364, in connection with the Company's 1998 Annual
Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions
Information required by this item is incorporated by reference
to page 6 of the company's definitive Proxy Statement, dated
March 13, 1998, filed with the Commission, File number 1-6364,
in connection with the Company's 1998 Annual Meeting of
Shareholders.
SJI-12
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on
Form 8-K
(a) Listed below are all financial statements and schedules
filed as part of this report:
1 - The consolidated financial statements and notes to
consolidated financial statements together with the report
thereon of Deloitte & Touche LLP, dated February 18, 1998, are
incorporated herein by reference to pages 13 through 23 of the
Company's Annual Report to Shareholders for the year ended
December 31, 1997 which is attached to this report. See Item
14(c)(13).
2 - Supplementary Financial Information
Information regarding selected quarterly financial data is
incorporated herein by reference to page 24 of the Company's
Annual Report to Shareholders for the year ended December 31,
1997 which is attached to this report. See Item 14(c)(13).
Supplemental Schedules as of December 31, 1997, 1996 and 1995
and for the three years ended December 31, 1997, 1996, and 1995:
The Independent Auditors' Report of Deloitte & Touche LLP,
Auditors of the Company (page 21)
Schedule II - Valuation and Qualifying Accounts (page 22)
(All Schedules, other than that listed above, are omitted
because the information called for is included in the financial
statements filed or because they are not applicable or are not
required. Separate financial statements are not presented
because all consolidated subsidiaries are wholly-owned.)
3 - See Item 14(c)(13)
(b) Reports on Form 8-K - None.
(c) List of Exhibits (Exhibit Number is in Accordance with the
Exhibit Table in Item 601 of Regulation S-K)
Exhibit
Number
-------
(3)(a)(i) Certificate of Incorporation of the Company, as
amended through April 19, 1984. Incorporated by reference from
Exhibit (4)(a) of Form S-2 (2-91515).
(3)(a)(ii) Amendment to Certificate of Incorporation relating to
two-for-one stock split effective as of April 28, 1987. Incorporated
by reference from Exhibit (4)(e)(1) of Form S-3 (33-1320).
(3)(a)(iii) Amendment to Certificate of Incorporation relating
to director and officer liability. Incorporated by reference
from Exhibit (4)(e)(2) of Form S-3 (33-1320).
(3)(b) Bylaws of the Company as amended and restated through
December 30, 1997 (filed herewith).
(4)(a) Form of Stock Certificate for common stock.
Incorporated by reference from Exhibit (4)(a) of Form 10-K for 1985
(1-6364).
SJI-13
Exhibit
Number
-------
(4)(a)(i) Rights Agreement dated as of September 20, 1996
between South Jersey Industries, Inc. and The Farmers & Merchants
National Bank of Bridgeton. Incorporated by reference from Exhibit
99.1 of Form 8-A filed April 9, 1996 (1-6364).
(4)(b)(i) First Mortgage Indenture dated October 1, 1947.
Incorporated by reference from Exhibit (4)(b)(i) of Form 10-K for 1987
(1-6364).
(4)(b)(x) Twelfth Supplemental Indenture dated as of June 1, 1980.
Incorporated by reference from Exhibit 5(b) of Form S-7 (2-68038).
(4)(b)(xiv) Sixteenth Supplemental Indenture dated as of April 1,
1988, 10 1/4% Series due 2008. Incorporated by reference from Exhibit
(4)(b)(xv) of Form 10-Q for the quarter ended March 31, 1988 (1-6364).
(4)(b)(xv) Seventeenth Supplemental Indenture dated as of May 1,
1989. Incorporated by reference from Exhibit (4)(b)(xv) of Form 10-K
for 1989 (1-6364).
(4)(b)(xvi) Eighteenth Supplemental Indenture dated as of March 1,
1990. Incorporated by reference from Exhibit (4)(e) of Form S-3
(33-36581).
(4)(b)(xvii) Nineteenth Supplemental Indenture dated as of April 1,
1992. Incorporated by reference from Exhibit (4)(b)(xvii) of Form
10-K for 1992 (1-6364).
(4)(b)(xviii) Twentieth Supplemental Indenture dated as of June 1,
1993. Incorporated by reference from Exhibit (4)(b)(xviii) of Form
10-K for 1993(1-6364).
(4)(b)(xviv) Twenty-First Supplemental Indenture dated as of March 1,
1997 (filed herewith).
(4)(c) Indenture dated as of January 31, 1995; 8.60% Debenture
Notes due February 1, 2010. Incorporated by reference from Exhibit
(4)(c) of Form 10-K for 1994 (1-6364).
(4)(d) Certificate of Trust for SJG Capital Trust.
Incorporated by reference from Exhibit 3(a) of Form S-3 - SJG Capital
Trust and South Jersey Gas Company as filed March 27, 1997, as amended
April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(i) Trust Agreement of SJG Capital Trust. Incorporated by
reference from Exhibit 3(b) of Form S-3 - SJG Capital Trust and South
Jersey Gas Company as filed March 27, 1997, as amended April 18, 1997
and April 23, 1997 (333-24065).
(4)(d)(ii) Form of Amended and Restated Trust Agreement for SJG
Capital Trust. Incorporated by reference from Exhibit 3(c) of Form
S-3 - SJG Capital Trust and South Jersey Gas Company as filed March
27, 1997, as amended April 18, 1997 and April 23, 1997 (333-24065).
SJI-14
Exhibit
Number
-------
(4)(d)(iii) Form of Preferred Security for SJG Capital Trust.
Incorporated by reference from Exhibit 4(a) of Form S-3 - SJG Capital
Trust and South Jersey Gas Company as filed March 27, 1997, as amended
April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(iv) Form of Deferrable Interest Subordinated Debenture.
Incorporated by reference from Exhibit 4(b) of Form S-3 - SJG Capital
Trust and South Jersey Gas Company as filed March 27, 1997, as amended
April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(v) Form of Deferrable Interest Subordinated Debenture.
Incorporated by reference from Exhibit 4(c) of Form S-3 - SJG Capital
Trust and South Jersey Gas Company as filed March 27, 1997, as amended
April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(vi) Form of Guaranty Agreement between South Jersey Gas
Company and SJG Capital Trust. Incorporated by reference from Exhibit
4(d) of Form S-3 - SJG Capital Trust and South Jersey Gas Company as
filed March 27, 1997, as amended April 18, 1997 and April 23, 1997
(333-24065).
(9) None
(10)(d) Gas storage agreement (GSS) between South Jersey Gas
Company and Transco dated October 1, 1993. Incorporated by reference
from Exhibit (10)(d) of Form 10-K for 1993 (1-6364).
(10)(e) Gas storage agreement (S-2) between South Jersey Gas
Company and Transco dated December 16, 1953. Incorporated by
reference from Exhibit (5)(h) of Form S-7 (2-56223).
(10)(f) Gas storage agreement (LG-A) between South Jersey Gas
Company and Transco dated June 3, 1974. Incorporated by reference from
Exhibit (5)(f) of Form S-7 (2-56223).
(10)(h) Gas storage agreement (WSS) between South Jersey Gas
Company and Transco dated August 1, 1991. Incorporated by reference
from Exhibit (10)(h) of Form 10-K for 1991 (1-6364).
(10)(i) Gas storage agreement (LSS) between South Jersey Gas
Company and Transco dated October 1, 1993. Incorporated by reference
from Exhibit (10)(i) of Form 10-K for 1993 (1-6364).
(10)(i)(a) Gas storage agreement (SS-1) between South Jersey Gas
Company and Transco dated May 10, 1987 (effective April 1, 1988).
Incorporated by reference from Exhibit (10)(i)(a) of Form 10-K for
1988 (1-6364).
(10)(i)(b) Gas storage agreement (ESS) between South Jersey Gas
Company and Transco dated November 1, 1993. Incorporated by reference
from Exhibit (10)(i)(b) of Form 10-K for 1993 (1-6364).
SJI-15
Exhibit
Number
-------
(10)(i)(c) Gas transportation service agreement between South
Jersey Gas Company and Transco dated April 1, 1986. Incorporated by
reference from Exhibit (10)(i)(c) of Form 10-K for 1989 (1-6364).
(10)(i)(e) Service agreement (FS) between South Jersey Gas Company
and Transco dated August 1, 1991. Incorporated by reference from
Exhibit (10)(i)(e) of Form 10-K for 1991 (1-6364).
(10)(i)(f) Service agreement (FT) between South Jersey Gas Company
and Transco dated February 1, 1992. Incorporated by reference from
Exhibit (10)(i)(f) of Form 10-K for 1991 (1-6364).
(10)(i)(g) Service agreement (Incremental FT) between South Jersey
Gas Company and Transco dated August 1, 1991. Incorporated by
reference from Exhibit (10)(i)(g) of Form 10-K for 1991 (1-6364).
(10)(i)(i) Gas storage agreement (SS-2) between South Jersey Gas
Company and Transco dated July 25, 1990. Incorporated by reference
from Exhibit (10)(i)(i) of Form 10-K for 1991 (1-6364).
(10)(i)(j) Gas transportation service agreement between South
Jersey Gas Company and Transco dated December 20, 1991. Incorporated
by reference from Exhibit (10)(i)(j) of Form 10-K for 1993 (1-6364).
(10)(i)(k) Amendment to gas transportation agreement dated December
20, 1991 between South Jersey Gas Company and Transco dated October 5,
1993. Incorporated by reference from Exhibit (10)(i)(k) of Form 10-K
for 1993 (1-6364).
(10)(j)(a) Gas transportation service agreement (FTS) between South
Jersey Gas Company and Equitable Gas Company dated November 1, 1986.
Incorporated by reference from Exhibit (10)(j)(a) of Form 10-K for
1989 (1-6364).
(10)(k)(h) Gas transportation service agreement (TF) between South
Jersey Gas Company and CNG Transmission Corporation dated October 1,
1993. Incorporated by reference from Exhibit (10)(k)(h) of Form 10-K
for 1993 (1-6364).
(10)(k)(i) Gas purchase agreement between South Jersey Gas Company
and ARCO Gas Marketing, Inc. dated March 5, 1990. Incorporated by
reference from Exhibit (10)(k)(i) of Form 10-K for 1989 (1-6364).
(10)(k)(k) Gas transportation service agreement (FTS-1) between
South Jersey Gas Company and Columbia Gulf Transmission Company dated
November 1, 1993. Incorporated by reference from Exhibit (10)(k)(k) of
Form 10-K for 1993 (1-6364).
(10)(k)(l) Assignment agreement capacity and service rights (FTS-2)
between South Jersey Gas Company and Columbia Gulf Transmission
Company dated November 1, 1993. Incorporated by reference from
Exhibit (10)(k)(i) of Form 10-K for 1993 (1-6364).
SJI-16
Exhibit
Number
-------
(10)(k)(m) FTS Service Agreement No. 39556 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November 1,
1993. Incorporated by reference from Exhibit (10)(k)(m) of Form 10-K
for 1993 (1-6364).
(10)(k)(n) FTS Service Agreement No. 38099 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November 1,
1993. Incorporated by reference from Exhibit (10)(k)(n) of Form 10-K
for 1993 (1-6364).
(10)(k)(o) NTS Service Agreement No. 39305 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November 1,
1993. Incorporated by reference from Exhibit (10)(k)(o) of Form 10-K
for 1993 (1-6364).
(10)(k)(p) FSS Service Agreement No. 38130 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November 1,
1993. Incorporated by reference from Exhibit (10)(k)(p) of Form 10-K
for 1993 (1-6364).
(10)(k)(q) SST Service Agreement No. 38086 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November 1,
1993. Incorporated by reference from Exhibit (10)(k)(q) of Form 10-K
for 1993 (1-6364).
(10)(k)(r) NS (Negotiated Sales) Service Agreement dated December
1, 1994 between South Jersey Gas Company and Transco Gas Marketing
Company as agent for Transcontinental Gas Pipeline. Incorporated by
reference from Exhibit (10)(k)(r) of Form 10-K for 1994 (1-6364).
(10)(l) Deferred Payment Plan for Directors of South Jersey
Industries, Inc., South Jersey Gas Company, Energy & Minerals, Inc.,
R&T Group, Inc. and South Jersey Energy Company as amended and
restated October 21, 1994. Incorporated by reference from Exhibit
(10)(l) of Form 10-K for 1994 (1-6364).
(10)(l)(a) Form of Deferred Compensation Agreement between the
Company and/or a subsidiary and seven of its officers. Incorporated
by reference from Exhibit (10)(j)(a) of Form 10-K for 1980 (1-6364).
(10)(l)(b) Schedule of Deferred Compensation Agreements (filed
herewith).
(10)(l)(d) Form of Officer Employment Agreement between certain
officers and either the Company or its subsidiaries. Incorporated by
reference from Exhibit (10)(l)(d) of Form 10-K for 1994 (1-6364).
(10)(l)(e) Schedule of Officer Employment Agreements (filed
herewith).
(10)(l)(f) Officer Severance Benefit Program for all officers.
Incorporated by reference from Exhibit (10)(l)(g) of Form 10-K for
1985 (1-6364).
SJI-17
Exhibit
Number
-------
(10)(l)(g) Discretionary Incentive Bonus Program for all officers
and management employees. Incorporated by reference from Exhibit
(10)(l)(h) of Form 10-K for 1985 (1-6364).
(10)(l)(h) The 1987 Stock Option and Stock Appreciation Rights Plan
including Form of Agreement. Incorporated by reference from Exhibit
(10)(l)(i) of Form 10-K for 1987 (1-6364).
(10)(l)(i) Supplemental Executive Retirement Program, as amended
and restated effective July 1, 1997, and Form of Agreement between
certain Company or subsidiary Company officers (filed herewith).
(10)(l)(j) 1997 Stock Option and Stock Appreciation Rights Plan
(filed herewith).
(11) Not applicable.
(12) Calculation of Ratio of Earnings to Fixed Charges
(Before Federal Income Taxes) (filed herewith).
(13) The Annual Report to Shareholders of the Company for the
year ended December 31, 1997 is filed as an exhibit hereto solely to
the extent portions are specifically incorporated by reference herein
(filed herewith).
(16) Not applicable.
(18) Not applicable.
(21) Subsidiaries of the Registrant (filed herewith).
(22) None.
(23) Independent Auditors' Consent (filed herewith).
(24) Power of Attorney (filed herewith).
(27) Financial Data Schedule (submitted only in electronic
format to the Securities and Exchange Commission).
(99) None.
SJI-18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BY: /s/ David A. Kindlick
David A. Kindlick, Vice President
Date March 27, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Title Date
/s/ Richard L. Dunham Chairman of the Board and March 27, 1998
(Richard L. Dunham) Acting Chief Executive Officer
/s/ David A. Kindlick Vice President March 27, 1998
(David A. Kindlick) (Principal Financial Officer)
/s/ William J. Smethurst, Jr. Assistant Secretary and March 27, 1998
(William J. Smethurst, Jr.) Assistant Treasurer
(Principal Accounting Officer)
/s/ George L. Baulig Secretary and Treasurer March 27, 1998
(George L. Baulig)
/s/ Anthony G. Dickson Director March 27, 1998
(Anthony G. Dickson)
/s/ W. Cary Edwards Director March 27, 1998
(W. Cary Edwards)
/s/ Thomas L. Glenn, Jr. Director March 27, 1998
(Thomas L. Glenn, Jr.)
SJI-19
Signature Title Date
/s/ Herman D. James Director March 27, 1998
(Herman D. James)
/s/ Clarence D. McCormick Director March 27, 1998
(Clarence D. McCormick)
Director March 27, 1998
(Peter M. Mitchell)
/s/ Frederick R. Raring Director March 27, 1998
(Federick R. Raring)
/s/ Shirli M. Vioni Director March 27, 1998
(Shirli M. Vioni)
SJI-20
INDEPENDENT AUDITORS' REPORT
South Jersey Industries, Inc.:
We have audited the consolidated financial statements of South
Jersey Industries, Inc. and its subsidiaries as of December 31,
1997 and 1996 and for each of the three years in the period
ended December 31, 1997 and have issued our report thereon dated
February 18, 1998. Such financial statements and report are
included in your 1997 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the
financial statement schedule of South Jersey Industries, Inc.
and its subsidiaries, listed in Item 14(a). This financial
statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 18, 1998
SJI-21
<TABLE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
- ---------------------------------------------------------------------------------------------------------
Additions
-----------------------------
(1) (2)
Balance at Charged to Charged to Balance at
Beginning Costs and Other Accounts - Deductions - End
Classification of Period Expenses Describe (a) Describe (b) of Period
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Provision for Uncollectible
Accounts for the Year Ended
December 31, 1997 $1,425,062 $1,351,360 $623,647 $1,870,558 $1,529,511
Provision for Uncollectible
Accounts for the Year Ended
December 31, 1996 $982,031 $2,143,518 $376,919 $2,077,406 (c) $1,425,062
Provision for Uncollectible
Accounts for the Year Ended
December 31, 1995 $991,128 $1,264,897 $502,173 $1,776,167 $982,031
<FN>
(a) Recoveries of accounts previously written off and minor adjustments.
(b) Uncollectible accounts written off.
(c) Includes $379,297 reduction in provision resulting from the sale of The Morie Company, Inc. in 1996.
</FN>
</TABLE>
SJI-22
South Jersey Industries, Inc.
One South Jersey Plaza, Route 54
Folsom, NJ 08037
Form 10-K FYE 12/31/97
EXHIBIT INDEX
Exhibit
Number
- -----------
(3)(a)(i) Certificate of Incorporation of the Company, as amended
through April 19, 1984. Incorporated by reference from Exhibit (4)(a)
of Form S-2 (2-91515).
(3)(a)(ii) Amendment to Certificate of Incorporation relating to
two-for-one stock split effective as of April 28, 1987. Incorporated
by reference from Exhibit (4)(e)(1) of Form S-3 (33-1320).
(3)(a)(iii) Amendment to Certificate of Incorporation relating to
director and officer liability. Incorporated by reference from Exhibit
(4)(e)(2) of Form S-3 (33-1320).
(3)(b) Bylaws of the Company as amended and restated through
December 30, 1997 (filed herewith).
(4)(a) Form of Stock Certificate for common stock. Incorporated
by reference from Exhibit (4)(a) of Form 10-K for 1985 (1-6364).
(4)(a)(i) Rights Agreement dated as of September 20, 1996 between
South Jersey Industries, Inc. and The Farmers & Merchants National Bank
of Bridgeton. Incorporated by reference from Exhibit 99.1 of Form 8-A
filed April 9, 1996 (1-6364).
(4)(b)(i) First Mortgage Indenture dated October 1, 1947.
Incorporated by reference from Exhibit (4)(b)(i) of Form 10-K for 1987
(1-6364).
(4)(b)(x) Twelfth Supplemental Indenture dated as of June 1, 1980.
Incorporated by reference from Exhibit 5(b) of Form S-7 (2-68038).
(4)(b)(xiv) Sixteenth Supplemental Indenture dated as of April 1,
1988, 10 1/4% Series due 2008. Incorporated by reference from Exhibit
(4)(b)(xv) of Form 10-Q for the quarter ended March 31, 1988 (1-6364).
(4)(b)(xv) Seventeenth Supplemental Indenture dated as of May 1,
1989. Incorporated by reference from Exhibit (4)(b)(xv) of Form 10-K
for 1989 (1-6364).
(4)(b)(xvi) Eighteenth Supplemental Indenture dated as of March 1,
1990. Incorporated by reference from Exhibit (4)(e) of Form S-3
(33-36581).
(4)(b)(xvii) Nineteenth Supplemental Indenture dated as of April 1,
1992. Incorporated by reference from Exhibit (4)(b)(xvii) of Form 10-K
for 1992 (1-6364).
(4)(b)(xviii) Twentieth Supplemental Indenture dated as of June 1,
1993. Incorporated by reference from Exhibit (4)(b)(xviii) of Form
10-K for 1993(1-6364).
(4)(b)(xviv) Twenty-First Supplemental Indenture dated as of March 1,
1997 (filed herewith).
(4)(c) Indenture dated as of January 31, 1995; 8.60% Debenture
Notes due February 1, 2010. Incorporated by reference from Exhibit
(4)(c) of Form 10-K for 1994 (1-6364).
SJI-23
South Jersey Industries, Inc.
One South Jersey Plaza, Route 54
Folsom, NJ 08037
Form 10-K FYE 12/31/97
EXHIBIT INDEX
Exhibit
Number
- -----------
(4)(d) Certificate of Trust for SJG Capital Trust. Incorporated
by reference from Exhibit (3)(a) of Form S-3 - SJG Capital Trust and
South Jersey Gas Company as filed March 27, 1997, as amended April 18,
1997 and April 23, 1997 (333-24065).
(4)(d)(i) Trust Agreement of SJG Capital Trust. Incorporated by
reference from Exhibit (3)(b) of Form S-3 - SJG Capital Trust and South
Jersey Gas Company as filed March 27, 1997, as amended April 18, 1997
and April 23, 1997 (333-24065).
(4)(d)(ii) Form of Amended and Restated Trust Agreement for SJG
Capital Trust. Incorporated by reference from Exhibit (3)(c) of Form
S-3 - SJG Capital Trust and South Jersey Gas Company as filed March 27,
1997, as amended April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(iii) Form of Preferred Security for SJG Capital Trust.
Incorporated by reference from Exhibit (4)(a) of Form S-3 - SJG Capital
Trust and South Jersey Gas Company as filed March 27, 1997, as amended
April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(iv) Form of Deferrable Interest Subordinated Debenture.
Incorporated by reference from Exhibit (4)(b) of Form S-3 - SJG Capital
Trust and South Jersey Gas Company as filed March 27, 1997, as amended
April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(v) Form of Deferrable Interest Subordinated Debenture.
Incorporated by reference from Exhibit (4)(c) of Form S-3 - SJG Capital
Trust and South Jersey Gas Company as filed March 27, 1997, as amended
April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(vi) Form of Guaranty Agreement between South Jersey Gas
Company and SJG Capital Trust. Incorporated by reference from Exhibit
(4)(d) of Form S-3 - SJG Capital Trust and South Jersey Gas Company as
filed March 27, 1997, as amended April 18, 1997 and April 23, 1997
(333-24065).
(9) None
(10)(d) Gas storage agreement (GSS) between South Jersey Gas
Company and Transco dated October 1, 1993. Incorporated by reference
from Exhibit (10)(d) of Form 10-K for 1993 (1-6364).
SJI-24
South Jersey Industries, Inc.
One South Jersey Plaza, Route 54
Folsom, NJ 08037
Form 10-K FYE 12/31/97
EXHIBIT INDEX
Exhibit
Number
- -----------
(10)(e) Gas storage agreement (S-2) between South Jersey Gas
Company and Transco dated December 16, 1953. Incorporated by reference
from Exhibit (5)(h) of Form S-7 (2-56223).
(10)(f) Gas storage agreement (LG-A) between South Jersey Gas
Company and Transco dated June 3, 1974. Incorporated by reference from
Exhibit (5)(f) of Form S-7 (2-56223).
(10)(h) Gas storage agreement (WSS) between South Jersey Gas
Company and Transco dated August 1, 1991. Incorporated by reference
from Exhibit (10)(h) of Form 10-K for 1991 (1-6364).
(10)(i) Gas storage agreement (LSS) between South Jersey Gas
Company and Transco dated October 1, 1993. Incorporated by reference
from Exhibit (10)(i) of Form 10-K for 1993 (1-6364).
(10)(i)(a) Gas storage agreement (SS-1) between South Jersey Gas
Company and Transco dated May 10, 1987 (effective April 1, 1988).
Incorporated by reference from Exhibit (10)(i)(a) of Form 10-K for 1988
(1-6364).
(10)(i)(b) Gas storage agreement (ESS) between South Jersey Gas
Company and Transco dated November 1, 1993. Incorporated by reference
from Exhibit (10)(i)(b) of Form 10-K for 1993 (1-6364).
(10)(i)(c) Gas transportation service agreement between South Jersey
Gas Company and Transco dated April 1, 1986. Incorporated by reference
from Exhibit (10)(i)(c) of Form 10-K for 1989 (1-6364).
(10)(i)(e) Service agreement (FS) between South Jersey Gas Company
and Transco dated August 1, 1991. Incorporated by reference from
Exhibit (10)(i)(e) of Form 10-K for 1991 (1-6364).
(10)(i)(f) Service agreement (FT) between South Jersey Gas Company
and Transco dated February 1, 1992. Incorporated by reference from
Exhibit (10)(i)(f) of Form 10-K for 1991 (1-6364).
(10)(i)(g) Service agreement (Incremental FT) between South Jersey
Gas Company and Transco dated August 1, 1991. Incorporated by
reference from Exhibit (10)(i)(g) of Form 10-K for 1991 (1-6364).
(10)(i)(i) Gas storage agreement (SS-2) between South Jersey Gas
Company and Transco dated July 25, 1990. Incorporated by reference
from Exhibit (10)(i)(i) of Form 10-K for 1991 (1-6364).
(10)(i)(j) Gas transportation service agreement between South Jersey
Gas Company and Transco dated December 20, 1991. Incorporated by
reference from Exhibit (10)(i)(j) of Form 10-K for 1993 (1-6364).
SJI-25
South Jersey Industries, Inc.
One South Jersey Plaza, Route 54
Folsom, NJ 08037
Form 10-K FYE 12/31/97
EXHIBIT INDEX
Exhibit
Number
- -----------
(10)(i)(k) Amendment to gas transportation agreement dated December
20, 1991 between South Jersey Gas Company and Transco dated October 5,
1993. Incorporated by reference from Exhibit (10)(i)(k) of Form 10-K
for 1993 (1-6364).
(10)(j)(a) Gas transportation service agreement (FTS) between South
Jersey Gas Company and Equitable Gas Company dated November 1, 1986.
Incorporated by reference from Exhibit (10)(j)(a) of Form 10-K for 1989
(1-6364).
(10)(k)(h) Gas transportation service agreement (TF) between South
Jersey Gas Company and CNG Transmission Corporation dated October 1,
1993. Incorporated by reference from Exhibit (10)(k)(h) of Form 10-K
for 1993 (1-6364).
(10)(k)(i) Gas purchase agreement between South Jersey Gas Company
and ARCO Gas Marketing, Inc. dated March 5, 1990. Incorporated by
reference from Exhibit (10)(k)(i) of Form 10-K for 1989 (1-6364).
(10)(k)(k) Gas transportation service agreement (FTS-1) between
South Jersey Gas Company and Columbia Gulf Transmission Company dated
November 1, 1993. Incorporated by reference from Exhibit (10)(k)(k) of
Form 10-K for 1993 (1-6364).
(10)(k)(l) Assignment agreement capacity and service rights (FTS-2)
between South Jersey Gas Company and Columbia Gulf Transmission Company
dated November 1, 1993. Incorporated by reference from Exhibit
(10)(k)(i) of Form 10-K for 1993 (1-6364).
(10)(k)(m) FTS Service Agreement No. 39556 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November 1,
1993. Incorporated by reference from Exhibit (10)(k)(m) of Form 10-K
for 1993 (1-6364).
(10)(k)(n) FTS Service Agreement No. 38099 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November 1,
1993. Incorporated by reference from Exhibit (10)(k)(n) of Form 10-K
for 1993 (1-6364).
(10)(k)(o) NTS Service Agreement No. 39305 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November 1,
1993. Incorporated by reference from Exhibit (10)(k)(o) of Form 10-K
for 1993 (1-6364).
(10)(k)(p) FSS Service Agreement No. 38130 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November 1,
1993. Incorporated by reference from Exhibit (10)(k)(p) of Form 10-K
for 1993 (1-6364).
SJI-26
South Jersey Industries, Inc.
One South Jersey Plaza, Route 54
Folsom, NJ 08037
Form 10-K FYE 12/31/97
EXHIBIT INDEX
Exhibit
Number
- -----------
(10)(k)(q) SST Service Agreement No. 38086 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November 1,
1993. Incorporated by reference from Exhibit (10)(k)(q) of Form 10-K
for 1993 (1-6364).
(10)(k)(r) NS (Negotiated Sales) Service Agreement dated December 1,
1994 between South Jersey Gas Company and Transco Gas Marketing Company
as agent for Transcontinental Gas Pipeline. Incorporated by reference
from Exhibit (10)(k)(r) of Form 10-K for 1994 (1-6364).
(10)(l) Deferred Payment Plan for Directors of South Jersey
Industries, Inc., South Jersey Gas Company, Energy & Minerals, Inc.,
R&T Group, Inc. and South Jersey Energy Company as amended and restated
October 21, 1994. Incorporated by reference from Exhibit (10)(l) of
Form 10-K for 1994 (1-6364).
(10)(l)(a) Form of Deferred Compensation Agreement between the
Company and/or a subsidiary and seven of its officers. Incorporated by
reference from Exhibit (10)(j)(a) of Form 10-K for 1980 (1-6364).
(10)(l)(b) Schedule of Deferred Compensation Agreements (filed
herewith).
(10)(l)(d) Form of Officer Employment Agreement between certain
officers and either the Company or its subsidiaries. Incorporated by
reference from Exhibit (10)(l)(d) of Form 10-K for 1994 (1-6364).
(10)(l)(e) Schedule of Officer Employment Agreements (filed
herewith).
(10)(l)(f) Officer Severance Benefit Program for all officers.
Incorporated by reference from Exhibit (10)(l)(g) of Form 10-K for 1985
(1-6364).
(10)(l)(g) Discretionary Incentive Bonus Program for all officers
and management employees. Incorporated by reference from Exhibit
(10)(l)(h) of Form 10-K for 1985 (1-6364).
(10)(l)(h) The 1987 Stock Option and Stock Appreciation Rights Plan
including Form of Agreement. Incorporated by reference from Exhibit
(10)(l)(i) of Form 10-K for 1987 (1-6364).
(10)(l)(i) Supplemental Executive Retirement Program, as amended and
restated effective July 1, 1997, and Form of Agreement between certain
Company or subsidiary Company officers (filed herewith).
(10)(l)(j) 1997 Stock Option and Stock Appreciation Rights Plan
(filed herewith).
SJI-27
South Jersey Industries, Inc.
One South Jersey Plaza, Route 54
Folsom, NJ 08037
Form 10-K FYE 12/31/97
EXHIBIT INDEX
Exhibit
Number
- -----------
(11) Not applicable.
(12) Calculation of Ratio of Earnings to Fixed Charges (Before
Federal Income Taxes) (filed herewith).
(13) The Annual Report to Shareholders of the Company for the
year ended December 31, 1997 is filed as an exhibit hereto solely to
the extent portions are specifically incorporated by reference herein
(filed herewith).
(16) Not applicable.
(18) Not applicable.
(21) Subsidiaries of the Registrant (filed herewith).
(22) None.
(23) Independent Auditors' Consent (filed herewith).
(24) Power of Attorney (filed herewith).
(27) Financial Data Schedule (submitted only in electronic
format to the Securities and Exchange Commission).
(99) None.
SJI-28
Exhibit (3)(b)
--------------
BYLAWS
(AMENDED AND RESTATED THROUGH DECEMBER 30, 1997)
SOUTH JERSEY INDUSTRIES, INC.
ARTICLE I
SHAREHOLDERS
1.1 Place of Meetings. Meetings of the shareholders shall
be held at such place as may be designated by the Board of Directors
in the notice of meeting.
1.2 Annual Meeting. An annual meeting of the shareholders
for the election of Directors and for other business shall be held on
the next to the last Thursday in April of each year, if not a legal
holiday, and if a legal holiday, then on the first day following which
is not a legal holiday, or on such other day as may be designated by
the Board of Directors.
1.3 Special Meetings. Special meetings of the shareholders
may be called at any time by the President or by action of a majority
of the Board of Directors. Upon the application of the holder or
holders of not less than 10% of all shares entitled to vote at a
meeting, the Superior Court, in an action in which the court may
proceed in a summary manner, for good cause shown, may order a special
meeting of the shareholder to be called and held at such time and
place, upon such notice and for the transaction of such business as
may be designated in such order.
1.4 Notice. Written notice of the time, place and purpose of
every meeting of shareholders shall be given not less than ten nor
more than 60 days before such meeting, either personally or by mail,
by or at the direction of the Chairman of the Board and Chief
Executive Officer, the Secretary, or the officer or persons calling
the meeting, to each shareholder of record entitled to vote at the
meeting.
1.5 Quorum. At all meetings of shareholders, a majority of
the outstanding shares of capital stock entitled to vote, represented
by shareholders in person or by proxy, shall constitute a quorum for
the transaction of business. In the absence of a quorum, the
shareholders present in person or by proxy by majority vote may
adjourn the meeting from time to time without notice other than by
oral announcement at the meeting, until a quorum shall be present. At
any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the
original meeting.
1.6 Business at Meetings of Shareholders. Except as otherwise
provided by law, or in these Bylaws, the business which shall be
conducted at any meeting of the shareholders shall (a) have been
specified in the written notice of the meeting (or any supplement
thereto) given by the Company, or (b) be brought before the meeting at
the direction of the Board of Directors or the President, or (c) be
brought before the meeting by the presiding officer of the meeting
- 1 -
unless either a majority of the Directors then in office or the
President object to such business being conducted at the meeting, or
(d) have been specified in a written notice given to the Secretary of
the Company, by or on behalf of any shareholder entitled to vote at
the meeting (the "Shareholder Notice"), in accordance with all of the
following requirements:
(1) Each Shareholder Notice must be delivered to, or mailed and
received at, the principal executive offices of the Company (i) in the
case of an annual meeting that is called for a date that is within 30
days before or after the anniversary date of the immediately
preceding annual meeting of shareholders, not less than 60 days nor
more than 90 days prior to such anniversary date, (ii) in the case of
an annual meeting that is called for a date that is not within 30 days
before or after the anniversary date of the immediately preceding
annual meeting, not later than the close of business on the tenth day
following the day on which notice of the date of the meeting was
mailed or public disclosure of the date of the meeting was made,
whichever comes first, and (iii) in the case of any special meeting of
the shareholders, not less than 60 days nor more than 90 days prior to
the date of such meeting; and
(2) Each such Shareholder Notice must set forth with particularity
(i) the names and business addresses of the shareholder submitting the
proposal (the "Proponent") and all persons acting in concert with the
Proponent; (ii) the name and address of the Proponent and the persons
identified in clause (i), as they appear on the Company's books (if
they so appear); (iii) the class and number of shares of the Company
beneficially owned by the Proponent and the persons identified in
clause (i); (iv) a description of the Shareholder Proposal containing
all material information relating thereto; (v) a representation that
the Proponent is a holder of record of the stock of the Company
entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to bring the business specified in the notice
before the meeting; and (vi) such other information as the Board of
Directors reasonably determines is necessary or appropriate to enable
the Board of Directors and the shareholders of the Company to consider
the shareholder proposal. The presiding officer at any shareholders
meeting may determine, in his or her sole discretion, that any
shareholder proposal was not made in accordance with the procedures
prescribed in these Bylaws or is otherwise not in accordance with law,
and if such officer should so determine, such officer shall so declare
at the meeting and the shareholder proposal shall be disregarded.
ARTICLE II
DIRECTORS
2.1 Powers, Number, Classification and Election. The
business and affairs of the Company shall be conducted and managed by
its Board of Directors, which shall have all the powers of the Company
except such as are by statute, by the Certificate of Incorporation, or
by these Bylaws conferred upon or reserved to the shareholders. The
number of Directors constituting the entire Board of Directors shall
be 9. The members of the Board of Directors shall be divided into
classes in the manner provided by Article SEVENTH of the Company's
Certificate of Incorporation and shall be elected and serve for such
terms of office as are provided therein.
- 2 -
2.2 Meetings.
(a) Place of Meetings. Meetings of the Board of Directors
shall be held at such place as may be designated by the Board or in
the notice of the meeting.
(b) Regular Meetings. Regular meetings of the Board of Directors
shall be held on such dates as may be fixed, from time to time, by a
majority of the Directors at a meeting or in writing without a
meeting.
(c) Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board and Chief
Executive Officer or by a majority of the Board of Directors at a
meeting or in writing without a meeting.
(d) Notice. Notice of the time and place of every meeting, which
need not be in writing, shall be given to each Director at least two
days before the meeting.
(e) Quorum. At all meetings of the Board of Directors, or
any committee thereof, a majority of the total number of the members
shall constitute a quorum for the transaction of business, provided
that a quorum shall never be less than two persons. Except in cases
in which it is by law, by the Certificate of Incorporation, or by
these Bylaws otherwise provided, a majority of members present at a
meeting of the full Board or of a committee at which a quorum is
present shall decide any questions that may come before the meeting.
In the absence of a quorum, the members present by majority vote may
adjourn the meeting from time to time without notice other than by
oral announcement at the meeting, until a quorum shall be present. At
any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the
meeting as originally notified.
2.3 Newly Created Directorships and Vacancies. Newly created
Directorships resulting from an increase in the number of Directors
and vacancies occurring in the Board of Directors for any reason may
be filled by vote of a majority of the Directors then in office,
although less than a quorum, or by a sole remaining director, at any
meeting of the Board of Directors. Newly created Directorships shall
be assigned by the Board of Directors to one of the classes described
in Article SEVENTH of the Company's Certificate of Incorporation in
the manner provided in such Article. The person so elected by the
Board of Directors to fill a newly created Directorship or a vacancy
shall be elected to hold office until the next succeeding annual
meeting of shareholders and until his successor shall be duly elected
and qualified or until his earlier death, resignation or removal.
2.4 Committees. The Board of Directors may by resolution adopted
by a majority of the whole Board designate one or more committees,
each committee to consist of three or more Directors, one of whom
shall be designated by the Board as Chairman, and such alternate
members (also Directors) as may be designated by the Board. The
Chairman of the Board and Chief Executive Officer of the Company shall
be ex officio a member of each such committee unless the Board shall
otherwise direct. The Board may provide by resolution for
compensation and payment of expenses to committee members and
alternate members. Any such committee, to the extent permitted by law
and provided in such resolution, shall have and exercise the authority
of the Board of Directors in the management of the business and
affairs of the Company, and shall have power to fix its own rules of
- 3 -
procedure. In the absence or disqualification of any member of a
committee or other person authorized to act as such, the member or
members thereof present and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint another
Director to act at the meeting in the place of any such absent or
disqualified member.
2.5 Removal. No member of the Board of Directors may be removed
except for cause.
2.6 Nominations by Shareholders. Notwithstanding the provisions
of Section 2.1, nominations for the election of the Directors may be
made at any annual meeting or any special meeting of shareholders at
which Directors are to be elected by any shareholder of record
entitled to vote at such meeting; provided, however, that such
shareholder must provide timely written notice (the "Nomination
Notice") to the Secretary of the Company in accordance with the
following requirements:
(1) Each Nomination Notice must be delivered to, or mailed or
received at, the principal executive offices of the Company (i) in the
case of an annual meeting that is called for a date that is within 30
days before or after the anniversary date of the immediately
preceding annual meeting of shareholders, not less than 60 days nor
more than 90 days prior to such anniversary date, and (ii) in the case
of an annual meeting that is called for a date that is not within 30
days before or after the anniversary date of the immediately
preceding annual meeting, not later than the close of business on the
tenth day following the day on which notice of the date of the meeting
was mailed or public disclosure of the date of the meeting was made,
whichever comes first; and (iii) in the case of any special meeting of
the shareholders, not less than 60 days nor more than 90 days prior to
the date of such meeting; and
(2) Each Nomination Notice must set forth: (i) as to each
individual nominated, (A) the name, date of birth, business address
and residence address of such individual; (B) the business experience
during the past five years of such nominee, including his or her
principal occupations and employment during such period, the name and
principal business of any corporation or other organization in which
such occupations and employment were carried on, and such other
information as to the nature of his or her responsibilities and level
of professional competence as may be sufficient to permit assessment
of his or her prior business experience; (C) whether the nominee is or
has ever been at any time a director, officer or owner of 5% or more
of any class of capital stock, partnership interests or other equity
interest of any corporation, partnership or other entity; (D) any
directorships held by such nominee in any company with a class of
securities registered pursuant to section 12 of the Securities
Exchange Act of 1934, as amended, or subject to the requirements of
section 15(d) of such Act or any company registered as an investment
company under the Investment Company Act of 1940, as amended; (E)
whether, in the last five years, such nominee has been convicted in a
criminal proceeding or has been subject to a judgement, order,
finding, decree of any federal, state or other governmental entity,
concerning any violation of federal, state or other law, or any
proceeding in bankruptcy, which conviction, order, finding, decree or
proceeding may be material to an evaluation of the ability or
integrity of the nominee; (F) a description of all arrangements or
understandings between the nominating shareholder (the "Nominating
Shareholder") and each nominee and any other person or persons (naming
- 4 -
such person or persons) pursuant to which the nomination or
nominations are to be made by the Nominating Shareholder; (G) such
other information regarding each nominee as would have been required
to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission had the nominee been
nominated, or intended to be nominated, by the Board of Directors; and
(H) the consent of each nominee to serve as a Director of the Company
if so elected; and (ii) as to the Nominating Shareholder and any
person acting in concert with the Nominating Shareholder, (x) the
names and business addresses of such Nominating Shareholder and the
persons identified in clause (ii); (ii) the name and address of such
Nominating Shareholder and the persons identified in clause (ii), as
they appear on the Company's books (if they so appear); (iii) the
class and number of shares of the Company beneficially owned by such
Nominating Shareholder and the persons identified in clause (ii). The
presiding officer at any shareholders meeting may determine, in his or
her sole discretion, that any nomination of any person was not made in
accordance with the procedures prescribed in these Bylaws or is
otherwise not in accordance with law, and if such officer should so
determine, such officer shall so declare at the meeting and the
nomination shall be disregarded.
ARTICLE III
OFFICERS
3.1 Executive Officers. The Executive officers of the Company
shall be a President (who may be designated by resolution of the Board
as the Chief Executive Officer), one or more Vice Presidents (one or
more of whom may be designated as Executive Vice President or Senior
Vice President), a Secretary and a Treasurer. The Chairman of the
Board may also be elected as an Executive Officer and if so designated
by the Board of Directors, shall be the Chief Executive Officer in
which case the President shall then be the Chief Operating Officer.
The Executive officers shall be elected annually by the Board of
Directors following the annual meeting of the shareholders and each
such officer shall hold office until the corresponding meeting in the
next year and until his successor shall have been duly chosen and
qualified, or until he shall have resigned or shall have been removed.
Any vacancy in any of the above-mentioned offices may be filled for
the unexpired term by the Board of Directors at any regular or special
meeting.
3.2 Authority, Duties and Compensation. The Executive officers
shall have such authority, perform such duties and serve for such
compensation as shall be provided in these Bylaws or as may be
determined by resolution of the Board of Directors. The Chairman of
the Board and Chief Executive Officer shall preside at all meetings of
the Board of Directors and the shareholders at which he is present,
shall carry out policies adopted or approved by the Board of
Directors, shall have general charge and supervision of the business
of the Company, subject to the control of the Board of Directors, and
may perform any act and execute any instrument in the conduct of the
business of the Company. The other Executive Officers shall have the
duties and powers usually related to their offices, except as the
Board of Directors or the Chairman of the Board and Chief Executive
Officer shall otherwise determine from time to time.
- 5 -
3.3 Assistant and Subordinate Officers. The Board of Directors
may choose one or more Assistant Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such
subordinate Officers as it may deem desirable. Each Assistant and
subordinate Officer, if any, shall hold office for such period, shall
have such authority and perform such duties, and shall receive such
compensation as the Board of Directors or the Chairman of the Board
and Chief Executive Officer, or such other Officer as the Board shall
so authorize, may prescribe.
3.4 Officers Holding Two or More Offices. Any two of the above-
mentioned offices may be held by the same person, but no officers
shall execute, acknowledge, or verify any instrument in more than one
capacity, if such instrument be required by statute, by the
Certificate of Incorporation, or by these Bylaws, to be executed,
acknowledged, or verified by any two or more officers.
ARTICLE IV
INDEMNIFICATION
4.1 Right to Indemnification. The Company shall indemnify any
corporate agent against his expenses and liabilities in connection
with any proceedings involving the corporate agent by reason of his
being or having been such a corporate agent to the extent that (a)
such corporate agent is not otherwise indemnified; and (b) the power
to do so has been or may be granted by statute; and for this purpose
the Board of Directors may, and on request of any such corporate agent
shall be required to, determine in each case whether or not the
applicable standards in any such statute have been met, or such
determination shall be made by independent legal counsel if the Board
so directs or if the Board is not empowered by statute to make such
determination.
4.2 Prepayment of Expenses. To the extent that the power to do so
has been or may be granted by statute, the Company shall pay expenses
incurred by a corporate agent in connection with a proceeding in
advance of the final disposition of the proceeding upon receipt of an
undertaking by or on behalf of such corporate agent to repay such
amount unless it shall ultimately be determined that he is entitled to
be indemnified as provided by statute.
4.3 Indemnification Not Exclusive. This indemnification shall not
be exclusive of any other rights to which a corporate agent may be
entitled, both as to any action in his official capacity or as to any
action in another capacity while holding such office, and shall inure
to the benefits of the heirs, executors or administrators of any such
corporate agent.
4.4 Insurance and Other Indemnification. The Board of Directors
shall have the power to (a) purchase and maintain, at the Company's
expense, insurance on behalf of the Company and on behalf of others to
the extent that power to do so has been or may be granted by statute
and (b) give other indemnification to the extent permitted by law.
4.5 Definitions. As used in this Article,
(a) "corporate agent" means any person who is or was a
Director, officer, employee or agent of the Company and any
person who is or was a Director, officer, trustee, employee or agent
- 6 -
of any other enterprise, serving as such at the request of the
Company, or the legal representative of any such Director, officer,
trustee, employee or agent;
(b) "other enterprise" means any domestic or foreign
corporation, other than the Company, and any partnership, joint
venture, sole proprietorship, trust or other enterprise whether or not
for profit, served by a corporate agent;
(c) "expenses" means reasonable costs, disbursements and
counsel fees;
(d) "liabilities" means amounts paid or incurred in
satisfaction of settlements, judgments, fines and penalties;
(e) "proceedings" means any pending, threatened or completed
civil, criminal, administrative or arbitrative action, suit or
proceeding, and any appeal therein and any inquiry or investigation
which could lead to such action, suit or proceeding.
ARTICLE V
SHARE CERTIFICATES AND
UNCERTIFICATED SHARES
5.1 Share Certificates. Except as provided in Section 5.4, every
shareholder of record shall be entitled to a share certificate
representing the shares held by him and such certificates shall
conform to all applicable provisions of law.
5.2 Transfer of Shares. The Board of Directors shall have power
and authority to make all such rules and regulations as it may deem
expedient and in accordance with law concerning the issue, transfer,
and registration of share certificates.
5.3 Mutilated, Lost or Destroyed Certificates. The Board of
Directors may direct a new certificate to be issued in place of any
certificate theretofore issued by the Company alleged to have been
mutilated, lost or destroyed. When authorizing such issue of a new
certificate, the Board of Directors, in its discretion and as a
condition precedent to the issuance thereof, may prescribe such terms
and conditions as it deems expedient, and may require such indemnities
as it deems adequate, to protect the Company from any claim that may
be made against it with respect to any such certificate alleged to
have been lost or destroyed.
5.4 Uncertificated Shares. The Board of Directors may provide
that some or all of the shares of any class or series of stock of the
Company shall be represented by uncertificated shares. Within 20 days
after the issuance or transfer of uncertificated shares, the Company
shall send to the registered owner thereof a written notice stating
that the Company is organized under the laws of New Jersey, the name
of the person to whom the shares were issued, the number and class,
and the designation of the series, if any, of such shares, and
containing any other information required by law or deemed advisable
by the Company to be included in such notice. Except as otherwise
expressly provided by law, the rights and obligations of the holders
of uncertificated shares and the rights and obligations of the holders
of certificates representing shares of the same class and series shall
be identical.
- 7 -
ARTICLE VI
MISCELLANEOUS
6.1 Fiscal Year. The fiscal year of the Company shall be the
calendar year, unless otherwise provided by the Board of Directors.
6.2 Amendments. These Bylaws may be amended or repealed (i) by
action of a majority of the Board of Directors at any regular or
special meeting of the Board of Directors, provided notice of any such
alteration, amendment, or repeal shall be given in the notice of any
such meeting, (ii) or except as otherwise provided in Article TENTH of
the Certificate of Incorporation of the Company, as amended, by action
of the holders of a majority of the outstanding shares of capital
stock of the Company entitled to vote generally in the election of
Directors, considered for this purpose as one class.
- 8 -
AMENDMENTS
Article I Section 1.2 Amended March 19, 1970
Article I Section 1.2 Amended April 16, 1970
Article II Section 2.1 Amended February l8, 1971
Article II Section 2.1 Amended June 22, 1972
Article II Section 2.1 Amended August 23, 1973
Article II Section 2.1 Amended February 20, 1975
Article II Section 2.1 Amended February 19, 1976
Article II Section 2.1 Amended February 17, 1977
Article II Section 2.1 Amended February 16, 1978
Article II Section 2.1 Amended February 15, 1979
Article II Section 2.1 Amended August 23, 1979
Article I Section 1.3 Amended November 16, 1979
Article I Section 1.4 Amended November 16, 1979
Article II Section 2.2 (c) Amended November 16, 1979
Article II Section 2.4 Amended November 16, 1979
Article III Section 3.1 Amended November 16, 1979
Article III Section 3.2 Amended November 16, 1979
Article III Section 3.3 Amended November 16, 1979
Article III Section 3.4 Amended November 16, 1979
Article V Section 5.1 Amended November 16, 1979
Article II Section 2.4 Amended October 24, 1980
Article II Section 2.1 Amended April 22, 1981 (Special Mtg.)
Article II Section 2.1 Amended October 23, 1981
Article III Section 3.1, 3.2, and 3.3 Amended October 23, 1981
Article II Section 2.1, 2.3 Amended January 21, 1983
Article II Section 2.5 Amended by including new section Jan. 21, 1983
Article IV Section 6.2 Amended January 21, 1983
Article II Section 2.1 Amended January 24, 1986
Article I Section 1.3 Amended April 18, 1989, eff. April 19, 1989 (Spl.Mtg.)
Article I Section 1.4 Amended April 18, 1989, eff. April 19, 1989 (Spl.Mtg.)
Article II Section 2.1 Amended April 18, 1989, eff. April 19, 1989 (Spl.Mtg.)
Article II Section 2.2 Amended April 18, 1989, eff. April 19, 1989 (Spl.Mtg.)
Article III Section 3.1 Amended April 18, 1989, eff. April 19, 1989 (Spl.Mtg.)
Article III Section 3.2 Amended April 18, 1989, eff. April 19, 1989 (Spl.Mtg.)
Article V Section 5.1 Amended April 18, 1989, eff. April 19, 1989 (Spl.Mtg.)
Article V Section 5.1 Amended November 17, 1989
Article V Section 5.4 Amended by including new section November 17, 1989
Article II Section 2.1 Amended October 1, 1990.
Article II Section 2.1 Amended April 23, 1992.
Article II Section 2.1 Amended April 22, 1993.
Article II Section 2.1 Amended September 1, 1993.
Article II Section 2.1 Amended April 21, 1994.
Article II Section 2.1 Amended February 17, 1995.
Article I Section 1.3 and 1.4 Amended April 20, 1995.
Article II Section 2.2 (c) and 2.4 Amended April 20, 1995.
Article III Section 3.1, 3.2, and 3.3 Amended April 20, 1995.
Article II Section 2.1 Amended August 23, 1996.
Article II Section 2.1 Amended April 17, 1997.
Article I Section 1.3 Amended October 24, 1997.
Article I Section 1.6 Amended by adding new section October 24, 1997.
Article II Section 2.6 Amended by adding new section October 24, 1997.
Article II Section 2.1 Amended December 30, 1997.
Article III Section 3.1 Amended December 30, 1997.
- 9 -
Exhibit (4)(b)(xviv)
--------------------
This instrument was prepared by
/s/ George W. Patrick
--------------------------------
George W. Patrick, Esquire
MORTGAGE
------------------------------------------------------------
SOUTH JERSEY GAS COMPANY
TO
THE BANK OF NEW YORK,
Trustee
------------------------------
TWENTY-FIRST SUPPLEMENTAL INDENTURE
Dated as of March 1, 1997
------------------------------
Providing for the Issuance of First Mortgage Bonds,
7.70% Series due 2027
and
Further Supplementing and Amending the Indenture of Mortgage
Dated October 1, 1947
------------------------------
(This Instrument Contains After-Acquired Property Provisions)
------------------------------------------------------------
THIS TWENTY-FIRST SUPPLEMENTAL INDENTURE dated as of March 1,
1997 between SOUTH JERSEY GAS COMPANY, a New Jersey
corporation, with principal offices at Number One South Jersey
Plaza, Route 54, Folsom, New Jersey 08037, party of the first
part, hereinafter called the "Company," and The Bank of New York
(successor trustee to Guarantee Bank), a New York banking
corporation with a corporate trust office at 385 Rifle Camp
Road, West Paterson, New Jersey 07424, party of the second part,
hereinafter called "Trustee," as Trustee under the Indenture of
Mortgage hereinafter mentioned, Witnesseth that:
Whereas, the Company has heretofore duly executed, acknowledged
and delivered to Guarantee Bank and Trust Company (name later
changed to Guarantee Bank), as Trustee, a certain Indenture of
Mortgage dated October 1, 1947 (hereinafter called the "Original
Indenture") to provide for the issuance of, and to secure, its
First Mortgage Bonds (the "Bonds"), issuable in series and
without limit as to aggregate principal amount (except as
provided under Article III of the Original Indenture), and by
the Original Indenture granted and conveyed unto the Trustee,
upon the trusts and for the uses and purposes therein
specifically set forth, certain real estate, franchises and
other property therein described or which might be thereafter
acquired by it, to secure the payment of the principal of and
interest on the Bonds from time to time issued thereunder, and
pursuant to which the Company provided for the creation of an
initial series of First Mortgage Bonds designated as "South
Jersey Gas Company First Mortgage Bonds, 4 1/8% Series due 1977"
(herein and in the Original Indenture sometimes called the
"Bonds of the Initial Series"); and
Whereas, the Original Indenture provides that Bonds may be
issued thereunder from time to time and in one or more series,
upon conditions therein fully provided, the Bonds of each series
to be substantially in the forms therein recited for the Bonds
of the Initial Series but with such omissions, variations and
insertions as are authorized or permitted by the Original
Indenture and determined and specified by the Board of Directors
of the Company; and
Whereas, the Company has heretofore duly executed, acknowledged
and delivered to the Trustee a First Supplemental Indenture
dated as of October 1, 1952, a Second Supplemental Indenture
dated as of February 1, 1961, a Third Supplemental Indenture
dated as of July 1, 1963, a Fourth Supplemental Indenture dated
as of August 1, 1966, a Fifth Supplemental Indenture dated as of
September 1, 1968, a Sixth Supplemental Indenture dated as of
July 1, 1969. a Seventh Supplemental Indenture dated as of July
1, 1971, an Eighth Supplemental Indenture dated as of June 1,
1973, a Ninth Supplemental Indenture dated as of July 1, 1974, a
Tenth Supplemental Indenture dated as of November 10, 1976, an
Eleventh Supplemental Indenture dated as of December 1, 1979, a
Twelfth Supplemental Indenture dated as of June 1, 1980, a
Thirteenth Supplemental Indenture dated as of August 1, 1981 a
Fourteenth Supplemental Indenture dated as of August 1, 1984, a
Fifteenth Supplemental Indenture dated as of July 1, 1986, a
Sixteenth Supplemental Indenture dated as of April 1, 1988, a
Seventeenth Supplemental Indenture dated of as May 1, 1989, an
Eighteenth Supplemental Indenture dated of March 1, 1990, a
Nineteenth Supplemental Indenture dated as of April 1, 1992 and
a Twentieth Supplemental Indenture dated as of June 1, 1993
- 2 -
(hereinafter called, respectively, the "First Supplement," the
"Second Supplement," the "Third Supplement," the "Fourth
Supplement," the "Fifth Supplement," the "Sixth Supplement," the
"Seventh Supplement," the "Eighth Supplement," the "Ninth
Supplement," the "Tenth Supplement," the "Eleventh Supplement,"
the "Twelfth Supplement," the "Thirteenth Supplement," the
"Fourteenth Supplement," the "Fifteenth Supplement," the
"Sixteenth Supplement," the "Seventeenth Supplement," the
"Eighteenth Supplement," the "Nineteenth Supplement" and the
"Twentieth Supplement") (the Original Indenture, all such
supplemental indentures and the Twenty-First Supplemental
Indenture being hereinafter collectively referred to as the
"Indenture"), pursuant to which the Company provided for the
creation of a second series of Bonds designated as "South Jersey
Gas Company First Mortgage Bonds, 3 7/8% Series due 1977"
(herein and in the First Supplement sometimes called the "Bonds
of the Second Series"), a third series of Bonds designated as
"South Jersey Gas Company First Mortgage Bonds, 5% Series due
1986" (herein and in the Second Supplement sometimes called the
"Bonds of the Third Series"), a fourth series of Bonds
designated as "South Jersey Gas Company First Mortgage Bonds, 4
1/2% Series due 1988" (herein and in the Third Supplement
sometimes called the "Bonds of the Fourth Series"), a fifth
series of Bonds designated as "South Jersey Gas Company First
Mortgage Bonds, 5.70% Series due 1991" (herein and in the Fourth
Supplement sometimes called the "Bonds of the Fifth Series"), a
sixth series of Bonds designated as "South Jersey Gas Company
First Mortgage Bonds, 7% Series due 1993" (herein and in the
Fifth Supplement sometimes called the "Bonds of the Sixth
Series"), a seventh series of Bonds designated as "South Jersey
Gas Company First Mortgage Bonds, 7 7/8% Series due 1994"
(herein and in the Sixth Supplement sometimes called the "Bonds
of the Seventh Series"), an eighth series of Bonds designated as
"South Jersey Gas Company First Mortgage Bonds, 8 1/4% Series
due 1996" (herein and in the Seventh Supplement sometimes called
the "Bonds of the Eighth Series"), a ninth series of Bonds
designated as "South Jersey Gas Company First Mortgage Bonds, 8
1/4% Series due 1998" (herein and in the Eighth Supplement
sometimes called the "Bonds of the Ninth Series"), a tenth
series of Bonds designated as "South Jersey Gas Company First
Mortgage Bonds, 9 1/2% Series due 1989" (herein and in the Ninth
Supplement sometimes called the "Bonds of the Tenth Series"), an
eleventh series of Bonds designated as "South Jersey Gas Company
First Mortgage Bonds, 8% Series due 1995" (herein and in the
Twelfth Supplement sometimes called the "Bonds of the Eleventh
Series"), a twelfth series of Bonds designated as "South Jersey
Gas Company First Mortgage Bonds, 15 3/4% Series due 1996"
(herein and in the Thirteenth Supplement sometimes called the
"Bonds of the Twelfth Series"), a thirteenth series of Bonds
designated as "South Jersey Gas Company First Mortgage Bonds, 14
3/8% Series due 1996" (herein and in the Fourteenth Supplement
sometimes called the "Bonds of the Thirteenth Series"), a
fourteenth series of Bonds designated as "South Jersey Gas
Company First Mortgage Bonds, 9.20% Series due 1998" (herein and
in the Fifteenth Supplement sometimes called the "Bonds of the
Fourteenth Series"), a fifteenth series of Bonds designated as
"South Jersey Gas Company First Mortgage Bonds, 10 1/4% Series
due 2008" (herein and in the Sixteenth Supplement sometimes
called the "Bonds of the Fifteenth Series"), a sixteenth series
of Bonds designated as "South Jersey Gas Company First Mortgage
Bonds, 9% Series due 2010" (herein and in the Eighteenth
Supplement sometimes called the "Bonds of the Sixteenth
Series"), a seventeenth series of Bonds designated as "South
Jersey Gas Company First Mortgage Bonds, 8.19% Series due 2007"
- 3 -
(herein and in the Nineteenth Supplement sometimes called the
"Bonds of the Seventeenth Series") and an eighteenth series of
Bonds due 2013 (herein and in the Twentieth Supplement sometimes
called the "Bonds of the Eighteenth Series"); and
Whereas, pursuant to the Indenture there have been executed,
authenticated and issued, and there are outstanding as of the
date of execution hereof by the Company, First Mortgage Bonds of
series and in principal amounts as follows:
<TABLE>
<CAPTION>
Series Issued Now Outstanding
- ------------------------------- ---------- ---------------
<S> <C> <C>
Bonds of the Initial Series $4,000,000 -0-
Bonds of the Second Series $4,500,000 -0-
Bonds of the Third Series $4,500,000 -0-
Bonds of the Fourth Series $5,000,000 -0-
Bonds of the Fifth Series $5,000,000 -0-
Bonds of the Sixth Series $6,000,000 -0-
Bonds of the Seventh Series $6,000,000 -0-
Bonds of the Eighth Series $4,000,000 -0-
Bonds of the Ninth Series $6,000,000 -0-
Bonds of the Tenth Series $6,000,000 -0-
Bonds of the Eleventh Series $1,000,000 -0-
Bonds of the Twelfth Series $20,000,000 -0-
Bonds of the Thirteenth Series $10,000,000 -0-
Bonds of the Fourteenth Series $20,000,000 -0-
Bonds of the Fifteenth Series $25,000,000 $25,000,000
Bonds of the Sixteenth Series $35,000,000 $28,437,500
Bonds of the Seventeenth Series $25,000,000 $25,000,000
Bonds of the Eighteenth Series $35,000,000 $35,000,000
</TABLE>
; and
Whereas, said Bonds of the Fifteenth Series, Bonds of the
Sixteenth Series, Bonds of the Seventeenth Series and Bonds of
the Eighteenth Series constitute the only Bonds outstanding
under the Indenture; and
Whereas, the Company, by appropriate resolutions adopted by its
Board of Directors pursuant to the terms of the Original
Indenture, has duly determined to create a new series of Bonds
to be issued under the Indenture, including this Twenty-First
Supplemental Indenture dated as of March 1, 1997 (hereinafter
called the "Twenty-First Supplement"), to be designated as
"South Jersey Gas Company First Mortgage Bonds, 7.70% Series due
2027 (hereinafter sometimes called the "Bonds of the Nineteenth
Series"), and has duly determined that the terms and form of the
Bonds of the Nineteenth Series, which will be fully registered
bonds, and the form of the Trustee's Certificate of
Authentication to be set forth on the Bonds of the Nineteenth
Series, shall be substantially as follows respectively:
- 4 -
[FORM OF BOND]
THIS BOND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). BY ITS ACCEPTANCE OF
THIS BOND, THE HOLDER OF THIS BOND REPRESENTS THAT (1) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" OR A "QUALIFIED
INSTITUTIONAL BUYER" AS SUCH TERMS ARE DEFINED UNDER RULE 501(a)
AND RULE 144A OF THE SECURITIES ACT, RESPECTIVELY, AND (2) THIS
BOND IS BEING ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, EXCEPT IN THE CASE OF RESALES PURSUANT
TO RULE 144A OF THE SECURITIES ACT. PRIOR TO THE DATE WHICH IS
TWO YEARS AFTER THE ORIGINAL ISSUE DATE OF THIS BOND ("SECOND
ANNIVERSARY OF ISSUANCE"), NEITHER THIS BOND NOR ANY INTEREST
HEREIN MAY BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED
WITHOUT REGISTRATION UNDER THE SECURITIES ACT EXCEPT (A) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS SUCH A "QUALIFIED
INSTITUTIONAL BUYER" IN A TRANSACTION COMPLYING WITH THE
REQUIREMENTS OF RULE 144A, OR (B) PURSUANT TO ANOTHER APPLICABLE
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, AND IN THE
CASE OF EITHER (A) OR (B) ABOVE, UNDER CIRCUMSTANCES WHICH WOULD
NOT RESULT IN A VIOLATION OF THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. PROSPECTIVE PURCHASERS ARE HEREBY NOTIFIED
THAT THE SELLER OF THIS BOND MAY BE RELYING ON THE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A. THE ISSUER OF THIS BOND
HAS AGREED THAT UNTIL THE SECOND ANNIVERSARY OF ISSUANCE IT WILL
FURNISH THE HOLDER OF THIS BOND AND PROSPECTIVE PURCHASERS
DESIGNATED BY THE HOLDER WITH THE INFORMATION ABOUT THE ISSUER
REQUIRED BY RULE 144(d) (4).
UNLESS THIS CERTIFICATE IF PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO SOUTH JERSEY GAS COMPANY OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
No. $
- 5 -
SOUTH JERSEY GAS COMPANY
FIRST MORTGAGE BOND, 7.70% SERIES DUE 2027
South Jersey Gas Company, a New Jersey corporation (hereinafter
called the "Company"), for value received, promises to pay on
April 1, 2027, to _____________________, or registered assigns,
on the surrender hereof, the principal sum of ___________
Dollars, and to pay interest thereon from the date hereof, at
the rate of 7.70% per annum (computed on the basis of a 360-day
year of twelve 30-day months) until payment of said principal
sum, such interest to be payable April 1 and October 1 in each
year, commencing October 1, 1997, and to pay on demand interest
at the rate of 7.70% per annum (computed on the basis of a
360-day year of twelve 30-day months) on any overdue principal
and, to the extent permitted by applicable law, on any overdue
interest, from the due date thereof until the obligation of the
Company with respect to the payment thereof shall be discharged.
All payments of principal (which term as used in this Bond
includes the Redemption Price below referred to if this Bond is
called for redemption) hereof and interest hereon shall be paid
at the corporate trust office of the Bank of New York
(hereinafter called the "Trustee"), or its successor as Trustee
under the indenture below mentioned, or at such other places as
the Company may agree pursuant to Section 2.7 of the
Twenty-First Supplement (as hereinafter defined), in such coin
or currency of the United States of America as at the time of
payment shall constitute legal tender for the payment of public
and private debts.
This Bond is one of an authorized issue of Bonds of the
Company, designated as its First Mortgage Bonds, without
specified limit as to aggregate authorized principal amount and
issuable in one or more series (each of which is hereinafter
referred to as a "Series"), all issued or to be issued under and
(except in respect of any sinking, replacement, purchase, or
other analogous fund provided in said indenture or in any
supplement thereto for any one or more particular series of
Bonds) equally and ratably secured by an indenture dated October
1, 1947 (hereinafter called the "Original Indenture") between
the Company and Guarantee Bank and Trust Company, as predecessor
trustee, as supplemented by indentures supplemental thereto,
including a Twenty-First Supplemental Indenture dated as of
March 1, 1997 (hereinafter called the "Twenty-First
Supplement"), duly executed by the Company to the Trustee, to
which Original Indenture and all indentures supplemental thereto
(herein sometimes collectively called the "Indenture") reference
is hereby made for a description of the property mortgaged and
pledged and the respective rights of the Company, the Trustee,
and the Bondholders in respect thereof, and for a specification
of the principal amount of said Bonds from time to time issuable
thereunder and the conditions upon which said Bonds may be
issued and shall be secured.
The Bonds of the 7.70% Series due 2027, of which this Bond is
one, are of similar tenor hereto, and are limited to the
aggregate authorized principal amount of $35,000,000, except as
- 6 -
provided in Section 2.11 of the Original Indenture (relating to
replacement of mutilated, lost, destroyed or stolen Bonds).
The Bonds of this Series are entitled to the benefit of the
sinking fund provided for in Article II of the Twenty-First
Supplement, and all Bonds of all Series are entitled to the
benefit of the replacement fund provided for in the Indenture.
As more fully provided in the Indenture, the Bonds of this
Series are subject to redemption, either as a whole or in part
from time to time, on not more than 60 nor less than 30 days'
written notice in advance of the date fixed for redemption (a)
after February 29, 2012, and subject to any required approval of
the Board of Regulatory Commissioners of New Jersey, or any
successor agency, at the election of the Company upon payment of
an amount equal to the applicable percentage of the principal
amount thereof set forth in the tabulation below under the
heading "Redemption Price" during the respective periods set
forth in said tabulation:
<TABLE>
<CAPTION>
Twelve Months' Period
Beginning April 1 Redemption Price
--------------------- ----------------
<S> <C>
2012 102.00%
2013 101.60%
2014 101.20%
2015 100.80%
2016 100.40%
2017-27 100.00%
</TABLE>
together with accrued interest to the date fixed for redemption,
(b) after February 29, 2012 by operation of said sinking fund
(as provided in Article II of the Twenty-First Supplement) upon
payment of the principal amount thereof together with accrued
interest to the date fixed for redemption, (c) through the
application of proceeds from the condemnation of property
subject to the lien of the Indenture, or proceeds of sale of
such property to a governmental body or agency having the power
of eminent domain made as the result of the threat (evidenced in
writing by such body or agency) of condemnation of such
property, but not through the application of funds from any
other source, upon payment of the principal amount thereof
together with accrued interest to the date fixed for redemption,
or (d) by any combination of (a), (b) and (c). Except as set
forth in this paragraph, the Bonds of this Series are not
subject to redemption.
On certain defaults by the Company, as provided in the
Indenture, the principal of said Bonds may become payable in
advance of the expressed maturity thereof.
Bonds of this Series are issuable in denominations of $100,000
and any integral multiple of $1,000 larger than $100,000, except
that such Bonds may be issued in denominations of less than
$100,000 when necessary after a partial redemption.
- 7 -
As more fully provided in the Indenture, any Bonds of this
Series, upon payment of the charges specified in the Indenture
and upon surrender at the corporate trust office of the Trustee,
may be exchanged for an equal aggregate principal amount of
Bonds of this Series of any of the authorized denominations.
As more fully provided in the Indenture, any of the provisions
of the Indenture or any Bonds issued pursuant thereto may be
altered, amended, or eliminated, or additional provisions added,
with the consent of the holders or registered owners (evidenced
as in the Indenture provided) of at least 66 2/3% in principal
amount of the Bonds issued thereunder and then outstanding, or,
if such change pertains only to the Bonds of one or more Series
but less than all Series of Bonds outstanding, the holders of
registered owners of at least 66 2/3% in principal amount of the
then outstanding Bonds of each Series to which such change
pertains; provided, however, that none of the provisions of any
Bond with respect to the time, terms, manner, or amount of any
payment of the principal thereof or interest thereon shall be
changed without the consent of the holder or registered owner of
such Bond nor shall there be reduced the percentage of Bonds the
holders of which are required to consent to the execution of any
supplemental indenture.
No recourse under or upon any obligation, covenant or agreement
contained in the Indenture or in any indenture supplemental
thereto, or in any Bond issued under the Indenture or coupon
thereby secured or because of any indebtedness thereby secured,
shall be had against any incorporator, or against any past,
present or future stockholder, officer or director, as such, of
the Company or of any successor corporation, either directly or
through the Company or any successor corporation, under any rule
or law, statue or constitutional provision or by the enforcement
of any assessment or by any legal equitable proceeding or
otherwise, it being expressly agreed and understood that the
Indenture and any indenture supplemental thereto, and the
obligations thereby secured, are solely corporate obligations,
and that no personal liability whatever shall attach to, or be
incurred by, such incorporators, stockholders, officers or
directors, as such, of the Company, or of any successor
corporation, or any of them, because of the incurring of the
indebtedness thereby authorized, or under or by reason of any of
the obligations, covenants or agreements contained in the
Indenture or in any indenture supplemental thereto, or in any of
the Bonds or coupons thereby secured, or implied therefrom.
The execution by the Trustee, or by its successor in trust
under the Indenture, of the Trustee's certificate of
authentication set forth hereon is essential to the validity of
this Bond.
This Bond is transferable, but only as provided in the
Indenture and on payment of charges therein specified upon
surrender hereof, by the registered owner in person or by
attorney duly authorized in writing, at the corporate trust
office of the Trustee; upon any such transfer a new Bond similar
hereto will be issued to the transferee. The Company, the
Trustee and any paying agent may deem and treat the person in
whose name this Bond is registered as the absolute owner hereof
for the purpose of receiving payment of or on account of the
principal and the interest on this Bond and for all other
- 8 -
purposes; and neither the Company nor the Trustee nor any paying
agent shall be affected by any notice to the contrary.
IN WITNESS WHEREOF, SOUTH JERSEY GAS COMPANY has caused this
Bond to be duly executed by the manual or facsimile signatures
of its proper officers under its corporate seal or a facsimile
thereof.
Dated: _________, ______
SOUTH JERSEY GAS COMPANY
By: __________________________
President
[CORPORATE SEAL]
Attest:
______________________________
Secretary
- 9 -
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
The within Bond is one of the Bonds of the Series designated
therein, which are described or provided for in the
within-mentioned Indenture.
The Bank of New York,
Trustee
By ________________________
Authorized Signatory
; and
WHEREAS, the Company deems it advisable and has determined
pursuant to the provisions of the Original Indenture, to convey,
transfer and assign to the Trustee and to subject to the lien of
the Indenture with the same effect as though included in the
granting clauses of the Original Indenture certain additional
property now owned by the Company; and
WHEREAS, the execution and delivery of the Twenty-First
Supplement have been duly authorized by the Board of Directors
of the Company at a meeting duly called and held according to
the law; and
WHEREAS, all acts and things prescribed by law, by the charter
and bylaws of the Company and by the Indenture necessary to make
the Bonds of the Nineteenth Series, when executed by the Company
and authenticated by the Trustee as in the Indenture provided,
valid, binding and legal obligations of the Company, and to make
the Twenty-First Supplement a valid, binding and legal
instrument in accordance with its terms, have been done,
performed and fulfilled, and the execution and delivery hereof
have been in all respects duly authorized;
NOW, THEREFORE, THIS TWENTY-FIRST SUPPLEMENT WITNESSETH, that
by way of further assurance and in consideration of the premises
and of the acceptance by the Trustee of the trusts hereby
created, and in order to secure further the payment of the
principal of, the premium, if any, and the interest on all Bonds
at any time issued and outstanding under the Indenture,
according to their tenor and effect, and the performance and
observance by the Company of the covenants and conditions
contained in the Indenture and in said Bonds, the Company has
executed and delivered the Twenty-First Supplement, and has
granted, bargained, sold, conveyed, aliened, enfeoffed,
mortgaged, pledged, released, confirmed, assigned, transferred
and set over, and by these presents does grant, bargain, sell,
convey, alien, enfeoff, mortgage, pledge, release, confirm,
assign, transfer and set over unto the Trustee, its successors
in the trust and its and their assigns, the following described
property:
- 10 -
1. All and singular its lands, real estate and any and every
interest in lands or real estate wheresoever situate.
2. All buildings, structures, machinery, apparatus and
equipment situate upon the premises referred to above or
appurtenant thereto or used in connection therewith, and all
property of the Company used or useful in and about the business
of manufacturing, transmitting and disposing of gas for light,
heat, power or other purposes and consisting of, inter alia, gas
works and plants, engines, furnaces, boilers, generators,
machinery, shafting, belting, retorts, tanks, condensers, pumps,
steam holders, gas holders, purifiers, scrubbers, tar
extractors, separators, dehydrators, pressure regulators,
blowers, compressors, motors, exhausters, tracks and sidings,
oil-gas generators, expansions tanks, gas mains, pipes, gas
transmissions systems, gas distribution systems, tunnels,
service pipes, pipe line fittings, gates, valves, connections,
implements, gas meters, lamps and all other appliances,
instruments, equipment, stores, repair parts and the like, now
owned by the Company, and all other property for similar uses
hereafter in any way acquired by the Company or to which it may
hereafter be entitled, it being hereby expressly agreed that any
and all personal property covered by the foregoing description,
whether or not located in or upon the real property of the
Company, shall be considered as fixtures and appurtenances
constituting part of the real property of the Company.
3. All easements, rights of way, rights, franchises, contracts,
permits, leases, licenses, privileges and appurtenances
belonging or in any way appertaining to the premises and
property hereinbefore referred to, or to any other property now
owned by the Company or hereafter acquired by it, and every part
thereof, or derived or acquired by the Company in any manner
whatsoever; and all the reversions, remainders, revenues, rents,
issues, and profits of all property at any time subject hereto
and all the estate, right, title, interest, property,
possession, claim, and demand whatsoever, as well at law as in
equity, of the Company, of, in, and to the same and every part
thereof.
4. All other property of whatever kind and description, whether
real or personal, now owned or which may at any time hereafter
be acquired by the Company, and whether or not specifically
described or referred to herein, excepting, however, all
materials and supplies consumable in the operation of the
properties of the Company, all merchandise and products
acquired, manufactured, produced, or held for sale in the usual
course of business, all automobiles and motor vehicles, and all
cash, accounts receivable, stocks, bonds, notes, and other
securities which are neither specifically pledged with the
Trustee nor required by any provision of the Indenture to be
pledged with the Trustee.
5. All money, securities, or property of any kind which may at
any time be paid, conveyed, assigned, transferred or delivered
to the Trustee by the Company or any other person, to be held
hereunder as additional security for all the Bonds, which money,
securities, or property the Trustee is hereby authorized to
receive and accept.
- 11 -
UNDER AND SUBJECT to any excepted encumbrances of the character
defined in Subdivision A of Section 3.04 of the Original
Indenture.
TO HAVE AND TO HOLD the same unto the Trustee, its successors
and assigns, forever.
IN TRUST, nevertheless, for the benefit of the Trustee in
respect of all reasonable compensation due it hereunder and all
expenses and liabilities incurred by it pursuant hereto without
negligence or bad faith, and for the equal and ratable benefit
and security of the holders, present and future, of all Bonds at
any time issued and outstanding under the Indenture, and for the
enforcement of the payment thereof, when payable, and the
performance and observance of the covenants and conditions
contained in the Indenture, without preference, priority or
distinction (except as otherwise herein specifically provided),
of any one of such Bonds over any other of such Bonds by reason
of priority in issue or acquisition or otherwise, so that,
except as aforesaid, the principal (which term as used in this
Twenty-First Supplement where the context requires includes the
Redemption Price contained in the form of Bond hereinbefore set
forth in the recitals contained in the Twenty-First Supplement
if the Bond is called for redemption) of and interest on each
Bond at any time issued and outstanding under the Indenture
shall be equally and ratably secured hereby, as if all of such
Bonds had been executed, authenticated, delivered, sold, and
negotiated simultaneously with the execution and delivery
hereof; and it is hereby covenanted and declared that all Bonds
at any time issued and outstanding under the Indenture are to be
issued, authenticated, and delivered, and that the mortgaged
property is to be held by the Trustee, upon and subject to the
covenants, conditions, uses and trusts as in the Original
Indenture and in any supplemental indenture, including the
Twenty-First Supplement, contained;
PROVIDED, HOWEVER, and these presents are upon the condition
that if the Company, its successors or assigns, shall pay or
cause to be paid the principal of and interest on all said
Bonds, together with the premium, if any, payable on such of
said Bonds as may have been called for redemption prior to
maturity, or shall provide, as permitted by the Indenture, for
the payment thereof by depositing with the Trustee the entire
amount due or to become due thereon for principal, interest and
premium, if any, and if the Company shall also pay or cause to
be paid all other sums payable under the Indenture by it, then
the Indenture, including the Twenty-First Supplement, and the
estate and rights thereby granted shall cease, determine and be
void, otherwise to be and remain in full force and effect.
IT IS HEREBY FURTHER COVENANTED, DECLARED AND AGREED by and
between the Company and the Trustee for the benefit of those who
shall hold Bonds of the Nineteenth Series, or any of them, as
follows:
- 12 -
ARTICLE I
DESCRIPTION OF BONDS OF THE NINETEENTH SERIES
The Bonds of the Nineteenth Series shall be designated as
"South Jersey Gas Company First Mortgage Bonds, 7.70% Series due
2027," and shall be issuable as fully registered Bonds,
substantially in the form hereinbefore recited, but they may
bear and contain such legends and modifications as may be
required by law or as may be necessary to comply with
requirements of any stock exchange or of any regulatory board,
body or official. Except as provided in Section 2.11 of the
Original Indenture, the aggregate principal amount of Bonds
authorized by the Twenty-First Supplement is limited to
$35,000,000, and except as aforesaid, and except for exchanges
and transfers, the Company shall not execute and the Trustee
shall not authenticate or deliver Bonds of the Nineteenth Series
in excess of such aggregate principal amount.
Except as otherwise provided in Section 2.11 of the Original
Indenture, Bonds of the Nineteenth Series shall be dated and
shall bear interest from the April 1 or October 1 next preceding
the date of authentication thereof by the Trustee, except that
if the authentication date is an interest payment date, such
Bonds shall be dated, and shall bear interest from, the
authentication date; provided, however, that if upon
authentication of any Bonds of the Nineteenth Series upon the
transfer or in exchange for other such Bonds or under Section
2.6 of the Twenty-First Supplement, interest on the Bonds of the
Nineteenth Series shall be in default, the date from which such
Bond shall bear interest shall be the date to which interest
shall have been paid upon the Bonds transferred or surrendered
in exchange for the Bond so authenticated; and provided further,
however, that in the case of the authentication of Bonds of the
Nineteenth Series upon an original issue hereunder, such Bonds
may be dated the date of authentication thereof and in such case
shall bear interest from such date of authentication.
Bonds of the Nineteenth Series shall mature April 1, 2027, and
shall bear interest on the unpaid principal amount thereof at
the rate of 7.70% per annum (computed on the basis of a 360-day
year of twelve 30-day months), payable on April 1 and October 1
in each year, commencing October 1, 1997, and shall bear
interest payable on demand at the rate of 7.70% per annum
(computed on the basis of a 360-day year of twelve 30-day
months) on any overdue principal and, to the extent permitted by
applicable law, on any overdue interest, from the due date
thereof, until the obligation of the Company with respect to the
payment thereof shall be discharged. All payments of principal
and interest shall be made at the corporate trust office of The
Bank of New York or its successor as Trustee under the
Indenture, or at such other places as the Company may agree
pursuant to Section 2.7 of the Twenty-First Supplement, in such
coin or currency of the United States of America as at the time
of payment shall constitute legal tender for the payment of
public and private debts.
Bonds of the Nineteenth Series shall be issuable in
denominations of $100,000 and in any integral multiple of $1,000
larger than $100,000; provided, however, that such Bonds may be
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issued in denominations of less than $100,000 when necessary to
satisfy the requirements of Section 2.6 of the Twenty-First
Supplement. Each Bond of such Series, and each of the
authorized denominations, shall bear such appropriate
distinguishing numbers and letters as may be adopted by the
Company.
Except as provided below, Bonds of the Nineteenth Series shall
be transferable and exchangeable as to denominations and
registered name upon the same terms and conditions as are
applicable under Section 2.10 of the Original Indenture to fully
registered Bonds of the Initial Series.
The Bonds of the Nineteenth Series may be presented to the
Trustee in exchange for a global Bond in an aggregate principal
amount equal to the aggregate principal amount of all
outstanding Bonds of the Nineteenth Series (a "Global Bond"), to
be registered in the name of a depository (the "Depository")
which may include The Depository Trust Company, or its nominee,
and delivered by the Trustee to the Depository for crediting to
the accounts of its participants pursuant to the instructions of
the Trustee. The Company upon any such presentation shall
execute a Global Bond in such aggregate principal amount and
deliver the same to the Trustee for authentication and delivery
in accordance with the Original Indenture and this Twenty-First
Supplemental Indenture. Payments on the Bonds of the Nineteenth
Series issued as a Global Bond will be made to the Depository.
A Global Bond may be transferred, in whole but not in part,
only to another nominee of the Depository, or to a successor
Depository selected or approved by the Company or to a nominee
of such successor Depository.
If at any time the Depository notifies the Company that it is
unwilling or unable to continue as Depository or if any time the
Depository for such series shall no longer be registered or in
good standing under the Securities Exchange Act of 1934, as
amended, or other applicable statute or regulation, and a
successor Depository for such series is not appointed by the
Company within 90 days after the Company receives such notice or
becomes aware of such condition as the case may be, the Company
will execute, and the Trustee, upon written notice from the
Company, will authenticate and deliver the Bonds of the
Nineteenth Series in definitive registered form without coupons,
in authorized denominations, and in an aggregate principal
amount equal to the principal amount of the Global Bond in
exchange for such Global Bond. In addition, the Company may at
any time determine that the Bonds of the Nineteenth Series shall
no longer be represented by a Global Bond. In such a event the
Company will execute, and the Trustee, upon receipt of an
Officer's Certificate evidencing such determination by the
Company, will authenticate and deliver the Bonds of the
Nineteenth Series in definitive registered form without coupons,
in authorized denominations, and in aggregate principal amount
equal to the principal amount of the Global Bond in exchange
for such Global Bond. Upon the exchange of the Global Bond for
such Bonds of the Nineteenth Series in definitive registered
form without coupons, in authorized denominations, the Global
Bond shall be canceled by the Trustee. Such Bonds of the
Nineteenth Series in definitive registered form issued in
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exchange for the Global Bond shall be registered in such name
and in such authorized denominations as the Depository, pursuant
to instructions from its direct or indirect participants or
otherwise, shall in writing, instruct the Trustee. The Trustee
shall deliver such Bonds to the Depository for delivery to the
persons in whose names such Bonds are so registered.
ARTICLE II
REDEMPTION OF AND SINKING FUND FOR
BONDS OF THE NINETEENTH SERIES
SECTION 2.1. Bonds of the Nineteenth Series shall be subject
to redemption, either as a whole or in part from time to time:
(a) after February 29, 2012, and subject to any required
approval of the Board of Public Utilities of New Jersey (the
"New Jersey BPU"), or any successor agency, at the election of
the Company upon payment of an amount equal to the applicable
percentage of the principal amount thereof specified under the
heading "Redemption Price" in the tabulation contained in the
form of Bond hereinbefore set forth in the recitals in the
Twenty-First Supplement;
(b) after February 29, 2012, upon payment of the principal
amount thereof, through the operation of the sinking fund for
the Bonds of the Nineteenth Series provided for in Section 2.2
of the Twenty-First Supplement;
(c) upon payment of the principal amount thereof through
the application pursuant to Subdivision C of Section 6.07 of the
Original Indenture of proceeds from the condemnation of property
subject to the lien of the Indenture, or proceeds of sale of
such property to a governmental body or agency having the power
of eminent domain made as a result of the threat (evidenced in
writing by such body or agency) or condemnation of such
property, but not through the application of money from any
other source; or
(d) by any combination of clauses (a), (b) and (c);
together in each case with accrued interest to the date fixed
for redemption. Except as set forth in this Section 2.1, the
Bonds of the Nineteenth Series are not subject to redemption.
SECTION 2.2. As further security for the Bonds of the
Nineteenth Series and to create and maintain a sinking fund
(herein referred to as the "sinking fund") for the benefit
thereof, the Company covenants to pay in cash, so long as any of
the Bonds of the Nineteenth Series remain outstanding, to the
Trustee, on or before April 1 of each year, commencing April 1,
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2012, and continuing to and including April 1, 2026, the sum of
$2,187,500. For purposes of this Section 2.2, any redemption of
less than all of the Bonds of the Nineteenth Series pursuant to
Section 2.1 of the Twenty-First Supplement shall be applied to
principal payments in inverse order of their scheduled maturity.
The Trustee shall select for redemption, in the manner set
forth in Section 2.5 of the Twenty-First Supplement, such
principal amount of Bonds of the Nineteenth Series as the amount
of such sinking fund payment to be paid in cash on or before the
next succeeding April 1 shall be sufficient to redeem. The
Trustee shall certify to the Company the numbers of the Bonds
selected and the portion of the principal amount of each Bond
that is to be redeemed.
The Trustee shall, not more than 60 nor less than 30 days in
advance of such April 1, give, in the name of the Company,
written notice that Bonds of the Nineteenth Series bearing the
serial number specified have been called for redemption through
the sinking fund, that they will be due and payable on such
April 1 at the corporate trust office of the Trustee at a stated
amount which shall be the principal amount thereof, together
with accrued interest to said date, and that all interest
thereon will cease to accrue after said date (unless the Company
shall default in making such payment on said date). Such notice
of redemption shall be given to the registered owners of Bonds
which, or portions of which, are to be redeemed by mailing the
same to such registered owners, at their respective addresses as
the same appear on the registry books kept in accordance with
Section 2.10 of the Original Indenture.
SECTION 2.3. The election of the Company to redeem any
of the Bonds of the Nineteenth Series, other than through the sinking
fund above provided for, shall be evidenced by a resolution of
its Board of Directors calling all or a stated principal amount
thereof for redemption on a stated date. At least 40 days prior
to such redemption date (or at such later time as shall be
satisfactory to the Trustee), the Company shall file with the
Trustee a certified copy of such resolution. The Company shall
on or before such redemption date deposit with the Trustee the
total redemption price of all Bonds so called, with accrued
interest thereon to the redemption date.
If the Company elects to redeem less than all of the Bonds of
the Nineteenth Series, the particular Bonds to be redeemed shall
be selected by the Trustee in the manner set forth in Section
2.5 of the Twenty-First Supplement from the Bonds of the
Nineteenth Series then outstanding. The Trustee shall certify
to the Company the numbers of the Bonds selected and the portion
of the principal amount of each Bond that is to be redeemed.
The Trustee shall, not more than 60 nor less than 30 days in
advance of such redemption date, give, in the name of the
Company, written notice that Bonds of the Nineteenth Series
bearing the serial numbers specified have been called for
redemption, that they will be due and payable on such redemption
date at the corporate trust office of the Trustee at a stated
amount (which shall be the applicable redemption price), and
that all interest thereon will cease to accrue after said date
(unless the Company shall default in payment of the amount
necessary to effect such redemption). If all the Bonds of the
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Nineteenth Series be called, the notice shall so state and may
omit the numbers thereof. The notice shall state that the Bonds
will be payable at the stated redemption price, plus accrued
interest to the redemption date. If the redemption date is an
interest payment date, the notice may state that the interest
payment due on such date will be paid in the usual manner. Such
notice of redemption shall be given to the registered owners of
Bonds which, or portions of which, are to be redeemed by mailing
the same to such registered owners, at their respective
addresses as the same appear on the aforementioned registry
books.
Before any money shall be applied by the Trustee to the
redemption of Bonds under this Section, the Company shall
deliver to the Trustee a certificate of the President or a Vice
President of the Company stating that all conditions precedent
provided for herein (including compliance with all applicable
covenants) relating to such redemption have been complied with.
SECTION 2.4. Each Bond so called for redemption under either
Section 2.2 or Section 2.3 shall be due and payable at the
places and price and on the date specified in such notice.
Subject to any agreement entered into pursuant to Section 2.7,
beginning on the date when each Bond shall be due and payable as
aforesaid, the holder thereof may present the same for
redemption, in negotiable form, and the Trustee shall, out of
the money deposited with it under the provisions of this
Article, cause the same to be paid and redeemed; after said date
(unless upon such presentation on or after the due date the
Trustee shall have refused or failed to make such payment) all
further interest shall cease to accrue thereon. In any case
where the redemption date is an interest payment date, the
interest payment due on such date on Bonds called for redemption
may be paid in the usual manner.
SECTION 2.5. Whenever less than all of the outstanding Bonds
of the Nineteenth Series are to be redeemed, the principal
amount of Bonds of the Nineteenth Series to be redeemed, shall
be prorated among the holders of the Bonds of the Nineteenth
Series in the proportion, as nearly as practicable, that their
respective holdings bear to the aggregate principal amount of
Bonds of the Nineteenth Series outstanding on the date of
selection. In making any proration pursuant to this provision,
the Trustee may make such adjustment as it may determine, with
the approval of the Company, to the end that the principal
amount prorated to each holder of Bonds shall be in each
instance $1,000 or an integral multiple thereof.
SECTION 2.6. If only a part of any fully registered Bond
shall be selected by the Trustee in the manner set forth in Section
2.5 of the Twenty-First Supplement, the notice of redemption
hereinbefore provided for shall specify the distinctive number
of such Bond and the portion of the principal amount thereof to
be redeemed. Upon surrender of such Bond for partial redemption
and upon payment of the portion so called for redemption, a new
Bond or Bonds of the Nineteenth Series, in aggregate principal
amount equal to the unredeemed portion of such surrendered Bond,
shall be executed by the Company, authenticated by the Trustee,
and delivered to the registered owner thereof, without expense
to such holder.
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SECTION 2.7. The Company may enter into an agreement with
the registered owners of any Bond of the Nineteenth Series (or
prospective registered owner of any such Bond) providing for the
payment without the surrender of such Bond to such registered
owner (or to such prospective registered owner, upon becoming a
registered owner of any such Bond) of the principal of and the
premium, if any, and interest on such Bond or any part thereof
at a place other than the offices or agencies therein specified,
and for the making of notation as to principal payments, if any,
on such Bond by such registered owner or by any agent of the
Company or of the Trustee. A copy of any such agreement shall
be filed with the Trustee. The Trustee is authorized to approve
any such agreement, and shall thereafter make all payments on
such Bond as provided in such agreement. The Trustee shall not
be liable for any act or omission to act on the part of the
Company, any such registered owner or any agent of the Company
in connection with any such agreement.
SECTION 2.8. So long as any of the Bonds of the Nineteenth
Series shall remain outstanding, upon any application by the
Trustee of funds from sources described in Section 2.1 (c) of
the Twenty-First Supplement to the redemption of Bonds pursuant
to Subdivision C of Section 6.07 of the Original Indenture, if
less than all Bonds of all Series then outstanding are to be
redeemed, a principal amount of Bonds of the Nineteenth Series
shall be redeemed by the application of a portion of such funds,
such portion to be determined by multiplying the total amount of
such funds so to be applied by a fraction the numerator of which
shall be the aggregate amount required for the redemption,
pursuant to Subdivision C of Section 6.07 (exclusive of accrued
interest, if any), of all of the Bonds of the Nineteenth Series
outstanding on the date of the selection for such redemption and
the denominator of which shall be the aggregate amount required
for the redemption, pursuant to such Subdivision C of Section
6.07 (exclusive of accrued interest, if any), of all of the
Bonds of all Series outstanding on such date; provided, however,
that nothing in this Section 2.8 shall restrict the manner (pro
rata, by lot or otherwise) by which the remaining balance of
such funds shall be applied to the redemption of Bonds of any
Series other than the Nineteenth Series.
SECTION 2.9. Bonds paid or retired by the use of any money
subject to the lien of the Indenture, or by the operation of the
sinking fund provided for in this Article II, or by the
operation of any replacement, purchase, or other analogous fund,
or made the basis of a credit against the obligations of the
Company under any sinking, replacement, purchase, or other
analogous fund, may thereafter be made the basis of the
authentication of a like principal amount of Bonds of any Series
under the provisions of Section 3.06 of the Original Indenture.
SECTION 2.10. To the extent the Company shall elect to include
the same, the principal amount of Bonds redeemed by the
operation of the sinking fund provided for in this Article II
(whether through mandatory sinking fund payments or voluntary
sinking fund payments) shall be included among the Bonds
purchased, paid or otherwise acquired or retired by the Company
specified in Section 5.19(A)(3) of the Original Indenture.
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ARTICLE III
ADDITIONAL COVENANTS OF THE COMPANY
SECTION 3.1. So long as any Bonds of the Nineteenth Series
shall remain outstanding, the Company will not declare or pay
any dividend on any shares of its Common Stock (other than
dividends payable in shares of its Common Stock) or make any
distribution on such shares, or purchase or otherwise acquire
any such shares (except shares acquired without cost to the
Company), or advance any amount to or invest any amount in the
property, securities or indebtedness of, or guarantee any
indebtedness of, any subsidiary if, after giving effect to such
action, the sum of the aggregate amounts so declared, paid,
distributed, purchased, acquired, advanced, invested or
guaranteed after December 31, 1996 would exceed the aggregate
net income of the Company available for dividends on its Common
Stock earned after such date plus the sum of $51,000,000. For
the purposes of this Section 3.1, "subsidiary" shall mean any
corporation directly or indirectly controlled by or under common
control with the Company.
For the purpose of calculating the requirements of this
Section, the net income of the Company available for dividends
on its Common Stock shall be determined in accordance with such
system of accounts as may be prescribed by any governmental
authority having jurisdiction in the premises or in the absence
thereof in accordance with generally accepted accounting
principles as in effect at such time; provided, however, that
(a) the deductions for depreciation or renewal or replacement
reserves in respect of each year shall be the amount taken
therefor on the accounts of the Company or the amount required
to be stated in item (1) of the Replacement Fund Certificate to
be filed under Section 5.19 of the Original Indenture with
respect to the period ending at the close of such year,
whichever be greater, and (b) no deduction or adjustment shall
be made from gross income for or in respect of (i) expenses in
connection with the redemption or retirement of any securities
issued by the Company, including any amount paid in excess of
the principal or par or stated value of securities redeemed or
retired, and, if such redemption or retirement is effected with
the proceeds of sale of other securities of the Company,
interest on the securities redeemed or retired from the date on
which the funds required for such redemption or retirement shall
be deposited in trust for such purpose to the date of such
redemption or retirement, (ii) profits or losses from sales of
capital assets or taxes in respect of such profits, (iii) any
adjustments to retained earnings (including tax adjustments)
applicable to any period prior to January 1, 1997, (iv) charges
for the write-off of unamortized debt discount and expense
carried on the books of the Company at December 31, 1996, or (v)
charges for the write-off or write-down of the amount at which
any property of the Company was carried on its books at December
31, 1996, to the extent that the same shall be approved by, or
be made pursuant to any rule, regulation, or order of, any
governmental authority having jurisdiction in the premises and
shall not be required by such authority to be charged against
earnings accumulated after December 31, 1996.
SECTION 3.2. So long as any Bonds of the Nineteenth Series
shall remain outstanding, the Company will satisfy its
obligations under the Replacement Fund provided for in Section
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5.19 of the Original Indenture first through the use of all
available property additions and retired Bonds of any Series and
then, if and only to the extent that said property additions and
retired Bonds are not sufficient to satisfy such obligations,
through the use of cash.
SECTION 3.3. So long as any Bonds of the Nineteenth Series
shall remain outstanding, in the event that the Company shall
consolidate or merge with or into any corporation or
corporations, or the Company shall transfer all of its property
and franchises to any other corporation, the corporation formed
by any such consolidation, or into which the Company shall be so
merged, or which shall acquire such property of the Company,
shall be a corporation incorporated under the laws of the United
States, any State or the District of Columbia.
SECTION 3.4. So long as any Bonds of the Nineteenth Series
shall remain outstanding, no owner of any portion of the
mortgaged property will be entitled to any credit against
interest payable on any Bonds by reason of the payment of any
tax on such property.
ARTICLE IV
ISSUE AND AUTHENTICATION OF BONDS OF THE NINETEENTH SERIES
Upon compliance by the Company with the requirements of the
Indenture, including the Twenty-First Supplement, for the
issuance of additional Bonds, Bonds of the Nineteenth Series up
to an aggregate principal amount of $35,000,000 may forthwith,
or from time to time, be executed by the Company and delivered
to the Trustee, and the Trustee shall thereupon authenticate and
deliver said Bonds in accordance with the provisions of Article
III of the Original Indenture. The signature of the officers of
the Company on Bonds of the Nineteenth Series may be by
facsimile if so authorized by the Company's Board of Directors.
ARTICLE V
AMENDMENT TO THE ORIGINAL INDENTURE
SECTION 5.1. Section 3.06. of the Original Indenture shall
be amended to delete paragraph (2) of subsection A thereof, so that
such Section shall thereafter read in full as follows:
"SECTION 3.06. ADDITIONAL BONDS CONDITIONS FOR AUTHENTICATION
ACQUISITION OR REFUNDING OF BONDS ISSUED HEREUNDER. Whenever
any Bonds shall have been acquired, paid, or retired by the
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Company, or whenever the Company shall have made provision for
the payment of any Bonds (as such provision for payment is
defined in Article I), or shall surrender any Bonds to the
Trustee, thereupon or at any time thereafter additional Bonds
shall be authenticated and delivered by the Trustee in a
principal amount not exceeding the principal amount of the Bonds
so acquired, paid, retired, surrendered, or for the payment of
which such provision shall have been made, upon application by
the Company and upon compliance with the following conditions,
in addition to those specified in Section 3.03:
A. Any Bonds so acquired, paid, retired or surrendered, or
for which payment shall have been so provided, may, when deposited
with the Trustee as below provided in Subdivision B, be
uncancelled or may have been cancelled; provided, however, that
in respect of any which shall have been cancelled prior to or
concurrently with the application for such authentication (and,
for the purposes of this Subdivision A, in case payment shall
have been so provided for such Bonds, the same shall be deemed
to have been cancelled upon the date of such provision for
payment) no Bond shall have been authenticated in lieu thereof
or in exchange therefor or by virtue of the acquisition,
payment, retirement, cancellation, or such provision for payment
thereof; nor shall any money have been withdrawn hereunder by
virtue of such acquisition, payment, retirement, cancellation,
or provision.
B. There shall be delivered to the Trustee the following
documents:
(1) The Bonds so acquired, paid, retired, or surrendered. Any
of such Bonds which shall be uncancelled shall be in negotiable
form or accompanied by proper instruments of assignment and
transfer, and shall be accompanied by all unmatured coupons, if
any, appertaining thereto. In the case of any Bonds for which
payment shall have been so provided, such Bonds shall not then
be required to be deposited, but in lieu thereof the Company
shall deliver to the Trustee a statement describing the same;
thereafter, upon payment of such Bonds, the same shall forthwith
be delivered to the Trustee for cancellation. In the case of
any Bonds which shall have been paid or retired or surrendered
and which shall have theretofore been cancelled and cremated by
the Trustee, such Bonds shall not be required to be deposited,
but in lieu thereof the Company shall deliver to the Trustee a
statement describing the same and specifying the date upon which
the same were paid or retired or surrendered and were cancelled
and cremated.
(2) If the Bonds so deposited shall be cancelled Bonds, or if
in lieu of such deposit of Bonds a statement by the Company
shall be delivered as provided in subparagraph (1) of this
Subdivision B, a certificate by the President or a
Vice-President of the Company, stating such facts in connection
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therewith as may reasonably be required to show compliance with
the conditions specified in Subdivision A.
C. If the Bonds so acquired, paid, retired, surrendered,
or the payment of which has been so provided for, shall not at any
time theretofore have been bona fide issued by the Company, and
if they shall bear interest at a lower rate per annum than the
new Bonds the authentication of which is then applied for, the
net earnings condition specified in Subdivision C of Section
3.04 shall be complied with, and the Company shall deliver to
the Trustee (i) a net earnings certificate, conforming to the
provision of Subdivision E (3) of Section 3.04, showing the
fixed charges and net earnings of the Company in such reasonable
detail as may be required to show compliance with said
condition, (ii) an opinion of counsel conforming to the
provisions of Subdivision E (4) (b) of Section 3.04, and (iii) a
certificate by the trustee or mortgagee of each prior lien
conforming to the provisions of Subdivision E (5) of Section
3.04"
SECTION 5.2. The foregoing amendment to Section 3.06 of the
Original Indenture shall become effective upon the earlier to
occur of the following:
(a) the date as of which no Bonds remain outstanding that
where part of a series of Bonds initially issued prior to the issuance
of Bonds of the Nineteenth Series;
(b) the date as of which a supplemental indenture to the
Indenture is executed by the Company and the Trustee setting
forth the foregoing amendment to Section 3.06 of the Original
Indenture, after the holders of at least 66 2/3% of the Bonds
then outstanding have consented to and approved the execution of
such supplemental indenture, all in accordance with Article X
and the other relevant provisions of the Original Indenture.
SECTION 5.3. Each holder of any Bonds of the Nineteenth
Series, by the acceptance by such holder of such Bonds, (a)
consents to and approves the foregoing amendment to Section 3.06
of the Original Indenture, and consents to and approves the
execution by the Company and the Trustee of a supplemental
indenture to the Indenture setting forth such amendment, and (b)
agrees to execute such instrument or instruments as may be
requested by the Company or the Trustee to evidence such consent
and approval in accordance with Section 10.02 of the Original
Indenture.
ARTICLE VI
CONCERNING THE TRUSTEE
SECTION 6.1. The Trustee, for itself and its successors in
said trusts, hereby accepts the trust hereby provided and agrees
to perform the same upon the terms and conditions contained in
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the Indenture, including the Twenty-First Supplement. The
Trustee shall not be responsible in any manner whatsoever for
the recitals in the Twenty-First Supplement.
SECTION 6.2. So long as any Bonds of the Nineteenth Series
shall remain outstanding, any successor trustee to the Trustee
shall at all times be a corporation which shall have at all
times a combined capital and surplus of not less than
$100,000,000. If any such successor trustee publishes reports
of condition annually, pursuant to law or to the requirements of
a supervising or examining authority, the combined capital and
surplus of such successor trustee at any time for the purposes
of this Section shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.
ARTICLE VII
CONCERNING EVENTS OF DEFAULT
SECTION 7.1. So long as any Bonds of the Nineteenth Series
shall remain outstanding, the following shall constitute events
of default within the meaning of Section 9.02 of the Original
Indenture (in addition to the events of default set forth in
Section 9.02 of the Original Indenture):
(a) If the Company shall default in the payment of any
portion of the principal of any Bond of the Nineteenth Series, as and
when the same shall have made due, whether at the stated
maturity thereof or upon proceedings for redemption (pursuant to
the provisions of any sinking, replacement, purchase or other
analogous fund established in the Original Indenture or in the
Twenty-First Supplement or pursuant to any optional or other
redemption) or otherwise; provided, however, that in the event
the Company and the Trustee shall have taken all action required
to be taken so that each such payment of principal by means of
wire transfer could reasonably be expected to be effective on
the due date thereof, but nevertheless, any such transfer shall
not have been credited to the account of a registered owner of
Bonds of the Nineteenth Series to whom such payment is required
to be made effective as of the due date, the Company shall not
be deemed to have defaulted upon the obligation to make such
payment until the expiration of five days following said due
date;
(b) if the Company shall default in the payment of any
installment of interest due on any Bond of the Nineteenth Series
and such default shall continue for a period of 10 days; or
(c) if the Company shall default in the performance of or
compliance with any covenant, condition or term contained in the
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Indenture, including the Twenty-First Supplement, and such
default shall continue for 30 days after the Company shall have
knowledge thereof.
SECTION 7.2. So long as any Bonds of the Nineteenth Series
shall remain outstanding, the Company covenants that if at any
time or times or from time to time an event of default referred
to in Section 7.1 of the Twenty-First Supplement shall occur,
the Company will, on demand of the Trustee, forthwith pay to the
Trustee, for the benefit of all holders of Bonds then
outstanding under the Indenture, a sum equal to the total amount
then due for principal and interest on all Bonds then
outstanding under the Indenture, with interest thereon (to the
extent that payment of such interest is enforceable under
applicable law) in accordance with the terms of the respective
Bonds.
Should said sum not be so paid to the Trustee, it shall be
entitled, at any time or times and from time to time, in its own
name and as Trustee of an express trust and without the
possession or production of any Bonds of any Series or coupons,
to recover judgment for the same against the Company or any
other obligor upon such Bonds.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. As supplemented and amended by the Twenty-First
Supplement, the Indenture is in all respects ratified and
confirmed, and the Indenture, including the Twenty-First
Supplement, shall be read as one instrument. All terms used in
the Twenty-First Supplement shall have the same meaning as used
elsewhere in the Indenture except where the context clearly
indicates otherwise.
SECTION 8.2. The Twenty-First Supplement has been dated as
of March 1, 1997 for convenience. The date of actual execution
hereof by each of the parties is the date shown by the
acknowledgment of execution hereof by its officers.
SECTION 8.3. The Twenty-First Supplement may be executed in
several counterparts, each of which shall be considered an
original and all collectively as but one instrument.
SECTION 8.4. The approval of the New Jersey BPU of the
execution and delivery of these presents, and of the issue of
any Bonds of the Nineteenth Series, shall not be construed as
approval of said New Jersey BPU of any other act, matter or
thing which requires approval of said New Jersey BPU under the
laws of the States of New Jersey; nor shall the approval of said
New Jersey BPU of the issue of any such Bonds bind said New
Jersey BPU or any other public body or authority of the State of
New Jersey having jurisdiction in the premises in any future
application for the issuance of Bonds under the Indenture.
- 24 -
IN WITNESS WHEREOF, the Company and the Trustee have caused
these presents to be duly executed under the respective
corporate seals by their respective proper officers, all duly
authorized thereunto, and have caused these presents to be dated
as of the day and year first above written.
SOUTH JERSEY GAS COMPANY
By: /s/ William F. Ryan
William F. Ryan
President
ATTEST:
[SEAL]
/s/ G. L. Baulig
G. L. Baulig
Secretary
THE BANK OF NEW YORK
By: /s/ Bruce C. Vecchio
ATTEST: [SEAL]
/s/ Alison R. Migliaccio
- 25 -
STATE OF NEW JERSEY :
: ss:
COUNTY OF ATLANTIC :
Be it remembered, that on this March 18, before me, a Notary
Public of New Jersey, personally appeared William F. Ryan, who,
I am satisfied, is President of South Jersey Gas Company, one of
the corporations named in the foregoing deed or instrument, and
I having first made known to him the contents thereof, he
acknowledged that he had signed the same as such officer for and
on behalf of such corporation, that the same was made by such
corporation as its voluntary act and deed, and sealed with its
corporate seal, by virtue of authority of its board of
directors, and that he has received, without charge, a true copy
of said foregoing deed or instrument. All of which is hereby
certified.
Eleanor Merighi /s/ Eleanor Merighi
Notary Public Notary Public of New Jersey
New Jersey
My Commission Expires: May 2, 1999
STATE OF NEW JERSEY :
: ss
COUNTY OF MERCER :
Be it remembered, that on this ___________, before me, a Notary
Public of New Jersey, personally appeared, who, I am satisfied,
is an Assistant Vice President of The Bank of New York, one of
the corporations named in the foregoing deed or instrument, and
I have first made known to him the contents thereof, he
acknowledged that he had signed the same as such officer for and
on behalf of such corporation, that the same was made by such
corporation as its voluntary act and deed, and sealed with its
corporate seal, by virtue of authority of its board of
directors. All of which is hereby certified.
/s/ Serina L. Pedano
Notary Public of New Jersey
My Commission Expires:
SERINA L. PEDANO
Notary Public, State of New Jersey
No. 2192036
Qualified in Passaic County
Commission Expires July 31, 2001
- 26 -
The within Twenty-First Supplemental Indenture has been
recorded and filed as follows:
Date of
County Recordation Book Page
New Jersey:
Atlantic
Burlington
Camden
Cape May
Cumberland
Gloucester
Salem
Exhibit (10)(l)(b)
------------------
SOUTH JERSEY INDUSTRIES, INC.
DEFERRED COMPENSATION AGREEMENTS
Pursuant to the instructions to Item 601 to Regulation S-K, the
following schedule sets forth the materials details which differ
in the Deferred Compensation Agreements, the form of which was
filed as Exhibit (10)(j)(a) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1980, which exhibit is
incorporated by reference into the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 as Exhibit
(10)(l)(a).
<TABLE>
<CAPTION>
AMOUNT
PAYABLE IN
CONTRACTING 60 MONTHLY
NAME TITLE PARTY INSTALLMENTS
- ------------------- ------------------------- ----------- ------------
<S> <C> <C> <C>
C. Biscieglia President Gas Company $75,000
G. S. Levitt Executive Vice President Gas Company 75,000
S. A. Pignatelli Vice President Gas Company 75,000
W. M. Weis Vice President Gas Company 75,000
G. L. Baulig Secretary Gas Company 75,000
W. J. Smethurst, Jr. Vice President & Treasurer Gas Company 75,000
J. J. Bodrog Assistant Vice President Industries 75,000
</TABLE>
Exhibit (10)(l)(e)
-----------------
SOUTH JERSEY INDUSTRIES, INC.
SCHEDULE OF OFFICER AGREEMENTS
Pursuant to Rule 12b-31, the following sets forth the materials
details which differ in the Executive Employment Agreements, the
form of which is filed herewith as Exhibit (10)(l)(d).
<TABLE>
<CAPTION>
Minimum
Date of Base
Name Capacities in Which Served Agreement Salary
- ----------------------- --------------------------- --------- --------
<S> <C> <C> <C>
George L. Baulig Secretary & Treasurer, South 10/1/96 $125,000
Jersey Industries, Inc.;
Secretary, South Jersey Gas
Company.
Charles Biscieglia President, South Jersey Gas 10/1/96 167,000
Company; Vice President,
South Jersey Industries, Inc.
Julius J. Bodrog President, Energy & 10/1/96 104,000
Minerals, Inc.; Assistant
Vice President, South Jersey
Gas Company; President, R&T
Group, Inc.
Edward J. Graham President, South Jersey 8/1/96 110,000
Fuel, Inc.; Vice President,
South Jersey Gas Company
David A. Kindlick Vice President, South Jersey 10/1/96 115,000
Gas Company
Gerald S. Levitt Executive Vice President, 1/1/97 167,000
South Jersey Gas Company.
Joseph E. McCullough President, South Jersey 8/1/96 127,500
Energy Company; Vice
President, South Jersey Gas
Company.
Albert V. Ruggiero Vice President, South Jersey 10/1/96 120,000
Gas Company
William J. Smethurst, Jr. Assistant Secretary & 10/1/96 105,000
Assistant Treasurer,
South Jersey Industries,
Inc. and Energy & Minerals,
Inc.; Vice President &
Treasurer, South Jersey Gas
Company; Treasurer, South
Jersey Energy Company
</TABLE>
Exhibit (10)(l)(i)
-----------------
SOUTH JERSEY INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PROGRAM
EFFECTIVE: October 1, 1983
AMENDED and RESTATED: July 1, 1997
- Title Page -
SOUTH JERSEY INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PROGRAM
TABLE OF CONTENTS
Item Description Page(s)
I Purpose 1
II Definitions 1
III Program Retirement Income 2
IV Protection of Confidential
Information: Non-competition 4
V Miscellaneous 5
ATTACHMENT A Individual Agreement 8
ATTACHMENT B Sample Calculation 10
ATTACHMENT C Projected Officer Benefits as of
January 1, 1997 11
- Table of Contents -
SOUTH JERSEY INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PROGRAM
I. PURPOSE. South Jersey Industries, Inc., and its subsidiary
companies as defined in Section II (e), hereby establish this
Program, effective October 1, 1983, amended and restated
effective January 1, 1989, September 1, 1991, and July 1, 1997
for the purpose of providing retirement income benefits to
designated officers of the Companies.
II. DEFINITIONS.
(a) "Accrued Benefit" shall mean a vested right to benefits
under the Program which shall commence upon the Officer's
attaining age 50 while still in the service of the Company; or
death after attaining age 50 and while employed by the Company.
The "accrued benefit" shall be equivalent to 2% per year of
service (inclusive of both the qualified plan and the SERP) up to
the maximum stipulated in Section III (a)(1), plus an additional
5% of Final Average Compensation.
(b) "Actuarial Equivalent" shall mean that all benefit forms
payable under this Program shall be the actuarial equivalent of a
Life Annuity with six years guaranteed. The actuarial factors
used in making those determinations shall be the applicable
actuarial factors specified in the Plan, as defined in Section
2(i).
(c) "Board of Directors" shall mean the Board of Directors of
South Jersey Industries, Inc.
(d) "Committee" shall mean the Compensation/Pension Committee as
appointed by the Board of Directors to administer the Program
pursuant to Section 5(a) hereunder.
(e) "Company" shall mean South Jersey Industries, Inc.; South
Jersey Gas Company; Energy & Minerals, Inc; South Jersey Energy
Company; South Jersey Fuel Company and R & T Group, Inc.
(f) "Effective Date" shall mean October 1, 1983. The effective
date of this Amendment and Restatement is July 1, 1997.
(g) "Final Average Compensation" shall mean the Officer's
average total cash compensation (salary plus annual incentive
bonus earned and paid) for the highest 36 consecutive calendar
months of the final 60 months prior to the earliest of the
Officer's actual retirement, death or disability.
- 1 -
(h) "Officer" shall mean Chief Executive Officer, President,
Executive Vice Presidents, Senior Vice Presidents, Vice
Presidents, Assistant Vice Presidents, Secretary, Assistant
Secretaries, Treasurer, Assistant Treasurers, Controller and
Assistant Controllers of the Company, or Officer as prescribed by
the Bylaws of the Company from time to time, who have attained
the age of 50.
(i) "Plan" shall mean the qualified Retirement Plan for non-
union employees of South Jersey Industries, and its subsidiary
companies as identified in the Plan Document.
(j) "Program" or "SERP" shall mean the Supplemental Executive
Retirement Program of the Company as set forth in this document,
including any and all amendments hereto and restatements hereof.
(k) "Primary Social Security" shall mean the primary benefit
paid to an Officer under the Federal Social Security Act, as
amended from time to time.
(l) "Year of Service" shall have the same meaning as the
definition given under Section 3.03(a) of the Plan.
(m) "Change in Control" for the exclusive purposes of this plan,
shall mean any of the following: (1) approval by the shareholders
of the Company without the recommendation and approval of the
Board of Directors of the Company of any plan or proposal for the
consolidation, merger, liquidation, dissolution or acquisition of
the Company or all or substantially all of its assets; (2)
election to the Board of Directors of the Company of directors
who constitute a majority of the directors, different from the
individuals who at the effective date of this amendment and
restatement of the SERP constituted the entire Board of Directors
of the Company, unless those individuals were recommended for
election as directors by a majority of the original Board of
Directors, or by successor directors recommended by the original
Board of Directors; or (3) the acquisition by any person of 20%
or more of the stock of the Company having general voting rights
in the election of directors (for purposes of this clause (3),
the term "person" shall include any individual or entity or any
combination of two or more individuals or entities acting as a
group within the meaning of Section 13(d) of the Securities
Exchange Act of 1934 for the purpose of acquiring, holding or
disposing of stock of the Company).
III. PROGRAM RETIREMENT INCOME.
The Company agrees to pay a Program benefit to an Officer under
the following circumstances and conditions:
(a) Retirement Benefit. The benefit payable to an Officer
eligible under this plan upon retirement at the age of 60, or
upon early retirement as defined in Section III(b) shall be as
follows:
- 2 -
(1) A benefit of 2% of the Officer's final average
compensation as defined under Section 2(g), multiplied by
the Officer's years of service (not to exceed 30 years),
inclusive of the qualified Pension Plan Benefit; except in
the instance where the qualified Pension Plan Benefit yields
a percentage of final average compensation calculated on the
basis of a Life Annuity with six years guaranteed in excess
of 60%, whereas, in such case, the higher qualified Plan
benefit shall be payable, plus,
(2) an additional 5% of the Final Average Compensation as
defined under Section 2(g), and pursuant to the provisions
of Section II (a).
(3) The amount payable shall commence on the first day of
the month immediately following the Officer's retirement.
The benefit shall be payable in any form elected by the
officer from among the benefit forms available under
the Plan. The benefit under the program shall be the
Actuarial Equivalent of a Life Annuity with six years
guaranteed. However, the SERP shall provide for a 50% joint
annuitant option for the spouse of the Officer without any
actuarial reduction, for both the SERP and the "Plan". (See
Attachment "B")
(4) The benefit payable under Section 3(a)(1) shall be
supplemented to the extent necessary to ensure that the
Officer receives a benefit under this Program which is at
least equal to the benefit that would have been paid to the
Officer under the Plan had that benefit been determined
without regard to the limit on compensation taken into
account under the Plan imposed by section 401(a)(17) of the
Internal Revenue Code of 1986, as amended (the "Code") and
without regard to the limit on benefits payable under the
Plan imposed by section 415 of the Code.
(b) Early Retirement Benefit. If the Officer has attained the
age of 55 while in the service of the Company, the Officer may,
upon written application to retire made to the Company, and upon
receipt of the Company's written consent to such early
retirement, receive an annual benefit equal to the normal
retirement benefit, as calculated under Section 3(a) of this
Program, multiplied by 100% minus 1/6% (one-sixth of one percent)
for each month by which the Officer's retirement date precedes
the Officer's 60th birthday. The amount payable shall commence
on the first day of the month following the Officer's retirement.
The benefit shall be payable in any form elected by the officer
from among the benefit forms available under the Plan. The
benefit under the Program shall be the Actuarial Equivalent of a
Life Annuity with six years guaranteed with a 50% joint
annuitant option provided as indicated in Section 3(a)(3).
Further, the Board of Directors at the recommendation of the
Committee may waive all or a portion of the early retirement
penalty stipulated in this paragraph. Further, the CEO and
eligible Officer may agree to a retirement age between 58 and
60 years of age. In such instances, when the Board has either
waived early retirement penalties or the CEO and eligible officer
have agreed to a retirement date between 58 and 60, all early
- 3 -
retirement penalties shall be eliminated under the SERP and the
Plan and the Officer shall be made whole through the SERP. In
such instances, when the Board has waived the early retirement
reduction, or the CEO and the eligible Officer have agreed to a
retirement date between 58 and 60, all early retirement
reductions shall be eliminated under the SERP. The offset for
Plan benefits will, however, be net of any applicable reductions.
(c) Disability Benefit. If the Officer receives disability
benefits under insurance provided by the Company, the Officer
shall continue to accumulate service for purposes of the Program
benefit as calculated under Section 3(a). The benefit shall be
based on Final Average Compensation determined to the date of
disability. The amount payable shall commence at the same time
and in the same form as the benefit under the Plan. The benefit
under the Program shall be the Actuarial Equivalent of a Life
Annuity with six years guaranteed, with a 50% joint annuitant
option provided as indicated in Section 3(a)(3).
(d) Death Benefit. If an Officer dies after attaining age 50
while employed by the Company, the Officer's spouse shall be
entitled to an annual survivor pension equal to one-half of the
Officer's Accrued Benefit calculated in accordance with Section
3(a), and without the application of any early retirement penalty
(reduction).
IV. PROTECTION OF CONFIDENTIAL INFORMATION: NONCOMPETITION.
In view of the fact that the Officer's work with the Company
brings him in close contact with many confidential affairs of the
Company, including matters of a business nature such as
information about costs, profits, markets, sales, plans for
future development and other information not readily available to
the public, the Officer who agrees to participate in the Program
also agrees:
(1) to keep confidential during and after the Officer's
employment by the Company all matters of and information
relating to the Company, and not to disclose them to anyone
outside of the Company under any circumstances, or to anyone
within the Company who is not in a position where he needs
to know such information;
(2) to deliver promptly to the Company on termination of the
Officer's employment, or at any time that the Company may so
request, all memoranda, notes, records, reports and other
documents (and all copies thereof) relating to the business
of the Company which he may then possess or have under the
Officer's control; and
(3) during the term of the Officer's employment and for a
period of ten (10) years thereafter, not directly or
indirectly to (a) enter the employ of, or render any
- 4 -
services to, any person, firm or corporation engaged in any
business competitive with the business of the Company in any
area serviced by the Company or in which the Company does
business; (b) engage in such business for the Officer's own
account; or (c) become interested in any such business as an
individual, partner, director, Officer, principal, agent,
employee, trustee, consultant or in any other relationship
or capacity. Anything to the contrary herein
notwithstanding, the Officer may be retained as an
independent advisor and consultant to the President of the
Company as to such matters as the President of the Company
may from time to time request.
V. MISCELLANEOUS.
(a) Administration of Program. The Program shall be administered
by the Compensation/Pension committee appointed by the Board of
Directors. The Committee shall have full power, discretion and
authority to recommend interpretation, construction and
administration of the Program and any part thereof to the Board
of Directors. The Committee may recommend to the Board of
Directors employment of legal counsel, consultants, actuaries and
agents, as it deems desirable, in the administration of the
Program, and may rely on the opinion(s) of such counsel, the
advice of such consultants, and the computations of such
actuary(ies). The Committee shall have such rights, duties and
privileges under the Program as are allocated to the
administrative committee under the Plan. The Board of Directors
shall designate the President and Chief Executive Officer as
Program Administrator.
(b) Arbitration. Any controversy or claim arising out of or
related to this Program, including any rights to benefits which
have accrued under this Program, or the interpretation,
construction or administration of the Program, shall be settled
by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, and judgment upon
the award rendered by the Arbitrators is binding and may be
entered in any Court having jurisdiction thereof.
(1) The arbitration panel shall consist of three arbitrators, one
appointed by each party, and a third, neutral arbitrator
appointed by the first two arbitrators.
(2) Each party shall appoint its arbitrator within fourteen
days after the filing of the Demand for Arbitration, and the
third arbitrator shall be appointed within ten days
thereafter.
(3) The third, neutral arbitrator, shall serve as chairman
of the Arbitration Panel.
(4) All decisions of the Arbitration Panel, including the
award, must: be by at least a majority.
- 5 -
(c) Amendment, Suspension and Termination. The Program may be
amended, suspended, or terminated in whole or in part at any time
and from time to time by the Board of Directors. No such
amendment, suspension or termination shall retroactively impair
or otherwise adversely affect the rights of any person to
benefits under this Program that have accrued prior to that date.
(d) Change of Control. Upon a Change of Control, the Company
shall, as soon as possible, but in no event longer than 45 days
following the Change of Control, as defined herein, make an
irrevocable contribution to a Rabbi Trust or, other comparable
funding vehicle in an amount that is equal to 120% of the amount
necessary to pay each program participant or beneficiary the
benefits accrued for the program participants and their
beneficiaries under the terms of the program on the date of the
Change in Control, determined using the same actuarial
assumptions and methods as are used in funding the Plan.
(e) Proof of Date of Birth. In order to be eligible to receive
payments under this Program, the Officer, or the Officer's
surviving spouse seeking benefits under Section 3(d) of this
Program shall provide written proof of the date of birth of the
Officer to the Committee.
(f) Notices. Each Officer or surviving spouse or their
authorized designee shall be responsible for furnishing the
Committee with the current and proper address for the mailing of
notices, reports and benefit payments. Any notice required or
permitted to be given shall be deemed given if directed to the
person to whom addressed at such address and mailed by regular
United States mail, first-class and prepaid. If any check mailed
to such address is returned as undeliverable to the addressee,
mailing of checks will be suspended until the Officer or
surviving spouse furnishes proper address.
(g) Nonalienation of Benefits. None of the payments, benefits
or rights of any Officer or surviving spouse shall be subject to
any claim or any creditor, and, in particular, to the fullest
extent permitted by law, all such payments, benefits and rights
shall be free from attachments, garnishment, trustee's process,
or any other legal or equitable process available to any creditor
of such Officer or surviving spouse.
(h) Reliance on Data. The Company, the Committee and all other
persons associated with the Program's operation shall have the
right to rely on the veracity and accuracy of any required
written data provided by the Officer or the surviving spouse
including representation of age, health and marital status.
(i) No Contract of Employment. Neither the establishment of
the Program, nor any modification thereof, nor the payment of any
benefits shall be construed as giving any Officer the right to be
retained in the service of any entity const ituting the Company,
and all officers shall remain subject to discharge to the same
extent as if the Program had never been adopted.
- 6 -
(j) Severability of Provisions. If any provision of this
Program shall be held invalid or unenforceable, such invalidity
or unenforceability shall not affect any other provisions hereof,
and this Program shall be construed and forced as if such
provisions had not been included.
(k) Controlling Law. This Program shall be construed and
enforced according to the laws of the State of New Jersey, to the
extent not preempted by Federal law, which shall otherwise
control.
(l) Effect-on Other Plans. Any benefit payable under the
Program shall not be deemed salary or other compensation for the
purpose of computing benefits under any employee benefit plans or
other arrangement of the Company for the benefit of its
employees.
- 7 -
ATTACHMENT "A"
SOUTH JERSEY INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
This Agreement dated ______________________ between South Jersey
Industries, Inc., a New Jersey Corporation, (hereinafter Referred to as the
"Company"'), and __________________________________________, an Officer of
the Company who resides at ______________________________________________.
WITNESSETH:
In consideration of the Officer's employment by the Company
hereinafter and of the covenants hereinafter set forth, it is mutually
agreed as follows:
1. OFFICER'S SERVICES. The OFFICER shall faithfully, and to the
best of the Officer's ability, devote all of the Officer's working
time exclusively to the performance of such services for the
COMPANY as may be assigned to him from time to time under written
employment agreements or otherwise and the OFFICER shall not, for
remuneration or profit, directly or indirectly render any service
to, or undertake any employment for, any other person, firm or
corporation, without first obtaining the written consent of the
President and Chief Executive Officer of the COMPANY.
- 8 -
2. PROGRAM RETIREMENT INCOME. The COMPANY agrees to provide
the OFFICER with a Supplemental Executive Retirement Program as
outlined in the Plan documents attached as Exhibit "A".
3. ASSIGNABILITY. This Agreement shall inure to the benefit of
any assignee of the COMPANY, and the OFFICER specifically agrees,
on demand, to execute any and all necessary documents reasonably
requested in connection therewith.
4. ENTIRE AGREEMENT. This Agreement (including Exhibit A)
constitutes the entire understanding between the parties hereto
with reference to the subject matter hereof and shall not be
changed or modified except by a written instrument signed by both
parties. This agreement amends and restates all prior agreements
between the COMPANY and the OFFICER relating to the Supplemental
Executive Retirement Program. Otherwise, all existing contracts of
employment between the COMPANY and the OFFICER shall survive the
making of this Agreement and, except to the extent amended hereby,
remain in full force and effect.
IN WITNESS WHEREOF, the COMPANY has caused this Agreement to be
executed in duplicate by a proper and duly authorized representative
thereof, and the OFFICER has signed this Agreement in duplicate, as of the
day and year first above written.
SOUTH JERSEY INDUSTRIES, INC. OFFICER
By_______________________________ By________________________________
Title_____________________________ Title_____________________________
- 9 -
Exhibit (10)(l)(j)
-----------------
SOUTH JERSEY INDUSTRIES, INC.
1997 Stock Option and Stock Appreciation Rights Plan
1. Purpose Of Plan
The purpose of the Plan is to assist the Company in retaining the
employment of valued employees by offering them a greater stake in the
Company's success and a closer identity with it, and to aid in obtaining
the services of individuals whos e employment would be helpful to the
Company and would contribute to its success.
2. Definitions
(a) "Board" means the board of directors of the Parent Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the committee described in Paragraph 5.
(d) "Company" means South Jersey Industries, Inc. and each of
its Subsidiary Companies.
(e) Date of Grant" means the date on which an Option or SAR is
granted.
(f) "Fair Market Value" means on any given date the mean
between the highest and lowest prices of actual sales of
Shares on the principal national securities exchange on
which the Shares are listed on such date or, if there are
no such sales on such date, the mean between the closing
bid and asked prices of the Shares on such exchange on such
date.
(g) "Holder" means a person to whom an SAR has been granted
under the Plan, which SAR has not been exercised and has
not expired or terminated.
(h) "Incentive Stock Option" means an Option granted under the
Plan, designated by the Committee at the time of such grant
as an Incentive Stock Option and containing the terms
specified herein for Incentive Stock Options.
(i) "Non-Qualified Option" means an Option granted under the
Plan, designated by the Committee at the time of such grant
as a Non-Qualified Option and containing the terms
specified herein for Non-Qualified Options.
(j) "Option" means any stock option granted under the Plan and
described either in Paragraph 3(a) or 3(b).
- 1 -
(k) "Optionee" means a person to whom an Option has been
granted under the Plan, which Option has not been exercised
and has not expired or terminated.
(l) "Parent Company" means South Jersey Industries, Inc.
(m) "SAR" means a stock appreciation right granted under the
Plan and described in Paragraph 3(c).
(n) "Share" or "Shares" means a share or shares of Common Stock
of the Parent Company.
(o) "Subsidiary Companies" means all corporations that, at the
time in question, are subsidiary corporations of the Parent
Company within the meaning of section 425(f) of the Code.
(p) "Ten Percent Shareholder" means a person who on the Date of
Grant owns, either directly or within the meaning of the
attribution rules contained in section 425(d) of the Code,
stock possessing more than ten percent of the total
combined voting power of all classes of stock of his or her
employer corporation or of its parent or subsidiary
corporations, as defined respectively in sections 425(e)
and (f) of the Code.
(q) "Value" of an SAR means the excess of the Fair Market Value
of a Share on the date of exercise of such SAR over the
Fair Market Value of a Share on the Date of Grant of such
SAR.
3. Rights To Be Granted
Rights that may be granted under the Plan are:
(a) Incentive Stock Options, which give the Optionee the right
for a specified time period to purchase a specified number
of Shares for a price not less than their Fair Market Value
on the Date of Grant;
(b) Non-Qualified Options, which give the Optionee the right
for a specified time period to purchase a specified number
of Shares for a price determined by the Committee on the
Date of Grant; and
(c) SARs, which give the Holder the right for a specified time
period, without payment to the Company, to receive the
Value of such SARS, to be paid in cash or Shares or a
combination of cash and Shares, the number and amount of
which shall be determined pursuant to Paragraph 8(e) below.
- 2 -
4. Stock Subject To Plan
Not more than 266,777 Shares in the aggregate may be delivered
pursuant to the Plan upon exercise of Options or SARs. The Shares so
delivered may, at the option of the Company, be either treasury Shares or
Shares originally issued for such p urpose. If an Option or an SAR
covering Shares terminates or expires without having been exercised in
whole or in part, other Options or SARs may be granted covering the Shares
as to which the Option or SAR was not exercised.
5. Administration Of Plan
The Plan shall be administered by a committee of the Board, which
may be a standing committee of the Board and which shall be composed of not
less than three directors of the Parent Company, appointed by the Board,
none of whom shall be eligi ble (or shall have been eligible within one
year prior to the date of his or her appointment) to be granted Options or
SARs under the Plan or to be selected as a participant under any other
discretionary plan of the Company or any of its affiliates e ntitling him
or her to acquire stock, stock options or stock appreciation rights of the
Company or any of its affiliates.
6. Grant of Rights
The Committee may grant Options or SARs or both to eligible
employees of the Company.
7. Eligibility
(a) Eligible employees to whom Options and SARs may be granted
shall be officers and other key employees of the Company,
including employees who are also directors. Directors who
are not employees of the Company shall not be eligible.
(b) An Incentive Stock Option shall not be granted to a Ten
Percent Shareholder except on such terms concerning the
option price and period of exercise as are provided in
Paragraphs 8(a) and 8(f) with respect to such a person. A
Non-Qualified Option shall not be granted to a Ten Percent
Shareholder.
8. Option and SAR Agreements and Terms
All Options and SARs shall be granted within ten years from January
23, 1997 and be evidenced by Option agreements or SAR agreements which
shall be executed on behalf of the Parent Company and by the respective
Optionees or Holders. The term s of each such agreement shall be
determined from time to time by the Committee, consistent, however, with
the following:
- 3 -
(a) Option Price. The option price per Share shall be
determined by the Committee but, in the case of Incentive
Stock Option, shall not be less than 100% of the Fair
Market Value of such Share on the Date of Grant. With
respect to any Incentive Stock Option granted to a Ten
Percent Shareholder, the option price per Share shall not
be less than 110% of the Fair Market Value of such Share on
the Date of Grant.
(b) Restrictions on Transferability. No Option or SAR shall be
transferable otherwise than by will or the laws of descent
and distribution and, during the lifetime of the Optionee
or Holder, shall be exercisable only by him or her. Upon
the death of an Optionee or Holder, the person to whom the
rights shall have passed by will or by the laws of descent
and distribution may exercise any Options or SARs only in
accordance with the provisions of Paragraph 8(f).
(c) Payment Upon Exercise of Options. Full payment for Shares
purchased upon the exercise of an Option shall be made in
cash or, at the election of the Optionee and as the
Committee may, in its sole discretion, approve, either (1)
by surrendering Shares with an aggregate Fair Market Value
equal to the aggregate option price, (2) by delivering such
combination of Shares and cash as the Committee may, in its
sole discretion, approve or (3) at the election of the
Optionee, and if the C ommittee, in its sole discretion
approves, by surrendering the Option in exchange for
issuance of a number of shares equal to the difference
between the exercise price of the Option and the Fair
Market Value of the Shares subject to the Option.
(d) Issuance of Certificates Upon Exercise of Options; Payment
of Cash. Only whole Shares shall be issuable upon exercise
of Options. Any right to a fractional Share shall be
satisfied in cash. Upon payment of the option price, a
certificate for the number of whole Shares and a check for
the Fair Market Value on the date of exercise of any
fractional Share to which the Optionee is entitled shall be
delivered to such Optionee by the Parent Company, provided,
however, that in the ca se of the exercise of a Non-
Qualified Option, the Optionee has remitted to his employer
an amount, determined by such employer, necessary to
satisfy applicable federal, state or local tax-withholding
requirements, or made other arrangements with his or her
employer for the satisfaction of such tax-withholding
requirements. The Parent Company shall not be obligated to
deliver any certificates for Shares until such Shares have
been listed (or authorized for listing upon official notice
of issuanc e) upon each stock exchange upon which
outstanding Shares of such class at the time are listed nor
until there has been compliance with such laws or
regulations as the Parent Company may deem applicable. The
Parent Company shall use its best efforts to effect such
listing and compliance.
- 4 -
(e) Issuance of Certificates Upon Exercise of SARS; Payment of
Cash. Upon exercise of an SAR, its Value shall be payable
in cash, Shares, or in such combination of cash and Shares
as is selected by the Holder and approved by the Committee
in its sole discretion. Any Shares due upon exercise of an
SAR shall be delivered to the Holder by the Parent Company
and any payment of cash shall be made by the employer of
the Holder. The employer of the Holder shall deduct from
the amount of any cash so payable an amount necessary to
satisfy applicable federal, state, or local tax-withholding
requirements. If no cash is payable (or if the amount of
cash payable is insufficient to satisfy applicable tax-
withholding requirements), no Shar es shall be delivered by
the Parent Company to the Holder until the Holder remits to
his or her employer an amount, determined by such employer,
necessary to satisfy applicable federal, state, or local
tax-withholding requirements or makes other arra ngements
for the satisfaction of such tax-withholding requirements.
The Parent Company shall not be obligated to deliver any
certificates for Shares until such Shares have been listed
(or authorized for listing upon official notice of
issuance) upon each stock exchange upon which outstanding
Shares of such class at the time are listed nor until there
has been compliance with such laws or regulations as the
Parent Company may deem applicable. The Parent Company
shall use its best efforts to eff ect such listing and
compliance.
(f) Periods of Exercise Of Options and SARs. An Option or SAR
shall be exercisable in whole or in part at such time as
may be determined by the Committee and stated in the Option
or SAR agreement, provided, however, that, unless otherwise
determined by the Committee, no Option or SAR shall be
exercisable before one year or after five years from the
Date of Grant in the case of an Option or SAR granted to a
Ten Percent Shareholder, or before one year or after ten
years from the Date of Grant in all other cases, except as
provided below:
(i) In the event that an Optionee or Holder ceases to
be employed by the Company for any reason other
than retirement, disability or death, any Option or
SAR held by such Optionee or Holder shall not be
exercisable after the date the Optionee or Holder
ceases to be employed by the Company unless
otherwise determined by the Committee and set forth
in the Option or SAR agreement or a written
amendment thereto; provided, however, that in no
event shall an Option or SAR be exerci sable after
five years from the Date of Grant in the case of a
Ten Percent Shareholder or after ten years from the
Date of Grant in all other cases;
(ii) If an Optionee or Holder ceases to be employed by
the Company, and if such cessation of employment is
due to the disability (as determined by the
Committee) or the retirement of the Optionee or
Holder, he or she shall have the right to exercise
his or her Options or SARs until the last day of
the sixth month following cessation of employment,
or such longer period as the Committee may
- 5 -
determine and set out in writing, even if the date
of exercise is within any time period prescribed by
the Plan prior to which such Option or SAR shall
not be exercisable; provided, however, that in no
event shall an Option or SAR be exercisable after
five years from the Date of Grant in the case of a
Ten Percent Shareholder or after te n years from
the Date of Grant in all other cases;
(iii) In the event that an Optionee or Holder ceases to
be employed by the Company by reason of his or her
death, any Incentive Stock Option, Non-Qualified
Option or SAR held by such Optionee or Holder shall
be exercisable, the pers on to whom the rights of
the Optionee shall be passed by will or by the laws
of descent and distribution until the last day of
the twelfth month folowing the date of the
Optionee's or Holder's death, or such longer period
as the Committee may determi ne and set out in
writing, even if the date of exercise is within any
time period prescribed by the Plan prior to which
such Option or SAR shall not be exercisable;
provided, however, that in no event shall an Option
or SAR be exercisable after five years from the
Date of Grant in the case of a Ten Percent
Shareholder or after ten years from the Date of
Grant in all other cases.
(g) Date of Exercise. The date of exercise of an Option or SAR
shall be the date on which written notice of exercise,
addressed to the Parent Company at its main office to the
attention of its Secretary, is hand delivered, telecopied
or mailed, first class postage prepaid; provided, however,
that the Parent Company shall not be obligated to deliver
any certificates for Shares pursuant to the exercise of an
Option or SAR until the Optionee shall have made payment in
full of the optio n price for such Shares. Each such
exercise shall be irrevocable when given. Each notice of
exercise must (i) specify the Incentive Stock Option, Non-
Qualified Option, SAR, or combination thereof, being
exercised; (ii) must, in the case of the exer cise of an
Option, include a statement of preference (which shall not
be binding on the Committee) as to the manner in which
payment to the Parent Company shall be made (Shares or cash
or a combination of Shares and cash); and (iii) must, in
the case of the exercise of an SAR, include a statement of
preference (which shall not be binding on the Committee) as
to the manner in which payment to the Holder shall be made
(Shares or cash or a combination of Shares and cash).
(h) Termination of Employment. For purposes of the Plan, a
transfer of an employee between two employers, each of
which is a Company, shall not be deemed a termination of
employment.
- 6 -
(i) Multiple Grants of Incentive Stock Options, Non-Qualified
Options and SARs. The grant, exercise, termination or
expiration of any Incentive Stock Option, Non-Qualified
Option or SAR shall have no effect upon any other Incentive
Stock Option, Non-Qualified Option or SAR held by the same
Optionee or Holder; provided, however, that the Committee
may, in its sole discretion, provide in the Option
agreement or SAR agreement that the exercise of a certain
number of SARs is conditioned upon the exercise of a
certain number of Options or provide that an SAR shall
otherwise be attached to Options granted under the Plan.
All SARs which are attached to Options shall be subject to
the following terms:
(A) such SAR shall expire no later than the
Option to which it is attached,
(B) such SAR shall be for an amount no more
than the excess of the Fair Market Value of
the Shares subject to the attached Option
on the date such SAR is exercised over the
option price of such Option,
(C) such SAR shall be subject to the same
restrictions on transferability as the
Option to which it is attached,
(D) such SAR shall be exercisable only when the
Option to which it is attached is eligible
to be exercised,
(E) such SAR shall be exercisable only when the
Fair Market Value of the Shares subject to
the attached Option exceeds the option
price of such Option, and
(F) such SAR shall expire upon the exercise of
the Option to which it is attached.
Upon exercise of an SAR which is attached to an Option, the Option
to which the SAR is attached shall expire.
9. Limitation on Grant of Incentive Stock Options
The aggregate Fair Market Value (determined as of the time options
are granted) of the shares for which any employee may be granted incentive
stock options that first become exercisable in any one calendar year under
the Plan and any other pl an of his employer corporation and its parent and
subsidiary corporations, as defined respectively in sections 425(e) and (f)
of the Code, shall not exceed $100,000.
- 7 -
10. Rights As Shareholders
Neither an Optionee nor a Holder shall have any right as a
shareholder with respect to any Shares subject to his or her Options or
SARs until the date of the issuance of a stock certificate to him or her
for such Shares.
11. Changes in Capitalization
In the event of a stock dividend, stock split, recapitalization,
combination, subdivision, issuance of rights, or other similar corporate
change, the Board shall make full anti-dilution adjustments in the
aggregate number of Shares that may b e covered by Options issued pursuant
to the Plan, the aggregate number of SARs that may be granted, the number
of Shares subject to, and the option price of, each then-outstanding
Option, the number of then-outstanding SARs and the Fair Market Value of
Shares upon which the Value of such SARs is based.
12. Mergers, Dispositions and Certain Other Transactions
If, during the term of any Option or SAR, the Parent Company or any
of the Subsidiary Companies shall be merged into or consolidated with or
otherwise combined with or acquired by another person or entity, or there
is a divisive reorganizatio n or a liquidation or partial liquidation of
the Parent Company, the Parent Company may choose to take no action with
regard to the Options or SARs outstanding or, notwithstanding any other
provision of the Plan, to take any of the following courses of action:
(a) Not less than 15 days or more than 60 days prior to any
such transaction, all Optionees and Holders shall be
notified that their Options and SARs shall expire on the
15th day after the date of such notice, in which event all
Optionees and Holders shall have the right to exercise all
of their Options and SARs prior to such new expiration
date; or
(b) The Parent Company shall provide in any agreement with
respect to any such merger, consolidation, combination or
acquisition that the surviving, new or acquiring
corporation shall grant options and stock appreciation
rights to the Optionees and Holders to acquire shares, or
stock appreciation rights in shares in such corporation
with respect to which the excess of the fair market value
of the shares of such corporation immediately after the
consummation of such merger, consolidat ion, combination or
acquisition over the option price, or the value of such
stock appreciation rights, shall not be greater than the
excess of the Fair Market Value of the Shares over the
option price of Options (or, in the case of an SAR, the
Value of such SAR), immediately prior to the consummation
of such merger, consolidation, combination or acquisition;
or
- 8 -
(c) The Parent Company shall take such other action as the
Board shall determine to be reasonable under the
circumstances in order to permit Optionees and Holders to
realize the value of rights granted to them under the Plan.
13. Plan Not To Affect Employment
Neither the Plan nor any Option or SAR shall confer upon any
employee of the Company any right to continue in the employment of the
Company.
14. Interpretation
The Committee shall have the power to interpret the Plan and to
make and amend rules for putting it into effect and administering it. It
is intended that the Incentive Stock Options granted under the Plan shall
constitute incentive stock opt ions within the meaning of section 422A of
the Code, that the Non-Qualified Options shall constitute property subject
to federal income tax pursuant to the provisions of section 83 of the Code
and that the Plan shall qualify for the exemption availab le under Rule
16b-3 (or any similar rule) of the Securities and Exchange Commission. The
provisions of the Plan shall be interpreted and applied insofar as possible
to carry out such intent.
15. Amendments
The Plan may be amended by the Board, but any amendment that
increases the aggregate number of Shares that may be issued pursuant to the
Plan upon exercise of Options or SARs (otherwise than pursuant to Paragraph
11), that changes the class of eligible employees, or that otherwise
requires the approval of the shareholders of the Parent Company in order to
maintain the exemption available under Rule 16b-3 (or any similar rule) of
the Securities and Exchange Commission, shall require the approval of the
holders of such portion of the shares of the capital s tock of the Parent
Company present and entitled to vote on such amendment as is required by
applicable state law and the terms of the Parent Company's Articles of
Incorporation, as then in effect, to make the amendment effective. No
outstanding Opti on or SAR shall be affected by any such amendment without
the written consent of the Optionee, Holder or other person then entitled
to exercise such Option or SAR.
16. Securities Laws
The Committee shall have the power to make each grant under the
Plan subject to such conditions as it deems necessary or appropriate to
comply with the then-existing requirements of the Securities Act of 1933
or the Securities Exchange Act of 1934, including Rule 16b-3 (or any
similar rule) of the Securities and Exchange Commission.
- 9 -
17. Effective Date and Term of Plan
The Plan shall become effective on the date on which the Plan is
adopted by the Board, and shall expire no later than 10 years from Board
adoption, unless sooner terminated by the Board. The Board shall submit
the Plan to the shareholders of the Parent Company for their approval
within 12 months of the grant of any Option intended to be an Incentive
Stock Option. Any Incentive Stock Option granted before the approval of
the Plan by the Parent Company's shareholders shall be expressly co
nditioned upon, and shall not be exercisable until, such approval.
18. General
Each Option or SAR shall be evidenced by a written instrument
containing such terms and conditions not inconsistent with the Plan as the
Committee may determine. The issuance of Shares on the exercise of an
Option or SAR shall be subject to all of the applicable requirements of the
New Jersey Business Corporation Act and other applicable laws, including
federal or state securities laws, and all Shares issued under the Plan
shall be subject to the terms and restrictions contained in the Articles of
Incorporation of the Parent Company, as amended from time to time. Among
other things, the Optionee or Holder may be required to deliver an
investment representation to the Company in connection with any exercise of
such Option or SAR or to agree to refrain from selling or otherwise
disposing of the Shares required for a specified period of time or on
specified terms.
- 10 -
<TABLE>
Exhibit 12
----------
SOUTH JERSEY INDUSTRIES, INC.
Calculation of Ratio of Earnings from Continuing Operations to
Fixed Charges (Before Federal Income Taxes)
(IN THOUSANDS)
<CAPTION>
Fiscal Year Ended December 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income* $18,429 $18,265 $14,874 $10,209 $14,455
Federal Income Taxes, 10,716 10,155 8,753 5,400 7,282
Fixed Charges** 20,320 20,408 20,442 15,402 14,906
Capitalized Interest (107) (114) (98) (120) (191)
------------------------------------------------------------
Total Available $49,358 $48,714 $43,971 $30,891 $36,452
============================================================
Total Available 2.4x 2.4x 2.2x 2.0x 2.5x
- ---------------------
Fixed Charges
<FN>
* Net Income before Discontinued Operations and Cumulative Effect
of a Change in Accounting Principle.
** Includes interest and preferred securities dividend requirements of
a subsidiary.
</FN>
</TABLE>
Exhibit 13
----------
Front Cover - Outside
1997 ANNUAL REPORT TO SHAREHOLDERS
South Jersey Industries, Inc.
INSERT: Three photographs side by side. First photo shows people in discussion
behind the South Jersey Energy Company sign. Second photo shows
gentleman wearing South Jersey Gas Company hard hat. Third photo shows
people in discussion around a PC with EnerTrade insignia on PC screen.
Below the three photographs is a group of people indicating various
walks of life.
First Page of Report
Table of Contents
Financial Highlights 1
Letter to Shareholders 2
1997 Highlights 4
Increased Value Through Growth 6
Management's Discussion 10
Consolidated Financial Statements 14
Notes to Consolidated Financial Statements 18
Quarterly Financial Data 24
Comparative Operating Statistics 25
SJI Directors and Officers 26
Company Profile
South Jersey Industries, Inc. is an energy services holding company. South
Jersey Gas Company, SJI's principal subsidiary, is a regulated natural gas
distribution utility supplying natural gas and transportation services to
residential, commercial and industrial customers in southern New Jersey. Gas
Company also sells natural gas to wholesale customers in the interstate market.
South Jersey Energy Company markets natural gas and total energy management
services, including energy consulting, to residential, commercial and industrial
customers in New Jersey and surrounding states. Energy Company also trades
wholesale electricity. SJ EnerTrade, Inc. is a wholesale natural gas asset
manager and marketer serving the mid-Atlantic and southern regions of the
country.
This report contains certain forward-looking statements concerning projected
future financial performance, future operating performance, future plans and
courses of action and future economic conditions. All statements in this report
other than statements of historical fact are forward-looking statements. These
forward-looking statements are made based upon management's expectations and
beliefs concerning future events impacting the company and therefore involve a
number of risks and uncertainties. Management cautions that forward-looking
statements are not guarantees and that actual results could differ materially
from those expressed or implied in the forward-looking statements.
There are a number of factors that could cause the company's actual results to
differ materially from those anticipated, which include, but are not limited to
the following: general economic conditions on an international, federal, state
and local level; weather conditions in the company's marketing areas; regulatory
and court decisions; competition in the company's regulated and deregulated
activities; the availability and cost of capital; the company's ability to
maintain existing and/or establish successful new alliances and joint ventures
to take advantage of marketing opportunities; costs and effects of unanticipated
legal proceedings and environmental liabilities; and changes in business
strategies.
INSERT: Map of South Jersey Gas Company Service Area.
Shows location of Main Office, SJG Divisions, and
SJG Gas Advantage Stores.
(first page)
In Memory Of William F. Ryan
Dear Shareholder, On December 28, 1997, William F. Ryan, chairman, president and
CEO of your company, passed away suddenly at the age of 63. His passing is a sad
occasion for the South Jersey Industries, Inc. family of companies. As members
of the Board of Directors, we deeply regret the loss of Bill Ryan, our friend
and colleague. The Board and I are committed to implementing the strategic
direction we recently finalized in conjunction with the company's senior
management. At the time of Bill Ryan's passing, he had just completed his
message to the shareholders for this report. Out of respect for him, we have
printed his message on pages 2 and 3 as he would have wished it to appear.
Bill spent 32 years with our company, joining South Jersey Gas Company in 1965
as Manager, Systems and Applications and steadily rising to the company's top
position. In 1966, he was elected Assistant Treasurer of Gas Company. The Board
elected Bill to the position of Assistant Vice President of Operations of Gas
Company in 1967 and then Vice President of Operations in the same year. He
became Executive Vice President of Gas Company in 1972 and 5 years later was
elected President and COO. In 1981, Bill was elected President and CEO of both
Gas Company and SJI. He became Gas Company's Chairman of the Board in 1989 and
SJI's Chairman of the Board in 1995.
During his career at SJI, Bill's leadership enabled the company to achieve many
significant milestones. From the time Bill became CEO, SJI's consolidated net
income rose from $8.7 million in 1981 to $18.4 million from continuing
operations in 1997.
In 1983, Gas Company added 27,000 customers in Cape May County through the
acquisition of New Jersey Natural Gas Company's southern division, which is now
the Cape May Division.
In 1988, Gas Company developed some of the most innovative and flexible rates in
the industry allowing large commercial and industrial customers to purchase gas
supplies directly from producers. This resulted in customer savings without
negatively impacting SJI's net income. Gas Company was the first natural gas
utility in New Jersey to offer these unbundled rates.
Capitalizing on Gas Company's initiative, SJI restructured South Jersey Energy
Company in 1987 to assist large commercial and industrial customers to acquire
and transport natural gas in the deregulated marketplace. Energy Company was one
of the first natural gas marketing companies to serve utility customers in New
Jersey.
Bill's philosophy of lean staffing enabled the company to downsize through
attrition where many other utility companies resorted to layoffs in reaction to
competition and the need to lower costs. Under Bill's leadership, Gas Company's
operating and maintenance expenses per customer were historically lower than
its peers.
And, this year, Energy Company became certified to buy and sell electricity
nationwide and established a power marketing group to trade wholesale
electricity on the Pennsylvania-New Jersey-Maryland grid. Also, SJI formed SJ
EnerTrade, Inc. to sell natural gas to energy marketers, electric and natural
gas utilities and other wholesale users in the mid-Atlantic and southern regions
of the country. EnerTrade's creative alliance with Union Pacific Fuels, Inc.
continues to benefit both parties and generate new opportunities for innovative
energy solutions.
My own experience as an SJI Board member since 1984 has helped to facilitate my
transition to a new capacity. In accepting this new role, I am confident that we
will advance our corporate objectives and achieve greater shareholder value.
Richard L. Dunham
Chairman of the Board and Acting CEO of SJI
February 18, 1998
(second page)
<TABLE>
1997 Highlights
Five-Year Summary of Selected Financial Data
(In Thousands Where Applicable)
<CAPTION>
South Jersey Industries, Inc. and Subsidiaries
Year Ended December 31,
- -----------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Results:
Operating Revenues $348,567 $355,458 $304,163 $329,722 $ 293,492
======== ======== ======== ======== =========
Operating Income $ 38,642 $ 38,559 $ 35,218 $ 27,766 $ 29,170
======== ======== ======== ======== =========
Income Applicable to
Common Stock:
Continuing
Operations (1) $ 18,429 $ 18,265 $ 14,874 $ 10,209 $ 14,455
Discontinued
Operations - Net (2) (2,633) 12,233 2,769 2,170 516
Cumulative Effect of a Change
in Accounting Principle (3) - - - - 382
-------- -------- -------- -------- --------
Net Income Applicable to
Common Stock $ 15,796 $ 30,498 $ 17,643 $ 12,379 $ 15,353
======== ======== ======== ======== =========
Total Assets $670,601 $658,381 $604,309 $571,095 $531,778
======== ======== ======== ======== =========
Capitalization:
Common Equity $173,499 $172,731 $157,297 $154,972 $140,526
Preferred Stock and
Securities of Subsidiary 37,224 2,314 2,404 2,494 2,584
Long-Term Debt 176,360 149,736 168,721 153,086 144,305
-------- -------- -------- -------- --------
Total Capitalization $387,083 $324,781 $328,422 $310,552 $287,415
======== ======== ======== ======== =========
Ratio of Income from Continuing
Operations to Fixed Charges
(Before Federal Income Taxes) 2.44 2.40 2.16 2.02 2.48
======== ======== ======== ======== =========
Earnings Applicable to Common
Stock (Based on Average Shares):
Continuing Operations (1) $ 1.71 $ 1.70 $ 1.39 $ 1.00 $ 1.50
Discontinued
Operations - Net (2) (0.24) 1.14 0.26 0.21 0.05
Cumulative Effect of a
Change in Accounting
Principle (3) - - - - 0.04
-------- -------- -------- -------- --------
Earnings per Common Share $ 1.47 $ 2.84 $ 1.65 $ 1.21 $ 1.59
======== ======== ======== ======== =========
Return on Average
Common Equity (4) 10.65% 11.07% 9.53% 6.91% 10.61%
======== ======== ======== ======== =========
Share Data:
Number of Shareholders 11.4 12.1 12.9 14.0 13.1
Average Common Shares 10,763 10,732 10,720 10,258 9,680
Common Shares Outstanding
at Year End 10,771 10,757 10,722 10,715 9,805
Dividend Reinvestment
and Stock Purchase Plan:
Number of Shareholders 6.0 6.1 6.5 6.6 5.7
Number of Participating Shares 1,440 2,845 2,932 2,941 2,716
Book Value at Year End $ 16.11 $ 16.06 $ 14.67 $ 14.46 $ 14.33
Cash Dividends Declared $ 1.440 $ 1.440 $ 1.440 $ 1.440 $ 1.433
Market Price at Year End 30 5/16 24 3/8 23 1/8 18 1/8 23 3/4
Dividend Payout:
From Continuing Operations 84.1% 84.6% 103.8% 141.5% 94.8%
From Total Net Income 98.1% 50.7% 87.5% 116.7% 89.2%
Market Price to Book Value 188.2% 151.8% 157.6% 125.3% 165.7%
Price Earnings Ratio (4) 17.73 14.34 16.64 18.13 15.83
<FN>
Certain restatements of previously reported amounts were required as a result of
discontinued business segments during the current year.
(1) Included in 1994 is the negative impact of a $3.5 million Customer Refund
Obligation ordered by the BPU which reduced 1994 earnings by $2.3 million,
or $0.22 per share.
(2) Represents discontinued business segments: sand mining and distribution
operations which were sold in 1996, construction operations which were sold
in 1997 and fuel oil operations with related environmental liabilities in
1997 (See Note 2 to Consolidated Financial Statements).
(3) Included in 1993 is the Cumulative Effect of a Change in Accounting
Principle for Income Taxes.
(4) Calculated based on Income from Continuing Operations.
</FN>
</TABLE>
-1-
TO OUR SHAREHOLDERS
South Jersey Industries, Inc. achieved improved financial results in 1997,
setting a new record for earnings from continuing operations. Consolidated net
income reached $18.4 million compared with $18.3 million in 1996. Earnings
applicable to common stock from continuing operations rose to $1.71 in 1997,
compared with $1.70 in 1996.
Our financial results reflect improved net income from South Jersey Gas Company
in a year when weather was approximately 7 percent warmer than last year.
Increased sales margins from rate relief granted in January 1997 heavily
contributed to our successful year. Improved revenue, in part, resulted from an
expanding customer base which continues to be a valuable, inherent asset. Key to
this growth is the economic development occurring in Atlantic City which has
positively affected growth throughout our entire service area.
We are pleased to announce that during 1997, SJI's management team updated our
long-term strategic plan, which defines our role in the energy marketplace and
provides challenging, yet achievable, goals and objectives for SJI's companies.
An inspiring road map now exists to guide us toward success in a highly
competitive industry and we are avidly following its path. This process helped
us identify skills and core competencies inherent in our companies and we are
capitalizing on those management skills by applying them to exciting new
prospects in the natural gas and electric sectors. Our number one priority is to
position SJI as an attractive energy investment while creating a sound
foundation for improved shareholder value.
Accepting this challenge means finding and taking advantage of niches and
windows of opportunity as the energy market evolves. Our plan not only
recognizes, but anticipates, both shareholder and market expectations in a
deregulated environment. To meet those expectations, we need to offer greater
returns from innovative, new activities than we can reasonably expect from the
regulated arena. Success in these activities will lead to sustainable growth in
market price and dividend yield. To sustain that growth component, SJI is
investing in moderate risk activities and projects in the deregulated energy
marketplace and will reinvest earnings of its non-utility subsidiaries to fuel
their growth. Designing and offering competitively priced, innovative and
quality energy products, services and solutions will be important to our
success.
We are proud of Gas Company's history as a low-cost natural gas provider and
maintaining that position is a key conclusion of our planning process.
Historically, our efforts to control costs and maintain efficiency and
productivity resulted in lower operating and maintenance expenses than our peer
companies. Although we must maintain our vigilance in this area, we realize that
to further improve earnings we must have realistic and achievable objectives
designed to generate new revenues.
Gas Company's service area growth is unprecedented in its history and our
capital expenditure program has anticipated this growth. We are well prepared
and eager to add and serve new customers ranging from the expanding Atlantic
City casino marketplace to the steadily growing suburban communities of
Philadelphia. New customer growth is just one area of focus for additional
revenue generation. We are ardently working on aggressive new programs for
existing customers that will result in increased use of our products and
services.
Complementing our utility business, the non-regulated companies now offer a
broader range of products and services to traditional customers, as well as new
markets. Our planning efforts have refocused our approach. Now, we offer not
only the energy commodity but also viable energy solutions to commercial and
industrial customers. By managing the total energy needs of our customers we
help them become efficient and informed energy consumers. In the past, we
profited from our natural gas industry expertise. Today, we are seizing
opportunities made available by electric deregulation. In an historic move for
our company, we received certification from the Federal Energy Regulatory
Commission to buy and sell electricity. We then established a power marketing
group and began trading wholesale electricity. Also, we changed SJI's corporate
structure by creating a new subsidiary, SJ EnerTrade, Inc., to assume our
wholesale marketing and natural gas management functions. This restructuring
increases our recognition and presence not only in our region but in the
industry as well.
-2-
During the year we worked hard at improving our financial profile, consistent
with our long-term objectives. Our financing activities, which included a
preferred security offering, were very well received by the investment
community. In addition to increasing our investment in Gas Company, the company
funded select entrepreneurial activities of our non-regulated businesses. SJI's
capital structure was significantly improved with a decrease in the debt
portion, including current debt, by 12.6 per cent. We are pleased that
improvements to our key financial ratios were acknowledged by brokers, analysts
and the financial community.
Our road map for success is clear and the outlook for SJI is exciting. We
defined our role in the evolving energy marketplace and are committed to our
goals and objectives. The prudent investment of our capital, time and talent in
both the regulated and deregulated arenas will improve shareholder value,
maintain dividend stability and provide an essential growth component. Pleased
with the progress we have made and confident in achieving a new vision, we thank
our shareholders and employees for the interest, loyalty and support they have
shown for SJI's plans for the future.
December 22, 1997
* The numbers highlighted in bold italic were placed into the text in January
1998.
INSERT: Photograph - William F. Ryan
-3-
1997 Highlights
INSERT: Photograph on the left side of page 4.
Service trucks laying gas lines in a local neighborhood.
SOUTH JERSEY INDUSTRIES, INC.
. Updated the strategic plan to maximize long-term shareholder value in the
face of regulatory and competitive environments undergoing significant
change. Key objectives of the plan include:
. Achieving earnings growth which will improve the dividend payout ratio
enabling a future pattern of regular, sustainable dividend increases;
. Developing a growth component for SJI stock by exploiting opportunities
within Gas Company's dynamic service territory and prudently investing
capital in SJI's non-regulated businesses;
. Focusing the company's activities exclusively on energy and energy
services.
. Formalized the Investor Relations function to provide the investment
community with an increased awareness of the company's activities and
opportunities. Securities analysts at PaineWebber, Prudential Securities and
Value Line are currently following the company.
. Sold R&T Group, Inc.'s remaining assets in April, marking SJI's exit from
the utility construction and general contracting business.
. Formed SJ EnerTrade, Inc., a non-regulated subsidiary to assume the
marketing activities of South Jersey Fuel, Inc. in selling natural gas to
energy marketers, electric and gas utilities and other wholesale users
throughout the mid-Atlantic and southern regions of the country.
. Achieved a 31.9 percent total return on investment for the full year of 1997
for an SJI investor who reinvested dividends.
-4-
SOUTH JERSEY GAS COMPANY
. Added approximately 6,700 customers, bringing total customers to
approximately 260,600 and completed approximately $44.0 million in pipeline
system expansion and upgrades.
. Recorded the highest number of conversions from other fuels in the last 7
years. Conversions in 1997 were up over 10 percent from 1996.
. Concluded a rate case with the New Jersey Board of Public Utilities in
January 1997. The major components include:
. $10.3 million increase in revenues;
. $6 million increase in base rates and an 11.25 percent return on common
equity;
. Improved the formula to share profits between stockholders and
customers for off-system and interruptible sales and transportation;
. Established rates, service fees and unbundled services on a cost-
causation basis.
. Developed and successfully implemented an innovative pilot program allowing
nearly 13,000 residential customers a choice in their natural gas supplier.
. Implemented a natural gas purchasing strategy which generated savings of
$4.3 million for customers during the 1996-97 winter season.
. Executed off-system sales or released pipeline capacity and storage totaling
51 Bcf which is approximately 46 percent of Gas Company's total throughput.
Off-system throughput increased approximately 49 percent in 1997 over 1996.
. Produced pre-tax profits of $16.1 million from off-system and interruptible
sales. After applying the improved sharing formula, these activities
generated $5.3 million in net income or approximately 27 percent of Gas
Company's earnings.
. Addressed capital needs to build new facilities by selling $35.0 million of
8.35% Preferred Securities through the creation of the SJG Capital Trust.
Gas Company sold $35.0 million principal amount of First Mortgage Bonds and
also received a $25.6 million equity infusion from SJI.
. Negotiated long-term labor contracts with the company's three bargaining
units and restructured the work force to address competitive market
realities.
. Created new programs to generate additional revenues for Gas Company, while
continuing cost reduction initiatives.
. Implemented the Automated Dispatch System to allow Gas Company to dispatch
service crews via a computer network.
SOUTH JERSEY ENERGY COMPANY
. Received a $2.0 million equity infusion from SJI to develop market
initiatives for natural gas, electricity and related energy services.
. Signed a long-term agreement with Mid-Atlantic Recycling Technologies to
supply natural gas to its Vineland, N.J. soil remediation facility. Energy
Company also assisted in financing the pipeline extension for the project.
. Formed a power marketing group to buy and sell electricity on the wholesale
market after receiving a license from the Federal Energy Regulatory
Commission.
. Signed seven long-term agreements of between 5 and 10 years to provide
natural gas and electricity requirements for large residential complexes.
SJ ENERTRADE, INC.
. Through its formal alliance with Union Pacific Fuels, Inc., South Jersey
Resources Group, LLC:
. Managed natural gas storage for several large natural gas utilities in
the mid-Atlantic region;
. Managed the entire gas supply portfolio for a natural gas local
distribution company;
. Expanded commitments for management services to be provided to
customers in 1998.
INSERT: Photograph across the bottom of pages 4 & 5.
Two gentlemen standing in front of storage tanks
-5-
INCREASED VALUE THROUGH GROWTH
South Jersey Industries, Inc.'s management updated our long-term strategic plan
in 1997 to ensure our continued success as the energy industry further evolves.
During this process, we asked ourselves, "what do we do best and how can we use
those strengths and skills to create and offer energy products and services that
fill our customers' needs?" In answering those questions we fashioned
objectives for each subsidiary which contribute to fulfilling our primary goal
of maximizing shareholder value.
SOUTH JERSEY GAS COMPANY
Serving as the foundation for South Jersey Gas Company's objectives are customer
growth, revenue generation from new or enhanced services and continued cost
control. Homeowners in Gas Company's service area continue to show an
overwhelming preference for natural gas heat, as almost all of the new homes
built with access to our mains use natural gas for heating. As evidence of this
preference, we recorded the highest number of conversions from other fuels in
the last 7 years. Conversions in 1997 increased by 10 percent over last year.
In 1997, we added approximately 6,700 customers, boosting our total number of
customers to approximately 260,600 at year end. Our earnings potential has grown
through the net addition of over 31,400 customers during the last 5 years and
residential and small-commercial customers account for nearly 87 percent of our
total sales margin. These customer groups provide earnings stability and
insulation from market risk.
Fueling future growth is the second wave of Atlantic City casino expansion which
is still in its infancy. Leading the continuing revitalization effort, the new
convention center and the Sheraton Hotel, Atlantic City's first deluxe non-
casino hotel, form the beginning of a grand entrance corridor linking the
convention center with the world-famous boardwalk and casino area. In the next 5
to 6 years, we expect the number of first-class hotel rooms in the city to
triple, with new tourist attractions, housing and small businesses augmenting
the renaissance of the city and the surrounding areas. Throughout Gas Company's
service area, homes and small businesses are sprouting up at a rapid pace. With
Atlantic City serving as a catalyst, we anticipate our already impressive
current annual growth rate of 2.6 percent will increase an additional 1 to 1.5
percent during the next 5 years.
Conversions to natural gas from other fuels remain an important part of our
growth, accounting for nearly one-third of Gas Company's new customers each
year. And, a large conversion market remains to be tapped. To identify and
target potential customers, we are introducing an aggressive new conversion
program in the commercial and residential markets during 1998.
Delivering natural gas in southern New Jersey will continue to be SJI's primary
business in the foreseeable future, and we intend to invest significantly in
that business to serve current and prospective customers effectively. Our
commitment to this business is evidenced by our plans to spend approximately
$150 million from 1997 through 1999 to improve our existing pipeline network and
install new mains and services.
INSERT: Photograph in the center of page 6 - Laser-filled lighthouse
INSERT: Passage under photograph -
A laser-filled lighthouse illuminates Atlantic City's grand entrance
corridor linking the convention center with the boardwalk.
-6-
Our planning process also generated ideas for new services and products that our
customers want and need, that are cost-effective to implement and have
significant revenue and income enhancement prospects. During 1997, Gas Company
developed and implemented a targeted campaign to persuade existing customers to
upgrade their electric water heaters to more efficient and less costly natural
gas units. Our goal is to convert a minimum of 4,500 water heaters to natural
gas over the next 5 years. In 1998, we will introduce an expanded Service Sentry
program to customers through a multi-faceted marketing campaign. Changes to this
appliance service contract program were driven by customer demand and our desire
to increase revenues by capturing a larger share of the heating, air
conditioning and appliance repair
INSERT: Bar chart at lower left hand corner of page 7 listing the following
information:
SJI - Earnings Per Common Share from Continuing Operations and
Dividends Declared (Dollars)
INSERT: Photograph on right hand side of page 7 showing man working at meter
station.
-7-
INSERT: Photograph on left hand side of page 8 of power lines.
market. By participating in this program, customers will have more service
contract choices and the benefit of Gas Company's long-standing expertise in the
appliance repair business. We plan to increase our market penetration for this
program from almost 7 percent to about 38 percent over the next 5 years.
SOUTH JERSEY ENERGY COMPANY
South Jersey Energy Company's new objectives expand its focus from solely
providing a commodity to offering customers viable energy solutions. Innovative
steps taken by Energy Company in 1997 resulted in new service and product
offerings, including
INSERT: Line chart at bottom of page 8 listing the following information:
SJI - Consolidated Net Income Applicable to Common Shareholders
($ millions). Information provides Total Consolidated Net
Income; Continuing Operations; and Discontinued Operations.
-8-
financing for commercial conversions to natural gas, electric lighting
retrofitting and wholesale electricity trading.
Becoming a total energy manager for commercial and industrial customers is
another key to Energy Company's growth. Through Energy Company's "Gatekeeper"
program, we can guide customers at all points in their energy decision-making
process from system design to equipment selection to price-based commodity
selection. An alliance with another energy services management company has
enabled Energy Company to offer Gatekeeper services to the long-term health care
industry, including lighting retrofits , heating system conversions and natural
gas and electricity sales.
During the year, in a bold step, Energy Company acquired certification from the
Federal Energy Regulatory Commission to buy and sell electric power nationwide
and established a power marketing group to trade electricity on the
Pennsylvania-New Jersey-Maryland grid. In this capacity, Energy Company arranges
for bulk, power transactions among municipal and regional electric utilities and
energy marketers. When the electric industry is further deregulated, we will add
electricity sales to the Gatekeeper package of retail services. This exciting
new venture brings us one step closer to the vision of establishing Energy
Company as the preferred total energy supplier in our region.
Energy Company's core business, natural gas sales to residential, commercial and
industrial customers, is slated to grow significantly over the next 5 years.
This growth assumes that natural gas prices will remain reasonably competitive
with natural gas utility rate structures and that the New Jersey Board of Public
Utilities opens the retail marketing programs to more residential customers. In
1997, Energy Company successfully participated in Gas Company's pilot
residential marketing program capturing approximately 50 percent of the
eligible customers while competing with five other companies. An alliance with
an outside marketing organization provided Energy Company with an innovative way
to use a large sales force for the project, contributing to the program's
success.
SJ ENERTRADE, INC.
In 1997, SJI formed SJ EnerTrade, Inc. to separate the wholesale energy
marketing and asset management operations from South Jersey Fuel, Inc.'s
previous business activities. EnerTrade assumed Fuel Company's function of
selling natural gas to energy marketers, electric and natural gas utilities and
other wholesale users in the mid-Atlantic and southern regions of the country.
Also, EnerTrade acquired Fuel Company's 50 percent share in South Jersey
Resources Group, LLC, a company formed through an alliance with Union Pacific
Fuels, Inc. Through SJRG, EnerTrade actively manages and profits from its own
portfolio of natural gas assets including storage and the assets of several
large, natural gas utilities. Positioning EnerTrade as a viable wholesale gas
marketer and asset manager on its own, as well as creating new services and
expanding market share with Union Pacific Fuels, are fundamental to its ongoing
success. For 1998, we have secured commitments from several, large utilities to
re new, and in some cases expand, our services which places EnerTrade on target
to meet earnings projections.
We are enthusiastic about the opportunities brought about by natural gas and
electric deregulation. We have prepared and repositioned ourselves based on the
needs and demands of increasingly aware energy consumers and a rapidly evolving
market. Be assured that all our activities are designed and carried out with
particular attention to our primary objective - improving the value of your
investment.
INSERT: Photograph upper right hand corner of page 9 - Caesars' Centurion
Tower.
INSERT: Passage -
Caesars' Centurion tower, which added 620 rooms, is just one example of
the dramatic growth occurring in Atlantic City.
-9-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Overview - South Jersey Industries, Inc. (SJI) has three operating subsidiaries,
South Jersey Gas Company (SJG); South Jersey Energy Company (SJE); and SJ
EnerTrade, Inc. (EnerTrade). SJG is a natural gas distribution company serving
260,567 customers at December 31, 1997, compared with 253,874 customers at
December 31, 1996. EnerTrade, formed in October 1997, provides services for the
sale of natural gas to energy marketers, electric and gas utilities, and other
wholesale users in the mid-Atlantic and southern regions of the country. SJE
provides services for the acquisition and transportation of natural gas for
retail end users and also markets total energy management services. The results
of operations of the Company's non-regulated energy service companies are not
material to the Company's financial statements taken as a whole. See "Sale of
Capital and Income from Discontinued Operations" for details related to
discontinued operations.
Competition - SJG franchises are non-exclusive. Currently, no other utility
provides retail gas distribution services within its territory. SJG does not
expect other utilities to do so in the foreseeable future because of the
extensive investment required for utility plant and related costs. SJG competes
with oil, propane and electricity suppliers for residential, commercial and
industrial users. The market for natural gas sales is subject to competition as
a result of deregulation. SJG has enhanced its competitive position while
maintaining its margins by using an unbundled tariff which isolates the variable
cost of the commodity within SJG's rate structure. Under this tariff, SJG
derives substantially all of its profits from the transportation rather than
the sale of the commodity. SJG's commercial and industrial customers can choose
their supplier while SJG recovers its cost of service and fixed gas costs
primarily through its transportation service. In April 1997, SJG initiated its
New Jersey Board of Public Utilities (BPU) approved pilot program giving some
residential customers a choice of gas suppliers (See "Pilot Program - Choice of
Gas Supplier"). SJG believes it has been a leader in addressing the changing
marketplace, while maintaining its focus on being a low-cost provider of natural
gas and energy services. SJE and EnerTrade also actively arrange energy services
designed to provide low-cost energy supplies in a highly competitive
marketplace. SJI's companies intend to develop creative initiatives and propose
meaningful regulatory and tax reforms designed to benefit its customers and
shareholders.
Pilot Program -- Choice of Gas Supplier - In April 1997, SJG initiated its BPU-
approved pilot program giving residential customers a choice of gas supplier.
During the enrollment period, which ended June 30, 1997, nearly 13,000
residential customers applied for this service. Transportation of gas for these
customers began on August 1, 1997. Participants' bills are reduced for certain
cost of gas charges and applicable taxes. The resulting decrease in revenues is
offset by a corresponding decrease in SJG's gas costs and taxes under SJG's BPU-
approved fuel clause. The program does not affect its net income, financial
condition or margins.
Energy Adjustment Clauses - SJG's tariff includes a Levelized Gas Adjustment
Clause (LGAC), a Temperature Adjustment Clause (TAC), a Remediation Adjustment
Clause (RAC) and a Demand Side Management Clause (DSMC). These clauses permit
adjustments for changes in gas supply costs, reduce the impact of extreme
fluctuations in temperatures on SJG and its customers, recover costs for the
remediation of former gas manufacturing plants and recover costs associated with
its conservation plan, respectively. The BPU-approved LGAC, RAC and DSMC
adjustments are made to match revenues and expenses. TAC adjustments do affect
revenue, income and cash flows since extremely cold weather can generate credits
to customers, while extremely warm weather during t he winter season can result
in additional billings to customers.
Status of Year 2000 Conversion - The Company prepared a Year 2000 Impact and
Assessment study and developed a plan for program modification. An outside
service was used to identify both informational and logic date variables within
the programming codes. This service was completed and expensed in 1997.
Presently, the Company is revising affected programming code. As of December 31,
1997, approximately 20 percent of the programming code was revised. All
revisions are scheduled to be completed by early 1999, providing the remainder
of 1999 for testing. Total conversion costs are estimated at $0.4 million of
which approximately $0.1 million was spent as of December 31, 1997. Vendors who
provide third party software and support services are being contacted to
establish Year 2000 compliance. The Company is also in the process of securing
written verification from its key product and service vendors to ensure their
compliance.
Operating Revenues -- Utility - In 1997, revenues decreased $1.8 million from
1996. Revenues increased $49.1 million when comparing 1996 with 1995. In 1997,
the revenue decrease is due to lower firm sales resulting from weather which was
6.7 percent warmer than 1996 and increased firm transportation service replacing
firm sales. These results were partially offset by the settlement of the base
rate case and customer growth. The revenue from transportation excludes
commodity costs (See Competition), and SJG's profits are from the transportation
rather than the sale of commodity. Therefore, the migration to firm
transportation does not lower SJG's margin. Total sales margin was higher in
1997 due to the impact of a rate increase effective January 27, 1997 (See
Regulatory Matters), the addition of 6,700 new customers, increased off-system
sales (nonjurisdictional sales) and increased capacity release revenues. The
revenue and sales margin increase in 1996 was primarily due to greater firm
sales resulting from weather which was 6.4 percent colder than 1995 and a net
increase of approximately 5,900 customers. The net customer increase in 1995 was
approximately 6,600.
Operating Revenues -- Nonutility - Revenues decreased $5.1 million in 1997
compared with 1996 and increased $2.2 million in 1996 compared with 1995. The
1997 decrease was principally due to lower commodity sales. The 1996 increase
resulted from higher volume sales and the effect of increased prices resulting
from higher commodity costs.
Gas Purchased for Resale - Gas purchased for resale decreased $4.0 million in
1997 compared with 1996 principally due to decreased unit sales. Gas purchased
for resale increased by $41.4 million for 1996 compared with 1995, principally
due to increased unit sales. Sources of gas supply include both contract and
open-market purchases. SJG is responsible for securing and maintaining its own
gas supplies to serve its customers.
SJG has entered into long-term contracts for natural gas supplies, firm
transportation, and firm gas storage service. The earliest expiration of any of
these contracts is 1999. All of the transportation and storage service
agreements between SJG and its interstate pipeline suppliers are provided under
tariffs approved by the Federal Energy Regulatory Commission. SJG's cumulative
obligation for demand charges and reservation fees for all of these services is
approximately $4.6 million per month, which is recovered on a current basis
through its LGAC.
Operation and Maintenance -- Utility - A summary of net changes in utility
operations and maintenance cost is as follows (in thousands):
<TABLE>
<CAPTION>
1997 vs. 1996 1996 vs. 1995
-----------------------------
<S> <C> <C>
Other Production Expense $ 123 $ 171
Transmission (35) 83
Distribution (179) 474
Customer Accounts and Services (322) 186
Sales 126 (32)
Administration and General 3,216 (994)
Other (433) (243)
---------------------------
$ 2,496 $ (355)
===========================
</TABLE>
Customer Accounts and Service costs decreased in 1997 principally due to a
charge in 1996 to increase the Company's reserve for uncollectible accounts and
lower payroll costs. Administrative and General costs increased in 1997
principally due to increased payroll, employee benefits (including a $1.5
million death-benefit liability which became payable upon the death of the
Company's president in December 1997) and regulatory costs.
-10-
Distribution costs increased in 1996 principally due to greater markout and leak
survey activities. The 1996 reduction in administrative and general costs was
principally due to decreased data processing, employee welfare and regulatory
costs.
Other Operating Expenses - A summary of principal changes in other consolidated
expenses for December 31, 1997 and 1996, is as follows (in thousands):
<TABLE>
<CAPTION>
1997 vs. 1996 1996 vs. 1995
-----------------------------
<S> <C> <C>
Operation and Maintenance - Nonutility $ (3,625) $ 2,312
Depreciation 1,114 1,016
Federal Income Taxes 561 1,402
Gross Receipts & Franchise and Other Taxes (3,499) 2,229
</TABLE>
Changes in nonutility expenses principally reflect the impact of unit sales and
commodity costs. Depreciation is higher in each period principally due to
increased investment in property, plant and equipment by SJG. Federal Income Tax
changes reflect the impact of changes in pre-tax income. The changes in Gross
Receipts & Franchise Taxes are due to changes in volumes of gas sold, which are
subject to those taxes. In addition, lower tax rates applied to certain customer
classes in 1997.
Interest Charges - Interest charges decreased in 1997 and 1996. The decrease in
1997 was due to the effect of lower short-term interest resulting from lower
levels of short-term debt outstanding. Short-term debt levels were reduced in
March 1997 by using proceeds from the sale of $35.0 million of first mortgage
bonds by SJG; the application of a $25.6 million cash equity infusion to SJG
from SJI; and the application of the net proceeds from the sale of the
Mandatorily Redeemable Preferred Securities in May 1997. Utility long-term
interest increased in 1997 due to increased levels of long-term debt
outstanding.
Preferred Dividend Requirements of Subsidiary - Preferred Dividends increased in
1997 due to the issuance of $35.0 million of 8.35% SJG-guaranteed Mandatorily
Redeemable Preferred Securities (See Capital Resources).
Sale of Capital Assets and Income from Discontinued Operations - In 1996, Energy
& Minerals, Inc. (EMI) sold The Morie Company, Inc.'s (Morie) common stock for
approximately $55.3 million. The underlying book value was approximately $27.9
million and the net gain on the transaction amounted to $15.0 million, after
deducting income taxes of $11.3 million and selling costs of $1.1 million (See
Note 2). A portion of the sale proceeds was used to redeem subsidiary debt,
including $9.0 million of 9.6 6% Senior Notes and a bank note of approximately
$2.0 million. Also, the Company sold the assets of certain R&T Group, Inc.
(R&T) subsidiaries in early 1997 for approximately $3.5 million, which
approximated the net book value of the assets sold. In connection with a plan to
discontinue or sell the R&T companies, R&T's recorded value was reduced in 1996
to estimated net realizable value (net of income taxes). The profit or loss and
the write down to net realizable value, net of income taxes, are included under
the caption Net (Loss) Gain on the Disposal of Discontinued Operations (See Note
2). The sale of assets in 1996, as described above, impacts the comparative
financial information for 1997 and 1996. Also, in 1997, the Company recorded
additional costs of approximately $2.6 million related to environmental
remediation expenditures for the previously operated fuel oil business of South
Jersey Fuel, Inc. (SJF) and for Morie (See Note 2).
The 1997 decrease in income from discontinued operations is principally due to
the recording of liabilities for anticipated environmental remediation
expenditures. The 1996 decrease in income from discontinued operations is
principally due to recording a liability for anticipated environmental
remediation expenses, insurance claims and termination costs.
Net Income Applicable to Common Stock - Net income (in thousands) and earnings
per common share reflect the following changes:
<TABLE>
<CAPTION>
1997 vs. 1996 1996 vs. 1995
-----------------------------
<S> <C> <C>
Income from Continuing Operations $ 164 $ 3,391
Loss from Discontinued Operations (1,459) (3,176)
Net (Loss) Gain on Disposal of
Discontinued Operations (13,407) 12,640
---------------------------
Net Income (Decrease) Increase $ (14,702) $ 12,855
===========================
Earnings per Common Share
Continuing Operations $ .01 $ 0.31
Discontinued Operations (1.38) 0.88
---------------------------
Earnings per Share (Decrease) Increase $ (1.37) $ 1.19
===========================
</TABLE>
The details affecting the increase in net income and earnings per share are
discussed under the appropriate captions above.
Liquidity - The seasonal nature of gas operations, the timing of construction
and remediation expenditures and related permanent financing, as well as
mandated tax and sinking fund payment dates require large short-term cash
requirements. These are generally met by cash from operations and short-term
lines of credit. The Company maintains short-term lines of credit with a number
of banks, aggregating $130.0 million of which $84.1 million was available at
December 31, 1997. The credit lines are uncommitted and unsecured with interest
rates below the prime rate.
The changes in cash flows from operating activities are as follows (in
thousands):
<TABLE>
<CAPTION>
1997 vs. 1996 1996 vs. 1995
-----------------------------
<S> <C> <C>
Increases/(Decreases):
Net Income $ (14,702) $ 12,855
Depreciation, Depletion and Amortization (3,350) 740
Provision for Losses on Accounts Receivable (792) 878
Revenues and Fuel Costs Deferred - Net 4,449 (2,196)
Deferred and Non-Current
Federal Income Taxes - Net (4,365) 5,397
Environmental Remediation Costs - Net (1,112) (3,315)
Net Pre-Tax Loss (Gain) on the Disposal
of Discontinued Operations 23,465 (22,620)
Accounts Receivable 44 18,745
Inventories 6,732 (10,663)
Prepayments and Other Current Assets (973) 1,367
Prepaid Gross Receipts & Franchise Taxes (1,011) 5,892
Accounts Payable and Other
Accrued Liabilities (13,184) 8,453
Other - Net 2,865 (9,087)
------------------------
Net Cash from Operating Activities $ (1,934) $ 6,446
========================
</TABLE>
Depreciation and Amortization are non-cash charges to income and do not impact
cash flow. Changes in depreciation cost reflect the effect of additions and
reductions to fixed assets.
Increases in Revenues and Fuel Costs Deferred - Net reflect the impact of
overcollection of fuel costs or the recovery of previously deferred fuel costs.
Decreases reflect the impact of payments or credits to customers for amounts
previously overcollected and the undercollection of fuel costs resulting from
increases in natural gas costs.
Increases in Deferred and Non-Current Federal Income Taxes and Credits - Net
represent the excess of taxes accrued over amounts paid. Decreases reflect the
impact of taxes paid in excess of amounts accrued. Generally, deferred income
taxes related to deferred fuel costs will be paid in the next year.
Changes in Environmental Remediation Costs - Net represent the difference
between remediation expenditures and amounts collected under the RAC and
insurance recoveries.
-11-
Changes in Accounts Receivable are generally weather and price related. Changes
impact cash flows when collected in subsequent periods.
Changes in Inventory reflect the impact of seasonal requirements, temperatures
and price changes.
Changes in Prepaid Gross Receipts & Franchise Taxes reflect the impact of excess
taxes paid over taxes accrued. However, significant timing differences exist in
cash flows during the year since SJG must pay the full year's tax on April 1 of
each year and amortize any prepaid tax over the remainder of the year, on the
basis of gas volumes sold. SJG uses short-term borrowings to make these tax
payments which result in a temporary increase in the short-term debt level. The
carrying costs of timing differences are recognized in base utility rates.
As stated in Note 1, on January 1, 1998, the Gross Receipts & Franchise Taxes
were being replaced with a 6 percent State Sales and Use Tax, a 9 percent State
Corporation Business Tax on income before taxes and a Transitional Energy
Facilities Assessment (TEFA) on volumes of gas sold and transported. The TEFA
will be phased out over 5 years beginning January 1, 1999. Approximately 50
percent of the new taxes will be paid in monthly installments during the first 6
months of the year and the principal portion of the remaining taxes will be paid
on June 25, 1998, and on May 15 of each year thereafter. New rates became
effective on January 1, 1998, and are subject to change following BPU approval
which is expected in early 1998.
Changes in Accounts Payable and Other Current Liabilities reflect the impact of
timing differences between the accrual and payment of costs.
Cash flow from nonutility operations is generally retained by those companies
with amounts in excess of cash requirements passed up to SJI either as dividends
or as temporary short-term loans. Nonutility operations are service oriented and
do not require significant investment in capital facilities, inventories or
personnel. These operations are not considered material to the financial
statements.
EMI has assumed responsibility for the environmental liabilities of Morie, which
was sold in 1996. The environmental liabilities are estimated to range between
$3.1 million and $15.5 million. EMI has accrued the lower end of the range under
the guidance of FASB No. 5 "Accounting for Contingencies" (See Note 13).
As a result of additional testing performed during 1997, both SJI and SJF's
discontinued operations have also estimated their potential exposure for the
future environmental remediation of four sites where fuel oil operations were
conducted years ago. Estimates for SJI's site range between $0.3 million and
$1.1 million while the estimated liability for SJF's discontinued operations
ranges from $1.5 million to $4.2 million for the remaining three sites. The
lower end of these ranges have been accrued. SJI's charge is included in the
consolidated income statement as operating expense while SJF's charge is
reflected under the caption "(Loss) Income from Discontinued Operations - Net"
(See Note 2).
Regulatory Matters - On January 27, 1997, the BPU granted SJG a base 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 common equity. The majority of this
increase comes from residential and small commercial customers. Part of the
increase is recovered from new service fees which charge specific customers for
costs they cause SJG to incur. Additionally, SJG is now allowed to retain the
first $5.5 million of pre-tax margins generated by interruptible and off-system
sales and transportation and 20 percent of pre-tax margins above that level. In
1998 and 1999, this $5.5 million threshold will increase by the annual revenue
requirement associated with specified major construction projects. These
sharing formula improvements are expected to result in additional rate relief of
approximately $0.3 million in 1998 and $1.8 million in 1999.
Rates of return are calculated by weighting SJG's individual capital cost rates
by the proportion of each respective type of capital. This requires selecting
appropriate capital structure ratios and determining the cost rate for each
capital component as determined in each rate proceeding.
In setting a rate of return, the BPU must provide a utility and its investors
with a return that is commensurate with the risk to which the invested capital
is exposed so that the utility has access to the capital required to meet its
public service responsibility.
Also on January 27, 1997, the BPU approved SJG's request for a $2.5 million
revenue reduction through the TAC. This is the standard BPU procedure used to
credit customers with previously collected revenues, which were in excess of
those allowed by the TAC (See "Energy Adjustment Clauses"). This revenue
reduction reflects the TAC's normal operation, as does the BPU's confirmation of
the decrease.
In April 1996, SJG received BPU approval to increase its rates to recover
approximately $8.0 million of increased natural gas costs through the LGAC.
In September 1996, SJG filed to reduce its rates through its 1996-97 LGAC
reflecting a $1.4 million decrease in natural gas costs. Updated projections of
the 1996-97 LGAC year results were rolled into the 1997-98 LGAC year and filed
with the BPU on September 12, 1997. The 1997-98 LGAC filing requested a rate
increase to reflect an increase of $4.7 million in natural gas costs, inclusive
of the $1.4 million reduction related to the 1996-97 LGAC filing. Both filings
are still pending at the BPU.
The adoption of FASB No. 109, "Accounting for Income Taxes" in 1993 primarily
resulted in creating a regulatory asset and a deferred income tax liability. As
a result of positions taken in the 1994 rate case, the amortization of the asset
is being recovered through rates over an 18-year period which began in December
1994. Also, FASB No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions", adopted by the Company in 1993, requires an accrual basis
of accounting for retiree benefit payments during the years of employment. The
Company elected to recognize the unfunded transition obligation over a 20-year
period beginning in 1993. The majority of the postretirement benefit costs apply
to SJG, which previously recovered these costs through rates on a pay-as-you-go
basis. A December 1994 BPU order provided for partial recovery of costs
associated with FASB No. 106 and prescribed continued deferral of unrecovered
costs. Also, beginning in 1995, an external trust was established towards
funding postretirement benefit costs. Rate recovery in excess of SJG's pay-as-
you-go requirement is contributed to the trust and provides no operating benefit
to SJG except to the extent that trust income reduces future net periodic cost.
Gross contributions to the trust amounted to $2.0 million in 1997 and the
balance of the regulatory asset amounted to $6.1 million at December 31, 1997.
This amount will be recovered from ratepayers over a 15-year period beginning
January 1, 1998, as approved by the BPU in December 1997. In addition, the BPU
approved full recovery of the net periodic benefit cost.
The Company incurred and recorded certain costs for environmental remediation of
sites where SJG or predecessor companies operated gas manufacturing plants. SJG
terminated manufactured gas operations at all sites more than 35 years ago.
Since the early 1980s, the Company has recorded environmental remediation costs
of $96.2 million, of which $39.2 million was expended as of December 31, 1997.
The Company, with the assistance of an outside consulting firm, estimates that
total future expenditures to remediate SJG sites will range from $52.4 million
to $165.6 million. The lower end of this range was recorded as a liability and
is reflected on the balance sheet under the captions "Current Liabilities" and
"Deferred Credits and Other Non-Current Liabilities". Recorded environmental
remediation costs of SJG do not directly affect earnings because those costs
are deferred and, when expended, recovered through rates over 7-year
amortization periods as authorized by the BPU. Amounts accrued for future
expenditures were not adjusted for future insurance recoveries, which
management is pursuing. SJG received $4.2 million of insurance recoveries as of
December 31, 1997. SJG used these proceeds first to offset legal fees incurred
in connection with those recoveries and used the excess to reduce the balance
of deferred environmental remediation costs. Recorded amounts include estimated
costs 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, changing technology, government regulations
and site specific requirements.
The major portion of recorded environmental costs relate to the cleanup of SJG's
former gas manufacturing sites. SJG recorded $90.2 million for
-12-
the remediation of these sites, of which $37.8 million was expended through
December 31, 1997.
As a result of the 7-year recovery mechanism, SJG does not expense environmental
remediation costs when incurred and defers costs to be recovered. SJG has two
regulatory assets associated with environmental cost. The first regulatory asset
is titled "Environmental Remediation Cost: Expended - Net". These expenditures
represent actual costs incurred to remediate former gas manufacturing plant
sites net of rate and insurance recoveries. These costs meet the requirements of
FASB No. 71, "Accounting for the Effects of Certain Types of Regulation". The
BPU allowed recovery of these expenditures through July 1995 and petitions to
recover these costs through July 1997 are pending.
The other regulatory asset titled "Environmental Remediation Cost: Liability for
Future Expenditures" relates to estimated future expenditures determined under
the guidance of FASB No. 5, "Accounting for Contingencies". This amount, which
relates to former manufactured gas plant sites was recorded as a deferred debit
with the corresponding amount reflected in Current Liabilities and Deferred
Credits and Other Non-Current Liabilities, as appropriate. The deferred debit is
a regulatory asset under FASB No. 71, because the BPU's intent, as evidenced by
its current practice, is to provide recovery sufficient to recover the deferred
costs after they are expended.
Annually, SJG files with the BPU to recover expended remediation costs in rates.
The BPU has consistently allowed the full recovery over 7-year periods, and SJG
believes this will continue. As of December 31, 1997, SJG's unamortized
remediation expenditures of $21.0 million are reflected on the balance sheet
under the caption "Regulatory and Other Non-Current Assets." Since BPU approval
of the RAC mechanism in August 1992, SJG recovered $12.6 million as of December
31, 1997.
On July 31, 1996 and 1997, SJG made its annual filings with the BPU to recover
remediation costs expended during the period of August 1995 through July 1997
totaling $1.6 million. Both filings were subsequently updated and are still
pending at the BPU.
On September 9, 1997, SJG filed with the BPU to adjust rates by replacing the
current State Gross Receipts & Franchise Tax components with a Sales and Use
Tax, a Corporation Business Tax and a Transitional Energy Facilities Assessment
(See "Liquidity").
On May 5, 1997, SJG filed with the BPU to update rates related to appliance
service charges, including a profit margin. The new rates are competitive with
other service providers in New Jersey and are designed to increase earnings and
cash flows to SJG over the current rates. This filing is pending.
The Company is subject to claims which arise in the ordinary course of its
business and other legal proceedings. A group of Atlantic City casinos filed a
petition with the BPU on January 16, 1996, alleging overcharges of over $10.0
million, including interest. Management believes that charges to the casinos
were based on applicable tariffs and that the casinos were not qualified under
less expensive rate schedules, as claimed. Management believes that the
ultimate impact of these actions will not materially affect the Company's
financial position, results of operations or liquidity.
Capital Resources - The Company has a continuing need for cash resources and
capital, primarily to invest in new and replacement facilities, equipment and
for environmental cleanup costs. Total construction and remediation expenditures
for 1997 amounted to $58.7 million. The costs for 1998, 1999 and 2000 are
estimated at approximately $63.9 million, $60.2 million and $48.7 million,
respectively. These investments are expected to be funded from several sources,
which may include cash generated by operations, temporary use of short-term
debt, sale of first mortgage bonds, capital leases and RAC recoveries.
On March 21, 1997, SJG sold $35.0 million of its First Mortgage Bonds, 7.7%
Series due 2027.
On May 2, 1997, SJG's Delaware statutory trust subsidiary, SJG Capital Trust,
sold $35.0 million of 8.35% SJG-guaranteed Mandatorily Redeemable Preferred
Securities. The Trust holds as its sole asset the 8.35% Deferrable Interest
Subordinated Debentures issued by SJG maturing April 30, 2037. The Debentures
and Preferred Securities are redeemable at the option of SJG at a redemption
price equal to 100 percent of the principal amount at any time on or after April
30, 2002.
In January 1996, SJG redeemed a total of $5,258,000 of its 8-1/4% Series First
Mortgage Bonds maturing in 1996 and 1998. In April 1996, SJG redeemed the
remaining balance of its 9.2% Series First Mortgage Bonds due 1998 amounting to
$2,667,000.
A shareholder rights plan is in effect beginning September 20, 1996, extending
through September 20, 2006 (See Note 4).
Inflation - The ratemaking process provides that only the original cost of
utility plant is recoverable in revenues as depreciation. Therefore, the excess
cost of utility plant, stated in terms of current cost over the original cost
of utility plant, is not presently recoverable. While the ratemaking process
gives no recognition to the current cost of replacing utility plant, based on
past practices, SJG believes it will be allowed to earn on the increased cost
of its net investment as replacement of facilities actually occurs.
Summary - The company is confident it will have sufficient cash flow to meet its
operating, capital and dividend needs and is taking and will take such actions
necessary to employ its resources effectively.
INDEPENDENT AUDITORS' REPORT
To the Shareholders and
Board of Directors of
South Jersey Industries, Inc.:
We have audited the consolidated balance sheet of South Jersey Industries, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the related statements of
consolidated income, consolidated retained earnings and consolidated cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of South Jersey Industries, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Philadelphia, Pennsylvania
February 18, 1998
-13-
<TABLE>
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands Except for Per Share Data)
<CAPTION>
South Jersey Industries, Inc. and Subsidiaries
Year Ended December 31,
1997 1996 1995
----------------------------
<S> <C> <C> <C>
Operating Revenues:
Utility (Notes 1 & 6) $327,477 $329,295 $280,233
Nonutility 21,090 26,163 23,930
----------------------------
Total Operating Revenues 348,567 355,458 304,163
----------------------------
Operating Expenses:
Gas Purchased for Resale 181,117 185,138 143,788
Operation and Maintenance - Utility (Note 9) 48,519 46,023 46,378
Nonutility 23,154 26,779 24,467
Depreciation (Note 1) 15,978 14,864 13,848
Federal Income Taxes (Notes 1, 5 & 8) 10,716 10,155 8,753
Gross Receipts & Franchise Taxes
and Other Taxes (Note 8) 30,441 33,940 31,711
----------------------------
Total Operating Expenses 309,925 316,899 268,945
----------------------------
Operating Income 38,642 38,559 35,218
----------------------------
Interest Charges:
Long-Term Debt 15,197 14,117 15,022
Short-Term Debt 2,550 5,533 3,489
Other 364 470 1,655
----------------------------
Total Interest Charges 18,111 20,120 20,166
----------------------------
Preferred Dividend Requirements
of Subsidiary (Note 3) 2,102 174 178
----------------------------
Income from Continuing Operations 18,429 18,265 14,874
Discontinued Operations (Note 2):
(Loss) Income from Discontinued
Operations - Net (1,866) (407) 2,769
Net (Loss) Gain on the Disposal
of Discontinued Operations (767) 12,640 -
----------------------------
Net Income Applicable to Common Stock $ 15,796 $ 30,498 $ 17,643
============================
Average Shares of Common Stock
Outstanding (Note 4) 10,763 10,732 10,720
============================
Earnings Per Common Share: (Notes 2 & 4)
Continuing Operations $ 1.71 $ 1.70 $ 1.39
Discontinued Operations - Net (0.24) 1.14 0.26
----------------------------
Earnings Per Common Share $ 1.47 $ 2.84 $ 1.65
============================
Cash Dividends Declared Per Common Share $ 1.44 $ 1.44 $ 1.44
============================
</TABLE>
<TABLE>
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
(In Thousands)
<CAPTION>
Year Ended December 31,
1997 1996 1995
----------------------------
<S> <C> <C> <C>
Balance at Beginning of Year $ 48,743 $ 33,705 $ 31,497
Net Income Applicable to Common Stock 15,796 30,498 17,643
Cash Dividends Declared - Common Stock (15,501) (15,460) (15,435)
----------------------------
Balance at End of Year (Note 12) $ 49,038 $ 48,743 $ 33,705
============================
<FN>
The accompanying schedule and footnotes are an integral part of the financial
statements.
</FN>
</TABLE>
-14-
<TABLE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In Thousands)
<CAPTION>
South Jersey Industries, Inc. and Subsidiaries
Year Ended December 31,
1997 1996 1995
----------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income Applicable to Common Stock $ 15,796 $ 30,498 $ 17,643
Adjustments to Reconcile Net Income
to Cash Flows Provided by Operating
Activities:
Depreciation, Depletion and Amortization 18,112 21,462 20,722
Provision for Losses on Accounts Receivable 1,351 2,143 1,265
Revenues and Fuel Costs Deferred - Net (3,270) (7,719) (5,523)
Deferred and Non-Current Federal
Income Taxes and Credits - Net 5,358 9,723 4,326
Net Pre-Tax Loss (Gain) on the Disposal
of Discontinued Operations 845 (22,620) -
Environmental Remediation Costs - Net* (2,883) (1,771) 1,544
Changes in:
Accounts Receivable 2,113 2,069 (16,676)
Inventories (1,634) (8,366) 2,297
Prepayments and Other Current Assets (89) 884 (483)
Prepaid Gross Receipts & Franchise
Taxes - Net 1,036 2,047 (3,845)
Accounts Payable and Other
Accrued Liabilities 3,720 16,904 8,451
Other - Net (502) (3,367) 5,720
----------------------------
Net Cash Provided by Operating Activities 39,953 41,887 35,441
----------------------------
Cash Flows from Investing Activities:
Investment in Affiliate - (1,000) -
Loan to Affiliate (1,761) (2,800) -
Proceeds from the Sale of Assets - Net 3,488 56,056 -
Taxes Paid on the Sale of Assets - Net (9,807) - -
Proceeds from the Sale of
Available-for-Sale Securities - 795 -
Capital Expenditures, Cost of
Removal and Salvage (49,604) (43,218) (44,607)
----------------------------
Net Cash (Used in) Provided
by Investing Activities (57,684) 9,833 (44,607)
----------------------------
Cash Flows from Financing Activities:
Net (Repayments of) Borrowings
from Lines of Credit (62,400) 32,000 (3,900)
Proceeds from Issuance of Long-Term Debt 35,618 - 30,000
Principal Repayments of Long-Term Debt (6,603) (27,235) (9,500)
Dividends on Common Stock (15,501) (15,460) (15,435)
Proceeds from Sale of Common Stock 320 383 117
Proceeds from the Issuance of
Preferred Securities 35,000 - -
Repurchase of Preferred Stock (90) (90) (90)
Payments for Issuance of Long-Term
Debt and Preferred Securities (2,429) - (647)
----------------------------
Net Cash (Used In) Provided by
Financing Activities (16,085) (10,402) 545
----------------------------
Net (Decrease) Increase in Cash and
Cash Equivalents (33,816) 41,318 (8,621)
Cash and Cash Equivalents
at Beginning of Year 46,905 5,587 14,208
----------------------------
Cash and Cash Equivalents
at End of Year $ 13,089 $ 46,905 $ 5,587
============================
Supplemental Disclosures of Cash Flow Info
Cash paid during the year for:
Interest (Net of Amounts Applicable to LGAC
Overcollections and Amounts Capitalized) $ 18,303 $ 21,879 $ 18,409
Income Taxes (Net of Refunds) $ 12,129 $ 2,858 $ 6,907
<FN>
* Note 13 contains additional information relating to environmental remediation
costs.
The accompanying schedule and footnotes are an integral part of the financial
statements.
</FN>
</TABLE>
-15-
<TABLE>
CONSOLIDATED BALANCE SHEET
(In Thousands)
<CAPTION>
South Jersey Industries, Inc. and Subsidiaries
December 31,
------------------------
1997 1996
---------- ---------
<S> <C> <C>
Assets
Property, Plant and Equipment: (Note 1)
Utility Plant, at original cost $ 619,489 $ 577,304
Accumulated Depreciation (167,176) (157,682)
Gas Plant Acquisition Adjustment - Net 1,926 2,000
Nonutility Property and Equipment, at cost 3,332 3,342
Accumulated Depreciation (1,033) (1,060)
------------------------
Property, Plant and Equipment - Net 456,538 423,904
------------------------
Investment in Affiliate (Note 2) 849 1,286
------------------------
Current Assets:
Cash and Cash Equivalents (Notes 1 & 11) 13,089 46,905
Notes Receivable - Affiliate 4,561 2,800
Accounts Receivable 35,947 38,714
Unbilled Revenues (Note 1) 17,263 17,855
Provision for Uncollectibles (1,530) (1,425)
Natural Gas in Storage, average cost 23,877 22,638
Materials and Supplies, average cost 4,509 4,114
Assets of Discontinued Businesses Held for Disposal 622 4,966
Prepaid Gross Receipts & Franchise Taxes 566 1,602
Prepayments and Other Current Assets 1,862 1,773
------------------------
Total Current Assets 100,766 139,942
------------------------
Accounts Receivable - Merchandise 1,998 1,999
------------------------
Regulatory and Other Non-Current Assets (Note 1)
Environmental Remediation Costs: (Note 13)
Expended - Net 21,041 15,566
Liability for Future Expenditures 52,400 41,700
Gross Receipts & Franchise Taxes (Note 8) 4,028 4,468
Income Taxes - Flowthrough Depreciation (Note 8) 13,999 14,977
Deferred Fuel Costs - Net 3,674 404
Deferred Postretirement Benefit Costs (Notes 6 & 9) 6,150 5,153
Other 9,158 8,982
------------------------
Total Regulatory and Other Non-Current Assets 110,450 91,250
------------------------
Total Assets $ 670,601 $ 658,381
========================
Capitalization and Liabilities
Capitalization: (see Schedule)
Common Equity (Notes 4 & 12) $ 173,499 $ 172,731
Preferred Stock and Securities
of Subsidiary (Note 3) 37,224 2,314
Long-Term Debt 176,360 149,736
------------------------
Total Capitalization 387,083 324,781
------------------------
Current Liabilities:
Notes Payable (Note 11) 45,900 108,300
Current Maturities of Long-Term Debt 8,994 6,603
Accounts Payable 49,142 50,301
Customer Deposits 5,871 6,050
Environmental Remediation Costs (Note 13) 16,511 9,377
Federal Income Taxes Accrued 884 4,417
Interest Accrued and Other Current Liabilities 12,477 13,693
------------------------
Total Current Liabilities 139,779 198,741
------------------------
Deferred Credits and Other
Non-Current Liabilities: (Note 1)
Deferred Income Taxes - Net (Note 5) 78,631 75,821
Investment Tax Credits 5,632 6,025
Pension and Other Postretirement Benefits (Note 9) 11,747 10,218
Environmental Remediation Costs (Note 13) 40,511 34,353
Other 7,218 8,442
------------------------
Total Deferred Credits and
Other Non-Current Liabilities 143,739 134,859
------------------------
Commitments and Contingencies (Note 13)
Total Capitalization and Liabilities $ 670,601 $ 658,381
========================
<FN>
The accompanying schedule and footnotes are an integral part of the financial
statements.
</FN>
</TABLE>
-16-
<TABLE>
SCHEDULE OF CONSOLIDATED CAPITALIZATION
(In Thousands Except for Share Data)
<CAPTION>
South Jersey Industries, Inc. and Subsidiaries
December 31,
1997 1996
------------------------
<S> <C> <C>
Common Equity: (Notes 4 & 12)
Common Stock: Par Value $1.25 per share;
Authorized 20,000,000 shares;
Outstanding Shares: 10,771,413 (1997)
and 10,756,679 (1996) $ 13,464 $ 13,446
Premium on Common Stock 110,997 110,542
Retained Earnings 49,038 48,743
------------------------
Total Common Equity 173,499 172,731
------------------------
Preferred Stock and Securities of Subsidiary:(Note 3)
Redeemable Cumulative Preferred Stock:
South Jersey Gas Company, Par Value $100 per share
Authorized Shares: 47,304 (1997)
and 48,204 (1996)
Outstanding Shares:
Series A, 4.70% - 3,000 (1997)
and 3,900 (1996) 300 390
Series B, 8.00% - 19,242 1,924 1,924
Company-Guaranteed Manditorily Redeemable
Preferred Securities of Subsidiary Trust:
Par Value $25 per share, 1,400,000 shares
Authorized and Outstanding 35,000 -
------------------------
Total Preferred Stock and
Securities of Subsidiary $ 37,224 $ 2,314
========================
Long-Term Debt: (A)
South Jersey Gas Company:
First Mortgage Bonds (B):
8.19% Series due 2007 22,727 25,000
10 1/4% Series due 2008 25,000 25,000
9% Series due 2010 28,438 30,625
6.95% Series due 2013 35,000 35,000
7.7% Series due 2027 (C) 35,000 -
Unsecured Notes:
Term Note, 8.47% due 2001 (D) 8,571 10,714
Debenture Notes, 8.6% due 2010 30,000 30,000
South Jersey Energy Company:
Promissory Notes (E) 618 -
------------------------
Total Long-Term Debt Outstanding 185,354 156,339
Less Current Maturities 8,994 6,603
------------------------
Total Long-Term Debt 176,360 149,736
------------------------
Total Capitalization $ 387,083 $ 324,781
========================
<FN>
(A) The long-term debt maturities and sinking fund requirements for the
succeeding 5 years are as follows: 1998, $8,994,176; 1999, $9,005,064;
2000, $9,016,888; 2001, $12,029,829; and 2002, $9,810,873.
(B) SJG's First Mortgage dated October 1, 1947, as supplemented, securing
the First Mortgage Bonds constitutes a direct first mortgage lien on
substantially all utility plant.
(C) On March 21, 1997, SJG sold $35,000,000 of its First Mortgage Bonds,
7.7% Series due 2027.
(D) An additional $5,000,000 revolving credit facility was available under
the terms of this agreement which expired December 31, 1997.
(E) SJE has several unsecured notes at interest rates ranging from 8.75% to
9.0% and an average term of 5 years. SJE has a $1,000,000 line of credit
against which these notes are drawn.
</FN>
</TABLE>
-17-
NOTES TO CONSOLIDATED 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 $1.9 million, $7.3
million, and $6.9 million, respectively, in 1997, 1996 and 1995, 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 by SJG 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 Note 6).
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 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.
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 4 for discussion of FASB No. 123
which also became effective in 1996.
In February 1997, the FASB issued FASB No. 128, "Earnings per Share", which is
effective for financial statements for periods ending after December 15, 1997.
FASB No. 128 supersedes previous reporting requirements on Earnings per Share
(EPS) and replaces the presentation of primary EPS with a presentation of basic
EPS. It also requires dual presentation of basic and diluted EPS on the face of
the income statement for all entities with a complex capital structure when
those amounts are different. The adoption of FASB No. 128 did not have an
impact on the Company's EPS (See Note 4).
In June 1997, the FASB issued FASB No. 130, "Reporting Comprehensive Income".
This statement, which establishes standards for reporting and disclosure of
comprehensive income, is effective for annual periods beginning after December
15, 1997. The Company currently has no additional items qualifying as other
comprehensive income under FASB No. 130 and, therefore, believes its adoption
will not have any impact on the Company's financial position on results of
operations.
In June 1997, the FASB also issued FASB No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which is also effective for fiscal years
beginning after December 15, 1997. This statement establishes standards for the
reporting of selected information about operating segments in the Company's
interim and annual financial statements. The Company is evaluating whether the
adoption of this statement will result in any change to its presentation of
financial information. The Company expects to adopt FASB No. 131 effective
January 1, 1998; however, as permitted by this statement, segment information
will not be reported in interim financial statements until 1999.
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 1997, 1996 and 1995.
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 $1.9 million at December 31, 1997, 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 35 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 &
8).
On July 14, 1997, legislation reforming energy taxation in New Jersey was
adopted. The new law eliminates the Gross Receipts & Franchise Tax (equivalent
to approximately 13 percent of utility revenue) and replaces it with a
combination of taxes. Beginning January 1, 1998, retail sales of natural gas and
electricity and utility services, including transportation, will be subject to
the 6 percent State Sales and Use Tax. Utilities will also be subject to the 9
percent State Corporation Business Tax on income before taxes. To bridge the
revenue gap created by the new tax law, the State will impose a Transitional
Energy Facilities Assessment (TEFA) on volumes of gas sold and transported. The
TEFA will be phased out over a 5-year period beginning January 1, 1999 and
ending January 1, 2003. It is expected that the revised tax policy will
eliminate tax disparities between utility and non-utility suppliers, providing
fair competition and lower energy costs for the consumer. The adoption of the
new legislation will not materially affect the Company's financial position,
results of operations or liquidity (See Note 6).
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.
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 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
-18-
Notes to Consolidated Financial Statements, Continued
to the books of EMI (See Note 13). The 1996 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
(Loss) Gain on the Disposal of Discontinued Operations". The sale price was
subject to customary post-closing entries resulting in a downward adjustment of
$0.6 million which was recorded in 1997.
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. Additionally, in two
separate sales on January 9, 1997, and on April 4, 1997, R & T sold all of its
operating assets, except certain real estate. The aggregate proceeds from these
sales, approximately $3.5 million, approximated the net book value of the assets
at the date of sale. Associated disposal costs of $189,500, or $123,200 after
taxes, are included in the consolidated income statement for 1997. These losses
are reflected in the consolidated income statement under the caption "Net (Loss)
Gain on the Disposal of Discontinued Operations".
In 1997, the Company performed additional testing to arrive at an estimate of
the cost to perform environmental cleanup and remediation of properties owned by
South Jersey Fuel, Inc. (SJF), a subsidiary of EMI, as part of its previously
operated fuel oil business. Also in 1997, SJ EnerTrade, Inc. (EnerTrade) was
created as a direct subsidiary of SJI to assume SJF's gas marketing activity,
including its affiliation with South Jersey Resources Group, LLC (SJRG). The gas
marketing activities are shown as part of continuing operations; the
environmental remediation activity related to properties used in the previously
operated fuel oil business are reported as part of discontinued operations
consistent with the reporting in previous years of other costs related to the
discontinued fuel oil business (See also Note 13).
Summarized operating results of the discontinued operations were:
<TABLE>
<CAPTION>
Thousands of Dollars
1997 1996 1995
----------------------------
<S> <C> <C> <C>
Operating Revenues:
Sand Mining $ - $ 30,054 $ 32,249
Construction 4,928 17,081 18,335
----------------------------
Total Operating Revenues $ 4,928 $ 47,135 $ 50,584
============================
(Loss) Income before Income Taxes:
Sand Mining $ (1,257) $ 68 $ 3,592
Construction 39 (1,348) 11
Fuel Oil (See Note 13) (1,725) - -
Income Tax Credits (Expense) 1,077 873 (834)
----------------------------
(Loss) Income from Discontinued Operations $ (1,866) $ (407) $ 2,769
============================
(Loss) Income per Common Share
from Discontinued Operations $ (0.17) $ (0.04) $ 0.26
============================
</TABLE>
The 1995 results of operations were restated to reflect the accounting for these
segments as Discontinued Operations.
Affiliations - On April 1, 1996, SJF and Union Pacific Fuels, Inc. joined
efforts in the formation of SJRG, to provide natural gas storage, peaking
services and transportation capacity for wholesale customers in New Jersey and
surrounding states. EnerTrade currently holds a 50 percent non-controlling
interest in this affiliation and, accordingly, accounts for the investment under
the equity method.
3. Preferred Stock and Securities of Subsidiary:
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.
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 SJG's directors.
Mandatorily Redeemable Preferred Securities - On May 2, 1997, SJG's statutory
trust subsidiary, SJG Capital Trust (Trust), established in the State of
Delaware on March 24, 1997, sold $35.0 million of 8.35 percent SJG-guaranteed
Mandatorily Redeemable Preferred Securities. The Trust holds as its only asset
the 8.35 percent Deferrable Interest Subordinated Debentures issued by SJG which
mature on April 30, 2037, which is also the maturity date of the Preferred
Securities. The Debentures and Preferred Securities are redeemable at the option
of SJG at a redemption price equal to 100 percent of the principal amount
thereof at any time on or after April 30, 2002.
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 4).
4. Common Stock:
The Company has 20,000,000 shares of Common Stock authorized of which the
following shares were issued and outstanding:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------------
<S> <C> <C> <C>
Beginning of Year 10,756,679 10,722,171 10,715,211
New Issues During Year:
Employees' Stock Ownership Plan 4,770 5,945 6,960
Stock Option & Stock Appreciation
Rights Plan 9,514 14,163 -
Directors' Restricted Stock Plan 450 14,400 -
----------------------------------------
End of Year 10,771,413 10,756,679 10,722,171
========================================
</TABLE>
The par value ($1.25 per share) of the stock issued in 1997, 1996 and 1995 was
credited to common stock and the net excess over par value of approximately $0.5
million, $0.4 million, and $0.1 million, respectively, was credited to Premium
on Common Stock.
Effective January 1, 1996, the Company adopted FASB No. 123, "Accounting for
Stock-Based Compensation". This statement 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 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 years ended December 31, 1997, 1996 and 1995.
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,
1997, the Company had 13,060 options outstanding exercisable at prices from
$17.89 to $24.69 per share and at December 31, 1996, the Company had 34,990
options outstanding exercisable at prices from $17.16 to $24.69 per share.
During 1997 and 1996, 4,311 and 14,550 options were exercised respectively, at
prices from $17.16 to $17.89 per share. In addition, during 1997, 17,619 options
were surrendered for the issuance of 5,203 shares. No options were exercised in
1995. No options were granted in 1997, 1996 or 1995. No stock appreciation
rights were issued under the plan. The stock options outstanding at December 31,
1997, 1996, and 1995, did not have an effect on the earnings per share
calculations (See Note 1).
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. All shares offered through the ESOP are
issued directly by the Company. As of December 31, 1997, 208,647 and 35,371
shares of authorized, but unissued, Common Stock were reserved for future
issuance to the DRP and ESOP, respectively.
-19-
Notes to Consolidated Financial Statements, Continued
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, in December 1997 and 1996,
respectively, 450 and 600 additional shares were granted. Initial awards will
vest over a 5-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 stock outstanding on October 11, 1996. Each entitles its
holder to purchase 1/1000 of one share of Series A Stock at an exercise price
of $90 (See Note 3).
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.
5. Federal Income Taxes:
Income tax expense applicable to operations 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:
<TABLE>
<CAPTION>
Thousands of Dollars
1997 1996 1995
----------------------------
<S> <C> <C> <C>
Tax at Statutory Rate $ 10,260 $ 9,947 $ 8,269
Increase (Decrease) Resulting from:
Amortization of Investment
Tax Credits (ITC) (393) (390) (390)
Liberalized Depreciation Under Book
Depreciation on Utility Plant 664 664 664
Other - Net 185 (66) 210
----------------------------
Federal Income Taxes as reported on the
Statements of Consolidated Income 10,716 10,155 8,753
Tax Associated with
Discontinued Operations (674) 5,887 621
----------------------------
Net Federal Income Taxes $ 10,042 $ 16,042 $ 9,374
============================
</TABLE>
<TABLE>
The provision for Federal Income Taxes is comprised of the following:
<CAPTION>
Thousands of Dollars
1997 1996 1995
----------------------------
<S> <C> <C> <C>
Current $ 4,964 $ (709) $ 4,506
Deferred:
Excess of Tax Depreciation Over
Book Depreciation - Net 4,162 4,610 4,059
Deferred Fuel Costs 349 3,340 1,380
Environmental Remediation Costs - Net 1,903 1,214 (556)
Amortization of Gross Receipts Taxes (140) (140) (136)
Alternative Minimum Tax (304) 2,939 -
Other - Net 175 (709) (110)
----------------------------
Total Deferred 6,145 11,254 4,637
----------------------------
ITC (393) (390) (390)
Federal Income Taxes as reported
on the Statements of Consolidated Income 10,716 10,155 8,753
Tax Associated with Discontinued Operations (674) 5,887 621
----------------------------
Net Federal Income Taxes $ 10,042 $ 16,042 $ 9,374
============================
</TABLE>
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's net deferred tax liability at December 31, 1997 and 1996, are as
follows:
<TABLE>
<CAPTION>
Thousands of Dollars
1997 1996
-----------------------
<S> <C> <C>
Deferred Tax Liabilities:
Tax Depreciation Over Book Depreciation $ 62,945 $ 60,527
Difference Between Book and Tax Basis of Property 5,579 5,215
Deferred Fuel Costs 5,078 4,720
Deferred Regulatory Costs 996 1,189
Environmental Remediation Costs 7,463 5,332
Excess Protected 3,485 3,550
Gross Receipts Taxes 1,424 1,564
Other 1,204 2,351
-----------------------
Total Deferred Tax Liabilities 88,174 84,448
-----------------------
Deferred Tax Assets:
Alternative Minimum Tax 1,542 1,102
ITC Basis Gross Up 3,004 3,207
Other 4,997 4,318
-----------------------
Total Deferred Tax Assets $ 9,543 $ 8,627
-----------------------
Net Deferred Tax Liability $ 78,631 $ 75,821
=======================
</TABLE>
6. Recent Regulatory Actions:
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.
On June 20, 1996, SJG received approval from the BPU to recover environmental
remediation costs incurred during the 2-year period ended July 31, 1995,
totaling $1.5 million, net of insurance recoveries. On July 31, 1996 and 1997,
SJG made its annual filings with the BPU to recover remediation costs expended
during the period of August 1995 through July 1997 totaling $1.6 million. Both
filings were subsequently updated and are still pending at the BPU (See Note
13).
On September 6, 1996, SJG made its annual LGAC and TAC filings with the BPU
proposing a decrease to the LGAC of $1.4 million and a credit resulting from the
TAC of $2.5 million. The TAC credit resulted from significantly colder weather
in SJG's service area during the TAC period running from October 1, 1995 through
May 31, 1996. The BPU approved the revenue reduction for the TAC credit on
January 27, 1997. While customers received the credit in their bills during
1997, the earnings impact was reflected in the 1996 results of operations.
On January 27, 1997, the BPU granted SJG a base 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 common equity. The majority of this increase comes from
residential and small commercial customers. Part of the increase is recovered
from new miscellaneous service fees which charge specific customers for costs
they cause SJG to incur. Additionally, SJG is now allowed to retain the first
$5.5 million of pre-tax margins generated by interruptible and off-system sales
and transportation and 20 percent of pre-tax margins above that level. In 1998,
this $5.5 million threshold will increase by the annual revenue requirement
associated with specified major construction projects. These sharing formula
improvements are expected to result in additional rate relief of approximately
$0.3 million in 1998 and $1.8 million in 1999.
As part of the tariff changes approved in the rate case, SJG initiated its pilot
program in April 1997, giving residential customers a choice of gas supplier.
During the enrollment period, which ended June 30, 1997, nearly 13,000
residential customers applied for this service. Transportation of gas for these
customers began on August 1, 1997. Participant's bills are reduced for certain
cost of gas charges and applicable taxes. The resulting decrease in revenues is
offset by a corresponding decrease in SJG's gas costs and taxes under SJG's BPU-
approved fuel clause. The program does not affect its net income, financial
condition or margins. In addition, because the program affects only
-20-
Notes to Consolidated Financial Statements, Continued
5 percent of SJG's residential customers, any reduction in revenue is not
material. Also, SJG further expanded the choices available to commercial and
industrial customers, including a new transportation tariff providing savings to
qualified customers.
On May 5, 1997, SJG filed with the BPU to update rates related to appliance
service charges, including a profit margin. The new rates are competitive with
other service providers in New Jersey and are designed to increase earnings and
cash flows to SJG over the current rates. The filing is pending.
On May 13, 1997, SJG filed to recover additional post-retirement benefit costs
of approximately $1.3 million annually. This recovery was approved on December
17, 1997, and began January 1, 1998 (See Note 9).
On September 9, 1997, SJG filed with the BPU to adjust rates by replacing the
current State Gross Receipts and Franchise Tax components with a Sales and Use
Tax, a Corporation Business Tax and a Transitional Energy Facilities Assessment.
The new rates became effective January 1, 1998, on an interim basis subject to
refund upon final BPU order which is expected in early 1998.
On September 12, 1997, SJG made its annual LGAC, TAC and Demand Side Management
Clause (DSMC) filings with the BPU for the period November 1997 through October
1998. In this filing, SJG requested an increase in the annual level of LGAC
recovery of $4.7 million which is inclusive of the $1.4 million proposed
decrease filed in 1996. It also requested that the 1996-1997 filing be resolved
simultaneously with this filing. Both filings are still pending at the BPU.
7. Segments of Business:
Information about the Company's operations in different industry segments is
presented below:
<TABLE>
<CAPTION>
Thousands of Dollars
1997 1996 1995
----------------------------
<S> <C> <C> <C>
Operating Revenues:
Gas Utility Operations $327,548 $330,334 $282,719
Other Industries 22,083 27,237 23,982
----------------------------
Total 349,631 357,571 306,701
Intersegment Sales (1,064) (2,113) (2,538)
----------------------------
Consolidated Operating Revenues $348,567 $355,458 $304,163
============================
Operating Income:
Gas Utility Operations $ 51,555 $ 49,476 $ 44,716
Other Industries (942) 327 556
----------------------------
Total 50,613 49,803 45,272
Federal Income Taxes (10,716) (10,155) (8,753)
General Corporate Expense (1,255) (1,089) (1,301)
----------------------------
Total Operating Income $ 38,642 $ 38,559 $ 35,218
============================
Depreciation, Depletion and Amortization:
Gas Utility Operations $ 17,867 $ 17,540 $ 16,672
Other Industries 18 35 40
Discontinued Operations 227 3,887 4,010
----------------------------
Total $ 18,112 $ 21,462 $ 20,722
============================
Property Additions:
Gas Utility Operations $ 48,533 $ 39,384 $ 40,078
Other Industries 141 6 1
Discontinued Operations 1 2,841 3,628
----------------------------
Total $ 48,675 $ 42,231 $ 43,707
============================
Identifiable Assets:
Gas Utility Operations $649,113 $599,926 $549,458
Other Industries 11,322 8,041 5,703
Discontinued Operations 2,993 9,341 52,821
----------------------------
Total 663,428 617,308 607,982
Corporate Assets 23,664 67,018 11,981
Intersegment Assets (16,491) (25,945) (15,654)
----------------------------
Total Assets $670,601 $658,381 $604,309
============================
</TABLE>
Gas utility operations consist primarily of natural gas distribution to
residential, commercial and industrial customers. Other industries include the
natural gas and electric 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 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, land, buildings and equipment held for corporate use.
8. Regulatory Assets and Deferred 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 regulatory asset is being recovered through
rates over an 18-year period which began in December 1994.
The ITC attributable to SJG was deferred and continues 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 of the
tax to gas volumes rather than percentage of revenue (See Note 1).
9. Retirement Benefit Plans & Other:
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 53 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, including the amortization of the cost of past service benefits over a
period of approximately 30 years, included the following components:
<TABLE>
<CAPTION>
Thousands of Dollars
1997 1996 1995
-------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during
the period $ 1,960 $ 1,916 $ 1,736
Interest cost on projected
benefit obligation 3,820 3,481 3,183
Actual return on plan assets (6,103) (3,336) (3,245)
Net amortization and deferral 3,157 525 730
-------------------------------------
Net periodic pension cost $ 2,834 $ 2,586 $ 2,404
=====================================
Assumptions as of December 31 were:
Discount rate 7.25% 7.25%-7.50% 7.25%-7.50%
Rate of increase in compensation levels 4.1% 4.6% 4.6%
Expected long term rate of return
on assets 8.5% 8.5% 8.5%
</TABLE>
Due to the positive performance of the capital markets in 1997, the actual
return on plan assets increased significantly compared with prior years. In
accordance with FASB No. 87, "Employers' Accounting for Pensions", the amounts
in excess of the expected return of 8.5 percent is deferred and will be
recognized over future periods.
-21-
Notes to Consolidated Financial Statements, Continued
A reconciliation of the funded status of the plans to the amounts recognized in
the consolidated balance sheets is presented below:
<TABLE>
<CAPTION>
Thousands of Dollars
1997 1996
------------------------
<S> <C> <C>
Actuarial present value of plan benefits
Vested benefits $ (44,885) $ (39,078)
Non-vested benefits (291) (314)
Impact of estimated future compensation changes (11,577) (11,343)
------------------------
Projected plan benefits (56,753) (50,735)
Plan assets at fair value 46,875 40,335
------------------------
Projected plan benefits in excess of plan assets (9,878) (10,400)
Unrecognized net loss 3,312 5,297
Unrecognized prior service costs 3,514 2,113
Unrecognized net obligation at January 1 430 502
------------------------
Net Pension liability recognized in the
consolidated balance sheet $ (2,622) $ (2,488)
========================
</TABLE>
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 elected to recognize the unfunded
transition obligation over a 20-year period.
The majority of the Company's costs apply to SJG, which 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 $2.0 million in 1997 and $2.1 million in both 1996 and 1995.
However, due to the timing of 1995 contributions, the return stated in the
table below does not reflect a full year's return. SJG was also authorized to
continue recording a regulatory asset for the amount by which the cost exceeded
the level recovered in rates. The balance of this regulatory asset, which
amounted to approximately $6.1 million at December 31, 1997, will be recovered
from ratepayers over a 15-year period beginning January 1, 1998, as approved by
the BPU in December 1997. At that time, the BPU also approved full recovery of
the net periodic benefit costs. The additional annual recovery of approximately
$1.3 million will be contributed to the external trust and provides no operating
benefit to SJG except to the extent that trust income would reduce future net
postretirement benefit costs (See Note 6).
A reconciliation of the accumulated postretirement benefit obligation to the
amounts recognized in the Consolidated Balance Sheet is presented below:
<TABLE>
<CAPTION>
Thousands of Dollars
1997 1996 1995
----------------------------
<S> <C> <C> <C>
Service cost - benefits earned during
the period $ 994 $ 930 $ 878
Actual return on plan assets (272) (164) (26)
Interest cost on accumulated
postretirement benefit obligation 1,579 1,432 1,320
Amortization of transition obligation 796 796 796
----------------------------
Subtotal 3,097 2,994 2,968
Other Adjustments - - (2,690)
----------------------------
Net postretirement benefit costs
as reported in the consolidated
Financial Statements $ 3,097 $ 2,994 $ 278
============================
</TABLE>
The amounts expensed in 1997, 1996 and 1995 were $1.5 million, $1.7 million and
$1.7 million, respectively.
The following table sets forth the life and health care plans' funded status at
December 31, 1997 and 1996.
Actuarial present value of accumulated postretirement benefit obligations:
<TABLE>
<CAPTION>
Thousands of Dollars
1997 1996
-----------------------
<S> <C> <C>
Retirees $ (5,631) $ (4,933)
Other active plan participants (18,393) (16,744)
-----------------------
Accumulated postretirement benefit obligation (24,024) (21,677)
Fair value of plan assets 4,403 2,835
-----------------------
Accumulated postretirement benefit obligation
in excess of plan assets (19,621) (18,842)
Unrecognized net loss 701 242
Unrecognized transition obligation 11,947 12,743
-----------------------
Postretirement benefit liability recognized in
the consolidated balance sheet $ (6,973) $ (5,857)
=======================
</TABLE>
In 1995, the Company recalculated the net postretirement benefit cost and
present value of accumulated postretirement benefit for the years 1994 and 1993
utilizing assumptions based on corrected data. The effects of the recalculation
were recorded in 1995 since the changes did not materially affect previously
reported net income or retained earnings.
The assumed health care cost trend rates used in measuring the accumulated
postretirement benefit obligation as of December 31, 1997, are as follows:
Medical and Drug - 7.4 percent for participants age 65 or older and 10.15
percent for participants under age 65 in 1997, both grading to 5.75 percent in
2008. Dental - 7.42 percent in 1997, 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, 1997, would be
increased by $3.4 million. The effect of this change on the sum of the service
cost and interest cost would be an increase of $0.5 million. An assumed discount
rate of 7.25 percent in 1997 and 7.5 percent in 1996, and an expected return on
plan assets of 8.5 percent were used in determining the accumulated
postretirement benefit obligation as of December 31, 1997 and 1996.
Employment Contracts - With the death of the Company's president, certain
benefits became payable under the provisions of his employment contract. The
total of these benefits, approximately $1.5 million, has been accrued as of
December 31, 1997. Under a separate contract, life insurance proceeds of
approximately $0.2 million payable to the Company were also recorded. The
benefit expense is reflected in the statement of consolidated income for the
year 1997 under the caption "Operation and Maintenance - Utility".
10. Financial Instruments:
Long-Term Debt - The fair values of the Company's long-term debt, including
current maturities, as of December 31, 1997 and 1996, are estimated to be
$205.8 million and $166.6 million, respectively (carrying amounts $185.4
million and $156.3 million, respectively). They are estimated based on the
interest rates available to the Company at each respective year end for debt
with similar terms and remaining maturities. The Company retires higher cost
debt whenever it is cost effective to do so with in 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, 1997 and
1996.
11. Unused Lines of Credit and Compensating Balances:
Unused lines of credit available at December 31, 1997, were approximately $84.1
million. Borrowings under these lines of credit are at market rates. The
weighted cost of such borrowings, which usually changes each business day,
approximated 6.06 and 5.85 percent at December 31, 1997 and 1996, respectively.
Demand deposits are maintained with lending banks on an informal basis and do
not constitute compensating balances.
-22-
Notes to Consolidated Financial Statements, Continued
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. The Company's aggregate equity in its subsidiaries' retained earnings
which is free of these restrictions was approximately $47.1 million as of
December 31, 1997.
13. Commitments and Contingencies:
Construction Commitments - The estimated cost of construction and environmental
remediation programs of SJI and its subsidiaries for the year 1998 aggregates
$63.9 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 1999. 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 and reservation fees paid to its suppliers for all
of these services is approximately $4.6 million per month which is recovered on
a current basis through the LGAC.
Pending Litigation - The Company is subject to claims which arise in the
ordinary course of its business and other legal proceedings. A group of Atlantic
City casinos filed a petition with the BPU on January 16, 1996, alleging
overcharges of over $10.0 million, including interest. Management believes that
charges to the casinos were based on applicable tariffs and that the casinos
were not qualified under less expensive rate schedules, as claimed. Management
believes that the ultimate impact of these actions will not materially affect
the Company's financial position, results of operations or liquidity.
Environmental Remediation Costs - The Company incurred and recorded certain
costs for environmental remediation of sites where SJG or predecessor companies
operated gas manufacturing plants. SJG terminated manufactured gas operations at
all sites more than 35 years ago. SJI and certain of its 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 $96.2 million, of which $39.2 million was expended as of December 31, 1997.
The Company, with the assistance of an outside consulting firm, estimates that
total future expenditures to remediate SJG's sites will range from $52.4
million to $165.6 million. The lower end of this range was 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 as authorized by the BPU. Amounts accrued for
future expenditures were not adjusted for future insurance recoveries, which
management is pursuing. SJG received $4.2 million of insurance recoveries as of
December 31, 1997. SJG first used these proceeds to offset legal fees incurred
in connection with those recoveries and used the excess to reduce the balance
of deferred environmental remediation costs. Recorded amounts include estimated
costs 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, changing technology, government regulations
and site specific requirements.
The major portion of recorded environmental costs relate to the cleanup of SJG's
former gas manufacturing sites. SJG recorded $90.2 million for the remediation
of these sites, of which $37.8 million was expended through December 31, 1997.
As a result of the 7-year RAC recovery mechanism, SJG does not expense
environmental remediation costs when incurred and defers costs to be recovered.
SJG has two regulatory assets associated with environmental cost. The first
regulatory asset is titled "Environmental Remediation Cost: Expended - Net".
These expenditures represent actual cost incurred to remediate former gas
manufacturing plant sites. These costs meet the requirements of FASB No. 71,
"Accounting for the Effects of Certain Types of Regulation". The BPU allowed
recovery of these expenditures through July 1995 and petitions to recover these
costs through July 1997 are pending (See Note 6).
The other regulatory asset titled "Environmental Remediation Cost: Liability for
Future Expenditures" relates to estimated future expenditures determined under
the guidance of FASB No. 5, "Accounting for Contingencies". This amount, which
relates to former manufactured gas plant sites was recorded as a deferred debit
with the corresponding amount reflected in Current Liabilities and Deferred
Credits and Other Non-Current Liabilities, as appropriate. The deferred debit is
a regulatory asset under FASB No. 71, because the BPU's intent, as evidenced by
its current practice, is to provide recovery sufficient to recover the deferred
costs after they are expended.
SJG files with the BPU to recover these costs in rates through its RAC. The BPU
has consistently allowed the full recovery over 7-year periods, and SJG believes
this will continue. As of December 31, 1997, SJG's unamortized remediation
expenditures of $21.0 million are reflected on the balance sheet under the
caption "Regulatory and Other Non-Current Assets". Since BPU approval of the RAC
mechanism in August 1992, SJG recovered $12.6 million through rates as of
December 31, 1997 (See Note 6). With Morie's sale, EMI assumed responsibility
for environmental liabilities which are currently estimated to range between
$2.8 million and $15.5 million. The information available on these sites is
sufficient only to establish a range of probable liability and no point within
the range is more likely than any other, therefore, EMI continues to accrue the
lower end of the range. The 1997 increase in the accrual of $0.8 million, $0.5
million after taxes, is included in the consolidated income statement under the
caption "(Loss) Income from Discontinued Operations - Net".
As a result of additional testing performed during 1997, both SJI and the
discontinued operations of SJF have also estimated their potential exposure for
the future environmental remediation of four sites where fuel oil operations
were conducted years ago. Estimates for SJI's site range between $0.3 million
and $1.1 million while SJF's estimated liability ranges from $1.5 million to
$4.2 million for the remaining three sites. The lower end of these ranges were
recorded and are reflected in Current Liabilities and Deferred Credits and
Other Non-Current Liabilities as of December 31, 1997. SJI's charge is included
in the statement of consolidated income as operating expense while SJF's charge
is reflected under the caption "(Loss) Income from Discontinued Operations -
Net" (See Note 2).
MANAGEMENT'S RESPONSIBILITIES FOR FINANCIAL STATEMENTS
The management of South Jersey Industries, Inc. is responsible for the integrity
and objectivity of the Company's financial statements and related disclosures.
These statements and disclosures were prepared using management's best judgment
and are in conformity with generally accepted accounting principles.
The Board of Directors, acting through its Audit Committee, which is composed of
outside directors, oversees management's responsibilities for accounting,
internal control and financial reporting. The Audit Committee meets periodically
with management and the internal and independent auditors to discuss auditing
and financial matters, and to assure that each is carrying out its
responsibilities. The internal auditors and independent auditors have access to
the members of the Audit Committee at any time.
-23-
<TABLE>
QUARTERLY FINANCIAL DATA
The summarized quarterly results of operations of the Company, in thousands
except for per share amounts, for 1997 and 1996 are presented below:
<CAPTION>
1997 Quarter Ended 1996 Quarter Ended
-------------------------------------- --------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
-------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues: $131,403 $ 62,312 $ 54,151 $100,701 $149,960 $ 59,325 $ 44,856 $101,317
-------------------------------------- --------------------------------------
Operating Expenses:
Operation and
Maintenance Including
Fixed Charges 94,802 56,666 57,532 79,981 108,678 56,638 47,326 80,456
Federal Income Taxes 8,374 338 (2,071) 4,075 9,180 (935) (2,021) 3,931
Gross Receipts &
Franchise and
Other Taxes 13,179 5,306 3,173 8,783 15,291 5,546 3,437 9,666
-------------------------------------- --------------------------------------
Income (Loss) from
Continuing Operations 15,048 2 (4,483) 7,862 16,811 (1,924) (3,886) 7,264
Discontinued
Operations - Net (147) (173) (284) (2,029) (1,585) 1,157 1,532 11,129
-------------------------------------- --------------------------------------
Net Income (Loss)
Applicable to
Common Stock $ 14,901 $ (171) $ (4,767) $ 5,833 $ 15,226 $ (767) $ (2,354) $ 18,393
====================================== ======================================
Earnings (Loss)
Per Common Share
(Based on Average
Shares Outstand.):(1)
Continuing
Operations $ 1.39 $ 0.00 $ (0.42) $ 0.73 $ 1.57 $ (0.18) $ (0.36) $ 0.67
Discontinued
Operations (0.01) (0.02) (0.02) (0.19) (0.15) 0.11 0.14 1.04
-------------------------------------- --------------------------------------
Earnings (Loss) Per
Common Share $ 1.38 $ (0.02) $ (0.44) $ 0.54 $ 1.42 $ (0.07) $ (0.22) $ 1.71
====================================== ======================================
Average Shares
Outstanding 10,760 10,762 10,763 10,767 10,724 10,728 10,732 10,745
<FN>
(1) The sum of the quarters for 1997 does not equal the year's total due to
rounding.
NOTE: Because of the seasonal nature of the business, statements for the 3-month
periods are not indicative of the results for a full year.
</FN>
</TABLE>
<TABLE>
MARKET PRICE OF COMMON STOCK AND RELATED INFORMATION
<CAPTION>
Market Price Market Price
Per Share Dividends Per Share Dividends
Quarter Ended ---------------- Declared Quarter Ended ---------------- Declared
1997 High Low Per Share 1996 High Low Per Share
- ------------- ------- ------- --------- ------------- ------- ------- ---------
<S> <C> <C> <C> <S> <C> <C> <C>
March 31 24 7/8 21 3/8 $0.36 March 31 23 1/2 20 7/8 $0.36
June 30 23 3/8 21 $0.36 June 30 23 3/4 21 1/4 $0.36
Sept. 30 25 3/16 22 3/8 $0.36 Sept. 30 24 20 1/8 $0.36
Dec. 31 30 1/2 24 5/16 $0.36 Dec. 31 24 5/8 23 $0.36
<FN>
These quotations are based on the list of composite transactions of the New York
Stock Exchange. The Company's stock is traded on the New York and Philadelphia
stock exchanges and the ticker symbol is SJI. The Company has declared and
expects to continue to declare regular quarterly cash dividends. As of December
10, 1997, the latest available date, the stock records indicate that there were
11,429 shareholders.
</FN>
</TABLE>
-24-
<TABLE>
SOUTH JERSEY GAS COMPANY COMPARATIVE OPERATING STATISTICS
<CAPTION>
1997 1996 1995 1994 1993
------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues
(Thousands): (1)
Firm
Residential $176,717 $177,673 $151,720 $151,857 $142,409
Commercial 60,418 70,755 58,135 61,848 57,392
Industrial 5,535 7,540 6,014 8,349 13,609
Cogeneration &
Electric Generation 5,249 16,173 15,725 19,301 23,726
Firm Transportation 15,966 10,473 13,930 18,092 13,746
------------------------------------------------
Total Firm 263,885 282,614 245,524 259,447 250,882
Interruptible 6,085 7,256 6,786 6,610 11,299
Interruptible
Transportation 3,507 2,630 2,778 2,985 2,412
Off-System 39,403 28,236 20,360 38,161 8,788
Capacity Release & Storage 8,533 4,349 3,374 2 -
Other 6,135 5,249 3,897 4,254 4,200
------------------------------------------------
Total Operating Revenues $327,548 $330,334 $ 282,719 $311,459 $277,581
================================================
Throughput (MMcf):
Firm
Residential 19,955 21,699 19,573 19,543 19,368
Commercial 8,067 10,117 8,945 9,276 9,182
Industrial 733 1,238 1,016 1,364 2,599
Cogeneration &
Electric Generation 1,230 5,180 4,860 5,384 6,741
Firm Transportation 20,196 12,969 14,417 14,401 10,194
------------------------------------------------
Total Firm Throughput 50,181 51,203 48,811 49,968 48,084
Interruptible 1,345 1,618 1,843 1,810 3,105
Interruptible Transportation 7,586 5,422 5,888 5,424 4,328
Off-System 14,462 8,571 9,590 16,840 3,563
Capacity Release & Storage 36,382 25,460 25,915 46 -
------------------------------------------------
Total Throughput 109,956 92,274 92,047 74,088 59,080
================================================
Number of Customers at
Year End: (2)
Residential 242,132 236,008 230,446 224,394 218,484
Commercial 18,037 17,469 17,179 16,615 16,206
Industrial 398 397 397 397 377
------------------------------------------------
Total Customers 260,567 253,874 248,022 241,406 235,067
================================================
Maximum Daily Sendout (MMcf) 355 325 335 370 318
================================================
Annual Degree Days 4,829 5,175 4,865 4,820 4,953
================================================
Normal Degree Days (3) 4,953 4,928 4,936 4,911 4,895
================================================
<FN>
(1) Before the elimination of intercompany sales.
(2) 1996 has been restated.
(3) Average degree days recorded in SJG service territory during 20-year period
ended June 30 of prior year.
</FN>
</TABLE>
-25-
South Jersey Industries, Inc.
Board Of Directors
Anthony G. Dickson
Director since 1995, Age 49 3, 4, 6
President, New Jersey Manufacturers Insurance Company and New Jersey
Re-Insurance Company, West Trenton, N.J.
Richard L. Dunham
Director since 1984, Age 68 3, 5*
Chairman of the Board and Acting Chief Executive Officer of SJI; former Chairman
of Zinder Companies, Inc., an economic and regulatory consulting firm,
Washington, D.C.; former Chairman of the Federal Power Commission (now the
Federal Energy Regulatory Commission), Washington, D.C.
W. Cary Edwards
Director from April 1990 to January 1993 and September 1993 to present, Age 53
2, 4
Partner, law firm of Edwards, Caldwell & Poff, Hawthorne, N.J.
Thomas L. Glenn, Jr.
Director since 1986, Age 63 3, 4*, 5, 6
Chairman, Glenn Insurance, Inc., Absecon, N.J.
Herman D. James, Ph.D.
Director since 1990, Age 54 1, 6
President, Rowan University, Glassboro, N.J.
Clarence D. McCormick
Director since 1979, Age 68 2*, 3*, 5
Chairman and CEO of The Farmers and Merchants National Bank of Bridgeton, N.J.
and Chairman and President of Southern Jersey Bancorp of Delaware, Bridgeton,
N.J.
Peter M. Mitchell, Ph.D.
Director since 1981, Age 63 1, 2, 5, 6*
President, Massachusetts Maritime Academy, Buzzards Bay, Mass.
Frederick R. Raring
Director since 1995, Age 60 1, 4
President, Seashore Supply Company, Atlantic City, N. J.
Shirli M. Vioni, Ph.D.
Director since 1983, Age 57 1*, 2
President, Billings-Vioni Management Associates, Gahanna, Ohio
1 Audit Committee
2 Compensation/Pension Committee
3 Corporate Development Committee
4 Environmental Committee
5 Executive Committee
6 Nominating Committee
* Committee Chair
South Jersey Industries, Inc.
Officers
Richard L. Dunham
Chairman of the Board and Acting Chief Executive Officer
Charles Biscieglia
Vice President
David A. Kindlick
Vice President
Joseph E. McCullough
Vice President
George L. Baulig
Secretary and Treasurer
William J. Smethurst, Jr.
Assistant Secretary and Assistant Treasurer
-26-
Back Cover - Inside
SJI Corporate Headquarters
1 South Jersey Plaza
Folsom, NJ 08037-9917
(609) 561-9000
TDD only 1-800-547-9085
www.sjindustries.com
Transfer Agent and Registrar
First Union National Bank of North Carolina
Corporate Trust Client Services NC 1153
1525 West W. T. Harris Blvd. 3C3
Charlotte, NC 28288-1153
Dividend, Dividend Reinvestment and Other Shareholder Inquiries
South Jersey Industries, Inc.
Shareholder Records Department
609-561-9000 ext. 4238 or 4321
Investor Relations
Stephen H. Clark, Manager
609-561-9000 ext. 4260
www.sjindustries.com
Annual Meeting Information
The Annual Meeting of Shareholders will be held Thursday, April 23, 1998, at 10
a.m. at the company's corporate headquarters.
South Jersey Industries, Inc. stock is traded on the New York and Philadelphia
stock exchanges under the trading symbol, SJI.
The information contained herein is not given in connection with any sale or
offer of, or solicitation of an offer to buy, any securities.
Dividend Reinvestment and Stock Purchase Plan
SJI's Dividend Reinvestment and Stock Purchase Plan provides record shareholders
of the company's common stock with a way to increase their investment in the
company without payment of any brokerage commission or service charge.
Shareholders who participate in the Plan may purchase shares of common stock by
the automatic reinvestment of dividends. Optional purchases are permitted each
quarter up to a maximum of $100,000 in any calendar year as prescribed in the
Plan. Shares of common stock offered through the Plan are currently purchased in
the open market. The price of shares purchased under the Plan will be determined
by dividing the total cost of all shares purchased during the investment period
by the number of shares purchased. The offer and sale of shares under the Plan
will be made only through a Prospectus, which may be obtained by contacting the
Shareholder Records Department (address and phone listed above).
Back cover - Outside
South Jersey Industries, Inc.
1 South Jersey Plaza
Folsom, New Jersey 08037-9917
<TABLE>
Exhibit 21
----------
SOUTH JERSEY INDUSTRIES, INC.
SUBSIDIARIES OF REGISTRANT
AS OF DECEMBER 31, 1997
<CAPTION>
Percentage of
Voting Securities State of
Owned by Parent Relationship Incorporation
--------------------------------------------------
<S> <C> <C> <C>
South Jersey Industries, Inc. Registrant Parent New Jersey
South Jersey Gas Company (3) 99.06 (1) New Jersey
Energy & Minerals, Inc. (3) 100 (1) New Jersey
South Jersey Energy Company (3) 100 (1) New Jersey
SJ EnerTrade, Inc. (3) 100 (1) New Jersey
R&T Group, Inc. (3) 100 (1) New Jersey
South Jersey Fuel, Inc. (3) 100 (2) New Jersey
<FN>
(1) Subsidiary of South Jersey Industries, Inc.
(2) Subsidiary of Energy & Minerals, Inc.
(3) Subsidiary included in financial statements
</FN>
</TABLE>
Exhibit 23
----------
INDEPENDENT AUDITORS' CONSENT
South Jersey Industries, Inc.:
We consent to the incorporation by reference in Registration
Statement Nos. 33-27132 and 33-58349 on Forms S-8 and Registration
Statement No. 33-53127, as amended, on Form S-3 of our reports dated
February 18, 1998 appearing in and incorporated by reference in
the Annual Report on Form 10-K of South Jersey Industries, Inc. for
the year ended December 31, 1997.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
March 27, 1998
Exhibit 24
----------
SOUTH JERSEY INDUSTRIES, INC.
POWER OF ATTORNEY
Each of the undersigned, in his capacity as an officer or
director, or both, as the case may be, of South Jersey
Industries, Inc., a New Jersey corporation, does hereby appoint
Richard L. Dunham, Charles Biscieglia, David A. Kindlick and
George L. Baulig, and each of them, severally, as his or her
true and lawful attorneys or attorney to execute in his or her
name, place and stead, in his or her capacity as a director or
officer, or both, as the case may be, of said corporation, its
Annual Report for the fiscal year ended December 31, 1997 on
Form 10-K, pursuant to Section 13 of the Securities Exchange Act
of 1934, and any and all amendments thereto and instruments
necessary or incidental in connection therewith, and to file the
same with the Securities and Exchange Commission; and does
hereby provide that each of said attorneys shall have power to
act hereunder with or without the other said attorneys, and
shall have full power of substitution and resubstitution and
that each of said attorneys shall have full power and authority
to do and perform in the name and on behalf of the undersigned
in any and all capacities every act whatsoever required to be
done in the premises, as fully and to all intents and purposes
as he or she might or could do in person, hereby ratifying and
approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned have executed this
instrument, this 27th day of March 1998.
/s/ Richard L. Dunham
Richard L. Dunham, Chairman of the Board and
Acting Chief Executive Officer
/s/ Anthony G. Dickson
Anthony G. Dickson, Director
/s/ W. Cary Edwards
W. Cary Edwards, Director
/s/ Thomas L. Glenn
Thomas L. Glenn, Jr., Director
/s/ Herman D. James
Herman D. James, Director
Exhibit 24
Power of Attorney -- 10-K Page 2 of 2
/s/ Clarence D. McCormick
Clarence D. McCormick, Director
Peter M. Mitchell, Director
/s/ Frederick R. Raring
Frederick R. Raring, Director
/s/ Shirli M. Vioni
Shirli M. Vioni, Director
/s/ Charles Biscieglia
Charles Biscieglia, Vice President
/s/ David A. Kindlick
David A. Kindlick, Vice President
/s/ George L. Baulig
George L. Baulig, Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 454,239
<OTHER-PROPERTY-AND-INVEST> 2,299
<TOTAL-CURRENT-ASSETS> 100,766
<TOTAL-DEFERRED-CHARGES> 110,450
<OTHER-ASSETS> 2,847
<TOTAL-ASSETS> 670,601
<COMMON> 13,464
<CAPITAL-SURPLUS-PAID-IN> 110,997
<RETAINED-EARNINGS> 49,038
<TOTAL-COMMON-STOCKHOLDERS-EQ> 173,499
35,000
2,224
<LONG-TERM-DEBT-NET> 176,360
<SHORT-TERM-NOTES> 45,900
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 8,994
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 228,624
<TOT-CAPITALIZATION-AND-LIAB> 670,601
<GROSS-OPERATING-REVENUE> 348,567
<INCOME-TAX-EXPENSE> 10,716
<OTHER-OPERATING-EXPENSES> 299,209
<TOTAL-OPERATING-EXPENSES> 309,925
<OPERATING-INCOME-LOSS> 38,642
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 38,642
<TOTAL-INTEREST-EXPENSE> 18,111
<NET-INCOME> 15,796
2,102
<EARNINGS-AVAILABLE-FOR-COMM> 15,796
<COMMON-STOCK-DIVIDENDS> 15,501
<TOTAL-INTEREST-ON-BONDS> 15,197
<CASH-FLOW-OPERATIONS> 39,953
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.47
</TABLE>
