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