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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003 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 12,120,500 shares of voting stock
held by non-affiliates of the registrant as of March 1, 2004 was $510,515,460.
As of March 1, 2004, there were 13,549,849 shares of the registrant's common
stock outstanding.
Documents Incorporated by Reference:
In Part I of Form 10-K: Pages 16, 24, and 28 through 33 of 2003 Annual Report
to Shareholders
In Part II of Form 10-K: Pages 1 and 12 through 33 of 2003 Annual Report to
Shareholders
In Part III of Form 10-K: Pages 1 through 7 and 13 through 15 of the Proxy
Statement dated March 15, 2004 for the 2004 Annual
Meeting of Shareholders
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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. 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:
* sells natural gas and pipeline transportation capacity (off-system
sales) on a wholesale basis to various customers on the interstate
pipeline system;
* transports natural gas purchased directly from producers or suppliers
for its own sales and for some of its customers; and
* services appliances via the sale of appliance warranty and
preventative maintenance programs as well as on a time and materials
basis.
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.
Marina Energy LLC (Marina) develops and operates energy-related projects
in southern New Jersey. Marina's largest project, the development of a facility
to provide cooling, heating and hot water to The Borgata Hotel and Spa in
Atlantic City, began commercial operations in July 2003.
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.
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
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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 page 29 of SJI's Annual Report to Shareholders for the year ended
December 31, 2003 which is attached to this report. See Item 15(c)(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
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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 in an area of approximately 2,500 square miles in
the southern part of New Jersey. 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's service territory 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 serves 304,562 residential, commercial and industrial customers (at
December 31, 2003) in southern New Jersey. Gas sales, transportation and
capacity release for 2003 amounted to 125,024 MMcf (million cubic feet), of
which 54,397 MMcf was firm sales and transportation, 2,467 MMcf was
interruptible sales and transportation and 68,160 MMcf was off-system sales and
capacity release. The breakdown of firm sales includes 29.1% residential, 9.9%
commercial, 1.4% cogeneration and electric generation, .4% industrial and 59.2%
transportation. At year-end 2003, SJG served 283,722 residential customers,
20,405 commercial customers and 435 industrial customers. This includes 2003 net
additions of 7,743 residential customers, 439 commercial customers and 6
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 2003, .8 Bcf (billion cubic feet) was delivered under
this agreement.
SJG serviced 6 cogeneration facilities in 2003. Combined sales and
transportation of natural gas to such customers amounted to approximately 3.8
Bcf in 2003.
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.
SJI-3
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 2003, off-system sales amounted to 27.0 Bcf.
Also in 2003, capacity release and storage throughput amounted to 41.1 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 2003 amounted to approximately 2.5
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.
Service Territory
-----------------
The majority of SJG's residential customers reside in the northern and
western portions of its service territory in Burlington, Camden, Salem and
Gloucester counties. A majority of new customers reside in this section of the
service territory, which includes the residential suburbs of Wilmington and
Philadelphia. The franchise area to the east is centered on Atlantic City and
the neighboring resort communities in Atlantic and Cape May counties, which
experience large population increases in the summer months. The impact of the
casino gaming industry on the Atlantic City area has resulted in the creation of
new jobs and the expansion of the residential and commercial infrastructure
necessary to support a developing year-round economy. Construction was completed
at the beginning of July on the first new casino/hotel in 13 years, emphasizing
the continued expansion of the gaming and hospitality industry in New Jersey.
Manufacturers or processors of sand, glass, farm products, paints,
chemicals and petroleum products are located in the western and southern sectors
of the service territory. New commercial establishments and high technology
industrial parks and complexes are part of the economic growth of this area.
SJG's service area includes parts of the Pinelands region, a largely undeveloped
area in the heart of southern New Jersey. Future construction in this area is
expected to be limited by statute and by a master plan adopted by the New Jersey
Pinelands Commission; however, in terms of potential growth, significant
portions of SJG's service area are not affected by these limitations.
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
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.
The tariff also allows for the adjustment of revenues due to the impact of
"temperature" fluctuations. 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
SJI-4
has historically been set annually by the BPU under a Levelized Gas Adjustment
Clause (LGAC) within SJG's tariff. As recently approved by the BPU, in the
future gas costs will be recovered through Basic Gas Supply Service ("BGSS").
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
adjusted to provide credits for 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 Basic Gas Supply Service 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 approved price structure replaced the current pricing
structure in the LGAC, all other LGAC mechanisms, such as, but not limited to,
deferred accounting treatment and the allowance for full recovery of natural gas
costs, remain in place under BGSS.
The Act also contains numerous provisions requiring the BPU to
promulgate and adopt a variety of standards related to implementing the Act.
These required standards address fair competition, affiliate relations,
accounting, competitive services, supplier licensing, consumer protection and
aggregation. In March 2000, the BPU issued Interim Standards in response to the
Act. The BPU has undertaken an extensive comment, meeting and audit process to
address the concerns of all impacted parties. SJG actively participated in the
process, and as such we believe that to date the final standards have not had,
nor will they have in the future, a material adverse affect on the company.
In August 2002, SJG filed a petition with the BPU seeking to transfer
its appliance service business from the regulated utility into a newly created
unregulated, limited liability company. If approved, the newly created company
would have the flexibility to be more responsive to competition and its
customers and further its service offerings in an unregulated environment.
In August 2003, SJG filed a base rate case with the BPU to increase its
base rates to obtain a certain level of return on its investment of capital. SJG
expects the rate case to be concluded during 2004. SJG has not sought a base
rate increase from the BPU since the implementation of its base rate case
approved in January 1997.
Additional information on regulatory affairs is incorporated by
reference to Notes 1, 6, 9, 10 and 13 of SJI's Annual Report to Shareholders for
the year ended December 31, 2003 which is attached to this report. See Item
15(c)(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, 2003, SJE marketed natural gas to 93,409 customers, of which
SJI-5
87,782 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 2003, SJE was profitable and contributed approximately 9.7% 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 commodity
risk management services to other SJI subsidiaries. In 2003, SJRG transacted
60.1 Bcf of natural gas. SJRG contributed approximately 9.1% on a consolidated
basis to SJI's net income.
Marina Energy
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
Marina Thermal Facility is located on an approximate 3/4-acre site off of Route
30 (Absecon Blvd.) and between Tennessee and New York Avenues in Atlantic City.
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 runs throughout the
Renaissance Point area, terminating at customer facilities.
The thermal facility was completed on budget and ahead of schedule. 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.
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 2003, SJG purchased and had
delivered approximately 51.7 Bcf of natural gas for distribution to both
on-system and off-system customers. Of this total, 38.4 Bcf was transported on
the Transco pipeline system and 13.3 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
SJI-6
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 2004 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 2004 to 2017.
Dominion:
Effective April 1, 2003, regained control of its Dominion GSS storage
service which had been released to Sempra Energy Trading Corporation. This
storage service 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.
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 expires 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 2003 SJG entered into a Liquified Natural Gas (LNG)liquefaction
service agreement with a third party provider which extends through March 31,
2004. SJG's contract quantity under the agreement is 186,047 Mcf. LNG supplied
by this vendor is transported to SJG's McKee City, 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 McKee City
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 2003-2004 winter season to be 496,304 Mcf. SJG projects that
it has adequate supplies and interstate pipeline entitlements to meet its design
requirements. On January 23, 2003, SJG experienced its highest peak-day demand
for the year of 403,575 Mcf with an average temperature of 15.35 degrees F.
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Natural Gas Prices
------------------
SJG's average cost of natural gas purchased and delivered in 2003, 2002
and 2001, including demand charges, was $6.74 per Mcf, $4.46 per Mcf and $6.80
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.
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, 2005, under which up to 2,441,000 Mcf of gas may be stored during the
summer season and up to 20,825 Mcf per day may be withdrawn during the winter
season.
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, 2005. Under this agreement, National Fuel will
provide SJRG with a maximum daily injection transportation quantity of 16,500
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 20,825 Mcf with primary delivery points on
Transcontinental Gas Pipe Line and National Fuel's system storage.
SJRG also has a long-term capacity assignment of firm pipeline capacity
on the Columbia Gulf System. This agreement expires in October 2004. We intend
to renew the agreement through October 2005 and do not anticipate any difficulty
in doing so.
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
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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. Other activities, such as wholesale gas marketing, air
monitoring and energy services, do not follow seasonal patterns. However, these
activities are not yet significant enough to materially alter SJI's historical
earnings pattern.
Working Capital Practices
Reference is made to "Liquidity and Capital Resources" on page 16 of
the SJI's Annual Report to Shareholders for the year ended December 31, 2003
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, currently no other utility
is providing natural gas service within its territory. SJG competes with oil,
propane and electricity suppliers for residential, commercial and industrial
users. 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 and energy services. 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 successfully 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.
SJI-9
Research
During the last three fiscal years, neither SJI nor any of its
subsidiaries engaged in research activities to any material extent.
Environmental Matters
Information on environmental matters for SJI and its subsidiaries is
incorporated by reference to Note 13 on pages 32 and 33 of the SJI Annual Report
to Shareholders for the year ended December 31, 2003 which is attached to this
report.
Employees
SJI and its subsidiaries had a total of 643 employees as of December
31, 2003. Of that total, 390 employees are unionized. 341 and 49 unionized
employees and are covered under collective bargaining agreements that expire in
January 2005 and January 2008, respectively.
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, 2003, there were approximately 92 miles of mains in the transmission systems
and 5,349 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, 2003, SJG's utility plant had a gross book value of
$894.6 million and a net book value, after accumulated depreciation, of $639.6
million. In 2003, $53.2 million was spent on additions to utility plant and
there were retirements of property having an aggregate gross book cost of $5.4
million. SJG's construction and remediation expenditures for 2004 are currently
expected to approximate $67.8 million. SJI's total construction and remediation
expenditures for 2004 are expected to total $68.1 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 $63.4 million consists
primarily of Marina's 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.
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SJI owns approximately 139 acres of land in Folsom, New Jersey, and
approximately 3.41 acres of land in Linwood, New Jersey.
Item 3. Legal Proceedings
-------------------------
SJI is subject to claims arising in the ordinary course of its 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 2003 fiscal year.
Item 4-A. Executive Officers of the Registrant
----------------------------------------------
Name Age Positions with SJI
Charles Biscieglia 59 Chairman of the Board (Retired as Chief Executive
Officer effective February 1, 2004.)
Edward J. Graham 46 President & Chief Executive Officer
David A. Kindlick 49 Vice President & Chief Financial Officer
Albert V. Ruggiero 55 Vice President
Richard H. Walker, Jr. 53 Vice President, Corporate Counsel & Corporate
Secretary
Charles Biscieglia was elected Assistant Vice President, Commercial
Operations of SJG in May 1981, Vice President, Commercial Operations in November
1983, Senior Vice President, Operations in April 1987, Executive Vice President
and Chief Operating Officer in April 1991 and President and Chief Executive
Officer in March 1998. Mr. Biscieglia was elected Vice President of SJI in April
1997, President and Chief Executive Officer in October 1998 and Chairman,
President and Chief Executive Officer in January 2000. Mr. Biscieglia
relinquished the roles of President in January 2003 and CEO in February 2004.
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.
SJI-11
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-12
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 27 and 28 of SJI's Annual Report to Shareholders for the year ended
December 31, 2003 which is attached to this report.
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, 2003
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 18 of SJI's Annual Report to Shareholders for the year ended December
31, 2003 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 17 and 18 of SJI's Annual Report to
Shareholders for the year ended December 31, 2003, which is attached to this
report.
Item 8. Financial Statements and Supplementary Data
---------------------------------------------------
Information required by this item is incorporated by reference to pages
19 through 33 and the top of page 34 of SJI's Annual Report to Shareholders for
the year ended December 31, 2003 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
--------------------------------
SJI management, including the Chief Executive Officer and Chief
Financial Officer, have conducted an evaluation of the effectiveness of
disclosure controls and procedures pursuant to the Exchange Act. Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the disclosure controls and procedures are effective in ensuring that all
material information required to be filed in this annual report has been made
known to them in a timely fashion. There have been no significant changes in
internal controls, or in factors that could significantly affect internal
controls, subsequent to the date the Chief Executive Officer and Chief Financial
Officer completed their evaluation.
SJI-13
PART III
Item 10. Directors and Executive Officers of the Registrant
-----------------------------------------------------------
Information required by this item relating to the directors of SJI is
incorporated by reference to pages 1 through 5 of SJI's definitive Proxy
Statement, dated March 15, 2004, filed in connection with SJI's 2003 Annual
Meeting of Shareholders. Information required by this item relating to the
executive officers of SJI is set forth in Item 4-A of this report. The Company
has adopted a Code of Ethics for its Principal Executive, Financial and
Accounting Officers. This Code is filed as Exhibit (14). It is also available on
SJI's website, www.sjindustries.com by clicking "Investors" and then "Corporate
Governance."
Item 11. Executive Compensation
-------------------------------
Information required by this item is incorporated by reference to pages
13 through 15 of SJI's definitive Proxy Statement, dated March 15, 2004, filed
in connection with SJI's 2004 Annual Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------
Information required by this item is incorporated by reference to pages
6 and 7 of SJI's definitive Proxy Statement, dated March 15, 2004, filed in
connection with SJI's 2004 Annual Meeting of Shareholders.
Item 13. Certain Relationships and Related Transactions
-------------------------------------------------------
None
Item 14. Principal Accountant Fees and Services
-----------------------------------------------
Information required by this item is incorporated by reference to pages
17 and 18 of SJI's definitive Proxy Statement, dated March 15, 2004, filed in
connection with SJI's 2004 Annual Meeting of Shareholders.
SJI-14
PART IV
Item 15. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
------------------------------------------------------------------------
(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 February 18, 2004, are incorporated herein by reference to pages 18
through 33 of SJI's Annual Report to Shareholders for the year ended December
31, 2003 which is attached to this report.
2 - Supplementary Financial Information
Information regarding selected quarterly financial data is incorporated
herein by reference to page 34 of SJI's Annual Report to Shareholders for the
year ended December 31, 2003 which is attached to this report.
Supplemental Schedules as of December 31, 2003, 2002 and 2001 and for
the three years ended December 31, 2003, 2002, and 2001:
The Independent Auditors' Report of Deloitte & Touche LLP, Auditors of
SJI (page 24).
Schedule I - Statement of Income, Statement of Comprehensive Income,
Statement of Retained Earnings, Statement of Cash Flows and Balance Sheet of SJI
(pages 25, 26, 27).
Schedule II - Valuation and Qualifying Accounts (page 28).
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(c)(13)
(b) Reports on Form 8-K.
Dated: November 21, 2003 South Jersey Industries issued a press
release announcing the appointment of
Edward J. Graham to the position of
President and CEO, effective
February 1, 2004, under Item 5.
October 3, 2003 South Jersey Gas Company issued a press
release announcing the redemption of its
SJG Capital Trust 8.35% Preferred
Securities effective November 5, 2003,
under Items 5 and 9.
SJI-15
(c) List of Exhibits (Exhibit Number is in Accordance with the Exhibit
Table in 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).
(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).
SJI-16
Exhibit Description Reference
Number
(4)(d) Certificate of Trust for SJG Capital Trust. Incorporated by reference from Exhibit 3(a)
of Form S-3 - SJG Capital Trust and South
Jersey Gas Company as filed March 27, 1997,
as amended April 18, 1997 and April 23, 1997
(333-24065).
(4)(d)(i) Trust Agreement of SJG Capital Trust. Incorporated by reference from Exhibit 3(b)
of Form S-3 - SJG Capital Trust and South
Jersey Gas Company as filed March 27, 1997,
as amended April 18, 1997 and April 23, 1997
(333-24065).
(4)(d)(ii) Form of Amended and Restated Trust Agreement Incorporated by reference from Exhibit 3(c)
for SJG Capital Trust. of Form S-3 - SJG Capital Trust and South
Jersey Gas Company as filed March 27, 1997,
as amended April 18, 1997 and April 23, 1997
(333-24065).
(4)(d)(vi) Form of Guaranty Agreement between South Incorporated by reference from Exhibit 4(d)
Jersey Gas Company and SJG Capital Trust. of Form S-3 - SJG Capital Trust and South
Jersey Gas Company as filed March 27, 1997,
as amended April 18, 1997 and April 23, 1997
(333-24065).
(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)
(9) None
(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.
(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.
SJI-17
Exhibit Description Reference
Number
(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)(b) Gas storage agreement (ESS) between South Incorporated by reference from Exhibit
Jersey Gas Company and Transco dated November (10)(i)(b) of Form 10-K for 1993 (1-6364).
1, 1993.
(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)(e) Service agreement (FS) between South Jersey Incorporated by reference from Exhibit
Gas Company and Transco dated August 1, 1991. (10)(i)(e) of Form 10-K for 1991 (1-6364).
(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)(j) of Form 10-K for 1993 (1-6364).
Gas Company and Transco dated October 5, 1993.
(10)(j)(a) Gas transportation service agreement (FTS) Incorporated by reference from Exhibit
between South Jersey Gas Company and (10)(j)(a) of Form 10-K for 1989 (1-6364).
Equitable Gas Company dated November 1, 1986.
(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)(i) Gas purchase agreement between South Jersey Incorporated by reference from Exhibit
Gas Company and ARCO Gas Marketing, Inc. (10)(k)(i) of Form 10-K for 1989 (1-6364).
dated March 5, 1990.
SJI-18
Exhibit Description Reference
Number
(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.
(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)(k)(r) NS (Negotiated Sales) Service Agreement dated Incorporated by reference from Exhibit
December 1, 1994 between South Jersey Gas (10)(k)(r) of Form 10-K for 1994 (1-6364).
Company and Transco Gas Marketing Company as
agent for Transcontinental Gas Pipeline.
(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).
SJI-19
Exhibit Description Reference
- -------- ----------- ---------
Number
- ------
(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
(filed herewith).
(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).
(10)(l)(g)* Discretionary Incentive Bonus Program for all Incorporated by reference from Exhibit
officers and management employees. (10)(l)(h) of Form 10-K for 1985 (1-6364).
(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)* 1997 Stock Option and Stock Appreciation Incorporated by reference from Exhibit
Rights Plan. (10)(l)(j) of Form 10-K for 1999 (1-6364).
(10)(m) 364-day Revolving Credit Agreement for SJI Incorporated by reference from Exhibit 10.1
of Form 10-Q of SJI as filed November 14,
2003.
(10)(n) 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
(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, 2003 is filed as
an exhibit hereto solely to the extent
portions are specifically incorporated by
reference herein (filed herewith).
(14) Code of Ethics (filed herewith).
(18) Preferability Letter from Independent Auditors'
Re: Pension Measurement Date (filed herewith).
(21) Subsidiaries of the Registrant (filed herewith).
(23) Independent Auditors' Consent (filed herewith).
(24) Power of Attorney (filed herewith).
SJI-20
Exhibit Description Reference
Number
(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-21
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 12, 2004
---------------------
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 12, 2004
- -------------------------- Director
(Edward J. Graham) (Principal Executive Officer)
/s/ David A. Kindlick Vice President & Chief March 12, 2004
- -------------------------- Financial Officer
(David A. Kindlick) (Principal Financial and Accounting
Officer)
/s/ Richard H. Walker, Jr. Vice President, Corporate Counsel & March 12, 2004
- -------------------------- Corporate Secretary
(Richard H. Walker, Jr.)
/s/ Charles Biscieglia Chairman of the Board March 12, 2004
- --------------------------
(Charles Biscieglia)
/s/ Shirli M. Billings Director March 12, 2004
- --------------------------
(Shirli M. Billings)
/s/ Helen R. Bosley Director March 12, 2004
- --------------------------
(Helen R. Bosley)
SJI-22
Signature Title Date
/s/ Thomas A. Bracken Director March 12, 2004
- --------------------------
(Thomas A. Bracken)
/s/ Keith S. Campbell Director March 12, 2004
- --------------------------
(Keith S. Campbell)
/s/ Sheila Hartnett-Devlin Director March 12, 2004
- --------------------------
(Sheila Hartnett-Devlin)
/s/ W. Cary Edwards Director March 12, 2004
- --------------------------
(W. Cary Edwards)
/s/ William J. Hughes Director March 12, 2004
- --------------------------
(William J. Hughes)
/s/ Herman D. James Director March 12, 2004
- --------------------------
(Herman D. James)
/s/ Clarence D. McCormick Director March 12, 2004
- --------------------------
(Clarence D. McCormick)
/s/ Frederick R. Raring Director March 12, 2004
- --------------------------
(Frederick R. Raring)
SJI-23
INDEPENDENT AUDITORS' REPORT
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 its subsidiaries as of December 31, 2003 and 2002, and for
each of the three years in the period ended December 31, 2003, and have issued
our report thereon dated February 18, 2004 (which expresses an unqualified
opinion and includes an explanatory paragraph concerning the Company's change in
method of accounting for energy-related contracts to conform with the rescission
of EITF Issue No. 98-10 "Accounting for Contracts Involved in Energy Trading and
Risk Management Activities"); such financial statements and report are included
in your 2003 Annual Report to shareholders and are incorporated herein by
reference. Our audits also included in the financial statement schedules of
South Jersey Industries, Inc. and its subsidiaries, listed in Item 15(a) 2.
These financial statement schedules are the responsibility of the Corporation's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedules, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 18, 2004
SJI-24
SCHEDULE I - SOUTH JERSEY INDUSTRIES, INC.
STATEMENT OF INCOME
(In Thousands)
2003 2002 2001
------------ ------------ ------------
Operating Revenues $ 2,216 $ 1,483 $ 2,111
Operating Expenses:
Operations 3,176 1,901 1,549
Depreciation 80 60 57
Energy and Other Taxes 295 175 154
------------ ------------ ------------
Total Operating Expenses 3,551 2,136 1,760
Operating (Loss) Income (1,335) (653) 351
------------ ------------ ------------
Other Income:
Equity in Affiliated Companies 754 746 566
Equity in Earnings of Subs 33,643 28,658 26,743
Other 478 718 261
------------ ------------ ------------
Total Other Income 34,875 30,122 27,570
------------ ------------ ------------
Interest Charges 497 519 716
Income Taxes (1,084) (462) 188
------------ ------------ ------------
Income from Continuing Operations $ 34,127 $ 29,412 $ 27,017
Discontinued Operations - Net (275) - -
Equity in Undistributed Earnings of
Discontinued Subsidiaries (499) (424) (455)
------------ ------------ ------------
Net Income Applicable to Common Stock $ 33,353 $ 28,988 $ 26,562
============ ============ ============
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 Comprehensive Income
(In Thousands)
2003 2001 2000
------------ ------------ ------------
Net Income Applicable to Common Stock $ 33,353 $ 28,988 $ 26,562
------------ ------------ ------------
Other Comprehensive Income (Loss):
Minimum Pension Liability Adjustment - Net 803 (771) (32)
------------ ------------ ------------
Total Other Comprehensive Income (Loss) 803 (771) (32)
------------ ------------ ------------
------------ ------------ ------------
Comprehensive Income $ 34,156 $ 28,217 $ 26,530
============ ============ ============
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)
2003 2001 2000
------------ ------------ ------------
Retained Earnings - Beginning $ 78,002 $ 67,218 $ 58,004
Net Income Applicable to Common Stock 33,353 28,988 26,562
------------ ------------ ------------
111,355 96,206 84,566
Dividends Declared - Common Stock (19,717) (18,204) (17,348)
------------ ------------ ------------
Retained Earnings - Ending $ 91,638 $ 78,002 $ 67,218
============ ============ ============
See South Jersey Industries, Inc. and Subsidiaries Notes to Consolidated Financial Statements
incorporated by reference in Part II, Item 8.
SJI-25
SCHEDULE I - SOUTH JERSEY INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2003
2003 2002 2001
-------------- -------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income Applicable to Common Stock $ 33,353 $ 28,988 $ 26,562
-------------- -------------- -------------
Adjustments to Reconcile Net Income to Cash
Flows Provided by Operating Activities:
Equity in Earnings of Subsidiaries (33,144) (28,234) (26,288)
Depreciation 83 66 63
Deferred and Non-Current Income Taxes and Credits - Net 300 329 557
Environmental Remedition Costs - Net (61) (11) (5)
Additional Pension Contribution (468) - -
Changes in:
Accounts Receivable (80) (17) 4,369
Receivables with Associated Companies - Net (196) (103) (218)
Prepayments and Other Current Assets (47) (8) 35
Prepaid and Accrued Taxes - Net 482 (511) (488)
Accounts Payables & Other Current Liabilities 549 (5,389) (867)
Other - Net 421 (507) 32
-------------- -------------- -------------
Total Cash Provided by (Used In) Operating Activities 1,192 (5,397) 3,752
-------------- -------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Investment in) Return of Investment Affiliates (254) (286) 53
Capital Expenditures (153) (125) (134)
Dividends from Subsidiaries 10,500 10,700 17,501
Equity Infusion To Subsidiaries (30,700) (2,500) (8,500)
-------------- -------------- -------------
Net Cash (Used In) Provided by Investing Activities (20,607) 7,789 8,920
-------------- -------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings (Repayments) of Associated Companies (10,970) 9,528 (17,602)
Net (Repayments) Borrowings from Lines of Credits 13,000 (4,260) 9,560
Dividends on Common Stock (19,717) (18,204) (17,347)
Proceeds from Sale of Common Stock 37,170 10,926 10,953
-------------- -------------- -------------
Net Cash Used in Financing Activities 19,483 (2,010) (14,436)
-------------- -------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 68 382 (1,764)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR 521 139 1,903
-------------- -------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 589 $ 521 $ 139
============== ============== =============
See South Jersey Industries, Inc. and Subsidiaries Notes to Consolidated Financial Statements
incorporated by reference in Part II, Item 8.
SJI-26
SCHEDULE I - SOUTH JERSEY INDUSTRIES, INC.
BALANCE SHEET
(In Thousands)
2003 2002
------------- --------------
Assets
Property Plant and Equipment:
Nonutility Property, Plant and Equipment, at cost $ 1,340 $ 1,249
Accumulated Depreciation (253) (204)
------------- --------------
Property, Plant and Equipment - Net 1,087 1,045
------------- --------------
Investments:
Investments in Subsidiaries 295,623 242,279
Available-for-Sale Securities 53 55
Investment in Affiliates 1,382 1,128
------------- --------------
Total Investments 297,058 243,462
------------- --------------
Current Assets:
Cash and Cash Equivalents 589 521
Notes Receivable - Associated Companies 26,645 31,390
Accounts Receivable 110 30
Accounts Receivable - Associated Companies 2,132 1,604
Other 1,349 475
------------- --------------
Total Current Assets 30,825 34,020
------------- --------------
Other Non-Current Assets 130 618
------------- --------------
Total Assets $ 329,100 $ 279,145
============= ==============
Capitalization and Liabilities
Common Equity:
Common Stock SJI
Par Value $1.25 a share
Authorized - 20,000,000 shares
Outstanding - 13,229,001 shares and 12,206,474 $ 16,536 $ 15,258
Premium on Common Stock 186,316 150,434
Accumulated Other Comprehensive Loss - (803)
Retained Earnings 91,638 78,002
------------- --------------
Total Common Equity 294,490 242,891
------------- --------------
Current Liabilities:
Notes Payable - Banks 25,600 12,600
Notes Payable - Associated Companies 5,765 21,480
Accounts Payable 1,247 786
Accounts Payable to Associated Companies 614 282
Taxes Accrued (406) (870)
Other Current Liabilities 264 151
------------- --------------
Total Current Liabilities 33,084 34,429
------------- --------------
Other Non-Current Liabilities 1,526 1,825
------------- --------------
Total Capitalization and Liabilities $ 329,100 $ 279,145
============= ==============
See South Jersey Industries, Inc. and Subsidiaries Notes to Consolidated Financial
Statements incorporated by reference in Part II, Item 8.
SJI-27
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, 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
Provision for Uncollectible
Accounts for the Year Ended
December 31, 2001 $2,043 $2,667 $387 $2,436 $2,661
(a) Recoveries of accounts previously written off and minor adjustments.
(b) Uncollectible accounts written off.
SJI-28