SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1994 Commission File # 1-8353
NUI CORPORATION
(Exact name of registrant as specified in its charter)
22-1869941
New Jersey (I.R.S. employer identification
(State of incorporation) no.)
550 Route 202-206, P.O. Box 760, Bedminster, New Jersey 07921-0760
(Address of principal executive offices, including zip code)
(908) 781-0500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days:
Yes X No
The number of shares outstanding of each of the registrant's classes of
common stock, as of July 31, 1994: Common Stock, No Par Value:
9,090,792 shares outstanding.<PAGE>
<TABLE>
NUI Corporation and Subsidiaries
Statement of Consolidated Income (Unaudited)
(Dollars in thousands, except per share amounts)
<CAPTION>
Three Months Nine Months
Ended Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Operating Revenues $74,747 $69,072 $332,887 $302,223
------ ------ ------- -------
Operating Expenses
Purchased gas and fuel 42,106 38,131 189,471 166,108
Other operation 19,721 18,187 57,116 51,651
Maintenance 1,816 1,409 4,924 4,087
Depreciation and amortization 4,479 3,775 12,901 11,292
General taxes 6,388 6,310 34,083 32,122
Income taxes (1,494) (1,012) 7,945 8,703
------ ------ ------- -------
Total operating expenses 73,016 66,800 306,440 273,963
------ ------ ------- -------
Operating Income 1,731 2,272 26,447 28,260
------ ------ ------- -------
Other Income and Expense
Dividend and interest income 74 88 231 279
Other income, net (79) 241 199 635
Income taxes (32) (236) (119) (469)
------ ------ ------- -------
Total other income
and expense (37) 93 311 445
------ ------ ------- -------
Interest Expense 3,928 3,383 11,322 10,227
------ ------ ------- -------
Net Income (Loss) $(2,234) $(1,018) $15,436 $18,478
====== ====== ====== ======
Net Income (Loss) Per
Share of Common Stock $(0.25) $(0.12) $1.83 $2.28
Dividends Per Share of
Common Stock $0.40 $0.40 $1.20 $1.19
Weighted Average Number of
Shares of Common Stock
Outstanding 8,881,251 8,147,497 8,453,741 8,105,355
See the notes to the consolidated financial statements.<PAGE>
</TABLE>
<TABLE>
NUI Corporation and Subsidiaries
Consolidated Balance Sheet
(Dollars in thousands)
<CAPTION>
June 30, September 30,
1994 1993
(Unaudited) (*)
<S> <C> <C>
ASSETS
Property, Plant and Equipment
Utility plant, at original cost $550,237 $483,853
Accumulated depreciation and amortization (172,327) (151,725
Unamortized plant acquisition adjustment 32,290 15,084
------- -------
Net utility plant 410,200 347,212
------- -------
Funds for Construction Held by Trustee 16,259 24,184
Investments in Marketable Securities 3,468 3,986
------- -------
Current Assets
Cash and temporary cash investments 2,039 1,873
------- -------
Accounts receivable 41,918 27,675
Allowance for doubtful accounts (1,944) (1,225)
Fuel inventories, at average cost, and
deferred cost of gas 20,434 28,456
Deferred Federal income taxes - 2,134
Materials, supplies and other 19,346 10,031
------- -------
Current assets 81,793 68,944
------- -------
Deferred Charges and Other Assets 51,712 42,210
------- -------
$563,432 $486,536
======= =======
*Derived from audited financial statements.
See the notes to the consolidated financial
statements.<PAGE>
</TABLE>
<TABLE>
NUI Corporation and Subsidiaries
Consolidated Balance Sheet
(Dollars in thousands)
<CAPTION>
June 30, September
1994 30, 1993
(Unaudited) (*)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $149,361 $122,384
Preferred stock - -
145,885 142,090
Long-term debt ------- -------
Capitalization 295,246 264,474
------- -------
Capital Lease Obligations 11,694 12,290
------- -------
Current Liabilities
Current portion of long-term debt and
capital lease obligations 3,599 3,882
Notes payable to banks 82,100 69,325
Accounts payable, customer deposits and
accrued liabilities 58,163 48,513
General taxes 2,293 6,078
Federal income taxes 9,134 5,057
------- -------
Current liabilities 155,289 132,855
------- -------
Deferred Credits and Other Liabilities
Deferred Federal income taxes 46,366 36,703
Unamortized investment tax credits 7,626 7,687
Other liabilities 47,211 32,527
------- -------
Deferred credits and other liabilities 101,203 76,917
------- -------
$563,432 $486,536
======= =======
*Derived from audited financial statements
See the notes to the consolidated financial
statements <PAGE>
</TABLE>
<TABLE>
NUI Corporation and Subsidiaries
Statement of Consolidated Cash Flows (Unaudited)
(Dollars in thousands)
<CAPTION>
Nine Months Ended
June 30,
1994 1993
<S> <C> <C>
Operating Activities
Net income $15,436 $18,478
Adjustments to reconcile net income to net cash
provided by operating
activities:
Depreciation and amortization 13,910 12,257
Deferred Federal income taxes 3,922 8,164
Amortization of unamortized investment tax
credits (341) (341)
Other 2,231 2,001
Effect of changes in:
Accounts receivable, net (9,717) (4,753)
Fuel inventories 7,346 5,228
Deferred cost of gas 11,309 2,483
Accounts payable, deposits and accruals 2,029 (4,459)
General taxes (12,609) (16,452)
Other (2,354) (4,567)
------ ------
Net cash provided by operating activities 31,162 18,039
------ ------
Financing Activities
Proceeds from sales of common stock 4,567 3,318
Dividends to shareholders (10,194) (9,635)
Funds for construction held by trustee 8,430 7,000
Repayments of long-term debt (1,937) (7,034)
Principal payments under capital lease
obligations (1,548) (1,426)
Net short-term borrowings 5,868 14,100
------ ------
Net cash provided by financing activities 5,186 6,323
------ ------
Investing Activities
Cash expenditures for property, plant and
equipment (35,669) (24,462)
Proceeds from sale of marketable securities 659 47
Other (1,172) (697)
------ ------
Net cash used for investing activities (36,182) (25,112)
------ ------
Net Change in Cash and Temporary Cash Investments $166 $(750)
=== ===
Cash and Temporary Cash Investments
At beginning of period $1,873 $3,487
At end of period 2,039 2,737
Supplemental Disclosures of Cash Flows<PAGE>
Income taxes paid $666 $1,803
Interest paid 14,376 13,849
See the notes to the consolidated financial
statements.<PAGE>
</TABLE>
NUI Corporation and Subsidiaries
Notes to Consolidated Financial Statements
1. Basis of Presentation
The Consolidated Financial Statements, which include the accounts of
NUI Corporation ("NUI") and its subsidiaries (the "Company"), have been
prepared without audit, in accordance with the rules and regulations of
the Securities and Exchange Commission and reflect all adjustments which,
in the opinion of management, are necessary for a fair statement of the
results for interim periods. All adjustments made were of a normal
recurring nature. The Consolidated Financial Statements should be read in
conjunction with the Consolidated Financial Statements and the notes
thereto that are included in the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1993.
The Company distributes natural gas in the states of New Jersey,
Florida, North Carolina, Maryland, Pennsylvania and New York and is
subject to regulation as an operating utility by the public utility
commissions of the states in which it serves. Because of the seasonal
nature of gas utility operations, the results for interim periods are not
necessarily indicative of the results for an entire year.
2. Acquisition of Pennsylvania & Southern Gas Company
On April 19, 1994, the Company issued and exchanged 683,443 shares of
NUI common stock for all of the outstanding common shares of Pennsylvania
& Southern Gas Company ("PSGS") pursuant to which PSGS was merged with and
into NUI (the "PSGS Merger"). The transaction was valued at approximately
$17 million. PSGS was a gas distribution utility with approximately 22,000
customers with operations in North Carolina, Maryland, Pennsylvania and
New York. Upon consummation of the PSGS Merger, the Company's principal
operating subsidiary, Elizabethtown Gas Company, was merged with and into
NUI (the "EGC Merger").
The PSGS Merger has been accounted for as a purchase in accordance
with generally accepted accounting principles and the results of
operations of PSGS have been consolidated with those of NUI as of April
19, 1994. Due to the effects of the regulatory process, the underlying net
assets of PSGS have been recorded at their historical net book value. The
excess of the purchase price over the historical net book value of the
underlying net assets of PSGS approximates $8.8 million, including the
effects of providing deferred Federal income taxes. This excess is
included in utility plant as a "utility plant acquisition adjustment" and
is being amortized over a thirty-year period, which approximates the
remaining useful life of the utility plant acquired. The utility plant
acquisition adjustment is preliminary and may be affected by the
recognition of liabilities previously not recorded on the financial
statements of PSGS (see Note 4, "Contingencies"). Should any such events
occur and become subject to reasonable quantification within one year, the
amount of the plant acquisition adjustment would be changed accordingly.
3. Common Shareholders' Equity
The components of common shareholders' equity were as follows
(dollars in thousands):<PAGE>
June 30, September 30,
1994 1993
Common stock, no par value $136,326 $114,895
Shares held in treasury (797) (797)
Retained earnings 15,080 9,718
Valuation of marketable securities - (93)
Subsidiary's guaranty of ESOP indebtedness (1,248) (1,339)
------- -------
Total common shareholders' equity $149,361 $122,384
======= =======
4. Contingencies
Environmental Matters. The Company is subject to federal and state
legislation with respect to water, air quality, solid waste disposal and
employee health and safety matters and to environmental regulations issued
by the United States Environmental Protection Agency (the "EPA"), the New
Jersey Department of Environmental Protection (the "NJDEP"), and other
federal and state agencies.
The Company owns, or previously owned, certain properties on which
gas was manufactured by the Company's New Jersey Division or by other
parties in the past. Coal tar residues are present on six of these sites
and the Company has reported their presence to the EPA, the NJDEP and the
New Jersey Board of Public Utilities (the "NJBPU"). In April 1991, the
NJDEP issued an Administrative Consent Order that established the
procedures to be followed by the Company in the development of its
remediation plan for one of the sites. Subsequently, the Company and the
NJDEP entered into a Memoranda of Agreement that establish procedures for
the development of investigation and remediation plans for the other five
sites.
The Company expects it will expend in the next twenty years
approximately $25 million to complete investigation and remediation of
such sites, net of approximately $6 million that the Company estimates
will be borne by the prior owner and operator of certain of the sites. The
Company, with the assistance of an outside consulting firm, determined the
estimated expenditure by assessing the cost of (1) obtaining additional
required data about each site and (2) the applicable remedial action,
among those currently known, that is most appropriate for each site. The
ultimate costs will depend upon the investigation and remediation plans
that finally are adopted by the Company, subject to the approval of the
NJDEP, and may be less or greater than the Company's current estimate. The
Company has a reserve of approximately $25 million for investigation and
remediation of the sites and the related costs have been deferred on its
Consolidated Balance Sheet.
The Company believes that its remediation costs will be recoverable
in rates and that a portion of such costs may be recoverable from the
Company's insurance carriers. The current base rate order for the New
Jersey Division permits the Company to utilize full deferred accounting
for coal tar related expenditures, which amounted to approximately $0.3
million for the first nine months of fiscal 1994 and $1.7 million for the
first nine months of fiscal 1993. The current base rate order provides for
the recovery through rates at $130,000 annually of coal tar related
expenditures incurred prior to the rate order. Other New Jersey utilities<PAGE>
also have received authorization to recover similar environmental
expenditures in rates.
During the course of its due diligence activities in connection with
the PSGS Merger, the Company was informed that PSGS had operated ten
former coal gas manufacturing facilities, only three of which PSGS still
owns. No provision had been made in PSGS' financial statements for
potential clean-up costs. The Company, with the assistance of an outside
consulting firm, is in the process of assessing such sites. The Company is
not able at this time to determine the extent of any contamination, the
requirement for remediation if contamination is present, the costs
associated with remediation or recovery of any such costs from insurers,
third parties or ratepayers.
Other. In addition, the Company is involved in various claims or
litigation incidental to its business. In the opinion of management, none
of these other claims and litigation will have a material adverse effect
on the Company's results of operations or its financial condition.<PAGE>
<TABLE>
NUI Corporation and Subsidiaries
Summary Consolidated Operating Data
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Operating Revenues
Firm Sales:
Residential $32,652 $30,127 $166,986 $150,598
Commercial 17,879 16,831 93,844 83,007
Industrial 5,185 5,000 20,907 18,714
Interruptible Sales 13,577 11,478 35,855 35,893
Transportation
Services 3,575 3,185 9,818 9,288
Broker Sales - 1,239 1,147 1,239
Appliance Leasing,
Fees and Other 1,879 1,212 4,330 3,484
------ ------ ------ ------
Total $74,747 $69,072 $332,887 $302,223
====== ====== ======= =======
Gas Sold or
Transported (MMcf):
Firm Sales:
Residential 3,432 3,392 20,404 19,117
Commercial 2,748 2,674 14,090 13,060
Industrial 1,131 1,063 4,182 3,858
Interruptible Sales 4,917 3,228 11,208 10,317
Transportation
Services 4,534 4,322 12,311 12,438
Broker Sales - 204 583 204
------ ------ ------ ------
Total 16,762 14,883 62,778 58,994
====== ====== ======= =======
Average Customers
Served:
Firm:
Residential 322,452 297,852 309,509 297,506
Commercial 23,985 21,162 22,409 21,073
Industrial 403 373 376 379
Interruptible and 237 193 214 191
Transportation ------ ------ ------ ------
Total 347,077 319,580 332,508 319,149
======= ======= ======= =======
Degree Days in New
Jersey:
Actual 387 409 4,935 4,648
Normal (30 year
average) 538 538 4,936 4,936
Percentage variance 28% 24% 6%
from normal warmer warmer normal warmer
Average Number of
Employees 1,174 1,001 1,069 987<PAGE>
</TABLE>
NUI Corporation and Subsidiaries
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
The Company is engaged in the sale and transportation of natural gas
in New Jersey, Florida, North Carolina, Maryland, Pennsylvania and New
York and is subject to regulation as an operating utility by the public
utility commissions of the states in which it serves. Because of the
seasonal nature of gas utility operations, the results for interim periods
are not necessarily indicative of the results for an entire year.
For the quarter ended June 30, which is a period of seasonally low
demand for natural gas for heating, the Company incurred a net loss of
$2.2 million in 1994 as compared with a net loss of $1.0 million a year
ago. Net income decreased to $15.4 million for the nine months ended June
30, 1994 as compared with net income of $18.5 million for the same period
in the prior year. The decreases in both periods as compared with a year
ago, reflect a higher level of operating expenses and interest expense,
partly offset by increased sales volumes and margins. The decreases also
reflect a $0.4 million net loss from the addition of PSGS, which was
acquired in a merger in April 1994, following the conclusion of the
heating season (see "Acquisition of Pennsylvania & Southern Gas Company",
Note 2 of the Notes to the Consolidated Financial Statements). The net
loss expressed on a per share basis was $0.25 for the quarter ended June
30, 1994 and $0.12 for the quarter ended June 30, 1993. For the nine-month
period, net income was $1.83 per share through June 30, 1994 and $2.28 per
share through June 30, 1993.
Results of Operations
Operating Revenues. The Company's operating revenues increased by
$5.6 million, or 8.1% from $69.1 million in the third fiscal quarter of
1993 ("1993 quarter") to $74.7 million in the 1994 third quarter ("current
quarter"). Operating revenues for the first nine months of fiscal 1994
increased by $30.7 million or 10.2% from $302.2 million in the 1993 period
to $ 332.9 million in the current period. These increases principally
reflect increases in the number of customers served, including the
addition of PSGS in the current quarter, and the effect of gas cost
adjustment clauses. The increase for the quarter ended June 30, 1994, was
partly offset by the effects of weather in New Jersey, as it was 28%
warmer than normal during the current quarter, and 5% warmer than a year
ago. For the 1994 nine-month period, the weather in New Jersey contributed
to the higher revenues as the weather was 6% colder than the same period a
year ago.
The Company's total average number of customers served increased by
13,359 (including the PSGS acquisition), or 4.2%, for the first nine
months of fiscal 1994 as compared with the same period in fiscal 1993. For
the first nine months of fiscal 1994, the number of heating customers
served in New Jersey increased by 3,697, or 2.3%, as compared with the
same period in fiscal 1993, including the effects of converting existing
water heating and cooking service customers to gas-heating customers.
Gas cost adjustment clauses enable the Company to pass through to
customers, via periodic adjustments to the amounts billed, increased or<PAGE>
decreased costs incurred by the Company for purchased gas, without
affecting operating margins. Adjustments related to changes in gas costs
had the net effect of increasing operating revenues by $5.2 million and
$25.7 million, respectively, for the three and nine-month periods ended
June 30, 1994, as compared with $2.4 million and $11.5 million,
respectively, for the same periods in the prior year, with offsetting
adjustments to purchased gas and fuel costs and to gross receipts and
franchise taxes.
Operating Margins. The Company's operating margins (operating
revenues less the costs of purchased gas and fuel and gross receipts and
franchise taxes) increased by $2.2 million, or 8.5%, from $26.0 million in
the 1993 quarter to $28.2 million in the current quarter. For the first
nine months of fiscal 1994, operating margins increased by $6.2 million,
or 5.7%, from $108.0 million in the 1993 period to $114.2 million in the
current period. The increases principally reflect increases in the number
of customers served.
The Company has a weather normalization clause in its New Jersey
Division's tariff, which is designed to help stabilize the Company's
results by increasing amounts charged to customers when weather has been
warmer than normal and by decreasing amounts charged when weather has been
colder than normal. As the current year-to-date period fell within the
normal range, no adjustment was required. For the same period last year,
in which the weather was 28% warmer than normal, operating margins were
increased by $1.3 million.
Operating Income. Although operating margins increased, the Company's
operating income before income taxes decreased by $1.1 million, or 81%,
from $1.3 million in the 1993 quarter to $0.2 million in the current
quarter. For the first nine months of fiscal 1994, operating income before
income taxes decreased by $2.6 million, or 7%, from $37.0 million in the
1993 period to $34.4 million in the current period. These decreases are
attributable to increased operating expenses due in part to higher costs
associated with increased system growth (including the payroll and
employee benefits costs attributable to a larger work force and
depreciation due to additional plant-in-service), as well as the inclusion
of a $0.3 million operating loss incurred by the inclusion of the
operations of PSGS after the heating season. System growth is principally
occurring in the Company's Florida Division, where the Company's capital
expenditure program includes the development of the Port St. Lucie
franchise, the construction of a fifteen mile pipeline to bring natural
gas to the National Aeronautics and Space Administration's Kennedy Space
Center and additional main extensions for future growth. For the nine-
month period ended June 30, 1994, operating expenses also increased due to
the effect of severe weather in New Jersey during the second quarter of
the 1994 fiscal year. The decrease in income taxes for the current quarter
and 1994 year-to-date periods was due to lower pre-tax income.
The trend of lower operating income is expected to continue unless
additional margins can be added as a result of (1) customer growth from
the Company's investment in system growth in Florida or (2) the Company's
base rate increase request filed in Florida (see "--Regulatory Matters")
is granted. In addition, the Company is considering filing a base rate
petition in New Jersey in fiscal 1995 which, if granted, would be
implemented in fiscal 1996.
Interest Expense. Interest expense for the three and nine-month
periods of fiscal 1994 principally reflect higher outstanding borrowings<PAGE>
as compared with prior year periods (see "Financing Activities and
Resources").
Regulatory Matters
In March 1994, the Company's New Jersey Division filed with the NJBPU
new tariffs which are designed to provide for unbundling of natural gas
transportation and sales services to commercial and industrial customers.
The Company expects the effect of the new tariffs to be neutral to the
operating revenues and margins of the Company.
In response to an initiative by the Florida Public Service Commission
("FPSC"), effective January 1, 1994, the Company, along with other Florida
natural gas utilities, reduced its allowed return on the utility equity of
its Florida Division to 11%, which exceeds the return it is currently
achieving. Accordingly, the reduction has not affected operating revenues
and margins.
On May 20, 1994, the Company filed a request with the FPSC to modify
the rates its Florida Division charges natural gas customers to reflect
its investment in its natural gas distribution infrastructure. On a total
revenue basis, the proposed rate modifications would increase the
Company's annual revenue by $8.6 million. On July 19, 1994, the FPSC
granted interim rate relief, effective August 20, 1994, equivalent to an
increase in the Company's annual revenues of $260,000. There can be no
assurances that the Company's rate request will be granted, or if granted,
that the Company will receive the full amount requested.
On July 25, 1994, the Company's New Jersey Division filed with the
NJBPU a petition to reduce its annual gas cost adjustment revenues by
approximately $11.9 million. The decrease reflects the Company's
projections for lower gas costs over the coming year and will have no
effect on the Company's operating margins. The Company also anticipates
that it will refund approximately $2.8 million to its customers in
November 1994 as a result of lower gas prices experienced in the current
year.
Financing Activities and Resources
The Company generally funds its operations with internally generated
cash, supplemented with borrowings under its bank lines of credit to
satisfy seasonal requirements. The Company also borrows under its bank
lines of credit to finance portions of its construction expenditures,
pending refinancing through the issuance of equity or long-term
indebtedness at a later date depending upon prevailing market conditions.
The Company seeks to assure access to funds for system growth and
integrity through timely issuances of equity and debt at the lowest
reasonable costs that provide fair returns to investors.
Net cash provided by operating activities was $31.2 million for the
first nine months of fiscal 1994 as compared to $18.0 million a year ago.
The increase primarily reflects the temporary overcollection of lower-
than-anticipated gas costs and a higher level of receivables resulting
from increased sales due to colder weather in New Jersey during the
current nine-month period as compared with the same period in fiscal 1993.
In October 1991, Gas Facilities Revenue Bonds that mature in October
2021 were issued in the amount of $46.2 million at 6.75% and $8.4 million
at 6.625% to finance expenditures through fiscal 1995 for the construction
of certain gas facilities and related equipment in New Jersey. The<PAGE>
unexpended portion of the net proceeds from these borrowings, amounting to
$16.3 million at June 30, 1994, is classified on the Company's
Consolidated Balance Sheet as Funds for Construction Held by Trustee until
drawn upon incurring eligible expenditures.
The weighted average daily amounts outstanding of notes payable to
banks and the weighted average interest rates on those amounts were
$77.7 million at 3.8% for the nine months ended June 30, 1994 and
$48.2 million at 3.6% for the nine months ended June 30, 1993. The
weighted average daily amounts of notes payable to banks increased
principally to finance portions of the Company's construction
expenditures, primarily related to system growth in Florida, and the
accelerated payment of New Jersey gross receipts and franchise taxes (see
"--Capital Expenditures and Commitments"). At June 30, 1994, the Company
had $66 million of available unused credit lines.
The Company periodically issues shares of common stock in connection
with NUI Direct, the Company's Common Stock Investment Plan, (formerly the
NUI Dividend Reinvestment & Stock Purchase Plan) and various employee
benefit plans.
The Company or its predecessor has paid cash dividends on its Common
Stock in every year since 1893 and intends to continue to pay quarterly
cash dividends. The dividend policy is reviewed on an ongoing basis and is
dependent upon the Company's expectations of future earnings, cash flow,
financial condition, capital requirements and other factors. The quarterly
payment was increased to $0.40 per share beginning with the third quarter
of fiscal 1993. The Company's long-term debt agreements include, among
other things, restrictions as to the payment of cash dividends. Under the
most restrictive of these provisions, $27.6 million of the Company's
retained earnings were available for the payment of cash dividends at June
30, 1994.
On July 19, 1994, the Company received final regulatory approval to
issue $66.5 million of tax-exempt bonds in New Jersey and Florida. These
issuances will be comprised of $46.5 million of 6.35% Gas Facilities
Refunding Revenue Bonds due October 1, 2022, which will be used to prepay
11% and 11.25% Gas Facilities Revenue Bonds, and $20 million of 6.40% Gas
Facilities Revenue Bonds due October 1, 2024, which will be used to
finance part of the Company's capital expenditure program in Florida. Both
issuances are expected to close in August 1994. In addition, the Company
intends, by the end of the 1994 calendar year, to register with the
Securities and Exchange Commission up to $100 million of debt and equity
securities, which it may issue from time-to-time depending upon prevailing
market conditions. The Company intends to use part of the proceeds of such
securities to (1) repay approximately $50 million of variable rate debt,
which may include $30 million currently classified as long-term debt, and
(2) prepay the remaining $9.8 million balance of its first mortgage bonds.
The call premium amounts for refinancing both the Gas Facilities Revenue
Bonds and first mortgage bonds are approximately $0.9 million and $0.4
million, respectively.
Capital Expenditures and Commitments
Capital expenditures, which consist primarily of expenditures to
expand and upgrade the Company's gas distribution systems, were
$36.5 million for the nine months ended June 30, 1994 as compared with
$26.4 million for the nine months ended June 30, 1993. Capital
expenditures are expected to be approximately $53 million for the full
fiscal year 1994, including a $19 million capital investment program for<PAGE>
system growth in Florida, as compared with a total of $39.6 million for
fiscal 1993. Approximately $36 million of the capital expenditures planned
for fiscal 1994 is for construction relating to new customers and
additional distribution, storage and other gas plant facilities. In
addition, the net present value of minimum lease payments relating to
noncancelable operating leases, which pertain principally to the Company's
New Jersey Division office space, was approximately $23.0 million as of
June 30, 1994, including $0.7 million payable during the remainder of
fiscal 1994.
As discussed in "Contingencies," Note 4 of the Notes to the
Consolidated Financial Statements, the Company, in connection with the
PSGS Merger, acquired former coal gas manufacturing facilities. The
Company is not able at this time to determine the extent of any
contamination, the requirement for remediation if contamination is
present, the costs associated with remediation or recovery of any such
costs from insurers, third parties or ratepayers. If such costs become
subject to reasonable quantification, the utility plant acquisition
adjustment recorded in connection with the PSGS Merger may be affected.
As further discussed in "Contingencies", Note 4 of the Notes to the
Consolidated Financial Statements, the Company expects it will expend in
the next twenty years approximately $25 million to complete investigation
and remediation of the contamination on New Jersey properties which the
Company owns or previously owned on which gas was manufactured in the
past. The ultimate costs will depend upon the investigation and
remediation plans that finally are adopted by the Company, subject to the
approval of the NJDEP, and may be less or greater than the Company's
current estimate. The Company believes the remediation costs will be
recoverable in rates and that a portion of such costs may be recoverable
from the Company's insurance carriers.
In June 1991, legislation was enacted in New Jersey that accelerated
the payments of approximately $30 million of the Company's gross receipts
and franchise taxes by an average of almost one and a half years in stages
from 1992 through 1994. The Company expects that future base rate orders
will reflect the recovery of prospective costs associated with the related
additional financing requirements.
Certain of the Company's long-term contracts for the supply, storage
and delivery of natural gas include fixed charges that amount to
approximately $70 million annually, of which approximately $49 million is
associated with pipeline delivery contracts. The Company currently
recovers, and expects to continue to recover, such fixed charges through
its gas cost adjustment clauses. The Company also is committed to
purchase, at market-related prices, minimum quantities of gas that, in the
aggregate, are approximately 10.1 million Mcf per year or to pay certain
costs in the event the minimum quantities are not taken. The Company
expects that minimum demand on its systems will continue to exceed these
minimum purchase obligations.
The implementation of the Federal Energy Regulatory Commission
("FERC") Order No. 636 required the restructuring of the Company's
contracts with certain pipeline companies that together supply less than
one-third of the Company's total firm gas supply. Under Order No. 636 the
pipeline companies are passing through to their customers transition costs
associated with mandated restructuring, such as costs resulting from
buying out unmarketable gas purchase contracts. The Company has been
charged approximately $4.4 million of such costs as of June 30, 1994,
which the Company has been authorized to recover through its gas cost<PAGE>
adjustment clauses. The Company currently estimates that its remaining
Order No. 636 transition obligation will be approximately $4.3 million.
This estimate is subject to adjustment by FERC in its deliberations with
the Company's pipeline suppliers on their compliance filings, any future
filings by the suppliers and the outcome of bankruptcy proceedings
involving one of the Company's suppliers.
As of June 30, 1994, the scheduled repayments of the Company's
long-term debt through fiscal 1998 were as follows: $0.8 million in the
remainder of fiscal 1994, $1.2 million in fiscal 1995, $31.2 million in
fiscal 1996, $3.4 million in fiscal 1997 and $1.1 million in fiscal 1998.
See "--Financing Activities and Resources".
Acquisition of Pennsylvania & Southern Gas Company
As discussed in "Acquisition of Pennsylvania & Southern Gas Company",
Note 2 of the Notes to the Consolidated Financial Statements, on April 19,
1994, the Company completed its planned merger with PSGS. The merger
results in a 7% increase in the number of customers served as well as a
10% increase in annual gas volume throughput. The increase in customer
diversity and the similarity of the operating systems of the Company and
PSGS, in particular their gas transmission pipelines, will provide greater
flexibility in managing gas capacity and supply, thereby increasing
opportunities for lowering the overall cost of gas. The merger fits with
the Company's business plan to focus on customer growth and enhance the
profitability of its gas distribution business.
Business Plan
The Company, in accordance with its business plan, is concentrating on
customer growth and enhancing the profitability of its gas distribution
business. Growth opportunities, which include the acquisition of
additional gas distribution companies, the development of new franchises
and the management of certain service requirements of other utilities on a
contract basis, will likely require additional debt and equity financing.
The Company's implementation of its business plan has involved assembling,
as opportunities become available, natural gas distribution systems in
several states. From time to time, the Company reviews acquisition
opportunities and, when requested, submits acquisition proposals.<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K.
On April 20, 1994, the Company filed a Form 8-K, Item 2,
Acquisition or Disposition of Assets and Item 7, Financial Statements and
Exhibits, reporting the issuance of a press release on April 20, 1994,
stating that the merger of NUI Corporation and Pennsylvania & Southern Gas
Company was completed.
On July 29, 1994, the Company also filed a Form 8-K, Item 5,
Other Events, reporting the issuance of a press release on July 21, 1994
of the Company's third quarter results.
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.
NUI CORPORATION
August 10, 1994 JOSEPH P. COUGHLIN
Senior Vice President and
Secretary
August 10, 1994 BERNARD F. LENIHAN
Vice President and
Controller<PAGE>
