SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 1993 Commission File # 1-8353
NUI CORPORATION
(Exact name of registrant as specified in its charter)
22-1869941 New Jersey
(I.R.S. employer identification no.) (State of incorporation)
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 December 31, 1993: Common Stock, No Par Value:
8,252,207 shares outstanding. <PAGE>
NUI Corporation and Subsidiaries
Condensed Statements of Consolidated Income
(Dollars in thousands, except per share amounts)
Three Months Ended
December 31,
1992 1993
Operating Revenues $101,115 $105,603
------- -------
Operating Expenses
Purchased gas and fuel 56,105 58,834
Other operation 15,813 17,469
Maintenance 1,306 1,480
Depreciation and amortization 3,744 4,184
General taxes 10,626 11,142
Income taxes 3,486 3,143
------- -------
Total operating expenses 91,080 96,252
------- -------
Operating Income 10,035 9,351
------- -------
Other Income and Expense
Dividend and interest income 96 72
Other income, net 137 219
Income taxes (125) (36)
------- -------
Total other income and expense, net 108 255
------- -------
Interest Expense 3,385 3,754
------- -------
Net Income $6,758 $5,852
======= =======
Net Income Per Share of Common Stock $0.84 $0.71
Dividends Per Share of Common Stock $0.395 $0.40
Weighted Average Number of Shares of
Common Stock Outstanding 8,057,535 8,218,227
See the notes to the condensed consolidated
financial statements.
1 <PAGE>
NUI Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in thousands)
December
September 31,
30,1993 1993
ASSETS
Property, Plant and Equipment
Utility plant, at original cost $483,853 $494,659
Accumulated depreciation and
amortization (151,725) (155,220)
Unamortized plant acquisition 15,084 24,068
adjustment ------- -------
347,212 363,507
Net utility plant ------- -------
Funds for Construction Held by Trustee 24,184 21,474
Investments in Marketable Securities 3,986 3,468
Current Assets
Cash and temporary cash investments 1,873 1,733
Accounts receivable 27,675 58,242
Allowance for doubtful accounts (1,225) (1,813)
Fuel inventories, at average cost, and
deferred cost of gas, net 28,456 25,881
Deferred Federal income taxes 2,625 2,625
Materials, supplies and other 10,031 12,086
------- -------
69,435 98,754
Current assets ------- -------
41,719 42,754
Deferred Charges and Other Assets ------- -------
$486,536 $529,957
======= =======
See the notes to the condensed
consolidated financial statements.
2
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NUI Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in thousands)
December
September 31,
30,1993 1993
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $122,384 $126,385
Preferred stock -- --
Long-term debt 142,090 142,182
------- -------
Capitalization 264,474 268,567
------- -------
12,290 12,051
Capital Lease Obligations ------- -------
Current Liabilities
Current portion of long-term debt and
capital lease obligations 3,882 3,713
Notes payable to banks 69,325 87,125
Accounts payable, customer deposits and
accrued liabilities 48,513 48,027
General taxes 6,078 15,349
Federal income taxes 5,057 8,102
------- -------
Current liabilities 132,855 162,316
------- -------
Deferred Credits and Other Liabilities
Deferred Federal income taxes 36,703 40,023
Unamortized investment tax credits 7,687 7,555
Other liabilities 32,527 39,445
Deferred credits and other liabilities 76,917 87,023
------- -------
$486,536 $529,957
======= =======
See the notes to the condensed
consolidated financial statements.
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NUI Corporation and Subsidiaries
Statements of Consolidated Cash Flows
(Dollars in thousands)
Three Months Ended
December 31,
1992 1993
Operating Activities
Net income $6,758 $5,852
Adjustments to reconcile net income to net
cash provided by operating
activities:
Depreciation and amortization 4,101 4,489
Deferred Federal income taxes 457 199
Amortization of deferred investment tax
credits (113) (132)
Other 894 935
Effect of changes in:
Accounts receivable, net (20,765) (29,979)
Fuel inventories and deferred cost of
gas, net 3,150 2,575
Accounts payable, deposits and accruals (1,273) 4,604
General taxes 9,026 9,271
Other (4,959) (3,415)
------- -------
Net cash used by operating activities (2,724) (5,601)
------- -------
Financing Activities
Proceeds from sales of Common Stock 1,453 1,271
Dividends to shareholders (3,178) (3,284)
Funds for construction held by trustee 2,999 2,900
Principal payments under capital lease
obligations (467) (497)
Net short-term borrowings 9,575 17,800
------- -------
Net cash provided by financing activities 10,382 18,190
------- -------
Investing Activities
Cash expenditures for property, plant and
equipment (7,688) (13,092)
Proceeds from (investments in) marketable
securities (129) 659
Other (220) (296)
------- -------
(8,037) (12,729)
Net cash used for investing activities ------- -------
4 <PAGE>
Net Decrease in Cash and Temporary Cash $(379) $(140)
Investments ======= =======
Cash and Temporary Cash Investments
At beginning of period $3,487 $1,873
At end of period 3,108 1,733
Supplemental Disclosures of Cash Flows -- --
Income taxes paid
Interest paid $6,064 $6,450
See the notes to the condensed consolidated
financial statements.
5 <PAGE>
NUI Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
1. Basis of Presentation
The Condensed 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 Condensed Consolidated Financial
Statements should be read in conjunction with the Consolidated
Financial Statements and the notes thereto that are included in
the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1993.
The Company, through NUI's principal operating subsidiary,
Elizabethtown Gas Company ("EGC"), distributes natural gas in New
Jersey and Florida. See "Pending Acquisition," Note 3 of the
Notes to the Condensed Consolidated Financial Statements. Because
of the seasonal nature of gas utility operations, the results for
interim periods are not necessarily indicative of the results for
an entire year.
2. Changes in Accounting
Postretirement Benefits Other Than Pensions. The Company
provides certain health care benefits to substantially all
retirees receiving benefits under a Company pension plan (other
than the Florida Division plan) who reach retirement age while
working for the Company. The cost of these benefits is funded as
claims are incurred.
As of October 1, 1993, the Company adopted the accounting
method required by Statement of Financial Accounting Standards
("SFAS") No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," which requires enterprises to
accrue the expected cost of these benefits during the years that
eligible employees render the necessary service. The adoption of
SFAS No. 106 resulted in an accumulated postretirement benefit
obligation ("APBO") amounting to $20.6 million, which the Company
has elected to recognize over a twenty-year period. The
actuarially computed annual cost, including the amortization of
the transition obligation, totals $2.9 million.
The annual rate of increase in health care costs was assumed
at 12.5% for 1994 decreasing to 5% in 2004 and thereafter. The
discount rate used to determine the APBO was 7%. A one-percent
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increase in the annual health care trend rates would have
increased the APBO by $3.3 million and the annual cost by $0.6
million.
The Company has received an order from the New Jersey Board
of Regulatory Commissioners (the "NJBRC") permitting it to defer
for as long as five years the difference between the amount of
expense computed as claims are incurred and the amount computed
on the accrual method, pending ratemaking treatment that would be
considered in a full rate case. The consensus issued in 1993 by
the Emerging Issues Task Force of the Financial Accounting
Standards Board (the "EITF") permits rate regulated companies to
defer such expenses when ratemaking treatment provides for them
to be fully recovered in the subsequent fifteen-year period. The
Company expects to seek ratemaking treatment that is consistent
with the EITF's consensus and, accordingly, has deferred $0.5
million of such costs in the three months ended December 31,
1993.
The Company continually evaluates alternative ways to manage
these benefits and control their costs. Any changes in the plan
or revisions to assumptions that affect the amount of expected
future benefits may have a significant effect on the amount of
the reported obligation and the annual deferrals and expense.
Income Tax Accounting. As of October 1, 1993, the Company
adopted SFAS No. 109, "Accounting for Income Taxes," which
changes the method used by enterprises to account for income
taxes. Under SFAS No. 109, deferred income taxes are provided at
currently enacted income tax rates for all temporary differences
between the book and tax bases of assets and liabilities.
Adoption of SFAS No. 109 does not have a material effect on the
Company's net income because deferred taxes previously not
provided are recoverable from or payable to customers through
future rates as taxes come due, and, accordingly, regulatory
assets and liabilities have been recorded. As of October 1, 1993,
the Company increased the deferred tax liability by $5.8 million,
increased the unamortized plant acquisition adjustment by $9.2
million and recorded a net regulatory liability of $3.4 million.
The net deferred tax liability as of the date of adoption
consisted of the following temporary differences (dollars in
thousands):
Net Asset
(Liability)
Depreciation and other utility $(36,002)
plant differences
Plant acquisition adjustment (9,471)
Alternative minimum tax 2,060
Unamortized investment tax 4,256
credit
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Valuation of properties and 947
investments
Deferred charges and other (3,004)
-------
$(41,214)
=======
The deferred income taxes classified under current assets
principally relates to temporary differences associated with
gross receipts and franchise taxes.
3. Pending Acquisition
On July 27, 1993, NUI and Pennsylvania & Southern Gas
Company ("PSGS") entered into an Agreement and Plan of Merger,
pursuant to which PSGS would be merged with and into NUI (the
"PSGS Merger"). Under the Agreement and Plan of Merger, NUI will
acquire all of the outstanding common shares of PSGS for
approximately $17 million, payable in shares of NUI common stock,
no par value, ("NUI Common Stock") equivalent to $71.50 per PSGS
share, except that each shareholder will receive no less than 2.4
and no more than 3.0 shares of NUI Common Stock for each PSGS
share held. The exchange value of the NUI Common Stock will be
established immediately prior to the merger. The PSGS Merger will
be consummated upon receipt of all required regulatory approvals,
the approval of the stockholders of PSGS, and the satisfaction or
waiver of certain other conditions. Upon the effectiveness of the
PSGS Merger, NUI would assume all of the rights and obligations
of PSGS. Following the PSGS Merger, EGC will be merged with and
into NUI (the "EGC Merger").
The PSGS Merger will be accounted for as a purchase of PSGS
by NUI in accordance with generally accepted accounting
principles. Accordingly, due to the effects of the regulatory
process, the underlying net assets of PSGS will become the assets
of NUI at, generally, their historical net book value and the
excess of the purchase price over the historical net book value
of the underlying net assets of PSGS, which amounts to
approximately $6.8 million, will be added to utility plant as a
"utility plant acquisition adjustment," which will be amortized
over a thirty-year period that approximates the remaining useful
life of the utility plant acquired.
Under its business plan, the Company concentrates on
customer growth and the profitability of the gas distribution
business. The PSGS Merger, which will result in a seven percent
increase in the number of customers served, and the EGC Merger,
through which NUI will become an operating utility company with
three divisions providing gas service in six states, fit within
the business plan.
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4. Common Shareholders' Equity
The components of common shareholders' equity were as
follows (dollars in thousands):
September December
30, 1993 31, 1993
Common Stock, no par value $114,895 $116,166
Shares held in treasury (797) (797)
Retained earnings 9,718 12,325
Valuation of marketable securities (93) --
(1,339) (1,309)
Subsidiary's guaranty of ESOP indebtedness ------- -------
$122,384 $126,385
Total common shareholders' equity ======= =======
5. Contingencies
Environmental Matters. The Company is subject to federal and
state legislation with respect to water, air quality, solid waste
disposal and employee health and safety matters and to
environmental regulations issued by the United States
Environmental Protection Agency (the "EPA"), the New Jersey
Department of Environmental Protection and Energy (the "NJDEPE"),
and other federal and state agencies.
The Company owns, or previously owned, certain properties on
which gas was manufactured by the New Jersey Division or by other
parties in the past. Coal tar residues are present on six of
these sites and the Company has reported their presence to the
EPA, the NJDEPE and the NJBRC. In April 1991, the NJDEPE issued
an Administrative Consent Order that establishes the procedures
to be followed by the Company in the development of its
remediation plan for one of the sites. Subsequently, the Company
and the NJDEPE entered into Memoranda of Agreement that establish
procedures for the development of investigation and remediation
plans for the other five sites.
The Company expects it will expend in the next twenty years
approximately $25 million, net of approximately $6 million that
the Company estimates will be borne by the prior owner and
operator of certain of the sites, to complete investigation of
such sites and the remediation of the coal tar contamination. The
Company, with the assistance of an outside consulting firm,
determined the estimated expenditure by assessing the cost of (1)
obtaining additional required data about each site and (2) the
applicable remedial action, among those currently known, that is
most appropriate for each site. The ultimate costs will depend
upon the investigation and remediation plans that finally are
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adopted by the Company, subject to the approval of the NJDEPE,
and may be less or greater than the Company's current estimate.
The Company has an accrual of approximately $25 million for
investigation and remediation of the sites and the related costs
have been deferred on its Consolidated Balance Sheet.
The Company believes that its remediation costs will be
recoverable in rates and that a portion of such costs may be
recoverable from the Company's insurance carriers. The current
base rate order for the New Jersey Division permits the Company
to utilize full deferred accounting for coal tar related
expenditures, which amounted to approximately $0.3 million for
the first three months of fiscal 1994 and $0.2 million for the
first three months of fiscal 1993. The current base rate order
provides for the recovery through rates at $130,000 annually of
coal tar related expenditures incurred prior to the rate order.
Other New Jersey utilities also have received authorization to
recover similar environmental expenditures in rates.
Other. In addition, the Company is involved in various
claims or litigation incidental to its business. In the opinion
of management, none of these other claims and litigation will
have a material adverse effect on the Company's results of
operations or its financial condition.
10 <PAGE>
NUI Corporation and Subsidiaries
Summary Consolidated Operating Data
Three Months Ended
December 31
1992 1993
Operating Revenues (Dollars in thousands):
Firm Customers:
Residential $49,596 $51,895
Commercial 28,262 30,244
Industrial 6,213 6,336
Interruptible Customers 13,218 11,726
Transportation 2,706 3,477
Broker Sales -- 715
Appliance Leasing, Fees and Other 1,120 1,210
------- -------
Total $101,115 $105,603
======= =======
Gas Sold or Transported (MMcf):
Firm Customers:
Residential 6,305 6,405
Commercial 4,407 4,557
Industrial 1,286 1,256
Interruptible Customers 3,677 3,458
Broker Sales -- 307
Transportation 3,815 4,562
------- -------
Total 19,490 20,545
======= =======
Customers Served (Twelve month averages):
Firm Customers:
Residential 296,317 300,898
Commercial 20,716 21,296
Industrial 384 362
Interruptible and Transportation 186 200
------- -------
Total 317,603 322,756
======= =======
Degree Days:
New Jersey (normal: 4,978 annually) 1,647 1,633
Percentage variance from normal 5% 5%
warmer warmer
Florida (normal: 377 annually) 63 115
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Percentage variance from normal 44% 6%
warmer colder
Employees 984 1,028
12 <PAGE>
NUI Corporation and Subsidiaries
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
The Company, through EGC, is engaged in the distribution of
natural gas in New Jersey and Florida. Because of the seasonal
nature of gas utility operations, the results for interim periods
are not necessarily indicative of the results for an entire year.
Net income decreased to $5.9 million for the three months
ended December 31, 1993 as compared with net income of
$6.8 million for the same period in the prior year. The decrease
as compared with a year ago reflects a higher level of operating
expenses and higher interest expense, partly offset by increased
sales volumes and margins due to customer growth. Net income
expressed on a per share basis was $0.71 for the three months
ended December 31, 1993 as compared with $0.84 in the prior year.
The effect on net income in the current year's quarter from the
adoption of new accounting rules relating to income tax
accounting and accounting for post-retirement benefits other than
pensions was not material (see "Changes in Accounting," Note 2 of
the Notes to the Condensed Consolidated Financial Statements).
Results of Operations
Operating Revenues. The Company's operating revenues for the
first three months of fiscal 1994 increased by $4.5 million, or
4.5%, from $101.1 million in the fiscal 1993 period to
$105.6 million in the current period. The increase principally
reflects increases in the number of customers served as well as
the effect of gas cost adjustment clauses. Gas cost adjustment
clauses in both New Jersey and Florida enable the Company to pass
through to customers, through periodic adjustments to the amounts
billed, increased or decreased costs incurred by the Company for
purchased gas, without affecting operating margins. Adjustments
related to changes in gas costs had the net effect of increasing
operating revenues by $3.0 million in the first three months of
last year, and by $4.8 million in the current period, with
offsetting adjustments to purchased gas and fuel costs and to
gross receipts and franchise taxes.
Operating Margins. The Company's operating margins
(operating revenues less the costs of purchased gas and fuel and
gross receipts and franchise taxes) for the first three months of
fiscal 1994 increased by $1.4 million, or 3.9%, from
$35.6 million in the fiscal 1993 period to $37.0 million in the
current period. The increase principally reflects increases in
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the number of customers served and a higher level of gas sold or
transported to industrial customers.
The Company's total number of customers served increased by
5,153, or 1.6%, for the first three months of fiscal 1994 as
compared with fiscal 1993, and the number of heating customers
served in New Jersey increased by 4,812, or 3.0%, as compared
with fiscal 1993, including the effects of converting existing
water heating and cooking service customers into gas-heating
customers.
Operating margins from industrial customers amounted to $4.1
million in the fiscal 1994 period as compared with $3.3 million
in the fiscal 1993 period. The increase principally reflects
increased demand from these customers in both the New Jersey and
Florida Divisions.
Operating Income. Although operating margins increased, the
Company's operating income before income taxes for the first
three months of fiscal 1994 decreased by $1.0 million, or 7.4%,
from $13.5 million in the fiscal 1993 period to $12.5 million in
the current period, principally as a result of cost increases
associated with increased system growth, including the payroll
and employee benefits costs attributable to a larger work force.
These increases are occurring principally in the Florida
division, where the Company's capital expenditure program
includes the development of the Port St. Lucie franchise and
additional main extensions for future growth. The trend of lower
operating income may continue into fiscal 1995 when additional
margins are expected to have been added as a result of
accelerated customer growth and improved cost recovery.
Interest Expense. Interest expense for the first three
months of fiscal 1994 principally reflects higher outstanding
borrowings as compared with the prior year period (see "Financing
Activities and Resources").
Regulatory Matters
In November 1993, the NJBRC issued guidelines which are
designed to provide for unbundling of natural gas transportation
and sales services to commercial and industrial customers. Under
these guidelines the Company is required to file new tariffs for
its New Jersey Division by April 1, 1994. The Company expects the
effect of the new tariffs to be neutral to the operating revenues
and margins of the Company.
In response to an initiative by the Florida Public Service
Commission, the Company, along with other Florida natural gas
utilities, reduced its allowed return on the utility equity of
its Florida Division to 11%, which exceeds the return it is
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currently achieving. Accordingly, the reduction has not affected
operating revenues and margins.
Financing Activities and Resources
The Company generally funds its operations with internally
generated cash, supplemented with borrowings under its bank lines
of credit to satisfy seasonal requirements. The Company also
borrows under its bank lines of credit to finance portions of its
construction expenditures, pending refinancing through the
issuance of equity or long-term indebtedness at a later date
depending upon prevailing market conditions. The Company seeks to
assure access to funds for system growth and integrity through
timely issuances of equity and debt at the lowest reasonable
costs that provide fair returns to investors.
Net cash used by operating activities was $5.6 million for
the first three months of fiscal 1994 and $2.7 million a year
ago. The Company traditionally incurs a net use of cash during
the first quarter of the fiscal year principally as a result of
the normal business cycle associated with billing and collecting
from customers for gas delivered during the quarter. The level of
fuel purchases and inventory on hand, and the timing of payments
for these supplies, is dependent upon market conditions, system
operating requirements and the demand experienced during the
first part of the heating season. The greater increase in the
Company's accounts receivable in the first quarter of fiscal 1994
as compared with the same period of fiscal 1993 principally
reflects colder weather at the end of the period and the
resultant increase in demand and billings.
In October 1991, pursuant to agreements between EGC and the
New Jersey Economic Development Authority, Gas Facilities Revenue
Bonds that mature in October 2021 were issued in the amount of
$46.2 million at 6.75% and $8.4 million at 6.625% to finance
expenditures through fiscal 1995 for the construction of certain
gas facilities and related equipment in New Jersey. The
unexpended portion of the net proceeds from these borrowings,
amounting to $21.5 million at December 31, 1993, is classified on
the Company's Consolidated Balance Sheet as Funds for
Construction Held by Trustee until drawn upon incurring eligible
expenditures.
In the first quarter of fiscal 1994, the Company entered
into a three-year $30.0 million bank credit agreement that was
used to repay, without penalty, the loans outstanding under a
previous agreement and to reduce outstanding notes payable to
banks. Accordingly, the notes payable to banks and currently
maturing long-term debt repaid with the proceeds of the new
credit agreement were classified as long-term as of September 30,
1993. The weighted average interest rate on credit agreement
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borrowings was approximately 3.8% in each of the first quarters
for fiscal 1993 and 1994.
The weighted average daily amounts outstanding of notes
payable to banks and the weighted average interest rates on those
amounts were $78 million at 3.5% for the three months ended
December 31, 1993 and $40.2 million at 3.7% for the three months
ended December 31, 1992. The weighted average daily amounts of
notes payable to banks increased principally to finance portions
of the Company's construction expenditures and the accelerated
payment of New Jersey gross receipts and franchise tax payments
(see "Capital Expenditures and Commitments"). At December 31,
1993, the Company had $60.9 million of available unused credit
lines.
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. As of December 31, 1993, the NUI credit agreement
permits NUI to pay cash dividends aggregating $24.3 million.
Capital Expenditures and Commitments
Capital expenditures, which consist primarily of
expenditures to expand and upgrade the Company's gas distribution
systems, were $11.3 million for the first quarter of fiscal 1994
as compared with $8.1 for the first quarter of fiscal 1993.
Capital expenditures are expected to be approximately $48 million
for the full fiscal year 1994 including a $20 million capital
investment program in Florida, as compared with a total of
$39.6 million for fiscal 1993. Approximately $31 million of the
capital expenditures planned for fiscal 1994 is for construction
relating to new customers and additional distribution, storage
and other gas plant facilities. In addition, the net present
value of minimum lease payments relating to noncancelable
operating leases, which relate principally to New Jersey Division
office space, was approximately $23.0 million as of December 31,
1993, including $2.0 million payable during the remainder of
fiscal 1994.
As discussed in "Contingencies," Note 5 of the Notes to the
Company's Condensed Consolidated Financial Statements, the
Company expects it will expend in the next twenty years
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approximately $25 million to complete investigation and
remediation of the contamination on New Jersey properties which
the Company owns or previously owned on which gas was
manufactured in the past. The ultimate costs will depend upon the
investigation and remediation plans that finally are adopted by
the Company, subject to the approval of the NJDEPE, and may be
less or greater than the Company's current estimate. The Company
believes the remediation costs will be recoverable in rates and
that a portion of such costs may be recoverable from the
Company's insurance carriers.
In June 1991, legislation was enacted in New Jersey that
accelerates the payments of approximately $30 million of gross
receipts and franchise taxes by an average of almost one and a
half years in stages from 1992 through 1994. The Company expects
that future base rate orders will reflect the recovery of
prospective costs associated with the related additional
financing requirements.
Certain of the Company's long-term contracts for the supply,
storage and delivery of natural gas include fixed charges that
amount to approximately $64 million annually, of which
approximately $43 million is associated with pipeline delivery
contracts. The Company currently recovers, and expects to
continue to recover, such fixed charges through its gas
adjustment clauses. The Company also is committed to purchase, at
market-related prices, minimum quantities of gas that, in the
aggregate, are approximately 8.6 million Mcf per year or to pay
certain costs in the event the minimum quantities are not taken.
The Company expects that minimum demand on its systems will
continue to exceed these minimum purchase obligations.
The implementation of the Federal Energy Regulatory
Commission Order No. 636 required the restructuring of the
Company's contracts with certain pipeline companies that together
supply less than one-third of the Company's total firm gas
supply. Under Order No. 636 the pipeline companies are passing
through to their customers transition costs associated with
mandated restructuring, such as costs resulting from buying out
unmarketable gas purchase contracts. The transition costs charged
to the Company have amounted to approximately $3.1 million and
are being recovered through the Company's gas adjustment clauses.
As of December 31, 1993, the scheduled repayments of the
Company's long-term debt through fiscal 1998 were as follows:
$1.8 million in the remainder of fiscal 1994, $1.1 million in
fiscal 1995, $31.1 million in fiscal 1996, $3.2 million in fiscal
1997 and $1.0 million in fiscal 1998. The gas facilities revenue
bonds that are due in 2014 and the remaining balance of first
mortgage bonds become eligible in fiscal 1994 for optional
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prepayment amounting to $1.3 million in excess of their $57.3
million face value.
The Company's future capital expenditures and commitments
will likely require additional debt and equity financing. The
Company plans to seek regulatory approval in fiscal 1994 for the
registration of up to $100 million of debt and equity securities,
which it may issue from time-to-time depending upon prevailing
market conditions.
Pending Acquisition
On July 27, 1993, NUI and PSGS entered into an Agreement and
Plan of Merger, pursuant to which PSGS would be merged with and
into NUI. Under the Agreement and Plan of Merger, NUI will
acquire all of the outstanding common shares of PSGS for
approximately $17 million, payable in shares of NUI Common Stock
equivalent to $71.50 per PSGS share, except that each shareholder
will receive no less than 2.4 and no more than 3.0 shares of NUI
Common Stock for each PSGS share held. The exchange value of the
NUI Common Stock will be established immediately prior to the
merger. The PSGS Merger will be consummated upon receipt of all
required regulatory approvals, the approval of the stockholders
of PSGS, and the satisfaction or waiver of certain other
conditions. Upon the effectiveness of the PSGS Merger, NUI would
assume all of the rights and obligations of PSGS. Following the
PSGS Merger, EGC will be merged with and into NUI.
The PSGS Merger will be accounted for as a purchase of PSGS
by NUI in accordance with generally accepted accounting
principles. Accordingly, due to the effects of the regulatory
process, the underlying net assets of PSGS will become the assets
of NUI at, generally, their historical net book value and the
excess of the purchase price over the historical net book value
of the underlying net assets of PSGS, which amounts to
approximately $6.8 million, will be added to utility plant as a
"utility plant acquisition adjustment," which will be amortized
over a thirty-year period that approximates the remaining useful
life of the utility plant acquired.
The PSGS Merger, which will result in a seven percent
increase in the number of customers served, and the EGC Merger,
through which NUI will become an operating utility company with
three divisions providing gas service in six states, fit within
the Company's business plan (see "Business Plan"). Further growth
opportunities, which could include the acquisition of additional
gas distribution companies, the development of new franchises and
the management of certain service requirements of other utilities
on a contract basis, will likely require additional debt and
equity financing.
Business Plan
18
<PAGE>
Under its business plan, the Company concentrates on
customer growth and the profitability of the gas distribution
business. Growth opportunities could include the acquisition of
additional gas distribution systems, the development of new
franchises and the management of certain service requirements of
other utilities on a contract basis, any of which may require
additional debt and equity financing. The Company's strategy
involves assembling, as opportunities become available, natural
gas distribution systems in several states, while maintaining a
balanced capital structure. From time to time, the Company
reviews acquisition opportunities and, when requested, submits
acquisition proposals.
19 <PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed for the quarter ended
December 31, 1993.
20 <PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
NUI CORPORATION
February 11, 1994 JOSEPH P. COUGHLIN
Senior Vice President,
Secretary and Treasurer
February 11, 1994 RAND W. SMITH
Vice President and
Chief Accounting Officer
21 <PAGE>
