New Jersey
|
1-6364
|
22-1901645
|
(State or other jurisdiction Of incorporation)
|
(Commission File Number)
|
(IRS Employer Identification No.)
|
1 South Jersey Plaza, Folsom, NJ
|
08037
|
|
(Address of principal executive offices)
|
(Zip Code)
|
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Item 9.01
|
Financial Statements and Exhibits.
|
(a)
|
Financial Statements of Businesses Acquired
|
(b)
|
Pro forma financial information.
|
(d)
|
Exhibits
|
Exhibit No.
|
Description
|
|
Consent of Deloitte & Touche LLP with respect to the Audited Financial Statements of Elizabethtown Gas as of December 31, 2017 and 2016 and for the two years ended December 31, 2017
|
||
Consent of PricewaterhouseCoopers LLP with respect to the Audited Financial Statements of Elizabethtown Gas as of December 31, 2015 and for the year ended December 31, 2015.
|
||
Press release issued by South Jersey Industries, Inc. on July 2, 2018
|
||
Audited Financial Statements of Elizabethtown Gas as of December 31, 2017 and 2016 and for the years then ended and as of December 31, 2016 and 2015 and for the years then ended.
|
||
Unaudited Condensed Financial Statements of Elizabethtown Gas as of June 30, 2018 and December 31, 2017 and for the six months ended June 30, 2018 and 2017.
|
||
Unaudited pro forma condensed combined financial statements and explanatory notes for South Jersey Industries, Inc. as of June 30, 2018, for the six months ended June 30, 2018 and for the year ended December 31, 2017
|
Date: September 12
,
2018
|
SOUTH JERSEY INDUSTRIES, INC.
|
|
By:
|
/s/ Kenneth A. Lynch
|
|
Name: Kenneth A. Lynch
|
||
Title: Senior Vice President, Chief Risk and Accounting Officer
Principal Financial Officer
|
Page
|
||
Independent Auditor’s Report |
3
|
|
Financial Statements
|
||
Statements of Income
|
4
|
|
Statements of Comprehensive Income
|
5
|
|
Statements of Cash Flows
|
6
|
|
Balance Sheets
|
8
|
|
Statements of Equity
|
9
|
|
Notes to Financial Statements
|
||
1. Summary of Significant Accounting Policies
|
10
|
|
2. Retirement Benefits
|
16
|
|
3. Contingencies and Regulatory Matters
|
25
|
|
4. Income Taxes
|
26
|
|
5. Financing
|
28
|
|
6. Commitments
|
30
|
|
7. Fair Value Measurements
|
31
|
|
8. Derivatives
|
31
|
|
9. Disposition
|
34
|
|
10. Affiliate Transactions
|
34
|
|
11. Subsequent Events
|
34
|
2017
|
2016
|
|||||||
(in thousands)
|
||||||||
Operating Revenues
|
$
|
304,747
|
$
|
292,699
|
||||
Operating Expenses:
|
||||||||
Cost of natural gas
|
135,850
|
132,122
|
||||||
Other operations and maintenance
|
66,574
|
82,599
|
||||||
Depreciation and amortization
|
27,163
|
25,439
|
||||||
Taxes other than income taxes
|
4,917
|
2,572
|
||||||
Total operating expenses
|
234,504
|
242,732
|
||||||
Operating Income
|
70,243
|
49,967
|
||||||
Other Income and (Expense):
|
||||||||
Interest expense, net of amounts capitalized
|
(15,960
|
)
|
(14,932
|
)
|
||||
Other income (expense), net
|
1,460
|
1,610
|
||||||
Total other income and (expense)
|
(14,500
|
)
|
(13,322
|
)
|
||||
Earnings Before Income Taxes
|
55,743
|
36,645
|
||||||
Income taxes
|
21,926
|
14,751
|
||||||
Net Income
|
$
|
33,817
|
$
|
21,894
|
2017
|
2016
|
|||||||
(in thousands)
|
||||||||
Net Income
|
$
|
33,817
|
$
|
21,894
|
||||
Other comprehensive income (loss):
|
||||||||
Pension and other postretirement benefit plans:
|
||||||||
Benefit plan net loss, net of tax of $- and $(6,314), respectively
|
—
|
(9,142
|
)
|
|||||
Reclassification adjustment for amounts included in net income, net of tax of $- and $454, respectively
|
||||||||
Total Other Comprehensive Loss
|
—
|
(8,485
|
)
|
|||||
Comprehensive Income
|
$
|
33,817
|
$
|
13,409
|
2017
|
2016
|
|||||||
(in thousands)
|
||||||||
Operating Activities:
|
||||||||
Net income
|
$
|
33,817
|
$
|
21,894
|
||||
Adjustments to reconcile net income to net cash provided from operating activities —
|
||||||||
Depreciation and amortization, total
|
27,163
|
25,439
|
||||||
Deferred income taxes
|
33,355
|
7,819
|
||||||
Pension, postretirement, and other employee benefits
|
1,448
|
(13,083
|
)
|
|||||
Mark-to-market adjustments
|
10,391
|
(22,243
|
)
|
|||||
Other, net
|
(18,083
|
)
|
(17,315
|
)
|
||||
Changes in certain current assets and liabilities —
|
||||||||
—Receivables
|
(21,798
|
)
|
(16,458
|
)
|
||||
—Inventories
|
(476
|
)
|
3,029
|
|||||
—Other current assets
|
(161
|
)
|
3,672
|
|||||
—Accrued taxes
|
(13,451
|
)
|
7,381
|
|||||
—Accounts payable
|
27,765
|
2,611
|
||||||
—Accrued compensation
|
1,604
|
(997
|
)
|
|||||
—Other current liabilities
|
(31,572
|
)
|
21,099
|
|||||
Net cash provided from operating activities
|
50,002
|
22,848
|
||||||
Investing Activities:
|
||||||||
Property additions
|
(155,148
|
)
|
(117,221
|
)
|
||||
Cost of removal, net of salvage
|
(2,520
|
)
|
(6,612
|
)
|
||||
Change in construction payables, net
|
(2,584
|
)
|
5,542
|
|||||
Other investing activities
|
243
|
—
|
||||||
Net cash used for investing activities
|
(160,009
|
)
|
(118,291
|
)
|
||||
Financing Activities:
|
||||||||
Net borrowings from parent
|
100,878
|
51,698
|
||||||
Dividends to parent
|
(25,229
|
)
|
(23,494
|
)
|
||||
Capital contributions from parent company
|
34,358
|
67,239
|
||||||
Net cash provided from financing activities
|
110,007
|
95,443
|
||||||
Net Change in Cash and Cash Equivalents
|
—
|
—
|
||||||
Cash and Cash Equivalents at Beginning of Period
|
—
|
—
|
||||||
Cash and Cash Equivalents at End of Period
|
$
|
—
|
$
|
—
|
||||
Supplemental Cash Flow Information:
|
||||||||
Cash paid during the period for —
|
||||||||
Interest, net of amounts capitalized
|
$
|
15,872
|
$
|
12,324
|
||||
Income taxes
|
1,062
|
3,216
|
||||||
Noncash transactions — Accrued property additions at end of period
|
7,469
|
10,053
|
Assets
|
2017
|
2016
|
||||||
(in thousands)
|
||||||||
Receivables —
|
||||||||
Customer accounts receivable
|
$
|
29,078
|
$
|
22,979
|
||||
Unbilled revenues
|
35,209
|
24,948
|
||||||
Other accounts and notes receivable
|
6,659
|
1,221
|
||||||
Accumulated provision for uncollectible accounts
|
(4,904
|
)
|
(4,054
|
)
|
||||
Materials and supplies
|
307
|
304
|
||||||
Natural gas for sale
|
20,913
|
20,437
|
||||||
Prepaid taxes
|
21,544
|
3,682
|
||||||
Assets from risk management activities, net of collateral
|
—
|
7,473
|
||||||
Regulatory assets, current
|
7,922
|
10,186
|
||||||
Other current assets
|
141
|
218
|
||||||
Total current assets
|
116,869
|
87,394
|
||||||
Property, Plant, and Equipment:
|
||||||||
In service
|
1,290,302
|
1,140,213
|
||||||
Less: Accumulated depreciation
|
267,019
|
274,679
|
||||||
Plant in service, net of depreciation
|
1,023,283
|
865,534
|
||||||
Construction work in progress
|
32,052
|
54,994
|
||||||
Total property, plant, and equipment
|
1,055,335
|
920,528
|
||||||
Other Property and Investments:
|
||||||||
Goodwill
|
126,020
|
126,020
|
||||||
Deferred Charges and Other Assets:
|
||||||||
Regulatory assets, deferred
|
131,590
|
114,680
|
||||||
Other deferred charges and assets
|
40
|
919
|
||||||
Total deferred charges and other assets
|
131,630
|
115,599
|
||||||
Total Assets
|
$
|
1,429,854
|
$
|
1,249,541
|
Liabilities and Stockholder’s Equity
|
2017
|
2016
|
||||||
(in thousands)
|
||||||||
Current Liabilities:
|
||||||||
Due to affiliates
|
$
|
81,903
|
$
|
55,186
|
||||
Accounts payable
|
12,751
|
14,287
|
||||||
Customer deposits
|
7,299
|
9,686
|
||||||
Other accrued taxes
|
140
|
2,720
|
||||||
Accrued compensation
|
3,445
|
1,781
|
||||||
Liabilities from risk management activities, net of collateral
|
1,694
|
—
|
||||||
Regulatory liabilities, current
|
10,197
|
16,276
|
||||||
Accrued environmental remediation, current
|
9,700
|
29,000
|
||||||
Other current liabilities
|
1,506
|
1,530
|
||||||
Total current liabilities
|
128,635
|
130,466
|
||||||
Long-term Debt
(See notes)
|
447,825
|
346,879
|
||||||
Deferred Credits and Other Liabilities:
|
||||||||
Accumulated deferred income taxes
|
130,889
|
210,826
|
||||||
Deferred credits related to income tax
|
121,041
|
673
|
||||||
Other cost of removal obligations
|
57,819
|
55,873
|
||||||
Accrued environmental remediation, deferred
|
75,437
|
77,054
|
||||||
Other regulatory liabilities, deferred
|
456
|
1,583
|
||||||
Employee benefit obligations
|
18,909
|
20,700
|
||||||
Other deferred credits and liabilities
|
1,438
|
1,028
|
||||||
Total deferred credits and other liabilities
|
405,989
|
367,737
|
||||||
Total Liabilities
|
982,449
|
845,082
|
||||||
Stockholder’s Equity
|
||||||||
Common stock, no par value; 12,807,111 shares authorized, issued, and outstanding
|
—
|
—
|
||||||
Paid-in capital
|
166,377
|
132,019
|
||||||
Retained earnings
|
281,028
|
272,440
|
||||||
Total Stockholder’s Equity
|
447,405
|
404,459
|
||||||
Total Liabilities and Stockholder’s Equity
|
$
|
1,429,854
|
$
|
1,249,541
|
||||
Commitments and Contingent Matters
(See Notes)
|
Paid-in Capital
|
Retained
Earnings
|
Accumulated Other
Comprehensive Loss
|
Total
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Balance at December 31, 2015
|
$
|
64,858
|
$
|
274,040
|
$
|
(19,961
|
)
|
$
|
318,937
|
|||||||
Net income
|
—
|
21,894
|
—
|
21,894
|
||||||||||||
Other comprehensive loss
|
—
|
—
|
(8,485
|
)
|
(8,485
|
)
|
||||||||||
Reclassification of accumulated other comprehensive loss to regulatory assets
|
—
|
—
|
28,446
|
28,446
|
||||||||||||
Dividends to parent
|
—
|
(23,494
|
)
|
—
|
(23,494
|
)
|
||||||||||
Capital contributions from parent company
|
67,161
|
—
|
—
|
67,161
|
||||||||||||
Balance at December 31, 2016
|
$
|
132,019
|
$
|
272,440
|
$
|
—
|
$
|
404,459
|
||||||||
Net income
|
—
|
33,817
|
—
|
33,817
|
||||||||||||
Dividends to parent
|
—
|
(25,229
|
)
|
—
|
(25,229
|
)
|
||||||||||
Capital contributions from parent company
|
34,358
|
—
|
—
|
34,358
|
||||||||||||
Balance at December 31, 2017
|
$
|
166,377
|
$
|
281,028
|
$
|
—
|
$
|
447,405
|
2017
|
2016
|
|||||||
(in thousands)
|
||||||||
Environmental remediation
|
$
|
87,792
|
$
|
72,482
|
||||
Retiree benefit plans
|
32,188
|
35,283
|
||||||
Under recovered regulatory clause revenues
|
12,426
|
10,186
|
||||||
Other regulatory assets
|
7,106
|
6,915
|
||||||
Deferred credits related to income tax
(*)
|
(121,041
|
)
|
(673
|
)
|
||||
Other cost of removal obligations
|
(57,819
|
)
|
(55,873
|
)
|
||||
Over recovered regulatory clause revenues
|
(10,223
|
)
|
(7,425
|
)
|
||||
Other regulatory liabilities
|
(430
|
)
|
(10,434
|
)
|
||||
Total regulatory assets (liabilities), net
|
$
|
(50,001
|
)
|
$
|
50,461
|
2017
|
2016
|
|||||||
(in thousands)
|
||||||||
Utility plant in service
|
$
|
1,170,020
|
$
|
1,056,686
|
||||
Information technology equipment and software
|
46,885
|
37,124
|
||||||
Storage facilities
|
27,888
|
7,193
|
||||||
Other
|
45,509
|
39,210
|
||||||
Total other plant in service
|
120,282
|
83,527
|
||||||
Total plant in service
|
$
|
1,290,302
|
$
|
1,140,213
|
Assumptions used to determine net periodic costs:
|
Year Ended
December 31, 2017
|
July 1, 2016 through
December 31, 2016
|
January 1, 2016
through June 30, 2016
|
|||||||||
Pension plans
|
||||||||||||
Discount rate - interest costs
|
3.76
|
%
|
3.21
|
%
|
4.00
|
%
|
||||||
Discount rate - service costs
|
4.64
|
4.07
|
4.80
|
|||||||||
Expected long-term return on plan assets
|
7.60
|
7.75
|
7.80
|
|||||||||
Annual salary increase
|
3.50
|
3.50
|
3.70
|
|||||||||
Other postretirement benefit plans
|
||||||||||||
Discount rate - interest costs
|
3.40
|
%
|
2.84
|
%
|
3.60
|
%
|
||||||
Discount rate - service costs
|
4.55
|
3.96
|
4.70
|
|||||||||
Expected long-term return on plan assets
|
6.03
|
5.93
|
6.60
|
|||||||||
Annual salary increase
|
3.50
|
3.50
|
3.70
|
|||||||||
Assumptions used to determine benefit obligations:
|
December 31, 2017
|
December 31, 2016
|
||||||
Pension plans
|
||||||||
Discount rate
|
3.74
|
%
|
4.39
|
%
|
||||
Annual salary increase
|
2.88
|
3.50
|
||||||
Other postretirement benefit plans
|
||||||||
Discount rate
|
3.62
|
%
|
4.15
|
%
|
||||
Annual salary increase
|
2.56
|
3.50
|
Initial Cost Trend
Rate |
Ultimate Cost
Trend Rate |
Year That
Ultimate Rate is Reached |
||||||||||
Pre-65
|
6.40
|
%
|
4.50
|
%
|
2038
|
|||||||
Post-65 medical
|
7.80
|
4.50
|
2038
|
|||||||||
Post-65 prescription
|
7.80
|
4.50
|
2038
|
Year Ended
December 31, 2017 |
July 1, 2016 through
December 31, 2016 |
January 1, 2016
through June 30, 2016 |
||||||||||
(in thousands)
|
||||||||||||
Change in benefit obligation
|
||||||||||||
Benefit obligation at beginning of period
|
$
|
94,963
|
$
|
105,458
|
$
|
90,910
|
||||||
Service cost
|
1,393
|
990
|
861
|
|||||||||
Interest cost
|
4,383
|
2,044
|
2,238
|
|||||||||
Benefits paid
|
(10,407
|
)
|
(3,592
|
)
|
(3,338
|
)
|
||||||
Actuarial (gain) loss
|
15,175
|
(9,937
|
)
|
14,787
|
||||||||
Balance at end of period
|
105,507
|
94,963
|
105,458
|
|||||||||
Change in plan assets
|
||||||||||||
Fair value of plan assets at beginning of period
|
74,849
|
60,687
|
61,044
|
|||||||||
Actual return on plan assets
|
20,986
|
3,706
|
2,981
|
|||||||||
Employer contributions
|
—
|
14,048
|
—
|
|||||||||
Benefits paid
|
(10,407
|
)
|
(3,592
|
)
|
(3,338
|
)
|
||||||
Fair value of plan assets at end of period
|
85,428
|
74,849
|
60,687
|
|||||||||
Accrued liability
|
$
|
20,079
|
$
|
20,114
|
$
|
44,771
|
2017
|
2016
|
|||||||
(in thousands)
|
||||||||
Other regulatory assets, deferred
|
$
|
28,176
|
$
|
30,484
|
||||
Employee benefit obligations
|
(20,079
|
)
|
(20,114
|
)
|
Amount Subject to
Regulatory Amortization |
Prior Service
Costs |
Net (Gain)
Loss |
||||||||||
(in thousands)
|
||||||||||||
Balance at December 31, 2017:
|
||||||||||||
Regulatory assets (liabilities)
|
$
|
38,584
|
$
|
(89
|
)
|
$
|
(10,319
|
)
|
||||
Balance at December 31, 2016:
|
||||||||||||
Regulatory assets (liabilities)
|
$
|
—
|
$
|
(2,000
|
)
|
$
|
32,484
|
|||||
Estimated amortization in net periodic cost in 2018:
|
||||||||||||
Regulatory assets
|
$
|
2,691
|
$
|
10
|
$
|
—
|
Accumulated OCI
|
Regulatory Assets
|
|||||||
(in thousands)
|
||||||||
Balance at December 31, 2015:
|
$
|
27,789
|
$
|
—
|
||||
Net (gain) loss
|
15,216
|
(9,816
|
)
|
|||||
Reclassification adjustments:
|
||||||||
Amortization of prior service costs
|
434
|
434
|
||||||
Amortization of net loss
|
(1,396
|
)
|
(2,177
|
)
|
||||
Reclassification from accumulated OCI to regulatory assets
|
(42,043
|
)
|
42,043
|
|||||
Total reclassification adjustments
|
(43,005
|
)
|
40,300
|
|||||
Total change
|
(27,789
|
)
|
30,484
|
|||||
Balance at December 31, 2016:
|
$
|
—
|
$
|
30,484
|
||||
Net (gain) loss
|
—
|
(149
|
)
|
|||||
Reclassification adjustments:
|
||||||||
Amortization of prior service costs
|
—
|
424
|
||||||
Amortization of net loss
|
—
|
(1,427
|
)
|
|||||
Amortization of regulatory assets
|
—
|
(1,156
|
)
|
|||||
Total reclassification adjustments
|
—
|
(2,159
|
)
|
|||||
Total change
|
—
|
(2,308
|
)
|
|||||
Balance at December 31, 2017:
|
$
|
—
|
$
|
28,176
|
2017
|
2016
|
|||||||
(in thousands)
|
||||||||
Service cost
|
$
|
1,393
|
$
|
1,851
|
||||
Interest cost
|
4,383
|
4,282
|
||||||
Expected return on plan assets
|
(6,534
|
)
|
(6,249
|
)
|
||||
Amortization of regulatory assets
|
1,156
|
—
|
||||||
Amortization:
|
||||||||
Prior service costs
|
(424
|
)
|
(868
|
)
|
||||
Net loss
|
1,427
|
3,573
|
||||||
Net periodic pension cost
|
$
|
1,401
|
$
|
2,589
|
Benefit Payments
|
||||
(in thousands)
|
||||
2018
|
$
|
7,244
|
||
2019
|
7,006
|
|||
2020
|
7,382
|
|||
2021
|
7,041
|
|||
2022
|
6,890
|
|||
2023 to 2027
|
32,623
|
Year Ended
December 31, 2017 |
July 1, 2016 through
December 31, 2016 |
January 1, 2016
through June 30, 2016 |
||||||||||
(in thousands)
|
||||||||||||
Change in benefit obligation
|
||||||||||||
Benefit obligation at beginning of period
|
$
|
12,317
|
$
|
13,174
|
$
|
13,512
|
||||||
Service cost
|
100
|
55
|
47
|
|||||||||
Interest cost
|
416
|
187
|
218
|
|||||||||
Benefits paid
|
(843
|
)
|
(293
|
)
|
(438
|
)
|
||||||
Actuarial (gain) loss
|
1,424
|
(806
|
)
|
(165
|
)
|
|||||||
Benefit obligation at end of period
|
13,414
|
12,317
|
13,174
|
|||||||||
Change in plan assets
|
||||||||||||
Fair value of plan assets at beginning of period
|
13,177
|
12,829
|
12,737
|
|||||||||
Actual return on plan assets
|
2,489
|
348
|
92
|
|||||||||
Employer contributions
|
843
|
293
|
438
|
|||||||||
Benefits paid
|
(843
|
)
|
(293
|
)
|
(438
|
)
|
||||||
Fair value of plan assets at end of period
|
15,666
|
13,177
|
12,829
|
|||||||||
(Prepaid asset) accrued liability
|
$
|
(2,252
|
)
|
$
|
(860
|
)
|
$
|
345
|
2017
|
2016
|
|||||||
(in thousands)
|
||||||||
Other regulatory assets, deferred
|
$
|
4,012
|
$
|
4,361
|
||||
Employee benefit obligations
|
2,252
|
860
|
Amount Subject to
Regulatory Amortization |
Prior Service Costs
|
Net (Gain) Loss
|
||||||||||
(in thousands)
|
||||||||||||
Balance at December 31, 2017:
|
||||||||||||
Regulatory assets (liabilities)
|
$
|
5,285
|
$
|
395
|
$
|
(1,668
|
)
|
|||||
Balance at December 31, 2016:
|
||||||||||||
Regulatory assets
|
$
|
—
|
$
|
—
|
$
|
4,361
|
Accumulated OCI
|
Regulatory Assets
|
|||||||
(in thousands)
|
||||||||
Balance at December 31, 2015:
|
$
|
5,548
|
$
|
—
|
||||
Net (gain) loss
|
90
|
(933
|
)
|
|||||
Reclassification adjustments:
|
||||||||
Amortization of prior service costs
|
(1
|
)
|
(1
|
)
|
||||
Amortization of net loss
|
(137
|
)
|
(205
|
)
|
||||
Reclassification from accumulated OCI to regulatory assets
|
(5,500
|
)
|
5,500
|
|||||
Total reclassification adjustments
|
(5,638
|
)
|
5,294
|
|||||
Total change
|
(5,548
|
)
|
4,361
|
|||||
Balance at December 31, 2016:
|
$
|
—
|
$
|
4,361
|
||||
Net (gain) loss
|
—
|
53
|
||||||
Reclassification adjustments:
|
||||||||
Amortization of net loss
|
—
|
(149
|
)
|
|||||
Amortization of regulatory assets
|
—
|
(253
|
)
|
|||||
Total reclassification adjustments
|
—
|
(402
|
)
|
|||||
Total change
|
—
|
(349
|
)
|
|||||
Balance at December 31, 2017:
|
$
|
—
|
$
|
4,012
|
2017
|
2016
|
|||||||
(in thousands)
|
||||||||
Service cost
|
$
|
100
|
$
|
102
|
||||
Interest cost
|
416
|
405
|
||||||
Expected return on plan assets
|
(655
|
)
|
(673
|
)
|
||||
Amortization of regulatory assets
|
253
|
—
|
||||||
Amortization:
|
||||||||
Prior service costs
|
—
|
2
|
||||||
Net loss
|
149
|
342
|
||||||
Net periodic pension cost
|
$
|
263
|
$
|
178
|
Benefit Payments
|
||||
(in thousands)
|
||||
2018
|
$
|
748
|
||
2019
|
797
|
|||
2020
|
829
|
|||
2021
|
864
|
|||
2022
|
890
|
|||
2023 to 2027
|
4,295
|
Target
|
2017
|
2016
|
||||||||||
Pension plan assets:
|
||||||||||||
Equity
|
53
|
%
|
65
|
%
|
69
|
%
|
||||||
Fixed Income
|
15
|
19
|
20
|
|||||||||
Cash
|
2
|
6
|
1
|
|||||||||
Other
|
30
|
10
|
10
|
|||||||||
Total
|
100
|
%
|
100
|
%
|
100
|
%
|
||||||
Other postretirement benefit plan assets:
|
||||||||||||
Equity
|
72
|
%
|
76
|
%
|
74
|
%
|
||||||
Fixed Income
|
24
|
20
|
23
|
|||||||||
Cash
|
1
|
2
|
1
|
|||||||||
Other
|
3
|
2
|
2
|
|||||||||
Total
|
100
|
%
|
100
|
%
|
100
|
%
|
• |
Domestic equity.
A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.
|
• |
International equity.
A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.
|
• |
Fixed income.
A mix of domestic and international bonds.
|
• |
Special situations
.
Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.
|
• |
Real estate investments.
Investments in traditional private market equity-oriented investments in real properties (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.
|
• |
Private equity.
Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.
|
• |
Domestic and international equity.
Investments in equity securities such as common stocks, American depositary receipts, and real estate investment trusts that trade on a public exchange are classified as Level 1 investments and are valued at the closing price in the active market. Equity investments with unpublished prices (i.e. pooled funds) are valued as Level 2, when the underlying holdings used to value the investment are comprised of Level 1 or Level 2 equity securities.
|
• |
Fixed income.
Investments in fixed income securities are generally classified as Level 2 investments and are valued based on prices reported in the market place. Additionally, the value of fixed income securities takes into consideration certain items such as broker quotes, spreads, yield curves, interest rates, and discount rates that apply to the term of a specific instrument.
|
• |
Real estate investments and private equity.
Investments in real estate, private equity, and special situations are generally classified as Net Asset Value as a Practical Expedient, since the underlying assets typically do not have publicly available observable inputs. The fund manager values the assets using various inputs and techniques depending on the nature of the underlying investments. Techniques may include purchase multiples for comparable transactions, comparable public company trading multiples, discounted cash flow analysis, prevailing market capitalization rates, recent sales of comparable investments, and independent third-party appraisals. The fair value of partnerships is determined by aggregating the value of the underlying assets less liabilities.
|
Fair Value Measurements Using
|
||||||||||||||||
Quoted Prices
in Active Markets for Identical Assets |
Significant Other
Observable Inputs |
Net Asset Value
as a Practical Expedient |
||||||||||||||
As of December 31, 2017
|
(Level 1)
|
(Level 2)
|
(NAV)
|
Total
|
||||||||||||
(in thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Domestic equity
(*)
|
$
|
13,978
|
$
|
29,196
|
$
|
—
|
$
|
43,174
|
||||||||
International equity
(*)
|
—
|
14,988
|
—
|
14,988
|
||||||||||||
Fixed income:
|
||||||||||||||||
U.S. Treasury, government, and agency bonds
|
—
|
7,710
|
—
|
7,710
|
||||||||||||
Corporate bonds
|
—
|
3,554
|
—
|
3,554
|
||||||||||||
Cash equivalents and other
|
7,574
|
2,251
|
4,379
|
14,204
|
||||||||||||
Real estate investments
|
288
|
—
|
1,399
|
1,687
|
||||||||||||
Private equity
|
—
|
—
|
111
|
111
|
||||||||||||
Total
|
$
|
21,840
|
$
|
57,699
|
$
|
5,889
|
$
|
85,428
|
(*) |
Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.
|
Fair Value Measurements Using
|
||||||||||||||||
Quoted Prices
in Active Markets for Identical Assets |
Significant Other
Observable
Inputs |
Net Asset Value
as a Practical Expedient |
||||||||||||||
As of December 31, 2016
|
(Level 1)
|
(Level 2)
|
(NAV)
|
Total
|
||||||||||||
(in thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Domestic equity
(*)
|
$
|
10,800
|
$
|
26,103
|
$
|
—
|
$
|
36,903
|
||||||||
International equity
(*)
|
—
|
14,117
|
—
|
14,117
|
||||||||||||
Fixed income:
|
||||||||||||||||
U.S. Treasury, government, and agency bonds
|
—
|
6,482
|
—
|
6,482
|
||||||||||||
Corporate bonds
|
—
|
3,099
|
—
|
3,099
|
||||||||||||
Pooled funds
|
—
|
5,039
|
—
|
5,039
|
||||||||||||
Cash equivalents and other
|
931
|
375
|
6,328
|
7,634
|
||||||||||||
Real estate investments
|
275
|
—
|
1,110
|
1,385
|
||||||||||||
Private equity
|
—
|
—
|
190
|
190
|
||||||||||||
Total
|
$
|
12,006
|
$
|
55,215
|
$
|
7,628
|
$
|
74,849
|
(*) |
Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.
|
Fair Value Measurements Using
|
||||||||||||||||
Quoted Prices
in Active Markets for Identical Assets |
Significant Other
Observable Inputs |
Net Asset Value
as a Practical Expedient |
||||||||||||||
As of December 31, 2017
|
(Level 1)
|
(Level 2)
|
(NAV)
|
Total
|
||||||||||||
(in thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Domestic equity
(*)
|
$
|
370
|
$
|
8,811
|
$
|
—
|
$
|
9,181
|
||||||||
International equity
(*)
|
—
|
2,858
|
—
|
2,858
|
||||||||||||
Fixed income:
|
||||||||||||||||
U.S. Treasury, government, and agency bonds
|
—
|
70
|
—
|
70
|
||||||||||||
Corporate bonds
|
—
|
29
|
—
|
29
|
||||||||||||
Pooled funds
|
—
|
3,053
|
—
|
3,053
|
||||||||||||
Cash equivalents and other
|
289
|
—
|
133
|
422
|
||||||||||||
Real estate investments
|
8
|
—
|
42
|
50
|
||||||||||||
Private equity
|
—
|
—
|
3
|
3
|
||||||||||||
Total
|
$
|
667
|
$
|
14,821
|
$
|
178
|
$
|
15,666
|
(*) |
Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.
|
Fair Value Measurements Using
|
||||||||||||||||
Quoted Prices
in Active Markets for Identical Assets |
Significant Other
Observable Inputs |
Net Asset Value
as a Practical Expedient |
||||||||||||||
As of December 31, 2016
|
(Level 1)
|
(Level 2)
|
(NAV)
|
Total
|
||||||||||||
(in thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Domestic equity
(*)
|
$
|
315
|
$
|
7,264
|
$
|
—
|
$
|
7,579
|
||||||||
International equity
(*)
|
—
|
2,206
|
—
|
2,206
|
||||||||||||
Fixed income:
|
||||||||||||||||
U.S. Treasury, government, and agency bonds
|
—
|
63
|
—
|
63
|
||||||||||||
Corporate bonds
|
—
|
28
|
—
|
28
|
||||||||||||
Pooled funds
|
—
|
2,942
|
—
|
2,942
|
||||||||||||
Cash equivalents and other
|
99
|
—
|
209
|
308
|
||||||||||||
Real estate investments
|
8
|
—
|
37
|
45
|
||||||||||||
Private equity
|
—
|
—
|
6
|
6
|
||||||||||||
Total
|
$
|
422
|
$
|
12,503
|
$
|
252
|
$
|
13,177
|
(*) |
Level 1 securities consist of actively traded stocks while Level 2 securities consist of pooled funds.
|
• |
provide rate credits of $17.5 million to its customers; and
|
• |
file a rate case no later than September 1, 2016, with another rate case no later than three years after the 2016 rate case.
|
(in thousands)
|
||||
December 31, 2017
|
$
|
7,229
|
||
December 31, 2016
|
5,535
|
2017
|
2016
|
|||||||
(in thousands)
|
||||||||
Federal —
|
||||||||
Current
|
$
|
(10,363
|
)
|
$
|
5,630
|
|||
Deferred
|
29,339
|
6,661
|
||||||
18,976
|
12,291
|
|||||||
State —
|
||||||||
Current
|
(1,066
|
)
|
1,302
|
|||||
Deferred
|
4,102
|
1,277
|
||||||
3,036
|
2,579
|
|||||||
Amortization of investment tax credits
|
(86
|
)
|
(119
|
)
|
||||
Total
|
$
|
21,926
|
$
|
14,751
|
2017
|
2016
|
|||||||
(in thousands)
|
||||||||
Deferred tax liabilities —
|
||||||||
Accelerated depreciation
|
$
|
163,965
|
$
|
208,605
|
||||
Property basis differences
|
16,961
|
23,262
|
||||||
Regulatory assets associated with employee benefit obligations
|
9,656
|
15,525
|
||||||
Other
|
5,816
|
7,558
|
||||||
Total
|
196,398
|
254,950
|
||||||
Deferred tax assets —
|
||||||||
Federal net operating loss
|
5,829
|
8,275
|
||||||
Federal effect of state deferred taxes
|
8,296
|
12,426
|
||||||
Employee benefit obligations
|
10,275
|
15,566
|
||||||
Regulatory liability associated with the Tax Reform Legislation
|
34,858
|
—
|
||||||
Bad debt and insurance reserves
|
1,555
|
1,936
|
||||||
Other
|
4,696
|
5,921
|
||||||
Total
|
65,509
|
44,124
|
||||||
Accumulated deferred income taxes, net
|
$
|
130,889
|
$
|
210,826
|
Years Ended December 31,
|
||||||||
2017
|
2016
|
|||||||
Federal statutory rate
|
35.0
|
%
|
35.0
|
%
|
||||
State income tax, net of federal deduction
|
5.9
|
5.9
|
||||||
Other
|
(1.6
|
)
|
(0.6
|
)
|
||||
Effective income tax rate
|
39.3
|
%
|
40.3
|
%
|
December 31, 2017
|
December 31, 2016
|
|||||||||||||||||||
(Dollars in thousands)
|
Year(s) due
|
Weighted
average interest rate |
Outstanding
|
Weighted average
interest rate |
Outstanding
|
|||||||||||||||
Gas facility revenue bonds
|
2022-2033
|
1.7
|
%
|
$
|
180,100
|
1.3
|
%
|
$
|
180,100
|
|||||||||||
Affiliate promissory note
|
2034
|
4.5
|
%
|
268,406
|
7.2
|
%
|
167,528
|
|||||||||||||
Total principal long-term debt
|
|
|
|
3.4
|
%
|
$
|
448,506
|
|
4.1
|
%
|
$
|
347,628
|
||||||||
Unamortized debt issuance costs
|
|
|
n/a
|
|
$
|
(681
|
)
|
|
n/a |
|
$
|
(749
|
) | |||||||
Total debt
|
|
|
n/a
|
$
|
447,825
|
|
n/a
|
346,879
|
2018
|
2019-2020
|
2021-2022
|
After 2022
|
Total
|
||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Long-term debt
(a) _
|
||||||||||||||||||||
Principal
|
$
|
—
|
$
|
—
|
$
|
46,500
|
$
|
401,325
|
447,825
|
|||||||||||
Interest
|
3,082
|
6,165
|
6,165
|
19,538
|
34,950
|
|||||||||||||||
Pipeline charges, storage capacity, and gas supply
(b)
|
57,278
|
112,079
|
78,698
|
264,754
|
512,809
|
|||||||||||||||
Operating leases
(c)
|
4,046
|
8,181
|
5,660
|
—
|
17,887
|
|||||||||||||||
Asset management agreements
(d)
|
4,250
|
2,125
|
—
|
—
|
6,375
|
|||||||||||||||
Financial derivative obligations
(e)
|
1,694
|
312
|
—
|
—
|
2,006
|
|||||||||||||||
Other purchase commitments
(f)
|
7,000
|
—
|
—
|
—
|
7,000
|
|||||||||||||||
Total
|
$
|
77,350
|
$
|
128,862
|
$
|
137,023
|
$
|
685,617
|
$
|
1,028,852
|
(a) |
Amounts are reflected based on final maturity dates. The Company plans to continue, when economically feasible, to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit. Variable rate interest obligations are estimated based on rates at December 31, 2017 and do not include interest on the affiliated promissory note.
|
(b) |
Includes charges recoverable through a natural gas cost recovery mechanism, subject to review by the New Jersey BPU.
|
(c) |
Certain operating leases have provisions for step rent or escalation payments and certain lease concessions are accounted for by recognizing the future minimum lease payments on a straight-line basis over the respective minimum lease terms. However, this accounting treatment does not affect the future annual operating lease cash obligations as shown herein. In terms of rental charges and duration of contracts, the Company’s most significant operating leases relate to real estate and fleet vehicles.
|
(d) |
Represent fixed-fee minimum payments for Sequent’s affiliated asset management agreements.
|
(e) |
See Notes 1 and 9 for additional information.
|
(f) |
Includes contractual environmental remediation liabilities that are generally recoverable through base rates or rate rider mechanisms.
|
Fair Value Measurements Using
|
||||||||||||||||||||
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
Net Asset Value
as a Practical Expedient (NAV) |
Total
|
||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Liabilities:
|
||||||||||||||||||||
Energy-related derivatives
|
$
|
—
|
$
|
2,006
|
$
|
—
|
$
|
—
|
$
|
2,006
|
Fair Value Measurements Using
|
||||||||||||||||||||
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
Net Asset Value
as a Practical Expedient (NAV) |
Total
|
||||||||||||||||
Assets:
|
||||||||||||||||||||
Energy-related derivatives
|
$
|
—
|
$
|
8,385
|
$
|
—
|
$
|
—
|
$
|
8,385
|
• |
Regulatory Hedges
- Energy-related derivative contracts which are designated as regulatory hedges relate primarily to the Company’s fuel-hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in the cost of natural gas as the underlying natural gas is used in operations and ultimately recovered through cost recovery clauses.
|
• |
Cash Flow Hedges
- Gains and losses on energy-related derivatives designated as cash flow hedges (which are mainly used to hedge anticipated purchases and sales) are initially deferred in OCI before being recognized in the statements of income in the same period as the hedged transactions are reflected in earnings.
|
• |
Not Designated
- Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the statements of income in the period of change.
|
Asset Derivatives
|
Liability Derivatives
|
|||||||||||||||||
Derivative
Category |
Balance Sheet
Location |
2017
|
2016
|
Balance Sheet
Location |
2017
|
2016
|
||||||||||||
(in thousands)
|
(in thousands)
|
|||||||||||||||||
Derivatives designated as hedging instruments for regulatory purposes
|
||||||||||||||||||
Energy-related derivatives:
|
||||||||||||||||||
Assets from risk management activities – current
|
$
|
—
|
$
|
7,473
|
Liabilities from risk management activities – current
|
$
|
1,694
|
$
|
—
|
|||||||||
Other deferred charges and assets
|
—
|
912
|
Other deferred credits and liabilities
|
312
|
—
|
|||||||||||||
Total derivatives designated as hedging instruments for regulatory purposes
|
$
|
—
|
$
|
8,385
|
$
|
2,006
|
$
|
—
|
||||||||||
Gross amounts of recognized
|
$
|
—
|
$
|
8,385
|
$
|
2,006
|
$
|
—
|
||||||||||
Gross amounts offset
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||
Net amounts recognized in the Balance Sheets
|
$
|
—
|
$
|
8,385
|
$
|
2,006
|
$
|
—
|
Unrealized Losses
|
Unrealized Gains
|
|||||||||||||||||
Derivative
Category |
Balance Sheet
Location |
2017
|
2016
|
Balance Sheet
Location |
2017
|
2016
|
||||||||||||
|
(in thousands)
|
(in thousands)
|
||||||||||||||||
Energy-related derivatives:
|
||||||||||||||||||
Other regulatory assets, current
|
$
|
(1,694
|
)
|
$
|
—
|
Other regulatory liabilities, current
|
$
|
—
|
$
|
7,473
|
||||||||
Other regulatory assets, deferred
|
(312
|
)
|
—
|
Other regulatory liabilities, deferred
|
—
|
912
|
||||||||||||
Total energy-related derivative gains (losses)
|
$
|
(2,006
|
)
|
$
|
—
|
$
|
—
|
$
|
8,385
|
Profit sharing / fees payments
|
|||||||||||||
Expiration date
|
Type of fee structure
|
Annual fee
|
2017
|
2016
|
|||||||||
(in thousands)
|
|||||||||||||
March 2019
|
Tiered
|
(*)
|
$
|
11,195
|
$
|
15,043
|
(*) |
In March 2014, the New Jersey BPU authorized the renewal of the asset management agreement between Elizabethtown Gas and Sequent for five years. This renewed agreement began on April 1, 2014 and requires Sequent to pay minimum annual fees of $4.25 million to Elizabethtown Gas and includes tiered margin sharing levels between Elizabethtown Gas and Sequent.
|
Page
|
||
Independent Auditor’s Report |
4
|
|
Financial Statements
|
||
Statements of Income
|
5
|
|
Statements of Comprehensive Income
|
5
|
|
Statements of Cash Flows
|
6
|
|
Balance Sheets
|
7
|
|
Statements of Equity
|
9
|
|
Notes to Financial Statements | ||
1. Summary of Significant Accounting Policies
|
10
|
|
2. Retirement Benefits
|
16
|
|
3. Contingencies and Regulatory Matters
|
26
|
|
4. Income Taxes
|
27
|
|
5. Financing
|
29
|
|
6. Commitments
|
29
|
|
7. Fair Value Measurements
|
30
|
|
8. Derivatives
|
31
|
|
9. Affiliate Transactions
|
33
|
|
10. Subsequent Events
|
33
|
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Operating Revenues
|
$
|
292,699
|
$
|
307,162
|
||||
Operating Expenses:
|
||||||||
Cost of natural gas
|
132,122
|
148,876
|
||||||
Other operations and maintenance
|
82,599
|
65,403
|
||||||
Depreciation and amortization
|
25,439
|
24,154
|
||||||
Taxes other than income taxes
|
2,572
|
2,850
|
||||||
Total operating expenses
|
242,732
|
241,283
|
||||||
Operating Income
|
49,967
|
65,879
|
||||||
Other income, net
|
1,610
|
367
|
||||||
Interest expense, net of amounts capitalized
|
14,932
|
14,664
|
||||||
Earnings Before Income Taxes
|
36,645
|
51,582
|
||||||
Income taxes
|
14,751
|
20,230
|
||||||
Net Income
|
$
|
21,894
|
$
|
31,352
|
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Net Income
|
$
|
21,894
|
$
|
31,352
|
||||
Other comprehensive income (loss):
|
||||||||
Pension and other postretirement benefit plans:
|
||||||||
Benefit plan net loss, net of tax of $(6,314) and $(742), respectively
|
(9,142
|
)
|
(1,075
|
)
|
||||
Reclassification adjustment for amounts included in net income, net of tax of $454 and $1,143, respectively
|
657
|
1,654
|
||||||
Total Other Comprehensive Income (Loss)
|
(8,485
|
)
|
579
|
|||||
Comprehensive Income
|
$
|
13,409
|
$
|
31,931
|
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Operating Activities:
|
||||||||
Net income
|
$
|
21,894
|
$
|
31,352
|
||||
Adjustments to reconcile net income to net cash provided from operating activities —
|
||||||||
Depreciation and amortization, total
|
25,439
|
24,154
|
||||||
Deferred income taxes
|
7,819
|
20,113
|
||||||
Pension, postretirement, and other employee benefits
|
(13,083
|
)
|
1,490
|
|||||
Mark-to-market adjustments
|
(22,243
|
)
|
(2,455
|
)
|
||||
Other, net
|
(17,315
|
)
|
(9,279
|
)
|
||||
Changes in certain current assets and liabilities —
|
||||||||
—Receivables
|
(16,458
|
)
|
31,467
|
|||||
—Proceeds from insurance settlement
|
—
|
32,000
|
||||||
—Inventories
|
3,029
|
6,635
|
||||||
—Other current assets
|
3,672
|
67
|
||||||
—Accrued taxes
|
7,381
|
(13,574
|
)
|
|||||
—Accounts payable
|
2,611
|
(6,932
|
)
|
|||||
—Accrued compensation
|
(997
|
)
|
(354
|
)
|
||||
—Other current liabilities
|
21,099
|
(7,492
|
)
|
|||||
Net cash provided from operating activities
|
22,848
|
107,192
|
||||||
Investing Activities:
|
||||||||
Property additions
|
(117,221
|
)
|
(89,525
|
)
|
||||
Cost of removal, net of salvage
|
(6,612
|
)
|
(5,016
|
)
|
||||
Change in construction payables, net
|
5,542
|
1,146
|
||||||
Net cash used for investing activities
|
(118,291
|
)
|
(93,395
|
)
|
||||
Financing Activities:
|
||||||||
Net borrowings from parent
|
51,698
|
3,000
|
||||||
Dividends to parent
|
(23,494
|
)
|
(24,001
|
)
|
||||
Capital contributions from parent company
|
67,239
|
7,204
|
||||||
Net cash provided from (used for) financing activities
|
95,443
|
(13,797
|
)
|
|||||
Net Change in Cash and Cash Equivalents
|
—
|
—
|
||||||
Cash and Cash Equivalents at Beginning of Period
|
—
|
—
|
||||||
Cash and Cash Equivalents at End of Period
|
$
|
—
|
$
|
—
|
||||
Supplemental Cash Flow Information:
|
||||||||
Interest, net of amounts capitalized
|
$
|
12,324
|
$
|
14,465
|
||||
Income taxes
|
3,216
|
13,799
|
||||||
Accrued property additions at end of period
|
10,053
|
4,511
|
Assets
|
2016
|
2015
|
||||||
(in thousands)
|
||||||||
Receivables —
|
||||||||
Customer accounts receivable
|
$
|
22,979
|
$
|
16,295
|
||||
Unbilled revenues
|
24,948
|
14,745
|
||||||
Other accounts and notes receivable
|
1,221
|
1,650
|
||||||
Accumulated provision for uncollectible accounts
|
(4,054
|
)
|
(4,897
|
)
|
||||
Materials and supplies
|
304
|
322
|
||||||
Natural gas for sale
|
20,437
|
23,466
|
||||||
Prepaid taxes
|
3,682
|
14,205
|
||||||
Assets from risk management activities, net of collateral
|
7,473
|
—
|
||||||
Regulatory assets
|
10,186
|
5,663
|
||||||
Other current assets
|
218
|
3,207
|
||||||
Total current assets
|
87,394
|
74,656
|
||||||
Property, Plant, and Equipment:
|
||||||||
In service
|
1,140,213
|
1,047,564
|
||||||
Less accumulated depreciation
|
274,679
|
268,063
|
||||||
Plant in service, net of depreciation
|
865,534
|
779,501
|
||||||
Construction work in progress
|
54,994
|
44,883
|
||||||
Total property, plant, and equipment
|
920,528
|
824,384
|
||||||
Other Property and Investments:
|
||||||||
Goodwill
|
126,020
|
126,020
|
||||||
Deferred Charges and Other Assets:
|
||||||||
Assets from risk management activities, net of collateral
|
912
|
—
|
||||||
Regulatory assets
|
114,680
|
92,465
|
||||||
Other deferred charges and assets
|
7
|
26
|
||||||
Total deferred charges and other assets
|
115,599
|
92,491
|
||||||
Total Assets
|
$
|
1,249,541
|
$
|
1,117,551
|
Liabilities and Stockholder’s Equity
|
2016
|
2015
|
||||||
(in thousands)
|
||||||||
Current Liabilities:
|
||||||||
Due to affiliates
|
$
|
55,186
|
$
|
50,031
|
||||
Accounts payable
|
14,287
|
11,289
|
||||||
Customer deposits
|
9,686
|
10,684
|
||||||
Other accrued taxes
|
2,720
|
5,215
|
||||||
Accrued interest
|
167
|
166
|
||||||
Accrued compensation
|
1,781
|
2,765
|
||||||
Liabilities from risk management activities, net of collateral
|
—
|
12,291
|
||||||
Regulatory liabilities
|
16,276
|
5,106
|
||||||
Accrued environmental remediation
|
29,000
|
18,300
|
||||||
Other current liabilities
|
1,363
|
3,242
|
||||||
Total current liabilities
|
130,466
|
119,089
|
||||||
Long-Term Debt (see notes)
|
346,879
|
295,114
|
||||||
Deferred Credits and Other Liabilities:
|
||||||||
Accumulated deferred income taxes
|
210,826
|
187,880
|
||||||
Accrued pension and retiree welfare benefits
|
20,700
|
32,234
|
||||||
Other cost of removal obligations
|
55,873
|
56,413
|
||||||
Accrued environmental remediation
|
77,054
|
104,072
|
||||||
Other regulatory liabilities
|
2,256
|
1,355
|
||||||
Liabilities from risk management activities, net of collateral
|
—
|
1,567
|
||||||
Other deferred credits and liabilities
|
1,028
|
890
|
||||||
Total deferred credits and other liabilities
|
367,737
|
384,411
|
||||||
Total Liabilities
|
845,082
|
798,614
|
||||||
Stockholder’s Equity
|
||||||||
Paid-in capital
|
132,019
|
64,858
|
||||||
Retained earnings
|
272,440
|
274,040
|
||||||
Accumulated other comprehensive loss
|
—
|
(19,961
|
)
|
|||||
Total Stockholder’s Equity
|
404,459
|
318,937
|
||||||
Total Liabilities and Stockholder’s Equity
|
$
|
1,249,541
|
$
|
1,117,551
|
||||
Commitments and Contingent Matters
(see notes)
|
Paid-in Capital
|
Retained
Earnings |
Accumulated Other
Comprehensive Loss |
Total
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Balance at December 31, 2014
|
$
|
57,654
|
$
|
266,689
|
$
|
(20,540
|
)
|
$
|
303,803
|
|||||||
Net income
|
—
|
31,352
|
—
|
31,352
|
||||||||||||
Other comprehensive income
|
—
|
—
|
579
|
579
|
||||||||||||
Dividends to parent
|
—
|
(24,001
|
)
|
—
|
(24,001
|
)
|
||||||||||
Capital contributions from parent company
|
7,204
|
—
|
—
|
7,204
|
||||||||||||
Balance at December 31, 2015
|
$
|
64,858
|
$
|
274,040
|
$
|
(19,961
|
)
|
$
|
318,937
|
|||||||
Net income
|
—
|
21,894
|
—
|
21,894
|
||||||||||||
Other comprehensive loss
|
—
|
—
|
(8,485
|
)
|
(8,485
|
)
|
||||||||||
Reclassification of accumulated other comprehensive loss to regulatory assets
|
—
|
—
|
28,446
|
28,446
|
||||||||||||
Dividends to parent
|
—
|
(23,494
|
)
|
—
|
(23,494
|
)
|
||||||||||
Capital contributions from parent company
|
67,239
|
—
|
—
|
67,239
|
||||||||||||
Stock-based compensation
|
(78
|
)
|
—
|
—
|
(78
|
)
|
||||||||||
Balance at December 31, 2016
|
$
|
132,019
|
$
|
272,440
|
$
|
—
|
$
|
404,459
|
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Regulatory Assets
|
||||||||
Recoverable weather normalization adjustment
|
$
|
10,186
|
$
|
—
|
||||
Deferred natural gas costs
|
—
|
5,663
|
||||||
Regulatory assets – current
|
10,186
|
5,663
|
||||||
Recoverable environmental remediation costs
|
72,481
|
85,922
|
||||||
Recoverable pension and retiree welfare benefit costs
|
35,283
|
—
|
||||||
Unamortized losses on reacquired debt
|
4,425
|
4,867
|
||||||
Other
|
2,491
|
1,676
|
||||||
Regulatory assets – long-term
|
114,680
|
92,465
|
||||||
Total Regulatory Assets
|
$
|
124,866
|
$
|
98,128
|
||||
Regulatory Liabilities
|
||||||||
Accrued natural gas costs
|
$ |
14,898
|
$ |
—
|
||||
Other
|
1,378
|
5,106
|
||||||
Regulatory liabilities – current
|
16,276
|
5,106
|
||||||
Other cost of removal obligations
|
55,873
|
56,413
|
||||||
Regulatory income tax liability
|
673
|
907
|
||||||
Other
|
1,583
|
448
|
||||||
Regulatory liabilities – long-term
|
58,129
|
57,768
|
||||||
Total Regulatory Liabilities
|
$
|
74,405
|
$
|
62,874
|
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Distribution and transmission
|
$
|
1,056,686
|
$
|
964,796
|
||||
Information technology equipment and software
|
37,124
|
35,515
|
||||||
Storage facilities
|
7,193
|
7,112
|
||||||
Other
|
39,210
|
40,141
|
||||||
Total plant in service
|
$
|
1,140,213
|
$
|
1,047,564
|
Assumptions used to determine net periodic costs:
|
July 1, 2016 through
December 31, 2016
|
January 1, 2016 through
June 30, 2016
|
Year Ended Ended
December 31, 2015
|
|||||||||
Pension plans
|
||||||||||||
Discount rate - interest costs
(*)
|
3.21
|
%
|
4.00
|
%
|
4.20
|
%
|
||||||
Discount rate - service costs
(*)
|
4.07
|
4.80
|
4.20
|
|||||||||
Expected long-term return on plan assets
|
7.75
|
7.80
|
7.80
|
|||||||||
Annual salary increase
|
3.50
|
3.70
|
3.70
|
|||||||||
Other postretirement benefit plans
|
||||||||||||
Discount rate - interest costs
(*)
|
2.84
|
%
|
3.60
|
%
|
4.00
|
%
|
||||||
Discount rate - service costs
(*)
|
3.96
|
4.70
|
4.00
|
|||||||||
Expected long-term return on plan assets
|
5.93
|
6.60
|
7.80
|
|||||||||
Annual salary increase
|
3.50
|
3.70
|
3.70
|
Assumptions used to determine benefit obligations:
|
December 31, 2016
|
December 31, 2015
|
||||||
Pension plans
|
||||||||
Discount rate
|
4.39
|
%
|
4.60
|
%
|
||||
Annual salary increase
|
3.50
|
3.70
|
||||||
Other postretirement benefit plans
|
||||||||
Discount rate
|
4.15
|
%
|
4.40
|
%
|
||||
Annual salary increase
|
3.50
|
3.70
|
Initial Cost Trend
Rate |
Ultimate Cost
Trend Rate |
Year That Ultimate
Rate is Reached |
||||||||||
Pre-65
|
6.60
|
%
|
4.50
|
%
|
2038
|
|||||||
Post-65 medical
|
8.40
|
4.50
|
2038
|
|||||||||
Post-65 prescription
|
8.40
|
4.50
|
2038
|
July 1, 2016 through
December 31, 2016 |
January 1, 2016
through June 30, 2016 |
Year Ended Ended
December 31, 2015 |
||||||||||
(in thousands)
|
||||||||||||
Change in benefit obligation
|
||||||||||||
Benefit obligation at beginning of period
|
$
|
105,458
|
$
|
90,910
|
$
|
93,042
|
||||||
Service cost
|
990
|
861
|
1,713
|
|||||||||
Interest cost
|
2,044
|
2,238
|
4,788
|
|||||||||
Benefits paid
|
(3,592
|
)
|
(3,338
|
)
|
(6,812
|
)
|
||||||
Actuarial loss (gain)
|
(9,937
|
)
|
14,787
|
(1,821
|
)
|
|||||||
Benefit obligation at end of period
|
94,963
|
105,458
|
90,910
|
|||||||||
Change in plan assets
|
||||||||||||
Fair value of plan assets at beginning of period
|
60,687
|
61,044
|
63,830
|
|||||||||
Actual return on plan assets
|
3,706
|
2,981
|
4,026
|
|||||||||
Employer contributions
|
14,048
|
—
|
—
|
|||||||||
Benefits paid
|
(3,592
|
)
|
(3,338
|
)
|
(6,812
|
)
|
||||||
Fair value of plan assets at end of period
|
74,849
|
60,687
|
61,044
|
|||||||||
Accrued liability
|
$
|
20,114
|
$
|
44,771
|
$
|
29,866
|
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Other regulatory assets, deferred
|
$
|
30,484
|
$
|
—
|
||||
Employee benefit obligations
|
(20,114
|
)
|
(29,866
|
)
|
Prior Service Cost
|
Net (Gain) Loss
|
|||||||
(in thousands)
|
||||||||
Balance at December 31, 2016:
|
||||||||
Regulatory assets (liabilities)
|
$
|
(2,000
|
)
|
$
|
32,484
|
|||
Balance at December 31, 2015:
|
||||||||
Accumulated OCI
|
(2,848
|
)
|
30,637
|
|||||
Estimated amortization in net periodic cost in 2017:
|
||||||||
Regulatory assets (liabilities)
|
847
|
(2,903
|
)
|
Accumulated OCI
|
Regulatory Assets
|
|||||||
(in thousands)
|
||||||||
Balance at December 31, 2014:
|
$
|
29,172
|
$
|
—
|
||||
Net (gain) loss
|
997
|
—
|
||||||
Reclassification adjustments:
|
||||||||
Amortization of prior service costs
|
907
|
—
|
||||||
Amortization of net loss
|
(3,287
|
)
|
—
|
|||||
Total reclassification adjustments
|
(2,380
|
)
|
—
|
|||||
Total change
|
(1,383
|
)
|
—
|
|||||
Balance at December 31, 2015:
|
$
|
27,789
|
$
|
—
|
||||
Net (gain) loss
|
15,216
|
(9,816
|
)
|
|||||
Reclassification adjustments:
|
||||||||
Amortization of prior service costs
|
434
|
434
|
||||||
Amortization of net loss
|
(1,396
|
)
|
(2,177
|
)
|
||||
Reclassification from accumulated OCI to regulatory assets
|
(42,043
|
)
|
42,043
|
|||||
Total reclassification adjustments
|
(43,005
|
)
|
40,300
|
|||||
Total change
|
(27,789
|
)
|
30,484
|
|||||
Balance at December 31, 2016:
|
$
|
—
|
$
|
30,484
|
Years Ended December 31,
|
||||||||
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Service cost
|
$
|
1,851
|
$
|
1,713
|
||||
Interest cost
|
4,282
|
4,788
|
||||||
Expected return on plan assets
|
(6,249
|
)
|
(5,733
|
)
|
||||
Amortization:
|
||||||||
Prior service costs
|
(868
|
)
|
(907
|
)
|
||||
Net loss
|
3,573
|
3,287
|
||||||
Net periodic pension cost
|
$
|
2,589
|
$
|
3,148
|
Benefit Payments
|
||||
(in thousands)
|
||||
2017
|
$
|
8,286
|
||
2018
|
8,086
|
|||
2019
|
8,107
|
|||
2020
|
8,344
|
|||
2021
|
8,195
|
|||
2022 to 2026
|
40,610
|
July 1, 2016 through
December 31, 2016 |
January 1, 2016
through June 30, 2016 |
Year Ended December
31, 2015 |
||||||||||
(in thousands)
|
||||||||||||
Change in benefit obligation
|
||||||||||||
Benefit obligation at beginning of period
|
$
|
13,174
|
$
|
13,512
|
$
|
14,314
|
||||||
Service cost
|
55
|
47
|
114
|
|||||||||
Interest cost
|
187
|
218
|
553
|
|||||||||
Benefits paid
|
(293
|
)
|
(438
|
)
|
(636
|
)
|
||||||
Actuarial gain
|
(806
|
)
|
(165
|
)
|
(833
|
)
|
||||||
Benefit obligation at end of period
|
12,317
|
13,174
|
13,512
|
|||||||||
Change in plan assets
|
||||||||||||
Fair value of plan assets at beginning of period
|
12,829
|
12,737
|
13,600
|
|||||||||
Actual return (loss) on plan assets
|
348
|
92
|
(863
|
)
|
||||||||
Employer contributions
|
293
|
438
|
636
|
|||||||||
Benefits paid
|
(293
|
)
|
(438
|
)
|
(636
|
)
|
||||||
Fair value of plan assets at end of period
|
13,177
|
12,829
|
12,737
|
|||||||||
(Prepaid asset) accrued liability
|
$
|
(860
|
)
|
$
|
345
|
$
|
775
|
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Other regulatory assets, deferred
|
$
|
4,361
|
$
|
—
|
||||
Employee benefit asset (obligation)
|
860
|
(775
|
)
|
Prior Service Cost
|
Net (Gain) Loss
|
|||||||
(in thousands)
|
||||||||
Balance at December 31, 2016:
|
||||||||
Regulatory assets
|
$
|
—
|
$
|
4,361
|
||||
Balance at December 31, 2015:
|
||||||||
Accumulated OCI
|
$
|
2
|
$
|
5,546
|
Accumulated OCI
|
Regulatory Assets
|
|||||||
(in thousands)
|
||||||||
Balance at December 31, 2014:
|
$
|
5,058
|
$
|
—
|
||||
Net (gain) loss
|
891
|
—
|
||||||
Reclassification adjustments:
|
||||||||
Amortization of prior service costs
|
(44
|
)
|
—
|
|||||
Amortization of net loss
|
(357
|
)
|
—
|
|||||
Total reclassification adjustments
|
(401
|
)
|
—
|
|||||
Total change
|
490
|
—
|
||||||
Balance at December 31, 2015:
|
$
|
5,548
|
$
|
—
|
||||
Net (gain) loss
|
90
|
(933
|
)
|
|||||
Reclassification adjustments:
|
||||||||
Amortization of prior service costs
|
(1
|
)
|
(1
|
)
|
||||
Amortization of net loss
|
(137
|
)
|
(205
|
)
|
||||
Reclassification from accumulated OCI to regulatory assets
|
(5,500
|
)
|
5,500
|
|||||
Total reclassification adjustments
|
(5,638
|
)
|
5,294
|
|||||
Total change
|
(5,548
|
)
|
4,361
|
|||||
Balance at December 31, 2016:
|
$
|
—
|
$
|
4,361
|
Years Ended December 31,
|
||||||||
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Service cost
|
$
|
102
|
$
|
114
|
||||
Interest cost
|
405
|
553
|
||||||
Expected return on plan assets
|
(673
|
)
|
(1,015
|
)
|
||||
Amortization:
|
||||||||
Prior service costs
|
2
|
44
|
||||||
Net loss
|
342
|
357
|
||||||
Net periodic postretirement benefit cost
|
$
|
178
|
$
|
53
|
Benefit Payments
|
||||
(in thousands)
|
||||
2017
|
$
|
693
|
||
2018
|
745
|
|||
2019
|
790
|
|||
2020
|
826
|
|||
2021
|
861
|
|||
2022 to 2026
|
4,277
|
• |
Domestic equity.
A mix of large and small capitalization stocks with generally an equal distribution of value and growth attributes, managed both actively and through passive index approaches.
|
• |
International equity.
A mix of growth stocks and value stocks with both developed and emerging market exposure, managed both actively and through passive index approaches.
|
• |
Fixed income.
A mix of domestic and international bonds.
|
• |
Special situations.
Investments in opportunistic strategies with the objective of diversifying and enhancing returns and exploiting short-term inefficiencies as well as investments in promising new strategies of a longer-term nature.
|
• |
Real estate investments.
Investments in traditional private market equity-oriented investments (indirectly through pooled funds or partnerships) and in publicly traded real estate securities.
|
• |
Private equity.
Investments in private partnerships that invest in private or public securities typically through privately-negotiated and/or structured transactions, including leveraged buyouts, venture capital, and distressed debt.
|
• |
Domestic and international equity.
Investments in equity securities such as common stocks, American depositary receipts, and real estate investment trusts that trade on a public exchange are classified as Level 1 investments and are valued at the closing price in the active market. Equity investments with unpublished prices (i.e. pooled funds) are valued as Level 2, when the underlying holdings used to value the investment are comprised of Level 1 or Level 2 equity securities.
|
• |
Fixed income.
Investments in fixed income securities are generally classified as Level 2 investments and are valued based on prices reported in the market place. Additionally, the value of fixed income securities takes into consideration certain items such as broker quotes, spreads, yield curves, interest rates, and discount rates that apply to the term of a specific instrument.
|
• |
Real estate investments, private equity, and special situations investments.
Investments in real estate, private equity, and special situations are generally classified as Net Asset Value as a Practical Expedient, since the underlying assets typically do not have publicly available observable inputs. The fund manager values the assets using various inputs and techniques depending on the nature of the underlying investments. Techniques may include purchase multiples for comparable transactions, comparable public company trading multiples, discounted cash flow analysis, prevailing market capitalization rates, recent sales of comparable investments, and independent third-party appraisals. The fair value of partnerships is determined by aggregating the value of the underlying assets less liabilities.
|
Fair Value Measurements Using
|
||||||||||||||||
As of December 31, 2016
|
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
Significant Other
Observable Inputs (Level 2) |
Net Asset Value
as a Practical Expedient (NAV) |
Total
|
||||||||||||
(in thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Domestic equity
(*)
|
$
|
10,800
|
$
|
26,103
|
$
|
—
|
$
|
36,903
|
||||||||
International equity
(*)
|
—
|
14,117
|
—
|
14,117
|
||||||||||||
Fixed income:
|
||||||||||||||||
U.S. Treasury, government, and agency bonds
|
—
|
6,482
|
—
|
6,482
|
||||||||||||
Corporate bonds
|
—
|
3,099
|
—
|
3,099
|
||||||||||||
Pooled funds
|
—
|
5,039
|
—
|
5,039
|
||||||||||||
Cash equivalents and other
|
931
|
375
|
6,328
|
7,634
|
||||||||||||
Real estate investments
|
275
|
—
|
1,110
|
1,385
|
||||||||||||
Private equity
|
—
|
—
|
190
|
190
|
||||||||||||
Total
|
$
|
12,006
|
$
|
55,215
|
$
|
7,628
|
$
|
74,849
|
Pension plans
|
||||||||||||||||||||
As of December 31, 2015
|
Level 1
|
Level 2
|
Level 3
|
Total
|
% of total
|
|||||||||||||||
(in thousands)
|
||||||||||||||||||||
Cash
|
$
|
300
|
$
|
21
|
$
|
—
|
$
|
321
|
1
|
%
|
||||||||||
Equity securities:
|
||||||||||||||||||||
U.S. large cap
(a)
|
$
|
5,363
|
$
|
14,371
|
$
|
—
|
$
|
19,734
|
32
|
%
|
||||||||||
U.S. small cap
(a)
|
4,115
|
1,740
|
—
|
5,855
|
9
|
|||||||||||||||
International companies
(b)
|
—
|
9,017
|
—
|
9,017
|
15
|
|||||||||||||||
Emerging markets
(c)
|
—
|
1,992
|
—
|
1,992
|
3
|
|||||||||||||||
Total equity securities
|
$
|
9,478
|
$
|
27,120
|
$
|
—
|
$
|
36,598
|
59
|
%
|
||||||||||
Fixed income securities:
|
||||||||||||||||||||
Corporate bonds
(d)
|
$
|
—
|
$
|
6,528
|
$
|
—
|
$
|
6,528
|
10
|
%
|
||||||||||
Other (or gov’t/muni bonds)
|
—
|
10,881
|
—
|
10,881
|
18
|
|||||||||||||||
Total fixed income securities
|
$
|
—
|
$
|
17,409
|
$
|
—
|
$
|
17,409
|
28
|
%
|
||||||||||
Other types of investments:
|
||||||||||||||||||||
Global hedged equity
(e)
|
$
|
—
|
$
|
—
|
$
|
2,900
|
$
|
2,900
|
5
|
%
|
||||||||||
Absolute return
(f)
|
—
|
—
|
3,075
|
3,075
|
5
|
|||||||||||||||
Private capital
(g)
|
—
|
—
|
1,419
|
1,419
|
2
|
|||||||||||||||
Total other investments
|
$
|
—
|
$
|
—
|
$
|
7,394
|
$
|
7,394
|
12
|
%
|
||||||||||
Total assets at fair value
|
$
|
9,778
|
$
|
44,550
|
$
|
7,394
|
$
|
61,722
|
100
|
%
|
||||||||||
% of fair value hierarchy
|
16
|
%
|
72
|
%
|
12
|
%
|
100
|
%
|
(a) |
Includes funds that invest primarily in U.S. common stocks.
|
(b) |
Includes funds that invest primarily in foreign equity and equity-related securities.
|
(c) |
Includes funds that invest primarily in common stocks of emerging markets.
|
(d) |
Includes funds that invest primarily in investment grade debt and fixed income securities.
|
(e) |
Includes funds that invest in limited/general partnerships, managed accounts, and other investment entities issued by non-traditional firms or “hedge funds.”
|
(f) |
Includes funds that invest primarily in investment vehicles and commodity pools as a “fund of funds.”
|
(g) |
Includes funds that invest in private equity and small buyout funds, partnership investments, direct investments, secondary investments, directly/indirectly in real estate and may invest in equity securities of real estate related companies, real estate mortgage loans, and real estate mezzanine loans.
|
Global Hedged
Equity |
Absolute Return
|
Private Capital
|
Total
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Balance at December 31, 2014
|
$
|
2,043
|
$
|
2,959
|
$
|
1,409
|
$
|
6,411
|
||||||||
Actual return on plan assets
|
(82
|
)
|
116
|
(71
|
)
|
(37
|
)
|
|||||||||
Purchases
|
975
|
—
|
—
|
975
|
||||||||||||
Sales
|
(36
|
)
|
—
|
81
|
45
|
|||||||||||
Balance at December 31, 2015
|
$
|
2,900
|
$
|
3,075
|
$
|
1,419
|
$
|
7,394
|
Fair Value Measurements Using
|
||||||||||||||||
Quoted Prices
in Active Markets for Identical Assets |
Significant Other
Observable Inputs |
Net Asset Value
as a Practical Expedient |
||||||||||||||
As of December 31, 2016
|
(Level 1)
|
(Level 2)
|
(NAV)
|
Total
|
||||||||||||
(in thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Domestic equity
(*)
|
$
|
315
|
$
|
7,264
|
$
|
—
|
$
|
7,579
|
||||||||
International equity
(*)
|
—
|
2,206
|
—
|
2,206
|
||||||||||||
Fixed income:
|
||||||||||||||||
U.S. Treasury, government, and agency bonds
|
—
|
63
|
—
|
63
|
||||||||||||
Corporate bonds
|
—
|
28
|
—
|
28
|
||||||||||||
Pooled funds
|
—
|
2,942
|
—
|
2,942
|
||||||||||||
Cash equivalents and other
|
99
|
—
|
209
|
308
|
||||||||||||
Real estate investments
|
8
|
—
|
37
|
45
|
||||||||||||
Private equity
|
—
|
—
|
6
|
6
|
||||||||||||
Total
|
$
|
422
|
$
|
12,503
|
$
|
252
|
$
|
13,177
|
Other postretirement plans
|
||||||||||||||||||||
As of December 31, 2015
|
Level 1
|
Level 2
|
Level 3
|
Total
|
%
of total
|
|||||||||||||||
(in thousands)
|
||||||||||||||||||||
Cash
|
$
|
122
|
$
|
—
|
$
|
—
|
$
|
122
|
1
|
%
|
||||||||||
Equity securities:
|
||||||||||||||||||||
U.S. large cap
(a)
|
$
|
—
|
$
|
6,621
|
$
|
—
|
$
|
6,621
|
58
|
%
|
||||||||||
International companies
(b)
|
—
|
1,995
|
—
|
1,995
|
17
|
|||||||||||||||
Total equity securities
|
$
|
—
|
$
|
8,616
|
$
|
—
|
$
|
8,616
|
75
|
%
|
||||||||||
Fixed income securities:
|
||||||||||||||||||||
Corporate bonds
(c)
|
$
|
—
|
$
|
2,794
|
$
|
—
|
$
|
2,794
|
24
|
%
|
||||||||||
Total fixed income securities
|
$
|
—
|
$
|
2,794
|
$
|
—
|
$
|
2,794
|
24
|
%
|
||||||||||
Total assets at fair value
|
$
|
122
|
$
|
11,410
|
$
|
—
|
$
|
11,532
|
100
|
%
|
||||||||||
% of fair value hierarchy
|
1
|
%
|
99
|
%
|
—
|
%
|
100
|
%
|
(a) |
Includes funds that invest primarily in U.S. common stocks.
|
(b) |
Includes funds that invest primarily in foreign equity and equity-related securities.
|
(c) |
Includes funds that invest primarily in common stocks of emerging markets.
|
• |
provide rate credits of $17.5 million to its customers; and
|
• |
file a rate case no later than September 1, 2016, with another rate case no later than three years after the 2016 rate case.
|
(in thousands)
|
||||
December 31, 2016
|
$
|
5,535
|
||
December 31, 2015
|
3,844
|
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Federal —
|
||||||||
Current
|
$
|
5,630
|
$
|
(852
|
)
|
|||
Deferred
|
6,661
|
17,430
|
||||||
12,291
|
16,578
|
|||||||
State —
|
||||||||
Current
|
1,302
|
969
|
||||||
Deferred
|
1,277
|
2,835
|
||||||
2,579
|
3,804
|
|||||||
Amortization of investment tax credits
|
(119
|
)
|
(152
|
)
|
||||
Total
|
$
|
14,751
|
$
|
20,230
|
2016
|
2015
|
|||||||
(in thousands)
|
||||||||
Deferred tax liabilities —
|
||||||||
Accelerated depreciation
|
$
|
208,605
|
$
|
185,274
|
||||
Property basis differences
|
23,262
|
25,767
|
||||||
Regulatory assets associated with employee benefit obligations
|
15,525
|
—
|
||||||
Other
|
7,558
|
11,825
|
||||||
Total
|
254,950
|
222,866
|
||||||
Deferred tax assets —
|
||||||||
Federal net operating loss
|
8,275
|
—
|
||||||
Federal effect of state deferred taxes
|
12,426
|
10,609
|
||||||
Employee benefit obligations
|
15,566
|
18,243
|
||||||
Bad debt and insurance reserves
|
1,936
|
2,307
|
||||||
Other
|
5,921
|
6,817
|
||||||
Total
|
44,124
|
37,976
|
||||||
Accumulated deferred income taxes, net
|
$
|
210,826
|
$
|
184,890
|
Years Ended December 31,
|
||||||||
2016
|
2015
|
|||||||
Federal statutory rate
|
35.0
|
%
|
35.0
|
%
|
||||
State income tax, net of federal deduction
|
5.9
|
5.9
|
||||||
Other
|
(0.6
|
)
|
(1.7
|
)
|
||||
Effective income tax rate
|
40.3
|
%
|
39.2
|
%
|
December 31, 2016
|
December 31, 2015
|
|||||||||||||||||||
Dollars in thousands
|
Year(s) due
|
Weighted average
interest rate |
Outstanding
|
Weighted average
interest rate |
Outstanding
|
|||||||||||||||
Gas facility revenue bonds
|
2022-2033
|
1.3
|
%
|
$
|
180,100
|
0.9
|
%
|
$
|
180,100
|
|||||||||||
Affiliate promissory note
|
2034
|
7.2
|
167,528
|
10.0
|
115,830
|
|||||||||||||||
Total principal long-term debt
|
|
|
|
4.1
|
%
|
$
|
347,628
|
|
$
|
4.5
|
% |
295,930
|
||||||||
Unamortized debt issuance costs
|
|
n/a
|
|
$
|
(749
|
)
|
$
|
n/a
|
|
(816
|
) | |||||||||
Total debt
|
|
|
n/a
|
$
|
346,879
|
$
|
n/a
|
295,114
|
2017
|
2018-2019
|
2020-2021
|
After 2021
|
Total
|
||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Long-term debt
(a) _
|
||||||||||||||||||||
Principal
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
346,879
|
346,879
|
|||||||||||
Interest
|
2,313
|
4,625
|
4,625
|
16,969
|
28,532
|
|||||||||||||||
Pipeline charges, storage capacity, and gas supply
(b)
|
50,341
|
86,810
|
71,549
|
256,587
|
465,287
|
|||||||||||||||
Operating leases
(c)
|
4,082
|
7,946
|
8,269
|
1,394
|
21,691
|
|||||||||||||||
Asset management agreements
(d)
|
4,250
|
6,375
|
—
|
—
|
10,625
|
|||||||||||||||
Standby letters of credit and performance/surety bonds
(e)
|
576
|
116
|
—
|
—
|
692
|
|||||||||||||||
Other purchase commitments
(f)
|
28,875
|
1,000
|
—
|
—
|
29,875
|
|||||||||||||||
Total
|
$
|
90,437
|
$
|
106,872
|
$
|
84,443
|
$
|
621,829
|
$
|
903,581
|
(a) |
Amounts are reflected based on final maturity dates. The Company plans to continue, when economically feasible, to retire higher-cost securities and replace these obligations with lower-cost capital if market conditions permit. Variable rate interest obligations are estimated based on rates at January 1, 2017 and do not include interest on the affiliated promissory note.
|
(b) |
Includes charges recoverable through a natural gas cost recovery mechanism, subject to review by the New Jersey BPU.
|
(c) |
Certain operating leases have provisions for step rent or escalation payments and certain lease concessions are accounted for by recognizing the future minimum lease payments on a straight-line basis over the respective minimum lease terms. However, this accounting treatment does not affect the future annual operating lease cash obligations as shown herein. The Company’s operating leases are primarily related to equipment purchases and real estate licenses.
|
(d) |
Represent fixed-fee minimum payments for Sequent’s affiliated asset management agreements.
|
(e) |
Guarantees are provided to certain municipalities and other agencies in support of payment obligations.
|
(f) |
Primarily consists of contractual environmental remediation liabilities that are generally recoverable through base rates or rate rider mechanisms.
|
Fair Value Measurements Using
|
||||||||||||||||||||
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
Net Asset
Value as a Practical Expedient (NAV) |
Total
|
||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Assets:
|
||||||||||||||||||||
Energy-related derivatives
|
$
|
—
|
$
|
8,385
|
$
|
—
|
$
|
—
|
$
|
8,385
|
Fair Value Measurements Using
|
||||||||||||||||||||
Quoted Prices
in Active Markets for Identical Assets (Level 1) |
Significant
Other Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
Net Asset
Value as a Practical Expedient (NAV) |
Total
|
||||||||||||||||
(in thousands)
|
||||||||||||||||||||
Liabilities:
|
||||||||||||||||||||
Energy-related derivatives
|
$
|
—
|
$
|
13,858
|
$
|
—
|
$
|
—
|
$
|
13,858
|
• |
Regulatory Hedges
- Energy-related derivative contracts which are designated as regulatory hedges relate primarily to the Company’s fuel-hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then are included in the cost of natural gas as the underlying natural gas is used in operations and ultimately recovered through cost recovery clauses.
|
• |
Cash Flow Hedges
- Gains and losses on energy-related derivatives designated as cash flow hedges (which are mainly used to hedge anticipated purchases and sales) are initially deferred in OCI before being recognized in the statements of income in the same period as the hedged transactions are reflected in earnings.
|
• |
Not Designated
- Gains and losses on energy-related derivative contracts that are not designated or fail to qualify as hedges are recognized in the statements of income in the period of change.
|
Asset Derivatives
|
Liability Derivatives
|
|||||||||||||||||
Derivative
Category |
Balance Sheet Location
|
December 31,
2016
|
December 31,
2015
|
Balance Sheet
Location
|
December 31,
2016
|
December 31,
2015
|
||||||||||||
(in thousands)
|
(in thousands)
|
|||||||||||||||||
Derivatives designated as hedging instruments for regulatory purposes
|
||||||||||||||||||
Energy-related derivatives:
|
||||||||||||||||||
Assets from risk management activities – current
|
$
|
7,473
|
$
|
—
|
Liabilities from risk management activities – current
|
$
|
—
|
$
|
12,291
|
|||||||||
Assets from risk management activities – deferred
|
912
|
—
|
Liabilities from risk management activities – deferred
|
—
|
1,567
|
|||||||||||||
Total derivatives designated as hedging instruments for regulatory purposes
|
$
|
8,385
|
$
|
—
|
$
|
—
|
$
|
13,858
|
||||||||||
Gross amounts of recognized assets and liabilities
(a)
|
$
|
8,385
|
$
|
—
|
$
|
—
|
$
|
13,858
|
||||||||||
Gross amounts offset in the balance sheet
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||
Net amounts of derivatives assets and liabilities, presented in the balance sheet
(b)
|
$
|
8,385
|
$
|
—
|
$
|
—
|
$
|
13,858
|
Unrealized Losses
|
Unrealized Gains
|
|||||||||||||||||
Derivative
Category
|
Balance Sheet
Location
|
December 31,
2016
|
December 31,
2015
|
Balance Sheet
Location
|
December 31,
2016
|
December 31,
2015
|
||||||||||||
|
(in thousands)
|
(in thousands)
|
||||||||||||||||
Energy-related derivatives:
|
||||||||||||||||||
Other regulatory assets, current
|
$
|
—
|
$
|
(12,291
|
)
|
Other regulatory liabilities, current
|
$
|
7,473
|
$
|
—
|
||||||||
Other regulatory assets, deferred
|
—
|
(1,567
|
)
|
Other regulatory liabilities, deferred
|
912
|
—
|
||||||||||||
Total energy-related derivative gains (losses)
|
$
|
—
|
$
|
(13,858
|
)
|
$
|
8,385
|
$
|
—
|
Profit sharing / fees payments
|
|||||||||||||
Expiration date
|
Type of fee structure
|
Annual fee
|
2016
|
2015
|
|||||||||
(in thousands)
|
|||||||||||||
March 2019
|
Tiered
|
(*)
|
$
|
15,043
|
$
|
28,617
|
(*) |
In March 2014, the New Jersey BPU authorized the renewal of the asset management agreement between Elizabethtown Gas and Sequent for five years. This renewed agreement began on April 1, 2014 and requires Sequent to pay minimum annual fees of $4.25 million to Elizabethtown Gas and includes tiered margin sharing levels between Elizabethtown Gas and Sequent.
|
Page Number
|
|||
Condensed Financial Statements (Unaudited)
|
|||
Condensed Statements of Income
|
3
|
||
Condensed Statements of Comprehensive Income
|
3
|
||
Condensed Statements of Cash Flows
|
4
|
||
Condensed Balance Sheets
|
5
|
||
Notes to Condensed Financial Statements (Unaudited)
|
|||
A
|
Introduction
|
7
|
|
B
|
Contingencies and Regulatory Matters
|
8
|
|
C
|
Revenue From Contracts With Customers
|
9
|
|
D
|
Stockholder's Equity
|
10
|
|
E
|
Financing
|
10
|
|
F
|
Retirement Benefits
|
11
|
|
G
|
Income Taxes
|
12
|
|
H
|
Derivatives
|
12
|
|
I
|
Disposition
|
14
|
|
J
|
Affiliate Transactions
|
15
|
|
K
|
Subsequent Events
|
16
|
For The Six Months Ended June 30,
|
||||||||
2018
|
2017
|
|||||||
(in thousands)
|
||||||||
Operating Revenues:
|
||||||||
Natural gas revenues
|
$
|
190,655
|
$
|
169,441
|
||||
Alternative revenue programs
|
(6,337
|
)
|
4,667
|
|||||
Total operating revenues
|
184,318
|
174,108
|
||||||
Operating Expenses:
|
||||||||
Cost of natural gas
|
87,472
|
79,922
|
||||||
Other operations and maintenance
|
35,464
|
32,722
|
||||||
Depreciation and amortization
|
13,826
|
13,249
|
||||||
Taxes other than income taxes
|
1,713
|
3,177
|
||||||
Total operating expenses
|
138,475
|
129,070
|
||||||
Operating Income
|
45,843
|
45,038
|
||||||
Other Income and (Expense):
|
||||||||
Interest expense, net of amounts capitalized
|
(10,165
|
)
|
(7,738
|
)
|
||||
Other income (expense), net
|
348
|
1,785
|
||||||
Total other income and (expense)
|
(9,817
|
)
|
(5,953
|
)
|
||||
Earnings Before Income Taxes
|
36,026
|
39,085
|
||||||
Income taxes
|
10,586
|
16,481
|
||||||
Net Income
|
$
|
25,440
|
$
|
22,604
|
For The Six Months Ended June 30,
|
||||||||
2018
|
2017
|
|||||||
(in thousands)
|
||||||||
Net Income
|
$
|
25,440
|
$
|
22,604
|
||||
Other comprehensive income, net of tax
|
—
|
—
|
||||||
Comprehensive Income
|
$
|
25,440
|
$
|
22,604
|
For The Six Months Ended June 30,
|
||||||||
2018
|
2017
|
|||||||
(in thousands)
|
||||||||
Operating Activities:
|
||||||||
Net income
|
$
|
25,440
|
$
|
22,604
|
||||
Adjustments to reconcile net income to net cash provided from operating activities —
|
||||||||
Depreciation and amortization, total
|
13,826
|
13,249
|
||||||
Deferred income taxes
|
1,077
|
8,215
|
||||||
Mark-to-market adjustments
|
(2,006
|
)
|
7,665
|
|||||
Other, net
|
1,634
|
(17,046
|
)
|
|||||
Changes in certain current assets and liabilities —
|
||||||||
—Receivables
|
25,680
|
22,944
|
||||||
—Natural gas for sale
|
(515
|
)
|
(816
|
)
|
||||
—Prepaid taxes
|
1,486
|
348
|
||||||
—Other current assets
|
2,311
|
(4,737
|
)
|
|||||
—Accounts payable
|
198,293
|
38,200
|
||||||
—Accrued compensation
|
848
|
56
|
||||||
—Other current liabilities
|
6,925
|
(7,344
|
)
|
|||||
Net cash provided from operating activities
|
274,999
|
83,338
|
||||||
Investing Activities:
|
||||||||
Property additions
|
(62,990
|
)
|
(52,988
|
)
|
||||
Cost of removal, net of salvage
|
(3,577
|
)
|
(732
|
)
|
||||
Change in construction payables, net
|
396
|
(4,656
|
)
|
|||||
Other investing activities
|
—
|
228
|
||||||
Net cash used for investing activities
|
(66,171
|
)
|
(58,148
|
)
|
||||
Financing Activities:
|
||||||||
Redemptions - gas facility revenue bonds
|
(180,100
|
)
|
—
|
|||||
Dividends to parent
|
(28,722
|
)
|
(25,190
|
)
|
||||
Other
|
(6
|
)
|
—
|
|||||
Net cash used for financing activities
|
(208,828
|
)
|
(25,190
|
)
|
||||
Net Change in Cash and Cash Equivalents
|
—
|
—
|
||||||
Cash and Cash Equivalents at Beginning of Period
|
—
|
—
|
||||||
Cash and Cash Equivalents at End of Period
|
$
|
—
|
$
|
—
|
||||
Supplemental Cash Flow Information:
|
||||||||
Cash paid during the period for —
|
||||||||
Interest (net of $219 and $200 capitalized for 2018 and 2017, respectively)
|
$
|
7,684
|
$
|
4,628
|
||||
Income taxes, net
|
694
|
1,062
|
||||||
Noncash Transactions — Accrued property additions at end of period
|
7,512
|
5,395
|
Assets
|
At June 30, 2018
|
At December 31, 2017
|
||||||
(in thousands)
|
||||||||
Receivables —
|
||||||||
Customer accounts receivable
|
$
|
30,089
|
$
|
29,078
|
||||
Unbilled revenues
|
4,992
|
35,209
|
||||||
Other accounts and notes receivable
|
10,185
|
6,659
|
||||||
Accumulated provision for uncollectible accounts
|
(6,441
|
)
|
(4,904
|
)
|
||||
Materials and supplies
|
321
|
307
|
||||||
Natural gas for sale
|
21,428
|
20,913
|
||||||
Prepaid taxes
|
23,460
|
21,544
|
||||||
Regulatory assets, current
|
8,845
|
7,922
|
||||||
Other current assets
|
241
|
141
|
||||||
Total current assets
|
93,120
|
116,869
|
||||||
Property, Plant, and Equipment:
|
||||||||
In service
|
1,338,589
|
1,290,302
|
||||||
Less: Accumulated depreciation
|
266,030
|
267,019
|
||||||
Plant in service, net of depreciation
|
1,072,559
|
1,023,283
|
||||||
Construction work in progress
|
27,889
|
32,052
|
||||||
Total property, plant, and equipment
|
1,100,448
|
1,055,335
|
||||||
Other Property and Investments:
|
||||||||
Goodwill
|
126,020
|
126,020
|
||||||
Deferred Charges and Other Assets:
|
||||||||
Regulatory assets, deferred
|
119,954
|
131,590
|
||||||
Other deferred charges and assets
|
40
|
40
|
||||||
Total deferred charges and other assets
|
119,994
|
131,630
|
||||||
Total Assets
|
$
|
1,439,582
|
$
|
1,429,854
|
Liabilities and Stockholder's Equity
|
At June 30, 2018
|
At December 31, 2017
|
||||||
(in thousands)
|
||||||||
Current Liabilities:
|
||||||||
Due to affiliates
|
$
|
280,911
|
$
|
81,903
|
||||
Accounts payable
|
13,282
|
12,751
|
||||||
Customer deposits
|
5,233
|
7,299
|
||||||
Accrued taxes —
|
||||||||
Other accrued taxes
|
3,542
|
140
|
||||||
Accrued compensation
|
4,294
|
3,445
|
||||||
Regulatory liabilities, current
|
17,898
|
10,197
|
||||||
Accrued environmental remediation, current
|
7,100
|
9,700
|
||||||
Other current liabilities
|
1,697
|
3,200
|
||||||
Total current liabilities
|
333,957
|
128,635
|
||||||
Long-term Debt
(See notes)
|
268,406
|
447,825
|
||||||
Deferred Credits and Other Liabilities:
|
||||||||
Accumulated deferred income taxes
|
133,460
|
130,889
|
||||||
Deferred credits related to income tax
|
119,572
|
121,041
|
||||||
Other cost of removal obligations
|
50,391
|
57,819
|
||||||
Accrued environmental remediation, deferred
|
70,191
|
75,437
|
||||||
Employee benefit obligations
|
18,177
|
18,909
|
||||||
Other deferred credits and liabilities
|
1,310
|
1,894
|
||||||
Total deferred credits and other liabilities
|
393,101
|
405,989
|
||||||
Total Liabilities
|
995,464
|
982,449
|
||||||
Stockholder's Equity:
|
||||||||
Common stock, no par value; 12,807,111 shares authorized, issued, and outstanding
|
—
|
—
|
||||||
Paid-in capital
|
166,372
|
166,377
|
||||||
Retained earnings
|
277,746
|
281,028
|
||||||
Total Stockholder's Equity
|
444,118
|
447,405
|
||||||
Total Liabilities and Stockholder's Equity
|
$
|
1,439,582
|
$
|
1,429,854
|
(A)
|
INTRODUCTION
|
(B)
|
CONTINGENCIES AND REGULATORY MATTERS
|
(C)
|
REVENUE FROM CONTRACTS WITH CUSTOMERS
|
For the Six Months
Ended June 30, 2018
|
||||
(in thousands)
|
||||
Operating revenues
|
||||
Natural gas distribution revenues
|
||||
Residential
|
$
|
130,841
|
||
Commercial
|
37,033
|
|||
Transportation
|
22,022
|
|||
Industrial
|
1,647
|
|||
Other
(a)
|
(888
|
)
|
||
Alternative revenue programs
(b)
|
(6,337
|
)
|
||
Total operating revenues
|
$
|
184,318
|
(a)
|
Other operating revenues include $312 thousand of revenues not accounted for under ASC 606.
|
(b)
|
See Note 1 to the 2017 Financial Statements under "Revenues" for additional information on Elizabethtown Gas' alternative revenue programs
|
(D)
|
STOCKHOLDER'S EQUITY
|
Number of Common
Shares Issued
|
Total Stockholder's
Equity
|
|||||||
(in thousands)
|
(in thousands)
|
|||||||
Balance at December 31, 2017
|
12,807
|
$
|
447,405
|
|||||
Net income
|
—
|
25,440
|
||||||
Dividends to parent
|
—
|
(28,722
|
)
|
|||||
Stock-based compensation
|
—
|
(5
|
)
|
|||||
Balance at June 30, 2018
|
12,807
|
$
|
444,118
|
|||||
Balance at December 31, 2016
|
12,807
|
$
|
404,459
|
|||||
Net income
|
—
|
22,604
|
||||||
Dividends to parent
|
—
|
(25,190
|
)
|
|||||
Balance at June 30, 2017
|
12,807
|
$
|
401,873
|
(E)
|
FINANCING
|
(F)
|
RETIREMENT BENEFITS
|
Six Months Ended June 30,
|
||||||||
2018
|
2017
|
|||||||
(in thousands)
|
||||||||
Service cost
|
$
|
916
|
$
|
696
|
||||
Interest cost
|
1,803
|
2,192
|
||||||
Expected return on plan assets
|
(2,849
|
)
|
(3,335
|
)
|
||||
Amortization:
|
||||||||
Regulatory asset
|
1,345
|
—
|
||||||
Prior service costs
|
(5
|
)
|
(424
|
)
|
||||
Net (gain) loss
|
(7
|
)
|
1,006
|
|||||
Net periodic pension cost
|
$
|
1,203
|
$
|
135
|
Six Months Ended June 30,
|
||||||||
2018
|
2017
|
|||||||
(in thousands)
|
||||||||
Service cost
|
$
|
58
|
$
|
50
|
||||
Interest cost
|
213
|
208
|
||||||
Expected return on plan assets
|
(374
|
)
|
(327
|
)
|
||||
Amortization:
|
||||||||
Regulatory asset
|
279
|
—
|
||||||
Prior service costs
|
25
|
—
|
||||||
Net (gain) loss
|
(5
|
)
|
88
|
|||||
Net periodic postretirement benefit cost
|
$
|
196
|
$
|
19
|
(G)
|
INCOME TAXES
|
(H)
|
DERIVATIVES
|
• |
Regulatory Hedges
- Energy-related derivative contracts which were designated as regulatory hedges related primarily to Elizabethtown Gas' fuel-hedging programs, where gains and losses are initially recorded as regulatory liabilities and assets, respectively, and then included in the cost of natural gas as the underlying natural gas was used in operations and ultimately recovered through cost recovery clauses.
|
• |
Cash Flow Hedges
- Gains and losses on energy-related derivatives designated as cash flow hedges (which were mainly used to hedge anticipated purchases and sales) are initially deferred in other comprehensive income (OCI) before being recognized in the statements of income in the same period and in the same income statement line item as the earnings effect of the hedged transactions.
|
• |
Not Designated
- Gains and losses on energy-related derivative contracts that were not designated or fail to qualify as hedges were recognized in the statements of income as incurred.
|
As of December 31, 2017
|
|||||||||
Derivative
Category
|
Balance Sheet Location
|
Assets
|
Liabilities
|
||||||
(in thousands)
|
|||||||||
Derivatives designated as hedging instruments for regulatory purposes
|
|||||||||
Energy-related derivatives:
|
|||||||||
Assets from risk management activities/Liabilities from risk management activities – current
|
$
|
—
|
$
|
1,694
|
|||||
Other deferred charges and assets/Other deferred credits and liabilities
|
—
|
312
|
|||||||
Total derivatives designated as hedging instruments for regulatory purposes
|
$
|
—
|
$
|
2,006
|
|||||
Gross amounts of recognized
|
$
|
—
|
$
|
2,006
|
|||||
Gross amounts offset
|
$
|
—
|
$
|
—
|
|||||
Net amounts recognized in the Balance Sheets
|
$
|
—
|
$
|
2,006
|
Unrealized Losses
|
Unrealized Gains
|
||||||||
Derivative Category
|
Balance Sheet Location
|
December 31, 2017
|
Balance Sheet Location
|
December 31, 2017
|
|||||
(in thousands)
|
(in thousands)
|
||||||||
Energy-related derivatives:
|
|||||||||
Regulatory assets, current
|
$
|
(1,694
|
)
|
Regulatory liabilities, current
|
$
|
—
|
|||
Regulatory assets, deferred
|
(312
|
)
|
Other deferred credits and liabilities
|
—
|
|||||
Total energy-related derivative gains (losses)
|
$
|
(2,006
|
)
|
$
|
—
|
(I)
|
DISPOSITION
|
At June 30, 2018
|
||||
(in thousands)
|
||||
Current assets
|
$
|
69,566
|
||
Total property, plant, and equipment
|
1,100,448
|
|||
Goodwill
|
126,020
|
|||
Other non-current assets
|
119,994
|
|||
Total assets sold to SJI
|
$
|
1,416,028
|
||
Current liabilities
|
$
|
47,219
|
||
Non-current liabilities
|
259,641
|
|||
Total liabilities sold to SJI
|
$
|
306,860
|
(J)
|
AFFILIATE TRANSACTIONS
|
Profit sharing / fees payments
|
|||||||||||||
Expiration date
|
Type of fee
structure
|
Annual fee
|
June 30, 2018
|
December 31, 2017
|
|||||||||
(in thousands)
|
|||||||||||||
March 2019
|
Tiered
|
(*)
|
$
|
2,125
|
$
|
11,195
|
(*) |
In March 2014, the New Jersey BPU authorized the renewal of the asset management agreement between Elizabethtown Gas and Sequent for five years. This renewed agreement began on April 1, 2014 and requires Sequent to pay minimum annual fees of $4.25 million to Elizabethtown Gas and includes tiered margin sharing levels between Elizabethtown Gas and Sequent.
|
(K)
|
SUBSEQUENT EVENTS
|
· |
the audited consolidated financial statements of the Company as of and for the year ended December 31, 2017 and the related notes, included in the Company’s Annual Report on Form 10-K/A filed with the SEC on March 1, 2018;
|
· |
the unaudited consolidated financial statements of the Company as of and for the six months ended June 30, 2018 and the related notes, included in the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 8, 2018;
|
· |
the audited financial statements of the Elizabethtown Business as of and for the year ended December 31, 2017 and the related notes, which are included in the Company’s Amended Current Report on Form 8-K filed with the SEC on April 17, 2018;
|
· |
The unaudited financial statements of the Elizabethtown Business as of and for the six months ended June 30, 2018 and the related notes, which are included within this filing.
|
Historical
SJI
|
Historical
ETG
|
ETG
Acquisition
Adjustments
|
Financing &
Other
Adjustments
|
Pro Forma
|
||||||||||||||||||
(Note 3)
|
(Note 3)
|
(Note 4)
|
(Note 5)
|
|||||||||||||||||||
Assets
|
||||||||||||||||||||||
Property, Plant and Equipment:
|
||||||||||||||||||||||
Utility Plant, at original cost
|
$
|
2,748,076
|
$
|
1,366,478
|
$
|
(36,385
|
)
|
(i)
|
$
|
-
|
$
|
4,078,169
|
||||||||||
Accumulated Depreciation
|
(509,797
|
)
|
(266,030
|
)
|
12,728
|
(i)
|
-
|
(763,099
|
)
|
|||||||||||||
Nonutility Property and Equipment, net
|
123,029
|
-
|
-
|
-
|
123,029
|
|||||||||||||||||
Property, Plant and Equipment — Net
|
2,361,308
|
1,100,448
|
(23,657
|
)
|
-
|
3,438,099
|
||||||||||||||||
Investments:
|
||||||||||||||||||||||
Total Investments
|
83,126
|
-
|
-
|
-
|
83,126
|
|||||||||||||||||
Current Assets:
|
||||||||||||||||||||||
Cash and Cash Equivalents
|
22,420
|
-
|
-
|
-
|
22,420
|
|||||||||||||||||
Restricted Cash
|
1,740,380
|
-
|
(1,716,700
|
)
|
(a)
|
-
|
23,680
|
|||||||||||||||
Accounts Receivable, net
|
209,989
|
38,825
|
(378
|
)
|
(k)
|
-
|
248,436
|
|||||||||||||||
Natural Gas in Storage, average cost
|
44,086
|
21,428
|
-
|
-
|
65,514
|
|||||||||||||||||
Materials and Supplies, average cost
|
4,200
|
321
|
-
|
-
|
4,521
|
|||||||||||||||||
Assets Held for Sale
|
329,622
|
-
|
-
|
-
|
329,622
|
|||||||||||||||||
Other Prepayments and Current Assets
|
73,839
|
32,546
|
(23,542
|
)
|
(h)
|
-
|
82,843
|
|||||||||||||||
Total Current Assets
|
2,424,536
|
93,120
|
(1,740,620
|
)
|
-
|
777,036
|
||||||||||||||||
Regulatory and Other Noncurrent Assets:
|
||||||||||||||||||||||
Regulatory Assets
|
476,635
|
119,954
|
11,935
|
(j)
|
-
|
608,524
|
||||||||||||||||
Goodwill and Identifiable Intangible Assets
|
15,578
|
126,020
|
620,040
|
(b)
|
-
|
761,638
|
||||||||||||||||
Other
|
148,314
|
40
|
-
|
-
|
148,354
|
|||||||||||||||||
Total Regulatory and Other Noncurrent Assets
|
640,527
|
246,014
|
631,975
|
-
|
1,518,516
|
|||||||||||||||||
Total Assets
|
$
|
5,509,497
|
$
|
1,439,582
|
$
|
(1,132,302
|
)
|
$
|
-
|
$
|
5,816,777
|
|||||||||||
Capitalization and Liabilities
|
||||||||||||||||||||||
Equity:
|
||||||||||||||||||||||
Common Stock
|
$
|
106,882
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
106,882
|
||||||||||||
Premium on Common Stock
|
842,327
|
166,372
|
(166,372
|
)
|
(e)
|
-
|
842,327
|
|||||||||||||||
Treasury Stock (at par)
|
(282
|
)
|
-
|
-
|
-
|
(282
|
)
|
|||||||||||||||
Accumulated Other Comprehensive Loss
|
(36,748
|
)
|
-
|
-
|
-
|
(36,748
|
)
|
|||||||||||||||
Retained Earnings
|
391,538
|
277,746
|
(277,746
|
)
|
(e)
|
(15,000
|
)
|
(c)
|
376,538
|
|||||||||||||
Total Equity
|
1,303,717
|
444,118
|
(444,118
|
)
|
(15,000
|
)
|
1,288,717
|
|||||||||||||||
Long—Term Debt
|
1,403,802
|
268,406
|
(268,406
|
)
|
(d)
|
-
|
1,403,802
|
|||||||||||||||
Total Capitalization
|
2,707,519
|
712,524
|
(712,524
|
)
|
(15,000
|
)
|
2,692,519
|
|||||||||||||||
Current Liabilities:
|
||||||||||||||||||||||
Notes Payable
|
336,400
|
-
|
-
|
-
|
336,400
|
|||||||||||||||||
Current Portion of Long—Term Debt
|
1,368,809
|
-
|
-
|
-
|
1,368,809
|
|||||||||||||||||
Accounts Payable
|
262,090
|
294,193
|
(271,902
|
)
|
(c)
|
-
|
284,381
|
|||||||||||||||
Other Current Liabilities
|
147,519
|
39,764
|
(6,309
|
)
|
(l)
|
15,000
|
(c)
|
195,974
|
||||||||||||||
Total Current Liabilities
|
2,114,818
|
333,957
|
(278,211
|
)
|
15,000
|
2,185,564
|
||||||||||||||||
Deferred Credits and Other Noncurrent Liabilities:
|
||||||||||||||||||||||
Deferred Income Taxes – Net
|
91,690
|
133,460
|
(133,460
|
)
|
(h)
|
-
|
91,690
|
|||||||||||||||
Regulatory Liabilities
|
299,382
|
119,572
|
-
|
-
|
418,954
|
|||||||||||||||||
Other
|
296,088
|
140,069
|
(8,107
|
)
|
(j)
|
-
|
428,050
|
|||||||||||||||
Total Deferred Credits and Other Noncurrent Liabilities
|
687,160
|
393,101
|
(141,567
|
)
|
-
|
938,694
|
||||||||||||||||
Total Capitalization and Liabilities
|
$
|
5,509,497
|
$
|
1,439,582
|
$
|
(1,132,302
|
)
|
$
|
-
|
$
|
5,816,777
|
Historical
SJI
|
Historical
ETG
|
ETG
Acquisition
Adjustments
|
Financing &
Other
Adjustments
|
Pro Forma
|
||||||||||||||||||
(Note 3)
|
(Note 3)
|
(Note 4)
|
(Note 5)
|
|||||||||||||||||||
Operating Revenues:
|
||||||||||||||||||||||
Utility
|
$
|
307,371
|
$
|
184,318
|
$
|
-
|
$
|
-
|
$
|
491,689
|
||||||||||||
Nonutility
|
441,904
|
-
|
-
|
-
|
441,904
|
|||||||||||||||||
Total Operating Revenues
|
749,275
|
184,318
|
-
|
-
|
933,593
|
|||||||||||||||||
Operating Expenses:
|
||||||||||||||||||||||
Cost of Sales – (Excluding depreciation)
|
||||||||||||||||||||||
— Utility
|
105,298
|
87,472
|
-
|
-
|
192,770
|
|||||||||||||||||
— Nonutility
|
323,566
|
-
|
-
|
-
|
323,566
|
|||||||||||||||||
Operations
|
105,051
|
30,957
|
(13,206
|
)
|
(g)
|
-
|
122,802
|
|||||||||||||||
Impairment Charges
|
99,233
|
-
|
-
|
-
|
99,233
|
|||||||||||||||||
Maintenance
|
13,674
|
4,507
|
-
|
-
|
18,181
|
|||||||||||||||||
Depreciation
|
49,433
|
13,826
|
(2,209
|
)
|
(i)
|
-
|
61,050
|
|||||||||||||||
Energy and Other Taxes
|
3,682
|
1,713
|
-
|
-
|
5,395
|
|||||||||||||||||
Total Operating Expenses
|
699,937
|
138,475
|
(15,415
|
)
|
-
|
822,997
|
||||||||||||||||
Operating Income
|
49,338
|
45,843
|
15,415
|
-
|
110,596
|
|||||||||||||||||
Other Income and Expense
|
3,735
|
348
|
-
|
-
|
4,083
|
|||||||||||||||||
Interest Charges
|
(33,533
|
)
|
(10,165
|
)
|
10,178
|
(c),(d)
|
1,179
|
(a)
|
(32,341
|
)
|
||||||||||||
Income Before Income Taxes
|
19,540
|
36,026
|
25,593
|
1,179
|
82,338
|
|||||||||||||||||
Income Taxes
|
(4,443
|
)
|
(10,586
|
)
|
(6,398
|
)
|
(f)
|
(295
|
)
|
(b)
|
(21,722
|
)
|
||||||||||
Equity in Earnings of Affiliates
|
2,416
|
-
|
-
|
-
|
2,416
|
|||||||||||||||||
Income from Continuing Operations
|
$
|
17,513
|
$
|
25,440
|
$
|
19,195
|
$
|
884
|
$
|
63,032
|
||||||||||||
Basic Earnings Per Common Share: (Note 6)
|
||||||||||||||||||||||
Continuing Operations
|
$
|
0.21
|
$
|
-
|
$
|
0.74
|
||||||||||||||||
Basic Earnings Per Common Share
|
$
|
0.21
|
$
|
-
|
$
|
0.74
|
||||||||||||||||
Average Shares of Common Stock Outstanding – Basic (Note 6)
|
81,850
|
-
|
85,472
|
|||||||||||||||||||
Diluted Earnings Per Common Share: (Note 6)
|
||||||||||||||||||||||
Continuing Operations
|
$
|
0.21
|
$
|
-
|
$
|
0.73
|
||||||||||||||||
Diluted Earnings Per Common Share
|
$
|
0.21
|
$
|
-
|
$
|
0.73
|
||||||||||||||||
Average Shares of Common Stock Outstanding – Diluted (Note 6)
|
82,302
|
-
|
86,030
|
Historical
SJI
|
Historical
ETG
|
ETG
Acquisition
Adjustments
|
Financing &
Other
Adjustments
|
Pro Forma
|
||||||||||||||||||
(Note 3)
|
(Note 3)
|
(Note 4)
|
(Note 5)
|
|||||||||||||||||||
Operating Revenues:
|
||||||||||||||||||||||
Utility
|
$
|
512,482
|
$
|
304,747
|
$
|
-
|
$
|
-
|
$
|
817,229
|
||||||||||||
Nonutility
|
730,586
|
-
|
-
|
-
|
730,586
|
|||||||||||||||||
Total Operating Revenues
|
1,243,068
|
304,747
|
-
|
-
|
1,547,815
|
|||||||||||||||||
Operating Expenses:
|
||||||||||||||||||||||
Cost of Sales – (Excluding depreciation)
|
||||||||||||||||||||||
— Utility
|
199,660
|
135,850
|
-
|
-
|
335,510
|
|||||||||||||||||
— Nonutility
|
646,567
|
-
|
-
|
-
|
646,567
|
|||||||||||||||||
Operations
|
174,200
|
58,326
|
(14,481
|
)
|
(g)
|
-
|
218,045
|
|||||||||||||||
Impairment Charges
|
91,299
|
-
|
-
|
-
|
91,299
|
|||||||||||||||||
Maintenance
|
19,727
|
8,248
|
-
|
-
|
27,975
|
|||||||||||||||||
Depreciation
|
100,718
|
27,163
|
(4,653
|
)
|
(i)
|
-
|
123,228
|
|||||||||||||||
Energy and Other Taxes
|
6,487
|
4,917
|
-
|
-
|
11,404
|
|||||||||||||||||
Total Operating Expenses
|
1,238,658
|
234,504
|
(19,134
|
)
|
-
|
1,454,028
|
||||||||||||||||
Operating Income
|
4,410
|
70,243
|
19,134
|
-
|
93,787
|
|||||||||||||||||
Other Income and Expense
|
15,474
|
1,460
|
-
|
-
|
16,934
|
|||||||||||||||||
Interest Charges
|
(54,019
|
)
|
(15,960
|
)
|
16,097
|
(c),(d)
|
(52,308
|
)
|
(a)
|
(106,190
|
)
|
|||||||||||
(Loss) income Before Income Taxes
|
(34,135
|
)
|
55,743
|
35,231
|
(52,308
|
)
|
4,531
|
|||||||||||||||
Income Taxes
|
24,937
|
(21,926
|
)
|
(13,564
|
)
|
(f)
|
20,139
|
(b)
|
9,586
|
|||||||||||||
Equity in Earnings of Affiliates
|
5,794
|
-
|
-
|
-
|
5,794
|
|||||||||||||||||
(Loss) Income from Continuing Operations
|
$
|
(3,404
|
)
|
$
|
33,817
|
$
|
21,667
|
$
|
(32,169
|
)
|
$
|
19,911
|
||||||||||
Basic Earnings Per Common Share: (Note 6)
|
||||||||||||||||||||||
Continuing Operations
|
$
|
(0.04
|
)
|
$
|
-
|
$
|
0.23
|
|||||||||||||||
Basic Earnings Per Common Share
|
$
|
(0.04
|
)
|
$
|
-
|
$
|
0.23
|
|||||||||||||||
Average Shares of Common Stock Outstanding – Basic (Note 6)
|
79,541
|
-
|
85,431
|
|||||||||||||||||||
Diluted Earnings Per Common Share: (Note 6)
|
||||||||||||||||||||||
Continuing Operations
|
$
|
(0.04
|
)
|
$
|
-
|
$
|
0.23
|
|||||||||||||||
Diluted Earnings Per Common Share
|
$
|
(0.04
|
)
|
$
|
-
|
$
|
0.23
|
|||||||||||||||
Average Shares of Common Stock Outstanding – Diluted (Note 6)
|
79,541
|
-
|
85,431
|
1. |
Basis of Presentation
|
2. |
Purchase Price and Preliminary Purchase Price Allocation
|
(In thousands)
|
||||
Property, plant and equipment
|
$
|
1,076,791
|
||
Accounts Receivable, net
|
38,447
|
|||
Natural Gas in Storage
|
21,428
|
|||
Materials and Supplies
|
321
|
|||
Other Prepayments and Current Assets
|
9,044
|
|||
Regulatory Assets
|
131,889
|
|||
Goodwill
|
746,060
|
|||
Total assets acquired
|
2,023,980
|
|||
Accounts Payable
|
22,291
|
|||
Other Current Liabilities
|
33,455
|
|||
Regulatory Liabilities
|
119,572
|
|||
Other
|
131,962
|
|||
Total liabilities assumed
|
307,280
|
|||
Net assets acquired
|
$
|
1,716,700
|
3. |
Reclassifications
|
(a) |
Represents the reclassification of Operating revenues on ETG’s statement of income into Operating Revenues - Utility to conform to SJI’s statement of income presentation.
|
(b) |
Represents the reclassification of Cost of natural gas on ETG’s statement of income into Cost of Sales — Utility to conform to SJI’s statement of income presentation.
|
(c) |
Represents the reclassification of Other operations and maintenance on ETG’s statement of income into Operating Expenses - Operations and Operating Expenses - Maintenance to conform to SJI’s statement of income presentation.
|
(d) |
Represents the reclassification of Depreciation and amortization on ETG’s statement of income into Operating Expenses - Depreciation to conform to SJI’s statement of income presentation.
|
(e) |
Represents the reclassification of Taxes other than income taxes on ETG’s statement of income into Operating Expenses - Energy and Other Taxes to conform to SJI’s statement of income presentation.
|
(f) |
Represents the reclassification of Other income, net on ETG’s statement of income into Other Income and Expense to conform to SJI’s statement of income presentation.
|
(g) |
Represents the reclassification of Interest expense, net of amounts capitalized on ETG’s statement of income into Interest Charges to conform to SJI’s statement of income presentation.
|
(a) |
Represents the reclassification of Operating revenues on ETG’s statement of income into Operating Revenues - Utility to conform to SJI’s statement of income presentation.
|
(b) |
Represents the reclassification of Cost of natural gas on ETG’s statement of income into Cost of Sales — Utility to conform to SJI’s statement of income presentation.
|
(c) |
Represents the reclassification of Other operations and maintenance on ETG’s statement of income into Operating Expenses - Operations and Operating Expenses - Maintenance to conform to SJI’s statement of income presentation.
|
(d) |
Represents the reclassification of Depreciation and amortization on ETG’s statement of income into Operating Expenses - Depreciation to conform to SJI’s statement of income presentation.
|
(e) |
Represents the reclassification of Taxes other than income taxes on ETG’s statement of income into Operating Expenses - Energy and Other Taxes to conform to SJI’s statement of income presentation.
|
(f) |
Represents the reclassification of Other income, net on ETG’s statement of income into Other Income and Expense to conform to SJI’s statement of income presentation.
|
(g) |
Represents the reclassification of Interest expense, net of amounts capitalized on ETG’s statement of income into Interest Charges to conform to SJI’s statement of income presentation.
|
(In Thousands)
|
Before
Reclassification
|
Reclassification
|
After
Reclassification
|
||||||||||
Customer accounts receivable
|
30,089
|
(30,089
|
)
|
(h)
|
—
|
||||||||
Unbilled revenues
|
4,992
|
(4,992
|
)
|
(h)
|
—
|
||||||||
Other accounts and notes receivable
|
10,185
|
(10,185
|
)
|
(h)
|
—
|
||||||||
Accumulated provision for uncollectible accounts
|
(6,441
|
)
|
6,441
|
(h)
|
—
|
||||||||
Accounts Receivable, net
|
—
|
38,825
|
(h)
|
38,825
|
|||||||||
Materials and supplies
|
321
|
(321
|
)
|
(i)
|
—
|
||||||||
Materials and Supplies, average cost
|
—
|
321
|
(i)
|
321
|
|||||||||
Natural gas for sale
|
21,428
|
(21,428
|
)
|
(j)
|
—
|
||||||||
Natural Gas in Storage, average cost
|
—
|
21,428
|
(j)
|
21,428
|
|||||||||
Prepaid taxes
|
23,460
|
(23,460
|
)
|
(k)
|
—
|
||||||||
Regulatory assets, current
|
8,845
|
(8,845
|
)
|
(k)
|
—
|
||||||||
Other current assets
|
241
|
(241
|
)
|
(k)
|
—
|
||||||||
Other Prepayments and Current Assets
|
—
|
32,546
|
(k)
|
32,546
|
|||||||||
In service
|
1,338,589
|
(1,338,589
|
)
|
(l)
|
—
|
||||||||
Construction work in progress
|
27,889
|
(27,889
|
)
|
(l)
|
—
|
||||||||
Utility Plant, at original cost
|
—
|
1,366,478
|
(l)
|
1,366,478
|
|||||||||
Accumulated depreciation
|
(266,030
|
)
|
266,030
|
(m)
|
—
|
||||||||
Accumulated Depreciation — Utility Plant
|
—
|
(266,030
|
)
|
(m)
|
(266,030
|
)
|
|||||||
Goodwill
|
126,020
|
(126,020
|
)
|
(n)
|
—
|
||||||||
Goodwill and Identifiable Intangible Assets
|
—
|
126,020
|
(n)
|
126,020
|
|||||||||
Regulatory assets, deferred
|
119,954
|
(119,954
|
)
|
(o)
|
—
|
||||||||
Regulatory Assets
|
—
|
119,954
|
(o)
|
119,954
|
|||||||||
Other deferred charges and assets
|
40
|
(40
|
)
|
(p)
|
—
|
||||||||
Other
|
—
|
40
|
(p)
|
40
|
|||||||||
Due to affiliates
|
280,911
|
(280,911
|
)
|
(q)
|
—
|
||||||||
Accounts payable
|
13,282
|
(13,282
|
)
|
(q)
|
—
|
||||||||
Accounts Payable
|
—
|
294,193
|
(q)
|
294,193
|
|||||||||
Customer deposits
|
5,233
|
(5,233
|
)
|
(r)
|
—
|
||||||||
Other accrued taxes
|
3,542
|
(3,542
|
)
|
(r)
|
—
|
||||||||
Accrued environmental remediation, current
|
7,100
|
(7,100
|
)
|
(r)
|
—
|
||||||||
Accrued compensation
|
4,294
|
(4,294
|
)
|
(r)
|
—
|
||||||||
Regulatory liabilities, current
|
17,898
|
(17,898
|
)
|
(r)
|
—
|
||||||||
Other current liabilities
|
1,697
|
(1,697
|
)
|
(r)
|
—
|
||||||||
Other Current Liabilities
|
—
|
39,764
|
(r)
|
39,764
|
|||||||||
Accumulated deferred income taxes
|
133,460
|
(133,460
|
)
|
(s)
|
—
|
||||||||
Deferred Income Taxes — Net
|
—
|
133,460
|
(s)
|
133,460
|
|||||||||
Deferred credits related to income tax
|
119,572
|
(119,572
|
)
|
(t)
|
—
|
||||||||
Regulatory Liabilities
|
—
|
119,572
|
(t)
|
119,572
|
|||||||||
Employee benefit obligations
|
18,177
|
(18,177
|
)
|
(u)
|
—
|
||||||||
Other cost of removal obligations
|
50,391
|
(50,391
|
)
|
(u)
|
—
|
||||||||
Accrued environmental remediation, deferred
|
70,191
|
(70,191
|
)
|
(u)
|
—
|
||||||||
Other deferred credits and liabilities
|
1,310
|
(1,310
|
)
|
(u)
|
—
|
||||||||
Other
|
—
|
140,069
|
(u)
|
140,069
|
|||||||||
Paid—in capital
|
166,372
|
(166,372
|
)
|
(v)
|
—
|
||||||||
Premium on Common Stock
|
—
|
166,372
|
(v)
|
166,372
|
(h) |
Represents the reclassification of
Customer accounts receivable,
Unbilled revenues, Other accounts and notes receivable, and Accumulated provision for uncollectible accounts on ETG’s balance sheet into
Accounts Receivable, net
to conform to SJI’s balance sheet presentation.
|
(i) |
Represents the reclassification of Materials and supplies on ETG’s balance sheet into Materials and Supplies, average cost to conform to SJI’s balance sheet presentation.
|
(j) |
Represents the reclassification of Natural gas for sale on ETG’s balance sheet into Natural Gas in Storage, average cost to conform to SJI’s balance sheet presentation.
|
(k) |
Represents the reclassification of
Prepaid taxes, Regulatory assets, current, and Other current assets
on ETG’s balance sheet into
Other Prepayments and Current Assets
to conform to SJI’s balance sheet presentation.
|
(l) |
Represents the reclassification of Property, Plant, and Equipment:
In service and Construction work in progress
on ETG’s balance sheet into Utility Plant, at original cost to conform to SJI’s balance sheet presentation.
|
(m) |
Represents the reclassification of Property, Plant, and Equipment: Less
accumulated depreciation
on ETG’s balance sheet into
Accumulated Depreciation — Utility Plant
to conform to SJI’s balance sheet presentation.
|
(n) |
Represents the reclassification of
Goodwill
on ETG’s balance sheet into
Goodwill and Identifiable Intangible Assets
to conform to SJI’s balance sheet presentation.
|
(o) |
Represents the reclassification of
Regulatory assets, deferred
on ETG’s balance sheet into
Regulatory Assets
to conform to SJI’s balance sheet presentation.
|
(p) |
Represents the reclassification of
Other deferred charges and assets
on ETG’s balance sheet into
Other
to conform to SJI’s balance sheet presentation.
|
(q) |
Represents the reclassification of
Due to affiliates and
Accounts payable
on ETG’s balance sheet into
Accounts Payable
to conform to SJI’s balance sheet presentation.
|
(r) |
Represents the reclassification of
Customer deposits, Other accrued taxes, Accrued environmental remediation, current, Accrued compensation, Regulatory liabilities, current, and
Other current liabilities
on ETG’s balance sheet into
Other Current Liabilities
to conform to SJI’s balance sheet presentation.
|
(s) |
Represents the reclassification of
Accumulated deferred income taxes
on ETG’s balance sheet into
Deferred Income Taxes — Net
to conform to SJI’s balance sheet presentation.
|
(t) |
Represents the reclassification of
Deferred credits related to income tax
on ETG’s balance sheet into
Regulatory Liabilities
to conform to SJI’s balance sheet presentation.
|
(u) |
Represents the reclassification of
Employee benefit obligations,
Other cost of removal obligations, Accrued environmental remediation, deferred, and Other deferred credits and liabilities on ETG’s balance sheet into
Other
to conform to SJI’s balance sheet presentation.
|
(v) |
Represents the reclassification of
Paid—in capital
on ETG’s balance sheet into
Premium on Common Stock
to conform to SJI’s balance sheet presentation.
|
4. |
ETG Acquisition Related Pro Forma Adjustments
|
(In Thousands)
|
As of
June 30, 2018
|
|||
Purchase Price
|
$
|
1,690,000
|
||
Working Capital Adjustment
|
26,700
|
|||
Total adjustment to Restricted Cash
|
$
|
1,716,700
|
(b) |
Adjustment to eliminate ETG’s historical goodwill of $126.0 million and to recognize goodwill related to the proposed ETG Acquisition of $746.0 million. Goodwill is calculated as the difference between the estimated purchase price and the fair value of identifiable tangible and intangible assets acquired net of liabilities assumed. The adjustment is preliminary and subject to change based upon final determination of the fair value of assets acquired and liabilities assumed and finalization of the purchase price.
|
(c) |
Adjustment to eliminate ETG’s amounts due to affiliates of $271.9 million that will not be assumed by SJI as part of the ETG Acquisition as of June 30, 2018, as well as $8.2 million and $13.4 million of intercompany interest that will not be assumed by SJI as part of the ETG Acquisition for the six months ended June 30, 2018 and for the year ended December 31, 2017, respectively.
|
(d) |
Adjustment to eliminate $268.4 million of ETG’s long—term debt, and $2.0 million and $2.7 million of related interest expense that will not be assumed by SJI as part of the ETG Acquisition for the six months ended June 30, 2018 and for the year ended December 31, 2017, respectively.
|
(e) |
Adjustment to eliminate ETG’s historical stockholder’s equity of $444.1 million.
|
(f) |
Adjustment to record the income tax impacts of the pro forma adjustments using blended statutory tax rates of 25.0% and 38.5% for the six months ended June 30, 2018 and for the year ended December 31, 2017, respectively. This rate does not reflect SJI’s effective tax rate, which includes other items and may be significantly different than the rates assumed for purposes of preparing these statements for a variety of reasons.
|
(g) |
Adjustment to eliminate $13.2 million and $14.5 million of non-recurring transaction costs incurred by SJI that are directly attributable to the ETG Acquisition for the six months ended June 30, 2018 and for the year ended December 31, 2017, respectively.
|
(h) |
Adjustment to eliminate $23.5 million of ETG’s prepaid taxes and $133.5 million of ETG’s accumulated deferred income taxes that will not be assumed by SJI as part of the ETG Acquisition.
|
(i) |
Adjustment to eliminate $36.4 million of ETG’s IT assets and $12.7 million of ETG’s related accumulated depreciation as of June 30, 2018, as well as $2.2 million and $4.7 million of depreciation expense that will not be assumed by SJI as part of the ETG Acquisition for the six months ended June 30, 2018 and for the year ended December 31, 2017, respectively.
|
(j) |
Adjustment to record $11.9 million of ETG’s recoverable postretirement benefits assumed by SJI as part of the ETG Acquisition, eliminate $18.2 million of ETG’s accrued pension costs and accrued postretirement benefits that will not be assumed by SJI as part of the ETG Acquisition, and to record a $10.1 million pension benefit obligation assumed by SJI as part of the ETG Acquisition.
|
(k) |
Adjustment to eliminate $0.4 million of ETG receivables that will not be assumed by SJI as part of the ETG Acquisition as of June 30, 2018.
|
(l) |
Adjustment to eliminate $3.5 million of ETG’s other accrued taxes, $1.2 million of accrued compensation, and $1.6 million of other current liabilities primarily related to unclaimed property and escheatment liability that will not be assumed by SJI as part of the ETG Acquisition as of June 30, 2018.
|
5. |
Financing and Other Related Pro Forma Adjustments
|
(a) |
Adjustment to interest expense consists of the following:
|
(In Thousands)
|
Year ended
December 31, 2017
|
Six months
ended
June 30, 2018
|
||||||
Interest expense related to new debt borrowings
(1)
|
$
|
41,742
|
$
|
4,527
|
||||
Interest expense related to equity units
(2)
|
11,548
|
5,614
|
||||||
Interest expense related to draw down from revolver
(3)
|
954
|
477
|
||||||
Amortization of deferred financing fees
(4)
|
3,148
|
460
|
||||||
Add back: amortization of deferred financing fees and ticking fees related the Bridge Facility
(5)
|
(5,084
|
)
|
(9,504
|
)
|
||||
Add back: actual interest/amortization expense incurred for the period ended June 30, 2018
(6)
|
-
|
(2,753
|
)
|
|||||
Pro forma adjustment to Interest Charges
|
$
|
52,308
|
$
|
(1,179
|
)
|
(b) |
Adjustment to record the income tax impacts of the pro forma adjustments using blended statutory tax rates of 25.0% and 38.5% for the six months ended June 30, 2018 and for the year ended December 31, 2017, respectively. This rate does not reflect SJI’s effective tax rate, which includes other items and may be significantly different than the rates assumed for purposes of preparing these statements for a variety of reasons.
|
(c) |
Adjustment to record a $15.0 million liability for a one-time rate payout to ETG customers mandated by the New Jersey Board of Public Utilities as part of the regulatory approval process for the ETG Acquisition.
|
6.
|
Pro Forma Earnings Per Share
|
(In Thousands Except Share and Per Share Data)
|
Year ended
December 31, 2017
|
Six months
ended
June 30, 2018
|
||||||
Pro Forma Basic EPS
|
||||||||
Pro forma income from continuing operations
|
$
|
19,911
|
$
|
63,032
|
||||
Pro forma basic weighted—average common stock outstanding
|
85,431
|
85,472
|
||||||
Pro forma basic EPS
|
$
|
0.23
|
$
|
0.74
|
||||
Pro Forma Diluted EPS
|
||||||||
Pro forma income from continuing operations
|
$
|
19,911
|
$
|
63,032
|
||||
Pro forma diluted weighted—average common shares outstanding
|
85,431
|
86,030
|
||||||
Pro forma diluted EPS
|
$
|
0.23
|
$
|
0.73
|