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 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 has one subsidiary, SJ EnerTrade (EnerTrade), that primarily provides services for the sale of natural gas to the casino industry in Atlantic City, N.J. 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. SJRG became a wholly owned subsidiary on January 1, 2001 when SJI acquired the 50% ownership interest in SJRG formerly owned by UPR Energy Marketing. Prior to then, SJI held a 50% ownership interest in the company.
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 Resort in Atlantic City, is scheduled to be fully operational by summer 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.
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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; 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 7 on page 26 of SJI's Annual Report to Shareholders for the year ended December 31, 2002 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
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 296,374 residential, commercial and industrial customers (at December 31, 2002) in southern New Jersey. Gas sales, transportation and capacity release for 2002 amounted to approximately 120,865 MMcf (million cubic feet), of which approximately 49,450 MMcf was firm sales and transportation, 3,387 MMcf was interruptible sales and transportation and 68,028 MMcf was off-system sales and capacity release. The breakdown of firm sales includes 31.4% residential, 10.7% commercial, 4.0% cogeneration and electric generation, ..4% industrial and 53.5% transportation. At year-end 2002, SJG served 275,979 residential customers, 19,966 commercial customers and 429 industrial customers. This includes 2002 net additions of 7,933 residential customers, 424 commercial customers and 9 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 2002, 2.1 Bcf (billion cubic feet) was delivered under this agreement.
SJG serviced 5 cogeneration facilities in 2002. Combined sales and transportation of natural gas to such customers amounted to approximately 4.1 Bcf in 2002.
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
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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 2002, off-system sales amounted to 30.0 Bcf. Also in 2002, capacity release and storage throughput amounted to 38.0 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 2002 amounted to approximately 3.4 Bcf, approximately 2.8% 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 is nearing completion on the first new casino/hotel in 13 years, marking the beginning of another round of development in the city.
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 and Dominion Transmission, Inc., 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 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
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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 the LGAC, customer bills in the subsequent LGAC 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 should 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 will provide SJG with more pricing flexibility, through automatic rate changes, resulting in the reduction or elimination of over/under-recoveries. Although the BGSS approved price structure will replace 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, will 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.
Additional information on regulatory affairs is incorporated by reference to Notes 1, 5, 9, 11 and 14 of SJI's Annual Report to Shareholders for the year ended December 31, 2002 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 for retail and end users, markets total energy management services, and markets an air quality monitoring system. As of December 31, 2002, SJE marketed natural gas to 76,219 customers, of which 72,902 were residential customers. All of SJE's residential gas customers and most of its commercial and industrial customers are located within southern New Jersey.
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In 2002, SJE was profitable and contributed approximately 8.7% 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 2002, SJRG transacted 49.5 Bcf of natural gas. SJRG contributed approximately 8.7% on a consolidated basis to SJI's net income.
Marina Energy
Marina's largest project is an energy plant that will provide for the thermal needs of The Borgata Resort in Atlantic City. The facility consists of a production facility and a distribution and interconnection system to be 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 will consist of hot and chilled water production equipment, emergency electric generating equipment and related equipment. The facility is located adjacent to the Borgata site and in close proximity to other potential customer sites. The distribution system will consist of both hot and chilled water piping, manholes, valves, heat exchangers, controls and electrical devices. The system will commence within the Marina Thermal Facility and will run throughout the Renaissance Point area and terminate at various customer facilities.
With construction of the thermal facility expected to be completed on budget and ahead of schedule, Marina is already providing heat for the remainder of the Borgata's construction work. The plant is scheduled to be fully operational for the Borgata's summer of 2003 opening. The Marina Thermal Facility will have 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 2002, SJG purchased and had delivered approximately 54.9 Bcf of natural gas for distribution to both on-system and off-system customers. Of this total, 42.0 Bcf was transported on the Transco pipeline system and 12.9 Bcf was transported on the Columbia pipeline system. SJG also secures firm transportation and other long term services from four additional pipelines upstream of the Transco and Columbia systems. They include: Columbia Gulf Transmission Company (Columbia Gulf), Sempra Energy Trading Corp. (Sempra), Texas Gas Transmission Corporation (Texas Gas) and Dominion Transmission Inc. 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 changes as directed by FERC Order No. 636.
Transco:
Transco is SJG's largest supplier of long-term gas transmission services. These services include four 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
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164,089 Thousand Cubic Feet of gas per day ("Mcf/d"). The terms of the year-round agreements extend for various periods from 2003 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 2003 to 2008.
Sempra:
SJG has separate gas sales and capacity management agreements with Sempra, which provide SJG with up to 9,662 Mcf per day of gas during the period November 16 through March 31 of each year. This contract provides management services for storage and pipeline capacity held by SJG on the Dominion Transmission System. Effective April 1, 2003, this service agreement terminates and the storage and transportation assets revert back to SJG.
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.
South Jersey Resources Group:
SJG has a one year storage capacity contract with South Jersey Resources Group which expires March 31, 2003. There is a maximum withdrawal capacity of 4,831 Mcf per day and total storage capacity of 504,831 Mcf. Gas is delivered through the Transco pipeline system.
Gas Supplies
SJG has several long-term gas supply agreements with various producers and marketers that expire between 2003 and 2006. Under these agreements, SJG can purchase up to 17,350,098 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
SJG entered into a Liquified Natural Gas (LNG) purchase agreement with a third party provider which extends through October 31, 2003. For the 2002-2003 contract year, SJG's annual contract quantity under the agreement is 186,047 Mcf. LNG purchases are 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.
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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 2002-2003 winter season to be 485,476 Mcf. SJG projects that it has adequate supplies and interstate pipeline entitlements to meet its design requirements. On December 3, 2002, SJG experienced its highest peak-day demand for the year of 343,572 Mcf with an average temperature of 22.45 degrees F.
Commodity Prices
SJG's average commodity cost of gas purchased in 2002, 2001 and 2000 was $4.46 per Mcf, $6.80 per Mcf and $5.68 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 and its subsidiary, EnerTrade. 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 1,207,729 Mcf of gas may be stored during the summer season and up to 9,684 Mcf/d 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 7,344 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 9,684 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.
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.
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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. 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 pages 15 and 16 of the SJI's Annual Report to Shareholders for the year ended December 31, 2002 which is attached to this report.
Customers
No material part of the Company's business or that of any of its subsidiaries is dependent upon a single customer or a few customers, the loss of which would have a material adverse effect on any such business.
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 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. SJE competes successfully based upon a combination of effective customer acquisition efforts and pricing. Competition includes SJG, other utilities, and alliances which include other utility companies. SJRG competes
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with other wholesale gas marketers based upon a combination of familiarity with the markets we serve and price.
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 14 on pages 28 and 29 of the SJI Annual Report to Shareholders for the year ended December 31, 2002 which is attached to this report.
Employees
SJI and its subsidiaries had a total of 638 employees as of December 31, 2002. Of that total, 387 employees are unionized and are covered under collective bargaining agreements that expire in January 2005.
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.
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, 2002, there were approximately 92 miles of mains in the transmission systems and 5,279 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, 2002, SJG's utility plant had a gross book value of $846.9 million and a net book value, after accumulated depreciation, of $610.1 million. In 2002, $49.6 million was spent on additions to utility plant and there were retirements of property having an aggregate gross book cost of $6.9 million. SJG's construction and remediation expenditures for 2003 are currently expected to approximate $55.2 million. SJI's total construction and remediation expenditures for 2003 are expected to total $57.8 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 $56.5 million consists primarily of Marina's thermal energy plant in Atlantic City, N.J.
EMI owns 235 acres of land in Vineland, New Jersey.
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South Jersey Fuel, Inc., an inactive subsidiary, owns real estate in Deptford Township and Upper Township, New Jersey.
R&T Castellini, Inc., an inactive subsidiary, owns land and buildings in Vineland, New Jersey.
SJI owns approximately 139 acres of land in Folsom, New Jersey, and approximately 9.29 acres of land in Linwood, New Jersey.
Item 3.
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 was 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.
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 2002 fiscal year.
Item 4 - A. Executive Officers of the Registrant
Name Age Positions with SJI
Charles Biscieglia 58 Chairman of the Board, President and Chief Executive Officer
Edward J. Graham 45 Executive Vice President & Chief Operating Officer
David A. Kindlick 48 Vice President, Treasurer & Chief Financial Officer
Albert V. Ruggiero 54 Vice President
Richard H. Walker, Jr. 52 Corporate Secretary & Corporate Counsel
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 role of President in January 2003.
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.
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
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of SJI in June 1997, Vice President and Treasurer in April 2001, and Vice President, Treasurer and Chief Financial Officer in January 2002.
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 Secretary & Corporate Counsel in April 2002.
Executive officers of SJI are elected annually and serve at the pleasure of the Board of Directors.
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PART II
Item 5.
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 page 25 of SJI's Annual Report to Shareholders for the year ended December 31, 2002 which is attached to this report.
Item 6.
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, 2002 which is attached to this report.
Item 7.
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 17 of SJI's Annual Report to Shareholders for the year ended December 31, 2002 which is attached to this report.
Item 7A.
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 16 and 17 of SJI's Annual Report to Shareholders for the year ended December 31, 2002, which is attached to this report.
Item 8.
Item 8. Financial Statements and Supplementary Data
Information required by this item is incorporated by reference to pages 18 through 29 and the top of page 30 of SJI's Annual Report to Shareholders for the year ended December 31, 2002 which is attached to this report.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
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PART III
Item 10.
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 4 of SJI's definitive Proxy Statement, dated March 14, 2003, 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.
Item 11.
Item 11. Executive Compensation
Information required by this item is incorporated by reference to pages 10 through 13 of SJI's definitive Proxy Statement, dated March 14, 2003, filed in connection with SJI's 2003 Annual Meeting of Shareholders.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required by this item is incorporated by reference to pages 5 and 6 of SJI's definitive Proxy Statement, dated March 14, 2003, filed in connection with SJI's 2003 Annual Meeting of Shareholders.
Item 13.
Item 13. Certain Relationships and Related Transactions
None
Item 14.
Item 14. 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 Exchange Act Rule 13a-14. 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.
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PART IV
Item 15.
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 19, 2003, are incorporated herein by reference to pages 17 through 29 of SJI's Annual Report to Shareholders for the year ended December 31, 2002 which is attached to this report.
2 - Supplementary Financial Information
Information regarding selected quarterly financial data is incorporated herein by reference to page 30 of SJI's Annual Report to Shareholders for the year ended December 31, 2002 which is attached to this report.
Supplemental Schedules as of December 31, 2002, 2001 and 2000 and for the three years ended December 31, 2002, 2001, and 2000:
The Independent Auditors' Report of Deloitte & Touche LLP, Auditors of SJI (page 25).
Schedule I - Statement of Income, Statement of Comprehensive Income, Statement of Retained Earnings, Statement of Cash Flows and Balance Sheet of SJI (pages 26, 27 and 28).
Schedule II - Valuation and Qualifying Accounts (page 29).
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 - None.
(c) List of Exhibits (Exhibit Number is in Accordance with the Exhibit Table in Item 601 of Regulation S-K).
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SJI-16
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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, Treasurer & Chief Financial Officer
Date: March 13, 2003
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/ Charles Biscieglia Chairman of the Board & Chief March 13, 2003 - ----------------------------- Executive Officer (Charles Biscieglia)
/s/ David A. Kindlick Vice President, Treasurer & March 13, 2003 - ----------------------------- Chief Financial Officer (David A. Kindlick) (Principal Financial Officer)
/s/ Richard H. Walker, Jr. Corporate Secretary & Corporate March 13, 2003 - ----------------------------- Counsel (Richard H. Walker, Jr.)
/s/ Shirli M. Billings Director March 13, 2003 - ----------------------------- (Shirli M. Billings)
/s/ Keith S. Campbell Director March 13, 2003 - ----------------------------- (Keith S. Campbell)
/s/ Sheila Hartnett-Devlin Director March 13, 2003 - ----------------------------- (Sheila Hartnett-Devlin)
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Signature Title Date
/s/ W. Cary Edwards Director March 13, 2003 - ---------------------------- (W. Cary Edwards)
/s/ Herman D. James Director March 13, 2003 - ---------------------------- (Herman D. James)
/s/ Clarence D. McCormick Director March 13, 2003 - ---------------------------- (Clarence D. McCormick)
/s/ Frederick R. Raring Director March 13, 2003 - ---------------------------- (Frederick R. Raring)
/s/ William J. Hughes Director March 13, 2003 - ---------------------------- (William J. Hughes)
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CERTIFICATIONS
I, Charles Biscieglia, certify that:
1. I have reviewed this annual report on Form 10-K of South Jersey Industries, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 13, 2003 /s/ Charles Biscieglia Charles Biscieglia Chairman of the Board & Chief Executive Officer
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I, David A. Kindlick, certify that:
1. I have reviewed this annual report on Form 10-K of South Jersey Industries, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 13, 2003 /s/ David A. Kindlick David A. Kindlick Vice President, Treasurer & Chief Financial Officer
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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, 2002 and 2001, and for each of the three years in the period ended December 31, 2002, and have issued our report thereon dated February 19, 2003 (which expresses an unqualified opinion and includes an explanatory paragraph concerning the Company's change in method of presenting revenues and expenses from trading in physical power contracts); such financial statements and report are included in your 2002 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the financial statement schedules of South Jersey Industries, Inc. and its subsidiaries, listed in Item 14(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 19, 2003
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