[X]
|
ANNUAL REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
[ ]
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
New
Jersey
|
22-1901645
|
(State
of incorporation)
|
(IRS
employer identification no.)
|
Common
Stock
|
|
($1.25
par value per share)
|
New
York Stock Exchange
|
(Title
of each class)
|
(Name
of exchange on which registered)
|
Large
accelerated filer [X]
|
Accelerated
filer [ ]
|
Non-accelerated
filer [ ]
|
Units
of Measurement
|
||
For
Natural Gas:
|
||
1
Mcf
|
=
One thousand cubic feet
|
|
1
MMcf
|
=
One million cubic feet
|
|
1
Bcf
|
=
One billion cubic feet
|
|
1dth
|
=
One decatherm
|
|
1
MMdth
|
=
One million decatherms
|
·
|
South Jersey Gas Company (SJG) is
a regulated natural gas utility. SJG distributes natural gas in the seven
southernmost counties of New
Jersey.
|
·
|
South Jersey Resources Group, LLC
(SJRG) markets wholesale natural gas storage, commodity and transportation
in the mid-Atlantic and southern
states.
|
·
|
Marina Energy, LLC (Marina)
develops and operates on-site energy-related
projects.
|
·
|
South Jersey Energy Company (SJE)
acquires and markets natural gas and electricity to retail end users and
provides total energy management services to commercial and industrial
customers.
|
·
|
South Jersey Energy Service Plus,
LLC (SJESP) installs residential and small commercial HVAC systems,
provides plumbing services and services appliances via the sale of
appliance service programs.
|
|
•
|
SJI
is a holding
company and its assets consist primarily of investments in subsidiaries.
Should
SJI
’s subsidiaries be unable to pay
dividends or make other payments to
SJI
for financial, regulatory, legal
or other reasons,
SJI
’s ability to pay dividends on
its common stock could be limited.
SJI
’s stock price could be adversely
affected as a result.
|
|
•
|
SJI
’s business
activities are concentrated in southern
New
Jersey
.
Changes in the economies of
southern
New
Jersey
and
surrounding regions could negatively impact the growth opportunities
available to
SJI
and the financial condition of
customers and prospects of
SJI
.
|
|
•
|
Changes in the
regulatory environment or unfavorable rate regulation at its utility may
have an unfavorable impact on
SJI
’s financial
performance or condition.
SJI
’s utility business is regulated
by the New Jersey Board of Public Utilities which has authority over many
of the activities of the business including, but not limited to, the rates
it charges to its customers, the amount and type of securities it can
issue, the nature of investments it can make, the nature and quality of
services it provides, safety standards and other matters. The extent to
which the actions of regulatory commissions restrict or delay SJG’s
ability to earn a reasonable rate of return on invested capital and/or
fully recover operating costs may adversely affect its results of
operations, financial condition and cash
flows.
|
|
•
|
SJI
may not be
able to respond effectively to competition, which may negatively impact
SJI
’s financial
performance or condition.
Regulatory initiatives may
provide or enhance opportunities for competitors that could reduce utility
income obtained from existing or prospective customers. Also, competitors
in all of
SJI
’s business lines may be able to
provide superior or less costly products or services based upon currently
available or newly developed
technologies.
|
|
•
|
Warm weather,
high commodity costs, or customer conservation initiatives could result in
reduced demand for some of
SJI
’s energy
products and services.
While
SJI
’s utility currently has a
conservation incentive program clause that protects its revenues and gross
margin against usage per customer that is lower than a set level, the
clause is currently approved as a three-year pilot program. Should this
clause expire without replacement, lower customer energy utilization
levels would likely reduce
SJI
’s net
income.
|
|
•
|
High natural
gas prices could cause more of
SJI
’s receivables
to be uncollectible.
Higher levels of uncollectibles
from either residential or commercial customers would negatively impact
SJI
’s income and could result in
higher working capital
requirements.
|
|
•
|
SJI
’s net income
could decrease if it is required to incur additional costs to comply with
new governmental safety, health or environmental legislation.
SJI
is subject to extensive and
changing federal and state laws and regulations that impact many aspects
of its business; including the storage, transportation and distribution of
natural gas, as well as the remediation of environmental contamination at
former manufactured gas plant
facilities.
|
|
•
|
SJI
’s wholesale
commodity marketing business is exposed to the risk that counterparties
that owe money or energy to
SJI
will not be
able to meet their obligations for operational or financial
reasons.
SJI
could be forced to buy or sell
commodity at a loss as a result of such failure. Such a failure, if large
enough, could also impact
SJI
’s
liquidity.
|
|
•
|
Increasing
interest rates will negatively impact the net income of
SJI
.
Several of
SJI
’s subsidiaries are capital
intensive, resulting in the incurrence of significant amounts of debt
financing. SJI has issued almost all of its existing long-term debt at
fixed rates or has utilized interest rate swaps to mitigate changes in
variable rates. However, new issues of long-term debt and all
variable rate short-term debt are exposed to the impact of rising interest
rates.
|
|
•
|
SJI
has guaranteed certain
obligations of unconsolidated affiliates and is exposed to the risk that
these affiliates will not be able to meet performance and financial
commitments.
SJI’s unconsolidated affiliates develop and
operate on-site energy related projects. SJI has guaranteed
certain obligations of these affiliates in connection with the development
and operation of the facilities. In the event that these
projects do not meet specified levels of operating performance or are
unable to meet certain financial obligations as they become due, SJI could
be required to make payments related to these
obligations.
|
|
•
|
A downgrade in
SJG’s credit rating could negatively affect its ability to access adequate
and cost effective capital.
SJG’s ability to obtain adequate
and cost effective capital depends largely on its credit ratings, which
are greatly influenced by financial condition and results of operations.
If the rating agencies downgrade SJG’s credit ratings, particularly below
investment grade, SJG’s borrowing costs would increase. In addition, SJG
would likely be required to pay higher interest rates in future financings
and potential funding sources would likely decrease. To the extent that a
decline in SJG’s credit rating has a negative effect on
SJI
,
SJI
could be required to provide
additional support to certain counterparties of the wholesale gas
operations.
|
|
•
|
Hedging
activities of the company designed to protect against commodity price or
interest rate risk may cause fluctuations in reported financial results
and
SJI
’s stock price
could be adversely affected as a result.
Although
SJI
enters into various contracts to
hedge the value of energy assets, liabilities, firm commitments or
forecasted transactions, the timing of the recognition of gains or losses
on these economic hedges in accordance with accounting principles
generally accepted in the
United States of
America
does
not always match up with the gains or losses on the items being hedged.
The difference in accounting can result in volatility in reported results,
even though the expected profit margin is essentially unchanged from the
dates the transactions were
consummated.
|
|
•
|
The inability
to obtain natural gas would negatively impact the financial performance of
SJI
.
Several of
SJI
’s subsidiaries have businesses
based upon the ability to deliver natural gas to customers. Disruption in
the production of natural gas or transportation of that gas to
SJI
from its suppliers, could
prevent
SJI
from completing sales to its
customers.
|
|
•
|
Transporting
and storing natural gas involves numerous risks that may result in
accidents and other operating risks and costs.
SJI
’s gas distribution activities
involve a variety of inherent hazards and operating risks, such as leaks,
accidents, mechanical problems, natural disasters or terrorist activities
which could cause substantial financial losses. In addition, these risks
could result in loss of human life, significant damage to property,
environmental pollution and impairment of operations, which in turn could
lead to substantial losses. In accordance with customary industry
practice,
SJI
maintains insurance against
some, but not all, of these risks and losses. The occurrence of any of
these events not fully covered by insurance could adversely affect
SJI
’s financial position and results
of operations.
|
|
•
|
Adverse
results in legal proceedings could be detrimental to the financial
condition of
SJI
.
The outcomes of legal
proceedings can be unpredictable
and can result in adverse judgments.
|
Name, age and position with the
Company
|
Period Served
|
|
Edward J. Graham
, Age
50
|
||
Chairman
|
April
2005 - Present
|
|
Chief
Executive Officer
|
February
2004 - Present
|
|
President
|
January
2003 - Present
|
|
Chief
Operating Officer
|
January
2002 - February 2004
|
|
Executive
Vice President
|
January
2002 - January 2003
|
|
David A. Kindlick
, Age
53
|
||
Chief
Financial Officer
|
January
2002 - Present
|
|
Vice
President
|
June
1997 - Present
|
|
Treasurer
|
April
2001 - January 2004
|
Jeffery E. DuBois
, Age
49
|
||
Vice
President
|
January
2004 - Present
|
|
Assistant
Vice President (SJG)
|
January
2002 - January 2004
|
|
Michael J. Renna
, Age
40
|
||
Vice
President
|
January
2004 - Present
|
|
Assistant
Vice President
|
January
2002 - January 2004
|
|
Richard H. Walker, Jr.
,
Age 57
|
||
Vice
President, General Counsel and Secretary
|
January
2006 - Present
|
|
Vice
President, Corporate Counsel & Corporate Secretary
|
May
2003 - January 2006
|
|
Corporate
Counsel & Corporate Secretary
|
April
2002 - May 2003
|
|
Kevin D.
Patrick,
Age 47
|
||
Vice
President
|
June
2007 - Present
|
|
Albertsons/Super
Valu
|
||
Division
CFO – Eastern Region
|
September
2004 – June 2006
|
|
Brown-Forman
Corporation
|
||
Assistant
Vice President Corporate Development
|
June
2000 – September 2004
|
|
Sharon M. Pennington,
Age 45
|
||
Vice
President
|
January
2008 to Present
|
|
Vice
President (SJI Services LLC)
|
January
2006 – December 2007
|
|
Assistant
Vice President (SJG)
|
April
2004 – December 2005
|
|
Director,
Human Resources (SJG)
|
July
2002 – March 2004
|
2007
HIGHLIGHTS
|
||||||||||||||||||||
Five-Year
Summary of Selected Financial Data
|
South
Jersey Industries, Inc. and Subsidiaries
|
|||||||||||||||||||
(In
Thousands Where Applicable)
|
Year
Ended December 31,
|
|||||||||||||||||||
2007
|
2006
|
2005
|
2004
|
2003
|
||||||||||||||||
Operating
Results:
|
||||||||||||||||||||
Operating
Revenues
|
$ | 956,371 | $ | 931,428 | $ | 906,016 | $ | 819,416 | $ | 703,898 | ||||||||||
Operating
Income
|
$ | 129,623 | $ | 145,802 | $ | 86,818 | $ | 91,079 | $ | 76,545 | ||||||||||
Income
Applicable to Common Stock:
|
||||||||||||||||||||
Continuing
Operations
|
$ | 62,659 | $ | 72,250 | $ | 39,770 | $ | 43,173 | $ | 33,789 | ||||||||||
Discontinued
Operations - Net (1)
|
(391 | ) | (818 | ) | (669 | ) | (680 | ) | (775 | ) | ||||||||||
Cumulative
Effect of a Change in Accounting Principle - Net
|
- | - | - | - | (426 | ) | ||||||||||||||
Net Income Applicable to Common
Stock
|
$ | 62,268 | $ | 71,432 | $ | 39,101 | $ | 42,493 | $ | 32,588 | ||||||||||
Total
Assets
|
$ | 1,529,441 | $ | 1,573,032 | $ | 1,441,712 | $ | 1,243,666 | $ | 1,126,203 | ||||||||||
Capitalization:
|
||||||||||||||||||||
Common
Equity
|
$ | 481,080 | $ | 443,036 | $ | 393,645 | $ | 343,363 | $ | 296,412 | ||||||||||
Preferred
Stock (2)
|
- | - | - | 1,690 | 1,690 | |||||||||||||||
Long-Term
Debt
|
357,896 | 358,022 | 319,066 | 328,914 | 308,781 | |||||||||||||||
Total
Capitalization
|
$ | 838,976 | $ | 801,058 | $ | 712,711 | $ | 673,967 | $ | 606,883 | ||||||||||
Ratio
of Operating Income to Fixed Charges (3)
|
4.8 | x | 5.3 | x | 4.1 | x | 4.4 | x | 3.7 | x | ||||||||||
Diluted
Earnings Per Common Share
|
||||||||||||||||||||
(Based
on Average Diluted Shares Outstanding):
|
||||||||||||||||||||
Continuing
Operations
|
$ | 2.12 | $ | 2.47 | $ | 1.40 | $ | 1.56 | $ | 1.33 | ||||||||||
Discontinued
Operations - Net (1)
|
(0.02 | ) | (0.03 | ) | (0.02 | ) | (0.03 | ) | (0.03 | ) | ||||||||||
Cumulative
Effect of a Change in Accounting Principle - Net
|
- | - | - | - | (0.02 | ) | ||||||||||||||
Diluted Earnings Per Common
Share
|
$ | 2.10 | $ | 2.44 | $ | 1.38 | $ | 1.53 | $ | 1.28 | ||||||||||
Return
on Average Common Equity (4)
|
13.3 | % | 16.9 | % | 12.5 | % | 13.0 | % | 12.5 | % | ||||||||||
Share
Data:
|
||||||||||||||||||||
Number
of Shareholders of Record
|
7.7 | 7.9 | 8.1 | 8.1 | 8.3 | |||||||||||||||
Average
Common Shares
|
29,480 | 29,175 | 28,175 | 27,382 | 25,118 | |||||||||||||||
Common
Shares Outstanding at Year End
|
29,607 | 29,326 | 28,982 | 27,760 | 26,458 | |||||||||||||||
Dividend
Reinvestment Plan:
|
||||||||||||||||||||
Number
of Shareholders
|
5.3 | 5.3 | 5.3 | 5.2 | 5.1 | |||||||||||||||
Number
of Participating Shares
|
2,179 | 2,194 | 2,722 | 2,764 | 2,750 | |||||||||||||||
Book
Value at Year End
|
$ | 16.25 | $ | 15.11 | $ | 13.58 | $ | 12.37 | $ | 11.20 | ||||||||||
Dividends
Declared per Common Share
|
$ | 1.01 | $ | 0.92 | $ | 0.86 | $ | 0.82 | $ | 0.78 | ||||||||||
Market
Price at Year End
|
$ | 36.09 | $ | 33.41 | $ | 29.14 | $ | 26.28 | $ | 20.25 | ||||||||||
Dividend
Payout :
|
||||||||||||||||||||
From
Continuing Operations
|
47.3 | % | 37.2 | % | 60.9 | % | 52.0 | % | 58.0 | % | ||||||||||
From
Total Net Income
|
47.6 | % | 37.6 | % | 62.0 | % | 52.8 | % | 60.1 | % | ||||||||||
Market-to-Book
Ratio
|
2.2 | x | 2.2 | x | 2.1 | x | 2.1 | x | 1.8 | x | ||||||||||
Price
Earnings Ratio (4)
|
17.0 | x | 13.5 | x | 20.8 | x | 16.8 | x | 15.2 | x | ||||||||||
(1)
Represents discontinued business segments: sand mining and distribution
operations (sold in 1996) and fuel oil operations with related
environmental liabilities (discontinued in 1986) (See Note 2 to
Consolidated Financial Statements).
|
||||||||||||||||||||
(2)
On May 2, 2005, South Jersey Gas (SJG) redeemed its 8% Redeemable
Cumulative Preferred Stock at par.
|
||||||||||||||||||||
(3)
Calculated as Operating Income divided by Interest
Charges.
|
||||||||||||||||||||
(4)
Calculated based on Income from Continuing Operations.
|
||||||||||||||||||||
·
|
A 51% equity interest in AC
Landfill Energy, LLC (
ACLE
) which began commercial
operation in
Egg
Harbor Township
,
NJ
of a 1,600 kilowatt landfill
gas-fired electricity production facility in March 2005 and a 1,900
kilowatt facility in August 2006. An additional 1,900 kilowatt facility
began commercial operations in the first quarter of
2008.
|
·
|
A 51% equity interest in WC
Landfill Energy, LLC (WCLE) which began commercial operation in
White
Township
,
NJ
of a 3,800 kilowatt landfill
gas-fired electricity production facility in November
2006.
|
·
|
A
50% equity interest in a partnership that leases and operates a 7,200
kilowatt landfill gas-fired electricity production facility in Burlington
County, NJ, which began commercial operations in October 2007.
|
·
|
A
50% equity interest in a partnership that will own and operate a 1,900
kilowatt landfill gas-fired electricity production facility in Salem
County, NJ. This facility is expected to be operational in the
third quarter of 2008.
|
2007
|
2006
|
2005
|
||||||||||
Net
Income Benefit/(Reduction):
|
||||||||||||
TAC
|
$ | - | $ | 5.1 | $ | (0.2 | ) | |||||
CIP
– Weather Related
|
1.6 | 2.9 | - | |||||||||
CIP
– Usage Related
|
5.9 | 1.7 | - | |||||||||
Total
Net Income Benefit/(Reduction)
|
$ | 7.5 | $ | 9.7 | $ | (0.2 | ) | |||||
Weather
Compared to 20-Year TAC Average
|
3.2%
warmer
|
15.0
% warmer
|
3.0
% colder
|
|||||||||
Weather
Compared to Prior Year
|
13.8%
colder
|
17.5
% warmer
|
2.9
% colder
|
·
|
a
34.1% decrease in gross margin generated by SJRG related to unrealized
gains on energy related derivative contracts recognized in 2006 that did
not recur in 2007;
|
·
|
offset
by a 1.7% increase in SJG
customers.
|
|
·
|
a 163% increase in gross margin
generated from SJRG related to $30.8 million of unrealized gains (pre-tax)
on energy related derivatives contracts recognized in 2006 and favorable
time spreads on storage asset
positions;
|
·
|
a 2.4% increase in SJG customers
and;
|
·
|
a $5.0 million reduction in
utility operations expense.
|
2007
|
2006
|
2005
|
||||||||||||||||||||||
Utility Throughput –
dth:
|
||||||||||||||||||||||||
Firm
Sales -
|
||||||||||||||||||||||||
Residential
|
22,523 | 16 | % | 19,830 | 15 | % | 19,464 | 12 | % | |||||||||||||||
Commercial
|
6,339 | 4 | % | 6,958 | 5 | % | 7,607 | 5 | % | |||||||||||||||
Industrial
|
193 | - | 296 | - | 204 | - | ||||||||||||||||||
Cogeneration
and electric generation
|
1,335 | 1 | % | 1,103 | 1 | % | 1,743 | 1 | % | |||||||||||||||
Firm
Transportation -
|
||||||||||||||||||||||||
Residential
|
1,870 | 1 | % | 956 | 1 | % | 5,755 | 4 | % | |||||||||||||||
Commercial
|
5,927 | 4 | % | 4,420 | 3 | % | 5,267 | 3 | % | |||||||||||||||
Industrial
|
12,107 | 9 | % | 11,970 | 9 | % | 12,920 | 8 | % | |||||||||||||||
Cogeneration
and electric generation
|
3,088 | 2 | % | 2,625 | 2 | % | 3,604 | 2 | % | |||||||||||||||
Total
Firm Throughput
|
53,382 | 37 | % | 48,158 | 36 | % | 56,564 | 35 | % | |||||||||||||||
Interruptible
Sales
|
68 | - | 93 | - | 119 | - | ||||||||||||||||||
Interruptible
Transportation
|
3,002 | 2 | % | 3,474 | 3 | % | 2,836 | 2 | % | |||||||||||||||
Off-System
|
17,686 | 13 | % | 18,221 | 13 | % | 15,045 | 9 | % | |||||||||||||||
Capacity
Release
|
67,430 | 48 | % | 66,458 | 48 | % | 86,119 | 54 | % | |||||||||||||||
Intercompany
Throughput
|
(12,282 | ) | (15,573 | ) | (7,856 | ) | ||||||||||||||||||
Total
Throughput - Utility
|
129,286 | 100 | % | 120,831 | 100 | % | 152,827 | 100 | % |
Utility Operating
Revenues:
|
||||||||||||||||||||||||
Firm
Sales-
|
||||||||||||||||||||||||
Residential
|
$ | 342,809 | 54 | % | $ | 334,201 | 52 | % | $ | 252,150 | 43 | % | ||||||||||||
Commercial
|
80,237 | 13 | % | 99,578 | 15 | % | 88,321 | 15 | % | |||||||||||||||
Industrial
|
8,381 | 1 | % | 6,590 | 1 | % | 4,428 | 1 | % | |||||||||||||||
Cogeneration
and electric generation
|
11,722 | 2 | % | 10,746 | 2 | % | 17,916 | 3 | % | |||||||||||||||
Firm
Transportation -
|
||||||||||||||||||||||||
Residential
|
8,982 | 1 | % | 4,768 | 1 | % | 25,296 | 4 | % | |||||||||||||||
Commercial
|
17,299 | 3 | % | 12,510 | 2 | % | 14,043 | 3 | % | |||||||||||||||
Industrial
|
12,229 | 2 | % | 11,351 | 2 | % | 11,437 | 2 | % | |||||||||||||||
Cogeneration
and electric generation
|
1,847 | - | 1,552 | - | 1,821 | - | ||||||||||||||||||
Total
Firm Revenues
|
483,506 | 76 | % | 481,296 | 75 | % | 415,412 | 71 | % | |||||||||||||||
Interruptible
Sales
|
785 | - | 1,109 | - | 1,498 | - | ||||||||||||||||||
Interruptible
Transportation
|
1,970 | - | 1,868 | - | 1,898 | - | ||||||||||||||||||
Off-System
|
131,586 | 22 | % | 147,180 | 23 | % | 153,637 | 27 | % | |||||||||||||||
Capacity
Release
|
11,208 | 2 | % | 9,656 | 2 | % | 12,808 | 2 | % | |||||||||||||||
Other
|
1,492 | - | 1,562 | - | 1,959 | - | ||||||||||||||||||
Intercompany
Sales
|
(19,540 | ) | - | (40,672 | ) | - | (10,807 | ) | ||||||||||||||||
Total
Utility Operating Revenues
|
611,007 | 100 | % | 601,999 | 100 | % | 576,405 | 100 | % | |||||||||||||||
Less:
|
||||||||||||||||||||||||
Cost
of sales
|
433,495 | 431,615 | 404,144 | |||||||||||||||||||||
Conservation
recoveries *
|
4,458 | 6,862 | 7,933 | |||||||||||||||||||||
RAC
recoveries *
|
2,056 | 1,806 | 2,181 | |||||||||||||||||||||
Revenue
taxes
|
8,850 | 7,890 | 9,089 | |||||||||||||||||||||
Utility
Net Operating Revenues (margin)
|
$ | 162,148 | $ | 153,826 | $ | 153,058 | ||||||||||||||||||
Margin:
|
||||||||||||||||||||||||
Residential
|
$ | 102,077 | 63 | % | $ | 90,442 | 59 | % | $ | 102,706 | 67 | % | ||||||||||||
Commercial
and industrial
|
40,036 | 25 | % | 38,129 | 25 | % | 40,862 | 27 | % | |||||||||||||||
Cogeneration
and electric generation
|
2,212 | 1 | % | 2,189 | 1 | % | 2,514 | 2 | % | |||||||||||||||
Interruptible
|
195 | - | 226 | - | 249 | - | ||||||||||||||||||
Off-system
& capacity release
|
2,994 | 2 | % | 4,711 | 3 | % | 4,697 | 3 | % | |||||||||||||||
Other
revenues
|
1,952 | 1 | % | 1,871 | 1 | % | 2,319 | 1 | % | |||||||||||||||
Margin
before weather normalization & decoupling
|
149,466 | 92 | % | 137,568 | 89 | % | 153,347 | 100 | % | |||||||||||||||
TAC
mechanism
|
- | - | 8,511 | 6 | % | (289 | ) | - | ||||||||||||||||
CIP
mechanism
|
12,682 | 8 | % | 7,747 | 5 | % | - | - | ||||||||||||||||
Utility
Net Operating Revenues (margin)
|
$ | 162,148 | 100 | % | $ | 153,826 | 100 | % | $ | 153,058 | 100 | % | ||||||||||||
Number of Customers at
Year End:
|
||||||||||||||||||||||||
Residential
|
312,969 | 93 | % | 307,919 | 93 | % | 300,652 | 93 | % | |||||||||||||||
Commercial
|
22,220 | 7 | % | 21,652 | 7 | % | 21,322 | 7 | % | |||||||||||||||
Industrial
|
474 | - | 478 | - | 450 | - | ||||||||||||||||||
Total
Customers
|
335,663 | 100 | % | 330,049 | 100 | % | 322,424 | 100 | % | |||||||||||||||
Degree
Days
|
4,488 | 3,943 | 4,777 | |||||||||||||||||||||
*
Represents revenues for which there is a corresponding charge in operating
expenses. Therefore, such recoveries have no impact on
our
financial results.
|
||||||||||||||||||||||||
2007
|
2006
|
Change
|
||||||||||
SJRG
Revenue
|
$ | 75.2 | $ | 77.5 | $ | (2.3 | ) | |||||
Less:
Unrealized gains
|
(3.8 | ) | (36.5 | ) | 32.7 | |||||||
SJRG
Revenue,
Excluding
unrealized gains
|
$ | 71.4 | $ | 41.0 | $ | 30.4 | ||||||
|
·
|
Gross
Margin for SJRG decreased $19.0 million in 2007, compared with 2006.
Excluding the impact of the net change in unrealized gains and losses
recorded on forward financial contracts as discussed above, gross margin
for SJRG increased $13.7 million in 2007 compared with 2006.
Operationally, margins increased significantly in 2007 due primarily to
favorable time spreads on storage asset positions. These storage assets
allow SJRG to lock in the differential between purchasing natural gas at
low current prices and selling equivalent quantities at higher future
prices. Gross margin is generated via seasonal pricing differentials.
Overall, SJRG’s contribution to margin has continued to increase as we
have expanded our portfolio of storage assets under contract, which
totaled 10.0 Bcf, 9.6 Bcf and 4.8 Bcf as of December 31, 2007, 2006 and
2005, respectively. However, future margins could fluctuate significantly
due to the volatile nature of wholesale gas
prices.
|
|
·
|
Gross
Margin for Marina increased $3.9 million in 2007 compared with 2006 due
mainly to the increase in sales volumes from the thermal plant and the
landfill gas-fired electricity production facilities discussed in
Operating Revenues – Nonutility. Gross margin as a percentage of Operating
Revenues did not change significantly in 2007 compared with
2006.
|
|
·
|
Gross
margin from SJE’s retail gas sales increased $4.4 million in 2007,
compared with 2006. Gross margin as a percentage of Operating Revenues
increased 2.6 percentage points in 2007 compared to 2006. This increase is
due mainly to losses from a full requirements customer in the
commercial market that was recorded in 2006. Litigation of this matter is
currently in advanced stages and a settlement is anticipated in early
2008. The 2007 margin also includes 12 months of sales to over 13,000 of
our residential customers and those commercial customers being served in
northwestern Pennsylvania as mentioned in Operating Revenues -
Nonutility.
|
|
·
|
Gross
margin from SJE’s retail electricity sales decreased $1.8 million in 2007,
compared with 2006. Gross margin as a percentage of Operating Revenues has
decreased 3.9 percentage points in 2007 compared to 2006. This decrease is
due mainly to the recovery in 2006 of $1.8 million in electric commodity
costs that were recognized in previous
periods.
|
|
·
|
Gross
Margin for SJESP decreased $0.3 million in 2007, compared with 2006 due
mainly to higher payroll-related and insurance costs which were partially
offset by higher margins from strong installation and appliance
maintenance contracts.
|
|
·
|
Gross
Margin for SJRG increased $57.5 million in 2006, compared with 2005.
Excluding the impact of the net change in unrealized gains and losses
recorded on forward financial contracts as discussed above, gross margin
for SJRG increased $9.3 million in 2006 compared with 2005. Operationally,
margins increased primarily due to favorable time spreads on storage asset
positions. SJRG’s contribution to margin has continued to increase as we
have expanded our portfolio of storage assets under contract, which
totaled 9.6 Bcf and 4.8 Bcf as of December 31, 2006 and 2005,
respectively. However, future margins could fluctuate significantly due to
the volatile nature of wholesale gas
prices.
|
|
·
|
Gross
Margin for Marina increased $1.3 million in 2006 compared with 2005 due
mainly to the increase in sales volumes from the thermal plant and the
landfill gas-fired electricity production facilities discussed above.
Gross margin as a percentage of Operating Revenues did not change
significantly in 2006 compared to
2005.
|
|
·
|
Gross
margin from SJE’s retail gas sales decreased $6.9 million in 2006,
compared with 2005. Gross margin as a percentage of Operating Revenues
decreased 3.4 percentage points in 2006 compared to 2005. This decrease
was due mainly to the decline in residential sales volumes and losses from
a full requirements customer in the commercial market discussed above.
Management believes the vast majority of this loss was caused by erroneous
consumption information provided by the sponsoring consortium in the
original bid document.
|
|
·
|
Gross
margin from SJE’s retail electricity sales increased $3.5 million in 2006,
compared with 2005. Gross margin as a percentage of Operating Revenues
increased 9.1 percentage points in 2006 compared to 2005. This increase
was due mainly to the recovery of $1.8 million in electric commodity costs
recognized in previous periods. SJE also restructured its contracts in
2006 to pass a variable component of pricing on to its
customers.
|
|
·
|
Gross
Margin for SJESP decreased $2.6 million in 2006, compared with 2005.
Contributing to these margin decreases were higher payroll and benefit
costs. Gross margins on sales of service contracts increased by
$0.9 million in 2006 compared with 2005 due mainly to price increases that
went into effect in August 2006.
|
2007
vs. 2006
|
2006
vs. 2005
|
|||||||
Utility
|
$ | 1,745 | $ | (4,995 | ) | |||
Nonutility:
|
||||||||
Wholesale
Gas
|
978 | 1,035 | ||||||
Retail
Gas and Other
|
667 | (2,029 | ) | |||||
Retail
Electricity
|
230 | (113 | ) | |||||
On-Site
Energy Production
|
2,720 | 1,445 | ||||||
Appliance
Service
|
1,307 | (2,105 | ) | |||||
Total
Nonutility
|
5,902 | (1,767 | ) | |||||
Intercompany
Eliminations and Other
|
(295 | ) | (2,235 | ) | ||||
Total
Operations
|
$ | 7,352 | $ | (8,997 | ) |
2007
vs. 2006
|
2006
vs. 2005
|
|||||||
Maintenance
|
$ | 807 | $ | (276 | ) | |||
Depreciation
|
1,693 | 2,218 | ||||||
Energy
and Other Taxes
|
706 | (1,158 | ) |
As
of December 31,
|
||||||||
2007
|
2006
|
|||||||
Common
Equity
|
50.3 | % | 44.4 | % | ||||
Long-Term
Debt
|
37.3 | % | 36.1 | % | ||||
Short-Term
Debt
|
12.4 | % | 19.5 | % | ||||
Total
|
100.0 | % | 100.0 | % |
Up
to
|
Years
|
Years
|
More
than
|
|||||||||||||||||
Contractual Cash
Obligations
|
Total
|
1
Year
|
2
& 3
|
4
& 5
|
5
Years
|
|||||||||||||||
Long-Term
Debt
|
$ | 358,002 | $ | 106 | $ | 10,231 | $ | 27,446 | $ | 320,219 | ||||||||||
Interest
on Long-Term Debt
|
277,611 | 20,009 | 39,999 | 36,997 | 180,606 | |||||||||||||||
Capital
Contribution Obligation
|
30,000 | - | 30,000 | - | - | |||||||||||||||
Operating
Leases
|
2,302 | 674 | 953 | 442 | 233 | |||||||||||||||
Commodity
Supply Purchase Obligations
|
491,717 | 296,652 | 102,831 | 24,133 | 68,101 | |||||||||||||||
New
Jersey Clean Energy Program (Note 9)
|
10,542 | 10,542 | - | - | - | |||||||||||||||
Other
Purchase Obligations
|
1,538 | 892 | 500 | 146 | - | |||||||||||||||
Total
Contractual Cash Obligations
|
$ | 1,171,712 | $ | 328,875 | $ | 184,514 | $ | 89,164 | $ | 569,159 |
|
·
|
In
April 2007 SJI guaranteed certain obligations of LVE Energy Partners, LLC
(LVE), an unconsolidated joint venture in which Marina has a 50% equity
interest. LVE entered into a 25 year contract with a resort
developer to design, build, own and operate a district energy system and
central energy center for a planned resort in Las Vegas,
Nevada. LVE began construction of the facility in 2007 and
expects to provide full energy services when the resort is completed in
2010. SJI holds a significant variable interest in LVE but is
not the primary beneficiary. SJI has issued a performance
guarantee for up to $180.0 million to the resort developer to ensure that
certain construction milestones relating to the development of the thermal
facility are met. Concurrently, SJI is the beneficiary of a
surety bond purchased by the project’s general contractor that provides
SJI with assurance that construction of the thermal facility will meet
those same milestones. In addition, SJI has guaranteed the
obligations of LVE under certain insurance policies during the
construction period. The maximum amount that SJI could be
obligated for, in the event that LVE does not have sufficient resources to
make deductible payments on future claims under these insurance policies,
is approximately $6.0 million. SJI has also guaranteed certain
performance obligations of LVE under the operating agreements between LVE
and the resort, up to $20 million each year for the term of the agreement,
commencing with the first year of operations. SJI and the
partner in this joint venture have entered into reimbursement agreements
that secure reimbursement for SJI of a proportionate share of any payments
made by SJI on these guarantees.
|
|
·
|
SJI
has also guaranteed certain obligations of BC Landfill Energy, LLC (BCLE),
an unconsolidated joint venture in which Marina has a 50% equity
interest. BCLE has entered into a 20-year agreement with a
county government to lease and operate a facility that will produce
electricity from landfill methane gas. The facility went online
in the fourth quarter of 2007. Although unlikely, the maximum
amount that SJI could be obligated for, in the event that BCLE does not
meet minimum specified levels of operating performance and no mitigating
action is taken, or is unable to meet certain financial obligations as
they become due, is approximately $4.0 million each year. SJI
and the partner in this joint venture have entered into reimbursement
agreements that secure reimbursement for SJI of a proportionate share of
any payments made by SJI on these guarantees. SJI holds a
variable interest in BCLE but is not the primary
beneficiary.
|
Assets
|
Source
of
Fair
Value
|
Maturity
<
1 Year
|
Maturity
1 -
3 Years
|
Beyond
3
Years
|
Total
|
||||||||||||
Prices
Actively Quoted
|
NYMEX
|
$ | 10,862 | $ | 7,589 | $ | 0 | $ | 18,451 | ||||||||
Other
External Sources
|
Basis
|
12,408 | 3,336 | 16 | 15,760 | ||||||||||||
Total
|
$ | 23,270 | $ | 10,925 | $ | 16 | $ | 34,211 | |||||||||
Liabilities
|
Source
of
Fair
Value
|
Maturity
<
1 Year
|
Maturity
1 -
3 Years
|
Beyond
3
Years
|
Total
|
||||||||||||
Prices
Actively Quoted
|
NYMEX
|
$ | 6,802 | $ | 1,319 | $ | 0 | $ | 8,121 | ||||||||
Other
External Sources
|
Basis
|
6,933 | 2,858 | 13 | 9,804 | ||||||||||||
Total
|
$ | 13,735 | $ | 4,177 | $ | 13 | $ | 17,925 |
Net
Derivatives — Energy Related Assets,
|
||||
January
1, 2007
|
$
|
19,122
|
||
Contracts
Settled During 2007, Net
|
(3,275
|
)
|
||
Other
Changes in Fair Value from Continuing and New Contracts,
Net
|
439
|
|||
Net
Derivatives — Energy Related Assets,
|
||||
December
31, 2007
|
$
|
16,286
|
Notional
Amount
|
Fixed
Interest
Rate
|
Start
Date
|
Maturity
|
Type
of Debt
|
Obligor
|
|||||||||
$ |
3,900,000
|
4.795 | % |
12/01/2004
|
12/01/2014
|
Taxable
|
Marina
|
|||||||
$ | 8,000,000 | 4.775 | % |
11/12/2004
|
11/12/2014
|
Taxable
|
Marina
|
|||||||
$ | 20,000,000 | 4.080 | % |
11/19/2001
|
12/01/2011
|
Tax-exempt
|
Marina
|
|||||||
$ | 14,500,000 | 3.905 | % |
03/17/2006
|
01/15/2026
|
Tax-exempt
|
Marina
|
|||||||
$ | 500,000 | 3.905 | % |
03/17/2006
|
01/15/2026
|
Tax-exempt
|
Marina
|
|||||||
$ | 330,000 | 3.905 | % |
03/17/2006
|
01/15/2026
|
Tax-exempt
|
Marina
|
|||||||
$ | 7,100,000 | 4.895 | % |
02/01/2006
|
02/01/2016
|
Taxable
|
Marina
|
|||||||
$ | 12,500,000 | 3.430 | % |
12/01/2006
|
02/01/2036
|
Tax-exempt
|
SJG
|
|||||||
$ | 12,500,000 | 3.430 | % |
12/01/2006
|
02/01/2036
|
Tax-exempt
|
SJG
|
|||||||
Statements of
Consolidated Cash Flows
|
South
Jersey Industries, Inc. and Subsidiaries
|
||||||||||||
(In
Thousands)
|
Year
Ended December 31,
|
||||||||||||
2007 |
2006
|
2005
|
|||||||||||
Cash
Flows from Operating Activities:
|
|||||||||||||
Net
Income
|
$ | 62,268 | $ | 71,432 | $ | 39,101 | |||||||
Loss
from Discontinued Operations
|
391 | 818 | 669 | ||||||||||
Income
from Continuing Operations
|
62,659 | 72,250 | 39,770 | ||||||||||
Adjustments
to Reconcile Income from Continuing Operations to Cash Flows
|
|||||||||||||
Provided
by Operating Activities:
|
|||||||||||||
Depreciation
and Amortization
|
32,865 | 30,834 | 26,842 | ||||||||||
Unrealized
(Gain) Loss on Derivatives - Energy Related
|
(3,635 | ) | (36,688 | ) | 12,397 | ||||||||
Provision
for Losses on Accounts Receivable
|
2,603 | 1,466 | 3,910 | ||||||||||
TAC/CIP
Receivable
|
(7,946 | ) | (15,740 | ) | 291 | ||||||||
Deferred
Gas Costs - Net of Recoveries
|
7,755 | 18,694 | (34,742 | ) | |||||||||
Deferred
SBC Costs - Net of Recoveries
|
3,960 | (4,221 | ) | 1,871 | |||||||||
Stock-Based
Compensation Expense
|
1,090 | 1,059 | 3,208 | ||||||||||
Deferred
and Noncurrent Income Taxes and Credits - Net
|
12,030 | 21,829 | 19,030 | ||||||||||
Environmental
Remediation Costs - Net
|
(10,926 | ) | (10,840 | ) | (4,071 | ) | |||||||
Additional
Pension Contributions
|
- | - | (1,486 | ) | |||||||||
Gas
Plant Cost of Removal
|
(1,275 | ) | (1,369 | ) | (985 | ) | |||||||
Changes
in:
|
|||||||||||||
Accounts
Receivable
|
(5,232 | ) | 38,020 | (36,778 | ) | ||||||||
Inventories
|
21,459 | (25,726 | ) | (33,503 | ) | ||||||||
Prepaid
and Accrued Taxes - Net
|
8,916 | (5,243 | ) | (4,677 | ) | ||||||||
Accounts
Payable and Other Accrued Liabilities
|
(5,036 | ) | (57,892 | ) | 56,037 | ||||||||
Margin
Account Liability
|
4,112 | - | - | ||||||||||
Derivatives
- Energy Related
|
21,050 | 3,046 | (4,310 | ) | |||||||||
Other
Assets and Liabilities
|
3,453 | (948 | ) | (2,729 | ) | ||||||||
Cash
Flows from Discontinued Operations
|
(56 | ) | 178 | (1,155 | ) | ||||||||
Net
Cash Provided by Operating Activities
|
147,846 | 28,709 | 38,920 | ||||||||||
Cash
Flows from Investing Activities:
|
|||||||||||||
Capital
Expenditures
|
(55,539 | ) | (73,677 | ) | (92,906 | ) | |||||||
Net
Proceeds from Sale of (Purchase of) Restricted Investments in Margin
Account
|
10,404 | (2,170 | ) | 4,810 | |||||||||
Proceeds
from Sale of Restricted Investments from Escrowed Loan
Proceeds
|
6,710 | 6,075 | 553 | ||||||||||
Purchase of Restricted Investments with Escrowed Loan Proceeds | (523 | ) | (18,722 | ) | - | ||||||||
Merchandise
Loans
|
(4,123 | ) | (3,342 | ) | (4,425 | ) | |||||||
Proceeds
from Merchandise Loans
|
3,877 | 3,707 | 4,831 | ||||||||||
Purchase
of Company Owned Life Insurance
|
(3,917 | ) | - | - | |||||||||
Investment
in Affiliate
|
(7,463 | ) | - | - | |||||||||
Return
of Investment in Affiliate
|
7,208 | - | - | ||||||||||
Proceeds
from Sale of Investment in Affiliate
|
- | 1,450 | - | ||||||||||
Purchase
of Gas Marketing and Production Assets
|
- | (3,277 | ) | - | |||||||||
Other
|
- | (650 | ) | 470 | |||||||||
Net
Cash Used in Investing Activities
|
(43,366 | ) | (90,606 | ) | (86,667 | ) | |||||||
Cash
Flows from Financing Activities:
|
|||||||||||||
Net
(Repayments of) Borrowings from Lines of Credit
|
(76,310 | ) | 47,300 | 55,000 | |||||||||
Proceeds
from Issuance of Long-Term Debt
|
- | 41,400 | 10,000 | ||||||||||
Principal
Repayments of Long-Term Debt
|
(2,389 | ) | (2,437 | ) | (22,832 | ) | |||||||
Dividends
on Common Stock
|
(29,656 | ) | (26,874 | ) | (24,397 | ) | |||||||
Proceeds
from Sale of Common Stock
|
7,484 | 6,606 | 31,882 | ||||||||||
Payments
for Issuance of Long-Term Debt
|
- | (1,350 | ) | (420 | ) | ||||||||
Redemption
of Preferred Stock
|
- | - | (1,690 | ) | |||||||||
Other
|
137 | 300 | (184 | ) | |||||||||
Net
Cash (Used in) Provided by Financing Activities
|
(100,734 | ) | 64,945 | 47,359 | |||||||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
3,746 | 3,048 | (388 | ) | |||||||||
Cash
and Cash Equivalents at Beginning of Year
|
7,932 | 4,884 | 5,272 | ||||||||||
Cash
and Cash Equivalents at End of Year
|
$ | 11,678 | $ | 7,932 | $ | 4,884 | |||||||
Supplemental
Disclosures of Cash Flow Information
|
|||||||||||||
Cash
paid during the year for:
|
|||||||||||||
Interest
(Net of Amounts Capitalized)
|
$ | 27,025 | $ | 27,341 | $ | 21,608 | |||||||
Income
Taxes (Net of Refunds)
|
$ | 22,461 | $ | 28,171 | $ | 15,054 | |||||||
Supplemental
Disclosures of Non-Cash Investing Activities
|
|||||||||||||
Capital
Expenditures acquired on account but unpaid as of year-end
|
$ | 4,797 | $ | 3,776 | $ | 10,397 | |||||||
Guarantee
of certain obligations of unconsolidated affiliates
|
$ | 1,985 | $ | - | $ | - | |||||||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
Consolidated Balance
Sheets
|
South
Jersey Industries, Inc. and Subsidiaries
|
||||||||
(In
Thousands)
|
December
31,
|
||||||||
2007
|
2006
|
||||||||
Assets
|
|||||||||
Property,
Plant and Equipment:
|
|||||||||
Utility
Plant, at original cost
|
$ | 1,123,992 | $ | 1,079,614 | |||||
Accumulated
Depreciation
|
(276,301 | ) | (257,781 | ) | |||||
Nonutility
Property and Equipment, at cost
|
112,971 | 106,657 | |||||||
Accumulated
Depreciation
|
(11,793 | ) | (8,485 | ) | |||||
Property,
Plant and Equipment - Net
|
948,869 | 920,005 | |||||||
Investments:
|
|||||||||
Available-for-Sale
Securities
|
6,734 | 6,356 | |||||||
Restricted
|
6,460 | 23,051 | |||||||
Investment
in Affiliates
|
1,694 | 1,368 | |||||||
Total
Investments
|
14,888 | 30,775 | |||||||
Current
Assets:
|
|||||||||
Cash
and Cash Equivalents
|
11,678 | 7,932 | |||||||
Accounts
Receivable
|
111,899 | 117,832 | |||||||
Unbilled
Revenues
|
48,304 | 39,397 | |||||||
Provision
for Uncollectibles
|
(5,491 | ) | (5,224 | ) | |||||
Natural
Gas in Storage, average cost
|
123,790 | 145,130 | |||||||
Materials
and Supplies, average cost
|
2,777 | 2,895 | |||||||
Prepaid
Taxes
|
6,878 | 12,443 | |||||||
Derivatives
- Energy Related Assets
|
23,270 | 45,627 | |||||||
Other
Prepayments and Current Assets
|
5,225 | 5,692 | |||||||
Total
Current Assets
|
328,330 | 371,724 | |||||||
Regulatory
and Other Noncurrent Assets:
|
|||||||||
Regulatory
Assets
|
188,688 | 196,962 | |||||||
Prepaid
Pension
|
1,970 | - | |||||||
Derivatives
- Energy Related Assets
|
10,941 | 23,537 | |||||||
Unamortized
Debt Issuance Costs
|
7,386 | 7,972 | |||||||
Contract
Receivables
|
13,220 | 13,654 | |||||||
Other
|
15,149 | 8,403 | |||||||
Total
Regulatory and Other Noncurrent Assets
|
237,354 | 250,528 | |||||||
Total
Assets
|
$ | 1,529,441 | $ | 1,573,032 |
Capitalization
and Liabilities
|
||||||||
Capitalization:
|
||||||||
Common
Equity
|
$ | 481,080 | $ | 443,036 | ||||
Long-Term
Debt
|
357,896 | 358,022 | ||||||
Total
Capitalization
|
838,976 | 801,058 | ||||||
Minority
Interest
|
440 | 461 | ||||||
Current
Liabilities:
|
||||||||
Notes
Payable
|
118,290 | 194,600 | ||||||
Current
Maturities of Long-Term Debt
|
106 | 2,369 | ||||||
Accounts
Payable
|
101,154 | 101,615 | ||||||
Customer
Deposits and Credit Balances
|
18,475 | 24,982 | ||||||
Margin
Account Liability
|
4,112 | - | ||||||
Environmental
Remediation Costs
|
25,827 | 26,439 | ||||||
Taxes
Accrued
|
5,310 | 1,967 | ||||||
Derivatives
- Energy Related Liabilities
|
13,735 | 42,124 | ||||||
Deferred
Income Taxes - Net
|
20,251 | 10,687 | ||||||
Deferred
Contract Revenues
|
5,231 | 5,066 | ||||||
Interest
Accrued
|
6,657 | 6,458 | ||||||
Pension
and Other Postretirement Benefits
|
805 | 788 | ||||||
Other
Current Liabilities
|
8,358 | 5,699 | ||||||
Total
Current Liabilities
|
328,311 | 422,794 | ||||||
Deferred
Credits and Other Noncurrent Liabilities:
|
||||||||
Deferred
Income Taxes - Net
|
175,686 | 177,220 | ||||||
Investment
Tax Credits
|
2,150 | 2,470 | ||||||
Pension
and Other Postretirement Benefits
|
29,036 | 33,162 | ||||||
Environmental
Remediation Costs
|
52,078 | 45,391 | ||||||
Asset
Retirement Obligations
|
24,604 | 23,970 | ||||||
Derivatives
- Energy Related Liabilities
|
4,190 | 7,918 | ||||||
Derivatives
- Other
|
2,484 | 488 | ||||||
Regulatory
Liabilities
|
55,779 | 50,797 | ||||||
Other
|
15,707 | 7,303 | ||||||
Total
Deferred Credits and Other Noncurrent Liabilities
|
361,714 | 348,719 | ||||||
Commitments
and Contingencies (Note 14)
|
||||||||
Total
Capitalization and Liabilities
|
$ | 1,529,441 | $ | 1,573,032 | ||||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
Statements of
Consolidated Capitalization
|
South
Jersey Industries, Inc. and Subsidiaries
|
|||||||||||||
(In
Thousands Except for Share Data)
|
December
31,
|
|||||||||||||
2007
|
2006
|
|||||||||||||
Common
Equity:
|
||||||||||||||
Common Stock: Par Value $1.25 per share; Authorized 60,000,000
shares;
|
||||||||||||||
Outstanding
Shares: 29,607,802 (2007) and 29,325,593 (2006)
|
||||||||||||||
Balance
at Beginning of Year
|
$ | 36,657 | $ | 36,228 | ||||||||||
Common
Stock Issued or Granted Under Stock Plans
|
353 | 429 | ||||||||||||
Balance
at End of Year
|
37,010 | 36,657 | ||||||||||||
Premium
on Common Stock
|
248,449 | 239,763 | ||||||||||||
Treasury
Stock (at par)
|
(187 | ) | - | |||||||||||
Accumulated
Other Comprehensive Loss
|
(10,315 | ) | (7,791 | ) | ||||||||||
Retained
Earnings
|
206,123 | 174,407 | ||||||||||||
Total
Common Equity
|
481,080 | 443,036 | ||||||||||||
Long-Term
Debt: (A)
|
||||||||||||||
South Jersey Gas Company:
|
||||||||||||||
First
Mortgage Bonds: (B)
|
||||||||||||||
8.19 | % |
Series
due 2007
|
- | 2,270 | ||||||||||
6.12 | % |
Series
due 2010
|
10,000 | 10,000 | ||||||||||
6.74 | % |
Series
due 2011
|
10,000 | 10,000 | ||||||||||
6.57 | % |
Series
due 2011
|
15,000 | 15,000 | ||||||||||
4.46 | % |
Series
due 2013
|
10,500 | 10,500 | ||||||||||
5.027 | % |
Series
due 2013
|
14,500 | 14,500 | ||||||||||
4.52 | % |
Series
due 2014
|
11,000 | 11,000 | ||||||||||
5.115 | % |
Series
due 2014
|
10,000 | 10,000 | ||||||||||
5.387 | % |
Series
due 2015
|
10,000 | 10,000 | ||||||||||
5.437 | % |
Series
due 2016
|
10,000 | 10,000 | ||||||||||
6.50 | % |
Series
due 2016
|
9,873 | 9,893 | ||||||||||
4.60 | % |
Series
due 2016
|
17,000 | 17,000 | ||||||||||
4.657 | % |
Series
due 2017
|
15,000 | 15,000 | ||||||||||
7.97 | % |
Series
due 2018
|
10,000 | 10,000 | ||||||||||
7.125 | % |
Series
due 2018
|
20,000 | 20,000 | ||||||||||
5.587 | % |
Series
due 2019
|
10,000 | 10,000 | ||||||||||
7.7 | % |
Series
due 2027
|
35,000 | 35,000 | ||||||||||
5.55 | % |
Series
due 2033
|
32,000 | 32,000 | ||||||||||
6.213 | % |
Series
due 2034
|
10,000 | 10,000 | ||||||||||
5.45 | % |
Series
due 2035
|
10,000 | 10,000 | ||||||||||
Series
A 2006 Bonds at variable rates due 2036 (C)
|
25,000 | 25,000 | ||||||||||||
Marina
Energy LLC: (D)
|
||||||||||||||
Series
A 2001 Bonds at variable rates due 2031
|
20,000 | 20,000 | ||||||||||||
Series
B 2001 Bonds at variable rates due 2021
|
25,000 | 25,000 | ||||||||||||
Series
A 2006 Bonds at variable rates due 2036
|
16,400 | 16,400 | ||||||||||||
AC
Landfill Energy, LLC: (E)
|
||||||||||||||
Bank
Term Loan, 6% due 2014
|
548 | 647 | ||||||||||||
Mortgage
Bond, 4.19% due 2019
|
1,181 | 1,181 | ||||||||||||
Total
Long-Term Debt Outstanding
|
358,002 | 360,391 | ||||||||||||
Less
Current Maturities
|
(106 | ) | (2,369 | ) | ||||||||||
Total
Long-Term Debt
|
357,896 | 358,022 | ||||||||||||
Total
Capitalization
|
$ | 838,976 | $ | 801,058 | ||||||||||
(A)
|
The
long-term debt maturities and sinking fund requirements for the succeeding
five years are as follows:
|
|||||||||||||
2008,
$106; 2009, $112; 2010, $10,119; 2011, $25,126 and 2012,
$2,320.
|
||||||||||||||
(B)
|
SJG's
First Mortgage dated October 1, 1947, as supplemented, securing the First
Mortgage Bonds constitutes a direct first mortgage lien on substantially
all
|
|||||||||||||
utility plant. | ||||||||||||||
(C)
|
On
April 20, 2006, SJG issued $25.0 million of tax exempt, auction rate debt
through the New Jersey Economic Development Authority (NJEDA) under its
$150.0
|
|||||||||||||
million MTN Program. As of December 31, 2007, $115.0 million remains available under the program. | ||||||||||||||
(D)
|
Marina
has issued $61.4 million of unsecured variable-rate revenue bonds through
the (NJEDA). The variable rates at December 31, 2007 for the Series A
2001,
|
|||||||||||||
Series B 2001, and Series A 2006 bonds were 3.43%, 4.90% and 3.48% respectively. | ||||||||||||||
(E)
|
The
debt of AC Landfill Energy is secured by a first mortgage interest in
plant and equipment, and an assignment of rents and leases of the
facility.
|
|||||||||||||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
Consolidated
Statements of Changes In Common Equity
|
||||||||||||||||||||||||
and Comprehensive
Income
|
South
Jersey Industries, Inc. and Subsidiaries
|
|||||||||||||||||||||||
(In
Thousands)
|
Years
Ended December 31, 2005, 2006 & 2007
|
|||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||
Other
|
||||||||||||||||||||||||
Common
|
Premium
on
|
Treasury
|
Comprehensive
|
Retained
|
||||||||||||||||||||
Stock
|
Common
Stock
|
Stock
|
Loss
|
Earnings
|
Total
|
|||||||||||||||||||
Balance
at January 1, 2005
|
$ | 34,700 | $ | 197,737 | $ | - | $ | (4,933 | ) | $ | 115,859 | $ | 343,363 | |||||||||||
Net
Income
|
39,101 | 39,101 | ||||||||||||||||||||||
Other
Comprehensive Income (Loss), Net of Tax:(a)
|
||||||||||||||||||||||||
Minimum
Pension Liability Adjustment
|
427 | 427 | ||||||||||||||||||||||
Unrealized
Gain on Available-for-Sale Securities
|
63 | 63 | ||||||||||||||||||||||
Unrealized
Loss on Derivatives - Other
|
(2 | ) | (2 | ) | ||||||||||||||||||||
Other
Comprehensive Income, Net of Tax (a)
|
488 | |||||||||||||||||||||||
Comprehensive
Income
|
39,589 | |||||||||||||||||||||||
Common
Stock Issued or Granted Under Stock Plans
|
1,528 | 34,124 | (562 | ) | 35,090 | |||||||||||||||||||
Cash
Dividends Declared - Common Stock
|
(24,397 | ) | (24,397 | ) | ||||||||||||||||||||
Balance
at December 31, 2005
|
36,228 | 231,861 | - | (4,445 | ) | 130,001 | 393,645 | |||||||||||||||||
Net
Income
|
71,432 | 71,432 | ||||||||||||||||||||||
Other
Comprehensive Income (Loss), Net of Tax:(a)
|
||||||||||||||||||||||||
Minimum
Pension Liability Adjustment
|
(439 | ) | (439 | ) | ||||||||||||||||||||
Unrealized
Gain on Available-for-Sale Securities
|
53 | 53 | ||||||||||||||||||||||
Unrealized
Gain on Derivatives - Other
|
260 | 260 | ||||||||||||||||||||||
Other
Comprehensive Loss, Net of Tax (a)
|
(126 | ) | ||||||||||||||||||||||
Comprehensive
Income
|
71,306 | |||||||||||||||||||||||
FAS
158 Transition Amount (b)
|
(3,220 | ) | (3,220 | ) | ||||||||||||||||||||
Common
Stock Issued or Granted Under Stock Plans
|
429 | 7,902 | (152 | ) | 8,179 | |||||||||||||||||||
Cash
Dividends Declared - Common Stock
|
(26,874 | ) | (26,874 | ) | ||||||||||||||||||||
Balance
at December 31, 2006
|
36,657 | 239,763 | - | (7,791 | ) | 174,407 | 443,036 | |||||||||||||||||
Cumulative
Effect Adjustment (c)
|
- | - | - | - | (771 | ) | (771 | ) | ||||||||||||||||
Balance
at January 1, 2007, as adjusted
|
36,657 | 239,763 | - | (7,791 | ) | 173,636 | 442,265 | |||||||||||||||||
Net
Income
|
62,268 | 62,268 | ||||||||||||||||||||||
Other
Comprehensive Income (Loss), Net of Tax:(a)
|
||||||||||||||||||||||||
Postretirement
Liability Adjustment
|
199 | 199 | ||||||||||||||||||||||
Unrealized
Loss on Available-for-Sale Securities
|
(195 | ) | (195 | ) | ||||||||||||||||||||
Unrealized
Loss on Derivatives - Other
|
(1,385 | ) | (1,385 | ) | ||||||||||||||||||||
Other
Comprehensive Loss of Affiliated Companies
|
(1,143 | ) | (1,143 | ) | ||||||||||||||||||||
Other
Comprehensive Loss, Net of Tax (a)
|
(2,524 | ) | ||||||||||||||||||||||
Comprehensive
Income
|
59,744 | |||||||||||||||||||||||
Common
Stock Issued or Granted Under Stock Plans
|
353 | 8,686 | (187 | ) | (125 | ) | 8,727 | |||||||||||||||||
Cash
Dividends Declared - Common Stock
|
(29,656 | ) | (29,656 | ) | ||||||||||||||||||||
Balance
at December 31, 2007
|
$ | 37,010 | $ | 248,449 | $ | (187 | ) | $ | (10,315 | ) | $ | 206,123 | $ | 481,080 |
2007
|
2006
|
|||||||
AROs
as of January 1,
|
$ | 23,970 | $ | 22,588 | ||||
Accretion
|
511 | 961 | ||||||
Additions
|
174 | 426 | ||||||
Settlements
|
(51 | ) | (5 | ) | ||||
ARO’s
as of December 31,
|
$ | 24,604 | $ | 23,970 |
Notional
Amount
|
Fixed
Interest
Rate
|
Start
Date
|
Maturity
|
Type
of Debt
|
Obligor
|
||||||||
$ | 3,900,000 |
4.795
|
%
|
12/01/2004
|
12/01/2014
|
Taxable
|
Marina
|
||||||
$ | 8,000,000 |
4.775
|
%
|
11/12/2004
|
11/12/2014
|
Taxable
|
Marina
|
||||||
$ | 20,000,000 |
4.080
|
%
|
11/19/2001
|
12/01/2011
|
Tax-exempt
|
Marina
|
||||||
$ | 14,500,000 |
3.905
|
%
|
03/17/2006
|
01/15/2026
|
Tax-exempt
|
Marina
|
||||||
$ | 500,000 |
3.905
|
%
|
03/17/2006
|
01/15/2026
|
Tax-exempt
|
Marina
|
||||||
$ | 330,000 |
3.905
|
%
|
03/17/2006
|
01/15/2026
|
Tax-exempt
|
Marina
|
||||||
$ | 7,100,000 |
4.895
|
%
|
02/01/2006
|
02/01/2016
|
Taxable
|
Marina
|
||||||
$ | 12,500,000 |
3.430
|
%
|
12/01/2006
|
02/01/2036
|
Tax-exempt
|
SJG
|
||||||
$ | 12,500,000 |
3.430
|
%
|
12/01/2006
|
02/01/2036
|
Tax-exempt
|
SJG
|
||||||
Grant
|
Shares
|
Fair Value
|
Expected
|
Risk-Free
|
||||||
Date
|
Outstanding
|
Per Share
|
Volatility
|
Interest
Rate
|
||||||
Officers
&
|
Jan.
2005
|
34,311
|
$
|
25.155
|
15.5%
|
3.4%
|
||||
Key
Employees
|
Jan.
2006
|
36,591
|
$
|
27.950
|
16.9%
|
4.5%
|
||||
Jan.
2007
|
40,066
|
$
|
29.210
|
18.5%
|
4.9%
|
|||||
Directors
-
|
Dec.
2005
|
6,340
|
$
|
29.970
|
-
|
-
|
||||
Dec.
2006
|
9,261
|
$
|
34.020
|
-
|
-
|
|||||
-
|
-
|
2007
|
2006
|
2005
|
||||||||||
Officers
& Key Employees
|
$ | 996 | $ | 919 | $ | 3,677 | ||||||
Directors
|
209 | 140 | 93 | |||||||||
Total
Cost
|
$ | 1,205 | $ | 1,059 | $ | 3,770 | ||||||
Capitalized
|
(115 | ) | (114 | ) | (872 | ) | ||||||
Net
Expense
|
$ | 1,090 | $ | 945 | $ | 2,898 |
Officers
&
|
||||||||
Key
Employees
|
Directors
|
|||||||
Nonvested
Shares Outstanding, January 1, 2007
|
116,432 | 20,821 | ||||||
Granted
|
44,106 | - | ||||||
Vested*
|
(42,135 | ) | (5,220 | ) | ||||
Cancelled/Forfeited
|
(7,435 | ) | - | |||||
Nonvested
Shares Outstanding, December 31, 2007
|
110,968 | 15,601 | ||||||
*
Actual shares awarded to officers upon vesting, including dividend
equivalents and
|
adjustments for performance measures, totaled 69,781
shares.
|
Balance
at January 1, 2007
|
$ | 2,125 | ||
Increase
as a result of tax positions taken in prior years
|
154 | |||
Decrease
due to a lapse in the statute of limitations
|
(353 | ) | ||
Balance
at December 31, 2007
|
$ | 1,926 |
|
·
|
In
the Statements of Consolidated Cash Flows, the Company reclassified
Derivatives – Energy Related of $(2.8) million in 2006 and $(8.5) million
in 2005, which was previously included in the change in Other Liabilities,
to a separate line item within Changes in Operating Activities (see
Correction in the Presentation of the Statement of Consolidated Cash Flows
below for additional information);
|
|
·
|
Also,
in the Statements of Consolidated Cash Flows, the Company combined the
presentation of Other Prepayments and Current Assets of $(0.2) million in
2006 and $0.9 million in 2005 into Other Assets and Liabilities within
Changes in Operating Activities;
and
|
|
·
|
In
the Consolidated Balance Sheets, the Company reclassified Derivatives –
Other of $0.5 million in 2006, which was previously included in Other, to
a separate line within Deferred Credits and Other Noncurrent
Liabilities.
|
|
·
|
Cash
flows related to merchandise loans to customers for the purpose of
attracting conversions to natural gas heating systems should have been
classified under the caption Cash Flows from Investing Activities on the
Statements of Consolidated Cash Flows. Accordingly, cash outflows for
loans originated of $3.3 million in 2006 and $4.4 million in 2005 and
cash inflows from the principal collection on these loans of $3.7
million in 2006 and $4.8 million in 2005 are now included within Cash
Flows from Investing Activities. The overall net impact resulted
in $0.4 million of Cash Flows from Operating Activities for each of
the years ended December 31, 2006 and 2005 now being included within Cash
Flows from Investing Activities.
|
|
·
|
Unrealized
(Gain) Loss on Derivatives - Energy Related within Cash Flows from
Operating Activities on the Statements of Consolidated Cash Flows
improperly included certain realized gains and losses related to the
purchase of natural gas in storage. Accordingly, $5.8 million and $4.2
million of net gains for the years ended December 31, 2006 and 2005
respectively, has now been included under changes in Derivatives - Energy
Related, also within Cash Flows from Operating Activities. This change had
no overall impact on total Cash Flows from Operating Activities on the
Statements of Consolidated Cash
Flows.
|
|
·
|
Cash
flows related to unused loan proceeds that are held in restricted escrow
accounts were incorrectly presented on a net basis with the cash flows
related to the restricted margin account that is used to support the
Company’s risk management activities within Cash Flows from Investing
Activities on the Statements of Consolidated Cash Flows. Accordingly,
purchases of restricted investments with unused loan proceeds of $18.7
million in 2006 is now included in Purchase of Restricted Investments with
Escrowed Loan Proceeds and proceeds from the sale of these restricted
investments of $6.1 million in 2006 and $0.6 million in 2005 are now
included in Proceeds from Sale of Restricted Investments from Escrowed
Loan Proceeds. The cash flows related to the restricted margin account
remain in Net Proceeds from Sale of (Purchase of) Restricted
Investments
in Margin Account. This change had no overall impact on total Cash Flows
from Investing Activities on the Statements of Consolidated Cash
Flows.
|
|
|
2007
|
2006
|
2005
|
||||||||||
Loss
before Income Taxes:
|
||||||||||||
Sand
Mining
|
$ | (411 | ) | $ | (1,021 | ) | $ | (944 | ) | |||
Fuel
Oil
|
(95 | ) | (266 | ) | (84 | ) | ||||||
Income
Tax Benefits
|
115 | 469 | 359 | |||||||||
Loss
from Discontinued Operations
|
$ | (391 | ) | $ | (818 | ) | $ | (669 | ) | |||
Earnings
Per Common Share from
|
||||||||||||
Discontinued
Operations
|
||||||||||||
Basic
and Diluted
|
$ | (0.02 | ) | $ | (0.03 | ) | $ | (0.02 | ) |
2007
|
2006
|
|||||||
Current:
|
||||||||
Deferred
Fuel Costs - Net
|
$ | 4,122 | $ | 7,669 | ||||
Derivatives
/ Unrealized Gain
|
8,681 | 3,487 | ||||||
Conservation
Incentive Program
|
8,061 | - | ||||||
Other
|
(613 | ) | (469 | ) | ||||
Current
Deferred Tax Liability - Net
|
$ | 20,251 | $ | 10,687 | ||||
Noncurrent:
|
||||||||
Book
versus Tax Basis of Property
|
$ | 163,366 | $ | 152,802 | ||||
Deferred
Fuel Costs - Net
|
5,141 | 9,108 | ||||||
Environmental
|
9,711 | 5,188 | ||||||
Deferred
Regulatory Costs
|
1,239 | 3,370 | ||||||
Deferred
State Tax
|
(6,708 | ) | (4,461 | ) | ||||
Investment
Tax Credit Basis Gross-Up
|
(1,107 | ) | (1,272 | ) | ||||
Deferred
Pension & Other Post Retirement Benefits
|
15,239 | 15,239 | ||||||
Pension
& Other Post Retirement Benefits
|
(10,862 | ) | (12,991 | ) | ||||
Deferred
Revenues
|
(3,726 | ) | 2,376 | |||||
Derivatives/Unrealized Gain
|
2,428 | 6,646 | ||||||
Other
|
965 | 1,215 | ||||||
Noncurrent
Deferred Tax Liability - Net
|
$ | 175,686 | $ | 177,220 |
2007
|
2006
|
2005
|
|||||
Beginning
of Year
|
29,325,593
|
28,982,440
|
27,759,936
|
||||
New
Issues During Year:
|
|||||||
Dividend
Reinvestment Plan
|
212,428
|
232,883
|
1,141,590
|
||||
Stock-Based
Compensation Plan
|
69,781
|
110,270
|
80,914
|
||||
End
of Year
|
29,607,802
|
29,325,593
|
28,982,440
|
2007
|
2006
|
2005
|
||||||||||
Operating
Revenues:
|
||||||||||||
Gas
Utility Operations
|
$ | 630,547 | $ | 642,671 | $ | 587,212 | ||||||
Wholesale
Gas Operations
|
75,747 | 78,060 | 14,388 | |||||||||
Retail
Gas and Other Operations
|
174,043 | 163,064 | 204,699 | |||||||||
Retail
Electric Operations
|
51,098 | 50,732 | 75,779 | |||||||||
On-Site
Energy Production
|
40,084 | 32,264 | 30,846 | |||||||||
Appliance
Service Operations
|
17,224 | 15,730 | 14,870 | |||||||||
Corporate
& Services
|
14,778 | 12,886 | 2,788 | |||||||||
Subtotal
|
1,003,521 | 995,407 | 930,582 | |||||||||
Intersegment
Sales
|
(47,150 | ) | (63,979 | ) | (24,566 | ) | ||||||
Total
Operating Revenues
|
$ | 956,371 | $ | 931,428 | $ | 906,016 | ||||||
Operating
Income:
|
||||||||||||
Gas
Utility Operations
|
$ | 83,989 | $ | 81,208 | $ | 77,676 | ||||||
Wholesale
Gas Operations
|
33,156 | 53,014 | (3,287 | ) | ||||||||
Retail
Gas and Other Operations
|
192 | (3,685 | ) | 1,511 | ||||||||
Retail
Electric Operations
|
2,201 | 4,231 | 602 | |||||||||
On-Site
Energy Production
|
8,406 | 7,901 | 8,785 | |||||||||
Appliance
Service Operations
|
1,003 | 2,554 | 2,896 | |||||||||
Corporate
and Services
|
676 | 579 | (1,365 | ) | ||||||||
Total
Operating Income
|
$ | 129,623 | $ | 145,802 | $ | 86,818 | ||||||
Depreciation
and Amortization:
|
||||||||||||
Gas
Utility Operations
|
$ | 29,317 | $ | 28,140 | $ | 24,717 | ||||||
Wholesale
Gas Operations
|
6 | 11 | 15 | |||||||||
Retail
Gas and Other Operations
|
13 | 9 | 10 | |||||||||
On-Site
Energy Production
|
2,955 | 2,262 | 1,817 | |||||||||
Appliance
Service Operations
|
280 | 237 | 182 | |||||||||
Corporate
and Services
|
294 | 175 | 101 | |||||||||
Total
Depreciation and Amortization
|
$ | 32,865 | $ | 30,834 | $ | 26,842 | ||||||
Interest
Expense:
|
||||||||||||
Gas
Utility Operations
|
$ | 20,985 | $ | 22,099 | $ | 18,156 | ||||||
Wholesale
Gas Operations
|
2,204 | 2,244 | 173 | |||||||||
Retail
Gas and Other Operations
|
190 | 186 | 182 | |||||||||
On-Site
Energy Production
|
3,698 | 3,081 | 2,786 | |||||||||
Corporate
and Services
|
3,772 | 3,723 | 988 | |||||||||
Subtotal
|
30,849 | 31,333 | 22,285 | |||||||||
Intersegment
Borrowings
|
(3,634 | ) | (3,662 | ) | (1,335 | ) | ||||||
Total
Interest Expense
|
$ | 27,215 | $ | 27,671 | $ | 20,950 |
Property
Additions:
|
||||||||||||
Gas
Utility Operations
|
$ | 49,061 | $ | 55,510 | $ | 74,873 | ||||||
Wholesale
Gas Operations
|
330 | 557 | 2 | |||||||||
Retail
Gas and Other Operations
|
74 | 8 | 151 | |||||||||
On-Site
Energy Production
|
5,495 | 10,731 | 23,149 | |||||||||
Appliance
Service Operations
|
219 | 313 | 315 | |||||||||
Corporate
and Services
|
1,381 | 491 | - | |||||||||
Total
Property Additions
|
$ | 56,560 | $ | 67,610 | $ | 98,490 | ||||||
Identifiable
Assets:
|
||||||||||||
Gas
Utility Operations
|
$ | 1,227,162 | $ | 1,228,076 | ||||||||
Wholesale
Gas Operations
|
142,848 | 181,257 | ||||||||||
Retail
Gas and Other Operations
|
42,735 | 48,998 | ||||||||||
Retail
Electric Operations
|
7,082 | 4,537 | ||||||||||
On-Site
Energy Production
|
124,982 | 121,498 | ||||||||||
Appliance
Service Operations
|
16,060 | 14,147 | ||||||||||
Discontinued
Operations
|
2,604 | 415 | ||||||||||
Subtotal
|
1,563,473 | 1,598,928 | ||||||||||
Corporate
and Services
|
58,274 | 109,201 | ||||||||||
Intersegment
Assets
|
(92,306 | ) | (135,097 | ) | ||||||||
Total
Identifiable Assets
|
$ | 1,529,441 | $ | 1,573,032 |
Year
ended December 31,
|
||||
2008
|
$ | 4,618 | ||
2009
|
4,618 | |||
2010
|
4,618 | |||
2011
|
4,618 | |||
2012
|
4,618 | |||
Thereafter
|
62,343 | |||
Total
minimum future rentals
|
$ | 85,433 |
·
|
February 2005 - SJG filed notice
with the BPU to provide for an $11.4 million bill credit to
customers.
|
·
|
March 2005 - The bill credit was
approved and implemented.
|
·
|
June 2005 - SJG made its periodic
BGSS filing with the BPU requesting a $17.1 million, or 6.3%, increase in
gas cost recoveries in response to increasing wholesale gas
costs.
|
·
|
August 2005 - The BPU approved
SJG’s requested June 2005 increase, effective
September 1, 2005
, on an interim
basis.
|
·
|
November 2005 - SJG filed a BGSS
Motion for Emergent Rate Relief in conjunction with the other natural gas
utilities in
New
Jersey
. This filing
was necessary due to substantial increases in wholesale natural gas prices
across the country. SJG requested a $103.2 million
increase.
|
·
|
December 2005 - The BPU approved
on a provisional basis, an $85.7 million increase to SJG’s rates,
effective December 15, 2005.
|
·
|
March 2006 - The BPU approved a
global settlement, effective
April 1, 2006
, which among other items, fully
resolved SJG’s 2004-2005 BGSS filing and certain issues in the 2005-2006
BGSS filing. The net impact of the global settlement was a $4.4 million
reduction to annual revenues; however, this reduction had no impact on net
income as there was a corresponding reduction in expense. In addition, a
pilot storage incentive program was approved. This program began during
the second quarter of 2006 and will continue for three summer injection
periods through 2008. It is designed to provide SJG with the opportunity
to achieve BGSS price reductions and additional price stability. It will
also provide SJG with an opportunity to share in storage-related gains and
losses, with 20% being retained by SJG, and 80% being credited to
customers. Total storage-related gains for 2007 and 2006 were $2.3 million
and $1.6 million, respectively, under this storage incentive
program.
|
·
|
June
2006 - SJG made its periodic BGSS filing with the BPU requesting a $19.7
million, or 4.4% decrease in gas cost recoveries in response to decreasing
wholesale gas costs, an $11.5 million benefit derived from the release of
a storage facility, and the liquidation of some low-cost base gas made
available during the second
quarter.
|
·
|
September 2006 - The BPU approved
on a provisional basis, a $38.7 million, or 8.6%, annual decrease in gas
cost recoveries due to the continuing decrease in wholesale gas costs
subsequent to SJG’s June 2006 filing, an agreement to utilize gas from a
released storage facility for the upcoming winter, and a credit to gas
costs for previously overcollected state
taxes.
|
·
|
June
2007 – SJG made the annual periodic BGSS filing with the BPU requesting a
$16.9 million, or 5.0%, decrease in gas cost recoveries in response to
decreasing wholesale gas costs and a $5.4 million benefit derived from the
Company electing not to extend the terms of two firm transportation
contracts beyond their primary
terms.
|
·
|
October
2007 – The BPU approved on a provisional basis, a $36.7 million, or 11%,
annual decrease in gas cost recoveries due to the continuing decrease in
wholesale gas costs subsequent to SJG’s June 2007
filing.
|
·
|
November 2005 - SJG made an
annual
TAC
filing, requesting a $1.0
million increase in annual revenues, to recover the cash related to the
net
TAC
deficiency resulting from
warmer-than-normal weather for the 2003-2004 winter, partially offset by
colder-than-normal weather for the 2004-2005
winter.
|
·
|
March 2006 - The BPU approved a
global settlement, effective
April 1, 2006
, fully resolving SJG’s 2003-2004
TAC
filing.
|
·
|
October 1, 2006
- The
TAC
was replaced by the Conservation
Incentive Program (CIP).
|
·
|
October
2006 - SJG made its annual TAC filing, requesting recovery of an $8.3
million net deficiency associated with weather being 12.5% warmer than
normal for the TAC year ended May 31,
2006.
|
·
|
October
2007 – The BPU approved on a provisional basis, SJG’s 2005-2006 TAC
filing, which superseded the 2004-2005 TAC filing. The effect
of this action resulted in an $8.0 million increase in annual
revenues.
|
·
|
June
2007 – SJG made the first annual CIP filing, requesting recovery of $14.3
million in deficiency.
|
·
|
October
2007 – The BPU approved on a provisional basis, recovery of $15.5 million
in deficiency of which $9.1 million was non-weather
related.
|
·
|
November 2005 - SJG made the
annual
SBC
filing, requesting a $6.1
million reduction in annual
recoveries.
|
·
|
March 2006 - As part of the
global settlement discussed under BGSS above, the September 2004
SBC
filing was fully resolved
effective
April 1,
2006
.
|
·
|
October
2006 - SJG made the annual SBC filing, superseding the 2005 SBC filing,
requesting a $0.4 million reduction in annual SBC
recoveries.
|
·
|
December
2007 – SJG made the annual SBC filing, superseding the 2005 and 2006 SBC
filings, requesting a $7.4 million increase in annual SBC
recoveries.
|
·
|
April 2005 - SJG made the annual
USF filing, along with the state’s other electric and gas utilities,
proposing no rate change to the statewide program. This rate proposal was
approved by the BPU in June
2005.
|
·
|
July
2006 - SJG made the annual USF filing, along with the state’s other
electric and gas utilities, proposing to increase annual statewide gas
revenues to $115.3 million, an increase of $68.5 million. This rate
proposal was approved by the BPU in October 2006, on an interim basis and
was designed to increase annual revenues by $7.7 million. The revised
rates were effective from November, 1, 2006 through September 30,
2007.
|
·
|
July
2007 – SJG made its annual USF filing, along with the state’s other
electric and gas utilities, proposing to decrease annual statewide gas
revenues to $78.1 million. This rate proposal was approved by
the BPU in October 2007, on an interim basis, and is designed to decrease
the annual USF revenues by $3.4 million. The revised rates are
effective from October 5, 2007 through September 30,
2008.
|
2007
|
2006
|
|||||||
Environmental
Remediation Costs:
|
||||||||
Expended
- Net
|
$ | 25,960 | $ | 17,743 | ||||
Liability
for Future Expenditures
|
73,880 | 67,905 | ||||||
Income
Taxes-Flowthrough Depreciation
|
3,707 | 4,685 | ||||||
Deferred
Asset Retirement Obligation Costs
|
21,572 | 21,009 | ||||||
Deferred
Fuel Costs - Net
|
- | 19,698 | ||||||
Deferred
Pension and Other Postretirement Benefit Costs
|
32,686 | 39,359 | ||||||
Temperature
Adjustment Clause Receivable
|
6,516 | 8,996 | ||||||
Conservation
Incentive Program Receivable
|
18,173 | 7,747 | ||||||
Societal
Benefit Costs Receivable
|
2,952 | 6,912 | ||||||
Premium
for Early Retirement of Debt
|
1,370 | 1,532 | ||||||
Other
Regulatory Assets
|
1,872 | 1,376 | ||||||
$ | 188,688 | $ | 196,962 |
2007
|
2006
|
|||||||
Excess
Plant Removal Costs
|
$ | 48,705 | $ | 48,377 | ||||
Liability
for NJCEP
|
2,797 | 796 | ||||||
Deferred
Revenues - Net
|
2,586 | - | ||||||
Other
|
1,691 | 1,624 | ||||||
Total
Regulatory Liabilities
|
$ | 55,779 | $ | 50,797 |
Pension
Benefits
|
Other
Postretirement Benefits
|
||||||||||||||||||
2007
|
2006
|
2005
|
2007
|
2006
|
2005
|
||||||||||||||
Service
Cost
|
$
|
3,324
|
$
|
3,169
|
$
|
3,236
|
$
|
976
|
$
|
931
|
$
|
907
|
|||||||
Interest
Cost
|
7,765
|
7,214
|
6,761
|
2,681
|
2,622
|
2,155
|
|||||||||||||
Expected
Return on Plan Assets
|
(9,998
|
)
|
(9,237
|
)
|
(8,569
|
)
|
(2,091
|
)
|
(1,791
|
)
|
(1,597
|
)
|
|||||||
Amortizations:
|
|||||||||||||||||||
Prior
Service Cost (Credits)
|
292
|
457
|
606
|
(355
|
)
|
(355
|
)
|
(466
|
)
|
||||||||||
Actuarial
Loss
|
1,923
|
2,385
|
2,394
|
606
|
822
|
603
|
|||||||||||||
Net
Periodic Benefit Cost
|
3,306
|
3,988
|
4,428
|
1,817
|
2,229
|
1,602
|
|||||||||||||
ERIP
Cost
|
-
|
-
|
532
|
-
|
-
|
1,415
|
|||||||||||||
Capitalized
Benefit Costs
|
(1,131
|
)
|
(1,574
|
)
|
(1,823
|
)
|
(648
|
)
|
(903
|
)
|
(640
|
)
|
|||||||
Total
Net Periodic Benefit Expense
|
$
|
2,175
|
$
|
2,414
|
$
|
3,137
|
$
|
1,169
|
$
|
1,326
|
$
|
2,377
|
|||||||
Pension
Benefits
|
Other
Postretirement
Benefits
|
|||||||
Prior
Service Costs (Credits)
|
$ | 239 | $ | (254 | ) | |||
Net
Actuarial Loss
|
$ | 677 | $ | 540 |
Pension
Benefits
|
Other
Postretirement
Benefits
|
|||||||
Prior
Service Costs (Credits)
|
$ | 53 | $ | (101 | ) | |||
Net
Actuarial Loss
|
$ | 863 | $ | 64 |
Other
Postretirement
|
||||||||||||
Pension
Benefits
|
Benefits
|
|||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||
Change
in Benefit Obligations:
|
||||||||||||
Benefit
Obligation at Beginning of Year
|
$
|
132,619
|
$
|
126,680
|
$
|
47,727
|
$
|
43,391
|
||||
Service
Cost
|
3,324
|
3,169
|
976
|
931
|
||||||||
Interest
Cost
|
7,765
|
7,214
|
2,681
|
2,622
|
||||||||
Plan
Amendments
|
-
|
-
|
-
|
1,545
|
||||||||
Actuarial
(Gain) / Loss
|
(3,799
|
)
|
1,953
|
(1,718
|
)
|
1,745
|
||||||
Retiree
Contributions
|
-
|
-
|
147
|
305
|
||||||||
Benefits
Paid
|
(6,894
|
)
|
(6,397
|
)
|
(3,162
|
)
|
(2,812
|
)
|
||||
Benefit
Obligation at End of Year
|
$
|
133,015
|
$
|
132,619
|
$
|
46,651
|
$
|
47,727
|
||||
Change
in Plan Assets:
|
||||||||||||
Fair
Value of Plan Assets at Beginning of Year
|
$
|
117,066
|
$
|
108,529
|
$
|
29,054
|
$
|
25,053
|
||||
Actual
Return on Plan Assets
|
9,299
|
14,156
|
1,459
|
3,040
|
||||||||
Employer
Contributions
|
943
|
778
|
3,753
|
3,468
|
||||||||
Retiree
Contributions
|
-
|
-
|
147
|
305
|
||||||||
Benefits
Paid
|
(6,894
|
)
|
(6,397
|
)
|
(3,162
|
)
|
(2,812
|
)
|
||||
Fair
Value of Plan Assets at End of Year
|
$
|
120,414
|
$
|
117,066
|
$
|
31,251
|
$
|
29,054
|
||||
Funded
Status at End of Year:
|
$
|
(12,601
|
)
|
$
|
(15,553
|
)
|
$
|
(15,400
|
)
|
$
|
(18,673
|
)
|
Amounts
Related to Unconsolidated Affiliate
|
(125
|
)
|
-
|
255
|
276
|
|||||||
Accrued
Net Benefit Cost at End of Year
|
$
|
(12,726
|
)
|
$
|
(15,553
|
)
|
$
|
(15,145
|
)
|
$
|
(18,397
|
)
|
Amounts
Recognized in the Statement of Financial Position Consist
of:
|
||||||||||||
Noncurrent
Assets
|
$
|
1,970
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
Current
Liabilities
|
(805
|
)
|
(788
|
)
|
-
|
-
|
||||||
Noncurrent
Liabilities
|
(13,891
|
)
|
(14,765
|
)
|
(15,145
|
)
|
(18,397
|
)
|
||||
Net
Amount Recognized at End of Year
|
$
|
(12,726
|
)
|
$
|
(15,553
|
)
|
$
|
(15,145
|
)
|
$
|
(18,397
|
)
|
Amounts
Recognized in Regulatory Assets
|
||||||||||||
Consist
of:
|
||||||||||||
Prior
Service Costs (Credit)
|
$
|
1,620
|
$
|
1,859
|
$
|
(977
|
)
|
$
|
(1,231
|
)
|
||
Net
Actuarial Loss
|
18,913
|
23,376
|
11,240
|
13,087
|
||||||||
$
|
20,533
|
$
|
25,235
|
$
|
10,263
|
$
|
11,856
|
|||||
Amounts
Recognized in Accumulated Other
|
||||||||||||
Comprehensive Loss Consist of
(pre-tax):
|
||||||||||||
Prior
Service Costs (Credit)
|
$
|
288
|
$
|
339
|
$
|
(494
|
)
|
(588
|
)
|
|||
Net
Actuarial Loss
|
10,764
|
11,284
|
1,250
|
1,064
|
||||||||
$
|
11,052
|
$
|
11,623
|
$
|
756
|
476
|
Other
|
||||||||||||||||
Postretirement
|
||||||||||||||||
Pension
Benefits
|
Benefits
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Discount
Rate
|
6.36 | % | 6.04 | % | 6.36 | % | 6.04 | % | ||||||||
Rate
of Compensation Increase
|
3.60 | % | 3.60 | % | - | - |
Other
Postretirement
|
||||||||||||||||||||||||
Pension
Benefits
|
Benefits
|
|||||||||||||||||||||||
2007
|
2006
|
2005
|
2007
|
2006
|
2005
|
|||||||||||||||||||
Discount
Rate
|
6.04 | % | 5.84 | % | 5.75 | % | 6.04 | % | 5.84 | % | 5.75 | % | ||||||||||||
Expected
Long-Term Return on Plan Assets
|
8.75 | % | 8.75 | % | 8.75 | % | 7.25 | % | 7.25 | % | 7.25 | % | ||||||||||||
Rate
of Compensation Increase
|
3.60 | % | 3.60 | % | 3.60 | % | - | - | ||||||||||||||||
2007
|
2006
|
|||||||
Post-65
Medical Care Cost Trend Rate Assumed for Next Year
|
10.00 | % | 6.67 | % | ||||
Pre-65
Medical Care Cost Trend Rate Assumed for Next Year
|
10.00 | % | 9.00 | % | ||||
Dental
Care Cost Trend Rate Assumed for Next Year
|
6.33 | % | 6.67 | % | ||||
Rate
to which Cost Trend Rates are Assumed to Decline (the Ultimate Trend
Rate)
|
5.00 | % | 5.00 | % | ||||
Year
that the Rate Reaches the Ultimate Trend Rate
|
2013
|
2013
|
1-Percentage-
|
1-Percentage-
|
|||||||
Point
Increase
|
Point
Decrease
|
|||||||
Effect
on the Total of Service and Interest Cost
|
$ | 148 | $ | (130 | ) | |||
Effect
on Postretirement Benefit Obligation
|
$ | 1,465 | $ | (1,305 | ) |
Pension
Benefits
|
Other
Postretirement
Benefits
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Asset
Category:
|
||||||||||||||||
U.S.
Equity Securities
|
50 | % | 51 | % | 47 | % | 48 | % | ||||||||
International
Equity Securities
|
15 | 16 | 15 | 17 | ||||||||||||
Fixed
Income
|
35 | 33 | 38 | 35 | ||||||||||||
Total
|
100 | % | 100 | % | 100 | % | 100 | % |
Pension
Benefits
|
Other
Postretirement
Benefits
|
|||||||
2008
|
$ | 6,910 | $ | 3,780 | ||||
2009
|
7,032 | 3,970 | ||||||
2010
|
7,137 | 4,100 | ||||||
2011
|
7,497 | 4,012 | ||||||
2012
|
7,840 | 4,052 | ||||||
2013-2017 | 48,151 | 20,557 |
2007
|
2006
|
|||||||
Beginning
of Year
|
$ | 71,830 | $ | 60,654 | ||||
Accruals
|
18,704 | 20,679 | ||||||
Expenditures
|
(12,629 | ) | (9,503 | ) | ||||
End
of Year
|
$ | 77,905 | $ | 71,830 |
|
·
|
Report of
Independent Registered Public Accounting Firm of Deloitte & Touche LLP
(page 86).
|
|
·
|
Schedule I -
Statements of Income, Statements of Comprehensive Income, Statements of
Retained Earnings, Statements of Cash Flows and Balance Sheets
of
|
SJI (pages 87-89). |
|
·
|
Schedule II -
Valuation and Qualifying Accounts (page
91).
|
Exhibit
Number
|
Description
|
Reference
|
(3)(a)(i)
|
Certificate
of Incorporation of South Jersey Industries, Inc., as amended through
April 19, 1984.
|
Incorporated
by reference from Exhibit (4)(a) of Form S-2 (2-91515).
|
(3)(a)(ii)
|
Amendment
to Certificate of Incorporation relating to two-for-one stock split
effective as of April 28, 1987.
|
Incorporated
by reference from Exhibit (4)(e)(1) of Form S-3
(33-1320).
|
(3)(a)(iii)
|
Amendment
to Certificate of Incorporation relating to director and officer
liability.
|
Incorporated
by reference from Exhibit (4)(e)(2) of Form S-3
(33-1320).
|
(3)(a)(iv)
|
Amendment
to Certificate of Incorporation relating to two-for-one stock split
effective as of June 30, 2005.
|
Incorporated
by reference from Exhibit 3 of Form 10-Q of SJI filed on May 10,
2005.
|
Exhibit
Number
|
Description
|
Reference
|
||
(10)(c)(iii)
|
FTS
Service Agreement No. 38099 between South Jersey Gas Company and Columbia
Gas Transmission Corporation dated November 1, 1993.
|
Incorporated
by reference from Exhibit (10)(k)(n) of Form 10-K for 1993
(1-6364).
|
||
(10)(c)(iv)
|
NTS
Service Agreement No. 39305 between South Jersey Gas Company and Columbia
Gas Transmission Corporation dated November 1, 1993.
|
Incorporated
by reference from Exhibit (10)(k)(o) of Form 10-K for 1993
(1-6364).
|
||
(10)(c)(v)
|
FSS
Service Agreement No. 38130 between South Jersey Gas Company and Columbia
Gas Transmission Corporation dated November 1, 1993.
|
Incorporated
by reference from Exhibit (10)(k)(p) of Form 10-K for 1993
(1-6364).
|
(10)(d)(i)
|
SST
Service Agreement No. 38086 between South Jersey Gas Company and Columbia
Gas Transmission Corporation dated November 1, 1993.
|
Incorporated
by reference from Exhibit (10)(k)(q) of Form 10-K for 1993
(1-6364).
|
||
(10)(e)(i)*
|
Deferred
Payment Plan for Directors of South Jersey Industries, Inc., South Jersey
Gas Company, Energy & Minerals, Inc., R&T Group, Inc. and South
Jersey Energy Company as amended and restated October 21,
1994.
|
Incorporated
by reference from Exhibit (10)(l) of Form 10-K for 1994
(1-6364).
|
||
(10)(e)(ii)*
|
Schedule
of Deferred Compensation Agreements.
|
Incorporated
by reference from Exhibit (10)(l)(b) of Form 10-K for 1997
(1-6364).
|
||
(10)(e)(iii)*
|
Form
of Officer Employment Agreement between certain officers and either South
Jersey Industries, Inc. or its subsidiaries. (filed
herewith)
|
|||
(10)(e)(iv)*
|
Schedule
of Officer Employment Agreements.
(filed
herewith)
|
|||
(10)(f)(i)*
|
Officer
Severance Benefit Program for all Officers.
|
Incorporated
by reference from Exhibit (10)(l)(g) of Form 10-K for 1985
(1-6364).
|
||
(10)(f)(ii)*
|
Supplemental
Executive Retirement Program, as amended and restated effective July 1,
1997, and Form of Agreement between certain SJI or subsidiary
officers.
|
Incorporated
by reference from Exhibit (10)(l)(i) of Form 10-K for 1997
(1-6364).
|
Exhibit
Number
|
Description
|
Reference
|
(10)(f)(iii)*
|
South
Jersey Industries, Inc. 1997 Stock-Based Compensation Plan (As Amended and
Restated Effective January 26, 2005).
|
Incorporated
by reference from Exhibit 10 of Form 10-Q of SJI as filed May 10,
2005.
|
(10)(g)(i)
|
Five-year
Revolving Credit Agreement for SJI.
|
Incorporated
by reference from Exhibit 10 of Form 8-K of SJI as filed August 25,
2006.
|
(10)(g)(ii)
|
Five-year
Revolving Credit Agreement for SJG.
|
Incorporated
by reference from Exhibit 10 of Form 8-K of SJG as filed on August 8,
2006.
|
(10)(g)(iii)
|
Letter
of Credit Reimbursement Agreement (filed herewith)
|
|
(12)
|
Calculation
of Ratio of Earnings to Fixed Charges (Before Federal Income Taxes) (filed
herewith).
|
|
(14)
|
Code
of Ethics. (filed herewith)
|
|
(21)
|
Subsidiaries
of the Registrant (filed herewith).
|
|
(23)
|
Independent
Registered Public Accounting Firm’s Consent (filed
herewith).
|
|
(31.1)
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
|
|
(31.2)
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
|
|
(32.1)
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
|
|
(32.2)
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
|
Signature
|
Title
|
Date
|
/s/
Edward J. Graham
|
President,
Chairman of the Board & Chief Executive Officer
|
February
29, 2008
|
(Edward
J. Graham)
|
(Principal
Executive Officer)
|
|
/s/
David A. Kindlick
|
Vice
President & Chief Financial Officer
|
February
29, 2008
|
(David
A. Kindlick)
|
(Principal
Financial and Accounting Officer)
|
|
/s/
Richard H. Walker, Jr.
|
Vice
President, General Counsel &
|
February
29, 2008
|
(Richard
H. Walker, Jr.)
|
Secretary
|
|
/s/
Shirli M. Billings
|
Director
|
February
29, 2008
|
(Shirli
M. Billings)
|
||
/s/ Helen R.
Bosley
|
Director
|
February
29, 2008
|
(Helen
R. Bosley)
|
/s/
Thomas A. Bracken
|
Director
|
February
29, 2008
|
(Thomas
A. Bracken)
|
||
/s/
Keith S. Campbell
|
Director
|
February
29, 2008
|
(Keith
S. Campbell)
|
||
/s/
W. Cary Edwards
|
Director
|
February
29, 2008
|
(W.
Cary Edwards)
|
||
/s/
Sheila Hartnett-Devlin
|
Director
|
February
29, 2008
|
(Sheila
Hartnett-Devlin)
|
||
/s/
William J. Hughes
|
Director
|
February
29, 2008
|
(William
J. Hughes)
|
||
/s/
Herman D. James
|
Director
|
February
29, 2008
|
(Herman
D. James)
|
||
/s/
Frederick R. Raring
|
Director
|
February
29, 2008
|
(Frederick
R. Raring)
|
|
1.
Disability Plan
|
Name
|
Capacities in Which Served
|
Date
of
Agreement
|
Minimum
Base Salary
|
Edward
J. Graham
|
Chairman,
President and Chief Executive Officer, South Jersey Industries,
Inc.; President and Chief Executive Officer, South Jersey Gas
|
1/1/06
|
425,000
|
David
A. Kindlick
|
Vice
President and Chief Financial Officer,South Jersey Industries,
Inc.; Senior Vice President and Chief Financial Officer,
South Jersey Gas Company
|
1/1/06
|
218,000
|
Richard
H. Walker, Jr.
|
Vice
President, General Counsel and Secretary, South Jersey Industries, Inc.;
Senior Vice President, General Counsel and Secretary, South Jersey Gas
Company
|
1/1/06
|
167,000
|
Michael
Renna
|
Vice
President, South Jersey Industries,
Inc.; President, South Jersey Energy
|
1/1/06
|
170,000
|
Jeffrey
E. DuBois
|
Vice
President, South Jersey Industries, Inc.;
Senior
Vice President, Operations & Sales, South Jersey Gas
Company
|
1/1/06
|
150,000
|
Page | ||
ARTICLE
I
DEFINITIONS.................................................................................................................................................................................................
|
1
|
|
SECTION
1.01
|
Certain
Defined
Terms...................................................................................................................................
|
1
|
SECTION
1.02
|
Computation
of Time
Periods.......................................................................................................................
|
12
|
SECTION
1.03
|
Accounting
Terms...........................................................................................................................................
|
12
|
SECTION
1.04
|
Internal
References.........................................................................................................................................
|
12
|
ARTICLE
II CERTAIN ADMINISTRATIVE
MATTERS.............................................................................................................................................
|
13
|
|
SECTION
2.01
|
[Reserved]........................................................................................................................................................
|
13
|
SECTION
2.02
|
[Reserved]........................................................................................................................................................
|
13
|
SECTION
2.03
|
[Reserved]........................................................................................................................................................
|
13
|
SECTION
2.04
|
[Reserved]........................................................................................................................................................
|
13
|
SECTION
2.05
|
[Reserved]........................................................................................................................................................
|
13
|
SECTION
2.06
|
[Reserved]........................................................................................................................................................
|
13
|
SECTION
2.07
|
[Reserved]........................................................................................................................................................
|
13
|
SECTION
2.08
|
[Reserved]........................................................................................................................................................
|
13
|
SECTION
2.09
|
[Reserved]........................................................................................................................................................
|
13
|
SECTION
2.10
|
Payments..........................................................................................................................................................
|
13
|
SECTION
2.11
|
[Reserved]........................................................................................................................................................
|
13
|
SECTION
2.12
|
[Reserved]........................................................................................................................................................
|
13
|
SECTION
2.13
|
[Reserved]........................................................................................................................................................
|
13
|
SECTION
2.14
|
Increased
Costs...............................................................................................................................................
|
13
|
SECTION
2.15
|
[Reserved]........................................................................................................................................................
|
14
|
SECTION
2.16
|
Nature
of Obligations of Lenders Regarding the Letter of Credit; Assumption by
the Administrative
Agent.....................................................................................................................................
|
14
|
SECTION
2.17
|
Net
of Taxes,
Etc..............................................................................................................................................
|
15
|
SECTION
2.18
|
[Reserved]........................................................................................................................................................
|
16
|
SECTION
2.19
|
[Reserved]........................................................................................................................................................
|
16
|
SECTION
2.20
|
[Reserved]........................................................................................................................................................
|
16
|
ARTICLE
III LETTER OF CREDIT
FACILITY...............................................................................................................................................................
|
17
|
|
SECTION
3.01
|
L/C
Commitment.............................................................................................................................................
|
17
|
SECTION
3.02
|
Application;
Letter of
Credit........................................................................................................................
|
17
|
SECTION
3.03
|
Commissions
and Other
Charges.................................................................................................................
|
18
|
SECTION
3.04
|
L/C
Participations..........................................................................................................................................
|
18
|
SECTION
3.05
|
Reimbursement
Obligation of the
Borrower..............................................................................................
|
19
|
SECTION
3.06
|
Obligations
Absolute.....................................................................................................................................
|
20
|
ARTICLE
IV CONDITIONS
PRECEDENT......................................................................................................................................................................
|
21
|
|
SECTION
4.01
|
Conditions
Precedent to the Execution and Delivery of this
Agreement.............................................
|
21
|
SECTION
4.02
|
[Reserved]........................................................................................................................................................
|
23
|
SECTION
4.03
|
[Reserved]........................................................................................................................................................
|
23
|
SECTION
4.04
|
Reliance
on
Certificates................................................................................................................................
|
23
|
ARTICLE
V REPRESENTATIONS AND
WARRANTIES...........................................................................................................................................
|
24
|
|
SECTION
5.01
|
Representations
and Warranties of the
Borrower....................................................................................
|
24
|
ARTICLE
VI COVENANTS OF THE
COMPANY.........................................................................................................................................................
|
28
|
|
SECTION
6.01
|
Affirmative
Covenants....................................................................................................................................
|
28
|
SECTION
6.02
|
Negative
Covenants.......................................................................................................................................
|
30
|
SECTION
6.03
|
Reporting
Requirements................................................................................................................................
|
31
|
SECTION
6.04
|
Financial
Covenants.....................................................................................................................................
|
33
|
ARTICLE
VII EVENTS OF
DEFAULT............................................................................................................................................................................
|
34
|
|
SECTION
7.01
|
Events
of
Default.............................................................................................................................................
|
34
|
SECTION
7.02
|
Upon
an Event of
Default..............................................................................................................................
|
35
|
SECTION
7.03
|
Rights
and Remedies Cumulative; Non-Waiver;
Etc................................................................................
|
36
|
ARTICLE
VIII
RESERVED.................................................................................................................................................................................................
|
37
|
|
ARTICLE
IX THE ADMINISTRATIVE
AGENT...........................................................................................................................................................
|
38
|
|
SECTION
9.01
|
Appointment....................................................................................................................................................
|
38
|
SECTION
9.02
|
Delegation
of
Duties......................................................................................................................................
|
38
|
SECTION
9.03
|
Exculpatory
Provisions.................................................................................................................................
|
38
|
SECTION
9.04
|
Reliance
by Administrative
Agent...............................................................................................................
|
39
|
SECTION
9.05
|
Notice
of
Default.............................................................................................................................................
|
39
|
SECTION
9.06
|
Non
Reliance on Administrative Agent and Other
Lenders...................................................................
|
39
|
SECTION
9.07
|
Indemnification...............................................................................................................................................
|
40
|
SECTION
9.08
|
Administrative
Agent in Its Individual
Capacity......................................................................................
|
40
|
SECTION
9.09
|
Successor
Administrative
Agent...................................................................................................................
|
40
|
SECTION
9.10
|
Issuing
Lender.................................................................................................................................................
|
41
|
SECTION
9.11
|
Notices;
Actions Under Loan
Documents..................................................................................................
|
41
|
ARTICLE
X
MISCELLANEOUS......................................................................................................................................................................................
|
42
|
|
SECTION
10.01
|
Amendments,
Etc.............................................................................................................................................
|
42
|
SECTION
10.02
|
Notices,
Etc......................................................................................................................................................
|
42
|
SECTION
10.03
|
No
Waiver;
Remedies......................................................................................................................................
|
44
|
SECTION
10.04
|
Set
off.................................................................................................................................................................
|
44
|
SECTION
10.05
|
Indemnification...............................................................................................................................................
|
45
|
SECTION
10.06
|
Liability
of the
Lenders..................................................................................................................................
|
45
|
SECTION
10.07
|
Costs,
Expenses and
Taxes............................................................................................................................
|
46
|
SECTION
10.08
|
Binding
Effect..................................................................................................................................................
|
47
|
SECTION
10.09
|
Assignments
and
Participation....................................................................................................................
|
47
|
SECTION
10.10
|
Severability......................................................................................................................................................
|
49
|
SECTION
10.11
|
Governing
Law................................................................................................................................................
|
49
|
SECTION
10.12
|
Headings..........................................................................................................................................................
|
50
|
SECTION
10.13
|
Submission
To Jurisdiction;
Waivers.........................................................................................................
|
50
|
SECTION
10.14
|
Acknowledgments..........................................................................................................................................
|
50
|
SECTION
10.15
|
Waivers
of Jury
Trial......................................................................................................................................
|
51
|
SECTION
10.16
|
Confidentiality................................................................................................................................................
|
51
|
SECTION
10.17
|
Patriot
Act.......................................................................................................................................................
|
52
|
SECTION
10.18
|
Execution
in
Counterparts...........................................................................................................................
|
52
|
Exhibit
A
|
Form
of Opinion of Counsel to the Borrower
|
Exhibit
B
|
Form
of Assignment and Acceptance
|
Exhibit
C
|
Form
of Compliance Certificate
|
SCHEDULES
|
|
Schedule
I
|
Lenders,
Applicable Lending Offices, Commitments and Initial Commitment
Percentages
|
Schedule
II
|
Ownership
|
Schedule
III
|
Letter
of Credit
|
I.
|
Policy
|
2
|
II.
|
Responsibility
& Penalties for Non-Compliance
|
2
|
III.
|
Specific
Areas of Policy Statement
|
2-6
|
IV.
|
Guidelines
|
6
|
V.
|
Reporting
of Violations
|
6-8
|
VI.
|
Distribution
|
8
|
|
§
|
Procurement
Activities
|
|
The
highest standards of personal conduct and business ethics are required
of
each person directly involved in procurement activities, as well
as those
who are in a position to influence procurement decisions or relationships.
In the procurement of equipment, supplies and services, no supplier
may be
given improper information, preference or advantage over others.
|
|
§
|
Conflict
of Interest
|
|
No
Director or employee shall engage in business transactions or professional
activity or have a financial or other private interest, which is
in
conflict with the proper discharge of his/her position. A conflict
of
interest arises when a personal dealing or interest conflicts with
the
Company's interests.
|
|
§
|
Safety
|
|
The
Company is charged with providing safe service to the public and/or
customers. If an employee fails to correct a known hazard or to notify
supervision of a known hazard which exposes the public, customers
and/or
employees to harm, the employee is in violation of this policy. Employees
are responsible to observe and report safety problems, establish
warnings
to keep others safe and correct unsafe conditions.
|
|
§
|
Company
Information
|
|
Company
information may take many forms - physical records, electronic data
or
personal knowledge - and can include financial, technical, strategic
and
other records of a confidential or proprietary nature. Such information
is
a valuable corporate asset that must never be used for personal gain
or
given to others for their use. Disclosure of such proprietary information
by any Director or employee is strictly prohibited, unless there
is an
identified and valid business need, where executive authorization
has been
properly secured.
|
|
§
|
Company
Property and Funds
|
|
Every
Director and employee is responsible for safeguarding Company property
and
funds to prevent their abuse, unauthorized personal use, loss or
theft.
Company property includes facilities, equipment, supplies, tools,
vehicles, funds, telephone and computer lines and services and other
assets that are intended for conducting Company business. Users of
the
network system may be monitored to ensure compliance. (Refer to Operating
Procedure A6.2, Procedures for Corporate Personal Computing)
|
|
§
|
Acceptance
or Solicitation of Things of Value
|
|
Business
decisions must be made objectively; solely on the basis of quality,
service, price and similar competitive factors.
|
|
Gifts
other than those of a nominal value that are received by a Director
or
employee shall be returned to the donor, accompanied with an explanation
about this policy.
|
|
Meals
and other social events, the main purpose of which is to establish
and
maintain necessary business relationships, are considered legitimate
business expenses. Directors and employees may also accept business
meals
and entertainment as long as the business purpose is valid. Directors
and
employees shall decline any offers of lavish business meals or
entertainment, or any offers that could be interpreted or appear
as having
been offered with the intent of influencing the individual’s business
judgment.
|
|
§
|
Legislative
and Regulatory Compliance
|
|
All
businesses and public utilities in particular are subject to many
federal,
state and local laws and regulations. All Directors and employees
shall
uphold the laws and applicable regulations and never knowingly be
a party
to their evasion.
|
|
No
Director or employee shall accept employment, engage in any business
transaction or make any investment which will be detrimental to the
Company or interfere in any manner whatsoever, with the discharge
of
his/her Company duties and responsibilities.
|
|
§
|
Discrimination
and Under Coercion
|
|
No
Director or employee of the Company shall unfairly discriminate through
the dispensing of special privileges or favors, whether for remuneration
or not. No Director or employee shall utilize the authority vested
in
him/her by virtue of his/her position with the Company, to coerce
peers or
subordinates to provide favors or privileges, personal or financial,
under
fear of retribution or disparate treatment.
|
|
§
|
Affiliate
Relationships
|
|
The
New Jersey Board of Public Utilities has adopted standards in evaluating
affiliate relationships, which provide for both fair competition
as well
as a “no harm to ratepayers” standard. Additionally, federal
antitrust laws prohibit practices which restrict fair market
competition. Accordingly, SJG's affiliate relationships have
been structured to ensure that (1) our transactions are in compliance
with
applicable laws, (2) that our ratepayers are not subsidizing non-regulated
operations, and (3) that procurement practices and procedures are
open,
unbiased and at arms length. Specific accounting guidelines are
outlined in Operating Procedure A2.2 (Procedures for the Recording
and
Invoicing of Affiliated Company Transactions). Directors and
employees must be aware of state and federal laws and regulations
governing affiliate relationships.
|
|
§
|
Antitrust
- Competition
|
|
All
Directors and employees must comply with antitrust and competition
laws
throughout the world. These laws protect the free enterprise system
and encourage vigorous, but fair, competition. All product and
service development, manufacturing and sales efforts must conform
to the
highest ethical standards. Engaging in or conspiring to do any of the
following is strictly forbidden:
|
|
·
|
price
fixing, bid rigging, colluding to allocate customers or markets,
boycotting suppliers or customers;
|
|
·
|
controlling
the resale pricing of distributors and dealers;
|
|
·
|
disparaging
a competitor, misrepresenting our own products or services;
|
|
·
|
stealing
trade secrets;
|
|
·
|
offering
or paying bribes or kickbacks
|
|
§
|
Employment
|
|
§
|
Maintenance
of Accurate and Complete Records
|
|
§
|
Insider
Trading
|
|
§
|
Policies
and Procedures
|
|
All
Directors and employees are required to understand, endorse and support
Company policies and procedures, including this code of ethics and
the
standards it prescribes, and never knowingly be party to their evasion.
|
|
·
|
Could
this action appear “inappropriate” to others?
|
|
·
|
Will
my action comply with the intent and purpose of Company policies
and
practices?
|
|
·
|
May
I be called upon to defend my action to supervisors, the Board of
Directors, executives, employees and/or the general public?
|
|
·
|
Will
this action compromise me?
|
|
·
|
Can
I feel comfortable about doing this?
|
|
·
|
Interfering
with or obstructing an investigation
|
|
·
|
Misrepresenting
the facts, or failing to disclose facts during an investigation
|
|
·
|
Retaliating,
or attempting to retaliate, against anyone who has made a good faith
report of a suspected or known violation
|
|
·
|
Attempting
to discover the identity of any person cooperating in the investigation
|
____________________________________
Dr.
Shirli M. Billings
|
____________________________________
Helen
R. Bosley
|
____________________________________
Thomas
A. Bracken
|
____________________________________
Keith
S. Campbell
|
____________________________________
W.
Cary Edwards
|
____________________________________
Edward
J. Graham
|
____________________________________
Sheila
Hartnett-Devlin
|
____________________________________
William
J. Hughes
|
____________________________________
Dr.
Herman D. James
|
____________________________________
Frederick
R. Raring
|
Date: February 29, 2008 | /s/ Edward J. Graham |
|
Edward
J. Graham
|
President & Chief Executive Officer |
Date: February 29, 2008 | /s/ David A. Kindlick |
|
David
A. Kindlick
|
Vice President & Chief Financial Officer |