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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, 2002 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. [ ]
The aggregate market value of approximately 10,847,600 shares of voting stock
held by non-affiliates of the registrant as of February 27, 2003 was
$347,448,628. As of February 27, 2003, there were 12,241,272 shares of the
registrant's common stock outstanding.
Documents Incorporated by Reference:
In Part I of Form 10-K: Pages 15, 16, 22, and 25 through 29 of 2002
Annual Report to Shareholders
In Part II of Form 10-K: Pages 1 and 12 through 30 of 2002 Annual Report to
Shareholders
In Part III of Form 10-K: Pages 1 through 6 and 10 through 13 of the Proxy
Statement dated March 14, 2003 for the 2003 Annual
Meeting of Shareholders
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- Title Page -
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 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.
SJI-5
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
SJI-6
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. 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. 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. 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
SJI-11
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.
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
page 25 of SJI's Annual Report to Shareholders for the year ended December 31,
2002 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, 2002 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 17 of SJI's Annual Report to Shareholders for the year ended December
31, 2002 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 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. 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. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
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 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. 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. 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. Certain Relationships and Related Transactions
None
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.
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 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).
Exhibit Description Reference
Number
<s> <c> <c>
(3)(a)(i) Certificate of Incorporation of Incorporated by reference from
South Jersey Industries, Inc., as Exhibit (4)(a) of Form S-2
amended through April 19, 1984. (2-91515).
(3)(a)(ii) Amendment to Certificate of Incorporated by reference from
Incorporation relating to Exhibit (4)(e)(1) of Form S-3
two-for-one stock split effective (33-1320).
as of April 28, 1987.
(3)(a)(iii) Amendment to Certificate of Incorporated by reference from
Incorporation relating to director Exhibit (4)(e)(2) of Form S-3
and officer liability. (33-1320).
(3)(ii) Bylaws of South Jersey Industries, Incorporated by reference from
Inc. as amended and restated Exhibit (3)(ii) of Form 10-K for
through November 17, 2000. 2000 (1-6364).
SJI-15
Exhibit Number Description Reference
<s> <c> <c>
(4)(a) Form of Stock Certificate for Incorporated by reference from
common stock. Exhibit (4)(a) of Form 10-K for
1985 (1-6364).
(4)(a)(i) Rights Agreement dated as of Incorporated by reference from
September 20, 1996 between South Exhibit 99.1 of Form 8-A filed
Jersey Industries, Inc. and The April 9, 1996 (1-6364).
Farmers & Merchants National Bank
of Bridgeton.
(4)(b)(i) First Mortgage Indenture dated Incorporated by reference from
October 1, 1947. Exhibit (4)(b)(i) of Form 10-K for
1987 (1-6364).
(4)(b)(x) Twelfth Supplemental Indenture Incorporated by reference from
dated as of June 1, 1980. Exhibit 5(b) of Form S-7 (2-68038).
(4)(b)(xiv) Sixteenth Supplemental Indenture Incorporated by reference from
dated as of April 1, 1988, 10 1/4% Exhibit (4)(b)(xv) of Form 10-Q
Series due 2008. for the quarter ended March 31,
1988 (1-6364).
(4)(b)(xv) Seventeenth Supplemental Indenture Incorporated by reference from
dated as of May 1, 1989. Exhibit (4)(b)(xv) of Form 10-K
for 1989 (1-6364).
(4)(b)(xvi) Eighteenth Supplemental Indenture Incorporated by reference from
dated as of March 1, 1990. Exhibit (4)(e) of Form S-3
(33-36581).
(4)(b)(xvii) Nineteenth Supplemental Indenture Incorporated by reference from
dated as of April 1, 1992. Exhibit (4)(b)(xvii) of Form 10-K
for 1992 (1-6364).
(4)(b)(xviii) Twentieth Supplemental Indenture Incorporated by reference from
dated as of June 1, 1993. Exhibit (4)(b)(xviii) of Form 10-K
for 1993(1-6364).
(4)(b)(xix) Twenty-First Supplemental Incorporated by reference from
Indenture dated as of March 1, Exhibit (4)(b)(xviv) of Form 10-K
1997. for 1997(1-6364).
(4)(b)(xx) Twenty-Second Supplemental Incorporated by reference from
Indenture dated as of October 1, Exhibit (4)(b)(ix) of Form S-3
1998. (333-62019).
(4)(b)(xxi) Twenty-Third Supplemental Incorporated by reference from
Indenture dated as of September Exhibit (4)(b)(x) of Form S-3
1, 2002. (333-98411).
(4)(c) Indenture dated as of January 31, Incorporated by reference from
1995; 8.60% Debenture Notes due Exhibit (4)(c) of Form 10-K for
February 1, 2010. 1994 (1-6364).
(4)(d) Certificate of Trust for SJG Incorporated by reference from
Capital Trust. 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 Incorporated by reference from
Trust. 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).
SJI-16
Exhibit Number Description Reference
<s> <c> <c>
(4)(d)(ii) Form of Amended and Restated Trust Incorporated by reference from
Agreement for SJG Capital Trust.
Exhibit 3(c) 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)(iii) Form of Preferred Security for SJG Incorporated by reference from
Capital Trust. Exhibit 4(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)(iv) Form of Deferrable Interest Incorporated by reference from
Subordinated Debenture. Exhibit 4(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)(v) Form of Deferrable Interest Incorporated by reference from
Subordinated Debenture. Exhibit 4(c) 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 Incorporated by reference from
South Jersey Gas Company and SJG Exhibit 4(d) of Form S-3 - SJG
Capital Trust. 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 Incorporated by reference from
Trust dated October 1, 1998. Exhibit 4(e) of Form S-3
(333-62019).
(9) None
(10)(d) Gas storage agreement (GSS) Incorporated by reference from
between South Jersey Gas Company Exhibit (10)(d) of Form 10-K for
and Transco dated October 1, 1993. 1993 (1-6364).
(10)(e) Gas storage agreement (S-2) Incorporated by reference from
between South Jersey Gas Company Exhibit (5)(h) of Form S-7
and Transco dated December 16, (2-56223).
1953.
(10)(f) Gas storage agreement (LG-A) Incorporated by reference from
between South Jersey Gas Company Exhibit (5)(f) of Form S-7
and Transco dated June 3, 1974. (2-56223).
(10)(h) Gas storage agreement (WSS) Incorporated by reference from
between South Jersey Gas Company Exhibit (10)(h) of Form 10-K for
and Transco dated August 1, 1991. 1991 (1-6364).
(10)(i) Gas storage agreement (LSS) between Incorporated by reference from
South Jersey Gas Company and Transco Exhibit (10)(i) of Form 10-K
dated October 1, 1993. for 1993 (1-6364).
SJI-17
Exhibit Number Description Reference
<s> <c> <c>
(10)(i)(a) Gas storage agreement (SS-1) Incorporated by reference from
between South Jersey Gas Company Exhibit (10)(i)(a) of Form 10-K
and Transco dated May 10, 1987 for 1988 (1-6364).
(effective April 1, 1988).
(10)(i)(b) Gas storage agreement (ESS) Incorporated by reference from
between South Jersey Gas Company Exhibit (10)(i)(b) of Form 10-K
and Transco dated November 1, 1993. for 1993 (1-6364).
(10)(i)(c) Gas transportation service Incorporated by reference from
agreement between South Jersey Gas Exhibit (10)(i)(c) of Form 10-K
Company and Transco dated April 1, for 1989 (1-6364).
1986.
(10)(i)(e) Service agreement (FS) between Incorporated by reference from
South Jersey Gas Company and Exhibit (10)(i)(e) of Form 10-K
Transco dated August 1, 1991. for 1991 (1-6364).
(10)(i)(f) Service agreement (FT) between Incorporated by reference from
South Jersey Gas Company and Exhibit (10)(i)(f) of Form 10-K
Transco dated February 1, 1992. for 1991 (1-6364).
(10)(i)(g) Service agreement (Incremental FT) Incorporated by reference from
between South Jersey Gas Company Exhibit (10)(i)(g) of Form 10-K
and Transco dated August 1, 1991. for 1991 (1-6364).
(10)(i)(i) Gas storage agreement (SS-2) Incorporated by reference from
between South Jersey Gas Company Exhibit (10)(i)(i) of Form 10-K
and Transco dated July 25, 1990. for 1991 (1-6364).
(10)(i)(j) Gas transportation service Incorporated by reference from
agreement between South Jersey Gas Exhibit (10)(i)(j) of Form 10-K
Company and Transco dated December for 1993 (1-6364).
20, 1991.
(10)(i)(k) Amendment to gas transportation Incorporated by reference from
agreement dated December 20, 1991 Exhibit (10)(i)(k) of Form 10-K
between South Jersey Gas Company for 1993 (1-6364).
and Transco dated October 5, 1993.
(10)(j)(a) Gas transportation service Incorporated by reference from
agreement (FTS) between South Exhibit (10)(j)(a) of Form 10-K
Jersey Gas Company and Equitable for 1989 (1-6364).
Gas Company dated November 1, 1986.
(10)(k)(h) Gas transportation service Incorporated by reference from
agreement (TF) between South Exhibit (10)(k)(h) of Form 10-K
Jersey Gas Company and CNG for 1993 (1-6364).
Transmission Corporation dated
October 1, 1993.
(10)(k)(i) Gas purchase agreement between Incorporated by reference from
South Jersey Gas Company and ARCO Exhibit (10)(k)(i) of Form 10-K
Gas Marketing, Inc. dated March 5, for 1989 (1-6364).
1990.
SJI-18
Exhibit Number Description Reference
<s> <c> <c>
(10)(k)(k) Gas transportation service Incorporated by reference from
agreement (FTS-1) between South Exhibit (10)(k)(k) of Form 10-K
Jersey Gas Company and Columbia for 1993 (1-6364).
Gulf Transmission Company dated
November 1, 1993.
(10)(k)(l) Assignment agreement capacity and Incorporated by reference from
service rights (FTS-2) between Exhibit (10)(k)(i) of Form 10-K
South Jersey Gas Company and for 1993 (1-6364).
Columbia Gulf Transmission Company
dated November 1, 1993.
(10)(k)(m) FTS Service Agreement No. 39556 Incorporated by reference from
between South Jersey Gas Company Exhibit (10)(k)(m) of Form 10-K
and Columbia Gas Transmission for 1993 (1-6364).
Corporation dated November 1, 1993.
(10)(k)(n) FTS Service Agreement No. 38099 Incorporated by reference from
between South Jersey Gas Company Exhibit (10)(k)(n) of Form 10-K
and Columbia Gas Transmission for 1993 (1-6364).
Corporation dated November 1, 1993.
(10)(k)(o) NTS Service Agreement No. 39305 Incorporated by reference from
between South Jersey Gas Company Exhibit (10)(k)(o) of Form 10-K
and Columbia Gas Transmission for 1993 (1-6364).
Corporation dated November 1, 1993.
(10)(k)(p) FSS Service Agreement No. 38130 Incorporated by reference from
between South Jersey Gas Company Exhibit (10)(k)(p) of Form 10-K
and Columbia Gas Transmission for 1993 (1-6364).
Corporation dated November 1, 1993.
(10)(k)(q) SST Service Agreement No. 38086 Incorporated by reference from
between South Jersey Gas Company Exhibit (10)(k)(q) of Form 10-K
and Columbia Gas Transmission for 1993 (1-6364).
Corporation dated November 1, 1993.
(10)(k)(r) NS (Negotiated Sales) Service Incorporated by reference from
Agreement dated December 1, 1994 Exhibit (10)(k)(r) of Form 10-K
between South Jersey Gas Company for 1994 (1-6364).
and Transco Gas Marketing Company
as agent for Transcontinental Gas
Pipeline.
(10)(l)* Deferred Payment Plan for Incorporated by reference from
Directors of South Jersey Exhibit (10)(l) of Form 10-K for
Industries, Inc., South Jersey Gas 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 Incorporated by reference from
Agreement between South Jersey Exhibit (10)(j)(a) of Form 10-K
Industries, Inc. and/or a for 1980 (1-6364).
subsidiary and seven of its
officers.
(10)(l)(b)* Schedule of Deferred Compensation Incorporated by reference from
Agreements. Exhibit (10)(l)(b) of Form 10-K
for 1997 (1-6364).
SJI-19
Exhibit Number Description Reference
<s> <c> <c>
(10)(l)(d)* Form of Officer Employment Incorporated by reference from
Agreement between certain officers Exhibit (10)(l)(d) of Form 10-K
and either South Jersey for 1999 (1-6364).
Industries, Inc. or its
subsidiaries.
(10)(l)(e)* Schedule of Officer Employment Incorporated by reference from
Agreements. Exhibit (10)(l)(e) of Form 10-K
for 1999 (1-6364).
(10)(l)(f)* Officer Severance Benefit Program Incorporated by reference from
for all officers. Exhibit (10)(l)(g) of Form 10-K
for 1985 (1-6364).
(10)(l)(g)* Discretionary Incentive Bonus Incorporated by reference from
Program for all officers and Exhibit (10)(l)(h) of Form 10-K
management employees. for 1985 (1-6364).
(10)(l)(h)* The 1987 Stock Option and Stock Incorporated by reference from
Appreciation Rights Plan including Exhibit (10)(l)(i) of Form 10-K
Form of Agreement. for 1987 (1-6364).
(10)(l)(i)* Supplemental Executive Retirement Incorporated by reference from
Program, as amended and restated Exhibit (10)(l)(i) of Form 10-K
effective July 1, 1997, and Form for 1997 (1-6364).
of Agreement between certain SJI
or subsidiary officers.
(10)(l)(j)* 1997 Stock Option and Stock Incorporated by reference from
Appreciation Rights Plan. Exhibit (10)(l)(j) of Form 10-K
for 1999 (1-6364).
(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, 2002 is filed as an
exhibit hereto solely to the
extent portions are specifically
incorporated by reference herein
(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).
(99.1) Chief Executive Officer Certification
Pursuant to the Sarbanes-Oxley Act
of 2002 (filed herewith).
(99.2) Chief Financial Officer Certification
Pursuant to the Sarbanes-Oxley Act
of 2002 (filed herewith).
<fn>
* Constitutes a management contract or a compensatory plan or arrangement.
</fn>
SJI-20
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)
SJI-21
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)
SJI-22
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
SJI-23
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
SJI-24
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
SJI-25
SCHEDULE I - SOUTH JERSEY INDUSTRIES, INC.
STATEMENT OF INCOME
(In Thousands)
2002 2001 2000
-------------- -------------- --------------
Operating Revenues $1,483 $2,111 $1,345
Operating Expenses:
Operations 1,901 1,549 1,341
Maintenance 0 0 15
Depreciation 60 57 27
Energy and Other Taxes 175 154 96
-------------- -------------- --------------
Total Operating Expenses 2,136 1,760 1,479
Operating (Loss) Income (653) 351 (134)
-------------- -------------- --------------
Other Income:
Equity in Affiliated Companies 746 566 437
Equity in Earnings of Subs 28,658 26,743 24,431
Other 718 261 700
-------------- -------------- --------------
Total Other Income 30,122 27,570 25,568
-------------- -------------- --------------
Interest Charges 519 716 463
Income Taxes (462) 188 230
-------------- -------------- --------------
Income from Continuing Operations 29,412 27,017 24,741
Equity in Undistributed Earnings of
Discontinued Subsidiaries (424) (455) (557)
-------------- -------------- --------------
Net Income Applicable to Common Stock $28,988 $26,562 $24,184
============== ============== ==============
<FN>
See South Jersey Industries, Inc. and Subsidiaries Notes to Consolidated Financial Statements
incorporated by reference in Part II, Item 8.
</FN>
SCHEDULE I - SOUTH JERSEY INDUSTRIES, INC.
Statement of Comprehensive Income
(In Thousands)
2002 2001 2000
-------------- -------------- --------------
Net Income Applicable to Common Stock $28,988 $26,562 $24,184
-------------- -------------- --------------
Other Comprehensive Loss:
Minimum Pension Liability Adjustment - Net (771) (32) 0
-------------- -------------- --------------
Total Other Comprehensive Loss (771) (32) 0
-------------- -------------- --------------
Comprehensive Income $28,217 $26,530 $24,184
============== ============== ==============
<FN>
See South Jersey Industries, Inc. and Subsidiaries Notes to Consolidated Financial Statements
incorporated by reference in Part II, Item 8.
</FN>
SCHEDULE I - SOUTH JERSEY INDUSTRIES, INC.
Statement of Retained Earnings
(In Thousands)
2002 2001 2000
-------------- -------------- --------------
Retained Earnings - Beginning $67,218 $58,004 $0
Net Income Applicable to Common Stock 28,988 26,562 24,184
-------------- -------------- --------------
96,206 84,566 24,184
Dividends Declared - Common Stock (18,204) (17,348) (16,647)
-------------- -------------- --------------
Retained Earnings - Ending $78,002 $67,218 $7,537
============== ============== ==============
<FN>
See South Jersey Industries, Inc. and Subsidiaries Notes to Consolidated Financial Statements
incorporated by reference in Part II, Item 8.
</FN>
SJI-26
SCHEDULE I - SOUTH JERSEY INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2002
2002 2001 2000
------------ ------------ ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income Applicable to Common Stock $28,988 $26,562 $24,184
------------ ------------ ----------------
Adjustments to Reconcile Net Income to Cash
Flows Provided by Operating Activities:
Equity in Earnings of Subsidiaries (28,234) (26,288) (23,874)
Depreciation 66 63 32
Deferred and Non-Current Income Taxes and Credits - Net 329 557 38
Environmental Remedition Costs - Net (11) (5) (74)
Changes in:
Accounts Receivable (17) 4,369 (297)
Receivables with Associated Companies - Net (103) (218) (549)
Prepayments and Other Current Assets (8) 35 (67)
Prepaid and Accrued Taxes - Net (511) (488) 41
Accounts Payables & Other Current Liabilities (5,389) (867) (199)
Other - Net (507) 32 339
------------ ------------ ----------------
Total Cash (Used In) Provided by Operating Activities (5,397) 3,752 (426)
------------ ------------ ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Investment in) Return of Investment Affiliates (286) 53 (637)
Capital Expenditures (125) (134) (152)
Dividends from Subsidiaries 10,700 17,501 16,800
Equity Infusion To Subsidiaries (2,500) (8,500) (10,000)
------------ ------------ ----------------
Net Cash Provided by Investing Activities 7,789 8,920 6,011
------------ ------------ ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings (Repayments) of Associated Companies 9,528 (17,602) (2,814)
Net (Repayments) Borrowings from Lines of Credits (4,260) 9,560 6,250
Dividends on Common Stock (18,204) (17,347) (16,647)
Proceeds from Sale of Common Stock 10,926 10,953 8,857
------------ ------------ ----------------
Net Cash Used in Financing Activities (2,010) (14,436) (4,354)
------------ ------------ ----------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 382 (1,764) 1,231
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR 139 1,903 672
------------ ------------ ----------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $521 $139 $1,903
============ ============ ================
<FN>
See South Jersey Industries, Inc. and Subsidiaries Notes to Consolidated Financial Statements
incorporated by reference in Part II, Item 8.
</FN>
SJI-27
SCHEDULE I - SOUTH JERSEY INDUSTRIES, INC.
BALANCE SHEET
(In Thousands)
2002 2001
---------------- --------------
Assets
Property Plant and Equipment:
Nonutility Property, Plant and Equipment, at cost $1,249 $1,828
Accumulated Depreciation (204) (153)
---------------- --------------
Property, Plant and Equipment - Net 1,045 1,675
---------------- --------------
Investments:
Investments in Subsidiaries 242,279 222,244
Available-for-Sale Securities 55 46
Investment in Affiliates 1,128 843
---------------- --------------
Total Investments 243,462 223,133
---------------- --------------
Current Assets:
Cash and Cash Equivalents 521 139
Notes Receivable - Associated Companies 31,390 24,323
Accounts Receivable 30 13
Accounts Receivable - Associated Companies 1,604 1,753
Other 475 69
---------------- --------------
Total Current Assets 34,020 26,297
---------------- --------------
Other Non-Current Assets 618 483
---------------- --------------
Total Assets $279,145 $251,588
================ ==============
Capitalization and Liabilities
Common Equity:
Common Stock SJI
Par Value $1.25 a share
Authorized - 20,000,000 shares
Outstanding - 12,206,474 shares and 11,860,990 $15,258 $14,826
Premium on Common Stock 150,434 139,929
Accumulated Other Comprehensive Income (803) (32)
Retained Earnings 78,002 67,218
---------------- --------------
Total Common Equity 242,891 221,941
---------------- --------------
Current Liabilities:
Notes Payable - Banks 12,600 16,860
Notes Payable - Associated Companies 21,480 4,885
Accounts Payable 786 687
Accounts Payable to Associated Companies 282 534
Taxes Accrued (870) (376)
Dividends Declared 0 4,389
Other Current Liabilities 151 1,271
---------------- --------------
Total Current Liabilities 34,429 28,250
---------------- --------------
Other Non-Current Liabilities 1,825 1,397
---------------- --------------
Total Capitalization and Liabilities $279,145 $251,588
================ ==============
<FN>
See South Jersey Industries, Inc. and Subsidiaries Notes to Consolidated Financial
Statements incorporated by reference in Part II, Item 8.
</FN>
SJI-28
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, 2002 $2,661 $3,706 $298 $3,495 $3,170
Provision for Uncollectible
Accounts for the Year Ended
December 31, 2001 $2,043 $2,667 $387 $2,436 $2,661
Provision for Uncollectible
Accounts for the Year Ended
December 31, 2000 $1,117 $2,280 $231 $1,585 $2,043
<FN>
(a) Recoveries of accounts previously written off and minor adjustments.
(b) Uncollectible accounts written off.
</FN>
SJI-29