FOR IMMEDIATE
RELEASE
Telephone: 609-561-9000
Investor Relations/Media Contact: Marissa Travaline x4227
e-mail: mtravaline@sjindustries.com
SJI Reports Q3
Earnings;
Maintains 2016 Guidance
Folsom, NJ, November 4, 2016
- South Jersey Industries (NYSE: SJI) today announced results for
the third quarter of 2016.
GAAP income and Economic Earnings* for the year to
date and for the third quarter are presented in the chart below, as
compared with the same periods in 2015.
|
2016 |
2015 |
GAAP income from continuing operations -
YTD |
$73.1 million |
$54.7 million |
GAAP income from continuing operations -
Q3 |
$9.7 million |
$(12.5) million |
GAAP EPS per diluted share - YTD |
$0.97 |
$0.80 |
GAAP EPS per diluted share - Q3 |
$0.12 |
$(0.18) |
|
|
|
Economic Earnings - YTD |
$69.6 million |
$55.8 million |
Economic Earnings - Q3 |
$3.9 million |
$(5.0) million |
Economic EPS per diluted share -
YTD |
$0.92 |
$0.82 |
Economic EPS per diluted share -
Q3 |
$0.05 |
$(0.07) |
"Our results clearly demonstrate progress toward
the key tenets of our strategic plan, most notably, growth in our
core businesses supported by a strong balance sheet," said SJI
President and CEO Michael J. Renna. "Growing contributions from our
utility coupled with strong performance from our fuel management
contracts and solar assets have us well positioned to achieve our
full year objectives, including Economic EPS of $1.29 to $1.35, as
we move toward our goal of $150 million of Economic Earnings by
2020."
We do not provide GAAP earnings expectations due
to the unpredictable impacts that mark-to-market adjustments can
have on our commodity businesses. Although sometimes significant,
these mark-to-market adjustments only affect the timing of when
unrealized gains and losses are recognized.
EXPECTED CONTRIBUTIONS TO
EARNINGS
The following chart outlines our expectations around 2016 Economic
Earnings composition.
Business Lines |
Expected Contribution to
2016 Economic Earnings |
|
Regulated
Gas Utility Operations |
65 - 68 percent |
|
Non-Utility
SJ Energy Group |
18 - 23 percent |
|
SJ Energy Services
|
10 - 15
percent |
|
|
|
|
The third quarter reflected consistent performance
within our utility, as well as strong contributions from our
non-utility businesses. Continued investment through our
Accelerated Infrastructure Replacement Program, or AIRP, and Storm
Hardening and Reliability Program, or SHARP, produced slight
improvement in year-over-year utility results. At the same time,
increased production from our solar portfolio, and the addition of
two new fuel management contracts bolstered non-utility
performance.
The following provides a more detailed discussion
of performance from each area of the business.
REGULATED BUSINESS
PERFORMANCE
SOUTH JERSEY GAS:
Year-to-date utility net income of $46.1 million exceeded prior
year results of $44.4 million. The third quarter is traditionally a
weak one for natural gas utilities; however, South Jersey Gas
reduced its third quarter 2016 loss to $3.3 million from a loss of
$3.4 million in the third quarter of 2015. There is no difference
between SJG's GAAP net income and Economic Earnings.
Customer Growth:
During the third quarter, South Jersey Gas added 1,424 new
customers. From September 30, 2015 through September 30, 2016, our
customer count increased by 4,830, bringing our total number of
customers served to 374,637. During this same twelve-month period,
we also achieved incremental net income of $2.6 million from
customer additions.
The 1.3% customer growth rate achieved over the
last twelve months came despite increased collection activity on
past due accounts and increasing parity in heating fuel costs. We
expect natural gas to remain the most cost effective fuel choice
for home heating, and anticipate conversion growth that continues
to outpace that of our peers.
Regulatory Update:
Year-to-date investments under our AIRP and SHARP, in the
aggregate, totaled a combined $57.7 million, and are expected to
total approximately $75 million by year end. Investments from these
programs provided an incremental net income contribution of $4.3
million for the first nine months of 2016, as compared with the
same period in 2015, and are expected to add approximately $5.8
million in incremental net income on a full year basis in 2016.
As a result of proactive collaboration with the
New Jersey Board of Public Utilities, our AIRP and SHARP programs
have enabled South Jersey Gas to replace more than 435 miles of
distribution mains, and 26,756 service lines to customers. The
success of these programs in reinforcing the safety and reliability
of our system was a driving force in the October 31 approval to
extend the AIRP originally set to expire at the end of this year.
The extended program will allow for an additional $302.5 million of
investment over the next 5 years, enabling South Jersey Gas to
replace all bare steel and cast iron pipe remaining in our
system.
The October 31 approval comes on the heels of a
September approval to adjust customer rates associated with gas
costs and our conservation incentive program. The approval of those
items resulted in a 2.4% average decrease to the typical
residential customer bill, effective October 1, with no impact on
utility net income. Low cost natural gas sourced from the Marcellus
region continues to deliver significant savings for South Jersey
Gas customers. Between the impacts of our October rate reduction
and a $10 million bill credit planned for later in the year, our
annual residential customer bills are, on average, at their lowest
levels in 15 years. As a result, we are able to make the
investments necessary to ensure the safety and reliability of our
system with minimal impact to ratepayers.
Project Updates:
In October, oral arguments were completed on the consolidated
appeals filed to challenge approvals we previously received to
build the pipeline that will reinforce our system reliability and
supply the former B.L. England generating station with natural gas.
Construction is expected to commence upon resolution of any
outstanding appeals, and will be pursued along a timeline that
carefully weighs cost and impacts to the community, as well as
environmental impacts.
SJI MIDSTREAM:
September marked the conclusion of the comment period on the
Federal Energy Regulatory Commission's (FERC) Draft Environmental
Impact Statement (DEIS) regarding the PennEast pipeline, with the
final environmental review expected in December 2016. The favorable
DEIS issued by FERC reinforces our confidence that the clear and
demonstrated need for this pipeline and its potential to
significantly lower energy costs for the region will result in a
Certificate of Public Convenience and Necessity being issued in
early 2017. This timeline would allow us to achieve the targeted
in-service date for the pipeline in the second half of 2018.
NON-UTILITY BUSINESS
PERFORMANCE
SJ ENERGY
GROUP:
The following chart details the quarterly and year-to-date
contributions to earnings from our wholesale and retail commodity
business, South Jersey Energy Group (SJEG):
|
2016 |
2015 |
SJEG GAAP income from continuing operations
- YTD |
$14.1 million |
$3.7 million |
SJEG GAAP income from continuing operations
- Q3 |
$4.2 million |
$(9.6) million |
|
|
|
SJEG Economic Earnings from continuing
operations - YTD |
$10.4 million |
$6.1 million |
SJEG Economic Earnings from continuing
operations - Q3 |
$(1.4) million |
$(2.3) million |
South Jersey Energy Group's contribution for the
quarter and year-to-date reflect the impact of two additional fuel
management contracts that commenced in June, for a total of five
active contracts contributing to current results. For the third
quarter, this area of our wholesale gas marketing business
contributed $1.3 million of Economic Earnings and $3.0 million on a
year-to-date basis. Also during the quarter, our sixth fuel
management contract, at the Stonewall facility, began taking test
gas and is expected to commence commercial operations in 2017. With
five contracts contributing to earnings in 2016, and five more
expected to be commercially operational over the next three years,
a sharp uptick in volumes and margins will help drive earnings from
this area. Energy Group's performance also continues to benefit
from existing natural gas wholesale marketing contracts and gas and
electric retail marketing contracts.
SJ ENERGY SERVICES:
The following chart details the quarterly and year-to-date
contributions to earnings from our energy production business,
South Jersey Energy Services (SJES):
|
2016 |
2015 |
SJES GAAP income from continuing operations
- YTD |
$12.9 million |
$6.7 million |
SJES GAAP income from continuing operations
- Q3 |
$8.9 million |
$0.5 million |
|
|
|
SJES Economic Earnings from continuing
operations - YTD |
$13.3 million |
$5.4 million |
SJES Economic Earnings from continuing
operations - Q3 |
$8.7 million |
$0.8 million |
Economic Earnings for SJES for the years to date
and third quarters of 2016 and 2015 included non-recurring items
that contributed to a large change from year to year. Among these
items are charges and recoveries associated with the write-down of
our energy facility at the former Revel casino and benefits from
investment tax credits (ITC) associated with solar project
development. The Economic Earnings impact of these items in their
respective time periods is detailed below (in millions of
dollars):
|
Energy Facility Impacts |
ITC Contributions |
YTD
2015 |
$(12.5) |
$18.6 |
YTD
2016 |
$3.8 |
$4.6
|
Q3
2015 |
$(1.0) |
$1.3 |
Q3
2016 |
$2.9 |
$1.8
|
Excluding the impacts of these items, operating
performance from our energy production assets improved
considerably, from a loss of $0.7 million of Economic Earnings for
the first nine months of 2015 to Economic Earnings of $4.9 million
for the same period in 2016. When excluding these impacts from
third quarter results, operating performance from our energy
production assets improved from $0.5 million in Economic Earnings
in the third quarter of 2015 to $4.0 million for the third quarter
of 2016. This year-over-year improvement is due in large part to
strong production from our solar fleet and improved SREC
prices.
CONFERENCE CALL / WEBCAST
DETAILS
To participate in the conference call at 11:00 AM ET on November 4,
2016, please pre-register by going to the South Jersey Industries
website, http://www.sjindustries.com, and clicking on Investors, to
access the pre-registration link. This will allow you to generate a
PIN to expedite your inclusion into the conference call when
dialing in. On the day of the call, dial 1-888-679-8035
approximately 15 minutes ahead of the scheduled call time; enter
the participant pass code 89519702 and the PIN you received during
pre-registration. International callers may dial 1-617-213-4848;
enter the participant pass code 89519702 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
This news release 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 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.
We use words such as "anticipate," "believe," "expect," "estimate,"
"forecast," "goal," "intend," "objective," "plan," "project,"
"seek," "strategy," "target", "will" and similar expressions 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 made and are inherently
uncertain. Forward-looking statements are subject to risks
and uncertainties that could cause actual results to differ
materially from those expressed 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; 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 that could cause actual results to differ
materially from those expressed in the forward-looking statements
may be found in the Company's Annual Report on Form 10-K for the
year ended December 31, 2015 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
speak only as of the date they are made. 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 delivers clean, efficient
natural gas and promotes energy efficiency to approximately 375,000
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; acquiring and marketing
natural gas and electricity for retail customers; providing
wholesale commodity marketing and fuel 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 financial measures of Economic
Earnings and Economic Earnings per share, which are not prepared in
accordance with generally accepted accounting principles in the
United States (GAAP), 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,
(1) 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, and (2) 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 (3) 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 GAAP income from continuing operations and earnings per share
from continuing operations, to Economic Earnings and Economic
Earnings per Share:
|
Three Months Ended
September 30 |
Nine Months Ended
September 30 |
|
|
In thousands except per share
data |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
|
Income/(Loss) from Continuing
Operations |
$ |
9,664 |
$ |
(12,532) |
$ |
73,053 |
$ |
54,662 |
(Minus)/Plus: |
|
|
|
|
|
|
|
|
Unrealized Mark-to-Market (Gains)/Losses on Derivatives |
|
(9,459) |
|
12,600 |
|
(5,548) |
|
4,449 |
Realized (Gains)/Losses on Inventory Injection Hedges |
|
(39) |
|
24 |
|
(12) |
|
87 |
Net Losses from Affiliated Companies (A) |
|
--- |
|
--- |
|
--- |
|
(2,540) |
Other (B) |
|
(41) |
|
(41) |
|
(124) |
|
(124) |
Income Taxes (C) |
|
3,816 |
|
(5,033) |
|
2,273 |
|
(749) |
Economic Earnings |
$ |
3,941 |
$ |
(4,982) |
$ |
69,642 |
$ |
55,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share from Continuing
Operations |
$ |
0.12 |
$ |
(0.18) |
$ |
0.97 |
$ |
0.80 |
(Minus)/Plus: |
|
|
|
|
|
|
|
|
Unrealized Mark-to-Market (Gains)/Losses on Derivatives |
|
(0.12) |
|
0.18 |
|
(0.08) |
|
0.07 |
Net Losses from Affiliated Companies (A) |
|
--- |
|
--- |
|
--- |
|
(0.04) |
Income Taxes (C) |
|
0.05 |
|
(0.07) |
|
0.03 |
|
(0.01) |
Economic Earnings Per Share |
$ |
0.05 |
$ |
(0.07) |
$ |
0.92 |
$ |
0.82 |
The following table presents reconciliations of
GAAP income from continuing operations to Economic Earnings and
prior year comparisons for our non-utility businesses for the three
and nine months periods ended September 30, 2016:
|
Three Months Ended
September 30 |
Nine Months Ended
September 30 |
|
|
In thousands except per share
data |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
|
South Jersey Energy Group Income/(Loss) from
Continuing Operations |
$ |
4,171 |
$ |
(9,593) |
$ |
14,140 |
$ |
3,671 |
(Minus)/Plus |
|
|
|
|
|
|
|
|
Unrealized Mark-to-Market Losses/(Gains) on Derivatives |
|
(9,305) |
|
12,076 |
|
(6,211) |
|
3,989 |
Realized (Gains)/Losses on Inventory Injection Hedges |
|
(39) |
|
24 |
|
(12) |
|
87 |
Income Taxes (C) |
|
3,738 |
|
(4,839) |
|
2,489 |
|
(1,630) |
South Jersey Energy Group Economic
Earnings |
$ |
(1,435) |
$ |
(2,332) |
$ |
10,406 |
$ |
6,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South Jersey Energy Services Income/(Loss)
from Continuing Operations |
$ |
8,857 |
$ |
514 |
$ |
12,936 |
$ |
6,678 |
Unrealized Mark-to-Market (Gains)/Losses on Derivatives |
|
(154) |
|
524 |
|
663 |
|
460 |
Net Loss from Affiliated Companies (A) |
|
---- |
|
---- |
|
--- |
|
(2,540) |
Other (B) |
|
(41) |
|
(41) |
|
(124) |
|
(124) |
Income Taxes (C) |
|
78 |
|
(194) |
|
(216) |
|
881 |
South Jersey Energy Services Economic
Earnings |
$ |
8,740 |
$ |
803 |
$ |
13,259 |
$ |
5,355 |
(A) Resulting from a reserve for uncollectible
accounts recorded by an Energenic subsidiary that owned and
operated a central energy center and energy distribution system for
a hotel, casino and entertainment complex in Atlantic City, New
Jersey. In the periods prior to the second quarter of 2015, this
charge was excluded from Economic Earnings until the total economic
impact of the proceedings was 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 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) Determined using a combined average statutory
tax rate of 40%.
###
SJI Financial Statements
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq 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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