SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1996 Commission File # 1-8353
NUI CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-1869941
(State of incorporation) (IRS employer
identification no.)
550 Route 202-206, PO Box 760, Bedminster, New Jersey
07921-0760
(Address of principal executive offices, including zip code)
(908) 781-0500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No
The number of shares outstanding of each of the registrant's
classes of common stock, as of July 31, 1996: Common Stock, No
Par Value: 11,089,599 shares outstanding.<PAGE>
<TABLE>
NUI Corporation and Subsidiaries
Consolidated Statement of Income (Unaudited)
(Dollars in thousands, except per share amounts)
<CAPTION>
Three Months Nine Months Ended Twelve Months
Ended June 30, Ended
June 30, June 30,
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Operating Margins
Operating $95,370 $62,136 $390,875 $315,928 $451,391 $378,292
revenues
Less - Purchased
gas and fuel 55,695 25,454 220,355 157,796 252,069 191,746
Gross receipts
and franchise 6,257 5,838 33,163 29,878 36,952 33,693
taxes ----- ----- ------ ------ ------ ------
33,418 30,844 137,357 128,254 162,370 152,853
------ ------ ------- ------- ------- -------
Other Operating
Expenses
Operations and 23,316 22,678 70,383 70,161 90,744 94,083
maintenance
Depreciation and 5,501 4,981 16,371 14,883 21,238 19,428
amortization
Restructuring and
other non-
recurring
charges - - - 8,591 - 9,514
Other taxes 1,959 2,057 5,808 5,853 7,613 7,620
Income taxes (730) (1,248) 10,842 5,111 8,617 (775)
------ ----- ------ ------- ----- -----
30,046 28,468 103,404 104,599 128,212 129,870
------- ------- ------- ------- ------- -------
Operating Income 3,372 2,376 33,953 23,655 34,158 22,983
Other Income and 122 157 230 445 224 705
Expense, Net
Interest Expense $4,497 $4,729 $14,285 $13,764 $19,303 $18,008
----- ----- ------ ------ ------ ------
Net Income $(1,003) $(2,196) $19,898 $10,336 $15,079 $ 5,680
====== ====== ====== ====== ====== ======
Net Income Per
Share of Common
Stock $(0.10) $(0.24) $ 2.11 $ 1.13 $ 1.61 $ 0.62
======= ====== ====== ======= ======= =====
Dividends Per
Share of Common
Stock $ 0.225 $ 0.225 $ 0.675 $ 0.675 $ 1.075 $ 1.075
======= ======= ======= ======= ======= =======
Weighted Average
Number of Shares
of Common Stock
Outstanding 9,947,967 9,164,110 9,411,091 9,155,500 9,346,168 9,142,818
========= ========= ========= ========= ========= =========
</TABLE>
See the notes to the consolidated financial statements<PAGE>
NUI Corporation and Subsidiaries
Consolidated Balance Sheet
(Dollars in thousands)
June 30, September 30,
1996 1995
(Unaudited) (*)
ASSETS
Utility Plant
Utility plant, at original cost $617,941 $597,360
Accumulated depreciation and (196,216) (184,558)
amortization
Unamortized plant acquisition
adjustments 33,492 35,269
------- --------
455,217 448,071
------- -------
Funds for Construction Held by
Trustee 46,323 14,405
------- ---------
Investments in Marketable Securities 3,135 2,723
-------- ---------
Current Assets
Cash and cash equivalents 4,243 3,601
Accounts receivable (less
allowance for doubtful accounts
of $2,534 and $1,689,
respectively) 51,775 30,293
Fuel inventories, at average cost 16,152 27,629
Prepayments and other 19,988 20,007
------- -------
92,158 81,530
------- -------
Other Assets
Regulatory assets 54,936 54,374
Deferred charges 9,929 9,062
------- --------
64,865 63,436
------- --------
$661,698 $610,165
======= =======
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $186,439 $140,912
Preferred stock - -
Long-term debt 230,958 222,060
------- -------
417,397 362,972
------- -------
Capital Lease Obligations 10,690 11,114
------- -------
Current Liabilities
Current portion of long-term debt
and capital lease obligations 1,660 1,759
Notes payable to banks 27,780 37,935
Accounts payable, customer
deposits and accrued liabilities 63,497 63,665
General taxes 3,644 3,054
Federal income taxes 6,806 4,664
------- --------
103,387 111,077
------- --------
Deferred Credits and Other
Liabilities
Deferred Federal income taxes 57,243 51,946
Unamortized investment tax 6,751 7,102
credits
Environmental remediation reserve 33,981 33,981
Regulatory and other liabilities 32,249 31,973
------- -------
130,224 125,002
------- -------
$661,698 $610,165
======= =======
*Derived from audited financial statements
See the notes to the consolidated financial statements<PAGE>
NUI Corporation and Subsidiaries
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in thousands)
Nine Months Twelve
Ended Months
June 30, Ended
June 30,
1996 1995 1996 1995
Operating Activities
Net income $19,898 $10,336 $15,079 $ 5,680
Adjustments to reconcile net
income to net cash provided by
operating actitivies
Depreciation and 16,398 15,809 21,521 20,672
amortization
Deferred Federal income 5,296 2,484 4,817 5,455
taxes
Restructuring and other
non-recurring charges - 4,913 - 5,799
Amortization of deferred
investment tax credits (351) (352) (467) (487)
Other 4,704 3,718 5,612 4,296
Effect of changes in:
Accounts receivable, net (21,482) 3,514 (17,073) 7,507
Fuel inventories 11,477 11,287 1,117 1,415
Accounts payable, deposits
and accruals 236 13,260 (2,300) 8,524
Gross receipts and
franchise taxes (827) (6,173) 1,194 (3,986)
Other (2,534) (8,354) 732 (13,072)
------ ------ ------ -------
Net cash provided by operating 32,815 50,442 30,292 41,803
activities ------ ------ ------ ------
Financing Activities
Proceeds from sales of
common stock, net of
treasury stock purchased 31,568 821 31,324 2,577
Dividends to shareholders (6,252) (6,222) (8,326) (9,864)
Proceeds from issuance of
long-term debt 39,000 70,000 39,000 136,500
Funds for construction
held by trustee, net (31,232) 9,972 (31,079) (551)
Repayments of long-term debt (30,101) (1,129) (38,874) (53,351)
Principal payments under
capital lease obligations (1,439) (1,364) (1,919) (1,871)
Net short-term borrowings
(repayments) (10,155) (94,025) 11,680 (66,000)
------- ------ ------- ------
Net cash (used in) provided
by financing activities (8,611) (21,947) 1,806 7,440
------ ------- ------ ------
Investing Activities
Cash expenditures for
utility plant (23,080) (28,839) (32,217) (46,771)
Other (482) (797) (134) (15)
------ ------- ------ -------
Net cash used in investing
activities (23,562) (29,636) (32,351) (46,786)
------- ------ ------- ------
Net increase (decrease) in
cash and cash equivalents $ 642 $(1,141) $ (253) $ 2,457
====== ====== ===== ======
Cash and Cash Equivalents
At beginning of period $ 3,601 $ 5,637 $ 4,496 $ 2,039
At end of period $ 4,243 $ 4,496 $ 4,243 $ 4,496
Supplemental Disclosures of
Cash Flows
Income taxes paid (refunds
received), net $1,969 $ (735) $ 1,575 $ (735)
Interest paid $15,691 $13,543 $19,584 $16,764
See the notes to the consolidated financial statements<PAGE>
NUI Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
1.Basis of Presentation
The consolidated financial statements include all operating
divisions and subsidiaries of NUI Corporation (collectively referred
to as the "Company"). The Company distributes and sells natural gas
and related services in six states through its Northern and Southern
utility divisions. The Northern Division operates in New Jersey as
Elizabethtown Gas Company. The Southern Division operates in five
states as City Gas Company of Florida, North Carolina Gas Service,
Elkton Gas Service (Maryland), Valley Cities Gas Service
(Pennsylvania) and Waverly Gas Service (New York). In addition to gas
distribution operations, the Company provides retail gas sales and
related services through its Natural Gas Services, Inc. subsidiary;
bill processing and related customer services for utilities and
municipalities through its Utility Billing Services, Inc. subsidiary;
and wholesale energy brokerage and related services through its NUI
Energy Brokers, Inc. subsidiary.
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 preparation of financial
statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates. 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, 1995. Certain
reclassifications have been made to the prior year financial
statements to conform with the current year presentation.
The Company is subject to regulation as an operating utility by the
public utility commissions of the states in which it operates.
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.Common Shareholders' Equity
The components of common shareholders' equity were as follows
(dollars in thousands):<PAGE>
June 30, September 30,
1996 1995
Common stock, no par value $171,878 $139,093
Shares held in treasury (1,564) (1,265)
Retained earnings 17,566 3,921
Unrealized gain on marketable securities 489 232
Unearned employee compensation (1,930) (1,069)
------- -------
Total common shareholders' equity $186,439 $140,912
======= =======
3. Contingencies
Environmental Matters The Company is subject to federal and
state laws 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 manufactured gas plants ("MGP") were operated by the Company or
by other parties in the past. Coal tar residues are present on the six
MGP sites located in the Northern Division. The Company has reported
the presence of the six MGP sites to the EPA, the NJDEP and the New
Jersey Board of Public Utilities ("NJBPU"). In 1991, the NJDEP
issued an Administrative Consent Order for an MGP site located at
South Street in Elizabeth, New Jersey, wherein the Company agreed to
conduct a remedial investigation and to design and implement a
remediation plan. In 1992 and 1993, the Company entered into a
Memorandum of Agreement with the NJDEP for each of the other five
Northern Division MGP sites. Pursuant to the terms and conditions of
the Administrative Consent Order and the Memoranda of Agreement, the
Company is conducting remedial activities at all six sites with
oversight from the NJDEP.
The Southern Division owned ten former MGP facilities, only three
of which it currently owns. The former MGP sites are located in the
states of North Carolina, South Carolina, Pennsylvania, New York and
Maryland. The Company has joined with other North Carolina utilities
to form the North Carolina Manufactured Gas Plant Group (the "MGP
Group"). The MGP Group has entered into a Memorandum of Understanding
with the North Carolina Department of Environment, Health and Natural
Resources ("NCDEHNR") to develop a uniform program and framework for
the investigation and remediation of MGP sites in North Carolina. The
Memorandum of Understanding contemplates that the actual investigation
and remediation of specific sites will be addressed pursuant to
Administrative Consent Orders between the NCDEHNR and the responsible
parties. The NCDEHNR has recently sought the investigation and
remediation of sites owned by members of the MGP Group and has entered
into Administrative Consent Orders with respect to four such sites.
None of these four sites are currently or were previously owned by the
Southern Division.<PAGE>
The Company, with the aid of environmental consultants, regularly
assesses the potential future costs associated with conducting
investigative activities at each of the Company's sites and
implementing appropriate remedial actions, as well as the likelihood
of whether such actions will be necessary. The Company records a
reserve if it is probable that a liability will be incurred and the
amount of the liability is reasonably estimable. Based on the
Company's most recent assessment, the Company has recorded a total
reserve for environmental investigation and remediation costs of
approximately $34 million, which the Company expects to expend during
the next twenty years. The reserve, which includes remediation costs
for 7 of the Company's 16 MGP sites, is net of approximately $5
million which will be borne by a prior owner and operator of two of
the Northern Division sites in accordance with a cost sharing
agreement. Of this approximate $34 million reserve, approximately $30
million relates to Northern Division MGP sites and approximately $4
million relates to Southern Division MGP sites. The Company is not
able at this time to determine the requirement for remediation if
contamination is present at any of the other sites and, if present,
the costs associated with such remediation. The Company believes that
it is possible that costs associated with conducting investigative
activities and implementing remedial activities, if necessary, with
respect to all of its MGP sites may exceed the approximately $34
million reserve by an amount that could range up to $21 million and be
incurred during a future period of time that may range up to fifty
years. Of this $21 million in additional possible future
expenditures, approximately $10 million relates to the Northern
Division MGP sites and approximately $11 million relates to the
Southern Division MGP sites. As compared with the approximately $34
million reserve discussed above, the Company believes that it is less
likely that this additional $21 million will be incurred and therefore
has not recorded it on its books.
The Company believes that its remediation costs for the Northern
Division MGP sites will be recoverable in rates and that a portion of
such costs may be recoverable from the Company's insurance carriers.
The most recent base rate order for the Northern Division permits the
Company to utilize full deferred accounting for expenditures related
to MGP sites. The order also provides for the recovery of $130,000
annually of MGP related expenditures incurred prior to the rate order.
Accordingly, the Company has recorded a regulatory asset of
approximately $33 million as of June 30, 1996, reflecting the future
recovery of environmental remediation liabilities related to the
Northern Division MGP sites. In July 1996, the NJBPU approved a
petition filed by the Northern Division to establish an MGP
Remediation Adjustment Clause ("RAC"). The RAC enables the Company
to recover actual MGP expenses over a rolling seven-year period. The
Company expects to file for recovery of actual environmental
expenditures incurred to date through the RAC by the end of the fiscal
year. With respect to costs associated with the Southern Division MGP
sites, the Company intends to pursue recovery from ratepayers, former
owners and operators, and insurance carriers, although the Company is
not able to express a belief as to whether any or all of these
recovery efforts will be successful. The Company is working with the
regulatory agencies to prudently manage its MGP costs so as to
mitigate the impact of such costs on both ratepayers and shareholders.
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>
<TABLE>
NUI Corporation and Subsidiaries
Summary Consolidated Operating Data
<CAPTION>
Three Nine Twelve
Months Ended Months Ended Months Ended
June 30 June 30, June 30
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues (Dollars
in thousands)
Firm Sales:
Residential $34,129 $26,270 $171,836 $156,557 $191,841 $180,355
Commercial 20,144 14,435 95,387 85,872 107,933 98,825
Industrial 6,091 4,117 20,837 16,568 24,378 21,455
Interruptible Sales 17,458 9,666 40,926 32,446 56,194 48,063
Unregulated Sales 8,852 1,296 34,795 6,552 35,741 6,895
Transportation Services 5,963 4,540 17,644 13,218 22,122 16,673
Customer Service, Appliance
Leasing and Other 2,733 1,812 9,450 4,715 13,182 6,026
------- ------- ------- ------- ------- -------
$95,370 $62,136 $390,875 $315,928 $451,391 $378,292
======= ======= ======= ======= ======= =======
Gas Sold or Transported
(MMcf)
Firm Sales:
Residential 3,852 3,507 22,730 19,349 24,857 21,502
Commercial 2,932 2,874 14,672 13,652 16,475 15,743
Industrial 1,256 1,187 4,366 4,124 5,459 5,258
Interruptible Sales 4,010 3,661 10,900 11,925 17,340 17,724
Unregulated Sales 4,961 542 12,727 3,039 13,086 3,220
Transportation Services 6,022 5,460 17,254 16,325 23,083 20,635
------ ------ ------ ------ ------ ------
23,033 17,231 82,649 68,414 100,300 84,082
====== ====== ====== ====== ======= ======
Average Utility Customers
Served
Firm:
Residential 332,831 329,835 332,621 328,667 331,710 327,133
Commercial 24,582 24,670 24,687 24,551 24,605 24,348
Industrial 331 396 340 395 350 396
Interruptible 320 107 200 106 200 106
Transportation 700 187 590 159 516 154
------- ------- ------- ------- ------- -------
358,764 355,195 358,438 353,878 357,381 352,137
======= ======= ======= ======= ======= =======
Degree Days in New Jersey
Actual 582 515 5,297 4,294 5,336 4,303
Normal 538 538 4,936 4,936 4,978 4,978
Percentage variance
from normal 8% 4% 7% 13% 7% 14%
colder warmer colder warmer colder warmer
Employees (period end) 1,075 1,050
Ratio of Earnings to Fixed
Charges (Twelve months only 2.02 1.22
</TABLE>
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 (collectively referred
to as the "Company"). The Company distributes and sells natural gas in
six states through its Northern and Southern utility divisions. The
Northern Division operates in New Jersey as Elizabethtown Gas Company.
The Southern Division operates in five states as City Gas Company of
Florida, North Carolina Gas Service, Elkton Gas Service (Maryland),
Valley Cities Gas Service (Pennsylvania) and Waverly Gas Service (New
York). In addition to gas distribution operations, the Company
provides retail gas sales and related services through its Natural Gas
Services, Inc. subsidiary; bill processing and related customer
services for utilities and municipalities through its Utility Billing
Services, Inc. subsidiary; and wholesale energy brokerage and related
services through its NUI Energy Brokers, Inc. subsidiary. 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 June 30, 1996 and 1995
Net Loss. The Company incurred a net loss for the three-month
period ended June 30, 1996 of $1.0 million, or $0.10 per share, as
compared with a net loss of $2.2 million, or $0.24 per share, for the
three-month period ended June 30, 1995. The third quarter is
historically a period of seasonally low demand for natural gas for
heating, resulting in a net loss. The improvement in the current
period was primarily the result of higher operating margins and lower
interest expense, partially offset by higher operations and
maintenance and depreciation expenses.
Net income per share in the current quarter was also affected by
the increased average number of outstanding shares of common stock
over the prior years' quarter, principally reflecting the Company's
issuance of 1.8 million additional shares in May 1996 (see "Financing
Activities and Resources-Common Stock").
Operating Revenues and Operating Margins. The Company's operating
revenues include amounts billed for the cost of purchased gas pursuant
to purchased gas adjustment clauses. Such clauses enable the Company
to pass through to its customers, via periodic adjustments to
customers' bills, increased or decreased costs incurred by the Company
for purchased gas without affecting operating margins. Since the
Company's utility operations do not earn a profit on the gas commodity
element of its revenues, the Company's level of operating revenues is
not necessarily indicative of financial performance. The Company's
operating revenues increased by $33.2 million, or 53%, for the three-
month period ended June 30, 1996 as compared with the three-month
period ended June 30, 1995. The increase principally reflects an $11.3
million refund to Northern Division customers in the third quarter of
1995 as a result of lower than projected gas prices incurred in fiscal
1995, and the effect of weather in New Jersey in the current quarter
that was 8% colder than normal and 13% colder than the prior year
period. The prior years' quarter reflected lower sales due to the<PAGE>
impact of a sustained warm Winter in the Company's northern service
territories which affected customers' consumption into the Spring.
Operating revenues were also increased due to higher sales to
unregulated customers, increased revenues to interruptible customers
as a result of higher gas prices, increased customer service revenues
and customer growth.
In order to take advantage of opportunities arising from increasing
deregulation within the natural gas industry, the Company has
increased its focus on transactions in which prices are established by
competitive markets rather than regulatory mandate. The Company has
increased its sales to commercial and industrial customers through its
subsidiary, Natural Gas Services, Inc. In addition, the Company
recently formed NUI Energy Brokers, Inc. for the purpose of enhancing
margins through energy brokerage activities. The Company's utility
operations also make sales of natural gas to customers outside of its
franchise service territories when opportunities exist to obtain
additional value from its supply and pipeline capacity under contract.
While the prices charged for these activities are not regulated,
margins realized are shared with the ratepayers of the utility
operations as follows: New Jersey- 80/20%, Florida-50/50% and North
Carolina-75/25%. The Company's other utility operations do not
currently have margin sharing and therefore any off-system sales are
returned 100% to ratepayers.
The Company's operating margins increased by $2.6 million, or 8%,
for the three-month period ended June 30, 1996 as compared with the
three-month period ended June 30, 1995. The increase principally
reflects higher utility margins in the current quarter primarily as a
result of lower margins in the 1995 quarter due to the effect of the
sustained warm weather in the Winter which lasted into the Spring.
Operating margins also increased due to higher sales to unregulated
customers, increased customer service revenues and increases in the
number of customers served.
Other Operating Expenses. The Company's other operating expenses,
excluding income taxes, increased by approximately $1.1 million, or
4%, for the three-month period ended June 30, 1996 as compared with
the three-month period ended June 30, 1995. The increase was primarily
the result of higher operations and maintenance expenses due to
increased business activity related to unregulated sales and customer
service, and an increase in costs associated with a larger workforce.
The prior years' quarter reflected the full effect of an early
retirement program effective April 1, 1995. Certain of the retired
employees were replaced during the year. Depreciation expense
increased by approximately $0.5 million due to additional utility
plant in service.
The increase in income taxes for the three-month period ended June
30, 1996 as compared with the three-month period ended June 30, 1995,
was principally due to the effects of a lower pre-tax loss .
Interest Expense. Interest expense decreased by approximately $0.2
million for the three-month period ended June 30, 1996 as compared
with the three-month period ended June 30, 1995. The decrease
principally reflects lower average interest rates, partially offset by
an increase in the average level of borrowings, and a decrease in
interest recorded on the over-collection of gas costs by the Northern
Division.
Nine-Month Periods Ended June 30, 1996 and 1995<PAGE>
Net Income. Net income for the nine-month period ended June 30,
1996 was $19.9 million, or $2.11 per share, as compared with net
income of $10.3 million, or $1.13 per share, for the nine-month period
ended June 30, 1995. The increase in the current period was primarily
due to higher operating margins, and approximately $5.6 million of
after-tax non-recurring charges incurred in the 1995 period. These
increases were partially offset by higher depreciation and interest
expenses.
Net income per share in the current period was also affected by the
increased average number of outstanding shares of common stock over
the prior years' period, principally reflecting the Company's issuance
of 1.8 million additional shares in May 1996 (see Financing
Activities and Resources-Common Stock").
Operating Revenues and Operating Margins. The Company's operating
revenues increased by $74.9 million, or 24%, for the nine-month period
ended June 30, 1996 as compared with the nine-month period ended June
30, 1995. The increase principally reflects the effect of weather in
New Jersey that was 7% colder than normal and 23% colder than the
prior year period, and additional refunds in the 1995 period totaling
$11.2 million to Northern Division customers as a result of lower than
projected gas prices. Operating revenues were also increased by
significantly higher sales to unregulated customers, increased
revenues to interruptible customers as a result of higher gas prices,
increased customer service revenues and customer growth.
The Company's operating margins increased by $9.1 million, or 7%,
for the nine-month period ended June 30, 1996 as compared with the
nine-month period ended June 30, 1995. The increase principally
reflects increases in the number of customers served, higher sales to
unregulated customers, increased customer service revenues and the
effect of colder-than-normal weather not fully returned to customers
through the weather normalization clauses. 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
increasing amounts charged to customers when weather has been warmer
than normal and by decreasing amounts charged when weather has been
colder than normal. As a result of these weather normalization
clauses, operating margins for the nine-month period ended June 30,
1996 were approximately $2.2 million less than they would have been
without such clauses. For the nine-month period ended June 30, 1995,
operating margins were approximately $4.5 million higher than they
otherwise would have been without such clauses.
Other Operating Expenses. The Company's other operating expenses,
excluding income taxes, decreased by approximately $7 million, or 7%,
for the nine-month period ended June 30, 1996 as compared with the
nine-month period ended June 30, 1995. The decrease was primarily the
result of non-recurring pre-tax charges of $8.6 million incurred in
the 1995 period associated with the implementation of the Company's
early retirement program, the restructuring of the Southern Division
and the settlement of a rate case in Florida. Operations and
maintenance expenses increased by approximately $0.2 million as a
result of costs incurred due to colder weather in New Jersey during
the current heating season, and higher costs associated with the
Company's unregulated sales and customer service activities, partially
offset by lower labor and employee benefits costs. Depreciation and
amortization expenses increased by $1.5 million primarily due to
additional plant in service.<PAGE>
Income tax expense increased by approximately $5.7 million for the
nine-month period ended June 30, 1996 as compared with the nine-month
period ended June 30, 1995, primarily due to the effects of higher
pre-tax income.
Interest Expense. Interest expense increased by approximately $0.5
million for the nine-month period ended June 30, 1996 as compared with
the nine-month period ended June 30, 1995 principally due to higher
average borrowings as a result of working capital requirements
associated with colder weather, partially offset by lower interest
recorded on the over-collection of gas costs by the Northern Division.
Twelve-Month Periods Ended June 30, 1996 and 1995
Net Income. Net income for the twelve-month period ended June 30,
1996 was $15.1 million, or $1.61 per share, as compared with $5.7
million, or $0.62 per share, for the twelve-month period ended June
30, 1995. The increase was due to non-recurring charges in the prior
year period which, on an after-tax basis, were approximately $6.1
million, higher operating margins and lower operations and maintenance
expenses. These increases were partially offset by higher interest and
depreciation expenses, and the reversal in the 1995 period of $1.6
million of income tax reserves.
Operating Revenues and Operating Margins. The Company's operating
revenues for the twelve-month period ended June 30, 1996 increased
approximately $73.1 million, or 19%, as compared with the twelve-month
period ended June 30, 1995. The increase was principally due to
weather in New Jersey that was 7% colder than normal and 24% colder
than the prior year period, and additional refunds in the 1995 period
totaling $11.2 million to Northern Division customers as a result of
lower than projected gas prices. Operating revenues were also
increased by higher sales to unregulated customers, increased customer
service revenues and customer growth.
The Company's operating margins increased by $9.5 million, or 6%,
for the twelve-month period ended June 30, 1996 as compared with the
twelve-month period ended June 30, 1995. The increase was principally
the result of increases in the number of customers served, higher
sales to unregulated customers, higher customer service revenues and
the effect of colder-than-normal weather not fully returned to
customers through the weather normalization clauses. As a result of
these weather normalization clauses, operating margins for the twelve-
month period ended June 30, 1996 were approximately $2.2 million less
than they would have been without such clauses. For the twelve-month
period ended June 30, 1995, operating margins were approximately $4.3
million higher than they otherwise would have been without such
clauses.
Other Operating Expenses. The Company's other operating expenses,
excluding income taxes, decreased by approximately $11.1 million, or
8%, for the twelve-month period ended June 30, 1996 as compared with
the twelve-month period ended June 30, 1995. The decrease was
primarily the result of non-recurring pre-tax charges of $9.5 million
incurred in the 1995 period associated with the implementation of the
Company's early retirement program, the restructuring of the Southern
Division and the settlement of a rate case in Florida. The decrease
was also due to lower operations and maintenance expenses primarily
reflecting lower labor, pension and employee benefits costs. Partially<PAGE>
offsetting these decreases was an increase in depreciation and
amortization expense of approximately $1.8 million primarily due to
additional utility plant in service.
Income taxes increased by $9.4 million for the twelve-month period
ended June 30, 1996 due to the reversal in the 1995 period of $1.6
million of income tax reserves no longer required as a result of
management's review of necessary reserve levels, and the effect of
higher pre-tax income in the 1996 period.
Interest Expense. Interest expense increased by $1.3 million for
the 1996 period as compared with the 1995 period primarily due to
higher average long-term borrowings, partially offset by lower
interest recorded on the over-collection of gas costs by the Northern
Division.
Regulatory Matters
On June 18, 1996, City Gas Company of Florida filed a request with
the Florida Public Service Commission (the "FPSC") to increase its
annual base rates by $5.3 million. On August 13, 1996, the FPSC
granted an interim rate increase, effective September 12, 1996,
equivalent to an increase in the Company's annual revenues of $2.2
million. The interim rates are subject to refund pending a decision on
the final rate increase which is expected in the first quarter of
fiscal 1997. There can be no assurances that the Company's rate
request will be granted or, if granted, that the Company will receive
the full amount requested.
On November 3, 1995, the New Jersey Board of Public Utilities (the
`` NJBPU'') approved a petition filed by the Northern Division to
reduce its annual purchased gas adjustment revenues by approximately
$13.7 million and to refund to customers approximately $2.7 million,
due to lower gas costs. None of such revenue reduction and refund
affects the operating margins of the Company. On August 2, 1996, the
Northern Division filed a petition with the NJBPU to increase its
annual purchased gas adjustment revenues by approximately $22 million
reflecting higher projected gas costs in the coming year. The petition
also includes a request to incorporate, in a two-year pilot program, a
performance based mechanism whereby Northern Division customers and
the Company would benefit from the Company's ability to secure gas at
rates that are more favorable than a market index benchmark. The
proposed performance mechanism would provide a 50/50 sharing of risk
and opportunity between Northern Division customers and the Company on
the difference between a monthly market benchmark and the actual cost
of purchased gas, up to $1 million annually. Action by the NJBPU on
the Company's petition is expected in the Fall of 1996.
On September 20, 1995, the North Carolina Utilities Commission
approved a stipulation to increase the Company's base rates in North
Carolina by $385,000 annually. The stipulation provides for a rate
base amounting to approximately $11.9 million with an overall after-
tax rate of return of 7.89%. The rate increase became effective in
October 1995.
Financing Activities and Resources
The Company had net cash provided by operating activities of $32.8
million for the nine-month period ended June 30, 1996 as compared with
$50.4 million for the nine-month period ended June 30, 1995. For the
twelve-month period ended June 30, 1996, the Company's net cash<PAGE>
provided by operating activities was $30.3 million as compared with
$41.8 million for the twelve-month period ended June 30, 1995. The
decrease in the 1996 periods reflect a higher level of accounts
receivable primarily due to colder weather and increased activity by
the Company's unregulated businesses, and a significantly lower over-
collection of gas costs through the Company's purchased gas adjustment
clauses.
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 $40.7 million at 5.8% for the nine-month period
ended June 30, 1996 and $67.6 million at 5.9% for the nine-month
period ended June 30, 1995. The weighted average daily amounts of
notes payable to banks decreased principally due to the full effect of
the issuance of $70 million of Medium-Term Notes in fiscal 1995, which
were used to repay short-term debt, and the issuance of an additional
1.8 million shares of common stock, in which part of the proceeds were
used to repay short-term debt. These decreases were partially offset
by borrowings to finance portions of the Company's construction
expenditures. At June 30, 1996, the Company had outstanding notes
payable to banks amounting to $27.8 million and available unused lines
of credit amounting to $130.2 million.
Long-Term Debt and Funds for Construction Held by Trustee. On June
14, 1996, the Company issued $39 million of floating rate tax exempt
Gas Facilities Revenue Bonds which mature on June 1, 2026. Under the
terms of the floating rate debt, the interest rate paid by the
Company, which averaged 3.3% since the date of issuance, is reset
daily. The proceeds of the bond issuance is being used to finance part
of the Northern Division's capital expenditure program.
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. As of June 30, 1996, the
Company has issued $70 million of Medium-Term Notes subject to the
shelf registration statement. While the Company has no present
intention to issue additional securities subject to the shelf
registration, such securities may be issued from time to time,
depending upon the Company's needs and prevailing market conditions.
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 June 30, 1996, the total unexpended
portion of all of the Company's Gas Facilities Revenue Bonds was $44.8
million and is classified on the Company's consolidated balance sheet,
including interest earned thereon, as funds for construction held by
trustee.
Common Stock. On May 24, 1996, the Company issued an additional 1.8
million shares of NUI common stock. The net proceeds from the offering
totaled $31.1 million and were used to reduce outstanding debt and for
other general corporate purposes.<PAGE>
The Company periodically issues shares of common stock in
connection with NUI Direct, the Company's dividend reinvestment and
stock purchase plan, and various employee benefit plans. Effective in
December 1994, these common stock plans commenced purchasing shares on
the open market to meet the plans' requirements, rather than
purchasing the shares directly from the Company. Under the terms of
NUI Direct, the Company may change the method of purchasing shares no
more frequently than every three months, from open market purchases to
purchases directly from the Company, or vice versa; the method of
purchasing shares may be changed no more frequently than every twelve
months for the other plans. The proceeds of such issuances amounted to
$1.1 million for the nine-month period ended June 30, 1995, and were
used primarily to reduce outstanding short-term debt. During fiscal
1996, the Company began issuing newly issued shares of NUI common
stock under three new stock plans. The proceeds from such issuances
amounted to $0.2 million for the nine-month period ended June 30,
1996, and were used primarily to reduce outstanding short-term debt.
Capital Expenditures and Commitments
Capital expenditures, which consist primarily of expenditures to
expand and upgrade the Company's gas distribution systems, were $23.1
million for the nine-month period ended June 30, 1996 as compared with
$26 million for the nine-month period ended June 30, 1995. Capital
expenditures are expected to be approximately $42 million for all of
fiscal 1996, as compared with a total of $37.9 million in fiscal 1995.
The Company owns or previously owned six former manufactured gas
plant ("MGP") sites in the Northern Division and ten MGP sites in
the Southern Division. The Company, with the aid of environmental
consultants, regularly assesses the potential future costs associated
with conducting remedial actions, as well as the likelihood of
whether such actions will be necessary. The Company records a reserve
if it is probable that a liability will be incurred and the amount of
the liability is reasonably estimable. Based on the Company's most
recent assessment, the Company has recorded a total reserve for
environmental investigation and remediation costs of approximately $34
million, which the Company expects it will expend in the next twenty
years to remediate 7 of the Company's 16 MGP sites. Of this reserve,
approximately $30 million relates to Northern Division MGP sites and
approximately $4 million relates to Southern Division MGP sites. In
addition to these costs, the Company believes that it is possible
that costs associated with conducting investigative activities and
implementing remedial actions, if necessary, with respect to all of
its MGP sites may exceed the approximately $34 million reserve by an
amount that could range up to $21 million and be incurred during a
future period of time that may range up to fifty years. Of this $21
million in possible future expenditures, approximately $10 million
relates to the Northern Division MGP sites and approximately $11
million relates to the Southern Division MGP sites. As compared with
the approximately $34 million reserve discussed above, the Company
believes that it is less likely that this additional $21 million will
be incurred and therefore has not recorded it on its books. The
Company believes that all costs associated with the Northern Division
MGP sites will be recoverable in rates or from insurance carriers. In
July 1996, the NJBPU approved a petition filed by the Northern
Division to establish an MGP Remediation Adjustment Clause ("RAC").
The RAC enables the Company to recover actual MGP expenses over a
rolling seven-year period. The Company expects to file for recovery of
actual environmental expenditures incurred to date through the RAC by
the end of the fiscal year. With respect to costs which may be
associated with the Southern Division MGP sites, the Company intends
to pursue recovery from ratepayers, former owners and operators of the
sites and from insurance carriers. However, the Company is not able at
this time to express a belief as to whether any or all of these
recovery efforts related to the Southern Division MGP sites will
ultimately be successful. For a further discussion of environmental
matters, see Note 3 of the Notes to the Consolidated Financial
Statements.
Certain of the Company's long-term contracts for the supply,
storage and delivery of natural gas include fixed charges that amount
to approximately $78 million annually. The Company currently recovers,
and expects to continue to recover, such fixed charges through its
purchased gas adjustment clauses. The Company also is committed to
purchase, at market-related prices, minimum quantities of gas that, in
the aggregate, are approximately 9 billion cubic feet 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 $9.1 million of such costs
through June 30, 1996. All of such costs, except for costs incurred by
the Company's Pennsylvania operation, have been authorized for
recovery through its purchased gas adjustment clauses. The Company
expects to file for and obtain full recovery of such costs in
Pennsylvania in the near future. The Company currently estimates that
its remaining Order No. 636 transition obligation will be
approximately $9.8 million, which it expects to also recover through
the Company's purchased gas adjustment clauses as these costs are
incurred. This transition obligation is subject to possible future
FERC actions based upon filings by the Company's pipeline suppliers.
As of June 30, 1996, the scheduled repayments of the Company's
long-term debt over the next five years were as follows: $0.1 million
for the remainder of fiscal 1996, and in each of fiscal years 1997,
1998, 1999 and 2000.<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
None<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
JOHN KEAN, JR.
August 14, 1996 President and Chief
Executive Officer
STEPHEN M. LIASKOS
August 14, 1996 Vice President and
Controller
(Principal Accounting
Officer)<PAGE>
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