Form 8-K SOUTH JERSEY INDUSTRIES For: Aug 03
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 3, 2022
(Exact Name of Registrant as Specified in Charter)
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
(Address of Principal Executive Offices) (Zip Code)
(609 ) 561-9000
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition
On August 3, 2022, South Jersey Industries, Inc. (“SJI”) issued a press release reporting the results of its operations for the three months ended June 30, 2022. The press release is attached hereto as Exhibit 99. SJI does not intend for this Item 2.02, Item 7.01 or Item 9.01, Exhibit 99, to be treated as “filed” under the Securities Exchange Act of 1934, as amended, or incorporated by reference into its filings under the Securities Act of 1933, as amended.
Item 7.01 Regulation FD Disclosure
On August 3, 2022, South Jersey Industries, Inc. (“SJI”) issued a press release reporting the results of its operations for the three and six months periods ended June 30, 2022. The press release is attached hereto as Exhibit 99. SJI does not intend for this Item 2.02, Item 7.01 or Item 9.01, Exhibit 99, to be treated as “filed” under the Securities Exchange Act of 1934, as amended, or incorporated by reference into its filings under the Securities Act of 1933, as amended.
Item 9.01. Financial Statements and Exhibits
Exhibit 99.1 South Jersey Industries, Inc. press release and financials dated August 3, 2022.
Exhibit Index
| Exhibit Number | |||||
| 99.1 | |||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and embedded within the Inline XBRL document) | ||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SOUTH JERSEY INDUSTRIES, INC. | ||||||||||||||
| Date: | August 3, 2022 | By: | /s/ Steven R. Cocchi | |||||||||||
| Steven R. Cocchi | ||||||||||||||
| Senior Vice President and Chief Financial Officer | ||||||||||||||
 | Investor Contact: | ||||
| Daniel Fidell | |||||
| 609-561-9000 x7027 | |||||
| dfidell@sjindustries.com | |||||
| Media Contact: | |||||
| Dominick DiRocco | |||||
| 609-561-9000 x4262 | |||||
| ddirocco@sjindustries.com | |||||
SJI Reports Second Quarter 2022 Results
Acquisition Proceeding on Track
FOLSOM, NJ (August 3, 2022) - SJI (NYSE: SJI) today reported operating results for the second quarter ended June 30, 2022. Highlights include:
▪Q2 2022 GAAP earnings $(0.15) per diluted share compared to $(0.87) per diluted share in 2021 Economic Earnings* $0.05 per diluted share compared to $0.02 per diluted share in 2021
▪YTD 2022 GAAP earnings $0.90 per diluted share compared to $0.30 per diluted share in 2021 Economic Earnings $1.27 per diluted share compared to $1.22 per diluted share in 2021
▪YTD Economic EPS improvement reflects increased profitability from both Utility and Non-Utility operations and the impact of financing activities
▪Acquisition by Infrastructure Investment Fund (IIF) on track; Closing expected in Q4 2022
▪Regulatory initiatives advancing — SJG new Infrastructure Investment Program (IIP) authorized; Base rate cases for ETG/SJG proceeding on schedule
▪RNG production at ten dairy farms under development; Expected in-service in 2022/2023
"Our businesses have performed very well year-to-date, and we remain on track to achieve our financial goals in 2022," said Mike Renna, SJI President and Chief Executive Officer. "Our regulatory initiatives and clean energy investments targeting enhanced infrastructure safety, reliability and decarbonization continue to advance. And our acquisition by IIF continues to secure requisite approvals, with closing of the transaction expected later this year,” added Renna.
| Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||
| GAAP | GAAP | Economic | Economic | GAAP | GAAP | Economic | Economic | |||||||||||||||||||||||||
| Earnings | EPS | Earnings | EPS | Earnings | EPS | Earnings | EPS | |||||||||||||||||||||||||
| Utility | $1.5 | $0.01 | $2.8 | $0.02 | $3.3 | $0.03 | $3.3 | $0.03 | ||||||||||||||||||||||||
| Non-Utility | $(11.3) | $(0.09) | $12.7 | $0.10 | $(90.7) | $(0.82) | $8.1 | $0.07 | ||||||||||||||||||||||||
| Other | $(8.8) | $(0.07) | $(9.2) | $(0.07) | $(9.3) | $(0.08) | $(9.3) | $(0.08) | ||||||||||||||||||||||||
| Total - Continuing Ops | $(18.7) | $(0.15) | $6.3 | $0.05 | $(96.7) | $(0.87) | $2.0 | $0.02 | ||||||||||||||||||||||||
| Average Diluted Shares | 125.9 | 125.9 | 110.9 | 110.9 | ||||||||||||||||||||||||||||
| *Non-GAAP, see "Explanation and Reconciliation of Non-GAAP Financial Measures." | ||||||||||||||||||||||||||||||||
| Note: Earnings and average shares outstanding are in millions. Amounts and/or EPS may not add due to rounding. | ||||||||||||||||||||||||||||||||
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Second Quarter 2022 Results
For the three-month period ended June 30, 2022, SJI reported consolidated GAAP earnings of $(18.7) million compared with $(96.7) million in the prior year period.
SJI uses the non-GAAP measure of economic earnings when discussing results. We believe this presentation provides clarity into the continuing earnings of our business. A full explanation and reconciliation of economic earnings is provided under “Explanation and Reconciliation of Non-GAAP Financial Measures” later in this report and in our 10-K for the year ending December 31, 2021.
For the three-month period ended June 30, 2022, economic earnings were $6.3 million compared with $2.0 million in the prior year period.
UTILITY
Utility entities include the regulated operations of South Jersey Gas (SJG) and Elizabethtown Gas (ETG). Second quarter 2022 GAAP earnings were $1.5 million compared with $3.3 million in 2021. Economic earnings were $2.8 million compared with $3.3 million in 2021.
South Jersey Gas
Performance. Second quarter 2022 GAAP earnings were $4.8 million compared with $6.3 million in 2021. Economic earnings were $6.2 million compared with $6.3 million in 2021. Utility margin increased $4.5 million, reflecting customer growth and the roll-in of investments from infrastructure replacement programs. We define utility margin, a non-GAAP measure, as natural gas revenues plus depreciation and amortization expenses, less natural gas costs, regulatory rider expenses and related volumetric and revenue-based energy taxes. Total expenses increased $4.6 million, primarily reflecting higher depreciation and interest expenses.
Customer Growth. SJG added approximately 6,600 new customers over the last 12 months and now serves approximately 413,000 customers. SJG’s 1.2% customer growth rate compares favorably to the peer average and remains driven by gas conversions from alternate fuels such as oil and propane, and new construction.
Infrastructure Modernization. Through infrastructure replacement programs, SJG enhances the safety and reliability of our system while earning our authorized utility return on approved investments in a timely manner. In June, the New Jersey Board of Public Utilities (NJBPU) authorized a new Infrastructure Investment Program (IIP) that accelerates planned capital expenditures to enhance the delivery of safe, reliable, affordable natural gas, create jobs, and support the State’s environmental goals. SJG's new program authorizes investment of $200 million from 2022-2027 for important infrastructure upgrades including the replacement of up to 250 miles of pre-code coated steel and vintage plastic main. Our annualized investment of approximately $40 million from July 2022 to June 2023 is anticipated to be rolled into rates on October 1, 2023.
Base Rate Case. In April, SJG filed a petition with the NJBPU requesting an increase of $73.1 million to its base rates, which was updated in July to an increase of $73.3 million. The request is based on a proposed pre-tax return on invested capital of 7.77%, with a capital structure that includes a common equity component of 57.0% and a return on common equity of 10.75%. The request is predominantly driven by the significant capital investments that SJG has made since its last base rate proceeding that was resolved in 2020. These capital investments have been and will continue to be made to ensure the safety, reliability and resiliency of SJG's distribution system, allow SJG to continue to provide safe, reliable and best in class customer service, and facilitate the environmental goals of NJ and SJI's commitment to ensuring that it is part of New Jersey’s clean energy future. A resolution of the case is expected later this year.
Energy Efficiency. Through energy efficiency programs, SJG advances New Jersey’s clean energy goals in a manner that benefits customers, the environment and the State’s green economy while recovering our investments in a timely manner. SJG's energy efficiency program, as approved by the BPU in April 2021, authorizes investment of $133.2 million from July 1, 2021 to June 30, 2024. The revenue requirement associated with our net investment of approximately $25 million from July 2021 to June 2022 commenced recovery in July 2021 under the terms of the program.
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Elizabethtown Gas
Performance. Second quarter 2022 GAAP/economic earnings were $(3.4) million compared with $(3.0) million in 2021. Utility margin, as previously defined, increased $2.0 million, reflecting customer growth and the roll-in of investments from infrastructure replacement programs. Total expenses increased $2.4 million, primarily reflecting higher O&M and interest expenses.
Customer Growth. ETG added approximately 5,000 new customers over the last 12 months and now serves approximately 307,000 customers. ETG’s 1.5% customer growth rate has increased from its historic 0.9% rate, driven by increases in gas conversions from alternate fuels such as oil and propane, and new construction.
Infrastructure Modernization. ETG's Infrastructure Investment Plan (IIP) authorizes investment of $300 million from 2019-2024 for important infrastructure upgrades including the replacement of up to 250 miles of cast iron and bare steel mains. Our investment of approximately $58 million from July 2021 to June 2022 is anticipated to be rolled into rates on October 1, 2022.
Base Rate Case. In December 2021, ETG filed a petition with the NJBPU requesting an increase of $76.6 million, which was updated in February 2022 to a requested increase of $72.9 million and in May 2022 to a requested increase of $77.3 million. The request is predominantly driven by the significant capital investments that ETG has made since its last base rate proceeding that was resolved in 2019. These capital investments have been and will continue to be made to ensure the safety, reliability and resiliency of ETG's distribution system, allow ETG to continue to provide safe, reliable and best in class customer service, and facilitate the environmental goals of NJ and SJI's commitment to ensuring that it is part of New Jersey’s clean energy future. A resolution of the case is expected in Q3 2022.
Energy Efficiency. ETG's energy efficiency program, as approved by the BPU in April 2021, authorizes investment of $74.0 million from July 1, 2021 to June 30, 2024. The revenue requirement associated with our net investment of approximately $12.7 million from July 2021 to June 2022 commenced recovery in July 2021 under the terms of the program.
NON-UTILITY
SJI's non-utility entities include Energy Management, Energy Production and Midstream. Second quarter 2022 GAAP earnings were $(11.3) million compared with $(90.7) million in 2021. Economic earnings were $12.7 million compared with $8.1 million in 2021.
Energy Management
Performance. Energy Management includes Wholesale Services (Fuel Management/Marketing) and Retail Services (Account Services/Energy Consulting). Second quarter 2022 GAAP earnings were $(22.2) million compared with $(4.1) million in 2021. Economic earnings were $2.4 million compared with $7.0 million in 2021, reflecting lower margins from daily energy trading activities and less robust asset optimization opportunities as compared with the year ago period, and contributions from consulting activities, meter reading and appliance service contract fees.
Energy Production
Performance. Energy Production primarily includes renewable (fuel cell/solar) and decarbonization (REV/RNG development) investments. Second quarter 2022 GAAP earnings were $10.2 million compared with $(0.4) million in 2021. Economic earnings were $10.2 million compared with $(0.2) million in 2021, primarily reflecting investment tax credits (ITC's) and income associated with fuel cell and solar investments, and contributions from SJI's 35% equity interest in REV. RNG development activities at ten dairy farms is proceeding on track, with in-service anticipated in 2022/2023.
Midstream
Performance. Second quarter GAAP/economic earnings were $0.8 million compared with $(86.1) million in 2021. Economic earnings were $0.0 million compared with $1.2 million in 2021, reflecting the absence of allowance for funds used during construction following cessation of the PennEast Pipeline project in 2021.
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OTHER
Performance. Other entity includes interest on debt, including debt associated with past acquisitions. Second quarter 2022 GAAP earnings were $(8.8) million compared with $(9.3) million in 2021. Economic earnings were $(9.2) million compared with $(9.3) million in 2021, reflecting lower outstanding indebtedness partially offset by higher interest and bank fees.
Six Months 2022 Results
| Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||
| GAAP | GAAP | Economic | Economic | GAAP | GAAP | Economic | Economic | |||||||||||||||||||||||||
| Earnings | EPS | Earnings | EPS | Earnings | EPS | Earnings | EPS | |||||||||||||||||||||||||
| Utility | $128.7 | $1.05 | $130.0 | $1.06 | $124.9 | $1.16 | $124.9 | $1.16 | ||||||||||||||||||||||||
| Non-Utility | $3.3 | $0.03 | $43.6 | $0.35 | $(74.4) | $(0.69) | $24.1 | $0.22 | ||||||||||||||||||||||||
| Other | $(21.2) | $(0.17) | $(17.9) | $(0.15) | $(18.4) | $(0.17) | $(18.2) | $(0.17) | ||||||||||||||||||||||||
| Total - Continuing Ops | $110.7 | $0.90 | $155.8 | $1.27 | $32.1 | $0.30 | $130.9 | $1.22 | ||||||||||||||||||||||||
| Average Diluted Shares | 122.9 | 122.9 | 107.4 | 107.4 | ||||||||||||||||||||||||||||
| *Non-GAAP, see "Explanation and Reconciliation of Non-GAAP Financial Measures." | ||||||||||||||||||||||||||||||||
| Note: Earnings and average shares outstanding are in millions. Amounts and/or EPS may not add due to rounding. | ||||||||||||||||||||||||||||||||
Six months YTD GAAP earnings were $110.7 million compared with $32.1 million in 2021. Economic earnings were $155.8 million compared with $130.9 million in the year-ago period.
UTILITY
Utility entities contributed six months YTD GAAP earnings of $128.7 million compared with $124.9 million in 2021. Economic earnings were $130.0 million compared with $124.9 million in the year-ago period.
▪SJG. YTD GAAP earnings were $93.5 million compared with $89.9 million in 2021. Economic earnings were $94.9 million compared with $89.9 million in 2021. Utility margin increased $13.4 million, reflecting customer growth and the roll-in of investments from infrastructure replacement programs. Total expenses increased $8.4 million, primarily reflecting higher depreciation and interest expenses.
▪ETG. YTD GAAP/economic earnings were $35.2 million compared with $35.0 million in 2021. Utility margin increased $5.7 million, reflecting customer growth and the roll-in of investments from infrastructure replacement programs. Total expenses increased $5.5 million, primarily reflecting higher depreciation and interest expenses.
NON-UTILITY
Six months YTD GAAP earnings were $3.3 million compared with $(74.4) million in 2021. Economic earnings were $43.6 million compared with $24.1 million in 2021.
▪Energy Management. YTD GAAP earnings were $(7.1) million compared with $9.6 million in 2021. Economic earnings were $32.9 million compared with $20.9 million in 2021, reflecting improved asset optimization opportunities, colder weather and improved contributions from consulting activities.
▪Energy Production. YTD GAAP earnings were $9.8 million compared with $1.2 million in 2021. Economic earnings were $10.7 million compared with $1.0 million in 2021, reflecting ITC's and income associated with fuel cell and solar investments and contributions from SJI's equity interest in REV.
▪Midstream. YTD GAAP earnings were $0.6 million compared with $(85.1) million in 2021. Economic earnings were $0.0 million compared with $2.2 million in 2021, reflecting the absence of AFUDC related to the project.
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OTHER
Six months YTD GAAP earnings were $(21.2) million compared with $(18.4) million in 2021. Economic earnings were $(17.9) million compared with $(18.2) million in 2021, reflecting lower outstanding indebtedness partially offset by higher interest and bank fees.
Capital Expenditures and Cash Flow
For the three months ended June 30, 2022:
▪Net cash provided by operating activities was $323.6 million compared with $241.7 million in the prior year period, primarily reflecting improved wholesale marketing results and customer growth.
▪Net cash used in investing activities was $(312.9) million compared with $(269.3) million in the prior year period, primarily reflecting utility capital expenditures and REV, fuel cell and solar investments.
▪Net cash provided by financing activities was $15.6 million compared with $73.8 million in the prior year period, primarily reflecting equity issuance partially offset by debt repayment.
Balance Sheet
▪Equity-to-total capitalization was 37.6% at June 30, 2022 compared with 35.8% at December 31, 2021, largely reflecting equity financing and repayment of debt.
▪Assuming conversion of mandatory convertible equity units and equity credit from rating agencies for long-duration debt, SJI's adjusted equity-to-total capitalization, a non-GAAP measure, was 45.3% at June 30, 2022 compared with 43.6% at December 31, 2021.
▪At June 30, 2022, SJI had total credit facilities of $1.0 billion, with $647.8 million of available liquidity.
Dividends
On August 3, SJI’s Board of Directors declared its regular dividend of $0.3100 per share for the third quarter of 2022. The dividend is payable October 4, 2022 to shareholders of record at the close of business on September 9, 2022. This is SJI's 71st consecutive year of paying dividends.
Acquisition
On February 24, 2022, SJI announced that it had entered into a definitive agreement to be acquired by IIF. The per share purchase price of $36.00 represented a 46.3% premium to SJI’s 30-day volume weighted average price (VWAP) as of February 23, 2022, the last trading day prior to the announcement of the agreement. The transaction was unanimously approved by SJI’s Board of Directors and is expected to close in the fourth quarter of 2022, subject to the approval of SJI’s shareholders, the receipt of regulatory approvals, including by the New Jersey Board of Public Utilities, and other customary closing conditions. Dividends payable to SJI shareholders are expected to continue in the ordinary course until the closing, subject to approval by SJI’s Board of Directors. Upon completion of the transaction, SJI’s shares will no longer trade on the New York Stock Exchange, and SJI will become a private company.
5
About SJI
SJI (NYSE: SJI), an energy infrastructure holding company based in Folsom, NJ, delivers energy services to customers through two primary subsidiaries: SJI Utilities (SJIU) and SJI Energy Enterprises (SJIEE). SJIU houses the company’s regulated natural gas utility operations, delivering safe, reliable and affordable natural gas to more than 700,000 residential, commercial and industrial customers across New Jersey via its South Jersey Gas and Elizabethtown Gas subsidiaries. SJIEE houses the company’s non-utility operations primarily focused on clean energy development and decarbonization via renewable energy production and energy management activities. Visit sjindustries.com for more information about SJI and its subsidiaries.
Forward-Looking Statements and Risk Factors
This news release, including information incorporated by reference, contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding guidance, industry prospects or future results of operations or financial position, expected sources of incremental margin, strategy, financing needs, future capital expenditures and the outcome or effect of ongoing litigation, are forward-looking. This Quarterly Report uses words such as "anticipate," "believe," "expect," "estimate," "forecast," "goal," "intend," "objective," "plan," "project," "seek," "strategy," "target," "will" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on the beliefs and assumptions of management at the time that these statements were prepared and are inherently uncertain. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These risks and uncertainties include, but are not limited to, general economic conditions on an international, national, state and local level; weather conditions in SJI’s marketing areas; changes in commodity costs; changes in the availability of natural gas; “non-routine” or “extraordinary” disruptions in SJI’s distribution system; cybersecurity incidents and related disruptions; regulatory, legislative and court decisions; competition; the availability and cost of capital; costs and effects of legal proceedings and environmental liabilities; the failure of customers, suppliers or business partners to fulfill their contractual obligations; changes in business strategies; failure to satisfy the conditions to closing of the Merger; the diversion of management time on Merger-related issues; and public health crises and epidemics or pandemics, such as the COVID-19 pandemic. These risks and uncertainties, as well as other risks and uncertainties that could cause our actual results to differ materially from those expressed in the forward-looking statements, are described in greater detail in Part II, Item 1A in this Quarterly Report, and Part I, Item 1A in SJI’s and SJG's Annual Report on Form 10-K for the year ended December 31, 2021, as they may be supplemented from time to time by other SEC filings made by SJI or SJG. earnings release. Also refer to the additional risk factor described below:
Explanation of Non-GAAP Financial Measures
Management uses the non-GAAP financial measures of Economic Earnings and Economic Earnings per share when evaluating its results of operations. These non-GAAP financial measures should not be considered as an alternative to GAAP measures, such as net income, operating income, earnings per share from continuing operations or any other GAAP measure of financial performance. We define Economic Earnings as: Income from Continuing Operations, (i) less the change in unrealized gains and plus the change in unrealized losses on non-utility derivative transactions; (ii) less income and plus losses attributable to noncontrolling interests; and (iii) less the impact of transactions, contractual arrangements or other events where management believes period to period comparisons of SJI's operations could be difficult or potentially confusing. With respect to part (iii) of the definition of Economic Earnings, items excluded from Economic Earnings for the three and six months ended June 30, 2022 and 2021, are described in (A)-(E) in the table below. Economic Earnings is a significant financial measure used by our management to indicate the amount and timing of income from continuing operations that we expect to earn after taking into account the impact of the items described above. Management uses Economic Earnings to manage its business and to determine such items as incentive/compensation arrangements and allocation of resources. Specifically regarding derivatives, we believe that this financial measure indicates to investors the profitability of the entire derivative-related transaction and not just the portion that is subject to mark-to-market valuation under GAAP. We believe that considering only the change in market value on the derivative side of the transaction can produce a false sense as to the ultimate profitability of the total transaction as no change in value is reflected for the non-derivative portion of the transaction.
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Reconciliation of Non-GAAP Financial Measures
The following table presents a reconciliation of our income from continuing operations and earnings per share from continuing operations to Economic Earnings and Economic Earnings per share (in thousands, except per share data):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| (Loss) Income from Continuing Operations | $ | (18,678) | $ | (96,660) | $ | 110,736 | $ | 32,138 | |||||||||||||||
| Minus/Plus: | |||||||||||||||||||||||
| Unrealized Mark-to-Market Losses on Derivatives | 33,922 | 15,230 | 55,191 | 15,274 | |||||||||||||||||||
| Income Attributable to Noncontrolling Interests | (104) | (120) | (291) | (299) | |||||||||||||||||||
| Impairment of Equity Method Investment (A) | — | 87,370 | — | 87,370 | |||||||||||||||||||
| Impairment of Property, Plant & Equipment (B) | 1,897 | — | 1,897 | — | |||||||||||||||||||
| Acquisition/Sale Net Costs (C) | (1,342) | 406 | 5,149 | 674 | |||||||||||||||||||
| Income Taxes (D) | (9,391) | (18,414) | (16,922) | (18,451) | |||||||||||||||||||
| Additional Tax Adjustments (E) | — | 14,176 | — | 14,176 | |||||||||||||||||||
| Economic Earnings | $ | 6,304 | $ | 1,988 | $ | 155,760 | $ | 130,882 | |||||||||||||||
| Earnings per Share from Continuing Operations | $ | (0.15) | $ | (0.87) | $ | 0.90 | $ | 0.30 | |||||||||||||||
| Minus/Plus: | |||||||||||||||||||||||
| Unrealized Mark-to-Market Losses on Derivatives | 0.27 | 0.14 | 0.45 | 0.14 | |||||||||||||||||||
| Income Attributable to Noncontrolling Interests | — | — | — | — | |||||||||||||||||||
| Impairment of Equity Method Investment (A) | — | 0.79 | — | 0.81 | |||||||||||||||||||
| Impairment of Property, Plant & Equipment (B) | 0.02 | — | 0.02 | — | |||||||||||||||||||
| Acquisition/Sale Net Costs (C) | (0.01) | — | 0.04 | 0.01 | |||||||||||||||||||
| Income Taxes (D) | (0.08) | (0.17) | (0.14) | (0.17) | |||||||||||||||||||
| Additional Tax Adjustments (E) | — | 0.13 | — | 0.13 | |||||||||||||||||||
| Economic Earnings per Share | $ | 0.05 | $ | 0.02 | $ | 1.27 | $ | 1.22 | |||||||||||||||
(A) Represents an other-than-temporary impairment charge taken in 2021 on the Company’s equity method investment in PennEast.
(B) Represents an other-than-temporary impairment charge on property, plant & equipment at SJG that was deemed unusable.
(C) In 2022, represents costs incurred related to the Merger Agreement and to finalize the transactions related to acquiring Bronx Midco and solar projects, partially offset with amounts included in continuing operations related to PennEast partnership distributions. In 2021, represents the final working capital payment on the sale of Elkton.
(D) The income taxes were determined using a combined average statutory tax rate.
(E) Represents a federal deferred tax asset valuation allowance taken in 2021 at SJI related to the impairment charge described in (A).
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Summary of Utility Margin
The following tables summarize Utility Margin for SJG and ETG (in thousands):
South Jersey Gas
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||
| Utility Margin: | ||||||||||||||||||||
| Residential | $ | 40,345 | $ | 37,728 | $ | 163,823 | $ | 157,701 | ||||||||||||
| Commercial and Industrial | 21,499 | 20,101 | 66,086 | 61,123 | ||||||||||||||||
| Cogeneration and Electric Generation | 953 | 1,172 | 2,204 | 2,421 | ||||||||||||||||
| Interruptible | 19 | 14 | 45 | 79 | ||||||||||||||||
| Off-System Sales & Capacity Release | 920 | 195 | 3,183 | 932 | ||||||||||||||||
| Other Revenues | 661 | 736 | 901 | 979 | ||||||||||||||||
| Margin Before Weather Normalization & Decoupling | 64,397 | 59,946 | 236,242 | 223,235 | ||||||||||||||||
| CIP Mechanism | (669) | 636 | (1,395) | (126) | ||||||||||||||||
| EET Mechanism | 1,920 | 1,555 | 3,724 | 3,009 | ||||||||||||||||
| Utility Margin** | $ | 65,648 | $ | 62,137 | $ | 238,571 | $ | 226,118 | ||||||||||||
Elizabethtown Gas
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||
| Utility Margin: | ||||||||||||||||||||
| Residential | $ | 21,427 | $ | 21,552 | $ | 89,033 | $ | 87,533 | ||||||||||||
| Commercial & Industrial | 16,629 | 16,716 | 47,775 | 49,773 | ||||||||||||||||
| Regulatory Rider Mechanisms (B) | (1,917) | (4,130) | (7,967) | (14,178) | ||||||||||||||||
| Utility Margin (C) | $ | 36,139 | $ | 34,138 | $ | 128,841 | $ | 123,128 | ||||||||||||
*B-Represents pass-through expenses for which there is a corresponding credit in operating revenues. Therefore, such recoveries have no impact on financial results.
**Utility Margin is a non-GAAP financial measure and is further defined on page 2 under SJG performance. The definition of Utility Margin is the same for SJG and ETG gas utility operations.
8
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS)/INCOME (UNAUDITED)
(In Thousands Except for Per Share Data)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Operating Revenues: | |||||||||||||||||||||||
| Utility | $ | 181,111 | $ | 144,270 | $ | 671,330 | $ | 546,886 | |||||||||||||||
| Nonutility | 330,320 | 167,558 | 664,679 | 439,242 | |||||||||||||||||||
| Total Operating Revenues | 511,431 | 311,828 | 1,336,009 | 986,128 | |||||||||||||||||||
| Operating Expenses: | |||||||||||||||||||||||
| Cost of Sales - (Excluding depreciation and amortization) | |||||||||||||||||||||||
| - Utility | 67,133 | 33,286 | 267,637 | 159,799 | |||||||||||||||||||
| - Nonutility | 354,237 | 168,209 | 662,001 | 413,270 | |||||||||||||||||||
| Operations and Maintenance | 62,791 | 62,881 | 141,769 | 132,984 | |||||||||||||||||||
| Depreciation | 34,181 | 33,031 | 68,138 | 64,843 | |||||||||||||||||||
| Impairment Charges | 1,897 | — | 1,897 | — | |||||||||||||||||||
| Energy and Other Taxes | 3,338 | 2,812 | 8,113 | 6,795 | |||||||||||||||||||
| Total Operating Expenses | 523,577 | 300,219 | 1,149,555 | 777,691 | |||||||||||||||||||
| Operating (Loss) Income | (12,146) | 11,609 | 186,454 | 208,437 | |||||||||||||||||||
| Other Income and Expense | 2,891 | 3,592 | 5,494 | 5,660 | |||||||||||||||||||
| Interest Charges | (31,561) | (31,185) | (63,140) | (62,644) | |||||||||||||||||||
| (Loss) Income Before Income Taxes | (40,816) | (15,984) | 128,808 | 151,453 | |||||||||||||||||||
| Income Taxes | 22,067 | 4,702 | (18,599) | (37,067) | |||||||||||||||||||
| Equity in Earnings (Loss) of Affiliated Companies | 71 | (85,378) | 527 | (82,248) | |||||||||||||||||||
| (Loss) Income from Continuing Operations | (18,678) | (96,660) | 110,736 | 32,138 | |||||||||||||||||||
| Loss from Discontinued Operations - (Net of tax benefit) | (152) | (80) | (222) | (151) | |||||||||||||||||||
| Net (Loss) Income | (18,830) | (96,740) | 110,514 | 31,987 | |||||||||||||||||||
| Less: Income Attributable to Noncontrolling Interests | 76 | 88 | 211 | 217 | |||||||||||||||||||
| Net (Loss) Income Attributable to South Jersey Industries, Inc. | $ | (18,906) | $ | (96,828) | $ | 110,303 | $ | 31,770 | |||||||||||||||
| Basic Earnings Per Common Share: | |||||||||||||||||||||||
| Continuing Operations | $ | (0.15) | $ | (0.87) | $ | 0.92 | $ | 0.30 | |||||||||||||||
| Discontinued Operations | — | — | — | — | |||||||||||||||||||
| Net (Loss) Income | (0.15) | (0.87) | 0.92 | 0.30 | |||||||||||||||||||
| Less: Income Attributable to Noncontrolling Interests | — | — | — | — | |||||||||||||||||||
| Net (Loss) Income Attributable to South Jersey Industries, Inc. | $ | (0.15) | $ | (0.87) | $ | 0.92 | $ | 0.30 | |||||||||||||||
| Average Shares of Common Stock Outstanding - Basic | 122,442 | 110,902 | 120,316 | 105,902 | |||||||||||||||||||
| Diluted Earnings Per Common Share: | |||||||||||||||||||||||
| Continuing Operations | $ | (0.15) | $ | (0.87) | $ | 0.90 | $ | 0.30 | |||||||||||||||
| Discontinued Operations | — | — | — | — | |||||||||||||||||||
| Net (Loss) Income | (0.15) | (0.87) | 0.90 | 0.30 | |||||||||||||||||||
| Less: Income Attributable to Noncontrolling Interests | — | — | — | — | |||||||||||||||||||
| Net (Loss) Income Attributable to South Jersey Industries, Inc. | $ | (0.15) | $ | (0.87) | $ | 0.90 | $ | 0.30 | |||||||||||||||
| Average Shares of Common Stock Outstanding - Diluted | 122,442 | 110,902 | 122,887 | 107,389 | |||||||||||||||||||
9
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Thousands)
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net Cash Provided by Operating Activities | $ | 323,580 | $ | 241,651 | |||||||
| Cash Flows from Investing Activities: | |||||||||||
| Capital Expenditures | (260,757) | (232,138) | |||||||||
| Investment in Contract Receivables | (11,324) | (18,335) | |||||||||
| Proceeds from Contract Receivables | 6,612 | 12,928 | |||||||||
| Investment in Affiliates | (40,158) | (9,802) | |||||||||
| Return of Investment in Affiliates | 10,466 | — | |||||||||
| Advances to Affiliates | (12,105) | (7,924) | |||||||||
| Net Repayment of Notes Receivable - Affiliates | — | 890 | |||||||||
| Divestiture Working Capital Settlement | — | (267) | |||||||||
| Investment in Subsidiary, Net of Cash Acquired | (5,660) | (14,672) | |||||||||
| Net Cash Used in Investing Activities | (312,926) | (269,320) | |||||||||
| Cash Flows from Financing Activities: | |||||||||||
| Net Repayments of Short-Term Credit Facilities | (100) | (571,700) | |||||||||
| Proceeds from Issuance of Long-Term Debt | — | 460,000 | |||||||||
| Principal Repayments of Long-Term Debt | (48,176) | (100,000) | |||||||||
| Payments for Issuance of Long-Term Debt | — | (12,761) | |||||||||
| Dividends on Common Stock | (36,398) | (30,453) | |||||||||
| Proceeds from Sale of Common Stock | 100,380 | 329,772 | |||||||||
| Payments for the Issuance of Common Stock | — | (2,300) | |||||||||
| Capital Distributions to Noncontrolling Interests in Subsidiaries | (130) | — | |||||||||
| Capital Contributions of Noncontrolling Interests in Subsidiaries | 43 | 1,213 | |||||||||
| Net Cash Provided by Financing Activities | 15,619 | 73,771 | |||||||||
| Net Increase in Cash, Cash Equivalents and Restricted Cash | 26,273 | 46,102 | |||||||||
| Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 29,440 | 41,831 | |||||||||
| Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 55,713 | $ | 87,933 | |||||||
10
SOUTH JERSEY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In Thousands)
| June 30, 2022 | December 31, 2021 | ||||||||||
| Assets | |||||||||||
| Property, Plant and Equipment: | |||||||||||
| Utility Plant, at original cost | $ | 5,870,464 | $ | 5,682,805 | |||||||
| Accumulated Depreciation | (1,005,538) | (975,619) | |||||||||
| Nonutility Property and Equipment, at cost | 287,314 | 240,503 | |||||||||
| Accumulated Depreciation | (38,630) | (35,367) | |||||||||
| Property, Plant and Equipment - Net | 5,113,610 | 4,912,322 | |||||||||
| Investments: | |||||||||||
| Available-for-Sale Securities | 37 | 37 | |||||||||
| Restricted | 2,241 | 686 | |||||||||
| Investment in Affiliates | 70,264 | 38,509 | |||||||||
| Total Investments | 72,542 | 39,232 | |||||||||
| Current Assets: | |||||||||||
| Cash and Cash Equivalents | 53,472 | 28,754 | |||||||||
| Accounts Receivable | 378,095 | 343,835 | |||||||||
| Unbilled Revenues | 23,012 | 87,357 | |||||||||
| Provision for Uncollectibles | (50,876) | (41,763) | |||||||||
| Notes Receivable - Affiliates | 5,258 | 5,695 | |||||||||
| Natural Gas in Storage, average cost | 69,615 | 59,744 | |||||||||
| Materials and Supplies, average cost | 1,633 | 1,053 | |||||||||
| Prepaid Taxes | 43,699 | 33,977 | |||||||||
| Derivatives - Energy Related Assets | 157,217 | 95,041 | |||||||||
| Other Prepayments and Current Assets | 27,490 | 25,269 | |||||||||
| Total Current Assets | 708,615 | 638,962 | |||||||||
| Regulatory and Other Noncurrent Assets: | |||||||||||
| Regulatory Assets | 643,014 | 672,416 | |||||||||
| Derivatives - Energy Related Assets | 61,923 | 22,488 | |||||||||
| Notes Receivable - Affiliates | 94,969 | 64,254 | |||||||||
| Contract Receivables | 49,381 | 45,339 | |||||||||
| Goodwill | 706,960 | 706,960 | |||||||||
| Other | 209,587 | 206,699 | |||||||||
| Total Regulatory and Other Noncurrent Assets | 1,765,834 | 1,718,156 | |||||||||
| Total Assets | $ | 7,660,601 | $ | 7,308,672 | |||||||
11
| June 30, 2022 | December 31, 2021 | ||||||||||
| Capitalization and Liabilities | |||||||||||
| Equity: | |||||||||||
| Common Stock | $ | 153,081 | $ | 146,675 | |||||||
| Premium on Common Stock | 1,654,503 | 1,559,060 | |||||||||
| Treasury Stock (at par) | (316) | (287) | |||||||||
| Accumulated Other Comprehensive Loss | (26,712) | (26,729) | |||||||||
| Retained Earnings | 346,374 | 310,433 | |||||||||
| Total South Jersey Industries, Inc. Equity | 2,126,930 | 1,989,152 | |||||||||
| Noncontrolling Interests | 10,413 | 10,289 | |||||||||
| Total Equity | 2,137,343 | 1,999,441 | |||||||||
| Long-Term Debt | 3,177,991 | 3,189,009 | |||||||||
| Total Capitalization | 5,315,334 | 5,188,450 | |||||||||
| Current Liabilities: | |||||||||||
| Notes Payable | 333,900 | 334,000 | |||||||||
| Current Portion of Long-Term Debt | 31,076 | 66,076 | |||||||||
| Accounts Payable | 429,986 | 330,164 | |||||||||
| Customer Deposits and Credit Balances | 32,136 | 40,355 | |||||||||
| Environmental Remediation Costs | 39,654 | 40,905 | |||||||||
| Taxes Accrued | 4,559 | 4,937 | |||||||||
| Derivatives - Energy Related Liabilities | 146,919 | 60,002 | |||||||||
| Deferred Contract Revenues | 356 | 753 | |||||||||
| Derivatives - Other Current | 320 | 568 | |||||||||
| Dividends Payable | 37,964 | — | |||||||||
| Interest Accrued | 22,051 | 23,611 | |||||||||
| Other Current Liabilities | 40,478 | 54,311 | |||||||||
| Total Current Liabilities | 1,119,399 | 955,682 | |||||||||
| Deferred Credits and Other Noncurrent Liabilities: | |||||||||||
| Deferred Income Taxes - Net | 224,421 | 198,901 | |||||||||
| Environmental Remediation Costs | 124,984 | 125,176 | |||||||||
| Asset Retirement Obligations | 233,061 | 229,030 | |||||||||
| Derivatives - Energy Related Liabilities | 50,446 | 16,079 | |||||||||
| Derivatives - Other Noncurrent | 4,031 | 7,432 | |||||||||
| Regulatory Liabilities | 408,942 | 398,951 | |||||||||
| Other | 179,983 | 188,971 | |||||||||
| Total Deferred Credits and Other Noncurrent Liabilities | 1,225,868 | 1,164,540 | |||||||||
| Commitments and Contingencies (Note 11) | |||||||||||
| Total Capitalization and Liabilities | $ | 7,660,601 | $ | 7,308,672 | |||||||
12
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