-----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, RoGCEyqTvQUlteh7nxMK6RNjG4SDM01h7CKhBsko24q/3yCEIyL1x36Ah6bJ+AL3 Y55cm1DIPgqaSL3BzhuzjA== 0000091928-99-000001.txt : 19990301 0000091928-99-000001.hdr.sgml : 19990301 ACCESSION NUMBER: 0000091928-99-000001 CONFORMED SUBMISSION TYPE: U-3A-2 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990226 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: 99551050 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-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 U-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 gas for residential, commercial, and industrial use in an area of approximately 2,500 square miles in the southern part of New Jersey. SJG also makes off- system sales of natural gas on a wholesale basis to various customers on the interstate pipeline system and transports natural gas purchased directly from producers or suppliers for its own sales and for some of its customers. SJG also assigns or buys capacity for the purchase or transportation of natural gas. 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 - cover page - Jersey 08037. EMI is not a public utility company. It principally owns real estate, temporary cash investments 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 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 owns all of the outstanding common stock of SJ EnerTrade (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. SJI owns all of the outstanding 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. 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 - 2 - 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 5,038 miles of distribution mains. There are 92 miles of mains in the transmission system. In 1998, 270 miles of mains previously reported as transmission were reclassified as distribution. 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 1998, SJG distributed at retail to residential, commercial and industrial customers 25,220,434 Mcf of natural or manufactured gas and transported 28,384,108 Mcf of natural gas purchased directly by its industrial, residential and commercial customers. Retail distribution revenues were $198.4 million and transportation revenues were $27.5 million. SJG also sold 4,279,131 Mcf, or $9.9 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 1998, SJG sold 22,636,748 Mcf, or $52.7 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 27,319,000 Mcf, or $6.0 million in revenues, in 1998. (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 1998, SJG purchased approximately 54,317,000 Mcf of natural gas from out-of-state sources at a total cost, including related expenses, of $174.3 million. During 1998, SJG purchased and had delivered to it approximately 107,912 Mcf 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 $0.5 million. - 3 - 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. (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 - 4 - 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 26th day of February 1999. SOUTH JERSEY INDUSTRIES, INC. DAVID A. KINDLICK Vice President CORPORATE SEAL ATTEST: GEORGE L. BAULIG Secretary and Treasurer Name, title and address of officer to whom notices and correspondence concerning this statement should be addressed: George L. Baulig, Secretary and Treasurer South Jersey Industries, Inc. 1 South Jersey Plaza Folsom, New Jersey 08037 - 5 - EXHIBIT B FINANCIAL DATA SCHEDULE Consolidated Financial Data Schedule filed via EDGAR as part of this report on Form U-3A-2. - 6 - EXHIBIT C EWG ORGANIZATIONAL CHART Not applicable. See response to Item 4. - 7 - SOUTH JERSEY INDUSTRIES, INC. CONSOLIDATING STATEMENT OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (In Thousands)
South South South Jersey Jersey Energy & Jersey Gas Energy SJ Minerals, R&T Elim. Industries, Company Company EnerTrade, Inc. Group, & Consd. Inc. Consd. Consd. Inc. Consd. Inc. Total Adjust. Total ------------ ---------- --------- ----------- ---------- --------- ---------- ---------- ---------- Operating Revenues: Utility $0 $299,070 $0 $0 $0 $0 $299,070 ($1,032)[C] $298,038 Nonutility 256 0 151,280 833 822 0 153,191 (983)[C] 152,208 ------------ ---------- --------- ----------- ---------- --------- ---------- ---------- ---------- Total Operating Revenues 256 299,070 151,280 833 822 0 452,261 (2,015) 450,246 ------------ ---------- --------- ----------- ---------- --------- ---------- ---------- ---------- Operating Expenses: Gas Purchased for Resale 0 174,822 0 0 0 0 174,822 (998)[C] 173,824 Utility Operations 0 42,268 0 0 0 0 42,268 0 42,268 Nonutility Operations 1,837 0 150,636 758 108 0 153,339 (49)[C] 153,290 Maintenance 9 5,282 8 0 0 0 5,299 0 5,299 Depreciation 5 17,120 11 1 7 0 17,144 (2)[D] 17,142 Current Federal and State Income Taxes (1,425) 5,842 202 (4) (162) 0 4,453 0 4,453 Deferred Federal and State Income Taxes 609 6,415 (35) 0 418 0 7,407 0 7,407 Other Taxes 54 10,343 60 0 21 0 10,478 0 10,478 ------------ ---------- --------- ----------- ---------- --------- ---------- ---------- ---------- Total Operating Expenses 1,089 262,092 150,882 755 392 0 415,210 (1,049) 414,161 ------------ ---------- --------- ----------- ---------- --------- ---------- ---------- ---------- Operating (Loss) Income (832) 36,978 398 78 430 0 37,051 (966) 36,085 Other Income: Dividends from Subsidiaries 16,667 0 0 0 0 0 16,667 (16,667)[A] 0 Equity in Undistributed Earnings of Subs (1,212) 0 0 0 0 0 (1,212) 1,212 [A] 0 ------------ ---------- --------- ----------- ---------- --------- ---------- ---------- ---------- Income Before Interest Charges 14,623 36,978 398 78 430 0 52,506 (16,421) 36,085 ------------ ---------- --------- ----------- ---------- --------- ---------- ---------- ---------- Interest Charges: Long-Term Debt 0 15,219 27 0 0 0 15,246 0 15,246 Short-Term Debt 781 3,437 161 85 0 0 4,464 (968)[C] 3,496 Other 27 412 0 0 0 0 439 0 439 ------------ ---------- --------- ----------- ---------- --------- ---------- ---------- ---------- Total Interest Charges 808 19,068 188 85 0 0 20,149 (968) 19,181 ------------ ---------- --------- ----------- ---------- --------- ---------- ---------- ---------- Income(Loss) from Continuing Operations Before Preferred Dividend Requirements of of Subsidiary 13,815 17,910 210 (7) 430 0 32,357 (15,453) 16,904 Preferred Dividend Requirements of Subsidiary 0 3,088 0 0 0 0 3,088 0 3,088 ------------ ---------- --------- ----------- ---------- --------- ---------- ---------- ---------- Income(Loss) from Continuing Operations 13,815 14,822 210 (7) 430 0 29,269 (15,453) 13,816 Equity in Undistributed Earnings of Discontinued Subsidiaries (2,830) 0 0 0 0 0 (2,830) 2,830 [A] 0 Loss from Discontinued Operations - Net 0 0 0 0 (2,458) (372) (2,830) 0 (2,830) ------------ ---------- --------- ----------- ---------- --------- ---------- ---------- ---------- Net Income(Loss) Applicable to Common Stock $10,985 $14,822 $210 ($7) ($2,028) ($372) $23,609 ($12,623) $10,986 ============ ========== ========= =========== ========== ========= ========== ========== ========== * SJ EnerTrade became a wholly-owned subsidiary of South Jersey Energy Company on July 1, 1998. - 8 -
SOUTH JERSEY INDUSTRIES, INC. CONSOLIDATING STATEMENT OF RETAINED EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (In Thousands)
South South South Jersey Jersey Energy & Jersey Gas Energy SJ Minerals, R&T Elim. Industries, Company Company EnerTrade, Inc. Group, & Consd. Inc. Consd. Consd. Inc. Consd. Inc. Total Adjust. Total ------------ ---------- --------- ----------- ---------- --------- ---------- ---------- ---------- Retained Earnings - Beginning $49,104 $56,120 ($297) $0 ($2,296) ($6,556) $96,075 ($47,037)[B] $49,038 Net Income (Loss) Applic to Common Stock 10,984 14,822 210 (7) (2,028) (372) 23,609 (12,623) 10,986 ------------ ---------- --------- ----------- ---------- --------- ---------- ---------- ---------- 60,088 70,942 (87) (7) (4,324) (6,928) 119,684 (59,660) 60,024 Dividends Declared - Common Stock 15,517 16,667 0 0 0 0 32,184 (16,667)[C] 15,517 ------------ ---------- --------- ----------- ---------- --------- ---------- ---------- ---------- Retained Earnings - Ending $44,571 $54,275 ($87) ($7) ($4,324) ($6,928) $87,500 ($42,993) $44,507 ============ ========== ========= =========== ========== ========= ========== ========== ========== * SJ EnerTrade became a wholly-owned subsidiary of South Jersey Energy Company on July 1, 1998. - 9 -
SOUTH JERSEY INDUSTRIES, INC. CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (In Thousands) [A] Dividends from Subsidiaries $16,667 Investment in Subsidiaries 4,042 Equity in Undistributed Earnings of Subsidiaries $1,212 Equity in Undistributed Earnings of Discontinued Subsidiaries 2,830 Retained Earnings - Dividends Declared - Common Stock 16,667 To eliminate intercompany dividends paid and equity in undistributed earnings recorded by South Jersey Industries, Inc. [B] Retained Earnings - 1/1/98 $47,037 Accumulated Deferred Federal Income Taxes - Noncurrent Liability 60 Accumulated Depreciation - 1/1/98 18 Investment in Subsidiaries $46,971 Nonutility Property 144 To eliminate prior inter-company gain and retained earnings of subsidiaries at 1/1/98 previously recorded by South Jersey Industries, Inc. under the equity method of accounting. [C] Operating Revenues - Utility $1,032 Operating Revenues - Nonutility 983 Gas Purchased for Resale $998 Operating Expense - Nonutility 49 Interest Expense - Short-Term Debt 968 To eliminate intercompany revenue and expense. [D] Accumulated Depreciation $2 Depreciation $2 To eliminate South Jersey Industries, Inc. depreciation on Millville property gain. - 10 -
SOUTH JERSEY INDUSTRIES, INC. CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1998 (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 $678,675 $0 $0 $0 $678,675 $0 $678,675 Gas Plant Acquisition Adjustment - Net 0 1,851 0 0 0 1,851 0 1,851 Gas Stored Underground 0 1,322 0 0 0 1,322 0 1,322 Accumulated Depreciation and Amortization 0 (179,605) 0 0 0 (179,605) 0 (179,605) Nonutility Property and Equipment, at cost 1,675 0 71 1,379 0 3,125 (144)[4] 2,981 Accumulated Depreciation (160) 0 (17) (808) 0 (985) 20 [5] (965) ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Property, Plant and Equipment - Net 1,515 502,243 54 571 0 504,383 (124) 504,259 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Investments: Investments in Subsidiaries 177,319 0 0 0 0 177,319 (177,319)[1] 0 Available-for-Sale Securities 46 885 0 0 0 931 0 931 Investment in Affiliate 0 0 1,440 0 0 1,440 0 1,440 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Investments 177,365 885 1,440 0 0 179,690 (177,319) 2,371 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Current Assets: Cash and Cash Equivalents 286 4,380 465 1,505 3 6,639 0 6,639 Notes Receivable - Associated Companies 7,490 0 0 11,795 755 20,040 (20,040)[3] 0 Notes Receivable - Affiliate 0 0 4,350 0 0 4,350 0 4,350 Accounts Receivable 292 28,669 13,644 352 0 42,957 (357)[2,8] 42,600 Unbilled Revenues 0 18,998 491 0 0 19,489 0 19,489 Provision for Uncollectibles 0 (1,032) (115) (136) 0 (1,283) 0 (1,283) Accounts Receivable - Associated Companies 349 102 125 63 4 643 (643)[2] 0 Natural Gas in Storage, Average Cost 0 27,619 0 0 0 27,619 0 27,619 Materials and Supplies, Average Cost 0 4,051 0 0 0 4,051 0 4,051 Assets of Discontinued Businesses Held for Disposal 0 0 0 336 574 910 0 910 Accumulated Deferred Income Taxes 5 672 29 0 7 713 (713)[6] 0 Prepaid Taxes 486 12,597 175 420 172 13,850 0 13,850 Prepayments and Other Current Assets 14 1,638 172 22 15 1,861 0 1,861 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Current Assets 8,922 97,694 19,336 14,357 1,530 141,839 (21,753) 120,086 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Accounts Receivable - Merchandise 0 990 564 0 0 1,554 0 1,554 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Regulatory and Other Non-Current Assets: Gross Receipts & Franchise Taxes 0 3,585 0 0 0 3,585 0 3,585 Environmental Remediation Costs 0 78,091 0 0 0 78,091 0 78,091 Accumulated Deferred Income Taxes (92) 9,489 104 1,685 1,018 12,204 (12,204)[7] 0 Income Taxes - Flowthrough Depreciation 0 13,021 0 0 0 13,021 0 13,021 Deferred Fuel Costs - Net 0 7,857 0 0 0 7,857 0 7,857 Deferred Postretirement Benefit Costs 0 5,522 0 0 0 5,522 0 5,522 Other 0 10,922 0 827 0 11,749 0 11,749 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Regulatory and Other Non-Current Assets (92) 128,487 104 2,512 1,018 132,029 (12,204) 119,825 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Assets $187,710 $730,299 $21,498 $17,440 $2,548 $959,495 ($211,400) $748,095 ============ ========== ========= ========== ========== ========== =========== ========== - 11 - SOUTH JERSEY INDUSTRIES, INC. CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1998 (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 - 10,778,990 shares $13,474 $0 $0 $0 $0 $13,474 $0 $13,474 Common Stock - Subsidiaries 0 5,848 50 13,283 1,000 20,181 (20,181)[1] 0 Premium on Common Stock 111,253 102,817 2,000 1,584 7,800 225,454 (114,201)[1] 111,253 Retained Earnings 44,571 54,275 (87) (4,323) (6,928) 87,508 (43,001)[1,4,5 44,507 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Common Equity 169,298 162,940 1,963 10,544 1,872 346,617 (177,383) 169,234 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Preferred Stock and Securities of Subsidiary: Series A, 4.70%- 2,100 shares 0 210 0 0 0 210 0 210 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 37,134 0 0 0 37,134 0 37,134 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Long-Term Debt (less current maturities & sinking fund requirements) 0 194,710 0 0 0 194,710 0 194,710 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Current Liabilities: Notes Payable to Banks 0 97,000 0 0 0 97,000 0 97,000 Current Maturities of Long-Term Debt 0 8,876 0 0 0 8,876 0 8,876 Notes Payable - Associated Companies 12,550 0 7,460 30 0 20,040 (20,040)[3] 0 Accounts Payable 374 40,540 11,196 197 11 52,318 (358)[2,8] 51,960 Accounts Payable to Associated Companies 253 283 83 16 7 642 (642)[2] 0 Customer Deposits 0 5,576 0 0 0 5,576 0 5,576 Accumulated Deferred Income Taxes 5 6,923 60 (3) 6 6,991 (713)[6] 6,278 Taxes Accrued 1 1,387 150 17 (24) 1,531 0 1,531 Environmental Remediation Costs 55 8,752 0 861 0 9,668 0 9,668 Interest Accrued 0 5,618 0 0 0 5,618 0 5,618 Dividends Declared 3,880 41 0 0 0 3,921 0 3,921 Other Current Liabilities 240 1,603 568 1,877 183 4,471 0 4,471 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Current Liabilities 17,358 176,599 19,517 2,995 183 216,652 (21,753) 194,899 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Deferred Credits and Other Non-Current Liabilities: Pension and Other Postretirement Benefits 237 13,297 71 355 267 14,227 0 14,227 Deferred Income Taxes - Net 45 90,596 (53) 0 225 90,813 (12,264)[4,7] 78,549 Investment Tax Credit 0 5,239 0 0 0 5,239 0 5,239 Environmental Remediation Costs 192 44,187 0 3,546 0 47,925 0 47,925 Other 581 5,597 0 0 0 6,178 0 6,178 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Def. Credits and Other Non-Current Liabilities 1,055 158,916 18 3,901 492 164,382 (12,264) 152,118 ------------ ---------- --------- ---------- ---------- ---------- ----------- ---------- Total Capitalization and Liabilities $187,710 $730,299 $21,498 $17,440 $2,548 $959,495 ($211,400) $748,095 ============ ========== ========= ========== ========== ========== =========== ========== - 12 -
SOUTH JERSEY INDUSTRIES, INC. CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS BALANCE SHEET - DECEMBER 31, 1998 (In Thousands) [1] Common Stock - Subsidiaries $20,181 Premium on Common Stock 114,201 Retained Earnings 42,937 Investment in Subsidiaries $177,319 To eliminate South Jersey Industries, Inc. investment in subsidiaries which is maintained on the equity method of accounting. [2] Accounts Payable - Associated Companies $642 Accounts Payable 3 Accounts Receivable - Associated Companies $643 Accounts Receivable 2 To eliminate intercompany accounts receivable and payable. [3] Notes Payable - Associated Companies $20,040 Notes Receivable - Associated Companies $20,040 To eliminate intercompany short-term notes between South Jersey Industries, Inc. and Subsidiaries [4] Retained Earnings $84 Accumulated Deferred Income Taxes - Noncurrent Liability 60 Non-Utility Property $144 To eliminate South Jersey Gas Company gain and related deferred taxes on sale of Millville property to South Jersey Industries, Inc. [5] Accumulated Depreciation $20 Retained Earnings $20 To eliminate South Jersey Industries, Inc. depreciation on Millville property gain. [6] Accumulated Deferred Income Taxes - Current Liability $713 Accumulated Deferred Income Taxes - Current Asset $713 To net current accumulated DFIT Asset and Liability [7] Accumulated Deferred Income Taxes - Noncurrent Liability $12,204 Accumulated Deferred Income Taxes - Noncurrent Asset $12,204 To net noncurrent accumulated DFIT Asset and Liability [8] Accounts Payable $355 Accounts Receivable $355 To eliminate intercompany gas receivable and payable between South Jersey Gas Company and South Jersey Energy Company. - 13 -
SOUTH JERSEY GAS COMPANY CONSOLIDATING STATEMENT OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (In Thousands)
South Jersey Eliminations South Jersey Gas Company & Consolidated Gas Company Capital Trust Total Adjustments Total ------------- -------------- ---------- --------------- ------------- Operating Revenues: Utility $299,070 $0 $299,070 $0 $299,070 Nonutility 0 3,013 3,013 (3,013)[B] 0 ------------- -------------- ---------- --------------- ------------- Total Operating Revenues 299,070 3,013 302,083 (3,013) 299,070 ------------- -------------- ---------- --------------- ------------- Operating Expenses: Gas Purchased for Resale 174,822 0 174,822 0 174,822 Utility Operations 42,268 0 42,268 0 42,268 Nonutility Operations 0 0 0 0 0 Maintenance 5,282 0 5,282 0 5,282 Depreciation 17,120 0 17,120 0 17,120 Current Federal and State Income Taxes 5,842 0 5,842 0 5,842 Deferred Federal and State Income Taxes 6,415 0 6,415 0 6,415 Other Taxes 10,343 0 10,343 0 10,343 ------------- -------------- ---------- --------------- ------------- Total Operating Expenses 262,092 0 262,092 0 262,092 ------------- -------------- ---------- --------------- ------------- Operating Income 36,978 3,013 39,991 (3,013) 36,978 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 37,068 3,013 40,081 (3,103) 36,978 ------------- -------------- ---------- --------------- ------------- Interest Charges: Long-Term Debt 18,232 0 18,232 (3,013)[B] 15,219 Short-Term Debt 3,437 0 3,437 0 3,437 Other 412 0 412 0 412 ------------- -------------- ---------- --------------- ------------- Total Interest Charges 22,081 0 22,081 (3,013) 19,068 ------------- -------------- ---------- --------------- ------------- Income from Continuing Operations Before Preferred Dividend Requirements of Subsidiary 14,987 3,013 18,000 (90) 17,910 Preferred Dividend Requirements of Subsidiary 165 2,923 3,088 0 3,088 ------------- -------------- ---------- --------------- ------------- Income from Continuing Operations 14,822 90 14,912 (90) 14,822 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 $14,822 $90 $14,912 ($90) $14,822 ============= ============== ========== =============== ============= - 14 -
SOUTH JERSEY GAS COMPANY CONSOLIDATING STATEMENT OF RETAINED EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (In Thousands)
South Jersey Eliminations South Jersey Gas Company & Consolidated Gas Company Capital Trust Total Adjustments Total ------------- -------------- ---------- --------------- ------------- Retained Earnings - Beginning $56,120 $0 $56,120 $0 $56,120 Net Income Applic to Common Stock 14,822 90 14,912 (90) 14,822 ------------- -------------- ---------- --------------- ------------- 70,942 90 71,032 (90) 70,942 Dividends Declared - Common Stock 0 90 90 (90)[A] 0 ------------- -------------- ---------- --------------- ------------- Retained Earnings - Ending $70,942 $0 $70,942 $0 $70,942 ============= ============== ========== =============== ============= - 15 -
SOUTH JERSEY GAS COMPANY CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (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 - 16 -
SOUTH JERSEY GAS COMPANY CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1998 (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 $678,675 $0 $678,675 $0 $678,675 Gas Plant Acquisition Adjustment - Net 1,851 0 1,851 0 1,851 Gas Stored Underground 1,322 0 1,322 0 1,322 Accumulated Depreciation and Amortization (179,605) 0 (179,605) 0 (179,605) Nonutility Property and Equipment, at cost 0 0 0 0 0 Accumulated Depreciation 0 0 0 0 0 ---------- -------------- ---------- -------------- -------------- Property, Plant and Equipment - Net 502,243 0 502,243 0 502,243 ---------- -------------- ---------- -------------- -------------- Investments: Investment in Subsidiary 1,082 0 1,082 (1,082)[1] 0 Available-for-Sale Securities 885 0 885 0 885 Investment in Affiliate 0 0 0 0 0 ---------- -------------- ---------- -------------- -------------- Total Investments 1,967 0 1,967 (1,082) 885 ---------- -------------- ---------- -------------- -------------- Current Assets: Cash and Cash Equivalents 4,380 0 4,380 0 4,380 Notes Receivable - Associated Companies 0 36,082 36,082 (36,082)[1] 0 Notes Receivable - Affiliate 0 0 0 0 0 Accounts Receivable 28,669 0 28,669 0 28,669 Unbilled Revenues 18,998 0 18,998 0 18,998 Provision for Uncollectibles (1,032) 0 (1,032) 0 (1,032) Accounts Receivable - Associated Companies 102 0 102 0 102 Natural Gas in Storage, Average Cost 27,619 0 27,619 0 27,619 Materials and Supplies, Average Cost 4,051 0 4,051 0 4,051 Assets of Discontinued Businesses Held for Disposal 0 0 0 0 0 Accumulated Deferred Income Taxes 672 0 672 0 672 Prepaid Taxes 12,597 0 12,597 0 12,597 Prepayments and Other Current Assets 1,638 0 1,638 0 1,638 ---------- -------------- ---------- -------------- -------------- Total Current Assets 97,694 36,082 133,776 (36,082) 97,694 ---------- -------------- ---------- -------------- -------------- Accounts Receivable - Merchandise 990 0 990 0 990 ---------- -------------- ---------- -------------- -------------- Regulatory and Other Non-Current Assets: Gross Receipts & Franchise Taxes 3,585 0 3,585 0 3,585 Environmental Remediation Costs 78,091 0 78,091 0 78,091 Accumulated Deferred Income Taxes 9,489 0 9,489 0 9,489 Income Taxes - Flowthrough Depreciation 13,021 0 13,021 0 13,021 Deferred Fuel Costs - Net 7,857 0 7,857 0 7,857 Deferred Postretirement Benefit Costs 5,522 0 5,522 0 5,522 Other 10,922 0 10,922 0 10,922 ---------- -------------- ---------- -------------- -------------- Total Regulatory and Other Non-Current Assets 128,487 0 128,487 0 128,487 ---------- -------------- ---------- -------------- -------------- Total Assets $731,381 $36,082 $767,463 ($37,164) $730,299 ========== ============== ========== ============== ============== - 17 - SOUTH JERSEY GAS COMPANY CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1998 (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 102,817 0 102,817 0 102,817 Retained Earnings 54,275 0 54,275 0 54,275 ---------- -------------- ---------- -------------- -------------- Total Common Equity 162,940 1,082 164,022 (1,082) 162,940 ---------- -------------- ---------- -------------- -------------- Preferred Stock and Securities of Subsidiary: Series A, 4.70%- 2,100 shares 210 0 210 0 210 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 2,134 35,000 37,134 0 37,134 ---------- -------------- ---------- -------------- -------------- Long-Term Debt (less current maturities & sinking fund requirements) 230,792 0 230,792 (36,082)[1] 194,710 ---------- -------------- ---------- -------------- -------------- Current Liabilities: Notes Payable to Banks 97,000 0 97,000 0 97,000 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 40,540 0 40,540 0 40,540 Accounts Payable to Associated Companies 283 0 283 0 283 Customer Deposits 5,576 0 5,576 0 5,576 Accumulated Deferred Income Taxes 6,923 0 6,923 0 6,923 Taxes Accrued 1,387 0 1,387 0 1,387 Environmental Remediation Costs 8,752 0 8,752 0 8,752 Interest Accrued 5,618 0 5,618 0 5,618 Dividends Declared 41 0 41 0 41 Other Current Liabilities 1,603 0 1,603 0 1,603 ---------- -------------- ---------- -------------- -------------- Total Current Liabilities 176,599 0 176,599 0 176,599 ---------- -------------- ---------- -------------- -------------- Deferred Credits and Other Non-Current Liabilities: Pension and Other Postretirement Benefits 13,297 0 13,297 0 13,297 Deferred Income Taxes - Net 90,596 0 90,596 0 90,596 Investment Tax Credit 5,239 0 5,239 0 5,239 Environmental Remediation Costs 44,187 0 44,187 0 44,187 Other 5,597 0 5,597 0 5,597 ---------- -------------- ---------- -------------- -------------- Total Def. Credits and Other Non-Current Liabilities 158,916 0 158,916 0 158,916 ---------- -------------- ---------- -------------- -------------- Total Capitalization and Liabilities $731,381 $36,082 $767,463 ($37,164) $730,299 ========== ============== ========== ============== ============== - 18 -
SOUTH JERSEY GAS COMPANY CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS BALANCE SHEET - DECEMBER 31, 1998 (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. - 19 -
SOUTH JERSEY ENERGY COMPANY CONSOLIDATING STATEMENT OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (In Thousands)
SJ Eliminations South Jersey EnerTrade, & Consolidated Energy Company Inc. Total Adjustments Total --------------- -------------- ---------- --------------- ------------- Operating Revenues: Utility $0 $0 $0 $0 $0 Nonutility 148,485 2,825 151,310 (30)[B] 151,280 --------------- -------------- ---------- --------------- ------------- Total Operating Revenues 148,485 2,825 151,310 (30) 151,280 --------------- -------------- ---------- --------------- ------------- Operating Expenses: Gas Purchased for Resale 0 0 0 0 0 Utility Operations 0 0 0 0 0 Nonutility Operations 148,143 2,523 150,666 (30)[B] 150,636 Maintenance 8 0 8 0 8 Depreciation 11 0 11 0 11 Current Federal and State Income Taxes 118 84 202 0 202 Deferred Federal and State Income Taxes (12) (23) (35) 0 (35) Other Taxes 60 0 60 0 60 --------------- -------------- ---------- --------------- ------------- Total Operating Expenses 148,328 2,584 150,912 (30) 150,882 --------------- -------------- ---------- --------------- ------------- Operating Income 157 241 398 0 398 Other Income: Dividends from Subsidiary 0 0 0 0 0 Equity in Undistributed Earnings of Subsidiary 92 0 92 (92)[A] 0 --------------- -------------- ---------- --------------- ------------- Income Before Interest Charges 249 241 490 (92) 398 --------------- -------------- ---------- --------------- ------------- Interest Charges: Long-Term Debt 27 0 27 0 27 Short-Term Debt 12 149 161 0 161 Other 0 0 0 0 0 --------------- -------------- ---------- --------------- ------------- Total Interest Charges 39 149 188 0 188 --------------- -------------- ---------- --------------- ------------- Income from Continuing Operations Before Preferred Dividend Requirements of Subsidiary 210 92 302 (92) 210 Preferred Dividend Requirements of Subsidiary 0 0 0 0 0 --------------- -------------- ---------- --------------- ------------- Income from Continuing Operations 210 92 302 (92) 210 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 $210 $92 $302 ($92) $210 =============== ============== ========== =============== ============= - 20 -
SOUTH JERSEY ENERGY COMPANY CONSOLIDATING STATEMENT OF RETAINED EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (In Thousands)
South Jersey SJ Eliminations Energy EnerTrade, & Consolidated Company Inc. Total Adjustments Total --------------- -------------- ---------- --------------- ------------- Retained Earnings - Beginning ($297) $0 ($297) $0 ($297) Net Income Applic to Common Stock 210 92 302 (92)[A] 210 --------------- -------------- ---------- --------------- ------------- (87) 92 5 (92) (87) Dividends Declared - Common Stock 0 0 0 0 0 --------------- -------------- ---------- --------------- ------------- Retained Earnings - Ending ($87) $92 $5 ($92) ($87) =============== ============== ========== =============== ============= - 21 -
SOUTH JERSEY ENERGY COMPANY CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (In Thousands) [A] Investment in Subsidiary $92 Equity in Undistributed Earnings of Subsidiary $92 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. - 22 -
SOUTH JERSEY ENERGY COMPANY CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1998 (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 65 6 71 0 71 Accumulated Depreciation (15) (2) (17) 0 (17) ---------- ------------- --------- ------------- ------------- Property, Plant and Equipment - Net 50 4 54 0 54 ---------- ------------- --------- ------------- ------------- Investments: Investment in Subsidiary 185 0 185 (185)[1] 0 Available-for-Sale Securities 0 0 0 0 0 Investment in Affiliate 0 1,440 1,440 0 1,440 ---------- ------------- --------- ------------- ------------- Total Investments 185 1,440 1,625 (185) 1,440 ---------- ------------- --------- ------------- ------------- Current Assets: Cash and Cash Equivalents 452 13 465 0 465 Notes Receivable - Associated Companies 0 0 0 0 0 Notes Receivable - Affiliate 0 4,350 4,350 0 4,350 Accounts Receivable 12,625 1,019 13,644 0 13,644 Unbilled Revenues 491 0 491 0 491 Provision for Uncollectibles (115) 0 (115) 0 (115) Accounts Receivable - Associated Companies 130 0 130 (5)[2] 125 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 29 0 29 0 29 Prepaid Taxes 81 94 175 0 175 Prepayments and Other Current Assets 169 3 172 0 172 ---------- ------------- --------- ------------- ------------- Total Current Assets 13,862 5,479 19,341 (5) 19,336 ---------- ------------- --------- ------------- ------------- Accounts Receivable - Merchandise 564 0 564 0 564 ---------- ------------- --------- ------------- ------------- 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 79 25 104 0 104 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 0 0 0 0 0 ---------- ------------- --------- ------------- ------------- Total Regulatory and Other Non-Current Assets 79 25 104 0 104 ---------- ------------- --------- ------------- ------------- Total Assets $14,740 $6,948 $21,688 ($190) $21,498 ========== ============= ========= ============= ============= - 23 - SOUTH JERSEY ENERGY COMPANY CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1998 (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 (87) 85 (2) (85)[1] (87) ---------- ------------- --------- ------------- ------------- Total Common Equity 1,963 185 2,148 (185) 1,963 ---------- ------------- --------- ------------- ------------- 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 1,375 6,085 7,460 0 7,460 Accounts Payable 10,697 499 11,196 0 11,196 Accounts Payable to Associated Companies 36 52 88 (5)[2] 83 Customer Deposits 0 0 0 0 0 Accumulated Deferred Income Taxes 59 1 60 0 60 Taxes Accrued 110 40 150 0 150 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 483 85 568 0 568 ---------- ------------- --------- ------------- ------------- Total Current Liabilities 12,760 6,762 19,522 (5) 19,517 ---------- ------------- --------- ------------- ------------- Deferred Credits and Other Non-Current Liabilities: Pension and Other Postretirement Benefits 71 0 71 0 71 Deferred Income Taxes - Net (54) 1 (53) 0 (53) 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 17 1 18 0 18 ---------- ------------- --------- ------------- ------------- Total Capitalization and Liabilities $14,740 $6,948 $21,688 ($190) $21,498 ========== ============= ========= ============= ============= - 24 -
SOUTH JERSEY ENERGY COMPANY CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS BALANCE SHEET - DECEMBER 31, 1998 (In Thousands) [1] Common Stock - Subsidiary $1 Premium on Common Stock 99 Retained Earnings 85 Investment in Subsidiary $185 To eliminate South Jersey Energy Company, Inc. investment in subsidiary which is maintained on the equity method of accounting. [2] Accounts Payable - Associated Companies $5 Accounts Receivable - Associated Companies $5 To eliminate intercompany accounts receivable and payable. - 25 -
ENERGY & MINERALS, INC. CONSOLIDATING STATEMENT OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (In Thousands)
Energy & South Jersey Eliminations Minerals, Fuel Company, & Consolidated Inc. Inc. Total Adjustments Total ----------- -------------- ---------- --------------- ------------- Operating Revenues: Utility $0 $0 $0 $0 $0 Nonutility 822 0 822 0 822 ----------- -------------- ---------- --------------- ------------- Total Operating Revenues 822 0 822 0 822 ----------- -------------- ---------- --------------- ------------- Operating Expenses: Gas Purchased for Resale 0 0 0 0 0 Utility Operations 0 0 0 0 0 Nonutility Operations 108 0 108 0 108 Maintenance 0 0 0 0 0 Depreciation 7 0 7 0 7 Current Federal and State Income Taxes (162) 0 (162) 0 (162) Deferred Federal and State Income Taxes 418 0 418 0 418 Other Taxes 21 0 21 0 21 ----------- -------------- ---------- --------------- ------------- Total Operating Expenses 392 0 392 0 392 ----------- -------------- ---------- --------------- ------------- Operating Income 430 0 430 0 430 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 430 0 430 0 430 ----------- -------------- ---------- --------------- ------------- Interest Charges: Long-Term Debt 0 0 0 0 0 Short-Term Debt 0 0 0 0 0 Other 0 0 0 0 0 ----------- -------------- ---------- --------------- ------------- Total Interest Charges 0 0 0 0 0 ----------- -------------- ---------- --------------- ------------- Income from Continuing Operations Before Preferred Dividend Requirements of Subsidiary 430 0 430 0 430 Preferred Dividend Requirements of Subsidiary 0 0 0 0 0 ----------- -------------- ---------- --------------- ------------- Income from Continuing Operations 430 0 430 0 430 Equity in Undistributed Earnings of Discontinued Subsidiary (55) 0 (55) 55 [A] 0 Loss from Discontinued Subsidiaries - Net (2,403) (55) (2,458) 0 (2,458) ----------- -------------- ---------- --------------- ------------- Net Loss Applicable to Common Stock ($2,028) ($55) ($2,083) $55 ($2,028) =========== ============== ========== =============== ============= - 26 -
ENERGY & MINERALS, INC. CONSOLIDATING STATEMENT OF RETAINED EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (In Thousands)
Energy & South Jersey Eliminations Minerals, Fuel Company, & Consolidated Inc. Inc. Total Adjustments Total ----------- -------------- ---------- --------------- ------------- Retained Earnings - Beginning ($2,296) ($1,454) ($3,750) $1,454 [B] ($2,296) Net Loss Applic to Common Stock (2,028) (55) (2,083) 55 [A] (2,028) ----------- -------------- ---------- --------------- ------------- (4,324) (1,509) (5,833) 1,509 (4,324) Dividends Declared - Common Stock 0 0 0 0 0 ----------- -------------- ---------- --------------- ------------- Retained Earnings - Ending ($4,324) ($1,509) ($5,833) $1,509 ($4,324) =========== ============== ========== =============== ============= - 27 -
ENERGY & MINERALS, INC. CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS STATEMENT OF INCOME AND RETAINED EARNINGS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (In Thousands) [A] Equity in Undistributed Earnings $55 of Subsidiary Investment in Subsidiary $55 To eliminate equity in undistributed earnings recorded by Energy & Minerals, Inc. [B] Retained Earnings - 1/1/98 $1,454 Investment in Subsidiary $1,454 To eliminate retained earnings of subsidiary at 1/1/98 previously recorded by Energy & Minerals, Inc. under the equity method of accounting. - 28 -
ENERGY & MINERALS, INC. CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1998 (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 871 508 1,379 0 1,379 Accumulated Depreciation (739) (69) (808) 0 (808) ---------- ------------- --------- ------------- ------------- Property, Plant and Equipment - Net 132 439 571 0 571 ---------- ------------- --------- ------------- ------------- Investments: Investment in Subsidiary (450) 0 (450) 450 [1] 0 Available-for-Sale Securities 0 0 0 0 0 Investment in Affiliate 0 0 0 0 0 ---------- ------------- --------- ------------- ------------- Total Investments (450) 0 (450) 450 0 ---------- ------------- --------- ------------- ------------- Current Assets: Cash and Cash Equivalents 1,503 2 1,505 0 1,505 Notes Receivable - Associated Companies 11,795 0 11,795 0 11,795 Notes Receivable - Affiliate 0 0 0 0 0 Accounts Receivable 352 0 352 0 352 Unbilled Revenues 0 0 0 0 0 Provision for Uncollectibles (136) 0 (136) 0 (136) Accounts Receivable - Associated Companies 63 0 63 0 63 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 336 0 336 0 336 Accumulated Deferred Income Taxes 1 0 1 (1)[2] 0 Prepaid Taxes 344 76 420 0 420 Prepayments and Other Current Assets 22 0 22 0 22 ---------- ------------- --------- ------------- ------------- Total Current Assets 14,280 78 14,358 (1) 14,357 ---------- ------------- --------- ------------- ------------- 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 1,552 444 1,996 (311)[3] 1,685 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 827 0 827 0 827 ---------- ------------- --------- ------------- ------------- Total Regulatory and Other Non-Current Assets 2,379 444 2,823 (311) 2,512 ---------- ------------- --------- ------------- ------------- Total Assets $16,341 $961 $17,302 $138 $17,440 ========== ============= ========= ============= ============= - 29 - ENERGY & MINERALS, INC. CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 1998 (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 (4,323) (1,509) (5,832) 1,509 [1] (4,323) ---------- ------------- --------- ------------- ------------- Total Common Equity 10,544 (450) 10,094 450 10,544 ---------- ------------- --------- ------------- ------------- 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 30 30 0 30 Accounts Payable 161 36 197 0 197 Accounts Payable to Associated Companies 15 1 16 0 16 Customer Deposits 0 0 0 0 0 Accumulated Deferred Income Taxes (5) 3 (2) (1)[2] (3) Taxes Accrued 0 17 17 0 17 Environmental Remediation Costs 616 245 861 0 861 Interest Accrued 0 0 0 0 0 Dividends Declared 0 0 0 0 0 Other Current Liabilities 1,877 0 1,877 0 1,877 ---------- ------------- --------- ------------- ------------- Total Current Liabilities 2,664 332 2,996 (1) 2,995 ---------- ------------- --------- ------------- ------------- Deferred Credits and Other Non-Current Liabilities: Pension and Other Postretirement Benefits 355 0 355 0 355 Deferred Income Taxes - Net 254 57 311 (311)[3] 0 Investment Tax Credit 0 0 0 0 0 Environmental Remediation Costs 2,524 1,022 3,546 0 3,546 Other 0 0 0 0 0 ---------- ------------- --------- ------------- ------------- Total Def. Credits and Other Non-Current Liabilities 3,133 1,079 4,212 (311) 3,901 ---------- ------------- --------- ------------- ------------- Total Capitalization and Liabilities $16,341 $961 $17,302 $138 $17,440 ========== ============= ========= ============= ============= - 30 -
ENERGY & MINERALS, INC. CONSOLIDATING ADJUSTMENTS AND ELIMINATIONS BALANCE SHEET - DECEMBER 31, 1998 (In Thousands) [1] Premium on Common Stock $1,059 Investment in Subsidiary 450 Retained Earnings $1,509 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 $311 Accumulated Deferred Income Taxes - Noncurrent Asset $311 To net noncurrent accumulated DFIT Asset and Liability - 31 -
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. All significant intercompany accounts and transactions were eliminated. 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 - South Jersey Gas Company (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. 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 Note 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. - 32 - 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 1998. 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 $1.9 million at December 31, 1998, 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 1997, the FASB issued Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information," which became effective in 1998. This statement establishes standards for reporting selected information about operating segments in SJI's interim and annual financial statements. Adopting this statement did not significantly change the presentation of SJI's financial information. We adopted FASB No. 131 effective January 1, 1998 (See Note 8). In February 1998, the FASB issued Statement No. 132, "Employers' Disclosures About Pensions and Other Postretirement Benefits," to standardize and simplify disclosure requirements about employers' retirement benefit plans. SJI adopted this statement January 1, 1998 (See Note 11). In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities," which is effective for our fiscal year ending December 31, 2000. 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). New Jersey adopted legislation reforming energy taxation in 1997. The law eliminated the Gross Receipts & Franchise Tax (GRAFT) of approximately 13% of utility revenue, replacing it with a combination of taxes. Beginning January 1, 1998, retail sales and transportation of natural gas, electricity and utility services are subject to the 6% State Sales and Use Tax (SUT). Gas and electric utilities are also subject to the 9% State Corporation Business Tax (CBT). To bridge the revenue gap the law created, the State imposed a Transitional Energy Facilities Assessment (TEFA) on gas volumes sold and transported. The TEFA will be phased out over 5 years beginning January 1, 1999. The revised tax policy is expected to eliminate - 33 - tax differences between utility and non-utility suppliers, providing fair competition and lower energy costs for consumers. The legislation required SJG to prepay taxes which, primarily due to warmer weather, did not materialize as expense during 1998. SJG will utilize the balance of these prepayments in 1999. Additionally, the SUT is not included in reported utility revenues or tax expense, as GRAFT was previously. Therefore, there are equal reductions in these line items on the statement of consolidating income (See Notes 6 & 7). 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 $35.0 million of 8.35% SJG-guaranteed Mandatorily Redeemable Preferred Securities. The Trust's only assets are the 8.35% Deferrable Interest Subordinated Debentures issued by SJG maturing April, 2037. This is also the maturity date of the Preferred Securities. The Debentures and Preferred Securities are redeemable at SJG's option at a price equal to 100% of the principal amount at any time on or after April 30, 2002. SJI has 2,500,000 authorized shares of Preference Stock, no par value, which has not been issued. SJI has registered and reserved for issuance 15,000 shares of Series A Junior Participating Cumulative Preferred Stock (Series A Preferred Stock) connected with adopting its Shareholder Rights Plan (See Note 4). 3. Divestitures and Affiliations: Divestitures - In December 1996, Energy & Minerals, Inc. (EMI), a SJI subsidiary, sold the common stock of The Morie Company, Inc. (Morie), its sand mining and processing subsidiary, for $55.3 million in cash. The net book value of assets sold was approximately $27.9 million. We transferred cash, certain real estate and other assets, along with certain liabilities remaining after the sale, to EMI's books (See Note 13). Also in December 1996, SJI developed a formal plan to discontinue the operations of its construction and environmental services operations, R & T Group, Inc. (R&T). SJI recognized a net loss of $2.4 million in 1996 on the planned disposition of R&T's assets. In 1997, R&T sold all of its operating assets, except some real estate. - 34 - In 1997 and 1998, SJI conducted 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). Summarized operating results of the discontinued operations for 1998 were (in thousands): Loss before Income Taxes: Sand Mining $ (3,697) Construction (587) Fuel Oil (72) Income Tax Credits 1,526 -------- Loss from Discontinued Operations - Net $ (2,830) ======== Earnings per Common Share from Discontinued Operations $ (0.26) ======== Affiliations - In 1996, SJF and Union Pacific Fuels, Inc. formed South Jersey Resources Group, LLC (SJRG) to provide natural gas storage, peaking services and transportation capacity for wholesale customers in New Jersey and surrounding states. SJ EnerTrade, Inc. (EnerTrade) currently holds a 50% non-controlling interest in this affiliation and accounts for the investment under the equity method. In October 1998, SJI and Energy East Corporation announced plans to form a jointly-owned limited liability company to market retail electricity and energy management services. The LLC is intended to create significant efficiencies and expand service capabilities for both companies in the advent of electric utility restructuring legislation. Also in October 1998, SJI and Conectiv announced plans for a joint customer account services venture, Millennium Account Services, LLC, to provide meter reading services in southern New Jersey beginning January 1999. Customers should benefit from reduced meter reading costs resulting from synergies that exist because of overlapping territories. 4. Common Stock: SJI has 20,000,000 shares of authorized Common Stock. The following shares were issued and outstanding: - 35 - Beginning of Year 10,771,413 New Issues During Year: Employees' Stock Ownership Plan 3,875 Stock Option & Stock Appreciation Rights Plan 1,952 Directors' Restricted Stock Plan 1,750 ---------- End of Year 10,778,990 ========== The par value ($1.25 per share) of stock issued in 1998 was credited to Common Stock. Net excess over par value of approximately $0.3 million was credited to Premium on Common Stock. Effective 1996, SJI adopted FASB Statement No. 123, "Accounting for Stock- Based Compensation." This statement defines a fair value based method of accounting for stock-based compensation. As permitted by the statement, we elect to continue measuring compensation costs using the intrinsic value based method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees." The pro forma effect of adopting the fair value based method of accounting on net income and Earnings per Share (EPS) is immaterial for the year ended December 31, 1998. Stock Option and Stock Appreciation Rights Plan - Under this plan, not more than 306,000 shares 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 January 23, 2007. At December 31, 1998, SJI had 5,000 options outstanding, all exercisable at a price of $24.69 per share. During 1998, 8,060 options were surrendered for the issuance of 1,952 shares. No options were granted in 1998. No stock appreciation rights were issued under the Plan. Stock options outstanding at December 31, 1998, had no effect on EPS. Dividend Reinvestment and Stock Purchase Plan (DRP) and Employees' Stock Ownership Plan (ESOP) - Shares of common stock offered through the DRP are currently purchased in the open market. All shares offered through the ESOP are issued directly by SJI. As of December 31, 1998, SJI reserved 112,951 and 31,496 shares of authorized, but unissued, common stock for future issuance to the DRP and ESOP, respectively. Directors' Restricted Stock Plan - In September 1996, the board of directors adopted a restricted stock plan. Under this Plan, SJI granted an initial award of 13,800 shares in December 1996, at a market value of $24.00 per share. The Plan also provides for annual awards and, in December 1998, we granted 1,750 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. - 36 - 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 ten days following the time the acquiring person or group reached the 10% threshold. The rights will expire if not exercised or redeemed by September 20, 2006. 5. Regulatory Assets and Deferred Credits: Federal and Other Taxes: The primary asset created by adopting FASB Statement 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 federal 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 in rates. 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 1998 pre-tax income for the following reasons (in thousands): - 37 - Tax at Statutory Rate $ 7,877 Increase (Decrease) Resulting from: State Income Taxes 3,170 Amortization of ITC (393) Tax Depreciation Under Book Depreciation on Utility Plant 664 Other - Net 54 -------- Income Taxes as reported on the Statements of Consolidated Income 11,860 Tax Associated with Discontinued Operations (1,526) -------- Net Income Taxes $ 10,334 ======== The provision for Income Taxes for 1998 is comprised of the following (in thousands): Current: Federal $ 2,225 State 2,227 -------- Total Current 4,452 Deferred: Federal - Excess of Tax Depreciation Over Book Depreciation - Net 5,308 Deferred Fuel Costs 1,397 Environmental Remediation Costs - Net 1,990 Amortization of Gross Receipts Taxes (155) Alternative Minimum Tax (1,750) Other - Net 68 State 943 -------- Total Deferred 7,801 ITC (393) Income Taxes as reported on the -------- Statements of Consolidated Income 11,860 Tax Associated with Discontinued Operations (1,526) -------- Net Income Taxes $ 10,334 ======== 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, 1998 are as follows (in thousands): - 38 - Deferred Tax Liabilities: Tax Depreciation Over Book Depreciation $ 66,966 Difference Between Book and Tax Basis of Property 5,951 Deferred Fuel Costs 6,475 Deferred Regulatory Costs 776 Environmental Remediation Costs 7,925 Excess Protected 3,421 Gross Receipts Taxes 1,255 Other 1,277 --------- Total Deferred Tax Liabilities 94,046 Deferred Tax Assets: Alternative Minimum Tax 3,135 ITC Basis Gross Up 2,802 Other 3,282 --------- Total Deferred Tax Assets 9,219 --------- Net Deferred Tax Liability $ 84,827 ========= The significant components of Other Taxes for 1998 are (in thousands): TEFA $ 7,378 GRAFT 123 Other 2,977 --------- Total Other Taxes $ 10,478 ========= During 1998, SJG recorded an additional $12.0 million for SUT on utility services through its consolidated balance sheet. As an agent for the collection of SUT, we exclude these amounts from reported revenues and tax expense (See Note 1). 7. Recent Regulatory Actions: In July 1996, 1997 and 1998, SJG filed with the BPU to recover increased remediation costs expended from August 1995 through July 1998 totaling $4.5 million. The BPU approved the 1996-1997 RAC filing in October 1998. We updated the 1997-1998 RAC filing and included the results in the 1998-1999 RAC filing. The 1998-1999 RAC filing was updated in December 1998 to request an increase of $5.0 million. Both filings are still pending at the BPU. In January 1997, the BPU granted SJG a total rate increase of $10.3 million. The $6.0 million base rate portion of the increase was based on a 9.62% rate of return on rate base, which included an 11.25% return on common equity. The majority of this increase comes from residential and - 39 - small commercial customers. Part of the increase is recovered from service fees which charge specific customers for costs they cause SJG to incur. Additionally, SJG's threshold for sharing pre-tax margins generated by interruptible and off-system sales and transportation (Sharing Formula) increased from $4.0 million to $5.0 million. Later in 1997, the $5.0 million threshold increased by $500,000 - the annual revenue requirement associated with completing a specific pipeline interconnection. At the end of 1998, the threshold increased by $2.0 million, with the completion of major construction projects. SJG keeps 100% of pre-tax margins up to the threshold level and 20% of such margins above that level. In October 1998, the BPU approved a revision to the Sharing Formula as part of an agreement to modify SJG's 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, which ended June 1997, nearly 13,000 residential customers applied for this service. SJG began transporting gas for these customers in August 1997. In June 1998, the BPU expanded the number of potential participants to 25,000. There were 17,310 participants as of December 31, 1998. 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. We also expanded the choices available to commercial and industrial customers, including a new transportation tariff providing savings to qualified customers. In May 1997, SJG filed to recover additional postretirement benefit costs of approximately $1.3 million annually. This recovery was approved in December 1997 and began January 1998. In September 1997, SJG filed with the BPU to adjust rates by replacing the GRAFT with the SUT, CBT and TEFA (See Notes 1 & 5). The new rates were effective January 1, 1998. In September 1997 and 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 the 1997-1998 filing, SJG requested a $4.7 million increase in the annual LGAC recovery which includes the 1996-1997 LGAC year. The 1997-1998 LGAC year ended in October 1998 and the results of that year were rolled into the 1998-1999 LGAC filing. The 1998-1999 LGAC filing requested a decrease in rates of $414,000 and resolution of prior filings. All filings are still pending at the BPU. We believe the ultimate settlement of these filings will not adversely affect SJI's financial position, results of operations or liquidity. - 40 - In March 1998, the BPU approved new appliance service rates. The new rates are competitive with those of other service providers in New Jersey and are designed to increase earnings and cash flows. In April 1998, the BPU also authorized SJG to offer new appliance service contract plans and to service electric air conditioners. In June 1998, SJG filed a petition with the BPU requesting a change to the TAC. The request was granted in October 1998. As a result, SJG will experience reduced fluctuations in income when weather is warmer or colder than normal. 8. Segments of Business: Information about SJI's operations in different industry segments for 1998 is presented below (in thousands): Operating Revenues: Gas Utility Operations $299,070 Other Industries 153,191 -------- Subtotal 452,261 Intersegment Sales (2,015) -------- Total Operating Revenues $450,246 ======== The significant portion of operating revenues from Other Industries is attributable to SJE's wholesale electricity sales which began in January 1998. SJE exited this activity later in the year (See Note 3). Operating Income: Gas Utility Operations $ 49,234 Other Industries 640 --------- Subtotal 49,874 Income Taxes (11,860) General Corporate Expense (1,929) --------- Total Operating Income $ 36,085 ========= Depreciation, Depletion and Amortization: Gas Utility Operations $ 19,014 Other Industries 28 Discontinued Operations 21 --------- Total $ 19,063 ========= - 41 - Property Additions: Gas Utility Operations $ 64,862 Other Industries 71 Discontinued Operations - -------- Total $ 64,933 ======== Identifiable Assets: Gas Utility Operations $720,137 Other Industries 21,367 Discontinued Operations 2,380 -------- Subtotal 743,884 Corporate Assets 25,251 Intersegment Assets (21,040) -------- Total Assets $748,095 ======== SJI's interest expense relates primarily to SJG's borrowing and financing activities. Interest income is essentially derived from borrowings between the subsidiaries and is eliminated during consolidation. These amounts are included in our statement of consolidating income and not shown above. 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). Total Operating Revenues by industry segment include both sales to unaffiliated customers, as reported in SJI's statement of consolidating income, and intercompany sales, which are accounted for at the fair market value of the goods or services rendered. Operating Income is total revenues less operating expenses, income taxes and general corporate expenses, as shown on the statement of consolidating income. Identifiable Assets are those used in each segment of SJI's operations. Corporate assets are principally cash and cash equivalents, land, buildings and equipment held for corporate use. 9. Financial Instruments: Long-Term Debt - The fair value of SJI's long-term debt, including current maturities, as of December 31, 1998, is estimated to be $227.0 million (carrying amount $203.6 million). This estimate is based on the interest - 42 - rates available to SJI at year end 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, 1998. 10. Unused Lines of Credit and Compensating Balances: Unused lines of credit available at December 31, 1998, were approximately $38.0 million. Borrowings under these lines of credit are at market rates. The weighted borrowing cost, which changes daily, was approximately 5.81% at December 31, 1998. Demand deposits are maintained with lending banks on an informal basis and do not constitute compensating balances. 11. Pensions & Other Postretirement Benefits: The following reflects the new disclosure requirements of FASB Statement No. 132, "Employers' Disclosures about Pensions and 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 retired employees. The BPU authorized SJG to recover costs related to postretirement benefits other than pensions under the accrual method of accounting consistent with FASB Statement 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 $5.5 million at December 31, 1998 is recoverable in rates. We are amortizing the major portion of this amount over 15 years which started January 1998. Net periodic benefit cost related to the pension and other postretirement benefit insurance plans for 1998 consisted of the following components (in thousands): Pension Benefits Other Benefits ---------------- -------------- Service cost $1,912 $ 903 Interest cost 3,973 1,494 Expected return on plan assets (3,894) (417) Amortization of transition obligation 72 796 Amortization of loss (gain) and other 292 (14) ------ ------ Net periodic benefit cost $2,355 $2,762 ====== ====== - 43 - A reconciliation of the Plans' benefit obligations, fair value of plan assets, funded status and amounts recognized in SJI's consolidating balance sheet follows (in thousands): Pension Benefits Other Benefits ---------------- -------------- Change in Benefit Obligation: Benefit obligation at beginning of year $56,753 $24,024 Service cost 1,912 903 Interest cost 3,973 1,494 Actuarial loss (gain) and other 3,783 (1,669) Benefits paid (2,386) (504) ------- ------- Benefit obligation at end of year $64,035 $24,248 ======= ======= Change in Plan Assets: Fair value of plan assets at beginning of year $46,875 $ 4,403 Actual return on plan assets 1,887 568 Employer contributions 1,600 2,505 Benefits paid (2,386) (504) ------- ------- Fair value of plan assets at end of year $47,976 $ 6,972 ======= ======= Funded status $(16,059) $(17,276) Unrecognized prior service cost 3,222 - Unrecognized net transition obligation assets 359 11,151 Unrecognized net loss (gain) and other 9,101 (1,105) -------- -------- Accrued net benefit cost at end of year $ (3,377) $ (7,230) ======== ======== The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plan with accumulated benefit obligations in excess of plan assets as of December 31, 1998, were $35.2 million, $28.4 million, and $26.2 million, respectively. Assumptions used in the accounting for these plans were as follows (in thousands): Pension Benefits Other Benefits ---------------- -------------- Discount rate 6.75 6.75 Expected return on plan assets 9.00 9.00 Rate of compensation increase 4.10 ----- The assumed health care cost trend rates used in measuring the accumulated postretirement benefit obligation as of December 31, 1998, are: Medical and Drug - 6.25% in 1998 for participants age 65 or older, grading to 5.5% in - 44 - 2001, and 8.0% in 1998 for participants under age 65, grading to 5.5% in 2005. Dental - 7.25% in 1998, grading to 5.5% in 2005. A 1% change in the assumed health care cost trend rates for SJI's postretirement health care plans in 1998 would have the following effects: Thousands of Dollars 1% Increase 1% Decrease ----------- ----------- Effect on the aggregate of the service and interest cost components $397 $ (341) Effect on the postretirement benefit obligation $3,520 $(2,855) 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 $42.7 million as of December 31, 1998. 13. Commitments and Contingencies: Construction Commitments - SJI's estimated cost of construction and environmental remediation programs for 1999 totals $53.2 million. Commitments were made regarding 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 in the ordinary course of business and other legal proceedings. We set up reserves when these claims become apparent. We also maintain insurance and record probable insurance recoveries relating to outstanding claims. In 1996, a group of Atlantic City casinos filed a petition with the BPU alleging overcharges of over $10.0 million, including interest. We reached a settlement under which SJG will make no payments. The casinos issued general releases to SJG and withdrew the petition in September 1998. In return, SJG filed with the BPU to amend an existing rate schedule providing the casinos with limited firm service which will better meet their needs. - 45 - Environmental Remediation Costs - SJI incurred and recorded costs for environmental clean up of sites where SJG or its predecessors operated gas manufacturing plants. SJG stopped manufacturing gas over 35 years ago. SJI and some of its nonutility subsidiaries also recorded costs for environmental clean up 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 $105.4 million, of which $47.8 million was spent as of December 31, 1998. With the assistance of an outside consulting firm, we estimate that future costs to clean up SJG's sites will range from $52.9 million to $160.3 million. We recorded the lower end of this range as a liability. It is reflected on the 1998 consolidated balance sheet under the captions Current Liabilities and Deferred Credits and Other Non-Current Liabilities (See Note 1). SJG did not adjust the accrued liability for future insurance recoveries, which management is pursuing. SJG received $4.2 million of insurance recoveries as of December 31, 1998. 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 $98.6 million for the remediation of these sites and spent $45.7 million through December 31, 1998. SJG has two regulatory assets associated with environmental cost. The first regulatory 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 Statement No. 71, "Accounting for the Effects of Certain Types of Regulation." The BPU allowed SJG to recover expenditures through July 1996 and petitions to recover costs through July 1998 are pending (See Note 7). The other regulatory asset titled Environmental Remediation Cost: Liability for Future Expenditures relates to estimated future expenditures determined under the guidance of FASB Statement 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, 1998, SJG's unamortized remediation costs of $25.2 million are reflected on the consolidating - 46 - balance sheet under the caption Regulatory and Other Non-Current Assets. Since BPU approval of the RAC in 1992, SJG recovered $16.3 million through rates as of December 31, 1998 (See Note 7). With Morie's sale, EMI assumed responsibility for environmental liabilities which we estimate to range between $3.1 million and $9.7 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 statement 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 $0.3 million and $0.9 million, while SJF's estimated liability ranges from $1.3 million to $4.8 million for its three sites. The lower ends of these ranges were recorded and are reflected on the 1998 consolidating balance sheet under Current Liabilities and Deferred Credits and Other Non-Current Liabilities as of December 31, 1998. - 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-31-1998 DEC-31-1998 PER-BOOK 748,095 450,246 10,986
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