FOR IMMEDIATE RELEASE
Telephone: 609-561-9000
Investor Relations Contact: Marissa Travaline x4227 e-mail:
mtravaline@sjindustries.com
Media Contact: Dan Lockwood x4108 e-mail:
dlockwood@sjindustries.com
November 5, 2015
SJI Reports Third
Quarter Results,
Maintains Guidance
Folsom, NJ - South Jersey
Industries today announced third quarter 2015 and year-to-date
results. GAAP income and Economic Earnings* for the year to date
and for the third quarter of 2015 are presented below, as compared
with the same periods in 2014.
|
2015 |
2014 |
GAAP income from continuing operations -
YTD |
$54.7 million |
$53.6 million |
GAAP income from continuing operations -
Q3 |
$(12.5) million |
$(4.3) million |
GAAP EPS per diluted share - YTD |
$0.80 |
$0.81 |
GAAP EPS per diluted share - Q3 |
$(0.18) |
$(0.07) |
Economic Earnings - YTD |
$55.8 million |
$72.8 million |
Economic Earnings - Q3 |
$(5.0) million |
$(3.4) million |
Economic EPS per diluted share -
YTD |
$0.82 |
$1.10 |
Economic EPS per diluted share -
Q3 |
$(0.07) |
$(0.05) |
Economic Earnings through September totaled $55.8
million, as compared with $72.8 million for the prior year period.
Although these results reflect a nearly $11 million year-over-year
impact associated with the shut down and subsequent
write-down of our energy facility serving the former Revel
property, performance in our core utility and commodity marketing
businesses remains strong. Economic Earnings for the third quarter
of 2015 reflect a loss of $5 million, as compared with a loss of
$3.4 million in the third quarter of 2014. While the third quarter
is generally a lower producing period, these results were further
hindered by increases in write-offs for uncollectible accounts in
our utility, as well as increased post-retirement account expenses.
Lower levels of investment tax credits associated with solar
project development also contributed to the year-over-year
variance.
"Our 2015 EPS guidance of $1.49 to $1.54 remains
intact," said SJI President and CEO Michael J. Renna. "And, more
importantly, our core businesses continue to perform very well,
providing the foundation that will enable us to achieve our long
term target of $150 million of Economic Earnings by 2020."
"Significant infrastructure investments and
customer growth in our utility, coupled with strong contributions
from commodity marketing and new fuel supply contracts, will not
only drive growth but will also steadily improve the quality of
earnings," Renna added. "These results, combined with the benefits
from the PennEast pipeline investment that we expect to see in the
latter part of the decade, reinforce our commitment to and
confidence in our longer term strategic objectives."
EXPECTED CONTRIBUTIONS TO
EARNINGS
Customer additions and infrastructure investments remain poised to
be the primary drivers of SJG earnings in 2015. South Jersey Energy
Group's earnings are expected to continue to benefit from the
increasing contribution from fuel supply management contracts, and
from improved performance associated with our legacy supply
contracts. Investment tax credits from several large solar
projects, complemented by improving performance from our operating
energy production assets, will drive contributions from SJ Energy
Services.
Business Lines |
Expected Contribution
to
2015 Earnings |
Gas Utility Operations |
62 - 70 percent |
SJ Energy Group |
13 - 17 percent |
SJ Energy Services
|
(5) - (10) percent |
|
23 - 29 percent
|
Following is a more detailed discussion of
performance to date in 2015, and expectations for each area of the
business.
REGULATED BUSINESS
PERFORMANCE
Year-to-date utility net income was up over 4.6 percent at $44.4
million, as compared with $42.4 million for the same period in
2014. As in prior quarters, results were driven by infrastructure
investment reflected in our 2014 base rate case settlement, as well
as through accelerated programs, like our Accelerated
Infrastructure Replacement Program, or AIRP, and our Storm
Hardening and Reliability Program, or SHARP. Net customer additions
also remain well above the industry average. While the third
quarter is routinely expected to be the least profitable, utility
net income for the third quarter of 2015 saw negative impacts from
an increase in the write-off for uncollectible accounts, as well as
increased post-retirement benefits costs and higher depreciation
expense. These impacts produced a loss for the quarter of $3.4
million, as compared with the $1.0 million in earnings the utility
added in the third quarter of 2014. There is no difference between
SJG's GAAP net income and Economic Earnings.
Customer Growth:
Over the 12 month period ending September 30, 2015, South Jersey
Gas grew its customer base by nearly 6,900 customers, bringing our
current customer count to approximately 370,000, and achieving
customer growth of 1.9 percent. During the same period, we also
achieved incremental net margin of $1.9 million from customer
additions. Conversions for the quarter totaled 1,343, bringing our
year-to-date conversion total to 4,127, an improvement of 4.7
percent versus 2014.
Extreme weather conditions over the last two
winters drove higher account receivable levels in 2014 and 2015,
resulting in an increase in our reserves for and write-offs of
uncollectible accounts. Quarterly and year-to-date write-offs
totaled $2.1 million and $5.0 million, after tax, respectively in
2015, as compared with $0.5 million and $2.0 million for the same
periods in 2014. We continue working to educate customers about
assistance programs and connect them with the resources needed to
avail themselves of those programs.
Regulatory Update:
Infrastructure investment remains a core component of our regulated
growth, with combined investments totaling $48.8 million
year-to-date from our AIRP and SHARP. Investments through these
programs provided an incremental net income contribution of $1.3
million for the first nine months of 2015. For the full year, these
investments are expected to contribute incremental net income of
$2.5 million for 2015.
In August, South Jersey Gas received a Certificate
of Filing from the staff of the NJ Pinelands Commission, meeting a
critical requirement to move forward with the proposed B.L. England
system reliability project. The advancement of our amended
application was further bolstered by an October public hearing that
featured members of the community, as well as business and industry
organizations, speaking in favor of the project. Pending final
approvals from the New Jersey Board of Public Utilities and the
Pinelands Commission, we expect to commence construction of this
22-mile pipeline in 2016, which will provide enhanced reliability
and environmental benefits across the region.
In September, South Jersey Gas received approval
from the New Jersey Board of Public Utilities to reduce rates,
decreasing the average customer's 100-therm monthly gas bill by
10.3 percent. The reduction, which has no impact on SJG's net
income, was primarily driven by decreases to the company's Basic
Gas Supply Service and Conservation Incentive Program rate
components, and is made possible by lower natural gas prices,
coupled with effective gas supply portfolio management.
Compressed Natural Gas
Update:
In October, construction began on a compressed natural gas station
in Paulsboro that represents a joint project between South Jersey
Gas and Wawa. This is the first of five stations we expect to come
on-line by the end of 2016, as we continue to mainstream CNG
technology for the benefit of drivers throughout our service
territory.
NON-UTILITY BUSINESS
PERFORMANCE
SJ ENERGY SERVICES:
Year-to-date Economic Earnings in SJ Energy Services through the
third quarter of 2015 totaled $5.4 million, as compared with $21.5
million through the third quarter of 2014. Of the variance, $11
million is related to previous 2015 investment write-downs and 2014
income associated with our energy facility at the former Revel
property. Economic Earnings for the quarter totaled $0.8 million in
Energy Services, matching third quarter 2014 Economic Earnings,
which also totaled $0.8 million. These results reflect the benefits
of improving solar operating performance and lower ITC for this
period.
CHP/Thermal - CHP operations
for the year-to-date and the third quarter of 2015 produced a loss
in Economic Earnings of $8.6 million and a loss in Economic
Earnings of $0.1 million, respectively, as compared with Economic
Earnings of $2.7 million and a loss of $2.2 million for the same
periods in the prior year. Results for 2015 primarily reflect legal
costs and the lack of income from operations at Revel. Results from
steady performance of our operating CHP assets, including those
serving Borgata, Montclair University, and downtown Hartford,
contributed $0.9 million for the quarter, up slightly as compared
with $0.8 in the third quarter of 2014.
Solar - Economic Earnings
contributions from our solar portfolio year-to-date and for the
third quarter of 2015 totaled $16.6 million and $1.5 million,
respectively, as compared with $21.1 million and $3.5 million for
the same periods in the prior year. ITC contributions from solar
development to Economic Earnings for the first nine months of 2015
were $18.6 million, as compared with $23.6 million for the first
nine months of 2014. For the current quarter, ITC contributed $1.3
million, as compared with $3.5 million in the third quarter of
2014. We expect to recognize additional ITC during the fourth
quarter that will make up for the variances, versus the prior year,
for the quarter and year-to-date.
Solar production levels remain strong, generating
nearly 112,000 solar renewable energy credits year to date through
September. As has been the case in prior quarter's results,
the strong production that drove solar operating performance in the
third quarter is not yet fully recognized in net income due to the
timing of the certification of renewable energy certificates in
Massachusetts, which creates a six-month lag.
Landfill - Landfill projects
remain down on a year-to-date basis, with a loss of $3.2 million in
Economic Earnings through September 2015, as compared with a loss
of $2.7 million in 2014. The third quarter 2015 loss totaled $0.8
million as compared with $0.4 million for the third quarter of
2014. While we have experienced an uptick in production associated
with the landfill sites where we have implemented operational
improvement programs, we did experience higher than expected
maintenance costs in the quarter, and we continue to weigh options
regarding the future of these projects within our portfolio.
There is no difference between GAAP net income and Economic
Earnings for landfill results.
SJ ENERGY GROUP:
Economic Earnings from our commodity marketing activities for the
first nine months of 2015 were $6.1 million in 2015, as compared
with $8.8 million for the same period in 2014. For the third
quarter of 2015, this area of the business produced a loss of $2.3
million as compared with a loss of $5.1 million for the third
quarter of 2014. The year-to-date comparison continues to reflect
the optimization that occurred from the extreme weather and
associated price volatility during the first quarter of 2014.
However, the $2.8 million improvement for the third quarter of
2015, as compared with the third quarter of 2014, clearly
demonstrates improved performance associated with our long term
producer contracts, as we have indicated throughout the year in
investor communications.
We continue to expect this area of the business to
exceed 2014 full year performance. Further, the future remains
bright in this business line with additional announced contracts
scheduled to come on-line in 2016 and 2017. We also have several
additional deals we expect to announce soon.
SJI BALANCE SHEET
UPDATE
Our equity-to-capitalization ratio as of September 30, 2015 was 41
percent as compared with 43 percent at the end of the third quarter
2014.
Year to date through September 30, SJI has used
its Dividend Reinvestment Plan to issue equity totaling $9.7
million in support of infrastructure investments in 2015 and we
expect that to continue in the fourth quarter. The company also has
over $300 million of deferred tax benefits remaining, related to
our investments, that we expect to realize between now and 2021,
the benefits of which will help support the balance sheet.
CONFERENCE CALL / WEBCAST
DETAILS
To participate in the conference call at 11:00 AM ET on Thursday,
November 5, 2015, please pre-register by going to the South Jersey
Industries website, http://www.sjindustries.com, clicking on
Investors, and then scrolling down to "Webcasts and Presentations"
for the pre-registration link. This will allow you to generate an
event reminder as well as a PIN to expedite your inclusion into the
conference call when dialing in. On the day of the call, dial
1-888-713-4199 approximately 15 minutes ahead of the scheduled call
time; enter the participant pass code 31814439 and the PIN you
received during pre-registration. International callers may dial
1-617-213-4861; enter the participant pass code 31814439 and the
PIN you received during pre-registration.
To listen to the live webcast simply visit the
South Jersey Industries website at
http://www.sjindustries.com , and scroll down to the "Webcasts and
Presentations" section where you will find the link to participate.
SJI encourages shareholders, media, and members of the financial
community to listen to the webcast.
FORWARD LOOKING
STATEMENT
Certain statements contained in this news release may qualify as
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements other than statements of
historical fact included in this release should be considered
forward-looking statements made in good faith and are intended to
qualify for the safe harbor from liability established by the
Private Securities Litigation Reform Act of 1995. 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; 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.
A discussion of these and other
risks and uncertainties may be found in the Company's Annual Report
on Form 10-K for the year ended December 31, 2014 and in other
filings made by us with the Securities and Exchange Commission
(SEC). These cautionary statements should not be construed by you
to be exhaustive and they are made only as of the date of this news
release, or in any document incorporated by reference, at the date
of such document. While South Jersey Industries, Inc. (SJI or the
Company) believes these forward-looking statements to be
reasonable, there can be no assurance that they will approximate
actual experience or that the expectations derived from them will
be realized. Further, SJI undertakes no obligation to update or
revise any of its forward-looking statements, whether as a result
of new information, future events or otherwise.
ABOUT SOUTH JERSEY
INDUSTRIES
South Jersey Industries (NYSE: SJI), an energy services holding
company based in Folsom, NJ, operates its business through two
primary subsidiaries. South Jersey Gas, one of the nation's fastest
growing natural gas utilities, delivers clean, efficient natural
gas and promotes energy efficiency to approximately 370,000
customers in southern New Jersey. SJI's non-regulated businesses,
under South Jersey Energy Solutions, promote efficiency, clean
technology and renewable energy by developing, owning and operating
on-site energy production facilities - including Combined Heat and
Power, Solar, and District Heating and Cooling projects; acquiring
and marketing natural gas and electricity for retail customers;
providing wholesale commodity marketing and fuel supply management
services; and offering HVAC and other energy-efficiency related
services. For more information about SJI and its subsidiaries,
visit http://www.sjindustries.com.
EXPLANATION AND RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES
*This news release includes the non-generally accepted accounting
principles ("non-GAAP") financial measures of Economic Earnings and
Economic Earnings per share when evaluating the results of
operations for its nonutility 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 liquidity
or financial performance.
We define Economic Earnings as: Income from
continuing operations, (a) less the change in unrealized gains and
plus the change in unrealized losses, as applicable and in each
case after tax, on all derivative transactions, (b) less realized
gains and plus realized losses, as applicable and in each case
after tax, on all commodity derivative transactions attributed to
expected purchases of gas in storage to match the recognition of
these gains and losses with the recognition of the related cost of
the gas in storage in the period of withdrawal, and (c) less the
impact of transactions or contractual arrangements where the true
economic impact will be realized in a future period.
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 after
taking into account the impact of derivative instruments on the
related transactions and transactions or contractual arrangements
where the true economic impact will be realized in a future period.
Specifically, 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. 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.
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 for the three and nine months ended September 30 (in
thousands except per share data):
|
Three Months Ended
September 30 |
Nine Months Ended
September 30 |
|
|
In thousands except per share
data |
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
Income/(Loss) from Continuing
Operations |
$ |
(12,532) |
$ |
(4,276) |
$ |
54,662 |
$ |
53,636 |
(Minus)/Plus: |
|
|
|
|
|
|
|
|
Unrealized Mark-to-Market Losses/(Gains) on Derivatives |
|
7,560 |
|
936 |
|
2,670 |
|
18,816 |
Realized (Gains)/Losses on Inventory Injection Hedges |
|
15 |
|
(29) |
|
52 |
|
391 |
Net Loss from Affiliated Companies (A) |
|
--- |
|
--- |
|
(1,524) |
|
--- |
Other (B) |
|
(25) |
|
(25) |
|
(75) |
|
(75) |
Economic Earnings |
$ |
(4,982) |
$ |
(3,394) |
$ |
55,785 |
$ |
72,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share from Continuing
Operations (C) |
$ |
(0.18) |
$ |
(0.07) |
$ |
0.80 |
$ |
0.81 |
(Minus)/Plus: |
|
|
|
|
|
|
|
|
Unrealized Mark-to-Market Losses/(Gains) on Derivatives |
|
0.11 |
|
0.02 |
|
0.04 |
|
0.29 |
Net Loss from Affiliated Companies (A) |
|
--- |
|
--- |
|
(0.02) |
|
--- |
Economic Earnings Per Share |
$ |
(0.07) |
$ |
(0.05) |
$ |
0.82 |
$ |
1.10 |
The following table presents reconciliations of
GAAP income from continuing operations to Economic Earnings for our
non-utility businesses for the three and nine months ended
September 30, 2015:
|
Three Months Ended
September 30 |
Nine Months Ended
September 30 |
|
|
In thousands except per share
data |
|
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
|
|
|
|
|
|
|
|
South Jersey Energy Group Income/(Loss) from
Continuing Operations |
$ |
(9,593) |
$ |
(6,086) |
$ |
3,671 |
$ |
(10,138) |
(Minus)/Plus |
|
|
|
|
|
|
|
|
Unrealized Mark-to-Market Losses/(Gains) on Derivatives |
|
7,246 |
|
1,000 |
|
2,394 |
|
18,574 |
Realized (Gains)/Losses on Inventory Injection Hedges |
|
15 |
|
(29) |
|
52 |
|
391 |
South Jersey Energy Group Economic
Earnings |
$ |
(2,332) |
$ |
(5,115) |
$ |
6,117 |
$ |
8,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South Jersey Energy Services Income/(Loss)
from Continuing Operations |
$ |
514 |
$ |
852 |
$ |
6,678 |
$ |
21,381
|
Unrealized Mark-to-Market (Gains)/Losses on Derivatives |
|
314 |
|
(64) |
|
276 |
|
242 |
Net Loss from Affiliated Companies (A) |
|
--- |
|
--- |
|
(1,524) |
|
--- |
Other (B) |
|
(25) |
|
(25) |
|
(75) |
|
(75) |
South Jersey Energy Services Economic
Earnings |
$ |
803 |
$ |
763 |
$ |
5,355 |
$ |
21,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHP/Thermal Income/(Loss) from Continuing
Operations |
$ |
(390) |
$ |
(2,184) |
$ |
(7,360) |
$ |
2,424 |
Unrealized Mark-to-Market (Gains)/Losses on Derivatives |
|
314 |
|
(64) |
|
276 |
|
242 |
Net Loss from Affiliated Companies (A) |
|
--- |
|
--- |
|
(1,524) |
|
--- |
CHP/Thermal Economic Earnings |
$ |
(76) |
$ |
(2,248) |
$ |
(8,608) |
$ |
2,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solar Income/(Loss) from Continuing
Operations |
$ |
1,486 |
$ |
3,559 |
$ |
16,670 |
$ |
21,138 |
Other (B) |
|
(25) |
|
(25) |
|
(75) |
|
(75) |
Solar Economic Earnings |
$ |
1,461 |
$ |
3,534 |
$ |
16,595 |
$ |
21,063 |
(A) Resulting from a reserve for uncollectible
accounts recorded by an Energenic subsidiary that owns and operates
a central energy center and energy distribution system for a hotel,
casino and entertainment complex in Atlantic City, New Jersey. In
prior periods this charge was being excluded from Economic Earnings
until the total economic impact of the proceedings were realized.
During the second quarter of 2015, the Company, through its
investment in Energenic, reduced the carrying value of the
investment in this project. As such, this charge is now being
included in Economic Earnings for the nine months ended
September 30, 2015.
(B) Represents additional depreciation expense
within Economic Earnings on a solar generating facility. During
2012 an impairment charge was recorded within Income from
Continuing Operations on a solar generating facility which reduced
its depreciable basis and recurring depreciation expense. This
impairment charge was excluded from Economic Earnings and,
therefore, the related reduction in depreciation expense is being
added back.
(C) All per share amounts were adjusted for
the 2-for-1 stock split, effective on May 8, 2015.
Q3 2015 SJI Earnings
Statement
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: South Jersey Industries via Globenewswire
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