-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SyGiACGguoEsH5pc3M2bg8kGTSSDEWpCBDOhqz8u2G0pQrB2loqjoYruXrEKqA2O butAZWSKxE7R1b9R2mExww== 0000091928-00-000001.txt : 20000302 0000091928-00-000001.hdr.sgml : 20000302 ACCESSION NUMBER: 0000091928-00-000001 CONFORMED SUBMISSION TYPE: U-3A-2 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000229 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTH JERSEY INDUSTRIES INC CENTRAL INDEX KEY: 0000091928 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 221901645 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-3A-2 SEC ACT: SEC FILE NUMBER: 069-00207 FILM NUMBER: 556401 BUSINESS ADDRESS: STREET 1: 1 SO JERSEY PLZ STREET 2: RTE 54 CITY: FOLSOM STATE: NJ ZIP: 08037 BUSINESS PHONE: 6095619000 MAIL ADDRESS: STREET 1: 1 SO JERSEY PLZ STREET 2: RTE 54 CITY: FOLSOM STATE: NJ ZIP: 08037 FORMER COMPANY: FORMER CONFORMED NAME: SOUTH JERSEY GAS CO DATE OF NAME CHANGE: 19700507 FORMER COMPANY: FORMER CONFORMED NAME: ATLANTIC CITY GAS CO DATE OF NAME CHANGE: 19680301 U-3A-2 1 FILE NO. _____________ FORM U-3A-2 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC STATEMENT BY HOLDING COMPANY CLAIMING EXEMPTION UNDER RULE U-3A-2 FROM THE PROVISIONS OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 TO BE FILED ANNUALLY PRIOR TO MARCH 1 SOUTH JERSEY INDUSTRIES, INC. hereby files with the Securities and Exchange Commission, pursuant to Rule 2, its statement claiming exemption as a holding company from the provisions of the Public Utility Holding Company Act of 1935. In support of such claim for exemption, the following information is submitted: 1. Name, State of organization, location and nature of business of claimant and every subsidiary thereof other than any exempt wholesale generator (EWG) or foreign utility company in which claimant directly or indirectly holds an interest. The claimant, South Jersey Industries, Inc. (SJI), was organized under the laws of the State of New Jersey; its principal location is 1 South Jersey Plaza, Folsom, New Jersey 08037. SJI is not a public utility company. It is primarily engaged in the business of owning and holding a majority interest in other business enterprises. SJI owns all of the outstanding common stock of South Jersey Gas Company (SJG), which was organized under the laws of the State of New Jersey. SJG's principal location is 1 South Jersey Plaza, Folsom, New Jersey 08037. SJG is a public utility company engaged in the purchase, transmission and sale of natural and mixed gases for residential, commercial, and industrial use in an area of approximately 2,500 square miles in the southern part of New Jersey. SJG also makes off-system sales of natural gas on a wholesale basis to various customers on the interstate pipeline system and transports natural gas purchased directly from producers or suppliers for its own sales and for some of its customers. SJG also assigns or buys capacity for the purchase or transportation of natural gas. - 1 - SJI owns all of the outstanding common stock of South Jersey Energy Company (SJE), which was organized under the laws of the State of New Jersey. SJE's principal location is 1 South Jersey Plaza, Folsom, New Jersey 08037. SJE is not a public utility company. SJE provides services for the acquisition, sale and transportation of natural gas and electricity for industrial, commercial and residential users and markets total energy management services. SJE also markets an air quality monitoring system that tests for hazardous airborne particulate on a real-time basis. SJE owns all of the outstanding common stock of SJ EnerTrade, Inc. (EnerTrade) which was formed on October 22, 1997 under the laws of the State of New Jersey. EnerTrade's principal location is 1 South Jersey Plaza, Folsom, New Jersey 08037. EnerTrade is not a public utility company. It provides services for the sale of natural gas to energy marketers, electric and gas utilities, and other wholesale users in the mid-Atlantic and southern regions of the country. SJE also has a 50% investment in South Jersey Energy Solutions, LLC (SJES), a joint venture with Energy East Solutions, Inc. formed June 1, 1999 under the laws of the State of New Jersey. SJES's principal location is 1 South Jersey Plaza, Folsom, New Jersey 08037. SJES is not a public utility company. It sells electricity on a retail basis in the mid-Atlantic states. SJI owns 50% interest in Millennium Account Services, LLC (Millennium), a joint venture with Conectiv Solutions, LLC formed January 4, 1999 under the laws of the State of Delaware. Millennium's principal location is 2 Regulus Drive, Suite B, Turnersville, New Jersey 08012. Millennium is not a utility company. It provides meter reading services in southern New Jersey. SJI owns all of the outstanding common stock of Energy & Minerals, Inc. (EMI), which was organized under the laws of the State of New Jersey. EMI's principal location is 1 South Jersey Plaza, Folsom, New Jersey 08037. EMI is not a public utility company. It principally owns real estate and the stock of an inactive nonutility subsidiary. EMI owns all of the outstanding common stock of South Jersey Fuel, Inc. (SJF), which was organized under the laws of the State of New Jersey. SJF's principal location is 1 South Jersey Plaza, Folsom, New Jersey 08037. SJF is not a public utility company and is presently inactive. SJI owns all of the outstanding common stock of R&T Group, Inc. (R&T), which was organized under the laws of the State of New Jersey. R&T's principal location is 1 South Jersey Plaza, Folsom, New Jersey 08037. R&T is not a public utility company. It holds the remaining assets and liabilities of certain nonutility subsidiaries of SJI which were merged into R&T in 1997. R&T is presently inactive. Neither the claimant or any of its subsidiaries is an EWG nor do they hold a direct or indirect interest in a foreign utility company. - 2 - 2. A brief description of the properties of claimant and each of its subsidiary public utility companies used for the generation, transmission, and distribution of electric energy for sale, or for the production, transmission, and distribution of natural or manufactured gas, indicating the location of principal generating plants, transmission lines, producing fields, gas manufacturing plants, and electric and gas distribution facilities, including all such properties which are outside the State in which claimant and its subsidiaries are organized and all transmission or pipelines which deliver or receive electric energy or gas at the borders of such State. SJI does not own directly any properties used for the production, transmission, and distribution of natural or manufactured gas or electric energy. The properties of SJG used for the production, transmission, and distribution of natural or manufactured gas include mains, service connections and meters, supplemental gas storage facilities, two liquefied propane plants, and an LNG storage and vaporization facility, all of which are located in the State of New Jersey (except that certain gas owned by SJG is stored outside the State and transported when needed). There are 5,132 miles of distribution mains. There are 92 miles of mains in the transmission system. No pipelines of SJG deliver or receive gas at the borders of the State of New Jersey. 3. The following information for the last calendar year with respect to claimant and each of its subsidiary public utility companies: (a) Number of Kwh of electric energy sold (at retail or wholesale) and Mcf of natural or manufactured gas distributed at retail. During 1999, SJG distributed at retail to residential, commercial and industrial customers 25,320 MMcf of natural or manufactured gas and transported 28,771 MMcf of natural gas purchased directly by its industrial, residential and commercial customers. Retail distribution revenues were $203.0 million and transportation revenues were $34.8 million. SJG also sold 9,116 MMcf, or $23.3 million, of natural gas at wholesale for resale within the State of New Jersey. (b) Number of Kwh of electric energy and Mcf of natural or manufactured gas distributed at retail outside the State in which each company is organized. None (c) Number of Kwh of electric energy and Mcf of natural or manufactured gas sold at wholesale outside the State in which each such company is organized, or at the State line. During 1999 SJG sold 33,365 MMcf, or $80.8 million, of natural gas at wholesale to customers outside the borders of the State of New Jersey. Also, throughput related to capacity release amounted to 29,247 MMcf, or $4.2 million in revenues, in 1999. - 3 - (d) Number of Kwh of electric energy and Mcf of natural or manufactured gas purchased outside the State in which each such company is organized or at the State line. During 1999, SJG purchased approximately 64,528 MMcf of natural gas from out-of-state sources at a total cost, including related expenses, of $212.5 million. During 1999, SJG purchased and had delivered to it approximately 297 MMcf of liquefied natural gas by over-the-road truck transport to SJG's LNG Storage and Vaporization facility at McKee City, Atlantic County, New Jersey, at a cost of $1.8 million. 4. The following information for the reporting period with respect to claimant and each interest it holds directly or indirectly in an EWG or a foreign utility company, stating monetary amounts in United States dollars: (a) Name, location, business address and description of the facilities used by the EWG or foreign utility company for the generation, transmission and distribution of electric energy for sale or for the distribution at retail of natural or manufactured gas. The claimant has no direct or indirect interest or investment of any kind in, or has any sales, service or construction contracts of any kind with, an EWG or a foreign utility company. (b) Name of each system company that holds an interest in such EWG or foreign utility company; and description of the interest held. No system company holds any direct or indirect interest in an EWG or foreign utility company. (c) Type and amount of capital invested, directly or indirectly, by the holding company claiming exemption; any direct or indirect guarantee of the security of the EWG or foreign utility company by the holding company claiming exemption; and any debt or other financial obligation for which there is recourse, directly or indirectly, to the holding company claiming exemption or another system company, other than the EWG or foreign utility company. The claimant holding company has no capital invested, directly or indirectly; nor does it directly or indirectly guarantee any security debt of an EWG or foreign utility company; nor debt or other financial obligation for which there is recourse, directly or indirectly, to the holding company claiming exemption on another system company. - 4 - (d) Capitalization and earnings of the EWG or foreign utility company during the reporting period. None (e) Identify any service, sales or construction contract(s) between the EWG or foreign utility company and a system company, and describe the services to be rendered or goods sold and fees or revenues under such agreement(s). None - 5 - EXHIBIT A A consolidating statement of income and retained earnings of the claimant and its subsidiary companies for the last calendar year, together with a consolidating balance sheet of claimant and its subsidiary companies as of the close of such calendar year. The above-named claimant has caused this statement to be duly executed on its behalf by its authorized officer on this 25th day of February 2000. SOUTH JERSEY INDUSTRIES, INC. DAVID A. KINDLICK Vice President CORPORATE SEAL ATTEST: GEORGE L. BAULIG Vice President & Corporate Secretary Name, title and address of officer to whom notices and correspondence concerning this statement should be addressed: George L. Baulig, Vice President & Corporate Secretary South Jersey Industries, Inc. 1 South Jersey Plaza Folsom, New Jersey 08037 - 6 - EXHIBIT B FINANCIAL DATA SCHEDULE Consolidated Financial Data Schedule filed via EDGAR as part of this report on Form U-3A-2. - 7 - EXHIBIT C EWG ORGANIZATIONAL CHART Not applicable. See response to Item 4. - 8 - SOUTH JERSEY INDUSTRIES, INC. CONSOLIDATING STATEMENT OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 (In Thousands)
South South South Jersey Jersey Energy & Jersey Gas Energy Minerals, R & T Elim. Industries, Company Company Inc. Group, & Consd. Inc. Consd. Consd. Consd. Inc. Total Adjust. Total ------------ ---------- --------- ---------- --------- ---------- ---------- ---------- Operating Revenues: Utility $0 $350,922 $0 $0 $0 $350,922 ($5,212)[C] $345,710 Nonutility 2,496 0 46,622 533 0 49,651 (2,884)[C] 46,767 ------------ ---------- --------- ---------- --------- ---------- ---------- ---------- Total Operating Revenues 2,496 350,922 46,622 533 0 400,573 (8,096) 392,477 ------------ ---------- --------- ---------- --------- ---------- ---------- ---------- Operating Expenses: Gas Purchased for Resale 0 212,460 0 0 0 212,460 (5,413)[C] 207,047 Utility Operations 0 43,039 0 0 0 43,039 (1,925)[C] 41,114 Nonutility Operations 1,471 0 44,611 (164) 0 45,918 (99)[C] 45,819 Maintenance 12 6,057 8 0 0 6,077 0 6,077 Depreciation 6 18,894 34 14 0 18,948 20 [D] 18,968 Current Federal and State Income Taxes (22) 8,682 508 204 0 9,372 0 9,372 Deferred Federal and State Income Taxes 92 6,773 81 50 0 6,996 60 [D] 7,056 Other Taxes 69 10,992 57 19 0 11,137 0 11,137 ------------ ---------- --------- ---------- --------- ---------- ---------- ---------- Total Operating Expenses 1,628 306,897 45,299 123 0 353,947 (7,357) 346,590 ------------ ---------- --------- ---------- --------- ---------- ---------- ---------- Operating Income 868 44,025 1,323 410 0 46,626 (739) 45,887 Other Income: Dividends from Subsidiaries 25,950 0 0 0 0 25,950 (25,950)[A] 0 Equity in Undistributed Earnings of Subs (4,147) 0 0 0 0 (4,147) 4,147 [A] 0 ------------ ---------- --------- ---------- --------- ---------- ---------- ---------- Income Before Interest Charges 22,671 44,025 1,323 410 0 68,429 (22,542) 45,887 ------------ ---------- --------- ---------- --------- ---------- ---------- ---------- Interest Charges: Long-Term Debt 0 15,721 0 0 0 15,721 0 15,721 Short-Term Debt and Other 758 4,838 312 0 0 5,908 (803)[C] 5,105 ------------ ---------- --------- ---------- --------- ---------- ---------- ---------- Total Interest Charges 758 20,559 312 0 0 21,629 (803) 20,826 ------------ ---------- --------- ---------- --------- ---------- ---------- ---------- Income from Continuing Operations Before Preferred Dividend Requirements of Subsidiary 21,913 23,466 1,011 410 0 46,800 (21,739) 25,061 Preferred Dividend Requirements of Subsidiary 0 3,084 0 0 0 3,084 0 3,084 ------------ ---------- --------- ---------- --------- ---------- ---------- ---------- Income from Continuing Operations 21,913 20,382 1,011 410 0 43,716 (21,739) 21,977 Equity in Undistributed Earnings of Discontinued Subsidiaries (289) 0 0 0 0 (289) 289 [A] 0 Loss from Discontinued Operations - Net 0 0 (5) (157) (127) (289) 0 (289) ------------ ---------- --------- ---------- --------- ---------- ---------- ---------- Net Income(Loss) Applicable to Common Stock $21,624 $20,382 $1,006 $253 ($127) $43,138 ($21,450) $21,688 ============ ========== ========= ========== ========= ========== ========== ==========
- 9 - SOUTH JERSEY INDUSTRIES, INC. CONSOLIDATING STATEMENT OF RETAINED EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 (In Thousands)
South South South Jersey Jersey Energy & Jersey Gas Energy Minerals, R & T Elim. Industries, Company Company Inc. Group, & Consd. Inc. Consd. Consd. Consd. Inc. Total Adjust. Total ------------ ---------- --------- ---------- --------- ---------- ---------- ---------- Retained Earnings - Beginning $44,571 $54,275 ($87) ($4,323) ($6,928) $87,508 ($43,001)[B] $44,507 Net Income(Loss) Applic to Common Stock 21,624 20,382 1,006 253 (127) 43,138 (21,450) 21,688 ------------ ---------- --------- ---------- --------- ---------- ---------- ---------- 66,195 74,657 919 (4,070) (7,055) 130,646 (64,451) 66,195 Dividends Declared - Common Stock 15,728 16,200 0 9,750 0 41,678 (25,950)[C] 15,728 ------------ ---------- --------- ---------- --------- ---------- ---------- ---------- Retained Earnings - Ending $50,467 $58,457 $919 ($13,820) ($7,055) $88,968 ($38,501) $50,467 ============ ========== ========= ========== ========= ========== ========== ==========
- 10 - SOUTH JERSEY INDUSTRIES, INC. CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 (In Thousands) [A] Dividends from Subsidiaries $25,950 Investment in Subsidiaries 4,436 Equity in Undistributed Earnings of Subsidiaries $4,147 Equity in Undistributed Earnings of Discontinued Subsidiaries 289 Retained Earnings - Dividends Declared - Common Stock 25,950 To eliminate intercompany dividends paid and equity in undistributed earnings recorded by South Jersey Industries, Inc. [B] Retained Earnings - 1/1/99 $42,937 Investment in Subsidiaries $42,937 To eliminate retained earnings of subsidiaries at 1/1/99 previously recorded by South Jersey Industries, Inc. under the equity method of accounting. [C] Operating Revenues - Utility $5,212 Operating Revenues - Nonutility 3,028 Gas Purchased for Resale $5,413 Operating Expense - Utility 1,925 Operating Expense - Nonutility 99 Interest Expense - Short-Term Debt and Other 803 To eliminate intercompany revenue and expense. [D] Depreciation $20 Retained Earnings 64 Deferred Federal and State Income Taxes 60 Operating Revenues - Nonutility $144 To recognize deferred gain of 1988 sale of Millville buildings by SJG to SJI.
- 11 - SOUTH JERSEY INDUSTRIES, INC. CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999 (In Thousands)
South South South Jersey Jersey Energy & Jersey Gas Energy Minerals, R & T Elim. Industries, Company Company Inc. Group, & Consd. Inc. Consd. Consd. Consd. Inc. Total Adjust. Total ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Assets - ------ Property, Plant and Equipment: Utility Plant, at original cost $0 $720,016 $0 $0 $0 $720,016 $0 $720,016 Gas Plant Acquisition Adjustment - Net 0 1,776 0 0 0 1,776 0 1,776 Gas Stored Underground 0 1,322 0 0 0 1,322 0 1,322 Accumulated Depreciation and Amortization 0 (192,240) 0 0 0 (192,240) 0 (192,240) Nonutility Property and Equipment, at cost 1,582 0 461 1,380 0 3,423 0 3,423 Accumulated Depreciation (78) 0 (51) (822) 0 (951) 0 (951) ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Property, Plant and Equipment - Net 1,504 530,874 410 558 0 533,346 0 533,346 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Investments: Investments in Subsidiaries 187,883 0 0 0 0 187,883 (187,883)[1] 0 Available-for-Sale Securities 45 1,662 0 0 0 1,707 0 1,707 Investment in Affiliate 260 0 1,991 0 0 2,251 0 2,251 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Investments 188,188 1,662 1,991 0 0 191,841 (187,883) 3,958 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Current Assets: Cash and Cash Equivalents 672 4,694 208 36 24 5,634 0 5,634 Notes Receivable - Associated Companies 4,582 0 325 3,685 1,550 10,142 (10,142)[3] 0 Notes Receivable - Affiliate 0 0 2,650 0 0 2,650 0 2,650 Accounts Receivable 35 36,926 6,436 247 0 43,644 (514)[2,6] 43,130 Unbilled Revenues 0 21,294 1,034 0 0 22,328 0 22,328 Provision for Uncollectibles 0 (931) (51) (135) 0 (1,117) 0 (1,117) Accounts Receivable - Associated Companies 546 139 13 21 8 727 (727)[2] 0 Natural Gas in Storage, Average Cost 0 26,840 226 0 0 27,066 0 27,066 Materials and Supplies, Average Cost 0 4,085 0 0 0 4,085 0 4,085 Assets of Discontinued Businesses Held for Disposal 0 0 0 0 289 289 0 289 Accumulated Deferred Income Taxes 5 595 30 0 0 630 (630)[4] 0 Prepaid Taxes 0 4,069 0 0 0 4,069 0 4,069 Dividends Receivable 4,050 0 0 0 0 4,050 (4,050)[7] 0 Prepayments and Other Current Assets 36 2,462 382 20 14 2,914 0 2,914 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Current Assets 9,926 100,173 11,253 3,874 1,885 127,111 (16,063) 111,048 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Accounts Receivable - Merchandise 0 684 424 0 0 1,108 0 1,108 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Regulatory and Other Non-Current Assets: Gross Receipts & Franchise Taxes 0 3,141 0 0 0 3,141 0 3,141 Environmental Remediation Costs 0 76,731 0 0 0 76,731 0 76,731 Accumulated Deferred Income Taxes 697 8,296 64 1,425 361 10,843 (10,843)[5] 0 Income Taxes - Flowthrough Depreciation 0 11,531 0 0 0 11,531 0 11,531 Deferred Fuel Costs - Net 0 13,174 0 0 0 13,174 0 13,174 Deferred Postretirement Benefit Costs 0 4,914 0 0 0 4,914 0 4,914 Other 16 7,951 1 6 0 7,974 0 7,974 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Regulatory and Other Non-Current Assets 713 125,738 65 1,431 361 128,308 (10,843) 117,465 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Assets $200,331 $759,131 $14,143 $5,863 $2,246 $981,714 ($214,789) $766,925 ============ ========== ========= ========== ========== ========== =========== ==========
- 12 - SOUTH JERSEY INDUSTRIES, INC. CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999 (In Thousands)
South South South Jersey Jersey Energy & Jersey Gas Energy Minerals, R & T Elim. Industries, Company Company Inc. Group, & Consd. Inc. Consd. Consd. Consd. Inc. Total Adjust. Total ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Capitalization and Liabilities - ------------------------------ Common Equity: Common Stock SJI Par Value $1.25 a share Authorized - 20,000,000 shares Outstanding - 11,152,175 shares $13,940 $0 $0 $0 $0 $13,940 $0 $13,940 Common Stock - Subsidiaries 0 5,848 50 13,283 1,000 20,181 (20,181)[1] 0 Premium on Common Stock 120,971 117,817 2,000 1,584 7,800 250,172 (129,201)[1] 120,971 Capital Stock Expense (103) 0 0 0 0 (103) 0 (103) Retained Earnings 50,467 58,457 919 (13,820) (7,055) 88,968 (38,501)[1] 50,467 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Common Equity 185,275 182,122 2,969 1,047 1,745 373,158 (187,883) 185,275 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Preferred Stock and Securities of Subsidiary: Series A, 4.70%- 1,200 shares 0 120 0 0 0 120 0 120 Series B, 8% -19,242 shares 0 1,924 0 0 0 1,924 0 1,924 8.35% Company - Guaranteed Mandatorily Redeemable - 1,400,000 shares 0 35,000 0 0 0 35,000 0 35,000 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Preferred Stock and Securities of Subsidiary 0 37,044 0 0 0 37,044 0 37,044 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Long-Term Debt (less current maturities & sinking fund requirements) 0 183,561 0 0 0 183,561 0 183,561 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Current Liabilities: Notes Payable to Banks 1,050 118,900 0 0 0 119,950 0 119,950 Current Maturities of Long-Term Debt 0 8,876 0 0 0 8,876 0 8,876 Notes Payable - Associated Companies 5,560 0 4,425 157 0 10,142 (10,142)[3] 0 Accounts Payable 448 34,359 5,980 3 1 40,791 (518)[2,6] 40,273 Accounts Payable to Associated Companies 94 463 131 11 24 723 (723)[2] 0 Customer Deposits 0 5,386 0 0 0 5,386 0 5,386 Accumulated Deferred Income Taxes 4 8,905 165 (5) 6 9,075 (630)[4] 8,445 Taxes Accrued 70 634 131 (305) 33 563 0 563 Environmental Remediation Costs 97 12,534 0 1,396 0 14,027 0 14,027 Interest Accrued 0 3,896 0 0 0 3,896 0 3,896 Dividends Declared 4,014 4,090 0 0 0 8,104 (4,050)[7] 4,054 Other Current Liabilities 2,911 2,436 251 412 152 6,162 0 6,162 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Current Liabilities 14,248 200,479 11,083 1,669 216 227,695 (16,063) 211,632 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Deferred Credits and Other Non-Current Liabilities: Pension and Other Postretirement Benefits 304 12,303 118 356 261 13,342 0 13,342 Deferred Income Taxes - Net 39 93,529 (27) 0 24 93,565 (10,843)[5] 82,722 Investment Tax Credit 0 4,849 0 0 0 4,849 0 4,849 Environmental Remediation Costs 68 38,495 0 2,791 0 41,354 0 41,354 Other 397 6,749 0 0 0 7,146 0 7,146 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Def. Credits and Other Non-Current Liabilities 808 155,925 91 3,147 285 160,256 (10,843) 149,413 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Capitalization and Liabilities $200,331 $759,131 $14,143 $5,863 $2,246 $981,714 ($214,789) $766,925 ============ ========== ========= ========== ========== ========== =========== ==========
- 13 - SOUTH JERSEY INDUSTRIES, INC. CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS BALANCE SHEET - DECEMBER 31, 1999 (In Thousands) [1] Common Stock - Subsidiaries $20,181 Premium on Common Stock 129,201 Retained Earnings 38,501 Investment in Subsidiaries $187,883 To eliminate South Jersey Industries, Inc. investment in subsidiaries which is maintained on the equity method of accounting. [2] Accounts Payable - Associated Companies $723 Accounts Payable 6 Accounts Receivable - Associated Companies $727 Accounts Receivable 2 To eliminate intercompany accounts receivable and payable. [3] Notes Payable - Associated Companies $10,142 Notes Receivable - Associated Companies $10,142 To eliminate intercompany short-term notes between South Jersey Industries, Inc. and Subsidiaries [4] Accumulated Deferred Income Taxes - Current Liability $630 Accumulated Deferred Income Taxes - Current Asset $630 To net current accumulated DFIT asset and liability [5] Accumulated Deferred Income Taxes - Noncurrent Liability $10,843 Accumulated Deferred Income Taxes - Noncurrent Asset $10,843 To net noncurrent accumulated DFIT asset and liability [6] Accounts Payable $512 Accounts Receivable $512 To eliminate intercompany gas receivable and payable between South Jersey Gas Company, South Jersey Energy Company and SJ EnerTrade. [7] Dividends Payable $4,050 Dividends Receivable $4,050 To eliminate South Jersey Gas Company dividend payable to South Jersey Industries, Inc.
- 14 - SOUTH JERSEY GAS COMPANY CONSOLIDATING STATEMENT OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 (In Thousands)
South Jersey Eliminations South Jersey Gas Company & Consolidated Gas Company Capital Trust Total Adjustments Total ------------- -------------- ---------- --------------- ------------- Operating Revenues: Utility $350,922 $0 $350,922 $0 $350,922 Nonutility 0 3,013 3,013 (3,013)[B] 0 ------------- -------------- ---------- --------------- ------------- Total Operating Revenues 350,922 3,013 353,935 (3,013) 350,922 ------------- -------------- ---------- --------------- ------------- Operating Expenses: Gas Purchased for Resale 212,460 0 212,460 0 212,460 Utility Operations 43,039 0 43,039 0 43,039 Nonutility Operations 0 0 0 0 0 Maintenance 6,057 0 6,057 0 6,057 Depreciation 18,894 0 18,894 0 18,894 Current Federal and State Income Taxes 8,682 0 8,682 0 8,682 Deferred Federal and State Income Taxes 6,773 0 6,773 0 6,773 Other Taxes 10,992 0 10,992 0 10,992 ------------- -------------- ---------- --------------- ------------- Total Operating Expenses 306,897 0 306,897 0 306,897 ------------- -------------- ---------- --------------- ------------- Operating Income 44,025 3,013 47,038 (3,013) 44,025 Other Income: Dividends from Subsidiary 90 0 90 (90)[A] 0 Equity in Undistributed Earnings of Subsidiary 0 0 0 0 0 ------------- -------------- ---------- --------------- ------------- Income Before Interest Charges 44,115 3,013 47,128 (3,103) 44,025 ------------- -------------- ---------- --------------- ------------- Interest Charges: Long-Term Debt 18,734 0 18,734 (3,013)[B] 15,721 Short-Term Debt and Other 4,838 0 4,838 0 4,838 ------------- -------------- ---------- --------------- ------------- Total Interest Charges 23,572 0 23,572 (3,013) 20,559 ------------- -------------- ---------- --------------- ------------- Income from Continuing Operations Before Preferred Dividend Requirements of Subsidiary 20,543 3,013 23,556 (90) 23,466 Preferred Dividend Requirements of Subsidiary 161 2,923 3,084 0 3,084 ------------- -------------- ---------- --------------- ------------- Income from Continuing Operations 20,382 90 20,472 (90) 20,382 Equity in Undistributed Earnings of Discontinued Subsidiaries 0 0 0 0 0 Loss from Discontinued Operations - Net 0 0 0 0 0 ------------- -------------- ---------- --------------- ------------- Net Income Applicable to Common Stock $20,382 $90 $20,472 ($90) $20,382 ============= ============== ========== =============== =============
- 15 - SOUTH JERSEY GAS COMPANY CONSOLIDATING STATEMENT OF RETAINED EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 (In Thousands)
South Jersey Eliminations South Jersey Gas Company & Consolidated Gas Company Capital Trust Total Adjustments Total ------------- -------------- ---------- --------------- ------------- Retained Earnings - Beginning $54,275 $0 $54,275 $0 $54,275 Net Income Applic to Common Stock 20,382 90 20,472 (90) 20,382 ------------- -------------- ---------- --------------- ------------- 74,657 90 74,747 (90) 74,657 Dividends Declared - Common Stock 16,200 90 16,290 (90)[A] 16,200 ------------- -------------- ---------- --------------- ------------- Retained Earnings - Ending $58,457 $0 $58,457 $0 $58,457 ============= ============== ========== =============== =============
- 16 - SOUTH JERSEY GAS COMPANY CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 (In Thousands) [A] Dividends from Subsidiary $90 Retained Earnings - Dividends Declared - Common Stock $90 To eliminate intercompany dividends and interest paid [B] Operating Revenues - Nonutility $3,013 Interest Expense - Long-Term Debt $3,013 To eliminate intercompany interest paid
- 17 - SOUTH JERSEY GAS COMPANY CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999 (In Thousands)
South Jersey South Jersey Eliminations Gas Gas Company & Consolidated Company Capital Trust Total Adjustments Total ---------- -------------- ---------- -------------- -------------- Assets - ------ Property, Plant and Equipment: Utility Plant, at original cost $720,016 $0 $720,016 $0 $720,016 Gas Plant Acquisition Adjustment - Net 1,776 0 1,776 0 1,776 Gas Stored Underground 1,322 0 1,322 0 1,322 Accumulated Depreciation and Amortization (192,240) 0 (192,240) 0 (192,240) Nonutility Property and Equipment, at cost 0 0 0 0 0 Accumulated Depreciation 0 0 0 0 0 ---------- -------------- ---------- -------------- -------------- Property, Plant and Equipment - Net 530,874 0 530,874 0 530,874 ---------- -------------- ---------- -------------- -------------- Investments: Investment in Subsidiary 1,082 0 1,082 (1,082)[1] 0 Available-for-Sale Securities 1,662 0 1,662 0 1,662 Investment in Affiliate 0 0 0 0 0 ---------- -------------- ---------- -------------- -------------- Total Investments 2,744 0 2,744 (1,082) 1,662 ---------- -------------- ---------- -------------- -------------- Current Assets: Cash and Cash Equivalents 4,694 0 4,694 0 4,694 Notes Receivable - Associated Companies 0 36,082 36,082 (36,082)[1] 0 Notes Receivable - Affiliate 0 0 0 0 0 Accounts Receivable 36,926 0 36,926 0 36,926 Unbilled Revenues 21,294 0 21,294 0 21,294 Provision for Uncollectibles (931) 0 (931) 0 (931) Accounts Receivable - Associated Companies 139 0 139 0 139 Natural Gas in Storage, Average Cost 26,840 0 26,840 0 26,840 Materials and Supplies, Average Cost 4,085 0 4,085 0 4,085 Assets of Discontinued Businesses Held for Disposal 0 0 0 0 0 Accumulated Deferred Income Taxes 595 0 595 0 595 Prepaid Taxes 4,069 0 4,069 0 4,069 Prepayments and Other Current Assets 2,462 0 2,462 0 2,462 ---------- -------------- ---------- -------------- -------------- Total Current Assets 100,173 36,082 136,255 (36,082) 100,173 ---------- -------------- ---------- -------------- -------------- Accounts Receivable - Merchandise 684 0 684 0 684 ---------- -------------- ---------- -------------- -------------- Regulatory and Other Non-Current Assets: Gross Receipts & Franchise Taxes 3,141 0 3,141 0 3,141 Environmental Remediation Costs 76,731 0 76,731 0 76,731 Accumulated Deferred Income Taxes 8,296 0 8,296 0 8,296 Income Taxes - Flowthrough Depreciation 11,531 0 11,531 0 11,531 Deferred Fuel Costs - Net 13,174 0 13,174 0 13,174 Deferred Postretirement Benefit Costs 4,914 0 4,914 0 4,914 Other 7,951 0 7,951 0 7,951 ---------- -------------- ---------- -------------- -------------- Total Regulatory and Other Non-Current Assets 125,738 0 125,738 0 125,738 ---------- -------------- ---------- -------------- -------------- Total Assets $760,213 $36,082 $796,295 ($37,164) $759,131 ========== ============== ========== ============== ==============
- 18 - SOUTH JERSEY GAS COMPANY CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999 (In Thousands)
South Jersey South Jersey Eliminations Gas Gas Company & Consolidated Company Capital Trust Total Adjustments Total ---------- -------------- ---------- -------------- -------------- Capitalization and Liabilities - ------------------------------ Common Equity: Common Stock SJG Par Value $2.50 a share Authorized - 4,000,000 shares Outstanding - 2,339,139 shares $5,848 $0 $5,848 $0 $5,848 Common Stock - Subsidiary 0 1,082 1,082 (1,082)[1] 0 Premium on Common Stock 117,817 0 117,817 0 117,817 Retained Earnings 58,457 0 58,457 0 58,457 ---------- -------------- ---------- -------------- -------------- Total Common Equity 182,122 1,082 183,204 (1,082) 182,122 ---------- -------------- ---------- -------------- -------------- Preferred Stock and Securities of Subsidiary: Series A, 4.70%- 1,200 shares 120 0 120 0 120 Series B, 8% -19,242 shares 1,924 0 1,924 0 1,924 8.35% Company - Guaranteed Mandatorily Redeemable - 1,400,000 shares 0 35,000 35,000 0 35,000 ---------- -------------- ---------- -------------- -------------- Total Preferred Stock and Securities of Subsidiary 2,044 35,000 37,044 0 37,044 ---------- -------------- ---------- -------------- -------------- Long-Term Debt (less current maturities & sinking fund requirements) 219,643 0 219,643 (36,082)[1] 183,561 ---------- -------------- ---------- -------------- -------------- Current Liabilities: Notes Payable to Banks 118,900 0 118,900 0 118,900 Current Maturities of Long-Term Debt 8,876 0 8,876 0 8,876 Notes Payable - Associated Companies 0 0 0 0 0 Accounts Payable 34,359 0 34,359 0 34,359 Accounts Payable to Associated Companies 463 0 463 0 463 Customer Deposits 5,386 0 5,386 0 5,386 Accumulated Deferred Income Taxes 8,905 0 8,905 0 8,905 Taxes Accrued 634 0 634 0 634 Environmental Remediation Costs 12,534 0 12,534 0 12,534 Interest Accrued 3,896 0 3,896 0 3,896 Dividends Declared 4,090 0 4,090 0 4,090 Other Current Liabilities 2,436 0 2,436 0 2,436 ---------- -------------- ---------- -------------- -------------- Total Current Liabilities 200,479 0 200,479 0 200,479 ---------- -------------- ---------- -------------- -------------- Deferred Credits and Other Non-Current Liabilities: Pension and Other Postretirement Benefits 12,303 0 12,303 0 12,303 Deferred Income Taxes - Net 93,529 0 93,529 0 93,529 Investment Tax Credit 4,849 0 4,849 0 4,849 Environmental Remediation Costs 38,495 0 38,495 0 38,495 Other 6,749 0 6,749 0 6,749 ---------- -------------- ---------- -------------- -------------- Total Def. Credits and Other Non-Current Liabilities 155,925 0 155,925 0 155,925 ---------- -------------- ---------- -------------- -------------- Total Capitalization and Liabilities $760,213 $36,082 $796,295 ($37,164) $759,131 ========== ============== ========== ============== ==============
- 19 - SOUTH JERSEY GAS COMPANY CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS BALANCE SHEET - DECEMBER 31, 1999 (In Thousands) [1] Common Stock - Subsidiary $1,082 Long-Term Debt 36,082 Notes Receivable - Assoc. Co. $36,082 Investment in Subsidiary 1,082 To eliminate South Jersey Gas Company investment in subsidiary which is maintained on the equity method of accounting.
- 20 - SOUTH JERSEY ENERGY COMPANY CONSOLIDATING STATEMENT OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 (In Thousands)
SJ Eliminations South Jersey EnerTrade, & Consolidated Energy Company Inc. Total Adjustments Total --------------- -------------- ---------- --------------- ------------- Operating Revenues: Utility $0 $0 $0 $0 $0 Nonutility 39,678 6,974 46,652 (30)[B] 46,622 --------------- -------------- ---------- --------------- ------------- Total Operating Revenues 39,678 6,974 46,652 (30) 46,622 --------------- -------------- ---------- --------------- ------------- Operating Expenses: Gas Purchased for Resale 0 0 0 0 0 Utility Operations 0 0 0 0 0 Nonutility Operations 38,540 6,101 44,641 (30)[B] 44,611 Maintenance 8 0 8 0 8 Depreciation 33 1 34 0 34 Current Federal and State Income Taxes 299 209 508 0 508 Deferred Federal and State Income Taxes 80 1 81 0 81 Other Taxes 57 0 57 0 57 --------------- -------------- ---------- --------------- ------------- Total Operating Expenses 39,017 6,312 45,329 (30) 45,299 --------------- -------------- ---------- --------------- ------------- Operating Income 661 662 1,323 0 1,323 Other Income: Dividends from Subsidiary 0 0 0 0 0 Equity in Undistributed Earnings of Subsidiary 362 0 362 (362)[A] 0 --------------- -------------- ---------- --------------- ------------- Income Before Interest Charges 1,023 662 1,685 (362) 1,323 --------------- -------------- ---------- --------------- ------------- Interest Charges: Long-Term Debt 0 0 0 0 0 Short-Term Debt and Other 12 300 312 0 312 --------------- -------------- ---------- --------------- ------------- Total Interest Charges 12 300 312 0 312 Income from Continuing Operations Before Preferred Dividend Requirements of Subsidiary 1,011 362 1,373 (362) 1,011 Preferred Dividend Requirements of Subsidiary 0 0 0 0 0 --------------- -------------- ---------- --------------- ------------- Income from Continuing Operations 1,011 362 1,373 (362) 1,011 Equity in Undistributed Earnings of Discontinued Subsidiaries 0 0 0 0 0 Loss from Discontinued Operations - Net (5) 0 (5) 0 (5) --------------- -------------- ---------- --------------- ------------- Net Income Applicable to Common Stock $1,006 $362 $1,368 ($362) $1,006 =============== ============== ========== =============== =============
- 21 - SOUTH JERSEY ENERGY COMPANY CONSOLIDATING STATEMENT OF RETAINED EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 (In Thousands)
South Jersey SJ Eliminations Energy EnerTrade, & Consolidated Company Inc. Total Adjustments Total --------------- -------------- ---------- --------------- ------------- Retained Earnings - Beginning ($87) $84 ($3) ($84) ($87) Net Income Applic to Common Stock 1,006 362 1,368 (362)[A] 1,006 --------------- -------------- ---------- --------------- ------------- 919 446 1,365 (446) 919 Dividends Declared - Common Stock 0 0 0 0 0 --------------- -------------- ---------- --------------- ------------- Retained Earnings - Ending $919 $446 $1,365 ($446) $919 =============== ============== ========== =============== =============
- 22 - SOUTH JERSEY ENERGY COMPANY CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 (In Thousands) [A] Investment in Subsidiary $362 Equity in Undistributed Earnings of Subsidiary $362 To eliminate equity in undistributed earnings recorded by South Jersey Energy Company [B] Operating Revenues - Nonutility $30 Operating Expense - Nonutility $30 To eliminate intercompany revenue and expense.
- 23 - SOUTH JERSEY ENERGY COMPANY CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999 (In Thousands)
South Jersey SJ Eliminations Energy EnerTrade, & Consolidated Company Inc. Total Adjustments Total ----------- ----------- --------- ------------- ------------- Assets - ------ Property, Plant and Equipment: Utility Plant, at original cost $0 $0 $0 $0 $0 Gas Plant Acquisition Adjustment - Net 0 0 0 0 0 Gas Stored Underground 0 0 0 0 0 Accumulated Depreciation and Amortization 0 0 0 0 0 Nonutility Property and Equipment, at cost 452 9 461 0 461 Accumulated Depreciation (47) (4) (51) 0 (51) ----------- ----------- --------- ------------- ------------- Property, Plant and Equipment - Net 405 5 410 0 410 ----------- ----------- --------- ------------- ------------- Investments: Investment in Subsidiary 546 0 546 (546)[1] 0 Available-for-Sale Securities 0 0 0 0 0 Investment in Affiliate 0 1,991 1,991 0 1,991 ----------- ----------- --------- ------------- ------------- Total Investments 546 1,991 2,537 (546) 1,991 ----------- ----------- --------- ------------- ------------- Current Assets: Cash and Cash Equivalents 160 48 208 0 208 Notes Receivable - Associated Companies 325 0 325 0 325 Notes Receivable - Affiliate 0 2,650 2,650 0 2,650 Accounts Receivable 5,557 879 6,436 0 6,436 Unbilled Revenues 1,034 0 1,034 0 1,034 Provision for Uncollectibles (51) 0 (51) 0 (51) Accounts Receivable - Associated Companies 3 10 13 0 13 Natural Gas in Storage, Average Cost 157 69 226 0 226 Materials and Supplies, Average Cost 0 0 0 0 0 Assets of Discontinued Businesses Held for Disposal 0 0 0 0 0 Accumulated Deferred Income Taxes 30 0 30 0 30 Prepaid Taxes 0 0 0 0 0 Prepayments and Other Current Assets 379 3 382 0 382 ----------- ----------- --------- ------------- ------------- Total Current Assets 7,594 3,659 11,253 0 11,253 ----------- ----------- --------- ------------- ------------- Accounts Receivable - Merchandise 424 0 424 0 424 ----------- ----------- --------- ------------- ------------- Regulatory and Other Non-Current Assets: Gross Receipts & Franchise Taxes 0 0 0 0 0 Environmental Remediation Costs 0 0 0 0 0 Accumulated Deferred Income Taxes 63 1 64 0 64 Income Taxes - Flowthrough Depreciation 0 0 0 0 0 Deferred Fuel Costs - Net 0 0 0 0 0 Deferred Postretirement Benefit Costs 0 0 0 0 0 Other 1 0 1 0 1 ----------- ----------- --------- ------------- ------------- Total Regulatory and Other Non-Current Assets 64 1 65 0 65 ----------- ----------- --------- ------------- ------------- Total Assets $9,033 $5,656 $14,689 ($546) $14,143 =========== =========== ========= ============= =============
- 24 - SOUTH JERSEY ENERGY COMPANY CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999 (In Thousands)
South Jersey SJ Eliminations Energy EnerTrade, & Consolidated Company Inc. Total Adjustments Total ----------- ----------- --------- ------------- ------------- Capitalization and Liabilities - ------------------------------ Common Equity: Common Stock SJE No Par Value Authorized - 2,500 shares Outstanding - 500 shares $50 $0 $50 $0 $50 Common Stock - Subsidiary 0 1 1 (1)[1] 0 Premium on Common Stock 2,000 99 2,099 (99)[1] 2,000 Retained Earnings 919 446 1,365 (446)[1] 919 ----------- ----------- --------- ------------- ------------- Total Common Equity 2,969 546 3,515 (546) 2,969 ----------- ----------- --------- ------------- ------------- Preferred Stock and Securities of Subsidiary: Series A, 4.70%- 2,100 shares 0 0 0 0 0 Series B, 8% -19,242 shares 0 0 0 0 0 8.35% Company - Guaranteed Mandatorily 0 0 0 0 0 Redeemable - 1,400,000 shares 0 0 0 0 0 ----------- ----------- --------- ------------- ------------- Total Preferred Stock and Securities of Subsidiary 0 0 0 0 0 ----------- ----------- --------- ------------- ------------- Long-Term Debt (less current maturities & sinking fund requirements) 0 0 0 0 0 ----------- ----------- --------- ------------- ------------- Current Liabilities: Notes Payable to Banks 0 0 0 0 0 Current Maturities of Long-Term Debt 0 0 0 0 0 Notes Payable - Associated Companies 0 4,425 4,425 0 4,425 Accounts Payable 5,441 539 5,980 0 5,980 Accounts Payable to Associated Companies 84 47 131 0 131 Customer Deposits 0 0 0 0 0 Accumulated Deferred Income Taxes 131 34 165 0 165 Taxes Accrued 74 57 131 0 131 Environmental Remediation Costs 0 0 0 0 0 Interest Accrued 0 0 0 0 0 Dividends Declared 0 0 0 0 0 Other Current Liabilities 245 6 251 0 251 ----------- ----------- --------- ------------- ------------- Total Current Liabilities 5,975 5,108 11,083 0 11,083 ----------- ----------- --------- ------------- ------------- Deferred Credits and Other Non-Current Liabilities: Pension and Other Postretirement Benefits 117 1 118 0 118 Deferred Income Taxes - Net (28) 1 (27) 0 (27) Investment Tax Credit 0 0 0 0 0 Environmental Remediation Costs 0 0 0 0 0 Other 0 0 0 0 0 ----------- ----------- --------- ------------- ------------- Total Def. Credits and Other Non-Current Liabilities 89 2 91 0 91 ----------- ----------- --------- ------------- ------------- Total Capitalization and Liabilities $9,033 $5,656 $14,689 ($546) $14,143 =========== =========== ========= ============= =============
- 25 - SOUTH JERSEY ENERGY COMPANY CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS BALANCE SHEET - DECEMBER 31, 1999 (In Thousands)) [1] Common Stock - Subsidiary $1 Premium on Common Stock 99 Retained Earnings 446 Investment in Subsidiary $546 To eliminate South Jersey Energy Company, Inc. investment in subsidiary which is maintained on the equity method of accounting.
- 26 - ENERGY & MINERALS, INC. CONSOLIDATING STATEMENT OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 (In Thousands)
Energy & South Jersey Eliminations Minerals, Fuel Company, & Consolidated Inc. Inc. Total Adjustments Total ----------- -------------- ---------- --------------- ------------- Operating Revenues: Utility $0 $0 $0 $0 $0 Nonutility 533 0 533 0 533 ----------- -------------- ---------- --------------- ------------- Total Operating Revenues 533 0 533 0 533 ----------- -------------- ---------- --------------- ------------- Operating Expenses: Gas Purchased for Resale 0 0 0 0 0 Utility Operations 0 0 0 0 0 Nonutility Operations (164) 0 (164) 0 (164) Maintenance 0 0 0 0 0 Depreciation 14 0 14 0 14 Current Federal and State Income Taxes 204 0 204 0 204 Deferred Federal and State Income Taxes 50 0 50 0 50 Other Taxes 19 0 19 0 19 ----------- -------------- ---------- --------------- ------------- Total Operating Expenses 123 0 123 0 123 ----------- -------------- ---------- --------------- ------------- Operating Income 410 0 410 0 410 Other Income: Dividends from Subsidiary 0 0 0 0 0 Equity in Undistributed Earnings of Subsidiary 0 0 0 0 0 ----------- -------------- ---------- --------------- ------------- Income Before Interest Charges 410 0 410 0 410 ----------- -------------- ---------- --------------- ------------- Interest Charges: Long-Term Debt 0 0 0 0 0 Short-Term Debt and Other 0 0 0 0 0 ----------- -------------- ---------- --------------- ------------- Total Interest Charges 0 0 0 0 0 ----------- -------------- ---------- --------------- ------------- Income from Continuing Operations Before Preferred Dividend Requirements of Subsidiary 410 0 410 0 410 Preferred Dividend Requirements of Subsidiary 0 0 0 0 0 ----------- -------------- ---------- --------------- ------------- Income from Continuing Operations 410 0 410 0 410 Equity in Undistributed Earnings of Discontinued Subsidiary (46) 0 (46) 46 [A] 0 Loss from Discontinued Subsidiaries - Net (111) (46) (157) 0 (157) ----------- -------------- ---------- --------------- ------------- Net Income (Loss) Applicable to Common Stock $253 ($46) $207 $46 $253 =========== ============== ========== =============== =============
- 27 - ENERGY & MINERALS, INC. CONSOLIDATING STATEMENT OF RETAINED EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 (In Thousands)
Energy & South Jersey Eliminations Minerals, Fuel Company, & Consolidated Inc. Inc. Total Adjustments Total ----------- -------------- ---------- --------------- ------------- Retained Earnings - Beginning ($4,323) ($1,509) ($5,832) $1,509 [B] ($4,323) Net Income (Loss) Applic to Common Stock 253 (46) 207 46 [A] 253 ----------- -------------- ---------- --------------- ------------- (4,070) (1,555) (5,625) 1,555 (4,070) Dividends Declared - Common Stock 9,750 0 9,750 0 9,750 ----------- -------------- ---------- --------------- ------------- Retained Earnings - Ending ($13,820) ($1,555) ($15,375) $1,555 ($13,820) =========== ============== ========== =============== =============
- 28 - ENERGY & MINERALS, INC. CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 (In Thousands) [A] Equity in Undistributed Earnings $46 of Subsidiary Investment in Subsidiary $46 To eliminate equity in undistributed earnings recorded by Energy & Minerals, Inc. [B] Retained Earnings - 1/1/99 $1,509 Investment in Subsidiaries $1,509 To eliminate retained earnings of subsidiary at 1/1/99 previously recorded by Energy & Minerals, Inc. under the equity method of accounting.
- 29 - ENERGY & MINERALS, INC. CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999 (In Thousands)
Energy & South Jersey Eliminations Minerals, Fuel Company & Consolidated Inc. Inc. Total Adjustments Total ---------- ------------- --------- ------------- ------------- Assets - ------ Property, Plant and Equipment: Utility Plant, at original cost $0 $0 $0 $0 $0 Gas Plant Acquisition Adjustment - Net 0 0 0 0 0 Gas Stored Underground 0 0 0 0 0 Accumulated Depreciation and Amortization 0 0 0 0 0 Nonutility Property and Equipment, at cost 872 508 1,380 0 1,380 Accumulated Depreciation (746) (76) (822) 0 (822) ---------- ------------- --------- ------------- ------------- Property, Plant and Equipment - Net 126 432 558 0 558 ---------- ------------- --------- ------------- ------------- Investments: Investment in Subsidiary (496) 0 (496) 496 [1] 0 Available-for-Sale Securities 0 0 0 0 0 Investment in Affiliate 0 0 0 0 0 ---------- ------------- --------- ------------- ------------- Total Investments (496) 0 (496) 496 0 ---------- ------------- --------- ------------- ------------- Current Assets: Cash and Cash Equivalents 27 9 36 0 36 Notes Receivable - Associated Companies 3,685 0 3,685 0 3,685 Notes Receivable - Affiliate 0 0 0 0 0 Accounts Receivable 247 0 247 0 247 Unbilled Revenues 0 0 0 0 0 Provision for Uncollectibles (135) 0 (135) 0 (135) Accounts Receivable - Associated Companies 21 0 21 0 21 Natural Gas in Storage, Average Cost 0 0 0 0 0 Materials and Supplies, Average Cost 0 0 0 0 0 Assets of Discontinued Businesses Held for Disposal 0 0 0 0 0 Accumulated Deferred Income Taxes 1 0 1 (1)[2] 0 Prepaid Taxes 0 0 0 0 0 Prepayments and Other Current Assets 20 0 20 0 20 ---------- ------------- --------- ------------- ------------- Total Current Assets 3,866 9 3,875 (1) 3,874 ---------- ------------- --------- ------------- ------------- Accounts Receivable - Merchandise 0 0 0 0 0 ---------- ------------- --------- ------------- ------------- Regulatory and Other Non-Current Assets: Gross Receipts & Franchise Taxes 0 0 0 0 0 Environmental Remediation Costs 0 0 0 0 0 Accumulated Deferred Income Taxes 1,240 506 1,746 (321)[3] 1,425 Income Taxes - Flowthrough Depreciation 0 0 0 0 0 Deferred Fuel Costs - Net 0 0 0 0 0 Deferred Postretirement Benefit Costs 0 0 0 0 0 Other 6 0 6 0 6 ---------- ------------- --------- ------------- ------------- Total Regulatory and Other Non-Current Assets 1,246 506 1,752 (321) 1,431 ---------- ------------- --------- ------------- ------------- Total Assets $4,742 $947 $5,689 $174 $5,863 ========== ============= ========= ============= =============
- 30 - ENERGY & MINERALS, INC. CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1999 (In Thousands)
Energy & South Jersey Eliminations Minerals, Fuel Company & Consolidated Inc. Inc. Total Adjustments Total ---------- ------------- --------- ------------- ------------- Capitalization and Liabilities - ------------------------------ Common Equity: Common Stock EMI No Par Value Authorized - 500,000 shares Outstanding - 98,341 shares $13,283 $0 $13,283 $0 $13,283 Common Stock - Subsidiary 0 0 0 0 0 Premium on Common Stock 1,584 1,059 2,643 (1,059)[1] 1,584 Retained Earnings (13,820) (1,555) (15,375) 1,555 [1] (13,820) ---------- ------------- --------- ------------- ------------- Total Common Equity 1,047 (496) 551 496 1,047 ---------- ------------- --------- ------------- ------------- Preferred Stock and Securities of Subsidiary: Series A, 4.70%- 2,100 shares 0 0 0 0 0 Series B, 8% -19,242 shares 0 0 0 0 0 8.35% Company - Guaranteed Mandatorily Redeemable - 1,400,000 shares 0 0 0 0 0 ---------- ------------- --------- ------------- ------------- Total Preferred Stock and Securities of Subsidiary 0 0 0 0 0 ---------- ------------- --------- ------------- ------------- Long-Term Debt (less current maturities & sinking fund requirements) 0 0 0 0 0 ---------- ------------- --------- ------------- ------------- Current Liabilities: Notes Payable to Banks 0 0 0 0 0 Current Maturities of Long-Term Debt 0 0 0 0 0 Notes Payable - Associated Companies 0 157 157 0 157 Accounts Payable 2 1 3 0 3 Accounts Payable to Associated Companies 9 2 11 0 11 Customer Deposits 0 0 0 0 0 Accumulated Deferred Income Taxes (4) 0 (4) (1)[2] (5) Taxes Accrued (312) 7 (305) 0 (305) Environmental Remediation Costs 981 415 1,396 0 1,396 Interest Accrued 0 0 0 0 0 Dividends Declared 0 0 0 0 0 Other Current Liabilities 402 10 412 0 412 ---------- ------------- --------- ------------- ------------- Total Current Liabilities 1,078 592 1,670 (1) 1,669 ---------- ------------- --------- ------------- ------------- Deferred Credits and Other Non-Current Liabilities: Pension and Other Postretirement Benefits 356 0 356 0 356 Deferred Income Taxes - Net 265 56 321 (321)[3] 0 Investment Tax Credit 0 0 0 0 0 Environmental Remediation Costs 1,996 795 2,791 0 2,791 Other 0 0 0 0 0 ---------- ------------- --------- ------------- ------------- Total Def. Credits and Other Non-Current Liabilities 2,617 851 3,468 (321) 3,147 ---------- ------------- --------- ------------- ------------- Total Capitalization and Liabilities $4,742 $947 $5,689 $174 $5,863 ========== ============= ========= ============= =============
- 31 - ENERGY & MINERALS, INC. CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS BALANCE SHEET - DECEMBER 31, 1999 (In Thousands) [1] Premium on Common Stock $1,059 Investment in Subsidiary 496 Retained Earnings $1,555 To eliminate Energy & Minerals, Inc. investment in subsidiary which is maintained on the equity method of accounting. [2] Accumulated Deferred Income Taxes - Current Liability $1 Accumulated Deferred Income Taxes - Current Asset $1 To net current accumulated DFIT asset and liability [3] Accumulated Deferred Income Taxes - Noncurrent Liability $321 Accumulated Deferred Income Taxes - Noncurrent Asset $321 To net noncurrent accumulated DFIT asset and liability
- 32 - SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATING FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies: Consolidation - The consolidating financial statements include the accounts of South Jersey Industries, Inc. (SJI) and its subsidiaries. Estimates and Assumptions - Our financial statements are prepared to conform with generally accepted accounting principles. Management makes estimates and assumptions that affect the amounts reported in the financial statements and related disclosures. Therefore, actual results could differ from those estimates. Regulation - SJG is subject to the rules and regulations of the New Jersey Board of Public Utilities (BPU). We maintain our accounts according to the BPU's prescribed Uniform System of Accounts (See Note 7). Revenues - SJG and South Jersey Energy Company (SJE) bill customers monthly. For customers not billed at the end of each month, an accrual is made to recognize unbilled revenues from the date of the last bill to the end of the month. The BPU allows SJG to recover the excess cost of gas sold over the cost included in base rates through the Levelized Gas Adjustment Clause (LGAC). We collect these costs on a forecasted basis upon BPU order. SJG defers under- or over-recoveries of gas costs and includes them in the following year's LGAC. We pay interest on overcollected LGAC balances based on SJG's return on rate base determined in base rate proceedings (See Note 7). SJG's tariff also includes a Temperature Adjustment Clause (TAC), a Remediation Adjustment Clause (RAC) and a Demand Side Management Clause (DSMC). Our TAC reduces the impact of temperature fluctuations on SJG and its customers. The RAC recovers remediation costs of former gas manufacturing plants and the DSMC recovers costs associated with our conservation plan. TAC adjustments affect revenue, income and cash flows since colder-than-normal weather can generate credits to customers, while warmer-than-normal weather during the winter season can result in additional billings. RAC adjustments do not directly affect earnings because we defer and recover these costs through rates over 7-year amortization periods (See Notes 7 & 13). DSMC adjustments are not significant and do not affect earnings. Property, Plant & Equipment - For regulatory purposes, utility plant is stated at original cost. Nonutility plant is stated at cost. The cost of adding, replacing and renewing property is charged to the appropriate plant account. - 33 - Depreciation and Amortization - We depreciate utility plant on a straight- line basis over the estimated remaining lives of the various property classes. These estimates are periodically reviewed and adjusted as required after BPU approval. The composite annual rate for all depreciable utility property was approximately 2.8% in 1999. Except for extraordinary retirements, accumulated depreciation is charged with the cost of depreciable utility property retired, and removal costs less salvage. The gas plant acquisition adjustment is amortized on a straight-line basis over 40 years. The unamortized balance of $1.8 million at December 31, 1999, is not included in rate base. Nonutility property depreciation is computed on a straight-line basis over the estimated useful lives of the property, ranging up to 35 years. Gain or loss on the disposition of nonutility property is recognized in net income. New Accounting Pronouncements - In June 1998, the Financial Accounting Standards Board (FASB) issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities," which is effective for our fiscal year ending December 31, 2001. This statement establishes accounting and reporting standards for derivative instruments, including those embedded in other contracts, and for hedging activities. It requires recognizing derivatives as assets or liabilities at fair value on the balance sheet. We are currently evaluating the effects of FASB No. 133 on SJI's financial condition and results of operations, which will vary based on our use of derivative instruments at the time of adoption. Income and Other Taxes - Deferred Income Taxes are provided for all significant temporary differences between book and taxable income (See Notes 5 & 6). 2. Preferred Stock and Securities of Subsidiary: Redeemable Cumulative Preferred Stock - Annually, SJG is required to offer to purchase 900 and 1,500 shares of its Cumulative Preferred Stock, Series A and Series B, respectively, at par value, plus accrued dividends. If preferred stock dividends are in arrears, SJG may not declare or pay dividends or make distributions on its common stock. Preferred shareholders may elect a majority of SJG's directors if four or more quarterly dividends are in arrears. Mandatorily Redeemable Preferred Securities - In May 1997, SJG's statutory trust subsidiary, SJG Capital Trust (Trust), sold $35 million of 8.35% SJG- guaranteed Mandatorily Redeemable Preferred Securities. The Trust's only assets are the 8.35% Deferrable Interest Subordinated Debentures issued by SJG maturing April 2037. This is also the maturity date of the Preferred Securities. The Debentures and Preferred Securities are redeemable at SJG's option at a price equal to 100% of the principal amount at any time on or after April 30, 2002. - 34 - SJI has 2,500,000 authorized shares of Preference Stock, no par value, which has not been issued. SJI has registered and reserved for issuance 15,000 shares of Series A Junior Participating Cumulative Preferred Stock (Series A Preferred Stock) connected with adopting its Shareholder Rights Plan (See Note 4). 3. Divestitures and Affiliations: Divestitures - In 1996, Energy & Minerals, Inc. (EMI), an SJI subsidiary, sold the common stock of The Morie Company, Inc. (Morie), its sand mining and processing subsidiary. We transferred cash, certain real estate and other assets, along with certain liabilities remaining after the sale, to EMI's books (See Note 13). In 1997, R&T Group, Inc. (R&T), SJI's construction subsidiary, sold all of its operating assets, except some real estate. Annually, SJI conducts tests to estimate the environmental remediation costs for properties owned by South Jersey Fuel, Inc. (SJF), a subsidiary of EMI, from its previously operated fuel oil business. SJI reports the environmental remediation activity related to these properties as discontinued operations. This reporting is consistent with previous years (See Note 13). In 1998, SJE actively traded electricity in the wholesale market, but ceased its trading activities later that same year. Upon expiration of SJE's last wholesale electric contract in December 1999, SJE formally exited wholesale electric operations. Summarized operating results of the discontinued operations for 1999 were (in thousands): Loss before Income Taxes: Sand Mining $ (216) Construction (195) Fuel Oil (89) Wholesale Electric (8) Income Tax Credits 219 -------- Loss from Discontinued Operations - Net $ (289) ======== Earnings per Common Share from Discontinued Operations $ (0.02) ======== Affiliations - SJI, through its wholly-owned subsidiary, SJEnerTrade, Inc. (EnerTrade), and UPR Energy Marketing, Inc. jointly own South Jersey Resources Group, LLC (SJRG) which provides natural gas storage, peaking services and transportation capacity for wholesale customers in New Jersey and surrounding states. - 35 - In January 1999, SJI and Conectiv Solutions, LLC, formed Millennium Account Services, LLC, to provide meter reading services in southern New Jersey. Customers should benefit from reduced meter reading costs resulting from synergies that exist because of overlapping territories. In June 1999, SJE and Energy East Solutions, Inc. formed South Jersey Energy Solutions, LLC (SJES) to market retail electricity and energy management services. SJES is scheduled to begin supplying retail electric during the first quarter of 2000. SJE and GZA GeoEnvironmental, Inc. (GZA) market a jointly-developed air monitoring system designed to assist companies involved in environmental cleanup activities. This system is currently in use as a joint venture between the two companies on a contract-by-contract basis. SJI, through its wholly-owned subsidiaries, currently holds a 50% non- controlling interest in these affiliations and accounts for the investments under the equity method. The operations of SJRG, Millennium, SJES and air monitoring are not material to the accompanying consolidating financial statements. 4. Common Stock: SJI has 20,000,000 shares of authorized Common Stock. In 1999, the following shares were issued and outstanding: Beginning of Year 10,778,990 New Issues During Year: Dividend Reinvestment Plan 367,622 Employees' Stock Ownership Plan 4,144 Stock Option, Stock Appreciation Rights, and Restricted Stock Award Plan 31 Directors' Restricted Stock Plan 1,388 ---------- End of Year 11,152,175 ========== The par value ($1.25 per share) of stock issued in 1999 was credited to Common Stock. Net excess over par value of approximately $9.6 million was credited to Premium on Common Stock. Effective 1996, SJI adopted FASB No. 123, "Accounting for Stock-Based Compensation." This statement defines a fair value based method of accounting for stock-based compensation. As permitted by the statement, we elect to continue measuring compensation costs using the intrinsic value based method of accounting prescribed by APB Opinion No. 25, "Accounting for - 36 - Stock Issued to Employees." The pro forma effect of adopting the fair value based method of accounting on net income and Earnings per Share (EPS) is immaterial for the year ended December 31, 1999. Dividend Reinvestment Plan (DRP) and Employees' Stock Ownership Plan (ESOP) - Effective June 1999, newly issued shares of common stock offered through the DRP are issued directly by SJI. Prior to this date, these shares were purchased in the open market. All shares offered through the ESOP continue to be issued directly by SJI. As of December 31, 1999, SJI reserved 694,461 and 27,352 shares of authorized, but unissued, common stock for future issuance to the DRP and ESOP, respectively. Stock Option, Stock Appreciation Rights, and Restricted Stock Award Plan - Under this plan, no more than 306,000 shares of common stock in the aggregate may be issued to SJI's officers and other key employees. No options or stock appreciation rights may be granted under the Plan after November 22, 2006. At December 31, 1999, SJI had 4,500 options outstanding, all exercisable at a price of $24.69 per share. During 1999, 500 options were surrendered for the issuance of 31 shares of common stock. No options were granted in 1999. No stock appreciation rights were issued under the Plan. In 1999, the Plan was amended to include restricted stock awards. As of December 31, 1999, no awards were granted. Stock options outstanding at December 31, 1999, had no effect on EPS. Directors' Restricted Stock Plan - Under this Plan, SJI granted an initial award of 13,800 shares to outside directors in December 1996, at a market value of $24.00 per share. The Plan also provides for annual awards and, in December 1999, we granted 1,388 additional shares. Initial awards vest over 5 years, with 20% of those awards vesting annually. Annual awards vest on their third anniversary. SJI holds shares issued as restricted stock until the attached restrictions lapse. The stock's market value on the grant date is recorded as compensation expense over the applicable vesting period. Shareholder Rights Plan - In September 1996, the board of directors adopted a shareholder rights plan providing for the distribution of one right for each share of common stock outstanding on and after October 11, 1996. Each right entitles its holder to purchase 1/1000 of one share of Series A Preferred Stock at an exercise price of $90 (See Note 2). The rights will not be exercisable until after a person or group acquires 10% or more of SJI's common stock. Each of the rights (except for those held by the 10% holder) entitles the holder to purchase that number of shares of SJI's common stock, or common stock of the acquiring company, at a market value equal to two times the exercise price. SJI may redeem the rights in whole, but not in part, for $.001 per right at any time until 10 days following the time the acquiring person or group reached the 10% threshold. The rights expire if not exercised or redeemed by September 20, 2006. - 37 - 5. Regulatory Assets and Deferred Credits - Federal and Other Taxes: The primary asset created by adopting FASB No. 109, "Accounting for Income Taxes," was Income Taxes - Flowthrough Depreciation in the amount of $17.6 million as of January 1, 1993. This amount represented excess tax depreciation over book depreciation on utility plant because of temporary differences for which, prior to FASB No. 109, deferred taxes previously were not provided. SJG previously flowed these tax benefits through to ratepayers. SJG is recovering the amortization of the regulatory asset through rates over 18 years which began in December 1994. The Investment Tax Credit (ITC) attributable to SJG was deferred and continues to be amortized at the annual rate of 3%, which approximates the life of related assets. SJG deferred $11.8 million resulting from a change in the basis for accruing GRAFT in 1978, and is amortizing it on a straight-line basis to operations over 30 years beginning that same year. 6. Income and Other Taxes: Total income taxes applicable to operations differs from the tax that would have resulted by applying the statutory Federal Income Tax rate to 1999 pre- tax income for the following reasons (in thousands): Tax at Statutory Rate $12,090 Increase (Decrease) Resulting from: State Income Taxes 3,895 Amortization of ITC (390) Tax Depreciation Under Book Depreciation on Utility Plant 664 Other - Net 169 ------- Income Taxes - Continuing Operations 16,428 Income Taxes - Discontinued Operations (219) ------- Net Income Taxes $16,209 ======= The provision for Income Taxes for 1999 is comprised of the following (in thousands): Current: Federal $ 6,151 State 3,218 -------- Total Current 9,369 -------- - 38 - Deferred: Federal - Excess of Tax Depreciation Over Book Depreciation - Net 5,496 Deferred Fuel Costs 1,909 Environmental Remediation Costs - Net (1,058) Alternative Minimum Tax 676 Other - Net (15) State 441 -------- Total Deferred 7,449 -------- ITC (390) -------- Income Taxes - Continuing Operations 16,428 Income Taxes - Discontinued Operations (219) -------- Net Income Taxes $ 16,209 ======== Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. Significant components of SJI's net deferred tax liability at December 31, 1999 are as follows (in thousands): Deferred Tax Liabilities: Tax Depreciation Over Book Depreciation $ 70,362 Difference Between Book and Tax Basis of Property 6,478 Deferred Fuel Costs 9,235 Deferred Regulatory Costs 1,301 Environmental Remediation Costs 7,295 Excess Protected 3,355 GRAFT 1,022 Other 929 -------- Total Deferred Tax Liabilities 99,977 -------- Deferred Tax Assets: Alternative Minimum Tax 2,327 ITC Basis Gross Up 2,601 Deferred State Tax 674 Other 3,208 -------- Total Deferred Tax Assets 8,810 -------- Net Deferred Tax Liability $ 91,167 ======== - 39 - The significant components of Other Taxes for 1999 are (in thousands): TEFA $ 7,637 GRAFT 197 Other 3,303 -------- Total Other Taxes $ 11,137 ======== 7. Recent Regulatory Actions: In January 1997, the BPU granted SJG a total rate increase of $10.3 million. The $6.0 million base rate portion of the increase was based on a 9.62% rate of return on rate base, which included an 11.25% return on common equity. Additionally, SJG's threshold for sharing pre-tax margins generated by interruptible and off-system sales and transportation (Sharing Formula) increased from $4.0 million to $5.0 million. With the completion of major construction projects, this $5.0 million threshold increased by $500,000 in 1997 and by another $2.0 million in 1998. SJG keeps 100% of pre-tax margins up to the threshold level and 20% of such margins above that level. In October 1998, the BPU approved a revision to the Sharing Formula as part of an agreement to modify SJG's TAC. The revision credits the first $750,000 above the current threshold level to the LGAC customers. Thereafter, SJG keeps 20% of the pre-tax margins as it has historically. As part of the tariff changes approved in the rate case, SJG began its pilot program in April 1997, giving residential customers a choice of gas supplier. During the initial enrollment period, nearly 13,000 residential customers applied for this service. The BPU subsequently expanded the number of potential participants to 50,000 and, as of December 31, 1999, enrollment totaled 35,683. Effective January 10, 2000, the BPU approved full unbundling of SJG's system. This allows all natural gas consumers to select their supplier, lifting the previously existing cap of 50,000 residential customers. Participants' bills are reduced for cost of gas charges and applicable taxes. The resulting decrease in revenues is offset by a corresponding decrease in gas costs and taxes under SJG's BPU-approved fuel clause. While the program reduces utility revenues, it does not affect SJI's net income, financial condition or margins. In August 1998, SJG filed with the BPU to recover increased remediation costs expended from August 1995 through July 1998. In September 1999, the BPU approved the requested annual recovery level of $6.5 million. This represents an annual increase of approximately $4.5 million over the recovery previously included in rates. In July 1999, SJG filed its annual RAC with the BPU requesting recovery of carrying costs on unrecovered remediation costs and proposed no change in the current RAC rate for the next three years. In January 2000, the BPU approved the recovery of carrying costs on unrecovered remediation costs and SJG's proposal to keep its current RAC rate in effect through October, 2002. - 40 - In September 1998, SJG filed its annual LGAC, TAC and DSMC with the BPU. The LGAC and DSMC cover the period November 1 through October 31 of each year. The TAC period runs from October 1 through May 31. In May 1999, the BPU approved a $7.1 million increase in rates as part of this filing, which included the results of the previous two annual filings. We are currently in the process of preparing the 1999 annual filing which should be made with the BPU during the first quarter of 2000. In February 1999, the Electric Discount and Energy Competition Act became law. This law established "unbundling," where redesigned utility rate structures allow natural gas & electric consumers to choose their energy supplier. SJG filed its unbundling proposal in April 1999 and received final BPU approval in January 2000. In addition to allowing all customers to select their own supplier, the unbundling approval also created an incentive to customers to select a supplier, other than SJG, in the form of a Market Development Credit (MDC). This credit will be provided to customers over the next two years and will approximate $2.5 million plus carrying costs through December 2001. The majority of this credit was provided for on SJG's books as a Deferred Credit. Therefore, the impact of the MDC will not materially impact future periods. Also included in the proposal was the approved recovery of carrying costs on the RAC, as previously discussed, and a modification to SJG's LGAC. Under- recovered gas costs of $11.9 million as of October 31, 1999, and carrying costs thereon, will be recovered over 3 years. The LGAC for the period starting November 1999, continues to operate as it has in the past (See Note 1). 8. Segments of Business: Information about SJI's operations in different industry segments for 1999 is presented below (in thousands): Operating Revenues: Gas Utility Operations $350,921 Other Industries 49,651 -------- Subtotal 400,572 Intersegment Sales (8,095) -------- Total Operating Revenues $392,477 ======== Operating Income: Gas Utility Operations $ 59,480 Other Industries 1,911 -------- Subtotal 61,391 - 41 - Income Taxes (16,428) General Corporate 924 -------- Total Operating Income $ 45,887 ======== Depreciation and Amortization: Gas Utility Operations $ 21,676 Other Industries 59 Discontinued Operations 30 -------- Total Depreciation and Amortization $ 21,765 ======== Property Additions: Gas Utility Operations $ 47,390 Other Industries 390 Discontinued Operations - -------- Total Property Additions $ 47,780 ======== Identifiable Assets: Gas Utility Operations $750,239 Other Industries 14,049 Discontinued Operations 2,326 -------- Subtotal 766,614 Corporate Assets 15,744 Intersegment Assets (15,433) -------- Total Identifiable Assets $766,925 ======== Gas Utility Operations consist primarily of natural gas distribution to residential, commercial and industrial customers. Other Industries include the natural gas and electric acquisition and transportation service companies (See Note 3). SJI's interest expense relates primarily to SJG's borrowing and financing activities. These amounts are included in our statements of consolidating income and not shown above. Interest income is essentially derived from borrowings between the subsidiaries and is eliminated during consolidation. - 42 - 9. Financial Instruments: Long-Term Debt - The fair value of SJI's long-term debt, including current maturities, as of December 31, 1999 is estimated to be $190.1 million (carrying amount $192.4 million). This estimate is based on the interest rate available to SJI at the end of the year for debt with similar terms and maturities. SJI retires debt when it is cost effective as permitted by the debt agreements. Other Financial Instruments - The carrying amounts of SJI's other financial instruments approximate their fair values at December 31, 1999. 10. Unused Lines of Credit and Compensating Balances: Unused lines of credit available at December 31, 1999, were $24.1 million. Borrowings under these lines of credit are at market rates. The weighted borrowing cost, which changes daily, was 6.45% at December 31, 1999. Demand deposits are maintained with lending banks on an informal basis and do not constitute compensating balances. 11. Pensions & Other Postretirement Benefits: SJI has several defined benefit pension plans and other postretirement benefit plans. The pension plans provide annuity payments to substantially all full-time, regular employees upon retirement. The other postretirement benefit plans provide health care and life insurance benefits to some retirees. The BPU authorized SJG to recover costs related to postretirement benefits other than pensions under the accrual method of accounting consistent with FASB No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Amounts accrued prior to that authorization were deferred and are being amortized as allowed by the BPU. The unamortized balance amounting to $4.9 million at December 31, 1999, is recoverable in rates. We are amortizing this amount over 15 years which started January 1998. Net periodic benefit cost related to the pension and other postretirement benefit insurance plans for 1999, consisted of the following components (in thousands): Pension Benefits Other Benefits ---------------- -------------- Service cost $2,245 $1,098 Interest cost 4,211 1,593 Expected return on plan assets (4,280) (675) Amortization of transition obligation 72 772 Amortization of loss and other 436 - ------ ------ Net periodic benefit cost $2,684 $2,788 ====== ====== - 43 - A reconciliation of the Plans' benefit obligations, fair value of plan assets, funded status and amounts recognized in SJI's consolidating balance sheets follows (in thousands): Pension Benefits Other Benefits ---------------- -------------- Change in Benefit Obligation: Benefit obligation at beginning of year $64,035 $ 24,248 Service cost 2,245 1,098 Interest cost 4,211 1,593 Actuarial gain and other (8,260) (3,405) Benefits paid (2,701) (693) ------- -------- Benefit obligation at end of year $59,530 $ 22,841 ======= ======== Change in Plan Assets: Fair value of plan assets at beginning of year $47,976 $ 6,972 Actual return on plan assets 5,541 392 Employer contributions 2,504 2,801 Benefits paid (2,701) (693) ------- -------- Fair value of plan assets at end of year $53,320 $ 9,472 ======= ======== Funded status $(6,210) $(13,368) Unrecognized prior service cost 2,930 - Unrecognized net obligation assets from transition 287 10,033 Unrecognized net gain and other (564) (3,649) ------- -------- Accrued net benefit cost at end of year $(3,557) $ (6,984) ======= ======== As of December 31, 1999, the accumulated benefit obligations did not exceed plan assets. Assumptions used in the accounting for these plans in 1999 were: Pension Benefits Other Benefits ---------------- -------------- Discount rate 7.75% 7.75% Expected return on plan assets 9.00% 9.00% Rate of compensation increase 4.60% - The assumed health care cost trend rates used in measuring the accumulated postretirement benefit obligation as of December 31, 1999, are: Medical and Drug - 6.0% in 1999 for participants age 65 or older, grading to 5.5% in 2001, and 7.5% in 1999 for participants under age 65, grading to 5.5% in 2005. Dental - 7.0% in 1999, grading to 5.5% in 2005. - 44 - A 1% change in the assumed health care cost trend rates for SJI's postretirement health care plans in 1999 would have the following effects: Thousands of Dollars 1% Increase 1% Decrease ----------- ----------- Effect on the aggregate of the service and interest cost components $ 456 $ (366) Effect on the postretirement benefit obligation $ 2,898 $(2,660) 12. Retained Earnings: Restrictions exist under various loan agreements regarding the amount of cash dividends or other distributions that we may pay on SJG's common stock. SJI's total equity in its subsidiaries' retained earnings, which is free of these restrictions, was approximately $48.6 million as of December 31, 1999. 13. Commitments and Contingencies: Construction and Environmental - SJI's estimated net cost of construction and environmental remediation programs for 2000 totals $51.6 million. Commitments were made regarding some of these programs. Gas Supply Contracts - SJG, in the normal course of conducting business, has entered into long-term contracts for natural gas supplies, firm transportation and gas storage service. The earliest that any of these contracts expires is 2000. The transportation and storage service agreements between SJG and its interstate pipeline suppliers were made under Federal Energy Regulatory Commission approved tariffs. SJG's cumulative obligation for demand charges and reservation fees paid to suppliers for these services is approximately $4.8 million per month, recovered on a current basis through the LGAC. Pending Litigation - SJI is subject to claims arising from the ordinary course of business and other legal proceedings. In November 1999, Goldin Associates LLC, Trustee for the Power Company of America Liquidating Trust (PCA), filed a complaint in bankruptcy court against SJE seeking damages of $11 million plus interest and attorneys' fees. PCA was a wholesale electricity trading company with whom SJE did business. PCA filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code. We believe SJE acted prudently, responsibly and in accordance with contractual obligations in its transactions with PCA. We believe the ultimate impact of these actions will not materially affect SJI's financial position, results of operations or liquidity. - 45 - Environmental Remediation Costs - SJI incurred and recorded costs for environmental cleanup of sites where SJG or its predecessors operated gas manufacturing plants. SJG stopped manufacturing gas in the 1950s. SJI and some of its nonutility subsidiaries also recorded costs for environmental cleanup of sites where SJF previously operated a fuel oil business and Morie maintained equipment, fueling stations and storage. Since the early 1980s, SJI recorded environmental remediation costs of $116.3 million, of which $60.9 million was spent as of December 31, 1999. With the assistance of an outside consulting firm, we estimate that future costs to clean up SJG's sites will range from $51.0 million to $161.3 million. We recorded the lower end of this range as a liability. It is reflected on the consolidating balance sheet under the captions Current Liabilities and Deferred Credits and Other Non-Current Liabilities (See Note 1). SJG did not adjust the accrued liability for future insurance recoveries, which we have been successful in pursuing. We used these proceeds to offset related legal fees and to reduce the balance of deferred environmental remediation costs. Recorded amounts include estimated costs based on projected investigation and remediation work plans using existing technologies. Actual costs could differ from the estimates due to the long- term nature of the projects, changing technology, government regulations and site-specific requirements. The major portion of recorded environmental costs relate to the cleanup of SJG's former gas manufacturing sites. SJG recorded $109.6 million for the remediation of these sites and spent $58.5 million through December 31, 1999. SJG has two regulatory assets associated with environmental cost. The first asset is titled Environmental Remediation Cost: Expended - Net. These expenditures represent what was actually spent to clean up former gas manufacturing plant sites. These costs meet the requirements of FASB No. 71, "Accounting for the Effects of Certain Types of Regulation." The BPU allows SJG to recover expenditures through July 1998 and petitions to recover costs through July 1999 are pending (See Note 7). The other asset titled Environmental Remediation Cost: Liability for Future Expenditures relates to estimated future expenditures determined under the guidance of FASB No. 5, "Accounting for Contingencies." This amount, which relates to former manufactured gas plant sites, was recorded as a deferred debit with the corresponding amount reflected on the consolidating balance sheet under the captions, Current Liabilities and Deferred Credits and Other Non-Current Liabilities. The deferred debit is a regulatory asset under FASB No. 71. The BPU's intent, evidenced by current practice, is to allow SJG to recover the deferred costs after they are spent. SJG files with the BPU to recover these costs in rates through its RAC. The BPU has consistently allowed the full recovery over 7-year periods, and SJG believes this will continue. As of December 31, 1999, SJG's unamortized remediation costs of $25.7 million are reflected on the consolidating balance sheet under the caption, Regulatory and Other Non-Current Assets. - 46 - Since implementing the RAC in 1992, SJG recovered $21.6 million through rates as of December 31, 1999 (See Note 7). With Morie's sale, EMI assumed responsibility for environmental liabilities estimated between $2.8 million and $9.0 million. The information available on these sites is sufficient only to establish a range of probable liability, and no point within the range is more likely than any other. Therefore, EMI continues to accrue the lower end of the range. Changes in the accrual are included in the statements of consolidating income under the caption, Loss from Discontinued Operations - Net. SJI and SJF estimated their potential exposure for the future remediation of four sites where fuel oil operations existed years ago. Estimates for SJI's site range between $0.1 million and $0.2 million, while SJF's estimated liability ranges from $1.2 million to $4.5 million for its three sites. Amounts sufficient to cover the lower ends of these ranges were recorded and are reflected on the consolidating balance sheet under Current Liabilities and Deferred Credits and Other Non-Current Liabilities. - 47 - South Jersey Industries, Inc. Index to Exhibits Exhibit Number Description -------------- ---------------------------------------- 27 Financial Data Schedule (Exhibit B) (Submitted only in electronic format to the Securities and Exchange Commission). - 48 - EX-27 2
OPUR3 1,000 12-MOS DEC-31-1999 DEC-31-1999 PER-BOOK 766,925 392,477 21,688
-----END PRIVACY-ENHANCED MESSAGE-----