Folsom,
NJ - South Jersey Industries (NYSE: SJI) today
announced income from continuing operations for 2007 of $62.7
million, compared with income from continuing operations
of $72.3 million in 2006. Earnings per share from continuing
operations for 2007 totaled $2.12 compared with $2.47 for
2006. SJI’s Economic Earnings for 2007 were up 14%
to $61.8 million for 2007, from $54.0 million for 2006. Economic
Earnings per share from continuing operations were $2.09
for 2007, a 13% increase over the $1.85 per share posted
for 2006.
“SJI’s performance for 2007 reflects the strong
foundation we have established for this company,” said
SJI Chairman & CEO Edward Graham. “The combination
of our growing, increasingly efficient, and well capitalized
utility, and our energy centered non-utility businesses provided
a broad base of support for the sharp improvement in Economic
Earnings we saw in SJI’s 2007 performance. More importantly,
these businesses evidence real growth prospects that should
position SJI well for the years ahead,” continued Graham.
SJI’s goal is to produce 6%-7% average annual Economic
Earnings per share growth on a long-term, forward-looking
basis.
The non-GAAP measure, Economic Earnings, adjusts net income
by eliminating all unrealized gains and losses on commodity
derivative transactions and adjusts for realized gains and
losses attributed to hedges on inventory transactions. (Please
refer to the Explanation and Reconciliation of Non-GAAP Measures
at the end of this release.)
SJI’s 2007 Highlights:
Produced record earnings on an Economic
Earnings basis.
Increased our annualized dividend by $0.10 to $1.08
per share, a 10% hike.
Combined with dividends paid in 2007, shareholders
received a total return of 11% on investment.
For the 5-year period ended December 31, 2007,
investors realized a 21% annualized total return.
Maintained a strong balance sheet: equity-to-capitalization
ratio, including short-term debt, was 50.3% at December 31,
2007, compared with 44.4% at the end of 2006.
Moody’s Investor Service raised the ratings
outlook for South Jersey Gas to positive.
KLD Research & Analytics announced the inclusion
of SJI in its Global Climate 100 Index, a specialty index
of companies whose activities demonstrate the greatest potential
for mitigating immediate and long-term causes of climate
change.
Utility Business Posts Record Performance: For 2007, SJG
reported net income of $38.0 million, a 6% increase from
the $35.8 million earned during 2006. Performance for the
year was driven by customer margin growth and lower interest
expense. SJG reported net income of $11.6 million for the
fourth quarter of 2007 compared with $12.2 million for the
fourth quarter of 2006. Performance for the year and the
quarter was impacted by an increase in our reserve for uncollectible
accounts related to a higher accounts receivable balance.
Receivables were up due to colder weather experienced at
the end of 2007 than at the end of 2006.
• Conservation Incentive Program Delivers Results – The
CIP protected $7.5 million of 2007 net income for SJG by
offsetting the impacts of reduced customer utilization levels.
The CIP has enabled SJG to actively promote energy conservation
in our service territory, helping our customers lower their
energy bills. In addition, our customers are also benefiting
under the CIP from reduced costs achieved within our gas
supply and storage portfolio. During the first CIP program
year, residential heating customers reduced their annual
consumption by approximately 1.4%.
• Customer Margin Up 6.3% - South Jersey Gas added
5,614 customers, a 1.7% increase, during the 12-month period
ended December 31, 2007, for a total of 335,663. More importantly,
customer margin grew over 6% in 2007 as results from our
commercial customer segment were particularly strong. This
performance occurred despite the slowdown in the new housing
market. Customers added in the past 12 months are anticipated
to contribute approximately $1.9 million to net income annually.
Natural gas remains the fuel of choice within our service
territory, with over 95% of all new homes constructed using
natural gas as their primary heating source. The clean burning
characteristics of natural gas and the 40% price advantage
currently enjoyed by natural gas heat over alternative heating
fuels typically used in our market should also support our
efforts to acquire new customers in both the new housing
and conversion markets. Substantial new economic development
planned for the Atlantic City market is also expected to
drive up housing demand in the coming years.
Non-Utility Delivers Strong Results: Non-utility operations
produced income from continuing operations on a GAAP basis
of $24.6 million and $4.5 million for the 12 months and three
months ended December 31, 2007, respectively, compared with
$36.4 million and $8.1 million for the same periods in 2006.
On an Economic Earnings basis, non-utility income from continuing
operations for 2007 was up 30% to $23.7 million, compared
with $18.2 million earned for the same period in 2006. Economic
Earnings for the year benefited primarily from the extremely
strong performance posted by the wholesale segment of our
commodity marketing business during 2007. Fourth quarter
Economic Earnings were $7.2 million in 2007 and $7.9 million
in 2006. Performance at our key non-utility business lines
was as follows:
• Commodity Marketing – Our commodity marketing
business produced Economic Earnings of $18.9 million in 2007,
compared with $12.6 million in 2006. For the fourth quarter
of 2007, Economic Earnings from commodity marketing were
$6.0 million compared with $6.3 million for the prior year
period. Commodity marketing maintains 10Bcf of gas storage
capacity under management. Storage capacity creates opportunities
for our wholesale commodity business to lock in attractive
margins resulting from volatility in gas market pricing.
We hedge an initial profit margin on each commodity transaction
we enter into and then seek to build upon those margins by
taking advantage of favorable market conditions.
• On-Site Energy Production – Net income from
our on-site energy production business contributed $3.6 million
to SJI’s net earnings, compared with $3.4 million in
2006. This business added $0.7 million to SJI’s bottom
line in the fourth quarter of 2007, compared with $0.9 million
for the prior-year period. Performance benefited from the
opening of additional projects. In the fourth quarter of
2007 we brought online two new projects. Burlington County
Landfill Energy began commercial operations in October; and
our third unit at the Atlantic County landfill went online
in December. We also successfully raised the financing for
the thermal plant serving the Echelon resort in Las Vegas
during December. Our pursuit of energy project opportunities
at a substantial number of proposed gaming projects in Atlantic
City, Las Vegas and tribal areas is continuing. Marina develops,
owns and operates on-site energy plants. We expect these
projects to provide annuity-like income streams under long-term
contracts.
• Retail Services – Retail services, which include
appliance warranty and repair, HVAC installation, and meter
reading, contributed $1.3 million to net income during 2007
compared with $2.1 million of net income for the prior year.
For the fourth quarter, retail services contributed $0.5
million to net income, compared with $0.7 million from the
same 2006 quarter.
SJI’s Balance Sheet Remains Strong: SJI’s consolidated
equity-to-capitalization ratio, inclusive of short-term debt,
was 50.3% at December 31, 2007, compared with 44.4% at the
year end 2006. At our utility the equity-to-capitalization
ratio was 50.3% and 47.4% at December 31, 2007 and 2006,
respectively. Strong earnings growth coupled with cash generated
from operations that resulted in lower working capital needs
produced the improvement. Our goal remains for this ratio
to average close to 50% annually.
Explanation and Reconciliation of Non-GAAP Financial Measures:
This press release includes the non-GAAP financial measures
of Economic Earnings and Economic Earnings per share. The
accompanying schedule provides a reconciliation of these
non-GAAP financial measures to the most directly comparable
financial measures calculated and presented in accordance
with United States generally accepted accounting principles
("GAAP"). The 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 liquidity
or financial performance.
We define Economic Earnings as: Income from continuing operations,
(1) less the change in unrealized gains and plus the change
in unrealized losses, as applicable and in each case after
tax, on all commodity derivative transactions that we are
marking to market, and (2) adjusting for realized gains and
losses, as applicable and in each case after tax, on all
hedges attributed to inventory transactions to align them
with the related cost of inventory in the period of withdrawal.
Economic Earnings is a significant performance metric used
by our management to indicate the amount and timing of income
from continuing operations that we expect to earn related
to commodity transactions. Specifically, we believe that
this financial measure indicates to investors the profitability
of all portions of these transactions and not just the portion
that is subject to mark-to-market valuation measurement.
Considering only one side of the transaction can produce
a false sense as to the profitability of our commodity marketing
activities, as no change in value is reflected for the non-derivative
portion of the transaction.
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:
| |
Three Months Ended
Deceember
31,
|
|
| |
2007
|
2006
|
|
| |
(in thousands) |
|
Income
From Continuing Operations |
$ 16,112 |
$ 20,341 |
|
Minus/Plus:
Unrealized mark-to-market (Gains)/Losses
|
3,054 |
(125) |
|
Realized
(Gains)/Losses on Inventory
Injection Hedges |
(373)
|
(52)
|
|
| Economic Earnings |
$ 18,793
|
$ 20,164
|
|
| |
|
|
|
Earnings per share
From Continuing Operations |
$ 0.54 |
$ 0.69 |
|
Minus/Plus:
Unrealized mark-to-market (Gains)/Losses
|
.10 |
0.00 |
|
Realized
(Gains)/Losses on Inventory
Injection Hedges |
(0.01)
|
0.00
|
|
| Economic Earnings per share |
$ 0.63
|
$ 0.69
|
|
| |
|
|
|
Non-Utility Income
From Continuing Operations |
$ 4,496 |
$ 8,084 |
|
Minus/Plus:
Unrealized mark-to-market (Gains)/Losses
|
3,054 |
(125) |
|
Realized
(Gains)/Losses on Inventory
Injection Hedges |
(373)
|
(52)
|
|
| Economic Earnings |
$ 7,177
|
$ 7,907
|
|
| |
|
|
|
Commodity Marketing Income From Continuing
Operations |
$ 3,313 |
$ 6,484 |
|
Minus/Plus:
Unrealized mark-to-market (Gains)/Losses
|
3,054 |
(125) |
|
Realized
(Gains)/Losses on Inventory
Injection Hedges |
(373)
|
(52)
|
|
| Economic Earnings |
$ 5,994
|
$ 6,307
|
|
| |
|
|
|
| |
12
Months Ended
December 31 ,
|
|
| |
2007
|
2006
|
|
| |
(in thousands) |
|
Income
From Continuing Operations |
$ 62,659 |
$ 72,250 |
|
Minus/Plus:
Unrealized mark-to-market (Gains)/Losses
|
(2,141) |
(21,615) |
|
Realized
(Gains)/Losses on Inventory
Injection Hedges |
1,289
|
3,401
|
|
| Economic Earnings |
$ 61,807
|
$ 54,036
|
|
| |
|
|
|
Earnings per share
From Continuing Operations |
$ 2.12 |
$ 2.47 |
|
Minus/Plus:
Unrealized mark-to-market (Gains)/Losses
|
(0.7) |
(0.74) |
|
Realized
(Gains)/Losses on Inventory
Injection Hedges |
0.04
|
0.12
|
|
| Economic Earnings per share |
$ 2.09
|
$ 1.85
|
|
| |
|
|
|
Non-Utility Income
From Continuing Operations |
$ 24,600 |
$ 36,412 |
|
Minus/Plus:
Unrealized mark-to-market (Gains)/Losses
|
(2,141) |
(21,615) |
|
Realized
(Gains)/Losses on Inventory
Injection Hedges |
1,289
|
3,401
|
|
| Economic Earnings |
$ 23,748
|
$ 18,198
|
|
| |
|
|
|
Commodity Marketing Income From Continuing
Operations |
$ 19,736 |
$ 30,821 |
|
Minus/Plus:
Unrealized mark-to-market (Gains)/Losses
|
(2,141) |
(21,615) |
|
Realized
(Gains)/Losses on Inventory
Injection Hedges |
1,289
|
3,401
|
|
| Economic Earnings |
$ 18,884
|
$ 12,607
|
|
| |
|
|
|
Webcast and Conference Call Details
South Jersey Industries’ Chairman and CEO, Edward
J. Graham, will be hosting an open conference call and webcast
on Thursday, February 28, 2008 at 2:00pm EST to discuss the
company’s 2007 results and future prospects. To participate
in the conference call, dial 1-888-679-8035 approximately
15 minutes ahead of the scheduled time and enter the participant
passcode 53861894. To access the webcast simply visit the
South Jersey Industries website at http://www.sjindustries.com,
click on Investors and then click on the webcast icon. A
recorded version of the webcast will be available at SJI’s
website. A rebroadcast of the conference call will also be
available by calling 1-888-286-8010 and entering the code:
97087435. SJI encourages shareholders, media and members
of the financial community to listen to the conference call
or webcast.
Forward-Looking Statement
This news release contains forward-looking statements. All
statements other than statements of historical fact included
in this press release should be considered forward-looking
statements made in good faith by the Company and are intended
to qualify for the safe harbor from liability established
by the Private Securities Litigation Reform Act of 1995.
When used in this press release words such as “anticipate”, “believe”, “expect”, “estimate”, “forecast”, “goal”, “intend”, “objective”, “plan”, “project”, “seek”, “strategy”
and similar expressions are intended to identify forward-looking
statements. Such forward-looking statements are subject to
risks and uncertainties that could cause actual results to
differ materially from those expressed or implied in the
statements. These risks and uncertainties include, but are
not limited to, the following: general economic conditions
on an international, national, state and local level; weather
conditions in our marketing areas; changes in commodity costs;
the timing of new projects coming online; changes in the
availability of natural gas; “non-routine” or “extraordinary” disruptions
in our distribution system; 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; and changes
in business strategies. SJI assumes no duty to update these
statements should actual events differ from expectations.
About South Jersey Industries
South Jersey Industries (NYSE: SJI) is an energy services
holding company for utility and non-regulated businesses.
A member of the KLD Global Climate 100 Index, SJI offers
solutions to global warming through renewable energy, clean
technology and efficiency. South Jersey Gas, one of the fastest
growing natural gas utilities in the nation, strongly advocates
the efficient use of energy while safely and reliably delivering
natural gas in southern New Jersey. South Jersey Energy Solutions,
the parent of SJI’s non-regulated businesses, provides
innovative, environmentally friendly energy solutions that
help customers control energy costs. South Jersey Energy
acquires and markets natural gas and electricity for retail
customers and offers energy-related services. Marina Energy
develops and operates energy projects including thermal facilities
serving hot and chilled water for casinos, cogeneration facilities
and landfill gas-to-electricity facilities. South Jersey
Resources Group provides wholesale commodity marketing and
risk management services. South Jersey Energy Service Plus
installs, maintains and services heating, air conditioning
and water heating systems, services appliances, installs
solar systems and performs energy audits. For more information
about SJI and its subsidiaries, visit http://www.sjindustries.com.
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