A change in control generally means any of the following:
consummation of a merger or consolidation of the Company with another corporation where the shareholders of the Company, immediately prior to the merger or consolidation, will not own 50 percent or more of the shares of the surviving corporation;
sale or other disposition of substantially all of the assets of the Company;
election to the Board of Directors of SJI a new majority different from the current slate, unless each such new director stands for election as a management nominee and is elected by shareholders immediately prior to the election of any such new majority; or
the acquisition by any person(s) of 30 percent or more of the stock of SJI having general voting rights in the election of directors
Section 280G Modified Cutback
Termination Following a Change in Control (Good Reason or Without Cause) – The CIC Agreements include a modified cutback if any payments under the agreements (including any other agreements) would otherwise constitute a parachute payment under Section 280G of the Code so that the payments will be
limited to the greater of (i) the dollar amount which can be paid to the NEO without triggering an excise tax under Section 4999 of the Code or (ii) the greatest after-tax dollar amount after taking into account any excise tax incurred under Section 4999 of the Code with respect to such parachute payments.
Retirement – NEOs are entitled to pro-rated vesting of
PBRSUsPRSUs upon retirement, based on the applicable 3-year performance period and actual performance. NEOs are also entitled to pro-rated vesting of
TBRSUTRSU awards upon retirement, based on the applicable 3-year vesting
period (and achievement of the performance conditions.period.
Change in Control – Upon a qualifying termination following a change in control,
the award agreements currently provide that all unvested
PBRSUPRSU awards that are outstanding vest
on a pro-rated basis and pay at target level performance.
TBRSUTRSU awards that are outstanding will
fully vest. A qualifying termination includes an involuntary termination without cause by the Company or a resignation for good reason by the NEO, each following a change in control.
Termination Without a Change in Control – Under the Officer Severance Plan, upon an NEO’s qualifying termination, TBRSUTRSU awards that are outstanding will fully vest. PBRSUvest on a pro-rated basis. PRSU awards that are outstanding are forfeited, in accordance with the terms of the award agreements.forfeited. A qualifying termination includes an involuntary termination without cause for the Company or a resignation for good reason by the NEO, absent a change in control.
The
Pursuant to Item 402(u) of Regulation S-K, we are disclosing the ratio of our CEO’s compensation to
the compensation of the employee identified at median. We used the same median employee as identified in our
median employee’s compensationcalculation of the 2019 pay ratio, as we determined there was
calculated as required by the SEC pursuant to Item 402(u) of Regulation S-K. Weno significant change in our employee population. As disclosed last year, we determined our median employee based on 2019 W-2 gross earnings for all
full-time and part-time individuals who were employed by the Company as of December 31, 2019, excluding our CEO.
This included all full-time and part-time employees of the Company aside from the CEO. Compensation was annualized for employees hired or on leaves of absence during the year.
Consistent with the applicable rules we used reasonable estimates in the methodology used to identify our median employee. We calculated the median employee’s total 20192020 compensation in the same way as calculated for our NEOs in the Summary Compensation Table included in this Proxy Statement. Calculated inUsing this manner,methodology, the annual total compensation of our median employee was $110,892. Our
CEO’s annual total compensation was $92,730. Our CEO’s total 2019 compensation,for 2020, as set forth in the Summary Compensation Table was $6,346,963.$6,229,020. Therefore, our CEO to median employee pay ratio was 6856 to 1.
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described below. Because the SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
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Executive Compensation Tables
Securities Authorized for Issuance under Equity Compensation Plans The following table provides information as of December 31,
20192020 relating to equity compensation plans of the Company pursuant to which grants of restricted stock, restricted stock units, options or other rights to acquire shares may be made from time to time.
Plan Category | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights (#) | (b) Weighted average exercise price of outstanding options, warrants and rights ($) (1) | (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 (2) | | 720,043 | | | — | | | 1,370,001 | |
Equity compensation plans not approved by security holders | | — | | | — | | | — | |
Total 2015 Omnibus Equity Compensation Plan | | 720,043 | | | — | | | 1,370,001 | |
| Equity compensation plans approved by security holders (2) | | | 777,487 | | | — | | | 1,237,574 | |
| Equity compensation plans not approved by security holders | | | — | | | — | | | — | |
| Total | | | 777,487 | | | — | | | 1,237,574 | |
| (1)
| Represents TBRSUsTRSUs and PBRSUsPRSUs issuable under outstanding awards pursuant to the 2015 Omnibus Equity Compensation Plan. The restricted stock units are issuable for no additional consideration, and therefore, the shares are not included in the calculation of the weighted average exercise price. TheIn accordance with SEC guidance, the number of shares of common stock to be issued in respect of the PBRSUsPRSUs has been calculated based on the assumption that the maximum levels of performance applicable to the PBRSUsPRSUs will be achieved. |
| (2)
| These plans include those used to make awards of TBRSUsTRSUs and PBRSUsPRSUs to the Company’s Officers and restricted stock to the Directors under the 2015 Omnibus Equity Compensation Plan. |
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PROPOSAL 3 RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee is responsible for recommending the appointment of the independent registered public accounting firm to the Board and is directly responsible for the compensation and oversight of the independent auditor. Annually, prior to making its recommendation, the Audit Committee considers the audit firm’s capabilities, effectiveness, industry experience, and use of technology and data analytics in its audits; knowledge of the Company including its personnel, processes, accounting systems and risk profile; tenure serving the Company; and independence, and other firms with comparable professional qualifications.
Deloitte & Touche LLP (“Deloitte”) is a top accounting firm with expertise in public utility accounting. Deloitte has been the Company’s, or its predecessor Company’s, auditor since 1948 giving it a unique understanding of Company’s businesses and personnel. The Audit Committee considered the impact of tenure on Deloitte’s independence and determined Deloitte remains independent as, among other factors, the lead engagement partner is required to rotate off the Company’s audit every 5 years. The current lead engagement partner will rotate off after the 2023 audit. Further, the Audit Committee pre-approves all audit and non-audit services and related compensation and monitors the potential impact on independence. Finally, the Company has a policy restricting hiring certain persons formerly associated with Deloitte into an accounting or financial reporting oversight role to help ensure Deloitte’s continuing independence.
During 2019,2020, the audit services performed for the Company consisted of (1) audits of the Company’s and its subsidiaries’ financial statements and the effectiveness of the Company’s internal control over financial reporting, as required by the
Sarbanes-Oxley Act of 2002, Section 404 and the preparation of
reports based on such audits related to filings with the Securities and Exchange Commission; and (2) services performed in connection with financing transactions.
The Audit Committee evaluates the quality of Deloitte’s services annually, considering the quality of their audit services, industry knowledge from an audit and tax perspective, continued independence, information from PCAOB inspection reports, and the Audit Committee’s discussions with management about Deloitte’s performance.
After considering all factors, the Audit Committee and the Board believe that the continued retention of Deloitte to serve as the Company’s Independent Registered Public Accounting Firm for
20202021 is in the best interest of the Company and its shareholders. Although ratification is not required by our bylaws or otherwise, the Board is submitting the selection of Deloitte to our shareholders for ratification because we value the views of our shareholders on the Company’s Independent Registered Public Accounting Firm. If our shareholders fail to ratify the selection of Deloitte, it will be considered notice to the Board and Audit Committee to consider the selection of a different firm. Even if the selection is ratified, the Audit Committee may select a different Independent Registered Public Accounting Firm at any time during the year if it determines such change would be in the best interests of the Company and our shareholders. Representatives of Deloitte will be at the meeting to respond to appropriate questions and make a statement if they wish.
The Board of Directors unanimously recommends a vote “FOR”“FOR” the ratification of the reappointment of Deloitte & Touche LLP, as the Independent Registered Public Accounting Firm.
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FINANCIAL
2019 Annual2020Annual Report and Financial Information
A copy of the Company’s
20192020 Annual Report accompanies this Proxy Statement. The
20192020 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 20192020 Annual Report. Requests for this report should be directed to Edythe Nipper, Corporate Secretary, South Jersey Industries, Inc., 1 South Jersey Plaza, Folsom, New Jersey 08037.
By Order of the Board of Directors,
Corporate Secretary
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Annex A – Non-GAAP Measures
Annex A – Non-GAAP MeasuresWe define Economic Earnings as: Income from continuing operations,Continuing Operations, (i) less the change in unrealized gains and plus the change in unrealized losses on allnon-utility derivative transactions; (ii) less realized gainsincome and plus realized losses on inventory injection hedges, which relateattributable to expected purchases of gas in storage to match the recognition of these gains and losses with the recognition of the related cost of the gas in storage in the period of withdrawal;noncontrolling interest; and (iii) less the impact of transactions, contractual arrangements or other events where management believes period to period comparisons of SJI's operations could be difficult or potentially confusing. With respect to part (iii) of the definition severalof Economic Earnings, items are excluded from Economic Earnings includingfor the years ended December 31, 2020, 2019 and 2018, include impairment charges,charges; the impact of pricing disputes with third parties,parties; costs to acquire ETG and ELK, costs to prepare to exit the Transaction Services Agreement (TSA),ELK; costs incurred and gains recognized on the saleacquisitions of assets,Annandale (fuel cell projects) and EnerConnex; costs to prepare to exit the transaction service agreement (TSA); costs incurred and gains/losses recognized on sales of solar, MTF/ACB, ELK and SJE's retail gas business; costs incurred to cease operations at three landfill gas-to-energy production facilities; customer credits related to the acquisition of ETG and ELK, Employee Retirement Incentive Program (ERIP) costs,ELK; ERIP costs; severance and other employee separation costscosts; and additional tax adjustments including a state deferred valuation allowance and a one-time tax expense resulting from SJG's Stipulation of Settlement with the impact of Tax Reform.BPU. See (A)-(H) in the table below.
Economic Earnings is a significant
performance metricfinancial measure used by our management to indicate the amount and timing of income from continuing operations that we expect to earn after taking into account the impact of derivative instruments on the related transactions,
as well as the impact of contractual arrangements and other events that management believes make period to period comparisons of SJI's operations difficult or potentially confusing.
Management uses Economic Earnings to manage its business and to determine such items as incentive/compensation arrangements and allocation of resources. Specifically, regarding derivatives, we believe that this financial measure indicates to investors the profitability of the entire
derivative relatedderivative-related transaction and not just the portion that is subject to mark-to-market valuation under GAAP. We believe that considering only the change in market value on the derivative side of the transaction can produce a false sense as to the ultimate profitability of the total transaction as no change in value is reflected for the
nonderivativenon-derivative portion of the transaction.
The following table presents a reconciliation of our income
from continuing operations and earnings per share from continuing operations to Economic Earnings and Economic Earnings per share (in thousands, except per share data):
| 2019 | 2018 | 2017 |
Income (Loss) from Continuing Operations | $ | 77,189 | | $ | 17,903 | | $ | (3,404 | ) |
Minus/Plus: | | | | | | | | | |
Unrealized Mark-to-Market (Gains) Losses on Derivatives | | 14,546 | | | (35,846 | ) | | 14,226 | |
Realized Losses on Inventory Injection Hedges | | — | | | — | | | 332 | |
Loss on Property, Plant and Equipment (A) | | 10,745 | | | 105,280 | | | 91,299 | |
Net Losses from Legal Proceedings (B) | | 2,336 | | | 5,910 | | | 56,075 | |
Acquisition/Sale Costs (C) | | 3,468 | | | 34,674 | | | 19,564 | |
Customer Credits (D) | | — | | | 15,333 | | | — | |
ERIP and OPEB (E) | | — | | | 6,733 | | | — | |
Other (F) | | 4,179 | | | — | | | 2,227 | |
Income Taxes (G) | | (9,423 | ) | | (33,753 | ) | | (70,834 | ) |
Additional Tax Adjustments (H) | | — | | | — | | | (11,420 | ) |
Economic Earnings | $ | 103,040 | | $ | 116,234 | | $ | 98,065 | |
Earnings (Loss) per Share from Continuing Operations | $ | 0.84 | | $ | 0.21 | | $ | (0.04 | ) |
Minus/Plus: | | | | | | | | | |
Unrealized Mark-to-Market (Gains) Losses on Derivatives | | 0.16 | | | (0.42 | ) | | 0.18 | |
Realized Losses on Inventory Injection Hedges | | — | | | — | | | — | |
Loss on Property, Plant and Equipment (A) | | 0.12 | | | 1.24 | | | 1.14 | |
Net Losses from Legal Proceedings (B) | | 0.02 | | | 0.07 | | | 0.70 | |
Acquisition/Sale Costs (C) | | 0.04 | | | 0.41 | | | 0.25 | |
Customer Credits (D) | | — | | | 0.18 | | | — | |
ERIP and OPEB (E) | | — | | | 0.08 | | | — | |
Other (F) | | 0.04 | | | — | | | 0.03 | |
Income Taxes (G) | | (0.10 | ) | | (0.39 | ) | | (0.89 | ) |
Additional Tax Adjustments (H) | | — | | | — | | | (0.14 | ) |
Economic Earnings per Share | $ | 1.12 | | $ | 1.38 | | $ | 1.23 | |
| Income from Continuing Operations | | | $157,297 | | | $77,189 | | | $17,903 | |
| Minus/Plus: | | | | | | | | | | |
| Unrealized Mark-to-Market (Gains) Losses on Derivatives | | | (5,145) | | | 14,546 | | | (35,846) | |
| Loss Attributable to Noncontrolling Interest | | | 42 | | | — | | | — | |
| Loss on Property, Plant and Equipment (A) | | | — | | | 10,745 | | | 105,280 | |
| Net Losses from a Legal Proceeding in a Pricing Dispute (B) | | | — | | | 2,336 | | | 5,910 | |
| Acquisition/Sale Net Costs (C) | | | 2,174 | | | 3,468 | | | 34,674 | |
| Customer Credits (D) | | | — | | | — | | | 15,333 | |
| ERIP and OPEB (E) | | | — | | | — | | | 6,733 | |
| Other Costs (F) | | | 1,983 | | | 4,179 | | | — | |
| Income Taxes (G) | | | 527 | | | (9,423) | | | (33,753) | |
| Additional Tax Adjustments (H) | | | 6,081 | | | — | | | — | |
| Economic Earnings | | | $162,959 | | | $103,040 | | | $116,234 | |
| Earnings per Share from Continuing Operations | | | $1.62 | | | $0.84 | | | $0.21 | |
| Minus/Plus: | | | | | | | | | | |
| Unrealized Mark-to-Market (Gains) Losses on Derivatives | | | (0.05) | | | 0.16 | | | (0.42) | |
| Loss on Property, Plant and Equipment (A) | | | — | | | 0.12 | | | 1.24 | |
| Net Losses from a Legal Proceeding in a Pricing Dispute (B) | | | — | | | 0.02 | | | 0.07 | |
| Acquisition/Sale Net Costs (C) | | | 0.02 | | | 0.04 | | | 0.41 | |
| Customer Credits (D) | | | — | | | — | | | 0.18 | |
| ERIP and OPEB (E) | | | — | | | — | | | 0.08 | |
| Other Costs (F) | | | 0.02 | | | 0.04 | | | — | |
| Income Taxes (G) | | | 0.01 | | | (0.10) | | | (0.39) | |
| Additional Tax Adjustments (H) | | | 0.06 | | | — | | | — | |
| Economic Earnings per Share | | | $1.68 | | | $1.12 | | | $1.38 | |
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(A)
| Represents impairment charges taken as follows: in 2019 on solar generating facilities along with the agreement to sell MTF and ACB, which were both driven by the expected purchase prices being less than the carrying value of the assets; and in 2018 on solar generating facilities, which was also primarily driven by the purchase price in the agreement to sell solar assets being less than the carrying amount of the assets, along with LFGTE assets, which was primarily driven by the remaining carrying value of these assets no longer being recoverable; and in 2017 on solar generating facilities, LFGTE long-lived assets, LFGTE assets customer relationships, and goodwill.recoverable. |
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| (B) | Represents net losses, from three separate legal proceedings: (a) charges in 2017, 2018 and 2019, including interest, legal fees and the realized difference in the market value of the commodity (including financial hedges) resulting from a ruling in a legal proceeding related to a pricing dispute between SJI and a gas supplier that began in October 2014; (b) a charge in 2017, including legal fees, resulting from a settlement with a counterparty over a dispute related to a three-year capacity management contract; and 2014. |
(C) a gain taken in 2017 resulting from a favorable FERC decision, including interest, over a tariff rate dispute with a counterparty, whereby SJI contended that
| Represents the counterparty was overcharging for storage demand charges over a ten-year period.following:
|
Costs incurred in 2020 to acquire EnerConnex, Annandale, and four solar LLCs
Gain recorded in 2020 on the step-acquisition of EnerConnex
Costs incurred and gains/losses recognized in 2020 on the sales of MTF/ACB and ELK
Costs incurred and gains recognized in all three periods on the sale of certain solar assets included in Assets Held for Sale in previous periods. The gains pertain to those projects that were not impaired in previous periods.
Costs incurred in 2018 on the agreement to acquire the assets of ETG and ELK, and costs incurred in 2019/2020 to prepare to exit the transaction services agreement
Costs incurred in 2018 on the sale of the retail gas business of SJE
| (C) | Represents costs incurred on the agreement to acquire the assets of ETG and ELK, including legal, consulting and other professional fees, and costs incurred to exit the TSA. Also included here are costs incurred on the sale of solar and the retail gas business of SJE, partially offset by gains recorded on the sale of solar assets and sales of certain SREC’s. |
| (D)
| Represents credits to ETG and ELK customers that were required as part of the ETG/ELK Acquisition. |
| (E)
| Represents costs incurred on the Company’sCompany's ERIP as well as the benefit of amending the Company’sCompany's OPEB. |
| (F)
| Represents severance and other employee separation costs, taken in 2019. Included in this amount in 2017along with costs incurred to cease operations at three landfill gas-to-energy production facilities. |
(G)
| The income taxes on (A) through (F) above are amendments made to an existing interest rate derivative linked to unrealized losses previously recorded in AOCL |
| (G) | Determineddetermined using a combined average statutory tax rate applicable to each period presented. |
(H)
| Represents primarily additional tax adjustments including a state deferred tax valuation allowance at SJI, and a one-time tax expense resulting from SJG's Stipulation of approximately 26%, 25% and 39% for 2019, 2018 and 2017, respectively.Settlement with the BPU. |
| (H) | Represents one-time tax adjustments, most notably for Tax Reform. |
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Please note the meeting location!
Directions to The Westin Mount Laurel
for the Annual Meeting of Shareholders
The Westin Mount Laurel, The Grand Ballroom,
555 Fellowship Road, Mount Laurel, New Jersey 08054
| Time: | 9:00 a.m. - meeting begins
10:00 a.m. - meeting adjourns |
Admission to the Meeting:
Attendance at the Annual Meeting will be limited to shareholders as of the Record Date, their authorized representatives and guests of SJI. Guests of shareholders will not be admitted unless they are also shareholders as of the Record Date. If you plan to attend the meeting in person, you will need an admission ticket and a valid government issued photo ID to enter the meeting. For shareholders of record, an admission ticket is attached to your proxy card. If your shares are held in the name of a bank, broker or other holder of record, please bring your account statement as that will serve as your ticket.
Although we intend to hold our annual meeting in person, we are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to attend our annual meeting in person, we encourage you to attend online at www.virtualshareholdermeeting.com/SJI2020. If you attend online, you will be able to vote your shares and submit questions by following the instructions on the website. We reserve the right to convert to a virtual only meeting format should meeting in person become unsafe as a result of COVID-19. If we convert to a virtual only online meeting we will post a notification at sjindustries.com as soon as possible.
Use of cameras, recording devices, computers, and other electronic devices, such as smartphones and tablets, will not be permitted at the Annual Meeting. Photography and video are prohibited at the Annual Meeting. Photographs taken by South Jersey Industries at the 2020 Annual Shareholders’ Meeting may be used by South Jersey Industries. By attending the 2020 Annual Shareholders’ Meeting, you will be agreeing to South Jersey Industries’ use of those photographs and waive any claim or rights with respect to those photographs and their use.
From East
Follow the Atlantic City Expressway West to Exit 31, New Jersey 73 toward Winslow/Blue Anchor. Merge onto NJ 73 North. Go through one roundabout. Turn right onto Fellowship Road. The hotel entrance is on the left.
From West
Follow New Jersey 73 South toward the New Jersey Turnpike/Marlton/Berlin. Turn right onto Fellowship Road. The hotel entrance is on the left.
From Philadelphia Airport
Proceed on PA-291 East toward Valley Forge. Continue on PA-291/Penrose Avenue. Merge onto Penrose Avenue. Take I-76 East toward Walt Whitman Bridge. Take Exit 1B to I-295 North toward Trenton/New Jersey Turnpike. Continue on Trenton/New Jersey Turnpike and take RT 73 South. Turn right onto Fellowship Road. The hotel entrance is on the left.
From Delaware (South)
Follow Interstate 295, which becomes the New Jersey Turnpike. Take Exit 4, New Jersey 73 toward Camden / Philadelphia. Merge onto NJ 73 North. Turn right onto Fellowship Road. The hotel entrance is on the left.
From North
Follow the New Jersey Turnpike South to Exit 4, New Jersey 73. Turn right onto NJ 73 North. Turn right onto Fellowship Road. The hotel entrance is on the left.