Folsom,
NJ - South Jersey Industries (NYSE: SJI)
today announced income from continuing operations for the
first quarter 2008 of $24.7 million, or $0.83 per share,
compared with income from continuing operations of $27.2
million, or $0.92 per share for the same quarter of 2007.
SJI’s Economic Earnings of $39.2 million, or $1.32
per share, for the first quarter 2008 compared with $38.4
million, or $1.30 per share, produced in the first quarter
2007. First quarter 2007 Economic Earnings benefited from
strong reported performance at our Asset Management & Marketing
business that also produced $4.9 million of related hedge
losses that were recognized during the remainder of 2007.
Since the current quarter’s profits have no offsetting
hedge losses affecting future periods, SJI’s Economic
Earnings performance for the first quarter of 2008 reflects
a net 17% improvement over the prior year period.
“We are very pleased with first quarter performance,
with improved contributions from all segments of our business,” stated
Edward J. Graham, SJI’s chairman and CEO. “Results
produced and actions taken during the quarter that will benefit
the remainder of the year were instrumental in raising our
expectations for earnings growth for the year,” continued
Graham. Last week SJI announced a target of 6% to 10% Economic
Earnings per share growth for 2008. For this year, that target
represents an increase from SJI’s long-term average
growth target of 6% to 7% per year.
The non-GAAP financial measure, Economic Earnings, adjusts
income from continuing operations 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 for Non-GAAP Financial Measures at the
end of this release.)
SJI’s First Quarter 2008
Highlights:
Produced record earnings
on an Economic Earnings basis for SJI
Produced record utility earnings
Balance sheet strengthened: equity-to-capitalization
ratio was 56% at March 31, 2008
Non-Utility Income Contribution: Non-Utility operations
produced a loss from continuing operations on a GAAP basis
of $0.4 million in the first quarter of 2008, compared with
$2.9 million of income for the same period in 2007. On an
Economic Earnings basis, non-utility income from continuing
operations for the first quarter of 2008 duplicated first
quarter 2007 results of $14.1 million, despite the benefit
2007 results received from asset marketing transactions on
which related losses could not be recognized until subsequent
quarters. Performance at our key non-utility business lines
was as follows:
Asset Management & Marketing – This
business contributed $12.2 million in the first quarter of
2008 on an Economic Earnings basis. While slightly lower
than the $13.0 million produced in the same quarter of 2007,
prior year results benefited from gains on transactions in
the first quarter that incurred $4.9 million of offsetting
losses over the remainder of 2007. The results from our asset
management activities in the first quarter of 2008 incurred
no offsets that will impact future periods. Having in excess
of 10 Bcf of gas storage capacity under management creates
opportunities for this business to lock in attractive margins
resulting from volatility in gas market pricing and realizing
the value of related pipeline capacity. 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 - Our on-site energy
production business contributed $1.2 million in the first
quarter compared with $0.8 million in the prior-year period.
Improved year-over-year operating performance at Marina’s
existing thermal and landfill gas facilities accounted for
the over 40% improvement. We expect Marina’s performance
to receive an added boost when it begins to provide energy
services to the Borgata Casino Hotel & Resort’s
expansion that opens in the second quarter. Construction
of the thermal plant serving the Echelon resort in Las Vegas
is continuing ahead of schedule, and remains well positioned
to meet its planned start-up date of third quarter 2010.
Our pursuit of similar energy project opportunities at a
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 includes our appliance warranty and repair
business, and our meter reading business, contributed $0.7
million in the first quarter compared with $0.3 million for
the prior-year period. The combination of new sales campaigns
and some realized operational efficiencies drove the improved
performance.
Utility Performance: South
Jersey Gas’ first quarter
2008 net income was $25.0 million, a 3% increase over the
$24.3 million produced for the comparable quarter in 2007.
The combination of increased operating margins due to customer
growth, and lower operating and interest expense benefited
the 2008 comparison. Areas of note include:
Conservation Incentive Program – The CIP
continued to work as expected by protecting $6.2 million
of SJG’s first quarter net income, 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.
Customer Growth -
South Jersey Gas added 4,990 customers, a 1.5% increase,
during the 12-month period ended March 31, 2008, despite
the slowdown in the new housing market. Utility customers
total 337,455 at the end of the first quarter of 2008. Customers
added in the past 12 months are anticipated to contribute
approximately $1.7 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 an almost 50% 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. We also expect a continuation of the trend of obtaining
strong margins from new commercial customers that we have
experienced in recent years. For the future, substantial
new economic development planned for the Atlantic City market
is also expected to positively impact housing demand in our
service territory.
SJI’s Balance Sheet Remains on Target: SJI’s
consolidated equity-to-capitalization ratio, inclusive of
short-term debt, was 56.0% at March 31, 2008, compared with
51.1% at the same point in 2007. The equity-to-capitalization
ratio at our utility was 54.9% and 52.8% at March 31, 2008
and 2007, respectively. Cash generated from operations that
reduced the need for borrowing to support working capital
needs drove the improvement. Our goal remains for this ratio
to average 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
March
31,
|
|
| |
2008
|
2007
|
|
| |
(in thousands) |
|
Income
From Continuing Operations |
$ 24,712 |
$ 27,171 |
|
Minus/Plus:
Unrealized mark-to-market (Gains)/Losses
|
15,542 |
11,399 |
|
Realized
(Gains)/Losses on Inventory
Injection Hedges |
(1,061)
|
(217)
|
|
| Economic Earnings |
$ 39,193
|
$ 38,353
|
|
| |
|
|
|
Earnings per share
From Continuing Operations |
$ 0.83 |
$ 0.92 |
|
Minus/Plus:
Unrealized mark-to-market (Gains)/Losses
|
.52 |
0.39 |
|
Realized
(Gains)/Losses on Inventory
Injection Hedges |
(0.03)
|
(0.01)
|
|
| Economic Earnings per share |
$ 1.32
|
$ 1.30
|
|
| |
|
|
|
Non-Utility Income
From Continuing Operations |
($ 354) |
$ 2,910 |
|
Minus/Plus:
Unrealized mark-to-market (Gains)/Losses
|
15,542 |
11,399 |
|
Realized
(Gains)/Losses on Inventory
Injection Hedges |
(1,061)
|
(217)
|
|
| Economic Earnings |
$ 14,127
|
$ 14,092
|
|
| |
|
|
|
Asset Management & Marketing Income
From Continuing Operations |
($ 2,269) |
$ 1,853 |
|
Minus/Plus:
Unrealized mark-to-market (Gains)/Losses
|
15,542 |
11,399 |
|
Realized
(Gains)/Losses on Inventory
Injection Hedges |
(1,061)
|
(217)
|
|
| Economic Earnings |
$ 12,212
|
$ 13,035
|
|
| |
|
|
|
Webcast and Conference Call Details
South Jersey Industries’ President and CEO, Edward
J. Graham, will be hosting an open conference call and webcast
on Friday, May 9, 2008 at 11:00 am EDT to discuss the Company’s
first quarter 2008 results and future prospects. To participate
in the conference call, dial 1-888-680-0893 approximately
15 minutes ahead of the scheduled time and enter the participant
passcode 62680862. 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:
55615987. 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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