-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, lUg24gVZ1OOdB2BwMsOj0UwGT9nU+QRf6VBcUDrFqNVvztwGYXYYh4fX7923Cc2d 08JDp9fLAy9etyxdV9UmzQ== 0000950110-95-000062.txt : 19950515 0000950110-95-000062.hdr.sgml : 19950515 ACCESSION NUMBER: 0000950110-95-000062 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950214 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW JERSEY RESOURCES CORP CENTRAL INDEX KEY: 0000356309 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 222376465 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08359 FILM NUMBER: 95509701 BUSINESS ADDRESS: STREET 1: 1415 WYCKOFF ROAD STREET 2: PO BOX 1468 CITY: WALL STATE: NJ ZIP: 07719 BUSINESS PHONE: 9089381494 MAIL ADDRESS: STREET 1: 1350 CAMPUS PKWY STREET 2: P O BOX 1468 CITY: WALL STATE: NJ ZIP: 07719 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1994 Commission file number 1-8359 NEW JERSEY RESOURCES CORPORATION (Exact name of registrant as specified in its charter) New Jersey 22-2376465 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1415 Wyckoff Road, Wall, New Jersey - 07719 908-938-1480 (Address of principal executive offices) (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days YES: X No: The number of shares outstanding of $2.50 par value Common Stock as of February 1, 1995, was 17,547,821. -1- NEW JERSEY RESOURCES CORPORATION CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Three Months Ended December 31, ------------------------ 1994 1993 ---- ---- (Thousands, except per share data) OPERATING REVENUES ................................................... $129,945 $136,528 -------- -------- OPERATING EXPENSES Gas purchases ...................................................... 70,094 77,986 Operation and maintenance........................................... 16,197 15,694 Depreciation and amortization....................................... 6,682 6,736 Gross receipts tax, etc............................................. 13,494 15,029 Federal income taxes................................................ 5,237 5,166 ------- ------- Total operating expenses......................................... 111,704 120,611 ------- -------- OPERATING INCOME....................................................... 18,241 15,917 Other income (expense), net............................................ 41 (346) Interest charges, net.................................................. 6,629 4,633 ------- -------- INCOME BEFORE PREFERRED STOCK DIVIDENDS OF SUBSIDIARY.............................................. 11,653 10,938 Preferred stock dividends.............................................. 413 417 ------ ------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES................................. 11,240 10,521 Cumulative effect of change in accounting for income taxes...................................................... -- 721 ------- ------ NET INCOME ............................................................ $ 11,240 $ 11,242 ======== ======== EARNINGS PER COMMON SHARE BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES.......................................... $.65 $.62 Cumulative effect of change in accounting for income taxes..................................................... -- .04 ---- --- EARNINGS PER COMMON SHARE ............................................. $.65 $.66 ==== ==== DIVIDENDS PER COMMON SHARE............................................. $.38 $.38 ==== ==== AVERAGE SHARES OUTSTANDING............................................. 17,419 16,911 ====== ======
See Notes to Consolidated Financial Statements -2- NEW JERSEY RESOURCES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Three Months Ended December 31, ------------------------ 1994 1993 ---- ---- (Thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income available for common stock...................................... $ 11,240 $ 11,242 Adjustments to reconcile net income to cash flows Depreciation and amortization............................................. 6,682 6,736 Amortization of deferred charges.......................................... 497 543 Deferred income taxes..................................................... 2,730 741 Cumulative effect of change in accounting for income taxes................ -- (721) Change in working capital................................................. (3,394) (23,334) Other, net................................................................ (3,315) (2,097) -------- -------- Net cash flows from operating activities..................................... 14,440 (6,890) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt................................................ 27,000 44,050 Proceeds from common stock.................................................. 2,999 3,304 Payments of long-term debt ................................................. -- (13,842) Payments of common stock dividends.......................................... (6,575) (6,392) Net change in short-term debt............................................... (17,200) (6,900) -------- -------- Net cash flows from financing activities..................................... 6,224 20,220 -------- -------- CASH FLOWS USED IN INVESTING ACTIVITIES Expenditures for Utility plant.............................................................. (15,097) (11,472) Real estate properties..................................................... (646) (696) Oil and gas properties..................................................... (643) (533) Equity investments......................................................... (2,397) -- Cost of removal and other.................................................. (1,124) (454) -------- -------- Net cash flows used in investing activities.................................. (19,907) (13,155) -------- -------- Net change in cash and temporary investments................................. 757 175 Cash and temporary investments at September 30 .............................. 1,951 1,555 -------- -------- Cash and temporary investments at December 31 ............................... $ 2,708 $ 1,730 ======== ======== CHANGES IN COMPONENTS OF WORKING CAPITAL Receivables................................................................. $(39,544) $(44,604) Inventories................................................................. 4,394 5,182 Deferred gas costs.......................................................... 9,404 (1,038) Purchased gas............................................................... 10,100 3,671 Accrued taxes............................................................... 17,077 17,836 Customers' credit balances and deposits..................................... 3,339 2,866 Other, net.................................................................. (8,164) (7,247) -------- -------- Total........................................................................ $ (3,394) $(23,334) ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION Cash paid (received) for Interest (net of amounts capitalized)...................................... $ 7,844 $ 4,892 Income taxes............................................................... $ (1,148) $ --
See Notes to Consolidated Financial Statements -3- NEW JERSEY RESOURCES CORPORATION CONSOLIDATED BALANCE SHEETS ASSETS
December 31, September 30, December 31, 1994 1994 1993 ---- ---- ---- (unaudited) (unaudited) (Thousands) PROPERTY, PLANT AND EQUIPMENT Utility plant............................................. $706,687 $691,757 $649,353 Real estate properties.................................... 104,955 104,309 103,065 Oil and gas properties ................................... 63,750 63,224 65,080 -------- -------- -------- 875,392 859,290 817,498 Accumulated depreciation and amortization ................ (224,648) (218,913) (204,903) -------- -------- -------- Property, plant and equipment, net ..................... 650,744 640,377 612,595 -------- -------- -------- CURRENT ASSETS Cash and temporary investments............................ 2,708 1,951 1,730 Customer accounts receivable ............................. 40,592 18,805 38,470 Unbilled revenues......................................... 27,172 9,136 33,356 Allowance for doubtful accounts........................... (891) (657) (1,164) Gas in storage, at average cost........................... 29,494 33,483 30,586 Materials and supplies, at average cost .................. 6,738 7,143 8,605 Deferred gas costs........................................ 10,042 16,008 15,256 Prepaid state taxes....................................... -- 11,077 -- Other..................................................... 8,884 6,285 8,744 -------- -------- -------- Total current assets.................................... 124,739 103,231 135,583 -------- -------- -------- DEFERRED CHARGES AND OTHER................................... 54,742 53,739 42,035 -------- -------- -------- Total assets............................................ $830,225 $797,347 $790,213 ======== ======== ========
See Notes to Consolidated Financial Statements -4- NEW JERSEY RESOURCES CORPORATION CONSOLIDATED BALANCE SHEETS CAPITALIZATION AND LIABILITIES
December 31, September 30, December 31, 1994 1994 1993 ---- ---- ---- (unaudited) (unaudited) (Thousands) CAPITALIZATION Common stock equity....................................... $257,805 $250,163 $238,478 Redeemable preferred stock................................ 22,070 22,070 22,340 Long-term debt............................................ 325,590 323,590 311,128 -------- -------- -------- Total capitalization.................................... 605,465 595,823 571,946 -------- -------- -------- CURRENT LIABILITIES Current maturities of long-term debt ..................... 4,238 4,315 4,622 Short-term debt .......................................... 49,800 42,000 44,000 Purchased gas ............................................ 25,050 14,950 28,486 Accounts payable and other................................ 30,653 36,163 28,862 Accrued taxes ............................................ 9,130 3,130 29,082 Customers' credit balances and deposits .................. 17,819 14,480 14,505 -------- -------- -------- Total current liabilities............................... 136,690 115,038 149,557 -------- -------- -------- DEFERRED CREDITS Deferred income taxes .................................... 55,428 52,698 39,364 Deferred investment tax credits........................... 11,931 12,025 12,322 Other..................................................... 20,711 21,763 17,024 -------- -------- -------- Total deferred credits ................................. 88,070 86,486 68,710 -------- -------- -------- Total capitalization and liabilities ................. $830,225 $797,347 $790,213 ======== ======== ========
See Notes to Consolidated Financial Statements -5- NEW JERSEY RESOURCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. General The preceding financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). The September 30, 1994 balance sheet data is derived from the audited financial statements of New Jersey Resources Corporation (the Company). Although management believes that the disclosures are adequate to make the information presented not misleading, it is recommended that these financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's 1994 Annual Report on Form 10-K. In the opinion of management, the information furnished reflects all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results of the interim periods. Because of the seasonal nature of the Company's utility operations and other factors, the results of operations for the interim periods presented are not indicative of the results to be expected for the entire year. 2. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries - New Jersey Natural Gas Company (NJNG) and Paradigm Resources Corporation (PRC). Commercial Realty & Resources Corp. (CR&R), NJR Energy Corporation (NJR Energy) and Paradigm Power, Inc. (PPI) are wholly owned subsidiaries of PRC. Significant intercompany accounts and transactions have been eliminated. 3. Income Taxes Effective October 1, 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes" (SFAS 109). SFAS 109 requires the implementation of a liability method for the financial reporting of income taxes, as compared with the deferred method. Under the liability method, deferred tax balances must be recorded for all temporary differences and are adjusted to reflect changes in tax rates. Previously, deferred tax balances were not recorded for certain ratemaking items and were not adjusted to reflect changes in tax rates. The cumulative effect of adopting SFAS 109 on the Company's nonregulated operations was a credit to net income of $721,000, or $.04 per share. The effect on NJNG was to decrease its deferred tax liability by $375,000 with an offsetting regulatory liability, as the Company believes it is probable that the effects of SFAS 109 on NJNG will be payable to customers in the future. -6- 4. Capitalized Interest Capitalized interest and total interest charges for the three months ended December 31, 1994 and 1993, respectively, are as follows: Three Months Ended December 31, ----------------------- 1994 1993 ---- ---- (Thousands) Capitalized Interest .............. $516 $934 ==== ==== Total Interest Charges ............ $7,145 $5,567 ====== ====== 5. Legal and Regulatory Proceedings a. Levelized Gas Adjustment Clause (LGA) In December 1994, the New Jersey Board of Public Utilities (BPU) approved a stipulated agreement which included recovery over a two-year period of all transition costs incurred through September 1994 associated with interstate pipelines complying with FERC order 636. As a result of these and other gas costs expected to be recovered in excess of one year, $10 million of deferred gas costs has been classified as Deferred Charges and Other on the Consolidated Balance Sheet at December 31, 1994. The stipulation also included the continuation of NJNG's margin-sharing formulae associated with its non-firm sales and the approval of a Financial Risk Management Pilot Program (FRM) to provide price stability to NJNG's supply portfolio. All of the costs and results of the FRM are to be recovered through the LGA. b. Weather-Normalization Clause See Management's Discussion and Analysis of Financial Condition and Results of Operations - Utility Operations-Residential and Commercial for a discussion of the continuation of NJNG's weather-normalization clause. c. Manufactured Gas Plant (MGP) Sites NJNG has identified eleven former manufactured gas plant (MGP) sites, dating back to the late 1800's and early 1900's, which it acquired from predecessors, and which contain contaminated residues from former gas manufacturing operations. All of the gas manufacturing operations ceased at these sites at least since the mid-1950's and in some cases had been discontinued many years earlier, and all of the old gas manufacturing facilities were subsequently dismantled by NJNG or its predecessors. NJNG is currently involved in administrative proceedings with the New Jersey Department of Environmental Protection and Energy (the -7- NJDEPE) and local government authorities with respect to the plant sites in question, and is participating in various studies and investigations by outside consultants to determine the nature and extent of any such contaminated residues and to develop appropriate programs of remedial action, where warranted. Since October 1989, NJNG has entered into Administrative Consent Orders or Memoranda of Agreement with the NJDEPE covering all eleven sites. These documents establish the procedures to be followed by NJNG in developing a final remedial clean-up plan for each site. Most of the cost of such studies and investigations is being shared under an agreement with the former owner and operator of ten of the MGP sites. Through a remediation rider, which was originally approved by the BPU in its June 1992 base rate order and updated in December 1994, NJNG is recovering $5.7 million of expenditures incurred through June 1994 over a seven-year period. Costs incurred subsequent to June 30, 1994 will be reviewed annually and, subject to BPU approval, recovered over seven-year periods. NJNG estimates that it will incur additional expenditures of approximately $14 million over the next five years for further investigation and remedial action at these sites. Accordingly, this amount is reflected in both Deferred charges and other and Other deferred credits in the Consolidated Balance Sheets. d. Aberdeen Since June 1993, a total of six complaints have been filed in New Jersey Superior Court against NJNG and its contractor by persons alleging injuries arising out of a natural gas explosion and fire on June 9, 1993, at a residential building in Aberdeen Township, New Jersey. The plaintiffs allege in their respective actions, among other things, that the defendants were negligent or are strictly liable in tort in connection with their maintaining, replacing or servicing natural gas facilities at such building. The plaintiffs separately seek unspecified compensatory and punitive damages from NJNG and its contractor. In May 1994, the New Jersey Superior Court ordered that all causes of action relating to the Aberdeen Township incident be consolidated for purposes of discovery. NJNG's liability insurance carriers are participating in the defense of these matters. NJNG is unable to predict the extent to which other claims will be asserted against, or liability imposed on, NJNG. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on its consolidated financial condition or results of operations. e. Carnegie In March 1993, NJNG was named a defendant in a civil action commenced by Carnegie Natural Gas Company (Carnegie) in the U.S. District Court for the Western District of Pennsylvania. This action challenges NJNG's decision to terminate the June 18, 1986 "Service Agreement for Sales Service under Rate Schedule LVWS" (LVWS Service Agreement) between Carnegie and NJNG effective March 31, 1994, pursuant to a "market-out" clause. The LVWS -8- Service Agreement would otherwise have expired on March 31, 2001. Carnegie seeks, among other things, a declaratory judgment that the contract termination was void. Claims of tortious interference with contractual relations and abuse of process are also asserted and unspecified damages and punitive damages are also sought. In April 1993, Carnegie filed a motion for summary judgment on the contract termination claim. In May 1993, NJNG filed a response opposing Carnegie's motion, as well as a cross motion for summary judgment on all claims. In January 1994, a federal magistrate issued a recommended decision denying Carnegie's motion for summary judgment. In addition, the magistrate granted NJNG's motion for summary judgment on Carnegie's tortious interference claim and denied NJNG's motion for summary judgment on the contract termination and abuse of process claims. Both parties filed objections to various aspects of the magistrate's recommended decision, which were denied by order of a federal district court judge in March 1994. In July 1994, Carnegie served a motion for a preliminary injunction requiring NJNG to continue making payments pursuant to the contract during the pendency of the litigation. In September 1994, the magistrate issued a recommended decision denying Carnegie's motion for a preliminary injunction, stating that Carnegie had not met its burden of establishing a likelihood of success on the merits of the lawsuit and of establishing that it would suffer irreparable harm by NJNG's failure to make payments. Carnegie filed an objection to the magistrate's recommended decision, which was denied by order of a federal district court judge in November 1994. Pretrial discovery has been completed. The parties are now awaiting the scheduling of a trial date by the court. NJNG is unable to predict the outcome of this matter. The Company does not believe that the ultimate resolution of this matter will have a material adverse effect on its consolidated financial condition or results of operations. f. South Brunswick Asphalt, L.P. NJNG has been named a defendant in a civil action commenced in New Jersey Superior Court by South Brunswick Asphalt, L.P. (SBA) and its affiliated companies seeking damages arising from alleged environmental contamination at three sites owned or occupied by SBA and its affiliated companies. Specifically, the suit charges that tar emulsion removed from 1979 through 1983 by an affiliate of SBA (Seal Tite, Inc.) from NJNG's former gas manufacturing plant sites has been alleged by the NJDEPE to constitute a hazardous waste and that the tar emulsion has contaminated the soil and ground water at the three sites in question. In February 1991, the NJDEPE issued letters classifying the tar emulsion/sand and gravel mixture at each site as dry industrial waste, a non-hazardous classification. NJNG is presently exploring various disposal methods for the tar emulsion/sand and gravel mixture. NJNG's liability insurance carrier has assumed defense of this action but has denied coverage for SBA's claims. Although management is considering legal action against the carrier, NJNG believes that the total cost to remove and dispose of the tar emulsion/sand and gravel mixture from all three sites would be immaterial. Based upon the gas remediation rider approved by the BPU in June 1992, NJNG believes that such costs should be recoverable through the ratemaking process, but recognizes that such recovery is not assured. One of the SBA sites is the subject of a NJDEPE Directive and Notice alleging that the tar emulsion/sand and gravel mixture was a contributing factor to the contamination of ground water -9- at a residential community. The NJDEPE is seeking reimbursement under the New Jersey Spill Compensation and Control Act of cleanup, remediation and related costs, estimated by the NJDEPE at approximately $20 million. NJNG is contesting the NJDEPE directive on the grounds, among others, that any such alleged ground water contamination was not caused by tar emulsions removed from NJNG's former gas plant manufacturing sites. NJNG's liability insurance carriers, which have been defending the civil action, have denied coverage for these claims and NJNG intends to contest this position. NJNG would attempt to seek recovery through the ratemaking process of any such cleanup or remediation payments it might ultimately be required to make, but recognizes that such recovery is not assured. There can be no assurance as to the outcome of these proceedings. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on its consolidated financial condition or results of operations. g. Bridgeport Rental and Oil Service In January 1992, NJNG was advised of allegations that certain waste oil from its former manufactured gas plant site in Wildwood, New Jersey may have been sent by a demolition contractor to the Bridgeport Rental and Oil Service site in Logan Township, New Jersey. That site has been designated a Superfund site and is currently the subject of two lawsuits pending in the U.S. District Court in New Jersey. NJNG has notified its insurance carriers and is investigating this matter. NJNG is currently unable to predict the extent, if any, to which it may have cleanup or other liability with respect to this matter. NJNG would attempt to seek recovery through the ratemaking process of any such cleanup or remediation payments it might ultimately be required to make, but recognizes that such recovery is not assured. There can be no assurance as to the outcome of these proceedings. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on its consolidated financial condition or results of operations. h. Iroquois NJNR Pipeline Company (Pipeline), a wholly owned subsidiary of NJR Energy, owns a 2.8% equity interest in the Iroquois Gas Transmission System, L.P. (Iroquois) which has constructed and is operating a 375-mile pipeline from the Canadian border in Upstate New York to Long Island. Iroquois has been informed by the U.S. Attorney's Offices for the Northern, Southern and Eastern Districts of New York that an investigation is underway to determine whether or not Iroquois committed civil violations of the Federal Clean Water Act and/or its Corps of Engineers permit during construction of the pipeline. No proceedings in connection with this civil investigation have been commenced by the federal government against Iroquois. In addition, in conjunction with the Environmental Protection Agency, a criminal investigation has been initiated by the U.S. Attorney's Office for the Northern District of New York. To date, no criminal charges have been filed. In December 1993, Iroquois received notification from the Enforcement Staff of the Federal Energy Regulatory Commission Office of the General Counsel (Enforcement) that Enforcement -10- has commenced a preliminary, non-public investigation concerning matters related to Iroquois' construction of certain of its pipeline facilities. Enforcement has requested information regarding certain aspects of the pipeline construction. In addition, Iroquois has received similar communications from the Army Corps of Engineers, the Department of Transportation and the staff of the New York Public Service Commission requesting information in connection with certain aspects of the pipeline construction. Iroquois is providing information to these agencies in response to their requests. Iroquois has publicly stated that it believes the pipeline construction and right-of-way activities were conducted in a responsible manner. Iroquois and its counsel expect to meet with those conducting the civil and criminal investigations, from time to time, both to gain an informed understanding of the focus and direction of the investigations in order to defend itself and, if and when appropriate, to explore a range of possible resolutions acceptable to all parties. No understandings or agreements have been reached that have led Iroquois to make provision in its financial statements for any dollar liability associated with these proceedings. Iroquois believes, however, that a global resolution of the federal civil and criminal investigations could have a material adverse effect on its financial condition. Pipeline is unable to predict the outcome of these proceedings and investigations. Based upon information currently available to the Company concerning the above matters involving Iroquois and Pipeline's 2.8% equity interest, the Company does not believe that their ultimate resolution will have a material adverse effect on the Company's consolidated financial condition or results of operations. Pipeline's investment in Iroquois as of December 31, 1994 was $5.7 million. i. Various The Company is party to various claims, legal actions and complaints arising in the ordinary course of business. In management's opinion, the ultimate disposition of these matters will not have a material adverse effect on its financial condition or results of operations. 6. Long-Term Debt In October 1994, NJNG issued $25 million of its 8.25% Series Z First Mortgage Bonds due 2004 under its Medium-Term Note (MTN) Program and used the proceeds to reduce outstanding short-term debt. At September 30, 1994, this short-term debt was reclassified as long-term debt for financial reporting purposes. As of December 31, 1994, NJNG can issue an additional $20 million of First Mortgage Bonds under its MTN Program, as approved by the BPU in October 1993. 7. Other At December 31, 1994, there were 17,448,369 shares of common stock outstanding and book value per share was $14.78. Certain reclassifications have been made of previously reported amounts to conform with current year classifications. -11- NEW JERSEY RESOURCES CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED DECEMBER 31, 1994 RESULTS OF OPERATIONS Consolidated net income for the quarter ended December 31, 1994 totaled $11.2 million, or $.65 per share, compared with $11.2 million, or $.66 per share, for the same period last year. Consolidated net income for the three months ended December 31, 1993, included a non-cash credit of $721,000, or $.04 per share, from the effect of adopting SFAS 109, "Accounting for Income Taxes". Excluding the effect of adopting SFAS 109, earnings per share increased by 5%, to $.65, in the first fiscal quarter of 1995, compared with $.62 a year ago. The increase in consolidated earnings before the effect of SFAS 109 was attributable primarily to the higher financial results of the Company's principal subsidiary, New Jersey Natural Gas Company (NJNG). UTILITY OPERATIONS NJNG's financial results are summarized as follows: Three Months Ended December 31, ---------------------- 1994 1993 ---- ---- (Thousands) Gross margin Residential and commercial ......... $41,407 $38,137 Interruptible and agency ........... 536 149 Off system and capacity release .... 1,153 1,206 ------- ------- Total gross margin ................... $43,096 $39,492 ======= ======= Operating income before income taxes.. $22,171 $18,992 ======= ======= Net income ........................... $11,639 $10,349 ======= ======= Gross Margin Gross margin, defined as gas revenues less gas costs and gross receipts and franchise taxes (GRFT), provides a more meaningful basis for evaluating utility operations since gas costs and GRFT are passed through to customers and, therefore, have no effect on earnings. Gas costs are charged to operating expenses on the basis of therm sales at the base and Levelized Gas Adjustment (LGA) cost rates included in NJNG's tariff. The LGA clause allows NJNG to recover gas costs that exceed the level reflected in its base rates. GRFT are also calculated on a per-therm basis and exclude sales to other utilities. -12- Residential and Commercial Through fiscal 1992, gross margin from firm (i.e., residential and commercial) customers was weather-sensitive. In NJNG's June 1992 base rate order, the BPU approved a weather-normalization clause (WNC) on a two-year experimental basis effective October 1, 1992. The clause provides for a revenue adjustment if the weather varies by more than one-half of one percent from normal, or 10-year average, weather. The accumulated adjustment from one heating season (i.e., October-April) is billed or credited to customers in the subsequent heating season. In October 1994, NJNG received approval from the BPU to continue the clause on an interim basis pending a final BPU order. Gross margin from sales to firm customers increased by $3.3 million, or 9%, during the first fiscal quarter, compared with the same period last year due primarily to the impact of higher base rates and customer growth which more than offset an 8% decrease in firm therm sales. NJNG received a base rate increase of $7.5 million, or 2%, effective in January 1994 which increased gross margin by approximately $1.3 million. The decline in firm therm sales was due to the weather, which was 11% warmer than last year, and lower average customer usage, which more than offset the impact of 10,855 customer additions during the twelve months ended December 31, 1994. The weather for the three months was 10% warmer than normal, or the 10-year average. The impact of warmer weather on gross margin was partially mitigated by the above-mentioned WNC. Under this rate mechanism, a total of $2.6 million of gross margin was accrued for future recovery from customers in fiscal 1995. This contrasts with the activity under the WNC during the two years ended September 30, 1994 when, due to colder-than-normal weather, NJNG deferred a total of $4.2 million of gross margin of which $1.9 million has been credited to customers as of December 31, 1994. Average customer usage was approximately 6% lower than expected due to the consistently warmer-than-normal weather experienced during much of the first quarter of fiscal 1995. The usage level embedded in rates is not protected by the WNC. Off System and Capacity Release In order to reduce the overall cost of its gas supply commitments, NJNG has entered into contracts to sell gas to customers who are outside of its franchise territory. These sales enable NJNG to spread its fixed demand costs, which are charged by pipelines to access their supplies year-round, over a larger and more diverse customer base. NJNG also participates in the capacity release market on the interstate pipeline network when the capacity is not needed for its own system requirements. Effective January 1994, NJNG retains 20% of the gross margin from off-system sales and capacity release. NJNG's off-system sales totaled 70 million therms and generated $600,000 of gross margin in the first quarter of 1995, compared with 78 million therms and $915,000 of gross margin a year ago. The decrease in sales and margin per therm was due primarily to increased competition and a change in the margin-sharing formula. The capacity release program generated gross margin of $550,000 and $270,000 in the three months ended December 31, 1994 -13- and 1993, respectively. This increase was due primarily to increased marketing efforts. Operating Income Before Income Taxes and Net Income Operating income before income taxes increased by $3.2 million, or 17%, in the first fiscal quarter of 1995 as increased gross margin more than offset a 2.5% increase in operation and maintenance expenses associated primarily with the impact of growth on operations. Net income increased by $1.3 million, or 12%, as the higher operating income more than offset a $1.6 million increase in net interest expense which was due primarily to higher short-term interest rates and lower capitalized interest. NON-UTILITY OPERATIONS Paradigm Resources Corporation (PRC) was formed in 1992 as a sub-holding company to better segregate the Company's utility and non-utility operations. PRC includes the accounts of CR&R, NJR Energy and PPI. The financial results of PRC are summarized as follows: Three Months Ended December 31, ------------------ 1994 1993 ---- ---- (Thousands) Revenues................................... $6,920 $6,233 ====== ====== Operating income before income taxes ...... $1,072 $1,906 ====== ====== Income (loss) before SFAS 109 ............. $ (498) $ 97 ====== ====== Net income (loss) ......................... $ (498) $ 836 ====== ====== REAL ESTATE OPERATIONS CR&R's financial results are summarized as follows: Three Months Ended December 31, ------------------ 1994 1993 ---- ---- (Thousands) Revenues .................................. $3,006 $3,129 ====== ====== Operating income before income taxes ...... $1,467 $1,582 ====== ====== Income (loss) before SFAS 109 ............. $ (119) $ (44) ====== ====== Net income (loss) ......................... $ (119) $ 616 ====== ====== Earnings for the quarter ended December 31, 1993 include the cumulative effect of adopting SFAS 109 which was a non-cash credit to net income of $660,000. See Note 3 - Income Taxes -14- for a discussion of this change in accounting principle. Operating income before income taxes for the three months ended December 31, 1994 decreased by $115,000 reflecting primarily tenant rollover activity. The loss before the effect of SFAS 109 for the three months ended December 31, 1994, increased by $75,000 reflecting primarily the lower operating income and a $155,000 increase in net interest expense due to higher floating interest rates. CR&R has determined that the book value of its undeveloped land inventory has reached its estimated net realizable value based upon its development strategy. CR&R is required to continue capitalizing carrying charges on its undeveloped land inventory until it is developed. Therefore, CR&R's results for the three months ended December 31, 1994 include a pre-tax allowance of $499,000 associated with the carrying costs of CR&R's undeveloped land inventory. Additional allowances for these capitalized carrying charges will continue until the land is developed. Fiscal 1994 results include pre-tax costs of $653,000 associated with the October 1993 redemption of CR&R's remaining $13.8 million outstanding principal of its 11 5/8% mortgage. These costs are reflected net of tax in Other income (expense), net on the Consolidated Statements of Income. Since December 31, 1993, CR&R's inventory of completed space has remained unchanged at 914,200 square feet. The occupancy rate as of December 31, 1994 and 1993 was 96%. OIL AND GAS OPERATIONS NJR Energy's financial results are summarized as follows: Three Months Ended December 31, ------------------ 1994 1993 ---- ---- (Thousands) Revenues ...................................... $3,914 $3,104 ====== ====== Operating income (loss) before income taxes ... $ (277) $ 450 ====== ====== Income (loss) before SFAS 109 ................. $ (465) $ 227 ====== ====== Net income (loss) ............................. $ (465) $ 306 ====== ====== Earnings for the quarter ended December 31, 1993 include the cumulative effect of adopting SFAS 109 which was a non-cash credit to net income of $79,000. See Note 3 - Income Taxes for a discussion of this change in accounting principle. NJR Energy's operating income before income taxes decreased by $727,000 and its loss before SFAS 109 increased by $692,000 for the three months ended December 31, 1994 compared with a year ago, due primarily to the impact of lower oil and gas production and lower average gas prices, which more than offset higher average oil prices. -15- Production and price information are as follows: Three Months Ended December 31, ----------------- 1994 1993 ---- ---- Gas production (mmcf) ................... 725 936 Avg. gas price (mcf) .................... $1.70 $1.87 Oil production (mbbl) ................... 26 34 Avg. oil price (bbl) .................... $16.65 $16.11 NJR Energy's proved reserves at December 31, 1994 totaled 21 bcf of natural gas and 1.8 million barrels of oil. NJR Energy's ability to improve its financial results in the future is dependent on several factors including changes in oil and gas prices, the performance of reserve acquisitions, the results of development activity, the resolution of the Iroquois investigation, as discussed in Note 5. Legal and Regulatory Proceedings-h. Iroquois and other investments in areas such as gas gathering, storage and marketing, the amount and type of which will be determined by market and other conditions. Although NJR Energy pursues its investments in accordance with its new strategic direction, NJR Energy's results of operations may continue to be adversely impacted by one or a combination of these factors. LIQUIDITY AND CAPITAL RESOURCES In order to meet the working capital and external debt financing requirements of its non-regulated subsidiaries, as well as its own working capital needs, the Company maintains committed bank credit facilities totaling $145 million and has a $10 million credit facility available on an offering basis. At December 31, 1994, $120.2 million was outstanding under these agreements. The Company is responsible for meeting the common equity requirements of each subsidiary through new issuances, including the proceeds from its Dividend Reinvestment and Customer Stock Purchase Plan (DRP). The Company's Board of Directors has authorized up to an additional 1.6 million shares of common stock for issuance and sale under the DRP. The Company expects to file with the Securities and Exchange Commission a registration statement for these shares in the second quarter of fiscal 1995. UTILITY The seasonal nature of NJNG's operations creates large short-term cash requirements, primarily to finance gas purchases and customer accounts receivable. NJNG obtains working capital for these requirements, as well as for the temporary financing of construction expenditures, sinking fund needs and accelerated GRFT payments mandated by changes in New Jersey law, through the issuance of commercial paper and short-term bank loans. To support the issuance of commercial paper, NJNG maintains committed credit facilities totaling $71 million with a number of commercial banks and has an additional $15 million line of credit available on an offering basis. NJNG's lines of credit are adjusted quarterly based upon its projected cash needs. -16- Remaining fiscal 1995 construction expenditures are estimated at $28.8 million. These expenditures will be incurred for services, mains and meters to support NJNG's continued customer growth, and general system renewals and improvements. NJNG also has additional capital requirements in 1995 of approximately $20 million resulting from the acceleration of GRFT payments to the State of New Jersey. NJNG expects to finance these expenditures through internal generation, the issuance of short and long-term debt and proceeds from the Company's DRP, the amount and timing of which will be affected by market conditions and other factors. NJNG will also pursue the refinancing of existing long-term debt, the amount and timing of which will be affected by market conditions and other factors. NON UTILITY REAL ESTATE CR&R's capital expenditures will be limited to the fit-up of existing tenant space, the development of existing acreage and additional investments, approved by the Board of Directors, made for the purpose of preserving the value of particular real estate holdings. Under these parameters, the Board of Directors has approved the construction of an approximately 75,000 square foot flex building on about 10 acres of land in its Monmouth Shores Corporate Park (MSCP) at an expected cost of $5.5 million in fiscal 1995. MSCP currently has 74 acres of undeveloped land. Such capital expenditures are expected to be funded through bank loans obtained by the Company and internal generation. OIL AND GAS In April 1994 the Company announced that it plans to reallocate much of the capital previously dedicated to the development of natural gas and oil reserves to investments with closer strategic ties to the rest of its energy businesses. No further exploration is planned. Potential investment opportunities may include gas gathering, storage and marketing, as well as other investments designed to capitalize on the post - Order 636 investment environment. Consistent with this strategy, NJR Energy formed NJR Storage Corporation (Storage) and announced its participation in a partnership with affiliates of Tejas Power Corporation, NIPSCO Industries, Inc., Dayton Power and Light, Inc. and Public Service Enterprise Group to form Market Hub Partners, L.P. (MHP). MHP is expected to develop, own and operate a system of five natural gas market centers with high-deliverability salt cavern storage facilities. The market centers are expected to be strategically located in Texas, Louisiana, Mississippi, Michigan and Pennsylvania. As of December 31, 1994, Storage's 5.67% equity investment in MHP totaled $2.2 million. Storage expects to invest an additional $5.3 million in MHP over the next two years. Remaining capital expenditures for the development of oil and gas reserves in fiscal 1995 are expected to total up to $3.2 million, depending on market conditions and other factors. These expenditures are expected to be funded through bank loans obtained by the Company, proceeds from the Company's DRP and internal generation. -17- PART II - OTHER INFORMATION Item 1. Legal Proceedings Information required by this Item is incorporated by reference to Note 5 - Legal and Regulatory Proceedings. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27-1 Financial Data Schedule -18- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NEW JERSEY RESOURCES CORPORATION Date: February 13, 1995 LAURENCE M. DOWNES --------------------- Laurence M. Downes Senior Vice President and Chief Financial Officer Date: February 13, 1995 GLENN C. LOCKWOOD -------------------- Glenn C. Lockwood Vice President, Controller and Chief Accounting Officer -18- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NEW JERSEY RESOURCES CORPORATION Date: February 13, 1995 --------------------- Laurence M. Downes Senior Vice President and Chief Financial Officer Date: February 13, 1995 ---------------------- Glenn C. Lockwood Vice President, Controller and Chief Accounting Officer EX-27 2 SCHEDULE UT FDS FOR 1ST QTR. 10-Q
UT Exhibit 27-1 New Jersey Resources Corporation Financial Data Schedule UT For the Three Months Ended December 31, 1994 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NEW JERSEY RESOURCES CORPORATION'S DECEMBER 31, 1994 FORM 10-Q, INCLUDING THE CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED STATEMENTS OF CASH FLOWS AND CONSOLIDATED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 SEP-30-1994 DEC-31-1994 3-MOS PER-BOOK 534,493 168,705 124,739 54,742 000,000 830,225 43,625 196,852 12,809 257,805 20,000 2,070 325,590 2,800 0 47,000 4,238 0 0 0 170,722 830,225 129,945 5,237 106,467 111,704 18,241 41 18,282 6,629 11,653 413 11,240 6,630 15,294 14,440 .65 .65
-----END PRIVACY-ENHANCED MESSAGE-----