Back to GetFilings.com
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended
December 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________to ______________.
Commission File Number 1-6364
SOUTH JERSEY INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1901645
(State of incorporation) (IRS employer identification no.)
1 South Jersey Plaza, Folsom, New Jersey 08037
(Address of principal executive offices, including zip code)
(609) 561-9000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock
($1.25 par value per share) New York Stock Exchange
(Title of each class) (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2).
Yes [X] No [ ]
The aggregate market value of approximately 12,434,700 shares of voting stock
held by non-affiliates of the registrant as of March 1, 2005 was $696,716,200.
As of March 1, 2005, there were 13,931,308 shares of the registrant's common
stock outstanding.
Cover Page
Documents Incorporated by Reference:
In Part I of Form 10-K: Pages 18, 27 through 30, and 32 through 37 of 2004
Annual Report to Shareholders
In Part II of Form 10-K: Pages 1 and 12 through 38 of 2004 Annual Report to
Shareholders
In Part III of Form 10-K: Portions of the registrant's proxy statement filed
within 120 days of the close of the registrant's
fiscal year in connection with the registrant's 2005
annual meeting of shareholders are incorporated by
reference into Part III of this Form 10-K.
================================================================================
SJI-2
PART I
Item 1. Business
General
The registrant, South Jersey Industries, Inc. (SJI), a New Jersey
corporation, was formed in 1969 for the purpose of owning and holding all of the
outstanding common stock of South Jersey Gas Company (SJG), a public utility,
and acquiring and developing non-utility lines of business. The company's
Internet address is www.sjindustries.com. We make available free of charge on or
through our website SJI's annual report on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the Securities and Exchange Commission (SEC).
The SEC maintains an Internet site that contains these reports at
http://www.sec.gov. The content on any web site referred to in this filing is
not incorporated by reference into this filing unless expressly noted otherwise.
SJI currently provides a variety of energy related products and
services through the following wholly owned subsidiaries:
South Jersey Gas Company (SJG) is a regulated natural gas utility. SJG
distributes natural gas in the seven southernmost counties of New Jersey. SJG
also:
o sells natural gas and pipeline transportation capacity (off-system
sales) on a wholesale basis to various customers on the interstate
pipeline system;
o transports natural gas purchased directly from producers or
suppliers for its own sales and for some of its customers; and
o serviced appliances via the sale of appliance service programs as
well as on a time and materials basis through September 1, 2004,
at which time the business line was transferred out of SJG and
into South Jersey Energy Service Plus, LLC.
South Jersey Energy Company (SJE) acquires and markets natural gas and
electricity to retail end users and provides total energy management services to
commercial and industrial customers. SJE also markets an air quality monitoring
system through AirLogics, LLC. SJE and GZA GeoEnvironmental, Inc., an
environmental consulting firm, each have a 50% equity interest in AirLogics.
South Jersey Resources Group, LLC (SJRG) markets wholesale natural gas
storage, commodity and transportation in the mid-Atlantic and southern states.
SJRG also conducts price-risk management activities by entering into a variety
of physical and financial transactions including forward contracts, swap
agreements, option contracts and futures contracts.
Marina Energy LLC (Marina) develops and operates energy-related
projects. Marina's largest project, the development of a facility to provide
cooling, heating and hot water to the Borgata Hotel Casino and Spa in Atlantic
City, began commercial operations in July 2003. Marina also owns a 51% equity
interest in AC Landfill Energy, LLC (ACLE). ACLE was formed with DCO Energy, LLC
to develop and install a 1,400 kilowatt methane-to-electric power generation
system at a county-owned landfill in Egg Harbor Township, NJ. Commercial
operation of the plant is targeted for early 2005.
South Jersey Energy Service Plus, LLC (SJESP) installs residential and
small commercial HVAC systems and services appliances via the sale of appliance
service programs, as well as on a time and materials basis in southern New
Jersey.
SJI also has a joint venture investment with Conectiv Solutions, LLC in
Millennium Account Services, LLC (Millennium). Millennium provides meter reading
services to SJG and Conectiv Power Delivery in southern New Jersey.
SJI-3
Energy & Minerals, Inc. (EMI) principally manages liabilities associated
with discontinued operations of non-utility subsidiaries.
Forward Looking Statements
This report contains certain forward-looking statements concerning
projected financial and operating performance, future plans and courses of
action, and future economic conditions. All statements in this report other than
statements of historical fact are forward-looking statements. These
forward-looking statements are made based upon management's expectations and
beliefs concerning future events impacting the company and involve a number of
risks and uncertainties. We caution that forward-looking statements are not
guarantees and actual results could differ materially from those expressed or
implied in the forward-looking statements. Also, in making forward-looking
statements, we assume no duty to update these statements should expectations
change or actual results and events differ from current expectations.
A number of factors could cause our actual results to differ materially
from those anticipated, including, but not limited to, the following: general
economic conditions on an international, national, state and local level;
weather conditions in our marketing areas; changes in commodity costs; changes
in the availability of natural gas; regulatory and court decisions; competition
in our utility and non-utility activities; the availability and cost of capital;
our ability to maintain existing joint ventures to take advantage of marketing
opportunities; costs and effects of legal proceedings and environmental
liabilities; the failure of customers or suppliers to fulfill their contractual
obligations; and changes in business strategies.
Financial Information About Industry Segments
Information regarding Industry Segments is incorporated by reference to
Note 8 on pages 32 and 33 of SJI's Annual Report to Shareholders for the year
ended December 31, 2004 which is attached to this report. See Item 15(b)(13).
Description of Business
SJI is engaged in the business of operating, through subsidiaries,
various business enterprises. SJI's most significant subsidiary is SJG.
South Jersey Gas Company
Background
SJG, a New Jersey corporation, is an operating public utility company
engaged in the purchase, transmission and sale of natural gas for residential,
commercial and industrial use. SJG also sells natural gas and pipeline
transportation capacity (off-system sales) on a wholesale basis to various
customers on the interstate pipeline system and transports natural gas purchased
directly from producers or suppliers by some of its customers. SJG contributed
approximately 74.4% on a consolidated basis to SJI's net income.
SJG's service territory covers approximately 2,500 square miles in the
southern part of New Jersey. It includes 112 municipalities throughout Atlantic,
Cape May, Cumberland and Salem Counties and portions of Burlington, Camden and
Gloucester Counties, with an estimated permanent population of 1.2 million. SJG
benefits from its proximity to Philadelphia and Wilmington on the western side
of its service territory and Atlantic City and the burgeoning shore communities
on the eastern side. Economic development and housing growth had long been
driven by the development of the Philadelphia metropolitan area. In recent
years, however, housing growth in the eastern portion of the service territory
has increased substantially and now accounts for approximately half of SJG's
annual customer growth. The foundation for growth in Atlantic City and the
surrounding region rests primarily with new gaming and non-gaming investments
that emphasize destination style attractions. The casino industry is expected to
remain a significant source of regional economic development going forward. The
ripple effect from Atlantic City continues to produce new housing, commercial
SJI-4
and industrial construction. Combining with the gaming industry catalyst is the
ongoing conversion of southern New Jersey's oceanfront communities from seasonal
resorts to year round economies. New and expanded hospitals, schools, and large
scale retail developments throughout the service territory have contributed to
SJG's growth. Presently, SJG serves approximately 58% of households within its
territory with natural gas. SJG also serves southern New Jersey's diversified
industrial base that includes processors of petroleum and agricultural products;
chemical, glass and consumer goods manufacturers; and high technology industrial
parks.
SJG serves 313,579 residential, commercial and industrial customers (at
December 31, 2004) in southern New Jersey. Gas sales, transportation and
capacity release for 2004 amounted to 132,847 MMcf (million cubic feet), of
which 54,333 MMcf was firm sales and transportation, 2,635 MMcf was
interruptible sales and transportation and 75,879 MMcf was off-system sales and
capacity release. The breakdown of firm sales includes 27.1% residential, 9.6%
commercial, 2.0% cogeneration and electric generation, .3% industrial and 61.0%
transportation. At year-end 2004, SJG served 292,185 residential customers,
20,939 commercial customers and 455 industrial customers. This includes 2004 net
additions of 8,463 residential customers, 534 commercial customers and 20
industrial customers.
Under an agreement with Conectiv Inc., an electric utility serving
southern New Jersey, SJG supplies natural gas to several electric generation
facilities. This gas service is provided under the terms of a firm electric
service tariff approved by the New Jersey Board of Public Utilities (BPU) on a
demand/commodity basis. In 2004, 1.38 Bcf (billion cubic feet) was delivered
under this agreement.
SJG serviced 6 cogeneration facilities in 2004. Combined sales and
transportation of natural gas to such customers amounted to approximately 3.6
Bcf in 2004.
SJG makes wholesale gas sales for resale to gas marketers for ultimate
delivery to end users. These "off-system" sales are made possible through the
issuance of the Federal Energy Regulatory Commission (FERC) Orders No. 547 and
636. Order No. 547 issued a blanket certificate of public convenience and
necessity authorizing all parties, which are not interstate pipelines, to make
FERC jurisdictional gas sales for resale at negotiated rates, while Order No.
636 allowed SJG to deliver gas at delivery points on the interstate pipeline
system other than its own city gate stations and release excess pipeline
capacity to third parties. During 2004, off-system sales amounted to 21.3 Bcf.
Also in 2004, capacity release and storage throughput amounted to 54.6 Bcf.
Supplies of natural gas available to SJG that are in excess of the
quantity required by those customers who use gas as their sole source of fuel
(firm customers) make possible the sale and transportation of gas on an
interruptible basis to commercial and industrial customers whose equipment is
capable of using natural gas or other fuels, such as fuel oil and propane. The
term "interruptible" is used in the sense that deliveries of natural gas may be
terminated by SJG at any time if this action is necessary to meet the needs of
higher priority customers as described in SJG's tariffs. Usage by interruptible
customers, excluding off-system customers, in 2004 amounted to approximately 2.6
Bcf, approximately 2.0% of the total throughput.
No material part of SJG's business is dependent upon a single customer
or a few customers.
Rates and Regulation
As a public utility, SJG is subject to regulation by the New Jersey
Board of Public Utilities (BPU). Additionally, the Natural Gas Policy Act, which
was enacted in November 1978, contains provisions for Federal regulation of
certain aspects of SJG's business. SJG is affected by Federal regulation with
respect to transportation and pricing policies applicable to its pipeline
capacity from Transcontinental Gas Pipeline Corporation, SJG's major supplier,
Columbia Gas Transmission Corporation, Columbia Gulf Transmission Company,
Dominion Transmission, Inc., and Texas Gas Transmission Corporation, since such
services are provided under rates and terms established under the jurisdiction
of the FERC.
Retail sales by SJG are made under rate schedules within a tariff filed
with and subject to the jurisdiction of the BPU. These rate schedules provide
primarily for either block rates or demand/commodity rate structures. The tariff
SJI-5
allows for the adjustment of revenues when temperatures are higher or lower than
normal, thereby stabilizing SJG's income. In years which are warmer or colder
than normal, SJG increases or decreases its revenue, respectively, to a level
equivalent with that of normal temperatures. The tariff also contains provisions
permitting the recovery of environmental remediation costs associated with
former manufactured gas plant sites, energy efficiency and renewable energy
program costs, consumer education program costs and low income program costs.
These costs are recovered through SJG's Societal Benefits Clause. In addition,
the tariff contains provisions permitting SJG to pass on to customers increases
and decreases in the cost of purchased gas supplies. The cost of gas purchased
from the utility by consumers is set annually by the BPU through a Basic Gas
Supply Service ("BGSS") within SJG's tariff. When actual gas costs experienced
by SJG are less than those charged to customers under BGSS, customer bills in
the subsequent BGSS period(s) are reduced by returning the overrecovery with
interest. When actual gas costs are more than is recovered through rates, SJG is
permitted to charge customers more for gas in future periods for the
underrecovery.
In February 1999, the Electric Discount and Energy Competition Act (the
Act) was signed into law in New Jersey. This bill created the framework and
necessary time schedules for the restructuring of the state's electric and
natural gas utilities. The Act established unbundling, where redesigned utility
rate structures allow natural gas and electric consumers to choose their energy
supplier. It also established time frames for instituting competitive services
for customer account functions and for determining whether basic gas supply
services should become competitive.
In January 2000, the BPU approved full unbundling of SJG's system. This
allows all natural gas consumers to select their natural gas supplier. Customers
choosing to purchase natural gas from providers other than the utility are
charged for the cost of gas by the marketer, not the utility. The resulting
decrease in SJG's revenues is offset by a corresponding decrease in gas costs.
While customer choice can reduce utility revenues, it does not negatively affect
SJG's net income or financial condition. The BPU continues to allow for full
recovery of natural gas costs.
In December 2002, the BPU approved the BGSS price structure. BGSS is
the gas supply service being provided by the natural gas utility. Upon
implementation of BGSS in 2003, customers have the ability to make more informed
decisions regarding their choices of an alternate supplier by having a utility
price structure that is more consistent with market conditions. Further, BGSS
provides SJG with more pricing flexibility, through automatic rate changes,
conceptually resulting in the reduction of over/under-recoveries. Although the
BGSS price structure replaced the pricing structure in the previous rate clause,
all other mechanisms from the previous clause, such as, but not limited to,
deferred accounting treatment and the allowance for full recovery of natural gas
costs, remain in place under BGSS.
In July 2004, the BPU approved SJG's August 2002 petition and related
agreements to transfer its appliance service business from the regulated
utility. SJI had previously formed South Jersey Energy Service Plus (SJESP) to
accommodate the transfer. SJESP purchased certain assets and assumed certain
liabilities of the appliance service business for the net book value of $1.2
million. SJESP paid an additional $1.5 million for certain intangible assets and
that amount was credited by SJG to its customers through the Remediation
Adjustment Clause.
In January 1997, the BPU granted SJG rate relief, which was predicated
in part upon a 9.62% rate of return on rate base that included an 11.25% return
on common equity. This rate relief provided for the recovery of cost-of-service
recovery, including deferred costs, through base rates. Additionally, SJG's
threshold for sharing pre-tax margins generated by interruptible and off-system
sales and transportation had increased. As a result of this case, SJG kept 100%
of pre-tax margins up to the threshold level of $7.8 million. The next $750,000
was credited to customers through the BGSS clause. Thereafter, SJG kept 20% of
the pre-tax margins as it had historically.
On July 7, 2004, the BPU granted SJG a base rate increase of $20.0
million, which was predicated in part upon a 7.97% rate of return on rate base
that included a 10.0% return on common equity. The increase was effective July
8, 2004 and designed to provide an incremental $8.5 million on an annualized
basis to net income. SJG was also permitted recovery of regulatory assets
contained in its petition and a reduction in its composite depreciation rate
from 2.9% to 2.4%.
SJI-6
Included in the base rate increase was a change to the sharing of
pre-tax margins on interruptible and off-system sales and transportation. SJG
now recovers through its base rates the $7.8 million that it had previously
recovered through the sharing of pre-tax margins. As a result, the sharing of
pre-tax margins now begins from dollar one, with SJG retaining 20%. Moreover,
SJG now shares pre-tax margins from on-system capacity release sales, in
addition to the interruptible and off-system sales and transportation. Effective
July 1, 2006, the 20% retained by SJG will decrease to 15% of such margins.
As part of the overall settlement effective July 8, 2004, SJG is
providing customers with an offsetting $38.9 million in rate reductions. These
reductions are being provided to customers through the reduction and elimination
of rates associated with SJG's various clauses and did not negatively impact
SJG's net income. Under those clauses, costs incurred by SJG were being billed
to customers on a dollar-for-dollar basis and these reductions do not negatively
impact SJG's net income.
Additional information on regulatory affairs is incorporated by
reference to Notes 1, 6, 9, 10,11 and 13 of SJI's Annual Report to Shareholders
for the year ended December 31, 2004 which is attached to this report. See Item
15(b)(13).
South Jersey Energy Company
SJE, a New Jersey corporation established by SJI in 1973, is a wholly
owned non-utility subsidiary of SJI and provides services for the acquisition
and transportation of natural gas and electricity for retail end users, markets
total energy management services, and markets an air quality monitoring system.
As of December 31, 2004, SJE marketed natural gas to 76,424 customers, of which
73,424 were residential customers. All of SJE's residential gas customers and
most of its commercial and industrial customers are located within southern New
Jersey. In 2004, SJE was profitable and contributed approximately 12.5% on a
consolidated basis to SJI's net income. The majority of this contribution was
derived from retail gas marketing.
South Jersey Resources Group
SJRG is a wholly owned non-utility subsidiary of SJI, formed in 1996.
SJRG markets natural gas storage, commodity and transportation assets on a
wholesale basis. Customers include energy marketers, electric and gas utilities
and natural gas producers. SJRG's marketing activities occur mainly in the
mid-Atlantic and southern regions of the country. SJRG also provides natural gas
commodity risk management services to other SJI subsidiaries. In 2004, SJRG
transacted 78.5 Bcf of natural gas. SJRG contributed approximately 7.7% on a
consolidated basis to SJI's net income.
Marina Energy
Marina Energy LLC is a limited liability company formed in New Jersey
in 2000 and is wholly owned by SJI. Marina develops and operates energy-related
projects. Marina's largest project is an energy plant that provides for the
thermal needs of the Borgata Hotel Casino and Spa in Atlantic City. The facility
consists of a production facility and a distribution and interconnection system
located in the area of Atlantic City referred to as Renaissance Point. The
production facility consists of hot and chilled water production equipment,
emergency electric generating equipment and related equipment. The facility is
located adjacent to the Borgata and in close proximity to other potential
customer sites. The distribution system consists of both hot and chilled water
piping, manholes, valves, heat exchangers, controls and electrical devices. The
system commences within the Marina Thermal Facility and connects to the Borgata
via underground pipes and electric distribution lines.
The plant became fully operational for the Borgata's July 2003 opening.
The Marina Thermal Facility has the capacity to produce and distribute 20,000
tons of chilled water and 300 million British Thermal Units per hour of hot
water to customers in the Renaissance Point area of the City. The Marina Thermal
Facility is capable of serving multiple customers within the Renaissance Point
area.
SJI-7
Other than the Borgata thermal facility, Marina had completed three
smaller energy projects and was in the process of developing two additional
projects as of December 31, 2004. Marina contributed approximately 6.0% on a
consolidated basis to SJI's net income.
South Jersey Energy Service Plus
South Jersey Energy Service Plus, LLC (SJESP) is a limited liability
company formed in New Jersey in 2003 and is wholly owned by SJI. SJESP installs
residential and small commercial HVAC systems and services appliances via the
sale of appliance service programs as well as on a time and material basis.
SJESP serves southern New Jersey where it is the largest local appliance service
company with 50 experienced technicians and installers. As of December 31, 2004,
SJESP had 76,757 appliance service contracts for the repair and maintenance of
major appliances, such as house heaters, gas ranges, and electric central air
conditioning units. SJESP contributed approximately 1.1% on a consolidated basis
to SJI's net income.
Raw Materials
South Jersey Gas Company
Transportation and Storage Agreements
SJG has direct connections to two interstate pipeline companies,
Transcontinental Gas Pipeline Corporation (Transco) and Columbia Gas
Transmission Corporation (Columbia). During 2004, SJG purchased and had
delivered approximately 43.2 Bcf of natural gas for distribution to both
on-system and off-system customers. Of this total, 31.5 Bcf was transported on
the Transco pipeline system and 11.7 Bcf was transported on the Columbia
pipeline system. SJG also secures firm transportation and other long term
services from three additional pipelines upstream of the Transco and Columbia
systems. They include: Columbia Gulf Transmission Company (Columbia Gulf), Texas
Gas Transmission Corporation (Texas Gas) and Dominion Transmission Inc.
(Dominion). Services provided by these upstream pipelines are utilized to
deliver gas into either the Transco or Columbia systems for ultimate delivery to
SJG. Services provided by all of the above mentioned pipelines are subject to
the jurisdiction of the Federal Energy Regulatory Commission (FERC).
Transco:
Transco is SJG's largest supplier of long-term gas transmission
services. These services include five year-round and one seasonal firm
transportation (FT) service arrangements. When combined, these services enable
SJG to purchase from third parties and have delivered to its city gate stations
by Transco a total of 169,589 Thousand Cubic Feet of gas per day ("Mcf/d"). The
terms of the year-round agreements extend for various periods from 2005 to 2010
while the term of the seasonal agreement extends to 2011.
SJG also has seven long-term gas storage service agreements with
Transco that, when combined, are capable of storing approximately 10.1 Bcf.
Through these services, SJG can inject gas into market area storage during
periods of low demand and withdraw gas at a rate of up to 86,973 Mcf per day
during periods of high demand. The terms of the storage service agreements
extend for various periods from 2005 to 2017.
Dominion:
SJG has a storage service with Dominion which provides a maximum
withdrawal capacity of 9,662 Mcf per day during the period between November 16
and March 31 of winter season with 408,696 Mcf of storage capacity. Gas is
delivered through both the Dominion and Transco pipeline systems.
SJI-8
Columbia:
SJG has two firm transportation agreements with Columbia which, when
combined, provide for 43,500 Mcf/d of firm deliverability.
SJG also subscribes to a firm storage service from Columbia, to March
31, 2009, which provides a maximum withdrawal quantity of 51,102 Mcf/d during
the winter season with an associated 3,355,557 Mcf of storage capacity.
Gas Supplies
SJG has two long-term gas supply agreements with a single producer and
marketer that expire in 2006. Under these agreements, SJG can purchase up to
6,798,628 Mcf of natural gas per year. When advantageous, SJG can purchase spot
supplies of natural gas in place of or in addition to those volumes reserved
under long-term agreements. In recent years, SJG has replaced long-term gas
supply contracts with short-term agreements. The short-term agreements are
typically for several months in duration.
Supplemental Gas Supplies
During 2004 SJG entered into a Liquefied Natural Gas (LNG) liquefaction
service agreement with a third party provider which extends through March 31,
2005. SJG's contract quantity under the agreement is 232,744 Mcf. LNG supplied
by this vendor is transported to SJG's New Jersey LNG storage facility by truck.
SJG operates peaking facilities which can store and vaporize LNG for
injection into its distribution system. SJG's LNG facility has a storage
capacity equivalent to 404,000 Mcf of natural gas and has an installed capacity
to vaporize up to 90,000 Mcf of LNG per day for injection into its distribution
system.
SJG also operates a high pressure pipe storage field at its New Jersey
LNG facility which is capable of storing 12,000 Mcf of gas and injecting up to
10,000 Mcf/d of gas per day into SJG's distribution system.
Peak-Day Supply
SJG plans for a winter season peak-day demand on the basis of an
average daily temperature of 2 degrees F. Gas demand on such a design day was
estimated for the 2004-2005 winter season to be 511,363 Mcf. SJG projects that
it has adequate supplies and interstate pipeline entitlements to meet its design
requirements. On January 10, 2004, SJG experienced its highest peak-day demand
for the year of 407,207 Mcf with an average temperature of 11.51 degrees F.
Natural Gas Prices
SJG's average cost of natural gas purchased and delivered in 2004, 2003
and 2002, including demand charges, was $7.39 per Mcf, $6.74 per Mcf and $4.46
per Mcf, respectively.
South Jersey Energy Company
Transportation and Storage Agreements
Access to gas suppliers and cost of gas are significant to the
operations of SJE. No material part of the business of SJE is dependent upon a
single customer or a few customers. SJE purchases delivered gas only, primarily
from SJRG. Consequently, SJE maintains no transportation or storage agreements.
SJI-9
South Jersey Resources Group
Transportation and Storage Agreements
National Fuel Gas Supply Corporation:
SJRG has a long-term storage service agreement with National Fuel Gas
Supply Corporation (National Fuel) with a primary term which extends through
March 31, 2006, under which up to 2,716,000 Mcf of gas may be stored during the
summer season and up to 23,200 Mcf per day may be withdrawn during the winter
season. SJRG has entered into a new 3-year contract with National Fuel for an
additional 2,030,000 Mcf of similar storage capacity as of April 1, 2005.
SJRG also has a long-term firm transportation agreement with National
Fuel associated with the above mentioned storage service, with a primary term
which extends through March 31, 2006. Under this agreement, National Fuel will
provide SJRG with a maximum daily injection transportation quantity of 18,500
Mcf with primary receipt points on Tennessee Gas Pipeline and National Fuel's
system storage. The agreement also provides for a maximum daily withdrawal
transportation quantity of 23,200 Mcf with primary delivery points on
Transcontinental Gas Pipe Line and National Fuel's system storage.
Patents and Franchises
South Jersey Gas Company
SJG holds nonexclusive franchises granted by municipalities in the
seven-county area of southern New Jersey that it serves. No other natural gas
public utility presently serves the territory covered by SJG's franchises.
Otherwise, patents, trademarks, licenses, franchises and concessions are not
material to the business of SJG.
South Jersey Energy Company
AirLogics, LLC received a patent from the United States Patent Office
on its perimeter air monitoring system in September of 2000.
Seasonal Aspects
South Jersey Gas Company
SJG experiences seasonal fluctuations in sales when selling natural gas
for heating purposes. SJG meets this seasonal fluctuation in demand from its
firm customers by buying and storing gas during the summer months, and by
drawing from storage and purchasing supplemental supplies during the heating
season. As a result of this seasonality, SJG's revenues and net income are
significantly higher during the first and fourth quarters than during the second
and third quarters of the year.
Non-Utility Companies
Among SJI's non-utility activities, retail gas marketing has a seasonal
pattern similar to SJG's. Activities such as wholesale gas marketing, air
monitoring, energy services, and energy project development do not follow
seasonal patterns. Other activities such as retail electric marketing and
appliance service can have seasonal earnings patterns that are different from
the utility. While growth in the earnings contributions from non-utility
operations has improved SJI's second and third quarter net income levels, the
first and fourth quarters remain the periods where most of SJI's revenues and
net income is produced.
SJI-10
Working Capital Practices
Reference is made to "Liquidity and Capital Resources" on page 18 of
the SJI's Annual Report to Shareholders for the year ended December 31, 2004
which is attached to this report.
Customers
No material part of the Company's business is dependent upon a single
customer or a few customers, the loss of which would have a material adverse
effect on SJI performance on a consolidated basis. One of SJI's subsidiaries,
Marina Energy, does currently receive the majority of its revenues and income
from one customer. However, that customer is under long-term contract through
2023.
Backlog
Backlog is not material to an understanding of SJI's business or that
of any of its subsidiaries.
Government Contracts
No material portion of the business of SJI or any of its subsidiaries
is subject to renegotiation of profits or termination of contracts or
subcontracts at the election of any government.
Competition
South Jersey Gas Company
SJG's franchises are non-exclusive, however, no other utility provides
natural gas service within its territory. SJG does not expect any other
utilities to do so in the foreseeable future because of the extensive investment
required for utility plant and related costs. SJG competes with oil, propane and
electricity suppliers for residential, commercial and industrial users. SJG
competes with alternative fuel source providers based upon price, convenience
and environmental factors. The market for natural gas commodity sales is subject
to competition as a result of deregulation. Through its tariff, SJG has promoted
competition while maintaining its margins. Substantially all of SJG's profits
are from the transportation, rather than the sale, of the commodity. SJG has
maintained its focus on being a low-cost provider of natural gas. SJG also
competes with other marketers/brokers in the selling of wholesale natural gas
services.
Non-Utility Companies
SJE competes with a number of other marketers/brokers in selling retail
natural gas and electricity. SJE competes based upon a combination of effective
customer acquisition efforts and pricing. Retail natural gas competition
includes SJG, other utilities, and alliances which include other utility
companies and independent marketers. Retail electric competition is similar to
that of retail natural gas, excluding SJG. SJRG competes with other wholesale
gas marketers based upon a combination of familiarity with the markets we serve
and price. Marina competes with other energy project development companies on
specific projects. That competition is based upon reputation, service, and
price. SJESP competes with numerous other companies, both large and small, that
service appliances and install HVAC systems based upon reputation, service, and
price.
Research
During the last three fiscal years, neither SJI nor any of its
subsidiaries engaged in research activities to any material extent.
SJI-11
Environmental Matters
Information on environmental matters for SJI and its subsidiaries is
incorporated by reference to Note 13 on page 37 of the SJI Annual Report to
Shareholders for the year ended December 31, 2004 which is attached to this
report.
Employees
SJI and its subsidiaries had a total of 633 employees as of December
31, 2004. Of that total, 375 employees are unionized. Employees totaling 329 and
46 unionized employees are covered under collective bargaining agreements that
expire in January 2009 and January 2008, respectively. We consider relations
with employees to be good.
Financial Information About Foreign and Domestic Operations and Export Sales
SJI has no foreign operations and export sales have not been a
significant part of SJI's business.
Item 2. Properties
The principal property of SJI consists of SJG's gas transmission and
distribution systems that include mains, service connections and meters. The
transmission facilities carry the gas from the connections with Transco and
Columbia to SJG's distribution systems for delivery to customers. As of December
31, 2004, there were approximately 92 miles of mains in the transmission systems
and 5,478 miles of mains in the distribution systems.
SJG owns office and service buildings, including its corporate
headquarters, at seven locations in the territory. There is also a liquefied
natural gas storage and vaporization facility at one of these locations.
As of December 31, 2004, SJG's utility plant had a gross book value of
$957.3 million and a net book value, after accumulated depreciation, of $732.8
million. In 2004, $68.6 million was spent on additions to utility plant and
there were retirements of property having an aggregate gross book cost of $5.9
million. SJI's total construction and remediation expenditures for 2005 are
expected to total $87.2 million.
Virtually all of SJG's transmission pipeline, distribution mains and
service connections are in streets or highways or on the property of others. The
transmission and distribution systems are maintained under franchises or permits
or rights-of-way, many of which are perpetual. SJG's properties (other than
property specifically excluded) are subject to a lien of mortgage under which
its first mortgage bonds are outstanding. We believe these properties are well
maintained and in good operating condition.
Non-utility property and equipment totaling $67.1 million consists
primarily of Marina's energy projects, in particular the thermal energy plant in
Atlantic City, N.J.
EMI owns 235 acres of land in Vineland, New Jersey.
South Jersey Fuel, Inc., an inactive subsidiary, owns land and a
building in Deptford Township and owns real estate in Upper Township, New
Jersey.
R&T Castellini, Inc., an inactive subsidiary, owns land and buildings
in Vineland, New Jersey.
SJI owned approximately 139 acres of land in Folsom, New Jersey, and
approximately 3.41 acres of land in Linwood, New Jersey as of December 31, 2004.
SJI sold the Linwood property in February 2005 for $600,000.
SJI-12
Item 3. Legal Proceedings
SJI is subject to claims arising in the ordinary course of business and
other legal proceedings. We accrue liabilities related to these claims when we
can determine the amount or range of amounts of likely settlement costs for
these claims. Among other actions, SJI is named in certain product liability
claims related to our former sand mining subsidiary. Management does not
currently anticipate the disposition of any known claims to have a material
adverse effect on SJI's financial position, results of operations or liquidity.
Item 4. Submission Of Matters To A Vote of Security Holders
No matter was submitted to a vote of security holders during the fourth
quarter of the 2004 fiscal year.
Item 4-A. Executive Officers of the Registrant
Name Age Positions with SJI
Edward J. Graham 47 President & Chief Executive Officer
David A. Kindlick 50 Vice President & Chief Financial Officer
Jeffrey E. DuBois 46 Vice President
Richard J. Jackson 55 Vice President
Michael J. Renna 37 Vice President
Albert V. Ruggiero 56 Vice President
Richard H. Walker, Jr. 54 Vice President, Corporate Counsel &
Corporate Secretary
Edward J. Graham was elected Vice President & Controller of SJG in
June 1994, Vice President, Gas Management in April 1995, and Senior Vice
President, Energy Management in April 1998. Mr. Graham was elected President of
SJ EnerTrade in October 1997 and President of SJE in October 1998. Mr. Graham
was elected Vice President of SJI in June 1998, and Executive Vice President and
Chief Operating Officer in January 2002. Mr. Graham was elected President &
Chief Operating Officer in January 2003 and CEO in February 2004. Mr. Graham
relinquished the role of COO in February 2004.
David A. Kindlick was elected Assistant Vice President, Revenue
Requirements of SJG in October 1989, Vice President, Revenue Requirements in
April 1992, Vice President, Rates and Budgeting in April 1995, Senior Vice
President, Finance and Rates in April 1998, and Executive Vice President and
Chief Financial Officer in January 2002. Mr. Kindlick was elected Vice President
of SJI in June 1997, Vice President and Treasurer in April 2001, and Vice
President, Treasurer and Chief Financial Officer in January 2002. Mr. Kindlick
relinquished the role of Treasurer in January 2004.
Jeffrey E. DuBois was elected Assistant Vice President, Gas Supply and
Off-System Sales of SJG in January 2002. Mr. DuBois was elected Senior Vice
President, Gas Supply and Delivery of SJG and Vice President of SJI in January
2004.
Richard J. Jackson was elected Assistant Vice President, Division
Operations of SJG in October 1989, Vice President, Division Operations in April
1992, Vice President, Production & Transmission in July 1993, Senior Vice
President, Operations in April 1998, and Executive Vice President and Chief
Operating Officer in March 2002. Mr. Jackson was elected as Vice President of
SJI in January 2004.
Michael J. Renna was elected Assistant Vice President of SJI in January
2002 and Vice President in January 2004. Mr. Renna was elected Vice President of
SJE in January 2002 and President in January 2004.
SI-13
Albert V. Ruggiero was elected Vice President, Human Resources of SJG
in April 1990, Vice President, Human Resources & External Affairs in April 1995,
Senior Vice President, Corporate Development in April 1998, and Executive Vice
President and Chief Administrative Officer in January 2002. Mr. Ruggiero was
elected Vice President of SJI in October 1998.
Richard H. Walker, Jr. was elected Assistant Secretary of SJI and SJG
in April 1998, and Corporate Counsel & Corporate Secretary in April 2002.
Mr. Walker was elected Vice President, Corporate Counsel and Corporate Secretary
in May 2003.
Executive officers of SJI are elected annually and serve at the
pleasure of the Board of Directors.
SJI-14
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters
Information required by this item is incorporated by reference to Note
4 on pages 30 and 31 of SJI's Annual Report to Shareholders for the year ended
December 31, 2004 which is attached to this report.
In December 2004, non-employee members of SJI's Board of Directors
received an aggregate of 2,610 shares of unregistered stock, valued at that time
at $130,265, as part of their compensation for serving on the Board.
Item 6. Selected Financial Data
Information required by this item is incorporated by reference to page
1 of SJI's Annual Report to Shareholders for the year ended December 31, 2004
which is attached to this report.
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Information required by this item is incorporated by reference to pages
12 through 21 of SJI's Annual Report to Shareholders for the year ended December
31, 2004 which is attached to this report.
Item 7A. Quantitative and Qualitative Disclosures about Market Risks
Information required by this item is incorporated by reference to the
section entitled "Market Risks" on pages 19 and 20 of SJI's Annual Report to
Shareholders for the year ended December 31, 2004, which is attached to this
report.
Item 8. Financial Statements and Supplementary Data
Information required by this item is incorporated by reference to pages
22 through 38 of SJI's Annual Report to Shareholders for the year ended December
31, 2004 which is attached to this report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures - Management has
established controls and procedures to ensure that material information relating
to SJI, including its consolidated subsidiaries, is made known to the officers
who certify its financial reports and to other members of senior management and
the Board of Directors.
Based upon their evaluation as of December 31, 2004, the principal
executive officer and the principal financial officer of SJI have concluded that
SJI-15
the disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934) employed at SJI are
effective to ensure that the information required to be disclosed by SJI in the
reports that it files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms.
No change in SJI's internal control over financial reporting occurred
during SJI's fourth fiscal quarter.
Management's Report on Internal Control Over Financial Reporting -
Management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined under Exchange Act
Rules 13a-15(f). Under the supervision and with the participation of our
management, including our principal executive officer and principal financial
officer, we conducted an evaluation of the effectiveness of our internal control
over financial reporting based on the framework in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commision. Based on our evaluation under that framework, management concluded
that our internal control over financial reporting was effective as of December
31, 2004. Management's assessment of the effectiveness of our internal control
over financial reporting as of December 31, 2004 has been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in their
report which is incorporated by reference.
Item 9B. Other Information
None
SJI-16
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning Directors may be found under the captions
"Director Elections," "Nominees," "Directors Continuing in Office," and
"Security Ownership" in our definitive proxy statement for our 2005 Annual
Meeting of Shareholders (the "2005 Proxy Statement"), which will be filed within
the Commission within 120 days after the close of our fiscal year. Such
information is incorporated herein by reference. Information required by this
item relating to the executive officers of SJI is set forth in Item 4-A of this
report.
Code of Ethics
The Company has adopted a Code of Ethics for its Principal Executive,
Financial and Accounting Officers. It is available on SJI's website,
www.sjindustries.com by clicking "Investors" and then "Corporate Governance." We
will post any amendment to or waiver of the Code to our website.
Item 11. Executive Compensation
Information concerning executive compensation may be found under the
captions "Compensation/Pension Committee Report on Executive Compensation" and
"Executive Compensation" of our 2005 Proxy Statement. Such information is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information in our 2005 Proxy Statement set forth under the caption
"Security Ownership" is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information in our 2005 Proxy Statement set forth under the caption
"The Board of Directors" and the subcaption "Certain Relationships" is
incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information in our 2005 Proxy Statement set forth under the caption
"Ratification of Appointment of Independent Registered Public Accounting Firm"
is incorporated herein by reference.
SJI-17
PART IV
Item 15. Exhibits and Financial Statement Schedule
(a) Listed below are all financial statements and schedules filed as part of
this report:
1 - The consolidated financial statements and notes to consolidated
financial statements together with the report thereon of Deloitte & Touche LLP,
dated March 2, 2005, are incorporated herein by reference to pages 21 through 37
of SJI's Annual Report to Shareholders for the year ended December 31, 2004
which is attached to this report.
2 - Supplementary Financial Information
Information regarding selected quarterly financial data is incorporated
herein by reference to page 38 of SJI's Annual Report to Shareholders for the
year ended December 31, 2004 which is attached to this report.
Supplemental Schedules as of December 31, 2004 and 2003 and for the
three years ended December 31, 2004, 2003, and 2002:
Report of Independent Registered Public Accounting Firm of Deloitte &
Touche LLP, Auditors of SJI (page 24).
Schedule I - Statements of Income, Statements of Comprehensive Income,
Statements of Retained Earnings, Statements of Cash Flows and Balance Sheets of
SJI (pages 27-29).
Schedule II - Valuation and Qualifying Accounts (page 30).
All schedules, other than that listed above, are omitted because the
information called for is included in the financial statements filed or because
they are not applicable or are not required.
3 - See Item 15(b)(13)
(b) List of Exhibits (Exhibit Number is in Accordance with the Exhibit Table i
Item 601 of Regulation S-K).
Exhibit Description Reference
Number
(3)(a)(i) Certificate of Incorporation of South Jersey Incorporated by reference from Exhibit (4)(a)
Industries, Inc., as amended through April of Form S-2 (2-91515).
19, 1984.
(3)(a)(ii) Amendment to Certificate of Incorporation Incorporated by reference from Exhibit
relating to two-for-one stock split effective (4)(e)(1) of Form S-3 (33-1320).
as of April 28, 1987.
(3)(a)(iii) Amendment to Certificate of Incorporation Incorporated by reference from Exhibit
relating to director and officer liability. (4)(e)(2) of Form S-3 (33-1320).
SJI-18
Exhibit Description Reference
Number
(3)(ii) Bylaws of South Jersey Industries, Inc. as Incorporated by reference from Exhibit
amended and restated through November 17, (3)(ii) of Form 10-K for 2000 (1-6364).
2000.
(4)(a) Form of Stock Certificate for common stock. Incorporated by reference from Exhibit (4)(a)
of Form 10-K for 1985 (1-6364).
(4)(a)(i) Rights Agreement dated as of September 20, Incorporated by reference from Exhibit 99.1
1996 between South Jersey Industries, Inc. of Form 8-A filed April 9, 1996 (1-6364).
and The Farmers & Merchants National Bank of
Bridgeton.
(4)(b)(i) First Mortgage Indenture dated October 1, Incorporated by reference from Exhibit
1947. (4)(b)(i) of Form 10-K for 1987 (1-6364).
(4)(b)(x) Twelfth Supplemental Indenture dated as of Incorporated by reference from Exhibit 5(b)
June 1, 1980. of Form S-7 (2-68038).
(4)(b)(xv) Seventeenth Supplemental Indenture dated as Incorporated by reference from Exhibit
of May 1, 1989. (4)(b)(xv) of Form 10-K for 1989 (1-6364).
(4)(b)(xvii) Nineteenth Supplemental Indenture dated as of Incorporated by reference from Exhibit
April 1, 1992. (4)(b)(xvii) of Form 10-K for 1992 (1-6364).
(4)(b)(xix) Twenty-First Supplemental Indenture dated as Incorporated by reference from Exhibit
of March 1, 1997. (4)(b)(xviv) of Form 10-K for 1997(1-6364).
(4)(b)(xx) Twenty-Second Supplemental Indenture dated as Incorporated by reference from Exhibit
of October 1, 1998. (4)(b)(ix) of Form S-3 (333-62019).
(4)(b)(xxi) Twenty-Third Supplemental Indenture dated as Incorporated by reference from Exhibit
of September 1, 2002. (4)(b)(x) of Form S-3 (333-98411).
(4)(c) Indenture dated as of January 31, 1995; 8.60% Incorporated by reference from Exhibit (4)(c)
Debenture Notes due February 1, 2010. of Form 10-K for 1994 (1-6364).
(4)(e) Medium Term Note Indenture of Trust dated Incorporated by reference from Exhibit 4(e)
October 1, 1998. of Form S-3 (333-62019).
(4)(f) Medium Term Note Indenture of Trust, as Incorporated by reference from Exhibit 4(e)
amended, dated December 16, 2002. of Form S-3 (333-98411)
(10)(d) Gas storage agreement (GSS) between South Incorporated by reference from Exhibit
Jersey Gas Company and Transco dated October (10)(d) of Form 10-K for 1993 (1-6364).
1, 1993.
(10)(e) Gas storage agreement (S-2) between South Incorporated by reference from Exhibit (5)(h)
Jersey Gas Company and Transco dated December of Form S-7 (2-56223).
16, 1953.
SJI-19
Exhibit Description Reference
Number
(10)(f) Gas storage agreement (LG-A) between South Incorporated by reference from Exhibit (5)(f)
Jersey Gas Company and Transco dated June 3, of Form S-7 (2-56223).
1974.
(10)(h) Gas storage agreement (WSS) between South Incorporated by reference from Exhibit
Jersey Gas Company and Transco dated August (10)(h) of Form 10-K for 1991 (1-6364).
1, 1991.
(10)(i) Gas storage agreement (LSS) between South Incorporated by reference from Exhibit
Jersey Gas Company and Transco dated October (10)(i) of Form 10-K for 1993 (1-6364).
1, 1993.
(10)(i)(a) Gas storage agreement (SS-1) between South Incorporated by reference from Exhibit
Jersey Gas Company and Transco dated May 10, (10)(i)(a) of Form 10-K for 1988 (1-6364).
1987 (effective April 1, 1988).
(10)(i)(c) Gas transportation service agreement between Incorporated by reference from Exhibit
South Jersey Gas Company and Transco dated (10)(i)(c) of Form 10-K for 1989 (1-6364).
April 1, 1986.
(10)(i)(f) Service agreement (FT) between South Jersey Incorporated by reference from Exhibit
Gas Company and Transco dated February 1, (10)(i)(f) of Form 10-K for 1991 (1-6364).
1992.
(10)(i)(g) Service agreement (Incremental FT) between Incorporated by reference from Exhibit
South Jersey Gas Company and Transco dated (10)(i)(g) of Form 10-K for 1991 (1-6364).
August 1, 1991.
(10)(i)(i) Gas storage agreement (SS-2) between South Incorporated by reference from Exhibit
Jersey Gas Company and Transco dated July 25, (10)(i)(i) of Form 10-K for 1991 (1-6364).
1990.
(10)(i)(j) Gas transportation service agreement between Incorporated by reference from Exhibit
South Jersey Gas Company and Transco dated (10)(i)(j) of Form 10-K for 1993 (1-6364).
December 20, 1991.
(10)(i)(k) Amendment to gas transportation agreement Incorporated by reference from Exhibit
dated December 20, 1991 between South Jersey (10)(i)(k) of Form 10-K for 1993 (1-6364).
Gas Company and Transco dated October 5, 1993.
(10)(k)(h) Gas transportation service agreement (TF) Incorporated by reference from Exhibit
between South Jersey Gas Company and CNG (10)(k)(h) of Form 10-K for 1993 (1-6364).
Transmission Corporation dated October 1,
1993.
(10)(k)(k) Gas transportation service agreement (FTS-1) Incorporated by reference from Exhibit
between South Jersey Gas Company and Columbia (10)(k)(k) of Form 10-K for 1993 (1-6364).
Gulf Transmission Company dated November 1,
1993.
SJI-20
Exhibit Description Reference
Number
(10)(k)(l) Assignment agreement capacity and service Incorporated by reference from Exhibit
rights (FTS-2) between South Jersey Gas (10)(k)(i) of Form 10-K for 1993 (1-6364).
Company and Columbia Gulf Transmission
Company dated November 1, 1993.
(10)(k)(m) FTS Service Agreement No. 39556 between South Incorporated by reference from Exhibit
Jersey Gas Company and Columbia Gas (10)(k)(m) of Form 10-K for 1993 (1-6364).
Transmission Corporation dated November 1,
1993.
(10)(k)(n) FTS Service Agreement No. 38099 between South Incorporated by reference from Exhibit
Jersey Gas Company and Columbia Gas (10)(k)(n) of Form 10-K for 1993 (1-6364).
Transmission Corporation dated November 1,
1993.
(10)(k)(o) NTS Service Agreement No. 39305 between South Incorporated by reference from Exhibit
Jersey Gas Company and Columbia Gas (10)(k)(o) of Form 10-K for 1993 (1-6364).
Transmission Corporation dated November 1,
1993.
(10)(k)(p) FSS Service Agreement No. 38130 between South Incorporated by reference from Exhibit
Jersey Gas Company and Columbia Gas (10)(k)(p) of Form 10-K for 1993 (1-6364).
Transmission Corporation dated November 1,
1993.
(10)(k)(q) SST Service Agreement No. 38086 between South Incorporated by reference from Exhibit
Jersey Gas Company and Columbia Gas (10)(k)(q) of Form 10-K for 1993 (1-6364).
Transmission Corporation dated November 1,
1993.
(10)(l)* Deferred Payment Plan for Directors of South Incorporated by reference from Exhibit
Jersey Industries, Inc., South Jersey Gas (10)(l) of Form 10-K for 1994 (1-6364).
Company, Energy & Minerals, Inc., R&T Group,
Inc. and South Jersey Energy Company as amended
and restated October 21, 1994.
(10)(l)(a)* Form of Deferred Compensation Agreement Incorporated by reference from Exhibit
between South Jersey Industries, Inc. and/or (10)(j)(a) of Form 10-K for 1980 (1-6364).
a subsidiary and seven of its officers.
(10)(l)(b)* Schedule of Deferred Compensation Agreements. Incorporated by reference from Exhibit
(10)(l)(b) of Form 10-K for 1997 (1-6364).
(10)(l)(d)* Form of Officer Employment Agreement between Incorporated by reference from Exhibit
certain officers and either South Jersey (10)(l)(d) of Form 10-K for 1999 (1-6364).
Industries, Inc. or its subsidiaries.
(10)(l)(e)* Schedule of Officer Employment Agreements. Incorporated by reference from Exhibit
(10)(l)(e) of Form 10-K of SJI for 2003.
(10)(l)(f)* Officer Severance Benefit Program for all Incorporated by reference from Exhibit
officers. (10)(l)(g) of Form 10-K for 1985 (1-6364).
SJI-21
Exhibit Description Reference
Number
(10)(l)(i)* Supplemental Executive Retirement Program, as Incorporated by reference from Exhibit
amended and restated effective July 1, 1997, (10)(l)(i) of Form 10-K for 1997 (1-6364). and
Form of Agreement between certain SJI or
subsidiary officers.
(10)(l)(j)* South Jersey Industries, Inc. 1997 Incorporated by reference from Exhibit
Stock-Based Compensation Plan (As Amended and (10)(l)(j) of Form 10-K for 1999 (1-6364).
Restated Effective January 1, 1999).
(10)(m) Three-year Revolving Credit Agreement for SJI Incorporated by reference from Exhibit 10.1
of Form 10-Q of SJI as filed November 9, 2004.
(10)(n)(a) Three-year Revolving Credit Agreement for SJG Incorporated by reference from Exhibit 10.2
of Form 10-Q of SJI as filed on November 14,
2003.
(10)(n)(b) First Amendment to Three Year Revolving Incorporated by reference from Exhibit 10.2
Credit Agreement of Form 10-Q of SJI as filed on November 9,
2004.
(10)(o)(a) Amended and Restated Letter of Credit and
Reimbursement Agreement (filed herewith)
(10)(o)(b) First Amendment To Amended and Restated
Letter of Credit and Reimbursement Agreement
(filed herewith)
(10)(o)(c) Second Amendment To Amended and Restated
Letter of Credit and Reimbursement Agreement
(filed herewith)
(10)(o)(d) Third Amendment To Amended and Restated
Letter of Credit and Reimbursement Agreement
(filed herewith)
(12) Calculation of Ratio of Earnings to Fixed
Charges (Before Federal Income Taxes) (filed
herewith).
(13) The Annual Report to Shareholders of SJI for
the year ended December 31, 2004 is filed as
an exhibit hereto solely to the extent
portions are specifically incorporated by
reference herein (filed herewith).
(14) Code of Ethics. Incorporated by reference from Exhibit (14)
of Form 10-K of SJI as filed for 2003.
SJI-22
Exhibit Description Reference
Number
(18) Preferability Letter from Independent Incorporated by reference from Exhibit (18)
Auditors' Re: Pension Measurement of Form 10-K of SJI as filed for 2003.
Date.
(21) Subsidiaries of the Registrant (filed herewith).
(23) Independent Registered Public Accounting Firm's
Consent (filed herewith).
(31.1) Certification of Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
(31.2) Certification of Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
(32.1) Certification of Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
(32.2) Certification of Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (filed herewith).
* Constitutes a management contract or a compensatory plan or arrangement.
SJI-23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SOUTH JERSEY INDUSTRIES, INC.
BY: /s/ David A. Kindlick
---------------------
David A. Kindlick
Vice President & Chief Financial Officer
Date March 7, 2005
-----------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Edward J. Graham President, Chief Executive Officer March 7, 2005
- -------------------------- and Director
(Edward J. Graham) (Principal Executive Officer)
/s/ David A. Kindlick Vice President & Chief March 7, 2005
- -------------------------- Financial Officer
(David A. Kindlick) (Principal Financial and Accounting Officer)
/s/ Richard H. Walker, Jr. Vice President, Corporate Counsel March 7, 2005
- -------------------------- and Corporate Secretary
(Richard H. Walker, Jr.)
/s/ Charles Biscieglia Chairman of the Board March 7, 2005
- --------------------------
(Charles Biscieglia)
/s/ Shirli M. Billings Director March 7, 2005
- --------------------------
(Shirli M. Billings)
/s/ Helen R. Bosley Director March 7, 2005
- --------------------------
(Helen R. Bosley)
SJI-24
Signature Title Date
/s/ Thomas A. Bracken Director March 7, 2005
- -------------------------
(Thomas A. Bracken)
/s/ Keith S. Campbell Director March 7, 2005
- --------------------------
(Keith S. Campbell)
/s/ Sheila Hartnett-Devlin Director March 7, 2005
- ---------------------------
(Sheila Hartnett-Devlin)
/s/ W. Cary Edwards Director March 7, 2005
- --------------------------
(W. Cary Edwards)
/s/ William J. Hughes Director March 7, 2005
- --------------------------
(William J. Hughes)
/s/ Herman D. James Director March 7, 2005
- --------------------------
(Herman D. James)
/s/ Frederick R. Raring Director March 7, 2005
- --------------------------
(Frederick R. Raring)
SJI-25
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
South Jersey Industries, Inc.
We have audited the consolidated financial statements of South Jersey
Industries, Inc. and subsidiaries (the "Company") as of December 31, 2004 and
2003, and for each of the three years in the period ended December 31, 2004,
management's assessment of the effectiveness of the Company's internal control
over financial reporting as of December 31, 2004, and the effectiveness of the
Company's internal control over financial reporting as of December 31, 2004, and
have issued our reports thereon dated March 2, 2005; such consolidated financial
statements and reports are included in your 2004 Annual Report to Shareholders
and are incorporated herein by reference. Our report on the Company's
consolidated financial statements expresses an unqualified opinion and includes
explanatory paragraphs with respect to the restatement of the 2003 balance sheet
for the classification of prepaid pension assets from current assets to
noncurrent assets and the change in the method of accounting for energy-related
contracts to conform with the rescission of EITF 98-10 "Accounting for Contracts
Involved in Energy Trading and Risk Management Activities" in 2003. Our audits
also included the consolidated financial statement schedules of the Company
listed in Item 15(a)2. These consolidated financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such consolidated financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
March 2, 2005
SJI-26
SCHEDULE I - SOUTH JERSEY INDUSTRIES, INC.
STATEMENTS OF INCOME
(In Thousands)
2004 2003 2002
----------- ------------ ------------
Operating Revenues $ 2,491 $ 2,216 $ 1,483
Operating Expenses:
Operations 4,146 3,176 1,901
Depreciation 102 80 60
Energy and Other Taxes 391 295 175
----------- ------------ ------------
Total Operating Expenses 4,639 3,551 2,136
Operating Loss (2,148) (1,335) (653)
----------- ------------ ------------
Other Income:
Equity in Earnings of Subs 43,038 33,643 28,658
Other 417 478 718
----------- ------------ ------------
Total Other Income 43,455 34,121 29,376
----------- ------------ ------------
Interest Charges 619 497 519
Income Taxes (1,519) (1,084) (462)
Equity in Affiliated Companies (766) (754) (746)
----------- ------------ ------------
Income from Continuing
Operations 42,973 $ 34,127 $ 29,412
Discontinued Operations - Net - (275) -
Equity in Undistributed Earnings of
Discontinued Subsidiaries (680) (499) (424)
----------- ------------ ------------
Net Income Applicable to
Common Stock $ 42,293 $ 33,353 $ 28,988
=========== ============ ============
See South Jersey Industries, Inc. and Subsidiaries Notes to Consolidated
Financial Statements incorporated by reference in Part II, Item 8.
SCHEDULE I - SOUTH JERSEY INDUSTRIES, INC.
Statements of Comprehensive Income
(In Thousands)
2004 2003 2002
----------- ------------ ------------
Net Income Applicable to Common Stock $ 42,293 $ 33,353 $ 28,988
----------- ------------ ------------
Other Comprehensive Income (Loss):
Minimum Pension Liability
Adjustment - Net - 803 (771)
----------- ------------ ------------
Total Other Comprehensive Income (Loss) - 803 (771)
----------- ------------ ------------
Comprehensive Income $ 42,293 $ 34,156 $ 28,217
=========== ============ ============
See South Jersey Industries, Inc. and Subsidiaries Notes to Consolidated
Financial Statements incorporated by reference in Part II, Item 8.
SCHEDULE I - SOUTH JERSEY INDUSTRIES, INC.
Statement of Retained Earnings
(In Thousands)
2004 2003 2002
----------- ------------ ------------
Retained Earnings - Beginning $ 91,638 $ 78,002 $ 67,218
Net Income Applicable to Common Stock 42,293 33,353 28,988
----------- ------------ ------------
133,931 111,355 96,206
Dividends Declared - Common Stock (22,534) (19,717) (18,204)
----------- ------------ ------------
Retained Earnings - Ending $ 111,397 $ 91,638 $ 78,002
=========== ============ ============
See South Jersey Industries, Inc. and Subsidiaries Notes to Consolidated
Financial Statements incorporated by reference in Part II, Item 8.
SJI-27
SCHEDULE I - SOUTH JERSEY INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31,
(In Thousands)
2004 2003 2002
-------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income Applicable to Common Stock $ 42,293 $ 33,353 $ 28,988
-------------- -------------- --------------
Adjustments to Reconcile Net Income to Cash
Flows Provided by Operating Activities:
Equity in Earnings of Subsidiaries (42,358) (33,144) (28,234)
Depreciation 102 83 66
Deferred and Non-Current Income Taxes and Credits - Net (89) 300 329
Environmental Remedition Costs - Net - (61) (11)
Additional Pension Contribution (1,126) (468) (750)
Changes in:
Accounts Receivable 99 (80) (17)
Receivables with Associated Companies - Net (257) (196) (103)
Prepayments and Other Current Assets (68) (47) (8)
Prepaid and Accrued Taxes - Net (1,175) 482 (511)
Accounts Payables & Other Current Liabilities 659 549 (5,389)
Other - Assets 47 864 (104)
Other - Liabilities 718 (443) 347
-------------- -------------- --------------
Total Cash (Used In) Provided by Operating Activities (1,155) 1,192 (5,397)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Return of Investment (Investment in) Affiliates 134 (254) (286)
Capital Expenditures (82) (153) (125)
Dividends from Subsidiaries 9,123 10,500 10,700
Equity Infusion To Subsidiaries (19,000) (30,700) (2,500)
-------------- -------------- --------------
Net Cash (Used In) Provided by Investing Activities (9,825) (20,607) 7,789
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (Repayments) Borrowings of Associated Companies (6,648) (10,970) 9,528
Net Borrowings (Repayments) from Lines of Credits 13,700 13,000 (4,260)
Dividends on Common Stock (22,534) (19,717) (18,204)
Proceeds from Sale of Common Stock 26,662 37,170 10,926
-------------- -------------- --------------
Net Cash Provided by (Used In) Financing Activities 11,180 19,483 (2,010)
-------------- -------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 200 68 382
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR 589 521 139
-------------- -------------- --------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 789 $ 589 $ 521
============== ============== ==============
See South Jersey Industries, Inc. and Subsidiaries Notes to Consolidated Financial Statements
incorporated by reference in Part II, Item 8.
SJI-28
SCHEDULE I - SOUTH JERSEY INDUSTRIES, INC.
BALANCE SHEETS
(In Thousands)
2004 2003
------------- --------------
Assets
Property Plant and Equipment:
Nonutility Property, Plant and Equipment,
at cost $ 1,337 $ 1,340
Accumulated Depreciation (278) (253)
-------------- --------------
Property, Plant and Equipment - Net 1,059 1,087
-------------- --------------
Investments:
Investments in Subsidiaries 347,858 295,623
Available-for-Sale Securities 14 53
Investment in Affiliates 1,249 1,382
-------------- --------------
Total Investments 349,121 297,058
-------------- --------------
- -
Current Assets:
Cash and Cash Equivalents 789 589
Notes Receivable - Associated Companies 33,448 26,645
Accounts Receivable 11 110
Accounts Receivable - Associated Companies 2,288 2,132
Other 213 132
-------------- --------------
Total Current Assets 36,749 29,608
-------------- --------------
Other Noncurrent Assets 2,808 1,347
-------------- --------------
Total Assets $ 389,737 $ 329,100
============= ==============
Capitalization and Liabilities
Common Equity:
Common Stock SJI
Par Value $1.25 a share
Authorized - 20,000,000 shares
Outstanding - 13,879,968 shares
and 13,229,001 $ 17,350 $ 16,536
Premium on Common Stock 212,211 186,316
Retained Earnings 111,397 91,638
-------------- --------------
Total Common Equity 340,958 294,490
-------------- --------------
Current Liabilities:
Notes Payable - Banks 39,300 25,600
Notes Payable - Associated Companies 5,920 5,765
Accounts Payable 1,535 1,247
Accounts Payable to Associated Companies 512 614
Taxes Accrued (1,580) (406)
Other Current Liabilities 660 264
-------------- --------------
Total Current Liabilities 46,347 33,084
-------------- --------------
Other Noncurrent Liabilities 2,432 1,526
-------------- --------------
Total Capitalization and Liabilities $ 389,737 $ 329,100
============== ==============
See South Jersey Industries, Inc. and Subsidiaries Notes to Consolidated
Financial Statements incorporated by reference in Part II, Item 8.
SJI-29
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
Col. A Col. B Col. C Col. D Col. E
- ---------------------------------------------------------------------------------------------------------------------------
Additions
------------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other Accounts - Deductions - End
Classification of Period Expenses Describe (a) Describe (b) of Period
- ---------------------------------------------------------------------------------------------------------------------------
Provision for Uncollectible
Accounts for the Year Ended
December 31, 2004 $3,565 $1,171 $1,716 $2,957 $3,495
Provision for Uncollectible
Accounts for the Year Ended
December 31, 2003 $3,612 $3,245 $596 $3,888 $3,565
Provision for Uncollectible
Accounts for the Year Ended
December 31, 2002 $2,661 $4,148 $298 $3,495 $3,612
(a) Recoveries of accounts previously written off and minor adjustments.
(b) Uncollectible accounts written off.
SJI-30