SEGMENTS OF BUSINESS:

SJI operates in several different reportable operating segments which reflect the financial information regularly evaluated by the chief operating decision maker (CODM). These segments are as follows:


•	Gas utility operations (SJG) consist primarily of natural gas distribution to residential, commercial and industrial customers. The result of SJG are only included in this operating segment.


•	Wholesale energy operations include the activities of SJRG and SJEX.


•	SJE is involved in both retail gas and retail electric activities.


◦	Retail gas and other operations include natural gas acquisition and transportation service business lines.


◦	Retail electric operations consist of electricity acquisition and transportation to commercial, industrial and residential customers.


•	On-site energy production consists of Marina's thermal energy facility and other energy-related projects. Also included in this segment are the activities of ACB, ACLE, BCLE, SCLE, SXLE, MCS, NBS and SBS.

•

Appliance service operations includes SJESP, which serviced residential and small commercial HVAC systems, installed small commercial HVAC systems, provided plumbing services and serviced appliances under warranty via a subcontractor arrangement as well as on a time and materials basis. On September 1, 2017, SJESP sold certain assets of its residential and small commercial HVAC and plumbing business to a third party. SJESP continues to receive commissions paid on service contracts from the third party and will do so on a go forward basis.


•	Midstream was formed to invest in infrastructure and other midstream projects, including a current project to build a natural gas pipeline in Pennsylvania and New Jersey.


•	Costs incurred related to the agreement to acquire Elizabethtown Gas and Elkton Gas are recorded in the Corporate & Services segment.

SJI groups its nonutility operations into two categories: Energy Group and Energy Services. Energy Group includes wholesale energy, retail gas and other, and retail electric operations. Energy Services includes on-site energy production and appliance service operations. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Intersegment sales and transfers are treated as if the sales or transfers were to third parties at current market prices.

Information about SJI’s operations in different reportable operating segments is presented below (in thousands):



	Three Months Ended March 31,
	2018			2017
Operating Revenues:
Gas Utility Operations	$	234,459		$	196,814
Energy Group:
Wholesale Energy Operations	190,343			127,517
Retail Gas and Other Operations	40,201			36,878
Retail Electric Operations	44,035			48,957
Subtotal Energy Group	274,579			213,352
Energy Services:
On-Site Energy Production	21,157			19,612
Appliance Service Operations	520			1,658
Subtotal Energy Services	21,677			21,270
Corporate and Services	13,000			11,596
Subtotal	543,715			443,032
Intersegment Sales	(21,770		)	(17,203		)
Total Operating Revenues	$	521,945		$	425,829



	Three Months Ended March 31,
	2018			2017
Operating Income (See Note 1):
Gas Utility Operations	$	92,801		$	81,225
Energy Group:
Wholesale Energy Operations	75,657			(11,626		)
Retail Gas and Other Operations	(5,758		)	(1,667		)
Retail Electric Operations	(208		)	1,306
Subtotal Energy Group	69,691			(11,987		)
Energy Services:
On-Site Energy Production	(554		)	(1,969		)
Appliance Service Operations	503			(72		)
Subtotal Energy Services	(51		)	(2,041		)
Corporate and Services	(4,571		)	1,667
Total Operating Income	$	157,870		$	68,864

Depreciation and Amortization:
Gas Utility Operations	$	20,315		$	17,362
Energy Group:
Wholesale Energy Operations	23			28
Retail Gas and Other Operations	75			83
Subtotal Energy Group	98			111
Energy Services:
On-Site Energy Production	10,271			11,593
Appliance Service Operations	—			54
Subtotal Energy Services	10,271			11,647
Corporate and Services	3,214			401
Total Depreciation and Amortization	$	33,898		$	29,521

Interest Charges (See Note 1):
Gas Utility Operations	$	6,728		$	5,878
Energy Group:
Wholesale Energy Operations	—			3,059
Retail Gas and Other Operations	146			85
Subtotal Energy Group	146			3,144
Energy Services:
On-Site Energy Production	3,847			5,814
Midstream	426			510
Corporate and Services	7,470			4,731
Subtotal	18,617			20,077
Intersegment Borrowings	(4,645		)	(3,332		)
Total Interest Charges	$	13,972		$	16,745



	Three Months Ended March 31,
	2018			2017
Income Taxes (See Note 1):
Gas Utility Operations	$	21,836		$	29,911
Energy Group:
Wholesale Energy Operations	19,127			(6,319		)
Retail Gas and Other Operations	(1,534		)	(447		)
Retail Electric Operations	(58		)	535
Subtotal Energy Group	17,535			(6,231		)
Energy Services:
On-Site Energy Production	(1,157		)	(3,069		)
Appliance Service Operations	131			(17		)
Subtotal Energy Services	(1,026		)	(3,086		)
Midstream	62			(84		)
Corporate and Services	(1,992		)	1,360
Total Income Taxes	$	36,415		$	21,870

Property Additions (See Note 1):
Gas Utility Operations	$	50,237		$	62,280
Energy Group:
Wholesale Energy Operations	5			3
Retail Gas and Other Operations	173			295
Subtotal Energy Group	178			298
Energy Services:
On-Site Energy Production	1,113			7,349
Appliance Service Operations	—			6
Subtotal Energy Services	1,113			7,355
Midstream	211			152
Corporate and Services	3,345			93
Total Property Additions	$	55,084		$	70,178



	March 31, 2018			December 31, 2017
Identifiable Assets:
Gas Utility Operations	$	2,930,127		$	2,865,974
Energy Group:
Wholesale Energy Operations	150,330			208,785
Retail Gas and Other Operations	57,497			56,935
Retail Electric Operations	32,149			34,923
Subtotal Energy Group	239,976			300,643
Energy Services:
On-Site Energy Production	584,349			582,587
Appliance Service Operations	491			1,338
Subtotal Energy Services	584,840			583,925
Midstream	64,831			63,112
Discontinued Operations	1,751			1,757
Corporate and Services	640,996			711,038
Intersegment Assets	(572,441		)	(661,363		)
Total Identifiable Assets	$	3,890,080		$	3,865,086