FOR IMMEDIATE
RELEASE
Telephone: 609-561-9000
Investor Relations/Media Contact: Marissa Travaline x4227 e-mail:
mtravaline@sjindustries.com
May 5, 2016
SJI Reports Q1
Earnings;
Offers 2016 Guidance
Folsom, NJ - South Jersey
Industries (NYSE: SJI) today announced results for the first
quarter of 2016, reporting Economic Earnings totaling $57.0
million.
GAAP income and Economic Earnings for the quarter
are presented in the chart below, as compared with 2015.
|
2016 |
2015 |
GAAP income from continuing operations -
Q1 |
$68.2 million |
$53.9 million |
GAAP EPS per diluted share - Q1 |
$0.95 |
$0.79 |
Economic Earnings - Q1 |
$57.0 million |
$58.9 million |
Economic EPS per diluted share -
Q1 |
$0.80 |
$0.86 |
"Our first quarter performance positions us for a
strong 2016," said SJI President and CEO Michael J. Renna. "Robust
performance in our utility, complemented by a 56% year-over-year
increase in earnings from our commodity business and improved
operations from our energy production business, nearly offset an
$8.5 million year over year planned reduction in investment tax
credits. Most importantly, our performance reflects the foundation
for our strategy of achieving growth from high quality, repeatable,
low risk earnings streams."
2016 EXPECTED CONTRIBUTIONS TO
EARNINGS
After providing 67 percent of Economic Earnings in 2015, our
utility is on track to again contribute solid results in the
current year. South Jersey Energy Group is expected to contribute
nearly a quarter of Economic Earnings in 2016, while we expect that
the contribution from our energy production portfolio within South
Jersey Energy Services will be lower, as we scale back solar
development to focus on other strategic priorities.
Business Lines |
Expected Contribution to
2016 Earnings |
|
Regulated
Gas Utility Operations |
67 - 70 percent |
|
Non-Utility
SJ Energy Group |
18 - 23 percent |
|
SJ Energy Services
|
10 - 15
percent |
|
|
|
|
As we look out at the balance of 2016, we expect
strong double-digit growth in our core businesses to replace a
planned reduction in investment tax credits (ITCs) from solar
energy projects for the full year. We anticipate that reduced solar
investment will produce a contribution to earnings from ITCs of no
more than $13.0 million, as compared with $38.3 million in 2015.
Potential investment opportunities within our regulated businesses,
in excess of $600 million between 2016 and 2017, provide a solid
basis from which we expect to continue to grow SJI. Maintaining a
strong and flexible capital structure is of key importance, as we
expect to finance that investment through a combination of
operating cash flow, debt and equity. As a result, our Economic EPS
target for 2016 is projected to be between $1.29 and $1.35. This
projection reflects our financing plans as well as the anticipated
reduction in ITC for 2016. Long term, our targeted objective
remains to achieve Economic Earnings of $150 million by 2020.
The following provides a more detailed discussion
of performance from each area of the business.
REGULATED BUSINESS
PERFORMANCE
SOUTH JERSEY GAS:
First quarter utility net income of $44.4 million exceeded prior
year results of $42.6 million, due in large part to continued
strong customer growth and contributions from investments under our
Accelerated Infrastructure Replacement Program, or AIRP, and Storm
Hardening and Reliability Program, or SHARP. There is no difference
between SJG's GAAP net income and Economic Earnings.
Customer Growth:
During the first quarter, South Jersey Gas added 1,799 new
customers. From March 31, 2015 through March 31, 2016, our customer
count grew by 6,597, a 1.8% increase, bringing our total number of
customers served to 375,585. During this same twelve-month period,
we also achieved incremental net margin of $2.7 million from
customer additions.
Conversion activity has continued to drive the
majority of growth, by a margin of roughly two to one, while new
construction has also strengthened over the last two years. We
anticipate that natural gas prices will remain highly competitive
and help fuel further customer growth.
Regulatory Update:
First quarter 2016 investments under our Accelerated Infrastructure
Replacement Program, or AIRP, totaled $12.2 million. Investments
made under our Storm Hardening and Reliability Program, or SHARP,
totaled $9.1 million. In the aggregate, investments made through
these programs provided incremental net income of $1.9 million for
the quarter. On a full year basis, these investments are expected
to add approximately $4.8 million in incremental net income.
In March, South Jersey Gas filed a petition with
the NJBPU for approval to continue its AIRP. As filed, the petition
would allow SJG to invest an incremental $500 million over seven
years, enabling the complete replacement of all remaining bare
steel and cast iron mains in our system, as well as installation of
Excess Flow Valves designed to enhance safety in all service lines
renewed under the program.
Construction of the BL England pipeline and the
liquefier at our McKee City site remain high priorities within the
utility. We are targeting a 2018 in-service date for the BL England
pipeline, as we await the completion of the appeal process
initiated by opponents of the project. Construction of the natural
gas liquefier, designed to maintain operating pressures in our
distribution system, is expected to be completed this fall, in time
for the 2017 winter heating season.
Lastly, the warmer weather we experienced this
past winter season offered customers relief from the impacts of
several record cold periods that spanned the preceding eighteen
months. Coupled with a $20 million bill credit provided to our
customers in January, the warmer weather is expected to reduce the
utility's exposure to spikes in uncollectible accounts that
affected the prior year, while our utility's decoupling clause
allows for protection of margin at the same time.
Compressed Natural Gas
Update:
Also in March, SJG participated in the official ribbon-cutting for
a compressed natural gas station in Paulsboro, NJ. This exciting
project represents our first joint project with Wawa, a leading
convenience store and gas station chain operating in six states
spanning from Florida to Pennsylvania. There are presently seven
public access CNG stations in South Jersey Gas' service territory,
with an additional five stations planned for construction in the
coming year.
SJI MIDSTREAM:
The Notice of Schedule for Environmental Review, released in March
by the Federal Energy Regulatory Commission, represents an
important milestone for the PennEast pipeline partnership. The
document establishes December 16, 2016 for the completion of FERC's
environmental review of the project. Issuance of a Certificate of
Public Convenience and Necessity is then expected to follow within
90 days of completion of the environmental review. In the interim,
design, engineering and environmental assessments continue on the
approximately 118-mile PennEast pipeline, as we look forward to
this FERC-regulated pipeline's targeted startup date during the
second half of 2018.
NON-UTILITY BUSINESS
PERFORMANCE
SJ ENERGY GROUP:
South Jersey Energy Group continues to deliver growth, as
contributions from traditional marketing activities are
complemented by the benefits from fuel supply management contracts
that have come on-line in the last year. For the first quarter of
2016, this area of the business contributed $12.2 million of
Economic Earnings, as compared with $7.8 million in the first
quarter of 2015. Optimization of storage and transportation assets
produced significant year-over-year improvement in the first
quarter. With five fuel supply management contracts expected to be
on-line by the end of 2016, we anticipate a meaningful contribution
from this business line adding to full year results. Going forward,
we further expect that five additional contracts, including the
recently announced Lordstown Energy Center in Ohio, will help drive
this business's support of both our near and longer term targeted
Economic Earnings goals.
Our retail commodity subsidiary, South Jersey
Energy, contributed $0.4 million to Economic Earnings in the first
quarter, as compared with $1.4 million in the prior year period. A
historically warm winter season drove the year-over-year variance.
However, we expect to see full year 2016 performance ultimately
improve as a result of several large contracts won late last
year.
SJ ENERGY SERVICES:
In the first quarter of 2016, South Jersey Energy Services
contributed $0.5 million to Economic Earnings, as compared with
$8.6 million for the same period in 2015. This change reflects the
previously announced plan to phase out ITCs from solar development,
which historically were the largest contributor to Economic
Earnings from this area of the business. The current quarter's
results include only $1.7 million of ITCs from solar development,
as compared with $10.2 million in the prior year period. Excluding
ITCs, first quarter 2016 earnings from this area of the business
grew by $0.4 million as compared to the same period in 2015.
First quarter earnings reflect improved operating
performance across the majority of our energy production portfolio,
as nearly all of our solar projects outperformed the same period
last year. Solar production generated over 35,000 solar renewable
energy certificates (SRECs), as compared with 22,000 for the same
period in 2015. Operating performance from our landfill gas to
electricity projects also improved significantly, as the
restructuring of our energy production business at the end of 2015
has started to reduce the drag experienced in prior years,
associated with under-performing projects in which we no longer
have an equity interest. As a result of this restructuring,
SJI now owns only four New Jersey landfill assets, each of which
provides renewable sourced electricity to the highly successful
Borgata hotel and casino property in Atlantic City. Together, these
two areas helped to offset the impact of an unseasonably warm
winter on CHP performance.
Overall, we expect to continue seeing improved
performance from this area of our business, as the strategic
business decisions made in 2015 realign our focus on core, proven
assets.
CONFERENCE CALL / WEBCAST
DETAILS
To participate in the conference call at 11:00 AM
ET on May 6, 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 75622120 and the PIN you received during
pre-registration. International callers may dial 1-617-213-4848;
enter the participant pass code 75622120 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
March 31 |
|
In thousands except per share data |
|
|
2016 |
|
2015 |
|
|
|
|
|
Income from Continuing Operations |
$ |
68,187 |
$ |
53,853 |
(Minus)/Plus: |
|
|
|
|
Unrealized Mark-to-Market (Gains)/Losses on Derivatives |
|
(11,167) |
|
4,310 |
Realized Losses on Inventory Injection Hedges |
|
2 |
|
30 |
Net Loss from Affiliated Companies (A) |
|
--- |
|
742 |
Other (B) |
|
(25) |
|
(25) |
Economic Earnings |
$ |
56,997 |
$ |
58,910 |
|
|
|
|
|
|
|
|
|
|
Earnings Per Share from Continuing
Operations (C) |
$ |
0.95 |
$ |
0.79 |
(Minus)/Plus: |
|
|
|
|
Unrealized Mark-to-Market (Gains)/Losses on Derivatives |
|
(0.15) |
|
0.06 |
Net Loss from Affiliated Companies (A) |
|
--- |
|
0.01 |
Economic Earnings Per Share |
$ |
0.80 |
$ |
0.86 |
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
month period ended March 31, 2016:
|
Three Months Ended
March 31 |
|
In thousands except per share data |
|
|
2016 |
|
2015 |
|
|
|
|
|
South Jersey Energy Group Income from
Continuing Operations |
$ |
23,641 |
$ |
3,626 |
(Minus)/Plus |
|
|
|
|
Unrealized Mark-to-Market (Gains)/Losses on Derivatives |
|
(11,475) |
|
4,122 |
Realized Losses on Inventory Injection Hedges |
|
2 |
|
30 |
South Jersey Energy Group Economic
Earnings |
$ |
12,168 |
$ |
7,778 |
|
|
|
|
|
|
|
|
|
|
South Jersey Energy Services Income from
Continuing Operations |
$ |
176 |
$ |
7,661 |
Unrealized Mark-to-Market Losses on Derivatives |
|
307 |
|
188 |
Net Loss from Affiliated Companies (A) |
|
--- |
|
742 |
Other (B) |
|
(25) |
|
(25) |
South Jersey Energy Services Economic
Earnings |
$ |
458 |
$ |
8,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South Jersey Energy Income from Continuing
Operations |
$ |
102 |
$ |
2,175 |
Unrealized Mark-to-Market Losses/(Gains) on Derivatives |
|
268 |
|
(729) |
South Jersey Energy Economic
Earnings |
$ |
370 |
$ |
1,446 |
|
|
|
|
|
(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. This charge was excluded from Economic Earnings as the
total economic impact of the proceedings had not been realized as
of March 31, 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, effected in the form of a stock dividend,
effective on May 8, 2015.
SJI Financial Statements
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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