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, 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 January 31, 1995: Common Stock, No Par Value:
9,229,121 shares outstanding.<PAGE>
<TABLE>
NUI Corporation and Subsidiaries
Statement of Consolidated Income (Unaudited)
(Dollars in thousands, except per share amounts)
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Operating Margins
Operating revenues $102,524 $105,603 $389,207 $359,377
Purchased gas and fuel 54,197 58,609 219,009 198,346
Gross Receipts and franchise taxes 8,391 9,786 30,635 30,808
------- ------- ------- -------
Total operating margins 39,936 37,208 139,563 130,223
------- ------- ------- -------
Other Operating Expenses
Other operation 21,529 17,694 82,395 71,136
Maintenance 1,588 1,480 6,785 5,703
Depreciation and amortization 4,949 4,184 18,211 15,522
Other taxes 1,468 1,356 6,339 5,438
Income taxes 2,014 3,143 963 6,406
------- ------- ------- -------
Total other operating expenses 31,548 27,857 114,693 104,205
------- ------- ------- -------
Operating Income 8,388 9,351 24,870 26,018
------- ------- ------- -------
Other Income and Expense
Dividend and interest income 79 72 313 342
Other income, net (63) 219 (64) 869
Income taxes 30 (36) 55 (188)
------- ------- ------- -------
Total other income and expense, 46 255 304 1,023
net ------- ------- ------- -------
Interest Expense 4,456 3,754 16,268 14,137
------- ------- ------- -------
Net Income $ 3,978 $ 5,852 $ 8,906 $ 12,904
======= ======= ======= =======
Net Income Per Share of Common
Stock $0.44 $0.71 $1.01 $1.58
Dividends Per Share of Common
Stock $0.225 $0.40 $1.425 $1.60
Weighted Average Number of Shares
of Common Stock Outstanding 9,137,457 8,218,227 8,845,921 8,164,245
</TABLE>
See the notes to the consolidated financial statements<PAGE>
<TABLE>
NUI Corporation and Subsidiaries
Consolidated Balance Sheet
(Dollars in thousands)
<CAPTION>
December 31, September 30
1994 1994
(Unaudited) (*)
<S> <C> <C>
ASSETS
Utility Plant
Utility plant, at original cost $574,248 $566,982
Accumulated depreciation and amortization (176,248) (173,894)
33,287 33,604
Unamortized plant acquisition adjustments ------- -------
431,287 426,692
Net utility plant ------- -------
22,434 26,906
Funds for Construction Held by Trustee ------- -------
3,181 3,468
Investments in Marketable Securities ------- -------
Current Assets
Cash 4,778 5,637
Accounts receivable 60,710 39,584
Allowance for doubtful accounts (1,899) (1,368)
Fuel inventories, at average cost 22,988 28,616
11,968 13,435
Prepayments and other ------- -------
98,545 85,904
Current assets ------- -------
57,871 58,678
Deferred Charges and Other Assets ------- -------
$613,318 $601,648
======= =======
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $145,638 $142,768
Preferred stock -- --
160,897 160,928
Long-term debt ------- -------
306,535 303,696
Capitalization ------- -------
11,738 11,932
Capital Lease Obligations ------- -------
Current Liabilities
Current portion of long-term debt and capital lease obligations 2,711 2,761
Notes payable to banks 110,350 110,125
Accounts payable, customer deposits and accrued liabilities 58,446 53,476
General taxes 2,877 1,170
7,651 6,079
Federal income taxes ------- -------
182,035 173,611
Current liabilities ------- -------
Deferred Credits and Other Liabilities
Deferred Federal income taxes 50,913 50,066
Unamortized investment tax credits 7,452 7,570
54,645 54,773
Other liabilities ------- -------<PAGE>
113,010 112,409
Deferred credits and other liabilities ------- -------
$613,318 $601,648
======= =======
</TABLE>
*Derived from audited financial statements
See the notes to consolidated financial statements<PAGE>
<TABLE>
NUI Corporation and Subsidiaries
Statement of Consolidated Cash Flows (Unaudited)
(Dollars in thousands)
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Operating Activities
Net income $3,978 $5,852 $8,906 $12,904
Adjustments to reconcile net
income to net cash
provided by operating activities:
Depreciation and amortization 5,273 4,489 19,557 16,752
Deferred Federal income taxes 539 199 7,233 8,468
Amortization of deferred
investment tax credits (117) (132) (461) (480)
Other 2,074 849 4,834 4,161
Effect of changes in:
Accounts receivable, net (20,710) (29,979) 1,311 (7,132)
Fuel inventories 5,628 4,867 568 (8,886)
Deferred cost of gas 2,967 (2,292) 9,591 (2,143)
Accounts payable, deposits and
accruals 8,354 4,604 6,060 (1,735)
Gross receipts and franchise taxes 8,160 9,786 (11,906) (13,866)
Other (6,162) (3,844) (7,585) (6,654)
------- ------- ------- -------
Net cash provided by (used for)
operating activities 9,984 (5,601) 38,108 1,389
------- ------- ------- -------
Financing Activities
Proceeds from sales of common
stock 1,135 1,271 6,187 3,995
Dividends to shareholders (2,064) (3,284) (12,616) (13,011)
Proceeds from issuance of long-
term debt -- -- 66,500 30,000
Funds for construction held by
trustee, net 4,813 2,900 (180) 10,916
Repayments of long-term debt (31) -- (54,190) (22,734)
Principal payments under capital
lease obligations (520) (497) (2,078) (1,904)
Net short-term borrowings 225 17,800 16,318 31,175
------- ------- ------- -------
Net cash provided by financing 3,558 18,190 19,941 38,437
activities ------- ------- ------- -------
Investing Activities
Cash expenditures for utility
plant (14,089) (13,092) (54,598) (40,846)
Proceeds from (sales of)
marketable securities -- 659 -- 844
Proceeds from sale of assets -- -- 1,610 --
Other (312) (296) (2,016) (1,199)
------- ------- ------- -------
Net cash used for investing (14,401) (12,729) (55,004) (41,201)
activities ------- ------- ------- -------
Net increase (decrease) in cash $ (859) $ (140) $3,045 $(1,375)
====== ====== ====== ======= <PAGE>
Cash
At beginning of period $5,637 $1,873 $1,733 $3,108
At end of period 4,778 1,733 4,778 1,733
Supplemental Disclosures of Cash
Flows
Income taxes paid (refunds
received), net $(3,097) $ -- $(2,431) $2,377
Interest paid 4,812 6,450 15,959 15,521
</TABLE>
See the notes to consolidated financial statements<PAGE>
NUI Corporation and Subsidiaries
Notes to Consolidated Financial Statements
1. Basis of Presentation
The consolidated financial statements include all operating
divisions and subsidiaries of NUI Corporation ("NUI" or the "Company").
The Company's operating divisions include Elizabethtown Gas Company (New
Jersey), City Gas Company of Florida (Florida) and Pennsylvania &
Southern Gas Company ("PSGS"), which operates as North Carolina Gas
Service (North Carolina), Elkton Gas Service (Maryland), Valley Cities
Gas Service (Pennsylvania) and Waverly Gas Service (New York). PSGS was
acquired in a merger on April 19, 1994 (the "PSGS Merger"). The
consolidated financial statements contained herein 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, 1994.
The Company 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.
Effective October 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", which requires the Company
to carry its investments in marketable securities at their current
market value. As of December 31, 1994, the market value of the Company's
investments in marketable securities is lower than their cost by
approximately $288,000, which unrealized loss is reflected in the
accompanying consolidated balance sheet as a component of common
shareholders' equity.
2. Common Shareholders' Equity
The components of common shareholders' equity were as follows
(dollars in thousands):
December 31, September 30,
1994 1994
Common stock, no par value $139,217 $138,082
Shares held in treasury (797) (797)
Retained earnings 8,614 6,700
Valuation of marketable securities (179) --
Unearned employee compensation - ESOP (1,217) (1,217)
------- -------
Total common shareholders' equity $145,638 $142,768
======= =======
3. 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 or by other parties in the
past. Coal tar residues are present on six New Jersey Division 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 the site on South Street in Elizabeth, New Jersey.
Subsequently, the Company and the NJDEP entered into Memoranda of
Agreement that established procedures for the development of
investigation and remediation plans for the other five New Jersey
Division sites.
During the course of its due diligence activities in
connection with the PSGS Merger, the Company was informed that PSGS had
owned or operated ten former coal gas manufacturing facilities, only
three of which PSGS currently owns. PSGS had been notified that it is a
potential responsible party with respect to four of these ten sites. As
a result of a preliminary assessment completed by the North Carolina
Department of Environment, Health, and Natural Resources, Division of
Solid Waste Management, one of these sites has been recommended for a
screening site investigation. The other three sites have recently been
subjected to a preliminary assessment by the EPA which indicated that no
further action was required. No provision had been made, prior to the
PSGS Merger, in PSGS' financial statements for environmental
remediation. The Company, with the assistance of an outside consultant,
has begun preliminary assessments on certain of the PSGS Division sites.
The Company is not able at this time to determine the extent of
contamination at the other sites, if any, the requirement for
remediation if contamination is present, or the costs associated with
any remediation.
As of December 31, 1994, the Company has recorded a total
reserve for probable environmental remediation liabilities of
approximately $32 million, which the Company expects to expend in the
next twenty years. This estimate does not include any possible costs for
those PSGS Division sites for which preliminary assessments have not
begun. The reserve is net of approximately $5 million, which, in
accordance with an agreement, will be borne by a prior owner and
operator of certain New Jersey sites. The Company, with the assistance
of outside consulting firms, determined the estimate of probable
expenditures by assessing the cost of (1) obtaining additional required
data about each site and (2) the applicable remedial action, among those
currently known, that the Company believes is most appropriate for each
site. Based on currently available information and analysis, the Company
believes that it is reasonably possible that costs associated with these
sites may exceed current reserves by an amount of up to $15 million.
The Company believes that certain of 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. The current base<PAGE>
rate order also provides for the recovery through rates of $130,000
annually of coal tar related expenditures incurred prior to the rate
order. Accordingly, the Company has recorded a regulatory asset of
approximately $32 million as of December 31, 1994, reflecting the future
recovery of environmental remediation liabilities related to the New
Jersey Division sites. This amount includes costs incurred of
approximately $0.2 million for the three months ended December 31, 1994
and $0.3 million for the three months ended December 31, 1993. Other New
Jersey utilities also have received authorization to recover similar
environmental expenditures in rates. The Company intends to seek
recovery of the PSGS Division's environmental liabilities from
ratepayers in the PSGS states, former owners and operators, and
insurance carriers. However, based on preliminary assessments on certain
of the PSGS Division sites, the Company is not able at this time to
determine the extent of recovery, if any. Consequently, as of December
31, 1994, the Company has recorded an amount of $1.9 million as an
additional plant acquisition adjustment. Should additional information
concerning the PSGS Division's probable environmental liabilities become
known and subject to reasonable quantification within one year from the
date of the PSGS Merger, the plant acquisition adjustment may be changed
accordingly.
Other. The Company is involved in various claims and
litigation incidental to its business. In the opinion of management,
none of these claims and litigation will have a material adverse effect
on the Company's results of operations or its financial condition.<PAGE>
NUI Corporation and Subsidiaries
Summary Consolidated Operating Data
Three Months Ended Twelve Months Ended
December 31, December 31,
1994 1993 1994 1993
Operating Revenues
(Dollars in thousands):
Firm Sales:
Residential $49,393 $51,895 $185,970 $172,449
Commercial 27,499 30,244 103,240 95,615
Industrial 5,841 6,336 25,314 23,189
Interruptible Sales 11,966 11,726 52,298 47,346
Broker Sales 1,711 715 2,422 2,472
Transportation Services 4,055 3,477 12,425 11,168
Appliance Leasing, Fees 2,059 1,210 7,538 7,138
and Other ------- ------- ------- -------
Total $102,524 $105,603 $389,207 $359,377
======= ======= ======= =======
Gas Sold or Transported
(MMcf):
Firm Sales:
Residential 6,004 6,405 22,157 21,119
Commercial 4,367 4,557 15,985 15,068
Industrial 1,412 1,256 5,479 4,751
Interruptible Sales 4,336 3,458 17,591 14,312
Broker Sales 874 307 1,256 1,140
Transportation Services 4,947 4,562 16,986 16,353
------- ------- ------- -------
Total 21,940 20,545 79,454 72,743
======= ======= ======= =======
Average Customers
Served:
Firm:
Residential 326,059 300,898 318,186 298,902
Commercial 24,212 21,296 23,362 21,181
Industrial 391 362 387 370
Interruptible 107 102 107 104
Transportation 136 98 127 94
------- ------- ------- -------
Total 350,905 322,756 342,169 320,651
======= ======= ======= =======
Degree Days:
New Jersey
Actual 1,352 1,633 4,663 4,689
Normal 1,725 1,725 4,978 4,978
Percentage variance 22% 5% 6% 6%
from normal warmer warmer warmer warmer
North Carolina
Actual 1,238
Normal 1,485
See the notes to the consolidated financial statements
<PAGE>
Percentage variance 17%
from normal warmer
Employees (Average) 1,149 1,014 1,120 1,005
Ratio of Earnings to
Fixed
Charges (Twelve-
months only) 1.48 2.07
See the notes to the consolidated financial statements
<PAGE>
NUI Corporation and Subsidiaries
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion and analysis refers to all operating
divisions and subsidiaries of NUI Corporation ("NUI" or the "Company").
The Company's operating divisions are Elizabethtown Gas Company (New
Jersey), City Gas Company of Florida (Florida) and Pennsylvania &
Southern Gas Company ("PSGS"), which operates as North Carolina Gas
Service (North Carolina), Elkton Gas Service (Maryland), Valley Cities
Gas Service (Pennsylvania) and Waverly Gas Service (New York). PSGS was
acquired in a merger on April 19, 1994 (the "PSGS Merger"). 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.
Results of Operations
Three-Month Periods Ended December 31, 1994 and 1993
Operating Revenues and Operating Margins. The Company's
operating revenues decreased by $3.1 million, or 3%, for the three-month
period ended December 31, 1994 as compared with the three-month period
ended December 31, 1993. The decrease principally reflects the effect of
weather in New Jersey that was 22% warmer than normal and 17% warmer
than the prior year period. Operating revenues were also adversely
affected by lower sales to industrial customers due primarily to lower
gas prices incurred during the three-month period ended December 31,
1994 as compared with the three-month period ended December 31, 1993,
and a refund of approximately $2.6 million to New Jersey Division
customers as a result of lower than projected gas prices incurred in
fiscal 1994 (see- "Regulatory Matters"). Partially offsetting these
decreases was approximately $8.2 million of operating revenues from the
addition of the PSGS Division for the three-month period ended December
31, 1994, and other customer growth.
The Company's total average number of customers served
increased by 28,149 (including 21,282 from the PSGS Merger), or 9%, for
the three-month period ended December 31, 1994 as compared with the
three-month period ended December 31, 1993. The number of heating
customers served during the three-month period ended December 31, 1994
increased by 22,275, or 13% (including 18,871 from the PSGS Merger), as
compared with the three-month period ended December 31, 1993.
The Company's operating margins increased by $2.7 million, or
7%, for the three-month period ended December 31, 1994 as compared with
the three-month period ended December 31, 1993. The increase principally
reflects increases in the number of customers served, including those
resulting from the PSGS Merger, partially offset by the effects of
warmer weather in New Jersey. The Company has weather normalization
clauses in its New Jersey and North Carolina tariffs which are designed
to help stabilize the Company's results by permitting the Company to
recover from, or return to, customers substantially all margins
attributable to the effect of warmer or colder than normal weather. As a
result, margins were increased by approximately $2.6 million for the
three-month period ended December 31, 1994, and by approximately $0.5
million for the three-month period ended December 31, 1993 for the
effects of warmer than normal weather. <PAGE>
Operating Income. Although operating margins increased, the
Company's operating income before income taxes decreased by
approximately $2.1 million, or 17%, for the three-month period ended
December 31, 1994 as compared with the three-month period ended December
31, 1993. The decrease is principally the result of approximately $1.4
million of non-recurring pre-tax charges relating in part to the
settlement of the Florida Division's rate case in November 1994 (see-
"Regulatory Matters"), and in part to restructuring of the Florida
Division's operations. The decrease is also attributed to higher
operating costs associated with system growth, including the payroll and
employee benefit costs attributable to a larger work force and
depreciation due to additional plant-in-service. These decreases were
partially offset by the inclusion of the PSGS Division in only the 1994
period results. During the three-month period ended December 31, 1994,
the PSGS Division had $3.1 million of operating margins and incurred
$2.1 million of other operating expenses, excluding income taxes,
resulting in $1.0 million of additional pre-tax operating income. The
decrease in income taxes for the three-month period ended December 31,
1994 as compared to the three-month period ended December 31, 1993, was
due to lower pre-tax income.
The Company expects that the decrease in operating income
before income taxes for the three months ended December 31, 1994 as
compared to the same period in the prior year, will be partially offset
during the remainder of fiscal 1995 as a result of 1) the inclusion of
the PSGS Division for the full fiscal year of 1995 whereas fiscal 1994
included only the results after April 19, 1994 which were non-heating
months, 2) savings from approximately 100 fewer employees, including
those accepting early retirement, 3) new base rates in the Florida
Division, which were implemented on December 29, 1994, and 4) increased
rates for the Florida Division's newly deregulated appliance leasing
operations which became effective February 1, 1995. The Company has
offered an early retirement program to approximately 10% of its
employees. As of January 31, 1995, approximately 80% of the eligible
112 employees have opted for the program, which becomes effective on
April 1, 1995. The Company's estimates indicate discounted savings to
be realized over the next eight years of approximately $13 million, with
an associated cost of approximately $6.3 million.
Interest Expense. Interest expense for the three-month period
ended December 31, 1994 increased by approximately $0.7 million
principally reflecting higher short-term interest rates and higher
outstanding borrowings, including approximately $12.7 million of debt
assumed by the Company as a result of the PSGS Merger, as compared with
the three-month period ended December 31, 1993. These increases were
partially offset by a decrease in average long-term interest rates due
to the refinancing of $46.5 million of the Company's 11% and 11.25% Gas
Facilities Revenue Bonds to an interest rate of 6.35% in August 1994.
Net Income. Net income for the three-month period ended
December 31, 1994 was $4.0 million, or $0.44 per share, as compared with
net income of $5.9 million, or $0.71 per share, for the three-month
period ended December 31, 1993. The decrease in the current period is
primarily due to (1) non-recurring charges of approximately $1.4 million
(pre-tax) as described above, (2) higher interest costs (approximately
$0.5 million after taxes), and (3) higher operating costs as a result of
system growth. These decreases were partially offset by approximately
$1.0 million of pre-tax operating income from the addition of the PSGS
Division in the current period.<PAGE>
Net income per share for the three-month period ended December
31, 1994 was also affected by the increased average number of
outstanding shares of NUI common stock as compared with the three-month
period ended December 31, 1993.
Twelve-Month Periods Ended December 31, 1994 and 1993
Operating Revenues and Operating Margins. The Company's
operating revenues for the twelve-month period ended December 31, 1994
increased approximately $29.8 million, or 8%, as compared with the
twelve-month period ended December 31, 1993. The increase principally
reflects increases in the number of customers served, including the
addition of the PSGS Division on April 19, 1994, and the effect of gas
cost adjustment clauses.
The Company's average number of customers served increased by
21,518 (including 14,662 from the PSGS Merger), or 7%, for the twelve-
month period ended December 31, 1994 as compared with the twelve-month
period ended December 31, 1993. The number of heating customers served
for the twelve-month period ended December 31, 1994 increased by 16,950,
or 10% (including 12,998 from the PSGS Merger), as compared with the
twelve-month period ended December 31, 1993.
Gas cost adjustment clauses enable the Company to pass through
to its customers, via periodic adjustments to amounts billed, increased
or decreased costs incurred by the Company for purchased gas, without
affecting operating margins. For the twelve-month period ended December
31, 1994, adjustments related to changes in gas costs were higher by
approximately $11.6 million as compared with the twelve-month period
ended December 31, 1993, with an offsetting adjustment to purchased gas
costs.
The Company's operating margins increased by $9.3 million, or
7%, for the twelve-month period ended December 31, 1994 as compared with
the twelve-month period ended December 31, 1993. The increase is
principally the result of increases in the number of customers served,
including those resulting from the PSGS Merger. Through the Company's
weather normalization clauses, operating margins were increased by
approximately $2.1 million for the twelve-month period ended December
31, 1994, and by approximately $1.4 million for the twelve-month period
ended December 31, 1993.
Operating Income. Although operating margins increased, the
Company's operating income before income taxes decreased by
approximately $6.6 million, or 20%, for the twelve-month period ended
December 31, 1994 as compared with the twelve-month period ended
December 31, 1993, principally due to higher operating expenses. This
increase was due in part to higher costs associated with system growth,
including the payroll and employee benefits costs attributable to a
larger work force and depreciation due to additional plant-in-service.
System growth has occurred principally in the Company's Florida Division
where the Company's capital expenditure program has included the
development of the Port St. Lucie franchise, the construction of a new
pipeline in Brevard County, which includes service to the National
Aeronautics and Space Administration's Kennedy Space Center, and
additional main extensions for future growth. The decrease is also
attributed to approximately $1.4 million of non-recurring pre-tax
charges relating in part to the settlement of the Florida Division's
rate case in November 1994 (see- "Regulatory Matters"), and in part to
restructuring of the Florida Division's operations. The addition of the<PAGE>
PSGS Division as of April 19, 1994 had little effect on the Company's
operating income before taxes since the PSGS Division's results do not
reflect a full heating season. The decrease in income taxes for the
twelve-month period ended December 31, 1994 as compared with the twelve-
month period ended December 31, 1993 was due to lower pre-tax income, as
well as the reversal of approximately $1.8 million of income tax
reserves no longer required as a result of management's review of
necessary reserve levels.
Other Income and Expense. Other income, net for the twelve-
month period ended December 31, 1993 includes realized net pre-tax gains
on the sale of marketable securities amounting to $0.8 million.
Interest Expense. Interest expense for the twelve-month period
ended December 31, 1994 increased by approximately $2.1 million,
principally reflecting higher short-term interest rates and higher
outstanding borrowings, including approximately $12.7 million of debt
assumed by the Company as a result of the PSGS Merger, as compared with
the prior year period. These increases were partially offset by a
decrease in average long-term interest rates due to the refinancing of
$46.5 million of the Company's 11% and 11.25% Gas Facilities Revenue
Bonds to an interest rate of 6.35% in August 1994.
Net Income. Net income for the twelve-month period ended
December 31, 1994 was $8.9 million, or $1.01 per share, as compared with
net income of $12.9 million, or $1.58 per share, for the twelve-month
period ended December 31, 1993. The decrease is primarily due to (1) an
approximate $5.4 million decrease in operating income before income
taxes as a result of higher operating expenses, including $1.4 million
of non-recurring charges, in the Florida Division, coupled with lower
than anticipated margins in that Division due to slower than anticipated
customer growth, and (2) higher interest costs (approximately $1.4
million after taxes). Partly offsetting these decreases was the reversal
of approximately $1.8 million of income tax reserves no longer required
as a result of management's review of necessary reserve levels.
Net income per share for the twelve-month period ended
December 31, 1994 was also affected by the increased average number of
outstanding shares of NUI common stock as compared to the prior twelve-
month period.
Regulatory Matters
On November 4, 1994, the New Jersey Board of Public Utilities
(the "NJBPU") approved a petition filed by the New Jersey Division 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 has no effect on the Company's operating
margins. The NJBPU also approved a refund of approximately $2.6 million
to customers, which was made in the first quarter of fiscal 1995, as a
result of lower than projected gas prices incurred in fiscal 1994.
On November 29, 1994, the Florida Public Service Commission
(the "FPSC") voted to authorize the Florida Division to increase its
permanent rates by $1.6 million annually (the "FPSC Order"). The FPSC
Order provides for a rate base amounting to approximately $82.6 million
with an overall after-tax rate of return of 7.26%. In addition, the FPSC
Order provides for several tariff changes designed to promote growth in
developing markets for natural gas, including an experimental rate to
foster increased usage of natural gas as a fuel for vehicles. The FPSC<PAGE>
Order further approved the deregulation of the Florida Division's leased
appliance business which consists of leasing water heaters, clothes
dryers and ranges to customers to promote natural gas usage in the
residential market.
In December 1994, the NJBPU authorized new tariffs which are
designed to provide for unbundling of natural gas transportation and
sales services to New Jersey Division commercial and industrial
customers. The new tariffs are effective on January 1, 1995. The Company
expects the effect of the new tariffs to be neutral to the operating
margins of the Company.
Financing Activities and Resources
The Company's net cash provided by operating activities was
$10 million for the three-month period ended December 31, 1994 as
compared with a net use of cash of $5.6 million for the three-month
period ended December 31, 1993. For the twelve-month period ended
December 31, 1994, the Company's net cash provided by operating
activities was $38.1 million as compared to $1.4 million for the twelve-
month period ended December 31, 1993. The increases for the 1994 periods
primarily reflect the temporary overcollection of lower-than-anticipated
gas costs and lower prices incurred for fuel held in inventory. In
addition, the extreme warm weather experienced in the 1994 heating
season contributed to lower accounts receivable in the 1994 periods as
compared to the 1993 periods.
Because the Company's business is highly seasonal, short-term
debt is used to meet seasonal working capital requirements. The Company
also borrows under its bank lines of credit to finance portions of its
capital expenditures, pending refinancing through the issuance of equity
or long-term indebtedness at a later date depending upon prevailing
market conditions.
Short-Term Debt. The weighted average daily amounts
outstanding of notes payable to banks and the weighted average interest
rates on those amounts were $111.5 million at 5.6% for the three-month
period ended December 31, 1994 and $78 million at 3.5% for the three-
month period ended December 31, 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 to repay certain long-term debt assumed by the
Company as a result of the PSGS Merger. At December 31, 1994, the
Company had outstanding notes payable to banks amounting to $110.3
million and available unused lines of credit amounting to $57.7 million.
In November 1994, the Company filed a shelf registration
statement with the Securities and Exchange Commission for an aggregate
of up to $100 million of debt and equity securities. On February 9,
1995, the Company agreed to sell $50 million aggregate principal amount
of Medium-Term Notes, Series A, with a stated maturity date of February
1, 2005 and with an interest rate of 8.35%. The net proceeds from these
Medium-Term Notes will be used to repay short-term debt. The Company
anticipates issuing the remainder of the shelf securities from time to
time depending upon prevailing market conditions. The Company intends to
use the remainder of any proceeds from the sale of additional shelf
securities to discharge or refund outstanding debt obligations of the
Company, to finance the Company's capital expenditures, to reduce short-
term debt and for general corporate purposes.<PAGE>
Long-Term Debt and Funds for Construction Held by Trustee. The
Company deposits in trust the unexpended portion of the net proceeds
from its Gas Facilities Revenue Bonds until drawn upon for eligible
expenditures. As of December 31, 1994, the total unexpended portion of
all of the Company's Gas Facilities Revenue Bonds was $18.9 million and
is classified on the Company's consolidated balance sheet as funds for
construction held by trustee.
Common Stock. The Company periodically issues shares of common
stock in connection with NUI Direct, the Company's common stock
investment plan, and various employee benefit plans. The proceeds of
such issuances amounted to $1.1 million for the three-month period ended
December 31, 1994 and $1.3 million for the three-month period ended
December 31, 1993, and were used primarily to reduce outstanding short-
term debt. Effective in December 1994, these common stock plans
commenced purchasing shares on the open market to fulfill the plans'
requirements.
Dividends. On October 26, 1994, the Company declared a
quarterly dividend of $0.225 per share. The rate in prior quarters had
been $0.40 per share.
Capital Expenditures and Commitments
Capital expenditures, which consist primarily of expenditures
to expand and upgrade the Company's gas distribution systems, were $9.3
million for the three-month period ended December 31, 1994 as compared
with $11.3 million for the three-month period ended December 31, 1993.
Capital expenditures are expected to be approximately $44 million in
fiscal 1995, as compared with a total of $55.8 million in fiscal 1994.
As discussed in Note 3 of the Notes to the Consolidated
Financial Statements, the Company owns or previously owned certain
properties on which gas was manufactured by the Company or by other
parties in the past. Coal tar residues are present on six New Jersey
Division sites and the Company's PSGS Division may have contaminants on
as many as ten former sites. The Company, with the assistance of an
outside consultant, has begun preliminary assessments on certain of the
PSGS Division sites. The Company is not able at this time to determine
the extent of contamination at the other PSGS Division sites, if any,
the requirement for remediation if contamination is present, or the
costs associated with remediation. As of December 31, 1994, the Company
has recorded a total reserve for probable environmental remediation
liabilities of approximately $32 million, which the Company expects it
will expend in the next twenty years. This estimate does not include any
possible costs for those PSGS Division sites for which preliminary
assessments have not begun. Based on currently available information and
analysis, the Company believes that it is reasonably possible that costs
associated with remediation could exceed current reserves by an amount
of up to $15 million. The Company believes that certain of its
remediation costs will be recoverable in rates and that a portion of
such costs may be recoverable from the Company's insurance carriers and
former owners and operators of the sites. However, with respect to
remediation costs associated with certain of those PSGS Division sites
for which preliminary assessments have begun, the Company is not able at
this time to determine the extent of possible recovery, if any, from
among PSGS ratepayers, insurance carriers or former owners and
operators. Consequently, as of December 31, 1994, the Company has
recorded $1.9 million as an additional plant acquisition adjustment.
Should additional information concerning the PSGS Division's probable<PAGE>
environmental liability become known and subject to reasonable
quantification within one year from the date of the PSGS Merger, the
plant acquisition adjustment may be changed accordingly.
Certain of the Company's long-term contracts for the supply,
storage and delivery of natural gas include fixed charges that amount to
approximately $71 million annually, of which approximately $47 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 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 for the duration of
these contracts will continue to exceed these minimum purchase
obligations.
The implementation of the Federal Energy Regulatory
Commission's ("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 $5.8 million of such costs as of
December 31, 1994, which the Company has been authorized to recover
through its gas cost adjustment clauses. The Company currently estimates
that its remaining Order No. 636 transition obligation will be
approximately $3.9 million. This estimate is subject to subsequent FERC
actions based upon filings by the Company's pipeline suppliers.
As of December 31, 1994, the scheduled repayments of the
Company's long-term debt over the next five years were as follows: $1.1
million for the remainder of fiscal 1995, $1.2 million in fiscal 1996,
$3.3 million in fiscal 1997, $31.0 million in fiscal 1998 and
$1.0 million in fiscal 1999.<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit
No. Description of Exhibit Reference
27 Financial Data Schedule Filed herewith
(b) Reports on Form 8-K.
On November 1, 1994, the Company filed a Form 8-K, Item 5, Other
Events, reporting the issuance of a press release on October 26, 1994,
stating that the Company's quarterly dividend to shareholders was
reduced from a rate of $0.40 per share to a rate of $0.225 per share.
On January 31, 1995, the Company filed a Form 8-K, Item 5, Other
Events, reporting the issuance of a press release on January 25, 1995,
of the Company's first quarter of fiscal 1995 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
February 13, 1995 JOSEPH P. COUGHLIN
Senior Vice President and
Secretary
February 13, 1995 BERNARD F. LENIHAN
Vice President and
Controller (Principal accounting
officer)<PAGE>
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