FOR IMMEDIATE
RELEASE
Telephone: 609-561-9000
Investor Relations/Media Contact: Marissa Travaline x4227
e-mail: mtravaline@sjindustries.com
SJI Reports FY and
Q4 2016 Results
Folsom, NJ, February 23, 2017
- South Jersey Industries (NYSE: SJI) today announced results for
the full year and fourth quarter of 2016. GAAP income and Economic
Earnings* for both periods are presented in the chart below, as
compared with the same periods in 2015.
|
2016 |
2015 |
GAAP income from continuing operations -
FY |
$ 119.1 million |
$105.6 million |
GAAP income from continuing operations -
Q4 |
$46.0 million |
$50.9 million |
GAAP EPS per diluted share - FY |
$1.56 |
$1.53 |
GAAP EPS per diluted share - Q4 |
$0.58 |
$0.73 |
|
|
|
Economic Earnings - FY |
$ 102.8 million |
$99.0 million |
Economic Earnings - Q4 |
$33.2 million |
$43.2 million |
Economic EPS per diluted share - FY |
$1.34 |
$1.44 |
Economic EPS per diluted share -
Q4 |
$0.42 |
$0.62 |
"2016 marked the first full year of our 2020
strategic vision and the results we are reporting today clearly
support our ability to deliver on the key principles of that plan
," said SJI President and CEO Michael J. Renna.
"We strengthened our balance sheet, grew earnings
from our core business units by more than 12% and achieved Economic
Earnings per Share of $1.34 for the year," Renna added. "Most
importantly, this year's strong performance combined with a
long-term focus on high quality earnings from regulated,
repeatable, low risk sources have us well positioned to achieve our
target of at least $150MM in Economic Earnings by 2020."
* SJI uses
the non-GAAP measure of Economic Earnings when discussing results.
Economic Earnings eliminates all unrealized gains and losses on
commodity derivative transactions and on the ineffective portion of
interest rate derivative transactions. It also adjusts for realized
gains and losses attributed to hedges on inventory transactions and
for the impact of transactions or contractual arrangements where
the true economic impact will be realized in a future period. A
full explanation and reconciliation of this non-GAAP measure is
provided under "Explanation and Reconciliation of Non-GAAP
Financial Measures."
CONTRIBUTIONS TO
EARNINGS
The following chart outlines our 2016 Economic Earnings
composition, and our targeted composition for 2017.
Business Lines |
Contribution to 2016
Economic Earnings |
|
Expected Contribution to
2017 Economic Earnings |
Regulated
Gas Utility Operations |
67 percent |
|
67 - 70 percent |
Non-Utility
SJ Energy Group |
17 percent |
|
25 - 28 percent |
SJ Energy Services
|
16 percent |
|
3 - 6 percent |
|
|
|
|
Utility performance for the fourth quarter and
full year was driven by increased margins from accelerated
infrastructure investments and customer growth. Further, strong
performance from our solar portfolio combined with a year over year
improvement in our wholesale commodity business helped mitigate the
planned strategic reduction in renewable investments, which reduced
investment tax credits (ITC) by $29.2 million.
The following provides a more detailed discussion
of performance from each area of the business.
REGULATED BUSINESS
PERFORMANCE
SOUTH JERSEY GAS:
Full year utility net income of $69.0 million exceeded prior year
results of $66.6 million. For the fourth quarter of 2016, the
utility contributed $22.9 million to earnings, as compared with
$22.2 million for the same period in 2015. Contributions from our
accelerated infrastructure investment programs, as well as from
customer growth, drove year over year improvements. There is no
difference between SJG's GAAP net income and Economic Earnings.
Customer Growth:
Customer additions remain a strong driver of margin growth, and we
expect this growth to continue as we strategically target our
marketing and sales resources where we have the greatest
opportunities for conversions. For the year ended December 31,
2016, our customer count increased by 4,525, bringing our total
number of customers served to 377,625.
During this same twelve-month period, our utility
increased net margin by $6.3 million, a 4.2% increase as compared
with the prior year, with incremental contributions from customer
additions driving $2.3 million of that improvement.
Regulatory Update:
Full year investments under our AIRP and SHARP, in the aggregate,
totaled $74.1 million. Investments from these two programs provided
an incremental net income contribution of $5.3 million for 2016, as
compared with $2.3 million in 2015.
In October, South Jersey Gas received approval
from the New Jersey Board of Public Utilities (NJBPU) to extend and
expand its Accelerated Infrastructure Replacement Program, enabling
the utility to invest up to $302.5 million over the next five years
to complete the total replacement of the aging bare steel and cast
iron mains in its system. The extension of this program prioritizes
the safety and reliability of our system, capitalizing on low
natural gas costs to expedite system improvements, and providing
for timely recovery of investments outside of a traditional base
rate case.
Additionally, as a result of investments expected
to total over $500 million, the company filed a petition with the
NJBPU for a base rate case on January 27, 2017. The filing, which
requests an increase to base rates of approximately $75 million, is
the company's first since 2013. Since that last base rate case was
approved, South Jersey Gas has lowered rates 14.3 percent and
provided $30 million in BGSS bill credits, including credits
totaling $10 million in December, resulting in the average
residential customer receiving credits totaling $86. As a
result of these reductions, average annual natural gas bills are at
levels that are below those seen 15 years ago.
Finally, on January 24, the New Jersey Pinelands
Commission held a hearing to review South Jersey Gas' proposal to
build a natural gas supply line to serve the former B.L. England
generating facility. After hearing comments from both supporters
and opponents, the Commission extended its comment period through
February 8, and subsequently scheduled a final vote on the
project's approval on February 24. We remain confident that the
reliability and environmental benefits this vital project will
provide for the region will ultimately lead to its approval and
construction.
SJI MIDSTREAM:
The Federal Energy Regulatory Commission announced in January that
it planned to extend its review period of public comments received
regarding the PennEast pipeline project, in which SJI is an equity
partner. This move would also extend the target date for release of
the Final Environmental Impact Study (FEIS) to April 2017,
positioning the project for final approval in July 2017, with a
target start-up date in the latter part of 2018.
NON-UTILITY BUSINESS
PERFORMANCE
SJ ENERGY
GROUP:
The following chart details the quarterly and full year
contributions to earnings from our wholesale and retail commodity
business, South Jersey Energy Group (SJEG):
|
2016 |
2015 |
SJEG GAAP income from continuing operations
- FY |
$33.6 million |
$22.0 million |
SJEG GAAP income from continuing operations
- Q4 |
$19.5 million |
$18.3 million |
|
|
|
SJEG Economic Earnings from continuing
operations - FY |
$17.7 million |
$16.8 million |
SJEG Economic Earnings from continuing
operations - Q4 |
$7.3 million |
$10.7 million |
Despite relatively mild temperatures throughout
2016 and very limited price volatility at year end, Energy Group's
performance still improved as compared with the prior year.
Improvements were driven largely by contributions from two
additional fuel supply management contracts that came on-line
midyear, as well as from the optimization of our capacity and
storage assets. We expect contributions from our fuel management
business to grow considerably in 2017 as it will, for the first
time, reflect a full year of operation for five fuel supply
contracts. We also expect to commence service to the Panda
Stonewall merchant generating plant in the first half 2017.
As additional legacy producer contracts roll off
in 2017, we expect to be able to further optimize our capacity in
support of existing wholesale and retail gas marketing contracts.
In addition, our retail commodity marketing business remains one of
the more competitive entities in this market and continues to
realize strong customer and margin growth.
SJ ENERGY SERVICES:
The following chart details the quarterly and full year
contributions to earnings from our energy production business,
South Jersey Energy Services (SJES):
|
2016 |
2015 |
SJES GAAP income from continuing operations
- FY |
$16.8 million |
$16.2 million |
SJES GAAP income from continuing operations
- Q4 |
$3.9 million |
$9.5 million |
|
|
|
SJES Economic Earnings from continuing
operations - FY |
$16.5 million |
$14.7 million |
SJES Economic Earnings from continuing
operations - Q4 |
$3.3 million |
$9.3 million |
Economic Earnings within Energy Services clearly
reflect the impact of our decision to divest of non-core assets and
focus on repeatable, reliable income streams. Despite a full year
reduction of $29.2 million in ITC, Energy Services still delivered
strong performance in 2016, exceeding prior year results by just
over $1.8 million. This performance included only $9.1 million of
ITC in 2016, as compared with $38.3 million in 2015. The impacts of
the reduction in ITC created a more significant variance in fourth
quarter results, reflecting Economic Earnings that are $6 million
lower in 2016 as compared with the same period in 2015. However,
the ITC reduction of $15.2 million in the quarter was mitigated, in
large part, by significant improvements in the contributions from
our energy production assets coupled with strong Solar Renewable
Energy Certificate (SREC) prices.
Excluding the impacts of ITC and non-operational
events, like the prior year's write-off of energy assets associated
with the former Revel property, performance within Energy Services
improved by roughly $2.7 million in the aggregate on an Economic
Earnings basis for the fourth quarter of 2016, and $8.3 million for
the full year, as compared to the same periods in 2015.
CONFERENCE CALL / WEBCAST
DETAILS
To participate in the conference call at 9:00 AM ET on Friday,
February 24, 2017, 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 1-888-680-0878
approximately 15 minutes ahead of the scheduled call time; enter
the participant pass code 94371179 and the PIN you received during
pre-registration. International callers may dial 1-617-213-4855;
enter the participant pass code 94371179 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.
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, 2016 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 377,000
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
December 31 |
Twelve Months Ended
December 31 |
|
|
In thousands except per share
data |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
|
Income/(Loss) from Continuing
Operations |
$ |
46,008 |
$ |
50,949 |
$ |
119,061 |
$ |
105,610 |
(Minus)/Plus: |
|
|
|
|
|
|
|
|
Unrealized Mark-to-Market (Gains)/Losses on Derivatives |
|
(22,001) |
|
(12,893) |
|
(27,550) |
|
(8,444) |
Realized Losses on Inventory Injection Hedges |
|
696 |
|
1 |
|
683 |
|
89 |
Net Losses from Affiliated Companies (A) |
|
--- |
|
--- |
|
--- |
|
(2,540) |
Other (B) |
|
(41) |
|
(41) |
|
(165) |
|
(165) |
Income Taxes (C) |
|
8,538 |
|
5,173 |
|
10,813 |
|
4,424 |
Economic Earnings |
$ |
33,200 |
$ |
43,189 |
$ |
102,842 |
$ |
98,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share from Continuing
Operations |
$ |
0.58 |
$ |
0.73 |
$ |
1.56 |
$ |
1.53 |
(Minus)/Plus: |
|
|
|
|
|
|
|
|
Unrealized Mark-to-Market (Gains)/Losses on Derivatives |
|
(0.28) |
|
(0.18) |
|
(0.36) |
|
(0.12) |
Realized Losses on Inventory Injection Hedges |
|
0.01 |
|
--- |
|
0.01 |
|
--- |
Net Losses from Affiliated Companies (A) |
|
--- |
|
--- |
|
--- |
|
(0.04) |
Income Taxes (C) |
|
0.11 |
|
0.07 |
|
0.13 |
|
0.07 |
Economic Earnings Per Share |
$ |
0.42 |
$ |
0.62 |
$ |
1.34 |
$ |
1.44 |
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 twelve months periods ended December 31, 2016:
|
Three Months Ended
December 31 |
Twelve Months Ended
December 31 |
|
|
In thousands except per share
data |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
|
South Jersey Energy Group Income/(Loss) from
Continuing Operations |
$ |
19,479 |
$ |
18,335 |
$ |
33,619 |
$ |
22,006 |
(Minus)/Plus |
|
|
|
|
|
|
|
|
Unrealized Mark-to-Market (Gains)/Losses on Derivatives |
|
(20,959) |
|
(12,681) |
|
(27,170) |
|
(8,692) |
Realized Losses on Inventory Injection Hedges |
|
696 |
|
1 |
|
683 |
|
89 |
Income Taxes (C) |
|
8,105 |
|
5,072 |
|
10,593 |
|
3,442 |
South Jersey Energy Group Economic
Earnings |
$ |
7,321 |
$ |
10,727 |
$ |
17,725 |
$ |
16,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South Jersey Energy Services Income/(Loss)
from Continuing Operations |
$ |
3,903 |
$ |
9,482 |
$ |
16,840 |
$ |
16,161 |
Unrealized Mark-to-Market (Gains)/Losses on Derivatives |
|
(1,042) |
|
(212) |
|
(380) |
|
248 |
Net Loss from Affiliated Companies (A) |
|
---- |
|
---- |
|
--- |
|
(2,540) |
Other (B) |
|
(41) |
|
(41) |
|
(165) |
|
(165) |
Income Taxes (C) |
|
433 |
|
101 |
|
217 |
|
982 |
South Jersey Energy Services Economic
Earnings |
$ |
3,253 |
$ |
9,330 |
$ |
16,512 |
$ |
14,686 |
(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 2014, this charge was excluded from Economic Earnings as
the total economic impact of the proceedings had not been 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 in 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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