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, 1996 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 30, 1996: Common Stock, No
Par Value: 9,199,586 shares outstanding.<PAGE>
<TABLE>
NUI Corporation and Subsidiaries
Consolidated Statement of Income (Unaudited)
(Dollars in thousands, except per share amounts)
<CAPTION>
Three Months Six Months Ended Twelve Months
Ended Ended Ended
March 31, March 31, March 31,
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Operating Margins
Operating revenues $170,855 $147,940 $295,50 $253,79 $418,158 $394,090
Less - Purchased
gas and fuel 96,365 78,145 164,660 132,342 221,828 208,171
Gross receipts
and franchise 15,697 14,469 26,906 24,041 36,534 33,610
taxes ------- ------- ------- ------- ------- -------
58,793 55,326 103,939 97,409 159,796 152,309
------- ------- ------- ------- ------- -------
Other Operating
Expenses
Operations and
maintenance 24,300 23,896 47,068 47,484 90,107 94,819
Depreciation and
amortization 5,304 4,953 10,870 9,902 20,718 18,926
Restructuring and
other non-
recurring charges -- 7,134 -- 8,591 -- 9,514
Other taxes 1,992 2,045 3,847 3,795 7,709 7,734
Income taxes 8,036 4,310 11,573 6,301 8,158 (1,079)
------- ------- ------- ------- ------- ------
39,632 42,338 73,358 76,073 126,692 129,914
------- ------- ------- ------- ------- -------
Operating Income 19,161 12,988 30,581 21,336 33,104 22,395
Other Income and
Expense, Net 33 145 108 231 317 453
Interest Expense 4,739 4,579 9,788 9,035 19,535 17,206
------- ------- ------- ------- ------- -------
Net Income $14,455 $8,554 $20,901 $12,532 $13,886 $5,642
====== ===== ====== ====== ====== =====
Net Income Per
Share of Common $1.58 $0.93 $2.29 $1.37 $1.52 $0.62
Stock ==== ==== ==== ==== ==== ====
Dividends Per Share
of Common Stock $0.225 $0.225 $0.45 $0.45 $0.90 $1.25
===== ===== ==== ==== ==== ====
Weighted Average
Number of Shares of
Common Stock
Outstanding 9,143,299 9,165,239 9,144,120 9,151,195 9,149,302 9,071,734
========= ========= ========= ========= ========= =========
<PAGE>
</TABLE>
See the notes to the consolidated financial statements
<TABLE>
NUI Corporation and Subsidiaries
Consolidated Balance Sheet
(Dollars in thousands)
<CAPTION>
March 31, September 30,
1996 1995
(Unaudited) (*)
<S> <C> <C>
ASSETS
Utility Plant
Utility plant, at original cost $610,295 $597,360
Accumulated depreciation and
amortization (192,627) (184,558)
Unamortized plant acquisition
adjustments 34,281 35,269
------- -------
451,949 448,071
------- -------
Funds for Construction Held by
Trustee 14,449 14,405
------- -------
Investments in Marketable Securities 3,048 2,723
------- -------
Current Assets
Cash and cash equivalents 5,444 3,601
Accounts receivable (less
allowance for doubtful accounts
of $3,278 and $1,689, respectively) 85,210 30,293
Fuel inventories, at average cost 4,800 27,629
Prepayments and other 7,032 20,007
------- -------
102,486 81,530
------- -------
Other Assets
Regulatory assets 53,757 54,374
Deferred charges 8,445 9,062
------- -------
62,202 63,436
------- -------
$634,134 $610,165
======= =======
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $157,810 $140,912
Preferred stock -- --
Long-term debt 221,993 222,060
------- -------
379,803 362,972
------- -------
Capital Lease Obligations 10,467 11,114
Current Liabilities
Current portion of long-term debt
and capital lease obligations 1,607 1,759<PAGE>
Notes payable to banks 18,205 37,935
Accounts payable, customer
deposits and accrued liabilities 72,093 63,665
General taxes 15,742 3,054
Federal income taxes 9,707 4,664
------- -------
117,354 111,077
------- -------
Deferred Credits and Other
Liabilities
Deferred Federal income taxes 53,505 51,946
Unamortized investment tax
credits 6,868 7,102
Environmental remediation reserve 33,981 33,981
Regulatory and other liabilities 32,156 31,973
------- -------
126,510 125,002
------- -------
$634,134 $610,165
======= =======<PAGE>
</TABLE>
*Derived from audited financial statements
See the notes to the consolidated financial statements
<TABLE>
NUI Corporation and Subsidiaries
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in thousands)
<CAPTION>
Six Months Twelve Months
Ended Ended
March 31, March 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Operating Activities
Net income $20,901 $12,532 $13,886 $ 5,642
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and
amortization 11,408 10,544 21,796 20,287
Deferred Federal income
taxes 2,097 442 3,660 3,664
Restructuring & other non-
recurring charges -- 4,913 -- 6,149
Amortization of deferred
investment tax credits (234) (235) (467) (483)
Other 3,221 2,784 5,063 3,433
Effect of changes in:
Accounts receivable, net (54,917) (23,446) (23,548) 8,965
Fuel inventories 22,829 21,612 2,204 (767)
Accounts payable,
deposits and
accruals 10,433 24,629 (3,472) 13,538
Gross receipts and
franchise taxes 22,619 19,540 (1,073) 26,191
Other 4,730 (4,026) 3,668 (8,225)
------ ------ ----- ------
Net cash provided by
operating activities 43,087 69,289 21,717 78,394
activities ------ ------ ------ ------
Financing Activities
Proceeds from sales of
common stock, net of
treasury stock purchased -- 1,135 (588) 4,574
Dividends to shareholders (4,170) (4,149) (8,317) (11,382)
Proceeds from issuance of
long-term debt -- 50,000 20,000 116,500
Funds for construction held
by trustee, net 376 6,648 3,853 (795)
Repayments of long-term debt (67) (64) (9,905) (54,223)
Principal payments under
capital lease obligations (1,194) (951) (2,087) (1,970)
Net short-term borrowings
(repayments) (19,730) (98,550) 6,630 (76,377)
------ ------ ------ ------
Net cash provided by (used
in) financing activities (24,785) (45,931) 9,616 (23,673)
------ ------ ------ ------
Investing Activities
Cash expenditures for
utility plant (15,904) (20,990) (32,890) (50,919)
Other (555) (400) (604) (135)
------ ------ ------ ------
Net cash used in
investing activities (16,459) (21,390) (33,494) (51,054)
------ ------ ------ ------
Net increase (decrease)
in cash and cash
equivalents $1,843 $1,968 $(2,161) $3,667
===== ===== ===== =====
Cash and Cash Equivalents
At beginning of period $3,601 $5,637 $ 7,605 $ 3,938
At end of period $5,444 $7,605 $ 5,444 $ 7,605
Supplemental Disclosures
of Cash Flows
Income taxes paid
(refunds received), net $ 375 $(1,685) $(1,129) $(1,019)
Interest paid $10,506 $ 7,417 $17,436 $18,564
</TABLE>
*Derived from audited financial statements
See the notes to consolidated financial statements
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 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 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):
March 31, September 30,
1996 1995
Common stock, no par value $139,353 $139,093
Shares held in treasury (1,562) (1,265)
Retained earnings 20,652 3,921
Unrealized gain on marketable securities 436 232
Unearned employee compensation - ESOP (1,069) (1,069)
------ ------
Total common shareholders' equity $157,810 $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.
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<PAGE>
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 March 31, 1996, reflecting the future
recovery of environmental remediation liabilities related to the
Northern Division MGP sites. In September 1995, the Northern Division
filed a petition with the NJBPU to establish an MGP Remediation
Adjustment Clause ("RAC"). The RAC would enable the Company to recover
actual MGP expenses over a rolling seven-year period. Other New Jersey
utilities have received similar authorization to recover MGP
environmental expenditures in rates. 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 Months Six Months Twelve Months
Ended Ended Ended
March 31, March 31, March 31,
1995 1996 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues (Dollars in
thousands)
Firm Sales:
Residential $ 81,098 $ 76,493 $137,707 $127,107 $183,987 $183,010
Commercial 43,749 42,846 75,243 71,768 102,157 104,125
Industrial 9,090 6,584 14,746 12,514 22,402 22,545
Interruptible Sales 11,767 11,069 23,468 23,224 48,371 53,355
Unregulated Sales 15,985 3,545 25,943 5,255 28,190 5,235
Transportation Sales 5,886 4,623 11,681 8,678 20,699 15,693
Customer Service, Appliance
Leasing and Other 3,280 2,780 6,717 5,246 12,351 9,765
------- ------- ------- ------- ------- -------
Gas Sold or Transported
(MMcf)
Firm Sales:
Residential 11,181 9,833 18,592 15,936 24,255 21,487
Commercial 6,853 6,949 11,981 10,798 16,638 15,666
Industrial 1,749 1,525 3,145 2,937 5,425 5,235
Interruptible Sales 3,024 3,929 6,779 8,264 16,731 18,691
Unregulated Sales 4,481 1,695 8,261 2,722 9,269 2,884
5,149 6,112 12,485 10,865 22,759 19,620
------ ------ ------ ------ ------ ------
32,437 29,525 61,223 51,522 95,077 83,583
====== ====== ====== ====== ====== ======
Average Utility
Customers Served
Firm:
Residential 334,231 330,221 330,968 327,908 330,818 325,063
Commercial 24,826 24,800 24,739 24,628 24,764 24,204
Industrial 338 399 346 395 371 399
Interruptible 146 109 140 134 138 137
Transportation 643 149 535 148 387 144
------- ------- ------- ------- ------- -------
360,184 355,678 356,728 353,213 356,478 349,947
======= ======= ======= ======= ======= =======
Degree Days in
New Jersey
Actual 2,829 2,427 4,715 3,779 5,269 4,175
Normal 2,690 2,673 4,415 4,398 4,978 4,978
Percentage variance
from normal 5% 9% 7% 14% 6% 16%
colder warmer colder warmer colder warmer
Employees 1,070 1,129
Ratio of Earnings to
Fixed Charges
(Twelve months only) 1.99 1.22<PAGE>
</TABLE>
See the notes to the consolidated financial statements
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
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 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 March 31, 1996 and 1995
Net Income. Net income for the three-month period ended March 31,
1996 was $14.5 million, or $1.58 per share, as compared with net income
of $8.6 million, or $0.93 per share, for the three-month period ended
March 31, 1995. The increase in the current period was primarily the
result of higher operating margins and approximately $4.7 million of
after-tax non-recurring charges incurred in the 1995 period. This
increase was partially offset by higher operations and maintenance and
depreciation expenses.
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 $22.9 million, or 15%, for the three-month period
ended March 31, 1996 as compared with the three-month period ended March
31, 1995. The increase principally reflects the effect of weather in New
Jersey that was 5% colder than normal and 17% colder than the prior year
period. Operating revenues were also increased due to higher sales to
unregulated customers, increased customer service revenues and customer
growth. Partially offsetting these increases was a reduction in gas
costs under purchased gas adjustment clauses.
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
sales are not regulated, margins realized are shared between ratepayers
and the Company 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. During the three-month period ended March 31, 1996, the
Company was able to increase off-system sales as a result of the colder
weather.
The Company's operating margins increased by $3.5 million, or 6%, for
the three-month period ended March 31, 1996 as compared with the three-
month period ended March 31, 1995. The increase principally reflects
higher sales to unregulated customers, increased customer service
revenues, increases in the number of customers served 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. Operating
margins were decreased by approximately $1.0 million for the three-month
period ended March 31, 1996 and were increased by approximately $1.9
million for the three-month period ended March 31, 1995, under the
weather normalization clauses.
Other Operating Expenses. The Company's other operating expenses,
excluding income taxes, decreased by approximately $6.4 million, or 17%,
for the three-month period ended March 31, 1996 as compared with the
three-month period ended March 31, 1995. The decrease was primarily the
result of non-recurring pre-tax charges of $7.1 million incurred in the
1995 period associated in part with an early retirement program
established by the Company in fiscal 1995 under which 95 eligible
employees retired, and in part to the restructuring of the Company's
Southern Division operations. This decrease was partially offset by
higher operations and maintenance expenses and depreciation. Operations
and maintenance expenses increased approximately $0.4 million due to
increased costs incurred as a result of the colder weather in New Jersey
during the current quarter and to higher costs from the Company's
unregulated sales and customer service activities. The operations and
maintenance expense increase was partially offset by lower labor and
employee benefits costs reflecting the Company's 5% reduction in work
force. Depreciation expense increased by approximately $0.4 million due
to additional utility plant in service.
The increase in income taxes for the three-month period ended March
31, 1996 as compared with the three-month period ended March 31, 1995,
was principally due to the effects of higher pre-tax income .
Interest Expense . Interest expense increased by approximately $0.2
million for the three-month period ended March 31, 1996 as compared with
the three-month period ended March 31, 1995. The increase principally
reflects higher average borrowings partially offset by lower average
short-term interest rates and a decrease in interest recorded on the
over-collection of gas costs by the Northern Division.
Six-Month Periods Ended March 31, 1996 and 1995
Net Income. Net income for the six-month period ended March 31, 1996
was $20.9 million, or $2.29 per share, as compared with net income of
$12.5 million, or $1.37 per share, for the six-month period ended March
31, 1995. The increase in the current period was primarily due to higher
operating margins, lower operations and maintenance expenses and
approximately $5.6 million of after-tax non-recurring charges incurred
in the 1995 period. This increase was partially offset by higher
interest and depreciation expenses.
Operating Revenues and Operating Margins. The Company's operating
revenues increased by $41.7 million, or 16%, for the six-month period
ended March 31, 1996 as compared with the six-month period ended March
31, 1995. The increase principally reflects the effect of weather in New
Jersey that was 7% colder than normal and 25% colder than the prior year
period. Operating revenues were also increased by higher sales to
unregulated customers, increased customer service revenues and customer
growth. Partially offsetting these increases was a reduction in gas
costs under purchased gas adjustment clauses.
The Company's operating margins increased by $6.5 million, or 7%, for
the six-month period ended March 31, 1996 as compared with the six-month
period ended March 31, 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. Operating margins were decreased by approximately
$2.1 million for the six-month period ended March 31, 1996 and were
increased by approximately $4.5 million for the six-month period ended
March 31, 1995, under the weather normalization clauses.
Other Operating Expenses. The Company's other operating expenses,
excluding income taxes, decreased by approximately $8 million, or 11%,
for the six-month period ended March 31, 1996 as compared with the six-
month period ended March 31, 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. The decrease also reflects lower
operations and maintenance expenses primarily due to lower labor and
employee benefits costs reflecting the Company's 5% reduction in work
force, partially offset by costs incurred as a result of colder weather
in New Jersey during the current heating season, and higher costs
associated with the Company's unregulated sales and customer service
activities. These decreases were partially offset by higher depreciation
expense due primarily to additional utility plant in service.
The increase in income taxes for the six-month period ended March 31,
1996 as compared with the six-month period ended March 31, 1995, was
primarily due to the effects of higher pre-tax income .
Interest Expense . Interest expense increased by approximately $0.7
million for the six-month period ended March 31, 1996 as compared with
the six-month period ended March 31, 1995 principally due to higher
average borrowings as a result of working capital requirements
associated with colder weather and growth in the Company's investment in
plant.
Twelve-Month Periods Ended March 31, 1996 and 1995
Net Income. Net income for the twelve-month period ended March 31,
1996 was $13.9 million, or $1.52 per share, as compared with $5.6
million, or $0.62 per share, for the twelve-month period ended March 31,
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.
This increase was partially offset by higher interest and depreciation
expenses, and the reversal in the 1995 period of $1.8 million of income
tax reserves.
Operating Revenues and Operating Margins. The Company's operating
revenues for the twelve-month period ended March 31, 1996 increased
approximately $24.1 million, or 6%, as compared with the twelve-month
period ended March 31, 1995. The increase was principally due to
weather in New Jersey that was 6% colder than normal and 26% colder than
the prior year period. Operating revenues were also increased by higher
sales to unregulated customers, increased customer service revenues and
customer growth. Partially offsetting these increases were the effects
of lower gas costs which resulted in refunds totaling $14 million to
Northern Division customers and a significant decrease in revenues as a
result of the Company's purchased gas adjustment clauses. Also
contributing to a decrease in revenues were lower revenues from
industrial and interruptible sales customers who were able to remain on
transportation service in the current period due to the continuous
availability of pipeline capacity during the heating season.
Transportation revenues are significantly lower than sales revenues due
to the cost of gas included in sales revenues; however, tariffs for
transportation service are generally designed to provide the same
margins as tariffs to sell and transport gas together. Therefore, the
Company is financially indifferent as to whether it transports gas, or
sells gas and transportation together.
The Company's operating margins increased by $7.5 million, or 5%, for
the twelve-month period ended March 31, 1996 as compared with the
twelve-month period ended March 31, 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. Through the Company's weather
normalization clauses, operating margins were decreased by approximately
$2.1 million for the twelve-month period ended March 31, 1996, and were
increased by approximately $5.2 million for the twelve-month period
ended March 31, 1995.
Other Operating Expenses. The Company's other operating expenses,
excluding income taxes, decreased by approximately $12.5 million, or
10%, for the twelve-month period ended March 31, 1996 as compared with
the twelve-month period ended March 31, 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 offsetting these
decreases was an increase in depreciation expense due to additional
utility plant in service.
Income taxes increased by $9.2 million for the twelve-month period
ended March 31, 1996 due to the reversal in the 1995 period of $1.8
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 $2.3 million for the
1996 period as compared with the 1995 period primarily due to higher
average borrowings as a result of working capital requirements due to
colder weather and growth in the Company's investment in plant, and
higher short-term interest rates.
Regulatory Matters
On April 17, 1996, City Gas Company of Florida filed a notice with
the Florida Public Service Commission indicating that within 60 days it
intends to file a request for a change in base rates. There can be no
assurances that the Company's rate request, when filed, 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
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 affect the operating margins
of the Company.
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 $43.1
million for the six-month period ended March 31, 1996 as compared with
$69.3 million for the six-month period ended March 31, 1995. For the
twelve-month period ended March 31, 1996, the Company's net cash
provided by operating activities was $21.7 million as compared with
$78.4 million for the twelve-month period ended March 31, 1995. The
decreases in the 1996 periods reflect a higher level of accounts
receivable primarily due to colder weather and a significantly lower
overcollection of gas costs through the Company's purchased gas
adjustment clauses. The twelve-month period also reflects a decrease in
cash provided by operations due to the timing of the payment of New
Jersey gross receipts and franchise tax payments.
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 $45.9 million at 5.9% for the six-month period ended March
31, 1996 and $87.4 million at 5.8% for the six-month period ended March
31, 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, partially offset by borrowings to finance portions of
the Company's construction expenditures. Notes payable to banks
decreased as of March 31, 1996 as compared to the balance outstanding at
September 30, 1995, due to positive seasonal cash flows. At March 31,
1996, the Company had outstanding notes payable to banks amounting to
$18.2 million and available unused lines of credit amounting to
$139.8 million.
Long-Term Debt and Funds for Construction Held by Trustee. 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 March 31, 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 expects to issue in
fiscal 1996 approximately $39 million of tax-exempt Gas Facilities
Revenue Bonds for the purpose of financing a portion of the Northern
Division's capital expenditures program. Regulatory approval for such
issuance has been sought, but has not yet been obtained.
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 March 31, 1996, the total unexpended
portion of all of the Company's Gas Facilities Revenue Bonds was $13.2
million and is classified on the Company's consolidated balance sheet,
including interest earned thereon, as funds for construction held by
trustee.
Common Stock. In April 1996, the Company filed a registration
statement with the Securities and Exchange Commission to issue up to
2,000,000 additional shares of common stock. Regulatory approval for
such issuance has been sought and is expected in May 1996. The Company
anticipates issuing the additional shares in late May 1996 for the
purpose of reducing outstanding debt and for other general corporate
purposes.
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 six-month
period ended March 31, 1995, and were used primarily to reduce
outstanding short-term debt. The Company received approval at its Annual
Meeting of Shareholders held on March 12, 1996, for three new common
stock plans: the 1996 Employee Stock Purchase Plan, the 1996 Director
Stock Purchase Plan and the 1996 Stock Option and Stock Award Plan. Any
issuances of shares under the new plans will be made by newly issued
shares purchased from the Company.
Capital Expenditures and Commitments
Capital expenditures, which consist primarily of expenditures to
expand and upgrade the Company's gas distribution systems, were $14.2
million for the six-month period ended March 31, 1996 as compared with
$17.2 million for the six-month period ended March 31, 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 September 1995, the Northern Division filed a
petition with the NJBPU to establish an MGP Remediation Adjustment
Clause ("RAC"). The RAC would enable the Company to recover actual MGP
expenses over a rolling seven-year period. Other New Jersey utilities
have received similar authorization to recover MGP environmental
expenditures in rates. 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 million of such costs through March 31,
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 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 March 31, 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, $30.1 in fiscal 1997 and $0.1 million
in each of fiscal years 1998, 1999 and 2000.<PAGE>
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 1996.
The Annual Meeting of Shareholders of NUI Corporation was held on
March 12, 1996. Proxies for the Annual Meeting were solicited pursuant
to Regulation 14A and there was no solicitation in opposition to
management's nominees. At the meeting, the shareholders elected
directors, ratified the appointment of independent public accountants
and approved three new common stock plans; the 1996 Stock Option and
Stock Award Plan; the 1996 Employee Stock Purchase Plan; and the 1996
Director Stock Purchase Plan.
The total votes were as follows: Against or
For Withheld Abstain
(1) Election of directors to
serve for three-year
terms:
- Calvin R. Carver 7,839,602 237,744 --
- Vera King Farris 7,839,285 238,061 --
- John Winthrop 7,849,844 227,502 --
(2) Ratification of the
appointment of Arthur
Andersen LLP as
independent
public accountants 7,959,757 54,162 63,427
(3) Approval of three new
common stock plans:
-1996 Stock Option and
Stock Award Plan 7,274,930 623,658 178,758
-1996 Employee Stock
Purchase Plan 7,614,578 313,420 149,348
-1996 Director Stock
Purchase Plan 7,259,764 602,978 214,604
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.
May 6, 1996 President and Chief
Executive Officer
STEPHEN M. LIASKOS
May 6, 1996 Vice President and
Controller(Principal
Accounting Officer)<PAGE>
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