SEGMENTS OF BUSINESS | SEGMENTS OF BUSINESS: SJI operates in several different reportable operating segments which reflect the financial information regularly evaluated by the CODM. These segments are as follows: • SJG utility operations consist primarily of natural gas distribution to residential, commercial and industrial customers in southern New Jersey. • ETG utility operations consist of natural gas distribution to residential, commercial and industrial customers in northern and central New Jersey. • ELK utility operations consist of natural gas distribution to residential, commercial and industrial customers in Maryland. • Wholesale energy operations include the activities of SJRG and SJEX. • Retail gas and other operations at SJE included natural gas acquisition and transportation service business lines. This business was sold on November 30, 2018. • Retail electric operations at SJE 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 and SXLE. • Appliance service operations includes SJESP, which receives commissions on service contracts from a third party. • 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. • Corporate & Services segment includes costs related to the Acquisition, along with other unallocated costs. • Intersegment represents intercompany transactions among the above SJI consolidated entities. SJI groups its utility businesses under its wholly-owned subsidiary SJIU. This group consists of gas utility operations of SJG, ETG and ELK. SJI groups its nonutility operations into separate 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. Information about SJI’s operations in different reportable operating segments is presented below (in thousands): Three Months Ended Six Months Ended 2019 2018 2019 2018 Operating Revenues: SJI Utilities: SJG Utility Operations 62,268 $ 76,801 $ 334,466 $ 311,260 ETG Utility Operations 44,854 — 185,028 — ELK Utility Operations 944 — 4,318 — Subtotal SJI Utilities 108,066 76,801 523,812 311,260 Energy Group: Wholesale Energy Operations 126,483 67,220 316,490 257,563 Retail Gas and Other Operations — 23,168 — 63,369 Retail Electric Operations 20,531 42,662 43,222 86,697 Subtotal Energy Group 147,014 133,050 359,712 407,629 Energy Services: On-Site Energy Production 14,788 24,734 26,118 45,891 Appliance Service Operations 484 451 1,015 971 Subtotal Energy Services 15,272 25,185 27,133 46,862 Corporate and Services 11,815 11,082 21,186 24,082 Subtotal 282,167 246,118 931,843 789,833 Intersegment Sales (15,233 ) (18,788 ) (27,611 ) (40,558 ) Total Operating Revenues $ 266,934 $ 227,330 $ 904,232 $ 749,275 Three Months Ended Six Months Ended 2019 2018 2019 2018 Operating Income (Loss): SJI Utilities: SJG Utility Operations $ 10,215 $ 8,443 $ 108,560 $ 101,244 ETG Utility Operations 2,051 — 46,200 — ELK Utility Operations (32 ) — 598 — Subtotal SJI Utilities 12,234 8,443 155,358 101,244 Energy Group: Wholesale Energy Operations (2,386 ) (10,472 ) (4,892 ) 65,185 Retail Gas and Other Operations — 1,659 — (4,099 ) Retail Electric Operations (2,313 ) 1,094 (3,969 ) 886 Subtotal Energy Group (4,699 ) (7,719 ) (8,861 ) 61,972 Energy Services: On-Site Energy Production 1,343 (100,435 ) 1,461 (100,989 ) Appliance Service Operations 421 442 1,016 945 Subtotal Energy Services 1,764 (99,993 ) 2,477 (100,044 ) Corporate and Services (433 ) (9,263 ) (5,555 ) (13,834 ) Total Operating Income (Loss) $ 8,866 $ (108,532 ) $ 143,419 $ 49,338 Depreciation and Amortization: SJI Utilities: SJG Utility Operations $ 23,083 $ 20,274 $ 45,785 $ 40,589 ETG Utility Operations 6,813 — 13,471 — ELK Utility Operations 113 — 225 — Subtotal SJI Utilities 30,009 20,274 59,481 40,589 Energy Group: Wholesale Energy Operations 25 29 48 52 Retail Gas and Other Operations — 78 — 153 Subtotal Energy Group 25 107 48 205 Energy Services: On-Site Energy Production 1,256 10,324 2,508 20,595 Appliance Service Operations — — — — Subtotal Energy Services 1,256 10,324 2,508 20,595 Corporate and Services 1,754 5,951 2,998 9,165 Total Depreciation and Amortization $ 33,044 $ 36,656 $ 65,035 $ 70,554 Interest Charges: SJI Utilities: SJG Utility Operations $ 7,896 $ 6,999 $ 15,744 $ 13,727 ETG Utility Operations 6,620 — 12,941 — ELK Utility Operations 5 — 11 — Subtotal SJI Utilities 14,521 6,999 28,696 13,727 Energy Group: Retail Gas and Other Operations — 105 — 251 Subtotal Energy Group — 105 — 251 Energy Services: On-Site Energy Production 2,138 4,098 4,423 7,945 Midstream 555 479 1,099 905 Corporate and Services 14,659 13,368 30,063 20,838 Subtotal 31,873 25,049 64,281 43,666 Intersegment Borrowings (3,439 ) (5,488 ) (7,194 ) (10,133 ) Total Interest Charges $ 28,434 $ 19,561 $ 57,087 $ 33,533 Three Months Ended Six Months Ended 2019 2018 2019 2018 Income Taxes: SJI Utilities: SJG Utility Operations $ 671 $ 482 $ 24,368 $ 22,318 ETG Utility Operations (809 ) — 6,093 — ELK Utility Operations (9 ) — 154 — Subtotal SJI Utilities (147 ) 482 30,615 22,318 Energy Group: Wholesale Energy Operations (481 ) (2,478 ) (958 ) 16,649 Retail Gas and Other Operations — 474 — (1,060 ) Retail Electric Operations (569 ) 307 (818 ) 249 Subtotal Energy Group (1,050 ) (1,697 ) (1,776 ) 15,838 Energy Services: On-Site Energy Production 121 (26,489 ) (357 ) (27,646 ) Appliance Service Operations 136 106 303 237 Subtotal Energy Services 257 (26,383 ) (54 ) (27,409 ) Midstream (33 ) (22 ) (65 ) 40 Corporate and Services (3,673 ) (4,352 ) (8,417 ) (6,344 ) Total Income Taxes $ (4,646 ) $ (31,972 ) $ 20,303 $ 4,443 Property Additions: SJI Utilities: SJG Utility Operations $ 67,257 $ 65,148 $ 122,562 $ 115,385 ETG Utility Operations 53,938 — 91,962 — ELK Utility Operations 983 — 1,628 — Subtotal SJI Utilities 122,178 65,148 216,152 115,385 Energy Group: Wholesale Energy Operations — 27 — 32 Retail Gas and Other Operations — 136 — 309 Subtotal Energy Group — 163 — 341 Energy Services: On-Site Energy Production 141 570 164 1,683 Subtotal Energy Services 141 570 164 1,683 Midstream 7 99 19 310 Corporate and Services 1 8,204 586 11,549 Total Property Additions $ 122,327 $ 74,184 $ 216,921 $ 129,268 June 30, 2019 December 31, 2018 Identifiable Assets: SJI Utilities: SJG Utility Operations $ 3,183,710 $ 3,118,236 ETG Utility Operations 2,291,156 2,148,175 ELK Utility Operations 19,043 16,482 Subtotal SJI Utilities 5,493,909 5,282,893 Energy Group: Wholesale Energy Operations 177,183 266,417 Retail Gas and Other Operations (A) 141 12,736 Retail Electric Operations 34,394 39,345 Subtotal Energy Group 211,718 318,498 Energy Services: On-Site Energy Production 170,251 195,329 Appliance Service Operations 81 — Subtotal Energy Services 170,332 195,329 Midstream 78,246 72,333 Discontinued Operations 1,742 1,777 Corporate and Services 317,842 387,482 Intersegment Assets (245,527 ) (301,735 ) Total Identifiable Assets $ 6,028,262 $ 5,956,577 (A) As of June 30, 2019, the remaining $0.1 million of assets in the retail gas and other operations segment represents outstanding accounts receivable balances. |