<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997 Commission file number 1-8359
NEW JERSEY RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NEW JERSEY 22-2376465
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
1415 WYCKOFF ROAD, WALL, NEW JERSEY - 07719 732-938-1480
(Address of principal executive offices) (Registrant's telephone number, including area code)
</TABLE>
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
10, 1998 was 17,769,494
<PAGE> 2
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
THREE MONTHS ENDED
DECEMBER 31,
1997 1996
- -----------------------------------------------------------------------------------
(Thousands, except per share data)
<S> <C> <C>
OPERATING REVENUES ........................ $220,395 $188,601
-------- --------
OPERATING EXPENSES
Gas purchases ........................... 155,075 124,787
Operation and maintenance ............... 20,217 19,651
Depreciation and amortization ........... 7,057 6,129
Gross receipts tax, etc ................. 13,356 13,054
Federal income taxes .................... 5,928 6,432
-------- --------
Total operating expenses .................. 201,633 170,053
-------- --------
OPERATING INCOME .......................... 18,762 18,548
Other income, net ......................... 1,318 80
Interest charges, net ..................... 5,467 5,288
-------- --------
INCOME BEFORE PREFERRED STOCK DIVIDENDS ... 14,613 13,340
Preferred stock dividends ................. 397 398
-------- --------
NET INCOME ................................ $ 14,216 $ 12,942
======== ========
EARNINGS PER COMMON SHARE .................
BASIC ............................... $ .80 $ .72
======== ========
DILUTED ............................. $ .79 $ .71
======== ========
DIVIDENDS PER COMMON SHARE ................ $ .41 $ .40
======== ========
AVERAGE SHARES OUTSTANDING
BASIC ............................... 17,844 18,084
======== ========
DILUTED ............................. 17,938 18,109
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
1
<PAGE> 3
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
THREE MONTHS ENDED
DECEMBER 31,
1997 1996
- ----------------------------------------------------------------------------------
(Thousands)
<S> <C> <C>
CASH FLOWS (USED IN) OPERATING ACTIVITIES
Net income ............................................. $ 14,216 $ 12,942
Adjustments to reconcile net income to cash flows
Depreciation and amortization ......................... 7,057 6,129
Amortization of deferred charges ...................... 203 457
Deferred income taxes ................................. 5,615 2,282
Change in working capital ............................. (39,288) (29,181)
Other, net ............................................ (4,080) (1,395)
-------- --------
Net cash flows (used in) operating activities ............ (16,277) (8,766)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt ........................... 13,500 --
Proceeds from common stock ............................. 13 --
Payments of long-term debt ............................. (20,500) (2,000)
Repurchase of treasury stock ........................... (1,300) (933)
Payments of common stock dividends ..................... (7,161) (7,066)
Net change in short-term debt .......................... 29,340 23,600
-------- --------
Net cash flows from financing activities ................. 13,892 13,601
-------- --------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES
Expenditures for
Utility plant ......................................... (9,079) (11,061)
Real estate properties ................................ (634) (231)
Equity investments .................................... -- (250)
Cost of removal ....................................... (535) (795)
Proceeds from sale of assets ........................... 15,200 --
-------- --------
Net cash flows from (used in) investing activities ....... 4,952 (12,337)
-------- --------
Net change in cash and temporary investments ............. 2,567 (7,502)
Cash and temporary investments at September 30 ........... 5,467 10,808
-------- --------
Cash and temporary investments at December 31 ............ $ 8,034 $ 3,306
======== ========
CHANGES IN COMPONENTS OF WORKING CAPITAL
Receivables ............................................ $(65,530) $(72,908)
Inventories ............................................ (3,685) 4,372
Deferred gas costs ..................................... (1,286) (10,655)
Purchased gas .......................................... 34,217 41,592
Accrued taxes .......................................... 12,740 15,445
Customers' credit balances and deposits ................ (4,381) (434)
Other, net ............................................. (11,363) (6,593)
-------- --------
Total .................................................... $(39,288) $(29,181)
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid for
Interest (net of amounts capitalized) ................. $ 6,251 $ 6,526
Income taxes .......................................... -- $ 726
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE> 4
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1997 1997 1996
(unaudited) (unaudited)
- -----------------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C>
PROPERTY, PLANT AND EQUIPMENT
Utility plant ............................... $ 863,339 $ 855,375 $ 821,541
Real estate properties ...................... 23,515 22,897 37,295
--------- --------- ---------
886,854 878,272 858,836
Accumulated depreciation and amortization ... (224,617) (218,912) (205,430)
--------- --------- ---------
Property, plant and equipment, net ......... 662,237 659,360 653,406
--------- --------- ---------
CURRENT ASSETS
Cash and temporary investments .............. 8,034 5,467 3,306
Construction fund ........................... -- -- 6,500
Customer accounts receivable ................ 88,073 45,900 83,831
Unbilled revenues ........................... 29,888 3,998 24,357
Allowance for doubtful accounts ............. (2,508) (1,527) (1,374)
Gas in storage, at average cost ............. 37,841 34,152 35,968
Materials and supplies, at average cost ..... 5,441 5,445 6,436
Deferred gas costs .......................... 5,659 15,070 31,133
Prepaid state taxes ......................... 133 12,089 4,369
Assets held for sale, net ................... -- 13,386 7,098
Other ....................................... 12,240 6,377 7,305
--------- --------- ---------
Total current assets ....................... 184,801 140,357 208,929
--------- --------- ---------
DEFERRED CHARGES AND OTHER
Equity investments .......................... 6,720 7,086 14,666
Regulatory assets ........................... 38,413 38,635 37,983
Long-term deferred gas costs ................ 30,043 19,622 208
Other ....................................... 17,487 14,001 8,761
--------- --------- ---------
Total deferred charges and other ........... 92,663 79,344 61,618
--------- --------- ---------
Total assets ......................... $ 939,701 $ 879,061 $ 923,953
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 5
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1997 1997 1996
(unaudited) (unaudited)
- -----------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C>
CAPITALIZATION
Common stock equity ....................... $286,327 $278,436 $279,781
Redeemable preferred stock ................ 20,760 20,760 20,880
Long-term debt ............................ 284,407 291,407 301,363
-------- -------- --------
Total capitalization .................... 591,494 590,603 602,024
-------- -------- --------
CURRENT LIABILITIES
Current maturities of long-term debt ...... 138 138 1,501
Short-term debt ........................... 77,340 48,000 58,600
Purchased gas ............................. 92,096 57,879 75,230
Accounts payable and other ................ 22,487 28,632 26,765
Dividends payable ......................... 7,322 7,161 7,233
Accrued taxes ............................. 6,565 5,781 9,549
Customers' credit balances and deposits ... 9,145 13,526 23,411
-------- -------- --------
Total current liabilities ................ 215,093 161,117 202,289
-------- -------- --------
DEFERRED CREDITS
Deferred income taxes ..................... 69,116 63,501 54,292
Deferred investment tax credits ........... 10,847 10,934 11,193
Deferred revenue .......................... 20,253 20,551 21,505
Other ..................................... 32,898 32,355 32,650
-------- -------- --------
Total deferred credits ................... 133,114 127,341 119,640
-------- -------- --------
Total capitalization and liabilities ... $939,701 $879,061 $923,953
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 6
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, 1997 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 1997 Annual Report on Form 10-K.
In the opinion of management, the information furnished reflects all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair statement of the results of the interim periods. Because of the seasonal
nature of the Company's utility operations and other factors, the results of
operations for the interim periods presented are not indicative of the results
to be expected for the entire year.
2. Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries -- New Jersey Natural Gas Company (NJNG), NJR Energy Holdings
Corporation (Energy Holdings) and NJR Development Company (NJR Development). New
Jersey Natural Energy Company (Natural Energy), NJR Energy Services Company
(Energy Services) and NJR Energy Corporation (NJR Energy) are wholly-owned
subsidiaries of Energy Holdings and Commercial Realty & Resources Corp. (CR&R),
is a wholly-owned subsidiary of NJR Development. Significant intercompany
accounts and transactions have been eliminated.
3. 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
NJR Energy and its subsidiary, New Jersey Natural Resources Company. The Company
has accounted for this segment as a discontinued operation and in fiscal 1995
recorded an after-tax charge of $8.7 million, or $.49 per share. This charge was
based on estimates of the anticipated loss from operations until the assets were
sold, the estimated loss on the sale of the remaining reserves and other costs
related to the closing of its offices in Dallas and Tulsa.
In December 1995 and January 1996 NJR Energy sold its interests in all of its
oil and gas properties in three transactions for $19.6 million. The proceeds
from these sales were used to reduce outstanding debt. Based upon the results of
the asset sales and costs incurred to date, the Company currently estimates that
the reserve established in fiscal 1995 for the discontinued operations is
adequate.
5
<PAGE> 7
4. New Accounting Standards
The Company has adopted SFAS No. 128 "Earnings per Share" which
establishes standards for computing and presenting earnings per share (EPS).
SFAS No. 128 is effective for periods ending after December 15, 1997 and
requires that all prior-period data presented to be restated. The incremental
shares, using the treasury stock method, that were required for inclusion in the
denominator for diluted EPS were 91,636 and 24,693 related to stock options and
restricted stock, for the three months ended December 31, 1997 and 1996,
respectively. The numerator for both the basic and diluted calculation was net
income. The impact was a one-cent dilutive effect for both the three months
ended December 31, 1997 and 1996.
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 130 "Reporting Comprehensive Income" and SFAS No. 131 "Disclosure About
Segments of an Enterprise and Related Information." The Company is evaluating
the requirements of SFAS 130 and SFAS 131 which must be adopted by fiscal 1999.
Since these statements primarily relate to disclosure information, it is
management's opinion that they will not have a material effect on either its
financial condition or results of operations.
5. Capitalized Interest
The Company's capitalized interest totaled $193,000 and $418,000 for the
three months ended December 31, 1997 and 1996, respectively.
6. Legal and Regulatory Proceedings
a. Levelized Gas Adjustment (LGA)
In January 1998, the New Jersey Board of Public Utilities (BPU) approved an
interim settlement, representing an increase of approximately $13 million in LGA
revenues. This included the approval to collect $3.4 million of weather
normalization clause (WNC) margins accrued due to the impact of
warmer-than-normal weather during fiscal year 1997 and minimal adjustments to
its Remediation Adjustment and Demand Side Management Adjustment Clause factors.
The parties to the settlement are discussing the resolution of additional
matters such as expanding customer choice, extending margin-sharing incentives
and the allocation of LGA underrecovery among customer classes.
The BPU is currently performing an audit of NJNG's gas costs and related
accounts for the fiscal years 1991 through 1995. The Company expects this audit
to be finalized in fiscal 1998 and does not believe that the ultimate resolution
will have a material adverse effect on its consolidated financial condition or
results of operations.
6
<PAGE> 8
b. Postretirement Benefits Other Than Pensions
In January 1997, the BPU concluded a generic proceeding related to the
implementation of the provisions of SFAS 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (OPEB). SFAS 106 required that
publicly held companies change from the practice of accounting for OPEB costs on
a pay as you go basis to an accrual basis of accounting. The BPU's generic
proceeding provided for a Phase II proceeding in which each utility would
address the particular impact of SFAS 106 on its revenue requirements. In July
1997, NJNG filed a petition to recover an additional $900,000 in annual OPEB
costs with a proposed effective date no later than September 30, 1998. In
November 1997, NJNG revised the requested annual OPEB costs to $1.2 million to
reflect updated actuarial results and the imposition of state sales tax. NJNG
expects to receive approval to collect the additional annual cost by the end of
fiscal year 1998.
c. Aberdeen
A total of six complaints were 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 alleged 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 sought compensatory
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 explosion be consolidated for purposes of
discovery. By February 4, 1998, all six complaints were settled. All settlement
amounts, less NJNG's self insured retention, were paid by insurers for NJNG and
its contractor.
d. Gas Remediation
NJNG has identified eleven former manufactured gas plant (MGP) sites, dating
back to the late 1800's and early 1900's, which contain contaminated residues
from the former gas manufacturing operations. Ten of the eleven sites in
question were acquired by NJNG in 1952. All of the gas manufacturing operations
ceased at these sites at least 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 the former owner. NJNG is currently
involved in administrative proceedings with the New Jersey Department of
Environmental Protection (NJDEP) and local government authorities with respect
to the plant sites in question, and is participating in various studies and
investigations by outside consultants to determine the nature and extent of any
such contaminated residues and to develop appropriate programs of remedial
action, where warranted. Since October 1989, NJNG has entered into
Administrative Consent Orders or Memoranda of Agreement with the NJDEP covering
all eleven sites. These documents establish the procedures to be followed by
NJNG in developing a final remedial clean-up plan for each site.
7
<PAGE> 9
Most of the cost of such studies and investigations is being shared under an
agreement with the former owner and operator of ten of the MGP sites. Through a
Remediation Rider approved by the BPU, NJNG is recovering its expenditures
incurred through June 1997 over a seven-year period. Costs incurred subsequent
to June 30, 1997 will be reviewed annually and, subject to BPU approval,
recovered over seven-year periods.
In March 1995, NJNG filed a complaint in New Jersey Superior Court against
various insurance carriers for declaratory judgment and for damages arising from
such defendants' breach of their contractual obligations to defend and/or
indemnify NJNG against liability for claims and losses (including defense costs)
alleged against NJNG relating to environmental contamination at the former MGP
sites and other sites. NJNG is seeking (i) a declaration of the rights, duties
and liabilities of the parties under various primary and excess liability
insurance policies purchased from the defendants by NJNG from 1951 through 1985,
and (ii) compensatory and other damages, including costs and fees arising out of
defendants' obligations under such insurance policies. The complaint was amended
in July 1996 to name Kaiser-Nelson Steel & Salvage Company (Kaiser-Nelson) and
its successors as additional defendants. NJNG is seeking (a) a declaration of
the rights, duties and liabilities of the parties under agreements with respect
to claims against NJNG that allege property damage caused by various substances
used, handled or generated by NJNG or the predecessor in title that were removed
from several of the MPG sites by Kaiser-Nelson, and (b) money damages or
compensatory relief for the harm caused by Kaiser-Nelson's aforementioned
actions. Discovery is proceeding in this matter. There can be no assurance as to
the outcome of these proceedings.
e. 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, and two other non-affiliated companies, seeking damages arising from
alleged environmental contamination at three sites owned or occupied by the
plaintiffs. 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 NJDEP to constitute a
hazardous waste and that the tar emulsion has contaminated the soil and ground
water at the three sites in question. In February 1991, the NJDEP issued letters
classifying the tar emulsion/sand and gravel mixture at each site as dry
industrial waste, a non-hazardous classification. In April 1996, in a meeting
with all parties to the litigation and the judge assigned to the case, the NJDEP
confirmed the non-hazardous classification, which will allow for conventional
disposal. In May 1997, SBA submitted applications to NJDEP for permits to allow
SBA to recycle the tar emulsion/sand and gravel mixture at each site into
asphalt, to be used as a paving material. These applications are currently under
review by NJDEP. 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.
f. 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 by the Joint Venture, et al. until
proper PaPUC authorization was obtained.
8
<PAGE> 10
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 January 1993, the Joint Venture, et al. filed two separate Petitions for
Review with the Commonwealth Court of Pennsylvania. The first Petition for
Review challenged the lawfulness of the PaPUC's action in October 1992 in light
of the April 1989 tie vote. On appeal of the Commonwealth Court's order
reversing the PaPUC, the Pennsylvania Supreme Court held that the April 1989 tie
vote did not preclude the PaPUC from taking its October 1992 vote.
The second Petition for Review challenged the merits of the PaPUC's
determination that the Joint Venture, et al. are a "public utility" under the
Pennsylvania Public Utility Code. In July 1996, a three-judge panel of the
Commonwealth Court, in a 2-1 decision, affirmed the PaPUC's determination that
the Joint Venture, et al. were a "public utility" under Pennsylvania law. The
Joint Venture, et al. filed a petition for review with the Pennsylvania Supreme
Court, which petition is now pending before the Court.
In September 1993, People's 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 which merely tolled the statute of limitations and preserved any
claim People's may have against the defendants until resolution of the actions
discussed above. In June 1997, People's filed a complaint in equity against the
Joint Venture, et al. in the Allegheny County Common Pleas Court. The complaint
alleges, among other things, that the Joint Venture, et al. unlawfully provided
natural gas services without prior authorization of the PaPUC and tortiously
interfered with the contractual and business relations of various existing and
potential Peoples' customers. The complaint seeks unspecified money damages and
injunctive relief against the Joint Venture et al. The Company is unable to
predict the outcome of these matters but 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.
g. Securities and Exchange Commission
On January 2, 1998, the Company announced that it had reached a settlement
with the SEC in connection with the previously reported investigation by the SEC
into certain transactions engaged in by subsidiaries of the Company in 1992. In
the settlement, approved by the SEC on December 31, 1997, the Company agreed,
without admitting or denying the SEC's findings, to consent to the entry of an
administrative order finding that the Company had not fully complied with
Sections 10(b), 13(a) and 13(b) of the Securities Exchange Act of 1934 (the
Order). The Order agreed to by the Company does not
9
<PAGE> 11
impose any monetary penalty or require any restatement of the Company's
financial statements. In a related development, the Company's former Chairman
and CEO, Oliver G. Richard III, and three current officers, Laurence M. Downes,
Glenn C. Lockwood and Jay B. Corn, also entered into settlements with the SEC as
of December 31, 1997, in which they agreed, without admitting or denying the
SEC's findings, to consent to the entry of administrative orders finding that
they had caused the Company not to fully comply with Section 13(a) of the
Securities Exchange Act of 1934. These orders do not impose any fines or
penalties on these individuals.
h. 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.
7. State of New Jersey Tax Reform
In July 1997, legislation was signed that reformed New Jersey's taxes
affecting energy companies. The legislation repealed the long-standing utility
tax formula and replaced it with a state sales tax, a corporate business tax and
a transitional energy facilities assessment which would become effective in
January 1998. It required a rate filing by each utility in September 1997
designed to implement the new tax structure. In December 1997 the BPU approved
NJNG's new rates implementing the new tax structure on an interim basis. The new
rates have no effect on revenue or margin. The transitional energy facilities
assessment will be gradually phased out starting in 1999 and ending in 2002. The
new law requires that all providers of energy in the state be subject to the
sales and corporate business taxes. Previously, non-utility providers of energy
were not subject to a state sales tax.
8. Long-Term Debt
NJNG has entered into loan agreements with the New Jersey Economic
Development Authority (the Authority) in which the Authority issues bonds to the
public. To secure its loans from the Authority, NJNG issues First Mortgage Bonds
with interest rates and maturity dates similar to the Authority's bonds.
Under these agreements NJNG issued variable rate Series DD Bonds in October
1997 for $13.5 million and utilizing the proceeds from the series DD Bonds,
redeemed its $13.5 million 9% Series Q Bonds in December 1997. Additionally, in
January 1998, NJNG issued variable rate Series EE and Series FF Bonds for $9.5
million and $15 million, respectively. The proceeds will be utilized to redeem
the $9.5 million 7.05% Series T and the $15 million 7.25% Series U Bonds on
March 1, 1998.
9. Other
At December 31, 1997 there were 17,859,071 shares of common stock outstanding
and the book value per share was $16.03.
Certain reclassifications have been made of previously reported amounts to
conform with current year classifications.
10
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1997
A. RESULTS OF OPERATIONS
Consolidated net income for the quarter ended December 31, 1997 increased by
10% to $14.2 million, compared with $12.9 million for the same period last year.
Basic earnings per share (EPS) increased 11% to $.80, compared with $.72 last
year. Diluted EPS also increased 11% to $.79, compared with $.71 last year. The
increase in consolidated earnings was attributed primarily to continued
profitable customer growth at the Company's principal subsidiary, NJNG, and
improved overall unregulated operating results.
NJNG OPERATIONS
NJNG's financial results are summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1997 1996
------------------------
(Thousands)
<S> <C> <C>
Gross margin
Residential and commercial $41,550 $41,403
Firm transportation 5,598 3,926
Interruptible 130 140
Off-system and capacity release 1,356 1,758
------- -------
Total gross margin $48,634 $47,227
======= =======
Appliance service revenues $ 2,875 $ 2,432
======= =======
Operating income before income taxes $25,119 $23,897
======= =======
Net income $13,735 $12,738
======= =======
</TABLE>
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 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 and off-system sales.
11
<PAGE> 13
Residential and Commercial
Since fiscal 1993, NJNG's firm gross margin has been subject to a
weather-normalization clause (WNC) which provides for a revenue adjustment if
the weather varies by more than one-half of one percent from normal, or 20-year
average weather. The accumulated adjustment from one heating season is billed or
credited to customers in the subsequent heating season.
Gross margin from sales to firm customers increased by $147,000 during the
first fiscal quarter, compared with the same period last year, due primarily to
a 4.7% increase in firm therm sales. The increase in firm therm sales was due to
the impact of 12,379 customer additions during the twelve months ended December
31, 1997 combined with increased customer usage. These results were impacted by
residential, commercial and industrial customers switching to firm
transportation service, as described below.
The weather for the three months ended December 31, 1997 was 3% colder than
normal, or the 20-year average. The impact of colder weather on gross margin was
partially reduced by the above-mentioned WNC. Under this rate mechanism, a total
of $394,000 of gross margin was deferred for future refund to customers.
Firm Transportation
Gross margin from firm transportation increased by $1.7 million, or 43%,
reflecting an increase in the number of customers utilizing this service. At
December 31, 1997 and 1996, NJNG provided firm transportation service to 8,200
and 2,153 residential, commercial and industrial customers, respectively. NJNG's
total gross margin is not 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 and all customers who do purchase gas from another
supplier continue to utilize NJNG for transportation.
Interruptible
NJNG services 48 customers through interruptible sales and/or transportation
tariffs. Sales made under the interruptible sales tariff are priced on
market-sensitive oil and gas parity rates. Although therms sold and transported
to interruptible customers represented 6% of total therm throughput in the three
months ended December 31, 1997 and 1996, they accounted for less than 1% of the
total gross margin in each period due to the regulated margin-sharing formulas
that govern these sales. Under these formulas, NJNG retains 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.
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
12
<PAGE> 14
pipeline network when the capacity is not needed for its own system
requirements. NJNG retains 20% of the gross margin from these sales.
NJNG's off-system sales totaled 14.6 billion cubic feet (Bcf) and NJNG
retained $766,000 of gross margin in the first quarter of fiscal 1998, compared
with 9.9 Bcf and $1 million of gross margin in the same period a year ago. The
capacity release program generated gross margin of $590,000 and $742,000 in the
three months ended December 31, 1997 and 1996, respectively. The decreases were
due primarily to lower margins per therm.
Operating Income Before Income Taxes and Net Income
Operating income before income taxes increased by $1.2 million and net income
increased by $997,000 in the first quarter of fiscal 1998, compared with the
same period last year due primarily to higher margins from customer growth,
improved usage and increased appliance service revenues, which more than offset
an increase in depreciation expense and interest charges from higher short-term
debt levels. The increase in depreciation is due primarily to a higher
depreciable plant balance, which includes a new customer information and
billing system (CIS) which was placed into service in August 1997.
The Year 2000 Issue
The Company has been evaluating the extent to which its computer systems
will be affected by the Year 2000 issue. With the implementation of NJNG's new
CIS system, the Company does not currently believe that the additional
investment needed for its computer systems to be Year 2000 compliant will have
a material adverse affect on either its financial condition or results of
operations.
ENERGY HOLDINGS OPERATIONS
Energy Holdings' consolidated financial results, which include Natural Energy
and Energy Services, the Company's unregulated marketing and fuel and capacity
management subsidiaries, and the continuing operations of NJR Energy, which
consist primarily of its equity investment in the Iroquois Gas Transmission
System, L.P., are summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1997 1996
------------------------
(Thousands)
<S> <C> <C>
Revenues $52,306 $35,876
======= =======
Operating income before income taxes $ 749 $ 657
======= =======
Net income $ 401 $ 204
======= =======
</TABLE>
Energy Holdings revenues increased for the three months ended December 31,
1997, compared to the same period last year, reflecting primarily higher fuel
and capacity management sales. Operating income before income taxes and net
income increased due primarily to higher margins from daily gas sales and fuel
management agreements, partially offset by lower margin from retail sales.
13
<PAGE> 15
Energy Service's gas under management totaled 23.3 Bcf and 7.6 Bcf, and
retail gas sales totaled 2.1 Bcf and 2.5 Bcf for the three months ended December
31, 1997 and 1996, respectively.
NJR DEVELOPMENT OPERATIONS
NJR Development's consolidated financial results, which consist solely of
CR&R's operations, are summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1997 1996
-----------------------------
(Thousands)
<S> <C> <C>
Revenues $ 155 $ 1,097
======= =======
Other income, net $ 1,035 $ 112
======= =======
Net income (loss) $ 272 $ (5)
======= =======
</TABLE>
In October 1997, CR&R sold a 280,000 square-foot office building for $15.6
million. Included in Other income, net is an after-tax gain of $900,000 related
to this transaction.
In December 1995, CR&R sold a 157,000 square foot, office building for $31.85
million, in a sale-leaseback transaction. CR&R's pre-tax gain on this
transaction was approximately $17.8 million which is included in deferred
revenue on the consolidated balance sheet and is being amortized over 25 years
in accordance with generally accepted accounting principles and is included in
Other income, net. The primary tenant of the facility, NJNG, is leasing the
building under a long-term master lease agreement and continues to occupy a
majority of the space in the building. Prior to the transaction, NJNG leased
about 79% of the building under a long-term lease.
NJR used the proceeds from these sales to reduce outstanding debt.
B. LIQUIDITY AND CAPITAL RESOURCES`
In order to meet the working capital and external debt financing requirements
of its unregulated subsidiaries, as well as its own working capital needs, the
Company maintains committed credit facilities with a number of banks totaling
$135 million and has a $10 million credit facility available on an offering
basis. At December 31, 1997, $33 million was outstanding under these agreements.
NJNG satisfies its debt needs by issuing short-term and long-term debt based
upon its own financial profile. The Company meets the common equity requirements
of each subsidiary, if any, through new issuances of the Company's common stock,
including the proceeds from its Automatic Dividend Reinvestment Plan (DRP). In
April 1996, the DRP was amended to allow for the purchase of shares in the open
market to satisfy the plan's needs. The Company can switch funding options every
90 days.
14
<PAGE> 16
NJNG
The seasonal nature of NJNG's operations creates large short-term cash
requirements, primarily to finance gas purchases and customer accounts
receivable. NJNG obtains working capital for these requirements, as well as for
the temporary financing of construction expenditures, sinking fund needs and
GRFT payments, through the issuance of commercial paper and short-term bank
loans. To support the issuance of commercial paper, NJNG maintains committed
credit facilities totaling $90 million with a number of commercial banks and has
an additional $10 million in lines of credit available on an offering basis.
Remaining fiscal 1998 construction expenditures are estimated at $41.5
million. These expenditures will be incurred for services, mains and meters to
support NJNG's continued customer growth, and general system renewals and
improvements. NJNG expects to finance these expenditures through internal
generation and the issuance of short-term debt. NJNG will pursue the refinancing
of other existing long-term debt and potentially issue new long-term debt, the
amount and timing of which will be affected by market conditions and other
factors.
ENERGY HOLDINGS
Energy Holdings does not currently expect any significant capital
expenditures or external financing requirements in fiscal 1998.
NJR DEVELOPMENT
Remaining capital expenditures in fiscal 1998 are projected to be $1.4
million in connection with the construction of a 20,000 square-foot,
build-to-suit office building, supported by a ten-year lease. These expenditures
are expected to be funded through the Company's committed credit facilities.
CR&R's future capital expenditures will be limited to the fit-up of existing
tenant space, developing existing acreage and additional investments to preserve
the value of its existing real estate holdings.
INFORMATION CONCERNING FORWARD LOOKING STATEMENTS
Certain of the statements contained in this report (other than the financial
statements and other statements of historical fact), including, without
limitation, statements as to the adequacy of established reserves for the
discontinued operations, expected disposition of legal and regulatory
proceedings, effect of new accounting standards and impact of the Year 2000
computer issue are forward-looking statements. Forward-looking statements are
made based upon management's expectations and beliefs concerning future
developments and their potential effect upon the Company. There can be no
assurance that future developments will be in accordance with management's
expectations or that the effect of future developments on the Company will be
those anticipated by management.
The Company wishes to caution readers that the assumptions which form the
basis for forward-looking statements with respect to or that may impact earnings
for fiscal 1998 and thereafter include many factors that are beyond the
Company's ability to control or estimate precisely, such as estimates of future
market conditions and the behavior of other market participants. Among the
factors that could cause actual results
15
<PAGE> 17
to differ materially from estimates reflected in such forward-looking statements
are weather conditions, economic conditions in NJNG's service territory,
fluctuations in energy-related commodity prices, conversion activity and other
marketing efforts, the conservation efforts of NJNG's customers, the pace of
deregulation of retail gas markets, competition for the acquisition of gas, the
regulatory and pricing policies of federal and state regulatory agencies, the
availability of Canada's reserves for export to the United States and other
regulatory changes.
While the Company periodically reassesses material trends and uncertainties
affecting the Company's results of operations and financial condition in
connection with its preparation of management's discussion and analysis of
results of operations and financial condition contained in its quarterly and
annual reports, the Company does not, by including this statement, assume any
obligation to review or revise any particular forward-looking statement
referenced herein in light of future events.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
Information required by this Item is incorporated herein by reference to
Part I, Item 1, Note 6 - Legal and Regulatory Proceedings.
ITEM 4. Submission of Matters to a Vote of Security Holders
On January 28, 1998, the shareowners voted upon the following matters at
the annual stockholder meeting.
(a) The election of four (4) directors, one (1) to serve for a one year
term expiring in 1999, one (1) to serve a two-year term expiring in 2000 and two
(2) to serve for three-year terms expiring in 2001, and until their respective
successors are duly elected and are qualified. The results of the voting were as
follows:
<TABLE>
<CAPTION>
Director For Withheld
-------- --- --------
<S> <C> <C>
Charles G. Stalon 15,317,111 167,738
John J. Unkles, Jr. 15,303,298 181,551
Laurence M. Downes 15,318,517 166,332
Joe B. Foster 15,321,646 163,203
</TABLE>
(b) The stockholders approved the action to retain Deloitte & Touche LLP
as auditors for the fiscal year ending September 30, 1998. The votes were as
follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
15,337,605 66,733 80,511
</TABLE>
16
<PAGE> 18
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4. Twenty-Eighth Supplemental Indenture,
Dated as of January 1, 1998
27-1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended December 31, 1997.
17
<PAGE> 19
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, 1998 /s/Glenn C. Lockwood
--------------------------------
Glenn C. Lockwood
Senior Vice President
and Chief Financial Officer
18
<PAGE> 20
EXHIBIT INDEX
4. Twenty-Eighth Supplemental Indenture,
Dated as of January 1, 1998 (filed herewith)
27-1 Financial Data Schedule
<PAGE> 1
MORTGAGE
NEW JERSEY NATURAL GAS COMPANY
To
HARRIS TRUST AND SAVINGS BANK,
As Trustee
TWENTY-EIGHTH SUPPLEMENTAL INDENTURE
Dated as of January 1, 1998
Supplemental to Indenture of Mortgage and
Deed of Trust Dated April 1, 1952
Prepared by: William M. Libit
Chapman and Cutler
111 W. Monroe Street
Chicago, Illinois 60603
<PAGE> 2
MORTGAGE
TWENTY-EIGHTH SUPPLEMENTAL INDENTURE, dated as of January 1, 1998, 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, its Twenty-Fifth
Supplemental Indenture dated as of July 15, 1995, its Twenty-Sixth Supplemental
Indenture dated as of October 1, 1995, and its Twenty-Seventh Supplemental
Indenture dated as of September 1, 1997, 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 Bonds," which 1977 Series A Bonds have since been paid and redeemed by the
Company; and
<PAGE> 3
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 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,"
-2-
<PAGE> 4
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-l/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," 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," which 2001 Series N 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
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," which 2002 Series P Bonds have since been paid and redeemed by
the Company; and
-3-
<PAGE> 5
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," which 2017 Series Q Bonds have since
been paid and redeemed by the Company; 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
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
-4-
<PAGE> 6
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 ($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 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 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 Sixteen Million Dollars
($16,000,000) in principal amount are outstanding at the date hereof; and
-5-
<PAGE> 7
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
Twenty-Sixth Supplemental Indentures, inclusive, as a twenty-seventh series
designated "First Mortgage Bonds, 6-7/8 Series CC due 2010," herein sometimes
called "2010 Series CC 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 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 Twenty-Seventh Supplemental Indentures, inclusive, as a
twenty-eighth series designated "First Mortgage Bonds, Adjustable Rate Series DD
due 2027," herein sometimes called "2027 Series DD Bonds," of which Thirteen
Million Five Hundred Thousand Dollars ($13,500,000) 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
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 January
1, 1998 (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 Nine Million Five Hundred Forty-Five Thousand Dollars
($9,545,000) in aggregate principal amount of its Natural Gas Facilities
Refunding Revenue Bonds, Series 1998A (New Jersey Natural Gas Company Project)
(the "1998A 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 $9,545,000 in aggregate principal
amount of the EDA's Natural Gas Facilities Refunding Revenue Bonds, Series 1991A
(New Jersey Natural Gas Company Project)), and (ii) the proceeds of the issuance
by the EDA of Fifteen Million Dollars ($15,000,000) in aggregate principal
amount of its Natural Gas Facilities Refunding Revenue Bonds, Series 1998B (New
Jersey Natural Gas Company Project) (the "1998B 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
$15,000,000 in aggregate principal amount of the EDA's Natural Gas Facilities
Revenue
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<PAGE> 8
Bonds, Series 1991B (New Jersey Natural Gas Company Project)), which 1998A EDA
Bonds and 1998B EDA Bonds (herein collectively referred to as the "1998 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-ninth series
of Bonds, to be known as "First Mortgage Bonds, Adjustable Rate Series EE due
2028," herein sometimes called "2028 Series EE Bonds," and a thirtieth series of
Bonds to be known as "First Mortgage Bonds, Adjustable Rate Series FF due 2028,"
herein sometimes called "2028 Series FF 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 Union National Bank, as trustee (the "EDA Loan
Trustee") pursuant to an indenture of trust dated as of January 1, 1998 (the
"EDA Bond Indenture") between the EDA and the EDA Loan Trustee for the benefit
and security of the holders of the 1998 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-Eighth Supplemental Indenture in the form
hereof for the purposes herein provided; and
WHEREAS, all conditions and requirements necessary to make this
Twenty-Eighth 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, 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
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<PAGE> 9
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, 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,
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<PAGE> 10
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 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,
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<PAGE> 11
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 Section 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:
ARTICLE I.
CERTAIN AMENDMENTS OF INDENTURE
Section 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:
Section l.01. The following definition be and it hereby is added
immediately after the twenty-seventh sentence of Section 1.01B:
"'TWENTY-EIGHTH SUPPLEMENTAL INDENTURE' shall mean the Supplemental
Indenture dated as of January 1, 1998, supplemental to the Indenture."
Section 1.01. The following definitions be and they hereby are added
immediately after the twenty-ninth sentence of Section 1.01F:
"'2028 SERIES EE BOND' shall mean one of the First Mortgage Bonds,
Adjustable Rate Series EE due 2028, issued hereunder.
'2028 SERIES FF BOND' shall mean one of the First Mortgage Bonds,
Adjustable Rate Series FF due 2028, issued hereunder."
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<PAGE> 12
Section 2.11. The following be and it hereby is added at the end of
Section 2.11:
"No charge except for taxes or governmental charges shall be made against
any holder of any 2028 Series EE Bond or 2028 Series FF Bond for the
exchange, transfer or registration of transfer thereof."
Section 8.08. The period at the end of the first paragraph of Section
8.08 be and it hereby is deleted and the following words and figures be and they
hereby are added thereto:
", and the 2028 Series EE Bonds and the 2028 Series FF Bonds shall be
redeemed at the redemption price specified in Section 10.74 and Section
10.76, respectively."
ARTICLE II.
2028 SERIES EE BONDS
Section 2.1. There shall be a twenty-ninth series of Bonds, known as
and entitled "First Mortgage Bonds, Adjustable Rate Series EE due 2028" or
"First Mortgage Bonds, Adjustable Rate Series EE" (herein and in the Indenture
referred to as the "2028 Series EE 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 2028 Series EE Bonds which may be
authenticated and delivered and outstanding under the Indenture is Nine Million
Five Hundred Forty-Five Thousand Dollars ($9,545,000).
The 2028 Series EE Bonds shall be payable to the EDA Loan Trustee, and
shall be nontransferable except to a successor of the EDA Loan Trustee.
The 2028 Series EE 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 1998A EDA Bonds, computed on the same
basis as the 1998A 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 2028
Series EE Bonds exceed ten percent (10%) per annum; and the 2028 Series EE Bonds
shall mature on January 1, 2028, subject to prior redemption as described
herein. The amount of "annual interest charges" on the 2028 Series EE 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 2028 Series EE Bonds), shall mean the amount
calculated by applying to the 2028 Series EE Bonds the interest rate of ten
percent (10%) per annum; provided, however, that if the rate of interest on the
1998A EDA Bonds shall have become fixed and determined at a per annum rate lower
than ten percent (10%) for a period not less than the remaining maturity of said
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<PAGE> 13
1998A EDA Bonds (whether said 1998A 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 2028 Series
EE Bonds.
The 2028 Series EE 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 2028 Series EE Bonds shall be dated as
provided in Section 2.05 of the Indenture. All 2028 Series EE Bonds shall bear
interest from their respective dates, such interest to be payable, upon the
terms of and otherwise in accordance with the 2028 Series EE Bonds, on the first
business day preceding each date on which interest shall from time to time be
payable on the 1998A 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 2028 Series EE 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
1998A 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 1998A EDA Bonds under the
EDA Bond Indenture or, as far as principal is concerned, reduced by the
principal amount of any of the 1998A 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 2028 Series EE 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 2028 Series
EE Bonds, payments of the principal of and the premium, if any, and interest on
any 2028 Series EE 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 2028 Series EE 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 2028 Series EE 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 2028 Series EE 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
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<PAGE> 14
Section 11.02 of the Indenture and shall also be excluded from the benefits of
the covenants of Section 9.08 and Section 11.01 of the Indenture.
Notwithstanding the provisions of Section 10.04 or any other provision of
the Indenture, the selection of 2028 Series EE Bonds to be redeemed shall, in
case fewer than all of the outstanding 2028 Series EE 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 2028 Series EE Bonds in
proportion, as nearly as practicable, to the respective unpaid principal amounts
of 2028 Series EE 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 2028 Series EE
Bonds).
The definitive 2028 Series EE 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 Section 2.11 of the Indenture, all definitive 2028
Series EE 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.
Section 2.2. 2028 Series EE Bonds in the aggregate principal amount
of Nine Million Five Hundred Forty-Five Thousand Dollars ($9,545,000) 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 2028 Series EE Bonds shall be issued under Article
Four, Five or Six without the consent in writing of the holders of all the
outstanding 2028 Series EE Bonds.
ARTICLE III.
2028 SERIES FF BONDS
Section 3.1. There shall be a thirtieth series of Bonds, known as and
entitled "First Mortgage Bonds, Adjustable Rate Series FF due 2028" or "First
Mortgage Bonds, Adjustable Rate Series FF" (herein and in the Indenture referred
to as the "2028 Series FF 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.
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<PAGE> 15
The aggregate principal amount of 2028 Series FF Bonds which may be
authenticated and delivered and outstanding under the Indenture is Fifteen
Million Dollars ($15,000,000).
The 2028 Series FF Bonds shall be payable to the EDA Loan Trustee, and
shall be nontransferable except to a successor of the EDA Loan Trustee.
The 2028 Series FF 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 1998B EDA Bonds, computed on the same
basis as the 1998B 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 2028
Series FF Bonds exceed ten percent (10%) per annum; and the 2028 Series FF Bonds
shall mature on January 1, 2028, subject to prior redemption as described
herein. The amount of "annual interest charges" on the 2028 Series FF 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 2028 Series FF Bonds), shall mean the amount
calculated by applying to the 2028 Series FF Bonds the interest rate of ten
percent (10%) per annum; provided, however, that if the rate of interest on the
1998B EDA Bonds shall have become fixed and determined at a per annum rate lower
than ten percent (10%) for a period not less than the remaining maturity of said
1998B EDA Bonds (whether said 1998B 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 2028 Series
FF Bonds.
The 2028 Series FF 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 2028 Series FF Bonds shall be dated as
provided in Section 2.05 of the Indenture. All 2028 Series FF Bonds shall bear
interest from their respective dates, such interest to be payable, upon the
terms of and otherwise in accordance with the 2028 Series FF Bonds, on the first
business day preceding each date on which interest shall from time to time be
payable on the 1998B 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 2028 Series FF 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
1998B 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 1998B EDA Bonds under the
EDA Bond Indenture or, as far as principal is concerned, reduced by the
principal amount of any of the 1998B 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 2028 Series FF 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
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<PAGE> 16
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 2028 Series
FF Bonds, payments of the principal of and the premium, if any, and interest on
any 2028 Series FF 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 2028 Series FF 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 2028 Series FF 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 2028 Series FF 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 Section 11.02 of the Indenture and shall also be excluded from the
benefits of the covenants of Section 9.08 and Section 11.01 of the Indenture.
Notwithstanding the provisions of Section 10.04 or any other provision of
the Indenture, the selection of 2028 Series FF Bonds to be redeemed shall, in
case fewer than all of the outstanding 2028 Series FF 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 2028 Series FF Bonds in
proportion, as nearly as practicable, to the respective unpaid principal amounts
of 2028 Series FF 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 2028 Series FF
Bonds).
The definitive 2028 Series FF 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 Section 2.11 of the Indenture, all definitive 2028
Series FF 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.
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<PAGE> 17
Section 3.2. 2028 Series FF Bonds in the aggregate principal amount of
Fifteen Million Dollars ($15,000,000) 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 2028
Series FF Bonds shall be issued under Article Four, Five or Six without the
consent in writing of the holders of all the outstanding 2028 Series FF Bonds.
ARTICLE IV
REDEMPTION OF THE 2028 SERIES EE BONDS
Section 4.1. The following Section 10.73 and Section 10.74 be and they
hereby are added to Article Ten of the Indenture:
"Section 10.73. The 2028 Series EE Bonds shall be subject to mandatory
redemption as follows: payments of principal of and premium on the 2028 Series
EE Bonds shall be made to the EDA Loan Trustee to redeem 2028 Series EE 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 1998A EDA Bonds) and (b) make, when due, any prepayment required by the
Loan Agreement in connection with any mandatory or optional redemption of 1998A
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 1998A 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 1998A EDA Bonds under the
EDA Bond Indenture or, as far as principal is concerned, reduced by the
principal amount of any 1998A 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-Eighth Supplemental Indenture
dated as of January 1, 1998."
"Section 10.74. In the case of the redemption of 2028 Series EE Bonds out
of moneys deposited with the Trustee pursuant to Section 8.08, such 2028 Series
EE Bonds shall, upon compliance with provisions of Section 10.04, and subject to
the provisions of Section 2.1 of the Twenty-Eighth Supplemental Indenture, be
redeemable at the principal amounts thereof, together with interest accrued
thereon to the date fixed for redemption, without premium."
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<PAGE> 18
ARTICLE V
REDEMPTION OF THE 2028 SERIES FF BONDS
Section 5.1. The following Section 10.75 and Section 10.76 be and they
hereby are added to Article Ten of the Indenture:
"Section 10.75. The 2028 Series FF Bonds shall be subject to mandatory
redemption as follows: payments of principal of and premium on the 2028 Series
FF Bonds shall be made to the EDA Loan Trustee to redeem 2028 Series FF 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 1998B EDA Bonds) and (b) make, when due, any prepayment required by the
Loan Agreement in connection with any mandatory or optional redemption of 1998B
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 1998B 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 1998B EDA Bonds under the
EDA Bond Indenture or, as far as principal is concerned, reduced by the
principal amount of any 1998B 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-Eighth Supplemental Indenture
dated as of January 1, 1998."
"Section 10.76. In the case of the redemption of 2028 Series FF Bonds out
of moneys deposited with the Trustee pursuant to Section 8.08, such 2028 Series
FF Bonds shall, upon compliance with provisions of Section 10.04, and subject to
the provisions of Section 3.1 of the Twenty-Eighth Supplemental Indenture, be
redeemable at the principal amounts thereof, together with interest accrued
thereon to the date fixed for redemption, without premium."
ARTICLE VI
MISCELLANEOUS
Section 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.
-17-
<PAGE> 19
Section 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.
Section 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.
Section 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.
Section 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.
Section 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)
-18-
<PAGE> 20
NEW JERSEY NATURAL GAS COMPANY HEREBY DECLARES THAT IT HAS READ THIS
TWENTY-EIGHTH SUPPLEMENTAL INDENTURE, HAS RECEIVED A COMPLETELY FILLED-IN TRUE
COPY OF IT WITHOUT CHARGE AND HAS SIGNED THIS TWENTY-EIGHTH 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
------------------------------------
Name: Timothy C. Hearne
Title: Senior Vice President,
Financial and Administrative
Services
(Corporate Seal)
ATTEST:
- ------------------------------------
Oleta J. Harden
Secretary
-19-
<PAGE> 21
Signed, sealed and delivered by NEW JERSEY
NATURAL GAS COMPANY in the presence of:
- ------------------------------------
Name:
- ------------------------------------
Name:
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By
----------------------------
Name: J. Bartolini
Title: Vice President
[Corporate Seal]
ATTEST:
- ------------------------------------
Name: M. Onischak
Title: Assistant Secretary
Signed, sealed and delivered by HARRIS
TRUST AND SAVINGS BANK in the presence of:
- ------------------------------------
Name:
- ------------------------------------
Name:
-20-
<PAGE> 22
STATE OF NEW JERSEY )
) SS:
COUNTY OF MONMOUTH )
BE IT REMEMBERED that on this _____ day of January 1998, 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 Senior Vice President, Financial and
Administrative Services of said corporation; that she saw said Timothy C.
Hearne, as such Senior Vice President, Financial and Administrative Services,
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.
----------------------------------------
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.
- ------------------------------------
Name:
Attorney-at-Law of the
State of New Jersey
-21-
<PAGE> 23
STATE OF ILLINOIS )
) SS:
COUNTY OF COOK )
BE IT REMEMBERED that on this ____ day of January 1998, 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.
----------------------------------------
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.
- --------------------------------------
Notary Public of the State of Illinois
[SEAL]
-22-
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NEW JERSEY
RESOURCES CORPORATION'S DECEMBER 31, 1997 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>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1997
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 641,337
<OTHER-PROPERTY-AND-INVEST> 20,900
<TOTAL-CURRENT-ASSETS> 184,801
<TOTAL-DEFERRED-CHARGES> 92,663
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 939,701
<COMMON> 45,387
<CAPITAL-SURPLUS-PAID-IN> 204,469
<RETAINED-EARNINGS> 36,471
<TOTAL-COMMON-STOCKHOLDERS-EQ> 286,327
20,000
760
<LONG-TERM-DEBT-NET> 252,845
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 6,840
<COMMERCIAL-PAPER-OBLIGATIONS> 70,500
<LONG-TERM-DEBT-CURRENT-PORT> 138
0
<CAPITAL-LEASE-OBLIGATIONS> 31,562
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 270,729
<TOT-CAPITALIZATION-AND-LIAB> 939,701
<GROSS-OPERATING-REVENUE> 220,395
<INCOME-TAX-EXPENSE> 5,928
<OTHER-OPERATING-EXPENSES> 195,705
<TOTAL-OPERATING-EXPENSES> 201,633
<OPERATING-INCOME-LOSS> 18,762
<OTHER-INCOME-NET> 1,318
<INCOME-BEFORE-INTEREST-EXPEN> 20,080
<TOTAL-INTEREST-EXPENSE> 5,467
<NET-INCOME> 14,613
397
<EARNINGS-AVAILABLE-FOR-COMM> 14,216
<COMMON-STOCK-DIVIDENDS> 7,161
<TOTAL-INTEREST-ON-BONDS> 14,897
<CASH-FLOW-OPERATIONS> 16,277
<EPS-PRIMARY> .80
<EPS-DILUTED> .79
</TABLE>
