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 March 31, 1994 Commission File # 1-8353
NUI CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-1869941
(State of incorporation) (I.R.S. employer identification 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 April 22, 1994: Common Stock, No Par Value: 9,014,383
shares outstanding.
<PAGE>
NUI Corporation and Subsidiaries
Condensed Statements of Consolidated Income (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended
March 31, March 31,
1993 1994 1993 1994
Operating Revenues $132,036 $152,537 $233,151 $258,140
------- ------- ------- -------
Operating Expenses
Purchased gas and fuel 71,873 88,983 127,977 147,817
Other operation 17,652 19,474 33,464 36,943
Maintenance 1,372 1,628 2,678 3,108
Depreciation and
amortization 3,773 4,238 7,517 8,422
General taxes 15,186 16,553 25,812 27,695
Income taxes 6,228 6,296 9,715 9,439
------- ------- ------- -------
Total operating expenses 116,084 137,172 207,163 233,424
------- ------- ------- -------
Operating Income 15,952 15,365 25,988 24,716
------- ------- ------- -------
Other Income and Expense
Dividend & interest income 95 85 191 157
Other income, net 257 59 394 278
Income taxes (108) (51) (233) (87)
------- ------- ------- -------
Total other income
and expense, net 244 93 352 348
------- ------- ------- -------
Interest Expense 3,458 3,640 6,844 7,394
------- ------- ------- -------
Net Income $12,738 $11,818 $19,496 $17,670
======= ======= ======= =======
Net Income Per Share
of Common Stock $1.57 $1.43 $2.41 $2.14
Dividends Per Share
of Common Stock $0.395 $0.40 $0.79 $0.80
Weighted Average Number
of Shares of Common
Stock Outstanding 8,111,627 8,262,229 8,084,284 8,239,986
See the notes to the condensed consolidated financial statements.
1
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NUI Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in thousands)
September 30, March 31,
1993 1994
(*) (Unaudited)
ASSETS
Property, Plant and Equipment
Utility plant, at original cost $483,853 $504,705
Accumulated depreciation
and amortization (151,725) (158,554)
Unamortized plant acquisition
adjustment 15,084 23,823
------- -------
Net utility plant 347,212 369,974
------- -------
Funds for Construction Held by Trustee 24,184 19,191
Investments in Marketable Securities 3,986 3,468
Current Assets
Cash and temporary cash investments 1,873 3,938
Accounts receivable 27,675 67,400
Allowance for doubtful accounts (1,225) (2,815)
Fuel inventories, at average cost,
and deferred cost of gas, net 28,456 6,415
Current portion of Deferred Federal
income taxes 2,134 --
Materials, supplies and other 10,031 24,432
------- -------
Current assets 68,944 99,370
------- -------
Deferred Charges and Other Assets 42,210 44,002
------- -------
$486,536 $536,005
======= =======
*Derived from audited financial statements.
See the notes to the condensed consolidated financial statements.
2
<PAGE>
NUI Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in thousands)
September 30, March 31,
1993 1994
(*) (Unaudited)
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $122,384 $136,568
Preferred stock -- --
Long-term debt 142,090 142,027
------- -------
Capitalization 264,474 278,595
------- -------
Capital Lease Obligations 12,290 11,714
------- -------
Current Liabilities
Current portion of long-term debt
and capital lease obligations 3,882 3,688
Notes payable to banks 69,325 81,045
Accounts payable, customer deposits
and accrued liabilities 48,513 58,331
General taxes 6,078 2,821
Federal income taxes 5,057 10,940
------- -------
Current liabilities 132,855 156,825
------- -------
Deferred Credits and Other Liabilities
Deferred Federal income taxes 36,703 41,339
Unamortized investment tax credits 7,687 7,424
Other liabilities 32,527 40,108
------- -------
Deferred credits and other liabilities 76,917 88,871
======= =======
$486,536 $536,005
======= =======
*Derived from audited financial statements
See the notes to the condensed consolidated financial statements
3
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NUI Corporation and Subsidiaries
Statements of Consolidated Cash Flows (Unaudited)
(Dollars in thousands)
Six Months Ended
March 31,
1993 1994
Operating Activities
Net income $19,496 $17,670
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 8,161 9,030
Deferred Federal income taxes 5,935 3,671
Amortization of deferred investment tax
credits (227) (228)
Other 1,340 1,810
Effect of changes in:
Accounts receivable, net (29,804) (38,135)
Fuel inventories 15,175 22,041
Accounts payable, deposits and accruals 4,780 17,729
General taxes (21,259) (17,297)
(4,920) (2,873)
Other ------- -------
Net cash provided by (used for) operating (1,323) 13,418
activities ------- -------
Financing Activities
Proceeds from sales of Common Stock 2,432 2,884
Dividends to shareholders (6,379) (6,603)
Funds for construction held by trustee 4,425 5,350
Repayments of long-term debt (1,000) --
Principal payments under capital lease obligations (936) (1,036)
18,275 11,720
Net short-term borrowings ------- -------
16,817 12,315
Net cash provided by financing activities ------- -------
Investing Activities
Cash expenditures for property, plant and
equipment (14,764) (23,672)
Proceeds from (investments in) marketable
securities (439) 659
(380) (655)
Other ------- -------
(15,583) (23,668)
Net cash used for investing activities ------- -------
$(89) $2,065
Net Change in Cash and Temporary Cash Investments === =====
Cash and Temporary Cash Investments
At beginning of period $3,487 $1,873
At end of period 3,398 3,938
Supplemental Disclosures of Cash Flows
Income taxes paid $971 $--
Interest paid 7,856 7,580
<PAGE>
See the notes to the condensed consolidated
financial statements.
4 <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 distributes natural gas in New Jersey and Florida and
since April 19, 1994, in the states of North Carolina, Maryland,
Pennsylvania and New York. See "Acquisition of Pennsylvania & Southern Gas
Company," Note 2 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. 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 is a gas distribution utility with
approximately 22,000 customers with operations in Pennsylvania, New York,
Maryland and North Carolina. 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 is being accounted for as a purchase in accordance
with generally accepted accounting principles and the results of operations
of PSGS will be consolidated with those of NUI as of April 19, 1994. Due
to the effects of the regulatory process, the underlying net assets of PSGS
will become the assets of NUI 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 $10.4 million, including the
effects of providing deferred Federal income taxes. This will be added to
utility plant as a "utility plant acquisition adjustment" and 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 either the potential sale of certain
non-utility assets or 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.
5 <PAGE>
Under its business plan, the Company concentrates on customer
growth and the profitability of the gas distribution business. The PSGS
Merger, which results in a seven percent increase in the number of
customers served, and the EGC Merger, through which NUI becomes an
operating utility company providing gas service in six states, fit within
the 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, would likely require additional debt and
equity financing.
3. Common Shareholders' Equity
The components of common shareholders' equity were as follows
(dollars in thousands):
September 30, March 31,
1993 1994
Common Stock, no par value $114,895 $117,779
Shares held in treasury (797) (797)
Retained earnings 9,718 20,865
Valuation of marketable securities (93) --
Subsidiary's guaranty of ESOP (1,339) (1,279)
indebtedness ------- -------
$122,384 $136,568
Total common shareholders' equity ======= =======
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 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 New Jersey Board
of Regulatory Commissioners (the "NJBRC"). In April 1991, the NJDEPE 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 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 to complete investigation of such sites and the
remediation of the coal tar contamination, 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
6
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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 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 $ 0.4
million for the first six months of fiscal 1994 and $0.1 million for the
first six months of fiscal 1993. The current base rate order provides for
the recovery through rates of $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.
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 cannot at this time determine the
costs for any of these sites or the regulatory treatment if clean-up is
required. The Company, with the assistance of an outside consulting firm,
is in the process of determining whether any contamination exists at such
sites, and in such event, the estimated cost of clean-up.
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.
7 <PAGE>
NUI Corporation and Subsidiaries
Summary Consolidated Operating Data
Three Months Ended Six Months Ended
March 31, March 31,
1993 1994 1993 1994
Operating Revenues
Firm Sales:
Residential $70,820 $82,395 $120,471 $134,334
Commercial 37,946 45,764 66,176 75,965
Industrial 7,501 9,387 13,714 15,722
Interruptible Sales 11,197 10,553 24,415 22,278
Transportation
Services 3,397 2,765 6,103 6,243
Off-system Sales 432 1,147
Appliance Leasing, 1,175 1,241 2,272 2,451
Fees and Other ------- ------- ------- -------
Total $132,036 $152,537 $233,151 $258,140
======= ======= ======= =======
Gas Sold or
Transported (MMcf):
Firm Sales:
Residential 9,419 10,567 15,724 16,972
Commercial 5,980 6,783 10,386 11,342
Industrial 1,509 1,795 2,795 3,051
Interruptible Sales 3,415 2,832 7,089 6,291
Transportation
Services 4,301 3,217 8,116 7,777
-- 243 -- 583
Off-system Sales ------- ------- ------- -------
Total 24,624 25,437 44,110 46,016
======= ======= ======= =======
Average Customers
Served:
Firm:
Residential 297,770 304,569 296,986 303,084
Commercial 21,043 21,679 20,965 21,559
Industrial 400 382 400 382
Interruptible and 183 196 183 199
Transportation ------- ------- ------- -------
Total 319,396 326,826 318,534 325,224
======= ======= ======= =======
Degree Days:
New Jersey (normal:
4,978 annually) 2,592 2,915 4,239 4,548
Percentage
variance from normal 3% warmer 9% colder 3% warmer 3% colder
Florida (normal: 377
annually) 130 130 191 245
Percentage
variance from normal 51% warmer 51% warmer 49% warmer 34% warmer <PAGE>
Average Number of
Employees 978 1,014 982 1,016
8 <PAGE>
NUI Corporation and Subsidiaries
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
The Company 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 $11.8 million for the quarter ended March
31, 1994, as compared with net income of $12.7 million for the same period
in the prior year. On a six-month basis, net income decreased to $17.7
million through March 31, 1994, as compared with net income of $19.5
million a year ago. The decrease in both periods reflects a higher level
of operating expenses and higher interest expense, partly offset by
increased sales volumes and margins. Net income expressed on a per share
basis was $1.43 for the quarter ended March 31, 1994 as compared with $1.57
in the prior year. For the six- month period then ended, net income was
$2.14 per share through March 31, 1994 and $2.41 per share through March
31, 1993.
Results of Operations
Operating Revenues. The Company's operating revenues increased by
$20.5 million, or 15.5%, from $132.0 million in the 1993 quarter to
$152.5 million in the current quarter. Operating revenues for the first
six months of fiscal 1994 increased by $25.0 million or 10.7% from $233.1
million in the 1993 period to $258.1 million in the current period. These
increases principally reflect increases in the number of customers served
and the effects of weather that was colder than a year ago, as well as the
effect of gas cost adjustment clauses.
The Company's total average number of customers served increased by
6,690, or 2.1%, for the first six months of fiscal 1994 as compared with
fiscal 1993. The number of heating customers served in New Jersey
increased by 4,290, or 2.6%, as compared with fiscal 1993, including the
effects of converting existing water heating and cooking service customers
into gas-heating customers. As to the effects of weather, total degree
days in New Jersey was approximately 9% colder than normal for the quarter
ended March 31, 1994, and 12% colder than a year ago. For the respective
six-month period, total degree days in New Jersey was approximately 3%
above normal and 7% above the 1993 period.
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
9
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by $9.8 million and $14.6 million respectively, for the three and six-month
periods ended March 31, 1994, as compared with $3.0 million and $6.0
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 $2.1 million, or 4.5% from $46.4 million in
the 1993 quarter to $48.5 million in the current quarter. For the first six
months of fiscal 1994, operating margins increased by $3.5 million, or
4.3%, from $82.0 million in the 1993 period to $85.5 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 tariff.
Operating margins were decreased by approximately $1.4 million and $0.9
million, respectively for the three and six-month periods ended March 31,
1994, due to the colder than normal weather. For the same periods in the
prior year, operating margins were increased $0.6 million and $1.0 million,
respectively for the effects of the weather normalization adjustment.
Operating Income. Although operating margins increased, the
Company's operating income before income taxes decreased by $0.5 million,
or 2.3%, from $22.2 million in the 1993 quarter to $21.7 million in the
current quarter. For the first six months of fiscal 1994, operating income
before taxes decreased by $1.5 million, or 4.3% from $35.7 million in the
1993 period to $34.2 million in the current period. These decreases were
attributed to increased operating expenses due in part to severe weather,
as well as cost increases associated with system growth, including the
payroll and employee benefits costs attributable to a larger work force.
Expansion programs are occurring principally in the 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. The
trend of lower operating income may continue into fiscal 1995 when
additional margins are expected to be added as a result of accelerated
customer growth and improved cost recovery through a base rate increase.
Interest Expense. Interest expense for the three and six-month
periods of fiscal 1994 principally reflect higher outstanding borrowings as
compared with prior year periods (see "--Financing Activities and
Resources").
Regulatory Matters
In March 1994, the Company filed with the NJBRC 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 with respect to the operating
revenues and margins of the Company.
10
<PAGE>
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.
In March 1994, the Company filed a notification with the FPSC of
its intent to petition for base rate relief in May 1994.
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 $13.4 million for the
first six months of fiscal 1994 as compared to $1.3 million use of cash a
year ago. 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 heating
season. The greater increase in the Company's accounts receivable in 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 $19.2 million at March 31, 1994, is classified on the
Company's Consolidated Balance Sheets 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
$78.8 million at 3.5% for the six months ended March 31, 1994 and
$45.5 million at 3.6% for the six months ended March 31, 1993. 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 taxes (see
"--Capital Expenditures and Commitments"). At March 31, 1994, the Company
had $67 million of available unused credit lines.
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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 March 31, 1994, the NUI credit agreement
permits NUI to pay cash dividends aggregating $33.1 million.
The Company expects, during fiscal 1994, to refinance certain of
its gas facilities revenue bonds that become eligible for optional
redemption in the third quarter of fiscal 1994, and to issue approximately
$20 million of new gas facilities revenue bonds to finance its capital
expenditure program in Florida. In addition, the Company intends, by the
end of the 1994 calendar year, to register up to $100 million of debt and
equity securities, which it may issue from time-to-time depending upon
prevailing market conditions. The remaining balance of the Company's first
mortgage bonds also become eligible in fiscal 1994 for optional
prepayment. The prepayment amounts for refinancing both the gas
facilities revenue and first mortgage bonds approximate $1.3 million in
excess of their $57.3 million face value.
Capital Expenditures and Commitments
Capital expenditures, which consist primarily of expenditures to
expand and upgrade the Company's gas distribution systems, were
$21.9 million for the six months ended March 31, 1994 as compared with
$15.2 million for the six months ended March 31, 1993. Capital expenditures
are expected to be approximately $52 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 $35 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 March 31, 1994, including $1.3 million payable during
the remainder of fiscal 1994.
As discussed in "Contingencies," Note 4 of the Notes to the
Company's Condensed 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
12
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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
accelerated 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 $65 million annually, of which approximately $44 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. While the full amount of the
transition costs is currently not determinable, the Company has been
charged approximately $3.2 million as of March 31, 1994, which is being
recovered through the Company's gas adjustment clauses.
As of March 31, 1994, 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.
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 Condensed 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
13
<PAGE>
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 the
profitability of its gas distribution business. See Note 2 for a
discussion of continuing issues surrounding the PSGS Merger.
Business Plan
Under its business plan, the Company concentrates on customer
growth and the profitability of the gas distribution business. The PSGS
and EGC Mergers, through which NUI becomes an operating utility company
providing gas service in six states, fit within the 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. 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.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were presented for submission to a vote of
security holders through the solicitation of proxies or otherwise during
the second quarter of fiscal 1994.
The Annual Meeting of Shareholders of NUI Corporation was held on
March 8, 1994.
Proxies for the Annual Meeting were solicited pursuant to
Regulation 14A and there was no solicitation in opposition to management's
nominees. All of management's nominees as listed in the proxy statement
were elected directors of NUI Corporation for three-year terms and,
accordingly, will hold office until the Annual Meeting of Shareholders held
in 1997 and until the director's successor shall have been elected and
qualified.
Briefly described below is the other matter voted upon at the
Annual Meeting of Shareholders held on March 8, 1994 and the number of
affirmative votes and the number of negative votes cast with respect to
such matter:
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On the matter of approval of the appointment by
the Board of Directors of Arthur Andersen & Co. as
independent public accountants for the fiscal year
ended September 30, 1994, the shareholders voted
6,679,756 for such approval; 646,191 votes against
such approval and 64,912 votes abstained.
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.
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
May 13, 1994 JOSEPH P. COUGHLIN
Senior Vice President and
Secretary
May 13, 1994 BERNARD F. LENIHAN
Vice President and
Controller
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