SEGMENTS OF BUSINESS | SEGMENTS OF BUSINESS: SJI operates in several different reportable operating segments which reflect the financial information regularly evaluated by the chief operating decision maker. These segments are as follows: • Gas utility operations (SJG) consist primarily of natural gas distribution to residential, commercial and industrial customers. The result of SJG are only included in this operating segment. • Wholesale energy operations include the activities of SJRG and SJEX. • SJE is involved in both retail gas and retail electric activities. ◦ Retail gas and other operations include natural gas acquisition and transportation service business lines. ◦ Retail electric operations consist of electricity acquisition and transportation to commercial, industrial and residential customers. • On-site energy production consists of Marina's thermal energy facility and other energy-related projects. Also included in this segment are the activities of ACB, ACLE, BCLE, SCLE, SXLE, MCS, NBS and SBS. • Appliance service operations includes SJESP, which services residential and small commercial HVAC systems, installs small commercial HVAC systems, provides plumbing services and services appliances under warranty via a subcontractor arrangement as well as on a time and materials basis. In May 2017, SJESP entered into an agreement to sell certain assets of its residential and small commercial HVAC and plumbing business to a third party. This transaction is expected to be completed by August 31, 2017. • Midstream was formed to invest in infrastructure and other midstream projects, including a current project to build a natural gas pipeline in Pennsylvania and New Jersey. The activities of Midstream are a part of the Corporate and Services segment. SJI groups its nonutility operations into two categories: Energy Group and Energy Services. Energy Group includes wholesale energy, retail gas and other, and retail electric operations. Energy Services includes on-site energy production and appliance service operations. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. Intersegment sales and transfers are treated as if the sales or transfers were to third parties at current market prices. Information about SJI’s operations in different reportable operating segments is presented below (in thousands): Three Months Ended Six Months Ended 2017 2016 2017 2016 Operating Revenues: Gas Utility Operations $ 83,251 $ 68,762 $ 280,065 $ 256,528 Energy Group: Wholesale Energy Operations 76,409 (1,309 ) 203,926 63,765 Retail Gas and Other Operations 21,759 22,305 58,637 52,038 Retail Electric Operations 42,620 43,065 91,577 82,556 Subtotal Energy Group 140,788 64,061 354,140 198,359 Energy Services: On-Site Energy Production 25,135 23,043 44,747 39,364 Appliance Service Operations 1,980 2,050 3,638 3,938 Subtotal Energy Services 27,115 25,093 48,385 43,302 Corporate and Services 11,013 8,417 22,609 17,293 Subtotal 262,167 166,333 705,199 515,482 Intersegment Sales (17,793 ) (11,931 ) (34,996 ) (28,045 ) Total Operating Revenues $ 244,374 $ 154,402 $ 670,203 $ 487,437 Three Months Ended Six Months Ended 2017 2016 2017 2016 Operating (Loss) Income: Gas Utility Operations $ 8,156 $ 9,931 $ 88,802 $ 85,704 Energy Group: Wholesale Energy Operations (18,191 ) (31,149 ) (29,817 ) 7,095 Retail Gas and Other Operations (1,560 ) 6,250 (3,227 ) 5,491 Retail Electric Operations 1,155 2,277 2,461 2,862 Subtotal Energy Group (18,596 ) (22,622 ) (30,583 ) 15,448 Energy Services: On-Site Energy Production 5,104 4,561 3,135 4,472 Appliance Service Operations 66 258 (6 ) 302 Subtotal Energy Services 5,170 4,819 3,129 4,774 Corporate and Services 706 (114 ) 1,774 341 Total Operating (Loss) Income $ (4,564 ) $ (7,986 ) $ 63,122 $ 106,267 Depreciation and Amortization: Gas Utility Operations $ 17,446 $ 15,788 $ 34,808 $ 31,414 Energy Group: Wholesale Energy Operations 33 204 61 408 Retail Gas and Other Operations 84 83 167 168 Subtotal Energy Group 117 287 228 576 Energy Services: On-Site Energy Production 11,674 10,895 23,267 20,814 Appliance Service Operations 56 91 110 175 Subtotal Energy Services 11,730 10,986 23,377 20,989 Corporate and Services 418 260 819 483 Total Depreciation and Amortization $ 29,711 $ 27,321 $ 59,232 $ 53,462 Interest Charges: Gas Utility Operations $ 6,077 $ 4,552 $ 11,955 $ 9,339 Energy Group: Wholesale Energy Operations 134 1 3,193 65 Retail Gas and Other Operations 64 78 149 210 Subtotal Energy Group 198 79 3,342 275 Energy Services: On-Site Energy Production 3,877 3,442 9,691 6,904 Corporate and Services 4,941 2,858 10,182 6,310 Subtotal 15,093 10,931 35,170 22,828 Intersegment Borrowings (4,114 ) (2,702 ) (7,446 ) (5,439 ) Total Interest Charges $ 10,979 $ 8,229 $ 27,724 $ 17,389 Three Months Ended Six Months Ended 2017 2016 2017 2016 Income Taxes: Gas Utility Operations $ 1,431 $ 1,415 $ 31,342 $ 28,819 Energy Group: Wholesale Energy Operations (6,384 ) (12,258 ) (12,703 ) 2,479 Retail Gas and Other Operations (593 ) 2,450 (1,040 ) 2,282 Retail Electric Operations 472 931 1,007 1,170 Subtotal Energy Group (6,505 ) (8,877 ) (12,736 ) 5,931 Energy Services: On-Site Energy Production 219 110 (2,850 ) (2,902 ) Appliance Service Operations 36 126 19 152 Subtotal Energy Services 255 236 (2,831 ) (2,750 ) Corporate and Services (725 ) 37 551 78 Total Income Taxes $ (5,544 ) $ (7,189 ) $ 16,326 $ 32,078 Property Additions: Gas Utility Operations $ 66,128 $ 50,133 $ 128,408 $ 101,503 Energy Group: Wholesale Energy Operations 4 1 7 7 Retail Gas and Other Operations 133 354 428 725 Subtotal Energy Group 137 355 435 732 Energy Services: On-Site Energy Production 2,917 2,665 10,266 5,316 Appliance Service Operations 254 251 260 352 Subtotal Energy Services 3,171 2,916 10,526 5,668 Corporate and Services 839 564 1,084 727 Total Property Additions $ 70,275 $ 53,968 $ 140,453 $ 108,630 June 30, 2017 December 31, 2016 Identifiable Assets: Gas Utility Operations $ 2,673,743 $ 2,551,923 Energy Group: Wholesale Energy Operations 165,932 233,019 Retail Gas and Other Operations 36,954 52,729 Retail Electric Operations 34,480 41,280 Subtotal Energy Group 237,366 327,028 Energy Services: On-Site Energy Production 719,556 767,710 Appliance Service Operations 2,571 2,879 Subtotal Energy Services 722,127 770,589 Discontinued Operations 1,778 1,756 Corporate and Services 708,131 649,795 Intersegment Assets (601,285 ) (570,524 ) Total Identifiable Assets $ 3,741,860 $ 3,730,567 |