Back to GetFilings.com
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, 1997 Commission File Number 000-22211
SOUTH JERSEY GAS COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 21-0398330
(State of incorporation) (IRS employer identification no.)
Number One South Jersey Plaza, Route 54, 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:
Company Guaranteed Mandatorily Redeemable
Preferred Securities of Subsidiary Trust,
$25 Value per Preferred Security 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. [X]
All of the equity securities of the registrant are owned by
South Jersey Industries, Inc., its parent company, a 1934 Act
reporting company named in the registrants description of its
business, which has itself fulfilled its 1934 Act filing
requirements.
During the preceding 36 months (and any subsequent period of
days) there has not been any default in (1) any of the
indebtedness of the registrant or its subsidiaries, and (2) the
payment of rentals under material long-term leases (of which
there are none).
Documents Incorporated by Reference: None
- Title Page -
PART I
Item 1. Business
General
The registrant, South Jersey Gas Company (the Company or SJG),
a New Jersey corporation, is an operating public utility. SJG
owns all of the common stock of SJG Capital Trust, a statutory
trust organized in the State of Delaware. All of the equity
securities of the Company are owned by South Jersey Industries,
Inc. (SJI), its parent company, which is itself a 1934 Act
reporting company.
Financial Information About Industry Segments
Not applicable.
Description of Business
South Jersey Gas Company, 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 makes
off-system sales of natural gas 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 1.1 million.
SJG serves 260,567 residential, commercial and industrial
customers (at December 31, 1997) in southern New Jersey. Gas
sales and transportation for 1997 amounted to approximately
73,574,000 Mcf (thousand cubic feet), of which approximately
50,181,000 Mcf was firm sales and transportation, 8,931,000 Mcf
was interruptible sales and transportation and 14,462,000 Mcf
was off-system sales. The breakdown of firm sales includes
39.8% residential, 16.1% commercial, 2.5% cogeneration and
electric generation, 1.4% industrial and 40.2% transportation.
At year-end 1997, SJG served 242,132 residential customers,
18,037 commercial customers and 398 industrial customers. This
includes 1997 net additions of 6,124 residential customers, 568
commercial customers and one industrial customer.
Under an agreement with Atlantic Electric, 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 1997, 1.97 Bcf (billion cubic feet)
was delivered under this agreement.
SJG serviced 7 cogeneration facilities in 1997. Combined sales
and transportation of natural gas to such customers amounted to
approximately 9.5 Bcf in 1997.
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 by the Federal Energy
Regulatory Commission (FERC) of Orders No. 547 and 636. Order
No. 547 issued a blanket certificate of public convenience and
necessity authorizing all parties, which are not interstate
pipelines, to make FERC jurisdictional gas sales for resale at
negotiated rates, while Order No. 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 1997, off-system sales amounted to
14.5 Bcf. Also in 1997, capacity release and storage throughput
amounted to 36.4 Bcf.
SJG-2
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 1997 amounted to
approximately 8.9 Bcf, approximately 8.1 percent 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 the 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. Atlantic City is experiencing a second wave of
development as a result of casino gaming. The centerpiece of
this development is the recently completed multipurpose
convention center, accompanied by planned major hotel and
entertainment complexes. These facilities will be used to
attract large conventions as well as making Atlantic City into a
family resort on a year-round basis.
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 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 (Transco), SJG's major supplier, Columbia
Gas Transmission Corporation (Columbia), CNG Transmission
Corporation (CNG) and Equitrans, Inc. (Equitrans), 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 SJG to pass on to customers increases and
decreases in the cost of purchased gas supplies. The tariff
also contains provisions permitting the recovery of
environmental remediation costs associated with former
manufactured gas plant sites and for the adjustment of revenues
due to the impact of "temperature" fluctuations as prescribed in
SJG's tariff.
In August 1997, SJG initiated its BPU approved pilot program to
give residential customers a choice of gas supplier. The
program includes approximately 13,000 residential customers.
SJG continues to deliver the natural gas through its
distribution system with no loss of margins.
SJG-3
Revenue requirements for ratemaking purposes are established on
the basis of firm sales projections. On January 27, 1997, the
BPU granted SJG a rate increase of $6.0 million based on an
overall rate of return of 9.62% including an 11.25% return on
equity. The majority of this increase impacted residential and
small commercial customers. In addition, part of the increase
will be recovered from customers through new service fees which
charge specific customers for costs which they cause SJG to
incur. Also, as part of this rate increase, SJG is allowed to
retain the first $5.5 million of pre-tax margins generated by
interruptible and off-system sales and transportation and 20% of
pre-tax margins generated by such sales above that level. In
1997 and 1998, this $5.5 million threshold will be increased by
the annual revenue requirement associated with specified major
construction projects. These sharing formula improvements are
expected to result in additional rate relief of approximately
$0.3 million in 1998 and $1.8 million in 1999. In 1997, SJG
filed to recover additional post-retirement benefit costs of
approximately $1.3 million annually and this recovery was
approved effective January 1, 1998. Additional information on
regulatory affairs is incorporated by reference to Notes 1, 2, 6
and 12 to the Company's consolidated financial statements for
the year ended December 31, 1997. See Item 8.
SJG Capital Trust, a Deleware statutory trust, is a wholly
owned subsidiary of the Company, which had the sole purpose of
issuing beneficial interests in its costs (Preferred
Securities), the proceeds of selling such Preferred Securities
invested in Deferrable Interest Subordinated Debentures issued
by SJG. SJG is the guarantor of such Preferred Securities.
In 1997, the Company made no public announcement of, or
otherwise made public information about, a new product or
industry segment that would require the investment of a material
amount of the assets of the Company or which otherwise was
material.
Raw Materials
Supply Contracts and Storage
SJG has direct connections to two interstate pipeline
companies, Transco and Columbia. It 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),
CNG, Texas Gas Transmission Corporation (Texas Gas) and
Equitrans. 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 five year-round and one
seasonal firm transportation (FT) service arrangement. When
combined, these services enable SJG to purchase from third
parties and have delivered to its city gate stations by Transco
a total of 163,741 Thousand Cubic Feet of gas per day ("Mcf/d").
The terms of the year-round agreements extend for various
periods from 2002 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 storage during periods of low demand and withdraw gas
at a rate of up to 86,972 Mcf per day during periods of high
demand. The terms of the storage service agreements extend for
various periods from 1998 to 2008.
Transco renders a merchant service to SJG under its Rate
Schedule FS (defined below). Williams Energy Services Company
(WESCO), an affiliate of Transco, has assumed Transco's natural
gas merchant function under which the maximum purchase quantity
amounts to 51,769 Mcf per day. FS is a no-notice swing service
which allows SJG to take between zero and its full contract
quantities (51,769 Mcf/d) on any day of the year. This
flexibility enables SJG to respond to changes in its
requirements for gas due to weather and market conditions. The
initial term of the FS agreement extends through March 31, 2001.
SJG-4
In addition to FS service, SJG has also secured a second
merchant service from Transco under Transco's Rate Schedule NS.
NS service is also provided by WESCO acting as agent for
Transco. Under this service, SJG can purchase up to 30,000 Mcf
per day of NS gas with 24 hours advance notice.
SJG has a long term gas purchase agreement with Vastar Gas
Marketing (Vastar) which provides for the delivery of up to
14,618 Mcf/d to SJG's service area on a year round basis by way
of Transco FT service. The initial term of the gas purchase
agreement with Vastar extends through March 31, 2000.
SJG also has a winter season firm transportation service on the
Transco system which is available for the period December 1
through the last day of February of each year. SJG's maximum
entitlement under this service is 2,900 Mcf/d. SJG has
contracted with Amerada Hess Corporation (Hess) to provide the
gas supply to fill this transportation capacity during each
winter season through October 31, 2007.
SJG may deliver up to 24,700 Mcf per day of gas under a firm
transportation agreement as part of Transco's Texas
Gas-CNG-Transco FT project. This project was developed to
provide additional firm pipeline capacity which would deliver
gas to the US Northeast via a bundled service provided by
Transco under its Rate Schedule FT-NT. SJG has also contracted
with Hess for a 15 year gas supply service to fill this capacity
which extends through October 31, 2007.
CNG
SJG has entered into separate gas sales and capacity management
agreements with CNG Energy Services Corporation (CNGES), a
non-jurisdictional affiliate of CNG, through which SJG has
assigned to CNGES its pipeline FT and storage entitlements on
the CNG system to provide SJG with up to 9,662 Mcf per day of
gas during the period November 16 through March 31 of each year.
Columbia
SJG has three firm transportation agreements with Columbia
which, when combined, provide for 43,500 Mcf/d of firm
deliverability.
SJG has four long term gas purchase agreements, for periods
ranging from 1999 to 2003, with major non-jurisdictional
producer/suppliers for gas delivered into the Columbia pipeline
system which, in aggregate, provide SJG with up to 43,500 Mcf/d
via the Columbia pipeline system during the winter season. Such
agreements also provide for delivery in non-winter months at
lower quantities.
SJG also subscribes to a firm storage service from Columbia, to
March 31, 2009, which provides a maximum withdrawal quantity of
19,807 Mcf/d during the winter season with an associated
1,121,095 Mcf of storage capacity.
As part of addressing future winter season requirements, SJG
has entered into an agreement with Columbia to subscribe to an
incremental 31,296 Mcf per day of storage deliverability with an
additional 2,234,482 Mcf of storage capacity to become available
April 1, 1998. The term of the agreement expires October 31,
2013. The FERC has approved Columbia's arrangements to provide
such services.
Equitrans
SJG has a long term storage service provided by Equitrans, to
April 1, 2002, under which up to 500,000 Mcf of gas may be
stored during the summer season and up to 4,783 Mcf/d may be
withdrawn during the winter season. The gas is delivered to SJG
under firm transportation agreements with Equitrans, CNG and
Transco.
SJG-5
Supplemental Gas Supplies
SJG has a long term LNG purchase agreement with Distrigas of
Massachusetts Corporation (DOMAC) which extends through October
31, 2000. For the 1997-98 contract year, SJG's annual contract
quantity under the DOMAC agreement is 186,047 Mcf. LNG
purchases from DOMAC are transported to SJG's LNG storage
facility in McKee City, New Jersey via over-the-road trucks.
SJG operates peaking facilities which can store and vaporize
both LNG and propane 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 maintains two propane-air plants that are located in
Middle Township and Ocean City, New Jersey. The combined
maximum storage capacity of these plants is 150,000 gallons of
liquefied propane or the equivalent of approximately 11,364 Mcf
of natural gas.
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 of gas per day into SJG's
distribution system.
SJG has a LNG peaking service agreement with the Philadelphia
Gas Works (PGW) which provides up to 250,000 Mcf per year of
peaking service gas on a firm basis at a rate of up to 25,000
Mcf per day when taken as vapor and delivered through the
Transco pipeline system or up to twelve truckloads per day
(approximately 10,200 Mcf) when taken as liquid and trucked to
SJG's LNG storage facility in McKee City, New Jersey. The term
of this agreement extends through the 1998-99 winter season,
however it may be extended by mutual agreement of the parties.
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 1997-98 winter season to be
387,293 Mcf versus a design day supply of 416,308 Mcf. On
January 19, 1994, SJG experienced its highest peak-day demand of
370,582 Mcf with an average temperature of 2.68 degrees F. In
1997, SJG experienced a peak-day demand of 352,259 Mcf with an
average temperature of 12.5 degrees F.
Gas Prices
During 1997, SJG purchased and had delivered approximately 46.8
Bcf of natural gas for distribution to both on-system and
off-system customers. Of this total, 31.9 Bcf was transported
on the Transco pipeline system and 14.9 Bcf was transported on
the Columbia pipeline system.
SJG's average commodity cost of gas purchased in 1997 was $2.60
per Mcf.
Patents and Franchises
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 the Company or any of its subsidiaries.
Seasonal Aspects
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
SJG-6
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 experiences reductions of revenues and net income
during the second and third quarters of the year.
Working Capital Practices
As stated under Seasonal Aspects, SJG buys and stores natural
gas during the summer months. These purchases are financed by
short-term loans which are substantially paid down during the
winter months when gas revenues are higher. Reference is also
made to "Liquidity" included in Management's Discussion and
Analysis of Results of Operations and Financial Condition. See
Item 7.
Customers
No material part of the Company's business is dependent upon a
single customer or a few customers, the loss of which would have
a material adverse effect on any such business. See page 3.
Backlog
Backlog is not material to an understanding of the Company's
business.
Government Contracts
No material portion of the business of the Company is subject
to renegotiation of profits or termination of contracts or
subcontracts at the election of any government.
Competition
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
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 believes it has been a leader in addressing the changing
marketplace. It maintains 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.
Research
During the last three fiscal years, the Company did not engage
in research activities to any material extent.
Environmental Matters
Information on environmental matters is incorporated by
reference to Note 12 to the Company's consolidated financial
statements for the year ended December 31, 1997. See Item 8.
Employees
The Company had a total of 658 employees as of December 31,
1997.
Financial Information About Foreign and Domestic Operations and
Export Sales
The Company has no foreign operations and export sales are not
a part of the Company's business.
SJG-7
Item 2. Properties
The principal property of SJG consists of its 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, 1997,
there were approximately 343 miles of mains in the transmission
systems and 4,652 miles of mains in the distribution systems.
SJG owns office and service buildings, including its corporate
headquarters, at eight locations in the territory, a liquefied
natural gas storage and vaporization facility, and two
propane-air vaporization plants.
As of December 31, 1997, the SJG utility plant had a gross book
value of $619,489,213 and a net book value, after accumulated
depreciation, of $452,313,245. In 1997, $48,533,132 was spent
on additions to utility plant and there were retirements of
property having an aggregate gross book cost of $6,347,794.
Construction expenditures for 1998 are currently expected to
approximate $61.8 million.
Virtually all of the SJG transmission pipeline, distribution
mains and service connections are in streets or highways or on
the property of others. The SJG transmission and distribution
systems are maintained under franchises or permits or
rights-of-way, many of which are perpetual. The SJG properties
(other than property specifically excluded) are subject to a
lien of mortgage under which its first mortgage bonds are
outstanding. Such properties are well maintained and in good
operating condition.
Item 3. Legal Proceedings
The Company is subject to claims which arise in the ordinary
course of its business and other legal proceedings. Included
therewith, a group of Atlantic City casinos have filed a
petition with the BPU alleging overcharges of over $10 million,
including interest. Management of the Company believes that any
pending or potential legal proceedings will not materially
affect its operations or consolidated financial position.
Reference is made under Commitments and Contingencies in Note 12
to the Company's consolidated financial statements for the year
ended December 31, 1997. See Item 8.
Item 4. Submission Of Matters To A Vote of Security Holders
Not applicable.
SJG-8
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters
Common equity securities of SJG, owned by its parent company,
South Jersey Industries, Inc., are not traded on any stock
exchange.
Cash dividends are usually declared on the Company's common
stock on a quarterly basis. SJG is restricted under its First
Mortgage Indenture, as supplemented, as to the amount of cash
dividends or other distributions that may be paid on its common
stock. Retained Earnings free of such restriction approximate
$54.1 million at December 31, 1997.
If preferred stock dividend are in arrears, no dividends may be
declared or paid, or other distribution made on the common stock
of SJG. If four or more quarterly dividends are in arrears, the
Preferred Shareholders may elect a majority of SJG's directors.
See Notes 4 and 10 of the Company's consolidated financial
statements for additional information on Capitalization. See
Item 8.
SJG-9
Item 6. Selected Financial Data
The following financial data has been obtained from the Company's audited
financial statements:
(In Thousands Except for Share Data)
1997 1996 1995 1994 1993
------------------------------------------------------------
Operating Revenues $327,548 $330,335 $282,719 $311,459 $277,581
============================================================
Operating Income $39,996 $38,849 $35,438 $28,003 $29,555
============================================================
Income before Preferred Securities Dividend
Requirement (1) 22,000 19,389 15,991 11,200 16,854
Preferred Dividend Requirements:
Preferred Stock (170) (174) (178) (183) (187)
Preferred Securities (1,932) 0 0 0 0
------------------------------------------------------------
Net Income Applicable to Common Stock $19,898 $19,215 $15,813 $11,017 $16,667
============================================================
Average Shares of Common Stock Outstanding 2,339,139 2,339,139 2,339,139 2,339,139 2,339,139
Earnings per Common Share $8.51 $8.21 $6.76 $4.71 $7.13
Property, Plant and Equipment, Net $454,239 $421,622 $396,770 $375,093 $351,844
============================================================
Total Assets $649,113 $599,926 $549,950 $509,987 $482,784
============================================================
Capitalization:
Common Equity (2) $164,785 $134,564 $130,406 $124,593 $117,113
Preferred Stock and Securities (3) 37,224 2,314 2,404 2,494 2,584
Long-Term Debt 175,860 149,736 156,784 138,594 130,446
------------------------------------------------------------
Total $377,869 $286,614 $289,594 $265,681 $250,143
============================================================
(1) Included in 1993 is a positive cumulative effect of a change in
accounting princple for income taxes amounting $1,235.
(2) Included are cash contributions to capital as follows:
1997 - $25.6 million; 1995 - $6.0 million.
(3) Includes sale in 1997 of $35.0 million Company Guaranteed
Mandatorily Redeemable Preferred Securities of Subsidiary
Trust.
SJG-10
Comparative statistical data related to revenues and gas throughput is as follows:
1997 1996 1995 1994 1993
------------------------------------------------------------
Operating Revenues (Thousands):
Firm
Residential $176,717 $177,673 $151,720 $151,857 $142,409
Commercial 60,418 70,755 58,135 61,848 57,392
Industrial 5,535 7,540 6,014 8,349 13,609
Cogeneration & Electric Generation 5,249 16,173 15,725 19,301 23,726
Firm Transportation 15,966 10,473 13,930 18,092 13,746
------------------------------------------------------------
Total Firm 263,885 282,614 245,524 259,447 250,882
Interruptible 6,085 7,256 6,786 6,610 11,299
Interruptible Transportation 3,507 2,630 2,778 2,985 2,412
Off-System 39,403 28,236 20,360 38,161 8,788
Capacity Release & Storage 8,533 4,349 3,374 2 0
Other 6,135 5,250 3,897 4,254 4,200
------------------------------------------------------------
Total Operating Revenues $327,548 $330,335 $282,719 $311,459 $277,581
============================================================
Throughput (MMcf):
Firm
Residential 19,955 21,699 19,573 19,543 19,368
Commercial 8,067 10,117 8,945 9,276 9,182
Industrial 733 1,238 1,016 1,364 2,599
Cogeneration & Electric Generation 1,230 5,180 4,860 5,384 6,741
Firm Transportation 20,196 12,969 14,417 14,401 10,194
------------------------------------------------------------
Total Firm Throughput 50,181 51,203 48,811 49,968 48,084
------------------------------------------------------------
Interruptible 1,345 1,618 1,843 1,810 3,105
Interruptible Transportation 7,586 5,422 5,888 5,424 4,328
Off-System 14,462 8,571 9,590 16,840 3,563
Capacity Release & Storage 36,382 25,460 25,915 46 0
------------------------------------------------------------
Total Throughput 109,956 92,274 92,047 74,088 59,080
============================================================
Number of Customers at Year End: (1)
Residential 242,132 236,008 230,446 224,394 218,484
Commercial 18,037 17,469 17,179 16,615 16,206
Industrial 398 397 397 397 377
------------------------------------------------------------
Total Customers 260,567 253,874 248,022 241,406 235,067
============================================================
Maximum Daily Sendout (MMcf) 355 325 335 370 318
============================================================
Annual Degree Days 4,829 5,175 4,865 4,820 4,953
============================================================
Normal Degree Days (2) 4,953 4,928 4,936 4,911 4,895
============================================================
(1) 1996 has been restated.
(2) Average degree days recorded in SJG service territory during
20-year period ended June 30 of prior year.
SJG-11
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Overview
South Jersey Gas Company (SJG) is a natural gas distribution
company serving 260,567 customers at December 31, 1997, compared
with 253,874 customers at December 31, 1996. SJG also makes
off-system sales of natural gas on a wholesale basis to various
customers on the interstate pipeline system and transports
natural gas purchased directly from producers or suppliers for
its own sales and for some of its customers. South Jersey
Industries, Inc. owns all of the common stock of SJG.
This report contains certain forward-looking statements
concerning projected future financial performance, future
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 therefore involve a number of
risks and uncertainties. Management cautions that
forward-looking statements are not guarantees and that actual
results could differ materially from those expressed or implied
in the forward-looking statements.
There are a number of factors that could cause the company's
actual results to differ materially from those anticipated,
which include, but are not limited to the following: general
economic conditions on an international, federal, state and
local level; weather conditions in the company's marketing
areas; regulatory and court decisions; competition in the
company's regulated and deregulated activities; the availability
and cost of capital; the company's ability to maintain existing
and/or establish successful new alliances and joint ventures to
take advantage of marketing opportunities; costs and effects of
unanticipated legal proceedings and environmental liabilities;
and changes in business strategies.
Competition
SJG franchises are non-exclusive. Currently no other utility
provides retail gas distribution services within its territory.
SJG does not expect other utilities to do so in the foreseeable
future because of the extensive investment required for utility
plant and related costs. SJG competes with oil, propane and
electricity suppliers for residential, commercial and industrial
users. The market for natural gas sales is subject to
competition as a result of deregulation. SJG has enhanced its
competitive position while maintaining its margins by using an
unbundled tariff which isolates the variable cost of the
commodity within SJG's rate structure. Under this tariff, SJG
derives substantially all of its profits from the transportation
rather than the sale of the commodity. SJG's commercial and
industrial customers can choose their supplier while SJG
recovers its cost of service and fixed gas costs primarily
through its transportation service. In April 1997, SJG
initiated its New Jersey Board of Public Utilities (BPU)
approved pilot program giving some residential customers a
choice of gas suppliers (See "Pilot Program - Choice of Gas
Supplier"). SJG believes it has been a leader in addressing the
changing marketplace, while maintaining its focus on being a
low-cost provider of natural gas and energy services.
Pilot Program - Choice of Gas Supplier
In April 1997, SJG initiated its BPU-approved pilot program
giving residential customers a choice of gas supplier. During
the enrollment period, which ended June 30, 1997, nearly 13,000
residential customers applied for this service. Transportation
of gas for these customers began on August 1, 1997.
Participants' bills are reduced for certain cost of gas charges
and applicable taxes. The resulting decrease in revenues is
offset by a corresponding decrease in SJG's gas costs and taxes
under SJG's BPU-approved fuel clause. The program does not
affect its net income, financial condition or margins.
SJG-12
Energy Adjustment Clauses
SJG's tariff includes a Levelized Gas Adjustment Clause (LGAC),
a Temperature Adjustment Clause (TAC), a Remediation Adjustment
Clause (RAC) and a Demand Side Management Clause (DSMC). These
clauses permit adjustments for changes in gas supply costs,
reduce the impact of extreme fluctuations in temperatures on SJG
and its customers, recover costs for the remediation of former
gas manufacturing plants and recover costs associated with its
conservation plan, respectively. The BPU-approved LGAC, RAC and
DSMC adjustments are made to match revenues and expenses. TAC
adjustments do affect revenue, income and cash flows since
extremely cold weather can generate credits to customers, while
extremely warm weather during the winter season can result in
additional billings to customers.
Status of Year 2000 Conversion
The Company prepared a Year 2000 Impact and Assessment study
and developed a plan for program modification. An outside
service was used to identify both informational and logic date
variables within the programming codes. This service was
completed and expensed in 1997. Presently, the Company is
revising affected programming code. As of December 31, 1997,
approximately 20% of the programming code was revised. All
revisions are scheduled to be completed by early 1999, providing
the remainder of 1999 for testing. The conversion costs are
estimated at $0.4 million of which approximately $0.1 million
was spent as of December 31, 1997. Vendors who provide third
party software and support services are being contacted to
establish Year 2000 compliance. The Company is also in the
process of securing written verification from its key product
and service vendors to ensure their compliance.
Results of Operations
Operating Revenues
In 1997, revenues decreased $2.8 million from 1996. Revenues
increased $47.6 million when comparing 1996 with 1995. In 1997,
the revenue decrease is due to lower firm sales resulting from
weather which was 6.7 percent warmer than 1996 and increased
firm transportation service replacing firm sales. These results
were partially offset by the settlement of the base rate case
and customer growth. The revenue from transportation excludes
commodity costs (See Competition), and SJG's profits are from
the transportation rather than the sale of commodity.
Therefore, the migration to firm transportation does not lower
SJG's margin. Total sales margin was higher in 1997 due to the
impact of a rate increase effective January 27, 1997 (See
Regulatory Matters), the addition of 6,700 new customers,
increased off-system sales (nonjurisdictional sales) and
increased capacity release revenues. The revenue and sales
margin increase in 1996 was primarily due to greater firm sales
resulting from weather which was 6.4 percent colder than 1995
and a net increase of approximately 5,900 customers. The net
customer increase in 1995 was approximately 6,600.
Gas Purchased for Resale
Gas purchased for resale decreased $5.0 million in 1997
compared with 1996 principally due to decreased unit sales. Gas
purchased for resale increased by $39.9 million for 1996
compared with 1995, principally due to increased unit sales.
Sources of gas supply include both contract and open-market
purchases. SJG is responsible for securing and maintaining its
own gas supplies to serve its customers.
SJG has entered into long-term contracts for natural gas
supplies, firm transportation, and firm gas storage service.
The earliest expiration of any of these contracts is 1999. All
of the transportation and storage service agreements between SJG
and its interstate pipeline suppliers are provided under tariffs
approved by the Federal Energy Regulatory Commission. SJG's
cumulative obligation for demand charges and reservation fees
for all of these services is approximately $4.6 million per
month, which is recovered on a current basis through its LGAC.
SJG-13
Operations
A summary of net changes in utility operations cost is as
follows (in thousands):
1997 vs. 1996 1996 vs. 1995
------------- -------------
Other Production Expense $ (25) $ 19
Transmission (21) 6
Distribution (76) 524
Customer Accounts and Services (322) 186
Sales 126 (32)
Administration and General 3,170 (1,062)
Other (446) (244)
------ -------
$2,406 $ (603)
====== =======
Customer Accounts and Service costs decreased in 1997
principally due to a charge in 1996 to increase the Company's
reserve for uncollectible accounts and lower payroll costs.
Administrative and General costs increased in 1997 principally
due to increased payroll, employee benefits (including a $1.5
million death-benefit liability which became payable upon the
death of the Company's president in December 1997) and
regulatory costs.
Distribution costs increased in 1996 principally due to greater
markout and leak survey activities. The 1996 reduction in
administrative and general costs was principally due to
decreased data processing, employee welfare and regulatory costs.
Other Operating Expenses
A summary of principal changes in other expenses for December
31, 1997 and 1996, is as follows (in thousands):
1997 vs. 1996 1996 vs. 1995
------------- -------------
Maintenance $ 77 $ 247
Depreciation 1,123 1,019
Federal Income Taxes - Net 932 1,349
Gross Receipts & Franchise and
Other Taxes (3,497) 2,290
The increase in maintenance expense is principally due to
utility plant production plant maintenance, which includes the
amortization of increased environmental remediation costs (such
increases are offset by revenue recovery under SJG's RAC).
Depreciation is higher in each period principally due to
increased investment in property, plant and equipment. Federal
Income Tax changes reflect the impact of changes in pre-tax
income. The changes in Gross Receipts and Franchise Taxes and
Other Taxes are due to changes in volumes of gas sold, which are
subject to those taxes. In addition, lower tax rates applied to
certain customer classes in 1997.
Interest Charges
Interest charges decreased in 1997 due to the effect of lower
short-term interest resulting from lower levels of short-term
debt outstanding. Short-term debt levels were reduced in March
1997 by using proceeds from the sale of $35.0 million of first
mortgage bonds by SJG; the application of a $25.6 million cash
equity infusion to SJG from SJI and the application of the net
proceeds from the sale of the Mandatorily Redeemable Preferred
Securities in May 1997. Utility long-term interest increased in
1997 due to increased levels of long-term debt outstanding.
SJG-14
Preferred Securities Dividend Requirements
Preferred Dividends increased in 1997 due to the issuance of
$35.0 million of 8.35% SJG-guaranteed Mandatorily Redeemable
Preferred Securities (See Capital Resources).
Net Income Applicable to Common Stock
The details affecting net income and earnings per common share
are discussed under the appropriate captions above.
Liquidity
The seasonal nature of gas operations, the timing of
construction and remediation expenditures and related permanent
financing, as well as mandated tax and sinking fund payment
dates require large short-term cash requirements. These are
generally met by cash from operations and short-term lines of
credit. The Company maintains short-term lines of credit with a
number of banks, aggregating $115.0 million of which $69.1
million was available at December 31, 1997. The credit lines
are uncommitted and unsecured with interest rates below the
prime rate.
The changes in cash flows from (used in) operating activities
are as follows (in thousands):
1997 vs. 1996 1996 vs. 1995
------------- -------------
Increases/(Decreases):
Net Income $ 683 $ 3,402
Depreciation and Amortization 327 868
Provision for Losses on Accounts
Receivable (244) 340
Revenues and Fuel Costs Deferred-Net 4,449 (2,196)
Deferred and Non-Current Federal
Income Taxes and Credits - Net (3,889) 5.947
Environmental Remediation Costs - Net (1,682) (5,381)
Accounts Receivable (2,334) 17,986
Inventories 6,395 (10,511)
Prepayments and Other Current Assets (549) 844
Prepaid Gross Receipts & Franchise
Taxes - Net (1,011) 5,892
Accounts Payable and Other Accrued
Liabilities (3,360) (2,925)
Other - Net (47) (4,651)
------- --------
Net Cash from Operating Activities $(1,262) $ 9,615
======= ========
Depreciation and Amortization are non-cash charges to income
and do not impact cash flow. Changes in depreciation cost
reflect the effect of additions and reductions to fixed assets.
Increases in Revenues and Fuel Costs Deferred - Net reflect the
impact of overcollection of fuel costs or the recovery of
previously deferred fuel costs. Decreases reflect the impact of
payments or credits to customers for amounts previously
overcollected and the undercollection of fuel costs resulting
from increases in natural gas costs.
SJG-15
Increases in Deferred and Non-Current Federal Income Taxes and
Credits - Net represent the excess of taxes accrued over
amounts paid. Decreases reflect the impact of taxes paid in
excess of amounts accrued. Generally, deferred income taxes
related to deferred fuel costs will be paid in the next year.
Changes in Environmental Remediation Costs - Net represent the
difference between remediation expenditures and amounts
collected under the RAC and insurance recoveries..
Changes in Accounts Receivable are generally weather and price
related. Changes impact cash flows when collected in subsequent
periods.
Changes in Inventory reflect the impact of seasonal
requirements, temperatures and price changes.
Changes in Prepaid Gross Receipts & Franchise Taxes reflect the
impact of excess taxes paid over taxes accrued. However,
significant timing differences exist in cash flows during the
year since SJG must pay the full year's tax on April 1 of each
year and amortize any prepaid tax over the remainder of the
year, on the basis of gas volumes sold. SJG uses short-term
borrowings to make these tax payments which result in a
temporary increase in the short-term debt level. The carrying
costs of timing differences are recognized in base utility rates.
As stated in Note 1, on January 1, 1998, the Gross Receipts and
Franchise Taxes were being replaced with a 6 percent State Sales
and Use Tax, a 9 percent State Corporation Business Tax on
income before taxes and a Transitional Energy Facilities
Assessment (TEFA) on volumes of gas sold and transported. The
TEFA will be phased out over 5 years beginning January 1, 1999.
Approximately 50 percent of the new taxes will be paid in
monthly installments during the first 6 months of the year and
the principal portion of the remaining taxes will be paid on
June 25, 1998, and on May 15 of each year thereafter. New
rates became effective on January 1, 1998, and are subject to
change following BPU approval which is expected in early 1998.
Changes in Accounts Payable and Other Current Liabilities
reflect the impact of timing differences between the accrual and
payment of costs.
Regulatory Matters
On January 27, 1997, the BPU granted SJG a base rate increase
of $6.0 million based on a 9.62 percent rate of return on rate
base, which included an 11.25 percent return on common equity.
The majority of this increase comes from residential and small
commercial customers. Part of the increase is recovered from
new service fees which charge specific customers for costs they
cause SJG to incur. Additionally, SJG is now allowed to retain
the first $5.5 million of pre-tax margins generated by
interruptible and off-system sales and transportation and 20
percent of pre-tax margins above that level. In 1998 and 1999,
this $5.5 million threshold will increase by the annual revenue
requirement associated with specified major construction
projects. These sharing formula improvements are expected to
result in additional rate relief of approximately $0.3 million
in 1998 and $1.8 million in 1999.
Rates of return are calculated by weighting SJG's individual
capital cost rates by the proportion of each respective type of
capital. This requires selecting appropriate capital structure
ratios and determining the cost rate for each capital component
as determined in each rate proceeding.
In setting a rate of return, the BPU must provide a utility and
its investors with a return that is commensurate with the risk
to which the invested capital is exposed so that the utility has
access to the capital required to meet its public service
responsibility.
Also on January 27, 1997, the BPU approved SJG's request for a
$2.5 million revenue reduction through the TAC. This is the
standard BPU procedure used to credit customers with previously
collected revenues, which were in excess of those allowed by the
TAC (See "Energy Adjustment Clauses"). This revenue reduction
reflects the TAC's normal operation, as does the BPU's
confirmation of the decrease.
SJG-16
In April 1996, SJG received BPU approval to increase its rates
to recover approximately $8.0 million of increased natural gas
costs through the LGAC. In September 1996, SJG filed to reduce
its rates through its 1996-97 LGAC reflecting a $1.4 million
decrease in natural gas costs. Updated projections of the
1996-97 LGAC year results were rolled into the 1997-98 LGAC year
and filed with the BPU on September 12, 1997. The 1997-98 LGAC
filing requested a rate increase to reflect an increase of $4.7
million in natural gas costs, inclusive of the $1.4 million
reduction related to the 1996-97 LGAC filing. Both filings are
still pending at the BPU.
The adoption of FASB No. 109, "Accounting for Income Taxes" in
1993 primarily resulted in creating a regulatory asset and a
deferred income tax liability. As a result of positions taken
in the 1994 rate case, the amortization of the asset is being
recovered through rates over an 18-year period which began in
December 1994. Also, FASB No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions", adopted by the
Company in 1993, requires an accrual basis of accounting for
retiree benefit payments during the years of employment. The
Company elected to recognize the unfunded transition obligation
over a 20-year period beginning in 1993. The majority of the
postretirement benefit costs apply to SJG, which previously
recovered these costs through rates on a pay-as-you-go basis. A
December 1994 BPU order provided for partial recovery of costs
associated with FASB No. 106 and prescribed continued deferral
of unrecovered costs. Also, beginning in 1995, an external
trust was established towards funding postretirement benefit
costs. Rate recovery in excess of SJG's pay-as-you-go
requirement is contributed to the trust and provides no
operating benefit to SJG except to the extent that trust income
reduces future net periodic cost. Gross contributions to the
trust amounted to $2.0 million in 1997 and the balance of the
regulatory asset amounted to $6.1 million at December 31, 1997.
This amount will be recovered from ratepayers over a 15-year
period beginning January 1, 1998, as approved by the BPU in
December 1997. In addition, the BPU approved full recovery of
the net periodic benefit cost.
The Company incurred and recorded certain costs for
environmental remediation of sites where SJG or predecessor
companies operated gas manufacturing plants. SJG terminated
manufactured gas operations at all sites more than 35 years ago.
Since the early 1980s, the Company has recorded environmental
remediation costs of $90.2 million, of which $37.8 million was
expended as of December 31, 1997. The Company, with the
assistance of an outside consulting firm, estimates that total
future expenditures to remediate SJG sites will range from $52.4
million to $165.6 million. The lower end of this range was
recorded as a liability and is reflected on the balance sheet
under the captions "Current Liabilities" and "Deferred Credits
and Other Non-Current Liabilities". Recorded environmental
remediation costs of SJG do not directly affect earnings because
those costs are deferred and, when expended, recovered through
rates over 7-year amortization periods as authorized by the BPU.
Amounts accrued for future expenditures were not adjusted for
future insurance recoveries, which management is pursuing. SJG
received $4.2 million of insurance recoveries as of December 31,
1997. SJG used these proceeds first to offset legal fees
incurred in connection with those recoveries and used the excess
to reduce the balance of deferred environmental remediation
costs. Recorded amounts include estimated costs based on
projected investigation and remediation work plans using
existing technologies. Actual expenditures could differ from
the estimates due to the long-term nature of the projects,
changing technology, government regulations and site specific
requirements.
As a result of the 7-year recovery mechanism, SJG does not
expense environmental remediation costs when incurred and defers
costs to be recovered. SJG has two regulatory assets associated
with environmental cost. The first regulatory asset is titled
"Environmental Remediation Cost: Expended - Net". These
expenditures represent actual costs incurred to remediate former
gas manufacturing plant sites net of rate and insurance
recoveries. These costs meet the requirements of FASB No. 71,
"Accounting for the Effects of Certain Types of Regulation".
The BPU allowed recovery of these expenditures through July 1995
and petitions to recover these costs through July 1997 are
pending.
The other regulatory asset titled "Environmental Remediation
Cost: Liability for Future Expenditures" relates to estimated
future expenditures determined under the guidance of FASB No. 5,
"Accounting for Contingencies". This amount, which relates to
former manufactured gas plant sites was recorded as a deferred
debit with the corresponding amount reflected in Current
Liabilities and Deferred Credits and Other Non-Current
SJG-17
Liabilities, as appropriate. The deferred debit is a regulatory
asset under FASB No. 71, because the BPU's intent, as evidenced
by its current practice, is to provide recovery sufficient to
recover the deferred costs after they are expended.
Annually, SJG files with the BPU to recover expended
remediation costs in rates. The BPU has consistently allowed
the full recovery over 7-year periods, and SJG believes this
will continue. As of December 31, 1997, SJG's unamortized
remediation expenditures of $21.0 million are reflected on the
balance sheet under the caption "Regulatory and Other
Non-Current Assets." Since BPU approval of the RAC mechanism in
August 1992, SJG recovered $12.6 million as of December 31, 1997.
On July 31, 1996 and 1997, SJG made its annual filings with the
BPU to recover remediation costs expended during the period of
August 1995 through July 1997 totaling $1.6 million. Both
filings were subsequently updated and are still pending at the
BPU.
On September 9, 1997, SJG filed with the BPU to adjust rates by
replacing the current State Gross Receipts and Franchise Tax
components with a Sales and Use Tax, a Corporation Business Tax
and a Transitional Energy Facilities Assessment (See
"Liquidity").
On May 5, 1997, SJG filed with the BPU to update rates related
to appliance service charges, including a profit margin. The
new rates are competitive with other service providers in New
Jersey and are designed to increase earnings and cash flows to
SJG over the current rates. This filing is pending.
The Company is subject to claims which arise in the ordinary
course of its business and other legal proceedings. A group of
Atlantic City casinos filed a petition with the BPU on January
16, 1996, alleging overcharges of over $10.0 million, including
interest. Management believes that charges to the casinos were
based on applicable tariffs and that the casinos were not
qualified under less expensive rate schedules, as claimed.
Management believes that the ultimate impact of these actions
will not materially affect the Company's financial position,
results of operations or liquidity.
Capital Resources
The Company has a continuing need for cash resources and
capital, primarily to invest in new and replacement facilities,
equipment and for environmental cleanup costs. Net construction
and remediation expenditures for 1997 amounted to $54.9
million. The costs for 1998, 1999 and 2000 are estimated at
approximately $61.8 million, $58.6 million and $47.8 million,
respectively. These investments are expected to be funded from
several sources, which may include cash generated by operations,
temporary use of short-term debt, sale of first mortgage bonds,
capital leases and RAC recoveries.
On March 21, 1997, SJG sold $35.0 million of its First Mortgage
Bonds, 7.7% Series due 2027.
On May 2, 1997, SJG's Delaware statutory trust subsidiary, SJG
Capital Trust, sold $35.0 million of 8.35% SJG-guaranteed
Mandatorily Redeemable Preferred Securities. The Trust holds as
its sole asset the 8.35% Deferrable Interest Subordinated
Debentures issued by SJG maturing April 30, 2037. The
Debentures and Preferred Securities are redeemable at the option
of SJG at a redemption price equal to 100 percent of the
principal amount at any time on or after April 30, 2002.
In January 1996, SJG redeemed a total of $5,258,000 of its
8-1/4% Series First Mortgage Bonds maturing in 1996 and 1998.
In April 1996, SJG redeemed the remaining balance of its 9.2%
Series First Mortgage Bonds due 1998 amounting to $2,667,000.
SJG-18
Inflation
The ratemaking process provides that only the original cost of
utility plant is recoverable in revenues as depreciation.
Therefore, the excess cost of utility plant, stated in terms of
current cost over the original cost of utility plant, is not
presently recoverable. While the ratemaking process gives no
recognition to the current cost of replacing utility plant,
based on past practices, SJG believes it will be allowed to earn
on the increased cost of its net investment as replacement of
facilities actually occurs.
Summary
The company is confident it will have sufficient cash flow to
meet its operating, capital and dividend needs and is taking and
will take such actions necessary to employ its resources
effectively.
SJG-19
Item 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITOR'S REPORT
To the Shareholder and Board of Directors of
South Jersey Gas Company:
We have audited the consolidated balance sheets of South Jersey
Gas Company and subsidiary as of December 31, 1997 and 1996 and
the related statements of consolidated income, consolidated
retained earnings and consolidated cash flows for each of the
three years in the period ended December 31, 1997. Our audits
included the financial statement schedule listed in Item 14(a).
These financial statements and the financial statement schedule
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
South Jersey Gas Company and subsidiary as of December 31, 1997
and 1996, and the results of their operations and their cash
flows for each of the three years in the period ended December
31, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, the financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 18, 1998
SJG-20
SOUTH JERSEY GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31,
-----------------------
1997 1996
----------- -----------
ASSETS
PROPERTY, PLANT AND EQUIPMENT: (Notes 1, 3 & 7)
Utility Plant, at original cost $619,489 $577,304
Accumulated Depreciation (167,176) (157,682)
Gas Plant Acquisition Adjustment - Net 1,926 2,000
----------- -----------
Property, Plant and Equipment - Net 454,239 421,622
----------- -----------
CURRENT ASSETS:
Cash & Cash Equivalents (Note 1 & 9) 6,596 7,469
Accounts Receivable:
Customers (Notes 2 & 3) 25,303 28,733
Unbilled Revenues (Note 1) 17,263 17,855
Merchandise 1,977 2,260
Other 2,836 508
Provision for Uncollectibles (1,032) (1,032)
Natural Gas in Storage, average cost 23,877 22,638
Materials and Supplies, average cost 4,509 4,055
Prepaid Gross Receipts and Franchise Taxes
(Notes 1, 2 & 6) 566 1,602
Prepayments and Other 1,661 1,562
----------- -----------
Total Current Assets 83,556 85,650
----------- -----------
ACCOUNTS RECEIVABLE - Merchandise 1,449 1,999
----------- -----------
REGULATORY AND OTHER NON-CURRENT ASSETS:
Environmental Remediation Costs: (Note 12)
Expended - Net 21,041 15,566
Liability for Future Expenditures 52,400 41,700
Gross Receipts and Franchise Taxes (Note 6) 4,028 4,468
Income Taxes - Flowthrough Depreciation (Note 6) 13,999 14,977
Deferred Fuel Costs (Note 1) 3,674 404
Deferred Postretirement Benefit Costs
(Notes 2 & 11) 6,150 5,153
Other 8,577 8,387
----------- -----------
Total Regulatory and Other Non-Current Assets 109,869 90,655
----------- -----------
TOTAL $649,113 $599,926
=========== ===========
The accompanying notes to the financial statements are
an integral part of these statements.
SJG-21
SOUTH JERSEY GAS COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
December 31,
------------------------
1997 1996
----------- -----------
CAPITALIZATION AND LIABILITIES
COMMON EQUITY: (Note 10)
Common Stock, Par Value $2.50 per share:
Authorized - 4,000,000 shares
Outstanding - 2,339,139 shares $5,848 $5,848
Other Paid-In Capital and Premium on
Common Stock 102,817 77,194
Retained Earnings 56,120 51,522
----------- -----------
Total Common Equity 164,785 134,564
----------- -----------
PREFERRED STOCK AND SECURITIES: (Note 4)
Redeemable Cum. Pref.: Par Value $100 per share,
Auth. 47,304 and 48,204 shares, respectively
Outstanding shares:
Series A, 4.70% - 3,000 and 3,900 shares 300 390
Series B, 8.00% - 19,242 shares 1,924 1,924
Company-Guaranteed Mandatory Redeemable
Preferred Securities of Subsidiary Trust:
Par Value $25 per share, 1,400,000 shares
Authorized and Outstanding 35,000 0
----------- -----------
Total Preferred Stock and Securities 37,224 2,314
----------- -----------
LONG-TERM DEBT (Notes 7 & 8) 175,860 149,736
----------- -----------
Total Capitalization 377,869 286,614
----------- -----------
CURRENT LIABILITIES:
Notes Payable to Banks (Note 9) 45,900 108,300
Current Maturities of Long-Term Debt (Note 7) 8,876 6,603
Accounts Payable (Note 3) 45,623 48,347
Customer Deposits 5,871 6,050
Environmental Remediation Costs (Notes 2 & 12) 14,373 9,377
Interest and Other Accrued Current Liabilities 7,689 2,161
----------- -----------
Total Current Liabilities 128,332 180,838
----------- -----------
DEFERRED CREDITS & OTHER NON-CURRENT LIABILITIES:
Accum. Deferred Inc Taxes-Net (Notes 5 & 6) 81,847 78,415
Investment Tax Credits (Note 6) 5,632 6,025
Pension & Other Postretirement Benefit (Note 11) 10,798 9,551
Environmental Remediation Costs (Notes 2 & 12) 38,027 32,323
Other 6,608 6,160
----------- -----------
Total Deferred Credits and Other Non-Current
Liabilities 142,912 132,474
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 12)
TOTAL $649,113 $599,926
=========== ===========
The accompanying notes to the financial statements are
an integral part of these statements.
SJG-22
SOUTH JERSEY GAS COMPANY
STATEMENTS OF CONSOLIDATED INCOME AND RETAINED EARNINGS
(In Thousands Except for Share Data)
Year Ended December 31,
------------------------------------
1997 1996 1995
---------- ---------- ----------
OPERATING REVENUES:
Utility (Notes 1 & 3) $324,766 $327,317 $279,764
Other 2,782 3,018 2,955
---------- ---------- ----------
Total Operating Revenues 327,548 330,335 282,719
---------- ---------- ----------
OPERATING EXPENSES:
Gas Purchased for Resale 181,166 186,141 146,238
Operation - Utility (Note 11) 41,265 38,413 38,772
Operation - Other 1,794 2,240 2,484
Maintenance 5,482 5,405 5,158
Depreciation (Note 1) 15,962 14,839 13,820
Federal Income Taxes (Notes 1 & 5) 5,461 640 5,238
Deferred and Non-current Federal Income
Taxes (Notes 1 & 5) 6,491 10,379 4,430
Investment Tax Credit Deferred - Net (Note 6) (393) (392) (390)
Gross Receipts & Franchise Taxes (Notes 1,2&6) 27,808 31,419 29,115
Other Taxes 2,516 2,402 2,416
---------- ---------- ----------
Total Operating Expenses 287,552 291,486 247,281
---------- ---------- ----------
OPERATING INCOME 39,996 38,849 35,438
INTEREST CHARGES (Note 1) 17,996 19,460 19,447
---------- ---------- ----------
INCOME BEFORE PREFERRED DIVIDEND REQUIREMENTS 22,000 19,389 15,991
PREFERRED STOCK DIVIDEND REQUIREMENTS 170 174 178
PREFERRED SECURITIES DIVIDEND REQUIREMENTS 1,932 0 0
---------- ---------- ----------
NET INCOME APPLICABLE TO COMMON STOCK 19,898 19,215 15,813
RETAINED EARNINGS AT BEGINNING OF YEAR 51,522 47,364 47,551
---------- ---------- ----------
TOTAL 71,420 66,579 63,364
COMMON STOCK DIVIDENDS DECLARED 15,300 15,057 16,000
---------- ---------- ----------
RETAINED EARNINGS AT END OF YEAR (Note 10) $56,120 $51,522 $47,364
========== ========== ==========
AVERAGE SHARES OF COMMON STOCK OUTSTANDING 2,339,139 2,339,139 2,339,139
EARNINGS PER COMMON SHARE $8.51 $8.21 $6.76
========== ========== ==========
DIVIDENDS PAID PER COMMON SHARE $6.541 $6.437 $6.840
========== ========== ==========
The accompanying notes to the financial statements are
an integral part of these statements.
SJG-23
SOUTH JERSEY GAS COMPANY
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In Thousands)
Year Ended December 31,
---------------------------------
1997 1996 1995
--------- --------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income Applicable to Common Stock $19,898 $19,215 $15,813
Adjustments to Reconcile Net Income to Cash Flows
Provided by Operating Activities:
Depreciation and Amortization 17,867 17,540 16,672
Provision for Losses on Accounts Receivable 1,371 1,615 1,275
Revenues and Fuel Costs Deferred - Net (3,270) (7,719) (5,523)
Deferred and Non-Current Federal Income Taxes
and Credits - Net 6,098 9,987 4,040
Environmental Remediation Costs - Net (5,475) (3,793) 1,588
Changes in:
Accounts Receivable 606 2,940 (15,046)
Inventories (1,693) (8,088) 2,423
Prepayments and Other Current Assets (99) 450 (394)
Prepaid Gross Receipts & Franchise Taxes-Net 1,036 2,047 (3,845)
Accounts Payable & Other Accrued Liabilities 2,625 5,985 8,910
Other - Net 824 871 5,522
--------- --------- --------
Net Cash Provided by Operating Activities 39,788 41,050 31,435
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures, Cost of Removal & Salvage (49,462) (40,371) (40,978)
--------- --------- --------
Net Cash Used in Investing Activities (49,462) (40,371) (40,978)
--------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (Repayments of)Borrowings from Lines of Credit (62,400) 32,000 (3,900)
Proceeds from Sale of Long-Term Debt 35,000 0 30,000
Principal Repayments of Long-Term Debt (6,603) (12,256) (6,851)
Dividends on Common Stock (15,300) (15,057) (16,000)
Proceeds from Issuance of Preferred Securities 35,000 0 0
Repurchase of Preferred Stock (90) (90) (90)
Payments for Issuance Costs of Long-Term Debt
and Preferred Securities (2,429) 0 (647)
Additional Investment by Shareholder 25,623 0 6,000
--------- --------- --------
Net Cash Provided by Financing Activities 8,801 4,597 8,512
--------- --------- --------
NET (DECREASE)INCREASE IN CASH & CASH EQUIVALENTS (873) 5,276 (1,031)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,469 2,193 3,224
--------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $6,596 $7,469 $2,193
========= ========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (Net of Amounts Applicable to LGAC
Overcollections and Amounts Capitalized) $18,268 $19,985 $16,632
Income Taxes (Net of Refunds) $4,382 $1,733 $5,976
The accompanying notes to the financial statements are
an integral part of these statements.
SJG-24
SOUTH JERSEY GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Entity - The consolidated financial statements present
the accounts of South Jersey Gas Company (the Company or SJG)
and its wholly owned statutory trust subsidiary, SJG Capital
Trust. South Jersey Industries, Inc. (Industries) owns all of
the outstanding common stock of SJG. Certain reclassifications
have been made of previously reported amounts to conform with
classifications used in the current year.
Estimates and Assumptions - The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and
related disclosures. Therefore, actual results could differ
from those estimates.
Regulation - SJG is subject to the rules and regulations
of the New Jersey Board of Public Utilities (BPU) and maintains its
accounts in accordance with the prescribed Uniform System of
Accounts of that Board (See Note 2).
Utility Revenues - SJG bills most of its customers on a
monthly cycle basis, although certain commercial and industrial
customers are billed at or near the end of each month. An
accrual is made to recognize the unbilled revenues from the date
of the last bill to the end of period.
In accordance with a BPU order, SJG is allowed to recover the
excess cost of gas sold over the cost included in base rates
through the Levelized Gas Adjustment Clause (LGAC). This
collection is made on a forecasted basis upon BPU order.
Under-recoveries and over-recoveries of gas costs are deferred
and included in the determination of the following year's LGAC.
Interest is paid on overcollected LGAC balances based on SJG's
return on rate base as determined in its base rate proceedings.
SJG's tariff also includes a Temperature Adjustment Clause
(TAC) and a Remediation Adjustment Clause (RAC). These clauses
are designed to reduce the impact of extreme fluctuations in
temperatures on SJG and its customers, and recover costs
incurred in the remediation of former gas manufacturing plants,
respectively. TAC adjustments affect revenue, income and cash
flows since extremely cold weather can generate credits to
customers, while extremely warm weather during the winter season
can result in additional billings to customers. RAC adjustments
do not directly affect earnings because costs are deferred and
recovered through rates over 7-year amortization periods (See
Note 12).
Property, Plant & Equipment - Utility plant is stated at
original cost as defined for regulatory purposes. The cost of
additions, replacements and renewals of property is charged to
the appropriate plant account. Utility plant by major classes
as of December 31, 1997 and 1996 is as follows (in thousands):
SJG-25
1997 1996
-------- --------
Utility Plant:
Production Plant $ 971 $ 996
Storage Plant 8,210 8,092
Transmission Plant 66,726 61,169
Distribution Plant 513,536 477,968
General Plant 26,096 25,142
Intangible Plant 267 181
Utility Plant in Service 615,806 573,548
Construction Work in Progress 2,361 2,434
Gas Stored - Base Gas 1,322 1,322
-------- --------
Total Utility Plant $619,489 $577,304
======== ========
Depreciation and Amortization - Depreciation of gas utility
plant is provided on a straight-line basis over the estimated
remaining lives of the various classes of property. These
estimates are periodically reviewed and adjustments are made as
required after BPU approval. The composite rate per annum for
all depreciable utility property was approximately 2.8% in 1997,
1996 and 1995. Generally, with the exception of extraordinary
retirements, accumulated depreciation is charged with the cost
of depreciable utility property retired, together with removal
costs less salvage. The gas plant acquisition adjustment is
being amortized on a straight-line basis over a 40-year period.
The unamortized balance amounting to $1.9 million at December
31, 1997 is not included in rate base.
New Accounting Pronouncements - In March 1995, the Financial
Accounting Standards Board (FASB) issued FASB No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". SJG adopted this
statement in 1996. It requires that long-lived assets be
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. The adoption of FASB No. 121 had no impact
on the financial statements.
In February 1997, the Financial Accounting Standards Board
issued FASB No. 128, "Earnings per Share", which is effective
for financial statements for periods ending after December 15,
1997. FASB No. 128 supersedes previous reporting requirements
on Earnings per Share (EPS) and replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires
dual presentation of basic and diluted EPS on the face of the
income statement for all entities with a complex capital
structure when those amounts are different The adoption of FASB
No. 128 did not have an impact on the Company's EPS.
In June 1997, the FASB issued FASB No. 130, "Reporting
Comprehensive Income". This statement, which establishes
standards for reporting and disclosure of comprehensive income,
is effective for annual periods beginning after December 15,
1997. The Company currently has no additional items qualifying
as other comprehensive income under FASB No. 130 and, therefore,
believes its adoption will not have any impact on the Company's
financial statements.
In June 1997, the FASB also issued FASB No. 131, "Disclosures
about Segments of an Enterprise and Related Information", which
is also effective for fiscal years beginning after December 15,
1997. This statement establishes standards for the reporting of
selected information about operating segments in the Company's
interim and annual financial statements. The Company is
evaluating whether the adoption of this statement will result in
any change to its presentation of financial information. The
SJG-26
Company expects to adopt FASB No. 131 effective January 1, 1998;
however, as permitted by this statement, segment information
will not be reported in interim financial statements until 1999.
Federal Income and Other Taxes - Deferred Income Taxes are
provided for all significant temporary differences between book
and taxable income (See Notes 5 & 6).
On July 14, 1997, legislation reforming the taxation of energy
in New Jersey was adopted. The new law eliminates the Gross
Receipts and Franchise Tax (equivalent to approximately 13
percent of utility revenue) and replaces it with a combination
of taxes. Beginning January 1, 1998, retail sales of natural
gas and electricity and utility services, including
transportation, will be subject to the 6 percent State Sales and
Use Tax. Utilities will also be subject to the 9 percent State
Corporation Business Tax on income before taxes. To bridge the
revenue gap created by the new tax law, the State will impose a
Transitional Energy Facilities Assessment (TEFA) on volumes of
gas sold and transported. The TEFA will be phased out over a
5-year period beginning January 1, 1999 and ending January 1,
2003. It is expected that the revised tax policy will eliminate
tax disparities between utility and non-utility suppliers,
providing fair competition and lower energy costs for the
consumer. The adoption of the new legislation will not
materially affect the Company's financial position, results of
operations or liquidity (See Note 2)
Statements of Cash Flows - For purposes of reporting cash
flows, all highly liquid investments with original maturities of
three months or less are considered cash equivalents.
2. RECENT REGULATORY ACTIONS:
On April 10, 1996, SJG received approval from the BPU to
increase its rates by approximately $8.0 million, or 2.9
percent, through its LGAC. The primary reason for the LGAC
increase was higher natural gas costs incurred by the Company
during November and December 1995 due to weather that was colder
than normal.
On June 20, 1996, SJG received approval from the BPU to
recover environmental remediation costs incurred during the
2-year period ended July 31, 1995, totaling $1.5 million, net of
insurance recoveries. On July 31, 1996 and 1997, SJG made its
annual filings with the BPU to recover remediation costs
expended during the period of August 1995 through July 1997
totaling $1.6 million. Both filings were subsequently updated
and are still pending at the BPU (See Note 12).
On September 6, 1996, SJG made its annual LGAC and TAC
filings with the BPU proposing a decrease to the LGAC of $1.4 million
and a credit resulting from the TAC of $2.5 million. The TAC
credit resulted from significantly colder weather in SJG's
service area during the TAC period running from October 1, 1995
through May 31, 1996. The BPU approved the revenue reduction for
the TAC credit on January 27, 1997. While customers received the
credit in their bills during 1997, the earnings impact was
reflected in the 1996 results of operations.
On January 27, 1997, the BPU granted SJG a base rate increase
of $6.0 million based on a 9.62 percent rate of return on rate
base, which included an 11.25 percent return on common equity.
The majority of this increase comes from residential and small
commercial customers. Part of the increase is recovered from new
miscellaneous service fees which charge specific customers for
costs they cause SJG to incur. Additionally, SJG is now allowed
to retain the first $5.5 million of pre-tax margins generated by
interruptible and off-system sales and transportation and 20
percent of pre-tax margins above that level. In 1998, this $5.5
million threshold will increase by the annual revenue
requirement associated with specified major construction
projects. These sharing formula improvements are expected to
result in additional rate relief of approximately $0.3 million
in 1998 and $1.8 million in 1999.
As part of the tariff changes approved in the rate case,
SJG initiated its pilot program in April 1997, giving residential
customers a choice of gas supplier. During the enrollment
period, which ended June 30, 1997, nearly 13,000 residential
customers applied for this service. Transportation of gas for
SJG-27
these customers began on August 1, 1997. Participant's bills
are reduced for certain cost of gas charges and applicable
taxes. The resulting decrease in revenues is offset by a
corresponding decrease in SJG's gas costs and taxes under SJG's
BPU-approved fuel clause. The program does not affect its net
income, financial condition or margins. In addition, because the
program affects only 5 percent of SJG's residential customers,
any reduction in revenue is not material. Also, SJG further
expanded the choices available to commercial and industrial
customers, including a new transportation tariff providing
savings to qualified customers.
On May 5, 1997, SJG filed with the BPU to update rates related
to appliance service charges, including a profit margin. The new
rates are competitive with other service providers in New Jersey
and are designed to increase earnings and cash flows to SJG over
the current rates. The filing is pending.
On May 13, 1997, SJG filed to recover additional
post-retirement benefit costs of approximately $1.3 million
annually. This recovery was approved on December 17, 1997, and
began January 1, 1998 (See Note 11).
On September 9, 1997, SJG filed with the BPU to adjust rates
by replacing the current State Gross Receipts and Franchise Tax
components with a Sales and Use Tax, a Corporation Business Tax
and a Transitional Energy Facilities Assessment. The new rates
became effective January 1, 1998, on an interim basis subject to
refund upon final BPU order which is expected in early 1998.
On September 12, 1997, SJG made its annual LGAC, TAC and
Demand Side Management Clause (DSMC) filings with the BPU for
the period November 1997 through October 1998. In this filing,
SJG requested an increase in the annual level of LGAC recovery
of $4.7 million which is inclusive of the $1.4 million proposed
decrease filed in 1996. It also requested that the 1996-1997
filing be resolved simultaneously with this filing. Both filings
are still pending at the BPU.
3. RELATED PARTY TRANSACTIONS:
SJG had contracted with R & T Group, Inc., a wholly owned
subsidiary of Industries, for general utility construction and
environmental remediation services costing approximately
$1,895,500, $7,257,800 and $6,852,700 for the years ended
December 31, 1997, 1996 and 1995, respectively. The amounts
payable to R & T Group, Inc. relating to these services were
$-0- and $1,445,100 at December 31, 1997 and 1996, respectively.
SJG engages in sales of natural gas for resale pursuant to
Section 284.402 of the Regulations of the Federal Energy
Regulatory Commission which included sales to South Jersey
Energy Company (SJE) and South Jersey Fuel Company (SJF),
affiliates by common ownership of Industries. Sales to SJE
approximated $48,200, $339,700 and $2,365,400 for the years
ended December 31, 1997, 1996 and 1995, respectively. The
amount due from SJE relating to these sales was $6,000 at
December 31, 1997. SJG also engaged in sales with SJF. Such
sales approximated $ -0-, $663,800 and $25,000 for the years
ended December 31, 1997, 1996 and 1995, respectively.
4. PREFERRED STOCK AND SECURITIES:
Redeemable Cumulative Preferred Stock - The shares of Cumulative
Preferred Stock, Series A and Series B, are redeemable at the option
of SJG in whole or in part, plus accrued dividends, at a premium of
1.5% of par value on the Series A shares and at par value on the Series B
shares. SJG is required to offer annually to purchase 900 and 1,500
shares of its Cumulative Preferred Stock, Series A and Series B,
respectively, at par value, plus accrued dividends.
If preferred stock dividends are in arrears, no dividends
may be declared or paid, or other distribution made on the Common
Stock of SJG. If four or more quarterly dividends are in
arrears, the Preferred Shareholders may elect a majority of
SJG's Directors.
SJG-28
Mandatorily Redeemable Preferred Securities - On May 2, 1997,
SJG's statutory trust subsidiary, SJG Capital Trust (Trust),
established in the State of Delaware on March 24, 1997, sold
$35.0 million of 8.35% SJG-Guaranteed Mandatorily Redeemable
Preferred Securities. The Trust holds as its only asset the
8.35% Deferrable Interest Subordinated Debentures issued by SJG
which mature on April 30, 2037, which is also the maturity date
of the Preferred Securities. The Debentures and Preferred
Securities are redeemable at the option of SJG at a redemption
price equal to 100% of the principal amount thereof at any time
on or after April 30, 2002.
5. FEDERAL INCOME TAXES:
SJG is included in the consolidated Federal Income tax
return filed by Industries. The actual taxes, including
credits, are allocated by Industries to its subsidiaries
generally on a separate return basis. Income tax expense
applicable to operations differs from the tax that would have
resulted by applying the statutory rate to income before Federal
Income Tax for the following reasons (in thousands):
1997 1996 1995
------- ------- -------
Tax at Statutory Rate $11,069 $10,506 $ 8,844
Increase (Decrease) Resulting from:
Amortization of Investment
Tax Credits (ITC) (393) (392) (390)
Liberalized Depreciation Under Book
Depreciation on Utility Plan 664 664 664
Other - Net 219 (151) 160
------- ------- -------
Net Federal Income Taxes $11,559 $10,627 $ 9,278
======= ======= =======
The provision for Federal Income Taxes is comprised of the following (in
thousands):
1997 1996 1995
------- ------- -------
Current $ 5,461 $ 640 $ 5,238
Deferred: ------- ------- -------
Excess of Tax Depreciation
Over Book Depreciation - Net 4,496 4,608 4,262
Deferred Fuel Costs 349 3,340 1,380
Environmental Remediation Costs - Net 2,017 1,214 (556)
Amortization of Gross Receipts Taxes (140) (140) (136)
Alternative Minimum Tax 0 1,929 0
Other - Net (231) (572) (520)
------- ------ ------
Total Deferred 6,491 10,379 4,430
------- ------ ------
ITC (393) (392) (390)
------- ------- -------
Net Federal Income Taxes $11,559 $10,627 $ 9,278
======= ======= =======
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of SJG's
net deferred tax liability at December 31, 1997 and 1996, are as
follows (in thousands):
SJG-29
1997 1996
------- -------
Deferred Tax Liabilities:
Tax Depreciation over Book Depreciation $62,879 $60,123
Difference between Book and Tax Basis
of Property 5,579 5,215
Deferred Fuel Costs 5,078 4,720
Deferred Regulatory Costs 996 1,189
Environmental Remediation Costs 7,463 5,332
Excess Protected 3,485 3,550
Gross Receipts Taxes 1,424 1,564
Other 901 1,984
------- -------
Total Deferred Tax Liabilities 87,805 83,677
------- -------
Deferred Tax Assets:
Alternative Minimum Tax 843 694
ITC Basis Gross Up 3,004 3,207
Other 2,111 1,361
------- -------
Total Deferred Tax Assets 5,958 5,262
------- -------
Net Deferred Tax Liability $81,847 $78,415
======= =======
As of December 31, 1997 and 1996, income taxes due (to)
from Industries were approximately ($514) and $2,387,700,
respectively.
6. REGULATORY ASSETS AND DEFERRED CREDITS - FEDERAL AND OTHER TAXES:
The primary asset created as a result of adopting FASB No. 109,
"Accounting for Income Taxes", was income taxes - flowthrough
depreciation in the amount of $17.6 million as of January 1,
1993. This amount represented the recording of the net tax
effect of excess liberalized depreciation over book depreciation
on utility plant because of temporary differences for which,
prior to FASB No. 109, deferred taxes had not previously been
provided. These tax benefits were previously flowed through in
rates. As a result of positions taken in the 1994 rate case,
the amortization of the regulatory asset is being recovered
through rates over an 18-year period which began in December
1994.
The ITC attributable to SJG was deferred and continue to be
amortized at the annual rate of 3 percent, which approximates
the life of the related assets.
Effective March 1, 1978, SJG began and continued to accrue
through 1991 for Gross Receipts and Franchise Taxes (GRAFT) on
current revenues rather than on the previous basis of prior
period revenues. The one-time increase resulting from this
change has been deferred and is being amortized on a
straight-line basis to operations over a 30-year period. In June
1991, New Jersey adopted GRAFT legislation accelerating tax
payments, the carrying costs on which are being recovered from
ratepayers. The legislation also changed the basis of the tax
to gas volumes rather than percentage of revenue (See Note 1).
SJG-30
7. LONG-TERM DEBT: (A)
Principal Outstanding
December 31,
(In Thousands)
1997 1996
-------- --------
First Mortgage Bonds: (B)
8.19% Series due 2007 $ 22,727 $ 25,000
10 1/4% Series due 2008 25,000 25,000
9% Series due 2010 28,438 30,625
6.95% Series due 2013 35,000 35,000
7.7% Series due 2027 (C) 35,000 0
Unsecured Notes:
Term Note, 8.47% due 2001 (D) 8,571 10,714
Debenture Notes, 8.6% due 2010 30,000 30,000
-------- --------
Total Long-Term Debt Outstanding 184,736 156,339
Less Current Maturities 8,876 6,603
-------- --------
Long-Term Debt $175,860 $149,736
======== ========
(A) Long-Term Debt Maturities and Sinking Fund Requirements for the
succeeding five years are as follows: 1998, $8,876,357; 1999,
$8,876,357; 2000, $8,876,357; 2001, $11,876,358; and 2002,
$9,733,500.
(B) SJG's First Mortgage dated October 1, 1947, as supplemented, securing
the First Mortgage Bonds constitutes a direct first mortgage lien on
substantially all utility plant. The First Mortgage Bonds also
require an annual replacement fund, which may be met by the deposit
of cash funds with the Trustee or by the utilization of bondable
property additions at 166.6 percent of cash requirements. SJG
expects to continue to satisfy this requirement with property
additions in each of the next five years.
(C) On March 21, 1997, SJG sold $35,000,000 of its First Mortgage Bonds,
7.7% Series due 2027.
(D) An additional $5,000,000 revolving credit facility was available
under the terms of this agreement which expired December 31, 1997.
8. FINANCIAL INSTRUMENTS:
Long-Term Debt - The fair values of SJG's long-term debt,
including current maturities, as of December 31, 1997 and 1996,
are estimated to be $205.2 million and $166.6 million,
respectively, (carrying amounts $184.7 million and $156.3
million, respectively). They are estimated based on the
interest rates available to SJG at each respective balance sheet
date for debt with similar terms and remaining maturities. SJG
retires higher cost debt whenever it is cost effective to do so
within the constraints of the respective debt covenants.
Other Financial Instruments - The carrying amounts of SJG's
other financial instruments approximate their fair values at
December 31, 1997 and 1996, respectively.
SJG-31
9. UNUSED LINES OF CREDIT AND COMPENSATING BALANCES:
Unused lines of credit available at December 31, 1997 were
$69.1 million. Borrowings under these lines of credit are at
market rates. The weighted cost of such borrowings, which
usually changes each business day, approximated 6.06 percent and
5.85 percent at December 31, 1997 and 1996, respectively.
Demand deposits are maintained with lending banks on an informal
basis and do not constitute compensating balances.
10. CAPITALIZATION:
SJG is restricted under its First Mortgage Indenture, as
supplemented, as to the amount of cash dividends or other
distributions that may be paid on its common stock. SJG had
retained earnings free of such restriction of approximately
$54.1 million at December 31, 1997.
On March 26, 1997 and February 28, 1995, SJG received $25.6
million and $6.0 million, respectively, as contributions of
capital from Industries. Contributions of capital are credited
to Other Paid-In Capital and Premium on Common Stock. There
have been no other changes in Common Stock during 1997, 1996,
and 1995.
11. RETIREMENT BENEFIT PLANS & OTHER:
Pensions - SJG participates in the defined benefit retirement
plans of SJI that provide annuity payments to substantially all
full-time regular employees upon retirement. SJG pays the
entire cost related to its employees' participation in the
plans. Approximately 53 percent of the plans' assets are
invested in securities which provide for fixed income and a
return of principal. The remaining assets are invested in
professionally managed common stock portfolios. Net periodic
pension cost, including the amortization of the cost of past
service benefits over a period of approximately 30 years,
included the following components (in thousands):
1997 1996 1995
------- ------- -------
Service cost - benefits earned during
the period $ 1,858 $ 1,589 $ 1,443
Interest cost on projected benefit
obligation 3,598 2,839 2,610
Actual return on plan assets (5,775) (2,782) (2,669)
Net amortization and deferral 2,983 458 575
------- ------- -------
Net periodic pension cost $ 2,664 $ 2,104 $ 1,959
======= ======= =======
Assumptions as of December 31 were:
Discount rate 7.25% 7.5% 7.5%
Rate of increase in compensation levels 4.1% 4.6% 4.6%
Expected long-term rate of return on
assets 8.5% 8.5% 8.5%
Due to the positive performance of the capital markets in 1997,
the actual return on plan assets increased significantly
compared with prior years. In accordance with FASB 87,
"Employers' Accounting for Pensions", the amounts in excess of
the expected return of 8.5 percent is deferred and will be
recognized over future periods.
SJG-32
A reconciliation of the funded status of the plans to the
amounts recognized in the consolidated balance sheets is
presented below (in thousands):
1997 1996
-------- --------
Actuarial present value of plan benefits
Vested benefits $(40,084) $(35,094)
Non-vested benefits (275) (285)
Impact of estimated future compensation changes (9,852) (9,623)
-------- --------
Projected plan benefits (50,211) (45,002)
Plan assets at fair value 41,993 36,326
-------- --------
Projected plan benefits in excess of plan assets (8,218) (8,676)
Unrecognized net loss 2,502 4,226
Unrecognized prior service costs 2,777 1,612
Unrecognized net obligation at January 1 523 609
-------- --------
Net Pension liability recognized in the
consolidated balance sheet $ (2,416) $ (2,229)
======== ========
Postretirement Benefits Other Than Pensions - SJG provides
postretirement health care and life insurance benefits to
certain retired employees. Effective January 1, 1993, SJG
adopted FASB No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions". This statement requires SJG to
accrue the estimated cost of retiree benefit payments during the
years the employee provides services. SJG previously expensed
the cost of these benefits, which are principally health care,
on a pay-as-you-go (PAYGO) basis. The Company elected to
recognize the unfunded transition obligation over a 20-year
period.
SJG previously recovered these costs on a PAYGO basis through
its rates. As part of SJG's 1994 base rate case settlement, SJG
was granted full recovery of the current service cost component
of the annual cost in addition to continued recovery of PAYGO
costs. The BPU also approved recovery of previously deferred
1993 and 1994 service costs over a 5-year period beginning in
December 1994. Beginning in 1995, an external trust was
established to fund a portion of the obligation recovered from
ratepayers as a part of the BPU settlement. Gross contributions
to this trust totaled $2.0 million in 1997 and $2.1 million in
both 1996 and 1995. However, due to the timing of 1995
contributions, the return stated in the table below does not
reflect a full year's return. SJG was also authorized to
continue recording a regulatory asset for the amount by which
the cost exceeded the level recovered in rates. The balance of
this regulatory asset, which amounted to approximately $6.1
million at December 31, 1997, will be recovered from ratepayers
over a 15-year period beginning January 1, 1998, as approved by
the BPU in December 1997. At that time, the BPU also approved
full recovery of the net periodic benefit costs. The additional
annual recovery of approximately $1.3 million will be
contributed to the external trust and provides no operating
benefit to SJG except to the extent that trust income would
reduce future net postretirement benefit costs (See Note 2).
SJG-33
A reconciliation of the accumulated postretirement benefit
obligation to the amounts recognized in the Consolidated Balance
Sheet is presented below (in thousands):
1997 1996 1995
------ ------ -------
Service cost - benefits earned during the
period $ 963 $ 883 $ 841
Actual return on plan assets (272) (164) (26)
Interest cost on accumulated
postretirement benefit obligation 1,540 1,381 1,287
Amortization of transition obligation 779 779 779
------ ------ -------
Subtotal 3,010 2,879 2,881
Other Adjustments 0 0 (2,630)
------ ------ -------
Net postretirement benefit costs
as reported in the consolidated
financial statements $3,010 $2,879 $ 251
====== ====== =======
The amounts expensed in 1997, 1996 and 1995 were $1.4 million,
$1.6 million and $1.6 million, respectively.
The following table sets forth the life and health care plans'
funded status at December 31, 1997 and 1996.
Actuarial present value of accumulated postretirement benefit
obligations (in thousands):
1997 1996
-------- --------
Retirees $ (5,412) $ (4,739)
Other active plan participants (18,016) (16,163)
Accumulated postretirement benefit obligation (23,428) (20,902)
Fair value of plan assets 4,403 2,835
Accumulated postretirement benefit obligation -------- --------
in excess of plan assets 19,025 (18,067)
Unrecognized net loss 770 75
Unrecognized transition obligation 11,691 12,471
-------- --------
Postretirement benefit liability recognized
in the consolidated balance sheet $ (6,564) $ (5,521)
======== ========
In 1995, SJG recalculated the net postretirement benefit cost
and present value of accumulated postretirement benefit for the
years 1994 and 1993 utilizing assumptions based on corrected
data. The effects of the recalculation were recorded in 1995
since the changes did not materially affect previously reported
net income or retained earnings.
The assumed health care cost trend rates used in measuring
the accumulated postretirement benefit obligation as of December 31,
1997, are as follows: Medical and Drug -7.4 percent for
participants age 65 or older and 10.15 percent for participants
under age 65 in 1997, both grading to 5.75 percent in 2008.
Dental - 7.42 percent in 1997, grading to 5.75 percent in 2003.
If the health care cost trend rate assumptions were increased by
1 percent, the accumulated postretirement benefit obligation as
of December 31, 1997, would be increased by $3.4 million. The
effect of this change on the sum of the service cost and
SJG-34
interest cost would be an increase of $0.5 million. An assumed
discount rate of 7.25 percent in 1997 and 7.5 percent in 1996,
and an expected return on plan assets of 8.5 percent were used
in determining the accumulated postretirement benefit obligation
as of December 31, 1997 and 1996.
Employment Contracts - With the death of the Company's
president, certain benefits became payable under the provisions
of his employment contract. The total of these benefits,
approximately $1.5 million, has been accrued as of December 31,
1997. Under a separate contract, life insurance proceeds of
approximately $0.2 million payable to the Company were also
recorded. The benefit expense is reflected in the statement of
consolidated income for the year 1997 under the caption
"Operation - Utility".
12. COMMITMENTS AND CONTINGENCIES:
Construction Commitments - The estimated cost of construction
and environmental remediation programs of SJG for the year 1998
aggregates $61.8 million and, in connection therewith, certain
commitments have been made.
Gas Supply Contracts - SJG, in the normal course of
conducting business, has entered into long-term contracts for
natural gas supplies, firm transportation, and firm gas storage
service. The earliest expiration of any of the gas supply
contracts is 1999. All of the transportation and storage
service agreements between SJG and its interstate pipeline
suppliers are provided under Federal Energy Regulatory
Commission (FERC) approved tariffs. SJG's cumulative obligation
for demand charges and reservation fees paid to its suppliers
for all of these services is approximately $4.6 million per
month which is recovered on a current basis through the LGAC.
Pending Litigation - The Company is subject to claims
which arise in the ordinary course of its business and other legal
proceedings. A group of Atlantic City casinos filed a petition
with the BPU on January 16, 1996, alleging overcharges of over
$10.0 million, including interest. Management believes that
charges to the casinos were based on applicable tariffs and that
the casinos were not qualified under less expensive rate
schedules, as claimed. Management believes that the ultimate
impact of these actions will not materially affect the Company's
financial position, results of operations or liquidity.
Environmental Remediation Costs - SJG has incurred and
recorded certain costs for environmental remediation of sites
where SJG or predecessor companies operated gas manufacturing
plants. SJG terminated manufactured gas operations at all sites
more than 35 years ago.
Since the early 1980s, SJG has recorded environmental
remediation costs of $90.2 million, of which $37.8 million was
expended as of December 31, 1997. SJG, with the assistance of
an outside consulting firm, estimates that total future
expenditures to remediate the sites will range from $52.4
million to $165.6 million. The lower end of this range was
recorded as a liability and is reflected on the consolidated
balance sheet under the captions "Current Liabilities" and
"Deferred Credits and Other Non-Current Liabilities". Recorded
environmental remediation costs of SJG do not directly affect
earnings because those costs are deferred and, when expended,
recovered through rates over 7-year amortization periods as
authorized by the BPU. Amounts accrued for future expenditures
were not adjusted for future insurance recoveries, which
management is pursuing. SJG received $4.2 million of insurance
recoveries as of December 31, 1997. SJG first used these
proceeds to offset legal fees incurred in connection with those
recoveries and used the excess to reduce the balance of deferred
environmental remediation costs. Recorded amounts include
estimated costs based on projected investigation and remediation
work plans using existing technologies. Actual expenditures
could differ from the estimates due to the long-term nature of
the projects, changing technology, government regulations and
site specific requirements.
As a result of the 7-year RAC recovery mechanism, SJG does
not expense environmental remediation costs when incurred and defers
costs to be recovered. SJG has two regulatory assets associated
with environmental cost. The first regulatory asset is titled
"Environmental Remediation Cost: Expended - Net". These
expenditures represent actual cost incurred to remediate former
gas manufacturing plant sites. These costs meet the
SJG-35
requirements of FASB No. 71, "Accounting for the Effects of
Certain Types of Regulation". The BPU allowed recovery of these
expenditures through July 1995 and petitions to recover these
costs through July 1997 are pending (See Note 2).
The other regulatory asset titled "Environmental Remediation
Cost: Liability for Future Expenditures" relates to estimated
future expenditures determined under the guidance of FASB No. 5,
"Accounting for Contingencies". This amount, which relates to
former manufactured gas plant sites was recorded as a deferred
debit with the corresponding amount reflected in Current
Liabilities and Deferred Credits and Other Non-Current
Liabilities, as appropriate. The deferred debit is a regulatory
asset under FASB No. 71, because the BPU's intent, as evidenced
by its current practice, is to provide recovery sufficient to
recover the deferred costs after they are expended.
SJG files with the BPU to recover these costs in rates
through its RAC. The BPU has consistently allowed the full recovery
over 7-year periods, and SJG believes this will continue. As of
December 31, 1997, SJG's unamortized remediation expenditures of
$21.0 million are reflected on the balance sheet under the
caption "Regulatory and Other Non-Current Assets". Since BPU
approval of the RAC mechanism in August 1992, SJG recovered
$12.6 million through rates as of December 31, 1997 (See Note 2).
SJG-36
13. QUARTERLY RESULTS OF OPERATIONS - UNAUDITED:
The summarized quarterly results of operations of the Company,
in thousands except for per share amounts, for 1997 and
1996 are presented below:
1997 Quarter Ended 1996 Quarter Ended
--------------------------------------- ---------------------------------------
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
--------- --------- --------- --------- --------- --------- --------- ---------
Operating Revenues $126,587 $58,343 $50,076 $92,542 $140,206 $53,586 $40,346 $96,197
--------- --------- --------- --------- --------- --------- --------- ---------
Operating Expenses:
Operation and Maintenance
Including Fixed Charges 89,862 51,818 51,939 70,046 98,845 50,384 42,213 75,056
Federal Income Taxes 8,426 486 (1,799) 4,446 9,215 (759) (1,820) 3,991
Gross Receipts & Franchise
and Other Taxes 13,132 5,277 3,149 8,766 15,224 5,518 3,426 9,653
--------- --------- --------- --------- --------- --------- --------- ---------
Income (Loss) before
Preferred Dividend
Requirements 15,167 762 (3,213) 9,284 16,922 (1,557) (3,473) 7,497
Preferrred Dividend
Requirements 43 514 773 772 44 44 43 43
--------- --------- --------- --------- --------- --------- --------- ---------
Net Income (Loss) Applicable
to Common Stock $15,124 $248 ($3,986) $8,512 $16,878 ($1,601) ($3,516) $7,454
========= ========= ========= ========= ========= ========= ========= =========
Earnings (Loss) Per Common
Share (Based on Average
Shares Outstanding):(1) $6.47 $0.11 ($1.70) $3.64 $7.22 ($0.68) ($1.50) $3.19
========= ========= ========= ========= ========= ========= ========= =========
Average Shares Outstanding 2,339 2,339 2,339 2,339 2,339 2,339 2,339 2,339
(1) The sum of the quarters for 1997 and 1996 does not equal the year's total due to rounding.
NOTE: Because of the seasonal nature of the business, results of any one quarter are not indicative
of the results of future quarters or the results of the Company's fiscal year.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
SJG-37
PART III
Item 10. Directors and Executive Officers of the Registrant
Not applicable.
Item 11. Executive Compensation
Not applicable.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Not applicable.
Item 13. Certain Relationships and Related Transactions
Not applicable.
SJG-38
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on
Form 8-K
(a) Listed below are all financial statements and schedules
filed as part of this report:
1 - The consolidated financial statements and notes to
consolidated financial statements together with the report
thereon of Deloitte & Touche LLP, dated February 18, 1998. See
Item 8.
2 - Supplementary Financial Information
Supplemental Schedules as of December 31, 1997, 1996 and 1995
and for the three years ended December 31, 1997, 1996, and 1995:
The Independent Auditors' Report of Deloitte & Touche LLP,
Auditors of the Company. See Item 8.
Schedule II - Valuation and Qualifying Accounts . See page
47.
(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. Separate financial statements are not presented
because SJG's subsidiary is wholly-owned.)
3 - See Item 14(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
Number
- --------
(3)(a) Certificate of Incorporation of the Company. Incorporated by
reference from Exhibit (3)(a) of Form 10 filed March 7, 1997.
(3)(b) Bylaws of the Company. Incorporated by reference from Exhibit
(3)(b) of Form 10 filed March 7, 1997.
(4)(a) Form of Stock Certified for Common Stock. Incorporated by
reference from Exhibit (4)(a) of Form 10 filed March 7, 1997.
(4)(b)(i) First Mortgage Indenture dated October 1, 1947. Incorporated by
reference from Exhibit (4)(b)(i) of Form 10-K of SJI for 1987 (1-6364).
(4)(b)(iv) Twelfth Supplemental Indenture dated as of June 1, 1980.
Incorporated by reference from Exhibit 5(b) of Form S-7 of SJI (2-68038).
(4)(b)(xiv) Sixteenth Supplemental Indenture dated as of April 1, 1988,
10 1/4% Series due 2008. Incorporated by reference from Exhibit (4)(b)(xv) of
Form 10-Q of SJI for the quarter ended March 31, 1988 (1-6364).
(4)(b)(xv) Seventeenth Supplemental Indenture dated as of May 1, 1989.
Incorporated by reference from Exhibit (4)(b)(xv) of Form 10-K of SJI for 1989
(1-6364).
SJG-39
Exhibit
Number
- --------
(4)(b)(xvi) Eighteenth Supplemental Indenture dated as of March 1, 1990.
Incorporated by reference from Exhibit (4)(e) of Form S-3 of SJI (33-36581).
(4)(b)(xvii) Nineteenth Supplemental Indenture dated as of April 1, 1992.
Incorporated by reference from Exhibit (4)(b)(xvii) of Form 10-K of SJI for
1992 (1-6364).
(4)(b)(xviii) Twentieth Supplemental Indenture dated as of June 1, 1993.
Incorporated by reference from Exhibit (4)(b)(xviii) of Form 10-K of SJI for
1993(1-6364).
(4)(b)(xviv) Twenty-First Supplemental Indenture dated as of March 1, 1997.
Incorporated by reference from Exhibit (4)(b)(xviv) of Form 10-K of SJI for
1997 (1-6364).
(4)(c) Indenture dated as of January 31, 1995; 8.60% Debenture Notes due
February 1, 2010. Incorporated by reference from Exhibit (4)(c) of Form 10-K
of SJI for 1994 (1-6364).
(4)(d) Certificate of Trust for SJG Capital Trust. Incorporated by
reference from Exhibit 3(a) of Form S-3 - SJG Capital Trust and South Jersey
Gas Company as filed March 27, 1997, as amended April 18, 1997 and April 23,
1997 (333-24065).
(4)(d)(i) Trust Agreement of SJG Capital Trust. Incorporated by reference
from Exhibit 3(b) of Form S-3 - SJG Capital Trust and South Jersey Gas Company
as filed March 27, 1997, as amended April 18, 1997 and April 23, 1997
(333-24065).
(4)(d)(ii) Form of Amended and Restated Trust Agreement for SJG Capital
Trust. Incorporated by reference from 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 Capital Trust. Incorporated
by reference from 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 Subordinated Debenture. Incorporated
by reference from 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 Subordinated Debenture. Incorporated
by reference from 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).
SJG-40
Exhibit
Number
- --------
(4)(d)(vi) Form of Guaranty Agreement between South Jersey Gas Company and
SJG Capital Trust. Incorporated by reference from Exhibit 4(d) 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).
(9) None
(10)(a) Gas storage agreement (GSS) between South Jersey Gas Company and
Transco dated October 1, 1993. Incorporated by reference from Exhibit (10)(d)
of Form 10-K of SJI for 1993 (1-6364).
(10)(b) Gas storage agreement (S-2) between South Jersey Gas Company and
Transco dated December 16, 1953. Incorporated by reference from Exhibit (5)(h)
of Form S-7 of SJI (2-56223).
(10)(c) Gas storage agreement (LG-A) between South Jersey Gas Company and
Transco dated June 3, 1974. Incorporated by reference from Exhibit (5)(f) of
Form S-7 of SJI (2-56223).
(10)(d) Gas storage agreement (WSS) between South Jersey Gas Company and
Transco dated August 1, 1991. Incorporated by reference from Exhibit (10)(h)
of Form 10-K of SJI for 1991 (1-6364).
(10)(e)(i) Gas storage agreement (LSS) between South Jersey Gas Company and
Transco dated October 1, 1993. Incorporated by reference from Exhibit (10)(i)
of Form 10-K of SJI for 1993 (1-6364).
(10)(e)(ii) Gas storage agreement (SS-1) between South Jersey Gas Company and
Transco dated May 10, 1987 (effective April 1, 1988). Incorporated by
reference from Exhibit (10)(i)(a) of Form 10-K of SJI for 1988 (1-6364).
(10)(e)(iii) Gas storage agreement (ESS) between South Jersey Gas Company and
Transco dated November 1, 1993. Incorporated by reference from Exhibit
(10)(i)(b) of Form 10-K of SJI for 1993 (1-6364).
(10)(e)(iv) Gas transportation service agreement between South Jersey Gas
Company and Transco dated April 1, 1986. Incorporated by reference from
Exhibit (10)(i)(c) of Form 10-K of SJI for 1989 (1-6364).
(10)(e)(v) Service agreement (FS) between South Jersey Gas Company and
Transco dated August 1, 1991. Incorporated by reference from Exhibit
(10)(i)(e) of Form 10-K of SJI for 1991 (1-6364).
(10)(e)(vi) Service agreement (FT) between South Jersey Gas Company and
Transco dated February 1, 1992. Incorporated by reference from Exhibit
(10)(i)(f) of Form 10-K of SJI for 1991 (1-6364).
(10)(e)(vii) Service agreement (Incremental FT) between South Jersey Gas
Company and Transco dated August 1, 1991. Incorporated by reference from
Exhibit (10)(i)(g) of Form 10-K of SJI for 1991 (1-6364).
(10)(e)(viii) Gas storage agreement (SS-2) between South Jersey Gas Company and
Transco dated July 25, 1990. Incorporated by
reference from Exhibit (10)(i)(i) of Form 10-K of SJI for 1991
(1-6364).
SJG-41
Exhibit
Number
- --------
(10)(e)(ix) Gas transportation service agreement between South Jersey Gas
Company and Transco dated December 20, 1991. Incorporated by reference from
Exhibit (10)(i)(j) of Form 10-K of SJI for 1993 (1-6364).
(10)(e)(x) Amendment to gas transportation agreement dated December 20, 1991
between South Jersey Gas Company and Transco dated October 5, 1993.
Incorporated by reference from Exhibit (10)(i)(k) of Form 10-K of SJI for 1993
(1-6364).
(10)(f) Gas transportation service agreement (FTS) between South Jersey
Gas Company and Equitable Gas Company dated November 1, 1986. Incorporated by
reference from Exhibit (10)(j)(a) of Form 10-K of SJI for 1989 (1-6364).
(10)(g)(i) Gas transportation service agreement (TF) between South Jersey
Gas Company and CNG Transmission Corporation dated October 1, 1993.
Incorporated by reference from Exhibit (10)(k)(h) of Form 10-K of SJI for 1993
(1-6364).
(10)(g)(ii) Gas purchase agreement between South Jersey Gas Company and ARCO
Gas Marketing, Inc. dated March 5, 1990. Incorporated by reference from
Exhibit (10)(k)(i) of Form 10-K of SJI for 1989 (1-6364).
(10)(g)(iii) Gas transportation service agreement (FTS-1) between South Jersey
Gas Company and Columbia Gulf Transmission Company dated November 1, 1993.
Incorporated by reference from Exhibit (10)(k)(k) of Form 10-K of SJI for 1993
(1-6364).
(10)(g)(iv) Assignment agreement capacity and service rights (FTS-2) between
South Jersey Gas Company and Columbia Gulf Transmission Company dated November
1, 1993. Incorporated by reference from Exhibit (10)(k)(i) of Form 10-K of
SJI for 1993 (1-6364).
(10)(g)(v) FTS Service Agreement No. 39556 between South Jersey Gas Company
and Columbia Gas Transmission Corporation dated November 1, 1993. Incorporated
by reference from Exhibit (10)(k)(m) of Form 10-K of SJI for 1993 (1-6364).
(10)(g)(vi) FTS Service Agreement No. 38099 between South Jersey Gas Company
and Columbia Gas Transmission Corporation dated November 1, 1993. Incorporated
by reference from Exhibit (10)(k)(n) of Form 10-K of SJI for 1993 (1-6364).
(10)(g)(vii) NTS Service Agreement No. 39305 between South Jersey Gas Company
and Columbia Gas Transmission Corporation dated November 1, 1993. Incorporated
by reference from Exhibit (10)(k)(o) of Form 10-K of SJI for 1993 (1-6364).
(10)(g)(viii) FSS Service Agreement No. 38130 between South Jersey Gas Company
and Columbia Gas Transmission Corporation dated November 1, 1993. Incorporated
by reference from Exhibit (10)(k)(p) of Form 10-K of SJI for 1993 (1-6364).
SJG-42
Exhibit
Number
- --------
(10)(g)(ix) SST Service Agreement No. 38086 between South Jersey Gas Company
and Columbia Gas Transmission Corporation dated November 1, 1993. Incorporated
by reference from Exhibit (10)(k)(q) of Form 10-K of SJI for 1993 (1-6364).
(10)(g)(x) NS (Negotiated Sales) Service Agreement dated December 1, 1994
between South Jersey Gas Company and Transco Gas Marketing Company as agent for
Transcontinental Gas Pipeline. Incorporated by reference from Exhibit
(10)(k)(r) of Form 10-K of SJI for 1994 (1-6364).
(10)(h)(i) Deferred Payment Plan for Directors of South Jersey Industries,
Inc., South Jersey Gas Company, Energy & Minerals, Inc., R&T Group, Inc. and
South Jersey Energy Company as amended and restated October 21, 1994.
Incorporated by reference from Exhibit (10)(l) of Form 10-K of SJI for 1994
(1-6364).
(10)(h)(ii) Form of Deferred Compensation Agreement between the Company
and/or a subsidiary and seven of its officers. Incorporated by reference from
Exhibit (10)(j)(a) of Form 10-K of SJI for 1980 (1-6364).
(10)(h)(iii) Schedule of Deferred Compensation Agreements. Incorporated by
reference from Exhibit (10)(l)(b) of Form 10-K of SJI for 1997 (1-6364).
(10)(h)(iv) Supplemental Executive Retirement Program, as amended and
restated effective July 1, 1997, and Form of Agreement between certain Company
or subsidiary Company officers. Incorporated by reference from Exhibit
(10)(l)(i) of Form 10-K of SJI for 1997 (1-6364).
(10)(h)(v) Form of Officer Employment Agreement between certain officers and
either the Company or its subsidiaries. Incorporated by reference from Exhibit
(10)(l)(d) of Form 10-K of SJI for 1994 (1-6364).
(10)(h)(vi) Schedule of Officer Employment Agreements. Incorporated by
reference from Exhibit (10)(l)(e) of Form 10-K of SJI for 1997 (1-6364).
(10)(h)(vii) Officer Severance Benefit Program for all officers. Incorporated
by reference from Exhibit (10)(l)(g) of Form 10-K of SJI for 1985 (1-6364).
(10)(h)(viii) Discretionary Incentive Bonus Program for all officers and
management employees. Incorporated by reference from Exhibit (10)(l)(h) of
Form 10-K of SJI for 1985 (1-6364).
(10)(h)(ix) The 1987 Stock Option and Stock Appreciation Rights Plan
including Form of Agreement. Incorporated by reference from Exhibit (10)(l)(i)
of Form 10-K of SJI for 1987 (1-6364).
SJG-43
Exhibit
Number
- --------
(11) Not applicable.
(12) Calculation of Ratio of Earnings to Fixed Charges (Before Federal
Income Taxes) (filed herewith).
(13) Not applicable.
(16) Not applicable.
(18) Not applicable.
(21) Subsidiaries of the Registrant (filed herewith).
(22) None.
(23) Independent Auditors' Consent (filed herewith).
(24) Power of Attorney (filed herewith).
(27) Financial Data Schedule (submitted only in electronic format to
the Securities and Exchange Commission).
(99) None.
SJG-44
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 GAS COMPANY
BY: /s/ David A. Kindlick
David A. Kindlick, Vice President
Rates and Budgeting
Date March 27, 1998
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 President March 27, 1998
(Charles Biscieglia)
/s/ David A. Kindlick Vice President, Rates and March 27, 1998
(David A. Kindlick) Budgeting
(Principal Financial Officer)
/s/ William J. Smethurst, Jr. Vice President and Treasurer March 27, 1998
(William J. Smethurst, Jr.) (Principal Accounting Officer)
/s/ George L. Baulig Secretary March 27, 1998
(George L. Baulig)
/s/ Anthony G. Dickson Director March 27, 1998
(Anthony G. Dickson)
/s/ Clarence D. McCormick Director March 27, 1998
(Clarence D. McCormick)
SJG-45
Signature Title Date
Director March 27, 1998
(Peter M. Mitchell)
/s/ Frederick R. Raring Director March 27, 1998
(Federick R. Raring)
/s/ Shirli M. Vioni Director March 27, 1998
(Shirli M. Vioni)
SJG-46
INDEPENDENT AUDITORS' REPORT
South Jersey Gas Company:
We have audited the consolidated financial statements of South
Jersey Gas Company and its subsidiary as of December 31, 1997
and 1996 and for each of the three years in the period ended
December 31, 1997 and have issued our report thereon dated
February 18, 1998. Such financial statements and report are
included in Item 8 of this report on Form 10K.
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 18, 1998
SJG-47
SOUTH JERSEY GAS COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Col. A Col. B Col. C Col. D Col. E
- -----------------------------------------------------------------------------------------------------------
Additions
--------------------------------
(1) (2)
Balance at Charged to Charged to Balance at
Beginning Costs and Other Accounts - Deductions - End
Classification of Period Expenses Describe * Describe ** of Period
- -----------------------------------------------------------------------------------------------------------
Provision for Uncollectible
Accounts for the Year Ended
December 31, 1997 $1,031,700 $1,371,080 $453,936 $1,825,016 $1,031,700
Provision for Uncollectible
Accounts for the Year Ended
December 31, 1996 $737,400 $1,615,490 $376,919 $1,698,109 $1,031,700
Provision for Uncollectible
Accounts for the Year Ended
December 31, 1995 $737,400 $1,274,685 $502,173 $1,776,858 $737,400
* Recoveries of accounts previously written off and minor adjustments.
** Uncollectible accounts written off.
SJG-48
South Jersey Gas Company
One South Jersey Plaza, Route 54
Folsom, NJ 08037
Form 10-K FYE 12/31/97
EXHIBIT INDEX
Exhibit
Number
- --------
(3)(a) Certificate of Incorporation of the Company.
Incorporated by reference from Exhibit (3)(a) of Form 10 filed March 7,
1997.
(3)(b) Bylaws of the Company. Incorporated by reference from
Exhibit (3)(b) of Form 10 filed March 7, 1997.
(4)(a) Form of Stock Certified for Common Stock. Incorporated
by reference from Exhibit (4)(a) of Form 10 filed March 7, 1997.
(4)(b)(i) First Mortgage Indenture dated October 1, 1947.
Incorporated by reference from Exhibit (4)(b)(i) of Form 10-K of SJI
for 1987 (1-6364).
(4)(b)(iv) Twelfth Supplemental Indenture dated as of June 1, 1980.
Incorporated by reference from Exhibit 5(b) of Form S-7 of SJI
(2-68038).
(4)(b)(xiv) Sixteenth Supplemental Indenture dated as of April 1,
1988, 10 1/4% Series due 2008. Incorporated by reference from Exhibit
(4)(b)(xv) of Form 10-Q of SJI for the quarter ended March 31, 1988
(1-6364).
(4)(b)(xv) Seventeenth Supplemental Indenture dated as of May 1,
1989. Incorporated by reference from Exhibit (4)(b)(xv) of Form 10-K
of SJI for 1989 (1-6364).
(4)(b)(xvi) Eighteenth Supplemental Indenture dated as of March 1,
1990. Incorporated by reference from Exhibit (4)(e) of Form S-3 of SJI
(33-36581).
(4)(b)(xvii) Nineteenth Supplemental Indenture dated as of April 1,
1992. Incorporated by reference from Exhibit (4)(b)(xvii) of Form 10-K
of SJI for 1992 (1-6364).
(4)(b)(xviii) Twentieth Supplemental Indenture dated as of June 1,
1993. Incorporated by reference from Exhibit (4)(b)(xviii) of Form
10-K of SJI for 1993 (1-6364).
(4)(b)(xviv) Twenty-First Supplemental Indenture dated as of March 1,
1997. Incorporated by reference from Exhibit (4)(b)(xviv) of Form 10-K
of SJI for 1997 (1-6364).
(4)(c) Indenture dated as of January 31, 1995; 8.60% Debenture
Notes due February 1, 2010. Incorporated by reference from Exhibit
(4)(c) of Form 10-K of SJI for 1994 (1-6364).
(4)(d) Certificate of Trust for SJG Capital Trust. Incorporated
by reference from Exhibit 3(a) of Form S-3 - SJG Capital Trust and
South Jersey Gas Company as filed March 27, 1997, as amended April 18,
1997 and April 23, 1997 (333-24065).
(4)(d)(i) Trust Agreement of SJG Capital Trust. Incorporated by
reference from Exhibit 3(b) of Form S-3 - SJG Capital Trust and South
Jersey Gas Company as filed March 27, 1997, as amended April 18, 1997
and April 23, 1997 (333-24065).
(4)(d)(ii) Form of Amended and Restated Trust Agreement for SJG
Capital Trust. Incorporated by reference from 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 Capital Trust.
Incorporated by reference from 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 Subordinated Debenture.
Incorporated by reference from 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 Subordinated Debenture.
Incorporated by reference from 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 South Jersey Gas
Company and SJG Capital Trust. Incorporated by reference from Exhibit
4(d) 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).
(9) None
(10)(a) Gas storage agreement (GSS) between South Jersey Gas
Company and Transco dated October 1, 1993. Incorporated by reference
from Exhibit (10)(d) of Form 10-K of SJI for 1993 (1-6364).
(10)(b) Gas storage agreement (S-2) between South Jersey Gas
Company and Transco dated December 16, 1953. Incorporated by reference
from Exhibit (5)(h) of Form S-7 of SJI (2-56223).
(10)(c) Gas storage agreement (LG-A) between South Jersey Gas
Company and Transco dated June 3, 1974. Incorporated by reference from
Exhibit (5)(f) of Form S-7 of SJI (2-56223).
(10)(d) Gas storage agreement (WSS) between South Jersey Gas
Company and Transco dated August 1, 1991. Incorporated by reference
from Exhibit (10)(h) of Form 10-K of SJI for 1991 (1-6364).
(10)(e)(i) Gas storage agreement (LSS) between South Jersey Gas
Company and Transco dated October 1, 1993. Incorporated by reference
from Exhibit (10)(i) of Form 10-K of SJI for 1993 (1-6364).
(10)(e)(ii) Gas storage agreement (SS-1) between South Jersey Gas
Company and Transco dated May 10, 1987 (effective April 1, 1988).
Incorporated by reference from Exhibit (10)(i)(a) of Form 10-K of SJI
for 1988 (1-6364).
(10)(e)(iii) Gas storage agreement (ESS) between South Jersey Gas
Company and Transco dated November 1, 1993. Incorporated by reference
from Exhibit (10)(i)(b) of Form 10-K of SJI for 1993 (1-6364).
(10)(e)(iv) Gas transportation service agreement between South Jersey
Gas Company and Transco dated April 1, 1986. Incorporated by reference
from Exhibit (10)(i)(c) of Form 10-K of SJI for 1989 (1-6364).
(10)(e)(v) Service agreement (FS) between South Jersey Gas Company
and Transco dated August 1, 1991. Incorporated by reference from
Exhibit (10)(i)(e) of Form 10-K of SJI for 1991 (1-6364).
(10)(e)(vi) Service agreement (FT) between South Jersey Gas Company
and Transco dated February 1, 1992. Incorporated by reference from
Exhibit (10)(i)(f) of Form 10-K of SJI for 1991 (1-6364).
(10)(e)(vii) Service agreement (Incremental FT) between South Jersey
Gas Company and Transco dated August 1, 1991. Incorporated by
reference from Exhibit (10)(i)(g) of Form 10-K of SJI for 1991
(1-6364).
(10)(e)(viii) Gas storage agreement (SS-2) between South Jersey Gas
Company and Transco dated July 25, 1990. Incorporated by reference
from Exhibit (10)(i)(i) of Form 10-K of SJI for 1991 (1-6364).
(10)(e)(ix) Gas transportation service agreement between South Jersey
Gas Company and Transco dated December 20, 1991. Incorporated by
reference from Exhibit (10)(i)(j) of Form 10-K of SJI for 1993
(1-6364).
(10)(e)(x) Amendment to gas transportation agreement dated December
20, 1991 between South Jersey Gas Company and Transco dated October 5,
1993. Incorporated by reference from Exhibit (10)(i)(k) of Form 10-K
of SJI for 1993 (1-6364).
(10)(f) Gas transportation service agreement (FTS) between South
Jersey Gas Company and Equitable Gas Company dated November 1, 1986.
Incorporated by reference from Exhibit (10)(j)(a) of Form 10-K of SJI
for 1989 (1-6364).
(10)(g)(i) Gas transportation service agreement (TF) between South
Jersey Gas Company and CNG Transmission Corporation dated October 1,
1993. Incorporated by reference from Exhibit (10)(k)(h) of Form 10-K
of SJI for 1993 (1-6364).
(10)(g)(ii) Gas purchase agreement between South Jersey Gas Company
and ARCO Gas Marketing, Inc. dated March 5, 1990. Incorporated by
reference from Exhibit (10)(k)(i) of Form 10-K of SJI for 1989
(1-6364).
(10)(g)(iii) Gas transportation service agreement (FTS-1) between
South Jersey Gas Company and Columbia Gulf Transmission Company dated
November 1, 1993. Incorporated by reference from Exhibit (10)(k)(k) of
Form 10-K of SJI for 1993 (1-6364).
(10)(g)(iv) Assignment agreement capacity and service rights (FTS-2)
between South Jersey Gas Company and Columbia Gulf Transmission Company
dated November 1, 1993. Incorporated by reference from Exhibit
(10)(k)(i) of Form 10-K of SJI for 1993 (1-6364).
(10)(g)(v) FTS Service Agreement No. 39556 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November 1,
1993. Incorporated by reference from Exhibit (10)(k)(m) of Form 10-K
of SJI for 1993 (1-6364).
(10)(g)(vi) FTS Service Agreement No. 38099 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November 1,
1993. Incorporated by reference from Exhibit (10)(k)(n) of Form 10-K
of SJI for 1993 (1-6364).
(10)(g)(vii) NTS Service Agreement No. 39305 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November 1,
1993. Incorporated by reference from Exhibit (10)(k)(o) of Form 10-K
of SJI for 1993 (1-6364).
(10)(g)(viii) FSS Service Agreement No. 38130 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November 1,
1993. Incorporated by reference from Exhibit (10)(k)(p) of Form 10-K
of SJI for 1993 (1-6364).
(10)(g)(ix) SST Service Agreement No. 38086 between South Jersey Gas
Company and Columbia Gas Transmission Corporation dated November 1,
1993. Incorporated by reference from Exhibit (10)(k)(q) of Form 10-K
of SJI for 1993 (1-6364).
(10)(g)(x) NS (Negotiated Sales) Service Agreement dated December 1,
1994 between South Jersey Gas Company and Transco Gas Marketing Company
as agent for Transcontinental Gas Pipeline. Incorporated by reference
from Exhibit (10)(k)(r) of Form 10-K of SJI for 1994 (1-6364).
(10)(h)(i) Deferred Payment Plan for Directors of South Jersey
Industries, Inc., South Jersey Gas Company, Energy & Minerals, Inc.,
R&T Group, Inc. and South Jersey Energy Company as amended and restated
October 21, 1994. Incorporated by reference from Exhibit (10)(l) of
Form 10-K of SJI for 1994 (1-6364).
(10)(h)(ii) Form of Deferred Compensation Agreement between the
Company and/or a subsidiary and seven of its officers. Incorporated by
reference from Exhibit (10)(j)(a) of Form 10-K of SJI for 1980
(1-6364).
(10)(h)(iii) Schedule of Deferred Compensation Agreements.
Incorporated by reference from Exhibit (10)(l)(b) of Form 10-K of SJI
for 1997 (1-6364).
(10)(h)(iv) Supplemental Executive Retirement Program, as amended and
restated effective July 1, 1997, and Form of Agreement between certain
Company or subsidiary Company officers. Incorporated by reference from
Exhibit (10)(l)(i) of Form 10-K of SJI for 1997 (1-6364).
(10)(h)(v) Form of Officer Employment Agreement between certain
officers and either the Company or its subsidiaries. Incorporated by
reference from Exhibit (10)(l)(d) of Form 10-K of SJI for 1994
(1-6364).
(10)(h)(vi) Schedule of Officer Employment Agreements. Incorporated
by reference from Exhibit (10)(l)(e) of Form 10-K of SJI for 1997
(1-6364).
(10)(h)(vii) Officer Severance Benefit Program for all officers.
Incorporated by reference from Exhibit (10)(l)(g) of Form 10-K of SJI
for 1985 (1-6364).
(10)(h)(viii) Discretionary Incentive Bonus Program for all officers
and management employees. Incorporated by reference from Exhibit
(10)(l)(h) of Form 10-K of SJI for 1985 (1-6364).
(10)(h)(ix) The 1987 Stock Option and Stock Appreciation Rights Plan
including Form of Agreement. Incorporated by reference from Exhibit
(10)(l)(i) of Form 10-K of SJI for 1987 (1-6364).
(11) Not applicable.
(12) Calculation of Ratio of Earnings to Fixed Charges (Before
Federal Income Taxes) (filed herewith).
(13) Not applicable.
(16) Not applicable.
(18) Not applicable.
(21) Subsidiaries of the Registrant (filed herewith).
(22) None.
(23) Independent Auditors' Consent (filed herewith).
(24) Power of Attorney (filed herewith).
(27) Financial Data Schedule (submitted only in electronic
format to the Securities and Exchange Commission).
(99) None.