South Jersey Industries Form 14A Dated March 20, 2007
South
Jersey Industries
1
South Jersey Plaza, Folsom, New Jersey 08037
Tel.
(609) 561-9000 l Fax
(609)
561-8225 l TDD
ONLY
1-800-547-9085
Notice
of Annual Meeting of Shareholders
April
20, 2007
NOTICE
IS
HEREBY GIVEN that the
Annual Meeting of Shareholders of South Jersey Industries, Inc. will be held
at
the Renault Winery Restaurant, 72 N. Bremen Avenue, Egg Harbor City, New Jersey,
on Friday, April 20, 2007, at 10:00 a.m., Eastern Time,
for the
following purposes:
1. To
elect
four Class III Directors to serve on the Board of Directors until the 2010
annual meeting of shareholders.
2. To
ratify
the appointment of Deloitte & Touche LLP as independent registered public
accounting firm for 2007.
3. To
transact such other business that may properly come before the
meeting.
The
Board of
Directors has fixed the close of business on February 23, 2007 as the record
date for determining the shareholders of the Company entitled to notice of
and
to vote at the Annual Meeting or any adjournments thereof. Accordingly, only
shareholders of record on that date are entitled to notice of and to vote at
the
meeting.
You
are
cordially invited to attend the meeting. Whether or not you expect to attend
the
meeting, we urge you to vote your shares now. Please complete and sign the
enclosed proxy card and promptly return it in the envelope provided or, if
you
prefer, you may vote by telephone or on the Internet. Please refer to the
enclosed proxy card for instructions on how to use these options. Should you
attend the meeting, you may revoke your proxy and vote in person.
By
Order of the Board
of Directors,
Richard
H. Walker,
Jr.
Vice
President,
General Counsel & Secretary
Folsom,
NJ
March
20,
2007
YOUR
VOTE IS IMPORTANT
PLEASE
VOTE, SIGN, DATE, AND PROMPTLY RETURN YOUR PROXY IN
THE
ENCLOSED ENVELOPE OR VOTE BY TELEPHONE OR ON THE
INTERNET.
SOUTH
JERSEY INDUSTRIES, INC.
1
South Jersey Plaza, Folsom, New Jersey 08037
PROXY
STATEMENT
This
statement is furnished on behalf of the Board of Directors of South Jersey
Industries, Inc. to solicit proxies for use at its 2007 Annual Meeting of
Shareholders. The meeting is scheduled for Friday, April 20, 2007, at 10:00
a.m.
at the Renault Winery Restaurant, 72 N. Bremen Avenue, Egg Harbor City, New
Jersey. The approximate date proxy materials will be sent to shareholders is
March 20, 2007.
Proxy
Solicitation
The
Company bears the cost of this solicitation, which is primarily made by mail.
However, the Secretary or employees of the Company may solicit proxies by phone,
telegram, fax, e-mail or in person, but such persons will not be separately
compensated for such services. The Company may also use a proxy-soliciting
firm
at a cost not expected to exceed $6,000, plus expenses, to distribute to
brokerage houses and other custodians, nominees, and fiduciaries additional
copies of the proxy materials and Annual Report to Shareholders for beneficial
owners of our stock.
Record
Date
Only
shareholders of record at the close of business on February 23, 2007 may vote
at
the meeting. On that date, the Company had 29,340,537 shares of Common Stock
outstanding. Shareholders are entitled to one vote per share on each matter
to
be acted upon.
Quorum
and Vote Required
A
quorum
is necessary to conduct the business of the meeting. This means that holders
of
at least a majority of the outstanding shares of Common Stock must be present
at
the meeting, either by proxy or in person. Directors are elected by a plurality
vote of all votes cast at the meeting. All other matters that come before the
meeting require the affirmative vote of a majority of the votes cast at the
meeting. Abstentions and broker non-votes will be treated as present to
determine a quorum but will not be deemed to be cast and, therefore, will not
affect the outcome of any of the shareholder questions. A broker non-vote occurs
when a nominee holding shares for a beneficial owner does
not
vote on a particular proposal because the nominee does not have discretionary
voting power with respect to that item and has not received instructions from
the beneficial owner.
Voting
of Proxies and Revocation
Properly
signed proxies received by the Company will be voted at the meeting. If a proxy
contains a specific instruction as to any matter to be acted on, the shares
represented by the proxy will be voted in accordance with those instructions.
If
you sign and return your proxy but do not indicate how to vote for a particular
matter, your shares will be voted as the Board of Directors recommends. A
shareholder who returns a proxy may revoke it at any time before it is voted
by
submitting a later-dated proxy or by voting by ballot at the meeting. If you
attend the meeting and wish to revoke your proxy, you must notify the meeting’s
secretary in writing prior to the voting of the proxy. If any other matters
or
motions properly come before the meeting, including any matters dealing with
the
conduct of the meeting, it is the intention of the persons named in the
accompanying proxy card to vote such proxy in accordance with their judgment.
The Board
of
Directors is not aware of any such matters other than those described in this
proxy statement.
PROPOSAL
1
DIRECTOR
ELECTIONS
At
the Annual Meeting, four Class III directors are to be elected to the Board
of
Directors to hold office for a three-year term. The persons listed below have
been nominated by the Board, and unless otherwise instructed, proxy votes will
be cast for such persons as directors: Helen R. Bosley, Edward J. Graham,
William J. Hughes and Herman D. James. The Board of Directors currently consists
of ten members. All of the nominees previously have been elected by the
Company’s shareholders and are currently serving as directors. While we do not
anticipate that, if elected, any of the nominees will be unable to serve, if
any
should be unable to accept the nomination or election, the persons designated
as
proxies on the proxy card will vote for the election of such other person as
the
Board of Directors may recommend.
In
consideration of the unique experience and valuable perspective that incumbent
director William J. Hughes brings to the Board, and as permitted under the
Company’s Corporate Governance Guidelines, the Board of Directors has decided to
waive its mandatory retirement policy to permit Mr. Hughes, a Class III Director
whose term is expiring at the annual meeting, to stand for election for a
three-year term.
NOMINEES
Class
I I I
Term
Expires in 2010
Helen
R. Bosley, CFA
has been
a director since 2004. Age 59. Member of the Audit Committee and Nominating
& Governance Committee; Chairman of the Management Development Committee.
President, Corporate Financial Management, Inc., a financial management and
insurance consulting firm, Yardley, PA (1990 to date); President, TBN Agency,
Inc., Yardley, PA (1995 to date); trustee, Abington Memorial Hospital, Abington,
PA; member, CFA Society of Philadelphia, Philadelphia, PA; Chair, Investment
Committee, Girl Scouts of Southeastern PA, Miquon, PA; director, South Jersey
Energy Company; Executive Committee Member, South Jersey Energy Solutions,
LLC,
Marina Energy, LLC, South Jersey Energy Service Plus, LLC and South Jersey
Resources Group, LLC.
Edward
J. Graham
has been
a director since 2004. Age 49. Chairman of the Executive Committee. Chairman
of
the Board (April 2005 to date), President and Chief Executive Officer of the
Company and South Jersey Gas Company (February 2004 to date); President and
Chief Operating Officer (2003 - January 2004) and President (2003 to date),
South Jersey Gas Company; President (2000 - 2003), South Jersey Energy Company;
Vice President of the Company (2000 - 2001); Senior Vice President, Energy
Management, South Jersey Gas Company (1998 - 2000); director, New Jersey
Manufacturers Insurance Company, Trenton, NJ; director, New Jersey Business
& Industry Association, Trenton, NJ; director, American Gas Association,
Washington, DC; director, New Jersey Utilities Association, Trenton, NJ; Vice
Chairman and Treasurer, Rowan University Foundation, Glassboro, NJ; member,
South Jersey Health System Foundation Board, Vineland, NJ; Vice-Chairman, New
Jersey Commission on Higher Education; director, South Jersey Gas
Company.
Ambassador
William J. Hughes
has been
a director since 2002. Age 74. Member of the Audit Committee, Environmental
Committee and Nominating & Governance Committee. Of Counsel, law firm of
Riker, Danzig, Scherer, Hyland & Perretti, LLP (2000 to date), Morristown
and Trenton, NJ; Visiting Distinguished Scholar of Public Policy, The Richard
Stockton College of New Jersey (1999 to date), Pomona, NJ; Visiting Professor,
Rutgers, The State University of New Jersey (1999 - 2003), New Brunswick, NJ;
United States Ambassador to the Republic of Panama (1995 - 1998); Member, United
States House of Representatives (1975 - 1995); director, South Jersey Gas
Company.
Herman
D. James, Ph.D.
has been
a director since 1990. Age 63. Member of the Compensation/Pension Committee,
the
Executive Committee, the Management Development Committee and the Audit
Committee. Distinguished Professor, Rowan University (1998 to date), President,
Rowan University (1984 - 1998), Glassboro, NJ; director, American Association
of
State Colleges and Universities, (1994 - 1998), Washington, DC; director, New
Jersey State Chamber of Commerce (1992 - 1998), Trenton, NJ; director, South
Jersey Energy Company; Executive Committee Member, South Jersey Energy
Solutions, LLC, Marina Energy LLC, South Jersey Energy Service Plus, LLC and
South Jersey Resources Group, LLC.
The
Board of Directors recommends a vote “FOR” each of
the
above nominees.
DIRECTORS
CONTINUING IN OFFICE
Class
I
Term
Expires in 2008
Keith
S. Campbell
has been
a director since 2000. Age 52. Member of the Compensation/Pension Committee,
Environmental Committee and Nominating and Governance Committee. Chairman of
the
Board, Mannington Mills, Inc., Salem, NJ, a leading manufacturer of hard and
soft surface flooring (1995 to date); trustee, Rowan University, Glassboro,
NJ;
director, Skytop Lodge, Inc.; director, South Jersey Energy Company; Executive
Committee Member, South Jersey Energy Solutions, LLC; Marina Energy LLC, South
Jersey Energy Service Plus, LLC and South Jersey Resources Group,
LLC.
W.
Cary Edwards
has been
a director since September 1993 and was also a director from April 1990 to
January 1993. Age 62. Lead Director (April 2005 to date), Member of the
Executive Committee, Audit Committee and Nominating & Governance Committees,
Chairman of the Compensation/Pension Committee; Chairman, New Jersey State
Commission on Investigation (1997 to date); Senior Attorney, Edwards &
Caldwell, LLC (1993 to date); Of Counsel (1993) and New Jersey Managing Partner
(1990 - 1993), law firm of Mudge Rose Guthrie Alexander & Ferdon; Attorney
General, State of New Jersey (1986 - 1989); Chief Legal Counsel - Governor
of
New Jersey (1982 - 1986); life trustee, Monmouth University; Chairman and
Director, South Jersey Sanitation, Inc.; director, South Jersey Energy Company;
Executive Committee Member, South Jersey Energy Solutions, LLC; Marina Energy
LLC, South Jersey Energy Service Plus, LLC and South Jersey Resources Group,
LLC.
DIRECTORS
CONTINUING IN OFFICE
Class
I I
Term
Expires in 2009
Shirli
M. Billings, Ph.D.
has been
a director since 1983. Age 66. Member of the Executive Committee,
Compensation/Pension Committee, and Management Development Committee; Chairman
of the Nominating & Governance Committee. President, Billings & Company,
New Albany, OH, a human resource consulting firm (2001 to date); President,
Leadership Learning Academy, Lakeland, FL, a human resource development agency
(1999 - 2001); Superintendent of Schools, Oberlin, OH (1994 - 1997); Vice
President, Human Resource Development, Honeywell, Inc., Minneapolis, MN
(1985-1990); director, South Jersey Gas Company.
Thomas
A. Bracken
has been
a director since 2004. Age 59. Member of Audit Committee, Environmental
Committee and Compensation/Pension Committee. President and CEO of Sun Bancorp,
Inc. and its wholly-owned subsidiary Sun National Bancorp, Inc., Vineland,
NJ
(2001 to January 22, 2007); Executive Director Public Sector Group, First Union
Bank (2000 - 2001); Executive Vice President, Head of Commercial and
Governmental Banking for New Jersey, New York and Connecticut, First Union
Bank
(1998 - 2000); Chairman, Economic Development Corporation of Trenton, Trenton,
NJ; Chairman, New Jersey Chamber of Commerce; director, New Jersey Bankers
Association; director and Chairman, Finance Committee, New Jersey Cancer
Institute; director, New Jersey Alliance for Action; director, New Jersey
Network; member, Community Bank Council, Federal Reserve Bank of Philadelphia;
director, South Jersey Energy Company; Executive Committee Member, South Jersey
Energy Solutions, LLC, Marina Energy LLC, South Jersey Energy Service Plus,
LLC
and South Jersey Resources Group, LLC.
Sheila
Hartnett-Devlin, CFA
has been
a director since 1999. Age 48. Member of the Executive Committee, the
Compensation/Pension Committee and the Management Development Committee;
Chairman of the Audit Committee. Managing Director, Cohen, Klingenstein &
Marks, Inc., an investment management company (September 2005 to date);
Executive Vice President (1997 - 2004), Senior Vice President (1991 - 1997),
Vice President (1985 - 1991), Chair, Global Investment Committee (1996 - 2004),
Member, Investment Policy Committee (1995 - 2004), Fiduciary Trust Company
International, New York, NY; member, New York Society of Security Analysts;
director, Mercy Investment Program, Inc.; director, Mannington Mills, Inc.;
director, South Jersey Gas Company.
Frederick
R. Raring
has been
a director since 1995. Age 69. Member of the Executive Committee, Management
Development Committee, and Nominating & Governance Committee; Chairman of
the Environmental Committee. President, Seashore Supply Company, Ocean City,
NJ,
a distributor of plumbing and heating supplies and materials (1990 to January
1,
2007); director, South Jersey Gas Company.
SECURITY
OWNERSHIP
Directors
and Management
The
following
table sets forth certain information with respect to the beneficial ownership
of
our common stock, as of February 12, 2007, of (a) each continuing director
and
nominee for director, (b) our principal executive officer, principal financial
officer, the three other most highly compensated executive officers during
2006
and a 2005 Named Executive Officer who retired in 2006 (collectively, the “Named
Executives”) and (c) all of the directors and executive officers of the Company
as a group.
|
Number
of Shares
|
|
|
of
Common Stock (1)
|
Percent
of Class
|
Shirli
M. Billings
|
18,945
(2)
|
*
|
Helen
R. Bosley
|
4,244
(2)
|
*
|
Thomas
A. Bracken
|
7,141
(2)
|
*
|
Keith
S. Campbell
|
5,834
(2)
|
*
|
W.
Cary Edwards
|
10,188
(2)
|
*
|
Edward
J. Graham
|
68,214
|
*
|
Sheila
Hartnett-Devlin
|
16,733
(2)
|
*
|
William
J. Hughes
|
6,392
(2)
|
*
|
David
A. Kindlick
|
51,771
|
*
|
Richard
J. Jackson
|
19,125
|
*
|
Herman
D. James
|
14,047
(2)
|
*
|
Frederick
R. Raring
|
59,031
(2)
|
*
|
Michael
J. Renna
|
11,591
|
*
|
Albert
V. Ruggiero
|
43,001
|
*
|
Richard
H. Walker, Jr.
|
24,133
|
*
|
|
|
|
All
continuing directors, nominees for director
|
|
|
and
executive officers as a group (14 persons)
|
360,390
|
1.2%
|
*
Less
than 1%.
Notes:
(1)
Based
on
information furnished by the Company’s directors and executive officers. Unless
otherwise
indicated, each person has sole voting and dispositive power with respect to
the
Common Stock shown as owned by him or her.
(2)
Includes
shares awarded to each director under a Restricted Stock Program for Directors.
Restricted stock owners have the power to vote shares but no investment power
with respect to the
shares until the restrictions lapse.
Stock
Ownership Requirements
The
Board
of Directors believes that significant ownership of Company Common Stock better
aligns the interests of management of the Company and its principal subsidiaries
with that of the Company’s shareholders. Therefore, in 2001 the Board of
Directors enacted the following stock ownership requirements for officers and
directors:
n The
Chief
Executive Officer is required to own shares of Company Common Stock with a
market value equal to a minimum of three times his or her annual base
salary;
n
Other
executive officers are required to own shares of Company Common Stock with
a
marketvalue equal to a minimum of one and one-half times their annual base
salary;
n
Other
officers are required to own shares of Company Common Stock with a market value
equal to a minimum of their annual base salary;
n
Shares
owned outright will be combined with vested restricted shares awarded under
the
Stock-Based Compensation Plan and vested shares beneficially owned through
any
employee benefit plan for purposes of determining compliance with the stock
ownership requirement for officers. Current officers will have a period of
six
years from the original date of adoption and newly elected or promoted officers
will have a period of six years following their election or promotion to a
new
position to meet these minimum stock ownership requirements; and
n
Members
of the Board of Directors are required, within six years of becoming a director
of the Company or any of its principal subsidiaries, to own shares of Company
Common Stock with a market value equal to a minimum of five times the current
value of a Director’s annual cash retainer. Shares owned outright will be
combined with restricted shares awarded as part of the annual stock retainer
for
the purpose of meeting these requirements.
Section
16(a) Beneficial Ownership Reporting Compliance
Pursuant
to Section 16(a) of the Securities Exchange Act of 1934, the Company’s directors
and executive officers are required to file reports with the Securities and
Exchange Commission relating to their ownership of and transactions in the
Company’s Common Stock. In 2006, Jeffrey E. DuBois, an executive officer of the
Company, inadvertently filed an untimely report of beneficial ownership on
Form
4. Based on our records and other information, the Company believes that all
other Section 16(a) filing requirements were met for 2006.
Security
Ownership of Certain Beneficial Owners
The
following table
sets forth certain information, as of February 21, 2006, as to each person
known
to the Company, based on filings with the Securities and Exchange Commission,
who beneficially owns 5% or more of the Common Stock. Based on filings made
with
the SEC, the shareholder named below has sole voting and investment power with
respect to such shares.
Name
and Address of Beneficial Owner
|
Shares
Beneficially Owned
|
Percent
of Class
|
Dimensional
Fund Advisors, Inc.
|
2,430,514
(1)
|
8.3%
|
1299
Ocean Avenue, 11th Floor
|
|
|
Santa
Monica, CA 90401-1005
|
|
|
|
|
|
Barclays
Global Investors
|
1,749,330
(2)
|
6.0%*
|
Japan
Trust and Banking Company Limited
|
|
|
Ebsiu
Prime Square Tower 8th Floor
|
|
|
1-1-39
Hiroo Shibuya - Ku
|
|
|
Tokyo
150-0012 Japan
|
|
|
(1)
Dimensional Fund Advisors LP (formerly, Dimensional Fund Advisors Inc.)
(“Dimensional”), an investment advisor registered under Section 203 of the
Investment Advisors Act of 1940, furnishes investment advice to four investment
companies registered under the Investment Company Act of 1940, and serves as
investment manager to
certain other commingled group trusts and separate accounts. These investment
companies, trusts and accounts are the “Funds.” In its role as investment
advisor or manager, Dimensional possesses investment and/or voting power over
the securities of the Company described above that are owned by the Funds,
and
may be deemed to be the beneficial owner of the shares of the Company held
by
the Funds. However, all securities reported in this schedule are owned by the
Funds. Dimensional disclaims beneficial ownership of such securities.
(2)
Barclays Global Investors Japan Trust and Banking Co. LTD has filed with the
Securities and Exchange Commission Schedule 13G indicating that shares
identified above are held by the company in trust accounts for Barclays Global
Investors NA, Barclays Global Fund Advisors and Barclays Global Investors,
LTD.
Barclays Global Investors NA holds 827,080 shares representing 2.82% of the
class. Barclays Global Fund Advisors holds 903,609 shares representing 3.09%
of
the class. Barclays Global Investors, LTD holds 18,641 shares representing
0.06%
of the class. Each company in Schedule 13G disclaims being a member of a “group”
as defined under Securities and Exchange Commission Rules.
THE
BOARD OF DIRECTORS
______________________________
Corporate
Governance
Independence
of Directors
The
Board
has adopted Corporate Governance Guidelines that require the Board to be
composed of a majority of directors who are “independent directors” as defined
by the rules of the New York Stock Exchange. No director will be considered
“independent” unless the Board of Directors affirmatively determines that the
director has no material relationship with the Company. When making
“independence” determinations, the Board considers all relevant facts and
circumstances, as well as any other facts and considerations specified by the
New York Stock Exchange, by law or by any rule or regulation of any other
regulatory body or self-regulatory body applicable to the Company. As a part
of
its Corporate Governance Guidelines, the Board established a policy
that Board members may not serve on more than four other boards of publicly
traded companies.
The
Board
has determined that incumbent directors Billings, Bosley, Bracken, Campbell,
Edwards, Hartnett-Devlin, Hughes, James and Raring, constituting all of the
non-employee directors, meet the New York Stock Exchange standards and our
own
standards set forth above for independence and are, therefore, considered to
be
independent directors. Accordingly, during 2006, nine of the ten directors
of
the Company were considered to be “independent.” Mr. Graham is not considered
independent by virtue of his employment with the Company.
Codes
of Conduct
The
Company has adopted codes of conduct for all employees, officers and directors,
which include the code of ethics for our principal executive, our principal
financial officer and principal accounting officer within the meaning of the
SEC
regulations adopted pursuant to the Sarbanes-Oxley Act of 2002. Additionally,
the Company has established a hotline and website for employees to anonymously
report suspected violations.
A
copy of
the codes of ethics are available on the Company’s website at
www.sjindustries.com under the heading “Investor Relations”. Copies of our codes
of conduct are also available at no cost to any shareholder who requests them
in
writing at South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, NJ
08037, Attention: Corporate
Secretary.
Communication
with Directors
The
independent directors met four times during 2006. Topics of these independent
sessions included CEO performance and compensation and discussions of corporate
governance. Meetings of the independent directors are chaired by the Lead
Director. You may communicate with the Lead Director and chairmen of the Audit,
Compensation/Pension and Nominating & Governance Committees by sending an
e-mail to auditchair@sjindustries.com, compchair@sjindustries.com (for Lead
Director) or nomgovchair@sjindustries.com, respectively, or you may communicate
with our outside independent directors as a group by sending an e-mail to
sjidirectors@sjindustries.com. The charters and scope of responsibility for
each
of the Company’s committees can be found on the Company’s website at
www.sjindustries.com. You may also address any correspondence to the chairmen
of
the committees or to the independent directors at South Jersey Industries,
Inc.,
1 South Jersey Plaza, Folsom, New Jersey 08037.
Meetings
of the Board of Directors and its Committees
The
Board
of Directors met seven times in 2006. Each director attended 75% or more of
the
total number of meetings of the Board of Directors and the meetings of the
committees of the Board on which he or she served. All current Board members
and
all nominees for election to the Company’s Board of Directors are required to
attend the Company’s annual meetings of stockholders, provided, however, that
attendance shall not be required if personal circumstances affecting the Board
member or director nominee make his or her attendance impracticable or
inappropriate. All of our directors with the exception of Thomas A. Bracken,
attended the 2006 Annual Meeting of Shareholders. During 2006, each of the
directors of the Company also served on the Boards or Executive Committees
of
one or more of South Jersey Gas Company, South Jersey Energy Company, South
Jersey Energy Solutions, LLC, Marina Energy LLC, South Jersey Resources Group,
LLC, South Jersey Energy Service Plus, LLC, Energy & Minerals, Inc. and
R&T Group, Inc., all of which are subsidiaries of the Company.
There
are
six standing committees of the Board: the Audit Committee; the
Compensation/Pension Committee; the Environmental Committee; the Executive
Committee; the Nominating & Governance Committee; and the Management
Development Committee.
Audit
Committee
The
Audit
Committee of the Board of Directors, which met eight times during 2006,
comprises six “independent” directors as that term is defined in the rules and
regulations of the Securities and Exchange Commission and the listing standards
of the New York Stock Exchange: Sheila Hartnett-Devlin, Chairman; Helen R.
Bosley; Thomas A. Bracken; W. Cary Edwards; Dr. Herman D. James and William
J.
Hughes. The Board has determined that no member of the Audit Committee has
a
material relationship that would jeopardize such member’s ability to exercise
independent judgment. In January 2005, the Board of Directors designated Ms.
Hartnett-Devlin, Ms. Bosley and Mr. Bracken as “audit committee financial
experts” as such term is defined by applicable rules and regulations of the
Securities and Exchange Commission. The Audit Committee: (1) annually engages
an
independent registered public accounting firm for appointment, subject to Board
and shareholder approval, as auditors of the Company and has the authority
to
unilaterally retain, compensate and terminate the Company’s independent
registered public accounting firm; (2) reviews with the independent registered
public accounting firm the scope and results of each annual audit; (3) reviews
with the independent registered public accounting firm, the Company’s internal
auditors and
management the quality and adequacy of the Company’s internal controls and the
internal audit function’s organization, responsibilities, budget and staffing;
and (4) considers the possible effect on the objectivity and independence of
the
independent registered public accounting firm of any non-audit services to
be
rendered to the Company. The Audit Committee has established policies and
procedures for the engagement of the independent registered public accounting
firm to provide audit and permitted non-audit services. The Audit Committee
evaluates itself on an annual basis. The Board of Directors has adopted a
written charter for the Audit Committee which is attached as Exhibit A and
which
is available on our website at www.sjindustries.com under the heading “Investor
Relations” or you may obtain a copy by writing to the Secretary,
South Jersey Industries Board of Directors, South Jersey Industries, Inc.,
1
South Jersey Plaza, Folsom, New Jersey 08037.
Compensation/Pension
Committee
The
Compensation/Pension Committee of the Board of Directors, which met four times
during 2006, comprises six “independent” directors: W. Cary Edwards, Chairman;
Dr. Shirli M. Billings; Thomas A. Bracken; Keith S. Campbell; Sheila
Hartnett-Devlin; and Dr. Herman D. James. Director Keith S. Campbell served
on
the Committee from April through December 2006. The Compensation/Pension
Committee: (1) is responsible for making grants under and otherwise
administering the Company’s Stock-Based Compensation Plan; (2) reviews and makes
recommendations to the Board of Directors on the operation, performance and
administration of the retirement plans, other employee benefit plans and
employment policies; and (3) reviews and makes recommendations to the Board
of
Directors on forms of compensation, including the performance and levels of
compensation of the officers of the Company. The Committee’s charter is
available on our website at www.sjindustries.com under the heading “Investor
Relations” or you may obtain a copy by writing to the Secretary, South Jersey
Industries Board of Directors, South Jersey Industries, Inc., 1 South Jersey
Plaza, Folsom, New Jersey 08037.
Compensation
Committee Interlocks and Insider Participation
The
Compensation Committee consists of W. Cary Edwards, Chairman; Dr. Shirli M.
Billings; Thomas A. Bracken; Keith S. Campbell; Sheila Hartnett-Devlin; and
Dr.
Herman D. James. No member of the Compensation Committee has ever been an
officer or employee of the Company, or any of its subsidiaries or affiliates.
During the last fiscal year, none of the Company’s executive officers has served
on a compensation committee or as a director for any other company, one of
whose
executive officers served as a director of the Company.
Nominating
and Governance Committee
The
Nominating & Governance Committee of the Board of Directors, which met four
times during 2006, comprises six directors: Dr. Shirli M. Billings, Chairman;
Helen R. Bosley; Keith S. Campbell; W. Cary Edwards; William J. Hughes and
Frederick R. Raring. Each member of the Committee satisfies the independence
requirements of the New York Stock Exchange. Among its functions, the Nominating
and Governance Committee: (1) maintains a list of prospective candidates for
director, including those recommended by shareholders; (2) reviews the
qualifications of candidates for director (minimum qualifications for director
candidates are provided in the Company’s Corporate Guidelines available on the
Company’s website at www.sjindustries.com under the heading “Investor Relations”
and include consideration of education, experience, judgment, diversity and
other applicable and relevant skills as determined by an assessment of the
needs
of the Board at the time an opening exists); (3) makes recommendations to the
Board of Directors to fill vacancies and for nominees for election to be voted
on by the shareholders; and (4) is responsible for monitoring the implementation
of the Company’s Corporate Governance Policy. The Committee’s charter is
available on our website at www.sjindustries.com under the heading “Investor
Relations” or you may obtain a copy by writing to the Secretary, South Jersey
Industries Board
of
Directors, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New
Jersey 08037. The Nominating & Governance Committee will consider nominees
for the Board of Directors recommended by shareholders and submitted, in
compliance with the Company’s bylaws, in writing to the Secretary of the
Company. Any shareholder wishing to propose a nominee should submit a
recommendation in writing to the Company’s Secretary at 1 South Jersey Plaza,
Folsom, New Jersey 08037, indicating the nominee’s qualifications and other
relevant biographical information and providing confirmation of the nominee’s
consent to serve as a director.
Environmental
Committee
The
Environmental Committee of the Board of Directors, which met one time during
2006, comprises four directors: Frederick R. Raring, Chairman; Keith S.
Campbell; Thomas A. Bracken and William J. Hughes. The Environmental Committee
reviews and evaluates management activities with respect to environmental
remediation of the Company’s and its subsidiaries’ current and former
properties.
Executive
Committee
The
Executive Committee of the Board of Directors, which met three times during
2006, is comprised of six directors: Edward J. Graham, Chairman; Dr. Shirli
M.
Billings; W. Cary Edwards; Sheila Hartnett-Devlin; Dr. Herman D. James and
Fredrick R. Raring. The Executive Committee: (1) oversees the Company’s
succession planning process; and (2) may act on behalf of the Board of Directors
during intervals between meetings of the Board in managing the business and
affairs of the Company.
Management
Development Committee
The
Management Development Committee of the Board of Directors, which met one time
during 2006, comprises five directors: Helen R. Bosley, Chairman; Dr. Shirli
M.
Billings; Sheila Hartnett-Devlin; Dr. Herman D. James and Frederick R. Raring.
The Management Development Committee: (1) reviews the Company’s programs and
practices used to develop employees identified for leadership positions in
the
organization; and (2) evaluates training and educational programs to assure
that
they reflect current and emerging workplace, industry and general business
issues.
Compensation
of Directors
In
2005
and 2006, studies of non-employee director compensation were conducted by Mercer
Human Resource Consulting and the Hay Group consultants comparing the Company’s
director compensation with a relevant peer group of 12 energy utility companies.
The Board approved targeting non-employee director compensation at the median
of
the peer group as there has been significant change in director compensation
over the last three years. Accordingly, effective December 1, 2006, non-employee
directors receive shares of restricted stock with a market value of $35,000.
The
Company has established a plan whereby directors may elect to defer the receipt
of the restricted stock until a specified date or until upon leaving the Board.
The deferred amount, together with dividends, may be paid in a lump sum
distribution or in equal annual installments as the director elects.
Non-employee
directors are paid an annual cash retainer of $30,000. The Lead Director is
paid
an additional annual retainer of $10,000. In 2006, chairmen of the committees
were paid a retainer as follows: Audit, $5,000; Compensation/Pension, $4,000;
Nominating and Governance, $4,000, Environmental, $2,000 and Management
Development, $2,000. Effective January 1, 2007, the chairmen of certain
committees are paid as follows: Audit, $8,000; Compensation/Pension, $5,000;
Nominating and Governance, $5,000. Chairmen of the Environmental and Management
Development committees are paid an annual retainer of $2,000. In 2006, directors
received $1,000 for each meeting of the Board of the Company or its subsidiaries
attended, except that the maximum fee paid to any person for attendance at
one
or more meetings of these boards held on the same day is $1,000. In 2006,
non-employee directors also received $500 for each meeting
of a committee of the Board of the Company or of a subsidiary that they attended
if the meeting is held on the same day as a Board meeting or $1,000 if the
meeting is held on any other day with the exception of Audit Committee members.
In 2006, Audit Committee members were paid $1,500 per meeting regardless of
type
of
meeting.
Also in 2006, non-employee directors who participate telephonically in a Board
or committee meeting received $500. Beginning January 2007, directors receive
$1,500 for each meeting of the Board of the Company or its subsidiaries
attended, except that the maximum fee paid to any person for attendance at
one
or more meetings of these boards held on the same day is $1,500. In 2007,
non-employee directors also receive $750 for each meeting of a committee of
the
Board of the Company or of a subsidiary that they attended if the meeting is
held on the same day as a Board meeting or $1,500 if the meeting is held on
any
other day. In 2007, Audit Committee members are paid $1,500 per meeting if
the
meeting is telephonic on a non-board meeting day. Also, in 2007, non-employee
directors who participate telephonically in a Board or committee meeting receive
$750. Directors who are also employees of the Company receive no separate
compensation for serving on the Board.
Director
Compensation for Fiscal 2006
Name
|
Fees
Earned
Or
Paid in
Cash
($)
|
Stock
Awards
($)
(1)
(2)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Change
in Pension Value
And
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other Compensation
($)
(3)
|
Total
($)
|
Shirli
M. Billings
|
53,500
|
22,333
|
0
|
0
|
0
|
580
|
76,413
|
Helen
R. Bosley
|
57,333
|
22,333
|
0
|
0
|
0
|
580
|
80,246
|
Thomas
A. Bracken
|
56,000
|
22,333
|
0
|
0
|
0
|
580
|
78,913
|
Keith
S. Campbell
|
45,000
|
22,333
|
0
|
0
|
0
|
580
|
67,913
|
Sheila
Hartnett-Devlin
|
57,500
|
22,333
|
0
|
0
|
0
|
580
|
80,413
|
W.
Cary Edwards
|
73,500
|
22,333
|
0
|
0
|
0
|
580
|
96,413
|
William
J. Hughes
|
57,000
|
22,333
|
0
|
0
|
0
|
580
|
79,913
|
Herman
D. James
|
55,000
|
22,333
|
0
|
0
|
0
|
580
|
77,913
|
Frederick
R. Raring
|
53,999
|
22,333
|
0
|
0
|
0
|
580
|
76,912
|
Footnotes
(1)
Represents the compensation expense incurred by the Company in the respective
fiscal year in conjunction with grants of restricted common stock calculated
in
accordance with SFAS 123R.
(2)
On
December 5, 2006, each director received shares of the Company’s common stock
with a value of $35,000. As of December 31, 2006, each director has three
outstanding restricted stock grants with a cumulative value at grant date of
$67,000 and a market value as of December 31, 2006 of $73,000. Restricted stock
grants were made to each director in December 2004 of 522 shares with a value
at
grant date of $13,000; in December 2005 of 634 shares with a value at grant
date
of $19,000 and in December 2006 of 1,029 shares with a value at grant date
of
$35,000.
(3)
Represents group life insurance payments totaling $580.
Certain
Relationships
Mr.
Campbell is Chairman
of Mannington Mills, Inc., which purchases natural gas from subsidiaries of
the
Company. Commencing January 2004, as a result of winning a competitive
bid, another subsidiary of the Company owns and operates a cogeneration facility
that provides electricity to Mannington Mills, Inc.
During
2006 Mr. Bracken was President of Sun National Bancorp, Inc. Until August 2006,
Sun National had a $10 million risk participation in a $46 million syndicated
letter of credit to the Company, and $11.1 million of total exposure in two
of
the Company’s syndicated revolving credits. The Company refinanced all of these
facilities in August 2006. Sun does not participate in the new facilities.
Sun
also maintains a bank account for another subsidiary of the Company.
Review
and Approval Policies and Procedures for Related Party
Transactions
Pursuant
to a policy adopted by the Company’s Nominating and Governance Committee, the
Company’s executive officers and directors, and principal stockholders,
including their immediate family members and affiliates, are not permitted
to
enter into a related party transaction with the Company without the prior
consent of the Nominating and Governance Committee, or other independent
committee of the Company’s Board of Directors in the case it is inappropriate
for the Nominating and Governance Committee to review such transaction due
to a
conflict of interest. Any request for the Company to enter into a transaction
with an executive officer, director, principal stockholder, or any of such
persons’ immediate family members or affiliates, in which the amount involved
exceeds $120,000 must first be presented to the Nominating and Governance
Committee for review, consideration and approval. All of the Company’s
directors, executive officers and employees are required to report to the
Nominating and Governance Committee any such related party transaction. In
approving or rejecting the proposed agreement, the Nominating and Governance
Committee shall consider the relevant facts and circumstances available and
deemed relevant to the Committee. The Nominating and Governance Committee shall
approve only those agreements that, in light of known circumstances, are in,
or
are not inconsistent with, the Company’s best interests, as the Nominating
and Governance Committee determines in the good faith exercise of its
discretion.
COMPENSATION
DISCUSSION & ANALYSIS
General
Description of Executive Compensation Program and Key
Objectives
SJI,
as a provider of
energy related products and services, has designed its executive compensation
program to advance the Company’s Strategic Plan and corporate mission which are
rooted in enhancing shareholder value while attracting and retaining qualified
executive management to carry out the work and goals of the organization. In
order to achieve the objectives of the Company’s Strategic Plan and increase
shareholder value, the executive compensation program incorporates to a great
degree performance-based incentives and a mix of shorter-term and longer-term
incentives. SJI’s performance over the last five years provides evidence that
the executive compensation program has been effective in furthering the
Company’s business objectives. SJI has outperformed the S&P 500 and S&P
Utilities indices in the last five years. SJI has outperformed the Company’s
Long-Term Incentive Compensation Peer Group in terms of Total Shareholder Return
in four of the past five years. By focusing executive compensation on
achievement of annual corporate goals, annual and longer-term earnings per
share
targets and three-year compound annual total shareholder returns, SJI’s
executive compensation program is an integral part of SJI’s corporate strategy
for improving shareholder value.
Oversight
of the Executive Compensation Program
The
SJI
executive compensation program is administered by the Compensation/Pension
Committee of the Board of Directors. The Compensation/Pension Committee is
composed of six independent directors. These directors meet the independence
standards of the New York Stock Exchange. In accordance with its charter, the
Committee sets the principles and strategies that serve to guide the design
of
our employee compensation and benefit programs. The Committee annually evaluates
the performance of the Chairman/CEO and reviews the recommendations of the
Chairman/CEO regarding the evaluations of the Chief Financial Officer, and
the
Named Executive Officers as identified in the Summary Compensation Table in
the
proxy. Taking the performance evaluations into consideration, the Committee
then
establishes and approves their compensation levels, including performance-based
stock awards. Goals for the executives’ annual cash compensation are established
at the beginning of each year for use in the performance evaluation process.
The
Committee has retained independent compensation consultants who report directly
to the Committee. The Committee has retained Mercer Human Resource Consulting
and the Hay Group to assist the Committee in its activities. Mercer Human
Resource Consulting is the Committee’s independent compensation
expert. The Committee meets regularly in executive session without members
of
management present and reports regularly to the Board of Directors on its
actions and recommendations following each meeting.
Executive
Compensation Principles
The
Company’s
key compensation objective as stated above is to advance the Company’s Strategic
Plan and corporate mission which are rooted in enhancing shareholder value
while
attracting and retaining highly qualified executive management to carry out
the
work and goals of the organization. In order to achieve the objectives of the
Company’s Strategic Plan and increase shareholder value, the executive
compensation program is founded on the following guiding
principles:
· Executive
compensation should be directly and measurably linked to business and individual
performance with a significant portion of the compensation designed to create
incentives for superior performance and meaningful consequences for below target
performance.
· The
Executives’ total compensation should be competitive with peer companies so that
the Company can attract, retain and motivate high performing business
leaders.
· Executive
compensation should align the interests of executives with shareholders so
that
compensation levels are commensurate with relative shareholder returns and
financial performance through the use of performance-based restricted
stock.
· Executive
compensation incentive plans should balance short-term and long-term financial
and strategic objectives whereby executives are rewarded for the businesses
for
which they are responsible and for overall Company performance.
· The
process for designing, determining and monitoring executive compensation should
be independent of management utilizing the assistance of independent
compensation consultants reporting directly to the Committee. The executive
compensation program is administered by independent Board members who receive
assistance from an independent compensation consultant who report directly
to
the Committee. The Committee is responsible for reviewing and establishing
the
compensation of the Chairman/CEO and the other executive officers.
Compensation/Pension
Committee Charter
The
Compensation/Pension Committee has a Charter which reflects the responsibilities
of the Committee. The primary function of the Compensation & Pension
Committee is to assist
the Board of Directors in fulfilling its oversight responsibilities related
to
the performance and compensation of executives and the structure and performance
of significant, long-term employee defined benefit and defined contribution
plans. Consistent with this function, the Committee encourages continuous
improvement of, and adherence to the Corporation’s policies, procedures and
practices at all levels. The Committee’s primary duties and responsibilities are
as follows:
· Develop
and administer an executive compensation program which is competitive; which
ensures that the interests of executives are aligned with the interests of
shareholders; which ensures the Company’s ability to attract and retain
qualified executive talent; and, which strikes a proper balance between
compensation and corporate growth. Subordinate tasks include:
· Engagement
of an executive compensation consultant and evaluation of that consultant’s work
product and recommendations
· Review
the Company’s Compensation Discussion & Analysis with management and
recommend to the Board of Directors that the Compensation Discussion &
Analysis be included in the annual proxy statement
· Review
/
modify peer group for executive compensation purposes
· Establish
the annual EPS target for executive compensation purposes
· Review
and recommend to the Board executive base salary adjustments (if
any)
· Review,
validate and report to the Board on actual results of the Company’s officer
annual cash program
· Review,
validate and report on Performance-Based Restricted Stock Grants (LTIP) issued
to executives
· Review,
validate and approve actual Restricted Stock Awards
· Prepare,
maintain and recommend a CEO evaluation policy and procedure and facilitate
the
effective completion of that process
· Review,
approve and recommend to the full Board, Officer Employment Agreements,
including any renewals or modifications to such agreements
· Approve
any waivers provided for under Restricted Stock, Deferred Compensation, or
SERP
agreements
· Review
and approve executive benefits programs
The
CEO
provides consultation to the Committee on compensation related to the named
executive officers. The Committee, in consultation with outside independent
experts, reviews and establishes the CEO’s total compensation.
Compensation
Practices
The
current
executive compensation structure has been in place since 1998 and applies to
all
officers of the Company. At that time, a comprehensive study of compensation
alternatives was undertaken, a primary objective being the creation of a system
which aligns the interest of Company shareholders with the financial incentives
of executives on a short-term and long-term basis. That study drew upon the
experience and knowledge of committee members in consultation with their
independent compensation consultant. Subsequently, on an every three-year cycle
basis, a compensation structure and market competitiveness study has been
completed to ensure that the structure remained consistent with contemporary
compensation methods and tools. The committee’s consulting firm, Mercer Human
Resource Consulting, presents a detailed update which reexamines the component
parts of the executive compensation program as currently applied. Further,
the
report provides a competitive analysis of how executives’ base salary, annual
cash and long-term compensation compare to peer companies in the energy industry
and the general business community. The committee then evaluates and assesses
those findings in the context of the Company’s performance over the years and
the growth predicted going forward. In 2005, the committee engaged its
consultant to provide a market-based update to its executive compensation
schedule, in anticipation of future compensation adjustments. That update was
completed and presented to the Committee in January 2006. Total annual direct
compensation forecasted for 2007 for the executive group, exclusive of the
CEO,
reported at 82% of the competitive market median. Using the same data sources,
the total annual direct compensation forecasted for 2007 for Mr. Graham, the
Chief Executive Officer, reported at approximately 82% of the competitive market
median.
Based
on the
input from Mercer Human Resource Consulting, the independent executive
consultants and experience and knowledge of the committee members, a
compensation structure was designed with three components; base salary, annual
performance-based cash awards and long-term performance-based equity awards.
The
annual performance-based cash awards and long-term performance-based equity
awards are “at-risk” compensation in that both components have a threshold
performance level that must be achieved before any payout. Consistent with
the
principle that compensation should be directly linked to the Company’s
performance, a significant portion of the executive’s compensation is at-risk.
The CEO’s at-risk portion of target compensation for 2007 represents 55% of his
total direct compensation.
Additionally,
the compensation structure provides for a significant portion of compensation
to
be paid in equity awards to continually align executives’ interests with
shareholders. Also, the Company has stock ownership guidelines for executives
and directors to reinforce the alignment with shareholders. The CEO is required
to own shares of the Company’s common stock with a market value equal to a
minimum of three times his or her annual base salary. The CEO’s equity
compensation component of target compensation for 2007 represents 34% of this
total direct compensation.
The
determination of peer groups for executive compensation is a critical task
of
the Committee. The Committee, with consultation from independent compensation
consultants, selects peers for the three components of executive compensation.
A
national peer group of 12 similarly sized energy utility companies is used
for
market comparison for base, total cash compensation and total direct
compensation for the CEO. The peer group includes AGL Resources, Atmos Energy
Corporation, Black Hills Corporation, Cascade Natural Gas Corporation, CH
Energy, Inc., Energen Corporation, LaClede Group, New Jersey Resources,
Northwest Natural Gas Company, Piedmont Natural Gas Corporation, Southwest
Gas
Corporation, and WGL Holdings, Inc. For the CFO and Named Executive Officers,
two or more industry specific executive compensation studies are used by the
Committee’s independent compensation consultants to provide market-based
compensation information. A national peer group of 49 energy companies is used
for the long-term incentive program that measures total shareholder return
for
the purposes of awards. In 2003, the Committee directed the completion of a
study to examine the efficacy of the peer group utilized for the long-term
incentive component. This report was completed and presented to the Committee.
The criteria and screening process employed by the consultant was carefully
reviewed and discussed. The Committee found the process sound and appropriate.
A
defined procedure and schedule for peer group population and review was adopted
and documented in the Committee’s chart of activities.
Compensation
Components
The
established incentive-based executive compensation structure consists of three
parts, two of which are directly linked to achieving predefined short-term
and
long-term performance goals. These three components were fully implemented
with
respect to compensation and performance for fiscal year 2000 and each year
thereafter. The Committee
has adopted a policy to use only performance-based restricted stock as the
long-term incentive component. No stock options are outstanding. The components
are as follows:
· Base
Salary - which is targeted at the 50th percentile of the relevant peer market.
For 2007, CEO base salary is targeted at 45% of the targeted total direct
compensation; for 2007, the Named Executive Officers’ base salary is
targeted
at an average of 55% of the targeted total direct compensation. The Committee
utilizes market survey data from executive compensation consultants in
establishing base salary amounts.
· Annual
Cash Awards - For the CEO and CFO, 100% of the annual cash award is tied
directly to the Company’s earnings per share from continuing operations. For the
other Named Executive Officers, 50% of the annual cash award is directly tied
to
the Company’s earnings per share from continuing operations, with the balance
based upon specific, predefined performance objectives for each executive.
Performance objectives include individual and multiple business unit financial
performance, customer goals, internal process projects and leadership goals.
Each executive has a pre-established annual cash target. Annually, the Committee
develops a schedule to determine the actual amount of the annual cash award.
The
schedule establishes a minimum, a target and a maximum. The amount of annual
cash awards is capped at this maximum level. The range of payout is plus or
minus twenty-five percent of the targeted annual cash amount. A minimum earnings
per share result is required for any payout of the annual cash award. The
minimum earnings per share level is the amount of the Company’s prior year’s
actual earnings per share result. For the Company’s executives to achieve any
annual cash payout, the Company must outperform the prior year’s earnings. For
2006, the Company publicly reported earnings both on a GAAP basis and an
economic earnings basis. Economic earnings are defined as income from continuing
operations less unrealized gains and plus unrealized losses, as applicable
and
in each case after tax, on all commodity derivative transactions that we are
marking to market each quarter. 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. Based on both 2006 GAAP and economic
earnings, the Company’s performance exceeded the maximum pay-out level. For
2007, the Committee has determined that ecomonic earnings are the appropriate
measure for the annual cash awards. For 2006, the CEO’s annual cash award was
set at 30% of the targeted total direct compensation. For 2007, the Named
Executive Officers’ annual cash award is set at an average of 30% of the
targeted total direct compensation. For the CEO, the Committee has established
that the targeted
2007 annual cash award will be 45% of the CEO’s base salary. The Committee
utilizes market survey data from executive compensation consultants in
establishing annual cash salary amounts.
· Long-Term
Incentive - which employs equity-based instruments. Currently, those instruments
are in the form of performance-based restricted stock grants, which are earned
based upon the Company’s relative total shareholder return measured against
industry peer companies, over three-year cycles. All executives have
pre-established performance-based long-term incentive targets. The Committee
has
developed a schedule to determine the actual amount of the long-term incentive
awards. The schedule establishes a minimum, a target and maximum. The amount
of
long-term incentive award is capped at this maximum level. The range of payout
is plus or minus 50% of the targeted long-term incentive amount. The minimum
level requires that the Company’s common stock over a three-year period achieve
a total shareholder return that matches at the 35th percentile level of the
peer
group companies. The target is set at the 50th percentile. The maximum award
level is set at the 80th percentile. In the last five years, the Company has
significantly outperformed the peer group of companies. For the three-year
cycle
ending December 31, 2006, the Company’s stock’s total shareholder return in
comparison with the peer group performed at the 84th percentile. For 2006,
the
CEO’s long-term incentive was set at 60% of the targeted total direct
compensation. For 2006 and 2007, the Named Executive Officers’ long-term
incentive is set at 50% of the targeted total direct compensation. For the
CEO,
the Committee has established that the targeted 2007 long-term incentive will
be
75% of the CEO’s base salary. The Committee utilizes market survey data from
executive compensation consultants in establishing annual long-term incentive
amounts.
Benefits
and Perquisites
The
Company provides a Retirement Plan, a 401-K Plan, medical, dental, life
insurance and disability coverage which are provided to all eligible employees
of the Company including officers. Officers of the Company who achieve the
age
of 50 are eligible for the Supplemental Executive Retirement Plan.
Executive
Pension Plans
The
executive
officers of the Company are eligible for benefits under a tax-qualified pension
plan for salaried employees provided by the Company. Compensation considered
under the pension plan consists of base salary only. Employees do not make
contributions to the plan, and the employer contributions (which are based
on
aggregate actuarial calculations without individual allocation) are held and
invested in a diversified portfolio of funds of recognized standing until they
are used to provide retirement
benefits. Early retirement with reduced annual benefits is permitted (but not
before age 55). Executive officers who are 50 years of age or older are also
covered by an unfunded supplemental retirement plan that is designed in general
to provide the officer with a minimum retirement benefit from the salaried
employee pension plan and the supplemental plan that aggregates 2% of the
average of the highest three of the final six years’ salary (as defined in the
plan), for each year of service, plus 5%. Assuming continued employment and
retirement at age 60, Messrs. Graham, Kindlick, Ruggiero, Walker and Renna
will
have,
respectively, 36, 36, 19, 31 and 29 years of credited service. No credit is
provided under the supplemental plan for more than 30 years of service.
The
following details the other benefits and perquisites provided to the Named
Executive Officers.
Disability
Plan - Temporary disability shall be paid at a rate of one hundred percent
(100%) of the Officer’s Base Salary, and extends at full pay for up to 120 days
for Officers with less than five (5) years of service, and up to 365 days for
Officers with service of five (5) or more years. Long-term disability (LTD),
begins upon the expiration of the temporary disability benefit as described
above. LTD is paid at a rate of fifty percent (50%) of the Officer’s Base
Salary, reduced by Social Security Disability payments, if any.
Group
Life Insurance - at a principle equivalent of two times (2x) the Officer’s Base
Salary, rounded to the next highest $5,000 increment. The insurance premium
shall be paid by the Companies; the Officer shall be responsible for resultant
federal, state or local income taxes. 24-Hour Accident Protection Coverage
is
provided while in the employ of the Company in an amount of $250,000. The
insurance premium shall be paid by the Company; the Officer shall be responsible
for resultant federal, state or local income taxes.
Supplemental
Survivor’s Benefit - Upon the death of the Officer while he/she is in the employ
of the Company, his/her surviving beneficiary shall receive a lump sum payment
of $1,000 to be paid as soon as practical following the Officer’s death. The
surviving beneficiary shall also receive a lump sum death benefit based upon
years of service with the Company in the amounts of six (6) months base salary
(10-15 service years); nine (9) months base salary (15-25 service years); twelve
(12) months base salary (25+ service years). Such payment shall be offset by
proceeds from the Officer’s qualified pension plan and SERP in the year of
death.
Supplemental
Saving Plan Contributions - The Internal Revenue Code limits the contributions
that may be made by or on behalf of an individual under defined contribution
plans such as the Company’s 401(k) Plan. The Company has adopted a policy of
currently reimbursing its executive officers with the amount of Company
contributions
that may not be made because of this limitation. This includes the tax liability
incurred by the additional income. Amounts paid pursuant to this policy are
included in the Summary Compensation Table.
Company
Automobile - The Officer shall be provided a company automobile to be used
for
business and at the Officer’s discretion, for commuting and other non-business
purposes. The Officer shall be responsible for any federal and/or state income
taxes which result from non-business usage.
Time
Off
- The Officer shall take such time off for vacation or personal needs as may
be
accommodated while ensuring the duties and responsibilities of his/her position
are accommodated to the satisfaction of SJI’s CEO. It is anticipated that such
time off would not normally exceed twenty (20) days per calendar year, exclusive
of scheduled corporate holidays. Time off shall not accrue, nor shall it be
carried from one year to the next, resultantly, there shall be no payment for
“unused time off” at the time of the Officer’s death, retirement or other such
termination.
Annual
Physical Examination - The Company provides the Officer with an annual physical
examination at its expense.
Retiree
Health Care - Upon retirement, the Officer receives the same medical,
hospitalization, prescription, dental and major medical benefits as are provided
to all employees.
Deferred
Compensation Program - The Company provides a Restricted Stock Deferral Plan
for
those employees entitled for the awards of the Performance-Based Restricted
Stock. The Plan permits those entitled employees to defer all or a portion
of
the Company stock that they would otherwise receive under the Company’s
Stock-Based Compensation Plan.
Employment
Agreements; Change of Control Agreements
The
Company has employment agreements with each of the Named Executives with the
exception of Mr. Jackson who retired on April 1, 2006. Mr. Graham and the
other
Named Executives have agreements for three-year periods ending December 31,
2008, which provide for a base salary that will be reviewed periodically but
will not be less than what was being paid at the beginning of the period. If
a
change of control (as defined in each agreement) occurs, the agreement is
automatically extended for three years from the date the change of control
occurs. If, during the extended term of the agreement, the Officer’s employment
is terminated for other than cause, or if he resigns after there has been a
significant adverse change in his employment arrangement with the Company due
to
a change of control, he is entitled to a severance payment equal to 300% of
his
average annual compensation during the preceding five calendar years. If the
Officer’s
employment agreement is terminated for other than cause without a change of
control, he is entitled to a severance payment equal to 150% of his current
base
salary.
The
South
Jersey Industries, Inc. 1997 Stock-Based Compensation Plan as amended and
restated effective January 26, 2005 and approved by the shareholders and the
Restricted Stock Agreements to the Named Executive Officers provide the option
to the Company that all unvested shares may vest upon a change of
control.
Tax
Implications
Section
162(m) of the Internal Revenue Code of 1986 limits the deduction allowable
for
compensation paid to certain of our executive officers up to $1 million.
Qualified performance-based compensation is excluded from this limitation if
certain requirements are met. Our policy is generally to preserve the federal
income tax deductibility of compensation paid, to the extent feasible. Awards
made under the 1997 Stock-Based Compensation Plan to employees are intended
to
qualify as performance-based compensation and thereby be excluded from the
$1
million limitation. Notwithstanding our policy to preserve the federal income
tax deductibility of compensation payments, under certain circumstances the
Compensation Committee, in its discretion, may authorize payment, such as
salary, bonuses or otherwise, that may cause an executive officer’s income to
exceed the deductible limits. The Compensation Committee does not anticipate
that such compensation will result in the loss of deductibility under Section
162(m).
Compensation
Committee Report
We
have
reviewed the foregoing Compensation Discussion and Analysis with management.
Based on our review and discussion with management, we have recommended to
the
Board of Directors that the Compensation Discussion and Analysis be included
in
the proxy statement and the Company’s Annual Report on Form 10-K for the year
ended December 31, 2006.
Compensation/Pension
Committee
W.
Cary
Edwards, Chairman
Dr.
Shirli M. Billings
Thomas
A.
Bracken
Keith
S.
Campbell
Sheila
Hartnett-Devlin
Dr.
Herman D. James
Summary
Compensation Table
Name
and
Principal
Position
(a)
|
Year
(b)
|
Salary
($)
(c)
|
Bonus
($)
(d)
|
Stock
Awards
($)
(1)
(e)
|
Option
Awards
($)
(f)
|
Non-Equity
Incentive Plan Compensation
($)
(g)
|
Change
in
Pension
Value
and
Nonqualified
Compensation
Earnings
($)
(h)
|
All
Other
Compensation
($)
(2)
(3)
(i)
|
Totals
($)
(j)
|
Edward
J. Graham (5)
Chairman,
President and
Chief
Executive Officer
|
2006
|
482,692
|
-
|
248,873
|
-
|
181,875
|
53,000
|
23,483
|
989,923
|
David
A. Kindlick
Vice
President and
Chief
Financial Officer
|
2006
|
228,375
|
-
|
106,435
|
-
|
74,050
|
174,000
|
13,441
|
596,301
|
Albert
V. Ruggiero
Vice
President
|
2006
|
229,279
|
|
106,584
|
-
|
57,438
|
186,000
|
15,437
|
594,738
|
Richard
H. Walker, Jr.
Vice
President, General Counsel & Secretary
|
2006
|
176,413
|
|
60,420
|
-
|
51,110
|
187,000
|
12,879
|
487,822
|
Michael
J. Renna (6)
Vice
President and
Chief
Operating Officer of
South
Jersey Energy Solutions
|
2006
|
183,060
|
|
60,027
|
-
|
57,378
|
16,000
|
10,839
|
327,304
|
Richard
J. Jackson
Vice
President (3) (7)
|
2006
|
54,054
|
|
22,452
|
-
|
0
|
533,000
|
196,805
(4)
|
806,311
|
Footnotes
to Summary Compensation Table
(1)
Represents the compensation expense incurred by the Company in the respective
fiscal year in connection with the grants of restricted common stock or stock
options, as applicable, calculated in accordance with SFAS 123R. See Footnote
1
of the Company’s financial statements for additional information, including
valuation assumptions used in calculating the fair value of the award. This
amount includes the SFAS 123R compensation expense for the outstanding three
years of performance based restricted stock grants.
(2)
Includes employer contributions to the Company’s 401(k) Plan, reimbursement for
401(k) contributions not permitted under Internal Revenue Code (see footnote
(1)), the value of a company provided automobile and the income value of group
life insurance. The 2006 values for these items are listed below:
|
Graham
|
Kindlick
|
Ruggiero
|
Walker
|
Renna
|
Jackson(4)
|
401(k)
Plan
|
5,792
|
6,587
|
6,877
|
5,692
|
5,491
|
3,330
|
401(k)
Reimbursement
|
11,215
|
446
|
934
|
-
|
-
|
-
|
Group
Life Insurance
|
1,260
|
1,124
|
2,102
|
1,562
|
339
|
446
|
Automobile
|
5,216
|
5,284
|
5,524
|
5,625
|
5,009
|
36,421
|
Total
Value
|
23,483
|
13,441
|
15,437
|
12,879
|
10,839
|
40,197
|
(3)
Retired April 1, 2006 as Vice President and Senior Vice President, Operations
of
South Jersey Gas Company.
(4)
Includes consulting payments of $156,608 received in 2006 and $40,197 which
includes transfer of automobile and items in the table above.
(5)
Mr.
Graham is not currently eligible for the SERP. The SERP covers officers of
South
Jersey Industries who have attained age 50, and Mr. Graham does not attain
age
50 until 2007. During 2007 he will become eligible for the plan, and he will
be
given credit for all of his past service (24 years) with South Jersey
Industries.
(6)
Mr.
Renna is not currently eligible for the SERP. The SERP covers officers of South
Jersey Industries who have attained age 50, and Mr. Renna does not attain age
50
until 2017.
(7)
Mr.
Jackson retired on April 1, 2006. In addition to his regular pension benefit
accrual, his change in pension value reflects the increase in value associated
with retiring at age 56 and five months instead of age 60 (due to the early
retirement subsidies provided under the South Jersey Industries, Inc.
Supplemental Executive Retirement Plan).
Grants
of Plan-Based Awards
The
following table sets forth certain information concerning the grant of awards
made to our named executive officers during the year ended December 31, 2006.
Grants
of Plan-Based Awards - 2006
|
|
Estimated
Possible Payouts Under
Non-Equity
Incentive Plan Awards
(1)
|
Estimated
Possible Payouts Under
Equity
Incentive Plan Awards
(2)
|
All
Other Stock Awards:
|
|
|
Name
|
|
|
|
|
|
|
|
Number
of Shares of Stock or Units
(#)
|
Exercise
or
Base Price
of
Option
Awards
($/Sh)
|
Grant
Date
Fair
Value of
Stock
and
Option
Awards
($)
(3)
|
Edward
J. Graham
|
1/01/06
1/26/06
|
0
|
145,500
|
181,875
|
0
|
9,986
|
14,979
|
-
|
-
|
279,109
|
David
A. Kindlick
|
1/01/06
1/26/06
|
0
|
59,240
|
74,050
|
0
|
3,925
|
5,887
|
-
|
-
|
109,704
|
Albert
V. Ruggiero
|
1/01/06
1/26/06
|
0
|
45,950
|
57,438
|
0
|
3,941
|
5,911
|
-
|
-
|
110,151
|
Richard
H. Walker
|
1/01/06
1/26/06
|
0
|
42,240
|
52,800
|
0
|
3,033
|
4,549
|
-
|
-
|
84,772
|
Michael
J. Renna
|
1/01/06
1/26/06
|
0
|
47,420
|
59,275
|
0
|
3,150
|
4,725
|
-
|
-
|
88,043
|
Richard
J. Jackson (4)
|
1/01/06
1/26/06
|
0
|
0
|
0
|
0
|
804
|
1,206
|
-
|
-
|
22,471
|
(1)
Amounts represent potential cash bonus amounts payable pursuant to the
respective named executive officers if all of goals and targets were achieved
for 2006 performance to be paid in 2007 for each named executive officer.
(2)
Represents the possible payouts of the performance based restricted stock grant
at the end of the three year vesting and performance measurement
period.
(3)
Represents the full grant date fair value of the grant of restricted common
stock calculated in accordance with SFAS 123R. See Footnote 1 of the financial
statements for additional information, including valuation assumptions used
in
calculating the fair value of the awards.
(4)
Richard Jackson retired April 1, 2006 and is not eligible for any non-equity
incentive plan awards. Mr. Jackson is only eligible for a pro-rated share of
his
equity incentive plan award.
Equity
Awards
The
following table sets forth certain information concerning our outstanding
restricted stock awards for our named executive officers at December 31,
2006.
Outstanding
Equity Awards At Fiscal Year-End - 2006
Stock
Awards
Name
|
Year
|
Number
of Shares
Or
Units of Stock
That
Have Not Vested
(#)
|
Market
Value of
Shares
or Units of
Stock
That Have
Not
Vested
($)
|
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
Or
Other Rights That
Have
Not Vested
(#)
(1)
|
Equity
Incentive Plan
Awards:
Market or
Payout
Value of
Unearned
Shares, Units
Or
Other Rights That
Have
Not Vested
($)
(2)
|
Edward
J. Graham
|
2005
2006
|
-
-
|
-
-
|
9,704
9,986
|
324,210
333,632
|
David
A. Kindlick
|
2005
2006
|
-
-
|
-
-
|
4,162
3,925
|
139,052
131,134
|
Albert
V. Ruggiero
|
2005
2006
|
-
-
|
-
-
|
4,162
3,941
|
139,052
131,668
|
Richard
H. Walker
|
2005
2006
|
-
-
|
-
-
|
1,916
3,033
|
64,013
101,332
|
Michael
J. Renna
|
2005
2006
|
-
-
|
-
-
|
1,942
3,150
|
64,882
105,241
|
Richard
J. Jackson
|
2005
2006
|
-
-
|
-
-
|
1,497
257
|
50,014
8,586
|
(1)
Represents grants of performance based restricted stock issued in January 2005
and January 2006 at target performance.
(2)
Market value of Company common stock at December 31, 2006 was $33.41 and was
used to calculate market value.
Stock
Vesting - 2006
The
following table sets forth certain information concerning the vesting of
restricted stock for the Company’s named executive officers during the year
ending December 31, 2006. No options are outstanding and none were exercised
by
the named executive officers during the year ending December 31, 2006. Richard
Jackson retired April 1, 2006 and is eligible only for a pro-rated share of
his
equity incentive plan awards.
Stock
Vested - 2006
Stock
Awards
Name
|
Number
of Shares Acquired on Vesting
(#)
|
Value
Realized on Vesting
($)
(1)
|
Edward
J. Graham
|
18,402
|
614,816
|
David
A. Kindlick
|
8,643
|
288,772
|
Albert
V. Ruggiero
|
8,643
|
288,772
|
Richard
H. Walker
|
3,977
|
132,865
|
Michael
J. Renna
|
3,558
|
118,864
|
Richard
J. Jackson
|
5,552
|
185,505
|
|
(1)
|
The
dollar value is calculated by multiplying the number of shares of
restricted stock that has vested by the market value of the Company’s
common stock on the vesting date of December 31, 2006, which was
$33.41.
|
Pension
Benefits Table
Name
|
Plan
Name
(1)
(2)
|
Number
of Years
Credited
Service under
Plan
at FAS Measurement
Date
|
Present
Value of
Accumulated
Benefit (3)
|
Payments
During
Las
Fiscal Year
|
Edward
J. Graham (4)
|
Retirement
Plan for
Employees
of SJI
|
24
|
355,000
|
0
|
David
A. Kindlick
|
Retirement
Plan for
Employees
of SJI
SJI
Supplemental
Executive
Retirement Plan
|
26
26
|
461,000
778,000
|
0
0
|
Albert
V. Ruggiero
|
Retirement
Plan for
Employees
of SJI
SJI
Supplemental
Executive
Retirement Plan
|
17
17
|
459,000
678,000
|
0
0
|
Richard
H. Walker, Jr.
|
Retirement
Plan for
Employees
of SJI
SJI
Supplemental
Executive
Retirement Plan
|
27
27
|
459,000
715,000
|
0
0
|
Michael
J. Renna (5)
|
Retirement
Plan for
Employees
of SJI
|
8
|
60,000
|
0
|
Richard
J. Jackson (6)
|
Retirement
Plan for
Employees
of SJI
SJI
Supplemental
Executive
Retirement Plan
|
19
19
|
478,000
944,000
|
27,000
53,000
|
Footnotes:
(1)
The
South Jersey Industries, Inc. Supplemental Executive Retirement Plan (the
“SERP”) provides benefits to officers of South Jersey Industries who have
attained age 50.
A
participant is eligible for a normal retirement benefit under the SERP after
having attained age 60. The normal retirement benefit is based on 2% of the
participant’s “final average compensation” multiplied by years of credited
service (up to 30 years), plus an additional 5% of final average compensation.
“Final average compensation” is the average of the participant’s base pay plus
annual incentive for the highest 36 consecutive calendar months out of the
final
60 months immediately preceding retirement.
A
participant is eligible for an early retirement benefit under the SERP after
having attained age 55. A participant’s early retirement benefit equals his or
her normal retirement benefit reduced by 2% per year. (Messrs. Ruggiero and
Walker are currently eligible for early retirement.)
The
SERP’s normal form of payment is a life annuity with six years
guaranteed.
(2)
The
Retirement Plan for Employees of South Jersey Industries, Inc. (the “plan”)
provides benefits to non-bargaining employees who were hired before July 1,
2003. A Participant is eligible for a normal retirement benefit under the plan
after having attained age 65. The normal retirement benefit is based on the
sum
of (1) the Participant’s accrued benefit as of September 30, 1989 increased 5%
per year thereafter, and (2) 1.00% of the participant’s “final average
compensation” plus 0.35% of the participant’s final average compensation in
excess of covered compensation, multiplied by years of credited service after
September 30, 1989 (up to 35 years less credited service as of September 30,
1989). “Final average compensation” is the average of the participant’s base pay
for the 36 calendar months immediately preceding retirement.
A
participant is eligible for an early retirement benefit under the plan after
having attained age 55 and completed five years of service. A participant’s
early retirement benefit equals his or her normal retirement benefit reduced
by
2% per year prior to age 60.
The
plan’s normal form of payment is a life annuity with six years
guaranteed.
(3)
Present values for participants are based on a 6.04% discount rate and RP-2000
mortality projected to 2010 (postretirement only), and no preretirement
decrements.
(4)
Mr.
Graham is not currently eligible for the SERP. The SERP covers officers of
South
Jersey Industries who have attained age 50, and Mr. Graham does not attain
age
50 until 2007. During 2007 he will become eligible for the plan, and he will
be
given credit for all of his past service (24 years) with South Jersey
Industries.
(5)
Mr.
Renna is not currently eligible for the SERP. The SERP covers officers of South
Jersey Industries who have attained age 50, and Mr. Renna does not attain age
50
until 2017.
(6)
Mr.
Jackson retired on April 1, 2006.
Nonqualified
Deferred Compensation Table
The
following table sets forth certain information regarding the Company’s
Restricted Stock Deferral Plan, which represents the Company’s only non
tax-qualified deferred compensation program. The Restricted Stock Deferral
Plan
permits the deferral of fully vested shares of restricted stock earned by the
Company’s executive officers pursuant to previously
issued performance-based restricted stock grants. The Company does not make
contributions to the plan, and all earnings referenced in the table represent
dividends paid on outstanding shares of common stock.
Name
|
Plan
Name
|
Executive
Contributions
In
Last FY (1)
|
Registrant
Contributions
In
Last FY
|
Aggregate
Earnings
in
Last
FY (2)
|
Aggregate
Withdrawals
Distributions
|
Aggregate
Balance
at
Last FYE
(1)
(3)
|
Edward
J. Graham
|
Restricted
Stock
Deferral
Plan
|
487,716
|
-
|
41,398
|
-
|
1,532,450
|
David
A. Kindlick
|
Restricted
Stock
Deferral
Plan
|
-
|
-
|
9,729
|
126,841
|
360,165
|
Albert
V. Ruggiero
|
Restricted
Stock
Deferral
Plan
|
301,220
|
-
|
32,994
|
-
|
1,221,327
|
Richard
H. Walker. Jr.
|
Restricted
Stock
Deferral
Plan
|
129,731
|
-
|
10,280
|
-
|
380,547
|
Michael
J. Renna
|
Restricted
Stock
Deferral
Plan
|
73,899
|
-
|
4,016
|
-
|
148,677
|
Footnotes:
(1)
The
amounts represent the market value of vested shares of previously restricted
stock deferred by the named executive officer calculated by multiplying the
number of shares of deferred stock by the market value of the Company’s common
stock as of December 31, 2006, which was $33.41.
(2)
The
amounts represent dividends paid on the deferred common stock. These amounts
are
not reported in the Summary Compensation Table as they represent dividends
earned on the deferred common stock, which dividends are payable on all
outstanding shares of the Company’s common stock.
(3)
The
amounts represent the market value of vested shares of previously restricted
stock deferred by the named executive officer. The Company has in previous
years
disclosed the issuance of the restricted shares as compensation in the Summary
Compensation Table for such year.
Securities
Authorized for Issuance Under Equity Compensation
Plans
The
following table provides information as of December 31, 2006 relating to equity
compensation plans of the Company pursuant to which grants of restricted stock,
options or other rights to acquire shares may be made from time to
time.
Equity
Compensation Plan Information
Plan
Category
|
(a)
Number
of securities to
be
issued upon exercise
of
outstanding options,
warrants
and rights
(#)
|
(b)
Weighted
average exercise
price
of outstanding options,
warrants
and rights
($)
(3)
|
(c)
Number
of securities remaining
Available
for future issuance
under
equity compensation
plans
excluding securities
Reflected
in column (a)
(#)
|
Equity
compensation plans
approved
by security
holders(1)
|
572,352
|
-
|
2,000,000
|
Equity
compensation plans
not
approved by security
holders(2)
|
7,104
|
-
|
-
|
Total
|
579,456
|
|
2,000,000
|
(1)
These
plans include those utilized to make awards of performance-based restricted
stock to the Company’s Officers and restricted stock to the
Directors.
(2)
This
item includes prior year ad hoc awards of restricted stock to the Company’s
directors. In 2005, shareholders approved inclusion of Directors into the 1997
Stock-Based Compensation Plan as amended and restated effective January 26,
2005.
(3)
Only
restricted stock has been issued. The restricted stock is issuable for no
additional consideration, and therefore the shares are not included in the
calculation of weighted average exercise price in column (b).
Employment
Agreements; Change of Control Agreements and
Other
Potential Post-Employment Payments
South
Jersey Industries has entered into certain agreements and maintains certain
plans that will require the Company to provide compensation to named executive
officers of the Company in the event of a termination of employment or a change
in control of the Company. The amount of benefits payable to each named
executive officer in each situation is listed in the table below assuming the
event occurred on December 31, 2006.
Name
(4)
Executive
Benefits
and
Payments
Upon
Termination
|
|
|
Termination
by
the
Officer
for
Good
Reason following
a CIC
|
Termination
by
the
Companies
for
Other than
Cause following
a CIC
|
Termination
by
the
Companies
for
Other
than
Cause without
a CIC
|
Edward
J. Graham
Cash
Compensation
Equity
Compensation (2)
Incremental
Nonqualified Pension
|
$0
|
$0
|
|
|
|
David
A. Kindlick
Cash
Compensation
Equity
Compensation
Incremental
Nonqualified
Pension
|
|
$0
$0
$0
|
|
|
|
Albert
V. Ruggiero Cash
Compensation Equity
Compensation Incremental
Nonqualified Pension
|
|
|
|
$749,000
$271,000
$0
|
|
Richard
H. Walker, Jr. Cash
Compensation
Equity
Compensation
Incremental
Nonqualified Pension
|
|
|
|
|
|
Michael
J. Renna
Cash
Compensation
Equity
Compensation
Incremental
Nonqualified Pension
|
$0
|
$0
|
|
|
|
(1)
Eligibility for retirement requires attaining both 55 years of age and five
years of continuous service with the Company.
(2)
Stock
Price - Assumed to be $33.41 based on the closing price as of December 31,
2006.
(3)
The
present values of accumulated pension benefits under the Retirement Plan for
Employees of SJI and the SJI Supplemental Executive Retirement Plan for the
NEOs
are disclosed in the Pension Benefits Table section of this proxy disclosure.
The payment amounts disclosed in this section represent the amount of the
increase under such payments upon any triggering events. Only Mr. Ruggiero
and
Mr. Walker are currently eligible to receive a SERP benefit.
(4)
Mr.
Jackson retired on April 1, 2006 and is receiving an annual pension benefit
of
$106,484.
STOCK
PERFORMANCE
___________________________________________
The
graph
below compares the cumulative total return on the Company’s Common Stock for the
5- year period ended December 31, 2006 with the cumulative total return on
the
S&P 500 and the S&P Utility Indexes. The graph assumes that $100 was
invested on December 31, 2001 in the Company’s Common Stock, the S&P 500
Index and the S&P Utility Index and that all dividends were reinvested.
Standard & Poor’s Utility Index is a commonly used indicator of utility
common stock performance based on selected gas, electric and telephone
companies. For the 5-year period ending December 31, 2006, investors received
a
20% annualized total return compared with the 6% and 9% returns from the S&P
500 Index and S&P Utility Index, respectively. The annual growth rate for
2006 for the Company was 18%. This compares with 16% for the S&P 500 and 21%
for the S&P Utility Index.
Indexed
Total Return Over 5 Years Assuming Dividends Reinvested
S&P
500
|
|
|
100
|
|
|
77.9
|
|
|
100.2
|
|
|
111.2
|
|
|
116.6
|
|
|
135.0
|
|
S&P
UTIL
|
|
|
100
|
|
|
70.0
|
|
|
88.4
|
|
|
109.8
|
|
|
128.3
|
|
|
155.3
|
|
SJI
|
|
|
100
|
|
|
106.0
|
|
|
135.7
|
|
|
182.5
|
|
|
208.4
|
|
|
246.5
|
|
AUDIT
COMMITTEE REPORT
The
Audit
Committee of the Board of Directors is comprised of six directors, each of
whom
is independent as defined under the listing standards of the New York Stock
Exchange and satisfies the additional independence criteria applicable to Audit
Committee members. The Board has determined that Sheila Hartnett-Devlin, Thomas
A. Bracken and Helen R. Bosley are “audit committee financial experts” as
defined by the rules of the Securities and Exchange Commission. The Audit
Committee’s activities and scope of its responsibilities are set forth in a
written charter adopted by the Board, and is posted on the Company’s website at
www.sjindustries.com under the heading “Investor Relations”.
In
accordance with its charter adopted by the Board of Directors, the Audit
Committee, among other things, assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Company. Management has the
responsibility for the preparation of the Company’s financial statements and for
an assessment of the effectiveness of the Company’s internal control over
financial reporting, and the independent registered public accounting firm
has
the responsibility for the examination of those financial statements and
management’s assessment of the effectiveness of the Company’s internal control
over financial reporting. The Audit Committee reviewed the audited financial
statements of the Company for the fiscal year ended December 31, 2006, and
management’s assessment of the effectiveness of the Company’s internal control
over financial reporting with management and with Deloitte & Touche LLP, the
Company’s independent registered public accounting firm. The Audit Committee
discussed with the independent registered public accounting firm the matters
required to be discussed by Statement on Auditing Standards (SAS) No. 61,
“Communication with Audit Committees,” as amended by SAS 89 and SAS 90, and Rule
2-07, “Communication with Audit Committees, of Regulation S-X”, and by standards
of the Public Company Accounting Oversight Board (United States), relating
to
the conduct of the audit. The Audit Committee also received written disclosures
from Deloitte & Touche LLP regarding its independence from the Company as
required by Independence Standards Board Standard No. 1, “Independence
Discussions with Audit Committees,” and has discussed with Deloitte & Touche
LLP the independence of that firm.
Based
on
the above-mentioned review and discussions with management and the independent
registered public accounting firm, the Audit Committee recommended to the Board
that the Company’s audited financial statements and management assessment of the
effectiveness of the Company’s internal controls over financial reporting be
included in its Annual Report on Form 10-K for the fiscal year ended December
31, 2006, for filing with the Securities and Exchange Commission.
Audit
Committee
Sheila
Hartnett-Devlin, Chairman
Helen
R.
Bosley
W.
Cary
Edwards
Thomas
A.
Bracken
William
J. Hughes
Dr.
Herman D. James
Fees
Paid to the Independent Registered Public Accounting
Firm
As
part
of its duties, the Audit Committee also considered whether the provision of
services other than the audit services by the independent registered public
accountants to the Company is compatible with maintaining the accountants’
independence. In accordance with its charter, the Audit Committee must
pre-approve all services provided by Deloitte & Touche LLP. The Audit
Committee discussed these services with the independent registered public
accounting firm and Company management to determine that they are permitted
under the rules and regulations concerning auditor independence promulgated
by
the U.S. Securities and Exchange Commission to implement the Sarbanes-Oxley
Act of 2002, as well as the American Institute of Certified Public
Accountants.
The
fees
for all services provided by the independent registered public accounting firm
to the Company during 2006 and 2005 are as follows:
|
|
2006
|
|
2005
|
|
Audit
Fees (a)
|
|
$
|
1,104,650
|
|
$
|
825,080
|
|
Audit-Related
Fees (b)
|
|
|
43,660
|
|
|
35,500
|
|
Tax
Fees (c)
|
|
|
45,880
|
|
|
33,000
|
|
All
other fees
|
|
|
-
|
|
|
-
|
|
Total
|
|
$
|
1,194,190
|
|
$
|
893,580
|
|
(a)
Fees
for audit services billed or expected to be billed relating to fiscal 2006
and
2005 include audits of the Company’s annual financial statements, reviews of the
Company’s quarterly financial statements, comfort letters, consents and other
services related to Securities and Exchange Commission matters. In addition,
audit services billed or expected to be billed relating to fiscal 2006 include
attestation of management’s assessment of internal control, as required by the
Sarbanes-Oxley Act of 2002, Section 404.
(b)
Fees
for audit-related services provided during fiscal 2006 and 2005 consisted of
employee benefit plan audits, transfer agent & registrar audits, and
accounting consultations.
(c)
Fees
for tax services provided during fiscal 2006 and 2005 consisted of tax
compliance and tax software. Tax compliance services are services rendered
based
upon facts already in existence or transactions that have already occurred
to
document, compute, and obtain government approval for amounts to be included
in
tax filings and Federal, state and local income tax return
assistance.
PROPOSAL
2
RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The
Audit
Committee and the Board of Directors, subject to the approval of the
shareholders, has reappointed Deloitte & Touche LLP, as the independent
registered public accounting firm of the Company for 2007. Unless otherwise
directed, proxies will be voted “FOR” approval of this appointment. If the
shareholders do not ratify this appointment by the affirmative vote of a
majority of the votes cast at the meeting, other auditors will be considered
by
the Audit Committee.
Deloitte
& Touche LLP served as the independent registered public accounting firm of
the Company during 2006. During 2006, the audit services performed by that
firm
for the Company consisted of the audits of the financial statements of the
Company and its subsidiaries and attestation of management’s assessment of
internal control, as required by the Sarbanes-Oxley Act of 2002, Section 404
and
the preparation of various reports based on those audits, services related
to
filings with the Securities and Exchange Commission and the New York Stock
Exchange, and audits of employee benefit plans as required by the Employee
Retirement Income Security Act. A representative of Deloitte & Touche LLP is
expected to be present at the Annual Meeting and will have the opportunity
to
make a statement, if he desires to do so, and to respond to appropriate
questions from shareholders.
The
Board of Directors recommends a vote “FOR” the ratification of the appointment
of the Independent Registered Public Accounting Firm.
ANNUAL
REPORT AND FINANCIAL INFORMATION
A
copy of
the Company’s Annual Report to Shareholders for the year ended December 31, 2006
accompanies this proxy statement. The Annual Report is not proxy-soliciting
material or a communication by which any solicitation is made.
Upon
written request of any person who on the record date for the Annual Meeting
was
a record owner of the Common Stock, or who represents in good faith that he
or
she was on that date a beneficial owner of such stock and is entitled to vote
at
the Annual Meeting, the Company will send to that person, without charge, a
copy
of its Annual Report on Form 10-K for 2006, as filed with the Securities and
Exchange Commission. Requests for this report should be directed to Richard
H.
Walker, Jr., Vice President, General Counsel and Secretary, South Jersey
Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey
08037.
OTHER
MATTERS
Any
proposal which a qualified shareholder of the Company wishes to include in
the
Company’s proxy statement to be sent to shareholders in connection with the
Company’s 2008 Annual Meeting of Shareholders that is received by the Company
after November 14, 2007 will not be eligible for inclusion in the Company’s
proxy statement and form of proxy for that meeting. To be included, proposals
can be mailed to the Corporate Secretary at 1 South Jersey Plaza, Folsom, New
Jersey 08037. To be a qualified shareholder, a shareholder must have owned
at
least $2,000 in market value of the Company’s securities for at least one year
before the date of submission of the proposal to the Company. In compliance
with
the Company’s bylaws, shareholders must provide the Company with at least 60
days, but no more than 90 days, notice prior to an announced annual meeting
date
of (i) business the shareholder wishes to raise at the meeting and (ii) persons,
if any, the shareholder wishes to nominate for election as directors at that
meeting.
The
Board of Directors knows of no matters other than those set forth in the Notice
of Annual Meeting of Shareholders to come before the 2007 Annual Meeting.
By
Order
of the Board of Directors,
Richard
H. Walker, Jr.
Vice
President, General Counsel & Secretary
March
20,
2007
Directions
to the Annual Meeting of Shareholders
From
Philadelphia:
Atlantic
City Expressway to the Egg Harbor Exit 17. Left onto Route 50 north, turn right
onto Route 30. Left onto Bremen Avenue, 2 1/4 miles to Renault.
From
North Jersey:
Garden
State Parkway south to Exit 44. Sharp right onto Moss Mill Road (Alt. #561),
follow 5 miles to Bremen Avenue. Turn right, 1/4 mile to Renault.
From
Atlantic City:
Route
30
west approximately 16 miles to Bremen Avenue. Right at the Renault wine bottle,
2 1/4 miles to Renault.
From
South Jersey:
Garden
State Parkway north to Exit at rest stop/service area, mile marker #41. Proceed
to north end of service area. Follow signs to Jim Leeds Road. At traffic light
turn left. Proceed to fork, bear right and continue on Route 561. Continue
to
Bremen Avenue and turn right. 1 1/2 miles to Renault.
South
Jersey Industries
1
South
Jersey Plaza, Folsom, NJ 08037
Vote
by Telephone
Have
your
proxy card available when you call the Toll-Free
number 1-888-693-8683
using a
touch-tone phone and follow the simple instructions to record your
vote.
Vote
by Internet
Have
your
proxy card available when you access
the website http://www.cesvote.com
and
follow the simple instructions to record your vote.
Vote
by Mail
Please
mark, sign and date your proxy card and return it in the postage-paid envelope
provided or return it to: Corporate Election Services, P. O. Box 1150,
Pittsburgh, PA 15230-1150.
Vote
by Telephone
Call
toll-Free using
a
Touch-Tone
phone:
1-888-693-8683
|
Vote
by Internet
Access
the Website
and
Cast
your vote:
http://www.cesvote.com
|
Vote
by Mail
Return
your proxy
in
the
postage-paid
envelope
provided.
|
Vote
24 hours a day, 7 days a week.
If
you vote by telephone or Internet, please do not send your proxy by
mail.
Proxy
must be signed and dated on the reverse side.
ê
Please fold and detach card at perforation before mailing.
ê
-----------------------------------------------------------------------------------------------------------------------------------------------------
SOUTH
JERSEY INDUSTRIES, INC.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF
SHAREHOLDERS ON APRIL 28, 2006.
The
undersigned shareholder hereby appoints E. J. Graham and R. H. Walker, Jr.,
and
each of them, attorneys and proxies with full power of substitution and
revocation to vote the number of shares of Common Stock the undersigned would
be
entitled to vote if personally present at the Annual Meeting of Shareholders
of
South Jersey Industries, Inc. on Friday, April 20, 2007, and at any adjournments
thereof, as indicated on the reverse and in accordance with the judgment
of said
attorneys and proxies on any other business which may come before the meeting
or
any adjournments, all as set forth in the accompanying notice and proxy
statement, the receipt of which the undersigned acknowledges.
______________________________________
Signature
______________________________________
Signature
Date:
______________________ ,
2007
Please
sign exactly as name is shown to the left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
VOTING
INSTRUCTIONS ON REVERSE SIDE
YOUR
VOTE IS IMPORTANT
If
you do
not vote by Internet or telephone, please sign and date this proxy card and
return it promptly in the enclosed postage-paid envelope, or otherwise to
Corporate Election Services, P.O. Box 1150, Pittsburgh, PA 15230, so your
shares
may be represented at the meeting. If you vote by Internet or telephone,
please
do not mail this proxy card.
Proxy
must be signed and dated on the reverse side.
ê
Please fold and detach card at perforation before mailing.
ê
------------------------------------------------------------------------------------------------------------------------------------------------------------------
SOUTH
JERSEY INDUSTRIES,
INC. Proxy
The
shares represented by this Proxy will be voted as directed by the shareholder.
If no direction is given, they will be voted in favor of the election of
the
listed nominees as a group and in favor of proposal 2.
1.
|
For
the election of four Directors:
|
Class
III (1) Helen
R. Bosley, CFA
(2) Edward J. Graham
(3)
Ambassador William J. Hughes (4)
Herman D. James, Ph.D.
q
FOR
all
nominees listed above. q
WITHHOLD AUTHORITY
(except
as shown to the contrary below)
to vote
for all nominees listed above.
INSTRUCTION:
To withhold authority to vote for any individual nominee, write that nominee’s
name or number on the line below.
2.
|
To
ratify the appointment of Deloitte & Touche LLP as Independent
Registered Public Accounting Firm for
2007.
|
q FOR q
AGAINST
q
ABSTAIN
3.
|
To
transact such other business that may properly come before the
meeting.
|
Continued
on reverse side