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, 1999 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.)
1 South Jersey Plaza, 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. [ ]
The aggregate market value of approximately 9,950,100 shares of voting stock
held by non-affiliates of the registrant as of March 1, 2000 was $288,553,000.
As of March 1, 2000, there were 11,278,619 shares of the registrant's common
stock outstanding.
Documents Incorporated by Reference:
In Part I of Form 10-K: Pages 13 and 20 through 24 of 1999 Annual
Report to Shareholders
In Part II of Form 10-K: Pages 2 and 12 through 26 of 1999 Annual Report
to Shareholders
In Part III of Form 10-K: Pages 2 through 6 and 8 through 10 of the Proxy
Statement dated March 10, 2000 for the 2000
Annual Meeting of Shareholders
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PART I
Item 1. Business
General
The registrant, South Jersey Industries, Inc. (SJI), 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 (SJG), a public
utility, and acquiring and developing non-utility lines of business. South
Jersey Energy Company (SJE), a wholly-owned subsidiary of SJI, provides
services for the acquisition and transportation of natural gas and electric for
retail end users and markets total energy manage ment services. SJE also
markets an air quality monitoring system that provides around-the-clock, real-
time monitoring for hazardous airborne substances around a site or facility.
SJE began marketing retail electricity in New Jersey in November 1999 through
South Jersey Energy Solutions, a limited liability company equally owned with
Energy East Solutions, Inc. SJ EnerTrade, Inc. (EnerTrade), a wholly-owned
subsidiary of SJE 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 SJI, principally manages liabilities
associated with the discontinued operations of non-utility subsidiaries and
owns the stock of South Jersey Fuel, Inc. (SJF), an inactive non-utility
subsidiary. SJI also invested in a joint venture with Conectiv Solutions, LLC,
forming Millennium Account Services, LLC (Millennium) in January 1999.
Millennium provides meter reading services to SJG and Conectiv Power Delivery
in southern New Jersey.
Financial Information About Industry Segments
Information regarding Industry Segments is incorporated by reference to
Note 10 on page 23 of SJI's Annual Report to Shareholders for the year ended
December 31, 1999 which is attached to this report. See Item 14(c)(13).
Description of Business
SJI is engaged in the business of operating, through subsidiaries, various
business enterprises. SJI's most significant subsidiary is SJG.
South Jersey Gas Company
Background
SJG, 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 1.2 million.
SJG serves 273,899 residential, commercial and industrial customers (at
December 31, 1999) in southern New Jersey. Gas sales, transportation and
capacity release for 1999 amounted to approximately 125,818 MMcf (million cubic
feet), of which approximately 50,080 MMcf was firm sales and transportation,
4,011 MMcf was interruptible sales and transportation and 71,727 MMcf was
off-system sales and capacity release. The breakdown of firm sales includes
35.4% residential, 9.3% commercial, 4.6% cogeneration and electric generation,
.5% industrial and 50.2% transportation. At year-end 1999, SJG served 254,601
SJI-2
residential customers, 18,894 commercial customers and 404 industrial
customers. This includes 1999 net additions of 6,391 residential customers,
437 commercial customers and 6 industrial customers.
Under an agreement with Conectiv Inc., 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 1999, 2.3 Bcf (billion cubic feet) was delivered
under this agreement.
SJG serviced 6 cogeneration facilities in 1999. Combined sales and
transportation of natural gas to such customers amounted to approximately 5.0
Bcf in 1999.
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 of the Federal Energy Regulatory Commission (FERC) 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 1999, off-system sales amounted to 42.5 Bcf.
Also in 1999, capacity release and storage through put amounted to 29.2 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 1999 amounted to
approximately 4.0 Bcf, approximately 3.2 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 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. With
the completion of a multipurpose convention center, accompanied by additional
casino, hotel and entertainment development, Atlantic City is enhancing its
status as a year-round destination resort.
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.
SJI-3
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.
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 February, 1999, the Electric Discount and Energy Competition Act (the
Act) was signed into law in New Jersey. This bill created the framework and
necessary time schedules for the restructuring of the state's electric and
natural gas utilities. The Act established "unbundling", where redesigned
utility rate structures allow natural gas and electric consumers to choose
their energy supplier. It also established time frames for instituting
competitive services for customer account functions and to determine whether
basic gas supply service should become competitive.
SJG received BPU approval of its unbundling proposal in January 2000. In
addition to allowing all customers to select their own gas supplier, the
approval incented customers to choose a supplier other than SJG with a Market
Development Credit (MDC). This credit is available to customers through
December 2001. The credit, approximately $2.5 million plus carrying costs,
appears on SJG's books as a Deferred Credit. Therefore, the MDC should not
materially impact future periods.
The unbundling proposal also provided SJG with the ability to recover
carrying costs on unrecovered remediation costs under the Remediation
Adjustment Clause (RAC), while holding the current RAC rate in effect through
October 2002. Our RAC rate last changed in September 1999. SJG's Levelized
Gas Adjustment Clause (LGAC) was also modified by the unbundling process.
Under-recovered gas costs of $11.9 million as of October 31, 1999, and related
carrying costs, will be recovered over 3 years. The LGAC for the period
starting November 1999, continues to operate as it has in the past.
The Act also contains numerous provisions requiring the BPU to
promulgate and adopt a variety of standards related to implementing the Act.
These required standards address fair competition, affiliate relations,
accounting, competitive services, supplier licensing, consumer protection and
aggregation. In March 2000, the BPU issued Interim Standards in response
to the Act. We believe the final standards will not have a material adverse
affect on the company.
Revenue requirements for ratemaking purposes are established on the basis
of firm sales projections. 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. The majority of this increase comes from residential
and small commercial customers. Part of the increase is recovered from service
fees which charge specific customers for costs they cause SJG to incur.
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. Later in 1997, the $5.0 million
threshold increased by $500,000, the annual revenue requirement associated with
completing a specific pipeline interconnection. At the end of 1998, the
threshold increased by another $2.0 million, with the completion of major
SJI-4
construction projects. 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 Temperature Adjustment Clause (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. Additional
information on regulatory affairs is incorporated by reference to Notes 1, 7,
8, 9 and 13 of SJI's Annual Report to Shareholders for the year ended
December 31, 1999 which is attached to this report. See Item 14(c)(13).
South Jersey Energy Company
SJE, a New Jersey corporation, is a wholly owned non-regulated subsidiary
of SJI and provides services for the acquisition and transportation of natural
gas for retail and end users and markets total energy management services.
During 1998, SJE also engaged in trading activities in the electric wholesale
market. However, as a result of an alliance with Energy East Corporation, SJE
ceased buying and selling wholesale electricity. Upon expiration of SJE's last
wholesale electric contract in December 1999, SJE formally exited wholesale
electric operations. The alliance enhances SJE's ability to offer a variety of
products and services, from large scale cogeneration projects to retail
electricity. In 1999, SJE was profitable but contributed less than 5% on a
consolidated basis to SJI's net income.
SJ EnerTrade
EnerTrade, a New Jersey corporation established by SJI in 1997, is a
wholly owned non-regulated subsidiary of SJE 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. EnerTrade conducts these activities directly, and through a joint
venture arrangement with UPR Energy Marketing. EnerTrade owns a 50%, non-
controlling interest in the joint venture, South Jersey Resources Group, LLC.
Energy & Minerals, Inc.
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 EnerTrade.
R&T Group, Inc.
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 by 1997 and the subsidiaries
were merged into R&T. The financial statements include R&T as a discontinued
operation (see Note 5 on page 21 of SJI's Annual Report to Shareholders for the
year ended December 31, 1999 which is attached to this report).
In 1999, SJI 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 SJI or which otherwise was
material.
Raw Materials
South Jersey Gas Company
Transportation Contracts and Storage
SJG has direct connections to two interstate pipeline companies, Transco
and Columbia. During 1999, SJG purchased and had delivered approximately 68.2
Bcf of natural gas for distribution to both on-system and off-system customers.
Of this total, 52.4 Bcf was transported on the Transco pipeline system and 15.8
Bcf was transported on the Columbia pipeline system. SJG also secures firm
transportation and other long term services from four additional pipelines
upstream of the Transco and Columbia systems. They include: Columbia Gulf
SJI-5
Transmission Company (Columbia Gulf), Sempra Energy Trading Corp. (Sempra),
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 four year-round and one seasonal firm transportation
(FT) service arrangements. When combined, these services enable SJG to
purchase from third parties and have delivered to its city gate stations by
Transco a total of 159,589 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 agre ement 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 86,999 Mcf per day during periods of high
demand. The terms of the storage service agreements extend for various periods
from 2001 to 2008.
Sempra:
SJG has separate gas sales and capacity management agreements with Sempra,
which were formerly with CNG Energy Service, Corp., which 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 also subscribes to a firm storage service from Columbia, to March 31,
2009, which provides a maximum withdrawal quantity of 51,102 Mcf/d during the
winter season with an associated 3,355,557 Mcf of storage capacity.
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 4,829 Mcf/d may be withdrawn during the winter season. The
gas is delivered to SJG under firm transportation agreements with Equitrans,
CNG and Transco.
Gas Supplies
SJG has several long term gas supply agreements with various producers and
marketers that expire between 2000 and 2007. Under these agreements, SJG can
purchase up to 66,427,914 Mcf of natural gas per year. When advantageous, SJG
can purchase spot supplies of natural gas in place of or in addition to those
volumes reserved under long-term agreements.
The following chart shows by percentage the actual sources of purchased
gas supply for each of the last three years:
1999 1998 1997
------ ------ ------
Long-Term Contract 76.8% 61.8% 73.2%
Spot 23.2% 38.2% 26.8%
------ ------ ------
Total 100.0% 100.0% 100.0%
SJI-6
Supplemental Gas Supplies
SJG has a long term Liquified Natural Gas (LNG) purchase agreement with a
third party provider which extends through October 31, 2000. For the 1999-2000
contract year, SJG's annual contract quantity under the agreement is 186,047
Mcf. LNG purchases are transported to SJG's McKee City, New Jersey LNG storage
facility by truck. SJG is currently in the process of securing a new LNG
contract to replace the existing deal.
SJG operates peaking facilities which can store and vaporize LNG 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 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/d of gas per day into SJG's distribution system.
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 1999-2000 winter season to be 442,676 Mcf versus a design day
supply of 460,565 Mcf. On January 17, 2000, SJG experienced its highest peak-
day demand of 371,612 Mcf with an average temperature of 12.95 degrees F. In
1999, SJG experienced a peak-day demand of 323,750 Mcf with an average
temperature of 22.58 degrees F.
Gas Prices
SJG's average commodity cost of gas purchased in 1999 was $2.30 per Mcf.
South Jersey Energy Company
Access to gas suppliers and cost of gas are significant to the operations
of SJE and its subsidiary, EnerTrade. 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 SJI 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's revenues and net income are
significantly higher during the first and fourth quarters than 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 and fall months. These purchases are financed by short-term loans
which are significantly reduced during the winter months when gas revenues are
higher. Reference is also made to "Liquidity" on page 13 of the SJI's Annual
Report to Shareholders for the year ended December 31, 1999 which is attached
to this report.
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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.
Backlog
Backlog is not material to an understanding of SJI's business or that of
any of its subsidiaries.
Government Contracts
No material portion of the business of SJI 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 commodity 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, while maintaining focus on
being a low-cost provider of natural gas and energy services.
SJE competes with a number of other marketers/brokers in the selling of
wholesale and retail natural gas and retail electricity. Competition includes
SJG, other utilities and alliances which include other utility companies.
Research
During the last three fiscal years, neither SJI 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 13 on pages 24 and 25 of the SJI Annual
Report to Shareholders for the year ended December 31, 1999 which is
attached to this report.
Employees
SJI and its subsidiaries had a total of 665 employees as of
December 31, 1999.
Financial Information About Foreign and Domestic Operations and Export Sales
SJI has no foreign operations and export sales have not been a significant
part of SJI's business.
SJI-8
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, 1999, there were approximately 92 miles of mains in the
transmission systems and 5,132 miles of mains in the distribution systems.
SJG owns office and service buildings, including its corporate
headquarters, at seven locations in the territory and a liquefied natural gas
storage and vaporization facility.
As of December 31, 1999, SJG's utility plant had a gross book value of
$721.3 million and a net book value, after accumulated depreciation, of $529.1
million. In 1999, $47.4 million was spent on additions to utility plant and
there were retirements of property having an aggregate gross book cost of $6.0
million. SJG construction and remediation expenditures for 2000 are currently
expected to approximate $49.8 million.
Virtually all of SJG's transmission pipeline, distribution mains and
service connections are in streets or highways or on the property of others.
The transmission and distribution systems are maintained under franchises or
permits or rights-of-way, many of which are perpetual. SJG's properties (other
than property specifically excluded) are subject to a lien of mortgage under
which its first mortgage bonds are outstanding. We believe these properties
are well maintained and in good operating condition.
EMI owns 235 acres of land in Vineland, New Jersey.
SJF, 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.
SJI owns approximately 139 acres of land in Folsom, New Jersey,
approximately 9.29 acres of land in Linwood, New Jersey and a commercial office
building in Chester, Pennsylvania.
Item 3. Legal Proceedings
SJI is subject to claims which arise in the ordinary course of its
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.
Management of SJI believes that any pending or potential legal proceedings will
not materially affect its operations, consolidated financial position or cash
flow.
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 1999 fiscal year.
SJI-9
Item 4-A. Executive Officers of the Registrant
Name Age Positions with SJI
Charles Biscieglia 55 Chairman of the Board, President
and Chief Executive Officer
Edward J. Graham 42 Vice President
David A. Kindlick 45 Vice President
Albert V. Ruggiero 51 Vice President
George L. Baulig 58 Vice President & Corporate
Secretary
William J. Smethurst, Jr. 53 Treasurer
Charles Biscieglia was elected Assistant Vice President, Commercial
Operations of SJG in May 1981, Vice President, Commercial Operations in
November 1983, Senior Vice President, Operations in April 1987, Executive Vice
President and Chief Operating Officer in April 1991 and President and Chief
Executive Officer in March 1998. Mr. Biscieglia was elected Vice President of
SJI in April 1997, President and Chief Executive Officer in October 1998 and
Chairman, President and Chief Executive Officer in January 2000.
Edward J. Graham was elected Vice President & Controller of SJG in
June 1994, Vice President, Gas Management in April 1995, and Senior Vice
President, Energy Management in April 1998. Mr. Graham was elected President
of SJ EnerTrade in October 1997 and President of SJE in October 1998.
Mr. Graham was elected Vice President of SJI in June 1998.
David A. Kindlick was elected Assistant Vice President, Revenue
Requirements of SJG in October 1989, Vice President, Revenue Requirements in
April 1992, Vice President, Rates and Budgeting in April 1995, and Senior Vice
President, Finance and Rates in April 1998. Mr. Kindlick was elected Vice
President of SJI in June 1997.
Albert V. Ruggiero was elected Vice President, Human Resources of SJG in
April 1990, Vice President, Human Resources & External Affairs in April 1995
and Senior Vice President, Corporate Development in April 1998. Mr. Ruggiero
was elected Vice President of SJI in October 1998.
George L. Baulig was elected Secretary and Assistant Treasurer of SJI, SJG
and EMI in November 1980 and Treasurer of SJI in October 1996. Mr. Baulig also
serves as Secretary of R&T and SJE, since October 1989 to date. Mr. Baulig
was elected Senior Vice President and Corporate Secretary of SJG in April 1998.
Mr. Baulig was elected Vice President of SJI in April 1999 and at the same time
relinquished the Treasurer's title.
William J. Smethurst, Jr. was elected Assistant Secretary & Assistant
Treasurer of SJG in November 1981, Treasurer & Assistant Secretary in
November 1983, Controller & Assistant Secretary in April 1988 and Vice
President & Treasurer in April 1992. Mr. Smethurst was elected Treasurer of
SJ EnerTrade in October 1997 and Treasurer of R&T Group in April 1998.
Mr. Smethurst was elected Assistant Secretary & Assistant Treasurer of SJE in
March 1981, Treasurer & Assistant Secretary in March 1987 and Treasurer in
April 1995. Mr. Smethurst was elected Assistant Secretary & Assistant
Treasurer of EMI in November 1981 and Treasurer in April 1998. Mr. Smethurst
was elected Assistant Secretary & Assistant Treasurer of SJI in November 1981
and Treasurer in April 1999.
Executive officers of SJI 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 6
on pages 21 and 22 and the bottom of page 26 of SJI's Annual Report to
Shareholders for the year ended December 31, 1999 which is attached to this
report.
Item 6. Selected Financial Data
Information required by this item is incorporated by reference to page 2
of SJI's Annual Report to Shareholders for the year ended December 31, 1999
which is attached to this report.
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
12 through 15 of SJI's Annual Report to Shareholders for the year ended
December 31, 1999 which is attached to this report.
Item 7A. Quantitative and Qualitative Disclosures about Market Risks
SJI is exposed to interest rate risk and, to a much lesser degree,
commodity price risk. Outlined below is a description of these exposures and
an explanation as to how we manage these risks.
Interest Rate Risk - SJI is subject to the risk of fluctuating interest
rates in the normal course of business. We manage interest rates through the
use of fixed and, to a lesser extent, variable rate debt. For fiscal year
1999, a hypothetical 10% change in interest rates would have resulted in a $0.5
million change in interest costs and earnings before taxes related to variable
rate debt.
Commodity Price Risk - SJI and its subsidiaries do not enter into
derivatives transactions to hedge natural gas costs. Information on commodity
price risk is incorporated by reference to the Financial Risk Management
section on Page 15 of SJI's Annual Report to Shareholders for the year ended
December 31, 1999, which is attached to this report.
Item 8. Financial Statements and Supplementary Data
Information required by this item is incorporated by reference to pages
15 through 25 and the top of page 26 of SJI's Annual Report to Shareholders for
the year ended December 31, 1999 which is attached to this report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
SJI-11
PART III
Item 10. Directors and Executive Officers of the Registrant
Information required by this item relating to the directors of SJI is
incorporated by reference to pages 2 through 5 of SJI's definitive Proxy
Statement, dated March 10, 2000, filed in connection with SJI's 2000 Annual
Meeting of Shareholders. Information required by this item relating to the
executive officers of SJI 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
7 through 11 of SJI's definitive Proxy Statement, dated March 10, 2000, filed
in connection with SJI's 2000 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 SJI's definitive Proxy Statement, dated March 10, 2000, filed in
connection with SJI's 2000 Annual Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions
Information required by this item is incorporated by reference to page 6
of SJI's definitive Proxy Statement, dated March 10, 2000, filed in connection
with SJI's 2000 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 16, 2000, are incorporated herein by reference to pages 15
through 25 of SJI's Annual Report to Shareholders for the year ended
December 31, 1999 which is attached to this report.
2 - Supplementary Financial Information
Information regarding selected quarterly financial data is incorporated
herein by reference to page 26 of SJI's Annual Report to Shareholders for the
year ended December 31, 1999 which is attached to this report.
Supplemental Schedules as of December 31, 1999, 1998 and 1997 and for the
three years ended December 31, 1999, 1998, and 1997:
The Independent Auditors' Report of Deloitte & Touche LLP, Auditors of
SJI (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.
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 Description/Reference
(3)(a)(i) Certificate of Incorporation of South Jersey Industries, Inc., 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 South Jersey Industries, Inc. as amended and restated
through November 19, 1999 (filed herewith).
SJI-13
Exhibit
Number Description/Reference
(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)(xix) Twenty-First Supplemental Indenture dated as of March 1, 1997.
Incorporated by reference from Exhibit (4)(b)(xviv) of Form 10-K
for 1997(1-6364).
(4)(b)(xx) Twenty-Second Supplemental Indenture dated as of October 1, 1998.
Incorporated by reference from Exhibit (4)(b)(ix) of Form S-3
(333-62019).
(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).
SJI-14
Exhibit
Number Description/Reference
(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 (33 3-24065).
(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 (33 3-24065).
(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 (33 3-24065).
(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).
(4)(e) Medium Term Note Indenture of Trust dated October 1, 1998.
Incorporated by reference from Exhibit 4(e) of Form S-3
(333-62019).
(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).
SJI-15
Exhibit
Number Description/Reference
(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).
(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).
SJI-16
Exhibit
Number Description/Reference
(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).
(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 South Jersey
Industries, Inc. 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. Incorporated by
reference from Exhibit (10)(l)(b) of Form 10-K for 1997 (1-6364).
SJI-17
Exhibit
Number Description/Reference
(10)(l)(d)* Form of Officer Employment Agreement between certain officers and
either South Jersey Industries, Inc. or its subsidiaries (filed
herewith).
(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 SJI or subsidiary officers. Incorporated by reference
from Exhibit (10)(l)(i) of Form 10-K for 1997 (1-6364).
(10)(l)(j)* 1997 Stock Option and Stock Appreciation Rights Plan (filed
herewith).
(12) Calculation of Ratio of Earnings to Fixed Charges (Before Federal
Income Taxes) (filed herewith).
(13) The Annual Report to Shareholders of SJI for the year ended
December 31, 1999 is filed as an exhibit hereto solely to the
extent portions are specifically incorporated by reference herein
(filed herewith).
(21) Subsidiaries of the Registrant (filed herewith).
(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).
* Constitutes a management contract or a compensatory plan or arrangement.
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 30, 2000
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/ Charles Biscieglia Chairman of the Board, March 30, 2000
(Charles Biscieglia) President and Chief
Executive Officer
/s/ David A. Kindlick Vice President March 30, 2000
(David A. Kindlick) (Principal Financial Officer)
/s/ William J. Smethurst, Jr. Treasurer March 30, 2000
(William J. Smethurst, Jr.) (Principal Accounting Officer)
/s/ George L. Baulig Vice President & Corporate March 30, 2000
(George L. Baulig) Secretary
/s/ Shirli M. Billings Director March 30, 2000
(Shirli M. Billings)
/s/ Sheila H. Coco Director March 30, 2000
(Sheila H. Coco)
/s/ Richard L. Dunham Director March 30, 2000
(Richard L. Dunham)
SJI-19
Signature Title Date
__________________________ Director March 30, 2000
(W. Cary Edwards)
/s/ Thomas L. Glenn, Jr. Director March 30, 2000
(Thomas L. Glenn, Jr.)
/s/ Herman D. James Director March 30, 2000
(Herman D. James)
/s/ Clarence D. McCormick Director March 30, 2000
(Clarence D. McCormick)
/s/ Frederick R. Raring Director March 30, 2000
(Frederick R. Raring)
SJI-20
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
South Jersey Industries, Inc.:
We have audited the consolidated financial statements of South Jersey
Industries, Inc. and its subsidiaries as of December 31, 1999 and 1998, and for
each of the three years in the period ended December 31, 1999, and have issued
our report thereon dated February 16, 2000; such financial statements and
report are included in your 1999 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) 2. This financial statement schedule is the
responsibility of the Corporation'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 16, 2000
SJI-21
<TABLE>
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
- -------------------------------------------------------------------------------------------------------
Additions
------------------------------
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, 1999 $1,283 $952 $336 $1,454 $1,117
Provision for Uncollectible
Accounts for the Year Ended
December 31, 1998 $1,530 $1,477 $411 $2,135 $1,283
Provision for Uncollectible
Accounts for the Year Ended
December 31, 1997 $1,425 $1,351 $624 $1,870 $1,530
<FN>
(a) Recoveries of accounts previously written off and minor adjustments.
(b) Uncollectible accounts written off.
</FN>
</TABLE>
SJI-22
South Jersey Industries, Inc.
1 South Jersey Plaza
Folsom, NJ 08037
Form 10-K FYE 12/31/99
EXHIBIT INDEX
Exhibit
Number Description/Reference
(3)(a)(i) Certificate of Incorporation of South Jersey Industries, Inc., 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 South Jersey Industries, Inc. as amended and restated
through November 19, 1999 (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)(xix) Twenty-First Supplemental Indenture dated as of March 1, 1997.
Incorporated by reference from Exhibit (4)(b)(xviv) of Form 10-K
for 1997(1-6364).
(4)(b)(xx) Twenty-Second Supplemental Indenture dated as of October 1, 1998.
Incorporated by reference from Exhibit (4)(b)(ix) of Form S-3
(333-62019).
SJI-23
South Jersey Industries, Inc.
1 South Jersey Plaza
Folsom, NJ 08037
Form 10-K FYE 12/31/99
EXHIBIT INDEX
Exhibit
Number Description/Reference
(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).
(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 (33 3-24065).
(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 (33 3-24065).
(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 (33 3-24065).
(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).
(4)(e) Medium Term Note Indenture of Trust dated October 1, 1998.
Incorporated by reference from Exhibit 4(e) of Form S-3
(333-62019).
(9) None
SJI-24
South Jersey Industries, Inc.
1 South Jersey Plaza
Folsom, NJ 08037
Form 10-K FYE 12/31/99
EXHIBIT INDEX
Exhibit
Number Description/Reference
(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).
(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.
1 South Jersey Plaza
Folsom, NJ 08037
Form 10-K FYE 12/31/99
EXHIBIT INDEX
Exhibit
Number Description/Reference
(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.
1 South Jersey Plaza
Folsom, NJ 08037
Form 10-K FYE 12/31/99
EXHIBIT INDEX
Exhibit
Number Description/Reference
(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 South Jersey
Industries, Inc. 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. Incorporated by
reference from Exhibit (10)(l)(b) of Form 10-K for 1997 (1-6364).
(10)(l)(d)* Form of Officer Employment Agreement between certain officers and
either South Jersey Industries, Inc. or its subsidiaries (filed
herewith).
(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 SJI or subsidiary officers. Incorporated by reference
from Exhibit (10)(l)(i) of Form 10-K for 1997 (1-6364).
(10)(l)(j)* 1997 Stock Option and Stock Appreciation Rights Plan (filed
herewith).
SJI-27
South Jersey Industries, Inc.
1 South Jersey Plaza
Folsom, NJ 08037
Form 10-K FYE 12/31/99
EXHIBIT INDEX
Exhibit
Number Description/Reference
(12) Calculation of Ratio of Earnings to Fixed Charges (Before Federal
Income Taxes) (filed herewith).
(13) The Annual Report to Shareholders of SJI for the year ended
December 31, 1999 is filed as an exhibit hereto solely to the
extent portions are specifically incorporated by reference herein
(filed herewith).
(21) Subsidiaries of the Registrant (filed herewith).
(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).
* Constitutes a management contract or a compensatory plan or arrangement.
SJI-28
Exhibit (3)(b)
BYLAWS
(AMENDED AND RESTATED THROUGH NOVEMBER 19, 1999)
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 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 -
(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 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.
- 2 -
(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 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.
- 3 -
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 judgment, 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 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 hav e 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
- 4 -
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 elected by the Board of Directors, may be designated the
Chief Executive Officer, in which case the President shall then be the Chief
Operating Officer. If the Chairman of the Board is elected as an Executive
Officer and is not designated by resolution of the Board as the Chief Executive
Officer, the President shall then be the Chief Executive Officer. The
Executive officers shall be elected annually by the Board of Directors
following the annual meeting of shareholders and each such officer shall hold
office until the corresponding meeting next year and until his successor shall
have been duly chosen and qualified, or until he shall resign 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.
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.
- 5 -
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 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.
- 6 -
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.
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 C ompany entitled to vote generally in the
election of Directors, considered for this purpose as one class.
- 7 -
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, Amended October 23, 1981
and 3.3
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, Amended April 20, 1995.
and 3.3
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.
Article II Section 2.1 Amended April 23, 1998.
Article II Section 2.1 Amended October 23, 1998.
Article III Section 3.1 Amended October 23, 1998.
- 8 -
AMENDMENTS
Article II Section 2.1 Amended May 21, 1999.
Article II Section 2.1 Amended November 19, 1999.
- 9 -
Exhibit (10)(l)(d)
SOUTH JERSEY INDUSTRIES
SOUTH JERSEY GAS COMPANY
SOUTH JERSEY ENERGY COMPANY
Officer Employment Agreement
THIS AGREEMENT made as of the first day of October 1999, by and between
South Jersey Industries, Inc. ("SJI"), and/or one or more of its subsidiaries
South Jersey Gas Company and South Jersey Energy Company, all New Jersey
corporations, having their principal offices at Number One South Jersey Plaza,
Route 54, Folsom, New Jersey (the "Companies"), and (the
"Officer").
W I T N E S S E T H :
WHEREAS, the Companies, desires to assure themselves of the continued
employment of the Officer by the Companies and to encourage his or her
continued attention and dedication to the Companies in the best interests of
the Companies and SJI shareholders; and
WHEREAS, the Officer is presently employed by the Companies as follows:
WHEREAS, the Officer desires to remain and continue in the employ of the
Companies on the terms hereinafter provided;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto agree as follows:
Section 1. Employment.
The Companies hereby agrees to continue to employ the Officer in the
positions in which he or she presently serves, and the Officer hereby agrees to
continue to serve in those positions, on the terms and conditions set forth
herein.
Section 2. Term.
The term of this Agreement shall be for a period of three (3) years
beginning October 1, 1999 and ending on September 30, 2002, subject to earlier
termination under sections 7 and 8.
Section 3. Duties and Responsibilities.
The Officer shall serve in the positions in which he or she presently
serves and shall report only to . The
Officer shall perform such duties and services as are customarily performed by
him or her and as are assigned to him or her by the Board of Directors of SJI.
- 1 -
Section 4. Outside Services.
The Officer agrees to devote substantially all of his or her working time
and efforts to the business and affairs of the Companies and shall not,
directly or indirectly, without the written consent of the SJI Board of
Directors, render any services to any other person, firm or entity, or own,
manage, operate, control or participate in the management of any other person,
firm or entity during the term of this Agreement. However, the Officer is not
prohibited or prevented from acquiring or holding investments and securities
listed on a national or regional securities exchange or sold in an over-the-
counter public market, provided that the Officer is not part of any control
group of such corporation or entity. So long as it does not interfere with his
or her duties under this Agreement, the Officer shall have the right to serve
as a director of any other corporation upon the approval of the Board of
Directors of SJI.
Section 5. Place of Performance.
The Officer's services during the term of this Agreement shall be
performed primarily in the corporate headquarters building of the Companies at
Number One South Jersey Plaza, Route 54, Folsom, New Jersey. Without his or
her prior consent, the Officer shall not be required to move his or her place
of permanent employment from this corporate headquarters building, although the
Officer may be required to undertake reasonable domestic and international
travel from time to time consistent with his or her business travel
obligations.
Section 6. Compensation and Expenses.
6.1 Total Cash Compensation.
During the period of the Officer's employment under this Agreement, the
Companies shall pay to the Officer a Base Salary of not less than $
per annum and, if established by the SJI Board of Directors, a performance
based annual cash award, the two components being defined as Total Cash
Compensation. Base Salary shall be paid in either twenty-four (24) or twenty-
six (26) equal installments. The amount of Total Cash Compensation shall be
reviewed annually in accordance with the normal business practices of the
Companies.
6.2 Additional Benefits.
In addition to the Base Salary, the Companies shall pay for and the
Officer shall be entitled without limitation to participate in employee benefit
plans presently in effect or hereafter adopted by the Companies which are
applicable to employees generally. To the extent said benefits have been
modified or additional benefits provided, they are detailed in Exhibit A, which
is attached hereto and made a part hereof. If employer contributions to any
such plan (other than a defined benefit plan) for the benefit of the Officer or
his or her dependents or beneficiaries are reduced in amount by any statute or
regulation from the payments that would otherwise be so made but for such
statute or regulation, the amount that is prohibited from being paid to such
plan because of such statute or regulation, increased if necessary as provided
in the next sentence, shall be paid, at the time it would have been paid to
such plan except for such prohibition to the Officer in a lump sum cash
- 2 -
payment. Such amount shall be increased if necessary so that, after federal and
state income taxes on the amount as so increased are taken into account, the
net amount after such taxes, shall be paid to the Officer.
6.3 Expenses.
In addition to the Total cash compensation and Additional Benefits, the
Companies shall pay for and the Officer shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Officer in performing
services under this Agreement, including all expenses of travel and living
expenses while away from home on business or at the request of and in the
service of the Companies, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures presently or
hereafter established by the Companies.
6.4 Services Furnished.
The Companies shall furnish the Officer with office space,
administrative/clerical assistance and such other facilities and services as
shall be suitable to the Officer's position and adequate for the performance of
his or her duties.
Section 7. Reasons for Termination.
7.1 Death.
This Agreement shall terminate upon the Officer's death, and he or she
shall be entitled to such death benefits to which he or she is otherwise
entitled presently or which may be hereafter established by the Companies.
7.2 Disability.
If the Officer shall be determined to be disabled in accordance with the
disability policy or plan of the Companies, the Officer may be removed from
positions within the Companies in which he or she then may be serving.
However, the Officer shall not be terminated as an employee of the Companies.
The Officer shall be retained in such positions and given such duties and
responsibilities as are commensurate with his or her abilities at the time.
The Officer shall be entitled to such disability benefits, including short term
and long term, to which he or she is otherwise entitled presently or which may
be hereafter established by the Companies. Until the Officer becomes entitled
to such disability benefits, he or she shall continue to be paid his or her
Total cash compensation in accordance with this Agreement. The determination
of the disability of the Officer shall be made by the Board of Directors of the
Companies in the exercise of his discretion in accordance with procedures set
forth in the disability policies or plan.
7.3 Retirement.
If the Officer shall retire, he or she shall be entitled to such pension
and other benefits applicable to executive employees generally and him or her
specifically including, without limitation, those presently existing or
hereafter established by the Companies.
- 3 -
7.4 For Cause by the Companies.
The Companies may terminate the Officer's employment for Cause. For
purposes of this Agreement, the Companies shall have "Cause" to terminate the
Officer's employment hereunder only for the following reasons: (1) the willful
and continued failure by the Officer to substantially perform his or her duties
hereunder other than any such failure resulting from the Officer's incapacity
due to physical or mental illness or injury; (2) the conviction of the Officer
of a crime under state or federal law and the Companies' Board of Directors or
one of its committees is unable to conclude in good faith (and in its sole
discretion) that the Officer had no reasonable cause to believe that the
activities of which he or she was convicted were unlawf ul and that such
conviction will not materially impair his or her ability to discharge his or
her duties; (3) the willful engaging by the Officer in misconduct which is
materially injurious to the Companies, monetarily or otherwise; or (4) the
continued inability of the Officer to perform his or her duties by reason of
alcoholism or drug abuse even after appropriate rehabilitation services have
been made available to him or her.
7.5 For Good Reason by the Officer.
The Officer may terminate the Officer's employment for Good Reason
following a Change of Control of the Companies at any time during the term of
this Agreement. For purposes of this Agreement, "Good Reason" shall mean any
of the following: (1) the assignment to the Officer by the Companies, without
the Officer's express written approval, of duties inconsistent with the
Officer's position, duties, responsibilities, titles, offices or status with
the Companies immediately prior to a Change of Control of the Companies, or any
removal of the Officer from or any failure to re-elect the Officer to any of
such positions; (2) a reduction in the Officer's Total Cash Compensation as in
effect on the date hereof or as the same is increased from time to time during
the term of this Agreement; (3) the failure to review and increase the
Officer's Total Cash Compensation within twelve (12) months after the Officer's
last increase in Total Cash Compensation by an amount which at least equals, on
a percentage basis, the average percentage increase in Total Cash Compensation
for all the Companies' Officers for that same period (excluding promotions);
(4) the failure to continue in effect any benefit plan or arrangement in which
the Officer is participating immediately prior to a Change of Control, or the
taking of any action by the Companies which would adversely affect the
Officer's participation in and/or materially reduce the Officer's benefits
under any such benefit plan or arrangement or which would deprive the Officer
of any material fringe benefit enjoyed by the Officer immediately prior to a
Change of Control; (5) a relocation of the Companies' corporate headquarters to
a location outside of Folsom, New Jersey, or the Officer's relocation to any
place other than the location at which the Officer performed the Officer's
duties except for required travel by the Officer on the Companies' business to
an extent substantially consistent with the Officer's business travel
obligations immediately prior to a Change of Control; (6) any purported
termination of the Officer's employment which is not effected pursuant to a
Notice of Termination.
For purposes of this Agreement a "Change of Control" of the Companies
shall mean any of the following: (1) consummation of any plan or proposal for
the merger, liquidation, dissolution or acquisition of SJI or all or
substantially all of its as sets; (2) election to the Board of Directors of SJI
- 4 -
of a new majority different from the individuals who at the beginning of the
term of this Agreement constituted the entire Board of Directors of SJI, unless
each such new director stands for election as a management nominee and is
elected by shareholders immediately prior to the election of any such new
majority; or (3) the acquisition by any person of 20% or more of the stock of
SJI having general voting rights in the election of directors (for purposes of
this clause (3), the term "person" shall include two or more persons acting as
a group for the purpose of acquiring, holding or disposing of stock of SJI).
Section 8. Benefits upon Termination.
8.1 Termination by the Companies for Cause.
If the Officer's employment by the Companies shall be terminated for Cause
(as defined in Section 7.4), the Companies shall pay the Officer his or her
Total Cash Compensation through the Date of Termination at the rate in effect
at the time Notice of Termination is given and the Companies shall have no
further salary obligations to the Officer under this Agreement. The Officer
shall be entitled to such retirement benefits as he or she may otherwise be
entitled to on the Date of Termination. Effective as of the Date of
Termination, the Officer shall no longer be an employee of the Companies and
shall no longer be entitled to the privileges and benefits thereof.
8.2 Termination by the Officer for Good Reason.
If the Officer's employment shall be terminated by the Officer for Good
Reason following a Change of Control (as defined in Section 7.5), the Companies
shall pay the Officer as severance pay an amount equal to 300% of a base amount
determined to be the average of the aggregate annual compensation paid to the
Officer during the five (5) calendar years preceding the Date of Termination
and subject to federal income taxes; provided that, if any lump-sum severance
payment, either alone or together with any other payment which the Officer has
the right to receive from the Companies, would constitute a "parachute payment"
as defined in Section 280G of the Internal Revenue Code of 1986, as amended,
such lump-sum severance payment shall be reduced to the largest amount as will
result in no portion of the lump-sum payment being subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended. The
Companies shall pay this lump-sum severance payment, in cash, on the Date of
Termination.
8.3 Termination by the Companies for Other than Cause.
If the Companies terminates the Officer's employment for other than Cause
following a Change of Control, the Officer shall be entitled to those benefits
set forth in paragraph 8.2 above. If the Companies terminates the Officer's
employment for other than Cause without a Change of Control (as defined in
Section 7.5), which the Companies may do at any time in its sole discretion,
the Companies shall pay the Officer as severance pay an amount equal to 150% of
the Officers then current Base Salary, to be paid out in eighteen (18) equal
monthly installments. In addition, the Officer shall be entitled to such
retirement benefits as he may otherwise be entitled to on the Date of
Termination. However, for purposes of the Supplemental Executive Retirement
Plan ("SERP") formula, the eighteen (18) month severance period shall be
- 5 -
included as service credit and the severance amount considered in the Final
Average Earnings ("FAE") calculation. In no case will the inclusion of this
severance period produce a SERP benefit in excess of the maximum percentage of
FAE provided for in the SERP plan in effect on the Date of Termination. The
continuation of such payments and benefits shall be the Officer's sole and
exclusive remedy and the Companies shall have no further obligations or
liability to the Officer or his survivors (except as otherwise provided by this
section) under this Agreement.
Section 9. Procedure for Termination.
9.1 Notice of Termination.
For the purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Officer's
employment.
9.2 Date of Termination.
For the purposes of this Agreement, the "Date of Termination" shall mean
the date of the Officer's death; or thirty (30) days after Notice of
Termination is given; provided that if within ten (10) days after any Notice of
Termination is given the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination, the date of
termination shall be extended for an additional period not to exceed ten (10)
days. During the period between Notice of Termination and the Date of
Termination the Officer may request and shall be granted a hearing before the
Board of Directors of the Companies or such committee thereof as it may
designate, at which time the Board of Directors shall decide whether in its
reasonable good faith opinion the Officer was either disabled or discharged for
Cause and specifying the particulars thereof in detail.
Section 10. No Obligation to Mitigate Damages; No Effect on Other
Contractual Rights.
10.1 The Officer shall not be required to mitigate damages or the amount
of any payment provided for under this Agreement by seeking other employment or
otherwise.
10.2 The amount of any payment provided to the Officer under this
Agreement shall not be reduced by any compensation earned by the Officer as the
result of employment by another employer after the Date of Termination.
10.3 The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Officer's existing rights, or rights which would accrue solely as
a result of the passage of time under any plan of benefits provided to officers
and managers of the Companies.
- 6 -
Section 11. Confidential Information.
The Officer will not, during or after the term of this Agreement, use for
himself or herself or others, or disclose to others, any formulae, trade
secrets, customer lists, know-how or other confidential information of or about
the Companies or any of its affiliates unless authorized in writing to do so by
the Companies. The Officer understands that this undertaking applies to
information of a technical or commercial or other nature and that any
information not made available to the general public is to be considered
confidential.
Section 12. Papers.
All correspondence, memoranda, notes, records, reports, plans and other
papers and items received or made by the Officer in connection with his or her
duties hereunder shall be the property of the Companies, and the Officer shall
not have any property rights to such items when he or she is no longer an
employee of the Companies.
Section 13. Noncompetition.
13.1 The Officer acknowledges that, during the course of his employment
hereunder, he will have access to the Companies' customer and business
prospects, knowledge of and experience in the techniques and methods the
Companies used to do business in its industries and other information and
know-how which, even if not directly disclosed to a competitor of the
Companies, would give a competitor significant and unfair advantages over the
Companies if made available to it through the Officer's employment.
13.2 Accordingly, unless the Officer requests in writing and is thereafter
authorized in writing to do so by the Companies, the Officer will not, during
the term of this Agreement, or for a period of one (1) year thereafter,
directly or indirectly own, manage, operate, join, control or participate in
the ownership, management, operation or control of, or be employed by, any
business, corporation, proprietorship, partnership or other entity which
competes with or is engaged in any alliance or joint venture with either of the
Companies.
13.3 The undertakings in this Section 13: shall apply only to those areas
where the Companies engage or propose to engage in business or which the
Companies, at the termination of the Officer's employment hereunder have
defined as their market territory, but shall not apply if the Company is or the
Companies are, and after thirty days' written notice to the Companies thereof
continue to be, in default of its or their obligation to make any of the
payments they are then required to make to the Officer and the Officer is not
in default in the performance of his obligations. For the avoidance of doubt,
it is agreed that Energy Company's business involves participation in
electronic gas trading markets with dealings with buyers, sellers and traders
located throughout the United States, and in which geographical location of
traders and managers in unimportant. Accordingly, it is agreed that the
restrictions of this Section 13 shall apply to Energy Company's competitors
located throughout the northeast and mid-atlantic United States, and that such
limitations are reasonable in light of the kind of business transacted by
Energy Company.
- 7 -
13.4 If the provisions of this Section 13 should ever be adjudicated to
exceed the time, geographic or other limitations permitted by applicable law in
any jurisdiction, then such provisions shall be deemed reformed in such
jurisdiction to the maximum time, geographic or other limitations permitted the
law applicable in that jurisdiction. In addition, the Officer hereby
authorizes the Company to bring the Officer's obligations hereunder to the
attention of, and to provide a copy or description of pertinent Sections of
this Agreement to, any entity which the Company believes may offer or has
offered employment to the Officer.
Section 14. Renewal and Extension of Agreement.
The term of this Agreement shall be automatically renewed and extended for
a period of three (3) years from the date of any Change of Control in order
that the Officer obtains the full benefit of all severance benefits in the
event of termination of employment after any Change of Control. This
Agreement, either under its normal three (3) year term or under the term
resulting from a Change of Control, shall be considered for renewal and
extension by the Board of Directors of the Companies or such committee thereof
as it may designate at least six (6) months prior to the end of its term.
Action by the Board of Directors shall be required to renew and extend this
Agreement.
Section 15. Enforcement.
The Officer acknowledges that in the event of his or her breach or threat
of breach of Sections 11, 12 or 13 of this Agreement, the Companies' remedies
at law will be inadequate and, in such event, the Companies will be entitled to
appropriate injunctive and other equitable relief in addition to its legal
remedies.
Section 16. Notices.
All notices and other communications provided for herein that one party
intends to give to the other party shall be in writing and shall be considered
given when mailed by certified mail, return receipt requested, or personally
delivered, either to the party or at the address set forth below (or to such
other address as a party shall designate by notice hereunder):
South Jersey Industries, Inc.
Attn: Chairman, Board of Directors
Number One South Jersey Plaza - Route 54
Folsom, New Jersey 08037
{OFFICER NAME & ADDRESS}
- 8 -
Section 17. Amendments.
This Agreement may be amended, modified, superseded, canceled, renewed or
extended only by a written instrument executed by both parties hereto.
Section 18. Binding Effect and Non-Assignability.
This Agreement shall inure to the benefit of the Officer's heirs and
personal representatives and shall be binding upon the successor of the
Companies, including any entity with which the Companies may be merged or
consolidated or which may acquire all or substantially all of the assets of the
Companies. This Agreement shall not be assignable, in whole or in part, by
either party, without the written consent of the other party.
Section 19. Legal Expenses.
In the event of a dispute in connection with this Agreement, the parties
shall each pay their own costs, except that in the event of such a dispute
after a Change of Control involving termination of employment, or involving
entitlement to compensation or benefits in the event of termination of
employment, the Companies shall pay the legal expenses of the Officer.
Section 20. Arbitration.
Any controversy or claim arising out of or relating to this Agreement or
the breach thereof shall be settled by arbitration in the County of Atlantic,
State of New Jersey, in accordance with the rules then in effect of the
American Arbitration Association, and judgment upon the award rendered may be
entered in any court having jurisdiction thereof. In any such arbitration each
party will choose one arbitrator and those two arbitrators will choose a third.
Each party will pay the costs associated with its arbitrator and will divide
equally the cost associated with the third arbitrator. Notwithstanding
anything to the contrary in this Section 20, either party may commence in any
court having jurisdiction over the parties hereto any action to obtain
injunctive relief.
Section 21. Equitable Relief
The Companies and the Officer confirm that the restrictions contained in
Section 11, 12 and 13 are, in view of the nature of the business of the
Companies, reasonable and necessary to protect the legitimate interests of the
Companies, and that any violation of any provision of those Sections will
result in irreparable injury to the Companies. The Officer hereby agrees that,
in the event of any breach or threatened breach of the terms or conditions of
the Agreement by the Officer, the Companies' remedies at law will be inadequate
and, in any such event, any of them shall be entitled to commence an action for
preliminary and permanent injunctive relief and other equitable relief in any
court of competent jurisdiction, notwithstanding any provision hereof relating
to arbitration. The Officer further irrevocably consents to the jurisdiction
of any state or federal court located in the State of New Jersey over any suit,
action or proceeding arising out of or relating to this Section and hereby
waives, to the fullest extent permitted by law, any objection that he may now
or hereafter have to such jurisdiction or to the laying of venue of any such
- 9 -
suit, action or proceeding brought in such a court and any claim that such
suit, action or proceeding has been brought in an inconvenient forum. The
Officer agrees that effective service of process may be made upon him by mail
under the notice provisions contained in Section 16. No party hereto shall be
required to post a bond prior to the commencement of any suit, action or
proceeding relating to this Section.
Section 22. Governing Law.
This Agreement shall be governed by the laws of the State of New Jersey.
Section 23. Entire Agreement.
This Agreement contains the entire agreement between the parties relative
to its subject matter, superseding all prior agreements or understandings of
the parties relating thereto.
Section 24. Waiver.
Any term or provision of this Agreement may be waived in writing at any
time by the party entitled to the benefit thereof. The failure of either party
at any time to require performance of any provision of this Agreement which has
not been waived in writing shall not affect such party's rights at a later time
to enforce such provision. No consent or waiver by either party to any default
or to any breach of a condition or term of this Agreement shall be deemed or
construed to be a consent or waiver to any other breach or default.
Section 25. Invalidity of Portion of Agreement.
If any provision of this Agreement or the application thereof to either
party shall be invalid or unenforceable to any extent, the remainder of this
Agreement shall not be affected thereby and shall be enforceable to the fullest
extent of the law.
Section 26. Benefits of the Agreement
This Agreement is for the benefit of each of the Companies, and each of
them as well as the Companies shall have standing to enforce it as though it is
a party hereto. Each reference in this Agreement to an obligation by either of
the Companies shall be a reference to the obligation of the Company to cause
the Companies to perform such obligation. Each undertaking by either of the
Companies in this Agreement shall be the undertaking of the Company to cause
the Companies to perform such undertaking.
- 10 -
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
effective as of the date first above written.
FOR THE COMPANIES:
By_________________________________
By_________________________________
- 11 -
EXHIBIT A
ADDITIONAL OR MODIFIED OFFICER BENEFITS
The following benefits are provided to the Officer who is party to this
Officer Employment Agreement.
1. Disability Plan
(a) temporary disability (sick pay), commences on the eighth
(8th) consecutive day of absence. Temporary disability shall be paid at a rate
of one hundred percent (100%) of the Officers Base Salary, and extends at full
pay for up to 120 days (for officers with less than five (5) years of service
and up to 365 days for Officers with service of five (5) or more years.
(b) long term disability (LTD), begins upon the expiration of
the temporary disability benefit as described above. LTD is paid at a rate of
fifty percent (50%) of the Officers Base Salary, reduced by Social Security
Disability payments, if any. LTD continues until the Officers status changes as
a result of retirement, rehabilitation, death, voluntary resignation or
reassignment as provided for in section 7.2. For the first two years of LTD,
medical certification of the ongoing disability against the Officers "own
position(s)" is required. Thereafter, medical certification shall consider "any
position". At the discretion of the CEO, the Officer's position may be replaced
following one year of his/her LTD.
2. Group Life Insurance - at a principle equivalent to two times
(2x) the Officer's Base Salary, rounded to the next highest $ 5,000 increment.
The insurance premium shall be paid by the Companies; the Officer shall be
responsible for resultant federal, state or local income taxes.
3. 24-Hour Accident Protection Coverage - while in the employ of
the Company in an amount of $ 250,000. The insurance premium shall be paid by
the Companies; the Officer shall be responsible for resultant federal, state or
local income taxes.
4. Supplemental Survivor's Benefit - upon the death of the
Officer while he/she is in the employ of the Company, his/her surviving
beneficiary shall receive a lump sum payment of $1,000 to be paid as soon as
practical following the Officer's death. The surviving beneficiary shall also
receive a lump sum death benefit based upon years of service with the company
in the amounts of six (6) months base salary (10-15 service years); nine (9)
months base salary (15-25 service years); twelve (12) months base salary
(25 + service years). Such payment shall be offset by proceeds from the
Officer's qualified pension plan and SERP in the year of death.
5. Supplemental Executive Retirement Plan (SERP) - the Officer
achieving eligibility under the SERP plan, shall be entitled to the pension
benefits of that plan in place on the effective date of the Officer Employment
Agreement or, in effect on the earlier of his/her termination or retirement
date, whichever provides the greater benefit in the opinion of the Officer.
- 12 -
6. Company Automobile - the Officer shall be provided a company
automobile to be used for business and at the Officer's discretion, for
commuting and other non-business purposes. The Companies shall provide for
vehicle registration, insurance coverage, repair, preventative maintenance and
fuel. The Officer shall be responsible for any federal and/or state income
taxes which result from non-business usage.
7. Time Off - the Officer shall take such time off for vacation or
personal needs as may be accommodated while ensuring the duties and
responsibilities of his/her position are accommodated to the satisfaction of
SJI's CEO. It is anticipated that such time off would not normally exceed
twenty (20) days per calendar year, exclusive of scheduled corporate holidays.
Time off shall not accrue, nor shall it be carried from one year to the next;
resultantly, there shall be no payment for "unused time off" at the time of the
Officer's death, retirement or other such termination.
8. Annual Physical Examination - the Companies shall provide the
Officer with an annual physical examination at its expense. The Officer shall
be responsible to schedule and undergo a reasonably comprehensive annual
physical examination by a physician of his/her choosing, between the months of
June and October. The attending physician shall provide to the Officer a
reasonably detailed oral or written report of his/her findings and
recommendations. Said report and recommendations shall neither be requested nor
provided to the Company, its other officers, employees or agents. However,
should the Officer be diagnosed with a condition which in his or her judgment
will (a) substantially effect his/her performance, or (b) render him or her
unable to continue as an Officer, or (c) likely result in his or her death
within a twelve month period of such diagnosis, the Companies request that the
Officer advise the CEO accordingly, so that proper succession planning can be
initiated.
9. Severance Benefits - in the event the Officer terminates
subject to section 8.2 or 8.3, the Companies shall provide out placement
services to the Officer in an amount not to exceed $ 15,000 or at the
discretion of the CEO, up to $ 20,000. The Officer shall provide the Companies
with a proposal from a consultant of the Officer's choosing. Consultant
invoices shall be rendered directly to the Companies and payment shall be made
up to the approved amount, directly to the out placement firm. In the event the
Officer terminates by virtue of retirement, disability, for good reason by the
officer or, by the companies for other than cause, the CEO of SJI may at
his/her discretion, transfer title to the companies car to the Officer (if the
SJI CEO, at the discretion of the SJI Board of Director's Compensation &
Pension Committee). Subject to governing law and/or regulation, death benefits
and health benefits may continue at the Officer's (or survivor's) request and
expense and at the applicable individual, group or COBRA premium/rates.
- 13 -
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).
Date of Minimum
Name Capacities in Which Served Agreement Base Salary
George L. Baulig Vice President & Corporate 10/1/99 $140,000
Secretary, South Jersey Industries,
Inc.; Senior Vice President &
Corporate Secretary, South Jersey
Gas Company
Charles Biscieglia Chairman of the Board, President 10/1/99 330,000
and Chief Executive Officer, South
Jersey Industries, Inc.; President
and CEO, South Jersey Gas Company
Edward J. Graham Vice President, South Jersey 10/1/99 175,000
Industries, Inc.; President, South
Jersey Energy Company; Senior Vice
President, Energy Management, South
Jersey Gas Company
Richard J. Jackson Senior Vice President, Operations, 10/1/99 122,000
South Jersey Gas Company
David A. Kindlick Vice President, South Jersey 10/1/99 170,000
Industries, Inc.; Senior Vice
President, Finance & Rates, South
Jersey Gas Company
Janet T. Nickels Senior Vice President, Marketing & 10/1/99 122,000
Customer Services, South Jersey
Gas Company
Albert V. Ruggiero Vice President, South Jersey 10/1/99 175,000
Industries, Inc.; Senior Vice
President, Corporate Development,
South Jersey Gas Company
APPENDIX A
SOUTH JERSEY INDUSTRIES, INC. 1997 STOCK-BASED COMPENSATION PLAN
(As Amended and Restated Effective January 1, 1999)
1. Purpose Of Plan
The purpose of the Plan, which was formerly known as the South Jersey
Industries, Inc. 1997 Stock Option and Stock Appreciation Rights Plan, is to
assist the Company in retaining the employment of valued officers and employees
by: (i) providing incentive compensation opportunities competitive with those
of other major companies; (ii) providing performance related incentives that
motivate superior performance on the part of the Company's officers and
employees; and (iii) providing the Company's officers and employees with the
opportunity to acquire an ownership interest in the Company and to thereby
acquire a greater stake in the Company and a closer identity with it.
2. Definitions
(a) "Award" means an award of Options, SARs, or Restricted Stock.
(b) "Board" means the board of directors of the Parent Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the committee described in Paragraph 5.
(e) "Company" means South Jersey Industries, Inc. and each of its
Subsidiary Companies.
(f) "Date of Grant" means the date on which an Option, SAR or Restricted
Stock Award is granted.
(g) "Dividend Equivalent" means the right to receive the equivalent value
(in Shares) of dividends that are paid on Restricted Stock and
reinvested in Shares.
(h) "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.
(i) "Holder" means a person to whom (i) an SAR has been granted under the
Plan, which SAR has not been exercised and has not expired or
terminated, or (ii) a Restricted Stock Award has been granted, which
Award has not become vested or been forfeited.
(j) "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.
(k) "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.
(l) Option" means any stock option granted under the Plan and described
either in Paragraph 3(a) or 3(b).
- 1 -
(m) "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.
(n) "Parent Company" means South Jersey Industries, Inc.
(o) "Performance Goal" means the annual consolidated earnings per share
from the Company's continuing operations, or any other goal that is
established at the discretion of the Committee including, among other
things: (i) the price of Shares, (ii) the market share of the Company
(or any business unit thereof), (iii) sales by the Company (or any
business unit thereof), (iv) return on equity of the Company, or (v)
costs of the Company (or any business unit thereof). The Committee
shall have sole discretion to determine specific targets within each
category of Performance Goals.
(p) "Restriction Period" means the period during which Restricted Stock
awarded under the Plan is subject to forfeiture.
(q) "Restricted Stock" means Shares awarded by the Company under
Paragraph 11 of the Plan and described in Paragraph 3(d).
(r) "SAR" means a stock appreciation right granted under the Plan and
described in Paragraph 3(c).
(s) "Share" or "Shares" means a share or shares of Common Stock of the
Parent Company.
(t) "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.
(u) "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.
(v) "Value" of a 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;
(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 -
(d) Restricted Stock Awards, which give the Holder a specific number of
Shares which are either (i) awarded upon the Company's achievement of
Performance Goals established by the Committee, or (ii) awarded,
subject to forfeiture if the Company fails to achieve Performance
Goals established by the Committee.
4. Stock Subject To Plan
Not more than 306,000 Shares in the aggregate may be delivered pursuant to
the Plan upon exercise of Options or SARs, or pursuant to Restricted Stock
Awards. The Shares so delivered may, at the option of the Company, be either
treasury Shares or Shares originally issued for such purpose. 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. If a Restricted Stock Award is
forfeited, other Restricted Stock Awards may be granted covering the Shares
which were forfeited.
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 eligible (or shall have been eligible within one year prior to the
date of his or her appointment) to be granted Options, SARs or Restricted Stock
Awards under the Plan. Additionally, no member of the Committee shall be
eligible (or shall have been eligible within one year prior to the date of his
or her appointment) to be selected as a participant under any other
discretionary plan of the Company or any of its affiliates entitling 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, SARs, Restricted Stock Awards or all of
the foregoing 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.
(c) Restricted Stock Awards may be granted to those officers and other
employees of the Company who are designated by the Committee as
eligible to receive Restricted Stock Awards.
- 3 -
8. Option and SAR Agreements and Terms
All Options and SARs shall be granted within ten years from November 22,
1996 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 terms of each such agreement shall be determined from time to
time by the Committee, consistent, however, with the following:
(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 Committee, 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 case 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 issuance) upon each stock exchange
- 4 -
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.
(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 Shares 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 arrangements 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 effect 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 (as determined by the Committee) 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 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;
- 5 -
(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 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 ten 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 person 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 following the date of the Optionee's or Holder's
death, or such longer period as the Committee may 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 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 option 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 exercise 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 plan 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.
10. Rights As Shareholders With Respect to Options and SARs
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. Restricted Stock Awards
The grant of Restricted Stock Award shall be subject to the following
terms and conditions:
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(a) Grant of Restricted Stock Award. Any Restricted Stock granted under
the Plan shall be evidenced by an agreement executed by the Company
and the Holder, which agreement shall conform to the requirements of
the Plan, and shall specify (i) the number of Shares subject to the
Award, (ii) the Restriction Period applicable to each Award, (iii)
the events that will give rise to a forfeiture of the Award, (iv) the
Performance Goals that must be achieved in order for the restriction
to be removed from the Award, (v) the extent to which the Holder's
right to receive the Shares under the Award will be forfeited if the
Performance Goals are not met, and (vi) whether the Restricted Stock
is subject to a vesting schedule. The agreement may contain such
other provisions not inconsistent with the terms of the Plan as the
Committee shall deem advisable.
(b) Delivery of Restricted Stock. Upon determination of the number of
shares of Restricted Stock that are to be granted to the Holder, the
Committee shall direct that a certificate or certificates
representing the number of Shares be issued to the Holder with the
Holder designated as the registered owner. The certificate(s)
representing such shares shall be legended as to restrictions on the
sale, transfer, assignment, or pledge of the Restricted Stock during
the Restriction Period and deposited by the Holder, together with a
stock power endorsed in blank, with the Company.
(c) Dividend Equivalents. Notwithstanding any provision of the Plan to
the contrary, a Holder who has been granted a Restricted Stock Award
pursuant to this Paragraph 11 may, at the discretion of the
Committee, be credited as of dividend payment dates during the
Restriction Period with Dividend Equivalents with respect to the
Shares underlying the Restricted Stock Award. Such Dividend
Equivalents shall be credited to an account established on behalf of
the Holder by the Company. The Dividend Equivalents credited under
this Paragraph (c) shall be notionally reinvested in Shares and shall
be converted into additional Shares under such formula, at such time,
and subject to such limitations as may be determined by the
Committee.
(d) Receipt of Common Stock. At the end of the Restriction Period, the
Committee shall determine, in light of the terms and conditions set
forth in the Restricted Stock agreement, the number of shares of
Restricted Stock with respect to which the restrictions imposed
hereunder shall lapse. The Restricted Stock with respect to which
the restrictions shall lapse shall be converted to unrestricted
Shares by the removal of the restrictive legends from the Restricted
Stock. Thereafter, Shares equal to the number of shares of the
Restricted Stock with respect to which the restrictions hereunder
shall lapse shall be delivered to the Holder. The Committee may, in
its sole discretion, modify or accelerate the vesting and delivery of
shares of Restricted Stock.
- 8 -
(e) Termination By Reason of Death, Disability or Retirement. Unless
otherwise determined by the Committee at the time of grant, if a
Holder ceases to be employed by the Company and such cessation of
employment is due to the Holder's death, disability (as determined by
the Committee) or retirement, the vested portion of the Restricted
Stock, if any, shall become nonforfeitable. The non-vested portion
of the Restricted Stock shall be forfeited as of the date of such
termination of employment.
(f) Other Termination. Unless otherwise determined by the Committee at
the time of grant, if a Holder ceases to be employed by the Company
and such cessation of employment is due to any reason other than for
death, disability (as determined by the Committee), or retirement,
any Restricted Stock with respect to which the Restriction Period has
not expired shall be forfeited.
12. 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 be covered by Options issued pursuant to the Plan,
the aggregate number of SARs that may be granted, the aggregate number of
Shares covered by Restricted Stock Awards that may be granted pursuant to the
Plan, 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, and the number of
Shares subject to each then-outstanding Restricted Stock Award.
13. Mergers, Dispositions and Certain Other Transactions
If, during the term of any Option or SAR, or during the Restricted Period
of any Restricted Stock Award, 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 reorganization
or a liquidation or partial liquidation of the Parent Company, the Parent
Company may choose to take no action with regard to the Options, SARs or
Restricted Stock Awards 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,
- 9 -
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,
consolidation, 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;
(c) The Parent Company shall provide that all Restricted Stock Awards
that are outstanding on the date of the merger, consolidation,
combination or acquisition shall become nonforfeitable and
immediately payable in cash; or
(d) 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.
14. Plan Not To Affect Employment
Neither the Plan nor any Award shall confer upon any employee of the
Company any right to continue in the employment of the Company.
15. 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 options within the meaning of section 422A of the Code, that
the Non-Qualified Options and Restricted Stock Awards 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 available 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.
16. 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 or upon the grant of a Restricted Stock Award
(otherwise than pursuant to Paragraph 12), 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 stock
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 Option, SAR or Restricted Stock Award shall be affected by any such
amendment without the written consent of the Optionee, Holder, or other person
- 10 -
then entitled to exercise such Option or SAR or receive Shares pursuant to such
Restricted Stock Award.
17. Securities Laws
The Committee shall have the power to make each Award 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.
18. Effective Date and Term of Plan
The effective date of the Plan, for purposes of granting Options and SARs
hereunder, shall be November 22, 1996, which is the date on which the Plan was
adopted by the Board. The effective date of the Plan, for purposes of granting
Restricted Stock Awards hereunder shall be the date of adoption of this
amendment and restatement of the Plan. The Plan shall expire no later than 10
years from the date that the Plan was adopted by the Board, unless sooner
terminated by the Board. Any Incentive Stock Option granted before the
approval of the Plan by the Parent Company's shareholders shall be expressly
conditioned upon, and shall not be exercisable until, such approval.
19. General
Each Option, SAR or Restricted Stock Award 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, or pursuant to a Restricted Stock Award, 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 an Option or SAR, or in connection with the receipt of Shares
pursuant to a Restricted Stock Award, or to agree to refrain from selling or
otherwise disposing of the Shares required for a specified period of time or on
specified terms.
- 11 -
<TABLE>
Exhibit 12
SOUTH JERSEY INDUSTRIES, INC.
Calculation of Ratio of Earnings from Continuing Operations to
Fixed Charges (Before Income Taxes)
(IN THOUSANDS)
<CAPTION>
Fiscal Year Ended December 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Income* $21,977 $13,444 $18,429 $18,265 $14,874
Income Taxes 16,428 11,659 10,739 10,171 8,753
Fixed Charges** 24,300 22,436 20,320 20,408 20,442
Capitalized Interest (390) (167) (107) (114) (98)
-------------------------------------------------------
Total Available $62,315 $47,372 $49,381 $48,730 $43,971
=======================================================
Total Available 2.6x 2.1x 2.4x 2.4x 2.2x
- --------------------
Fixed Charges
<FN>
* Net Income before Discontinued Operations.
** Includes interest and preferred securities dividend
requirements of a subsidiary.
</FN>
</TABLE>
Exhibit 13
South Jersey Industries, Inc.
Racing Into The Future
1999 Annual Report to Shareholders
Company Profile
- ---------------
South Jersey Industries, Inc. is an energy services holding company for South
Jersey Gas Company and South Jersey Energy Company. South Jersey Gas Company
provides natural gas utility service to residential, commercial and industrial
customers in the seven southern counties of New Jersey. SJG also sells natural
gas to wholesale customers in the interstate market. SJG provides residential
HVAC and appliance repair service and warranty programs, and sells natural gas
appliances and equipment at its retail Natural Gas Advantage Stores. South
Jersey Energy Company is a licensed natural gas and electricity supplier for
residential, commercial and industrial customers; provides energy consultation
services to help commercial and industrial facilities reduce their overall
energy costs; and provides companies with a new real-time environmental air
monitoring system used during environmental cleanups. To learn more about SJI
and its subsidiaries please visit http://www.sjindustries.com.
Table of Cotents
- ----------------
2 Financial Highlights
4 Where the Rubber Meets the Road:
Chairman's Letter to Shareholders
6 Pedal to the Metal:
South Jersey Gas Company
10 Start Your Engines:
South Jersey Energy Company
12 Under the Hood:
Management's Discussion
16 Consolidated Financial Statements
20 Notes to Consolidated Financial Statements
26 Quarterly Financial Data
27 Comparative Operating Statistics
28 SJI Directors and Officers
- 1 -
<TABLE>
1999 Highlights
Five-Year Summary of Selected Financial Data
(in Thousands Where Applicable)
<CAPTION>
South Jersey Industries, Inc. and Subsidiaries
Year Ended December 31,
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating Results:
Operating Revenues $392,477 $333,010 $348,567 $355,458 $304,163
======== ======== ======== ======== ========
Operating Income $45,887 $35,713 $38,642 $38,559 $35,218
======== ======== ======== ======== ========
Income Applicable to Common Stock:
Continuing Operations $21,977 $13,444 $18,429 $18,265 $14,874
Discontinued Operations - Net (1) (289) (2,458) (2,633) 12,233 2,769
-------- -------- -------- -------- --------
Net Income Applicable to Common Stock $21,688 $10,986 $15,796 $30,498 $17,643
======== ======== ======== ======== ========
Total Assets $766,925 $748,095 $670,601 $658,381 $604,309
======== ======== ======== ======== ========
Capitalization:
Common Equity $185,275 $169,234 $173,499 $172,731 $157,297
Preferred Stock and Securities of Subsidiary 37,044 37,134 37,224 2,314 2,404
Long-Term Debt 183,561 194,710 176,360 149,736 168,721
-------- -------- -------- -------- --------
Total Capitalization $405,880 $401,078 $387,083 $324,781 $328,422
======== ======== ======== ======== ========
Ratio of Income from Continuing Operations to
Fixed Charges (Before Income Taxes) 2.61 2.13 2.44 2.40 2.16
======== ======== ======== ======== ========
Earnings Applicable to Common Stock
(Based on Average Shares):
Continuing Operations $2.01 $1.25 $1.71 $1.70 $1.39
Discontinued Operations - Net (1) (0.02) (0.23) (0.24) 1.14 0.26
-------- -------- -------- -------- --------
Earnings per Common Share $1.99 $1.02 $1.47 $2.84 $1.65
======== ======== ======== ======== ========
Return on Average Common Equity (2) 12.40% 7.85% 10.65% 11.07% 9.53%
======== ======== ======== ======== ========
Share Data:
Number of Shareholders 9.7 10.4 11.4 12.1 12.9
Average Common Shares 10,922 10,776 10,763 10,732 10,720
Common Shares Outstanding at Year End 11,152 10,779 10,771 10,757 10,722
Dividend Reinvestment Plan:
Number of Shareholders 5.4 5.5 6.0 6.1 6.5
Number of Participating Shares 2,518 1,371 1,440 2,845 2,932
Book Value at Year End $16.61 $15.70 $16.11 $16.06 $14.67
Dividends Declared $1.44 $1.44 $1.44 $1.44 $1.44
Market Price at Year End $28 7/16 $26 3/16 $30 5/16 $24 3/8 $23 1/8
Dividend Payout:
From Continuing Operations 71.0% 115.4% 84.1% 84.6% 103.8%
From Total Net Income 71.9% 141.2% 98.1% 50.7% 87.5%
Market Price to Book Value 171.2% 166.8% 188.2% 151.8% 157.6%
Price Earnings Ratio (2) 14.13 20.99 17.73 14.34 16.64
<FN>
(1) Represents discontinued business segments: wholesale electric operations discontinued in 1999,
construction operations sold in 1997, sand mining and distribution operations sold in 1996
and fuel oil operations with related environmental liabilities in 1986 (See Note 5 to
Consolidated Financial Statements).
(2) Calculated based on Income from Continuing Operations.
</FN>
</TABLE>
- 2 -
Where The Rubber Meets The Road
Dear Fellow Shareholders,
What an exciting, dynamic year it was for SJI. We stayed on track,
pursuing a well-defined set of objectives. Building upon each success, we found
new and creative ways to distinguish ourselves from our competitors. And, when
the checkered flag came down on 1999, we delivered a winning year for our
shareholders.
The Winner's Circle -- Best Performance In Our History
We fulfilled our promise of higher performance in 1999 as SJI set new
record earnings from continuing operations of $22 million and record earnings
per share of $2.01 -- a 63 percent and 61 percent improvement over 1998,
respectively. Better financial results throughout the year also moved our stock
price and trading volumes in the right direction. As a result of the efforts of
all our employees, our shareholders realized a total return on their investment
of over 14 percent. Our ability to sustain and improve our performance enabled
our board of directors to raise the annual dividend to $1.46 per share at its
January 2000 meeting. This move demonstrates our commitment to improving total
shareholder value.
Our employees rallied behind SJI like a skilled, experienced pit crew as
we raced toward our record earnings goal. Today, it is clear that we truly are
a different company with more horsepower and far greater potential, focused
upon improving your in vestment.
The Power Train -- Pursuing Our Vision
SJI's subsidiaries drive the pursuit of our vision to be the energy
company of choice for consumers and investors. In 1999, South Jersey Gas put
the pedal to the metal, crossing the finish line with record earnings, new
customers and expanded revenue opportunities.
A thriving regional economy and target marketing helped us add 6,834
customers, the largest number of new natural gas consumers since 1990. We also
enjoyed sustained growth in terms of the natural gas we deliver to our largest
commercial and industrial users, increasing throughput to this group by nearly
17 percent over 1998.
Regional economic indicators forecast strong growth as new Atlantic City
casinos and ancillary businesses multiply in the eastern portion of our service
area. The business boom in our western service area also shows no sign of
slowing as the New Jersey-Philadelphia corridor grows and new companies appear
to provide services to new housing communities. The benefits of natural gas and
aggressive pursuit of customers in new properties constructed with access to
our mains helps us maintain a 90 percent connection rate.
Sometimes with a helpful nudge from SJI, once dormant industrial areas are
now slowly awakening. By securing new customers in several industrial parks,
this sector is strengthening and overwhelmingly prefers South Jersey Gas as its
energy provider of choice.
Our Service Sentry heating, cooling and appliance warranty program and our
time and materials repair service rapidly accelerated in terms of revenue
growth. In 2000, we plan to lap our competition as the best value consumers can
find in this very competitive field.
In January 2000, a long-term effort to secure the recovery of carrying
costs incurred in our environmental remediation program ended with a positive
outcome. Our attention to this responsibility has fostered highly efficient and
- 4 -
technically advanced approaches to the cleanup of former manufactured gas
sites, which will continue to move forward.
South Jersey Energy fired up its engine, bringing $1 million to bottom
line, its best year ever. Energy deregulation has fueled South Jersey Energy as
it continues to dominate other regional energy marketers. The company serves
32,300 natural gas customers and 83 percent of those who chose a non-utility
supplier in South Jersey Gas Company's service territory. New Jersey's retail
electricity market opened in November 1999, and less than 60 days later, South
Jersey Energy had received 2,000 applications. In 2000, we plan to expand
offers in other New Jersey areas where our brand is recognized and where we can
profit and provide energy savings to consumers.
In 1999, South Jersey Energy also hit the track with a real-time air
monitoring system targeted for utilities with environmental cleanup projects.
Interest in this patent-pending system is strong with leading industry and
environmental publications touting its release. We secured profitable contracts
from gas and electric utilities and respond regularly to inquiries from
interested prospects. Although in its early stages, the outlook for this
cutting-edge product is bright.
South Jersey Energy is structured as a growth-oriented, agile company --
one that can predict, identify and, in certain instances, create market
opportunities and capitalize upon them. While presently contributing about 5
percent to SJI's bottom line, our plans call for earnings to represent
approximately 15 percent within 5 years.
The Races Ahead
Over the last several years we rebuilt and refined SJI's engine and in
1999, won our first Grand Prix in a very long racing season. Each race pits us
against our competitors' and your expectations. We intend to keep our
expectations high, strive for excellence and deliver results by continuing to
align our goals with yours.
We expect you, to expect us, to be among the top performers at the end of
every racing season and fiscal year. As shareholders, you are an integral part
of our race team and we want you there with us in the winner's circle.
Sincerely,
Charles Biscieglia
Chairman & CEO
South Jersey Industries, Inc.
February 16, 2000
- 5 -
Pedal To The Metal
South Jersey Gas Company crossed 1999's finish line with record earnings
of $20.4 million. Changes made to our Temperature Adjustment Clause helped
stabilize earnings in 1999. The changes enabled us to achieve record earnings
while temperatures in our region were 4.2 percent above seasonal norms.
As we enter our 90th year in the energy business, the Year 2000 marks the
start of a new era for natural gas utilities in New Jersey. Beginning in 2000,
state residents may choose which company supplies their natural gas commodity
under the New Jersey Electric Discount and Energy Competition Act. Like a
high-performance engine, South Jersey Gas Company has its pedal to the metal
and is ready for the competition.
Deregulation will improve our bottom line. How? South Jersey Gas profits
by distributing the natural gas, not on selling the commodity. Plus, the more
affordable gas becomes, the more consumers are likely to choose it over other
fuels. Moreover, SJI will profit as our affiliate, South Jersey Energy Company,
sells the commodity to its customers.
Growth Drives Profits
South Jersey Gas had a head start on residential energy choice with nearly
36,000 customers already participating in our pilot choice program which began
in 1997. In the first quarter of 2000, we will aggressively promote customer
choice through advertising and public relations outreach activities.
Economy Fuels Growth
South Jersey Gas sets a fast pace in adding customers in a rapidly growing
region. In 1999, we increased our customer base by 6,834 compared with 6,498 in
1998. At year end, we served 273,899 natural gas customers compared with
267,065 in 1998, a 2.6 percent increase. We attribute our increase to targeted
marketing of a superior product and a surge of new housing construction in the
western and eastern portions of our territory.
According to the Builders League of South Jersey, in the first nine months
of 1999 new home permits increased by 19 percent in Atlantic and Cape May
counties and by almost 15 percent in Gloucester County. Growth drives our
profitability because virtually all new properties constructed along our mains
choose natural gas as their primary heating fuel.
- 6 -
Thanks to rapid residential, industrial, and commercial development, our
current growth rate of 2.6 percent is roughly twice the industry average. One
area in which we stand to reap substantial revenues is in Atlantic City with
increased gas load for new casino projects. The city's revitalization also
ensures a fast-track to profits with the outgrowth of new casinos which are
expected to add an estimated 1.0 to 1.5 percent to our current growth rate over
the next 3 to 5 years. As new casinos open, more housing developments,
businesses, and people will populate the area with most using natural gas as
their fuel of choice.
Shifting Gears
Unique public/private partnerships also paved the way for us to expand our
industrial customer base in 1999. In October, we partnered with the South
Jersey Economic Development District to extend gas service to the 51-acre Egg
Harbor City Industrial Park. The industrial park is expected to increase
profits and create 300 to 500 local jobs.
We also entered into a similar partnership with the City of Vineland to
extend gas service to its 155-acre, 25-lot Vineland Industrial Park. With only
five lots vacant as of January, this partnership will increase gas throughput
and profits for South Jersey Gas while also supporting economic development in
our region.
Another avenue for significant growth is in small commercial and
residential conversions to natural gas from other fuel sources. In 1999, 2,024
residential consumers switched to natural gas primarily from oil and
electricity. We identified about 50,000 homes located on or near our gas mains
and, early in 2000, we will launch a year-round marketing effort encouraging
those homeowners to switch to natural gas. Over the last decade, the small
commercial market has grown by 1 percent annually in our service area. In 1999,
we added resources and a dedicated sales force to capture a larger share of
this market.
- 7 -
We also penetrated unique niche markets in 1999, such as selling natural
gas for gas-powered Zambonis and gas-fired dehumidification systems to large
ice rinks in our service area.
Service Business Accelerates
Another of our success stories in 1999 is the appliance repair service
business. In 1998, we began aggressively marketing our Service Sentry appliance
warranty plan which covers parts and labor. Heightened consumer awareness of
our repair services through Service Sentry has generated a great deal of
interest as contract sales jumped by 35 percent over 1998. By marketing Service
Sentry we also benefited by a 28.2 percent increase in revenues from non-
warranty appliance service calls. In 1999, these calls contributed $1.8 million
in revenues.
Another factor leading to our success in appliance repair service is our
entry into the electric air conditioning repair business. In 1999, we completed
over 6,100 air conditioning repairs. Customer trust in our good name backed by
90 years of reliable service and a highly skilled workforce helps this business
unit prosper.
To further penetrate the appliance service market, we developed new
offerings to add to our Service Sentry program. Upon approval from the New
Jersey Board of Public Utilities, we will begin marketing those plans which
include several non-gas appliances. In 2000, we will launch a new program
covering exposed gas piping in the home. Additionally, we changed the way we
market our warranty program and are now reaching out to specific audiences with
very targeted messages. With these improvements we will build on the success we
currently enjoy.
Revving Operational Engines
South Jersey Gas continues controlling expenditures with process
improvements throughout our operations. We are able to do more with less and
continue to reduce our operating and maintenance costs per customer.
Comparatively, our 1999 operating and maintenance costs per customer decreased
1.6 percent following a 4.4 percent decrease last year. We plan to further
reduce these costs with continued training, efficient equipment and constant
evaluation of operational practices.
- 8 -
Our in-house computer expertise paved the way for a smooth transition into
Y2K. By completing all of our Y2K reprogramming with in-house staff, our
expenditures were considerably less than many other comparable companies.
Thanks to the hard work of our entire team, customers enjoyed a comfortable new
year with uninterrupted gas service.
January 1999 ushered in another milestone with the full activation of the
New Sentury Pipeline, which is the largest pipeline project in company history.
The 24-inch diameter pipeline runs some 20 miles in Gloucester County and is
vital in bringing additional capacity to our entire system, giving us the
ability to support future growth.
We completed our transition of the meter reading function into Millennium
Account Services, LLC, an unregulated company created through a joint venture
with Conectiv Solutions, LLC. Today, this company reads both gas and electric
meters in South Jersey bringing greater meter reading efficiency, cost savings
to the utility, and a first-year profit to SJI.
Exciting growth opportunities, higher profitability, new services and
revenue streams keep South Jersey Gas Company a leader. As we race into our
bright future, we will use our innovation, adaptability and competitive spirit
to help put your investment in SJI in the winner's circle again and again.
- 9 -
Start Your Engines
South Jersey Energy Company started its engines and roared across the
finish line with its most profitable year ever, adding $1 million to SJI's
bottom line. Our goal is to become a single point of contact for energy and
related services while partnering with others to satisfy our clients' needs.
The deregulated choice for electricity and natural gas is now available to
everyone in New Jersey. During 1999, many energy marketers came to our area,
then turned around and drove home. Why? South Jersey Energy does it better. Our
hometown approach and community involvement puts a real face on the complex
process of choosing a new gas or electricity supplier.
Today, we lap all other local gas marketers. In 1999, South Jersey
Energy's residential enrollment more than tripled. Our regional brand is strong
and we are using it to sell retail electricity to residential, commercial and
industrial customers. It is still quite early, but initial interest is strong
as we already received 2,000 applications for electricity supplies. In 2000, we
will grow this business by offering electricity and natural gas savings where
it is profitable for us, yet competitively priced for consumers. We also expect
to profit from retail electricity sales via South Jersey Energy Solutions, LLC,
a partnership we formed with Energy East Solutions, Inc., a subsidiary of New
York-based Energy East.
Counties in New Jersey are now pooling to buy their gas and electricity
supplies in bulk to increase energy savings for schools, large buildings and
offices. Last year, we won every bid we entered for natural gas supply
contracts in Atlantic, Cape May, Cumberland, Gloucester, Camden, and Salem
counties. These contracts are for 1-year terms and prove we can win against our
competitors. We are now bidding on similar contracts for electricity supplies
to those same counties as they become available.
High Performance Service
South Jersey Energy does more than just provide savings on energy
commodities. Did you know we also managed wholesale natural gas supply
portfolios, storage, and assets for five of the East Coast's largest utilities?
We have done so successfully for several years through our partnership with UPR
Energy Marketing, Inc.
- 10 -
South Jersey Energy offered commercial and industrial customers new ways
to save money in 1999. We now provide energy management services from design to
installation, energy-efficient lighting retrofits, and the construction of on-
site cogeneration facilities with in-house expertise and other partners.
In 1999, we completed several lighting retrofit contracts and will begin a
significant project for a major regional hospital in the first quarter of 2000.
We feel this is a highly valuable service to offer customers as they seek the
best ways to improve their overall energy efficiency.
Air Monitoring Boosts Horsepower
Last year, South Jersey Energy and its partner GZA GeoEnvironmental, Inc.
broke away from the pack with a new, real-time air monitoring technology
solution for utilities with environmental cleanup sites. This jointly
developed, patent-pending system protects public health and limits corporate
liability by monitoring the air for potentially hazardous substances released
during an environmental cleanup. Last year, we locked-in profitable contracts
with major utility companies in the mid-Atlantic region and another utility in
Wisconsin. In the first quarter of 2000, five environmental sites will be
using our system.
To effectively market this system, South Jersey Energy and GZA partnered
with the Institute of Gas Technology, a premier utility research and
development organization. This relationship provides an additional marketing
arm and access to utilities nationwide, backed with IGT's long-standing
credibility. Our system is highly adaptable and may be marketed for other types
of air monitoring at industrial facilities or landfills in the near future.
This system shows great promise and offers additional profits to South Jersey
Energy and, ultimately, SJI.
South Jersey Energy Company is a racing prototype for the energy future.
Evolving markets, competition and dynamic energy products and services put
extra horsepower behind your investment in SJI now and into tomorrow.
- 11 -
Under The Hood
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Overview -- South Jersey Industries, Inc. (SJI) has two operating
subsidiaries, South Jersey Gas Company (SJG) and South Jersey Energy Company
(SJE). SJG is a regulated natural gas distribution company serving 273,899
customers at December 31, 1999, compared with 267,065 customers at December 31,
1998. SJG also makes off-system sales of natural gas on a wholesale basis to
various customers on the interstate pipeline system. In addition, SJG
transports natural gas purchased directly from producers or suppliers for our
own sales and for some of our customers. SJE provides services for the
acquisition and transportation of natural gas for retail end users and markets
total energy management services. SJE also markets an air quality monitoring
system that provides around-the-clock, real-time monitoring for hazardous
airborne substances around a site or facility. SJE began marketing retail
electricity in New Jersey in November 1999 through South Jersey Energy
Solutions, a limited liability company equally owned with Energy East
Solutions, Inc. SJE has one subsidiary, SJEnerTrade (EnerTrade). 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
mid-Atlantic and southern states. These activities are conducted by EnerTrade
and South Jersey Resources Group, LLC (SJRG), a joint venture with UPR Energy
Marketing, Inc. SJI also invested in a joint venture with Conectiv Solutions,
LLC, forming Millennium Account Services, LLC (Millennium). Millennium provides
meter reading services to SJG and Conectiv Power Delivery in southern New
Jersey.
Forward-Looking Statements -- This report contains certain forward-looking
statements concerning projected financial and 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 SJI and involve a
number of risks and uncertainties. We caution that forward-looking statements
are not guarantees and actual results could differ materially from those
expressed or implied in the forward-looking statements. Also, in making
forward-looking statements, we assume no duty to update these statements
should actual results and events differ from current expectations.
A number of factors could cause our actual results to differ materially
from those anticipated, including, but not limited to the following: general
economic conditions on an international, federal, state and local level;
weather conditions in our marketing areas; regulatory and court decisions;
competition in our regulated and deregulated activities; the availability and
cost of capital; our 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, environmental liabilities
and Year 2000-related costs or operating problems; and changes in business
strategies.
Competition -- SJG's franchises are non-exclusive. Currently, no other
utility provides retail gas distribution services within our territory. We do
not expect any 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. We enhanced SJG's competitive position
while maintaining margins by using an unbundled tariff. This tariff allows full
cost of service recovery, except for the variable cost of the gas commodity,
when transporting gas for our customers. Under this tariff, SJG profits from
transporting, rather than selling, the commodity. SJG's residential, commercial
and industrial customers can choose their supplier while we recover the cost of
service through transportation service (See Customer Choice Legislation). We
believe SJG is a leader in addressing the changing marketplace, while focusing
on being a low-cost provider of natural gas and energy services. SJE and
EnerTrade actively arrange energy services, providing low-cost energy supplies
in a highly competitive marketplace.
Customer Choice Legislation -- Effective January 1, 2000, all residential
natural gas customers in New Jersey are able to choose their gas supplier under
the terms of the Electric Discount and Energy Competition Act of February 1999.
Commercial and industrial customers have had the ability to choose gas
suppliers since 1987. SJG's residential customers have been able to choose a
gas supplier since April of 1997 under a pilot program. As of December 31,
1999, 35,683 SJG residential customers participated in the program. Customers'
bills are reduced for cost of gas charges and applicable taxes. The resulting
decrease in SJG's revenues is offset by a corresponding decrease in gas costs
and taxes under a BPU-approved fuel clause. While customer choice can reduce
utility revenues, it does not negatively affect SJG's 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 us to: adjust customer bills for changes in gas supply costs;
reduce the impact of temperature fluctuations on SJG and its customers; recover
remediation costs for former gas manufacturing plants; and recover conservation
plan costs. The BPU-approved LGAC, RAC and DSMC adjustments match revenues
with expenses. TAC adjustments affect revenue, income and cash flows since
colder-than-normal weather can generate credits to customers, while warmer-
than-normal weather can result in additional billings to customers.
The BPU approved a revised TAC for SJG, effective October 1998. TAC
adjustments had the following impacts on 1999 and 1998 fourth quarter and 12-
month net earnings:
1999 1998
------ ------
TAC Adjustment Increase to Net Income
($ in thousands)
Quarter Ended 12/31 $ 642 $361
12 Months Ended 12/31 $1,980 $607
While the revenue and income impacts of TAC adjustments are recorded as
incurred, cash inflows or outflows directly attributable to TAC adjustments do
not begin until the next TAC year. Each TAC year begins October 1.
Status of Year 2000 Impact -- As of February 16, 2000, we were not aware
of any material Y2K-related event affecting either the operational or financial
performance of SJI. We continue to regularly monitor the output and performance
of our information and operating systems and our suppliers, but do not
anticipate any material residual Y2K problems. Total Y2K related costs were
$0.53 million.
Operating Revenues - Utility -- Revenues increased $47.7 million in 1999
compared with 1998. The primary reasons for the increase were higher off-
system sales and 6,834 additional customers at SJG. Results also benefited
significantly from the revised TAC. These factors more than offset revenue
reductions due to the continued migration of firm gas sales to firm
transportation. Note, however, that SJG's tariffs are structured so profits
are derived from gas transportation, not commodity sales. Consequently, the
switch to firm transportation reduced revenues but did not impact
profitability. In 1998, revenues decreased $29.4 million primarily due to
weather that was 14.9% warmer than 1997. State tax reform and increased firm
transportation in lieu of firm gas sales also reduced revenues.
Weather in 1999 was 8.7% colder than in 1998, but was 4.2% warmer than the
20-year average. Previously, changes in temperatures were typically the single
most important factor in explaining revenue fluctuations for comparative
periods in SJI's utility operations. Revisions to SJG's TAC significantly
reduced the weather-related volatility in SJI's utility revenues. However,
comparisons for the first two quarters of 1999 to the prior year's periods
continued to show volatility as 1998 revenues were heavily influenced by
weather. Weather during the third quarter of the year historically has minimal
impact on SJG's earnings as heating requirements are at their seasonal low
point. The fourth quarter of 1999 and 1998 operated under the same TAC.
Revenues for 1999 were closely tied to 20-year normal temperatures and not
actual weather conditions.
Total gas throughput increased 16.6% to 125,818 MMcf in 1999. Throughput
in 1998 declined 1.9% to 107,840 MMcf compared with 1997. The majority of the
1999 increase was due to increased off-system sales. The 1998 decline was due
to weather-related reductions in residential and commercial usage.
Operating Revenues - Nonutility -- Nonutility operating revenues increased
$11.8 million in 1999 and $13.9 million in 1998 almost entirely due to
increased retail gas sales to residential customers and casinos in Atlantic
City.
- 12 -
Gas Purchased for Resale -- Gas purchased for resale increased $33.2
million in 1999 compared with 1998 due mostly to increased sales volumes,
particularly to off-system customers. SJG's gas costs also accounted for a
portion of the increase, averaging $2.38/dt in 1999 compared with $2.35/dt in
1998. A $7.3 million decline in 1998 compared with 1997 was due principally to
warmer weather and customers switching from gas sales to firm transportation.
Gas supply sources include contract and open-market purchases. SJG secures and
maintains its own gas supplies to serve its customers. The next contract
expirations are in February and October 2000. We do not anticipate any
difficulty renewing or replacing expiring contracts under substantially
similar terms and conditions. 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.
Utility Operations -- A summary of net changes in Utility Operations
(in thousands):
1999 vs. 1998 1998 vs. 1997
------------- -------------
Production $ 9 $ 12
Transmission (47) 110
Distribution (238) 66
Customer Accounts and Services (343) 438
Sales (72) (147)
Administration and General (487) (1,256)
Other 23 9
------- -------
Total Net Change $(1,155) $ (768)
======= =======
Distribution expenses declined due to improvements in operating practices.
These improvements included the implementation of an automated dispatch system
and home-based reporting of service personnel. Customer Accounts and Services
costs decreased in 1999 principally due to lower bad debt expenses and a
corresponding downward adjustment in reserves for uncollectible accounts.
Administrative and General costs decreased from 1998 levels principally due to
a decline in regulatory expense amortization.
Other Operating Expenses -- Summary of principal changes in other
consolidated operating expenses (in thousands):
1999 vs. 1998 1998 vs. 1997
------------- -------------
Nonutility Operations $9,161 $13,522
Maintenance 782 (205)
Depreciation 1,828 1,162
Income Taxes 4,769 920
Other Taxes 685 (19,966)
Increases in Nonutility Operations expenses almost entirely reflected
increased retail gas sales to residential customers and Atlantic City casinos.
Higher Maintenance costs in 1999 were due primarily to higher levels of
amortization of previously deferred environmental remediation expenses. These
expenses did not negatively impact net income as they were offset by higher
revenue recovery through the RAC (See Notes 7 and 13). Depreciation is higher
due to increased investment in property, plant and equipment by SJG. Income Tax
changes reflect the impact of changes in pre-tax income. Other Taxes decreased
in 1998 due to the Energy Tax Reform Act implemented January 1998.
Interest Charges -- Interest charges increased in 1999 due to higher
average levels of short- and long-term debt outstanding, partially offset by
lower average interest rates on debt outstanding during the year. The debt was
incurred primarily to support working capital needs and improvements to SJG's
gas transmission and distribution system.
Discontinued Operations -- SJI sold the assets of certain R&T Group, Inc.
(R&T) subsidiaries in early 1997 for approximately $3.5 million. Assets were
sold for their approximate net book value. Based on a plan to discontinue or
sell the R&T companies, we reduced their recorded value in 1996 to estimated
net realizable value (net of income taxes). Also, in 1997, we recorded
additional costs of approximately $2.6 million for environmental remediation
expenditures for the previously operated fuel oil business of South Jersey
Fuel, Inc. (SJF) and for The Morie Company, Inc. (Morie) (See Note 5).
The 1998 loss from discontinued operations was principally due to a
product liability settlement and increased environmental cleanup costs. The
1999 loss was due primarily to environmental cleanup expenses.
In 1998, SJE actively traded electricity in the wholesale market, but
ceased its trading activities later in that same year. Upon expiration of its
last wholesale electric contract in December 1999, SJE formally exited
wholesale electric operations.
Net Income Applicable to Common Stock -- Net income (in thousands) and
earnings per common share reflect the following changes:
1999 vs. 1998 1998 vs. 1997
------------- -------------
Income from Continuing Operations $ 8,533 $(4,985)
Loss from Discontinued
Operations - Net 2,169 175
------- -------
Net Income Increase (Decrease) $10,702 $(4,810)
======= =======
Earnings per Common Share:
Continuing Operations $ 0.76 $ (0.46)
Discontinued Operations - Net 0.21 0.01
------- -------
Earnings per Share Increase
(Decrease) $ 0.97 $ (0.45)
======= =======
The details affecting the changes 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 create large, short-term
cash requirements. These requirements are generally met by cash from operations
and short-term lines of credit. We maintain short-term lines of credit with a
number of banks, totaling $144.0 million, of which $24.1 million was available
at December 31, 1999. The credit lines are uncommitted and unsecured with
interest rates typically available based upon the Federal Funds Rate or London
Interbank Offered Rates (LIBOR).
The changes in cash flows from operating activities (in thousands):
1999 vs. 1998 1998 vs. 1997
------------- -------------
Increases/(Decreases):
Net Income Applicable to Common Stock $10,702 $(4,810)
Depreciation and Amortization 2,702 951
Provision for Losses on Accounts
Receivable (525) 126
Revenues and Fuel Costs Deferred - Net (5,163) 101
Deferred and Non-Current Income Taxes and
Credits - Net (613) 2,367
Net Pre-Tax Loss on Disposal of
Discontinued Operations - (845)
Environmental Remediation Costs - Net 7,256 (2,210)
Accounts Receivable 6,116 (12,716)
Inventories 3,803 (1,650)
Prepayments and Other Current Assets 257 695
Prepaid and Accrued Taxes - Net 21,920 (17,462)
Accounts Payable and Other Accrued
Liabilities (16,301) 4,125
Other - Net 4,165 (619)
-------- --------
Net Cash Provided by Operating
Activities $34,319 $(31,947)
======== ========
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.
Decreases in Revenues and Fuel Costs Deferred - Net reflect
undercollection of fuel costs resulting from increases in natural gas costs and
payments or credits to customers for amounts previously overcollected.
Increases reflect overcollection of fuel costs or the recovery of previously
deferred fuel costs.
Changes in Deferred and Non-Current Income Taxes and Credits - Net
represent the differences between taxes accrued and amounts paid. Generally,
deferred income taxes related to deferred fuel costs will be paid in the next
year.
Changes in Environmental Remediation Costs - Net represent the differences
between amounts expended for environmental remediation compared with amounts
collected under the RAC and insurance recoveries.
Changes in Accounts Receivable are primarily due to the cessation of
wholesale electricity sales by SJE, which represented a $7.1 million receivable
balance at December 31, 1998. This cash source was partially offset by higher
- 13 -
receivable balances due to off-system sales and the impact of colder weather on
SJG's sales volumes. Commodity prices also impact this line item. Changes
impact cash flows when receivables are collected in subsequent periods.
Changes in Inventories reflect the impact of seasonal requirements,
temperatures and commodity price changes.
Changes in Prepaid and Accrued Taxes - Net reflect the impact of
differences between taxes paid and accrued. Significant timing differences
exist in cash flows during the year. Approximately 50% of SJG's taxes are paid
in installments during the first half of the year and the remaining 50% are
paid May 15 of each year. SJG uses short-term borrowings to pay taxes,
resulting in a temporary increase in short-term debt levels. The carrying costs
of timing differences are recognized in base utility rates.
Changes in Accounts Payable and Other Current Liabilities reflect the
impact of timing differences between the accrual and payment of costs.
Changes in Other - Net reflect numerous changes in non-current assets and
liabilities, including accrued deferred income taxes. The majority of the
change in 1999 relates to the reclassification of previously deferred costs to
Utility Plant.
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 have not required significant investment in capital
facilities, inventories or personnel.
Regulatory Matters --
Rate Actions
In February, 1999, the Electric Discount and Energy Competition Act (the
Act) was signed into law in New Jersey. This bill created the framework and
necessary time schedules for the restructuring of the state's electric and
natural gas utilities. The Act established unbundling, where redesigned
utility rate structures allow natural gas and electric consumers to choose
their energy supplier. It also established time frames for instituting
competitive services for customer accounting functions and to determine
whether basic gas supply services should become competitive.
SJG received BPU approval of its unbundling proposal in January 2000. In
addition to allowing all customers to select their own gas supplier, the
approval incented customers to choose a supplier other than SJG with a Market
Development Credit (MDC). This credit is available to customers through
December 2001. The credit, approximately $2.5 million plus carrying costs,
appears on SJG's books as a Deferred Credit. Therefore, the MDC will not
materially impact future periods.
The unbundling proposal also provided SJG with the ability to recover
carrying costs on unrecovered remediation costs under the RAC, while holding
the current RAC rate in effect through October 2002. Our RAC rate last changed
in September 1999. SJG's LGAC was also modified by the unbundling process.
Under-recovered gas costs of $11.9 million as of October 31, 1999, and related
carrying costs, will be recovered over 3 years. The LGAC for the period
starting November 1999, continues to operate as it has in the past.
The Act also contains numerous provisions requiring the BPU to promulgate
and adopt a variety of standards related to implementing the Act. These
required standards address fair competition, affiliate relations, accounting,
competitive services, supplier licensing, consumer protection and aggregation.
In March 1999, the BPU issued Draft Interim Standards in response to the Act.
In its Order, the BPU stated that the Draft Interim Standards "...do not
necessarily represent the final views of the Board on these matters...." As
such, the BPU has undertaken an extensive comment and meeting process to
address the concerns of all impacted parties. SJG has actively participated in
this process, and we believe the final standards will not have a material
adverse effect on the company.
In January 1997, the BPU granted SJG a total rate increase of $10.3
million. The $6 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.
The majority of this increase comes from residential and small commercial
customers. We recover the increase from new miscellaneous service fees that
charge specific customers for costs they cause us to incur. Additionally, our
starting point for sharing pre-tax margins generated by interruptible and off-
system sales and transportation (Sharing Formula) increased from $4 million to
$5 million. SJG was permitted to keep 100% of pre-tax margins up to the
threshold level and 20% of margins above that level. The $5 million threshold
increased by $500,000 later in 1997, and in December 1998, the threshold
increased an additional $2 million. The increases resulted from completion of
major construction projects. 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 applicable threshold level to the LGAC
customers. Thereafter, SJG keeps 20% of the pre-tax margins as it has
historically.
SJG calculates rates of return by weighting individual capital cost rates
by the proportion of each prospective 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 on
invested capital matching the risk so the utility can access capital required
to meet its public service responsibility.
In June 1998, we filed a petition with the BPU requesting a change to the
TAC. The request was granted in October 1998. As a result, SJG experiences
reduced fluctuations in income when weather is warmer or colder than normal.
In April 1999, the BPU approved an increase in our appliance service
rates, which SJG implemented that month. In June 1999, the BPU authorized SJG
to offer additional appliance service contract plans. The new rates and plans
are competitive with those of other service providers in New Jersey and are
designed to increase earnings and cash flows.
Environmental Remediation
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. We spent $60.9 million as of December 31, 1999. With the
assistance of an outside consulting firm, we estimate that future costs to
clean up the sites will range from $51 million to $161.3 million. We recorded
the lower end of this range as a liability. It is reflected on the consolidated
balance sheet under the captions, Current Liabilities and Deferred Credits and
Other Non-Current Liabilities. 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 remediation 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 costs. 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."
In September 1999, the BPU approved SJG's request to recover remediation
costs at former manufactured gas plant sites as permitted under the RAC. SJG's
RAC level increased from $0.0032 per therm to $0.0107 per therm to include all
RAC-related expenditures made between 1993 and 1998. Consequently, SJG expects
to recover an additional $4.5 million per year for the next 7 years.
The other asset titled Environmental Remediation Cost: Liability for
Future Expenditures relates to estimated future expenditures determined under
FASB No. 5. This amount, which relates to former manufactured gas plant sites,
was recorded as a deferred debit with the corresponding amount reflected on the
consolidated 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 its 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 consolidated balance
sheet under the caption, Regulatory and Other Non-Current Assets. Since
implementing the RAC in 1992, SJG recovered $21.6 million through rates as of
December 31, 1999.
With Morie's sale, EMI assumed responsibility for environmental
liabilities estimated between $2.8 million and $9 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.
- 14 -
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 consolidated balance sheet under Current Liabilities and
Deferred Credits and Other Non-Current Liabilities as of December 31, 1999.
Other Regulatory Asset Recovery
Adopting FASB No. 109, "Accounting for Income Taxes," in 1993 primarily
resulted in creating a $17.6 million regulatory asset. SJG is recovering the
amortization of this asset through rates over 18 years which began in December
1994. Also, SJI adopted FASB No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," in 1993. The BPU provided for
partial recovery of costs associated with FASB No. 106 and prescribed continued
deferral of unrecovered costs until 1998. Beginning January 1998, the BPU
approved full recovery of the net periodic benefit cost as well as recovery of
the regulatory asset, amounting to $4.9 million at December 31, 1999, over 15
years.
Other
SJI is subject to claims arising in the ordinary course of business and
other legal proceedings. We set up reserves when these claims become apparent.
SJI also maintains insurance and records probable insurance recoveries relating
to outstanding claims.
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.
Financial Risk Management -- SJI's regulated and unregulated natural gas
businesses are subject to market risk due to fluctuations in natural gas
prices. To hedge against fluctuations, SJI and its subsidiaries have at times
entered into forward contracts. SJG recovers gas costs through the LGAC, and
hedges against price fluctuations by using forward contracts. SJE and EnerTrade
enter fixed-price contracts to sell natural gas to customers, but hedge risks
on these transactions through matching forward physical purchases. SJE engaged
in wholesale electric trading activities during 1998, but ceased actively
trading and fully hedged all remaining open positions as of December 31, 1998.
The net profits realized from those activities are reflected on SJI's financial
statements as Discontinued Operations. The last wholesale electric trading
contract expired in the fourth quarter of 1999. SJRG enters into forward
transactions to hedge storage management and fixed-price sales transactions.
To manage these transactions, SJI has a well-defined risk management
policy that includes volumetric and monetary limits. All derivative activities
described above are entered into for hedging, not trading, purposes.
Capital Resources -- SJI has a continuing need for cash resources and
capital, primarily to invest in new and replacement facilities and equipment
and for environmental remediation costs. Net construction and remediation
expenditures for 1999 amounted to $47.2 million. The costs for 2000, 2001 and
2002 are estimated at approximately $51.6 million, $46.7 million and $53.1
million, respectively. We will fund these expenditures from several sources,
which may include cash generated by operations, temporary use of short-term
debt, sale of medium-term notes, capital leases, RAC recoveries and equity
issuance.
Effective June 1999, SJI changed the way that shares were purchased by
participants in its Dividend Reinvestment Plan (DRP). Since 1994, our DRP
purchased shares for participants on the open market. Now plan participants are
receiving newly issued shares. DRP participants received a total 367,622 newly
issued shares in 1999. We offer a 2% discount on DRP investments because it is
the most cost-effective way for us to raise equity capital in the quantities
that we are seeking. The revised DRP provided SJI with $10 million of equity
capital in 1999; and we expect to raise an additional $8 million to $12 million
via this method in 2000.
In March 1997, SJG sold $35 million of First Mortgage Bonds, 7.7% Series
due 2027.
In May 1997, SJG's Delaware 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. 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.
In October 1998, SJG issued $30 million of debt under a $100 million
Medium-Term Note Program. Notes totaling $10 million were issued at 6.12%,
maturing in 2010, and $20 million of notes were issued at 7.125%, maturing in
2018. The net proceeds of these note issuances were used to retire short-term
debt and to fund capital expenditures. The Medium-Term Note program had $70
million of availability remaining at December 31, 1999 and remains effective
through December 31, 2001.
Other Events -- 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 intended to create significant efficiencies
and expand service capabilities for both companies with the advent of electric
utility restructuring legislation. The new venture also completed SJI's efforts
to shift its focus away from the wholesale electric trading business and toward
the retail sector. SJES began soliciting retail electricity customers in
November 1999.
In August 1999, SJG completed the transition of all meter reading
activities to Millennium. Millennium began providing meter reading services in
southern New Jersey in January 1999. The new venture allows both companies to
capitalize on synergies that exist because of overlapping territories.
Customers should benefit from reduced meter reading costs.
Inflation -- In the ratemaking process, only the original cost of utility
plant is recoverable in revenues as depreciation. 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, SJG believes it will be allowed
to earn a return on the increased cost of its investment as facilities are
replaced.
Summary -- We are confident SJI 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 sheets and statements of
consolidated capitalization of South Jersey Industries, Inc. and subsidiaries
as of December 31, 1999 and 1998, 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, 1999. 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, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Philadelphia, Pennsylvania
February 16, 2000
- 15 -
<TABLE>
Statements of Consolidated Income
(in Thousands Except for Per Share Data)
<CAPTION>
South Jersey Industries, Inc. and Subsidiaries
Year Ended December 31,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Operating Revenues:
Utility (Notes 1 & 9) $345,710 $298,038 $327,477
Nonutility 46,767 34,972 21,090
-------- -------- --------
Total Operating Revenues 392,477 333,010 348,567
-------- -------- --------
Operating Expenses:
Gas Purchased for Resale 207,047 173,824 181,117
Utility Operations 41,114 42,269 43,037
Nonutility Operations 45,819 36,658 23,136
Maintenance 6,077 5,295 5,500
Depreciation (Note 1) 18,968 17,140 15,978
Income Taxes (Notes 1, 7 & 8) 16,428 11,659 10,739
Other Taxes (Notes 1 & 8) 11,137 10,452 30,418
-------- -------- --------
Total Operating Expenses 346,590 297,297 309,925
-------- -------- --------
Operating Income 45,887 35,713 38,642
-------- -------- --------
Interest Charges:
Long-Term Debt 15,721 15,246 15,197
Short-Term Debt and Other 5,105 3,935 2,914
-------- -------- --------
Total Interest Charges 20,826 19,181 18,111
-------- -------- --------
Preferred Dividend Requirements of Subsidiary (Note 2) 3,084 3,088 2,102
-------- -------- --------
Income from Continuing Operations 21,977 13,444 18,429
Discontinued Operations: (Note 5)
Loss from Discontinued Operations - Net (289) (2,458) (1,866)
Net Loss on Disposal of Discontinued Operations - - (767)
-------- -------- --------
Net Income Applicable to Common Stock $ 21,688 $ 10,986 $ 15,796
======== ======== ========
Average Shares of Common Stock Outstanding (Note 6) 10,922 10,776 10,763
======== ======== ========
Earnings Per Common Share: (Notes 5 & 6)
Continuing Operations $ 2.01 $ 1.25 $ 1.71
Discontinued Operations - Net (0.02) (0.23) (0.24)
-------- -------- --------
Earnings Per Common Share $ 1.99 $ 1.02 $ 1.47
======== ======== ========
Dividends Declared Per Common Share $ 1.44 $ 1.44 $ 1.44
======== ======== ========
Statements of Consolidated Retained Earnings
(in Thousands)
South Jersey Industries, Inc. and Subsidiaries
Year Ended December 31,
1999 1998 1997
-------- -------- --------
Balance at Beginning of Year $ 44,507 $ 49,038 $ 48,743
Net Income Applicable to Common Stock 21,688 10,986 15,796
Dividends Declared - Common Stock (15,728) (15,517) (15,501)
-------- -------- --------
Balance at End of Year (Note 12) $ 50,467 $ 44,507 $ 49,038
======== ======== ========
<FN>
The accompanying footnotes are an integral part of the financial statements.
</FN>
</TABLE>
- 16 -
<TABLE>
Statements of Consolidated Cash Flows
(in Thousands)
<CAPTION>
South Jersey Industries, Inc. and Subsidiaries
Year Ended December 31,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income Applicable to Common Stock $ 21,688 $ 10,986 $ 15,796
Adjustments to Reconcile Net Income to Cash Flows
Provided by Operating Activities:
Depreciation and Amortization 21,765 19,063 18,112
Provision for Losses on Accounts Receivable 952 1,477 1,351
Revenues and Fuel Costs Deferred - Net (7,665) (2,502) (2,603)
Deferred and Non-Current Income Taxes and
Credits - Net 7,112 7,725 5,358
Net Pre-Tax Loss on Disposal of Discontinued
Operations - - 845
Environmental Remediation Costs - Net* 1,496 (5,760) (3,550)
Changes in:
Accounts Receivable (4,487) (10,603) 2,113
Inventories 519 (3,284) (1,634)
Prepayments and Other Current Assets 216 (41) (736)
Prepaid and Accrued Taxes - Net 8,813 (13,107) 4,355
Accounts Payable and Other Accrued Liabilities (11,775) 4,526 401
Other - Net 3,044 (1,121) (502)
-------- -------- --------
Net Cash Provided by Operating Activities 41,678 7,359 39,306
-------- -------- --------
Cash Flows from Investing Activities:
Investment in Affiliates (811) (591) -
Loan to Affiliates 1,700 211 (1,761)
Proceeds from the Sale of Assets - Net 594 - 3,488
Taxes Paid on the Sale of Assets - Net - - (9,807)
Purchase of Available-for-Sale Securities (776) (889) -
Capital Expenditures, Cost of Removal and Salvage (48,736) (65,869) (49,604)
-------- -------- --------
Net Cash Used in Investing Activities (48,029) (67,138) (57,684)
-------- -------- --------
Cash Flows from Financing Activities:
Net Borrowings from (Repayments of) Lines of Credit 22,950 51,100 (62,400)
Proceeds from Issuance of Long-Term Debt - 30,000 35,618
Principal Repayments of Long-Term Debt (11,149) (11,768) (6,603)
Dividends on Common Stock (15,728) (15,517) (15,501)
Proceeds from Sale of Common Stock 10,011 160 320
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 - (557) (2,429)
-------- -------- --------
Net Cash Provided by (Used In) Financing Activities 5,994 53,328 (16,085)
-------- -------- --------
Net Decrease in Cash and Cash Equivalents (357) (6,451) (34,463)
Cash and Cash Equivalents at Beginning of Year 5,991 12,442 46,905
-------- -------- --------
Cash and Cash Equivalents at End of Year $ 5,634 $ 5,991 $ 12,442
======== ======== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest (Net of Amounts Capitalized) $ 25,264 $ 21,651 $ 18,303
Income Taxes (Net of Refunds) $ 4,423 $ 11,099 $ 10,235
<FN>
* Notes 9 and 13 contain additional information relating to environmental
remediation costs.
The accompanying footnotes are an integral part of the financial statements.
</FN>
</TABLE>
- 17 -
<TABLE>
Consolidated Balance Sheets
(in Thousands)
<CAPTION>
South Jersey Industries, Inc.
and Subsidiaries
December 31,
1999 1998
---------- ----------
<S> <C> <C>
Assets
Property, Plant and Equipment: (Note 1)
Utility Plant, at original cost $ 721,338 $ 679,997
Accumulated Depreciation (192,240) (179,605)
Gas Plant Acquisition Adjustment - Net 1,776 1,851
Nonutility Property and Equipment, at cost 3,423 2,981
Accumulated Depreciation (951) (965)
--------- ---------
Property, Plant and Equipment - Net 533,346 504,259
--------- ---------
Investments:
Available-for-Sale Securities (Note 3) 1,707 931
Investments in Affiliates (Note 5) 2,251 1,440
--------- ---------
Total Investments 3,958 2,371
--------- ---------
Current Assets:
Cash and Cash Equivalents (Notes 1 & 4) 5,634 5,991
Notes Receivable - Affiliates 2,650 4,350
Accounts Receivable 43,130 42,600
Unbilled Revenues (Note 1) 22,328 19,489
Provision for Uncollectibles (1,117) (1,283)
Natural Gas in Storage, average cost 27,066 27,619
Materials and Supplies, average cost 4,085 4,051
Prepaid Taxes (Note 1) 4,069 13,850
Prepayments and Other Current Assets 3,203 3,419
--------- ---------
Total Current Assets 111,048 120,086
--------- ---------
Accounts Receivable - Merchandise 1,108 1,554
--------- ---------
Regulatory and Other Non-Current Assets: (Note 1)
Environmental Remediation Costs: (Notes 9 & 13)
Expended - Net 25,702 27,500
Liability for Future Expenditures 51,029 52,939
Gross Receipts & Franchise Taxes (Note 7) 3,141 3,585
Income Taxes - Flowthrough Depreciation (Note 7) 11,531 13,021
Deferred Fuel Costs - Net (Note 9) 13,174 5,509
Deferred Postretirement Benefit Costs (Note 11) 4,914 5,522
Other 7,974 11,749
--------- ---------
Total Regulatory and Other Non-Current Assets 117,465 119,825
--------- ---------
Total Assets $ 766,925 $ 748,095
========= =========
Capitalization and Liabilities
Capitalization:
Common Equity (Notes 6 & 12) $ 185,275 $ 169,234
Preferred Stock and Securities of Subsidiary (Note 2) 37,044 37,134
Long-Term Debt (Note 3) 183,561 194,710
--------- ---------
Total Capitalization 405,880 401,078
--------- ---------
Current Liabilities:
Notes Payable (Note 4) 119,950 97,000
Current Maturities of Long-Term Debt (Note 3) 8,876 8,876
Accounts Payable 40,273 51,960
Customer Deposits 5,386 5,576
Environmental Remediation Costs (Note 13) 14,027 9,668
Taxes Accrued 563 1,531
Interest Accrued and Other Current Liabilities 14,112 14,010
--------- ---------
Total Current Liabilities 203,187 188,621
--------- ---------
Deferred Credits and Other Non-Current
Liabilities: (Note 1)
Deferred Income Taxes - Net (Note 8) 91,167 84,827
Investment Tax Credits (Note 7) 4,849 5,239
Pension and Other Postretirement Benefits (Note 11) 13,342 14,227
Environmental Remediation Costs (Note 13) 41,354 47,925
Other 7,146 6,178
--------- ---------
Total Deferred Credits and Other Non-Current
Liabilities 157,858 158,396
--------- ---------
Commitments and Contingencies (Note 13)
Total Capitalization and Liabilities $ 766,925 $ 748,095
========= =========
<FN>
The accompanying footnotes are an integral part of the financial statements.
</FN>
</TABLE>
- 18 -
<TABLE>
Statements of Consolidated Capitalization
(in Thousands Except for Share Data)
<CAPTION>
South Jersey Industries, Inc.
and Subsidiaries
December 31,
1999 1998
---------- ----------
<S> <C> <C>
Common Equity: (Notes 6 & 12)
Common Stock: Par Value $1.25 per share; Authorized 20,000,000 shares;
Outstanding Shares: 11,152,175 (1999) and 10,778,990 (1998)
Balance at Beginning of Year $ 13,474 $ 13,464
Stock Plans 466 10
-------- --------
Balance at End of Year 13,940 13,474
Premium on Common Stock 120,868 111,253
Retained Earnings 50,467 44,507
-------- --------
Total Common Equity 185,275 169,234
-------- --------
Preferred Stock and Securities of Subsidiary: (Note 2)
Redeemable Cumulative Preferred Stock:
South Jersey Gas Company, Par Value $100 per share
Authorized Shares: 45,504 (1999) and 46,404 (1998)
Outstanding Shares: Series A, 4.7% - 1,200 (1999) and 2,100 (1998) 120 210
Series B, 8.0% - 19,242 1,924 1,924
South Jersey Gas Company-Guaranteed Manditorily Redeemable
Preferred Securities of Subsidiary Trust:
Par Value $25 per share, 1,400,000 shares Authorized and Outstanding 35,000 35,000
-------- --------
Total Preferred Stock and Securities of Subsidiary 37,044 37,134
-------- --------
Long-Term Debt: (A)
South Jersey Gas Company:
First Mortgage Bonds (B):
8.19% Series due 2007 18,181 20,454
10.25% Series due 2008 15,908 20,454
9% Series due 2010 24,062 26,250
6.12% Series due 2010 (C) 10,000 10,000
6.95% Series due 2013 35,000 35,000
7.125% Series due 2018 (C) 20,000 20,000
7.7% Series due 2027 35,000 35,000
Unsecured Notes:
Term Note, 8.47% due 2001 4,286 6,428
Debenture Notes, 8.6% due 2010 30,000 30,000
-------- --------
Total Long-Term Debt Outstanding 192,437 203,586
Less Current Maturities 8,876 8,876
-------- --------
Total Long-Term Debt 183,561 194,710
-------- --------
Total Capitalization $405,880 $401,078
======== ========
<FN>
(A) The long-term debt maturities and sinking fund requirements
for the succeeding 5 years are as follows:
2000, $8,876; 2001, $11,876; 2002, $9,734; 2003, $12,884; and 2004, $12,884.
(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 October 21, 1998, SJG issued $30 million of debt under a Medium-Term Note
Program established October 5, 1998. A total of $100 million is authorized
to be issued under this program through December 2001.
The accompanying footnotes are an integral part of the financial statements.
</FN>
</TABLE>
- 19 -
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies:
Consolidation - The consolidated financial statements include the accounts
of South Jersey Industries, Inc. (SJI) and its subsidiaries. We were not
required to eliminate certain intercompany transactions, amounting to
approximately $1.9 million in 1997. We capitalized those amounts to utility
plant or environmental remediation costs on South Jersey Gas Company's (SJG)
books of account. SJG recovers those amounts through the rate-making process
(See Notes 9 & 13). All other significant intercompany accounts and
transactions were eliminated. SJI reclassified some previously reported amounts
to conform with current year classifications.
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 9).
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 9).
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 9 & 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.
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, 1998 and 1997. 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 7
& 8).
New Jersey adopted legislation reforming energy taxation in 1997. The law
eliminated the Gross Receipts & Franchise Tax (GRAFT) of approximately 13% of
utility revenue, replacing it with a combination of taxes. Beginning January
1, 1998, retail sales and transportation of natural gas, electricity and
utility services are subject to the 6% State Sales and Use Tax (SUT). Gas and
electric utilities are also subject to the 9% State Corporation Business Tax
(CBT). To bridge the revenue gap the law created, the State imposed a
Transitional Energy Facilities Assessment (TEFA) on gas volumes sold and
transported. The TEFA is being phased out over 5 years beginning January 1,
1999. The revised tax policy is expected to eliminate tax differences between
utility and nonutility suppliers, providing fair competition and lower energy
costs for consumers. The legislation requires SJG to prepay taxes which,
depending on weather, may not materialize as expense during that same year.
Any remaining balance of these payments is settled up in the subsequent year.
Additionally, the SUT is not included in reported utility revenues or tax
expense, as GRAFT was previously. Therefore, there are equal reductions in
these line items on the statements of consolidated income (See Note 8).
Statements of Consoliated Cash Flows - For purposes of reporting cash
flows, highly liquid investments with original maturities of 3 months or less
are considered cash equivalents.
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.
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
6).
3. Financial Instruments:
Long-Term Debt - The fair values of SJI's long-term debt, including
current maturities, as of December 31, 1999 and 1998, are estimated to be
$190.1 million and $227.0 million, respectively. Carrying amounts are $192.4
million and $203.6 million, respectively. The estimates are based on the
- 20 -
interest rates available to SJI at the end of each 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 and
1998.
4. 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% and 5.81% at December 31, 1999
and 1998, respectively. Demand deposits are maintained with lending banks on
an informal basis and do not constitute compensating balances.
5. 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 were:
Thousands of Dollars
1999 1998 1997
---------- ---------- ----------
Operating Revenues:
Construction $ - $ - $ 4,928
Wholesale Electric - 117,236 -
-------- -------- --------
Total Operating Revenues $ - $117,236 $ 4,928
======== ======== ========
(Loss) Income before Income Taxes:
Sand Mining $ (216) $ (3,697) $ (1,257)
Construction (195) (587) 39
Fuel Oil (89) (72) (1,725)
Wholesale Electric (8) 573 -
Income Tax Credits 219 1,325 1,077
-------- -------- --------
Loss from Discontinued Operations - Net $ (289) $ (2,458) $ (1,866)
======== ======== ========
Earnings per Common Share
from Discontinued Operations $ (0.02) $ (0.23) $ (0.17)
======== ======== ========
Affiliations - SJI, through its wholly-owned subsidiary, SJ EnerTrade
(EnerTrade), and UPR Energy Marketing, Inc., jointly own South Jersey Resources
Group, LLC (SJRG). SJRG provides natural gas storage, peaking services and
transportation capacity for wholesale customers in New Jersey and surrounding
states.
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 electricity 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 consolidated financial
statements.
6. Common Stock:
SJI has 20,000,000 shares of authorized Common Stock. The following shares
were issued and outstanding:
1999 1998 1997
---------- ---------- ----------
Beginning of Year 10,778,990 10,771,413 10,756,679
New Issues During Year:
Dividend Reinvestment Plan 367,622 - -
Employees' Stock Ownership Plan 4,144 3,875 4,770
Stock Option, Stock Appreciation
Rights, and Restricted Stock
Award Plan 31 1,952 9,514
Directors' Restricted Stock Plan 1,388 1,750 450
---------- ---------- ----------
End of Year 11,152,175 10,778,990 10,771,413
========== ========== ==========
The par value ($1.25 per share) of stock issued in 1999, 1998 and 1997 was
credited to Common Stock. Net excess over par value of approximately $9.6
million, $0.3 million, and $0.5 million, respectively, 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 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 1999, 1998, and 1997 fiscal years.
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, 1998, and 1997, SJI had 4,500, 5,000 and 13,060
options outstanding, respectively, all exercisable at prices from $17.89 to
$24.69 per share. During 1997, 4,311 options were exercised at prices from
$17.16 to $17.89 per share. In addition, during 1999, 1998 and 1997; 500, 8,060
and 17,619 options were surrendered for the issuance of 31, 1,952 and 5,203
shares of common stock, respectively. No options were granted in 1999, 1998, or
1997. 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, 1998,
and 1997, had no effect on EPS.
- 21 -
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, 1998, and 1997, we granted 1,388, 1,750, and 450 additional shares,
respectively. 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.
7. 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 as set 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.
8. 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
pre-tax income for the following reasons:
Thousands of Dollars
1999 1998 1997
---------- ---------- ----------
Tax at Statutory Rate $ 12,090 $ 7,676 $ 10,260
Increase (Decrease) Resulting from:
State Income Taxes 3,895 3,170 23
Amortization of ITC (390) (393) (393)
Tax Depreciation Under Book
Depreciation on Utility Plant 664 664 664
Other - Net 169 542 185
-------- -------- --------
Income Taxes - Continuing Operations 16,428 11,659 10,739
Income Taxes - Discontinued Operations (219) (1,325) (1,424)
-------- -------- --------
Net Income Taxes $ 16,209 $ 10,334 $ 9,315
======== ======== ========
The provision for Income Taxes is comprised of the following:
Thousands of Dollars
1999 1998 1997
---------- ---------- ----------
Current:
Federal $ 6,151 $ 2,024 $ 4,964
State 3,218 2,227 97
-------- -------- --------
Total Current 9,369 4,251 5,061
-------- -------- --------
Deferred:
Federal
Excess of Tax Depreciation Over
Book Depreciation - Net 5,496 5,308 4,162
Deferred Fuel Costs 1,909 1,397 349
Environmental Remediation Costs - Net (1,058) 1,990 1,903
Alternative Minimum Tax 676 (1,750) (304)
Other - Net (15) (87) 35
State 441 943 (74)
-------- -------- --------
Total Deferred 7,449 7,801 6,071
-------- -------- --------
ITC (390) (393) (393)
-------- -------- --------
Income Taxes - Continuing Operations 16,428 11,659 10,739
Income Taxes - Discontinued Operations (219) (1,325) (1,424)
-------- -------- --------
Net Income Taxes $ 16,209 $ 10,334 $ 9,315
======== ======== ========
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 are:
Thousands of Dollars
1999 1998
---------- ----------
Deferred Tax Liabilities:
Tax Depreciation Over Book Depreciation $ 70,362 $ 67,150
Difference Between Book and Tax Basis of Property 6,478 6,041
Deferred Fuel Costs 9,235 6,835
Deferred Regulatory Costs 1,301 727
Environmental Remediation Costs 7,295 8,430
Excess Protected 3,355 3,421
GRAFT 1,022 1,215
Other 929 227
-------- --------
Total Deferred Tax Liabilities 99,977 94,046
-------- --------
Deferred Tax Assets:
Alternative Minimum Tax 2,327 3,135
ITC Basis Gross Up 2,601 2,802
Deferred State Tax 674 167
Other 3,208 3,115
-------- --------
Total Deferred Tax Assets 8,810 9,219
-------- --------
Net Deferred Tax Liability $ 91,167 $ 84,827
======== ========
The significant components of Other Taxes are:
Thousands of Dollars
1999 1998 1997
---------- ---------- ----------
TEFA $ 7,637 $ 7,378 $ -
GRAFT 197 123 27,361
Other 3,303 2,951 3,057
-------- -------- --------
Total Other Taxes $ 11,137 $ 10,452 $ 30,418
======== ======== ========
During 1999 and 1998, SJG recorded an additional $13.4 and $12.0 million,
respectively, for SUT on utility services through its consolidated balance
sheet. As an agent for the collection of SUT, we exclude these amounts from
reported revenues and tax expense (See Note 1).
- 22 -
9. 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 June 1998, SJG filed a petition with the BPU requesting a change to the
TAC. The request was granted in October 1998. As a result, SJG experiences
reduced fluctuations in income when weather is warmer or colder than normal.
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 3 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.
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 and 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).
10. Segments of Business:
Information about SJI's operations in different industry segments is
presented below:
Thousands of Dollars
1999 1998 1997
---------- ---------- ----------
Operating Revenues:
Gas Utility Operations $350,921 $299,070 $327,548
Other Industries 49,651 35,955 22,083
-------- -------- --------
Subtotal 400,572 335,025 349,631
Intersegment Sales (8,095) (2,015) (1,064)
-------- -------- --------
Total Operating Revenues $392,477 $333,010 $348,567
======== ======== ========
Operating Income:
Gas Utility Operations $ 59,480 $ 49,234 $ 51,555
Other Industries 1,911 67 (1,009)
-------- -------- --------
Subtotal 61,391 49,301 50,546
Income Taxes (16,428) (11,659) (10,739)
General Corporate 924 (1,929) (1,165)
-------- -------- --------
Total Operating Income $ 45,887 $ 35,713 $ 38,642
======== ======== ========
Depreciation and Amortization:
Gas Utility Operations $ 21,676 $ 19,014 $ 17,867
Other Industries 59 26 18
Discontinued Operations 30 23 227
-------- -------- --------
Total Depreciation and Amortization $ 21,765 $ 19,063 $ 18,112
======== ======== ========
Property Additions:
Gas Utility Operations $ 47,390 $ 64,862 $ 48,533
Other Industries 390 67 141
Discontinued Operations - - 1
-------- -------- --------
Total Property Additions $ 47,780 $ 64,929 $ 48,675
======== ======== ========
Identifiable Assets:
Gas Utility Operations $750,239 $720,137 $649,113
Other Industries 14,049 14,185 11,322
Discontinued Operations 2,326 9,562 2,993
-------- -------- --------
Subtotal 766,614 743,884 663,428
Corporate Assets 15,744 25,251 23,664
Intersegment Assets (15,433) (21,040) (16,491)
-------- -------- --------
Total Identifiable Assets $766,925 $748,095 $670,601
======== ======== ========
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 5).
SJI's interest expense relates primarily to SJG's borrowing and financing
activities. These amounts are included in our statements of consolidated income
and not shown above. Interest income is essentially derived from borrowings
between the subsidiaries and is eliminated during consolidation.
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
- 23 -
$4.9 million at December 31, 1999, is recoverable in rates. We are amortizing
this amount over 15 years which started in January 1998.
Net periodic benefit cost related to the pension and other postretirement
benefit insurance plans, consisted of the following components:
Thousands of Dollars
Pension Benefits Other Benefits
1999 1998 1997 1999 1998 1997
------------------------- -------------------------
Service cost $ 2,245 $ 1,912 $ 1,960 $ 1,098 $ 903 $ 994
Interest cost 4,211 3,973 3,820 1,593 1,494 1,579
Expected return on
plan assets (4,280) (3,894) (3,358) (675) (417) (272)
Amortization of
transition
obligation 72 72 72 772 796 796
Amortization of loss
(gain) and other 436 292 340 - (14) -
------- ------- ------- ------- ------- -------
Net periodic
benefit cost $ 2,684 $ 2,355 $ 2,834 $ 2,788 $ 2,762 $ 3,097
------- ------- ------- ------- ------- -------
A reconciliation of the Plans' benefit obligations, fair value of plan
assets, funded status and amounts recognized in SJI's consolidated balance
sheets follows:
Thousands of Dollars
Pension Benefits Other Benefits
1999 1998 1999 1998
-------- -------- -------- --------
Change in Benefit Obligation:
Benefit obligation at beginning
of year $ 64,035 $ 56,753 $ 24,248 $ 24,024
Service cost 2,245 1,912 1,098 903
Interest cost 4,211 3,973 1,593 1,494
Actuarial (gain) loss and other (8,260) 3,783 (3,405) (1,436)
Benefits paid (2,701) (2,386) (693) (737)
-------- -------- -------- --------
Benefit obligation at end of year $ 59,530 $ 64,035 $ 22,841 $ 24,248
-------- -------- -------- --------
Change in Plan Assets:
Fair value of plan assets
at beginning of year $ 47,976 $ 46,875 $ 6,972 $ 4,403
Actual return on plan assets 5,541 1,887 392 568
Employer contributions 2,504 1,600 2,801 2,738
Benefits paid (2,701) (2,386) (693) (737)
-------- -------- -------- --------
Fair value of plan assets at end
of year $ 53,320 $ 47,976 $ 9,472 $ 6,972
-------- -------- -------- --------
Funded status $ (6,210) $(16,059) $(13,368) $(17,276)
Unrecognized prior service cost 2,930 3,222 - -
Unrecognized net obligation assets
from transition 287 359 10,033 10,805
Unrecognized net (gain) loss
and other (564) 9,101 (3,649) (527)
-------- -------- -------- --------
Accrued net benefit cost at end
of year $ (3,557) $ (3,377) $ (6,984) $ (6,998)
-------- -------- -------- --------
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plan with accumulated benefit obligations
in excess of plan assets as of December 31, 1998, were $35.2 million, $28.4
million, and $26.2 million, respectively. As of December 31, 1999, the
accumulated benefit obligations did not exceed plan assets.
Assumptions used in the accounting for these plans were:
Pension Benefits Other Benefits
1999 1998 1999 1998
-------- -------- -------- --------
Discount rate 7.75% 6.75% 7.75% 6.75%
Expected return on plan assets 9.00% 9.00% 9.00% 9.00%
Rate of compensation increase 4.60% 4.10% - -
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.
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.
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
1999 consolidated 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
- 24 -
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 9).
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 consolidated 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 consolidated balance
sheet under the caption, Regulatory and Other Non-Current Assets. Since
implementing the RAC in 1992, SJG recovered $21.6 million through rates as of
December 31, 1999 (See Note 9).
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 consolidated 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 1999 consolidated balance sheet under Current Liabilities
and Deferred Credits and Other Non-Current Liabilities as of December 31,
1999.
Management's Responsibilities to Financial Statements
South Jersey Industries, Inc.'s management is responsible for the
integrity and objectivity of SJI's financial statements and related
disclosures. These statements and disclosures were prepared using management's
best judgment and conform 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.
- 25 -
<TABLE>
Quarterly Financial Data (Unaudited)
Summarized quarterly results of SJI's operations, in thousands except for per share amounts:
<CAPTION>
1999 Quarter Ended 1998 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 $146,732 $ 76,697 $ 59,165 $109,883 $116,790 $ 60,019 $ 51,021 $105,180
-------- -------- -------- -------- -------- -------- -------- --------
Operating Expenses:
Operation and Maintenance
Including Fixed Charges 111,631 74,357 64,332 92,615 90,933 59,856 55,735 90,931
Income Taxes 12,701 470 (2,544) 5,801 9,489 (409) (2,357) 4,936
Other Taxes 4,497 1,872 1,531 3,237 3,914 2,027 1,601 2,910
-------- -------- -------- -------- -------- -------- -------- --------
Income (Loss) from
Continuing Operations 17,903 (2) (4,154) 8,230 12,454 (1,455) (3,958) 6,403
Discontinued Operations - Net (64) (59) (37) (129) (326) (2,467) 893 (558)
-------- -------- -------- -------- -------- -------- -------- --------
Net Income (Loss) Applicable
to Common Stock $ 17,839 $ (61) $ (4,191) $ 8,101 $ 12,128 $ (3,922) $ (3,065) $ 5,845
======== ======== ======== ======== ======== ======== ======== ========
Earnings Per Common Share
(Based on Average
Shares Outstanding): (1)
Continuing Operations $ 1.66 $ 0.00 $ (0.38) $ 0.74 $ 1.16 $ (0.14) $ (0.36) $ 0.59
Discontinued Operations - Net 0.00 (0.01) 0.00 (0.01) (0.03) (0.22) 0.08 (0.05)
-------- -------- -------- -------- -------- -------- -------- --------
Earnings Per Common Share $ 1.66 $ (0.01) $ (0.38) $ 0.73 $ 1.13 $ (0.36) $ (0.28) $ 0.54
======== ======== ======== ======== ======== ======== ======== ========
Average Shares Outstanding 10,780 10,781 10,975 11,151 10,774 10,775 10,776 10,778
<FN>
(1) The sum of the quarters for 1999 and 1998 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 Dividends Market Price Dividends
Quarter Ended Per Share Declared Quarter Ended Per Share Declared
1999 High Low Per Share 1998 High Low Per Share
- ------------- --------- ------- --------- ------------- --------- ------- ---------
<S> <C> <C> <C> <S> <C> <C> <C>
March 31 $26 11/16 $21 1/2 $0.36 March 31 $30 3/4 $28 3/4 $0.36
June 30 $30 $21 5/8 $0.36 June 30 $30 $26 1/2 $0.36
Sept. 30 $30 3/4 $26 1/16 $0.36 Sept. 30 $27 7/8 $22 $0.36
Dec. 31 $30 1/4 $25 1/2 $0.36 Dec. 31 $27 $25 $0.36
<FN>
These quotations are based on the list of composite transactions of the New
York Stock Exchange. Our stock is traded on the New York and Philadelphia stock
exchanges under the symbol SJI. We have declared and expect to continue to
declare regular quarterly cash dividends. As of December 10, 1999, the latest
available date, our stock records indicate that there were 9,725 shareholders.
</FN>
</TABLE>
- 26 -
<TABLE>
South Jersey Gas Company Comparative Operating Statistics
<CAPTION>
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating Revenues (Thousands):
Firm
Residential $152,946 $147,274 $176,717 $177,673 $151,720
Commercial 35,064 36,328 60,418 70,755 58,135
Industrial 4,879 4,175 5,535 7,540 6,014
Cogeneration & Electric Generation 8,496 8,119 5,249 16,173 15,725
Firm Transportation 33,125 24,893 15,966 10,473 13,930
-------- -------- -------- -------- --------
Total Firm Revenues 234,510 220,789 263,885 282,614 246,524
Interruptible 1,645 2,506 6,085 7,256 6,786
Interruptible Transportation 1,724 2,598 3,507 2,630 2,778
Off-System 104,142 62,578 39,403 28,236 20,360
Capacity Release & Storage 4,193 6,031 8,533 4,349 3,374
Other 4,707 4,568 6,135 5,249 3,897
-------- -------- -------- -------- --------
Intercompany Sales (5,211) (1,032) (71) (1,039) (2,486)
Total Operating Revenues $345,710 $298,038 $327,477 $329,295 $280,233
======== ======== ======== ======== ========
Throughput (MMcf):
Firm
Residential 17,741 16,979 19,955 21,699 19,573
Commercial 4,634 4,826 8,067 10,117 8,945
Industrial 246 348 733 1,238 1,016
Cogeneration & Electric Generation 2,316 2,373 1,230 5,180 4,860
Firm Transportation 25,143 22,336 20,196 12,969 14,417
-------- -------- -------- -------- --------
Total Firm Throughput 50,080 46,862 50,181 51,203 48,811
-------- -------- -------- -------- --------
Interruptible 383 694 1,345 1,618 1,843
Interruptible Transportation 3,628 6,049 7,586 5,422 5,888
Off-System 42,480 26,916 14,462 8,571 9,590
Capacity Release & Storage 29,247 27,319 36,382 25,460 25,915
-------- -------- -------- -------- --------
Total Throughput 125,818 107,840 109,956 92,274 92,047
======== ======== ======== ======== ========
Number of Customers at Year End:
Residential 254,601 248,210 242,132 236,008 230,446
Commercial 18,894 18,457 18,037 17,469 17,179
Industrial 404 398 398 397 397
-------- -------- -------- -------- --------
Total Customers 273,899 267,065 260,567 253,874 248,022
======== ======== ======== ======== ========
Maximum Daily Sendout (MMcf) 324 314 355 325 335
======== ======== ======== ======== ========
Annual Degree Days 4,468 4,110 4,829 5,175 4,865
======== ======== ======== ======== ========
Normal Degree Days* 4,664 4,708 4,728 4,689 4,709
======== ======== ======== ======== ========
<FN>
* Average degree days recorded in SJG service territory during 20-year period
ended June 30 of prior year.
</FN>
</TABLE>
- 27 -
South Jersey Industries, Inc.
Board of Directors
Shirli M. Billings, Ph.D.
Director since 1983, Age 59 1, 4, 5*
President, Leadership Learning Academy, Lakeland, Fla.
Charles Biscieglia
Director since 1998, Age 55 3+, 4*, 5+
Chairman, President and CEO of South Jersey Industries, Inc. and
President and CEO of South Jersey Gas Company
Sheila H. Coco
Director since 1999, Age 41 1, 2
Executive Vice President of Fiduciary Trust Company International, New York,
N.Y.
Richard L. Dunham
Director since 1984, Age 70 3+, 4, 5+
Former Chairman of the Board, now retired
Former Chairman of the Federal PowerCommission (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 55 2, 3, 4
Managing Partner, law firm of Edwards & Caldwell, Hawthorne, N.J.
Thomas L. Glenn, Jr.
Director since 1986, Age 65 1, 3*, 4
Chairman, Glenn Insurance, Inc., Absecon, N.J.
Herman D. James, Ph.D.
Director since 1990, Age 56 1*, 2, 5
Distinguished Professor, Rowan University, Glassboro, N.J.
Clarence D. McCormick
Director since 1979, Age 70 2*, 4, 5
Retired Chairman and CEO of The Farmers and Merchants National Bank of
Bridgeton, N.J. and Retired Chairman and President of Southern Jersey Bancorp
of Delaware, Bridgeton, N.J.
Frederick R. Raring
Director since 1995, Age 62 1, 3, 5
President, Seashore Supply Company, Atlantic City, N.J.
1 Audit Committee
2 Compensation/Pension Committee
3 Environmental Committee
4 Executive Committee
5 Nominating Committee
* Committee Chair
+ Ex Officio
South Jersey Industries, Inc.
Officers
Charles Biscieglia
Chairman, President and CEO
George L. Baulig
Vice President & Corporate Secretary
Edward J. Graham
Vice President
David A. Kindlick
Vice President
Albert V. Ruggiero
Vice President
William J. Smethurst, Jr.
Treasurer
Julius J. Bodrog
Assistant Vice President & Assistant Treasurer
Richard H. Walker, Jr.
Assistant Secretary
- 28 -
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
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
Call toll-free: 1-888-SJI-3100
Investor Relations
Stephen H. Clark, Director
(609) 561-9000 ext. 4260
Annual Meeting Information
The Annual Meeting of Shareholders will be held Wednesday, April 19, 2000
at 10 a.m. at the company's corporate headquarters.
Dividend Reinvestment Plan
SJI's Dividend Reinvestment Plan provides record shareholders of SJI'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. The Plan is now available to
any person who, upon enrollment, agrees to become a shareholder by purchasing
at least $100 of SJI common stock. 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 newly issued or
treasury common stock that the Plan acquires directly from SJI. The price of
these shares will be 98 percent of the average of the high and low sale prices
for SJI's common stock for each of the last 12 days on which the common stock
was traded prior to the purchase date, as published in The Wall Street Journal
report of New York Stock Exchange composite transactions. 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.
Direct Deposit of Dividends (Electronic Funds Transfer)
Stockholders of record can have immediate access to dividend funds. Your
dividend funds can be deposited directly into your checking or savings account.
Confirmation of dividend receipts will appear on your monthly bank statements.
South Jersey Industries, Inc.'s 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.
- 29 -
<TABLE>
Exhibit 21
SOUTH JERSEY INDUSTRIES, INC.
SUBSIDIARIES OF REGISTRANT
AS OF DECEMBER 31, 1999
<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 (4) 99.13 (1) New Jersey
Energy & Minerals, Inc. (4) 100 (1) New Jersey
South Jersey Energy Company (4) 100 (1) New Jersey
SJ EnerTrade, Inc. (4) 100 (2) New Jersey
R&T Group, Inc. (4) 100 (1) New Jersey
South Jersey Fuel, Inc. (4) 100 (3) New Jersey
<FN>
(1) Subsidiary of South Jersey Industries, Inc.
(2) Subsidiary of South Jersey Energy Company
(3) Subsidiary of Energy & Minerals, Inc.
(4) Subsidiary included in financial statements
</FN>
</TABLE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
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 South Jersey Industries, Inc. of our
reports dated February 16, 2000, appearing in and incorporated by reference in
this Annual Report on Form 10-K of South Jersey Industries, Inc. for the year
ended December 31, 1999.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
March 27, 2000
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 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, 1999 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
30th day of March 2000.
/s/ Charles Biscieglia
Charles Biscieglia, Chairman of the Board,
President and Chief Executive Officer
/s/ Shirli M. Billings
Shirli M. Billings, Director
/s/ Sheila H. Coco
Sheila H. Coco, Director
/s/ Richard L. Dunham
Richard L. Dunham, Director
_______________________________
W. Cary Edwards, Director
Exhibit 24
Power of Attorney -- 10-K Page 2 of 2
/s/ Thomas L. Glenn, Jr.
Thomas L. Glenn, Jr., Director
/s/ Herman D. James
Herman D. James, Director
/s/ Clarence D. McCormick
Clarence D. McCormick, Director
/s/ Frederick R. Raring
Frederick R. Raring, Director
/s/ George L. Baulig
George L. Baulig, Vice President &
Corporate Secretary
/s/ David A. Kindlick
David A. Kindlick, Vice President
<TABLE> <S> <C>
<ARTICLE> UT
<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-NET-UTILITY-PLANT> 530,874
<OTHER-PROPERTY-AND-INVEST> 2,472
<TOTAL-CURRENT-ASSETS> 111,048
<TOTAL-DEFERRED-CHARGES> 117,465
<OTHER-ASSETS> 5,066
<TOTAL-ASSETS> 766,925
<COMMON> 13,940
<CAPITAL-SURPLUS-PAID-IN> 120,868
<RETAINED-EARNINGS> 50,467
<TOTAL-COMMON-STOCKHOLDERS-EQ> 185,275
35,000
2,044
<LONG-TERM-DEBT-NET> 183,561
<SHORT-TERM-NOTES> 119,950
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 8,876
0
<CAPITAL-LEASE-OBLIGATIONS> 0
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<INCOME-BEFORE-INTEREST-EXPEN> 45,887
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3,084
<EARNINGS-AVAILABLE-FOR-COMM> 21,688
<COMMON-STOCK-DIVIDENDS> 15,278
<TOTAL-INTEREST-ON-BONDS> 15,721
<CASH-FLOW-OPERATIONS> 41,678
<EPS-BASIC> 1.99
<EPS-DILUTED> 1.99
