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, 1995 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, 1995: Common Stock, No Par Value:
9,227,807 shares outstanding.
NUI Corporation and Subsidiaries
Statement of Consolidated Income (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
1995 1994 1995 1994 1995 1994
Operating Margins
Operating revenues $143,938 $152,537 $246,462 $258,140 $380,608 $379,878
Purchased gas and fuel 78,145 88,756 132,342 147,365 208,398 215,230
Gross receipts and
franchise taxes 12,910 15,069 21,301 24,846 28,485 32,113
------ ------- ------- ------- ------- -------
Total operating margins 52,883 48,721 92,819 85,929 143,725 132,535
------- ------- ------- ------- ------- -------
Other Operating Expenses
Other operation 20,183 19,701 40,255 37,395 80,497 73,186
Maintenance 1,541 1,628 3,129 3,108 6,698 5,959
Restructuring and other
non-recurring charges 7,134 -- 8,591 -- 9,514 --
Depreciation and
amortization 4,953 4,238 9,902 8,422 18,926 15,987
Other taxes 1,712 1,493 3,180 2,849 6,558 5,500
Income taxes 4,391 6,296 6,405 9,439 (942) 6,473
------- ------- ------- ------- ------- -------
Total other operating 39,914 33,356 71,462 61,213 121,251 107,105
expenses ------- ------- ------- ------- ------- -------
Operating Income 12,969 15,365 21,357 24,716 22,474 25,430
Other Income and Expense, 164 93 210 348 375 872
Net
Interest Expense 4,579 3,640 9,035 7,394 17,207 14,318
------- ------- ------- ------- ------- -------
Net Income $ 8,554 $11,818 $12,532 $17,670 $ 5,642 $11,984
======= ======= ======= ======= ======= =======
Net Income Per Share of
Common Stock $0.93 $1.43 $1.37 $2.14 $0.62 $1.46
==== ==== ==== ==== ==== ====
Dividend Per Share of
Common Stock $0.225 $0.40 $0.45 $0.80 $1.25 $1.60
==== ==== ==== ==== ==== ====
Weighted Average Number of
Shares of Common Stock
Outstanding 9,165,239 8,262,229 9,151,195 8,239,986 9,071,734 8,201,865
========= ========= ========= ========= ========= =========
See the notes to the consolidated financial statements
2
NUI Corporation and Subsidiaries
Consolidated Balance Sheet
(Dollars in thousands)
March 31, September 30,
1995 1994
(*)
(Unaudited)
ASSETS
Utility Plant
Utility plant, at original cost $580,489 $566,982
Accumulated depreciation and amortization (179,435) (173,894)
Unamortized plant acquisition adjustments 35,869 33,604
-------- --------
Net utility plant 436,923 426,692
------- -------
Funds for Construction Held by Trustee 20,884 26,906
------- -------
Investments in Marketable Securities 3,611 3,468
-------- --------
Current Assets
Cash 7,605 5,637
Accounts receivable 64,374 39,584
Allowance for doubtful accounts (2,712) (1,368)
Fuel inventories, at average cost 7,004 28,616
Prepayments and other 12,389 13,435
------- ------
Current assets 88,660 85,904
------- ------
Deferred Charges and Other Assets 63,872 58,678
------- -------
$613,950 $601,648
======= =======
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $152,358 $142,768
Preferred stock -- --
Long-term debt 210,864 160,928
------- -------
Capitalization 363,222 303,696
------- -------
Capital Lease Obligations 11,392 11,932
------- -------
Current Liabilities
Current portion of long-term debt and capital lease
obligations 2,668 2,761
Notes payable to banks 11,575 110,125
Accounts payable, customer deposits and accrued
liabilities 71,003 53,476
General taxes 17,663 1,170
Federal income taxes 9,760 6,079
------- -------
Current liabilities 112,669 173,611
------- -------
Deferred Credits and Other Liabilities
Deferred Federal income taxes 51,519 50,066
Unamortized investment tax credits 7,335 7,570
67,813 54,773
Other liabilities ------- -------
126,667 112,409
Deferred credits and other liabilities ------- -------
$613,950 $601,648
======= =======
<F1>
* Derived from audited financial statements
See the notes to consolidated financial statements
3
NUI Corporation and Subsidiaries
Statement of Consolidated Cash Flows (Unaudited)
(Dollars in thousands)
Six Months Ended Twelve Months Ended
March 31, March 31,
1995 1994 1995 1994
Operating Activities
Net income $12,532 $17,670 $5,642 $11,984
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 10,544 9,030 20,287 17,215
Deferred Federal income taxes 442 3,671 3,664 6,462
Amortization of deferred
investment tax credits (235) (228) (483) (462)
Non-cash portion of
restructuring and other
non-recurring charges 5,466 -- 6,149 --
Other 2,231 1,724 3,433 4,608
Effect of changes in:
Accounts receivable, net (23,446) (38,135) 8,965 (6,249)
Fuel inventories 21,612 22,186 (767) (2,172)
Deferred cost of gas 19,665 9,545 14,452 2,341
Accounts payable, deposits and
accruals 4,964 7,673 (914) 9,373
Gross receipts and franchise
taxes 19,540 (16,931) 26,191 (17,942)
Other (4,026) (2,787) (8,225) (6,151)
------ ------ ------ ------
Net cash provided by operating 69,289 13,418 78,394 19,007
activities ------ ------ ------- ------
Financing Activities
Proceeds from sales of common
stock 1,135 2,884 4,574 4,629
Dividends to shareholders (4,149) (6,603) (11,382) (13,129)
Proceeds from issuance of long-
term debt 50,000 -- 116,500 30,000
Funds for construction held by
trustee, net 6,648 5,350 (795) 11,940
Repayments of long-term debt (64) -- (54,223) (21,734)
Principal payments under capital
lease obligations (951) (1,036) (1,970) (1,974)
Net short-term borrowings (98,550) 11,720 (76,377) 16,395
(repayments) ------ ------ ------ ------
Net cash provided by (used for) (45,931) 12,315 (23,673) 26,127
financing activities ------ ------ ------- ------
Investing Activities
Cash expenditures for utility
plant (20,990) (23,672) (50,919) (44,350)
Proceeds from sales of marketable
securities -- 659 -- 1,154
Proceeds from sale of assets -- -- 1,610 --
Other (400) (655) (1,745) (1,398)
------ ------ ------ ------
Net cash used for investing (21,390) (23,668) (51,054) (44,594)
activities ------ ------ ------ ------
Net increase in cash 1,968 2,065 3,667 540
Cash
At beginning of period 5,637 1,873 3,938 3,398
----- ----- ----- -----
At end of period $7,605 $3,938 $7,605 $3,938
===== ===== ===== =====
Supplemental Disclosures of Cash
Flows
Income taxes paid (refunds
received), net ($1,685) $ -- $(1,019) $1,406
Interest paid $7,417 $7,580 $18,564 $13,729
See the notes to the consolidated financial statements
4
NUI Corporation and Subsidiaries
Notes to Consolidated Financial Statements
1. Basis of Presentation
The consolidated financial statements include all operating
divisions and subsidiaries of NUI Corporation ("NUI" or the "Company").
The Company's operating divisions include Elizabethtown Gas Company (the
"New Jersey Division"), City Gas Company of Florida (the "Florida
Division") and Pennsylvania & Southern Gas Company (the "PSGS
Division"), which operates as North Carolina Gas Service (North
Carolina), Elkton Gas Service (Maryland), Valley Cities Gas Service
(Pennsylvania) and Waverly Gas Service (New York). PSGS was acquired in
a merger on April 19, 1994 (the "PSGS Merger"). Effective April 1, 1995,
the Company consolidated its Florida and PSGS divisions to form a new
NUI Southern Division (see Note 3). The consolidated financial
statements contained herein have been prepared without audit in
accordance with the rules and regulations of the Securities and Exchange
Commission and reflect all adjustments which, in the opinion of
management, are necessary for a fair statement of the results for
interim periods. All adjustments made were of a normal recurring nature.
The consolidated financial statements should be read in conjunction with
the consolidated financial statements and the notes thereto that are
included in the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994.
The Company is subject to regulation as an operating utility
by the public utility commissions of the states in which it serves.
Because of the seasonal nature of gas utility operations, the results
for interim periods are not necessarily indicative of the results for an
entire year.
Effective October 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities", which requires the Company
to carry its investments in marketable securities at their current
market value. As of March 31, 1995, the market value of the Company's
investments in marketable securities exceeds their cost by approximately
$143,000, which unrealized gain is reflected net of deferred income
taxes in the accompanying consolidated balance sheet as a component of
common shareholders' equity.
2. Common Shareholders' Equity
The components of common shareholders' equity were as follows
(dollars in thousands):
March 31, September 30,
1995 1994
Common stock, no par value $139,085 $138,082
Shares held in treasury (797) (797)
Retained earnings 15,084 6,700
Valuation of marketable securities 89 --
Unearned employee compensation - ESOP (1,103) (1,217)
------ ------
Total common shareholders' equity $152,358 $142,768
======= =======
3. Restructuring and Other Non-Recurring Charges
During the three-month period ended March 31, 1995, the
Company incurred approximately $7.1 million of non-recurring charges
for, among other things, the implementation of an early retirement
program, and the restructuring of its Florida and PSGS divisions.
In November 1994, the Company offered an early retirement
program to approximately 10% of its employees. The program, which became
effective on April 1, 1995, was accepted by 95 of the eligible 112
employees. In accordance with Statement of Financial Accounting
Standards No. 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination
Benefits", the Company recorded a special termination charge of
approximately $4.1 million. This charge relates to the 80 New Jersey
Division employees who opted for the program. In addition, the Company
recorded approximately $0.8 million of other benefit expenses associated
with these employees. The PSGS Division incurred a charge of
approximately $0.6 million for special termination benefits for its 15
employees who opted for the program, which has been deferred pending
regulatory recovery.
Effective April 1, 1995, the Company consolidated its Florida
and PSGS divisions to form a new NUI Southern Division. The Southern
Division will be headquartered in Hialeah, Florida. As a result, the
PSGS Division headquarters in Sayre, Pennsylvania will be closed by the
end of the calendar year. The Company accrued a charge of approximately
$1.8 million during the quarter ended March 31, 1995, for severance and
related expenses, including senior management changes, associated with
the consolidation of the two divisions.
4. Contingencies
Environmental Matters. The Company is subject to federal and
state legislation with respect to water, air quality, solid waste
disposal and employee health and safety matters, and to environmental
regulations issued by the United States Environmental Protection Agency
(the "EPA"), the New Jersey Department of Environmental Protection (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 New Jersey 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 (the "NJBPU"). In April 1991, the NJDEP issued
an Administrative Consent Order that established the procedures to be
followed by the Company in the development of an investigation and
remediation plan for an MGP site located at South Street in Elizabeth,
New Jersey. Subsequently, the Company and the NJDEP entered into
Memoranda of Agreement that established procedures for the development
of investigation and remediation plans for the other five New Jersey
Division MGP sites.
During the course of its due diligence activities in
connection with the PSGS Merger, the Company was informed that PSGS had
owned or operated ten former MGP facilities, only three of which PSGS
currently owns. The former MGP sites are located in the states of North
Carolina, South Carolina, Pennsylvania, New York and Maryland. No
provision had been made, prior to the PSGS Merger, in PSGS' financial
statements for environmental remediation. The PSGS Division has joined
with other North Carolina utilities to form the North Carolina
Manufactured Gas Plant Group. This group has entered into a Memorandum
of Understanding with the North Carolina Division of Environment, Health
and Natural Resources ("NCDEHNR") to develop a uniform program and
framework for the investigation and/or remediation of MGP sites in North
Carolina. The NCDEHNR has recently initiated investigation activities at
four MGP sites, none of which belong to the PSGS Division.
In order to quantify the potential future expenditures for all
MGP sites, the Company, with the aid of environmental consultants,
assesses the probability and costs associated with initiating and/or
continuing investigative activities at each of the Company's sites, as
well as implementing appropriate remedial actions. Based on the
Company's most recent assessment, as of March 31, 1995, the Company has
recorded a total reserve for probable environmental investigation and/or
remediation costs of approximately $34 million, which the Company
expects to expend during the next twenty years. The reserve, which
includes probable 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 New Jersey sites in accordance with a cost
sharing agreement. The Company is not able at this time to determine the
extent of contamination, if any, at the other sites, the requirement for
remediation if contamination is present, or the costs associated with
remediation. Based on the currently available information and
assessments, the Company believes it is reasonably possible that costs
associated with all of its sites may exceed current reserves by an
amount of up to $21 million.
The Company believes that certain of its remediation costs
will be recoverable in rates and that a portion of such costs may be
recoverable from the Company's insurance carriers. The most recent base
rate order for the New Jersey 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 $32 million as of March
31, 1995, reflecting the future recovery of environmental remediation
liabilities related to the New Jersey Division MGP sites. Other New
Jersey utilities also have received authorization to recover similar
environmental expenditures in rates. The Company intends to seek
recovery of the PSGS Division's environmental liabilities from
ratepayers in the PSGS states, former owners and operators, and
insurance carriers. However, the Company is not able at this time to
determine the extent of recovery, if any. Consequently, as of March 31,
1995, the Company has recorded an amount of $3.7 million as an
additional plant acquisition adjustment, of which, approximately $1.8
million was recorded during the quarter ended March 31, 1995.
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.
NUI Corporation and Subsidiaries
Summary Consolidated Operating Data
Three Months Six Months Twelve Months
Ended Ended Ended
March 31, March 31, March 31,
1995 1994 1995 1994 1995 1994
Operating Revenues (Dollars
in thousands):
Firm Sales:
Residential $75,490 $82,395 $125,314 $134,334 $179,686 $184,013
Commercial 41,310 45,764 69,022 75,965 99,035 103,422
Industrial 6,584 9,387 12,514 15,722 22,545 25,074
Interruptible sales 10,818 10,553 22,776 22,278 52,524 46,701
Off-System sales 3,545 432 5,255 1,147 5,597 2,904
Transportation services 4,623 2,765 8,678 6,243 15,693 10,537
Appliance leasing, fees and
other 1,568 1,241 2,903 2,451 5,528 7,227
------ ------ ------ ------ ------ ------
$143,938 $152,537 $246,462 $258,140 $380,608 $379,878
======= ======= ======= ======= ======= =======
Gas Sold or Transported
(MMcf):
Firm Sales:
Residential 9,833 10,567 15,936 16,972 21,487 22,267
Commercial 6,431 6,783 10,798 11,342 15,666 15,874
Industrial 1,525 1,795 2,937 3,051 5,235 5,037
Interruptible sales 3,929 2,832 8,264 6,291 18,691 13,733
Off-System sales 1,695 243 2,722 583 2,884 583
6,112 3,217 10,865 7,777 19,620 16,874
------ ------ ------ ------ ------ ------
Transportation services 29,525 25,437 51,522 46,016 83,583 74,368
====== ====== ====== ====== ====== ======
Average Customers Served:
Firm:
Residential 330,221 303,935 327,908 302,811 325,063 301,496
Commercial 24,800 21,581 24,628 21,549 24,204 21,411
Industrial 399 363 395 363 399 367
Interruptible sales 109 99 134 101 137 102
Transportation services 149 101 148 102 144 96
------ ------ ------ ------ ------ ------
355,687 326,079 353,213 324,926 349,947 323,472
====== ====== ====== ====== ====== ======
Degree Days:
New Jersey
Actual 2,427 2,915 3,779 4,548 4,175 5,012
Normal 2,673 2,673 4,398 4,398 4,978 4,978
Percentage variance from
normal 9.2% 9.1% 14.1% 3.4% 16.1% 0.7%
warmer colder warmer colder warmer colder
North Carolina
Actual 1,881 3,119 3,430
Normal 2,089 3,574 3,874
Percentage variance from
normal 10.0% 12.7% 11.5%
warmer warmer warmer
Average Number of Employees 1,108 1,018 1,129 1,016 1,143 1,013
Ratio of Earnings to Fixed
Charges (Twelve-months only) 1.22 2.02
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 ("NUI" or the "Company").
The Company's operating divisions are Elizabethtown Gas Company (the
"New Jersey Division"), City Gas Company of Florida (the "Florida
Division") and Pennsylvania & Southern Gas Company (the"PSGS Division"),
which operates as North Carolina Gas Service (North Carolina), Elkton
Gas Service (Maryland), Valley Cities Gas Service (Pennsylvania) and
Waverly Gas Service (New York). PSGS was acquired in a merger on April
19, 1994 (the "PSGS Merger"). Effective April 1, 1995, the Company
consolidated its Florida and PSGS divisions to form a new NUI Southern
Division (see Note 3 of the Notes to the Consolidated Financial
Statements). Because of the seasonal nature of gas utility operations,
the results for interim periods are not necessarily indicative of the
results for an entire year.
Results of Operations
Three-Month Periods Ended March 31, 1995 and 1994
Net Income. Net income for the three-month period ended March
31, 1995 was $8.5 million, or $0.93 per share, as compared with net
income of $11.8 million, or $1.43 per share, for the three-month period
ended March 31, 1994. The decrease in the current period is primarily
due to non-recurring charges which, on an after-tax basis were
approximately $4.7 million, or $0.51 per share, and higher interest
expense. Partially offsetting these decreases was approximately $0.9
million of net income, excluding non-recurring charges, attributable to
the PSGS Division in the 1995 period. Absent all non-recurring charges,
net income for the 1995 period would have been $13.2 million, or $1.44
per share.
Net income per share for the three-month period ended March
31, 1995 was also affected by the increased average number of
outstanding shares of NUI common stock (including 683,443 shares issued
as a result of the PSGS Merger) as compared to the three-month period
ended March 31, 1994.
Operating Revenues and Operating Margins. The Company's
operating revenues decreased by $8.6 million, or 6%, for the three-month
period ended March 31, 1995 as compared with the three-month period
ended March 31, 1994. The decrease principally reflects the effect of
weather in New Jersey that was 9% warmer than normal and 17% warmer than
the prior year period. The warmer weather resulted in decreased sales to
heating customers and lower revenues from industrial customers who were
able to remain on transportation service due to a lack of third party
supply curtailments in the current period. Operating revenues were also
reduced by the effect of gas cost adjustment clauses (described below).
Partially offsetting these decreases were approximately $11.2 million of
operating revenues from the addition of the PSGS Division, the effect of
base rate and appliance leasing rate increases in the Florida Division
(see- "Regulatory Matters"), an increase in sales to off-system
customers and other customer growth. The Company's total average number
of customers served increased by 29,599, or 9%, including 23,197 heating
customers. (Excluding 20,479 customers acquired as a result of the PSGS
Merger, of which 18,134 were heating customers, customers increased
approximately 3%.)
Gas cost adjustment clauses enable the Company to pass through
to its customers, via periodic adjustments to amounts billed, increased
or decreased costs incurred by the Company for purchased gas, without
affecting operating margins. For the three-month period ended March 31,
1995, adjustments related to changes in gas costs were lower by
approximately $7.8 million as compared with the three-month period ended
March 31, 1994, with an offsetting adjustment to purchased gas costs.
The Company's operating margins increased by $4.2 million, or
8.5%, for the three-month period ended March 31, 1995 as compared with
the three-month period ended March 31, 1994. The increase principally
reflects increases in the number of customers served, primarily those
resulting from the PSGS Merger, and the base rate and appliance leasing
rate increases in the Florida Division. Partially offsetting these
increases was the effect of the warmer weather in New Jersey. The
Company has weather normalization clauses in its New Jersey and North
Carolina tariffs which are designed to help stabilize the Company's
results by increasing amounts charged to customers when weather has been
warmer than normal and by decreasing amounts charged when weather has
been colder than normal. The Company's weather normalization clauses
increased operating margins by approximately $1.9 million for the three-
month period ended March 31, 1995, and decreased operating margins by
approximately $1.4 million for the three-month period ended March 31,
1994, for the effects of abnormal weather. The mechanics of the weather
normalization clause in New Jersey, however, did not allow for recovery
of all lost margins due to the extremely warm weather in the 1995
period.
Other Operating Expenses. The Company's other operating
expenses, excluding income taxes, increased by approximately $8.5
million, or 31%, for the three-month period ended March 31, 1995 as
compared with the three-month period ended March 31, 1994. The increase
is primarily the result of approximately $7.1 million of non-recurring
pre-tax charges relating in part to the Company's early retirement
program, and in part to restructuring of the Florida and PSGS Divisions'
operations, including senior management changes and other work force
reductions (see Note 3 of the Notes to the Consolidated Financial
Statements). The increase also includes approximately $2.2 million of
other pre-tax operating expenses from the addition of the PSGS Division
in the 1995 period results, and an increase in depreciation expense due
to additional plant in service. Offsetting these cost increases were
less overtime and other maintenance expenses incurred in the New Jersey
Division due to warmer weather during the current period, as well as
other expense reductions. The decrease in income taxes was due to lower
pre-tax income.
Interest Expense. Interest expense for the three-month period
ended March 31, 1995 increased by approximately $0.9 million as compared
with the three-month period ended March 31, 1994, principally reflecting
higher short-term interest rates and higher average outstanding
borrowings, including $50 million of Medium-Term Notes issued on
February 16, 1995 (see - "Financing Activities and Resources"). These
increases were partially offset by a decrease in average long-term
interest rates due to the refinancing of $46.5 million of the Company's
11% and 11.25% Gas Facilities Revenue Bonds to an interest rate of
6.35%.
Six-Month Periods Ended March 31, 1995 and 1994
Net Income. Net income for the six-month period ended March
31, 1995 was $12.5 million, or $1.37 per share, as compared with net
income of $17.7 million, or $2.14 per share, for the six-month period
ended March 31, 1994. The decrease is primarily due to non-recurring
charges, (including an additional $1.5 million of charges recorded in
the first quarter of fiscal 1995) which, on an after-tax basis were
approximately $5.6 million, or $0.61 per share, and higher interest
expense. Partially offsetting these decreases was approximately $1.3
million of net income, excluding non-recurring charges, attributable to
the PSGS Division in the 1995 period. Absent all non-recurring charges,
net income for the six-month period ended March 31, 1995 would have been
$18.1 million, or $1.98 per share.
Net income per share for the six-month period ended March 31,
1995 was also affected by the increased average number of outstanding
shares of NUI common stock (including 683,443 shares issued as a result
of the PSGS Merger) as compared to the six-month period ended March 31,
1994.
Operating Revenues and Operating Margins. The Company's
operating revenues for the six-month period ended March 31, 1995
decreased approximately $11.7 million, or 4.5%, as compared with the
six-month period ended March 31, 1994. The decrease principally reflects
the effects of weather in New Jersey that was 14% warmer than normal and
17% warmer than the prior year period. Operating revenues were also
reduced by approximately $7.7 million due to the effect of gas cost
adjustment clauses, and by a refund of approximately $2.6 million to New
Jersey Division customers as a result of lower than projected gas prices
incurred in fiscal 1994 (see- "Regulatory Matters"). Partially
offsetting these decreases was approximately $19.4 million of operating
revenues from the addition of the PSGS Division, the effects of base
rate and appliance leasing rate increases in the Florida Division,
increased sales to off-system customers and other customer growth. The
Company's average number of customers served increased by 28,287, or
8.7%, including 22,759 heating customers. (Excluding 20,479 customers
acquired as a result of the PSGS Merger, which included 18,134 heating
customers, customers increased approximately 2%.)
The Company's operating margins increased by $6.9 million, or
8%, for the six-month period ended March 31, 1995 as compared with the
six-month period ended March 31, 1994. The increase was principally the
result of increases in the number of customers served, primarily those
resulting from the PSGS Merger, and the base rate and appliance leasing
rate increases in the Florida Division. Partially offsetting these
increases was the effect of the warmer-than-normal weather in New Jersey
in the 1995 period not fully recovered through the weather normalization
clause. Through the Company's weather normalization clauses, operating
margins were increased by approximately $4.5 million for the six-month
period ended March 31, 1995, and decreased by approximately $0.9 million
for the six-month period ended March 31, 1994, for the effect of
abnormal weather.
Other Operating Expenses. The Company's other operating
expenses, excluding income taxes, increased by approximately $13.3
million, or 26%, for the six-month period ended March 31, 1995 as
compared with the six-month period ended March 31, 1994. The increase
is primarily the result of approximately $8.6 million of non-recurring
pre-tax charges discussed in Note 3 of the Notes to the Consolidated
Financial Statements including approximately $1.5 million related to the
settlement of the Florida Division's rate case (see - "Regulatory
Matters") and the partial restructuring of the Florida Division's
operations, which were recorded in the first quarter of fiscal 1995.
The increase also includes approximately $4.3 million of other pre-tax
operating expenses from the inclusion of the PSGS Division in the 1995
period results, and an increase in depreciation expense due to
additional plant in service. The decrease in income taxes was due to
lower pre-tax income.
Interest Expense. Interest expense for the six-month period
ended March 31, 1995 increased by approximately $1.6 million, as
compared with the six-month period ended March 31, 1994, for the reasons
discussed under "Three-Month Periods Ended March 31, 1995 and 1994-
Interest Expense".
Twelve-Month Periods Ended March 31, 1995 and 1994
Net Income. Net income for the twelve-month period ended March
31, 1995 was $5.6 million, or $0.62 per share, as compared with net
income of $12.0 million, or $1.46 per share, for the twelve-month period
ended March 31, 1994. The decrease is primarily due to non-recurring
charges, (including an additional $0.9 million of charges recorded in
the fourth quarter of fiscal 1994) which, on an after-tax basis were
approximately $6.1 million, or $0.67 per share, and higher interest and
operating costs. Partially offsetting these decreases was approximately
$0.5 million of net income, excluding non-recurring charges,
attributable to the PSGS Division in the 1995 period, and the reversal
of approximately $1.8 million of income tax reserves no longer required
as a result of management's review of necessary reserve levels.
Net income per share for the twelve-month period ended March
31, 1995 was also affected by the increased average number of
outstanding shares of NUI common stock (including 683,443 shares issued
as a result of the PSGS Merger) as compared to the twelve-month period
ended March 31, 1994.
Operating Revenues and Operating Margins. The Company's
operating revenues for the twelve-month period ended March 31, 1995
increased approximately $0.7 million as compared with the twelve-month
period ended March 31, 1994. The increase principally reflects $28.2
million of operating revenues since April 19, 1994, from the addition of
the PSGS Division, and other customer growth, offset by the effects of
warmer-than-normal weather in New Jersey and gas cost adjustment
clauses. The Company's average number of customers served increased by
26,475, or 8%, including 22,248 heating customers. (Excluding 20,479
customers acquired as a result of the PSGS Merger, of which 18,134 were
heating customers, customers increased approximately 2%.)
The Company's operating margins increased by $11.2 million, or
8%, for the twelve-month period ended March 31, 1995 as compared with
the twelve-month period ended March 31, 1994. The increase is
principally the result of increases in the number of customers served,
primarily those resulting from the PSGS Merger. Through the Company's
weather normalization clauses, operating margins were increased by
approximately $5.4 million for the twelve-month period ended March 31,
1995, and decreased by approximately $0.6 million for the twelve-month
period ended March 31, 1994.
Other Operating Expenses. The Company's other operating
expenses, before income taxes, increased by approximately $21.6 million,
or 21%, for the twelve-month period ended March 31, 1995 as compared
with the twelve-month period ended March 31, 1994. The increase is
primarily attributable to non-recurring pre-tax charges of $9.5 million
as previously discussed (including approximately $0.9 million of charges
related to the write-off of certain non-recoverable deferred charges and
certain Florida Division restructuring costs recorded in the fourth
quarter of fiscal 1994). The increase also includes approximately $7.9
million of other pre-tax operating expenses from the inclusion of the
PSGS Division in the 1995 period results, and other operating and
depreciation cost increases. These increases were due in part to higher
costs associated with system growth, including the payroll and employee
benefits costs attributable to a larger work force, and depreciation due
to additional plant in service. System growth has occurred principally
in the Florida Division where the Company's capital expenditure program
has included the development of the Port St. Lucie franchise, the
construction of a new pipeline in Brevard County, which includes service
to the National Aeronautics and Space Administration's Kennedy Space
Center, and additional main extensions for future growth. The decrease
in income taxes was due to lower pre-tax income, as well as the
reversal, recorded in the fourth quarter of fiscal 1994, of
approximately $1.8 million of income tax reserves no longer required as
a result of management's review of necessary reserve levels.
Interest Expense. Interest expense for the twelve-month period
ended March 31, 1995 increased by approximately $2.9 million as compared
with the twelve-month period ended March 31, 1994, for the reasons
discussed under "Three-Month Periods Ended March 31, 1995 and 1994-
Interest Expense".
Regulatory Matters
On November 4, 1994, the New Jersey Board of Public Utilities
(the "NJBPU") approved a petition filed by the New Jersey Division to
reduce its annual gas cost adjustment revenues by approximately $11.9
million. The decrease reflects the Company's projections for lower gas
costs over the coming year and has no effect on the Company's operating
margins. The NJBPU also approved a refund to customers of approximately
$2.6 million, which was made in the first quarter of fiscal 1995, as a
result of lower than projected gas prices incurred in fiscal 1994. On
March 9, 1995, the NJBPU approved a refund to customers of $12 million
as a result of lower than projected gas prices incurred during fiscal
1995. The refund was made in April 1995.
On November 29, 1994, the Florida Public Service Commission
(the "FPSC") voted to authorize the Florida Division to increase its
permanent rates by $1.6 million annually (the "FPSC Order"). The FPSC
Order provides for a rate base amounting to approximately $82.6 million
with an overall after-tax rate of return of 7.26%. In addition, the FPSC
Order provides for several tariff changes designed to promote growth in
developing markets for natural gas, and approved the deregulation of the
Florida Division's leased appliance business which consists of leasing
water heaters, clothes dryers and ranges to customers to promote natural
gas usage in the residential market.
In December 1994, the NJBPU authorized new tariffs which are
designed to provide for unbundling of natural gas transportation and
sales services to New Jersey Division commercial and industrial
customers. The new tariffs became effective on January 1, 1995. The
Company expects the effect of the new tariffs to be neutral on the
operating margins of the Company.
On February 17, 1995, the Company filed a request with the
North Carolina Utilities Commission for a base rate increase for its
North Carolina operations. The proposed rate modification would increase
the Company's annual revenues by approximately $770,000. A decision is
expected in the summer of 1995, with new rates to be effective in the
fall. 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.
Financing Activities and Resources
The Company's net cash provided by operating activities was
$69.3 million and $78.4 million for the six- and twelve-month periods
ended March 31, 1995, respectively, as compared with $13.4 million and
$19.0 million for the six- and twelve-month periods ended March 31,
1994, respectively. The increases for the 1995 periods primarily reflect
the timing and amount of the payment of the Company's New Jersey gross
receipts and franchise taxes. The current year payment was made in April
1995, while the prior year's payment was made in March 1994. Also, the
March 1994 payment reflected an additional amount representing almost a
half year's tax liability in accordance with New Jersey legislation. Net
cash provided by operating activities also increased due to the
temporary overcollection of lower-than-anticipated gas costs and a
reduction in accounts receivable in the 1995 period due to warmer
weather experienced as compared to the prior year.
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 $87.4 million at 5.8% for the six-month
period ended March 31, 1995 and $78.8 million at 3.5% for the six-month
period ended March 31, 1994. The weighted average daily amount of notes
payable to banks increased principally to finance portions of the
Company's construction expenditures, and to repay certain long-term debt
assumed by the Company as a result of the PSGS Merger. These increases
were partially offset by the issuance of $50 million of the Company's
Medium-Term Notes on February 16, 1995. At March 31, 1995, the Company
had outstanding notes payable to banks amounting to $11.6 million and
available unused lines of credit amounting to $156.4 million. Notes
payable to banks as of March 31, 1995, decreased as compared to the
balance outstanding at September 30, 1994, due to the issuance of the
Medium-Term Notes, the temporary overcollection of lower-than-
anticipated gas costs, and to positive seasonal cash flows.
In November 1994, the Company filed a shelf registration
statement with the Securities and Exchange Commission for an aggregate
of up to $100 million of debt and equity securities. On February 16,
1995, the Company issued $50 million aggregate principal amount of
Medium-Term Notes, Series A, with a stated maturity date of February 1,
2005 and an interest rate of 8.35%. The net proceeds from these Medium-
Term Notes were used to repay short-term debt. The Company anticipates
issuing the remainder of the shelf securities from time to time
depending upon prevailing market conditions. The Company intends to use
the remainder of any proceeds from the sale of additional shelf
securities to discharge or refund outstanding debt obligations of the
Company, to finance the Company's capital expenditures, to reduce short-
term debt and for general corporate purposes.
Long-Term Debt and Funds for Construction Held by Trustee. The
Company deposits in trust the unexpended portion of the net proceeds
from its Gas Facilities Revenue Bonds until drawn upon for eligible
expenditures. As of March 31, 1995, the total unexpended portion of all
of the Company's Gas Facilities Revenue Bonds was $17 million and is
classified on the Company's consolidated balance sheet, including
interest earned thereon, as funds for construction held by trustee.
Common Stock. The Company periodically issues shares of common
stock in connection with NUI Direct, the Company's common stock
investment plan, and various employee benefit plans. The proceeds of
such issuances amounted to $1.1 million for the six-month period ended
March 31, 1995 and $2.9 million for the six-month period ended March 31,
1994, and were used primarily to reduce outstanding short-term debt.
Effective in December 1994, these common stock plans commenced
purchasing shares on the open market to fulfill the plans' requirements.
Dividends. On October 26, 1994 and January 24, 1995, the
Company declared quarterly dividends of $0.225 per share. The rate in
prior quarters had been $0.40 per share.
Capital Expenditures and Commitments
Capital expenditures, which consist primarily of expenditures
to expand and upgrade the Company's gas distribution systems, were $17.2
million for the six-month period ended March 31, 1995 as compared with
$21.9 million for the six-month period ended March 31, 199y4. Capital
expenditures are expected to be approximately $44 million for all of
fiscal 1995, as compared with a total of $55.8 million in fiscal 1994.
The Company owns or previously owned six former manufactured
gas plant sites ("MGP") in the New Jersey Division and ten MGP sites in
the PSGS Division. In order to quantify the potential future
expenditures for all MGP sites, the Company, with the aid of
environmental consultants, assesses the probability and costs associated
with initiating and/or continuing investigative activities at each of
the Company's sites, as well as implementing appropriate remedial
actions. Based on the Company's most recent assessment, as of March 31,
1995, the Company has recorded a total reserve for probable
environmental investigation and/or 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. The Company is not
able at this time to determine the extent of contamination, if any, at
the other sites, the requirement for remediation if contamination is
present, or the costs associated with remediation. Based on currently
available information and assessments, the Company believes it is
reasonably possible that costs associated with all its sites may exceed
current reserves by an amount of up to $21 million. The Company believes
that certain of its remediation costs will be recoverable in rates and
that a portion of such costs may be recoverable from the Company's
insurance carriers and former owners and operators of the sites.
However, the Company is not able at this time to determine the extent of
possible recovery, if any, from among PSGS ratepayers, insurance
carriers or former owners and operators. Consequently, as of March 31,
1995, the Company has recorded $3.7 million as an additional plant
acquisition adjustment, of which, approximately $1.8 million was
recorded during the quarter ended March 31, 1995. For a further
discussion of environmental matters, see Note 4 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 $71 million annually. The Company currently recovers, and
expects to continue to recover, such fixed charges through its gas cost
adjustment clauses. The Company also is committed to purchase, at
market-related prices, minimum quantities of gas that, in the aggregate,
are approximately 10 million Mcf per year or to pay certain costs in the
event the minimum quantities are not taken. The Company expects that
minimum demand on its systems for the duration of these contracts will
continue to exceed these minimum purchase obligations.
The implementation of the Federal Energy Regulatory
Commission's ("FERC") Order No. 636 required the restructuring of the
Company's contracts with certain pipeline companies that together supply
less than one-third of the Company's total firm gas supply. Under Order
No. 636 the pipeline companies are passing through to their customers
transition costs associated with mandated restructuring, such as costs
resulting from buying out unmarketable gas purchase contracts. The
Company has been charged approximately $6.3 million of such costs as of
March 31, 1995, which the Company has been authorized to recover through
its gas cost adjustment clauses. The Company currently estimates that
its remaining Order No. 636 transition obligation will be approximately
$9.9 million and will also be recovered through the Company's gas cost
adjustment clauses. This estimate is subject to subsequent FERC actions
based upon filings by the Company's pipeline suppliers.
As of March 31, 1995, the scheduled repayments of the
Company's long-term debt over the next five years were as follows: $1.1
million for the remainder of fiscal 1995, $1.2 million in fiscal 1996,
$3.3 million in fiscal 1997, $31.0 million in fiscal 1998 and
$1.0 million in fiscal 1999.
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 1995.
The Annual Meeting of Shareholders of NUI Corporation was held on
March 14, 1995.
Proxies for the Annual Meeting were solicited pursuant to
Regulation 14A and there was no solicitation in opposition to
management's nominees. None of management's nominees, as listed in the
proxy statement for election of directors of NUI Corporation, received
less than 7,353,135 of the votes cast. The nominees were elected to
serve for three-year terms and, accordingly, will hold office until the
Annual Meeting of Shareholders held in 1998 and until the director's
successor shall have been elected and qualified.
Briefly described below is the other matter voted upon at the
Annual Meeting of Shareholders held on March 14, 1995 and the number of
affirmative votes and the number of negative votes cast with respect to
such matter:
On the matter of approval of the appointment by
the Board of Directors of Arthur Andersen LLP as
independent public accountants for the fiscal
year ended September 30, 1995, the shareholders
voted 7,525,569 for such approval; 141,606 votes
against such approval and 64,828 votes
abstained.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit
No. Description of Exhibit Reference
27 Financial Data Schedule Filed herewith
(b) Reports on Form 8-K.
On January 31, 1995, the Company filed a Form 8-K, Item 5, Other
Events, reporting the issuance of a press release on January 25, 1995,
of the Company's fiscal 1995 first quarter results.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
NUI CORPORATION
May 12, 1995 KENNETH G. WARD
Assistant Secretary
May 12, 1995 ROBERT F. LURIE
Treasurer