FILE NO. _____________
FORM U-3A-2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
STATEMENT BY HOLDING COMPANY CLAIMING EXEMPTION UNDER
RULE U-3A-2 FROM THE PROVISIONS OF THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935
TO BE FILED ANNUALLY PRIOR TO MARCH 1
SOUTH JERSEY INDUSTRIES, INC.
hereby files with the Securities and Exchange Commission, pursuant to Rule 2,
its statement claiming exemption as a holding company from the provisions of
the Public Utility Holding Company Act of 1935. In support of such claim for
exemption, the following information is submitted:
1. Name, State of organization, location and nature of business of claimant
and every subsidiary thereof other than any exempt wholesale generator (EWG) or
foreign utility company in which claimant directly or indirectly holds an
interest.
The claimant, South Jersey Industries, Inc. (SJI), was organized under
the laws of the State of New Jersey; its principal location is 1 South
Jersey Plaza, Folsom, New Jersey 08037. SJI is not a public utility
company. It is primarily engaged in the business of owning and holding
a majority interest in other business enterprises.
SJI owns all of the outstanding common stock of South Jersey Gas
Company (SJG), which was organized under the laws of the State of New
Jersey. SJG's principal location is 1 South Jersey Plaza, Folsom, New
Jersey 08037. SJG is a public utility company engaged in the purchase,
transmission and sale of natural and mixed gases for residential,
commercial, and industrial use in an area of approximately 2,500 square
miles in the southern part of New Jersey. SJG also makes off-system
sales of natural gas on a wholesale basis to various customers on the
interstate pipeline system and transports natural gas purchased
directly from producers or suppliers for its own sales and for some of
its customers. SJG also assigns or buys capacity for the purchase or
transportation of natural gas.
- 1 -
SJI owns all of the outstanding common stock of South Jersey Energy
Company (SJE), which was organized under the laws of the State of New
Jersey. SJE's principal location is 1 South Jersey Plaza, Folsom, New
Jersey 08037. SJE is not a public utility company. SJE provides
services for the acquisition, sale and transportation of natural gas
and electricity for industrial, commercial and residential users and
markets total energy management services. SJE also markets an air
quality monitoring system that tests for hazardous airborne particulate
on a real-time basis.
SJE owns all of the outstanding common stock of SJ EnerTrade, Inc.
(EnerTrade) which was formed on October 22, 1997 under the laws of the
State of New Jersey. EnerTrade's principal location is 1 South Jersey
Plaza, Folsom, New Jersey 08037. EnerTrade is not a public utility
company. It 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 also has a 50% investment in South Jersey Energy Solutions, LLC
(SJES), a joint venture with Energy East Solutions, Inc. formed June 1,
1999 under the laws of the State of New Jersey. SJES's principal
location is 1 South Jersey Plaza, Folsom, New Jersey 08037. SJES is
not a public utility company. It sells electricity on a retail basis
in the mid-Atlantic states.
SJI owns 50% interest in Millennium Account Services, LLC (Millennium),
a joint venture with Conectiv Solutions, LLC formed January 4, 1999
under the laws of the State of Delaware. Millennium's principal
location is 2 Regulus Drive, Suite B, Turnersville, New Jersey 08012.
Millennium is not a utility company. It provides meter reading
services in southern New Jersey.
SJI owns all of the outstanding common stock of Energy & Minerals, Inc.
(EMI), which was organized under the laws of the State of New Jersey.
EMI's principal location is 1 South Jersey Plaza, Folsom, New Jersey
08037. EMI is not a public utility company. It principally owns real
estate and the stock of an inactive nonutility subsidiary.
EMI owns all of the outstanding common stock of South Jersey Fuel, Inc.
(SJF), which was organized under the laws of the State of New Jersey.
SJF's principal location is 1 South Jersey Plaza, Folsom, New Jersey
08037. SJF is not a public utility company and is presently inactive.
SJI owns all of the outstanding common stock of R&T Group, Inc. (R&T),
which was organized under the laws of the State of New Jersey. R&T's
principal location is 1 South Jersey Plaza, Folsom, New Jersey 08037.
R&T is not a public utility company. It holds the remaining assets and
liabilities of certain nonutility subsidiaries of SJI which were merged
into R&T in 1997. R&T is presently inactive.
Neither the claimant or any of its subsidiaries is an EWG nor do they
hold a direct or indirect interest in a foreign utility company.
- 2 -
2. A brief description of the properties of claimant and each of its
subsidiary public utility companies used for the generation, transmission, and
distribution of electric energy for sale, or for the production, transmission,
and distribution of natural or manufactured gas, indicating the location of
principal generating plants, transmission lines, producing fields, gas
manufacturing plants, and electric and gas distribution facilities, including
all such properties which are outside the State in which claimant and its
subsidiaries are organized and all transmission or pipelines which deliver or
receive electric energy or gas at the borders of such State.
SJI does not own directly any properties used for the production,
transmission, and distribution of natural or manufactured gas or
electric energy.
The properties of SJG used for the production, transmission, and
distribution of natural or manufactured gas include mains, service
connections and meters, supplemental gas storage facilities, two
liquefied propane plants, and an LNG storage and vaporization facility,
all of which are located in the State of New Jersey (except that
certain gas owned by SJG is stored outside the State and transported
when needed). There are 5,132 miles of distribution mains. There are
92 miles of mains in the transmission system. No pipelines of SJG
deliver or receive gas at the borders of the State of New Jersey.
3. The following information for the last calendar year with respect to
claimant and each of its subsidiary public utility companies:
(a) Number of Kwh of electric energy sold (at retail or wholesale) and
Mcf of natural or manufactured gas distributed at retail.
During 1999, SJG distributed at retail to residential,
commercial and industrial customers 25,320 MMcf of natural
or manufactured gas and transported 28,771 MMcf of natural
gas purchased directly by its industrial, residential and
commercial customers. Retail distribution revenues were $203.0
million and transportation revenues were $34.8 million. SJG
also sold 9,116 MMcf, or $23.3 million, of natural gas at
wholesale for resale within the State of New Jersey.
(b) Number of Kwh of electric energy and Mcf of natural or
manufactured gas distributed at retail outside the State in which each
company is organized.
None
(c) Number of Kwh of electric energy and Mcf of natural or
manufactured gas sold at wholesale outside the State in which each such
company is organized, or at the State line.
During 1999 SJG sold 33,365 MMcf, or $80.8 million, of
natural gas at wholesale to customers outside the borders of
the State of New Jersey.
Also, throughput related to capacity release amounted to
29,247 MMcf, or $4.2 million in revenues, in 1999.
- 3 -
(d) Number of Kwh of electric energy and Mcf of natural or
manufactured gas purchased outside the State in which each such company
is organized or at the State line.
During 1999, SJG purchased approximately 64,528 MMcf of
natural gas from out-of-state sources at a total cost,
including related expenses, of $212.5 million.
During 1999, SJG purchased and had delivered to it
approximately 297 MMcf of liquefied natural gas by
over-the-road truck transport to SJG's LNG Storage and
Vaporization facility at McKee City, Atlantic County, New
Jersey, at a cost of $1.8 million.
4. The following information for the reporting period with respect to claimant
and each interest it holds directly or indirectly in an EWG or a foreign
utility company, stating monetary amounts in United States dollars:
(a) Name, location, business address and description of the facilities
used by the EWG or foreign utility company for the generation,
transmission and distribution of electric energy for sale or for the
distribution at retail of natural or manufactured gas.
The claimant has no direct or indirect interest or investment
of any kind in, or has any sales, service or construction
contracts of any kind with, an EWG or a foreign utility
company.
(b) Name of each system company that holds an interest in such EWG or
foreign utility company; and description of the interest held.
No system company holds any direct or indirect interest in an
EWG or foreign utility company.
(c) Type and amount of capital invested, directly or indirectly, by
the holding company claiming exemption; any direct or indirect
guarantee of the security of the EWG or foreign utility company by the
holding company claiming exemption; and any debt or other financial
obligation for which there is recourse, directly or indirectly, to the
holding company claiming exemption or another system company, other
than the EWG or foreign utility company.
The claimant holding company has no capital invested, directly
or indirectly; nor does it directly or indirectly guarantee any
security debt of an EWG or foreign utility company; nor debt or
other financial obligation for which there is recourse,
directly or indirectly, to the holding company claiming
exemption on another system company.
- 4 -
(d) Capitalization and earnings of the EWG or foreign utility company
during the reporting period.
None
(e) Identify any service, sales or construction contract(s) between
the EWG or foreign utility company and a system company, and describe
the services to be rendered or goods sold and fees or revenues under
such agreement(s).
None
- 5 -
EXHIBIT A
A consolidating statement of income and retained earnings of the claimant and
its subsidiary companies for the last calendar year, together with a
consolidating balance sheet of claimant and its subsidiary companies as of the
close of such calendar year.
The above-named claimant has caused this statement to be duly executed on its
behalf by its authorized officer on this 25th day of February 2000.
SOUTH JERSEY INDUSTRIES, INC.
DAVID A. KINDLICK
Vice President
CORPORATE SEAL
ATTEST:
GEORGE L. BAULIG
Vice President & Corporate Secretary
Name, title and address of officer to whom notices and correspondence
concerning this statement should be addressed:
George L. Baulig, Vice President & Corporate Secretary
South Jersey Industries, Inc.
1 South Jersey Plaza
Folsom, New Jersey 08037
- 6 -
EXHIBIT B
FINANCIAL DATA SCHEDULE
Consolidated Financial Data Schedule filed via EDGAR as part of this report on
Form U-3A-2.
- 7 -
EXHIBIT C
EWG ORGANIZATIONAL CHART
Not applicable. See response to Item 4.
- 8 -
<TABLE>
SOUTH JERSEY INDUSTRIES, INC.
CONSOLIDATING STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(In Thousands)
<CAPTION>
South South
South Jersey Jersey Energy &
Jersey Gas Energy Minerals, R & T Elim.
Industries, Company Company Inc. Group, & Consd.
Inc. Consd. Consd. Consd. Inc. Total Adjust. Total
------------ ---------- --------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues:
Utility $0 $350,922 $0 $0 $0 $350,922 ($5,212)[C] $345,710
Nonutility 2,496 0 46,622 533 0 49,651 (2,884)[C] 46,767
------------ ---------- --------- ---------- --------- ---------- ---------- ----------
Total Operating Revenues 2,496 350,922 46,622 533 0 400,573 (8,096) 392,477
------------ ---------- --------- ---------- --------- ---------- ---------- ----------
Operating Expenses:
Gas Purchased for Resale 0 212,460 0 0 0 212,460 (5,413)[C] 207,047
Utility Operations 0 43,039 0 0 0 43,039 (1,925)[C] 41,114
Nonutility Operations 1,471 0 44,611 (164) 0 45,918 (99)[C] 45,819
Maintenance 12 6,057 8 0 0 6,077 0 6,077
Depreciation 6 18,894 34 14 0 18,948 20 [D] 18,968
Current Federal and
State Income Taxes (22) 8,682 508 204 0 9,372 0 9,372
Deferred Federal and
State Income Taxes 92 6,773 81 50 0 6,996 60 [D] 7,056
Other Taxes 69 10,992 57 19 0 11,137 0 11,137
------------ ---------- --------- ---------- --------- ---------- ---------- ----------
Total Operating Expenses 1,628 306,897 45,299 123 0 353,947 (7,357) 346,590
------------ ---------- --------- ---------- --------- ---------- ---------- ----------
Operating Income 868 44,025 1,323 410 0 46,626 (739) 45,887
Other Income:
Dividends from Subsidiaries 25,950 0 0 0 0 25,950 (25,950)[A] 0
Equity in Undistributed
Earnings of Subs (4,147) 0 0 0 0 (4,147) 4,147 [A] 0
------------ ---------- --------- ---------- --------- ---------- ---------- ----------
Income Before Interest Charges 22,671 44,025 1,323 410 0 68,429 (22,542) 45,887
------------ ---------- --------- ---------- --------- ---------- ---------- ----------
Interest Charges:
Long-Term Debt 0 15,721 0 0 0 15,721 0 15,721
Short-Term Debt and Other 758 4,838 312 0 0 5,908 (803)[C] 5,105
------------ ---------- --------- ---------- --------- ---------- ---------- ----------
Total Interest Charges 758 20,559 312 0 0 21,629 (803) 20,826
------------ ---------- --------- ---------- --------- ---------- ---------- ----------
Income from Continuing Operations
Before Preferred Dividend
Requirements of Subsidiary 21,913 23,466 1,011 410 0 46,800 (21,739) 25,061
Preferred Dividend
Requirements of Subsidiary 0 3,084 0 0 0 3,084 0 3,084
------------ ---------- --------- ---------- --------- ---------- ---------- ----------
Income from Continuing Operations 21,913 20,382 1,011 410 0 43,716 (21,739) 21,977
Equity in Undistributed Earnings of
Discontinued Subsidiaries (289) 0 0 0 0 (289) 289 [A] 0
Loss from Discontinued Operations - Net 0 0 (5) (157) (127) (289) 0 (289)
------------ ---------- --------- ---------- --------- ---------- ---------- ----------
Net Income(Loss)
Applicable to Common Stock $21,624 $20,382 $1,006 $253 ($127) $43,138 ($21,450) $21,688
============ ========== ========= ========== ========= ========== ========== ==========
</TABLE>
- 9 -
<TABLE>
SOUTH JERSEY INDUSTRIES, INC.
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(In Thousands)
<CAPTION>
South South
South Jersey Jersey Energy &
Jersey Gas Energy Minerals, R & T Elim.
Industries, Company Company Inc. Group, & Consd.
Inc. Consd. Consd. Consd. Inc. Total Adjust. Total
------------ ---------- --------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retained Earnings - Beginning $44,571 $54,275 ($87) ($4,323) ($6,928) $87,508 ($43,001)[B] $44,507
Net Income(Loss) Applic to Common Stock 21,624 20,382 1,006 253 (127) 43,138 (21,450) 21,688
------------ ---------- --------- ---------- --------- ---------- ---------- ----------
66,195 74,657 919 (4,070) (7,055) 130,646 (64,451) 66,195
Dividends Declared - Common Stock 15,728 16,200 0 9,750 0 41,678 (25,950)[C] 15,728
------------ ---------- --------- ---------- --------- ---------- ---------- ----------
Retained Earnings - Ending $50,467 $58,457 $919 ($13,820) ($7,055) $88,968 ($38,501) $50,467
============ ========== ========= ========== ========= ========== ========== ==========
</TABLE>
- 10 -
<TABLE>
SOUTH JERSEY INDUSTRIES, INC.
CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(In Thousands)
<S> <C> <C>
[A] Dividends from Subsidiaries $25,950
Investment in Subsidiaries 4,436
Equity in Undistributed Earnings
of Subsidiaries $4,147
Equity in Undistributed Earnings
of Discontinued Subsidiaries 289
Retained Earnings - Dividends Declared - Common Stock 25,950
To eliminate intercompany dividends paid and
equity in undistributed earnings recorded by
South Jersey Industries, Inc.
[B] Retained Earnings - 1/1/99 $42,937
Investment in Subsidiaries $42,937
To eliminate retained earnings of subsidiaries
at 1/1/99 previously recorded by South Jersey
Industries, Inc. under the equity method of accounting.
[C] Operating Revenues - Utility $5,212
Operating Revenues - Nonutility 3,028
Gas Purchased for Resale $5,413
Operating Expense - Utility 1,925
Operating Expense - Nonutility 99
Interest Expense - Short-Term Debt and Other 803
To eliminate intercompany revenue and expense.
[D] Depreciation $20
Retained Earnings 64
Deferred Federal and State Income Taxes 60
Operating Revenues - Nonutility $144
To recognize deferred gain of 1988 sale of
Millville buildings by SJG to SJI.
</TABLE>
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<TABLE>
SOUTH JERSEY INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1999
(In Thousands)
<CAPTION>
South South
South Jersey Jersey Energy &
Jersey Gas Energy Minerals, R & T Elim.
Industries, Company Company Inc. Group, & Consd.
Inc. Consd. Consd. Consd. Inc. Total Adjust. Total
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
- ------
Property, Plant and Equipment:
Utility Plant, at original cost $0 $720,016 $0 $0 $0 $720,016 $0 $720,016
Gas Plant Acquisition
Adjustment - Net 0 1,776 0 0 0 1,776 0 1,776
Gas Stored Underground 0 1,322 0 0 0 1,322 0 1,322
Accumulated Depreciation and
Amortization 0 (192,240) 0 0 0 (192,240) 0 (192,240)
Nonutility Property and
Equipment, at cost 1,582 0 461 1,380 0 3,423 0 3,423
Accumulated Depreciation (78) 0 (51) (822) 0 (951) 0 (951)
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Property, Plant and
Equipment - Net 1,504 530,874 410 558 0 533,346 0 533,346
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Investments:
Investments in Subsidiaries 187,883 0 0 0 0 187,883 (187,883)[1] 0
Available-for-Sale Securities 45 1,662 0 0 0 1,707 0 1,707
Investment in Affiliate 260 0 1,991 0 0 2,251 0 2,251
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Total Investments 188,188 1,662 1,991 0 0 191,841 (187,883) 3,958
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Current Assets:
Cash and Cash Equivalents 672 4,694 208 36 24 5,634 0 5,634
Notes Receivable -
Associated Companies 4,582 0 325 3,685 1,550 10,142 (10,142)[3] 0
Notes Receivable - Affiliate 0 0 2,650 0 0 2,650 0 2,650
Accounts Receivable 35 36,926 6,436 247 0 43,644 (514)[2,6] 43,130
Unbilled Revenues 0 21,294 1,034 0 0 22,328 0 22,328
Provision for Uncollectibles 0 (931) (51) (135) 0 (1,117) 0 (1,117)
Accounts Receivable -
Associated Companies 546 139 13 21 8 727 (727)[2] 0
Natural Gas in Storage,
Average Cost 0 26,840 226 0 0 27,066 0 27,066
Materials and Supplies,
Average Cost 0 4,085 0 0 0 4,085 0 4,085
Assets of Discontinued Businesses
Held for Disposal 0 0 0 0 289 289 0 289
Accumulated Deferred Income Taxes 5 595 30 0 0 630 (630)[4] 0
Prepaid Taxes 0 4,069 0 0 0 4,069 0 4,069
Dividends Receivable 4,050 0 0 0 0 4,050 (4,050)[7] 0
Prepayments and
Other Current Assets 36 2,462 382 20 14 2,914 0 2,914
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Total Current Assets 9,926 100,173 11,253 3,874 1,885 127,111 (16,063) 111,048
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Accounts Receivable - Merchandise 0 684 424 0 0 1,108 0 1,108
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Regulatory and Other
Non-Current Assets:
Gross Receipts & Franchise Taxes 0 3,141 0 0 0 3,141 0 3,141
Environmental Remediation Costs 0 76,731 0 0 0 76,731 0 76,731
Accumulated Deferred Income Taxes 697 8,296 64 1,425 361 10,843 (10,843)[5] 0
Income Taxes -
Flowthrough Depreciation 0 11,531 0 0 0 11,531 0 11,531
Deferred Fuel Costs - Net 0 13,174 0 0 0 13,174 0 13,174
Deferred Postretirement
Benefit Costs 0 4,914 0 0 0 4,914 0 4,914
Other 16 7,951 1 6 0 7,974 0 7,974
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Total Regulatory and Other
Non-Current Assets 713 125,738 65 1,431 361 128,308 (10,843) 117,465
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Total Assets $200,331 $759,131 $14,143 $5,863 $2,246 $981,714 ($214,789) $766,925
============ ========== ========= ========== ========== ========== =========== ==========
</TABLE>
- 12 -
<TABLE>
SOUTH JERSEY INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1999
(In Thousands)
<CAPTION>
South South
South Jersey Jersey Energy &
Jersey Gas Energy Minerals, R & T Elim.
Industries, Company Company Inc. Group, & Consd.
Inc. Consd. Consd. Consd. Inc. Total Adjust. Total
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capitalization and Liabilities
- ------------------------------
Common Equity:
Common Stock SJI
Par Value $1.25 a share
Authorized - 20,000,000 shares
Outstanding - 11,152,175 shares $13,940 $0 $0 $0 $0 $13,940 $0 $13,940
Common Stock - Subsidiaries 0 5,848 50 13,283 1,000 20,181 (20,181)[1] 0
Premium on Common Stock 120,971 117,817 2,000 1,584 7,800 250,172 (129,201)[1] 120,971
Capital Stock Expense (103) 0 0 0 0 (103) 0 (103)
Retained Earnings 50,467 58,457 919 (13,820) (7,055) 88,968 (38,501)[1] 50,467
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Total Common Equity 185,275 182,122 2,969 1,047 1,745 373,158 (187,883) 185,275
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Preferred Stock and
Securities of Subsidiary:
Series A, 4.70%- 1,200 shares 0 120 0 0 0 120 0 120
Series B, 8% -19,242 shares 0 1,924 0 0 0 1,924 0 1,924
8.35% Company - Guaranteed
Mandatorily Redeemable -
1,400,000 shares 0 35,000 0 0 0 35,000 0 35,000
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Total Preferred Stock and
Securities of Subsidiary 0 37,044 0 0 0 37,044 0 37,044
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Long-Term Debt (less current
maturities & sinking fund
requirements) 0 183,561 0 0 0 183,561 0 183,561
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Current Liabilities:
Notes Payable to Banks 1,050 118,900 0 0 0 119,950 0 119,950
Current Maturities of
Long-Term Debt 0 8,876 0 0 0 8,876 0 8,876
Notes Payable -
Associated Companies 5,560 0 4,425 157 0 10,142 (10,142)[3] 0
Accounts Payable 448 34,359 5,980 3 1 40,791 (518)[2,6] 40,273
Accounts Payable to
Associated Companies 94 463 131 11 24 723 (723)[2] 0
Customer Deposits 0 5,386 0 0 0 5,386 0 5,386
Accumulated Deferred Income Taxes 4 8,905 165 (5) 6 9,075 (630)[4] 8,445
Taxes Accrued 70 634 131 (305) 33 563 0 563
Environmental Remediation Costs 97 12,534 0 1,396 0 14,027 0 14,027
Interest Accrued 0 3,896 0 0 0 3,896 0 3,896
Dividends Declared 4,014 4,090 0 0 0 8,104 (4,050)[7] 4,054
Other Current Liabilities 2,911 2,436 251 412 152 6,162 0 6,162
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Total Current Liabilities 14,248 200,479 11,083 1,669 216 227,695 (16,063) 211,632
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Deferred Credits and
Other Non-Current Liabilities:
Pension and Other
Postretirement Benefits 304 12,303 118 356 261 13,342 0 13,342
Deferred Income Taxes - Net 39 93,529 (27) 0 24 93,565 (10,843)[5] 82,722
Investment Tax Credit 0 4,849 0 0 0 4,849 0 4,849
Environmental Remediation Costs 68 38,495 0 2,791 0 41,354 0 41,354
Other 397 6,749 0 0 0 7,146 0 7,146
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Total Def. Credits and
Other Non-Current Liabilities 808 155,925 91 3,147 285 160,256 (10,843) 149,413
------------ ---------- --------- ---------- ---------- ---------- ----------- ----------
Total Capitalization
and Liabilities $200,331 $759,131 $14,143 $5,863 $2,246 $981,714 ($214,789) $766,925
============ ========== ========= ========== ========== ========== =========== ==========
</TABLE>
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<TABLE>
SOUTH JERSEY INDUSTRIES, INC.
CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS
BALANCE SHEET - DECEMBER 31, 1999
(In Thousands)
<S> <C> <C>
[1] Common Stock - Subsidiaries $20,181
Premium on Common Stock 129,201
Retained Earnings 38,501
Investment in Subsidiaries $187,883
To eliminate South Jersey Industries, Inc. investment in subsidiaries
which is maintained on the equity method of accounting.
[2] Accounts Payable - Associated Companies $723
Accounts Payable 6
Accounts Receivable - Associated Companies $727
Accounts Receivable 2
To eliminate intercompany accounts receivable and payable.
[3] Notes Payable - Associated Companies $10,142
Notes Receivable - Associated Companies $10,142
To eliminate intercompany short-term notes between
South Jersey Industries, Inc. and Subsidiaries
[4] Accumulated Deferred Income Taxes - Current Liability $630
Accumulated Deferred Income Taxes - Current Asset $630
To net current accumulated DFIT asset and liability
[5] Accumulated Deferred Income Taxes - Noncurrent Liability $10,843
Accumulated Deferred Income Taxes - Noncurrent Asset $10,843
To net noncurrent accumulated DFIT asset and liability
[6] Accounts Payable $512
Accounts Receivable $512
To eliminate intercompany gas receivable and payable between South
Jersey Gas Company, South Jersey Energy Company and SJ EnerTrade.
[7] Dividends Payable $4,050
Dividends Receivable $4,050
To eliminate South Jersey Gas Company dividend
payable to South Jersey Industries, Inc.
</TABLE>
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<TABLE>
SOUTH JERSEY GAS COMPANY
CONSOLIDATING STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(In Thousands)
<CAPTION>
South Jersey Eliminations
South Jersey Gas Company & Consolidated
Gas Company Capital Trust Total Adjustments Total
------------- -------------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Operating Revenues:
Utility $350,922 $0 $350,922 $0 $350,922
Nonutility 0 3,013 3,013 (3,013)[B] 0
------------- -------------- ---------- --------------- -------------
Total Operating Revenues 350,922 3,013 353,935 (3,013) 350,922
------------- -------------- ---------- --------------- -------------
Operating Expenses:
Gas Purchased for Resale 212,460 0 212,460 0 212,460
Utility Operations 43,039 0 43,039 0 43,039
Nonutility Operations 0 0 0 0 0
Maintenance 6,057 0 6,057 0 6,057
Depreciation 18,894 0 18,894 0 18,894
Current Federal and State Income Taxes 8,682 0 8,682 0 8,682
Deferred Federal and State Income Taxes 6,773 0 6,773 0 6,773
Other Taxes 10,992 0 10,992 0 10,992
------------- -------------- ---------- --------------- -------------
Total Operating Expenses 306,897 0 306,897 0 306,897
------------- -------------- ---------- --------------- -------------
Operating Income 44,025 3,013 47,038 (3,013) 44,025
Other Income:
Dividends from Subsidiary 90 0 90 (90)[A] 0
Equity in Undistributed Earnings of Subsidiary 0 0 0 0 0
------------- -------------- ---------- --------------- -------------
Income Before Interest Charges 44,115 3,013 47,128 (3,103) 44,025
------------- -------------- ---------- --------------- -------------
Interest Charges:
Long-Term Debt 18,734 0 18,734 (3,013)[B] 15,721
Short-Term Debt and Other 4,838 0 4,838 0 4,838
------------- -------------- ---------- --------------- -------------
Total Interest Charges 23,572 0 23,572 (3,013) 20,559
------------- -------------- ---------- --------------- -------------
Income from Continuing Operations Before
Preferred Dividend Requirements of Subsidiary 20,543 3,013 23,556 (90) 23,466
Preferred Dividend Requirements of Subsidiary 161 2,923 3,084 0 3,084
------------- -------------- ---------- --------------- -------------
Income from Continuing Operations 20,382 90 20,472 (90) 20,382
Equity in Undistributed Earnings of
Discontinued Subsidiaries 0 0 0 0 0
Loss from Discontinued Operations - Net 0 0 0 0 0
------------- -------------- ---------- --------------- -------------
Net Income Applicable to Common Stock $20,382 $90 $20,472 ($90) $20,382
============= ============== ========== =============== =============
</TABLE>
- 15 -
<TABLE>
SOUTH JERSEY GAS COMPANY
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(In Thousands)
<CAPTION>
South Jersey Eliminations
South Jersey Gas Company & Consolidated
Gas Company Capital Trust Total Adjustments Total
------------- -------------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Retained Earnings - Beginning $54,275 $0 $54,275 $0 $54,275
Net Income Applic to Common Stock 20,382 90 20,472 (90) 20,382
------------- -------------- ---------- --------------- -------------
74,657 90 74,747 (90) 74,657
Dividends Declared - Common Stock 16,200 90 16,290 (90)[A] 16,200
------------- -------------- ---------- --------------- -------------
Retained Earnings - Ending $58,457 $0 $58,457 $0 $58,457
============= ============== ========== =============== =============
</TABLE>
- 16 -
<TABLE>
SOUTH JERSEY GAS COMPANY
CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(In Thousands)
<S> <C> <C>
[A] Dividends from Subsidiary $90
Retained Earnings - Dividends Declared - Common Stock $90
To eliminate intercompany dividends
and interest paid
[B] Operating Revenues - Nonutility $3,013
Interest Expense - Long-Term Debt $3,013
To eliminate intercompany interest paid
</TABLE>
- 17 -
<TABLE>
SOUTH JERSEY GAS COMPANY
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1999
(In Thousands)
<CAPTION>
South
Jersey South Jersey Eliminations
Gas Gas Company & Consolidated
Company Capital Trust Total Adjustments Total
---------- -------------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Assets
- ------
Property, Plant and Equipment:
Utility Plant, at original cost $720,016 $0 $720,016 $0 $720,016
Gas Plant Acquisition Adjustment - Net 1,776 0 1,776 0 1,776
Gas Stored Underground 1,322 0 1,322 0 1,322
Accumulated Depreciation and Amortization (192,240) 0 (192,240) 0 (192,240)
Nonutility Property and Equipment, at cost 0 0 0 0 0
Accumulated Depreciation 0 0 0 0 0
---------- -------------- ---------- -------------- --------------
Property, Plant and Equipment - Net 530,874 0 530,874 0 530,874
---------- -------------- ---------- -------------- --------------
Investments:
Investment in Subsidiary 1,082 0 1,082 (1,082)[1] 0
Available-for-Sale Securities 1,662 0 1,662 0 1,662
Investment in Affiliate 0 0 0 0 0
---------- -------------- ---------- -------------- --------------
Total Investments 2,744 0 2,744 (1,082) 1,662
---------- -------------- ---------- -------------- --------------
Current Assets:
Cash and Cash Equivalents 4,694 0 4,694 0 4,694
Notes Receivable - Associated Companies 0 36,082 36,082 (36,082)[1] 0
Notes Receivable - Affiliate 0 0 0 0 0
Accounts Receivable 36,926 0 36,926 0 36,926
Unbilled Revenues 21,294 0 21,294 0 21,294
Provision for Uncollectibles (931) 0 (931) 0 (931)
Accounts Receivable - Associated Companies 139 0 139 0 139
Natural Gas in Storage, Average Cost 26,840 0 26,840 0 26,840
Materials and Supplies, Average Cost 4,085 0 4,085 0 4,085
Assets of Discontinued Businesses Held for Disposal 0 0 0 0 0
Accumulated Deferred Income Taxes 595 0 595 0 595
Prepaid Taxes 4,069 0 4,069 0 4,069
Prepayments and Other Current Assets 2,462 0 2,462 0 2,462
---------- -------------- ---------- -------------- --------------
Total Current Assets 100,173 36,082 136,255 (36,082) 100,173
---------- -------------- ---------- -------------- --------------
Accounts Receivable - Merchandise 684 0 684 0 684
---------- -------------- ---------- -------------- --------------
Regulatory and Other Non-Current Assets:
Gross Receipts & Franchise Taxes 3,141 0 3,141 0 3,141
Environmental Remediation Costs 76,731 0 76,731 0 76,731
Accumulated Deferred Income Taxes 8,296 0 8,296 0 8,296
Income Taxes - Flowthrough Depreciation 11,531 0 11,531 0 11,531
Deferred Fuel Costs - Net 13,174 0 13,174 0 13,174
Deferred Postretirement Benefit Costs 4,914 0 4,914 0 4,914
Other 7,951 0 7,951 0 7,951
---------- -------------- ---------- -------------- --------------
Total Regulatory and Other Non-Current Assets 125,738 0 125,738 0 125,738
---------- -------------- ---------- -------------- --------------
Total Assets $760,213 $36,082 $796,295 ($37,164) $759,131
========== ============== ========== ============== ==============
</TABLE>
- 18 -
<TABLE>
SOUTH JERSEY GAS COMPANY
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1999
(In Thousands)
<CAPTION>
South
Jersey South Jersey Eliminations
Gas Gas Company & Consolidated
Company Capital Trust Total Adjustments Total
---------- -------------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Capitalization and Liabilities
- ------------------------------
Common Equity:
Common Stock SJG
Par Value $2.50 a share
Authorized - 4,000,000 shares
Outstanding - 2,339,139 shares $5,848 $0 $5,848 $0 $5,848
Common Stock - Subsidiary 0 1,082 1,082 (1,082)[1] 0
Premium on Common Stock 117,817 0 117,817 0 117,817
Retained Earnings 58,457 0 58,457 0 58,457
---------- -------------- ---------- -------------- --------------
Total Common Equity 182,122 1,082 183,204 (1,082) 182,122
---------- -------------- ---------- -------------- --------------
Preferred Stock and Securities of Subsidiary:
Series A, 4.70%- 1,200 shares 120 0 120 0 120
Series B, 8% -19,242 shares 1,924 0 1,924 0 1,924
8.35% Company - Guaranteed Mandatorily
Redeemable - 1,400,000 shares 0 35,000 35,000 0 35,000
---------- -------------- ---------- -------------- --------------
Total Preferred Stock and Securities of Subsidiary 2,044 35,000 37,044 0 37,044
---------- -------------- ---------- -------------- --------------
Long-Term Debt (less current maturities
& sinking fund requirements) 219,643 0 219,643 (36,082)[1] 183,561
---------- -------------- ---------- -------------- --------------
Current Liabilities:
Notes Payable to Banks 118,900 0 118,900 0 118,900
Current Maturities of Long-Term Debt 8,876 0 8,876 0 8,876
Notes Payable - Associated Companies 0 0 0 0 0
Accounts Payable 34,359 0 34,359 0 34,359
Accounts Payable to Associated Companies 463 0 463 0 463
Customer Deposits 5,386 0 5,386 0 5,386
Accumulated Deferred Income Taxes 8,905 0 8,905 0 8,905
Taxes Accrued 634 0 634 0 634
Environmental Remediation Costs 12,534 0 12,534 0 12,534
Interest Accrued 3,896 0 3,896 0 3,896
Dividends Declared 4,090 0 4,090 0 4,090
Other Current Liabilities 2,436 0 2,436 0 2,436
---------- -------------- ---------- -------------- --------------
Total Current Liabilities 200,479 0 200,479 0 200,479
---------- -------------- ---------- -------------- --------------
Deferred Credits and Other Non-Current Liabilities:
Pension and Other Postretirement Benefits 12,303 0 12,303 0 12,303
Deferred Income Taxes - Net 93,529 0 93,529 0 93,529
Investment Tax Credit 4,849 0 4,849 0 4,849
Environmental Remediation Costs 38,495 0 38,495 0 38,495
Other 6,749 0 6,749 0 6,749
---------- -------------- ---------- -------------- --------------
Total Def. Credits and Other Non-Current Liabilities 155,925 0 155,925 0 155,925
---------- -------------- ---------- -------------- --------------
Total Capitalization and Liabilities $760,213 $36,082 $796,295 ($37,164) $759,131
========== ============== ========== ============== ==============
</TABLE>
- 19 -
<TABLE>
SOUTH JERSEY GAS COMPANY
CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS
BALANCE SHEET - DECEMBER 31, 1999
(In Thousands)
<S> <C> <C>
[1] Common Stock - Subsidiary $1,082
Long-Term Debt 36,082
Notes Receivable - Assoc. Co. $36,082
Investment in Subsidiary 1,082
To eliminate South Jersey Gas Company investment in subsidiary
which is maintained on the equity method of accounting.
</TABLE>
- 20 -
<TABLE>
SOUTH JERSEY ENERGY COMPANY
CONSOLIDATING STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(In Thousands)
<CAPTION>
SJ Eliminations
South Jersey EnerTrade, & Consolidated
Energy Company Inc. Total Adjustments Total
--------------- -------------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Operating Revenues:
Utility $0 $0 $0 $0 $0
Nonutility 39,678 6,974 46,652 (30)[B] 46,622
--------------- -------------- ---------- --------------- -------------
Total Operating Revenues 39,678 6,974 46,652 (30) 46,622
--------------- -------------- ---------- --------------- -------------
Operating Expenses:
Gas Purchased for Resale 0 0 0 0 0
Utility Operations 0 0 0 0 0
Nonutility Operations 38,540 6,101 44,641 (30)[B] 44,611
Maintenance 8 0 8 0 8
Depreciation 33 1 34 0 34
Current Federal and State Income Taxes 299 209 508 0 508
Deferred Federal and State Income Taxes 80 1 81 0 81
Other Taxes 57 0 57 0 57
--------------- -------------- ---------- --------------- -------------
Total Operating Expenses 39,017 6,312 45,329 (30) 45,299
--------------- -------------- ---------- --------------- -------------
Operating Income 661 662 1,323 0 1,323
Other Income:
Dividends from Subsidiary 0 0 0 0 0
Equity in Undistributed Earnings of Subsidiary 362 0 362 (362)[A] 0
--------------- -------------- ---------- --------------- -------------
Income Before Interest Charges 1,023 662 1,685 (362) 1,323
--------------- -------------- ---------- --------------- -------------
Interest Charges:
Long-Term Debt 0 0 0 0 0
Short-Term Debt and Other 12 300 312 0 312
--------------- -------------- ---------- --------------- -------------
Total Interest Charges 12 300 312 0 312
Income from Continuing Operations Before
Preferred Dividend Requirements of Subsidiary 1,011 362 1,373 (362) 1,011
Preferred Dividend Requirements of Subsidiary 0 0 0 0 0
--------------- -------------- ---------- --------------- -------------
Income from Continuing Operations 1,011 362 1,373 (362) 1,011
Equity in Undistributed Earnings of
Discontinued Subsidiaries 0 0 0 0 0
Loss from Discontinued Operations - Net (5) 0 (5) 0 (5)
--------------- -------------- ---------- --------------- -------------
Net Income Applicable to Common Stock $1,006 $362 $1,368 ($362) $1,006
=============== ============== ========== =============== =============
</TABLE>
- 21 -
<TABLE>
SOUTH JERSEY ENERGY COMPANY
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(In Thousands)
<CAPTION>
South Jersey SJ Eliminations
Energy EnerTrade, & Consolidated
Company Inc. Total Adjustments Total
--------------- -------------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Retained Earnings - Beginning ($87) $84 ($3) ($84) ($87)
Net Income Applic to Common Stock 1,006 362 1,368 (362)[A] 1,006
--------------- -------------- ---------- --------------- -------------
919 446 1,365 (446) 919
Dividends Declared - Common Stock 0 0 0 0 0
--------------- -------------- ---------- --------------- -------------
Retained Earnings - Ending $919 $446 $1,365 ($446) $919
=============== ============== ========== =============== =============
</TABLE>
- 22 -
<TABLE>
SOUTH JERSEY ENERGY COMPANY
CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(In Thousands)
<S> <C> <C>
[A] Investment in Subsidiary $362
Equity in Undistributed Earnings
of Subsidiary $362
To eliminate equity in undistributed
earnings recorded by South Jersey
Energy Company
[B] Operating Revenues - Nonutility $30
Operating Expense - Nonutility $30
To eliminate intercompany revenue and expense.
</TABLE>
- 23 -
<TABLE>
SOUTH JERSEY ENERGY COMPANY
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1999
(In Thousands)
<CAPTION>
South
Jersey SJ Eliminations
Energy EnerTrade, & Consolidated
Company Inc. Total Adjustments Total
----------- ----------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets
- ------
Property, Plant and Equipment:
Utility Plant, at original cost $0 $0 $0 $0 $0
Gas Plant Acquisition Adjustment - Net 0 0 0 0 0
Gas Stored Underground 0 0 0 0 0
Accumulated Depreciation and Amortization 0 0 0 0 0
Nonutility Property and Equipment, at cost 452 9 461 0 461
Accumulated Depreciation (47) (4) (51) 0 (51)
----------- ----------- --------- ------------- -------------
Property, Plant and Equipment - Net 405 5 410 0 410
----------- ----------- --------- ------------- -------------
Investments:
Investment in Subsidiary 546 0 546 (546)[1] 0
Available-for-Sale Securities 0 0 0 0 0
Investment in Affiliate 0 1,991 1,991 0 1,991
----------- ----------- --------- ------------- -------------
Total Investments 546 1,991 2,537 (546) 1,991
----------- ----------- --------- ------------- -------------
Current Assets:
Cash and Cash Equivalents 160 48 208 0 208
Notes Receivable - Associated Companies 325 0 325 0 325
Notes Receivable - Affiliate 0 2,650 2,650 0 2,650
Accounts Receivable 5,557 879 6,436 0 6,436
Unbilled Revenues 1,034 0 1,034 0 1,034
Provision for Uncollectibles (51) 0 (51) 0 (51)
Accounts Receivable - Associated Companies 3 10 13 0 13
Natural Gas in Storage, Average Cost 157 69 226 0 226
Materials and Supplies, Average Cost 0 0 0 0 0
Assets of Discontinued Businesses Held for Disposal 0 0 0 0 0
Accumulated Deferred Income Taxes 30 0 30 0 30
Prepaid Taxes 0 0 0 0 0
Prepayments and Other Current Assets 379 3 382 0 382
----------- ----------- --------- ------------- -------------
Total Current Assets 7,594 3,659 11,253 0 11,253
----------- ----------- --------- ------------- -------------
Accounts Receivable - Merchandise 424 0 424 0 424
----------- ----------- --------- ------------- -------------
Regulatory and Other Non-Current Assets:
Gross Receipts & Franchise Taxes 0 0 0 0 0
Environmental Remediation Costs 0 0 0 0 0
Accumulated Deferred Income Taxes 63 1 64 0 64
Income Taxes - Flowthrough Depreciation 0 0 0 0 0
Deferred Fuel Costs - Net 0 0 0 0 0
Deferred Postretirement Benefit Costs 0 0 0 0 0
Other 1 0 1 0 1
----------- ----------- --------- ------------- -------------
Total Regulatory and Other Non-Current Assets 64 1 65 0 65
----------- ----------- --------- ------------- -------------
Total Assets $9,033 $5,656 $14,689 ($546) $14,143
=========== =========== ========= ============= =============
</TABLE>
- 24 -
<TABLE>
SOUTH JERSEY ENERGY COMPANY
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1999
(In Thousands)
<CAPTION>
South
Jersey SJ Eliminations
Energy EnerTrade, & Consolidated
Company Inc. Total Adjustments Total
----------- ----------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Capitalization and Liabilities
- ------------------------------
Common Equity:
Common Stock SJE
No Par Value
Authorized - 2,500 shares
Outstanding - 500 shares $50 $0 $50 $0 $50
Common Stock - Subsidiary 0 1 1 (1)[1] 0
Premium on Common Stock 2,000 99 2,099 (99)[1] 2,000
Retained Earnings 919 446 1,365 (446)[1] 919
----------- ----------- --------- ------------- -------------
Total Common Equity 2,969 546 3,515 (546) 2,969
----------- ----------- --------- ------------- -------------
Preferred Stock and Securities of Subsidiary:
Series A, 4.70%- 2,100 shares 0 0 0 0 0
Series B, 8% -19,242 shares 0 0 0 0 0
8.35% Company - Guaranteed Mandatorily 0 0 0 0 0
Redeemable - 1,400,000 shares 0 0 0 0 0
----------- ----------- --------- ------------- -------------
Total Preferred Stock and Securities of Subsidiary 0 0 0 0 0
----------- ----------- --------- ------------- -------------
Long-Term Debt (less current maturities
& sinking fund requirements) 0 0 0 0 0
----------- ----------- --------- ------------- -------------
Current Liabilities:
Notes Payable to Banks 0 0 0 0 0
Current Maturities of Long-Term Debt 0 0 0 0 0
Notes Payable - Associated Companies 0 4,425 4,425 0 4,425
Accounts Payable 5,441 539 5,980 0 5,980
Accounts Payable to Associated Companies 84 47 131 0 131
Customer Deposits 0 0 0 0 0
Accumulated Deferred Income Taxes 131 34 165 0 165
Taxes Accrued 74 57 131 0 131
Environmental Remediation Costs 0 0 0 0 0
Interest Accrued 0 0 0 0 0
Dividends Declared 0 0 0 0 0
Other Current Liabilities 245 6 251 0 251
----------- ----------- --------- ------------- -------------
Total Current Liabilities 5,975 5,108 11,083 0 11,083
----------- ----------- --------- ------------- -------------
Deferred Credits and Other Non-Current Liabilities:
Pension and Other Postretirement Benefits 117 1 118 0 118
Deferred Income Taxes - Net (28) 1 (27) 0 (27)
Investment Tax Credit 0 0 0 0 0
Environmental Remediation Costs 0 0 0 0 0
Other 0 0 0 0 0
----------- ----------- --------- ------------- -------------
Total Def. Credits and Other Non-Current Liabilities 89 2 91 0 91
----------- ----------- --------- ------------- -------------
Total Capitalization and Liabilities $9,033 $5,656 $14,689 ($546) $14,143
=========== =========== ========= ============= =============
</TABLE>
- 25 -
<TABLE>
SOUTH JERSEY ENERGY COMPANY
CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS
BALANCE SHEET - DECEMBER 31, 1999
(In Thousands))
<S> <C> <C>
[1] Common Stock - Subsidiary $1
Premium on Common Stock 99
Retained Earnings 446
Investment in Subsidiary $546
To eliminate South Jersey Energy Company, Inc. investment in subsidiary
which is maintained on the equity method of accounting.
</TABLE>
- 26 -
<TABLE>
ENERGY & MINERALS, INC.
CONSOLIDATING STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(In Thousands)
<CAPTION>
Energy & South Jersey Eliminations
Minerals, Fuel Company, & Consolidated
Inc. Inc. Total Adjustments Total
----------- -------------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Operating Revenues:
Utility $0 $0 $0 $0 $0
Nonutility 533 0 533 0 533
----------- -------------- ---------- --------------- -------------
Total Operating Revenues 533 0 533 0 533
----------- -------------- ---------- --------------- -------------
Operating Expenses:
Gas Purchased for Resale 0 0 0 0 0
Utility Operations 0 0 0 0 0
Nonutility Operations (164) 0 (164) 0 (164)
Maintenance 0 0 0 0 0
Depreciation 14 0 14 0 14
Current Federal and State Income Taxes 204 0 204 0 204
Deferred Federal and State Income Taxes 50 0 50 0 50
Other Taxes 19 0 19 0 19
----------- -------------- ---------- --------------- -------------
Total Operating Expenses 123 0 123 0 123
----------- -------------- ---------- --------------- -------------
Operating Income 410 0 410 0 410
Other Income:
Dividends from Subsidiary 0 0 0 0 0
Equity in Undistributed Earnings of Subsidiary 0 0 0 0 0
----------- -------------- ---------- --------------- -------------
Income Before Interest Charges 410 0 410 0 410
----------- -------------- ---------- --------------- -------------
Interest Charges:
Long-Term Debt 0 0 0 0 0
Short-Term Debt and Other 0 0 0 0 0
----------- -------------- ---------- --------------- -------------
Total Interest Charges 0 0 0 0 0
----------- -------------- ---------- --------------- -------------
Income from Continuing Operations Before
Preferred Dividend Requirements of Subsidiary 410 0 410 0 410
Preferred Dividend Requirements of Subsidiary 0 0 0 0 0
----------- -------------- ---------- --------------- -------------
Income from Continuing Operations 410 0 410 0 410
Equity in Undistributed Earnings of
Discontinued Subsidiary (46) 0 (46) 46 [A] 0
Loss from Discontinued Subsidiaries - Net (111) (46) (157) 0 (157)
----------- -------------- ---------- --------------- -------------
Net Income (Loss) Applicable to Common Stock $253 ($46) $207 $46 $253
=========== ============== ========== =============== =============
</TABLE>
- 27 -
<TABLE>
ENERGY & MINERALS, INC.
CONSOLIDATING STATEMENT OF RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(In Thousands)
<CAPTION>
Energy & South Jersey Eliminations
Minerals, Fuel Company, & Consolidated
Inc. Inc. Total Adjustments Total
----------- -------------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Retained Earnings - Beginning ($4,323) ($1,509) ($5,832) $1,509 [B] ($4,323)
Net Income (Loss) Applic to Common Stock 253 (46) 207 46 [A] 253
----------- -------------- ---------- --------------- -------------
(4,070) (1,555) (5,625) 1,555 (4,070)
Dividends Declared - Common Stock 9,750 0 9,750 0 9,750
----------- -------------- ---------- --------------- -------------
Retained Earnings - Ending ($13,820) ($1,555) ($15,375) $1,555 ($13,820)
=========== ============== ========== =============== =============
</TABLE>
- 28 -
<TABLE>
ENERGY & MINERALS, INC.
CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(In Thousands)
<S> <C> <C>
[A] Equity in Undistributed Earnings $46
of Subsidiary
Investment in Subsidiary $46
To eliminate equity in undistributed
earnings recorded by Energy & Minerals, Inc.
[B] Retained Earnings - 1/1/99 $1,509
Investment in Subsidiaries $1,509
To eliminate retained earnings of
subsidiary at 1/1/99 previously recorded
by Energy & Minerals, Inc. under the
equity method of accounting.
</TABLE>
- 29 -
<TABLE>
ENERGY & MINERALS, INC.
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1999
(In Thousands)
<CAPTION>
Energy & South Jersey Eliminations
Minerals, Fuel Company & Consolidated
Inc. Inc. Total Adjustments Total
---------- ------------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets
- ------
Property, Plant and Equipment:
Utility Plant, at original cost $0 $0 $0 $0 $0
Gas Plant Acquisition Adjustment - Net 0 0 0 0 0
Gas Stored Underground 0 0 0 0 0
Accumulated Depreciation and Amortization 0 0 0 0 0
Nonutility Property and Equipment, at cost 872 508 1,380 0 1,380
Accumulated Depreciation (746) (76) (822) 0 (822)
---------- ------------- --------- ------------- -------------
Property, Plant and Equipment - Net 126 432 558 0 558
---------- ------------- --------- ------------- -------------
Investments:
Investment in Subsidiary (496) 0 (496) 496 [1] 0
Available-for-Sale Securities 0 0 0 0 0
Investment in Affiliate 0 0 0 0 0
---------- ------------- --------- ------------- -------------
Total Investments (496) 0 (496) 496 0
---------- ------------- --------- ------------- -------------
Current Assets:
Cash and Cash Equivalents 27 9 36 0 36
Notes Receivable - Associated Companies 3,685 0 3,685 0 3,685
Notes Receivable - Affiliate 0 0 0 0 0
Accounts Receivable 247 0 247 0 247
Unbilled Revenues 0 0 0 0 0
Provision for Uncollectibles (135) 0 (135) 0 (135)
Accounts Receivable - Associated Companies 21 0 21 0 21
Natural Gas in Storage, Average Cost 0 0 0 0 0
Materials and Supplies, Average Cost 0 0 0 0 0
Assets of Discontinued Businesses Held for Disposal 0 0 0 0 0
Accumulated Deferred Income Taxes 1 0 1 (1)[2] 0
Prepaid Taxes 0 0 0 0 0
Prepayments and Other Current Assets 20 0 20 0 20
---------- ------------- --------- ------------- -------------
Total Current Assets 3,866 9 3,875 (1) 3,874
---------- ------------- --------- ------------- -------------
Accounts Receivable - Merchandise 0 0 0 0 0
---------- ------------- --------- ------------- -------------
Regulatory and Other Non-Current Assets:
Gross Receipts & Franchise Taxes 0 0 0 0 0
Environmental Remediation Costs 0 0 0 0 0
Accumulated Deferred Income Taxes 1,240 506 1,746 (321)[3] 1,425
Income Taxes - Flowthrough Depreciation 0 0 0 0 0
Deferred Fuel Costs - Net 0 0 0 0 0
Deferred Postretirement Benefit Costs 0 0 0 0 0
Other 6 0 6 0 6
---------- ------------- --------- ------------- -------------
Total Regulatory and Other Non-Current Assets 1,246 506 1,752 (321) 1,431
---------- ------------- --------- ------------- -------------
Total Assets $4,742 $947 $5,689 $174 $5,863
========== ============= ========= ============= =============
</TABLE>
- 30 -
<TABLE>
ENERGY & MINERALS, INC.
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 1999
(In Thousands)
<CAPTION>
Energy & South Jersey Eliminations
Minerals, Fuel Company & Consolidated
Inc. Inc. Total Adjustments Total
---------- ------------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Capitalization and Liabilities
- ------------------------------
Common Equity:
Common Stock EMI
No Par Value
Authorized - 500,000 shares
Outstanding - 98,341 shares $13,283 $0 $13,283 $0 $13,283
Common Stock - Subsidiary 0 0 0 0 0
Premium on Common Stock 1,584 1,059 2,643 (1,059)[1] 1,584
Retained Earnings (13,820) (1,555) (15,375) 1,555 [1] (13,820)
---------- ------------- --------- ------------- -------------
Total Common Equity 1,047 (496) 551 496 1,047
---------- ------------- --------- ------------- -------------
Preferred Stock and Securities of Subsidiary:
Series A, 4.70%- 2,100 shares 0 0 0 0 0
Series B, 8% -19,242 shares 0 0 0 0 0
8.35% Company - Guaranteed Mandatorily
Redeemable - 1,400,000 shares 0 0 0 0 0
---------- ------------- --------- ------------- -------------
Total Preferred Stock and Securities of Subsidiary 0 0 0 0 0
---------- ------------- --------- ------------- -------------
Long-Term Debt (less current maturities
& sinking fund requirements) 0 0 0 0 0
---------- ------------- --------- ------------- -------------
Current Liabilities:
Notes Payable to Banks 0 0 0 0 0
Current Maturities of Long-Term Debt 0 0 0 0 0
Notes Payable - Associated Companies 0 157 157 0 157
Accounts Payable 2 1 3 0 3
Accounts Payable to Associated Companies 9 2 11 0 11
Customer Deposits 0 0 0 0 0
Accumulated Deferred Income Taxes (4) 0 (4) (1)[2] (5)
Taxes Accrued (312) 7 (305) 0 (305)
Environmental Remediation Costs 981 415 1,396 0 1,396
Interest Accrued 0 0 0 0 0
Dividends Declared 0 0 0 0 0
Other Current Liabilities 402 10 412 0 412
---------- ------------- --------- ------------- -------------
Total Current Liabilities 1,078 592 1,670 (1) 1,669
---------- ------------- --------- ------------- -------------
Deferred Credits and Other Non-Current Liabilities:
Pension and Other Postretirement Benefits 356 0 356 0 356
Deferred Income Taxes - Net 265 56 321 (321)[3] 0
Investment Tax Credit 0 0 0 0 0
Environmental Remediation Costs 1,996 795 2,791 0 2,791
Other 0 0 0 0 0
---------- ------------- --------- ------------- -------------
Total Def. Credits and Other Non-Current Liabilities 2,617 851 3,468 (321) 3,147
---------- ------------- --------- ------------- -------------
Total Capitalization and Liabilities $4,742 $947 $5,689 $174 $5,863
========== ============= ========= ============= =============
</TABLE>
- 31 -
<TABLE>
ENERGY & MINERALS, INC.
CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS
BALANCE SHEET - DECEMBER 31, 1999
(In Thousands)
<S> <C> <C>
[1] Premium on Common Stock $1,059
Investment in Subsidiary 496
Retained Earnings $1,555
To eliminate Energy & Minerals, Inc. investment in subsidiary
which is maintained on the equity method of accounting.
[2] Accumulated Deferred Income Taxes - Current Liability $1
Accumulated Deferred Income Taxes - Current Asset $1
To net current accumulated DFIT asset and liability
[3] Accumulated Deferred Income Taxes - Noncurrent Liability $321
Accumulated Deferred Income Taxes - Noncurrent Asset $321
To net noncurrent accumulated DFIT asset and liability
</TABLE>
- 32 -
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATING FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Consolidation - The consolidating financial statements include the accounts
of South Jersey Industries, Inc. (SJI) and its subsidiaries.
Estimates and Assumptions - Our financial statements are prepared to conform
with generally accepted accounting principles. Management makes 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). We maintain our accounts according to the
BPU's prescribed Uniform System of Accounts (See Note 7).
Revenues - SJG and South Jersey Energy Company (SJE) bill customers monthly.
For customers not billed at the end of each month, an accrual is made to
recognize unbilled revenues from the date of the last bill to the end of the
month.
The BPU allows SJG to recover the excess cost of gas sold over the cost
included in base rates through the Levelized Gas Adjustment Clause (LGAC).
We collect these costs on a forecasted basis upon BPU order. SJG defers
under- or over-recoveries of gas costs and includes them in the following
year's LGAC. We pay interest on overcollected LGAC balances based on SJG's
return on rate base determined in base rate proceedings (See Note 7).
SJG's tariff also includes a Temperature Adjustment Clause (TAC), a
Remediation Adjustment Clause (RAC) and a Demand Side Management Clause
(DSMC). Our TAC reduces the impact of temperature fluctuations on SJG and
its customers. The RAC recovers remediation costs of former gas
manufacturing plants and the DSMC recovers costs associated with our
conservation plan. TAC adjustments affect revenue, income and cash flows
since colder-than-normal weather can generate credits to customers, while
warmer-than-normal weather during the winter season can result in additional
billings. RAC adjustments do not directly affect earnings because we defer
and recover these costs through rates over 7-year amortization periods (See
Notes 7 & 13). DSMC adjustments are not significant and do not affect
earnings.
Property, Plant & Equipment - For regulatory purposes, utility plant is
stated at original cost. Nonutility plant is stated at cost. The cost of
adding, replacing and renewing property is charged to the appropriate plant
account.
- 33 -
Depreciation and Amortization - We depreciate utility plant on a straight-
line basis over the estimated remaining lives of the various property
classes. These estimates are periodically reviewed and adjusted as required
after BPU approval. The composite annual rate for all depreciable utility
property was approximately 2.8% in 1999. Except for extraordinary
retirements, accumulated depreciation is charged with the cost of
depreciable utility property retired, and removal costs less salvage. The
gas plant acquisition adjustment is amortized on a straight-line basis over
40 years. The unamortized balance of $1.8 million at December 31, 1999, is
not included in rate base. Nonutility property depreciation is computed on a
straight-line basis over the estimated useful lives of the property, ranging
up to 35 years. Gain or loss on the disposition of nonutility property is
recognized in net income.
New Accounting Pronouncements - In June 1998, the Financial Accounting
Standards Board (FASB) issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for our fiscal year
ending December 31, 2001. This statement establishes accounting and
reporting standards for derivative instruments, including those embedded in
other contracts, and for hedging activities. It requires recognizing
derivatives as assets or liabilities at fair value on the balance sheet. We
are currently evaluating the effects of FASB No. 133 on SJI's financial
condition and results of operations, which will vary based on our use of
derivative instruments at the time of adoption.
Income and Other Taxes - Deferred Income Taxes are provided for all
significant temporary differences between book and taxable income (See Notes
5 & 6).
2. Preferred Stock and Securities of Subsidiary:
Redeemable Cumulative Preferred Stock - Annually, SJG is required to offer
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, SJG may not declare or pay
dividends or make distributions on its common stock. Preferred shareholders
may elect a majority of SJG's directors if four or more quarterly dividends
are in arrears.
Mandatorily Redeemable Preferred Securities - In May 1997, SJG's statutory
trust subsidiary, SJG Capital Trust (Trust), sold $35 million of 8.35% SJG-
guaranteed Mandatorily Redeemable Preferred Securities. The Trust's only
assets are the 8.35% Deferrable Interest Subordinated Debentures issued by
SJG maturing April 2037. This is also the maturity date of the Preferred
Securities. The Debentures and Preferred Securities are redeemable at SJG's
option at a price equal to 100% of the principal amount at any time on or
after April 30, 2002.
- 34 -
SJI has 2,500,000 authorized shares of Preference Stock, no par value, which
has not been issued. SJI has registered and reserved for issuance 15,000
shares of Series A Junior Participating Cumulative Preferred Stock (Series A
Preferred Stock) connected with adopting its Shareholder Rights Plan (See
Note 4).
3. Divestitures and Affiliations:
Divestitures - In 1996, Energy & Minerals, Inc. (EMI), an SJI subsidiary,
sold the common stock of The Morie Company, Inc. (Morie), its sand mining
and processing subsidiary. We transferred cash, certain real estate and
other assets, along with certain liabilities remaining after the sale, to
EMI's books (See Note 13).
In 1997, R&T Group, Inc. (R&T), SJI's construction subsidiary, sold all of
its operating assets, except some real estate.
Annually, SJI conducts tests to estimate the environmental remediation costs
for properties owned by South Jersey Fuel, Inc. (SJF), a subsidiary of EMI,
from its previously operated fuel oil business. SJI reports the
environmental remediation activity related to these properties as
discontinued operations. This reporting is consistent with previous years
(See Note 13).
In 1998, SJE actively traded electricity in the wholesale market, but ceased
its trading activities later that same year. Upon expiration of SJE's last
wholesale electric contract in December 1999, SJE formally exited wholesale
electric operations.
Summarized operating results of the discontinued operations for 1999 were
(in thousands):
Loss before Income Taxes:
Sand Mining $ (216)
Construction (195)
Fuel Oil (89)
Wholesale Electric (8)
Income Tax Credits 219
--------
Loss from Discontinued Operations - Net $ (289)
========
Earnings per Common Share
from Discontinued Operations $ (0.02)
========
Affiliations - SJI, through its wholly-owned subsidiary, SJEnerTrade, Inc.
(EnerTrade), and UPR Energy Marketing, Inc. jointly own South Jersey
Resources Group, LLC (SJRG) which provides natural gas storage, peaking
services and transportation capacity for wholesale customers in New Jersey
and surrounding states.
- 35 -
In January 1999, SJI and Conectiv Solutions, LLC, formed Millennium Account
Services, LLC, to provide meter reading services in southern New Jersey.
Customers should benefit from reduced meter reading costs resulting from
synergies that exist because of overlapping territories.
In June 1999, SJE and Energy East Solutions, Inc. formed South Jersey Energy
Solutions, LLC (SJES) to market retail electricity and energy management
services. SJES is scheduled to begin supplying retail electric during the
first quarter of 2000.
SJE and GZA GeoEnvironmental, Inc. (GZA) market a jointly-developed air
monitoring system designed to assist companies involved in environmental
cleanup activities. This system is currently in use as a joint venture
between the two companies on a contract-by-contract basis.
SJI, through its wholly-owned subsidiaries, currently holds a 50% non-
controlling interest in these affiliations and accounts for the investments
under the equity method. The operations of SJRG, Millennium, SJES and air
monitoring are not material to the accompanying consolidating financial
statements.
4. Common Stock:
SJI has 20,000,000 shares of authorized Common Stock. In 1999, the
following shares were issued and outstanding:
Beginning of Year 10,778,990
New Issues During Year:
Dividend Reinvestment Plan 367,622
Employees' Stock Ownership Plan 4,144
Stock Option, Stock Appreciation
Rights, and Restricted Stock Award Plan 31
Directors' Restricted Stock Plan 1,388
----------
End of Year 11,152,175
==========
The par value ($1.25 per share) of stock issued in 1999 was credited to
Common Stock. Net excess over par value of approximately $9.6 million was
credited to Premium on Common Stock.
Effective 1996, SJI adopted FASB No. 123, "Accounting for Stock-Based
Compensation." This statement defines a fair value based method of
accounting for stock-based compensation. As permitted by the statement, we
elect to continue measuring compensation costs using the intrinsic value
based method of accounting prescribed by APB Opinion No. 25, "Accounting for
- 36 -
Stock Issued to Employees." The pro forma effect of adopting the fair value
based method of accounting on net income and Earnings per Share (EPS) is
immaterial for the year ended December 31, 1999.
Dividend Reinvestment Plan (DRP) and Employees' Stock Ownership Plan (ESOP)
- Effective June 1999, newly issued shares of common stock offered through
the DRP are issued directly by SJI. Prior to this date, these shares were
purchased in the open market. All shares offered through the ESOP continue
to be issued directly by SJI. As of December 31, 1999, SJI reserved 694,461
and 27,352 shares of authorized, but unissued, common stock for future
issuance to the DRP and ESOP, respectively.
Stock Option, Stock Appreciation Rights, and Restricted Stock Award Plan -
Under this plan, no more than 306,000 shares of common stock in the
aggregate may be issued to SJI's officers and other key employees. No
options or stock appreciation rights may be granted under the Plan after
November 22, 2006. At December 31, 1999, SJI had 4,500 options outstanding,
all exercisable at a price of $24.69 per share. During 1999, 500 options
were surrendered for the issuance of 31 shares of common stock. No options
were granted in 1999. No stock appreciation rights were issued under the
Plan. In 1999, the Plan was amended to include restricted stock awards. As
of December 31, 1999, no awards were granted. Stock options outstanding at
December 31, 1999, had no effect on EPS.
Directors' Restricted Stock Plan - Under this Plan, SJI granted an initial
award of 13,800 shares to outside directors in December 1996, at a market
value of $24.00 per share. The Plan also provides for annual awards and, in
December 1999, we granted 1,388 additional shares. Initial awards vest over
5 years, with 20% of those awards vesting annually. Annual awards vest on
their third anniversary. SJI holds shares issued as restricted stock until
the attached restrictions lapse. The stock's market value on the grant date
is recorded as compensation expense over the applicable vesting period.
Shareholder Rights Plan - In September 1996, the board of directors adopted
a shareholder rights plan providing for the distribution of one right for
each share of common stock outstanding on and after October 11, 1996. Each
right entitles its holder to purchase 1/1000 of one share of Series A
Preferred Stock at an exercise price of $90 (See Note 2).
The rights will not be exercisable until after a person or group acquires
10% or more of SJI's common stock. Each of the rights (except for those held
by the 10% holder) entitles the holder to purchase that number of shares of
SJI's common stock, or common stock of the acquiring company, at a market
value equal to two times the exercise price.
SJI may redeem the rights in whole, but not in part, for $.001 per right at
any time until 10 days following the time the acquiring person or group
reached the 10% threshold. The rights expire if not exercised or redeemed by
September 20, 2006.
- 37 -
5. Regulatory Assets and Deferred Credits - Federal and Other Taxes:
The primary asset created by 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 excess tax
depreciation over book depreciation on utility plant because of temporary
differences for which, prior to FASB No. 109, deferred taxes previously were
not provided. SJG previously flowed these tax benefits through to
ratepayers. SJG is recovering the amortization of the regulatory asset
through rates over 18 years which began in December 1994.
The Investment Tax Credit (ITC) attributable to SJG was deferred and
continues to be amortized at the annual rate of 3%, which approximates the
life of related assets.
SJG deferred $11.8 million resulting from a change in the basis for accruing
GRAFT in 1978, and is amortizing it on a straight-line basis to operations
over 30 years beginning that same year.
6. Income and Other Taxes:
Total income taxes applicable to operations differs from the tax that would
have resulted by applying the statutory Federal Income Tax rate to 1999 pre-
tax income for the following reasons (in thousands):
Tax at Statutory Rate $12,090
Increase (Decrease) Resulting from:
State Income Taxes 3,895
Amortization of ITC (390)
Tax Depreciation Under Book
Depreciation on Utility Plant 664
Other - Net 169
-------
Income Taxes - Continuing Operations 16,428
Income Taxes - Discontinued Operations (219)
-------
Net Income Taxes $16,209
=======
The provision for Income Taxes for 1999 is comprised of the following (in
thousands):
Current:
Federal $ 6,151
State 3,218
--------
Total Current 9,369
--------
- 38 -
Deferred:
Federal -
Excess of Tax Depreciation Over
Book Depreciation - Net 5,496
Deferred Fuel Costs 1,909
Environmental Remediation Costs - Net (1,058)
Alternative Minimum Tax 676
Other - Net (15)
State 441
--------
Total Deferred 7,449
--------
ITC (390)
--------
Income Taxes - Continuing Operations 16,428
Income Taxes - Discontinued Operations (219)
--------
Net Income Taxes $ 16,209
========
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting and income tax purposes. Significant components of SJI's net
deferred tax liability at December 31, 1999 are as follows (in thousands):
Deferred Tax Liabilities:
Tax Depreciation Over Book Depreciation $ 70,362
Difference Between Book and Tax Basis of Property 6,478
Deferred Fuel Costs 9,235
Deferred Regulatory Costs 1,301
Environmental Remediation Costs 7,295
Excess Protected 3,355
GRAFT 1,022
Other 929
--------
Total Deferred Tax Liabilities 99,977
--------
Deferred Tax Assets:
Alternative Minimum Tax 2,327
ITC Basis Gross Up 2,601
Deferred State Tax 674
Other 3,208
--------
Total Deferred Tax Assets 8,810
--------
Net Deferred Tax Liability $ 91,167
========
- 39 -
The significant components of Other Taxes for 1999 are (in thousands):
TEFA $ 7,637
GRAFT 197
Other 3,303
--------
Total Other Taxes $ 11,137
========
7. Recent Regulatory Actions:
In January 1997, the BPU granted SJG a total rate increase of $10.3 million.
The $6.0 million base rate portion of the increase was based on a 9.62% rate
of return on rate base, which included an 11.25% return on common equity.
Additionally, SJG's threshold for sharing pre-tax margins generated by
interruptible and off-system sales and transportation (Sharing Formula)
increased from $4.0 million to $5.0 million. With the completion of major
construction projects, this $5.0 million threshold increased by $500,000 in
1997 and by another $2.0 million in 1998. SJG keeps 100% of pre-tax margins
up to the threshold level and 20% of such margins above that level. In
October 1998, the BPU approved a revision to the Sharing Formula as part of
an agreement to modify SJG's TAC. The revision credits the first $750,000
above the current threshold level to the LGAC customers. Thereafter, SJG
keeps 20% of the pre-tax margins as it has historically.
As part of the tariff changes approved in the rate case, SJG began its pilot
program in April 1997, giving residential customers a choice of gas
supplier. During the initial enrollment period, nearly 13,000 residential
customers applied for this service. The BPU subsequently expanded the number
of potential participants to 50,000 and, as of December 31, 1999, enrollment
totaled 35,683. Effective January 10, 2000, the BPU approved full
unbundling of SJG's system. This allows all natural gas consumers to select
their supplier, lifting the previously existing cap of 50,000 residential
customers. Participants' bills are reduced for cost of gas charges and
applicable taxes. The resulting decrease in revenues is offset by a
corresponding decrease in gas costs and taxes under SJG's BPU-approved fuel
clause. While the program reduces utility revenues, it does not affect SJI's
net income, financial condition or margins.
In August 1998, SJG filed with the BPU to recover increased remediation
costs expended from August 1995 through July 1998. In September 1999, the
BPU approved the requested annual recovery level of $6.5 million. This
represents an annual increase of approximately $4.5 million over the
recovery previously included in rates. In July 1999, SJG filed its annual
RAC with the BPU requesting recovery of carrying costs on unrecovered
remediation costs and proposed no change in the current RAC rate for the
next three years. In January 2000, the BPU approved the recovery of carrying
costs on unrecovered remediation costs and SJG's proposal to keep its
current RAC rate in effect through October, 2002.
- 40 -
In September 1998, SJG filed its annual LGAC, TAC and DSMC with the BPU. The
LGAC and DSMC cover the period November 1 through October 31 of each year.
The TAC period runs from October 1 through May 31. In May 1999, the BPU
approved a $7.1 million increase in rates as part of this filing, which
included the results of the previous two annual filings. We are currently in
the process of preparing the 1999 annual filing which should be made with
the BPU during the first quarter of 2000.
In February 1999, the Electric Discount and Energy Competition Act became
law. This law established "unbundling," where redesigned utility rate
structures allow natural gas & electric consumers to choose their energy
supplier. SJG filed its unbundling proposal in April 1999 and received final
BPU approval in January 2000.
In addition to allowing all customers to select their own supplier, the
unbundling approval also created an incentive to customers to select a
supplier, other than SJG, in the form of a Market Development Credit (MDC).
This credit will be provided to customers over the next two years and will
approximate $2.5 million plus carrying costs through December 2001. The
majority of this credit was provided for on SJG's books as a Deferred
Credit. Therefore, the impact of the MDC will not materially impact future
periods.
Also included in the proposal was the approved recovery of carrying costs on
the RAC, as previously discussed, and a modification to SJG's LGAC. Under-
recovered gas costs of $11.9 million as of October 31, 1999, and carrying
costs thereon, will be recovered over 3 years. The LGAC for the period
starting November 1999, continues to operate as it has in the past (See
Note 1).
8. Segments of Business:
Information about SJI's operations in different industry segments for 1999
is presented below (in thousands):
Operating Revenues:
Gas Utility Operations $350,921
Other Industries 49,651
--------
Subtotal 400,572
Intersegment Sales (8,095)
--------
Total Operating Revenues $392,477
========
Operating Income:
Gas Utility Operations $ 59,480
Other Industries 1,911
--------
Subtotal 61,391
- 41 -
Income Taxes (16,428)
General Corporate 924
--------
Total Operating Income $ 45,887
========
Depreciation and Amortization:
Gas Utility Operations $ 21,676
Other Industries 59
Discontinued Operations 30
--------
Total Depreciation and Amortization $ 21,765
========
Property Additions:
Gas Utility Operations $ 47,390
Other Industries 390
Discontinued Operations -
--------
Total Property Additions $ 47,780
========
Identifiable Assets:
Gas Utility Operations $750,239
Other Industries 14,049
Discontinued Operations 2,326
--------
Subtotal 766,614
Corporate Assets 15,744
Intersegment Assets (15,433)
--------
Total Identifiable Assets $766,925
========
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 3).
SJI's interest expense relates primarily to SJG's borrowing and financing
activities. These amounts are included in our statements of consolidating
income and not shown above. Interest income is essentially derived from
borrowings between the subsidiaries and is eliminated during consolidation.
- 42 -
9. Financial Instruments:
Long-Term Debt - The fair value of SJI's long-term debt, including current
maturities, as of December 31, 1999 is estimated to be $190.1 million
(carrying amount $192.4 million). This estimate is based on the interest
rate available to SJI at the end of the year for debt with similar terms and
maturities. SJI retires debt when it is cost effective as permitted by the
debt agreements.
Other Financial Instruments - The carrying amounts of SJI's other financial
instruments approximate their fair values at December 31, 1999.
10. Unused Lines of Credit and Compensating Balances:
Unused lines of credit available at December 31, 1999, were $24.1 million.
Borrowings under these lines of credit are at market rates. The weighted
borrowing cost, which changes daily, was 6.45% at December 31, 1999. Demand
deposits are maintained with lending banks on an informal basis and do not
constitute compensating balances.
11. Pensions & Other Postretirement Benefits:
SJI has several defined benefit pension plans and other postretirement
benefit plans. The pension plans provide annuity payments to substantially
all full-time, regular employees upon retirement. The other postretirement
benefit plans provide health care and life insurance benefits to some
retirees.
The BPU authorized SJG to recover costs related to postretirement benefits
other than pensions under the accrual method of accounting consistent with
FASB No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." Amounts accrued prior to that authorization were deferred and are
being amortized as allowed by the BPU. The unamortized balance amounting to
$4.9 million at December 31, 1999, is recoverable in rates. We are
amortizing this amount over 15 years which started January 1998.
Net periodic benefit cost related to the pension and other postretirement
benefit insurance plans for 1999, consisted of the following components (in
thousands):
Pension Benefits Other Benefits
---------------- --------------
Service cost $2,245 $1,098
Interest cost 4,211 1,593
Expected return on plan assets (4,280) (675)
Amortization of transition obligation 72 772
Amortization of loss and other 436 -
------ ------
Net periodic benefit cost $2,684 $2,788
====== ======
- 43 -
A reconciliation of the Plans' benefit obligations, fair value of plan
assets, funded status and amounts recognized in SJI's consolidating balance
sheets follows (in thousands):
Pension Benefits Other Benefits
---------------- --------------
Change in Benefit Obligation:
Benefit obligation at beginning of year $64,035 $ 24,248
Service cost 2,245 1,098
Interest cost 4,211 1,593
Actuarial gain and other (8,260) (3,405)
Benefits paid (2,701) (693)
------- --------
Benefit obligation at end of year $59,530 $ 22,841
======= ========
Change in Plan Assets:
Fair value of plan assets
at beginning of year $47,976 $ 6,972
Actual return on plan assets 5,541 392
Employer contributions 2,504 2,801
Benefits paid (2,701) (693)
------- --------
Fair value of plan assets
at end of year $53,320 $ 9,472
======= ========
Funded status $(6,210) $(13,368)
Unrecognized prior service cost 2,930 -
Unrecognized net obligation assets
from transition 287 10,033
Unrecognized net gain and other (564) (3,649)
------- --------
Accrued net benefit cost at end of year $(3,557) $ (6,984)
======= ========
As of December 31, 1999, the accumulated benefit obligations did not exceed
plan assets.
Assumptions used in the accounting for these plans in 1999 were:
Pension Benefits Other Benefits
---------------- --------------
Discount rate 7.75% 7.75%
Expected return on plan assets 9.00% 9.00%
Rate of compensation increase 4.60% -
The assumed health care cost trend rates used in measuring the accumulated
postretirement benefit obligation as of December 31, 1999, are: Medical and
Drug - 6.0% in 1999 for participants age 65 or older, grading to 5.5% in
2001, and 7.5% in 1999 for participants under age 65, grading to 5.5% in
2005. Dental - 7.0% in 1999, grading to 5.5% in 2005.
- 44 -
A 1% change in the assumed health care cost trend rates for SJI's
postretirement health care plans in 1999 would have the following effects:
Thousands of Dollars
1% Increase 1% Decrease
----------- -----------
Effect on the aggregate of the service
and interest cost components $ 456 $ (366)
Effect on the postretirement
benefit obligation $ 2,898 $(2,660)
12. Retained Earnings:
Restrictions exist under various loan agreements regarding the amount of
cash dividends or other distributions that we may pay on SJG's common stock.
SJI's total equity in its subsidiaries' retained earnings, which is free of
these restrictions, was approximately $48.6 million as of December 31, 1999.
13. Commitments and Contingencies:
Construction and Environmental - SJI's estimated net cost of construction
and environmental remediation programs for 2000 totals $51.6 million.
Commitments were made regarding some of these programs.
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 that any of these
contracts expires is 2000. The transportation and storage service agreements
between SJG and its interstate pipeline suppliers were made under Federal
Energy Regulatory Commission approved tariffs. SJG's cumulative obligation
for demand charges and reservation fees paid to suppliers for these services
is approximately $4.8 million per month, recovered on a current basis
through the LGAC.
Pending Litigation - SJI is subject to claims arising from the ordinary
course of business and other legal proceedings. In November 1999, Goldin
Associates LLC, Trustee for the Power Company of America Liquidating Trust
(PCA), filed a complaint in bankruptcy court against SJE seeking damages of
$11 million plus interest and attorneys' fees. PCA was a wholesale
electricity trading company with whom SJE did business. PCA filed for
bankruptcy protection under Chapter 11 of the Bankruptcy Code. We believe
SJE acted prudently, responsibly and in accordance with contractual
obligations in its transactions with PCA. We believe the ultimate impact of
these actions will not materially affect SJI's financial position, results
of operations or liquidity.
- 45 -
Environmental Remediation Costs - SJI incurred and recorded costs for
environmental cleanup of sites where SJG or its predecessors operated gas
manufacturing plants. SJG stopped manufacturing gas in the 1950s. SJI and
some of its nonutility subsidiaries also recorded costs for environmental
cleanup of sites where SJF previously operated a fuel oil business and Morie
maintained equipment, fueling stations and storage.
Since the early 1980s, SJI recorded environmental remediation costs of
$116.3 million, of which $60.9 million was spent as of December 31, 1999.
With the assistance of an outside consulting firm, we estimate that future
costs to clean up SJG's sites will range from $51.0 million to $161.3
million. We recorded the lower end of this range as a liability. It is
reflected on the consolidating balance sheet under the captions Current
Liabilities and Deferred Credits and Other Non-Current Liabilities (See
Note 1). SJG did not adjust the accrued liability for future insurance
recoveries, which we have been successful in pursuing. We used these
proceeds to offset related legal fees and 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 costs 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 $109.6 million for the
remediation of these sites and spent $58.5 million through December 31,
1999.
SJG has two regulatory assets associated with environmental cost. The first
asset is titled Environmental Remediation Cost: Expended - Net. These
expenditures represent what was actually spent to clean up 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
allows SJG to recover expenditures through July 1998 and petitions to
recover costs through July 1999 are pending (See Note 7).
The other 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 on the consolidating balance
sheet under the captions, Current Liabilities and Deferred Credits and Other
Non-Current Liabilities. The deferred debit is a regulatory asset under FASB
No. 71. The BPU's intent, evidenced by current practice, is to allow SJG to
recover the deferred costs after they are spent.
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, 1999, SJG's unamortized
remediation costs of $25.7 million are reflected on the consolidating
balance sheet under the caption, Regulatory and Other Non-Current Assets.
- 46 -
Since implementing the RAC in 1992, SJG recovered $21.6 million through
rates as of December 31, 1999 (See Note 7).
With Morie's sale, EMI assumed responsibility for environmental liabilities
estimated between $2.8 million and $9.0 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. Changes in
the accrual are included in the statements of consolidating income under the
caption, Loss from Discontinued Operations - Net.
SJI and SJF estimated their potential exposure for the future remediation of
four sites where fuel oil operations existed years ago. Estimates for SJI's
site range between $0.1 million and $0.2 million, while SJF's estimated
liability ranges from $1.2 million to $4.5 million for its three sites.
Amounts sufficient to cover the lower ends of these ranges were recorded and
are reflected on the consolidating balance sheet under Current Liabilities
and Deferred Credits and Other Non-Current Liabilities.
- 47 -
South Jersey Industries, Inc.
Index to Exhibits
Exhibit Number Description
-------------- ----------------------------------------
27 Financial Data Schedule (Exhibit B)
(Submitted only in electronic format to
the Securities and Exchange Commission).
- 48 -
<TABLE> <S> <C>
<ARTICLE> OPUR3
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-ASSETS> 766,925
<TOTAL-OPERATING-REVENUES> 392,477
<NET-INCOME> 21,688
</TABLE>
