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LEASES

6 Months Ended

Jun. 30, 2020

LEASES:

Except as described below, there have been no significant changes to the nature of the Company's leases since December 31, 2019, which are described in Note 9 to the Consolidated Financial Statements in Item 8 of SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, 2019.

SJI's and SJG's real estate leases, which are comprised primarily of office space and payment centers, represent approximately 89% and 56%, respectively, of operating lease liabilities and generally have a lease term between 5 and 15 years. The remaining operating leases primarily consist of fleet vehicles (SJI only), communication towers, and general office equipment, each with various lease terms ranging between 3 and 25 years. As of June 30, 2020, SJI does not have any contracts where it is considered the lessor (see "MTF" below).

As of both June 30, 2020 and December 31, 2019, SJI recognized right-of-use assets and lease liabilities of $1.9 million each for operating leases. The lease liability is comprised of approximately $1.7 million of real estate leases, $0.2 million of equipment leases and less than $0.1 million of fleet vehicle leases as of June 30, 2020, and $1.5 million of real estate leases, $0.3 million of equipment leases and $0.1 million of fleet vehicle leases as of December 31, 2019.

SJG recognized right-of-use assets and lease liabilities of $0.2 million each for operating leases as of June 30, 2020, and $0.3 million each for operating leases as of December 31, 2019. As of June 30, 2020, the lease liability is comprised of approximately $0.1 million of equipment leases and $0.1 million of real estate leases, and as of December 31, 2019, the lease liability is comprised of approximately $0.2 million of equipment leases and $0.1 million of real estate leases.

SJI and SJG recorded the right-of-use assets in Other Noncurrent Assets and the lease liabilities in Other Current and Noncurrent Liabilities (as shown in the table below) on the condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019.

The maturity of the Company’s operating lease liabilities is as follows (in thousands):


	As of June 30, 2020
	SJI Consolidated		SJG
2020 (excluding the six months ended June 30, 2020)	$	515	$	65
2021	534		39
2022	348		21
2023	190		19
2024	165		12
Thereafter	236		102
Total future minimum lease payments	1,988		258
Less imputed interest	109		29
Total lease payments	$	1,879	$	229
Included in the condensed consolidated balance sheet
Current lease liabilities (included in Other Current Liabilities)	$	759	$	80
Long-term lease liabilities (included in Other Noncurrent Liabilities)	1,120		149
Total lease liabilities	$	1,879	$	229

The total operating lease cost for SJI was $0.6 million and $1.1 million, respectively, during the three and six months ended June 30, 2020, and $0.8 million and $1.6 million during the three and six months ended June 30, 2019, respectively. The total operating lease cost for SJG was less than $0.1 million and approximately $0.1 million during the three and six months ended June 30, 2020, respectively, and $0.1 million and $0.2 million during the three and six months ended June 30, 2019, respectively.

Short-term lease costs were immaterial for both SJI and SJG. Neither SJI nor SJG had any sublease income during the three and six months ended June 30, 2020 and 2019.

Operating cash flows from operating leases for SJI were $0.4 million and $0.7 million during the three and six months ended June 30, 2020, respectively, and $0.4 million and $0.8 million during the three and six months ended June 30, 2019, respectively. Operating cash flows from operating leases for SJG were less than $0.1 million and approximately $0.1 million during the three and six months ended June 30, 2020, respectively, and $0.1 million and $0.2 million during the three and six months ended June 30, 2019, respectively.

Neither SJI nor SJG have leases with related parties or leverage lease arrangements. There are no leases that have not yet commenced but that create significant rights and obligations.

SJI had $0.2 million and $0.3 million of variable lease payments pertaining to leased back assets during the three and six months ended June 30, 2020, respectively, and $0.4 million and $0.8 million during the three and six ended June 30, 2019, respectively.

Supplemental Non-Cash Disclosures

The weighted average remaining lease term for SJI's operating leases is 4.4 years at a weighted average discount rate of 3.1%.

The weighted average remaining lease term for SJG's operating leases is 8.4 years at a weighted average discount rate of 3.1%.

MTF

As of December 31, 2019, Marina was considered to be the lessor of certain thermal energy generating property and equipment under an operating lease which was set to expire in May 2027. As of December 31, 2019, the carrying costs of this property and equipment under operating lease was $68.9 million (net of accumulated depreciation of $40.6 million), and is included in Assets Held for Sale in the condensed consolidated balance sheets. As discussed in Note 1, MTF was sold to a third party buyer in February 2020, and as a result, Marina no longer is the lessor of this property, and no longer has future rentals or commitments.

LEASES