SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1995 Commission file number 1-8359
NEW JERSEY RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-2376465
(State or other jurisdiction oF (I.R.S. Employer
incorporation or organization) Identification Number)
1415 Wyckoff Road, Wall, New Jersey - 07719 908-938-1480
(Address of principal executive offices) (Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12 (b) of the Act:
Common Stock - $2.50 Par Value New York Stock Exchange
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12 (g) of the Act:
None
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:
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
YES: No: X
The aggregate market value of the Registrant's Common Stock held by
non-affiliates was $511,244,659 based on the closing price of $28.75 per share
on December 15, 1995.
The number of shares outstanding of $2.50 par value Common Stock as of December
15, 1995 was 17,928,239.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1995 Annual Report to Stockholders are incorporated
by reference into Part I and Part II of this report.
Portions of the Registrant's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held February 14, 1996, are incorporated by reference into
Part I and Part III of this report.
<PAGE>
TABLE OF CONTENTS
PART I Page
----
ITEM 1 - Business 1
Business Segments
New Jersey Natural Gas Company
General 2
Throughput 2
Seasonality of Gas Revenues 3
Gas Supply 3
Regulation and Rates 5
Environment 8
Franchises 8
Competition 9
New Jersey Natural Energy Company 9
NJR Energy Corporation 9
Commercial Realty & Resources Corp. 10
Paradigm Power, Inc. 11
Employee Relations 12
Executive Officers of the Registrant 12
ITEM 2 - Properties 13
ITEM 3 - Legal Proceedings 15
ITEM 4 - Submission of Matters to a Vote of Security Holders 21
PART II
ITEM 5 - Market for the Registrant's Common Stock and Related
Stockholder Matters 22
ITEM 6 - Selected Financial Data 22
ITEM 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 22
ITEM 8 - Financial Statements and Supplementary Data 22
ITEM 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 22
PART III
ITEMS 10, 11, 12, and 13 22
PART IV
ITEM 14 - Exhibits, Financial Statement Schedules
and Reports on Form 8-K 23
Index to Financial Statement Schedules 24
Signatures 26
Report of Independent Public Accountants 27
Consent of Independent Public Accountants 27
Exhibit Index 28
<PAGE>
1
PART I
ITEM 1. BUSINESS
New Jersey Resources Corporation (the Company or NJR) is a New Jersey
corporation formed in 1982 pursuant to a corporate reorganization. The Company
is an energy holding company and its subsidiaries are engaged primarily in
natural gas distribution, unregulated marketing of natural gas and fuel and
capacity management services, oil and natural gas transportation and storage and
commercial real estate development as follows:
1) New Jersey Natural Gas Company (NJNG), a public utility that distributes
natural gas to more than 352,000 residential, commercial and industrial
customers throughout virtually all of Monmouth and Ocean counties, and parts of
Morris and Middlesex counties in New Jersey;
2) NJR Energy Services Corporation (Energy Services), a sub-holding company of
NJR formed in 1995 to better segregate the Companies energy-related operations
which includes the following wholly-owned subsidiaries:
New Jersey Natural Energy Company (Natural Energy), formed in 1995 to
participate in the unregulated marketing of natural gas and fuel and capacity
management services; and
NJR Energy Corporation (NJR Energy), a participant in oil and natural gas
development, production, transportation, storage and other energy related
ventures in various locations in the United States through its subsidiaries, New
Jersey Natural Resources Company (NJNR), NJNR Pipeline Company (Pipeline), NJR
Storage Corporation (Storage), Natural Resources Compressor Company (Compressor)
and NJRE Operating Company (NJRE Operating);
3) NJR Development Corporation, formerly Paradigm Resources Corporation, a
sub-holding company of NJR which includes the Company's remaining non-regulated
subsidiaries, as follows:
Paradigm Power, Inc. (PPI), which was formed to develop and invest in
natural gas-fueled cogeneration and independent power production projects and
its subsidiaries, Lighthouse One, Inc. and Lighthouse II, Inc.;
Commercial Realty & Resources Corp. (CR&R), which develops and owns
commercial office and mixed-use commercial/industrial real estate projects
located in New Jersey; and
NJR Computer Technologies, Inc., which has invested in certain information
technologies.
See Note 2 to the Consolidated Financial Statements - Discontinued
Operations in the Company's 1995 Annual Report, filed as Exhibit 13-1 hereto,
for a discussion of the Company's decision to exit the oil and gas production
business and no longer pursue investments in cogeneration and independent power
production facilities. See Item 1. Business - Commercial Realty & Resources
Corp. below and Note 12 to the Consolidated Financial Statements - Subsequent
Event in the Company's 1995 Annual Report, filed as Exhibit 13-1 hereto, for a
<PAGE>
2
discussion of the sale of certain real estate assets.
The Company is an exempt holding company under Section 3(a)(1) of the
Public Utility Holding Company Act of 1935 (PUHCA).
BUSINESS SEGMENTS
See Note 11 to the Consolidated Financial Statements - Business Segment
Data in the Company's 1995 Annual Report, filed as Exhibit 13-1 hereto, for
business segment financial information.
NEW JERSEY NATURAL GAS COMPANY
General
NJNG provides natural gas service to more than 352,000 customers. Its
service territory encompasses 1,436 square miles, covering 104 municipalities
with an estimated population of 1.3 million.
NJNG's service territory is primarily suburban, with a wide range of
cultural and recreational activities, highlighted by approximately 100 miles of
New Jersey seacoast. NJNG's service territory is in proximity to New York,
Philadelphia and the metropolitan areas of northern New Jersey and is accessible
through a network of major roadways and mass transportation. These factors have
contributed to NJNG adding 12,465, 11,222 and 9,306 new customers in 1995, 1994
and 1993, respectively. This growth rate of more than 3% is expected to continue
with projected additions of 60,700 new customers over the next five years. See
Liquidity and Capital Resources-NJNG in the Company's 1995 Annual Report, filed
as Exhibit 13-1 hereto, for a discussion of NJNG's projected capital expenditure
program associated with this growth in 1996 and 1997.
In assessing the potential for future growth in its service area, NJNG uses
information derived from county and municipal planning boards which describes
housing development in various stages of approval. In addition, builders in
NJNG's service area are surveyed to determine their development plans for future
time periods. Finally, NJNG uses information concerning its service territory
and projected population growth rates from a study prepared by outside
consultants. In addition to customer growth through new construction, NJNG's
business strategy includes aggressively pursuing conversions from other fuels,
such as oil. It is estimated that approximately 35% of NJNG's projected customer
growth will consist of conversions. NJNG will also continue to pursue off-system
sales and non-peak sales, such as natural gas-fueled electric generating
projects.
Throughput
For the fiscal year ended September 30, 1995, operating revenues and
throughput by customer
<PAGE>
3
class were as follows:
Throughput
(Thousands) Operating Revenues (Thousands of Therms)
- ----------- ------------------ ---------------------
Residential ...................... $282,015 66% 339,254 28%
Commercial, industrial and other . 76,483 18 102,910 9
Firm transportation .............. 4,864 1 16,007 1
-------- --- --------- ---
Total firm ....................... 363,362 85 458,171 38
Interruptible and agency ......... 6,512 2 103,714 9
JCP&L ............................ 4,357 1 20,542 1
-------- --- --------- ---
Total system ..................... 374,231 88 582,427 48
Off system and capacity release .. 52,431 12 625,984 52
-------- --- --------- ---
Total ........................... $426,662 100% 1,208,411 100%
======== === ========= ===
See Utility Operations in the Company's 1995 Annual Report, filed as
Exhibit 13-1 hereto, for a discussion of gas and transportation sales. Also see
NJNG Operating Statistics in the Company's 1995 Annual Report, filed as Exhibit
13-1 hereto, for information on operating revenues and throughput for the past
six years. During this period, no single customer represented more than 10% of
operating revenues.
Seasonality of Gas Revenues
As a result of the heat-sensitive nature of NJNG's residential customer
base, therm sales are largely affected by weather conditions. Specifically,
customer demand substantially increases during the winter months when natural
gas is used for heating purposes. See Liquidity and Capital Resources - NJNG in
the Company's 1995 Annual Report, filed as Exhibit 13-1 hereto, for a discussion
of the effect of seasonality on cash flow.
The impact of weather on the level and timing of NJNG's revenues and cash
flows is affected by a weather-normalization clause (WNC) in its tariff which
became effective for two years on an experimental basis in October 1992. NJNG
received approval from the New Jersey Board of Public Utilities (the BPU) in
November 1995 to continue the clause. The WNC provides for a revenue adjustment
if the weather varies by more than one-half of 1% from the ten-year average. The
accumulated adjustment from one heating season (i.e., October-May) will be
billed or credited to customers in the subsequent heating season. See Note 8 to
the Consolidated Financial Statements -- Regulatory Issues in the Company's 1995
Annual Report, filed as Exhibit 13-1 hereto, for additional information with
regard to the weather-normalization clause.
Gas Supply
A) Firm Natural Gas Supplies
Due to Order Nos. 636, 636A and 636B, issued by the Federal Energy
Regulatory Commission (FERC) in 1992, (collectively, Order No. 636), NJNG has
had to change the manner in which it purchases natural gas supplies. Before
Order No. 636, NJNG purchased a significant percentage of
<PAGE>
4
its gas supplies from its interstate pipeline suppliers. As a result of Order
636, NJNG's pipeline suppliers no longer provide a bundled transportation and
sales services, but instead only transport natural gas supplies on behalf of
others. Accordingly, NJNG has been required to replace the natural gas supplies
formerly purchased from interstate pipelines.
NJNG currently purchases gas from a diverse gas supply portfolio consisting
of both long-term (over six months), winter-term (for the five winter months)
and short-term contracts. In 1995, NJNG purchased gas from 34 suppliers under
contracts ranging from less than one month to seventeen years. NJNG has seven
long-term firm gas purchase contracts. NJNG purchased approximately 17.7% of its
total gas purchases in 1995 under one long-term firm gas purchase contract with
Alberta Northeast Gas Limited (Alberta Northeast). The Alberta Northeast
contract expires in 2007. NJNG does not purchase more than 10% of its total gas
supplies under any other single long-term firm gas purchase contract. NJNG
believes that its supply strategy should adequately meet its expected firm load
over the next several years.
B) Firm Transportation and Storage Capacity
In order to deliver the above supplies, NJNG maintains agreements for firm
transportation and storage capacity with several interstate pipeline companies.
The pipeline companies that provide firm transportation service to NJNG's city
gate, the daily deliverability of that capacity and the contract expiration
dates are as follows:
<TABLE>
<CAPTION>
Daily
Pipeline Deliverability (Dths) Expiration Date
- -------- --------------------- ---------------
<S> <C> <C>
Texas Eastern Transmission Corp. ............ 288,497 Various dates after 2000
Iroquois Gas Transmission System, L.P. ..... 40,000 2011
Transcontinental Gas Pipe Line Corp. ....... 21,769 1998
Tennessee Gas Pipeline Co. .................. 10,835 2003
Columbia Gas Transmission Corp. ............ 10,000 2009
-------
371,101
</TABLE>
In addition, NJNG has storage and transportation contracts that provide
additional daily deliverability of 59,666 Dths from storage fields in
Pennsylvania to its market area. The significant storage suppliers, the peak day
deliverability of this storage capacity and the contract expiration dates are as
follows:
<TABLE>
<CAPTION>
Peak Day
Pipeline Deliverability Expiration Date
- -------- -------------- ---------------
<S> <C> <C>
Texas Eastern Transmission Corp. ............ 51,566 Various dates after 1995
Transcontinental Pipeline Corp. ............ 8,100 2005
------
59,666
</TABLE>
NJNG also has significant storage contracts with CNG Transmission
Corporation (peak day deliverability of 90,661) and Equitrans, Inc. (peak day
deliverability of 9,995), but utilizes its existing transportation contracts to
transport that gas from the storage fields to its city gate.
<PAGE>
5
C) Peaking Supply
To meet its increased winter peak day demand, NJNG maintains two liquefied
natural gas (LNG) facilities and purchases firm storage services. See Item 2 -
Properties - NJNG for additional information regarding the storage facilities
from various interstate pipeline companies. NJNG presently has LNG storage
deliverability of 165,000 Dths per day which represents approximately 26% of its
peak day sendout.
D) Summary
NJNG expects to be able to meet the current level of gas requirements of
its existing and projected firm customers for the foreseeable future.
Nonetheless, NJNG's ability to provide supply for its present and projected
sales will depend upon its suppliers' ability to obtain and deliver additional
supplies of natural gas, as well as NJNG's ability to acquire supplies directly
from new sources. Factors beyond the control of NJNG and its suppliers may
affect its ability to obtain such supplies. These factors include other parties
having control over the drilling of new wells and the facilities to transport
gas to NJNG's city gate, competition for the acquisition of gas, regulatory
policies (e.g., FERC Orders 436, 451, 500, 636, 636A and 636B), priority
allocations, the pricing policies of federal and state regulatory agencies, as
well as the availability of Canadian reserves for export to the United States.
Regulation and Rates
A) State
NJNG is subject to the jurisdiction of the BPU with respect to a wide range
of matters, such as rates, the issuance of securities, the adequacy of service,
the manner of keeping its accounts and records, the sufficiency of gas supply
and the sale or encumbrance of its properties.
Over the last five years, NJNG has been granted three increases in its base
tariff rates, and two increases and two decreases in its Levelized Gas
Adjustment clause (LGA). Through its LGA, which is reviewed annually, NJNG
recovers purchased gas costs that are in excess of the level included in its
base rates. LGA recoveries do not include an element of profit and, therefore,
have no effect on earnings.
<PAGE>
6
The following table sets forth information with respect to these rate changes:
Annualized Annualized
Amount Amount
Per Filing Granted
Date of Filing Type (000's) (000's) Effective Date
- -------------- ---- ------- ------- --------------
April 1993 Base Rates $26,900 $7,500 January 1994
August 1991 Base Rates 15,772 2,200 June 1992
August 1990 Base Rates 14,787 8,300 February 1991
July 1995 LGA (4,800) (5,200) December 1995
July 1994 LGA 8,800 0 December 1994
July 1993 LGA 4,800 4,800 December 1993
July 1992 LGA (15,814) (17,400)(A) January 1993
July 1991 LGA 33,407 17,100 November 1991
August 1990 LGA 0 0 October 1990
(A) Comprised of a $12 million billing credit and a $5.4 million reduction in
annual LGA revenues.
See Note 8 to the Consolidated Financial Statements - Regulatory Issues in
the Company's 1995 Annual Report, filed as Exhibit 13-1 hereto, for additional
information regarding NJNG's rate proceedings.
On September 25, 1991, the BPU adopted a conservation incentive rule which
provides utilities with the opportunity to recover conservation program costs
and lost revenues, and to earn a return on investments in energy efficiency
programs based upon a sharing of savings between utilities and customers. NJNG
filed its "Demand Side Management Resource Plan" (DSM) addressing these issues
with the BPU in February 1992. In June 1995, the BPU approved a Stipulation
Agreement approving NJNG's DSM plan. The Stipulation calls for recovery of
approximately $2.6 million in annual plan expenses plus the underrecovered
balance in NJNG's prior conservative plan, which was $1.9 million at September
30, 1995, through a Demand Side Management Adjustment Clause (DSMAC). The
initial DSMAC was approved by the BPU in November 1995.
In November 1992, NJNG filed a petition with the BPU for approval of a Gas
Service Agreement (GSA) executed between NJNG and Freehold Cogeneration
Associates L.P. (Freehold) in September 1992. The GSA would provide for NJNG to
supply Freehold with between 21,800 and 26,000 Dths of natural gas per day over
a twenty-year period. In February 1994, the BPU approved the GSA conditioned by
a side letter agreement in which Freehold and NJNG agree to negotiate in good
faith to amend the pricing terms of the GSA to conform it to changes, if any, in
the power purchase agreement between Freehold and Jersey Central Power and Light
Company (JCP&L) if it is renegotiated. In November 1993, the BPU ruled that
Freehold and JCP&L should attempt to reach a settlement on the power purchase
agreement within 30 days of receipt of a written order. The power purchase
contract has been the subject of litigation, not involving
<PAGE>
7
NJNG as a party, in various jurisdictions. To date Freehold has been successful
in these various proceedings.
On November 22, 1995, the BPU approved a Stipulation Agreement relating to
the 1995 Remediation Rider (RA), WNC, DSMAC and LGA. The approval of the
Stipulation allows recovery over seven years of $1 million of gas remediation
costs incurred through June 1995, the collection of the net $1.5 million of
gross margin relating to the impact of the fiscal 1995 winter on the WNC and
implementation of the initial DSMAC discussed above.
The Stipulation also settles our LGA filing and includes a reduction of
$5.2 million in gas costs, the continuation of NJNG's current margin sharing
formulae associated with its non-firm sales until the effective date of the BPU
Order in NJNG's 1997-98 LGA and approval for an extension of the Financial Risk
Management (FRM) Pilot Program designed to provide price stability to NJNG's
system supply portfolio. All of the costs and results of the FRM program are to
be recovered through the LGA.
As a result of the approval of the RA, WNC, DSMAC and LGA Stipulation,
NJNG's rates will not change.
B) Federal
Since the mid-1980's, the FERC has issued a series of orders, regulations
and policy statements (e.g., FERC Orders 380, 436, 451, 500, and 528) intended
to transform the natural gas industry from a highly regulated industry to a less
regulated, market-oriented industry. The culmination of the FERC's deregulatory
effort was the issuance of Order 636 which established new rules mandating the
unbundling of interstate pipeline sales for resale and transportation services.
The FERC instituted proceedings through which NJNG's interstate pipeline
suppliers have restructured their services in response to Order 636.
The transition to a more market-oriented interstate pipeline market may
offer long-term benefits. Order 636 has provided NJNG with increased
opportunities to purchase and manage its own, specifically-tailored gas supply
portfolio and to resell its interstate pipeline capacity to other potential
customers during off-peak periods. However, these long-term benefits have been
offset by increases in interstate pipeline demand charges required by Order 636,
in addition to the flow-through of transition costs that pipeline companies have
incurred as a result of the restructuring of their existing gas purchase and
sales arrangements. In the individual pipeline restructuring proceedings
resulting from Order 636, all but one of NJNG's pipeline suppliers have settled
transition cost recovery issues with their customers. These settlements provide
for partial cost absorption by some of NJNG's pipeline suppliers and the orderly
recovery of remaining costs from pipeline customers, including NJNG. The
transition costs of one of NJNG's pipeline suppliers is currently being
litigated before the FERC; however, at this time, NJNG does not expect to be
adversely affected by the outcome of that proceeding.
NJNG continually reviews its gas supply portfolio requirements in the
post-Order 636 environment. Because of its interconnections with multiple
interstate pipelines, NJNG believes
<PAGE>
8
that the Order 636 proceedings will not have a material impact on its ability to
obtain adequate gas supplies at market rates. However, no assurance can be given
in this regard.
Environment
The Company and its subsidiaries are subject to legislation and regulation
by federal, state and local authorities with respect to environmental matters.
NJNG has identified eleven former manufactured gas plant (MGP) sites,
dating back to the late 1800's and early 1900's, which it acquired from
predecessors, and which contain contaminated residues from the former gas
manufacturing operations. Ten of the eleven sites in question were acquired by
NJNG from a predecessor in 1952, and the eleventh site was acquired by a
predecessor of NJNG in 1922. All of the gas manufacturing operations ceased at
these sites at least since the mid-1950's and in some cases had been
discontinued many years earlier, and all of the old gas manufacturing facilities
were subsequently dismantled by NJNG or its predecessors. NJNG is currently
involved in administrative proceedings with the New Jersey Department of
Environmental Protection and Energy (NJDEPE) and local government authorities
with respect to the plant sites in question, and is participating in various
studies and investigations by outside consultants to determine the nature and
extent of any such contaminated residues and to develop appropriate programs of
remedial action, where warranted. Since October 1989, NJNG has entered into
Administrative Consent Orders or Memoranda of Agreement with the NJDEPE covering
all eleven sites. These documents establish the procedures to be followed by
NJNG in developing a final remedial clean-up plan for each site.
Most of the cost of such studies and investigations is being shared under
an agreement with the former owner and operator of ten of the MGP sites. See
Note 10 to the Consolidated Financial Statements - Commitments and Contingent
Liabilities in the Company's 1995 Annual Report, filed as Exhibit 13-1 hereto,
for a discussion of the regulatory treatment of gas remediation costs incurred
and anticipated expenditures over the next five years.
NJNG is named as a defendant in a civil action alleging environmental
contamination at three sites owned or occupied by a contractor and the
contractor's affiliated companies which removed tar emulsion from NJNG's former
MGP sites to its three sites. See Item 3d. - Legal Proceedings for additional
information regarding these actions.
Other than as discussed above, the Company does not presently anticipate
any additional significant future expenditures for compliance with existing
environmental laws and regulations which would have a material effect upon the
capital expenditures, earnings or competitive position of the Company or its
subsidiaries.
Franchises
NJNG holds non-exclusive franchises granted by the 104 municipalities it
serves which gives it the right to lay, maintain and operate public utility
property in order to provide natural gas service within these municipalities. Of
these franchises, 47 are perpetual and the balance expire between 1999 and 2038.
<PAGE>
9
Competition
Although its franchises are non-exclusive, NJNG is not currently subject to
competition from other natural gas distribution utilities with regard to the
transportation of natural gas in its service territory. Due to significant
distances between NJNG's current large industrial customers and the nearest
interstate natural gas pipelines, as well as the availability of its
transportation tariff, NJNG currently does not believe it has significant
exposure to the risk that its distribution system will be bypassed. Competition
does exist from suppliers of oil, coal, electricity and propane. At the present
time, natural gas enjoys an advantage over alternate fuels as the preferred
choice of fuels in over 95% of new construction due to its efficiency and
reliability. As deregulation of the natural gas industry continues, prices will
be determined by market supply and demand, and while NJNG believes natural gas
will remain competitive with alternate fuels, no assurance can be given in this
regard.
In October 1994, the BPU approved a Stipulation Agreement that provides
NJNG's commercial and industrial customers an expanded menu of transportation
and supplier choices. As a result of the BPU approval, NJNG's sales to its
commercial and industrial customers are subject to competition from other
suppliers of natural gas; however, NJNG continues to provide transportation
service to these customers. Based on its rate design, NJNG's profits would not
be affected by a customer's decision to utilize a sales and transportation or
transportation only service.
NEW JERSEY NATURAL ENERGY COMPANY
Natural Energy was formed in 1995 to facilitate the unregulated marketing
of natural gas and fuel and capacity management services. At September 30, 1995,
Natural Energy markets gas to 776 customers. In August 1995, Natural Energy
signed a three-year agreement with GPU Service Corporation (GPU) to assist GPU
in the management of natural gas procurement and transportation costs.
NJR ENERGY CORPORATION
NJR Energy and its subsidiaries: NJNR, Pipeline, Storage, Compressor and
NJRE Operating, are involved in oil and natural gas development, production,
transportation, storage and other energy-related ventures.
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
its affiliates, NJR Energy and NJNR. As discussed in Note 2 to the Consolidated
Financial Statements - Discontinued Operations in the Company's 1995 Annual
Report, filed as Exhibit 13-1 hereto, the Company is accounting for this segment
as a discontinued operation.
On December 21, 1995, NJNR completed the sale of its interests in all of
its oil and gas properties located in Western Oklahoma, Kansas and Texas. The
sale price was $7.75 million which will be adjusted for certain post-closing
adjustments. The proceeds were used to reduce outstanding debt. The Company has
executed sales contracts for its remaining properties located in Eastern
Oklahoma, Arkansas and Utah. It is anticipated that the sale of these properties
will be completed by January 31, 1996.
<PAGE>
10
NJR Energy's continuing operations consist of its equity investments in the
Iroquois Gas Transmission System, L.P. (Iroquois) and the Market Hub Partners
L.P. (MHP).
Pipeline is a 2.8% equity participant in Iroquois, a 375-mile natural gas
pipeline from the Canadian border to Long Island. Initial deliveries commenced
in December 1991. See Item 3f.-Legal Proceedings for additional information
regarding the Iroquois pipeline.
Storage, which was formed in December 1994, is a 5.66% equity participant
in MHP, which it is intended will develop, own and operate a system of five
natural gas market centers with high deliverability salt cavern storage
facilities in Texas, Louisiana, Mississippi, Michigan and Pennsylvania.
See Non-Utility Operations - NJR Energy in the Company's 1995 Annual
Report, filed as Exhibit 13-1 hereto, for a discussion of NJR Energy's financial
results from continuing operations.
COMMERCIAL REALTY & RESOURCES CORP.
CR&R develops and owns commercial office and mixed-use
commercial/industrial real estate projects primarily in Monmouth and Atlantic
Counties, New Jersey. At September 30, 1995, CR&R had completed 17 buildings
totaling approximately 914,200 square feet, of which 97% was occupied. In
addition, CR&R had one project under construction, an approximately 76,300
square feet flex building on 10 acres of land in its Monmouth Shores Corporate
Park. Completion of this project is expected in early fiscal 1996. CR&R also has
approximately 215 acres of undeveloped land that was master planned for
development.
Consistent with the Company's previously disclosed strategy to realign its
asset base more closely with its core energy business, the Company announced on
October 12, 1995 that CR&R had executed a contract to sell a substantial portion
of its developed real estate assets to Cali Realty Acquisition Corp. (together
with its affiliates, successors and assigns, "Cali"), and that the Company was
pursuing alternatives for its remaining real estate assets.
The closing of the Cali transaction was completed on November 8, 1995 and
included the sale of 14 buildings containing approximately 582,000 square feet
of space, representing over 60 percent of CR&R's office and flex space in
business parks in Monmouth and Atlantic Counties, New Jersey. The all-cash sale
price received at the closing was $52.65 million. The contract of sale for the
transaction contained certain conditions that will survive the closing, and CR&R
will remain subject to certain indemnity and other obligations with respect to
the properties that were sold.
The Company used the sale proceeds from the transaction to pay down
outstanding debt
<PAGE>
11
incurred to develop the real estate assets. The Company's future earnings from
continuing operations will not be materially affected by the sale based upon the
historical earnings generated by the real estate subsidiary.
In addition to the sale of the 14 buildings, the transaction included the
grant of options to Cali to purchase approximately 181 of CR&R's approximately
215 acres of undeveloped land generally adjacent to these buildings. CR&R has
retained limited rights to sell and develop the lands that are subject to the
options.
Separately, CR&R entered into a sale-leaseback transaction with Cali
pursuant to which it conveyed fee title to all of Jumping Brook Corporate Office
Park, including the undeveloped land portion thereof, to Cali in exchange for a
$5.8 million promissory note and mortgage on the undeveloped land and a ground
lease of such undeveloped land to CR&R for approximately 99 years, with options
to renew. In the event that CR&R obtains a subdivision of the undeveloped land
portion from the improved portion of such office park, Cali would be obliged to
convey fee title to the undeveloped land back to CR&R, and the ground lease,
promissory note and mortgage would be terminated. CR&R is currently seeking such
subdivision.
On December 22, 1995, CR&R sold its Monmonth Shores Corporate Office Park
(MSCOP) facility in a sale-leaseback transaction for $31.85 million. MSCOP is
the corporate headquarters building for NJNG and NJR. NJNG has entered into a
long-term master lease for the entire building. Prior to this transaction NJNG
leased approximately 79% of the building under a long-term lease. The proceeds
were used to pay down debt. CR&R's pre-tax gain of approximately $18 million
will be deferred and amortized to income over 25 years in accordance with
generally accepted accounting principles.
The Company will continue to pursue alternatives for its remaining real
estate assets. See Item 2 - Properties - CR&R for additional information
regarding CR&R's remaining real estate assets.
It is anticipated that any future or further development by CR&R of its
remaining real estate assets will be consistent with CR&R's development strategy
of concentrating on a high percentage of build-to-suit projects. This
concentration has served to put CR&R in a relatively strong position with regard
to both occupancy rate and remaining lease terms, and to lessen the impact on
CR&R caused by the downturn in the Northeast commercial real estate market which
had been characterized by speculative development and relatively high vacancy
rates. See Non-Utility Operations - Real Estate Operations in the Company's 1995
Annual Report, filed as Exhibit 13-1 hereto, for a discussion of CR&R's
financial results.
PARADIGM POWER, INC.
PPI was formed in April 1992 to pursue investment opportunities in natural
gas-fueled cogeneration and independent power production projects. As of
September 30, 1995, PPI had no project investments. As discussed in Note 2 to
the Consolidated Financial Statements - Discontinued Operations in the Company's
1995 Annual Report, filed as Exhibit 13-1 hereto, the Company has decided to no
longer pursue investments in cogeneration and independent power production
facilities and has treated this segment as a discontinued operation.
<PAGE>
12
EMPLOYEE RELATIONS
The Company and its subsidiaries employed 880 and 864 employees at
September 30, 1995 and 1994, respectively. NJNG had 522 and 500 union employees
at September 30, 1995 and 1994, respectively. NJNG has reached agreement with
the union on a new two-year collective bargaining agreement which provides,
among other things, for annual wage increases of 3.5% and 3.75%, effective
December 7, 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
First Elected
Office(1) Name Age an Officer
- -------- ---- --- -------------
President and
Chief Executive Officer ....... Laurence M. Downes 38 1/86
Senior Vice President and
Corporate Secretary ........... Oleta J. Harden 46 6/84
Vice President and
Chief Financial Officer ....... Glenn C. Lockwood 34 1/90
(1) All terms of office
are one year.
There is no arrangement or understanding between the officers listed above
and any other person pursuant to which they were selected as an officer. The
following is a brief account of their business experience during the past five
years:
Laurence M. Downes
President and Chief Executive Officer
Mr. Downes has held his present position since July 1995. From January 1990
to July 1995, he held the position of Senior Vice President and Chief Financial
Officer.
Oleta J. Harden
Senior Vice President and Corporate Secretary
Mrs. Harden has held her present position since January 1987.
Glenn C. Lockwood
Vice President and Chief Financial Officer
Mr. Lockwood has held his present position since September 1995. From
January 1994 to September 1995, he held the position of Vice President,
Controller and Chief Accounting Officer. From January 1990 to January 1994, he
held the position of Assistant Vice President, Controller and Chief Accounting
Officer.
<PAGE>
13
ITEM 2. PROPERTIES
NJNG (All properties are in New Jersey)
NJNG owns 10,385 miles of distribution main and services, 325 miles of
transmission main and approximately 369,000 meters. Mains are primarily located
under public roads. Where mains are located under private property, NJNG has
obtained easements from the owners of record.
In addition to mains and services, NJNG owns and operates two LNG storage
plants located in Stafford Township, Ocean County, and Howell Township, Monmouth
County. The two LNG plants have an estimated effective capacity of 19,200 and
150,000 Dths per day, respectively. These facilities are used for peaking supply
and emergencies.
NJNG owns four service centers located in Rockaway Township, Morris County;
Atlantic Highlands and Wall Township, Monmouth County; and Lakewood, Ocean
County. These service centers house storerooms, garages, gas distribution and
appliance service operations and administrative offices. NJNG leases its
headquarters facilities in Wall Township, customer service offices located in
Asbury Park and Wall Township, Monmouth County and a service center in
Manahawkin, Ocean County. These customer service offices support customer
contact, marketing and other functions. NJNG also owns a storage facility in
Long Branch, Monmouth County.
Substantially all of NJNG's properties, not expressly excepted or duly
released, are subject to the lien of an Indenture of Mortgage and Deed of Trust
to Harris Trust and Savings Bank, Chicago, Illinois, dated April 1, 1952, as
amended by twenty-five supplemental indentures, as security for NJNG's bonded
debt, which totaled approximately $202.9 million at September 30, 1995. In
addition, under the terms of its Indenture, NJNG could have issued approximately
$154 million of additional first mortgage bonds as of September 30, 1995. In
October 1995, NJNG issued $20 million of bonds, which was the remaining portion
of its Medium-Term Notes, Series A, consisting of its 6 7/8% Series CC First
Mortgage Bonds due 2010 under its Indenture, as amended by the twenty-sixth
supplemental indenture.
NJNG completed construction of the Monmouth-Ocean Transmission (MOT) line
in 1993. The MOT line is providing service to a cogeneration plant in Lakewood
Township, Ocean County and is helping NJNG meet the future energy needs
associated with the expected customer growth in Monmouth and Ocean counties.
NJNG has entered into an agreement to provide the cogeneration project with at
least 50,000 Dths per day of pipeline capacity on the MOT line, subject to
NJNG's right to utilize this capacity for up to 30 days per year to help meet
its peak-day requirements.
NJR Energy
At September 30, 1995, NJR Energy, as a working-interest participant, had
interests in oil and gas leases in Louisiana, New York, West Virginia and Texas.
Additionally, NJNR had working interests in oil and gas leases in Texas,
Oklahoma, Kansas, Arkansas, Utah and Pennsylvania, and is a participant in a
21-mile natural gas transportation pipeline joint venture, located in Cambria
County and Indiana County, Pennsylvania. NJNR also owned a natural gas gathering
system and is a
<PAGE>
14
participant in a 16-mile natural gas pipeline joint venture located in Utah.
Pipeline has a 2.8% equity interest in the Iroquois Gas Transmission
System, L.P. which owns and operates the Iroquois pipeline project, a 375-mile
pipeline from the Canadian border in upstate New York to Long Island.
Storage, which was formed in December 1994, has a 5.66% equity interest in
Market Hub Partners, L.P. which it is intended will develop, own and operate a
system of five natural gas market centers with high deliverability salt cavern
storage facilities in Texas, Louisiana, Mississippi, Michigan and Pennsylvania.
CR&R (All properties are in New Jersey)
At September 30, 1995, CR&R owned and operated 17 buildings consisting of
914,200 square feet of commercial office and mixed-use commercial/industrial
space, of which 886,000 square feet, or 97%, were occupied. CR&R and affiliated
companies, including NJNG, occupied approximately 149,800 square feet in four of
these buildings. These properties were located in Monmouth and Atlantic Counties
in various business parks. These business parks included the Monmouth Shores
Corporate Office Park (MSCOP), Monmouth Shores Corporate Park (MSCP), Jumping
Brook Corporate Office Park (JBCOP), Central Monmouth Business Park (CMBP) and
Expressway Corporate Center (ECC). See Item 3g. - Legal Proceedings - Real
Estate Properties for a discussion of regulatory matters concerning MSCP. A
summary of these business parks with pertinent data is as follows:
MSCOP MSCP JBCOP CMBP ECC Other
----- ---- ----- ---- --- -----
Completed buildings ......... 1 9 1 3 2 1
Buildings under
construction .............. -- 1 -- -- -- --
Acres developed to date ..... 22 91 20 9 10 4
Acres under construction .... -- 10 -- -- -- --
Acres undeveloped ........... 33 64 26 -- 52 40
Sq. ft. developed to date ... 160,400 417,500 181,100 69,000 82,200 4,000
Sq. ft. under construction .. -- 76,300 -- -- -- --
Sq. ft. undeveloped ......... 235,000 569,300 300,000 -- 495,000 366,400
<PAGE>
15
Major tenants included:
MSCOP NJNG, NatWest Home Mortgage and Prudential Insurance
MSCP Waterford/Wedgwood, American Press, CoreStates Bank, The Law Office of
Stephen E. Gertler and AT&T Information Systems
JBCOP USLIFE
CMBP State Farm Insurance, Beacon Tool and NJNG.
ECC Social Security Administration and Computer Science Corporation
The November 8, 1995 transaction with Cali (see Item 1 - Business -
Commercial Realty & Resources Corp.) resulted in the sale to Cali of 8 of the 9
completed buildings in MSCP, the 1 completed building in JBCOP, the 3 completed
buildings in CMBP, and the 2 completed buildings in ECC, and the grant of
options to Cali to purchase approximately 181 of the approximately 215
undeveloped acres owned by CR&R and described in the above chart. Also see Note
12 to the Consolidated Financial Statements - Subsequent Event in the Company's
1995 Annual Report, filed as Exhibit 13-1 hereto, for a further discussion of
such sale. The December 22, 1995 transaction (See Item 1 -- Business --
Commercial Realty and Resources Corp.) resulted in the sale of MSCOP.
Capital Expenditure Program
See Liquidity and Capital Resources in the Company's 1995 Annual Report,
filed as Exhibit 13-1 hereto, for a discussion of the Company's anticipated 1996
and 1997 capital expenditures for each business segment.
ITEM 3. LEGAL PROCEEDINGS
a. Aberdeen
Since June 1993, a total of six complaints have been filed in New Jersey
Superior Court against NJNG and its contractor by persons alleging injuries
arising out of a natural gas explosion and fire on June 9, 1993, at a
residential building in Aberdeen Township, New Jersey. The plaintiffs allege in
their respective actions, among other things, that the defendants were negligent
or are strictly liable in tort in connection with their maintaining, replacing
or servicing natural gas facilities at such building. The plaintiffs separately
seek compensatory damages from NJNG and its contractor. To date, NJNG and its
contractors have received demands for damages totaling $25.2 million from
various plantiffs.
In May 1994, the New Jersey Superior Court ordered that all causes of
action relating to the Aberdeen Township explosion be consolidated for purposes
of discovery.
NJNG's liability insurance carriers are participating in the defense of
these matters. NJNG is unable to predict the extent to which other claims will
be asserted against, or liability imposed on,
<PAGE>
16
NJNG. The Company does not believe that the ultimate resolution of these matters
will have a material adverse effect on its consolidated financial condition or
results of operations.
b. Carnegie
In March 1993, NJNG was named a defendant in a civil action commenced by
Carnegie Natural Gas Company (Carnegie) in the U.S. District Court for the
Western District of Pennsylvania. This action challenged NJNG's decision to
terminate the June 18, 1986 "Service Agreement for Sales Service under Rate
Schedule LVWS" (LVWS Service Agreement) between Carnegie and NJNG effective
March 31, 1994, pursuant to a "market-out" clause. The LVWS Service Agreement
otherwise would have expired on March 31, 2001. Carnegie sought, among other
things, a declaratory judgment that the contract termination was void. Claims of
tortious interference with contractual relations and abuse of process were also
asserted and unspecified damages and punitive damages were also sought. On
November 3, 1995, an agreement between NJNG and Carnegie to settle and resolve
the lawsuit became effective. In conjunction with this agreement, Carnegie and
NJNG filed a Joint Stipulation with the court in which Carnegie's lawsuit would
be dismissed with prejudice. On December 4, 1995, the court issued an order
dismissing Carnegie's civil action with prejudice. The ultimate resolution of
this matter will not have a material adverse effect on the Company's
consolidated financial condition or results of operations.
c. South Brunswick Asphalt, L.P.
NJNG has been named a defendant in a civil action commenced in New Jersey
Superior Court by South Brunswick Asphalt, L.P. (SBA) and its affiliated
companies seeking damages arising from alleged environmental contamination at
three sites owned or occupied by SBA and its affiliated companies. Specifically,
the suit charges that tar emulsion removed from 1979 through 1983 by an
affiliate of SBA (Seal Tite, Inc.) from NJNG's former gas manufacturing plant
sites has been alleged by the NJDEPE to constitute a hazardous waste and that
the tar emulsion has contaminated the soil and ground water at the three sites
in question. In February 1991, the NJDEPE issued letters classifying the tar
emulsion/sand and gravel mixture at each site as dry industrial waste, a
non-hazardous classification. NJNG continues to explore various disposal methods
for the tar emulsion/sand and gravel mixture.
One of the SBA sites is the subject of a NJDEPE Directive and Notice
alleging that the tar emulsion/sand and gravel mixture was a contributing factor
to the contamination of ground water at a residential community. The NJDEPE is
seeking reimbursement under the New Jersey Spill Compensation and Control Act of
cleanup, remediation and related costs, estimated by the NJDEPE at approximately
$20 million. NJNG is contesting the NJDEPE directive on the grounds, among
others, that any such alleged ground water contamination was not caused by tar
emulsions removed from NJNG's former gas plant manufacturing sites.
NJNG's liability insurance carriers, which have been defending the civil
action, have denied coverage for these claims. 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
<PAGE>
17
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. There can be no assurance
as to the outcome of these proceedings.
Based upon the gas remediation rider approved by the BPU in June 1992, NJNG
would attempt to seek recovery through the ratemaking process of any such
cleanup or remediation payments it might ultimately be required to make, but
recognizes that such recovery is not assured. There can be no assurance as to
the outcome of these proceedings. The Company does not believe that the ultimate
resolution of these matters will have a material adverse effect on its
consolidated financial condition or results of operations.
d. Bridgeport Rental and Oil Service
In January 1992, NJNG was advised of allegations that certain waste oil
from its former manufactured gas plant site in Wildwood, New Jersey may have
been sent by a demolition contractor to the Bridgeport Rental and Oil Service
site in Logan Township, New Jersey. That site has been designated a Superfund
site and is currently the subject of two lawsuits pending in the U.S. District
Court in New Jersey. NJNG has notified its insurance carriers and NJNG has
agreed to participate in settlement discussions as a non-party litigant. See
above, 3c. South Brunswick Asphalt, L.P., for a description of an action brought
by NJNG against various insurance carriers relating to insurance coverage of
liability arising out of these sites. NJNG is currently unable to predict the
extent, if any, to which it may have cleanup or other liability with respect to
this matter, but would seek recovery of any such costs through the ratemaking
process. However, no assurance can be given as to the timing or extent of the
ultimate recovery of such costs. 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. Iroquois
Pipeline owns a 2.8% equity interest in the Iroquois Gas Transmission
System, L.P. (Iroquois) which has constructed and is operating a 375-mile
pipeline from the Canadian border in upstate New York to Long Island.
Iroquois has been informed by the U.S. Attorney's Offices for the Northern,
Southern and Eastern Districts of New York that an investigation is underway to
determine whether or not Iroquois committed civil violations of the Federal
Clean Water Act and/or its Corps of Engineers permit during construction of the
pipeline. No proceedings in connection with this civil investigation have been
commenced by the federal government against Iroquois.
In addition, in conjunction with the Environmental Protection Agency, a
criminal investigation has
<PAGE>
18
been initiated by the U.S. Attorney's Office for the Northern District of New
York. To date, no criminal charges have been filed.
Iroquois has publicly stated that it believes the pipeline construction and
right-of-way activities were conducted in a responsible manner. Nevertheless,
Iroquois deems it probable that the U.S. Attorney will seek indictments and, in
them, substantial fines and other sanctions.
In December 1993, Iroquois received notification from the Enforcement Staff
of the Federal Energy Regulatory Commission Office of the General Counsel
(Enforcement) that Enforcement has commenced a preliminary, non-public
investigation concerning matters related to Iroquois' construction of certain of
its pipeline facilities. Enforcement has requested information regarding certain
aspects of the pipeline construction. In addition, in December 1993, Iroquois
received a similar communication from the Army Corps of Engineers requesting
information regarding permit compliance in connection with certain aspects of
the pipeline construction. Iroquois is providing information to these agencies
in response to their requests.
Iroquois and its counsel have met with those conducting the civil and
criminal investigations, from time to time, both to gain an informed
understanding of the focus and direction of the investigations in order to
defend itself and, if and when appropriate, to explore a range of possible
resolutions acceptable to all parties.
Although no agreements have been reached regarding the disposition of these
matters, in October 1995, Iroquois informed its partners that it intended to
record a provision in its 1995 financial statements for an estimated liability
associated with these proceedings to reflect its current understanding of the
probable outcome. Accordingly, in September 1995, the Company recorded a
provision of $560,000, or $.03 per share, reflecting its proportionate share of
this probable liability.
Pipeline is unable to predict the outcome of these proceedings and
investigations. Based upon information currently available to the Company
concerning the above matters involving Iroquois, the Company does not believe
that their ultimate resolution will have a material adverse effect on the
Company's consolidated financial condition or results of operations. Pipeline's
investment in Iroquois as of September 30, 1995 was $5.7 million.
f. Real Estate Properties
CR&R is the owner of Monmouth Shores Corporate Park (MSCP), located in
Monmouth County, New Jersey. The land comprising MSCP was exempt from the
provisions of the Freshwater Wetlands Protection Act (the Act) until assumption
of the Federal 404 freshwater wetlands program by the New Jersey Department of
Environmental Protection and Energy (NJDEPE) on March 2, 1994. MSCP is now
regulated by the provisions of the Act. The Act restricts building in areas
defined as "freshwater wetlands" and their transition areas. CR&R has hired an
environmental engineer to delineate the wetlands and transition areas of MSCP in
accordance with the provision of the Act.
<PAGE>
19
Based upon the environmental engineer's delineation of the wetland and
transition areas, CR&R has filed for and received a Letter of Interpretation
(LOI) from NJDEPE on one parcel of land. CR&R has also filed for a LOI with
NJDEPE regarding a second parcel and will file additional LOI's with NJDEPE as
the remaining parcels of land are selected for development.
Based upon the environmental engineer's delineation, it is anticipated that
the developable yield of MSCP would be reduced by approximately 7% compared with
the original master plan. The actual yield achieved will be dictated by market
and other conditions. Based upon the revised estimated developable yield for
MSCP, the Company does not believe that a reserve against this property was
necessary as of September 30, 1995.
g. Bessie-8
NJNR and others (the Joint Venture, et al.) were named in a complaint filed
by the People's Natural Gas Company (People's) before the Pennsylvania Public
Utility Commission (PaPUC). People's sought a determination that the Joint
Venture, et al. were a public utility subject to the jurisdiction of the PaPUC
and an order prohibiting natural gas service until proper PaPUC authorization
was obtained.
In April 1988, an Administrative Law Judge (ALJ) issued an initial decision
denying and dismissing People's complaint, "because the demonstrated activities
of the Bessie-8 joint venture are not within the jurisdiction of the PaPUC to
regulate". An initial decision is subject to adoption, modification or rejection
by the full PaPUC. In April 1989, alternative motions to adopt the ALJ's initial
decision or to subject the Joint Venture, et al. to the jurisdiction of the
PaPUC failed due to 2-2 tie votes. In October 1992, the PaPUC, on its own
initiative and without notice to any of the parties, determined in a 3-0 vote
that the Joint Venture, et al. are a "public utility" under the Pennsylvania
Public Utility Code and granted People's exceptions to the ALJ's April 1988
initial decision. In December 1992, the PaPUC issued a Final Order requiring the
Joint Venture, et al. to apply for a certificate of public convenience or to
cease and desist from providing service through the pipeline.
In October 1992, the Joint Venture, et al. filed a Petition for Review in
the nature of a declaratory judgment action in the Commonwealth Court of
Pennsylvania (Commonwealth Court) seeking among other things, a declaratory
order that the April 1989 tie vote constituted a final action dismissing
Peoples' complaint. In January 1993, the Joint Venture, et al. filed a second
Petition for Review with the Commonwealth Court challenging the merits of the
PaPUC's determination that the Joint Venture, et al. are a "public utility"
under the Pennsylvania Public Utility Code. In February 1993, the Commonwealth
Court stayed the PaPUC's order requiring the Joint Venture, et al. to file for a
certificate of public convenience and necessity, pending the outcome of the
declaratory judgment action. On December 16, 1993, the Commonwealth Court
granted the Joint Venture, et al. a declaratory judgment that the April 1989 tie
vote constituted a final action dismissing Peoples' complaint. In July 1995,
upon appeal, the Pennsylvania Supreme Court reversed the Commonwealth Court,
holding that the tie vote by the PaPUC cannot constitute final action on
Peoples' complaint and that the PaPUC was not prohibited from taking its vote in
October 1992.
<PAGE>
20
In September 1995, Peoples filed an application to lift the court's
February 1993 stay of the effectiveness of the PaPUC's December 1992 order. Also
in September 1995, the Joint Venture, et al. filed a Petition for Rescission or
Amendment of an Order (Petition for Rescission) with the PaPUC, requesting that
the PaPUC reconsider and rescind its December 1992 order. In addition, the Joint
Venture, et al. filed an Application for Continuance with the Commonwealth
Court, asking for a continuance of the February 1993 stay pending the outcome of
the PaPUC's consideration of the Petition for Rescission, and an Application for
Remand requesting that the Commonwealth Court remand the Joint Venture, et al.'s
appeal to the PaPUC for further consideration.
On November 29, 1995, the Commonwealth Court issued orders denying all of
the Joint Venture, et al.'s various requests.On November 30, 1995, the
Commonwealth Court granted Peoples' application to lift the court's February
1993 stay. Also, on December 12, 1995, the PaPUC issued an opinion and order
denying the Joint Venture et al.'s Petition for Rescission. The Joint Venture,
et al. are currently examining their options in light of the recent Commonwealth
Court and PaPUC orders.
In September 1993, Peoples instituted an action in the Court of Common
Pleas of Allegheny County against the Joint Venture, et al. by filing a Praecipe
for Writ of Summons. The Praecipe for Writ of Summons cannot and does not
contain any description of the claim being asserted by Peoples. It merely tolls
the statute of limitations and preserves any claim Peoples may have against the
defendants until resolution of the actions discussed above. This action may
concern a claim by Peoples for losses allegedly sustained as a result of the
activities of the Joint Venture, et al. However, there has been no activity in
this action and the nature of the action has not yet been determined. NJNR is
unable to predict the outcome of these matters. 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.
In 1994, the Company wrote-off its $1 million investment in the Bessie-8
pipeline.
h. Securities and Exchange Commission (SEC)
On October 18, 1995, the SEC issued an Order Directing Private
Investigation and Designating Officers to Take Testimony in connection with
certain transactions engaged in by subsidiaries of the Company in early 1992. An
SEC investigation is a fact-finding inquiry and not an adversarial proceeding.
No adversarial proceedings have been commenced by the SEC. The Company is
cooperating with the Staff of the SEC in its investigation.
i. Long Branch Pier
In August 1988 and 1989, NJNG and an electric utility were named defendants
in civil actions in New Jersey Superior Court commenced by the owners of several
businesses and stores destroyed in a fire at the Long Branch Amusement Pier in
New Jersey, which actions were subsequently consolidated. The plaintiffs allege,
among other things, that NJNG had lines beneath a boardwalk which, the
plaintiffs assert, reacted with faulty electric cables to cause the fire that
damaged the Pier. The several plaintiffs assert compensatory damages against the
defendants in an aggregate amount of approximately $35 million. Pre-trial
settlement conferences were unsuccessful and a trial on the issues of liability
commenced in October 1995.
<PAGE>
21
NJNG is vigoroutly defending these matters and its liability insurance
carriers are participating in its defense. NJNG is unable to predict the outcome
of such matters but does not believe that their ultimate resolution will have a
material adverse effect on its consolidated financial condition or results of
operations.
j. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
<PAGE>
22
PART II
Information for Items 5 through 8 of this report appears in the Company's
1995 Annual Report, filed as Exhibit 13-1 hereto, as indicated on the following
table and is incorporated herein by reference, as follows:
Annual Report
Page
-------------
ITEM 5. Market for the Registrant's Common
Equity and Related Stockholder Matters
Market Information - Exchange 46
- Stock Prices & Dividends 25
Dividend Restrictions 38
Holders of Common Stock 24
ITEM 6. Selected Financial Data 24
ITEM 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations 26-30
ITEM 8. Financial Statements and Supplementary Data 31-43
ITEM 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure - None
PART III
ITEM 10. Directors and Executive Officers of the Registrant
ITEM 11. Executive Compensation
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
ITEM 13. Certain Relationships and Related Transactions
Information for Items 10 through 13 of this report is incorporated herein
by reference to the Company's definitive proxy statement for the Annual Meeting
of Shareholders to be held February 14, 1996, which is expected to be filed with
the SEC pursuant to Regulation 14A not later than January 6, 1996.
<PAGE>
23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) (1) The following Financial Statements of the Registrant and
Independent Auditors' Report, included in the Company's 1995 Annual Report, are
incorporated by reference in Item 8 above:
Consolidated Balance Sheets as of September 30, 1995 and 1994
Consolidated Statements of Income for the Years Ended
September 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1995, 1994 and 1993
Consolidated Statements of Capitalization as of September 30, 1995
and 1994
Consolidated Statements of Common Stock Equity for the Years
Ended September 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Independent Auditors' Report
(2) Financial Statement Schedules - See Index to Financial Statement
Schedules on page 24.
(3) Exhibits - See Exhibit Index on page 28.
(b) The Company did not file a Form 8-K during the quarter ended
September 30, 1995.
On October 12, 1995, the Company filed a Form 8-K regarding CR&R's
execution of a contract to sell certain of its real estate
assets.
On December 1, 1995, the Company filed a Form 8-K regarding certain
amendments to its By-laws.
<PAGE>
24
NEW JERSEY RESOURCES CORPORATION
INDEX TO FINANCIAL STATEMENT SCHEDULES
Page
----
Schedule II - Valuation and qualifying accounts and
reserves for each of the three years in the period
ended September 30, 1995 24
Schedules other than those listed above are omitted because they are not
required or are not applicable, or the required information is shown in the
financial statements or notes thereto.
<PAGE>
25
Schedule II
NEW JERSEY RESOURCES CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED SEPTEMBER 30, 1995, 1994 and 1993
BALANCE ADDITIONS BALANCE
AT CHARGED AT END
BEGINNING TO OF
CLASSIFICATION OF YEAR EXPENSE OTHER YEAR
- -------------- --------- -------- ----- -------
($000)
1995:
Reserves deducted
from assets to which
they apply
Doubtful Accounts $657 $1,487 $(1,722)(1) $422
==== ====== =========== ====
Materials and Supplies $151 $ 12 $ 9 (2) $172
==== ====== =========== ====
1994:
Reserves deducted
from assets to which
they apply
Doubtful Accounts $684 $1,762 $(1,789)(1) $657
==== ====== =========== ====
Materials and Supplies $ 48 $1,181 $(1,078)(2) $151
==== ====== =========== ====
1993:
Reserves deducted
from assets to which
they apply
Doubtful Accounts $598 $1,397 $(1,311)(1) $684
==== ====== =========== ====
Materials and Supplies $ 48 $ -- $ -- $ 48
==== ====== =========== ====
Notes: (1) Uncollectible accounts written off, less recoveries.
(2) Obsolete inventory written off, less salvage.
<PAGE>
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
--------------------------------
(Registrant)
Date: December 28, 1995 By:/s/Glenn C. Lockwood
--------------------
Glenn C. Lockwood
Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, on behalf of the
Registrant in the capacities and on the dates included:
Dec. 28, 1995 /s/Bruce G. Coe Dec. 28, 1995 /s/Warren R. Haas
---------------- -----------------
Bruce G. Coe Warren R. Haas
Chairman and Director Director
Dec. 28, 1995 /s/Laurence M. Downes Dec. 28, 1995 /s/Dorothy K. Light
-------------------------- -------------------
Laurence M. Downes Dorothy K. Light
President, Chief Executive Director
Officer and Director
Dec. 28, 1995 /s/Glenn C. Lockwood Dec. 28, 1995 /s/Donald E. O'Neill
-------------------------- --------------------
Glenn C. Lockwood Donald E. O'Neill
Vice President and Director
Chief Financial Officer
(Principal Accounting
Officer)
Dec. 28, 1995 /s/Roger E. Birk Dec. 28, 1995 /s/Richard S. Sambol
-------------------------- --------------------
Roger E. Birk Richard S. Sambol
Director Director
Dec. 28, 1995 /s/Leonard S. Coleman Dec. 28, 1995 /s/Charles G. Stalon
-------------------------- --------------------
Leonard S. Coleman Charles G. Stalon
Director Director
Dec. 28, 1995 /s/Joe B. Foster Dec. 28, 1995 /s/Thomas B. Toohey
-------------------------- -------------------
Joe B. Foster Thomas B. Toohey
Director Director
Dec. 28, 1995 /s/Hazel F. Gluck Dec. 28, 1995 /s/John J. Unkles, Jr.
-------------------------- ----------------------
Hazel F. Gluck John J. Unkles, Jr.
Director Director
<PAGE>
27
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of New Jersey Resources Corporation:
We have audited the consolidated financial statements of New Jersey
Resources Corporation as of September 30, 1995 and 1994 and for each of the
three years in the period ended September 30, 1995, and have issued our report
thereon dated October 31, 1995 (Except for Note 12 as to which the date is
November 8, 1995); such consolidated financial statements and report are
included in your 1995 Annual Report to Shareholders and are incorporated herein
by reference. Our audits also included the consolidated financial statement
schedule of New Jersey Resources Corporation, listed in Item 14. This
consolidated financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
October 31, 1995
-------------------------------------------
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-52409 and No. 33-57711 of New Jersey Resources Corporation on Forms S-8 and
S-3, respectively, of our reports dated October 31, 1995 (Except for Note 12 as
to which the date is November 8, 1995), appearing in and incorporated by
reference in this Annual Report on Form 10-K of New Jersey Resources Corporation
for the year ended September 30, 1995.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
December 28, 1995
<PAGE>
28
<TABLE>
<CAPTION>
EXHIBIT INDEX
Previous Filing
Reg. S-K --------------------------------
Exhibit Item 601 Registration
No. Reference Document Description Number Exhibit
- ------ --------- -------------------- ------------ -------
<S> <C> <C> <C> <C>
3-1 3 Restated Certificate of Incorporation of the The Company's 3-1
Company, as amended Quarterly Report
on Form 10-Q for
the quarter ended
March 31, 1992
3-2 By-laws of the Company, as presently in effect The Company's 5-1
Form 8-K filed on
December 1, 1995
4-1 4 Specimen Common Stock Certificates 33-21872 4-1
4-2 Indenture of Mortgage and Deed of Trust 2-9569 4(g)
with Harris Trust and Savings Bank, as
Trustee, dated April 1, 1952
4-2L Twelfth Supplemental Indenture, Note (3) 4-2L
dated as of August 1, 1984
4-2M Thirteenth Supplemental Indenture, Note (4) 4-2M
dated as of September 1, 1985
4-2N Fourteenth Supplemental Indenture, Note (5) 4-2N
dated as of May 1, 1986
4-2O Fifteenth Supplemental Indenture, Note (6) 4-2O
dated as of March 1, 1987
4-2P Sixteenth Supplemental Indenture, Note (6) 4-2P
dated as of December 1, 1987
4-2Q Seventeenth Supplemental Indenture, Note (7) 4-2Q
dated as of June 1, 1988
4-2R Eighteenth Supplemental Indenture, 33-30034 4-2R
dated as of June 1, 1989
4-2S Nineteenth Supplemental Indenture, Note (10) 4-2S
dated as of March 1, 1991
4-2T Twentieth Supplemental Indenture, Note (11) 4-2T
dated as of December 1, 1992
4-2U Twenty-First Supplemental Indenture, Note (12) 4-2U
dated as of August 1, 1993
</TABLE>
<PAGE>
29
<TABLE>
<CAPTION>
EXHIBIT INDEX
Previous Filing
Reg. S-K --------------------------------
Exhibit Item 601 Registration
No. Reference Document Description Number Exhibit
- ------ --------- -------------------- ------------ -------
<S> <C> <C> <C> <C>
4-2V Twenty-Second Supplemental Indenture, Note (12) 4-2V
dated as of October 1, 1993
4-2W Twenty-Third Supplemental Indenture, Note (13) 4-2W
dated as of August 15, 1994
4-2X Twenty-Fourth Supplemental Indenture, Note (13) 4-2X
dated as of October 1, 1994
4-2Y Twenty-Fifth Supplemental Indenture
dated as of July 15, 1995
4-2Z Twenty-Sixth Supplemental Indenture
dated as of October 1, 1995
4-3 Term Loan Agreement between New Jersey Note (8) 4-3
Resources Corporation and Union Bank of
Switzerland, dated January 31, 1987
4-4 Revolving Credit Agreement between New Jersey Note (8) 4-4
Resources Corporation and Swiss Bank Corporation,
dated September 6, 1989
4-5 Amended and Restated Note and Credit The Company's 4-5
Agreement between New Jersey Resources Quarterly Report
Corporation and First Fidelity Bank, on Form 10-Q for
dated May 7, 1993 the quarter ended
June 30, 1993
4-6 Revolving Credit Agreement between New Jersey Note (10) 4-6
Resources Corporation and Union Bank of
Switzerland, dated September 28, 1990
4-7 Revolving Credit and Term Loan Agreement Note (10) 4-7
between New Jersey Resources Corporation and
Midlantic National Bank, dated December 20, 1990
4-8 Revolving Credit Agreement between New Jersey Note (10) 4-8
Resources Corporation and Union Bank of
Switzerland, dated December 31, 1990
</TABLE>
<PAGE>
30
<TABLE>
<CAPTION>
EXHIBIT INDEX
Previous Filing
Reg. S-K --------------------------------
Exhibit Item 601 Registration
No. Reference Document Description Number Exhibit
- ------ --------- -------------------- ------------ -------
<S> <C> <C> <C> <C>
4-9 Credit Agreement between New Jersey Resources Note (10) 4-9
Corporation and J.P. Morgan Delaware,
dated August 1, 1991
4-10 Revolving Credit Agreement between New Jersey Note (10) 4-10
Resources Corporation and Swiss Bank Corporation,
dated September 30, 1991
10-2 10 Agreements between NJNG and Algonquin Gas
Transmission Company:
10-2A Dated September 8, 1967 2-38344 4(d)
10-2B Dated September 8, 1967 2-38344 4(e)
10-2C Dated June 20, 1986 33-12437 10-2C
10-2D Dated June 20, 1986 33-12437 10-2D
10-4 Agreements between NJNG and Consolidated
Gas Transmission Corporation:
Dated November 16, 1983 Note (3) 10-6
10-4A Dated July 12, 1985 Note (4) 10-6A
10-4B Dated January 30, 1984 33-12437 10-4L
10-6 Agreement between NJNG and Boundary Gas Inc., Note (3) 10-8
dated March 6, 1984
10-7 Retirement Plan for Represented Employees, as 2-73181 10(f)
amended October 1, 1984
10-8 Retirement Plan for Non-Represented Employees, 2-73181 10(g)
as amended October 1, 1985
</TABLE>
<PAGE>
31
<TABLE>
<CAPTION>
EXHIBIT INDEX
Previous Filing
Reg. S-K --------------------------------
Exhibit Item 601 Registration
No. Reference Document Description Number Exhibit
- ------ --------- -------------------- ------------ -------
<S> <C> <C> <C> <C>
10-9 Supplemental Retirement Plans covering all Note (5) 10-9
Executive Officers as described in the
Registrant's definitive proxy statement
incorporated herein by reference
10-11 Agreements between NJNG and Transcontinental
Gas Pipe Line Corporation:
Dated April 1, 1989 Note (9) 10-11
10-11A Dated October 30, 1989 Note (9) 10-11A
0-13 Agreements between NJNG and Alberta Northeast Note (11) 10-13
Gas Limited, dated February 7, 1991
10-14 Agreement between NJNG and Iroquois Gas Note (11) 10-14
Transmission System, L.P., dated February 7, 1991
10-15 Agreement between NJNG and CNG Energy The Company's 10-15
Company, dated November 23, 1988 Quarterly Report
on Form 10-Q for
the quarter ended
December 31, 1992
13-1 13 1995 Annual Report to Stockholders. Such
Exhibit includes only those portions thereof
which are expressly incorporated by reference
in this Form 10-K.
21-1 21 Subsidiaries of the Registrant
23-1 23 Consent of Independent Accountants See page 26
27-1 27 Financial Data Schedule
Note (1) 1982 Form 10-K File No. 1-8359
Note (2) 1983 Form 10-K File No. 1-8359
Note (3) 1984 Form 10-K File No. 1-8359
Note (4) 1985 Form 10-K File No. 1-8359
Note (5) 1986 Form 10-K File No. 1-8359
Note (6) 1987 Form 10-K File No. 1-8359
Note (7) 1988 Form 10-K File No. 1-8359
Note (8) 1989 Form 10-K File No. 1-8359
Note (9) 1990 Form 10-K File No. 1-8359
Note (10) 1991 Form 10-K File No. 1-8359
Note (11) 1992 Form 10-K File No. 1-8359
Note (12) 1993 Form 10-K File No. 1-8359
Note (13) 1994 Form 10-K File No. 1-8359
</TABLE>
================================================================================
MORTGAGE
NEW JERSEY NATURAL GAS COMPANY
To
HARRIS TRUST AND SAVINGS BANK,
As Trustee
---------------------------
TWENTY-FIFTH SUPPLEMENTAL INDENTURE
Dated as of July 15, 1995
---------------------------
Supplemental to Indenture of Mortgage and
Deed of Trust Dated April 1, 1952
================================================================================
Prepared by: Joseph D. Ferraro, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
<PAGE>
MORTGAGE
TWENTY-FIFTH SUPPLEMENTAL INDENTURE, dated as of July 15, 1995, between NEW
JERSEY NATURAL GAS COMPANY, a corporation organized and existing under the laws
of the State of New Jersey (hereinafter called the "Company"), having its
principal office at 1415 Wyckoff Road, Wall, New Jersey, party of the first
part, and HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing
under the laws of the State of Illinois and authorized to accept and execute
trusts (hereinafter called the "Trustee"), having its principal office at 111
West Monroe Street, Chicago, Illinois, as Trustee under the Indenture of
Mortgage and Deed of Trust hereinafter mentioned, party of the second part.
WHEREAS, the Company has heretofore executed and delivered to the Trustee
its Indenture of Mortgage and Deed of Trust dated April 1, 1952 (hereinafter
sometimes called the "Original Indenture") to secure the payment of the
principal of and the interest and premium (if any) on all Bonds at any time
issued and outstanding thereunder, and to declare the terms and conditions upon
which Bonds are to be issued thereunder; and
WHEREAS, the Company thereafter executed and delivered to the Trustee its
First Supplemental Indenture dated February 1, 1958, its Second Supplemental
Indenture dated December 1, 1960, its Third Supplemental Indenture dated July 1,
1962, its Fourth Supplemental Indenture dated September 1, 1962, its Fifth
Supplemental Indenture dated December 1, 1963, its Sixth Supplemental Indenture
dated June 1, 1966, its Seventh Supplemental Indenture dated October 1, 1970,
its Eighth Supplemental Indenture dated May 1, 1975, its Ninth Supplemental
Indenture dated February 1, 1977, its Tenth Supplemental Indenture dated as of
September 1, 1980, its Eleventh Supplemental Indenture dated as of September 1,
1983, its Twelfth Supplemental Indenture dated as of August 1, 1984, its
Thirteenth Supplemental Indenture dated as of September 1, 1985, its Fourteenth
Supplemental Indenture dated as of May 1, 1986, its Fifteenth Supplemental
Indenture dated as of March 1, 1987, its Sixteenth Supplemental Indenture dated
as of December 1, 1987, its Seventeenth Supplemental Indenture dated as of June
1, 1988, its Eighteenth Supplemental Indenture dated as of June 1, 1989, its
Nineteenth Supplemental Indenture dated as of March 1, 1991, its Twentieth
Supplemental Indenture dated as of December 1, 1992, its Twenty-First
Supplemental Indenture dated as of August 1, 1993, its Twenty-Second
Supplemental Indenture dated as of October 1, 1993, its Twenty-Third
Supplemental Indenture dated as of August 15, 1994, and its Twenty-Fourth
Supplemental Indenture dated as of October 1, 1994, supplementing and amending
the Original Indenture; and
WHEREAS, Bonds in the aggregate principal amount of Twelve Million Five
Hundred Thousand Dollars ($12,500,000) were issued under and in accordance with
the terms of the Original Indenture, as an initial series designated "First
Mortgage Bonds, 4-1/4% Series A due 1977", herein sometimes called "1977
Series A
-2-
<PAGE>
Bonds", which 1977 Series A Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Two Million
Two Hundred Fifty Thousand Dollars ($2,250,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First Supplemental Indenture, as a second series designated "First
Mortgage Bonds, 5% Series B due 1983", herein sometimes called "1983 Series B
Bonds", which 1983 Series B Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Four Million
Dollars ($4,000,000) were issued under and in accordance with the terms of the
Original Indenture, as supplemented and amended by the First Supplemental
Indenture and the Second Supplemental Indenture, as a third series designated
"First Mortgage Bonds, 5-1/8% Series C due 1985", herein sometimes called "1985
Series C Bonds", which 1985 Series C Bonds have since been paid and redeemed by
the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Five Million
Dollars ($5,000,000) were issued under and in accordance with the terms of the
Original Indenture, as supplemented and amended by the First through the Fourth
Supplemental Indentures, inclusive, as a fourth series designated "First
Mortgage Bonds, 4-7/8% Series D due 1987", herein sometimes called "1987 Series
D Bonds", which 1987 Series D Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Four Million
Five Hundred Thousand Dollars ($4,500,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Fifth Supplemental Indentures, inclusive, as a fifth series
designated "First Mortgage Bonds, 4-3/4% Series E due 1988", herein sometimes
called "1988 Series E Bonds", which 1988 Series E Bonds have since been paid and
redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Fifteen
Million Dollars ($15,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Seventh Supplemental Indentures, inclusive, as a sixth series designated "First
Mortgage Bonds, 9-1/4% Series F due 1995", herein sometimes called "1995 Series
F Bonds", which 1995 Series F Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Dollars ($10,000,000) were issued under and in accordance with the terms of the
Original Indenture, as supplemented and amended by the First through the Eighth
Supplemental Indentures, inclusive, as a seventh series designated "First
Mortgage Bonds, 10% Series G due 1987", herein
-3-
<PAGE>
sometimes called "1987 Series G Bonds", which 1987 Series G Bonds have since
been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Dollars ($10,000,000) were issued under and in accordance with the terms of the
Original Indenture, as supplemented and amended by the First through the Ninth
Supplemental Indentures, inclusive, as an eighth series designated "First
Mortgage Bonds, 9% Series H due 1992", herein sometimes called "1992 Series H
Bonds", which 1992 Series H Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Nine Million
Five Hundred Forty-Five Thousand Dollars ($9,545,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Tenth Supplemental Indentures, inclusive, as a ninth
series designated "First Mortgage Bonds, 9-1/8% Series J due 2000", herein
sometimes called "2000 Series J Bonds", which 2000 Series J Bonds have since
been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Three Hundred Thousand Dollars ($10,300,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Eleventh Supplemental Indentures, inclusive, as a tenth series
designated "First Mortgage Bonds, 10-3/8% Series K due 2013", herein sometimes
called "2013 Series K Bonds", which 2013 Series K Bonds have since been paid and
redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Five Hundred Thousand Dollars ($10,500,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Twelfth Supplemental Indentures, inclusive, as an eleventh
series designated "First Mortgage Bonds, 10-1/2% Series L due 2014", herein
sometimes called "2014 Series L Bonds", which 2014 Series L Bonds have since
been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twelve
Million Dollars ($12,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Thirteenth Supplemental Indentures, inclusive, as a twelfth series designated
"First Mortgage Bonds, 10.85% Series M due 2000", herein sometimes called "2000
Series M Bonds", of which Seven Million Two Hundred Thousand Dollars
($7,200,000) in principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Dollars ($10,000,000) were issued under and in accordance with the terms of the
Original Indenture as
-4-
<PAGE>
supplemented and amended by the First through the Fourteenth Supplemental
Indentures, inclusive, as a thirteenth series designated "First Mortgage Bonds,
10% Series N due 2001", herein sometimes called "2001 Series N Bonds", of which
Six Million Dollars ($6,000,000) in principal amount are outstanding at the date
hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Fifteen
Million Dollars ($15,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Fifteenth Supplemental Indentures, inclusive, as a fourteenth series designated
"First Mortgage Bonds, 8.50% Series P due 2002", herein sometimes called "2002
Series P Bonds", of which Nine Million Five Hundred Forty-Five Thousand Dollars
($9,545,000) in principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Thirteen
Million Five Hundred Thousand Dollars ($13,500,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Sixteenth Supplemental Indentures, inclusive, as a
fifteenth series designated "First Mortgage Bonds, 9% Series Q due 2017", herein
sometimes called "2017 Series Q Bonds", of which Thirteen Million Five Hundred
Thousand Dollars ($13,500,000) in principal amount are outstanding at the date
hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty-Five
Million Dollars ($25,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Seventeenth Supplemental Indentures, inclusive, as a sixteenth series designated
"First Mortgage Bonds, 8.50% Series R due 2018", herein sometimes called "2018
Series R Bonds", of which Twenty-Five Million Dollars ($25,000,000) in principal
amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty
Million Dollars ($20,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Eighteenth Supplemental Indentures, inclusive, as a seventeenth series
designated "First Mortgage Bonds, 10.10% Series S due 2009", herein sometimes
called "2009 Series S Bonds", of which Twenty Million Dollars ($20,000,000) in
principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Nine Million
Five Hundred Forty-Five Thousand Dollars ($9,545,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Nineteenth Supplemental Indentures, inclusive, as an
eighteenth series designated "First Mortgage Bonds, 7.05% Series T due 2016",
herein sometimes called "2016 Series T
-5-
<PAGE>
Bonds", of which Nine Million Five Hundred Forty-Five Thousand Dollars
($9,545,000) in principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Fifteen
Million Dollars ($15,000,000) were authorized, of which Fifteen Million Dollars
($15,000,000) have been issued under and in accordance with the terms of the
Original Indenture, as supplemented and amended by the First through the
Nineteenth Supplemental Indentures, inclusive, as a nineteenth series designated
"First Mortgage Bonds, 7.25% Series U due 2021", herein sometimes called "2021
Series U Bonds", of which Fifteen Million Dollars ($15,000,000) in principal
amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty-Five
Million Dollars ($25,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twentieth Supplemental Indentures, inclusive, as a twentieth series designated
"First Mortgage Bonds, 7.50% Series V due 2002", herein sometimes called "2002
Series V Bonds", of which Twenty-Five Million Dollars ($25,000,000) in principal
amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Three Hundred Thousand Dollars ($10,300,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Twenty-First Supplemental Indentures, inclusive, as a
twenty-first series designated "First Mortgage Bonds, 5-3/8% Series W due 2023",
herein sometimes called "2023 Series W Bonds", of which Ten Million Three
Hundred Thousand Dollars ($10,300,000) in principal amount are outstanding at
the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Thirty
Million Dollars ($30,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twenty-Second Supplemental Indentures, inclusive, as a twenty-second series
designated "First Mortgage Bonds, 6.27% Series X due 2008", herein sometimes
called "2008 Series X Bonds", of which Thirty Million Dollars ($30,000,000) in
principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Five Hundred Thousand Dollars ($10,500,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Twenty-Third Supplemental Indentures, inclusive, as a
twenty-third series designated "First Mortgage Bonds, 6.25% Series Y due 2024",
herein sometimes called "2024 Series Y Bonds", of which Ten Million Five Hundred
Thousand Dollars
-6-
<PAGE>
($10,500,000) in principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty-Five
Million Dollars ($25,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twenty-Fourth Supplemental Indentures, inclusive, as a twenty-fourth series
designated "First Mortgage Bonds, 8.25% Series Z due 2004", herein sometimes
called "2004 Series Z Bonds", of which Twenty-Five Million Dollars ($25,000,000)
in principal amount are outstanding at the date hereof; and
WHEREAS, the Original Indenture provides that, subject to certain
exceptions not presently relevant, such changes in or additions to the
provisions of the Indenture (the term "Indenture" and other terms used herein
having the meanings assigned thereto in the Original Indenture except as herein
expressly modified) may be made to add to the covenants and agreements of the
Company in the Indenture contained other covenants and agreements thereafter to
be observed by the Company; and to provide for the creation of any series of
Bonds, designating the series to be created and specifying the form and
provisions of the Bonds of such series as in the Indenture provided or
permitted; and
WHEREAS, the Indenture further provides that the Company and the Trustee
may enter into indentures supplemental to the Indenture to convey, transfer and
assign unto the Trustee and to subject to the lien of the Indenture additional
properties acquired by the Company; and
WHEREAS, the Company has entered into a Loan Agreement dated as of August
1, 1995 (the "Loan Agreement") with the New Jersey Economic Development
Authority (herein sometimes called the "EDA"), a public body corporate and
politic of the State of New Jersey, pursuant to which (i) the proceeds of the
issuance by the EDA of Twenty-Five Million Dollars ($25,000,000) in aggregate
principal amount of its Natural Gas Facilities Refunding Revenue Bonds, Series
1995A (New Jersey Natural Gas Company Project) (the "1995A EDA Bonds") are to be
loaned to the Company to provide for the refinancing of certain natural gas and
functionally related and subordinate facilities (consisting of the refunding of
$25,000,000 in aggregate principal amount of the EDA's Natural Gas Facilities
Revenue Bonds, Series 1988 (New Jersey Natural Gas Company Project)), and (ii)
the proceeds of the issuance by the EDA of Sixteen Million Dollars ($16,000,000)
in aggregate principal amount of its Natural Gas Facilities Revenue Bonds,
Series 1995B (New Jersey Natural Gas Company Project) (the "1995B EDA Bonds")
are to be loaned from time to time to the Company to provide funds to finance a
part of the cost of the acquisition and construction of facilities for the local
furnishing of natural gas and functionally related and subordinate facilities to
be located in various municipalities in the County of Morris, New Jersey, which
1995A EDA Bonds and 1995B EDA Bonds (herein
-7-
<PAGE>
collectively referred to as the "1995 Series EDA Bonds") are being issued
pursuant to the EDA Bond Indenture (as defined below); and
WHEREAS, the Company has duly determined to create a twenty-fifth series of
Bonds, to be known as "First Mortgage Bonds, Adjustable Rate Series AA due
2030", herein sometimes called "2030 Series AA Bonds", and a twenty-sixth series
of Bonds, to be known as "First Mortgage Bonds, Adjustable Rate Series BB due
2030", herein sometimes called "2030 Series BB Bonds", each to be issued and
delivered (in conjunction with the assignment by the EDA of certain of its
rights under the Loan Agreement) to First Fidelity Bank, National Association,
as trustee (the "EDA Loan Trustee") pursuant to an indenture of trust dated as
of August 1, 1995 (the "EDA Bond Indenture") between the EDA and the EDA Loan
Trustee for the benefit and security of the holders of the 1995 Series EDA
Bonds, all as herein provided, and to add to the covenants and agreements
contained in the Indenture the covenants and agreements hereinafter set forth;
and
WHEREAS, the Company, in the exercise of the powers and authority conferred
upon and reserved to it under the provisions of the Indenture and pursuant to
appropriate resolutions of its Board of Directors (including the Executive
Committee thereof), has duly resolved and determined to make, execute and
deliver to the Trustee a Twenty-Fifth Supplemental Indenture in the form hereof
for the purposes herein provided; and
WHEREAS, all conditions and requirements necessary to make this
Twenty-Fifth Supplemental Indenture a valid, binding and legal instrument have
been done, performed and fulfilled and the execution and delivery hereof have
been in all respects duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That NEW JERSEY NATURAL GAS COMPANY, by way of further assurance and in
consideration of the premises and of the acceptance by the Trustee of the trusts
hereby created and of One Dollar to it duly paid by the Trustee at or before the
ensealing and delivery of these presents, the receipt whereof is hereby
acknowledged, and in order to secure the payment of principal of and any premium
which may be due and payable on and the interest on all Bonds at any time issued
and outstanding under the Indenture according to their tenor and effect, and the
performance and observance by the Company of all the covenants and conditions
herein and therein contained, has granted, bargained, sold, warranted, aliened,
remised, released, conveyed, assigned, transferred, mortgaged, pledged, set over
and confirmed, and by these presents does grant, bargain, sell, warrant, alien,
remise, release, convey, assign, transfer, mortgage, pledge, set over and
confirm, unto the party of the second part, and to its successors in the trust,
and to it and its assigns forever, and has granted and does hereby grant
-8-
<PAGE>
thereunto a security interest in, all of the property, real, personal and mixed,
now owned by the Company and situated in the Counties of Burlington, Middlesex,
Monmouth, Morris, Ocean, Passaic, Somerset and Sussex in the State of New
Jersey, or wherever situate (except property specifically excepted from the lien
of the Indenture by the terms of the Indenture) and also all of the property,
real, personal and mixed, hereafter acquired by the Company wherever situate
(except property specifically excepted from the lien of the Indenture by the
terms of the Indenture), including both as to property now owned and property
hereafter acquired, without in anywise limiting or impairing the enumeration of
the same, the scope and intent of the foregoing or of any general or specific
description contained in the Indenture, the following:
I.
FRANCHISES
All and singular, the franchises, grants, permits, immunities, privileges
and rights of the Company owned and held by it at the date of the execution
hereof or hereafter acquired for the construction, maintenance, and operation of
the gas plants and systems now or hereafter subject to the lien hereof, as well
as all certificates, franchises, grants, permits, immunities, privileges, and
rights of the Company used or useful in the operation of the property now or
hereafter mortgaged hereunder, including all and singular the franchises,
grants, permits, immunities, privileges, and rights of the Company granted by
the governing authorities of any municipalities or other political subdivisions
and all renewals, extensions and modifications of said certificates, franchises,
grants, permits, privileges, and rights or any of them.
II.
GAS DISTRIBUTION SYSTEMS AND RELATED PROPERTY
All gas generating plants, gas storage plants and gas manufacturing plants
of the Company, all the buildings, erections, structures, generating and
purifying apparatus, holders, engines, boilers, benches, retorts, tanks,
instruments, appliances, apparatus, facilities, machinery, fixtures, and all
other property used or provided for use in the generation, manufacturing and
purifying of gas, together with the land on which the same are situated, and all
other lands and easements, rights-of-way, permits, privileges, and sites forming
a part of such plants or any of them or occupied, enjoyed or used in connection
therewith.
All gas distribution or gas transmission systems of the Company, all
buildings, erections, structures, generating and purifying apparatus, holders,
engines, boilers, benches, retorts,
-9-
<PAGE>
tanks, pipe lines, connections, service pipes, meters, conduits, tools,
instruments, appliances, apparatus, facilities, machinery, fixtures, and all
other property used or provided for use in the construction, maintenance, repair
or operations of such distribution or transmission systems, together with all
the certificates, rights, privileges, rights-of-way, franchises, licenses,
easements, grants, liberties, immunities, permits of the Company, howsoever
conferred or acquired, under, over, or upon any private property or any public
streets or highways within as well as without the corporate limits of any
municipal corporation. Without limiting the generality of the foregoing, there
are expressly included the gas distribution or gas transmission systems located
in the Counties of Burlington, Middlesex, Monmouth, Morris, Ocean, Passaic,
Somerset and Sussex in the State of New Jersey, and in the following
municipalities in said State and Counties: Aberdeen Township (formerly Matawan
Township), Allenhurst Borough, City of Asbury Park, Atlantic Highlands Borough,
Avon Borough, Barnegat Light Borough, Barnegat Township (formerly named Union
Township), Bay Head Borough, Beach Haven Borough, Beachwood Borough, Belmar
Borough, Berkeley Township, Boonton Town, Boonton Township, Bradley Beach
Borough, Brick Township, Brielle Borough, Colts Neck Township, Deal Borough,
Denville Township, Dover Town, Dover Township, Eagleswood Township, East
Brunswick Township, Eatontown Borough, Englishtown Borough, Fair Haven Borough,
Farmingdale Borough, Franklin Township in Somerset County, Freehold Borough,
Freehold Township, Hanover Township, Harvey Cedars Borough, Hazlet Township,
Highlands Borough, Holmdel Township, Hopatcong Borough, Howell Township,
Interlaken Borough, Island Heights Borough, Jackson Township, Jefferson
Township, Keansburg Borough, Keyport Borough, Lacey Township, Lakehurst Borough,
Lakewood Township, Lavallette Borough, Lincoln Park Borough, Little Egg Harbor
Township, Little Silver Borough, Loch Arbour Village, Long Beach Township, Long
Branch City, Manalapan Township, Manasquan Borough, Manchester Township,
Mantoloking Borough, Marlboro Township, Matawan Borough, Middletown Township,
Milltown Borough, Mine Hill Township, Monmouth Beach Borough, Monroe Township,
Montville Township, Morris Plains Borough, Mount Arlington Borough, Mount Olive
Township, Mountain Lakes Borough, Neptune City Borough, Neptune Township,
Netcong Borough, New Brunswick City, North Brunswick Township, Ocean Township in
Monmouth County, Ocean Township in Ocean County, Ocean Gate Borough, Oceanport
Borough, Old Bridge Township (formerly named Madison Township), Parsippany-Troy
Hills Township, Pine Beach Borough, Point Pleasant Borough, Point Pleasant Beach
Borough, Randolph Township, Red Bank Borough, Rockaway Borough, Rockaway
Township, Roxbury Township, Rumson Borough, Sayreville Borough, Sea Bright
Borough, Sea Girt Borough, Seaside Heights Borough, Seaside Park Borough, Ship
Bottom Borough, Shrewsbury Borough, Shrewsbury Township, South Belmar Borough,
South Brunswick Township, South River Borough, South Toms River Borough, Spring
Lake Borough, Spring Lake Heights Borough, Stafford Township, Surf City Borough,
Tinton Falls Borough (formerly named New Shrewsbury Borough), Tuckerton Borough,
Union Beach Borough, Union Township, Victory Gardens Borough, Wall Township,
Washington Township in
-10-
<PAGE>
Burlington County, Washington Township in Morris County, West Long Branch
Borough, West Milford Township and Wharton Borough.
III.
CONTRACTS
All of the Company's right, title and interest in and under all contracts,
licenses or leases for the purchase of gas, either in effect at the date of
execution hereof or hereafter made and any extension or renewal thereof.
TOGETHER WITH ALL AND SINGULAR the tenements, hereditaments and
appurtenances belonging or in anywise appertaining to the Trust Estate, or any
part thereof, with the reversion or reversions, remainder and remainders, rents,
issues, income and profits thereof, and all the right, title, interest and claim
whatsoever, at law or in equity, which the Company now has or which it may
hereafter acquire in and to the Trust Estate and every part and parcel thereof.
TO HAVE AND TO HOLD the Trust Estate and all and singular the lands,
properties, estates, rights, franchises, privileges and appurtenances hereby
mortgaged, conveyed, pledged or assigned, or intended so to be, together with
all the appurtenances thereto appertaining, unto the Trustee and its successors
and assigns forever;
SUBJECT, HOWEVER, as to property hereby conveyed, to Permitted
Encumbrances;
BUT IN TRUST, NEVERTHELESS, under and subject to the terms and conditions
hereafter set forth, for the equal and proportionate use, benefit, security and
protection of each and every person and corporation who may be or become the
holders of the Bonds and coupons hereby secured, if any, without preference,
priority or distinction as to the lien or otherwise of one Bond or coupon over
or from the others by reason of priority in the issue or negotiation thereof, or
by reason of the date of maturity thereof, or otherwise (except as any sinking,
amortization, improvement, renewal or other analogous fund, established in
accordance with the provisions of the Indenture, may afford additional security
for the Bonds of any particular series and except as provided in ss.9.02 of the
Indenture), and for securing the observance and performance of all the terms,
provisions and conditions of the Indenture.
THIS INDENTURE FURTHER WITNESSETH, that the Company has agreed and
covenanted, and hereby does agree and covenant, with the Trustee and its
successors and assigns and with the respective holders from time to time of the
Bonds and coupons, or any thereof, as follows:
-11-
<PAGE>
ARTICLE I.
CERTAIN AMENDMENTS OF INDENTURE
ss.1.1. The Original Indenture, as heretofore amended, be and it hereby is
further amended in the following respects, the section numbers specified below
being the sections of the Indenture in which such amendments occur:
ss.1.01. The following definition be and it hereby is added immediately
after the twenty-fifth sentence of ss.1.01B:
"'TWENTY-FIFTH SUPPLEMENTAL INDENTURE' shall mean the Supplemental
Indenture dated as of July 15, 1995, supplemental to the Indenture."
ss.1.01. The following definitions be and they hereby are added immediately
after the twenty-sixth sentence of ss.1.01F:
"'2030 SERIES AA BOND' shall mean one of the First Mortgage Bonds,
Adjustable Rate Series AA due 2030, issued hereunder.
'2030 SERIES BB BOND' shall mean one of the First Mortgage Bonds,
Adjustable Rate Series BB due 2030, issued hereunder."
ss.2.11. The following be and it hereby is added at the end of ss.2.11:
"No charge except for taxes or governmental charges shall be made against
any holder of any 2030 Series AA Bond or 2030 Series BB Bond for the
exchange, transfer or registration of transfer thereof."
ss.8.08. The period at the end of the first paragraph of ss.8.08 be and it
hereby is deleted and the following words and figures be and they hereby are
added thereto:
", and the 2030 Series AA Bonds and the 2030 Series BB Bonds shall be
redeemed at the redemption price specified in ss.10.67 and ss.10.69,
respectively."
ARTICLE II.
2030 SERIES AA BONDS
ss.2.1. There shall be a twenty-fifth series of Bonds, known as and
entitled "First Mortgage Bonds, Adjustable Rate Series AA due 2030" or "First
Mortgage Bonds, Adjustable Rate Series AA" (herein and in the Indenture referred
to as the "2030 Series AA Bonds"), and the form thereof shall contain suitable
provisions with respect to the matters hereinafter in this Section specified and
shall in other respects be substantially as set forth in the preambles to the
Original Indenture.
-12-
<PAGE>
The aggregate principal amount of 2030 Series AA Bonds which may be
authenticated and delivered and outstanding under the Indenture is Twenty-Five
Million Dollars ($25,000,000).
The 2030 Series AA Bonds shall be payable to the EDA Loan Trustee, and
shall be nontransferable except to a successor of the EDA Loan Trustee.
The 2030 Series AA Bonds shall bear interest at the minimum rate per annum
necessary to yield interest in amounts sufficient, when taken together with
other amounts available therefor under the EDA Bond Indenture, to pay the
interest from time to time payable on the 1995A EDA Bonds, computed on the same
basis as the 1995A EDA Bonds (interest on overdue principal and premium, if any,
and, to the extent legally enforceable, interest, being at the rate of six
percent (6%) per annum), but in no event shall the interest rate on the 2030
Series AA Bonds exceed twelve percent (12%); and the 2030 Series AA Bonds shall
mature on August 1, 2030, subject to prior redemption as described herein. The
amount of "annual interest charges" on the 2030 Series AA Bonds, within the
meaning of any provision of the Indenture requiring a determination of said
amount as a condition to the issuance of any Bonds thereunder (including,
without limitation, the 2030 Series AA Bonds and the 2030 Series BB Bonds),
shall mean the amount calculated by applying to the 2030 Series AA Bonds the
interest rate of twelve percent (12%) per annum; provided, however, that if the
rate of interest on the 1995A EDA Bonds shall have become fixed and determined
at a per annum rate lower than twelve percent (12%) for a period not less than
the remaining maturity of said 1995A EDA Bonds (whether said 1995A EDA Bonds
shall mature at their stated maturity, by earlier redemption or otherwise), then
said lower rate shall be used to determine the amount of the "annual interest
charges" on the 2030 Series AA Bonds.
The 2030 Series AA Bonds shall be in the form of registered Bonds without
coupons of denominations of Five Thousand Dollars ($5,000) and any integral
multiple thereof which may be authorized by the Company, the issue of a
registered Bond without coupons in any such denomination to be conclusive
evidence of such authorization. The 2030 Series AA Bonds shall be dated as
provided in ss.2.05 of the Indenture. All 2030 Series AA Bonds shall bear
interest from their respective dates, such interest to be payable, upon the
terms of and otherwise in accordance with the 2030 Series AA Bonds, on the first
business day preceding each date on which interest shall from time to time be
payable on the 1995A EDA Bonds; provided, that the obligation of the Company to
make payments with respect to the principal of, premium, if any, and interest on
the 2030 Series AA Bonds shall be fully or partially, as the case may be,
satisfied and discharged to the extent that at the time any such payment shall
be due, the then due principal of, premium, if any, and interest on any of the
1995A EDA Bonds shall have been fully or partially paid from payments made by
the Company under the Loan Agreement or from other moneys expressly available
therefor in the
-13-
<PAGE>
principal and interest account for the 1995A EDA Bonds under the EDA Bond
Indenture or, as far as principal is concerned, reduced by the principal amount
of any of the 1995A EDA Bonds deemed paid pursuant to Article X of the EDA Bond
Indenture. The principal of and the premium, if any, and interest on the 2030
Series AA Bonds shall be payable at the principal office of the Trustee, in the
City of Chicago, Illinois, or, at the option of the Company, at the "Principal
Office" (as that term is defined in the EDA Bond Indenture) of the EDA Loan
Trustee, in any coin or currency of the United States of America which at the
time of payment shall be legal tender for the payment of public and private
debts.
Notwithstanding any other provision of the Indenture or of the 2030 Series
AA Bonds, payments of the principal of and the premium, if any, and interest on
any 2030 Series AA Bond may be made directly to the registered holder thereof
without presentation or surrender thereof or the making of any notation thereon
if there shall be filed with the Trustee a Certificate of the Company to the
effect that such registered holder (or the person for whom such registered
holder is a nominee) and the Company have entered into a written agreement that
payment shall be so made; provided, however, that before such registered holder
transfers or otherwise disposes of any 2030 Series AA Bond, such registered
holder will, at its election, either endorse thereon (or on a paper annexed
thereto) the principal amount thereof redeemed and the last date to which
interest has been paid thereon or make such Bond available to the Company at the
principal office of the Trustee for the purpose of making such endorsement
thereon.
The 2030 Series AA Bonds shall be subject to redemption at the option of
the Company or otherwise, in the manner provided in the applicable provisions of
Article Ten of the Indenture, as amended by Article IV of this Supplemental
Indenture.
The 2030 Series AA Bonds shall be excluded from the benefits of, and shall
not be subject to redemption through the operation of, a Mandatory Sinking Fund
pursuant to ss.11.02 of the Indenture and shall also be excluded from the
benefits of the covenants of ss.9.08 and ss.11.01 of the Indenture.
Notwithstanding the provisions of ss.10.04 or any other provision of the
Indenture, the selection of 2030 Series AA Bonds to be redeemed shall, in case
fewer than all of the outstanding 2030 Series AA Bonds are to be redeemed, be
made by the Trustee pro rata (to the nearest multiple of Five Thousand Dollars
($5,000)) among the registered holders of the 2030 Series AA Bonds in
proportion, as nearly as practicable, to the respective unpaid principal amounts
of 2030 Series AA Bonds registered in the names of such holders, with
adjustments, to the extent practicable, to compensate for any prior redemption
not made exactly in such proportion (or otherwise as may be specified by a
written order signed by the registered holders of all outstanding 2030 Series AA
Bonds).
-14-
<PAGE>
The definitive 2030 Series AA Bonds may be issued in the form of engraved
Bonds or Bonds printed or lithographed on steel engraved borders or Bonds in
typed form on normal bond paper. Subject to the foregoing provisions of this
Section and the provisions of ss.2.11 of the Indenture, all definitive 2030
Series AA Bonds shall be fully exchangeable for other Bonds of the same series,
of like aggregate principal amounts, and, upon surrender to the Trustee at its
principal office, shall be exchangeable for other Bonds of the same series of a
different authorized denomination or denominations, as requested by the holder
surrendering the same. The Company will execute, and the Trustee shall
authenticate and deliver, registered Bonds without coupons, whenever the same
shall be required for any such exchange.
ss.2.2. 2030 Series AA Bonds in the aggregate principal amount of
Twenty-Five Million Dollars ($25,000,000) may forthwith upon the execution and
delivery of this Supplemental Indenture, or from time to time thereafter, be
executed by the Company and delivered to the Trustee, and shall thereupon be
authenticated and delivered by the Trustee upon compliance by the Company with
the provisions of Articles Four, Five or Six of the Indenture, without awaiting
the filing or recording of this Supplemental Indenture. No additional 2030
Series AA Bonds shall be issued under Article Four, Five or Six without the
consent in writing of the holders of all the outstanding 2030 Series AA Bonds.
ARTICLE III.
2030 SERIES BB BONDS
ss.3.1. There shall be a twenty-sixth series of Bonds, known as and
entitled "First Mortgage Bonds, Adjustable Rate Series BB due 2030" or "First
Mortgage Bonds, Adjustable Rate Series BB" (herein and in the Indenture referred
to as the "2030 Series BB Bonds"), and the form thereof shall contain suitable
provisions with respect to the matters hereinafter in this Section specified and
shall in other respects be substantially as set forth in the preambles to the
Original Indenture.
The aggregate principal amount of 2030 Series BB Bonds which may be
authenticated and delivered and outstanding under the Indenture is Sixteen
Million Dollars ($16,000,000).
The 2030 Series BB Bonds shall be payable to the EDA Loan Trustee, and
shall be nontransferable except to a successor of the EDA Loan Trustee.
The 2030 Series BB Bonds shall bear interest at the minimum rate per annum
necessary to yield interest in amounts sufficient, when taken together with
other amounts available therefor under the EDA Bond Indenture, to pay the
interest from time to time payable on the 1995B EDA Bonds, computed on the same
-15-
<PAGE>
basis as the 1995B EDA Bonds (interest on overdue principal and premium, if any,
and, to the extent legally enforceable, interest, being at the rate of six
percent (6%) per annum), but in no event shall the interest rate on the 2030
Series BB Bonds exceed twelve percent (12%); and the 2030 Series BB Bonds shall
mature on August 1, 2030, subject to prior redemption as described herein. The
amount of "annual interest charges" on the 2030 Series BB Bonds, within the
meaning of any provision of the Indenture requiring a determination of said
amount as a condition to the issuance of any Bonds thereunder (including,
without limitation, the 2030 Series AA Bonds and the 2030 Series BB Bonds),
shall mean the amount calculated by applying to said 2030 Series BB Bonds the
interest rate of twelve percent (12%) per annum; provided, however, that if the
rate of interest on the 1995B EDA Bonds shall have become fixed and determined
at a per annum rate lower than twelve percent (12%) for a period not less than
the remaining maturity of said 1995B EDA Bonds (whether said 1995B EDA Bonds
shall mature at their stated maturity, by earlier redemption or otherwise), then
said lower rate shall be used to determine the amount of the "annual interest
charges" on the 2030 Series BB Bonds.
The 2030 Series BB Bonds shall be in the form of registered Bonds without
coupons of denominations of Five Thousand Dollars ($5,000) and any integral
multiple thereof which may be authorized by the Company, the issue of a
registered Bond without coupons in any such denomination to be conclusive
evidence of such authorization. The 2030 Series BB Bonds shall be dated as
provided in ss.2.05 of the Indenture. All 2030 Series BB Bonds shall bear
interest from their respective dates, such interest to be payable, upon the
terms of and otherwise in accordance with the 2030 Series BB Bonds, on the first
business day preceding each date on which interest shall from time to time be
payable on the 1995B EDA Bonds; provided, that the obligation of the Company to
make payments with respect to the principal of, premium, if any, and interest on
the 2030 Series BB Bonds shall be fully or partially, as the case may be,
satisfied and discharged to the extent that at the time any such payment shall
be due, the then due principal of, premium, if any, and interest on any of the
1995B EDA Bonds shall have been fully or partially paid from payments made by
the Company under the Loan Agreement or from other moneys expressly available
therefor in the principal and interest account for the 1995B EDA Bonds under the
EDA Bond Indenture or, as far as principal is concerned, reduced by the
principal amount of any of the 1995B EDA Bonds deemed paid pursuant to Article X
of the EDA Bond Indenture. The principal of and the premium, if any, and
interest on the 2030 Series BB Bonds shall be payable at the principal office of
the Trustee, in the City of Chicago, Illinois, or, at the option of the Company,
at the "Principal Office" (as that term is defined in the EDA Bond Indenture),
of the EDA Loan Trustee, in any coin or currency of the United States of America
which at the time of payment
-16-
<PAGE>
shall be legal tender for the payment of public and private debts.
Notwithstanding any other provision of the Indenture or of the 2030 Series
BB Bonds, payments of the principal of and the premium, if any, and interest on
any 2030 Series BB Bond may be made directly to the registered holder thereof
without presentation or surrender thereof or the making of any notation thereon
if there shall be filed with the Trustee a Certificate of the Company to the
effect that such registered holder (or the person for whom such registered
holder is a nominee) and the Company have entered into a written agreement that
payment shall be so made; provided, however, that before such registered holder
transfers or otherwise disposes of any 2030 Series BB Bond, such registered
holder will, at its election, either endorse thereon (or on a paper annexed
thereto) the principal amount thereof redeemed and the last date to which
interest has been paid thereon or make such Bond available to the Company at the
principal office of the Trustee for the purpose of making such endorsement
thereon.
The 2030 Series BB Bonds shall be subject to redemption at the option of
the Company or otherwise, in the manner provided in the applicable provisions of
Article Ten of the Indenture, as amended by Article V of this Supplemental
Indenture.
The 2030 Series BB Bonds shall be excluded from the benefits of, and shall
not be subject to redemption through the operation of, a Mandatory Sinking Fund
pursuant to ss.11.02 of the Indenture and shall also be excluded from the
benefits of the covenants of ss.9.08 and ss.11.01 of the Indenture.
Notwithstanding the provisions of ss.10.04 or any other provision of the
Indenture, the selection of 2030 Series BB Bonds to be redeemed shall, in case
fewer than all of the outstanding 2030 Series BB Bonds are to be redeemed, be
made by the Trustee pro rata (to the nearest multiple of Five Thousand Dollars
($5,000)) among the registered holders of the 2030 Series BB Bonds in
proportion, as nearly as practicable, to the respective unpaid principal amounts
of 2030 Series BB Bonds registered in the names of such holders, with
adjustments, to the extent practicable, to compensate for any prior redemption
not made exactly in such proportion (or otherwise as may be specified by a
written order signed by the registered holders of all outstanding 2030 Series BB
Bonds).
The definitive 2030 Series BB Bonds may be issued in the form of engraved
Bonds or Bonds printed or lithographed on steel engraved borders or Bonds in
typed form on normal bond paper. Subject to the foregoing provisions of this
Section and the provisions of ss.2.11 of the Indenture, all definitive 2030
Series BB Bonds shall be fully exchangeable for other Bonds of the same series,
of like aggregate principal amounts, and, upon
-17-
<PAGE>
surrender to the Trustee at its principal office, shall be exchangeable for
other Bonds of the same series of a different authorized denomination or
denominations, as requested by the holder surrendering the same. The Company
will execute, and the Trustee shall authenticate and deliver, registered Bonds
without coupons, whenever the same shall be required for any such exchange.
ss.3.2. 2030 Series BB Bonds in the aggregate principal amount of Sixteen
Million Dollars ($16,000,000) may forthwith upon the execution and delivery of
this Supplemental Indenture, or from time to time thereafter, be executed by the
Company and delivered to the Trustee, and shall thereupon be authenticated and
delivered by the Trustee upon compliance by the Company with the provisions of
Articles Four, Five or Six of the Indenture, without awaiting the filing or
recording of this Supplemental Indenture. No additional 2030 Series BB Bonds
shall be issued under Article Four, Five or Six without the consent in writing
of the holders of all the outstanding 2030 Series BB Bonds.
ARTICLE IV.
REDEMPTION OF THE 2030 SERIES AA BONDS
ss.4.1. The following ss.10.66 and ss.10.67 be and they hereby are added to
Article Ten of the Indenture:
"ss.10.66. The 2030 Series AA Bonds shall be subject to mandatory
redemption as follows: payments of principal of and premium on the 2030 Series
AA Bonds shall be made to the EDA Loan Trustee to redeem 2030 Series AA Bonds in
such amounts as shall be necessary, in accordance with the provisions of the
Loan Agreement, to provide funds under the Loan Agreement to (a) make, when due,
payment at maturity (including, without limitation, maturity upon acceleration
of the 1995A EDA Bonds) and (b) make, when due, any prepayment required by the
Loan Agreement in connection with any mandatory or optional redemption of 1995A
EDA Bonds; provided, however, that the obligation of the Company to make any
redemption payments under this Section shall be fully or partially, as the case
may be, satisfied and discharged to the extent that at any time such payment
shall be due, the then due payment at maturity or redemption payment on any of
the 1995A EDA Bonds shall have been fully or partially made from payments made
by the Company under the Loan Agreement or from other moneys expressly available
therefor in a redemption account or subaccount for the 1995A EDA Bonds under the
EDA Bond Indenture or, as far as principal is concerned, reduced by the
principal amount of any 1995A EDA Bonds deemed paid pursuant to Article X of the
EDA Bond Indenture. Terms used and not defined in this Section shall have the
respective meanings given to them in the Twenty-Fifth Supplemental Indenture
dated as of July 15, 1995.
-18-
<PAGE>
"ss.10.67. In the case of the redemption of 2030 Series AA Bonds out of
moneys deposited with the Trustee pursuant to ss.8.08, such 2030 Series AA Bonds
shall, upon compliance with provisions of ss.10.04, and subject to the
provisions of ss.2.1 of the Twenty-Fifth Supplemental Indenture, be redeemable
at the principal amounts thereof, together with interest accrued thereon to the
date fixed for redemption, without premium."
ARTICLE V.
REDEMPTION OF THE 2030 SERIES BB BONDS
ss.5.1. The following ss.10.68 and ss.10.69 be and they hereby are added to
Article Ten of the Indenture:
"ss.10.68. The 2030 Series BB Bonds shall be subject to mandatory
redemption as follows: payments of principal of and premium on the 2030 Series
BB Bonds shall be made to the EDA Loan Trustee to redeem 2030 Series BB Bonds in
such amounts as shall be necessary, in accordance with the provisions of the
Loan Agreement, to provide funds under the Loan Agreement to (a) make, when due,
payment at maturity (including, without limitation, maturity upon acceleration
of the 1995B EDA Bonds) and (b) make, when due, any prepayment required by the
Loan Agreement in connection with any mandatory or optional redemption of 1995B
EDA Bonds; provided, however, that the obligation of the Company to make any
redemption payments under this Section shall be fully or partially, as the case
may be, satisfied and discharged to the extent that at any time such payment
shall be due, the then due payment at maturity or redemption payment on any of
the 1995B EDA Bonds shall have been fully or partially made from payments made
by the Company under the Loan Agreement or from other moneys expressly available
therefor in a redemption account or subaccount for the 1995B EDA Bonds under the
EDA Bond Indenture or, as far as principal is concerned, reduced by the
principal amount of any 1995B EDA Bonds deemed paid pursuant to Article X of the
EDA Bond Indenture. Terms used and not defined in this Section shall have the
respective meanings given to them in the Twenty-Fifth Supplemental Indenture
dated as of July 15, 1995.
"ss.10.69. In the case of the redemption of 2030 Series BB Bonds out of
moneys deposited with the Trustee pursuant to ss.8.08, such 2030 Series BB Bonds
shall, upon compliance with provisions of ss.10.04, and subject to the
provisions of ss.3.1 of the Twenty-Fifth Supplemental Indenture, be redeemable
at the principal amounts thereof, together with interest accrued thereon to the
date fixed for redemption, without premium."
-19-
<PAGE>
ARTICLE VI.
MISCELLANEOUS
ss.6.1. The Company is lawfully seized and possessed of all the real
estate, franchises and other property described or referred to in the Indenture
(except properties released from the lien of the Indenture pursuant to the
provisions thereof) as presently mortgaged, subject to the exceptions stated
therein, such real estate, franchises and other property are free and clear of
any lien prior to the lien of the Indenture except as set forth in the Granting
Clauses of the Indenture and the Company has good right and lawful authority to
mortgage the same as provided in and by the Indenture.
ss.6.2. The Trustee assumes no duties, responsibilities or liabilities by
reason of this Supplemental Indenture other than as set forth in the Indenture,
and this Supplemental Indenture is executed and accepted by the Trustee subject
to all the terms and conditions of its acceptance of the trust under the
Indenture, as fully as if said terms and conditions were herein set forth at
length.
ss.6.3. The terms used in this Supplemental Indenture shall have the
meanings assigned thereto in the Indenture. Reference by number in this
Supplemental Indenture to Articles or Sections shall be construed as referring
to Articles or Sections contained in the Indenture, unless otherwise stated.
ss.6.4. As amended and modified by this Supplemental Indenture, the
Indenture is in all respects ratified and confirmed and the Indenture and this
Supplemental Indenture shall be read, taken and construed as one and the same
instrument.
ss.6.5. Neither the approval by the Board of Public Utilities of the State
of New Jersey of the execution and delivery of this Supplemental Indenture nor
the approval by said Board of the issue of any Bonds under the Indenture shall
in any way be construed as the approval by said Board of any other act, matter
or thing which requires approval of said Board under the laws of the State of
New Jersey; nor shall approval by said Board of the issue of any Bonds under the
Indenture bind said Board or any other public body or authority of the State of
New Jersey having jurisdiction in the premises in any future application for the
issue of Bonds under the Indenture or otherwise.
ss.6.6. This Supplemental Indenture may be executed in any number of
counterparts and all said counterparts executed and delivered each as an
original shall constitute but one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-20-
<PAGE>
NEW JERSEY NATURAL GAS COMPANY HEREBY DECLARES THAT IT HAS READ THIS
TWENTY-FIFTH SUPPLEMENTAL INDENTURE, HAS RECEIVED A COMPLETELY FILLED-IN TRUE
COPY OF IT WITHOUT CHARGE AND HAS SIGNED THIS TWENTY-FIFTH SUPPLEMENTAL
INDENTURE ON THE DATE CONTAINED IN ITS ACKNOWLEDGMENT HEREOF.
IN WITNESS WHEREOF, NEW JERSEY NATURAL GAS COMPANY, party of the first
part, has caused these presents to be signed in its corporate name by its
President or a Vice President and its corporate seal to be hereunto affixed and
attested by its Secretary or an Assistant Secretary, and HARRIS TRUST AND
SAVINGS BANK, party of the second part, in evidence of its acceptance of the
trust hereby created, has caused these presents to be signed in its corporate
name by one of its Vice Presidents and its corporate seal to be hereunto affixed
and attested by its Secretary or one of its Assistant Secretaries.
NEW JERSEY NATURAL GAS COMPANY
By /s/ TIMOTHY C. HEARNE
----------------------------
Name: Timothy C. Hearne
Title: Vice President and
Treasurer
[Corporate Seal]
Attest:
/s/ OLETA J. HAARDEN
- -------------------------------
Oleta J. Harden
Secretary
Signed, sealed and delivered by
NEW JERSEY NATURAL GAS COMPANY
in the presence of:
/s/KATHY S. GROCKI
- -------------------------------
Name: Kathy S. Grocki
/s/ MARIANNE SIMMS-BRAXTON
- -------------------------------
Name: Marianne Simms-Braxton
-21-
<PAGE>
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By /s/ J. BARTOLINI
-------------------------
Name: J. Bartolini
Title: Vice President
[Corporate Seal]
Attest:
/s/ M. ONISCHAK
- -------------------------------
Name: M. Onischak
Title: Assistant Secretary
Signed, sealed and delivered by
HARRIS TRUST AND SAVINGS BANK
in the presence of:
/s/ R. JOHNSON
- -------------------------------
Name: R. Johnson
/s/ MARIANNE CODY
- -------------------------------
Name: Marianne Cody
-22-
<PAGE>
STATE OF NEW JERSEY:
SS:
COUNTY OF MONMOUTH :
BE IT REMEMBERED that on this 28th day of July 1995, before me, the
subscriber, an Attorney-at-Law of the State of New Jersey, and I hereby certify
that I am such an Attorney-at-Law as witness my hand, personally appeared Oleta
J. Harden to me known who, being by me duly sworn according to law, on her oath,
does depose and make proof to my satisfaction that she is the Secretary of NEW
JERSEY NATURAL GAS COMPANY, the grantor or mortgagor in the foregoing
Supplemental Indenture named; that she well knows the seal of said corporation;
that the seal affixed to said Supplemental Indenture is the corporate seal of
said corporation, and that it was so affixed in pursuance of resolutions of the
Board of Directors (including the Executive Committee of said Board) of said
corporation; that Timothy C. Hearne is a Vice President of said corporation;
that she saw said Timothy C. Hearne, as such Vice President, affix said seal
thereto, sign and deliver said Supplemental Indenture, and heard him declare
that he signed, sealed and delivered the same as the voluntary act and deed of
said corporation, in pursuance of said resolutions, and that this deponent
signed her name thereto, at the same time, as attesting witness.
/s/ OLETA J. HARDEN
--------------------------------
Oleta J. Harden
Secretary
Subscribed and sworn to before me,
an Attorney-at-Law of the State of
New Jersey, at Wall, New Jersey,
the day and year aforesaid.
/s/ TIMOTHY S. KELSEY
- -------------------------------
Name: Timothy S. Kelsey
Attorney-at-Law of the
State of New Jersey
-23-
<PAGE>
STATE OF ILLINOIS:
SS:
COUNTY OF COOK :
BE IT REMEMBERED that on this 27th day of July 1995, before me, the
subscriber, a Notary Public of the State of Illinois, personally appeared M.
Onischak to me known who, being by me duly sworn according to law, on her oath,
does depose and make proof to my satisfaction that she is an Assistant Secretary
of HARRIS TRUST AND SAVINGS BANK, the grantee or mortgagee and trustee in the
foregoing Supplemental Indenture named; that she well knows the seal of said
corporation; that the seal affixed to said Supplemental Indenture is the
corporate seal of said corporation, and that it was so affixed in pursuance of a
resolution of the Board of Directors of said corporation; that J. Bartolini is a
Vice President of said corporation; that she saw said J. Bartolini as such Vice
President affix said seal thereto, sign and deliver said Supplemental Indenture,
and heard said J. Bartolini declare that she signed, sealed and delivered the
same as the voluntary act and deed of said corporation, in pursuance of said
resolution, and that this deponent signed her name thereto, at the same time, as
attesting witness.
/s/ M. ONISCHAK
--------------------------
Name: M. Onischak
Title: Assistant Secretary
Subscribed and sworn to before
me a Notary Public of the State
of Illinois at Chicago, the day
and year aforesaid.
/s/ T. MUZQUIZ
- --------------------------------------
Notary Public of the State of Illinois
T. Muzquiz
[SEAL]
"OFFICIAL SEAL"
T. Muzquiz
Notary Public, State of Illinois
Commission Expires 7/12/97
-24-
================================================================================
MORTGAGE
NEW JERSEY NATURAL GAS COMPANY
To
HARRIS TRUST AND SAVINGS BANK,
As Trustee
---------------------------
TWENTY-SIXTH SUPPLEMENTAL INDENTURE
Dated as of October 1, 1995
---------------------------
Supplemental to Indenture of Mortgage and
Deed of Trust Dated April 1, 1952
================================================================================
Prepared by: Joseph D. Ferraro, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
<PAGE>
MORTGAGE
TWENTY-SIXTH SUPPLEMENTAL INDENTURE, dated as of October 1, 1995, between
NEW JERSEY NATURAL GAS COMPANY, a corporation organized and existing under the
laws of the State of New Jersey (hereinafter called the "Company"), having its
principal office at 1415 Wyckoff Road, Wall, New Jersey, party of the first
part, and HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing
under the laws of the State of Illinois and authorized to accept and execute
trusts (hereinafter called the "Trustee"), having its principal office at 111
West Monroe Street, Chicago, Illinois, as Trustee under the Indenture of
Mortgage and Deed of Trust hereinafter mentioned, party of the second part.
WHEREAS, the Company has heretofore executed and delivered to the Trustee
its Indenture of Mortgage and Deed of Trust dated April 1, 1952 (hereinafter
sometimes called the "Original Indenture") to secure the payment of the
principal of and the interest and premium (if any) on all Bonds at any time
issued and outstanding thereunder, and to declare the terms and conditions upon
which Bonds are to be issued thereunder; and
WHEREAS, the Company thereafter executed and delivered to the Trustee its
First Supplemental Indenture dated February 1, 1958, its Second Supplemental
Indenture dated December 1, 1960, its Third Supplemental Indenture dated July 1,
1962, its Fourth Supplemental Indenture dated September 1, 1962, its Fifth
Supplemental Indenture dated December 1, 1963, its Sixth Supplemental Indenture
dated June 1, 1966, its Seventh Supplemental Indenture dated October 1, 1970,
its Eighth Supplemental Indenture dated May 1, 1975, its Ninth Supplemental
Indenture dated February 1, 1977, its Tenth Supplemental Indenture dated as of
September 1, 1980, its Eleventh Supplemental Indenture dated as of September 1,
1983, its Twelfth Supplemental Indenture dated as of August 1, 1984, its
Thirteenth Supplemental Indenture dated as of September 1, 1985, its Fourteenth
Supplemental Indenture dated as of May 1, 1986, its Fifteenth Supplemental
Indenture dated as of March 1, 1987, its Sixteenth Supplemental Indenture dated
as of December 1, 1987, its Seventeenth Supplemental Indenture dated as of June
1, 1988, its Eighteenth Supplemental Indenture dated as of June 1, 1989, its
Nineteenth Supplemental Indenture dated as of March 1, 1991, its Twentieth
Supplemental Indenture dated as of December 1, 1992, its Twenty-First
Supplemental Indenture dated as of August 1, 1993, its Twenty-Second
Supplemental Indenture dated as of October 1, 1993, its Twenty-Third
Supplemental Indenture dated as of August 15, 1994, its Twenty-Fourth
Supplemental Indenture dated as of October 1, 1994 and its Twenty-Fifth
Supplemental Indenture dated as of July 15, 1995, supplementing and amending the
Original Indenture; and
WHEREAS, Bonds in the aggregate principal amount of Twelve Million Five
Hundred Thousand Dollars ($12,500,000) were
-2-
<PAGE>
issued under and in accordance with the terms of the Original Indenture, as
an initial series designated "First Mortgage Bonds, 4-1/4% Series A due 1977",
herein sometimes called "1977 Series A Bonds", which 1977 Series A Bonds have
since been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Two Million
Two Hundred Fifty Thousand Dollars ($2,250,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First Supplemental Indenture, as a second series designated "First
Mortgage Bonds, 5% Series B due 1983", herein sometimes called "1983 Series B
Bonds", which 1983 Series B Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Four Million
Dollars ($4,000,000) were issued under and in accordance with the terms of the
Original Indenture, as supplemented and amended by the First Supplemental
Indenture and the Second Supplemental Indenture, as a third series designated
"First Mortgage Bonds, 5-1/8% Series C due 1985", herein sometimes called "1985
Series C Bonds", which 1985 Series C Bonds have since been paid and redeemed by
the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Five Million
Dollars ($5,000,000) were issued under and in accordance with the terms of the
Original Indenture, as supplemented and amended by the First through the Fourth
Supplemental Indentures, inclusive, as a fourth series designated "First
Mortgage Bonds, 4-7/8% Series D due 1987", herein sometimes called "1987 Series
D Bonds", which 1987 Series D Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Four Million
Five Hundred Thousand Dollars ($4,500,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Fifth Supplemental Indentures, inclusive, as a fifth series
designated "First Mortgage Bonds, 4-3/4% Series E due 1988", herein sometimes
called "1988 Series E Bonds", which 1988 Series E Bonds have since been paid and
redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Fifteen
Million Dollars ($15,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Seventh Supplemental Indentures, inclusive, as a sixth series designated "First
Mortgage Bonds, 9-1/4% Series F due 1995", herein sometimes called "1995 Series
F Bonds", which 1995 Series F Bonds have since been paid and redeemed by the
Company; and
-3-
<PAGE>
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Dollars ($10,000,000) were issued under and in accordance with the terms of the
Original Indenture, as supplemented and amended by the First through the Eighth
Supplemental Indentures, inclusive, as a seventh series designated "First
Mortgage Bonds, 10% Series G due 1987", herein sometimes called "1987 Series G
Bonds", which 1987 Series G Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Dollars ($10,000,000) were issued under and in accordance with the terms of the
Original Indenture, as supplemented and amended by the First through the Ninth
Supplemental Indentures, inclusive, as an eighth series designated "First
Mortgage Bonds, 9% Series H due 1992", herein sometimes called "1992 Series H
Bonds", which 1992 Series H Bonds have since been paid and redeemed by the
Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Nine Million
Five Hundred Forty-Five Thousand Dollars ($9,545,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Tenth Supplemental Indentures, inclusive, as a ninth
series designated "First Mortgage Bonds, 9-1/8% Series J due 2000", herein
sometimes called "2000 Series J Bonds", which 2000 Series J Bonds have since
been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Three Hundred Thousand Dollars ($10,300,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Eleventh Supplemental Indentures, inclusive, as a tenth series
designated "First Mortgage Bonds, 10-3/8% Series K due 2013", herein sometimes
called "2013 Series K Bonds", which 2013 Series K Bonds have since been paid and
redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Five Hundred Thousand Dollars ($10,500,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Twelfth Supplemental Indentures, inclusive, as an eleventh
series designated "First Mortgage Bonds, 10-1/2% Series L due 2014", herein
sometimes called "2014 Series L Bonds", which 2014 Series L Bonds have since
been paid and redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twelve
Million Dollars ($12,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Thirteenth Supplemental Indentures, inclusive, as a twelfth series
-4-
<PAGE>
designated "First Mortgage Bonds, 10.85% Series M due 2000", herein sometimes
called "2000 Series M Bonds", which 2000 Series M Bonds have since been paid and
redeemed by the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Dollars ($10,000,000) were issued under and in accordance with the terms of the
Original Indenture as supplemented and amended by the First through the
Fourteenth Supplemental Indentures, inclusive, as a thirteenth series designated
"First Mortgage Bonds, 10% Series N due 2001", herein sometimes called "2001
Series N Bonds", of which Six Million Dollars ($6,000,000) in principal amount
are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Fifteen
Million Dollars ($15,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Fifteenth Supplemental Indentures, inclusive, as a fourteenth series designated
"First Mortgage Bonds, 8.50% Series P due 2002", herein sometimes called "2002
Series P Bonds", of which Nine Million Five Hundred Forty-Five Thousand Dollars
($9,545,000) in principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Thirteen
Million Five Hundred Thousand Dollars ($13,500,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Sixteenth Supplemental Indentures, inclusive, as a
fifteenth series designated "First Mortgage Bonds, 9% Series Q due 2017", herein
sometimes called "2017 Series Q Bonds", of which Thirteen Million Five Hundred
Thousand Dollars ($13,500,000) in principal amount are outstanding at the date
hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty-Five
Million Dollars ($25,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Seventeenth Supplemental Indentures, inclusive, as a sixteenth series designated
"First Mortgage Bonds, 8.50% Series R due 2018", herein sometimes called "2018
Series R Bonds", which 2018 Series R Bonds have since been paid and redeemed by
the Company; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty
Million Dollars ($20,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Eighteenth Supplemental Indentures, inclusive, as a seventeenth series
designated "First Mortgage Bonds, 10.10% Series S due 2009", herein sometimes
called "2009 Series S Bonds", of which Twenty Million Dollars ($20,000,000) in
principal amount are outstanding at the date hereof; and
-5-
<PAGE>
WHEREAS, thereafter Bonds in the aggregate principal amount of Nine Million
Five Hundred Forty-Five Thousand Dollars ($9,545,000) were issued under and in
accordance with the terms of the Original Indenture, as supplemented and amended
by the First through the Nineteenth Supplemental Indentures, inclusive, as an
eighteenth series designated "First Mortgage Bonds, 7.05% Series T due 2016",
herein sometimes called "2016 Series T Bonds", of which Nine Million Five
Hundred Forty-Five Thousand Dollars ($9,545,000) in principal amount are
outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Fifteen
Million Dollars ($15,000,000) were authorized, of which Fifteen Million Dollars
($15,000,000) have been issued under and in accordance with the terms of the
Original Indenture, as supplemented and amended by the First through the
Nineteenth Supplemental Indentures, inclusive, as a nineteenth series designated
"First Mortgage Bonds, 7.25% Series U due 2021", herein sometimes called "2021
Series U Bonds", of which Fifteen Million Dollars ($15,000,000) in principal
amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty-Five
Million Dollars ($25,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twentieth Supplemental Indentures, inclusive, as a twentieth series designated
"First Mortgage Bonds, 7.50% Series V due 2002", herein sometimes called "2002
Series V Bonds", of which Twenty-Five Million Dollars ($25,000,000) in principal
amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Three Hundred Thousand Dollars ($10,300,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through the Twenty-First Supplemental Indentures, inclusive, as a
twenty-first series designated "First Mortgage Bonds, 5-3/8% Series W due 2023",
herein sometimes called "2023 Series W Bonds", of which Ten Million Three
Hundred Thousand Dollars ($10,300,000) in principal amount are outstanding at
the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Thirty
Million Dollars ($30,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twenty-Second Supplemental Indentures, inclusive, as a twenty-second series
designated "First Mortgage Bonds, 6.27% Series X due 2008", herein sometimes
called "2008 Series X Bonds", of which Thirty Million Dollars ($30,000,000) in
principal amount are outstanding at the date hereof; and
-6-
<PAGE>
WHEREAS, thereafter Bonds in the aggregate principal amount of Ten Million
Five Hundred Thousand Dollars ($10,500,000) were issued under and in accordance
with the terms of the Original Indenture, as supplemented and amended by the
First through Twenty-Third Supplemental Indentures, inclusive, as a twenty-third
series designated "First Mortgage Bonds, 6.25% Series Y due 2024", herein
sometimes called "2024 Series Y Bonds", of which Ten Million Five Hundred
Thousand Dollars ($10,500,000) in principal amount are outstanding at the date
hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty-Five
Million Dollars ($25,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twenty-Fourth Supplemental Indentures, inclusive, as a twenty-fourth series
designated "First Mortgage Bonds, 8.25% Series Z due 2004", herein sometimes
called "2004 Series Z Bonds", of which Twenty-Five Million Dollars ($25,000,000)
in principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Twenty-Five
Million Dollars ($25,000,000) were issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twenty-Fifth Supplemental Indentures, inclusive, as a twenty-fifth series
designated "First Mortgage Bonds, Adjustable Rate Series AA due 2030", herein
sometimes called "2030 Series AA Bonds", of which Twenty-Five Million Dollars
($25,000,000) in principal amount are outstanding at the date hereof; and
WHEREAS, thereafter Bonds in the aggregate principal amount of Sixteen
Million Dollars ($16,000,000) were authorized, of which Three Million Five
Hundred Thousand Dollars have been issued under and in accordance with the terms
of the Original Indenture, as supplemented and amended by the First through the
Twenty-Fifth Supplemental Indentures, inclusive, as a twenty-sixth series
designated "First Mortgage Bonds, Adjustable Rate Series BB due 2030", herein
sometimes called "2030 Series BB Bonds", of which Three Million Five Hundred
Thousand Dollars ($3,500,000) in principal amount are outstanding at the date
hereof; and
WHEREAS, the Original Indenture provides that, subject to certain
exceptions not presently relevant, such changes in or additions to the
provisions of the Indenture (the term "Indenture" and other terms used herein
having the meanings assigned thereto in the Original Indenture except as herein
expressly modified) may be made to add to the covenants and agreements of the
Company in the Indenture contained other covenants and agreements thereafter to
be observed by the Company; and to provide for the creation of any series of
Bonds, designating the series to be created and specifying the form and
-7-
<PAGE>
provisions of the Bonds of such series as in the Indenture provided or
permitted; and
WHEREAS, the Indenture further provides that the Company and the Trustee
may enter into indentures supplemental to the Indenture to convey, transfer and
assign unto the Trustee and to subject to the lien of the Indenture additional
properties acquired by the Company; and
WHEREAS, the Company has duly determined to create a twenty-seventh series
of Bonds, to be known as "First Mortgage Bonds, 6-7/8% Series CC due 2010",
herein sometimes called "2010 Series CC Bonds", all as herein provided, and to
add to the covenants and agreements contained in the Indenture the covenants and
agreements hereinafter set forth; and
WHEREAS, the Company, in the exercise of the powers and authority conferred
upon and reserved to it under the provisions of the Indenture and pursuant to
appropriate resolutions of its Board of Directors (including the Executive
Committee thereof), has duly resolved and determined to make, execute and
deliver to the Trustee a Twenty-Sixth Supplemental Indenture in the form hereof
for the purposes herein provided; and
WHEREAS, all conditions and requirements necessary to make this
Twenty-Sixth Supplemental Indenture a valid, binding and legal instrument have
been done, performed and fulfilled and the execution and delivery hereof have
been in all respects duly authorized.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That NEW JERSEY NATURAL GAS COMPANY, by way of further assurance and in
consideration of the premises and of the acceptance by the Trustee of the trusts
hereby created and of One Dollar to it duly paid by the Trustee at or before the
ensealing and delivery of these presents, the receipt whereof is hereby
acknowledged, and in order to secure the payment of principal of and any premium
which may be due and payable on and the interest on all Bonds at any time issued
and outstanding under the Indenture according to their tenor and effect, and the
performance and observance by the Company of all the covenants and conditions
herein and therein contained, has granted, bargained, sold, warranted, aliened,
remised, released, conveyed, assigned, transferred, mortgaged, pledged, set over
and confirmed, and by these presents does grant, bargain, sell, warrant, alien,
remise, release, convey, assign, transfer, mortgage, pledge, set over and
confirm, unto the party of the second part, and to its successors in the trust,
and to it and its assigns forever, and has granted and does hereby grant
thereunto a security interest in, all of the property, real, personal and mixed,
now owned by the Company and situated in the Counties of Burlington, Middlesex,
Monmouth, Morris, Ocean,
-8-
<PAGE>
Passaic, Somerset and Sussex in the State of New Jersey, or wherever situate
(except property specifically excepted from the lien of the Indenture by the
terms of the Indenture) and also all of the property, real, personal and mixed,
hereafter acquired by the Company wherever situate (except property specifically
excepted from the lien of the Indenture by the terms of the Indenture),
including both as to property now owned and property hereafter acquired, without
in anywise limiting or impairing the enumeration of the same, the scope and
intent of the foregoing or of any general or specific description contained in
the Indenture, the following:
I.
FRANCHISES
All and singular, the franchises, grants, permits, immunities, privileges
and rights of the Company owned and held by it at the date of the execution
hereof or hereafter acquired for the construction, maintenance, and operation of
the gas plants and systems now or hereafter subject to the lien hereof, as well
as all certificates, franchises, grants, permits, immunities, privileges, and
rights of the Company used or useful in the operation of the property now or
hereafter mortgaged hereunder, including all and singular the franchises,
grants, permits, immunities, privileges, and rights of the Company granted by
the governing authorities of any municipalities or other political subdivisions
and all renewals, extensions and modifications of said certificates, franchises,
grants, permits, privileges, and rights or any of them.
II.
GAS DISTRIBUTION SYSTEMS AND RELATED PROPERTY
All gas generating plants, gas storage plants and gas manufacturing plants
of the Company, all the buildings, erections, structures, generating and
purifying apparatus, holders, engines, boilers, benches, retorts, tanks,
instruments, appliances, apparatus, facilities, machinery, fixtures, and all
other property used or provided for use in the generation, manufacturing and
purifying of gas, together with the land on which the same are situated, and all
other lands and easements, rights-of-way, permits, privileges, and sites forming
a part of such plants or any of them or occupied, enjoyed or used in connection
therewith.
All gas distribution or gas transmission systems of the Company, all
buildings, erections, structures, generating and purifying apparatus, holders,
engines, boilers, benches, retorts, tanks, pipe lines, connections, service
pipes, meters, conduits,
-9-
<PAGE>
tools, instruments, appliances, apparatus, facilities, machinery, fixtures, and
all other property used or provided for use in the construction, maintenance,
repair or operations of such distribution or transmission systems, together with
all the certificates, rights, privileges, rights-of-way, franchises, licenses,
easements, grants, liberties, immunities, permits of the Company, howsoever
conferred or acquired, under, over, or upon any private property or any public
streets or highways within as well as without the corporate limits of any
municipal corporation. Without limiting the generality of the foregoing, there
are expressly included the gas distribution or gas transmission systems located
in the Counties of Burlington, Middlesex, Monmouth, Morris, Ocean, Passaic,
Somerset and Sussex in the State of New Jersey, and in the following
municipalities in said State and Counties: Aberdeen Township (formerly Matawan
Township), Allenhurst Borough, City of Asbury Park, Atlantic Highlands Borough,
Avon Borough, Barnegat Light Borough, Barnegat Township (formerly named Union
Township), Bay Head Borough, Beach Haven Borough, Beachwood Borough, Belmar
Borough, Berkeley Township, Boonton Town, Boonton Township, Bradley Beach
Borough, Brick Township, Brielle Borough, Colts Neck Township, Deal Borough,
Denville Township, Dover Town, Dover Township, Eagleswood Township, East
Brunswick Township, Eatontown Borough, Englishtown Borough, Fair Haven Borough,
Farmingdale Borough, Franklin Township in Somerset County, Freehold Borough,
Freehold Township, Hanover Township, Harvey Cedars Borough, Hazlet Township,
Highlands Borough, Holmdel Township, Hopatcong Borough, Howell Township,
Interlaken Borough, Island Heights Borough, Jackson Township, Jefferson
Township, Keansburg Borough, Keyport Borough, Lacey Township, Lakehurst Borough,
Lakewood Township, Lavallette Borough, Lincoln Park Borough, Little Egg Harbor
Township, Little Silver Borough, Loch Arbour Village, Long Beach Township, Long
Branch City, Manalapan Township, Manasquan Borough, Manchester Township,
Mantoloking Borough, Marlboro Township, Matawan Borough, Middletown Township,
Milltown Borough, Mine Hill Township, Monmouth Beach Borough, Monroe Township,
Montville Township, Morris Plains Borough, Mount Arlington Borough, Mount Olive
Township, Mountain Lakes Borough, Neptune City Borough, Neptune Township,
Netcong Borough, New Brunswick City, North Brunswick Township, Ocean Township in
Monmouth County, Ocean Township in Ocean County, Ocean Gate Borough, Oceanport
Borough, Old Bridge Township (formerly named Madison Township), Parsippany-Troy
Hills Township, Pine Beach Borough, Point Pleasant Borough, Point Pleasant Beach
Borough, Randolph Township, Red Bank Borough, Rockaway Borough, Rockaway
Township, Roxbury Township, Rumson Borough, Sayreville Borough, Sea Bright
Borough, Sea Girt Borough, Seaside Heights Borough, Seaside Park Borough, Ship
Bottom Borough, Shrewsbury Borough, Shrewsbury Township, South Belmar Borough,
South Brunswick Township, South River Borough, South Toms River Borough, Spring
Lake Borough, Spring Lake Heights Borough, Stafford Township, Surf City Borough,
Tinton Falls Borough (formerly named New Shrewsbury Borough), Tuckerton Borough,
Union Beach Borough, Union Township,
-10-
<PAGE>
Victory Gardens Borough, Wall Township, Washington Township in Burlington
County, Washington Township in Morris County, West Long Branch Borough, West
Milford Township and Wharton Borough.
III.
CONTRACTS
All of the Company's right, title and interest in and under all contracts,
licenses or leases for the purchase of gas, either in effect at the date of
execution hereof or hereafter made and any extension or renewal thereof.
TOGETHER WITH ALL AND SINGULAR the tenements, hereditaments and
appurtenances belonging or in anywise appertaining to the Trust Estate, or any
part thereof, with the reversion or reversions, remainder and remainders, rents,
issues, income and profits thereof, and all the right, title, interest and claim
whatsoever, at law or in equity, which the Company now has or which it may
hereafter acquire in and to the Trust Estate and every part and parcel thereof.
TO HAVE AND TO HOLD the Trust Estate and all and singular the lands,
properties, estates, rights, franchises, privileges and appurtenances hereby
mortgaged, conveyed, pledged or assigned, or intended so to be, together with
all the appurtenances thereto appertaining, unto the Trustee and its successors
and assigns forever;
SUBJECT, HOWEVER, as to property hereby conveyed, to Permitted
Encumbrances;
BUT IN TRUST, NEVERTHELESS, under and subject to the terms and conditions
hereafter set forth, for the equal and proportionate use, benefit, security and
protection of each and every person and corporation who may be or become the
holders of the Bonds and coupons hereby secured, if any, without preference,
priority or distinction as to the lien or otherwise of one Bond or coupon over
or from the others by reason of priority in the issue or negotiation thereof, or
by reason of the date of maturity thereof, or otherwise (except as any sinking,
amortization, improvement, renewal or other analogous fund, established in
accordance with the provisions of the Indenture, may afford additional security
for the Bonds of any particular series and except as provided in ss.9.02 of the
Indenture), and for securing the observance and performance of all the terms,
provisions and conditions of the Indenture.
THIS INDENTURE FURTHER WITNESSETH, that the Company has agreed and
covenanted, and hereby does agree and covenant, with the Trustee and its
successors and assigns and with the
-11-
<PAGE>
respective holders from time to time of the Bonds and coupons, or any thereof,
as follows:
ARTICLE I.
CERTAIN AMENDMENTS OF INDENTURE
ss.1.1. The Original Indenture, as heretofore amended, be and it hereby is
further amended in the following respects, the section numbers specified below
being the sections of the Indenture in which such amendments occur:
ss.1.01. The following definition be and it hereby is added immediately
after the twenty-sixth sentence of ss.1.01B:
"'TWENTY-SIXTH SUPPLEMENTAL INDENTURE' shall mean the Supplemental
Indenture dated as of October 1, 1995, supplemental to the Indenture."
ss.1.01. The following definition be and it hereby is added immediately
after the twenty-seventh sentence of ss.1.01F:
"'2010 SERIES CC BOND' shall mean one of the First Mortgage Bonds, 6-7/8%
Series CC due 2010, issued hereunder."
ss.2.11. The following be and it hereby is added at the end of ss.2.11:
"No charge except for taxes or governmental charges shall be made against
any holder of any 2010 Series CC Bond for the exchange, transfer or registration
of transfer thereof."
ss.8.08. The period at the end of the first paragraph of ss.8.08 be and it
hereby is deleted and the following words and figures be and they hereby are
added thereto:
", and the 2010 Series CC Bonds shall be redeemed at the redemption price
specified in ss.10.70."
ARTICLE II.
2010 SERIES CC BONDS
ss.2.1. There shall be a twenty-seventh series of Bonds, known as and
entitled "First Mortgage Bonds, 6-7/8% Series CC due 2010" or "First Mortgage
Bonds, 6-7/8% Series CC" (herein and in the Indenture referred to as the "2010
Series CC Bonds"), and the form thereof shall contain suitable provisions with
respect to the matters hereinafter in this Section specified and shall in
-12-
<PAGE>
other respects be substantially as set forth in the preambles to the Original
Indenture.
The aggregate principal amount of 2010 Series CC Bonds which may be
authenticated and delivered and outstanding under the Indenture is Twenty
Million Dollars ($20,000,000).
The 2010 Series CC Bonds shall bear interest at the rate of 6-7/8% per
annum, computed on the basis of a 360-day year consisting of twelve 30-day
months, and shall mature on October 1, 2010, subject to prior redemption as
described herein.
The 2010 Series CC Bonds shall be in the form of registered Bonds without
coupons of minimum denominations of Two Hundred and Fifty Thousand Dollars
($250,000) and integral multiples of Five Thousand Dollars ($5,000) in excess
thereof. The 2010 Series CC Bonds shall be dated as provided in ss.2.05 of the
Indenture. All 2010 Series CC Bonds shall bear interest from their respective
dates, such interest to be payable, upon the terms of and otherwise in
accordance with the 2010 Series CC Bonds, semiannually on the first day of April
and October in each year, the first interest payment date being April 1, 1996.
The principal of and the premium, if any, and interest on the 2010 Series CC
Bonds shall be payable at the principal office of the Trustee, in the City of
Chicago, Illinois, in any coin or currency of the United States of America which
at the time of payment shall be legal tender for the payment of public and
private debts.
Notwithstanding any other provision of the Indenture or of the 2010 Series
CC Bonds, payments of the principal of and the premium, if any, and interest on
any 2010 Series CC Bond may be made directly to the registered holder thereof
without presentation or surrender thereof or the making of any notation thereon
if there shall be filed with the Trustee a Certificate of the Company to the
effect that such registered holder (or the person for whom such registered
holder is a nominee) and the Company have entered into a written agreement that
payment shall be so made; provided, however, that before such registered holder
transfers or otherwise disposes of any 2010 Series CC Bond, such registered
holder will, at its election, either endorse thereon (or on a paper annexed
thereto) the principal amount thereof redeemed and the last date to which
interest has been paid thereon or make such Bond available to the Company at the
principal office of the Trustee for the purpose of making such endorsement
thereon.
The 2010 Series CC Bonds shall not be subject to redemption at the option
of the Company, but shall be subject to mandatory redemption pursuant to ss.8.08
of the Indenture in the manner provided in the applicable provisions of Article
Ten of the Indenture, as amended by Article III of this Supplemental Indenture.
-13-
<PAGE>
The 2010 Series CC Bonds shall be excluded from the benefits of, and shall
not be subject to redemption through the operation of, a Mandatory Sinking Fund
pursuant to ss.11.02 of the Indenture and shall also be excluded from the
benefits of the covenants of ss.9.08 and ss.11.01 of the Indenture. Each holder
of a 2010 Series CC Bond consents and shall be deemed to have consented to the
substance of the amendment to ss.9.08 of the Indenture as set forth in Article
IV of this Supplemental Indenture. Such consent shall constitute a fundamental
term of the 2010 Series CC Bonds and this Supplemental Indenture.
Notwithstanding the provisions of ss.10.04 or any other provision of the
Indenture, the selection of 2010 Series CC Bonds to be redeemed shall, in case
fewer than all of the outstanding 2010 Series CC Bonds are to be redeemed, be
made by the Trustee pro rata (to the nearest multiple of Five Thousand Dollars
($5,000)) among the registered holders of the 2010 Series CC Bonds in
proportion, as nearly as practicable, to the respective unpaid principal amounts
of 2010 Series CC Bonds registered in the names of such holders, with
adjustments, to the extent practicable, to compensate for any prior redemption
not made exactly in such proportion (or otherwise as may be specified by a
written order signed by the registered holders of all outstanding 2010 Series CC
Bonds).
The definitive 2010 Series CC Bonds may be issued in the form of engraved
Bonds or Bonds printed or lithographed on steel engraved borders or Bonds in
typed form on normal bond paper. Subject to the foregoing provisions of this
Section and the provisions of ss.2.11 of the Indenture, all definitive 2010
Series CC Bonds shall be fully exchangeable for other Bonds of the same series,
of like aggregate principal amounts, and, upon surrender to the Trustee at its
principal office, shall be exchangeable for other Bonds of the same series of a
different authorized denomination or denominations, as requested by the holder
surrendering the same. The Company will execute, and the Trustee shall
authenticate and deliver, registered Bonds without coupons, whenever the same
shall be required for any such exchange.
In connection with the transfer of any 2010 Series CC Bonds, the Trustee or
the Company may (but shall not be required to) require certifications or other
evidence that such transfer is in compliance with the transfer restrictions set
forth in the 2010 Series CC Bonds.
Except at such times as the Company is a reporting company under Section 13
or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") or has
complied with the requirements for the exemption from registration under the
Exchange Act set forth in Rule 12g3-2(b) under such Act, for so long as any of
the 2010 Series CC Bonds are outstanding and constitute "restricted securities"
within the meaning of Rule
-14-
<PAGE>
144(a)(3) under the Securities Act of 1933 (the "1933 Act"), the Company shall
provide such financial or other information required by Rule 144A(d)(4) as any
holder of the 2010 Series CC Bonds or any entity designated by such holder may
reasonably determine is required to permit such holder to comply with the
requirements of Rule 144A as in effect on the original issue date of the 2010
Series CC Bonds in connection with the resale by it of the 2010 Series CC Bonds,
in any such case promptly after the same is requested.
ss.2.2. 2010 Series CC Bonds in the aggregate principal amount of Twenty
Million Dollars ($20,000,000) may forthwith upon the execution and delivery of
this Supplemental Indenture, or from time to time thereafter, be executed by the
Company and delivered to the Trustee, and shall thereupon be authenticated and
delivered by the Trustee upon compliance by the Company with the provisions of
Articles Four, Five or Six of the Indenture, without awaiting the filing or
recording of this Supplemental Indenture. No additional 2010 Series CC Bonds
shall be issued under Article Four, Five or Six without the consent in writing
of the holders of all the outstanding 2010 Series CC Bonds.
ARTICLE III.
REDEMPTION OF THE 2010 SERIES CC BONDS
ss.3.1. The following ss.10.70 be and it hereby is added to Article Ten of
the Indenture:
"ss.10.70. In the case of the redemption of 2010 Series CC Bonds out of
moneys deposited with the Trustee pursuant to ss.8.08, such 2010 Series CC Bonds
shall, upon compliance with provisions of ss.10.04, and subject to the
provisions of ss.2.1 of the Twenty-Sixth Supplemental Indenture, be redeemable
at the principal amounts thereof, together with interest accrued thereon to the
date fixed for redemption, without premium."
ARTICLE IV.
CONSENT TO AMENDMENT
ss.4.1. Each holder of a 2010 Series CC Bond, by holding such 2010 Series
CC Bond, and as a fundamental term of the 2010 Series CC Bonds and this
Supplemental Indenture, consents and shall be deemed to have consented to the
substance of the following amendment to ss.9.08 of the Indenture (the 2010
Series CC Bonds being excluded from the benefit of the covenants in said ss.9.08
by operation of ss.2.1 of this Supplemental Indenture):
"Section 9.08 of the Indenture including all indentures supplemental
thereto (in
-15-
<PAGE>
particular, but without limitation, the Thirteenth, Fourteenth,
Fifteenth and Eighteenth Supplemental Indentures) is hereby amended by
deleting subparagraph (1) thereof and inserting in its stead the following:
(1) The Company may make Stock Payments if and to the extent that, after
giving effect thereto, the aggregate amount of all Stock Payments for the
period from October 1, 1993 to and including the date of the Stock Payment
in question will not exceed the sum of (or difference between, in the event
of a loss) $50,000,000 and the Net Earnings (or loss) of the Company for
such period, taken as one accounting period."
The foregoing consent shall be irrevocable, shall be continuing and in effect at
all times and shall be deemed to be "concurrent" (within the meaning of ss.13.01
of the Indenture) with the writings relating to the foregoing amendment by or on
behalf of all other Bondholders. Further, the foregoing consent shall survive
any transfer, exchange or substitution of any 2010 Series CC Bond and shall bind
all holders thereof and such holders' transferees, successors, assigns, heirs
and legatees. Each holder of a 2010 Series CC Bond (and such holder's
transferees, successors, assigns, heirs and legatees), by holding such 2010
Series CC Bond, authorizes and shall be deemed to have authorized the Trustee to
sign, in the name of all holders of the 2010 Series CC Bonds, any consent or
authorization deemed necessary or desirable in the discretion of the Trustee to
evidence the foregoing consent (it being understood and agreed, however, that
this ss.4.1 shall constitute, for all purposes of the Indenture, the written
consent by the holders of the 2010 Series CC Bonds to the foregoing amendment
without further act or instrument).
ARTICLE V.
MISCELLANEOUS
ss.5.1. The Company is lawfully seized and possessed of all the real
estate, franchises and other property described or referred to in the Indenture
(except properties released from the lien of the Indenture pursuant to the
provisions thereof) as presently mortgaged, subject to the exceptions stated
therein, such real estate, franchises and other property are free and clear of
any lien prior to the lien of the Indenture except as set forth in the Granting
Clauses of the Indenture and the Company has good right and lawful authority to
mortgage the same as provided in and by the Indenture.
-16-
<PAGE>
ss.5.2. The Trustee assumes no duties, responsibilities or liabilities by
reason of this Supplemental Indenture other than as set forth in the Indenture,
and this Supplemental Indenture is executed and accepted by the Trustee subject
to all the terms and conditions of its acceptance of the trust under the
Indenture, as fully as if said terms and conditions were herein set forth at
length.
ss.5.3. The terms used in this Supplemental Indenture shall have the
meanings assigned thereto in the Indenture. Reference by number in this
Supplemental Indenture to Articles or Sections shall be construed as referring
to Articles or Sections contained in the Indenture, unless otherwise stated.
ss.5.4. As amended and modified by this Supplemental Indenture, the
Indenture is in all respects ratified and confirmed and the Indenture and this
Supplemental Indenture shall be read, taken and construed as one and the same
instrument.
ss.5.5. Neither the approval by the Board of Public Utilities of the State
of New Jersey of the execution and delivery of this Supplemental Indenture nor
the approval by said Board of the issue of any Bonds under the Indenture shall
in any way be construed as the approval by said Board of any other act, matter
or thing which requires approval of said Board under the laws of the State of
New Jersey; nor shall approval by said Board of the issue of any Bonds under the
Indenture bind said Board or any other public body or authority of the State of
New Jersey having jurisdiction in the premises in any future application for the
issue of Bonds under the Indenture or otherwise.
ss.5.6. This Supplemental Indenture may be executed in any number of
counterparts and all said counterparts executed and delivered each as an
original shall constitute but one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-17-
<PAGE>
NEW JERSEY NATURAL GAS COMPANY HEREBY DECLARES THAT IT HAS READ THIS
TWENTY-SIXTH SUPPLEMENTAL INDENTURE, HAS RECEIVED A COMPLETELY FILLED-IN TRUE
COPY OF IT WITHOUT CHARGE AND HAS SIGNED THIS TWENTY-SIXTH SUPPLEMENTAL
INDENTURE ON THE DATE CONTAINED IN ITS ACKNOWLEDGMENT HEREOF.
IN WITNESS WHEREOF, NEW JERSEY NATURAL GAS COMPANY, party of the first
part, has caused these presents to be signed in its corporate name by its
President or a Vice President and its corporate seal to be hereunto affixed and
attested by its Secretary or an Assistant Secretary, and HARRIS TRUST AND
SAVINGS BANK, party of the second part, in evidence of its acceptance of the
trust hereby created, has caused these presents to be signed in its corporate
name by one of its Vice Presidents and its corporate seal to be hereunto affixed
and attested by its Secretary or one of its Assistant Secretaries.
NEW JERSEY NATURAL GAS COMPANY
By /s/ TIMOTHY C. HEARNE
-----------------------------
Name: Timothy C. Hearne
Title: Vice President and
Treasurer
[Corporate Seal]
Attest:
/s/ OLETA J. HARDEN
- -------------------------------
Oleta J. Harden
Secretary
Signed, sealed and delivered by
NEW JERSEY NATURAL GAS COMPANY
in the presence of:
/s/ GAIL C. LUNDIN
- -------------------------------
Name: Gail C. Lundin
/s/ ANGELA M. CROSBY
- -------------------------------
Name: Angela M. Crosby
-18-
<PAGE>
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By /s/ J. BARTOLINI
------------------------
Name: J. Bartolini
Title: Vice President
[Corporate Seal]
Attest:
/s/ M. ONISCHAK
- -------------------------------
Name: M. Onischak
Title: Assistant Secretary
Signed, sealed and delivered by
HARRIS TRUST AND SAVINGS BANK
in the presence of:
/s/ F. DAGUINSIN
- -------------------------------
Name: F. Daguinsin
/s/ K. RICHARDSON
- -------------------------------
Name: K. Richardson
-19-
<PAGE>
STATE OF NEW JERSEY:
SS:
COUNTY OF MONMOUTH :
BE IT REMEMBERED that on this 11th day of October 1995, before me, the
subscriber, an Attorney-at-Law of the State of New Jersey, and I hereby certify
that I am such an Attorney-at-Law as witness my hand, personally appeared Oleta
J. Harden to me known who, being by me duly sworn according to law, on her oath,
does depose and make proof to my satisfaction that she is the Secretary of NEW
JERSEY NATURAL GAS COMPANY, the grantor or mortgagor in the foregoing
Supplemental Indenture named; that she well knows the seal of said corporation;
that the seal affixed to said Supplemental Indenture is the corporate seal of
said corporation, and that it was so affixed in pursuance of resolutions of the
Board of Directors (including the Executive Committee of said Board) of said
corporation; that Timothy C. Hearne is a Vice President of said corporation;
that she saw said Timothy C. Hearne, as such Vice President, affix said seal
thereto, sign and deliver said Supplemental Indenture, and heard him declare
that he signed, sealed and delivered the same as the voluntary act and deed of
said corporation, in pursuance of said resolutions, and that this deponent
signed her name thereto, at the same time, as attesting witness.
/s/ OLETA J. HARDEN
-------------------------------
Oleta J. Harden
Secretary
Subscribed and sworn to before me,
an Attorney-at-Law of the State of
New Jersey, at Wall, New Jersey,
the day and year aforesaid.
/s/ TIMOTHY S. KELSEY
- -------------------------------
Name: Timothy S. Kelsey
Attorney-at-Law of the
State of New Jersey
-20-
<PAGE>
STATE OF ILLINOIS:
SS:
COUNTY OF COOK :
BE IT REMEMBERED that on this 10th day of October 1995, before me, the
subscriber, a Notary Public of the State of Illinois, personally appeared M.
Onischak to me known who, being by me duly sworn according to law, on her oath,
does depose and make proof to my satisfaction that she is an Assistant Secretary
of HARRIS TRUST AND SAVINGS BANK, the grantee or mortgagee and trustee in the
foregoing Supplemental Indenture named; that she well knows the seal of said
corporation; that the seal affixed to said Supplemental Indenture is the
corporate seal of said corporation, and that it was so affixed in pursuance of a
resolution of the Board of Directors of said corporation; that J. Bartolini is a
Vice President of said corporation; that she saw said J. Bartolini as such Vice
President affix said seal thereto, sign and deliver said Supplemental Indenture,
and heard said J. Bartolini declare that she signed, sealed and delivered the
same as the voluntary act and deed of said corporation, in pursuance of said
resolution, and that this deponent signed her name thereto, at the same time, as
attesting witness.
/s/ M. ONISCHAK
---------------------------
Name: M. Onischak
Title: Assistant Secretary
Subscribed and sworn to before
me a Notary Public of the State
of Illinois at Chicago, the day
and year aforesaid.
/s/ KIMBERLEY LANGE
- --------------------------------------
Notary Public of the State of Illinois
Kimberley Lange
[SEAL]
OFFICIAL SEAL
KIMBERLY LANGE
NOTARY PUBLIC, STATE OF ILLINOIS
MY COMMISSION EXPIRES 12-14-97
-21-
<TABLE>
<CAPTION>
Consolidated Financial Statistics New Jersey Resources Corporation
(Thousands, except per share data)
Income Statements 1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues $ 454,593 $ 497,075 $ 446,652 $ 392,041 $ 326,127 $318,746
--------- --------- --------- --------- --------- --------
Operating Expenses
Gas purchases .................................. 251,086 286,352 251,856 205,920 168,042 165,185
Operation and maintenance ...................... 59,233 64,194 57,509 55,887 55,939 54,541
Depreciation and amortization .................. 23,022 21,236 21,237 19,757 18,132 16,268
Gross receipts tax, etc. ....................... 46,017 53,744 52,712 52,607 45,489 44,273
Federal income taxes ........................... 15,967 16,569 13,726 11,543 5,189 6,125
--------- --------- --------- --------- --------- --------
Total operating expenses ......................... 395,325 442,095 397,040 345,714 292,791 286,392
--------- --------- --------- --------- --------- --------
Operating Income ................................. 59,268 54,980 49,612 46,327 33,336 32,354
Other income, net ................................ 362 30 713 574 (316) 43
Interest charges, net ............................ 24,082 21,619 20,130 21,499 22,523 19,596
--------- --------- --------- --------- --------- --------
Income Before Preferred Stock Dividends .......... 35,548 33,391 30,195 25,402 10,497 12,801
Preferred stock dividends ........................ 1,629 1,662 2,022 2,464 1,012 948
--------- --------- --------- --------- --------- --------
Income from Continuing Operations ................ 33,919 31,729 28,173 22,938 9,485 11,853
Loss from discontinued operations, net ........... (9,134) 545 (1,011) (691) (1,091) (2,781)
Cumulative effect of change in accounting for
income taxes ................................... -- 721 -- -- -- --
--------- --------- --------- --------- --------- --------
Net Income ....................................... $ 24,785 $ 32,995 $ 27,162 $ 22,247 $ 8,394 $ 9,072
========= ========= ========= ========= ========= ========
Common Stock Data
Earnings per share from continuing operations .. $ 1.93 $ 1.86 $ 1.70 $ 1.60 $ .69 $ .89
Earnings per share ............................. $ 1.41 $ 1.93 $ 1.64 $ 1.55 $ .61 $ .68
Dividends declared per share ................... $ 1.52 $ 1.52 $ 1.52 $ 1.52 $ 1.50 $ 1.44
Payout ratio* .................................. 79% 82% 90% 95% 217% 163%
Payout ratio ................................... 108% 79% 93% 98% 246% 212%
Market price at year end ....................... $ 25.88 $ 21.13 $ 29.13 $ 22.38 $ 19.75 $ 18.00
Dividend yield at year end ..................... 5.9% 7.2% 5.2% 6.8% 7.7% 8.2%
Price-earnings ratio ........................... 18 11 18 14 32 27
Book value per share ........................... $ 14.55 $ 14.46 $ 13.69 $ 13.18 $ 11.80 $ 12.41
Market to book ratio at year end ............... 1.8 1.5 2.1 1.7 1.7 1.5
Shares outstanding at year end ................. 17,793 17,303 16,820 16,286 13,965 13,520
Average shares outstanding ..................... 17,605 17,096 16,607 14,334 13,750 13,378
Number of shareholder accounts ................. 19,896 19,218 19,319 18,521 17,585 16,175
========= ========= ========= ========= ========= ========
Return on Average Equity* ........................ 12.8% 12.7% 12.2% 12.7% 5.5% 6.8%
Return on Average Equity ......................... 9.3% 13.2% 11.7% 12.3% 4.9% 5.2%
========= ========= ========= ========= ========= ========
Capitalization
Common stock equity ............................ $ 258,919 $ 250,163 $ 230,313 $ 214,703 $ 164,731 $167,723
Redeemable preferred stock ..................... 21,004 22,070 22,340 32,610 32,880 13,150
Long-term debt ................................. 352,227 323,590 310,996 251,955 262,737 227,782
--------- --------- --------- --------- --------- --------
Total ............................................ $ 632,150 $ 595,823 $ 563,649 $ 499,268 $ 460,348 $408,655
========= ========= ========= ========= ========= ========
Property, Plant and Equipment
Utility plant .................................. $ 736,434 $ 691,757 $ 637,580 $ 588,908 $ 552,519 $514,457
Accumulated depreciation ....................... (182,080) (168,299) (155,618) (141,364) (127,047) (114,153)
Real estate properties ......................... 49,509 104,309 102,369 99,522 96,832 90,979
Accumulated depreciation ....................... (7,728) (12,602) (10,660) (8,758) (7,577) (5,847)
Oil and gas properties ......................... -- 63,224 64,576 57,398 53,423 48,097
Accumulated amortization ....................... -- (38,012) (32,597) (28,478) (24,241) (18,863)
--------- --------- --------- --------- --------- --------
Property, Plant and Equipment, Net ............... $ 596,135 $ 640,377 $ 605,650 $ 567,228 $ 543,909 $514,670
========= ========= ========= ========= ========= ========
Capital Expenditures
Utility plant .................................. $ 47,286 $ 54,506 $ 53,420 $ 37,864 $ 43,014 $ 54,776
Real estate properties ......................... 5,214 2,619 2,869 4,397 6,321 9,727
Oil and gas properties ......................... 1,250 1,517 9,216 5,333 8,016 17,982
Equity investments ............................. 5,259 462 296 875 2,469 730
--------- --------- --------- --------- --------- --------
Total ............................................ $ 59,009 $ 59,104 $ 65,801 $ 48,469 $ 59,820 $ 83,215
========= ========= ========= ========= ========= ========
Total Assets ..................................... $ 826,364 $ 797,347 $ 738,662 $ 668,605 $ 651,861 $603,857
========= ========= ========= ========= ========= ========
* Using income from continuing operations.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Operating Statistics New Jersey Natural Gas Company
1995 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues (thousands)
Residential .................................... $ 282,015 $ 308,196 $ 284,638 $ 263,108 $ 220,752 $221,575
Commercial, industrial and other ............... 76,483 87,958 81,285 73,809 65,048 62,027
Firm transportation ............................ 4,864 255 - - - -
--------- --------- --------- --------- --------- --------
Total firm ....................................... 363,362 396,409 365,923 336,917 285,800 283,602
Interruptible and agency ......................... 6,512 9,431 7,817 11,671 14,539 16,727
JCP&L ............................................ 4,357 6,214 13,298 7,799 15,709 9,544
--------- --------- --------- --------- --------- --------
Total system ..................................... 374,231 412,054 387,038 356,387 316,048 309,873
Off system ....................................... 52,431 68,267 49,549 26,716 1,744 1,727
--------- --------- --------- --------- --------- --------
Total Operating Revenues ......................... $ 426,662 $ 480,321 $ 436,587 $ 383,103 $ 317,792 $311,600
========= ========= ========= ========= ========= ========
Throughput (thousands of therms)
Residential .................................... 339,254 385,144 363,440 347,859 297,106 336,245
Commercial, industrial and other ............... 102,910 119,343 110,468 104,175 90,047 96,224
Firm transportation ............................ 16,007 868 - - - -
--------- --------- --------- --------- --------- --------
Total firm ....................................... 458,171 505,355 473,908 452,034 387,153 432,469
Interruptible and agency ......................... 103,714 58,698 50,146 51,079 56,734 52,694
JCP&L ............................................ 20,542 22,985 25,410 18,232 65,169 36,589
--------- --------- --------- --------- --------- --------
Total system throughput .......................... 582,427 587,038 549,464 521,345 509,056 521,752
Off system and capacity release .................. 625,984 467,275 208,369 118,198 3,880 4,250
--------- --------- --------- --------- --------- --------
Total Throughput ................................. 1,208,411 1,054,313 757,833 639,543 512,936 526,002
========= ========= ========= ========= ========= ========
Customers at Year End
Residential .................................... 329,237 318,003 309,215 300,327 292,551 286,862
Commercial, industrial and other ............... 22,199 21,938 21,112 20,307 19,605 19,287
Firm transportation ............................ 880 27 -- -- -- --
--------- --------- --------- --------- --------- --------
Total firm ....................................... 352,316 339,968 330,327 320,634 312,156 306,149
Interruptible and agency ......................... 36 35 33 33 39 36
JCP&L ............................................ 2 2 3 3 2 2
Off system and capacity release .................. 23 17 4 4 1 1
--------- --------- --------- --------- --------- --------
Total Customers at Year End ...................... 352,377 340,022 330,367 320,674 312,198 306,188
========= ========= ========= ========= ========= ========
Interest Coverage Ratio .......................... 3.45 3.63 3.50 3.23 2.08 2.33
========= ========= ========= ========= ========= ========
Average Therm Use per Customer
Residential .................................... 1,031 1,211 1,175 1,158 1,016 1,172
Commercial ..................................... 4,636 5,287 5,013 4,899 4,245 4,663
========= ========= ========= ========= ========= ========
Degree Days ...................................... 4,877 5,064 5,048 4,965 4,208 4,937
Weather as a Percent of Normal ................... 98% 102% 103% 97% 79 92
Maximum Day Sendout (thousands of therms) ........ 4,527 5,320 4,203 3,971 3,707 4,109
Number of Employees .............................. 827 814 796 771 774 766
========= ========= ========= ========= ========= ========
</TABLE>
Two-Year Stock History New Jersey Resources Corporation
The range of high and low sales prices as reported in The Wall Street Journal
and dividends paid per share were as follows:
1995 1994 Dividends Paid
------------------ ---------------------- -----------------
Fiscal Quarter High Low High Low 1995 1994
- -------------- -------- -------- -------- -------- ------ ------
First ........ $23 $ 19 3/4 $ 29 1/4 $ 24 $ .38 $.38
Second ....... 23 3/8 21 1/2 27 3/8 24 1/4 .38 .38
Third ........ 24 1/8 21 7/8 25 21 5/8 .38 .38
Fourth ....... 25 7/8 21 7/8 22 7/8 20 5/8 .38 .38
25
<PAGE>
New Jersey Resources Corporation
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Consolidated. Net income was $24.8 million during 1995, compared with $33
million during 1994 and $27.2 million in 1993. As discussed in Note 2 to the
Consolidated Financial Statements -- Discontinued Operations, the 1995 results
include a loss of $9.1 million, or $.52 per share, associated primarily with
exiting the Company's oil and gas production business. Income from continuing
operations was $33.9 million, $31.7 million and $28.2 million in 1995, 1994 and
1993, respectively. The increase in income from continuing operations each year
was primarily the result of the impact of customer growth and higher margins
from non-core markets on New Jersey Natural Gas Company (NJNG), the principal
subsidiary of New Jersey Resources Corporation (the Company).
Earnings per share were $1.41 during 1995, $1.93 in 1994 and $1.64 in 1993.
Earnings per share from continuing operations were $1.93, $1.86 and $1.70 in
1995, 1994 and 1993, respectively.
Dividends declared per share were $1.52 in 1995, 1994 and 1993.
Utility Operations
As a result of Federal Energy Regulatory Commission Order No. 636 (Order 636),
which is designed to increase competition in the natural gas industry,
interstate pipeline companies were required to unbundle their sales and
transportation services. The transition to a more deregulated interstate
pipeline market has provided NJNG the opportunity to purchase and manage its
own, specifically tailored gas supply portfolio, and to resell its pipeline
capacity to other customers during off-peak periods. The recovery of costs
incurred by the interstate pipeline companies in connection with implementing
Order 636, which have been passed through to NJNG, is discussed in Note 8 to the
Consolidated Financial Statements.
NJNG's financial results are summarized as follows:
(Thousands) 1995 1994 1993
- ---------- -------- -------- --------
Gross margin
Residential and commercial ....... $141,246 $146,778 $133,773
Firm transportation .............. 4,691 250 --
Interruptible and agency ......... 363 1,844 932
Off system and capacity
release ......................... 3,974 3,451 1,753
-------- -------- --------
Total gross margin ................. $150,273 $152,323 $136,458
======== ======== ========
Operating income before
income taxes ..................... $ 67,211 $ 65,663 $ 56,773
======== ======== ========
Net income ......................... $ 33,703 $ 32,142 $ 27,551
======== ======== ========
Gross Margin. Gross margin, defined as gas revenues less gas costs and gross
receipts and franchise taxes (GRFT), provides a more meaningful basis for
evaluating utility operations since gas costs and GRFT are passed through to
customers and, therefore, have no effect on earnings. Gas costs are charged to
operating expenses on the basis of therm sales at the base and Levelized Gas
Adjustment (LGA) cost rates included in NJNG's tariff. The LGA clause allows
NJNG to recover gas costs that exceed the level reflected in its base rates.
GRFT are also calculated on a per-therm basis and exclude sales to other
utilities.
Residential and Commercial. Through fiscal 1992, gross margin from firm (i.e.,
residential and commercial) customers was weather-sensitive. In NJNG's June 1992
base rate order, the New Jersey Board of Public Utilities (the BPU) approved a
weather-normalization clause (WNC) on a two-year experimental basis effective
October 1, 1992. This clause provides for a revenue adjustment if the weather
varies by more than one-half of one percent from normal, or 10-year average,
weather. The accumulated adjustment from one heating season (i.e.,
October-April) is billed or credited to customers in the subsequent heating
season. The BPU approved the clause on an interim basis for fiscal 1995. BPU
approval to make the WNC permanent is expected in the first quarter of fiscal
1996.
The decrease in firm gross margin of $5.5 million, or 4%, in 1995 was due
to a 14% decrease in firm therm sales which more than offset customer growth.
The increase of $13.0 million, or 10%, in 1994 was due primarily to higher therm
sales from customer growth, colder weather and the impact of a base rate
increase.
NJNG received a base rate increase of $7.5 million, or 2%, effective in
January 1994 which increased gross margin by $2 million in 1995 and $5.5 million
in 1994, compared with the prior year.
Therm sales to firm customers were 442 million in 1995, compared with 504
million in 1994 and 474 million in 1993. The 14% decrease in therm sales in 1995
was due to warmer weather and lower average customer usage, which more than
offset the impact of continued customer growth. The usage level imbedded in
rates is not protected by the WNC. The weather was 4% warmer in 1995 and 1%
colder in 1994, compared with the respective prior year.
The weather in 1995 was 2% warmer than normal which, due to the WNC, resulted in
the accrual of $1.9 million of gross margin for future recovery from customers.
In 1994 and 1993,
26
<PAGE>
New Jersey Resources Corporation
colder-than-normal weather resulted in the deferral of $2.7 million and $1.5
million, respectively, for credit to customers in the subsequent fiscal year.
NJNG added 12,465 and 11,222 new customers in 1995 and 1994, and converted
the heating systems of another 923 and 798 existing customers in each year,
respectively. The growth in 1995 represents an annual increase of approximately
21 million therms, or 4%, in sales to firm customers. NJNG remains one of the
fastest-growing natural gas distribution utilities in the country, and expects
to maintain a customer growth rate of more than 3.5% in the future.
In 1996 and 1997, NJNG expects to add 13,000 and 13,500 new customers,
respectively, and convert to natural gas heat an additional 750 existing
customers each year. This would result in a sales increase of approximately 21
million therms per year, assuming normal weather and average use, and would
increase gross margin under present rates by approximately $6 million per
year. Future therm sales will continue to be affected by weather, the economic
conditions in NJNG's service territory, conversion activity and other marketing
efforts, as well as the conservation efforts of NJNG's customers.
Firm Transportation. At September 30, 1995, NJNG provided firm transportation
service to 880 commercial and industrial customers who chose this service.
NJNG's gross margin will not be negatively impacted by customers who utilize the
firm transportation service and purchase their gas from another supplier, as its
tariffs are designed such that no profit is earned on the commodity portion of
sales to firm customers.
Interruptible and JCP & L. NJNG services 38 customers through interruptible
sales and/or transportation tariffs and through May 31, 1995 served certain of
these customers through agency sales agreements. 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 10% of total therm throughput in 1995 and 8% in 1994, they accounted
for less than 1% of the total gross margin in each year due primarily to the
regulated margin-sharing formulas that govern these sales. Under these formulas,
NJNG retains 5% of the gross margin from transportation sales and 10% of the
gross margin from the interruptible sales, with the balance credited to
residential and commercial customers through the LGA clause. Interruptible therm
sales were 30 million in 1995, compared with 42 million in 1994 and 38 million
in 1993. In addition, NJNG transported 94 million therms in 1995, 38 million in
1994 and 37 million in 1993, for its interruptible customers.
In June 1995, the agency sales function was transferred to the Company's
newly-formed unregulated subsidiary, New Jersey Natural Energy Company. Margin
from agency sales agreements totaled $1.4 million in 1994 and $790,000 in 1993.
Off-System and Capacity Release. In order to reduce the overall cost of its gas
supply commitments, NJNG has entered into contracts to sell gas to customers who
are outside of its franchise territory. These sales enable NJNG to spread its
fixed demand costs, which are charged by pipelines to access gas supplies
year-round, over a larger and more diverse customer base. NJNG also participates
in the capacity release market on the interstate pipeline system when the
capacity is not needed for its own system requirements. Effective January 1994,
NJNG retained 20% of the gross margin from off-system sales and capacity
release.
NJNG's off-system sales totaled 246 million therms and generated $1.6 million
of gross margin in 1995, compared with 260 million therms and $2.2 million of
gross margin in 1994 and 208 million therms and $1.8 million of gross margin in
1993. The decreases in margin per therm were due primarily to the change in the
regulated margin-sharing formula and increased competition. The capacity release
program generated $2.4 million of gross margin in 1995 and $1.2 million in 1994.
This increase was due to increased marketing efforts.
Operating Income Before Income Taxes. Operating income before income taxes
increased by 2% to $67.2 million in 1995, due to lower operation and maintenance
expenses resulting primarily from lower health care and inventory costs, which
more than offset the decrease in firm margin and the transfer of the agency
sales function. Operating income before taxes increased by 16% to $65.7 million
in 1994, as the increase in gross margin more than offset higher operation and
maintenance expenses associated primarily with the impact of growth on
operations.
Summary. The 5% increase in NJNG's earnings in 1995 reflected higher margins
from continued customer growth and non-core markets, the full effect of its last
base rate increase, lower operating costs and a lower income tax provision,
which more than offset lower gross margin from customer usage. NJNG realizes
that base rate increases cannot be relied upon for future earnings growth. NJNG
expects to continue to generate incremental margins from growth in its core
markets and aggressively pursue new non-core markets to diversify and improve
its demand profile while continuing its cost containment programs, as it remains
committed to providing a proper return to its investors. The continuation of the
weather-normalization clause should also reduce the variability of both customer
bills and NJNG's earnings due to weather fluctuations.
27
<PAGE>
New Jersey Resources Corporation
Non-Utility Operations
Marketing Operations. New Jersey Natural Energy Company (Natural Energy) was
formed in 1995 to facilitate the unregulated marketing of natural gas and fuel
and capacity management services. In June 1995, the agency sales function of
NJNG was transferred to Natural Energy. In August 1995, Natural Energy entered
into a three-year fuel management agreement with GPU Service Corporation to
manage their gas purchases and interstate pipeline capacity. Margin from agency
sales agreements totaled $1.7 million and net income totaled $783,000 in 1995.
Real Estate Operations. The financial results of Commercial Realty & Resources
Corp. (CR&R) are summarized as follows:
(Thousands) 1995 1994 1993
- ---------- ------- ------- -------
Revenues .................................. $12,770 $12,466 $12,554
Operating income before
income taxes ............................ $ 6,367 $ 5,426 $ 5,976
Income (loss) before
SFAS 109 ................................ $ (67) $ 349 $ 464
Net income (loss) ......................... $ (67) $ 1,009 $ 464
======= ======= =======
In the first quarter of fiscal 1995, CR&R determined that the book value of its
undeveloped land inventory had reached its estimated net realizable value based
upon its projected development strategy. CR&R is required to continue
capitalizing carrying charges on its undeveloped land inventory until it is
developed. Therefore, CR&R's results for 1995 included a pre-tax allowance of
$1.8 million associated with the carrying costs of CR&R's undeveloped land
inventory. Additional allowances for these capitalized carrying charges will
continue until the land is developed.
CR&R's earnings before the effect of SFAS 109 decreased by $416,000 in 1995
reflecting primarily the aforementioned land allowance and an increase in net
interest expense due to higher floating interest rates. CR&R's earnings before
SFAS 109 decreased by $115,000 in 1994 as expenses associated with evaluating
CR&R's strategic alternatives more than offset lower interest costs realized
from refinancing activity.
CR&R's completed space totaled 914,200 square feet in each of the past
three years and the occupancy rate of the total portfolio totaled 97% at the end
of each year.
See Note 12 to the Consolidated Financial Statements -- Subsequent Event
for a discussion of the sale of certain real estate assets on November 8, 1995.
The Company does not expect the sale to have a significant impact on its results
of operations. As part of its continuing strategy to realign its asset base more
closely with its core energy business, the Company is pursuing alternatives for
disposing of additional real estate assets and expects to make further progress
during fiscal 1996.
Oil and Gas Operations. See Note 2 to the Consolidated Financial Statements --
Discontinued Operations for a discussion of the Company's decision to exit the
oil and gas production business and account for this segment as a discontinued
operation. NJR Energy Corporation's (NJR Energy) continuing operations consist
of its equity investments in the Iroquois Gas Transmission System, L.P.
(Iroquois) and the Market Hub Partners, L.P.
NJR Energy. The financial results from continuing operations of NJR Energy are
summarized as follows:
(Thousands) 1995 1994 1993
- ----------- ------- ------ ------
Revenues ................................. $ 557 $ 765 $ 924
Operating income before
income taxes ........................... $ 27 $ 99 $ 215
Net loss ................................. $(1,185) $ (712) $ (260)
======= ====== ======
The net loss in all periods is due to the interest expense related to the debt
that is estimated to remain after the sale of the reserves. The Company plans to
reduce such debt from the cash flow generated by NJR Energy's equity investments
and to make additional contributions from proceeds of the Company's Dividend
Reinvestment and Customer Stock Purchase Plan (DRP). As discussed in Note 10 to
the Consolidated Financial Statements -- Commitments and Contingent Liabilities,
1995 results also included a provision of $560,000 related to the Company's
investment in Iroquois.
Paradigm Power, Inc. See Note 2 to the Consolidated Financial Statements --
Discontinued Operations for a discussion of the Company's decision to no longer
pursue investments in gas-fired generating facilities.
Liquidity and Capital Resources
Consolidated. The Company is responsible for meeting the common equity
requirements of each subsidiary through new issuances, including the proceeds
from its DRP. During 1995,
28
<PAGE>
New Jersey Resources Corporation
the Company raised $10.8 million from its DRP compared with $12.1 million in
1994 and $13.2 million in 1993. The Company provides the debt requirements for
its non-regulated companies, while NJNG issues short-term and long-term debt
based upon its own financial profile.
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 projected mix of investments, the Company expects to
increase its common equity ratio to a range of 45% to 50%.
In order to meet the working capital and external debt financing
requirements of the non-regulated companies, as well as its own working capital
needs, the Company maintains committed credit facilities totaling $145 million
with a number of banks and has a $10 million credit facility available on an
offering basis.
At September 30, the Company's consolidated capital structure was as follows:
1995 1994
---- ----
Common stock equity .................... 41% 42%
Preferred stock ........................ 3 4
Long-term debt ......................... 56 54
--- ---
Total .................................. 100% 100%
=== ===
NJNG. The seasonal nature of the Company's utility operations creates large
short-term cash requirements, primarily to finance gas purchases and customer
accounts receivable. NJNG obtains working capital for these requirements, as
well as for the temporary financing of construction expenditures, sinking fund
needs and accelerated GRFT payments mandated by changes in New Jersey law,
through the issuance of commercial paper and short-term bank loans. To support
the issuance of commercial paper, NJNG maintains committed credit facilities
totaling $65 million with a number of commercial banks and has an additional $20
million in lines of credit available on an offering basis. NJNG's lines of
credit are adjusted quarterly based upon its projected cash needs.
Capital Requirements. NJNG's capital requirements for 1993 through 1995 and
projected amounts through 1997 are as follows:
Maturities and
Construction redemption of Redemption of
(Thousands) expenditures long-term debt preferred stock Total
- ---------- ------------ -------------- --------------- ---------
1993 ......... $ 53,420 $ 21,379 $ 10,270 $ 85,069
1994 ......... 54,506 14,064 270 68,840
1995 ......... 47,286 34,564 1,066 82,916
1996 ......... 48,800 2,360 120 51,280
1997 ......... 49,800 2,360 120 52,280
======== ========= ======== =========
The level of construction expenditures has resulted primarily from the need for
services, mains and meters to support NJNG's continued customer growth, and
general system renewals and improvements. NJNG also had additional capital
requirements in 1993 and 1994 of approximately $25 million annually resulting
from the acceleration of GRFT payments to the state of New Jersey. Optional
redemption activity included $31 million of First Mortgage Bonds and $796,000 of
preferred stock in 1995, $10.5 million of First Mortgage Bonds in 1994 and $17.4
million of First Mortgage Bonds and $10 million of preferred stock in 1993.
Based on current market conditions, NJNG expects to optionally redeem the
remaining $6 million balance of its 10% Series N Bonds in 1996.
Financing
(Thousands) 1995 1994 1993
- ----------- -------- -------- --------
Cash flow ....................... $ 59,778 $ 65,619 $ 48,389
External financing
Common stock .................. $ 9,619 $ 10,887 $ 13,218
Long-term debt ................ $ 53,500 $ 44,500 $ 39,300
======== ======== ========
Cash flow, defined as net income adjusted for depreciation, amortization of
deferred charges and the change in deferred income taxes, represents the cash
generated from operations available for capital expenditures, dividends, working
capital and other requirements. Cash flow decreased by 9% in 1995 due to the
reversal of certain deferred tax benefits, which more than offset higher
earnings. Cash flow increased by 36% in 1994 due primarily to higher earnings
and higher deferred tax benefits.
Common equity financing each year consisted of proceeds from the Company's
DRP, as described above.
NJNG's external financing requirements in 1996 and 1997 are expected to
average about $18 million annually, which will be met through additional
issuances of short-term and long-term debt and common equity contributions by
the Company. In October 1993, NJNG received approval from the BPU to issue up to
$75 million of First Mortgage Bonds under a Medium-Term Note (MTN) program, of
which $55 million was issued as of September 1995, with the remaining $20
million issued in October 1995 as 6 7/8% Series CC First Mortgage Bonds. NJNG
also expects to issue about $11 million of its Series BB Bonds during 1996 and
1997. The timing and mix of these issuances will be geared toward achieving a
common equity ratio of 53%, which is consistent with maintaining NJNG's current
short-term and long-term credit ratings and providing access to external
capital.
29
<PAGE>
New Jersey Resources Corporation
CR&R. Capital requirements and financing activity for CR&R from 1993 through
1995 were as follows:
(Thousands) 1995 1994 1993
- ----------- ------- ------- -------
Capital expenditures ................... $ 5,214 $ 2,619 $ 2,869
Maturities and redemption
of long-term debt .................... $ -- $13,842 $ 2,241
Cash flow .............................. $ 2,611 $ 3,987 $ 2,883
External financing
Long-term debt ....................... $ 2,302 $12,108 $ 2,091
======= ======= =======
As a result of the strategic re-evaluation conducted by the Company in 1992,
CR&R's capital expenditures have been limited to the fit-up of existing tenant
space and the development of existing acreage.
Under these parameters, the Board of Directors approved the construction of
a 76,300 square foot flex building on 10 acres of land in the Monmouth Shores
Corporate Park (MSCP) which is expected to be completed in 1996. The total
project cost is expected to total $6.4 million, of which $3.7 million had been
expended at September 30, 1995. Such capital expenditures are expected to be
funded through bank loans obtained by the Company and internal generation.
External financing activity included the refinancing of its 11 5/8%, $13.8
million mortgage in 1994 and the refinancing of its 12 3/4%, $2.1 million
mortgage in 1993. Funds for both refinancings were obtained from the Company's
bank credit facilities.
Capital expenditures are projected to be $7.5 million in 1996 in connection
with the completion of the above mentioned building, the fit-up of existing
tenant space and additional investments, approved by the Board of Directors,
made for the purpose of preserving the value of particular real estate holdings,
or made on a build-to-suit basis in accordance with acceptable commitments from
existing or prospective tenants or buyers. Such expenditures are expected to
be funded through internal generation and bank loans obtained by the Company.
NJR Energy. Capital requirements and financing activity for NJR Energy from 1993
through 1995 were as follows:
(Thousands) 1995 1994 1993
- ----------- ------- ------- -------
Capital expenditures and
equity investments .............. $ 6,509 $ 1,979 $ 9,512
Cash flow ......................... $ 4,875 $ 4,783 $ 3,323
External financing
Common stock .................... $ 1,200 $ 1,200 $ --
Long-term debt .................. $ (582) $(5,179) $ 6,143
======= ======= =======
NJR Energy formed NJR Storage Corporation (Storage) in December 1994 and
announced its participation in Market Hub Partners, L.P. (MHP) which is expected
to develop, own and operate a system of five natural gas market centers with
high-deliverability salt cavern storage facilities. The market centers are
expected to be strategically located in Texas, Louisiana, Mississippi, Michigan
and Pennsylvania. As of September 30, 1995, Storage's 5.67% equity investment in
MHP totaled $4.8 million.
Cash flow improved in 1995 and 1994 compared to 1993 due primarily to the
utilization of federal alternative minimum tax credits.
NJR Energy received $1.2 million of DRP proceeds in both 1995 and 1994.
Capital expenditures in 1996 and 1997 are projected to be $2.5 million and
$600,000, respectively, related to the MHP investment. Such expenditures are
expected to be funded through internal generation and the issuance of additional
debt and equity by the Company, the timing and mix of which will be decided by
market and other conditions.
Effects of Inflation. Under the ratemaking process, the recovery of plant
costs through depreciation and the allowed return on plant investment are
limited to levels based upon the historical cost of utility plant, which is
significantly less than current replacement costs. The Company believes, based
on past practices, that NJNG will be allowed to earn on the increased cost of
its investment when replacement of the facilities is included in rate base. The
Company's other operations have not been significantly affected by inflation.
New Accounting Standards. See Note 1 to the Consolidated Financial Statements
for a discussion of new accounting standards.
Summary. The Company is confident that it will have adequate cash flow and
proper access to both the short-term and long-term capital needed to meet the
projected capital and dividend requirements of each subsidiary. The Company and
NJNG will also explore various alternatives to take advantage of favorable
interest rates to reduce its overall cost of capital. In addition, NJNG is
committed to providing quality service to its customers and a fair return to the
Company's shareholders, without the need of base rate increases. The Company
will continue to take steps to align its asset base with its new strategic
direction which is focused on its core utility, retail marketing and wholesale
energy businesses.
30
<PAGE>
New Jersey Resources Corporation
The management of New Jersey Resources Corporation and its subsidiaries is
responsible for the integrity and objectivity of the financial statements and
related disclosures of the Company. These statements and disclosures have been
prepared using management's best judgment and are in conformity with generally
accepted accounting principles applied on a consistent basis. The financial
statements have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report.
To meet its responsibilities with respect to financial information,
management maintains and enforces a system of financial accounting controls,
which is designed to give reasonable assurance as to the reliability of the
financial records and the protection of assets. This system is augmented by
written policies and procedures, an organizational structure that provides for
appropriate division of responsibility and careful selection and training of
personnel. This system is also tested by the Company's Internal Audit
Department. Management believes the system is effective and provides reasonable
assurance that all transactions are properly recorded.
In addition, the Company has a Code of Conduct that requires all employees
to maintain the highest level of ethical standards and requires key management
personnel to formally declare their compliance with the Code annually.
The Board of Directors, through its Audit Committee, which is currently
composed of five outside directors, oversees management's responsibilities for
accounting, internal controls and financial reporting. The Audit Committee meets
periodically with management, the internal auditors and independent auditors to
discuss auditing and financial matters and to assure that each is carrying out
its responsibilities. Both the internal and independent auditors have access to
the Audit Committee at any time.
Independent Auditor's Report
Deloitte & Touche LLP [Logo]
To The Shareholders and Board of Directors of New Jersey Resources
Corporation: We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of New Jersey Resources Corporation
and its subsidiaries as of September 30, 1995 and 1994 and the related
consolidated statements of income, common stock equity and cash flows for each
of the three years in the period ended September 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the companies at September 30,
1995 and 1994 and the results of their operations and their cash flows for each
of the three years in the period ended September 30, 1995 in conformity with
generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
October 31, 1995 (Except for Note 12 as to
which the date is November 8, 1995)
31
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Income New Jersey Resources Corporation
(Thousands, except per share data)
For the Years Ended September 30, 1995 1994 1993
- -------------------------------- -------- -------- --------
<S> <C> <C> <C>
Operating Revenues .............................................................. $454,593 $497,075 $446,652
-------- -------- --------
Operating Expenses
Gas purchases ................................................................. 251,086 286,352 251,856
Operation and maintenance ..................................................... 59,233 64,194 57,509
Depreciation and amortization ................................................. 23,022 21,236 21,237
Gross receipts tax, etc. ...................................................... 46,017 53,744 52,712
Federal income taxes .......................................................... 15,967 16,569 13,726
-------- -------- --------
Total operating expenses ........................................................ 395,325 442,095 397,040
-------- -------- --------
Operating Income ................................................................ 59,268 54,980 49,612
-------- -------- --------
Other Income, Net ............................................................... 362 30 713
-------- -------- --------
Interest Charges, Net
Long-term debt ................................................................ 22,630 20,413 19,653
Short-term debt and other ..................................................... 1,452 1,206 477
-------- -------- --------
Total interest charges, net ..................................................... 24,082 21,619 20,130
Income Before Preferred Stock Dividends ......................................... 35,548 33,391 30,195
Preferred stock dividends ....................................................... 1,629 1,662 2,022
-------- -------- --------
Income from Continuing Operations ............................................... 33,919 31,729 28,173
Discontinued operations
Loss from operations, net ..................................................... (439) 545 (1,011)
Loss from disposal, less income tax benefits of $4,681 ........................ (8,695) -- --
Cumulative effect of change in accounting for income taxes -- 721 --
-------- -------- --------
Net Income ...................................................................... $ 24,785 $ 32,995 $ 27,162
Earnings Per Common Share from Continuing Operations ............................ $ 1.93 $ 1.86 $ 1.70
Loss from discontinued operations ............................................... (.52) .03 (.06)
Cumulative effect of change in accounting for income taxes ...................... -- .04 --
-------- -------- --------
Earnings Per Common Share ....................................................... $ 1.41 $ 1.93 $ 1.64
======== ======== ========
Dividends Per Common Share ...................................................... $ 1.52 $ 1.52 $ 1.52
======== ======== ========
Average Shares Outstanding ...................................................... 17,605 17,096 16,607
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Common Stock Equity
Number of Common Premium on Retained
(Thousands) Shares Stock Common Stock Other Earnings
- ---------- --------- ----- ------------ ----- --------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1992 ........................ 16,286 $40,715 $171,353 $ (1,503) $ 4,138
Net income 27,162
Common stock issued under stock plans ................ 534 1,335 11,643
Cash dividends declared (25,283)
Reduction of ESOP term loan and other ................ 753
------ ------- -------- -------- --------
Balance at September 30, 1993 ........................ 16,820 42,050 182,996 (750) 6,017
Net income 32,995
Common stock issued under stock plans ................ 483 1,206 10,918
Cash dividends declared (26,019)
Reduction of ESOP term loan and other 750
------ ------- -------- -------- --------
Balance at September 30, 1994 ........................ 17,303 43,256 193,914 -- 12,993
Net income 24,785
Common stock issued under stock plans ................ 490 1,225 9,585
Cash dividends declared (26,790)
Unearned compensation ................................ (49)
------ ------- -------- -------- --------
Balance at September 30, 1995 ........................ 17,793 $ 4,481 $203,499 $ (49) $ 10,988
====== ======= ======== ======== ========
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows New Jersey Resources Corporation
(Thousands)
<S> <C> <C> <C>
For the Years Ended September 30, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net income ................................................................... $ 24,785 $ 32,995 $ 27,162
Adjustments to reconcile net income to cash flows
Depreciation and amortization ............................................... 27,280 27,595 25,405
Loss from disposal of discontinued operations ............................... 8,695 - -
Amortization of deferred charges ............................................ 2,022 2,701 1,381
Deferred income taxes ....................................................... 6,523 14,075 (980)
Cumulative effect of change in accounting for income taxes .................. - (721) -
Change in working capital ................................................... 9,458 (30,711) (44,399)
Other, net .................................................................. (480) (4,494) 401
--------- --------- --------
Net cash flows from operating activities ....................................... 78,283 41,440 8,970
--------- --------- --------
Cash Flows (used in) from Financing Activities
Proceeds from long-term debt ................................................. 67,000 50,250 49,200
Proceeds from common stock ................................................... 10,819 12,087 13,218
Payments of long-term debt ................................................... (35,238) (28,580) (24,295)
Payments of preferred stock .................................................. (1,066) (270) (10,270)
Payments of common stock dividends ........................................... (26,605) (25,836) (24,426)
Net change in short-term debt ................................................ (30,600) 12,100 54,900
--------- --------- --------
Net cash flows (used in) from financing activities ............................. (15,690) 19,751 58,327
--------- --------- --------
Cash Flows used in Investing Activities
Expenditures for
Utility plant ............................................................... (47,286) (54,506) (58,270)
Contribution from cogeneration developer .................................... - - 4,850
Real estate properties ...................................................... (5,214) (2,619) (2,869)
Oil and gas properties ...................................................... (1,250) (1,517) (9,216)
Equity investments .......................................................... (5,259) (462) (296)
Cost of removal ............................................................. (4,470) (4,875) (1,752)
Proceeds from sale of assets ................................................. - 3,184 -
--------- --------- --------
Net cash flows used in investing activities .................................... (63,479) (60,795) (67,553)
--------- --------- --------
Net change in cash and temporary investments ................................... (886) 396 (256)
Cash and temporary investments at beginning of the year ........................ 1,951 1,555 1,811
--------- --------- --------
Cash and temporary investments at end of the year .............................. $ 1,065 $ 1,951 $ 1,555
========= ========= ========
Changes in Components of Working Capital
Construction fund ............................................................ $ (12,500) $ - $ -
Receivables .................................................................. (1,486) (4,055) (1,473)
Inventories .................................................................. 5,480 3,747 (8,374)
Deferred gas costs ........................................................... 12,353 (6,560) (19,566)
Purchased gas ................................................................ 14,154 (9,865) 4,958
Accrued and prepaid taxes, net ............................................... (4,895) (19,193) (20,879)
Customers' credit balances and deposits ...................................... 1,560 2,841 (1,582)
Other, net ................................................................... (5,208) 2,374 2,517
--------- --------- --------
Total .......................................................................... $ 9,458 $ (30,711) $(44,399)
========= ========= ========
Supplemental Disclosures of Cash Flows Information
Cash paid during the year for
Interest (net of amount capitalized) ......................................... $ 23,067 $ 19,455 $ 18,725
Income taxes ................................................................. $ 8,426 $ 6,734 $ 9,930
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
33
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets New Jersey Resources Corporation
(Thousands)
<S> <C> <C>
September 30, 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Assets
Property, Plant and Equipment
Utility plant, at original cost ........................................................... $ 736,434 $691,757
Real estate properties, at cost ........................................................... 49,509 104,309
Oil and gas properties .................................................................... - 63,224
--------- --------
785,943 859,290
Accumulated depreciation and amortization ................................................. (189,808) (218,913)
--------- --------
Property, plant and equipment, net .......................................................... 596,135 640,377
--------- --------
Current Assets
Cash and temporary investments ............................................................ 1,065 1,951
Construction fund ......................................................................... 12,500 -
Customer accounts receivable .............................................................. 20,196 18,805
Unbilled revenues ......................................................................... 9,768 9,136
Allowance for doubtful accounts ........................................................... (422) (657)
Gas in storage, at average cost ........................................................... 26,703 33,483
Materials and supplies, at average cost ................................................... 8,443 7,143
Prepaid state taxes ....................................................................... 18,041 11,077
Deferred gas costs ........................................................................ 17,098 16,008
Assets held for sale, net ................................................................. 66,997 -
Other ..................................................................................... 5,512 6,285
--------- --------
Total current assets ........................................................................ 185,901 103,231
--------- --------
Deferred Charges and Other
Equity investments ........................................................................ 10,709 6,237
Regulatory assets ......................................................................... 22,934 22,776
Other ..................................................................................... 10,685 24,726
--------- --------
Total deferred charges and other ............................................................ 44,328 53,739
--------- --------
Total Assets ................................................................................ $ 826,364 $797,347
========= ========
Capitalization and Liabilities
Capitalization
Common stock equity ....................................................................... $ 258,919 $250,163
Redeemable preferred stock ................................................................ 21,004 22,070
Long-term debt ............................................................................ 352,227 323,590
--------- --------
Total capitalization ........................................................................ 632,150 595,823
--------- --------
Current Liabilities
Current maturities of long-term debt ...................................................... 2,364 4,315
Short-term debt ........................................................................... 16,400 42,000
Purchased gas ............................................................................. 29,104 14,950
Accounts payable and other ................................................................ 33,817 36,163
Accrued taxes ............................................................................. 8,510 3,130
Customers' credit balances and deposits ................................................... 16,040 14,480
--------- --------
Total current liabilities ................................................................... 106,235 115,038
--------- --------
Deferred Credits
Deferred income taxes ..................................................................... 51,851 52,698
Deferred investment tax credits ........................................................... 11,628 12,025
Other ..................................................................................... 24,500 21,763
--------- --------
Total deferred credits ...................................................................... 87,979 86,486
--------- --------
Commitments and Contingent Liabilities (Note 10)
Total Capitalization and Liabilities ........................................................ $ 826,364 $797,347
========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
34
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock Equity
Common stock, $2.50 par value; authorized 25,000,000 shares;
outstanding shares 1995, 17,792,517; 1994, 17,302,584 $ 44,481 $ 43,256
Premium on common stock 203,499 193,914
Unearned compensation (49) -
Retained earnings 10,988 12,993
--------- --------
Total common stock equity 258,919 250,163
Redeemable Preferred Stock
New Jersey Natural Gas Company
$100 par value, cumulative; authorized shares
1995, 520,045; 1994, 530,700; outstanding shares
4-3/4% series - 1995, 45; 1994, 9,500 4 950
5.65% series - 1995, 10,000; 1994, 11,200 1,000 1,120
7.72% series - 1995 and 1994, 200,000 20,000 20,000
Total redeemable preferred stock 21,004 22,070
Long-Term Debt
New Jersey Natural Gas Company
First mortgage bonds Maturity date
10.85% Series M September 1, 2000 - 6,000
10% Series N May 1, 2001 5,000 6,000
8.5% Series P March 1, 2002 8,182 9,545
9% Series Q December 1, 2017 13,500 13,500
8-1/2% Series R June 1, 2018 - 25,000
10.10% Series S June 1, 2009 20,000 20,000
7.05% Series T March 1, 2016 9,545 9,545
7.25% Series U March 1, 2021 15,000 15,000
7.50% Series V December 1, 2002 25,000 25,000
5-3/8% Series W August 1, 2023 10,300 10,300
6.27% Series X November 1, 2008 30,000 30,000
6.25% Series Y August 1, 2024 10,500 10,500
8.25% Series Z October 1, 2004 25,000 -
Variable Series AA August 1, 2030 25,000 -
Variable Series BB August 1, 2030 16,000 -
Short-term debt refinanced 20,000 25,000
Total 233,027 205,390
New Jersey Resources Corporation
Revolving Credit Agreements, at floating rates October 1, 1996 - October 1, 1998 119,200 118,200
Total long-term debt 352,227 323,590
Total Capitalization $ 632,150 $595,823
========= ========
</TABLE>
35
<PAGE>
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include the
accounts of New Jersey Resources Corporation (the Company) and its subsidiaries
- -- New Jersey Natural Gas Company (NJNG), NJR Energy Services Corporation
(Energy Services) and NJR Development Company, formerly called Paradigm
Resources Corporation. New Jersey Natural Energy Company (Natural Energy) and
NJR Energy Corporation (NJR Energy) are wholly owned subsidiaries of Energy
Services and Commercial Realty & Resources Corp. (CR&R), Paradigm Power, Inc.
(PPI), and NJR Computer Technologies, Inc. are wholly owned subsidiaries of NJR
Development. Energy Services and Natural Energy were formed in 1995 to better
segregate the Company's energy-related operations and to facilitate the
unregulated marketing of natural gas and related services, respectively.
Significant intercompany accounts and transactions have been eliminated.
Regulatory Accounting. The Company's largest subsidiary, NJNG, maintains its
accounts in accordance with the Uniform System of Accounts as prescribed by the
New Jersey Board of Public Utilities (the BPU). As a result of the ratemaking
process, the accounting principles applied by NJNG differ in certain respects
from those applied by nonregulated businesses.
Utility Plant and Depreciation. Depreciation is computed on a straight-line
basis for financial statement purposes, using rates based on the estimated
average lives of the various classes of depreciable property. The composite rate
of depreciation was 3.05% of average depreciable property in 1995, 3% in 1994
and 3.27% in 1993. When depreciable properties are retired, the original cost
thereof, plus cost of removal less salvage, is charged to accumulated
depreciation.
Utility Revenues. Customers are billed through monthly cycle billings on the
basis of one month's actual or estimated usage. Revenues are based upon service
rendered.
Gas Purchases. NJNG's tariff includes a Levelized Gas Adjustment (LGA) clause,
which is normally revised on an annual basis. Under this clause, NJNG projects
its cost of gas, net of supplier refunds and credits from non-firm sales and
transportation activities, over the subsequent 12 months and recovers the
excess, if any, of such projected costs over those included in its base rates
through monthly levelized charges to customers. Any under- or over-recoveries
are deferred and reflected in the LGA clause in the subsequent year.
Gross Receipts Tax, Etc. Gross receipts tax, etc. consists principally of New
Jersey gross receipts and franchise taxes (GRFT), which are eventually paid to
the municipalities in which NJNG has utility plant facilities, and a surtax paid
to the state. These taxes are calculated on a per-therm basis and are paid in
lieu of personal property and state income taxes. Such amounts represent
approximately 90% of the Gross receipts tax, etc. figures.
Federal Income Taxes. Through September 30, 1993, deferred federal income taxes
were provided for timing differences between book and taxable income, except
that NJNG provided such taxes only to the extent permitted for ratemaking
purposes. Effective October 1, 1993, deferred federal income taxes are
calculated in conformance with Statement of Financial Accounting Standards
(SFAS) No. 109, (See Note 7 -- Federal Income Taxes).
Investment tax credits have been deferred and are being amortized as a
reduction to the tax provision over the average lives of the related property.
Capitalized Interest. The Company's capitalized interest totaled $2.6 million in
1995 and 1994 and $3.2 million in 1993.
Regulatory Assets. Regulatory assets at September 30, 1995 and 1994 consist of
the following items that are being amortized through rates over remaining time
periods ranging from 1 to 8 years, except for $14 million of projected
remediation costs, without any return on the unamortized balances.
(Thousands) 1995 1994
- --------------------------------------------------------------------------------
Remediation costs (Note 10) .............................. $19,632 $19,154
Postretirement costs (Note 9) ............................ 1,474 766
Other .................................................... 1,828 2,856
------- -------
Total .................................................... $22,934 $22,776
======= =======
Included in Other Deferred Credits are the following items:
(Thousands) 1995 1994
- --------------------------------------------------------------------------------
Remediation costs (Note 10) .............................. $14,000 $14,000
Postretirement costs ..................................... 1,594 886
------- -------
Total .................................................... $15,594 $14,886
======= =======
Statements of Cash Flows. For purposes of reporting cash flows, all temporary
investments with maturities of three months or less are considered cash
equivalents.
New Accounting Standards. In March 1995, the Financial Accounting Standards
Board (FASB) issued SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121), which requires
that long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. In performing this review an undiscounted operating cash flow
before interest test is to be used and any resultant impairment required would
be measured based on the fair value of the asset. In October 1995, the FASB
issued SFAS No. 123 "Accounting for Stock-Based Compensation" (SFAS 123), which
requires that an employer's financial statements include expanded disclosure
regarding stock-based employee compensation arrangements. The Company is
evaluating the requirements of SFAS 121 and 123, both of which must be adopted
by fiscal 1997 and currently believes that they will not have a material impact
on its results of operations.
36
<PAGE>
New Jersey Resources Corporation
2. Discontinued Operations
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
its affiliates, NJR Energy and New Jersey Natural Resources Company. The Company
accounted for this segment as a discontinued operation and recorded a loss from
the disposal of $8.7 million, or $.49 per share. This charge is based on
estimates of the anticipated loss from operations until the assets are 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. The Company expects to complete
the sale of its reserves by January 1996 and use the proceeds to reduce
outstanding debt. At September 30, 1995, the net assets of the discontinued
operation, consisting of oil and gas properties and related investments at
estimated net realizable value of $14.3 million, are classified as Assets Held
for Sale, net in the Consolidated Balance Sheets.
In September 1995, the Company announced that its efforts in the wholesale
electric power generation market would be focused on gas sales and fuel
management services, rather than seek long-term investments in gas-fired
generating facilities. Accordingly, the Company accounted for its PPI subsidiary
as a discontinued operation. At September 30, 1995, the net assets of PPI
consisted of a $2.5 million note receivable, $1 million of which is classified
as long-term.
Summarized financial results of the discontinued operations were:
(Thousands, except per share data) 1995 1994 1993
- --------------------------------------------------------------------------------
Operating revenues
Oil and gas ........................... $ 6,778 $ 8,675 $ 8,094
------- ------- -------
(Loss) income before
income taxes
Oil and gas ........................... $ (955) $(2,991) $(2,378)
PPI ................................... (68) 2,990 (402)
Income tax benefit ....................... 584 546 1,769
------- ------- -------
(Loss) income from
discontinued operations ................ $ (439) $ 545 $(1,011)
======= ======= =======
(Loss) income per common
share from discontinued
operations ............................. $ (.03) $ .03 $ (.06)
======= ======= =======
The 1994 results for PPI included a gain of $2.1 million after taxes from the
termination of a power purchase agreement.
The 1994 and 1993 Consolidated Financial Statements have been restated to
reflect the accounting for these segments as Discontinued Operations.
3. Common Stock
At September 30, 1995 there were 1,679,700 shares reserved for issuance under
the Company's Dividend Reinvestment and Customer Stock Purchase, Employee Stock
Ownership and Retirement Savings Plans.
A total of 750,000 shares are reserved for issuance to key employees under
the Executive Long-Term Incentive Compensation Plan (the Plan) at the discretion
of the Board of Directors. At September 30, 1995, there were 577,542 shares
reserved for issuance or grant under the plan. All options granted under the
Plan have been non-qualified stock options, allow for the purchase of common
stock at prices equal to the average market value for the 20 trading days
preceding the date of grant, vest over four years and must be exercised within
ten years.
In March 1995, shareholders approved a Restricted Stock and Stock Option
Program for Outside Directors (the Program) under which 175,000 shares are
reserved for issuance to outside directors to enable the Company to attract and
retain persons of outstanding competence to serve on its Board of Directors and
strengthen the link between the directors and NJR shareholders by paying such
persons a portion of their compensation in NJR common stock and options to
purchase such stock. Under the Program, each director received an award of 200
shares of restricted stock which vest evenly over four years. Each director was
also granted 5,000 options and will receive an annual grant of 1,000 options. In
1995, a total of 2,600 shares were issued and, at September 30, 1995, there were
107,400 shares reserved for issuance or grant under the Program. All options
granted under the Program allow for purchase of common stock at prices equal to
the closing price on the date of grant, vest over five years and must be
exercised within ten years.
The following table summarizes the stock option activity for the past three
years:
Shares Price Range
- -------------------------------------------------------------------------------
Outstanding at
September 30, 1992 ................... 23,672 $ 19.01
Granted ................................ 67,264 $ 22.25
------- -------- --------
Outstanding at
September 30, 1993 ................... 90,936 $ 19.01 - $ 22.25
Granted ................................ 57,222 $ 26.00
Exercised .............................. (1,220) $ 22.25
Forfeited .............................. (8,449) $ 22.25 - $ 26.00
------- -------- --------
Outstanding at
September 30, 1994 ................... 138,489 $ 19.01 - $ 26.00
Granted ................................ 139,672 $ 22.875 - $ 24.375
Forfeited .............................. (68,094) $ 19.01 - $ 26.00
------- -------- --------
Outstanding at
September 30, 1995 ................... 210,067 $ 19.01 - $ 26.00
======= ======== ========
Exercisable at
September 30, 1995 ................... 64,245 $ 19.01 - $ 26.00
======= ======== ========
37
<PAGE>
New Jersey Resources Corporation
4. Redeemable Preferred Stock
Under the terms of its preferred stock agreements, NJNG purchases 1,200 shares
of the 5.65% series annually, at par plus accumulated dividends. The series is
redeemable at NJNG's option for $102 per share plus accumulated dividends at any
time. In 1995, NJNG redeemed a total of 9,455 shares of the 4 3/4% series. The
7.72% series is subject to mandatory redemption in 2001 and optional redemption
from 1998 to 2000 at prices declining from $101.72 to $100 per share plus
accumulated dividends.
Preferred stockholders are entitled to one vote per share on all NJNG
matters and have priority as to dividends. The agreements prohibit the
distribution of common stock dividends unless NJNG is in compliance with all
their provisions. In addition, whenever preferred dividends are in arrears in an
amount equal to four quarterly dividends, preferred stockholders may elect a
number of directors necessary to constitute one less than a majority of NJNG's
Board of Directors, until such dividends are paid in full.
The Company has 200,000 shares of authorized and unissued $100 par value
preferred stock.
5. Long-Term Debt, Dividends and Retained Earnings Restrictions
Annual redemption requirements for the next five years are as follows: 1996,
$2.4 million; 1997, $101.6 million; 1998, $2.4 million; 1999, $24.2 million and
2000, $4.2 million.
NJNG's mortgage secures its first mortgage bonds and represents a lien on
substantially all its property, including gas supply contracts. Certain
indentures supplemental to the mortgage include restrictions as to cash
dividends and other distributions on NJNG's common stock, which restrictions
apply so long as certain series of first mortgage bonds are outstanding. Under
the most restrictive provision, approximately $27.6 million of NJNG's retained
earnings was available at September 30, 1995.
In October 1993, NJNG received approval from the BPU to issue up to $75
million under a Medium-Term Note (MTN) Program. In October 1994, NJNG issued $25
million of its 8.25% Series Z First Mortgage Bonds due 2004 under the MTN
Program and used the proceeds to reduce its outstanding short-term debt. In
October 1995, NJNG issued $20 million of its 6 7/8% Series CC First Mortgage
Bonds due 2010 under the MTN Program and used the proceeds to reduce its out-
standing short-term debt. Accordingly, at September 30, 1995 and 1994, $20
million and $25 million, respectively, of short-term debt have been reclassified
as long-term debt for financial reporting purposes.
In August 1995, NJNG entered into a loan agreement with the New Jersey
Economic Development Authority (the Authority) under which the Authority loaned
to NJNG the proceeds from the Authority's $25 million Natural Gas Facilities
Refunding Revenue Bonds, Series 1995A (the Refunding Bonds) and its $16 million
Natural Gas Facilities Revenue Bonds, Series 1995B (the Revenue Bonds,
collectively, the EDA Bonds). The rates of interest on the EDA Bonds are
variable, currently set at a daily mode, and may be changed from time to time by
NJNG to daily, weekly, flexible or long-term interest rate modes, not to exceed
12% per annum. The EDA Bonds mature on August 1, 2030. To provide initial
liquidity support for the mandatory and optional tender provisions of the EDA
Bonds, NJNG also entered into a standby bond purchase agreement with a bank. To
secure its loan from the Authority, NJNG issued $25 million of its First
Mortgage Bonds, Adjustable Rate Series AA and $3.5 million of its First Mortgage
Bonds, Adjustable Rate Series BB (Series BB Bonds), with interest rates and
maturity dates similar to those of the Refunding Bonds and Revenue Bonds,
respectively. The proceeds from the Refunding Bonds were used in September 1995
to redeem NJNG's $25 million, 8 1/2% Series R First Mortgage Bonds due 2018. The
proceeds from the Revenue Bonds were deposited into a project construction fund
with the indenture trustee for the EDA Bonds. NJNG may obtain such funds in
reimbursement of its qualified expenditures relating to the project upon
delivering an equivalent amount of its Series BB Bonds to the indenture trustee.
The $3.5 million of Series BB Bonds, together with the remaining $12.5 million
of proceeds from the Revenue Bonds in the project construction fund, are held as
security for the Revenue Bonds.
The Company has seven committed revolving credit agreements totaling $145
million, which provide for bank loans at negotiable rates at or below the prime
rate. At September 30, 1995, a total of $119.2 million was outstanding under
these agreements, of which $99.2 million matures in 1997 and $20 million matures
in 1999.
The Company has entered into two interest rate swap agreements, having an
aggregate notional amount of $45 million, to eliminate the impact of changes in
interest rates on a portion of its floating rate long-term debt. These
agreements effectively fix the Company's interest rate on $30 million of its
floating rate revolving credit facilities at 9% through 1996, and on $15 million
of its floating rate revolving credit facilities at 9.5% through 1999. In the
event of nonperformance by the counterparties, the Company's interest cost on
the $45 million of long-term debt would revert to a floating rate based on a
three- or six-month LIBOR. However, the Company does
38
<PAGE>
New Jersey Resources Corporation
not anticipate nonperformance by the counterparties. The differential to be paid
or received is accrued as interest rates change and is recognized over the life
of the interest rate swap agreements.
The Company's remaining long-term debt outstanding under revolving credit
agreements at September 30, 1995 and 1994 totaled $74.2 million and $73.2
million, with a weighted average interest rate of 6.3% and 5.3%, respectively.
SFAS 107, "Fair Value of Financial Instruments", requires disclosure of the
estimated fair value of an entity's financial instrument assets and liabilities.
The fair value of cash and temporary investments, accounts receivable, accounts
payable, commercial paper and borrowings under revolving credit facilities are
estimated to equal their carrying amounts due to the short maturity of those
instruments. The estimated fair value of long-term debt is based on quoted
market prices for similar issues and the fair value of interest rate swap
agreements is based on the estimated amount the Company would receive or pay to
terminate the agreements. At September 30, 1995, the carrying amount of
long-term debt was $334.6 million with a fair market value of $345.2 million and
the Company would have to pay approximately $2.2 million to terminate its
interest rate swap agreements.
6. Short-term Debt and Credit Facilities
Committed credit facilities of NJNG support the issuance of commercial paper and
provide for bank loans at negotiable rates at or below the prime rate. These
credit facilities total $65 million, and require commitment fees on the unused
amounts. In addition, the Company has $10 million and NJNG has $20 million in
lines of credit that are available on an offering basis without payment of a
commitment fee. NJNG's lines of credit are adjusted quarterly based upon its
projected cash needs.
A comparison of pertinent data follows:
(Thousands) 1995 1994 1993
- --------------------------------------------------------------------------------
Bank credit facilities ...................... $65,000 $71,000 $71,000
Maximum amount
outstanding ............................... $78,700 $74,000 $56,600
Average daily amount
outstanding
Notes payable to banks .................... $ 6,600 $ 9,200 $ 3,900
Commercial paper .......................... $24,200 $30,300 $ 7,900
Weighted average interest rate
Notes payable to banks .................... 5.87% 4.00% 3.34%
Commercial paper .......................... 5.63% 3.88% 3.24%
Amount outstanding at year end
Notes payable to banks .................... $ 3,400 $ 5,000 $ 5,000
Commercial paper .......................... $33,000 $62,000 $49,900
Interest rate at year end
Notes payable to banks .................... 6.03% 4.88% 3.22%
Commercial paper .......................... 5.83% 4.93% 3.22%
======= ======= =======
7. Federal Income Taxes
The Company's federal income tax returns have been examined by the Internal
Revenue Service (IRS) through 1991 and all matters have been settled. The IRS
has substantially completed its examination of the 1992 and 1993 returns and the
Company does not anticipate any significant issues.
Effective October 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes" which requires the implementation of a liability method for
the financial reporting of income taxes, as compared with the deferred method.
Under the liability method, deferred tax balances must be recorded for all
temporary differences and are adjusted to reflect changes in tax rates.
Previously, deferred tax balances were not recorded for certain ratemaking items
and were not adjusted to reflect changes in tax rates. The cumulative effect of
adopting SFAS 109 on the Company's nonregulated operations was a credit to net
income of $721,000, or $.04 per share. The effect on NJNG was to decrease its
deferred tax liability by $375,000 with an offsetting regulatory liability as
the Company believes it is probable that the effects of SFAS 109 on NJNG will be
payable to customers in the future.
Federal income tax expense applicable to continuing operations differs from the
amount computed by applying the statutory rate to pre-tax income for the
following reasons:
(Thousands) 1995 1994 1993
- --------------------------------------------------------------------------------
Tax expense at statutory rate
(35% in 1995 and 1994
and 34.75% in 1993) ....................... $18,094 $17,613 $15,538
Increase (reduction)
resulting from
Depreciation and cost
of removal ............................... (1,410) (1,032) (234)
Amortization of investment
tax credits .............................. (397) (394) (411)
Section 1341 refunds ...................... (990) - -
Other ..................................... 862 398 (820)
------- ------- -------
Provision for Federal
income taxes .............................. $16,169 $16,585 $14,073
======= ======= =======
39
<PAGE>
New Jersey Resources Corporation
The provision for federal income taxes is composed of the following:
(Thousands) 1995 1994 1993
- --------------------------------------------------------------------------------
Current ............................... $ 11,561 $ 10,392 $ 11,619
-------- -------- --------
Deferred
Excess tax depreciation ............ 6,460 3,487 3,946
Gross receipts and
franchise taxes .................... - (3,580) (3,555)
Alternative minimum tax ............. 2,576 1,057 (367)
Contributions ....................... 319 1,943 (1,593)
Deferred gas costs .................. (3,970) 2,322 6,645
Installment sale .................... (522) 1,327 --
Deferred charges and other .......... 132 31 (2,211)
-------- -------- --------
Total deferred ........................ 4,995 6,587 2,865
-------- -------- --------
Amortization of investment
tax credits ......................... (397) (394) (411)
-------- -------- --------
Total provision ....................... $ 16,159 $ 16,585 $ 14,073
======== ======== ========
Charged to:
Operating expenses .................. $ 15,967 $ 16,569 $ 13,726
Other income, net ................... 192 16 347
-------- -------- --------
Total provision ....................... $ 16,159 $ 16,585 $ 14,073
======== ======== ========
At September 30, 1995, the Company had an alternative minimum tax (AMT) credit
of $2.6 million available for an indefinite carryforward period against future
federal income taxes payable to the extent that regular federal income taxes
payable exceeds AMT payable.
The tax effects of significant temporary differences comprising the Company's
net deferred income tax liability at September 30, 1995 and 1994, were as
follows:
(Thousands) 1995 1994
- --------------------------------------------------------------------------------
Current
Deferred gas costs ................................ $ 5,984 $ 5,603
Other ............................................. (459) (1,598)
-------- --------
Current deferred tax liability, net ................. $ 5,525 $ 4,005
======== ========
Non-current
Property related items ............................ $ 64,092 $ 65,708
Installment sale .................................. 805 1,327
Customer contributions ............................ (4,080) (4,399)
Capitalized overhead and interest ................. (4,989) (4,400)
Alternative minimum taxes ......................... (2,577) (6,825)
Unamortized investment tax credits ................ (4,315) (4,341)
Deferred charges and other ........................ 2,915 5,628
-------- --------
Non-current deferred tax liability, net ............. $ 51,851 $ 52,698
======== ========
8. Regulatory Issues
In December 1994, the BPU approved an agreement which provided for recovery over
a two-year period of all remaining transition costs, totaling $6.5 million,
incurred through September 1994 associated with interstate natural gas pipelines
complying with Order 636. The BPU also approved a financial risk management
(FRM) pilot program designed to provide price stability to NJNG's system supply
portfolio. All of the costs and results of the FRM program are to be recovered
through the LGA.
In July 1995, NJNG filed a petition with the BPU to decrease its annual LGA
revenues by $4.8 million and continue the FRM program. The Company also filed
for recovery of $3.7 million of deferred and projected costs from its Demand
Side Management Adjustment clause. A decision is expected in the first quarter
of fiscal 1996.
NJNG's weather normalization clause (WNC) provides for a revenue adjustment
if the weather varies by more than one-half of one percent from the 10-year
average, or normal, weather. The accumulated adjustment from one heating season
(i.e., October - April) is billed or credited to customers in the subsequent
heating season. During 1995, $2.7 million was credited to customers representing
the fiscal 1994 weather normalization adjustment. The weather in 1995 was 2%
warmer than normal, which resulted in a $1.9 million receivable from customers
at September 30, 1995, that is included in Customers' Credit Balances and
Deposits in the Consolidated Balance Sheet. BPU approval to make the WNC
permanent and collect this receivable from customers is expected in the first
quarter of fiscal 1996.
9. Employee Benefit Plans
Pension Plans. The Company has two trusteed, noncontributory defined benefit
retirement plans covering all regular, full-time employees with more than one
year of service. Plan benefits are based on years of service and average
compensation during the last five years of employment. The Company makes annual
contributions to the plans consistent with the funding requirements of federal
law and regulations.
40
<PAGE>
New Jersey Resources Corporation
The components of the net pension cost are as follows:
(Thousands) 1995 1994 1993
- --------------------------------------------------------------------------------
Service cost - benefits earned
during the period ...................... $ 1,482 $ 1,733 $ 1,550
Interest cost on projected
benefit obligation ..................... 2,989 2,812 2,662
Return on plan assets .................... (3,326) (3,160) (2,910)
Net amortization and deferral ............ (172) (159) (183)
------- ------- -------
Net cost ................................. $ 973 $ 1,226 $ 1,119
======= ======= =======
Plan assets consist primarily of corporate equities and obligations, U.S.
Government obligations and cash equivalents. A reconciliation of the funded
status of the plans to the amounts recognized in the Consolidated Balance Sheets
is presented below:
(Thousands) 1995 1994
- --------------------------------------------------------------------------------
Plan assets at fair value ............................ $ 43,752 $ 37,070
-------- --------
Actuarial present value of plan benefits
Vested benefits .................................... 30,532 25,060
Non vested benefits ................................ 1,991 1,565
Impact of estimated future
compensation changes ............................... 10,019 8,850
-------- --------
Projected plan benefits .............................. 42,542 35,475
-------- --------
Plan assets in excess of projected
plan benefits ...................................... 1,210 1,595
Unrecognized net assets at beginning
of the year ........................................ (2,669) (2,975)
Unrecognized prior service costs ..................... 1,599 1,733
Unrecognized net loss ................................ (2,204) (1,655)
-------- --------
Net pension liability recognized in the
Consolidated Balance Sheets ........................ $ (2,064) $ (1,302)
======== ========
The assumptions used in determining the actuarial present value of the projected
benefit obligation were as follows:
1995 1994
- --------------------------------------------------------------------------------
Discount rate ............................................ 7.50% 8.50%
Compensation increase .................................... 4.25% 5.00%
Long-term rate of return on plan assets .................. 9.00% 9.00%
======== ========
Employee Stock Ownership Plan. The Company established an Employee Stock
Ownership Plan (ESOP) in September 1985 that purchased 488,376 shares of common
stock for allocation to employees over a 10-year period. To finance this
purchase, the trustee of the ESOP borrowed $6.7 million through a 10-year term
loan that was secured by the unallocated shares and guaranteed by the Company.
The loan was paid in full on May 1, 1995. The Company accrued $659,000 in 1994
and $648,000 in 1993 for contribution to the ESOP.
Other Postretirement Benefits. Effective October 1, 1993, the Company adopted
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (SFAS 106). SFAS 106 requires an accrual method of accounting for
postretirement benefits, similar to that presently in effect for pension plans.
Previously, certain health care and life insurance benefits were charged to
expense when paid. Under the accrual method, the cost of providing
postretirement benefits will be recognized over the employee's service period.
The Company's transition obligation associated with SFAS 106 is $8.6 million,
which is being amortized over 20 years, and its annual expense increased from
approximately $400,000 to $1.5 million, of which over 95% relates to NJNG. As
part of its January 1994 base rate order, NJNG is permitted to recover
approximately 50% of its SFAS 106 expense currently and defer the balance with
ultimate recovery of the deferred portion no later than that prescribed by
generally accepted accounting principles. At September 30, 1995, $1.5 million of
SFAS 106 expenses were deferred and are included in Regulatory Assets in the
Consolidated Balance Sheets.
The components of the accumulated postretirement benefit obligation (APBO) as of
September 30, 1995 and 1994 are as follows:
(Thousands) 1995 1994
- --------------------------------------------------------------------------------
Retirees ............................................ $ (1,335) $ (1,459)
Fully eligible participants ......................... (3,071) (2,707)
Other active participants ........................... (6,100) (4,815)
-------- --------
Total APBO .......................................... (10,506) (8,981)
Plan assets ......................................... 575 177
Unrecognized net (gain) loss ........................ 759 (170)
Unrecognized transition obligation .................. 7,740 8,170
-------- --------
Net liability recognized in the
Consolidated Balance Sheets ....................... $ (1,432) $ (804)
======== ========
The annual net postretirement benefit cost is comprised of the following:
(Thousands) 1995 1994
- --------------------------------------------------------------------------------
Service Cost ............................................. $ 385 $ 369
Interest Cost ............................................ 748 678
Amortization of transition obligation .................... 430 430
Deferral of current expense .............................. (794) (708)
----- -----
Total annual net expense ................................. $ 769 $ 769
===== =====
41
<PAGE>
New Jersey Resources Corporation
The assumed health care cost trend rate used in measuring the APBO as of
September 30, 1995 was 12% declining 1% each year to 7% in 2000 and then
remaining constant thereafter for participants under age 65. For participants
age 65 and older the trend rate was 9% in 1995 declining 1% each year to 7% in
1997 and then remaining constant thereafter. A 1% increase in the trend rates
would increase the APBO as of September 30 by $1.7 million and would increase
the annual service and interest costs by $221,000. The assumed discount rate
used in determining the APBO was 8.5% at September 30, 1994 and 7.5% at
September 30, 1995.
10. Commitments and Contingent Liabilities
Capital expenditures are estimated at $59 million and $50 million in fiscal 1996
and 1997, respectively and primarily consist of NJNG's construction program to
support its customer growth and maintain its distribution system. Real estate
capital expenditures will be limited to the fit-up of existing tenant space, the
completion of a new building and additional investments, approved by the Board
of Directors, made for the purpose of preserving the value of particular real
estate holdings.
NJNG is participating in environmental investigations and the preparation
of proposals for remedial action at 11 former manufactured gas plants (MGP)
sites. Through a remediation rider approved by the BPU, NJNG is recovering the
balance of $4.1 million of expenditures incurred through June 1994 over a
seven-year period. Additional costs of $1 million have been incurred through
June 1995, which are also expected to be recovered over seven years, subject to
BPU approval. At September 30, 1995 NJNG estimates that it will incur additional
expenditures of approximately $14 million over the next five years for further
investigation and remedial action at these sites. Accordingly, this amount is
reflected in both Regulatory Assets and Other Deferred Credits in the
Consolidated Balance Sheets. Estimates beyond this point cannot be made with
reasonable accuracy in view of changing technologies and governmental
regulations. However, the total cost to be incurred after the five-year period
could be significant. NJNG will continue to seek recovery of such costs through
the remediation rider.
In March 1992, NJR Energy and the Company entered into long-term, fixed-price
contracts to sell natural gas to a gas marketing company. In October 1994, in
conjunction with a shift in capital allocation policy, NJR Energy entered into a
swap agreement which hedges its price risk for sales volumes under the contract
which are in excess of the estimated production from existing reserves. NJR
Energy plans to sell its reserves pursuant to a plan to exit the oil and natural
gas production business. In June 1995, NJR Energy entered into a second swap
agreement in order to hedge its price risk for sales volumes under such contract
that would have otherwise been fulfilled by its reserves. NJR Energy received a
cash payment of $3.3 million in conjunction with this swap agreement which, at
September 30, 1995, is included in Other Deferred Credits and will be amortized
to income over the fifteen year life of the agreement. Under the swap
agreements, commencing November 1995 until the expiration of the contract, 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 all volumes under the gas supply
contract. The respective obligations of NJR Energy and the counterparties under
the swap agreement are guaranteed, subject to a minimum amount, by the Company
and the counterparties' parent corporations, respectively. In the event of
nonperformance by the counterparties and their parent corporations, NJR Energy's
financial results would be impacted by the difference, if any, between the fixed
price it is receiving under the gas contract compared with the price of natural
gas in the spot market. However, the Company does not anticipate nonperformance
by the counterparties.
NJNR Pipeline Company, a wholly owned subsidiary of NJR Energy, owns a 2.8%
equity interest in the Iroquois Gas Transmission System, L.P. (Iroquois) which
has constructed and is operating a 375-mile, natural gas pipeline from the
Canadian border to Long Island. The Company has guaranteed a pro-rata share of a
debt service letter of credit obtained by Iroquois which totaled $1 million at
September 30, 1995. The Company does not expect to incur any cash requirements
under the guarantee.
Iroquois is the subject of civil and criminal investigations concerning
matters related to the construction of certain of its pipeline facilities.
Although no agreements have been reached regarding the disposition of these
matters, Iroquois informed its partners in October 1995 that it intended to
record a provision in its 1995 financial statements for an estimated liability
associated with these proceedings to reflect its current understanding of the
probable outcome. Accordingly, the Company recorded a provision of $560,000 in
September 1995 reflecting its proportionate share of this probable liability.
The Company is party to various claims, legal actions and complaints
arising in the ordinary course of business and other investigations. In
management's opinion, the ultimate disposition of these matters will not have a
material adverse effect on either its financial condition or results of
operations.
42
<PAGE>
New Jersey Resources Corporation
11. Business Segment Data
Information related to the Company's various business segments, excluding
capital expenditures, which are presented in the Consolidated Statements of Cash
Flows, is detailed below:
(Thousands)
For the Years Ended September 30, 1995 1994 1993
- --------------------------------------------------------------------------------
Operating Revenues
Natural gas distribution ........... $ 426,662 $ 480,321 $ 436,587
Energy marketing ................... 23,711 7,001 --
Real estate ........................ 12,770 12,466 12,554
Oil and gas ........................ 557 765 924
--------- --------- ---------
Total before eliminations ............ 463,700 500,553 450,065
Eliminations
(intersegment revenues) ........... (9,107) (3,478) (3,413)
--------- --------- ---------
Total ................................ $ 454,593 $ 497,075 $ 446,652
========= ========= =========
Depreciation and Amortization
Natural gas distribution ........... $ 20,944 $ 19,270 $ 19,080
Real estate ........................ 1,985 1,941 1,924
Oil and gas and other .............. 93 25 233
--------- --------- ---------
Total ................................ $ 23,022 $ 21,236 $ 21,237
========= ========= =========
Operating Income Before
Income Taxes
Natural gas distribution ........... $ 67,211 $ 65,663 $ 56,773
Energy marketing ................... 1,206 -- --
Real estate ........................ 6,367 5,426 5,976
Oil and gas and other .............. 451 460 589
--------- --------- ---------
Total ................................ $ 75,235 $ 71,549 $ 63,338
========= ========= =========
Assets at Year End
Natural gas distribution ........... $ 690,566 $ 660,166 $ 597,508
Energy marketing ................... 5,229 -- --
Real estate ........................ 95,572 94,516 94,608
Oil and gas ........................ 27,517 33,506 41,391
Other .............................. 7,480 9,159 5,155
--------- --------- ---------
Total ................................ $ 826,364 $ 797,347 $ 738,662
========= ========= =========
12. Subsequent Event
In October 1995, CR&R entered into a contract to sell certain of its real estate
assets for $52.65 million in cash. The transaction also includes the issuance of
options to the buyer to purchase adjacent undeveloped land parcels at various
prices. One unsubdivided parcel of land was sold for an 11% interest only note
of $5.8 million, cancelable upon receipt of the subdivision, for which the
process has begun and is expected to be completed within one year. While the
subdivision is being sought, CR&R has leased the land back and is performing
various site improvements. This portion of the transaction will be accounted for
under the cost recovery method. At September 30, 1995, $52.65 million of real
estate property is classified as Assets Held for Sale, net (previously
classified as Real Estate Properties) in the Consolidated Balance Sheets. The
sale was consummated on November 8, 1995.
13. Selected Quarterly Data (Unaudited)
A summary of financial data for each fiscal quarter of 1995 and 1994 follows.
Due to the seasonal nature of the Company's utility business, quarterly amounts
vary significantly during the year. In the opinion of management, the
information furnished reflects all adjustments necessary for a fair presentation
of the results of the interim periods.
First Second Third Fourth
(Thousands) Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------
1995
Operating revenues .............. $126,047 $197,214 $ 74,357 $ 56,975
Operating income ................ 18,451 32,204 6,688 1,925
Income from
continuing
operations .................... 11,409 25,679 1,209 (4,378)
Net income ...................... 11,240 25,494 (7,480) (4,469)
Earnings from
continuing
operations .................... .65 1.46 .07 (.25)
Earnings per share .............. .65 1.45 (.42) (.25)
======== ======== ======== ========
1994
Operating revenues .............. $135,994 $222,279 $ 75,137 $ 63,665
Operating income ................ 15,383 29,819 7,138 2,640
Income from
continuing
operations .................... 10,103 24,074 1,225 (3,673)
Net income ...................... 11,242 23,274 3,302 (4,823)
Earnings from
continuing
operations .................... .60 1.41 .07 (.21)
Earnings per share .............. .66 1.37 .19 (.28)
======== ======== ======== ========
43
<PAGE>
Annual Meeting
The annual meeting of New Jersey Resources Corporation shareholders will be held
at 10:30 a.m. on Wednesday, February 14, 1996, at the Garden State Arts Center
Reception Center. The Garden State Arts Center is located at Exit 116 of the
Garden State Parkway in Holmdel, New Jersey.
Stock Listing
New Jersey Resources Corporation common stock is traded on the New York Stock
Exchange under the symbol NJR. The stock appears as NewJerRes or NJRsc in the
stock tables found in many daily newspapers and business publications.
Investor and Media Information
Members of the financial community who would like information about the Company
are invited to contact Timothy C. Hearne, Vice President and Treasurer, at 908-
938-1098, or Dennis R. Puma, Manager, Investor Relations, at 908-938-1229.
Members of the media are invited to contact Catherine M. Downey, Manager,
Corporate Communications, at 908-938-7866. A copy of our annual report is now
available on-line. New Jersey Resources Corporation has a World Wide Web home
page on the internet. It can be accessed with any Web browser at
http://www.njng.com
Employee Environmental Committee
The Company has a dedicated Employee Environmental Committee. Many thanks to
Chairpersons Terri Freeman, Doug Rudd and Anita Vena.
Stock Transfer Agent and Registrar
The Transfer Agent and Registrar for New Jersey Resources Corporation's common
stock is BancBoston State Street Investor Services. Shareholders with questions
about account activity such as cash contributions or stock transfers should
contact the Bank's investor relations representatives between 9 a.m. and 6 p.m.
Eastern time by calling toll-free: 800-817-3955.
Shareholders can also obtain certain routine information 24 hours a day, seven
days a week, by calling toll-free: 800-817-3955.
Correspondence with the Bank should be addressed to:
BancBoston State Street Investor Services
Investor Relations
Mail Stop 45-02-64
P.O. Box 644
Boston, MA 02102-0644
Dividends
Dividends on common stock are declared quarterly by the Board of Directors.
Shareholders of record will receive their dividend checks directly from
BancBoston State Street Investor Services unless they have elected to re-invest
their dividends through our Automatic Dividend Reinvestment Plan.
New Jersey Resources now offers DIRECT DEPOSIT of dividends into your bank
account so the funds are available the same day they are paid. This eliminates
the worry of lost, stolen, or mail-delayed checks. Contact BancBoston State
Street Investor Services at 800-817-3955 for details and an authorization
form.
Automatic Dividend Reinvestment Plan
New Jersey Resources Corporation offers an Automatic Dividend Reinvestment and
Customer Stock Purchase Plan. It provides shareholders, eligible employees of
the Company and residential customers of New Jersey Natural Gas Company and
their eligible family members the convenient opportunity to reinvest their
common stock dividends, plus an additional amount not exceeding $60,000 per
year, in additional common stock without payment of any brokerage or other fees.
Highlights of the Plan include:
No fee to join the Plan.
Cash contributions of as little as $25, to a maximum of $60,000 annually.
Participants may make automatic optional cash payments on a monthly basis by
means of an automatic electronic funds transfer from a predesignated bank
account in the United States.
Customers of NJNG can obtain authorization forms from either the Company or
BancBoston State Street Investor Services.
Investments of cash contributions are made on the first and fifteenth day of
each month.
A "safekeeping" feature which allows shareholders to have BancBoston State
Street Investor Services hold their certificates.
Details are contained in the Plan prospectus, which may be obtained from
BancBoston State Street Investor Services or from the Investor Relations
Department, New Jersey Resources Corporation, 1415 Wyckoff Road, P.O. Box 1468,
Wall, New Jersey 07719. The telephone number is 908-938-1230.
Non-customer authorization forms to join the Plan must be obtained from
BancBoston State Street Investor Services. Customers of New Jersey Natural Gas
Company desiring to join the Plan must obtain authorization forms directly from
the Company at the address and/or telephone number above.
10-K Annual Report
New Jersey Resources Corporation files its annual report on Form 10-K with the
Securities and Exchange Commission. The report is available to shareholders upon
written request to the Investor Relations Department, New Jersey Resources
Corporation, 1415 Wyckoff Road, P.O. Box 1468, Wall, New Jersey 07719.
This annual report was printed on recycled paper.
44
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARY STATE OF INCORPORATION
- ---------- ----------------------
New Jersey Natural Gas Company New Jersey
NJR Energy Services Corp. New Jersey
Subsidiaries:
NJ Natural Energy Company New Jersey
NJR Energy Corp. New Jersey
Subsidiaries:
New Jersey Natural Resources Company New Jersey
NJNR Pipeline Company New Jersey
NJR Storage Corporation Delaware
Natural Resources Compressor Company New Jersey
NJRE Operating Company Oklahoma
NJR Development Corp. New Jersey
Subsidiaries:
Commercial Realty & Resources Corp. New Jersey
NJR Computer Technologies, Inc. New Jersey
Paradigm Power, Inc. New Jersey
Subsidiaries:
Lighthouse One, Inc. New York
Lighthouse II, Inc. Delaware
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NEW JERSEY
RESOURCES CORPORATION'S 1995 ANNUAL REPORT TO STOCKHOLDERS INCLUDING THE
CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED STATEMENTS OF CASH FLOWS,
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF COMMON STOCK EQUITY
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 554,354
<OTHER-PROPERTY-AND-INVEST> 41,781
<TOTAL-CURRENT-ASSETS> 185,901
<TOTAL-DEFERRED-CHARGES> 44,328
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 826,364
<COMMON> 44,481
<CAPITAL-SURPLUS-PAID-IN> 203,450
<RETAINED-EARNINGS> 10,988
<TOTAL-COMMON-STOCKHOLDERS-EQ> 258,919
20,000
1,004
<LONG-TERM-DEBT-NET> 352,227
<SHORT-TERM-NOTES> 16,400
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 2,364
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 175,450
<TOT-CAPITALIZATION-AND-LIAB> 826,364
<GROSS-OPERATING-REVENUE> 454,593
<INCOME-TAX-EXPENSE> 15,967
<OTHER-OPERATING-EXPENSES> 363,391
<TOTAL-OPERATING-EXPENSES> 379,358
<OPERATING-INCOME-LOSS> 59,268
<OTHER-INCOME-NET> 362
<INCOME-BEFORE-INTEREST-EXPEN> 59,630
<TOTAL-INTEREST-EXPENSE> 24,082
<NET-INCOME> 35,548
1,629
<EARNINGS-AVAILABLE-FOR-COMM> 33,919
<COMMON-STOCK-DIVIDENDS> 26,605
<TOTAL-INTEREST-ON-BONDS> 16,149
<CASH-FLOW-OPERATIONS> 78,283
<EPS-PRIMARY> 1.41
<EPS-DILUTED> 1.41
</TABLE>
