-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SX7+On6SNZrWKSZHyyZ7apdhvwa6xCZhj+LxeuDD/uFmCAt6OYv/J3vEiEEcvdcr 9QdBVNJZLdJqndSgj27IKw== 0000950123-00-001011.txt : 20000211 0000950123-00-001011.hdr.sgml : 20000211 ACCESSION NUMBER: 0000950123-00-001011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000210 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: SEC FILE NUMBER: 001-08359 FILM NUMBER: 531619 BUSINESS ADDRESS: STREET 1: 1415 WYCKOFF RD 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 NEW JERSEY RESOURCES CORPORATION 1 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, 1999 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 (I.R.S. Employer of incorporation or organization) Identification Number) 1415 WYCKOFF ROAD, WALL, NEW JERSEY - 07719 732-938-1480 (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 January 31, 2000 was 17,779,421. 2 PART I-FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME (unaudited)
- --------------------------------------------------------------------------------- THREE MONTHS ENDED DECEMBER 31, (Thousands, except per share data) .... 1999 1998 - --------------------------------------------------------------------------------- OPERATING REVENUES .................... $263,438 $244,590 -------- -------- OPERATING EXPENSES Gas purchases ....................... 193,981 176,337 Operation and maintenance ........... 20,607 21,137 Depreciation and amortization ....... 7,981 7,399 Energy and other taxes .............. 10,044 10,480 -------- -------- Total operating expenses .............. 232,613 215,353 -------- -------- OPERATING INCOME ...................... 30,825 29,237 Other income, net ..................... 445 552 Interest charges, net ................. 5,176 5,280 -------- -------- INCOME BEFORE INCOME TAXES ........... 26,094 24,509 Income tax provision .................. 9,915 9,266 -------- -------- INCOME BEFORE PREFERRED STOCK DIVIDENDS 16,179 15,243 Preferred stock dividends ............. 8 91 -------- -------- NET INCOME ............................ $ 16,171 $ 15,152 ======== ======== EARNINGS PER COMMON SHARE BASIC ........................... $ .91 $ .85 ======== ======== DILUTED ......................... $ .90 $ .84 ======== ======== DIVIDENDS PER COMMON SHARE ............ $ .43 $ .42 ======== ======== AVERAGE SHARES OUTSTANDING BASIC ........................... 17,780 17,844 ======== ======== DILUTED ......................... 17,914 17,963 ======== ========
See Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- 1 3 CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
- --------------------------------------------------------------------------------------------- THREE MONTHS ENDED DECEMBER 31, (Thousands) 1999 1998 - --------------------------------------------------------------------------------------------- CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES Net income ...................................... $ 16,171 $ 15,152 Adjustments to reconcile net income to cash flows Depreciation and amortization .................. 7,981 7,399 Amortization of deferred charges ............... 1,512 770 Deferred income taxes .......................... (2,905) 6,118 Changes in working capital ..................... (41,224) (32,046) Other, net ..................................... 2,275 (893) -------- -------- Net cash flows (used in) from operating activities (16,190) (3,500) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt .................... 5,300 6,800 Proceeds from common stock ...................... 2,056 2,317 Payments of preferred stock ..................... -- (20,000) Purchases of treasury stock ..................... (2,803) (129) Payments of common stock dividends .............. (7,465) (7,304) Net change in short-term debt ................... 35,300 32,300 -------- -------- Net cash flows from financing activities .......... 32,388 13,984 -------- -------- CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES Expenditures for Utility plant .................................. (14,215) (11,038) Real estate properties ......................... (118) (23) Cost of removal ................................ (1,735) (1,052) Proceeds from sale of assets ................... 556 -- -------- -------- Net cash flows (used in) from investing activities (15,512) (12,113) -------- -------- Net change in cash and temporary investments ...... 686 (1,629) Cash and temporary investments at September 30 .... 2,123 2,476 -------- -------- Cash and temporary investments at December 31 ..... $ 2,809 $ 847 ======== ======== CHANGES IN COMPONENTS OF WORKING CAPITAL Receivables ..................................... $(44,830) $(83,528) Inventories ..................................... 4,471 14,887 Deferred gas costs .............................. 1,940 9,037 Accounts payable ................................ (3,886) (11,546) Purchased gas ................................... (2,536) 40,553 Prepaid and accrued taxes, net .................. 11,890 11,359 Customers' credit balances and deposits ......... 554 556 Other, net ...................................... (8,827) (13,364) -------- -------- Total ............................................. $(41,224) $(32,046) ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION Cash paid for Interest (net of amounts capitalized) .......... $ 6,742 $ 6,545 Income taxes ................................... $ 547 $ 1,737
See Notes to Consolidated Financial Statements 2 4 CONSOLIDATED BALANCE SHEETS ASSETS
- ------------------------------------------------------------------------------------------------------------------- DECEMBER 31, SEPTEMBER 30, DECEMBER 31, 1999 1999 1998 (Thousands) (unaudited) (unaudited) - ------------------------------------------------------------------------------------------------------------------- PROPERTY, PLANT AND EQUIPMENT Utility plant, at cost .................. $ 954,751 $ 941,490 $ 906,070 Real estate properties and other, at cost 26,437 26,326 26,019 ----------- ----------- ----------- 981,188 967,816 932,089 Accumulated depreciation and amortization (267,695) (262,372) (246,703) ----------- ----------- ----------- Property, plant and equipment, net ...... 713,493 705,444 685,386 ----------- ----------- ----------- CURRENT ASSETS Cash and temporary investments .......... 2,809 2,123 847 Construction fund ....................... 12,100 12,100 16,000 Customer accounts receivable ............ 101,080 80,974 111,295 Unbilled revenues ....................... 28,061 2,950 24,548 Allowance for doubtful accounts ......... (2,021) (1,684) (1,622) Gas in storage, at average cost ......... 31,451 35,718 37,686 Materials and supplies, at average cost . 3,513 3,717 4,070 Prepaid taxes .......................... -- 4,749 568 Deferred gas costs ...................... -- -- 5,249 Other ................................... 15,921 8,598 18,049 ----------- ----------- ----------- Total current assets .................... 192,914 149,245 216,690 ----------- ----------- ----------- DEFERRED CHARGES AND OTHER Equity investments ...................... 8,619 8,813 8,856 Regulatory assets ....................... 65,610 64,063 40,553 Long-term deferred gas costs ............ 6,113 9,744 24,136 Other ................................... 23,991 22,703 33,183 ----------- ----------- ----------- Total deferred charges and other ........ 104,333 105,323 106,728 ----------- ----------- ----------- Total assets ............................ $ 1,010,740 $ 960,012 $ 1,008,804 =========== =========== ===========
See Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- 3 5 CONSOLIDATED BALANCE SHEETS CAPITALIZATION AND LIABILITIES
- ------------------------------------------------------------------------------------------------------------ DECEMBER 31, SEPTEMBER 30, DECEMBER 31, 1999 1999 1998 (Thousands) (unaudited) (unaudited) - ------------------------------------------------------------------------------------------------------------ CAPITALIZATION Common stock equity .................... $ 310,426 $ 302,169 $ 301,229 Redeemable preferred stock ............. 520 520 640 Long-term debt ......................... 313,023 287,723 333,541 ---------- ---------- ---------- Total capitalization ................... 623,969 590,412 635,410 ---------- ---------- ---------- CURRENT LIABILITIES Current maturities of long-term debt ... 318 20,318 1,957 Short-term debt ........................ 97,000 61,700 93,000 Purchased gas .......................... 76,293 78,829 88,014 Accounts payable and other ............. 24,613 28,499 18,160 Dividends payable ...................... 7,649 7,465 7,507 Accrued taxes .......................... 8,343 2,138 7,204 Overrecovered gas costs ................ 1,678 3,369 -- Customers' credit balances and deposits 16,024 15,470 14,208 ---------- ---------- ---------- Total current liabilities .............. 231,918 217,788 230,050 ---------- ---------- ---------- DEFERRED CREDITS Deferred income taxes .................. 63,752 65,559 79,877 Deferred investment tax credits ........ 10,106 10,293 10,580 Deferred revenue ....................... 22,514 23,020 19,088 Other .................................. 58,481 52,940 33,799 ---------- ---------- ---------- Total deferred credits ................. 154,853 151,812 143,344 ---------- ---------- ---------- Total capitalization and liabilities .. $1,010,740 $ 960,012 $1,008,804 ========== ========== ==========
See Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- 4 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. General The accompanying financial statements have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). The September 30, 1999 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 1999 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), NJR Energy Holdings Corporation (Energy Holdings) and NJR Development Company (NJR Development). NJR Energy Services Company (Energy Services), New Jersey Natural Energy Company (Natural Energy) and NJR Energy Corporation (NJR Energy) are wholly-owned subsidiaries of Energy Holdings and Commercial Realty & Resources Corp. (CR&R), is a wholly-owned subsidiary of NJR Development. Significant intercompany accounts and transactions have been eliminated. 3. New Accounting Standards In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133 "Accounting for Derivative Investments and Hedging Activities," which must be adopted by the quarter ending December 31, 2000. The Company is currently evaluating the effects of SFAS No. 133 on its financial condition and results of operations, which will vary based on the Company's use of derivative instruments during any given reporting period following the time of adoption. The Company has adopted Emerging Issues Task Force 98-10 "Accounting for Contracts Involved in Energy Trading and Risk Management Activities" the impact of which was immaterial to its financial condition and results of operations. 4. Capitalized Interest The Company's capitalized interest totaled $254,000 and $182,000 for the three months ended December 31, 1999 and 1998, respectively. 5 7 5. Legal and Regulatory Proceedings a. Energy Deregulation Legislation In February 1999, the Electric Discount and Energy Competition Act (the Act), which provides the framework for the restructuring of New Jersey's energy markets, became law. In January 2000, the New Jersey Board of Public Utilities (the BPU) approved a stipulation agreement among various parties to fully open NJNG's residential markets to competition, restructure its rates to include a rate for Basic Gas Supply Service (BGS) and Delivery service as required by the Act, and expand an incentive for residential and small commercial customers to switch to transportation service. The stipulation agreement also extends incentives for NJNG's off-system sales and capacity management programs through December 31, 2002. Additionally, NJNG received approval to recover carrying costs on its expenditures associated with remediating its former manufactured gas plants. These expenditures are recovered over a seven-year period and are subject to annual BPU review and approval. The Act also allows continuation of each utility's role as a gas supplier at least until December 31, 2002, when the BPU must determine the ongoing role of each utility in providing gas supply services. The Act allows natural gas utilities to provide competitive services (e.g., appliance services). By December 31, 2000 the BPU is expected to decide whether some or all customer account services (i.e., meter reading, billing and collections) should be competitive. The BPU is continuing to issue standards and rules to implement the Act. b. Levelized Gas Adjustment (LGA) and Other Adjustment Clauses In September 1999, NJNG filed to reduce its LGA by less than 1%, reflecting a proposal to decrease the Prior Gas Cost Adjustment (PGCA) and Transportation Education and Implementation (TEI), partially offset by a minor increase to its Remediation Adjustment (RA) factor. No change was proposed for the Gas Cost Recovery (GCR), Demand Side Management (DSM) and Weather Normalization Clause (WNC) factors. The rate restructuring mandated by the Act did not impact the rates or revenues of any of the individual clauses. In August 1999, NJNG filed a Comprehensive Resource Analysis (CRA) plan pursuant to a BPU order. The CRA, which will replace NJNG's current DSM program, includes a program cost of $2.9 million recoverable through rates. NJNG expects the BPU to rule on the filing in February 2000. c. Gas Remediation NJNG has identified eleven former manufactured gas plant (MGP) sites, dating back to the late 1800's and early 1900's, which contain contaminated residues from the former gas manufacturing operations. Ten of the eleven sites in question were acquired by NJNG in 1952. All of the gas manufacturing operations ceased at these sites at least by 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 the former owners. NJNG is currently involved in administrative proceedings with the New Jersey Department of Environmental Protection (NJDEP) 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 6 8 Orders or Memoranda of Agreement with the NJDEP 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 approved by the BPU, NJNG is recovering its expenditures incurred through June 30, 1998 over a seven-year period. Costs incurred subsequent to June 30, 1998, including carrying costs on the deferred expenditures, as noted above, will be reviewed annually and recovered over seven-year periods, subject to BPU approval. In March 1995, NJNG filed a complaint in New Jersey Superior Court against various insurance carriers for declaratory judgment and for damages arising from such defendants' breach of their contractual obligations to defend and/or indemnify NJNG against liability for claims and losses (including defense costs) alleged against NJNG relating to environmental contamination at the former MGP sites and other sites. NJNG is seeking (i) a declaration of the rights, duties and liabilities of the parties under various primary and excess liability insurance policies purchased from the defendants by NJNG from 1951 through 1985, and (ii) compensatory and other damages, including costs and fees arising out of defendants' obligations under such insurance policies. The complaint was amended in July 1996 to name Kaiser-Nelson Steel & Salvage Company (Kaiser-Nelson) and its successors as additional defendants. The Company is seeking (a) a declaration of the rights, duties and liabilities of the parties under agreements with respect to claims against the Company that allege property damage caused by various substances used, handled or generated by NJNG or the predecessor in title that were removed from several of the MGP sites by Kaiser-Nelson, and (b) money damages or compensatory relief for the harm caused by Kaiser-Nelson's aforementioned actions. Discovery is proceeding in this matter. There can be no assurance as to the outcome of these proceedings. d. South Brunswick Asphalt, L.P. NJNG has been named as 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 to 1983 by an affiliate of SBA (Seal Tite Corp.) from NJNG's former gas manufacturing plant sites has been alleged by the NJDEP 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 NJDEP issued letters classifying the tar emulsion/sand and gravel mixture at each site as dry industrial waste, a non-hazardous classification. In April 1996, in a meeting with all parties to the litigation and the judge assigned to the case, the NJDEP confirmed the non-hazardous classification, which will allow for conventional disposal. In May 1997, SBA submitted applications to NJDEP for permits to allow SBA to recycle the tar emulsion/sand and gravel mixture at each site into asphalt, to be used as a paving materials. In July 1998, SBA filed an amended complaint adding NJDEP to the proceedings to facilitate the resolution of these applications. Following service of SBA's amended complaint, NJDEP filed a motion for dismissal of the amended complaint, but has not formally granted or denied SBA's permit applications. In March 1999, the court granted NJDEP's motion in part and denied NJDEP's motion in part, and directed SBA to file a more definite statement of its claims for equitable relief against NJDEP, including its request that a mandatory injunction be imposed compelling NJDEP to issue the subject permits. SBA's more definite statement of its claims has not yet 7 9 been filed. 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. Combe Fill South Landfill NJNG has been joined as a third-party defendant in two civil actions commenced in October 1998 in the U.S. District Court for the District of New Jersey by the U.S. Environmental Protection Agency and NJDEP. These two actions seek recovery of costs expended in connection with, and for continuation of the cleanup of, the Combe Fill South Landfill, a Superfund site in Chester, New Jersey. The plaintiffs claim that hazardous waste NJNG is alleged to have generated was sent to the site. There are approximately 180 defendants and third-party defendants in the actions thus far. Each third-party complaint seeks damages under CERCLA Section 113 and the New Jersey Spill Act, declaratory relief holding each third-party defendant strictly liable, and contribution and indemnification under the common law of the United States and New Jersey. No specific monetary demands or scope of cleanup work have been set forth to date. NJNG is in the process of investigating the allegations, formulating its position with respect thereto and has agreed to participate in an alternate dispute resolution process encouraged by the Court. Its insurance carriers have been notified and one has agreed to assume responsibility for the legal expenses, while reserving its rights with regard to liability. NJNG is currently unable to predict the extent, if any, to which it may have cleanup or other liability with respect to these civil actions, but would seek recovery of any such costs through the ratemaking process. No assurance can be given as to the timing or extent of the ultimate recovery of any such costs. f. Various The Company is party to various other 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. Earnings Per Share The Company has adopted SFAS No. 128 "Earnings per Share" which establishes standards for computing and presenting basic and diluted earnings per share (EPS). The incremental shares required for inclusion in the denominator for the diluted EPS calculation were 133,620 and 119,874 for the three months ended December 31, 1999 and 1998, respectively. These shares relate to stock options and restricted stock and were calculated using the treasury stock method. The numerator for both the basic and diluted calculation was net income. There was a one-cent dilutive effect for the three months ended December 31, 1999 and 1998. 7. Long-Term Debt In April 1998, NJNG entered into a loan agreement whereby the New Jersey Economic Development Authority loaned NJNG the proceeds from the Authority's $18 million Natural Gas Facilities Revenue Bonds, Series 1998C, which were deposited into a construction fund. NJNG may obtain these funds in reimbursement for certain qualified expenditures. In April 1998, NJNG drew down $2 million from the construction fund and issued $2 million of its Series GG Bonds. In April 1999, NJNG drew down $3.9 million from the construction fund and issued $3.9 million of its Series GG Bonds. In fiscal 2000, NJNG anticipates drawing down approximately $5 million from the construction fund. 8 10 8. Subsequent Event In May 1995, the Company adopted a plan to exit the oil and natural gas production business and pursue the sale of the reserves and related assets of NJR Energy and its subsidiary, New Jersey Natural Resources Company (NJNR). The Company accounted for this segment as a discontinued operation and in fiscal 1995 recorded an after-tax charge of $8.7 million, or $.49 per share. This charge was based on estimates of the anticipated loss from operations until the assets were sold, the estimated loss on the sale of the remaining reserves and other costs related to the closing of its offices in Dallas and Tulsa. Based upon actual proceeds received from the sale of the assets and costs incurred, net of insurance recoveries received in January 2000, the Company will close out its reserve balance and report income from discontinued operations of approximately $820,000, or $.05 per share in the quarter ended March 31, 2000. 9. Other At December 31, 1999 there were 17,783,264 shares of common stock outstanding and the book value per share was $17.46. Certain reclassifications have been made of previously reported amounts to conform with current year classifications. 9 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED DECEMBER 31, 1999 A. RESULTS OF OPERATIONS Consolidated net income for the quarter ended December 31, 1999 increased 7% to $16.2 million, compared with $15.2 million for the same period last year. Basic EPS increased 7% to $.91, compared with $.85 last year. Diluted EPS also increased 7% to $.90, compared with $.84 last year. The increase in consolidated net was attributable primarily to continued profitable customer growth at the Company's principal subsidiary, NJNG. NJNG OPERATIONS NJNG's financial results are summarized as follows:
Three months Ended December 31, 1999 1998 ------- ------- (Thousands) Gross margin Residential and commercial $44,300 $43,679 Firm transportation 9,249 7,159 ------- ------- Total firm margin 53,549 50,838 Interruptible 220 148 Off-system and capacity management 1,564 1,321 ------- ------- Total gross margin $55,333 $52,307 ======= ======= Appliance service revenues $ 3,086 $ 3,057 ======= ======= Operating income $29,205 $26,961 ======= ======= Net income $15,500 $14,118 ======= =======
Gross Margin Gross margin is defined as gas revenues less gas costs, sales tax and a Transitional Energy Facilities Assessment (TEFA). Gross margin provides a more meaningful basis for evaluating utility operations, since gas costs, sales tax and TEFA 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 rates included in NJNG's tariff. The LGA clause allows NJNG to recover gas costs that exceed the level reflected in its base rates. Sales tax is calculated at 6% of revenue and excludes off-system sales, sales to other utilities and federal accounts. TEFA is calculated on a per therm basis and excludes sales to other utilities, off-system sales and federal accounts. 10 12 Firm Margin Residential and commercial (i.e., firm) gross margin is subject to the WNC, which provides for a revenue adjustment if the weather varies by more than one-half of 1% from normal, or 20-year average, weather. The WNC does not fully protect NJNG from factors such as unusually warm weather and declines in customer usage patterns, which were set at the conclusion of NJNG's last base rate case in January 1994. The accumulated adjustment from one heating season (i.e., October-May) is billed or credited to customers in subsequent periods. This mechanism reduces the variability of both customer bills and NJNG's earnings due to weather fluctuations. The components of gross margin from firm customers are being impacted by customers switching from sales service to firm transportation service. NJNG's total gross margin is not negatively impacted by customers who utilize its firm transportation service and purchase their gas from another supplier. This is due to NJNG's tariff which is designed such that no profit is earned on the commodity portion of sales to firm customers, and all customers who purchase gas from another supplier continue to utilize NJNG for transportation. Total firm margin increased by $2.7 million, or 5.3% for the three months ended December 31, 1999, compared with the same period last year, reflecting customer growth and 1% colder weather. The weather for the three months ended December 31, 1999 was 9% warmer than normal, which, in accordance with the WNC, resulted in $2.9 million of gross margin being accrued for future recovery from customers. Gross margin from sales to firm customers increased $621,000, or approximately 1% for the three months ended December 31, 1999, compared with the same period last year. The increase in gross margin for the three months ended was due to an increase in therm sales, which primarily resulted from 1% colder weather than last year, and 11,872 customer additions during the twelve months ended December 31, 1999. Sales to firm customers were 12.6 billion cubic feet (Bcf) for the three months ended December 31, 1999 compared with 12.3 Bcf for the same period last year. The increase in sales was due to the colder weather and customer growth. Gross margin from transportation customers increased $2.1 million, or 29%, for the three months ended December 31, 1999, compared with the same period last year as more customers chose this service. NJNG transported 3.2 Bcf and 2.6 Bcf for the three months ended December 31, 1999 and 1998, respectively. The growth in the number of transportation customers was primarily due to NJNG's participation in an open, competitive market which allows residential customers to change natural gas suppliers. Under this program 30,527 and 24,459 residential customers and 4,248 and 4,053 commercial customers were using this service at December 31, 1999 and 1998, respectively. The number of customers switching from sales to transportation may continue to grow as all residential customers have the ability to switch to transportation service beginning January 1, 2000. 11 13 Interruptible NJNG services 51 customers through interruptible sales and/or transportation tariffs. Sales made under the interruptible sales tariff are priced on market-sensitive oil and gas parity rates. Although therms sold and transported to interruptible customers represented 4% and 3% of total therm throughput in the three months ended December 31, 1999 and 1998, respectively, they accounted for less than 1% of the total gross margin in each period due to the regulated margin-sharing formulas that govern these sales. Under these formulas, NJNG retains 10% of the gross margin from the interruptible sales and 5% of the gross margin from transportation sales, with the balance credited to firm sales customers through the LGA clause. Off-System and Capacity Management In order to reduce the overall cost of its gas supply commitments, NJNG has entered into contracts to sell gas to customers outside its franchise territory when the gas is not needed for system requirements. 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 October 1, 1998 through December 31, 2002, NJNG retains 15% of the gross margin from these sales. In order to reduce the fixed cost of NJNG's gas supply portfolio, any savings achieved through the permanent reduction or replacement of capacity or other services will be shared between customers and shareholders. Under this program, NJNG retains 40% of the savings for the first 12 months following any transaction and retains 15% for the remaining period through December 31, 2002, with the balances credited to firm sales customers through the LGA clause. NJNG's off-system and capacity management sales totaled 36 Bcf and generated $1.6 million of gross margin for the three months ended December 31, 1999, compared with 38.6 Bcf and $1.3 million of gross margin for the same period last year. 12 14 Operating Income Operating income increased $2.2 million, or 8%, for the three months ended December 31, 1999, compared with the same period last year due primarily to the increase in firm gross margin, discussed above, which more than offset increased operating expenses. Net Income Net income increased $1.4 million, or 10%, for the three months ended December 31, 1999, compared with the same period last year due primarily to the increased operating income discussed above, and lower financing costs due primarily to lower debt levels. ENERGY HOLDINGS OPERATIONS Energy Holdings' consolidated financial results, which include Energy Services and Natural Energy, the Company's unregulated fuel and capacity management and retail marketing subsidiaries, and the continuing operations of NJR Energy, which consist primarily of its equity investment in the Iroquois Gas Transmission System, L.P., are summarized as follows:
Three months Ended December 31, 1999 1998 ---------------------------- (Thousands) Revenues $63,287 $68,119 ======= ======= Operating income $ 826 $ 1,809 ======= ======= Net income $ 698 $ 913 ======= =======
Energy Holdings' operating income and net income decreased for the three months ended December 31, 1999 when compared with the same period last year, primarily due to lower storage management margins which were partially offset by a gain on the sale of Natural Energy's commercial customers to Reliant Energy in November 1999. Energy Service's gas under management totaled 25.5 Bcf and 30.5 Bcf for the three months ended December 31, 1999 and 1998 respectively. Retail gas sales totaled 1.2 Bcf and 1.9 Bcf for the three months ended December 31, 1999 and 1998, respectively. 13 15 NJR DEVELOPMENT OPERATIONS NJR Development's consolidated financial results, which consist solely of CR&R's operations, are summarized as follows:
Three months Ended December 31, 1999 1998 --------------------------- (Thousands) Revenues $ 277 $ 251 ===== ===== Other income, net $ 58 $ 102 ===== ===== Net income (loss) $(150) $ 27 ===== =====
In 1996, CR&R entered into a sale-leaseback transaction which generated a pre-tax gain of $17.8 million, which is included in Deferred revenue and is being amortized to Other income, net over 25 years in accordance with generally accepted accounting principles. The primary tenant of the facility, NJNG, is leasing the building under a long-term master lease agreement and continues to occupy a majority of the space in the building. The decrease in net income for the three months ended December 31, 1999 compared with the same period last year is due primarily to marketing costs associated with CR&R's remaining land portfolio. THE YEAR 2000 ISSUE The Company developed and implemented a plan to address Year 2000 issues facing the Company. The Company has not experienced any material incidents during the transition to Year 2000. All computers, infrastructure and business systems have been running smoothly following the transition to Year 2000. The Company will continue to closely monitor the Year 2000 issue and does not believe that any potential future failure to be Year 2000 compliant, including with respect to leap year calculations or other dates, would have a material adverse effect on the Company. The capitalized costs through December 31, 1999 of updating the Company's enterprise computer systems were $22.6 million. The Company incurred $1.3 million in the quarter ended December 31, 1999 for projects that have addressed Year 2000 readiness, of which $1.2 million was for new software and hardware which the Company capitalized. B. LIQUIDITY AND CAPITAL RESOURCES In order to meet the working capital and external debt financing requirements of its unregulated subsidiaries, as well as its own working capital needs, the Company maintains committed credit facilities with a number of banks totaling $100 million. At December 31, 1999, $64.1 million was outstanding under these agreements and is included in long-term debt. It is the Company's objective to maintain a consolidated capital structure that reflects the different characteristics of each business segment and provides adequate financial flexibility for accessing capital markets as required. Based upon its existing mix of investments, it is the Company's goal to maintain a common equity ratio of between 50% and 55%, which is consistent with maintaining its current short-term and long-term credit ratings. NJNG satisfies its debt needs by issuing short-term and long-term debt based upon its own financial profile. The 14 16 Company meets the common equity requirements of each subsidiary, if any, through new issuances of the Company's common stock, including the proceeds from its Automatic Dividend Reinvestment Plan (DRP). The DRP also allows for the purchase of shares in the open market to satisfy the plan's needs. The Company can switch funding options every 90 days. NJNG 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 energy tax payments through the issuance of commercial paper and short-term bank loans. To support the issuance of commercial paper, NJNG maintains committed credit facilities totaling $100 million of which $97 million is outstanding at December 31, 1999 and is included in Short-term debt. Remaining fiscal 2000 construction expenditures are estimated at $38 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 expects to finance these expenditures through internal generation and the issuance of short-term and long-term debt. ENERGY HOLDINGS Energy Holdings does not currently expect any material capital expenditures or external financing requirements in fiscal 2000. NJR DEVELOPMENT CR&R's future capital expenditures will be limited to the fit-up of existing tenant space, developing existing acreage and additional investments to preserve the value of its existing real estate holdings. CR&R does not currently expect any material capital expenditures or external financing requirements in fiscal 2000. 15 17 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FINANCIAL RISK MANAGEMENT Commodity Market Risks The regulated and unregulated natural gas businesses of the Company and its subsidiaries are subject to market risk due to fluctuations in the price of natural gas. To hedge against such fluctuations, the Company and its subsidiaries have entered into futures contracts, options agreements and over-the-counter swap agreements. The Company's natural gas businesses are conducted through three of its operating subsidiaries. First, NJNG is a regulated utility whose recovery of gas costs is protected by the LGA, but to further hedge against price fluctuations, utilizes futures and options through its financial risk management program. Second, Energy Services has hedged its commitments to purchase natural gas for the retail customers of Natural Energy and hedged purchases and sales of storage gas and fixed price sales to wholesale customers. Finally, NJR Energy has entered into a long-term, fixed-price contract to sell approximately 27.7 Bcf of natural gas to a gas marketing company at prices ranging from $2.69 to $4.41 per Million British Thermal Units (Mmbtu). Natural gas is a nationally traded commodity, and its prices are effectively determined by the New York Mercantile Exchange (NYMEX) and over-the-counter markets. The prices on the NYMEX and over-the-counter markets generally reflect the national balance of natural gas supply and demand, but are also influenced significantly from time to time by other events. NJNG entered into futures contracts to buy and sell 8.6 Bcf of natural gas through October 2000 at prices ranging from $2.23 to $3.00 per Mmbtu, and as of December 31, 1999, NJNG had a deferred unrealized gain of approximately $1.6 million from these contracts. Additionally, through its Financial Risk Management program, NJNG had options on 4.2 Bcf of natural gas at strike prices ranging from $2.00 to $3.00 per Mmbtu on which it had an unrealized gain of $200,000 as of December 31, 1999. As of December 31, 1999, Energy Services had entered into futures contracts to buy 4.8 Bcf of natural gas through February 2002, at prices ranging from $2.10 to $3.03 per Mmbtu, and had a deferred unrealized gain of $600,000 from these futures contracts. Energy Services also entered into natural gas swap agreements in order to hedge its risks on 58.9 Bcf of natural gas. As of December 31, 1999, Energy Services had a deferred unrealized gain of approximately $3.4 million from these swap agreements. Energy Services also held options for 85,000 Mmbtu at strike prices of $2.00 to $2.25 on which it had an realized gain of $21,000 as of December 31, 1999. NJR Energy has hedged both its price and physical delivery risks associated with a long-term, fixed-price sales contract with a gas marketing company (the "Gas Sale Contract"). To hedge its price risk, NJR Energy entered into two swap agreements. Under the terms of these two swap agreements, NJR Energy will pay to the counterparties the identical fixed price it receives from the gas marketing company in exchange for the payment by the counterparties of an index price plus a spread per Mmbtu for the total volumes under the Gas Sale Contract. The swap agreements were effective as of November 1995. In order to hedge its physical delivery risk, NJR Energy entered into a purchase contract with a second gas 16 18 marketing company for the identical volumes it is obligated to sell under the Gas Sale Contract. NJR Energy has agreed to pay this second gas marketing company the identical floating price it receives under the swap agreements mentioned above. To manage these instruments, the Company has well-defined risk management policies and procedures, which include volumetric limits and monetary guidelines. All of the futures contracts, options and swap agreements described are held for hedging, rather than trading, purposes except for 85,000 Mmbtu of options held by Energy Services. With respect to futures contracts, options and swap agreements, the Company has performed a sensitivity analysis to estimate its exposure to market risk arising from natural gas price fluctuations using the net futures positions and the net swaps positions. Futures contracts, options and swap agreements are substantially all settled at the NYMEX settlement date and the related natural gas quantity is purchased or sold in the physical market and, therefore, their notional values, which represent the absolute sum of all outstanding natural gas futures contracts or swap agreements, as the case may be, are not accurate measurements of risk to the Company from those futures contracts or swap agreements. With respect to natural gas futures contracts as of December 31, 1999 and 1998, in the event of a hypothetical 10% change in natural gas prices, the value of the Company's contracts would change by approximately $800,000 and $2.1 million, respectively. With respect to natural gas swap agreements as of December 31, 1999 and 1998, in the event of a hypothetical 10% change in natural gas prices, the value of such agreements would change by approximately $100,000 and $500,000. Finally, with respect to options as of December 31, 1999, in the event of a hypothetical 10% change in the option premiums related to the natural gas futures prices, the value of the options would change by approximately $100,000. There were no options outstanding as of December 31, 1998. However, any such additional changes in value under the futures contracts and the option and swap agreements would be substantially offset by a corresponding change in the related underlying contracts that are being hedged. Interest Rate Risk NJNG has total variable rate debt of $97 million, of which $56 million has been hedged by the purchase of a 6.5% interest rate cap through the year 2003. According to the Company's sensitivity analysis, NJNG's annual interest rate exposure on the $56 million, based on the difference between current average rates and the 6.5% interest rate cap, is limited to $1.1 million, net of tax. If interest rates were to change by 100 basis points on the remaining $41 million of variable rate debt, NJNG's annual interest expense, net of tax, would change by $242,000. The Company has variable rate debt of $64.1 million, if interest rates were to change by 100 basis points, annual interest expense, net of tax, would change by $378,000. INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS Certain of the statements contained in this report (other than the financial statements and other statements of historical fact), including, without limitation, impact of deregulation, expected disposition of legal and regulatory proceedings, effect of new accounting standards and impact of the Year 2000 computer issue, are forward-looking statements. Forward-looking statements are made based upon management's expectations and beliefs concerning future developments and their potential effect upon the Company. There can be no assurance that future developments will be in accordance with management's 17 19 expectations or that the effect of future developments on the Company will be those anticipated by management. The Company wishes to caution readers that the assumptions which form the basis for forward-looking statements with respect to, or that may impact earnings for, the first quarter of fiscal 2000 and thereafter include many factors that are beyond the Company's ability to control or estimate precisely, such as estimates of future market conditions and the behavior of other market participants. Among the factors that could cause actual results to differ materially from estimates reflected in such forward-looking statements are weather conditions, economic conditions in NJNG's service territory, fluctuations in energy-related commodity prices, conversion activity and other marketing efforts, the conservation efforts of NJNG's customers, the pace of deregulation of retail gas markets, competition for the acquisition of gas, the regulatory and pricing policies of federal and state regulatory agencies, the availability of Canada's reserves for export to the United States and other regulatory changes. While the Company periodically reassesses material trends and uncertainties affecting the Company's results of operations and financial condition in connection with its preparation of management's discussion and analysis of results of operations and financial condition contained in its quarterly and annual reports, the Company does not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events. 18 20 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings Information required by this Item is incorporated herein by reference to Part I, Item 1, Note 5 - Legal and Regulatory Proceedings. ITEM 4. Submission of Matters to a Vote of Security Holders On January 26, 2000, the stockholders voted upon the following matters at the annual stockholder meeting. (a) The election of four (4) directors, each to serve for three-year terms expiring in 2002, and until their respective successors are duly elected and are qualified. The results of the voting were as follows:
Director For Withheld -------- --- -------- Hazel Gluck 13,931,318 174,866 James Hacket 13,973,095 133,089 Gary Wolf 13,972,389 133,796 George Zoffinger 13,975,446 130,739
(b) The amendment to the Long-Term Incentive Compensation Plan. The results of the voting were as follows:
For Against Abstain --- ------- ------- 8,814,490 2,218,238 254,001
(c) The stockholders approved the action to retain Deloitte & Touche LLP as auditors for the fiscal year ending September 30, 2000. The votes were as follows:
For Against Abstain --- ------- ------- 13,970,192 70,044 65,948
ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 3-2 By-Laws of the Company, as adopted by the Board of Directors on November 17, 1999. 27-1 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed by the Company during the quarter ended December 31, 1999. 19 21 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 10, 2000 /s/Glenn C. Lockwood --------------------------- Glenn C. Lockwood Senior Vice President and Chief Financial Officer 20 EX-3.2 2 BY-LAWS AS ADOPTED ON JANUARY 26, 2000 1 NEW JERSEY RESOURCES CORPORATION BY-LAWS ADOPTED NOVEMBER 20, 1981 AMENDED NOVEMBER 19, 1982 AMENDED DECEMBER 8, 1983 AMENDED JANUARY 29, 1986 AMENDED AND ADOPTED DECEMBER 17, 1986 AMENDED JANUARY 27, 1988 AMENDED NOVEMBER 29, 1995 AMENDED MARCH 10, 1997 AMENDED NOVEMBER 17, 1999 2 ARTICLE I BOARD OF DIRECTORS SECTION 1 - ELECTION. The business and affairs of the Company shall be conducted under the direction of its Board of Directors, which shall have all the powers of the Company except such as are by statute, by the Certificate of Incorporation, or by these By-Laws conferred upon or reserved to the stockholders. The number of directors constituting the entire Board of Directors shall not be less than three, the exact number to be determined from time to time by resolution adopted by the affirmative vote of a majority of the entire Board of Directors, each director to hold office until his successor shall have been elected and qualified. The members of the Board of Directors shall be divided into classes in the manner provided by Paragraph 7 of the Corporation's Certificate of Incorporation and shall be elected and serve for such terms of office as are provided therein. Nominations of persons for election as directors may be made by the Board of Directors or by any stockholder entitled to vote for the election of directors. Any stockholder entitled to vote for the election of directors may nominate a person or persons for election as director only if written notice of such stockholder's intent is delivered to the Secretary of the Company at the principal executive offices of the Company (i) with respect to an election to be held at an annual meeting of stockholders, not later than 75 days prior to the first anniversary of the preceding year's annual meeting, or as set out below, and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, not later than 10 days following the date on which public announcement (as defined in Article III, Section 1 of these By-Laws) of the date of such meeting is first made. In the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary date of the annual meeting, notice by the stockholder must be delivered not later than 75 days prior to such annual meeting, or, if the date of the annual meeting is less than 75 days from the date on which public announcement of the date of such meeting is first made, not later than or the 10th day following the day on which public announcement of the date of such meeting is first made. Notwithstanding anything in the foregoing sentence to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Company is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Company at least 85 days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Section shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary of the Company not later than the close of business on the 10th day following the day on which such public announcement is first made. Such stockholder's notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and the name, address, age, and principal occupation or employment of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) the number and class of shares of the Company which are owned 3 by such stockholder and the beneficial owner, if any, and the number and class of shares, if any, beneficially owned by the nominee; (d) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (e) such other information regarding each nominee that is required to be disclosed in connection with the solicitation of proxies for the election of directors, or as otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including, without limitation, such person's written consent to being named in a proxy statement as a nominee and to serving as a director if nominated). The Chairman of the Board or other person presiding at a meeting of stockholders, may refuse to acknowledge the nomination of any person not made in accordance with the procedures prescribed by these By-Laws, and in that event the defective nomination shall be disregarded. Subject to limits, if any, contained in the Certificate of Incorporation, the Board of Directors shall be authorized at any time to increase the number of directors and to elect a new director to fill any such newly created directorship, by resolution adopted by the affirmative vote of the majority of the directors then in office. Any such new director shall hold office until the next annual meeting of stockholders and until his successor is elected. If the office of any director becomes vacant for any reason, any such vacancy shall be filled by the Board of Directors, by resolution adopted by the affirmative vote of the majority of the remaining directors then in office. Any such new director shall hold office for the unexpired term and until his successor is elected. The stockholders may fill a directorship resulting from a vacancy or from an increase in the number of directors only if the Board of Directors shall not have done so. The Board of Directors shall be authorized at any time by resolution to increase the number of directors and, by a majority vote, to elect a new director to fill any such newly created directorship. Any such new director shall hold office until the next Annual Stockholders' Meeting and until his successor is elected. A director, or the entire Board of Directors may be removed only for cause and only by the affirmative vote of the holders of at least 80% of the voting power of the voting stock. SECTION 2 - BOARD OF DIRECTORS MEETINGS. As soon as practicable, after the Annual Meeting of Stockholders, the Board of Directors shall meet for organization and elect a Chairman, who shall not ex officio be deemed an officer or employee of the Company unless expressly so designated by the Board as the Chief Executive Officer of the Company. The Chairman shall preside at all meetings of the Board of Directors. The Board of Directors may also elect a Vice Chairman, who shall not ex officio be deemed an officer or employee of the Company, but who shall preside at any meeting of the Board of Directors in the absence of the Chairman. Regular meetings of the Board of Directors shall be held in alternate months on the last Wednesday of each month unless otherwise determined by resolution of the Board. The time 4 and place of each meeting shall be designated by resolution of the Board, Chairman, the President, or the Secretary in the notice of meeting. Special meetings of the Board of Directors may be called at any time by the Chairman or the President. The Secretary shall also call such meeting on the written request of a majority of the directors. No notice shall be required for regular meetings of the Board of Directors, provided the time and place shall have been previously fixed by resolution of the Board. The meeting for organization may be held on the day of and after the annual meeting of stockholders. Two days notice of a special meeting of the Board of Directors shall be given, but this notice may be waived at any time in writing or by telegraph. A meeting may be held at any time without notice when all directors are present and consent thereto. The Board of Directors may also act without a meeting by unanimous written consent which shall be filed with the minutes of the Board. At all meetings of the Board of Directors, the presence in person or by telephonic conference call of a majority of directors shall constitute a quorum for the transaction of business. A lesser number than a quorum, however, may meet and adjourn to any day. SECTION 3 - REMUNERATION. Directors, other than Company Officers, shall receive remuneration in such amount as shall be fixed by the Board of Directors from time to time. ARTICLE II OFFICERS SECTION 1 - APPOINTMENT. The Board of Directors shall, as soon as practicable after the Annual Meeting, meet for organization and shall elect or appoint a president; such number of Vice Presidents as the Board may direct; Treasurer; and a Secretary, any of whom may but need not be a director, except that the officer designated as the Chief Executive Officer as provided herein must be one of the directors. The Board of Directors shall further designate either the Chairman of the Board, or the President, as the Chief Executive Officer of the Company. In the event that the Chairman of the Board is designated by the Board of Directors as the Chief Executive Officer, the president shall be the Chief Operating Officer of the Company. In the event that the President is designated as the Chief Executive Officer, the Board may, in its discretion, designate a Vice President as the Chief Operating Officer. The Board of Directors shall further designate an officer as the Chief Financial Officer of the Company. The Board of Directors may also elect or appoint one or more Assistant Vice Presidents, Assistant Treasurers, Assistant Secretaries, and such other officers as the Board shall from 5 time to time deem necessary, who shall have such authority and shall perform such duties as may be prescribed in these By-Laws or by the Board of Directors. Any two or more offices may be held by the same person. All of said officers shall hold their offices at the pleasure of the Board. SECTION 2 - CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall preside at all meetings of the stockholders and shall have, under the direction of the Board of Directors, overall executive responsibility for the supervision, management, and control of the business of the Company and of all departments of the Company's operations; he shall sign all certificates of stock and all contracts and other instruments in the name of the Company, unless otherwise ordered by the Board; and shall have the authority and responsibility to do and perform all other duties as provided by law, by these By-Laws, or which are otherwise incidental to his office. SECTION 3 - CHIEF OPERATING OFFICER. The Chief Operating Officer, if there be any such officer so designated, shall have general responsibility for the operation and administration of the business of the Company subject to the direction and control of the Chief Executive Officer and of the Board of Directors. He shall perform such other duties as may be delegated or assigned to him by the Chief Executive Officer, or by the Board of Directors, and in the absence of the Chief Executive Officer, the Chief Operating Officer shall perform the duties of the Chief Executive Officer, and the performance of any such duty by the Chief Operating Officer shall be conclusive evidence of his right to act. SECTION 4 - CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall have overall responsibility for the preparation and maintenance of the Company's financial books and records, for the accuracy and integrity of all reports of the Company's financial condition which are prepared or issued under his authority, and for the financial affairs; and requirements of the Company. Upon request, he shall make a report of the financial condition of the Company to the Board of Directors or to the Chief Executive Officer, and shall perform such other duties as may be delegated or assigned to him by the Board of Directors or by the Chief Executive Officer. SECTION 5 - VICE PRESIDENTS. Each Vice President shall have such powers and shall perform such duties as may be delegated or assigned to him by the Board of Directors, by the Chief Executive Officer (if other than the President), by the President, or by the Chief Operating Officer ( if other than the President), and in the absence of the President: the Vice Presidents severally, in the order to be designated by the chief Executive Officer, shall perform the duties of the President, and the performance of any such duty by a Vice President shall be conclusive evidence of his right to act. SECTION 6 - ASSISTANT VICE PRESIDENT. Each Assistant Vice President shall have such powers and perform such duties as may be assigned to him by the Board of Directors, by the Chief Executive Officer (if other than the President), by the President, or by any Vice President and the performance of any such duty shall be conclusive evidence of his right to act. 6 SECTION 7 - SECRETARY. The Secretary shall keep minutes of all meetings of the Board of Directors and Committees thereof, and of the stockholders, and shall give all notices of meetings of the stockholders, and of the Board of Directors and Committees thereof. He shall have custody of all deeds, contracts, agreements, and other records, except as otherwise provided in these By-Laws, or by the Board of Directors, and shall attend to such correspondence of the Company as the Board of Directors or the Chief Executive Officer shall direct. He shall be the custodian of the seal of the Company and shall affix it to any instrument requiring the same, except as otherwise provided herein or by the Board of Directors. He shall further perform such other duties as may be delegated or assigned to him by the Board of Directors, or by the Chief Executive Officer, and the performance of any such duty shall be conclusive evidence of his right to act. SECTION 8 - ASSISTANT SECRETARY. Each Assistant Secretary, if there be any such officer, shall perform such duties as may be assigned to him by the Board of Directors, by the Chief Executive Officer, or by the Secretary and the performance of any such duties shall be conclusive evidence of his right to act. SECTION 9 - TREASURER. The Treasurer shall have charge of all receipts and disbursements of the Company and shall be the custodian of the Company's funds. He shall have full authority to receive and give receipts for all monies due and payable to the Company from any source whatever, and to endorse checks, drafts and warrants in its name and on its behalf, and full discharge for the same to give. The Treasurer shall also have full authority to sign all checks, notes, drafts and certificates of stock. A report of the financial condition of the Company shall be made by the Treasurer or to the Chief Executive Officer whenever so requested by either of them. He shall further perform such other duties as may be delegated or assigned to him by the Board of Directors, by the Chief Executive Officer, or by the Chief Financial Officer, and the performance of any such duty shall be conclusive evidence of his right to act. SECTION 10 - ASSISTANT TREASURER. Each Assistant Treasurer, if there be any such officer, shall have such powers and shall perform such duties as may be assigned to him by the Board of Directors, or by the Chief Executive Officer, by the Chief Financial Officer, or by the Treasurer, and the performance of any such duty shall be conclusive evidence of his right to act. ARTICLE III STOCKHOLDERS' MEETINGS SECTION 1 - ANNUAL MEETING OF STOCKHOLDERS. The annual meeting of the stockholders shall be held on the last Wednesday in the month of January in each year, at the hour of 10:30 a.m., at the principal office of the Company in New Jersey, or at such other date, time and place as may be fixed from time to time by resolution of the Board of 7 Directors and set forth in the notice of the meeting, for the purpose of electing directors and transacting such other business as may properly come before the meeting. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before an annual meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (iii) otherwise properly brought before the meeting by a stockholder of the Company who was a stockholder of record at the time of giving of notice provided for in this Section, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Company, at the principal executive offices of the Company. To be timely, a stockholder's notice shall be delivered not less than 75 days prior to the first anniversary of the preceding year's meeting; provided however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, notice by the stockholder, to be timely, must be so delivered not later than the 75th day prior to such annual meeting or the 10th day following the day on which public announcement (as defined herein) of the date of such meeting is first made. Such stockholder's notice shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (ii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made (A) the name and address of such stockholder, as they appear on the Company's books, and of such beneficial owner and (B) the class and number of shares of the Company which are owned beneficially and of record by such stockholder and such beneficial owner; and (iii) in the event that such business includes a proposal to amend either the Certificate of Incorporation or the Bylaws of the Company, the language of the proposed amendment. Notwithstanding anything in these By-Laws to the contrary, no business shall be conducted at any annual meeting except in accordance with this paragraph, and the Chairman of the Board or other person presiding at an annual meeting of stockholders, may refuse to permit any business to be brought before an annual meeting without compliance with the foregoing procedures. For the purposes of this paragraph "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Company with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act. In addition to the provisions of this paragraph, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in these By-Laws shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Company's proxy statement pursuant to Rule 14a-8 under the Exchange Act. 8 Each share of stock entitled to vote at any meeting shall be entitled to one vote, which vote may be given either in person or by proxy, but no proxy shall be valid for more than eleven months unless a longer time is expressly provided therein, but in no event shall a proxy be valid after three years from the date of execution. Every proxy shall be executed in writing by the shareholder or his agent, except that a proxy may be given by a shareholder or his agent by telegram, cable, telephonic transmission or by any other means of electronic communication so long as that telegram, cable telephonic transmission or other means of electronic communication either sets forth or is submitted with information from which it can be determined that the proxy was authorized by the shareholder or his agent. SECTION 2 - SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings of the stockholders may be called at any time by the Chief Executive Officer, or upon the order of the Board of Directors, or upon the written request of the holders of a majority of the capital stock outstanding at the time and entitled to vote there at. SECTION 3 - NOTICE OF MEETINGS OF STOCKHOLDERS; POSTPONEMENT OF MEETINGS; OPENING AND CLOSING OF POLLS. Unless waived, written notice of the time, place, and purpose or purposes of all stockholders' meetings, either annual or special, shall be given by the Secretary not less than ten nor more than sixty days before the date of the meeting, either personally or by mail, to each stockholder entitled to vote at the meeting at his last post office address as shown on the books of the Company. Any previously scheduled annual or special meeting of the stockholders may be postponed by resolution of the Board of Directors upon public announcement made on or prior to the date previously scheduled for such annual or special meeting. The date and time for the opening and the closing of the polls for each matter to be voted upon at any meeting of stockholders shall be announced at the meeting by or pursuant to the direction of the officer presiding at the meeting. SECTION 4 - RECORD DATES. The Board of Directors by resolution shall have power to fix in advance a date, not exceeding sixty days or less than ten days preceding the date of any meeting of stockholders, and not exceeding sixty days preceding the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders' vote at any such meeting or entitled to receive payment of any such dividend, or any such allotment of rights or to exercise the rights in respect to any such change, conversion or exchange of capital stock, and in such case stockholders of record on the date so fixed shall be exclusively entitled to such notice of and to vote at such meeting, or to receive payment of such dividend, or allotment of rights, or to exercise such rights, as the case may be, not withstanding any transfer of any stock on the books of the Company after any such record date so fixed as aforesaid. 9 SECTION 5 - QUORUM OF STOCKHOLDERS. At any meeting of the stockholders, the holders of a majority of all the shares of the capital stock of the Company entitled to vote at such meeting, present in person or represented by proxy, shall constitute a quorum of the stockholders for all purposes, unless the representation of a larger number shall be required by law, and in that case, the representation of the number so required shall constitute a quorum. If the holders of the amount of stock necessary to constitute a quorum shall fail to attend in person or by proxy at the time and place fixed by these By-Laws for an annual meeting or fixed by notice as above provided for a special meeting, a majority in interest of the stockholders present in person or by proxy may adjourn from time to time, without notice other than by announcement at the meeting, until holders of the amount of stock requisite to constitute a quorum shall attend. At any such adjourned meeting at which a quorum shall be present any business may be transacted which might have been transacted at the meeting as originally called. ARTICLE IV COMMITTEES SECTION 1 - EXECUTIVE COMMITTEE. The Board of Directors may appoint an Executive Committee of not less than three of its members, including ex officio the Chairman of the Board and the Chief Executive Officer (if other than the Chairman). The Chairman shall, ex officio be the Chairman of the Executive Committee and shall preside at its meetings. The Executive Committee shall hold regular meetings at such times and places as shall be designated by resolution of the Board or of the Committee, or in the notice of meeting. Special meetings of the Executive Committee may be called at any time by the Chairman or by the Chief Executive Officer (if other than the Chairman) and shall be called upon the written request of a majority of the members thereof. No notice shall be required for regular meetings of the Executive Committee, provided the time and place thereof shall have been previously fixed by resolution of the Board or the Committee. Two days notice of a special meeting of the Executive Committee shall be given to each member, but this notice may be waived by such member at any time in writing or by telegraph. A meeting of the Executive Committee may be held at any time without notice when all the members are present and consent thereto. The Executive Committee may also act without a meeting, by unanimous written consent of the members thereof which shall be filed with the minutes of the Board. At every meeting of the Executive Committee, the presence in person or by telephonic conference call, of a majority of the members thereof shall constitute a quorum for the transaction of business. 10 During the intervals between the meetings of the Board of Directors, the Executive Committee shall possess and may exercise all the powers of the Board of Directors as may be permitted by law in the management and direction of the business and the conduct of the affairs of the Company, in such manner as the Executive Committee shall deem best for the interests of the Company, in all cases in which specific directions shall not have been given by the Board of Directors. All action taken by the Executive Committee shall be reported to the Board of Directors at its meeting next succeeding such action. SECTION 2 - AUDIT COMMITTEE. The Board of Directors shall appoint an Audit Committee of not less than three of its members who are otherwise independent of the management of the Company. The Audit Committee shall make recommendations to the Board with respect to the retention of the Company's independent auditors, and shall review the plan and scope of the annual and other independent audits; consult with the Company's independent auditors regarding audit results and financial statements, including compliance with disclosure requirements; oversee the adequacy of the Company's system of internal accounting control; and oversee the effectiveness of the Company's internal audit function, including review and consultation with the Company's internal auditors with respect to internal audit results and recommendations. SECTION 3 - OTHER COMMITTEES. The Board of Directors may, from time to time, appoint such other committees for any purpose or purposes as the Board may deem appropriate, which shall have such powers as shall be specified in the resolution of appointment. SECTION 4 - RECORDS AND REPORTS. All committees shall keep full records of their proceedings, and shall report from time to time to the Board, as called upon by the Board, or as provided by these By-Laws. SECTION 5 - REMUNERATION. Directors, other than Company Officers, shall receive such compensation for their services as a member of any Committee of the Board in such amount as shall be fixed by the Board of Directors from time to time. ARTICLE V COMPANY STOCK SECTION 1 - TRANSFER OF SHARES. Shares of Company stock shall be transferable only on the books of the Company by the holder or owner in person or by power of attorney, on surrender of the certificate. The canceled certificate shall be permanently attached to its original stub in the book of certificates. 11 SECTION 2 - STOCKHOLDER LIST. It shall be the duty of the Secretary or Assistant Secretary to prepare, at least ten days before every stockholders' meeting, a true, full, and complete list of all the stockholders of the Company entitled to vote at the ensuing meeting, with the residence or other address of record of each and with the number of shares held by each, which list shall be made and arranged in alphabetical order, and shall, at all times during the usual hours for business, be open to the examination of any stockholder. SECTION 3 - LOST CERTIFICATES OF STOCK. Any person or persons applying for a certificate of stock to be issued in lieu of one alleged to be lost or destroyed, shall, pursuant to the laws of the State of New Jersey relating to lost or destroyed certificates of stock, furnish to the Company such information as the Board of Directors may require to ascertain whether a certificate of stock has been lost or destroyed, and shall if required by the Board, furnish a surety bond in form and amount satisfactory to the Board to indemnify the Company and its transfer agent against any claim or loss arising therefrom. ARTICLE VI STOCK OF OTHER CORPORATIONS SECTION 1 - VOTING OF STOCK. Unless otherwise ordered by the Board of Directors, the Chief Executive Officer or the President of the Company or, in his or their absence, any Vice President, shall have full power and authority on behalf of the Company to attend and to act and to vote at any meetings of stockholders of any corporation in which the Company may hold stock, and at any such meeting shall possess and may exercise any and all the rights and powers incident to the ownership of such stock, and which as the owner thereof, the Company might have possessed and exercised. The Board of Directors or the Executive Committee, by resolution, from time to time may confer like powers upon any other person or persons. SECTION 2 - WAIVERS AND CONSENTS. Unless otherwise ordered by the Board of Directors, the Chief Executive Officer or the President of the Company or in his or their absence, any Vice President, shall have full power and authority on behalf of the Company to waive notice of any meeting of stockholders of any corporation in which the Company may hold stock, and to authorize or approve and consent in writing to any action by any such corporation to the same extent and with the same force and effect as an individual stockholder of such corporation. ARTICLE VII FISCAL YEAR SECTION 1. The fiscal year of the Company shall begin on October first of each year. 12 ARTICLE VIII SEAL SECTION 1. The seal of the Company shall be similar to the impression contained in the margin opposite hereto. It may at any time be changed by resolution of the Board of Directors. ARTICLE IX INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS SECTION 1. Each person who is a party or is threatened to be made a party, either as plaintiff, defendant, respondent, or otherwise, to any action, suit, or proceeding, whether civil, criminal, administrative, regulatory or investigative (a "Proceeding"), based upon, arising from, relating to, or by reason of the fact that such person, or a person of whom such person is the legal representative, is or was a director or officer of the Company, or is or was serving at the request of the Company as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation or non-profit corporation, cooperative, partnership, joint venture, trust, or other incorporated or unincorporated enterprise, or any employee benefit plan or trust (each, a "Company Affiliate"), shall be indemnified and held harmless by the Company to the fullest extent authorized by the NJBCA, as the same exists on the date of the adoption of this Bylaw [March 12, 1997] or as may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than the NJBCA permitted the Company to provide prior to such amendment), against any and all expenses, liability, and loss (including, without limitation, investigation expenses and expert witnesses' and attorneys' retainer, fees and expenses, judgments, penalties, fines, and amounts paid or to be paid in settlement) actually incurred by such person in connection therewith; provided, however, that, except for Proceedings seeking to enforce rights under this Bylaw, the Company shall indemnify any such person seeking to enforce such rights in connection with a Proceeding (or part thereof) initiated by such person only if such Proceeding (or part thereof) was authorized by a majority vote of the Board of Directors. The right to indemnification conferred in this Article IX shall be a contract right and shall include the right to be paid by the Company for expenses to be incurred in defending or prosecuting any such Proceeding in advance of its final disposition. SECTION 2. The right to indemnification and the payment of expenses incurred in defending a Proceeding in advance of its final disposition conferred in this Article IX shall not be exclusive of any other right which any person may be entitled under any statute, provision of the Restated Certificate of Incorporation, or Bylaw, an agreement, a resolution 13 of shareholders or directors, or otherwise both as to action in such person's official capacity and as to action in another capacity while holding such office. SECTION 3. The Company may purchase and maintain insurance or furnish similar protection on behalf of any person who is a director, officer, employee, or agent of the Company or who, while a director, officer, employee, or agent of the Company, is serving at the request of the Company as a director, officer, partner, trustee, employee, or agent of a Company Affiliate, against any liability asserted against and incurred by such director, officer, employee, or agent in such capacity or arising out of such director's, officer's, employee's, or agent's status as such, whether or not the Company would have the power to indemnify such director, officer, employee, or agent against such liability under the NJBCA. SECTION 4. The Board of Directors, or, if so authorized by the Board of Directors and as it relates to the employees or agents of the Company, one or more officers of the Company, may indemnify and advance expenses to directors, officers, employees or agents of the Company on such terms and conditions as the Board of Directors or any such officer or officers, as applicable, deem appropriate under the circumstances. SECTION 5. Anything in this Article IX to the contrary notwithstanding, no elimination of this Bylaw and no amendment of this Bylaw adversely affecting the right of any person to indemnification or advancement of expenses hereunder shall be effective until the sixtieth day following notice to such indemnified person of such action, and no elimination of or amendment to this Bylaw shall deprive any such person of such person's rights hereunder arising out of alleged or actual occurrences, acts, or failures to act which had their origin prior to such sixtieth day. SECTION 6. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article IX shall, unless otherwise provided when authorized, continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. ARTICLE X AMENDMENTS SECTION 1. These By-Laws may be amended or repealed (i) by action of a majority of the Board of Directors at any regular or special meeting of the Board of Directors, provided notice of such alteration, amendment, or repeal shall be given in the notice of any such meeting, or (ii) except as otherwise provided in Paragraphs 6, 7, 8, and 9 of the Certificate of Incorporation of the Corporation, by action of the holders of a majority of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for this purpose as one class. EX-27.1 3 FINANCIAL DATA SCHEDULE
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATON EXTRACTED FROM NEW JERSEY RESOURCES CORPORATION'S DECEMBER 31, 1999 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 3-MOS SEP-30-2000 DEC-31-1999 PER-BOOK 690,859 22,634 192,914 104,333 0 1,010,740 46,223 197,817 66,386 310,426 0 520 281,945 0 0 97,000 318 0 31,078 0 289,453 1,010,740 263,438 9,915 232,613 232,613 30,825 445 31,270 5,176 16,179 8 16,171 7,465 11,826 (16,190) .91 .90
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