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 Quarter Ended December 31, 1993 Commission File # 2-38193
ELIZABETHTOWN GAS COMPANY
A Wholly-Owned Subsidiary of NUI Corporation
(Exact name of registrant as specified in its charter)
22-0888120
New Jersey (I.R.S. employer identification
(State of incorporation) no.)
1 Elizabethtown Plaza, Union, New Jersey 07083-1975
(Address of principal executive offices, including zip code)
(908) 289-5000
(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 each of the registrant's classes of
common stock, as of December 31, 1993: Common Stock, No Par Value:
1,040,164 shares outstanding.
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Elizabethtown Gas Company and Subsidiaries
Condensed Statements of Consolidated Income
(Dollars in thousands)
Three Months Ended
December 31,
1992 1993
Operating Revenues $101,115 $105,603
------- -------
Operating Expenses
Purchased gas and fuel 56,105 58,834
Other operation 15,044 16,819
Maintenance 1,306 1,480
Depreciation and amortization 3,744 4,184
General taxes 10,626 11,142
Income taxes 3,860 3,452
------- -------
90,685 95,911
Total operating expenses ------- -------
Operating Income 10,430 9,692
------- -------
Other Income and Expense
Dividend and interest income 140 177
Other income, net 137 219
Income taxes (104) (71)
------- -------
173 325
Total other income and expense, net ------- -------
3,160 3,438
Interest Expense ------- -------
$ 7,443 $ 6,579
Net Income ======= =======
See the notes to the condensed consolidated
financial statements.
1 <PAGE>
Elizabethtown Gas Company and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in thousands)
September December
30, 31,
1993 1993
ASSETS
Property, Plant and Equipment
Utility plant, at original cost $483,853 $494,659
Accumulated depreciation and amortization (151,725) (155,220)
Unamortized plant acquisition adjustment 15,084 24,068
------- -------
Net utility plant 347,212 363,507
------- -------
Funds for Construction Held by Trustee 24,184 21,474
Investments in Marketable Securities 3,986 3,468
------- -------
Current Assets
Cash and temporary cash investments 1,662 1,670
Accounts receivable 27,609 58,160
Allowance for doubtful accounts (1,225) (1,813)
Amounts receivable from NUI 7,034 9,008
Fuel inventories, at average cost, and
deferred cost of gas, net 28,456 25,881
Deferred Federal income taxes 2,625 2,625
Materials, supplies and other 6,924 8,604
------- -------
Current assets 73,085 104,135
------- -------
Deferred Charges and Other Assets 41,082 41,969
------- -------
$489,549 $534,553
======= =======
See the notes to the condensed consolidated
financial statements.
2 <PAGE>
Elizabethtown Gas Company and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in thousands)
September December
30, 31,
1993 1993
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholder's equity $166,559 $170,239
Preferred stock -- --
Long-term debt 112,090 112,182
------- -------
Capitalization 278,649 282,421
------- -------
Capital Lease Obligations 12,290 12,051
------- -------
Current Liabilities
Current portion of long-term debt and
capital lease obligations 3,882 3,713
Notes payable to banks 63,200 82,950
Accounts payable, customer deposits and
accrued liabilities 46,798 46,368
Amounts payable to NUI 824 3,761
General taxes 6,078 15,349
Federal income taxes 524 524
------- -------
Current Liabilities 121,306 152,665
------- -------
Deferred Credits and Other Liabilities
Deferred Federal income taxes 37,737 41,057
Unamortized investment tax credits 7,687 7,555
Other liabilities 31,880 38,804
Deferred credits and other liabilities 77,304 87,416
------- -------
$489,549 $534,553
======= =======
See the notes to the condensed consolidated
financial statements.
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Elizabethtown Gas Company and Subsidiaries
Statements of Consolidated Cash Flows
(Dollars in thousands)
Three Months Ended
December 31,
1992 1993
Operating Activities
Net income $7,443 $6,579
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,083 4,489
Deferred Federal income taxes 351 199
Amortization of deferred investment tax
credits (113) (132)
Other 894 920
Effect of changes in:
Accounts receivable, net (23,367) (31,937)
Fuel inventories and deferred cost of gas,
net 3,150 2,575
Accounts payable, deposits and accruals 2,201 4,552
General taxes 9,026 9,271
Other (4,529) (2,871)
------- -------
(861) (6,355)
Net cash used by operating activities ------- -------
Financing Activities
Dividends paid to NUI (2,642) (3,061)
Funds for construction held by trustee 2,999 2,900
Principal payments under capital lease
obligations (467) (497)
Net short-term borrowings 8,750 19,750
------- -------
Net cash provided by financing activities 8,640 19,092
------- -------
Investing Activities
Cash expenditures for property, plant and
equipment (7,688) (13,092)
Proceeds from (investments in) marketable
securities (129) 659
Other (220) (296)
Net cash used for investing activities (8,037) (12,729)
------- -------
Net Increase (Decrease) in Cash and Temporary $(258) $8
Cash Investments ======= =======
Cash and Temporary Cash Investments
At beginning of period $3,303 $1,662
At end of period 3,045 1,670
Supplemental Disclosures of Cash Flows
Income taxes paid $851 $--
Interest paid 6,022 5,544
4
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See the notes to the condensed consolidated
financial statements.
5 <PAGE>
Elizabethtown Gas Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
1. Basis of Presentation
The Condensed Consolidated Financial Statements, which include the
accounts of Elizabethtown Gas Company and its subsidiaries (the
"Company"), have been prepared without audit, in accordance with the rules
and regulations of the Securities and Exchange Commission and reflect all
adjustments which, in the opinion of management, are necessary for a fair
statement of the results for interim periods. All adjustments made were of
a normal recurring nature. The Condensed Consolidated Financial Statements
should be read in conjunction with the Consolidated Financial Statements
and the notes thereto that are included in the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1993.
The Company, which is a wholly-owned subsidiary of NUI Corporation
("NUI"), distributes natural gas in New Jersey and Florida. See "Pending
Acquisition," Note 3 of the Notes to the Condensed Consolidated Financial
Statements. Because of the seasonal nature of gas utility operations, the
results for interim periods are not necessarily indicative of the results
for an entire year.
2. Changes in Accounting
Postretirement Benefits Other Than Pensions. The Company provides
certain health care benefits to substantially all retirees receiving
benefits under a Company pension plan (other than the Florida Division
plan) who reach retirement age while working for the Company. The cost of
these benefits is funded as claims are incurred.
As of October 1, 1993, the Company adopted the accounting method
required by Statement of Financial Accounting Standards ("SFAS") No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
which requires enterprises to accrue the expected cost of these benefits
during the years that eligible employees render the necessary service.
The adoption of SFAS No. 106 resulted in an accumulated postretirement
benefit obligation ("APBO") amounting to $20.6 million, which the Company
has elected to recognize over a twenty-year period. The actuarially
computed annual cost, including the amortization of the transition
obligation, totals $2.9 million.
The annual rate of increase in health care costs was assumed at 12.5%
for 1994 decreasing to 5% in 2004 and thereafter. The discount rate used
to determine the APBO was 7%. A one-percent increase in the annual health
care trend rates would have increased the APBO by $3.3 million and the
annual cost by $0.6 million.
The Company has received an order from the New Jersey Board of
Regulatory Commissioners (the "NJBRC") permitting it to defer for as long
as five years the difference between the amount of expense computed as
claims are incurred and the amount computed on the accrual method, pending
ratemaking treatment that would be considered in a full rate case. The
consensus issued in 1993 by the Emerging Issues Task Force of the
Financial Accounting Standards Board (the "EITF") permits rate regulated
companies to defer such expenses when ratemaking treatment provides for
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them to be fully recovered in the subsequent fifteen-year period. The
Company expects to seek ratemaking treatment that is consistent with the
EITF's consensus and, accordingly, has deferred $0.5 million of such costs
in the three months ended December 31, 1993.
The Company continually evaluates alternative ways to manage these
benefits and control their costs. Any changes in the plan or revisions to
assumptions that affect the amount of expected future benefits may have a
significant effect on the amount of the reported obligation and the annual
deferrals and expense.
Income Tax Accounting. As of October 1, 1993, the Company adopted
SFAS No. 109, "Accounting for Income Taxes," which changes the method used
by enterprises to account for income taxes. Under SFAS No. 109, deferred
income taxes are provided at currently enacted income tax rates for all
temporary differences between the book and tax bases of assets and
liabilities. Adoption of SFAS No. 109 does not have a material effect on
the Company's net income because deferred taxes previously not provided
are recoverable from or payable to customers through future rates as taxes
come due, and, accordingly, regulatory assets and liabilities have been
recorded. As of October 1, 1993, the Company increased the deferred tax
liability by $5.8 million, increased the unamortized plant acquisition
adjustment by $9.2 million and recorded a net regulatory liability of $3.4
million.
The net deferred tax liability as of the date of adoption consisted
of the following temporary differences (dollars in thousands):
Net Asset
(Liability)
Depreciation and other utility $(36,007)
plant differences
Plant acquisition adjustment (9,471)
Alternative minimum tax 1,627
Unamortized investment tax 4,256
credit
Valuation of properties and 948
investments
Deferred charges and other (3,602)
-------
$(42,249)
=======
The deferred income taxes classified under current assets principally
relates to temporary differences associated with gross receipts and
franchise taxes.
The Company is a wholly-owned subsidiary of NUI and is included in
NUI's consolidated federal income tax return. The consolidated tax
liability is allocated on a separate company basis.
3. Pending Acquisition
On July 27, 1993, NUI and Pennsylvania & Southern Gas Company
("PSGS") entered into an Agreement and Plan of Merger, pursuant to which
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PSGS would be merged with and into NUI (the "PSGS Merger"). Under the
Agreement and Plan of Merger, NUI will acquire all of the outstanding
common shares of PSGS for approximately $17 million, payable in shares of
NUI common stock, no par value, ("NUI Common Stock") equivalent to $71.50
per PSGS share, except that each shareholder will receive no less than 2.4
and no more than 3.0 shares of NUI Common Stock for each PSGS share held.
The exchange value of the NUI Common Stock will be established immediately
prior to the merger. The PSGS Merger will be consummated upon receipt of
all required regulatory approvals, the approval of the stockholders of
PSGS, and the satisfaction or waiver of certain other conditions. Upon the
effectiveness of the PSGS Merger, NUI would assume all of the rights and
obligations of PSGS. Following the PSGS Merger, Elizabethtown will be
merged with and into NUI (the "Elizabethtown Merger").
The PSGS Merger will be accounted for as a purchase of PSGS by NUI in
accordance with generally accepted accounting principles. Accordingly, due
to the effects of the regulatory process, the underlying net assets of
PSGS will become the assets of NUI at, generally, their historical net
book value and the excess of the purchase price over the historical net
book value of the underlying net assets of PSGS, which amounts to
approximately $6.8 million, will be added to utility plant as a "utility
plant acquisition adjustment," which will be amortized over a thirty-year
period that approximates the remaining useful life of the utility plant
acquired.
Under its business plan, the Company concentrates on customer growth
and the profitability of the gas distribution business. The PSGS Merger,
which will result in a seven percent increase in the number of customers
served, and the EGC Merger, through which NUI will become an operating
utility company with three divisions providing gas service in six states,
fit within the business plan.
4. Common Shareholder's Equity
The components of common shareholder's equity were as follows
(dollars in thousands):
September 30, December 31,
1993 1993
Common Stock, no par value $88,322 $88,322
Retained earnings 79,669 83,226
Valuation of marketable securities (93) --
Subsidiary's guaranty of ESOP (1,339) (1,309)
indebtedness ------- -------
$166,559 $170,239
Total common shareholder's equity ======= =======
5. Contingencies
Environmental Matters. The Company is subject to federal and state
legislation with respect to water, air quality, solid waste disposal and
employee health and safety matters and to environmental regulations issued
by the United States Environmental Protection Agency (the "EPA"), the New
Jersey Department of Environmental Protection and Energy (the "NJDEPE"),
and other federal and state agencies.
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The Company owns, or previously owned, certain properties on which
gas was manufactured by the New Jersey Division or by other parties in the
past. Coal tar residues are present on six of these sites and the Company
has reported their presence to the EPA, the NJDEPE and the NJBRC. In April
1991, the NJDEPE issued an Administrative Consent Order that establishes
the procedures to be followed by the Company in the development of its
remediation plan for one of the sites. Subsequently, the Company and the
NJDEPE entered into Memoranda of Agreement that establish procedures for
the development of investigation and remediation plans for the other five
sites.
The Company expects it will expend in the next twenty years
approximately $25 million, net of approximately $6 million that the
Company estimates will be borne by the prior owner and operator of certain
of the sites, to complete investigation of such sites and the remediation
of the coal tar contamination. The Company, with the assistance of an
outside consulting firm, determined the estimated expenditure by assessing
the cost of (1) obtaining additional required data about each site and (2)
the applicable remedial action, among those currently known, that is most
appropriate for each site. The ultimate costs will depend upon the
investigation and remediation plans that finally are adopted by the
Company, subject to the approval of the NJDEPE, and may be less or greater
than the Company's current estimate. The Company has an accrual of
approximately $25 million for investigation and remediation of the sites
and the related costs have been deferred on its Consolidated Balance
Sheet.
The Company believes that its remediation costs will be recoverable
in rates and that a portion of such costs may be recoverable from the
Company's insurance carriers. The current base rate order for the New
Jersey Division permits the Company to utilize full deferred accounting
for coal tar related expenditures, which amounted to approximately $0.3
million for the first three months of fiscal 1994 and $0.2 million for the
first three months of fiscal 1993. The current base rate order provides
for the recovery through rates at $130,000 annually of coal tar related
expenditures incurred prior to the rate order. Other New Jersey utilities
also have received authorization to recover similar environmental
expenditures in rates.
Other. In addition, the Company is involved in various claims or
litigation incidental to its business. In the opinion of management, none
of these other claims and litigation will have a material adverse effect
on the Company's results of operations or its financial condition.
<PAGE>
Elizabethtown Gas Company and Subsidiaries
Summary Consolidated Operating Data
Three Months Ended
December 31
1992 1993
Operating Revenues (Dollars in thousands):
Firm Customers:
Residential $49,596 $51,895
Commercial 28,262 30,244
Industrial 6,213 6,336
Interruptible Customers 13,218 11,726
Transportation 2,706 3,477
Broker Sales -- 715
Appliance Leasing, Fees and Other 1,120 1,210
------- -------
Total $101,115 $105,603
======= =======
Gas Sold or Transported (MMcf):
Firm Customers:
Residential 6,305 6,405
Commercial 4,407 4,557
Industrial 1,286 1,256
Interruptible Customers 3,677 3,458
Broker Sales -- 307
Transportation 3,815 4,562
------- -------
Total 19,490 20,545
======= =======
Customers Served (Twelve month averages):
Firm Customers:
Residential 296,317 300,898
Commercial 20,716 21,296
Industrial 384 362
Interruptible and Transportation 186 200
------- -------
Total 317,603 322,756
======= =======
Degree Days:
New Jersey (normal: 4,978 annually) 1,647 1,633
Percentage variance from normal 5% 5%
warmer warmer
Florida (normal: 377 annually) 63 115
Percentage variance from normal 44% 6%
warmer colder
Employees 984 1028
10
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Elizabethtown Gas Company and Subsidiaries
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
The Company is engaged in the distribution of natural gas in New
Jersey and Florida. Because of the seasonal nature of gas utility
operations, the results for interim periods are not necessarily indicative
of the results for an entire year.
Net income decreased to $6.6 million for the three months ended
December 31, 1993 as compared with net income of $7.4 million for the same
period in the prior year. The decrease as compared with a year ago
reflects a higher level of operating expenses and higher interest expense,
partly offset by increased sales volumes and margins due to customer
growth. The effect on net income in the current year's quarter from the
adoption of new accounting rules relating to income tax accounting and
accounting for post-retirement benefits other than pensions was not
material (see "Changes in Accounting," Note 2 of the Notes to the
Condensed Consolidated Financial Statements.)
Results of Operations
Operating Revenues. The Company's operating revenues for the first
three months of fiscal 1994 increased by $4.5 million, or 4.5%, from
$101.1 million in the fiscal 1993 period to $105.6 million in the current
period. The increase principally reflects increases in the number of
customers served as well as the effect of gas cost adjustment clauses.
Gas cost adjustment clauses in both New Jersey and Florida enable the
Company to pass through to customers, through periodic adjustments to the
amounts billed, increased or decreased costs incurred by the Company for
purchased gas, without affecting operating margins. Adjustments related to
changes in gas costs had the net effect of increasing operating revenues
by $3.0 million in the first three months of last year, and by $4.8
million in the current period, with offsetting adjustments to purchased
gas and fuel costs and to gross receipts and franchise taxes.
Operating Margins. The Company's operating margins (operating
revenues less the costs of purchased gas and fuel and gross receipts and
franchise taxes) for the first three months of fiscal 1994 increased by
$1.4 million, or 3.9%, from $35.6 million in the fiscal 1993 period to
$37.0 million in the current period. The increase principally reflects
increases in the number of customers served and a higher level of gas sold
or transported to industrial customers.
The Company's total number of customers served increased by 5,153, or
1.6%, for the first three months of fiscal 1994 as compared with fiscal
1993, and the number of heating customers served in New Jersey increased
by 4,812, or 3.0%, as compared with fiscal 1993, including the effects of
converting existing water heating and cooking service customers into
gas-heating customers.
Operating margins from industrial customers amounted to $4.1 million
in the fiscal 1994 period as compared with $3.3 million in the fiscal 1993
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period. The increase principally reflects increased demand from these
customers in both the New Jersey and Florida Divisions.
Operating Income. Although operating margins increased, the Company's
operating income before income taxes for the first three months of fiscal
1994 decreased by $1.2 million, or 8.4%, from $14.3 million in the fiscal
1993 period to $13.1 million in the current period, principally as a
result of cost increases associated with increased system growth,
including the payroll and employee benefits costs attributable to a larger
work force. These increases are occurring principally in the Florida
division, where the Company's capital expenditure program includes the
development of the Port St. Lucie franchise and additional main extensions
for future growth. The trend of lower operating income may continue into
fiscal 1995 when additional margins are expected to have been added as a
result of accelerated customer growth and improved cost recovery.
Interest Expense. Interest expense for the first three months of
fiscal 1994 principally reflects higher outstanding borrowings as compared
with the prior year period (see "--Financing Activities and Resources").
Regulatory Matters
In November 1993, the NJBRC issued guidelines which are designed to
provide for unbundling of natural gas transportation and sales services to
commercial and industrial customers. Under these guidelines the Company is
required to file new tariffs for its New Jersey Division by April 1, 1994.
The Company expects the effect of the new tariffs to be neutral to the
operating revenues and margins of the Company.
In response to an initiative by the Florida Public Service
Commission, the Company, along with other Florida natural gas utilities,
reduced its allowed return on the utility equity of its Florida Division
to 11%, which exceeds the return it is currently achieving. Accordingly,
the reduction has not affected operating revenues and margins.
Financing Activities and Resources
The Company generally funds its operations with internally generated
cash, supplemented with borrowings under its bank lines of credit to
satisfy seasonal requirements. The Company also borrows under its bank
lines of credit to finance portions of its construction expenditures,
pending refinancing through the issuance of equity or long-term
indebtedness at a later date depending upon prevailing market conditions.
The Company seeks to assure access to funds for system growth and
integrity through timely issuances of additional equity capital by NUI or
long-term debt at the lowest reasonable costs that provide fair returns to
investors.
Net cash used by operating activities was $6.4 million for the first
three months of fiscal 1994, and $0.9 million a year ago. The Company
traditionally incurs a net use of cash during the first quarter of the
fiscal year principally as a result of the normal business cycle
associated with billing and collecting from customers for gas delivered
during the quarter. The level of fuel purchases and inventory on hand, and
the timing of payments for these supplies, is dependent upon market
conditions, system operating requirements and the demand experienced
during the first part of the heating season. The greater increase in the
Company's accounts receivable in the first quarter of fiscal 1994 as
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compared with the same period of fiscal 1993 principally reflects colder
weather at the end of the period and the resultant increase in demand and
billings.
In October 1991, pursuant to agreements between EGC and the New
Jersey Economic Development Authority, Gas Facilities Revenue Bonds that
mature in October 2021 were issued in the amount of $46.2 million at 6.75%
and $8.4 million at 6.625% to finance expenditures through fiscal 1995 for
the construction of certain gas facilities and related equipment in New
Jersey. The unexpended portion of the net proceeds from these borrowings,
amounting to $21.5 million at December 31, 1993, is classified on the
Company's Consolidated Balance Sheet as Funds for Construction Held by
Trustee until drawn upon incurring eligible expenditures.
The weighted average daily amounts outstanding of notes payable to
banks and the weighted average interest rates on those amounts were
$78 million at 3.5% for the three months ended December 31, 1993 and
$40.2 million at 3.7% for the three months ended December 31, 1992. The
weighted average daily amounts of notes payable to banks increased
principally to finance portions of the Company's construction expenditures
and the accelerated payment of New Jersey gross receipts and franchise tax
payments (see "-Capital Expenditures and Commitments"). At December 31,
1993, the Company had $60.9 million of available unused credit lines.
Capital Expenditures and Commitments
Capital expenditures, which consist primarily of expenditures to
expand and upgrade the Company's gas distribution systems, were
$11.3 million for the first quarter of fiscal 1994 as compared with $8.1
for the first quarter of fiscal 1993. Capital expenditures are expected to
be approximately $48 million for the full fiscal year 1994 including a $20
million capital investment program in Florida, as compared with a total of
$39.6 million for fiscal 1993. Approximately $31 million of the capital
expenditures planned for fiscal 1994 is for construction relating to new
customers and additional distribution, storage and other gas plant
facilities. In addition, the net present value of minimum lease payments
relating to noncancelable operating leases, which relate principally to
New Jersey Division office space, was approximately $23.0 million as of
December 31, 1993, including $2.0 million payable during the remainder of
fiscal 1994.
As discussed in "Contingencies," Note 5 of the Notes to the Company's
Condensed Consolidated Financial Statements, the Company expects it will
expend in the next twenty years approximately $25 million to complete
investigation and remediation of the contamination on New Jersey
properties which the Company owns or previously owned on which gas was
manufactured in the past. The ultimate costs will depend upon the
investigation and remediation plans that finally are adopted by the
Company, subject to the approval of the NJDEPE, and may be less or greater
than the Company's current estimate. The Company believes the remediation
costs will be recoverable in rates and that a portion of such costs may be
recoverable from the Company's insurance carriers.
In June 1991, legislation was enacted in New Jersey that accelerates
the payments of approximately $30 million of gross receipts and franchise
taxes by an average of almost one and a half years in stages from 1992
through 1994. The Company expects that future base rate orders will
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reflect the recovery of prospective costs associated with the related
additional financing requirements.
Certain of the Company's long-term contracts for the supply, storage
and delivery of natural gas include fixed charges that amount to
approximately $64 million annually, of which approximately $43 million is
associated with pipeline delivery contracts. The Company currently
recovers, and expects to continue to recover, such fixed charges through
its gas adjustment clauses. The Company also is committed to purchase, at
market-related prices, minimum quantities of gas that, in the aggregate,
are approximately 8.6 million Mcf per year or to pay certain costs in the
event the minimum quantities are not taken. The Company expects that
minimum demand on its systems will continue to exceed these minimum
purchase obligations.
The implementation of the Federal Energy Regulatory Commission Order
No. 636 required the restructuring of the Company's contracts with certain
pipeline companies that together supply less than one-third of the
Company's total firm gas supply. Under Order No. 636 the pipeline
companies are passing through to their customers transition costs
associated with mandated restructuring, such as costs resulting from
buying out unmarketable gas purchase contracts. The transition costs
charged to the Company have amounted to approximately $3.1 million and are
being recovered through the Company's gas adjustment clauses.
As of December 31, 1993, the scheduled repayments of the Company's
long-term debt through fiscal 1998 were as follows: $1.8 million in the
remainder of fiscal 1994, $1.1 million in fiscal 1995, $1.1 million in
fiscal 1996, $3.2 million in fiscal 1997 and $1.0 million in fiscal 1998.
The gas facilities revenue bonds that are due in 2014 and the remaining
balance of first mortgage bonds become eligible in fiscal 1994 for
optional prepayment amounting to $1.3 million in excess of their $57.3
million face value.
The Company's future capital expenditures and commitments will likely
require additional debt and equity financing. The Company plans to seek
regulatory approval in fiscal 1994 for the registration of up to $100
million of debt and equity securities, which it may issue from
time-to-time depending upon prevailing market conditions.
Pending Acquisition
On July 27, 1993, NUI and PSGS entered into an Agreement and Plan of
Merger, pursuant to which PSGS would be merged with and into NUI. Under
the Agreement and Plan of Merger, NUI will acquire all of the outstanding
common shares of PSGS for approximately $17 million, payable in shares of
NUI Common Stock equivalent to $71.50 per PSGS share, except that each
shareholder will receive no less than 2.4 and no more than 3.0 shares of
NUI Common Stock for each PSGS share held. The exchange value of the NUI
Common Stock will be established immediately prior to the merger. The PSGS
Merger will be consummated upon receipt of all required regulatory
approvals, the approval of the stockholders of PSGS, and the satisfaction
or waiver of certain other conditions. Upon the effectiveness of the PSGS
Merger, NUI would assume all of the rights and obligations of PSGS.
Following the PSGS Merger, Elizabethtown will be merged with and into NUI
(the "Elizabethtown Merger").
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The PSGS Merger will be accounted for as a purchase of PSGS by NUI in
accordance with generally accepted accounting principles. Accordingly, due
to the effects of the regulatory process, the underlying net assets of
PSGS will become the assets of NUI at, generally, their historical net
book value and the excess of the purchase price over the historical net
book value of the underlying net assets of PSGS, which amounts to
approximately $6.8 million, will be added to utility plant as a "utility
plant acquisition adjustment," which will be amortized over a thirty-year
period that approximates the remaining useful life of the utility plant
acquired.
The PSGS Merger, which will result in a seven percent increase in the
number of customers served, and the Elizabethtown Merger, through which
NUI will become an operating utility company with three divisions
providing gas service in six states, fit within the Company's business
plan (see "--Business Plan"). Further growth opportunities, which could
include the acquisition of additional gas distribution companies, the
development of new franchises and the management of certain service
requirements of other utilities on a contract basis, will likely require
additional debt and equity financing.
Business Plan
Under its business plan, the Company concentrates on customer growth
and the profitability of the gas distribution business. Growth
opportunities could include the acquisition of additional gas distribution
systems, the development of new franchises and the management of certain
service requirements of other utilities on a contract basis, any of which
may require additional debt and equity financing. The Company's strategy
involves assembling, as opportunities become available, natural gas
distribution systems in several states, while maintaining a balanced
capital structure. From time to time, the Company reviews acquisition
opportunities and, when requested, submits acquisition proposals.
15
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed for the quarter ended December
31, 1993.
16 <PAGE>
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.
ELIZABETHTOWN GAS COMPANY
February 11, 1994 JOSEPH P. COUGHLIN
Secretary and Treasurer
February 11, 1994 RAND W. SMITH
Chief Accounting Officer
17 <PAGE>
