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 June 30, 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 July 31, 1995: Common Stock, No Par Value:
9,201,237 shares outstanding.
NUI Corporation and Subsidiaries
Consolidated Statement of Income (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended Nine Months Ended Twelve Months Ended
June 30, June 30, June 30,
1995 1994 1995 1994 1995 1994
Operating Margins
Operating revenues $58,974 $74,747 $305,436 $332,887 $364,835 $385,553
Purchased gas and fuel 25,454 42,106 157,796 189,471 191,746 219,205
Gross receipts and 4,563 4,511 25,864 29,357 28,537 31,583
franchise taxes ------ ------ ------- ------- ------- -------
Total operating 28,957 28,130 121,776 114,059 144,552 134,765
margins ------ ------ ------- ------- ------- -------
Other Operating
Expenses
Other operation 19,452 19,721 59,707 57,116 80,228 74,720
Maintenance 1,663 1,816 4,792 4,924 6,545 6,366
Restructuring and
other non-recurring - - 8,591 - 9,514 -
charges
Depreciation and 4,981 4,479 14,883 12,901 19,428 16,691
amortization
Other taxes 1,727 1,877 4,907 4,726 6,408 6,108
Income taxes (1,246) (1,494) 5,159 7,945 (694) 5,742
------ ------ ------ ------ ------ ------
Total other 26,577 26,399 98,039 87,612 121,429 109,627
operating expenses ------ ------ ------ ------ ------- -------
Operating Income 2,380 1,731 23,737 26,447 23,123 25,138
Other Income and 153 (37) 363 311 565 493
(Expense), Net
Interest Expense 4,729 3,928 13,764 11,322 18,008 14,863
------ ------ ------ ------ ------ ------
Net Income (Loss) $(2,196) $(2,234) $10,336 $15,436 $5,680 $10,768
====== ====== ====== ====== ===== ======
Net Income (Loss) Per
Share of Common Stock $(0.24) $(0.25) $1.13 $1.83 $0.62 $1.28
==== ==== ==== ==== ==== ====
Dividend Per Share of
Common Stock $0.225 $0.40 $0.675 $1.20 $1.075 $1.60
===== ==== ===== ==== ===== ====
Weighted Average
Number of Shares of
Common Stock 9,164,110 8,881,251 9,155,500 8,453,741 9,142,818 8,384,909
Outstanding ========= ========= ========= ========= ========= =========
See the notes to the consolidated financial statements
NUI Corporation and Subsidiaries
Consolidated Balance Sheet
(Dollars in thousands)
June 30, September 30,
1995 1994
(Unaudited) (*)
ASSETS
Utility Plant
Utility plant, at original cost $588,027 $566,982
Accumulated depreciation and amortization (183,130) (173,894)
Unamortized plant acquisition adjustments 35,560 33,604
------- ------
Net utility plant 440,457 426,692
------- -------
Funds for Construction Held by Trustee 17,589 26,906
------- ------
Investments in Marketable Securities 3,656 3,468
------ ------
Current Assets
Cash 4,496 5,637
Accounts receivable 36,120 38,786
Allowance for doubtful accounts (2,216) (1,368)
Fuel inventories, at average cost 17,329 28,616
Prepayments and other 24,841 14,233
------ ------
Current assets 80,570 85,904
------ ------
Deferred Charges and Other Assets 64,143 58,678
------ ------
$606,415 $601,648
======= =======
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $147,618 $142,768
Preferred stock - -
Long-term debt 222,093 160,928
------- ------
Capitalization 369,711 303,696
------- -------
Capital Lease Obligations 11,093 11,932
------ ------
Current Liabilities
Current portion of long-term debt and
capital lease obligations 10,336 2,761
Notes payable to banks 16,100 110,125
Accounts payable, customer deposits and
accrued liabilities 61,944 53,476
General taxes 1,498 1,170
Federal income taxes 7,576 6,079
------ ------
Current liabilities 97,454 173,611
------ -------
Deferred Credits and Other Liabilities
Deferred Federal income taxes 53,483 50,066
Unamortized investment tax credits 7,218 7,570
Other liabilities 67,456 54,773
------ ------
Deferred credits and other liabilities 128,157 112,409
------- -------
$606,415 $601,648
======= =======
<F1>
* Derived from audited financial statements
See the notes to consolidated financial statements
NUI Corporation and Subsidiaries
Consolidated Statement of Cash Flows (Unaudited)
(Dollars in thousands)
Nine Months Ended Twelve Months Ended
June 30, June 30,
1995 1994 1995 1994
Operating Activities
Net income $10,336 $15,436 $5,680 $10,768
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 15,809 13,910 20,672 17,999
Deferred Federal income
taxes, net 2,484 3,922 5,455 4,484
Amortization of
deferred investment tax
credits (352) (341) (487) (461)
Non-cash portion of
restructuring and other
non-recurring charges 5,116 - 5,799 -
Other 3,515 2,145 4,296 4,368
Effect of changes in:
Accounts receivable,
net 3,514 (9,717) 7,507 (2,882)
Fuel inventories 11,287 9,679 1,415 (3,794)
Deferred cost of gas 8,292 10,423 2,201 5,475
Accounts payable,
deposits and accruals 4,968 440 6,323 (2,264)
Gross receipts and
franchise taxes (6,173) (12,467) (3,986) (10,319)
Other (8,354) (2,268) (13,072) (5,985)
----- ----- ------ -----
Net cash provided by 50,442 31,162 41,803 17,389
operating activities ------ ------ ------ ------
Financing Activities
Proceeds from sales of
common stock 1,135 4,567 2,891 5,426
Purchases of treasury
stock (314) - (314) -
Dividends to shareholders (6,222) (10,194) (9,864) (13,464)
Proceeds from issuance of
long-term debt 70,000 - 136,500 30,000
Funds for construction
held by trustee, net 9,972 8,430 (551) 12,445
Repayments of long-term
debt (1,129) (1,937) (53,351) (17,637)
Principal payments under
capital lease obligations (1,364) (1,548) (1,871) (1,996)
Net short-term borrowings (94,025) 5,868 (66,000) 14,718
(repayments) ------ ----- ------ ------
Net cash provided by
(used for) financing (21,947) 5,186 7,440 29,492
activities ------ ----- ----- ------
Investing Activities
Cash expenditures for
utility plant (28,839) (35,669) (46,771) (46,649)
Proceeds from sales of
marketable securities - 659 - 668
Proceeds from sale of
assets - - 1,610 -
Other (797) (1,172) (1,625) (1,598)
--- ----- ----- -----
Net cash (used for) (29,636) (36,182) (46,786) (47,579)
investing activities ------ ------ ------ ------
Net increase (decrease)
in cash $(1,141) $166 $2,457 $(698)
Cash
At beginning of period $5,637 $1,873 $2,039 $2,737
----- ----- ----- -----
At end of period $4,496 $2,039 $4,496 $2,039
===== ===== ===== =====
Supplemental Disclosures
of Cash Flows
Income taxes paid
(refunds received), net $(735) $666 $(735) $574
Interest paid $13,543 $14,376 $16,764 $15,662
See the notes to the consolidated financial statements
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, through its New Jersey and Southern divisions, has utility
operations in six states. The Southern Division was formed effective April
1, 1995 through the consolidation of the Company's Florida and Pennsylvania
& Southern Gas Company ("PSGS") operations (see Note 3). PSGS, which has
operations in North Carolina, Maryland, Pennsylvania and New York, was
acquired on April 19, 1994 ("PSGS Merger").
The consolidated financial statements contained herein have been
prepared without audit in accordance with the rules and regulations of the
Securities and Exchange Commission and reflect all adjustments which, in
the opinion of management, are necessary for a fair statement of the
results for interim periods. All adjustments made were of a normal
recurring nature. The consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes
thereto that are included in the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1994.
The Company is subject to regulation as an operating utility by the
public utility commissions of the states in which it 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.
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
June 30, 1995, the market value of the Company's investments in marketable
securities exceeds their cost by approximately $98,000, 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):
June 30, September 30,
1995 1994
Common stock, no par value $138,957 $138,082
Retained earnings 10,814 6,700
Valuation of marketable securities 61 -
Unearned employee compensation - ESOP (1,103) (1,217)
----- -----
Total common shareholders' equity $147,618 $142,768
======= =======
3. Restructuring and Other Non-Recurring Charges
During the nine-month period ended June 30, 1995, the Company
incurred approximately $8.6 million of non-recurring charges for, among
other things, the implementation of an early retirement program and the
consolidation of its Florida and PSGS operations.
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 Southern Division deferred,
pending regulatory recovery, a charge of approximately $0.6 million for
special termination benefits for its 15 employees who opted for the
program.
Effective April 1, 1995, the Company consolidated its Florida and
PSGS divisions to form a new NUI Southern Division. The Southern Division
is headquartered in Hialeah, Florida. As a result, PSGS headquarters in
Sayre, Pennsylvania will be closed by the end of the calendar year. The
Company incurred a charge of approximately $2.6 million for severance and
other expenses associated with the consolidation of the two divisions.
In addition, the Company incurred a charge of approximately $0.8
million to write down certain regulatory assets as a result of the November
1994 settlement of the Company's Florida rate case (see "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Regulatory Matters").
4. 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 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 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 New Jersey 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.
PSGS owned 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. PSGS 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 Division 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 owned by
PSGS.
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 conducting 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 June
30, 1995, the Company has recorded a total reserve for probable
environmental investigation and 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 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 $33 million as of June 30, 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 environmental liabilities from
ratepayers in the PSGS states, former owners and operators, and insurance
carriers. Since the Company is not able at this time to determine the
extent of recovery, if any, as of June 30, 1995, the Company recorded an
amount of $3.7 million as an additional plant acquisition adjustment, of
which approximately $1.8 million was recorded during the second quarter of
fiscal 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 Ended Nine Months Ended Twelve Months Ended
June 30, June 30, June 30,
1995 1994 1995 1994 1995 1994
Operating Revenues
(Dollars in
thousands):
Firm Sales:
Residential $24,115 $32,982 $149,414 $167,316 $171,195 $186,774
Commercial 13,428 18,108 82,523 94,073 94,528 105,374
Industrial 4,117 5,185 16,568 20,907 21,455 25,257
Interruptible sales 9,666 13,577 32,446 35,855 48,063 48,800
Off-system sales 1,296 - 6,552 1,147 6,895 1,666
Transportation
services 4,540 3,575 13,218 9,818 16,673 12,682
Appliance leasing, 1,812 1,320 4,715 3,771 6,026 5,000
fees and other ----- ----- ----- ----- ----- -----
$58,974 $74,747 $305,436 $332,887 $364,835 $385,553
====== ====== ======= ======= ======= =======
Gas Sold or
Transported (MMcf):
Firm Sales:
Residential 3,507 3,432 19,349 20,404 21,502 22,302
Commercial 2,874 2,748 13,652 14,090 15,743 15,948
Industrial 1,187 1,131 4,124 4,182 5,258 5,112
Interruptible sales 3,661 4,917 11,925 11,208 17,724 15,418
Off-system sales 542 - 3,039 583 3,220 895
Transportation 5,460 4,534 16,325 12,311 20,635 16,312
services ----- ----- ------ ------ ------ ------
17,231 16,762 68,414 62,778 84,082 75,987
====== ====== ====== ====== ====== ======
Average Customers
Served:
Firm:
Residential 329,835 322,452 328,667 309,404 327,133 306,991
Commercial 24,670 23,985 24,551 22,387 24,348 22,200
Industrial 396 403 395 377 396 378
Interruptible sales 107 118 106 106 106 107
Transportation 187 119 159 106 154 103
services ------- ------- ------- -------- ------- -------
355,195 347,077 353,878 332,380 352,137 329,779
======= ======= ======= ======= ======= =======
Degree Days:
New Jersey
Actual 515 387 4,294 4,935 4,303 4,990
Normal 538 538 4,936 4,936 4,978 4,978
Percentage variance
from normal 4.3% 28.1% 13% - 13.6% -
warmer warmer warmer normal warmer normal
North Carolina
Actual 235 289 3,354 3,884 3,376 3,909
Normal 288 288 3,862 3,862 3,874 3,874
Percentage variance
from normal 18.4% - 13.2% - 12.9% -
warmer normal warmer normal warmer normal
Average Number of
Employees 1,050 1,197 1,122 1,069 1,139 1,066
Ratio of Earnings to
Fixed Charges
(Twelve-months only) 1.22 1.89
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, through its New Jersey and Southern divisions, has utility
operations in six states. The Southern Division was formed effective April 1,
1995 through the consolidation of the Company's Florida and Pennsylvania &
Southern Gas Company ("PSGS") operations (see Note 3 of the Notes to the
Consolidated Financial Statements). PSGS, which has operations in North
Carolina, Maryland, Pennsylvania and New York, was acquired on April 19,
1994 ("PSGS Merger"). Because of the seasonal nature of gas utility
operations, the results for interim periods are not necessarily indicative of
the results for an entire year.
Results of Operations
Three-Month Periods Ended June 30, 1995 and 1994
Net Loss. The Company incurred a net loss of $2.196 million, or $0.24 per
share, for the three-month period ended June 30, 1995, as compared with a net
loss of $2.234 million, or $0.25 per share, for the three-month period ended
June 30, 1994. The third quarter is historically a period of seasonally low
demand for natural gas for heating, resulting in a net loss. The results for
the 1995 quarter were slightly improved as compared to the 1994 quarter,
primarily due to an increase in operating margins, offset by an increase in
interest expense.
Operating Revenues and Operating Margins. The Company's operating revenues
decreased by $15.8 million, or 21%, for the three-month period ended June 30,
1995 as compared with the three-month period ended June 30, 1994. The decrease
is primarily due to an $11.3 million refund to New Jersey Division customers
in the 1995 quarter as a result of lower than projected gas prices incurred
in fiscal 1995 (see "Regulatory Matters"). The 1995 quarter also reflects lower
sales due to the impact of a sustained warm Winter in the Company's northern
service territories which affected customers' consumption into the Spring,
decreased revenues to interruptible customers due to lower gas prices and
less sales to a large electric customer, and to the effect of gas cost
adjustment clauses. 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. Partially offsetting these decreases were
the effects of base rate and appliance leasing rate increases in Florida (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 8,118, or 2%, for the three-month period ended June 30, 1995 as
compared to the 1994 period.
The Company's operating margins increased by $0.8 million, or 3%, for the
three months ended June 30, 1995 as compared with the prior year period. The
increase principally reflects base rate and appliance leasing rate increases
in Florida and customer growth. Partially offsetting these increases was the
effect of the sustained warm weather during the Winter which lasted into the
Spring. 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. There was no significant weather normalization
adjustment for the three-month period ended June 30, 1995 since the clauses
are not in effect during most of the Spring. The weather normalization
clause increased operating margins by approximately $0.9 million
for the three-month period ended June 30, 1994 due to the effect of warmer-
than-normal weather.
Other Operating Expenses. The Company's other operating expenses, excluding
income taxes, decreased by approximately $0.1 million for the three-month
period ended June 30, 1995 as compared with the three-month period ended
June 30, 1994. The decrease principally reflects lower labor and employee
benefits costs as a result of the Company's early retirement program (see
Note 3 of the Notes to the Consolidated Financial Statements) and other
workforce reductions. These cost reductions were partially offset by higher
depreciation expense due to additional plant in service. The increase in
income taxes was due to the reversal in the 1994 quarter of approximately $0.2
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 three-month period ended
June 30, 1995 increased by approximately $0.8 million as compared with the
three-month period ended June 30, 1994, as a result of both higher short-term
interest rates and higher average outstanding borrowings. 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 at an interest rate of 6.35%.
Nine-Month Periods Ended June 30, 1995 and 1994
Net Income. Net income for the nine-month period ended June 30, 1995 was
$10.3 million, or $1.13 per share, as compared with net income of $15.4
million, or $1.83 per share, for the nine-month period ended June 30, 1994.
The decrease is primarily due to non-recurring charges 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 $1.6
million of additional net income, excluding non-recurring charges,
attributable to the inclusion of PSGS in the entire 1995 period results.
Absent all non-recurring charges, net income for the 1995 period would have been
$15.9 million, or $1.74 per share.
Net income per share in the current period was also affected by the
increased average number of outstanding shares of NUI common stock over the
prior year period. This increase is primarily due to the issuance of 683,443
shares of NUI common stock as a result of the PSGS Merger.
Operating Revenues and Operating Margins. The Company's operating revenues
for the nine-month period ended June 30, 1995 decreased approximately $27.5
million, or 8%, as compared with the nine-month period ended June 30, 1994.
The decrease principally reflects the effects of weather in New Jersey that
was 13% warmer than both the prior year period and normal, and refunds totalling
$13.9 million to New Jersey Division customers (see "Regulatory Matters"). 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 the continuous availability of gas supply from third-party
providers throughout the current period's heating season. Operating revenues
were also reduced by decreased sales to interruptible customers due to lower
gas prices and the effect of gas cost adjustment clauses. Partially
offsetting these decreases were approximately $19.9 million of additional
operating revenues from the inclusion of PSGS in the entire 1995 period
results, the effects of base rate and appliance leasing rate increases in
Florida, increased sales to off-system customers and other customer growth.
The Company's average number of customers served increased by 21,498, or
6.5%, including 16,883 heating customers. Excluding customers acquired as a
result of the PSGS Merger, the average number of customers increased
approximately 2%.
The Company's operating margins increased by $7.7 million, or 7%, for the
nine-month period ended June 30, 1995 as compared with the nine-month period
ended June 30, 1994. The increase was principally the result of the inclusion
of PSGS for the entire 1995 period results, increases in the number of
customers served, and the base rate and appliance leasing rate increases in
Florida. 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 nine-month period ended June 30, 1995. There was no adjustment
to operating margins for the nine-month period ended June 30, 1994, as the
weather fell within the normal range.
Other Operating Expenses. The Company's other operating expenses,
excluding income taxes, increased by approximately $13.2 million, or 17%, for
the nine-month period ended June 30, 1995 as compared with the nine-month
period ended June 30, 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, an additional $4.5
million of other pre-tax operating expenses from the inclusion of PSGS in
the entire 1995 period results, and an increase in depreciation expense due
to additional plant in service. Partially offsetting these increases were lower
labor and employee benefits costs as a result of the Company's early retirement
program and other workforce reductions. The decrease in income taxes was due
to lower pre-tax income.
Interest Expense. Interest expense for the nine-month period ended June 30,
1995 increased by approximately $2.4 million, as compared with the nine-month
period ended June 30, 1994, for the reasons discussed under "Three-Month
Periods Ended June 30, 1995 and 1994 - Interest Expense".
Twelve-Month Periods Ended June 30, 1995 and 1994
Net Income. Net income for the twelve-month period ended June 30, 1995 was
$5.7 million, or $0.62 per share, as compared with net income of $10.8 million,
or $1.28 per share, for the twelve-month period ended June 30, 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 depreciation costs. Partially offsetting these decreases
was approximately $1.3 million of additional net income, excluding non-
recurring charges, from the inclusion of PSGS in the entire 1995 period
results, and the reversal of approximately $1.6 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 June 30, 1995 was
also affected by the increased average number of outstanding shares of NUI
common stock as compared to the 1994 period. This increase is primarily due
to the issuance of 683,443 shares of NUI common stock as a result of the PSGS
Merger.
Operating Revenues and Operating Margins. The Company's operating revenues
for the twelve-month period ended June 30, 1995 decreased approximately $20.7
million, or 5%, as compared with the twelve-month period ended June 30, 1994,
principally due to the effects of weather in New Jersey that was 14% warmer
than both the prior year period and normal. Operating revenues were also
reduced as a result of refunds to New Jersey Division customers and the effect
of gas cost adjustment clauses. Partially offsetting these decreases were
additional revenues from the inclusion of PSGS for the entire 1995 period
results, base rate and appliance leasing rate increases in Florida and other
customer growth.
The Company's operating margins increased by $9.8 million, or 7%, for the
twelve-month period ended June 30, 1995 as compared with the 1994 period. The
increase is principally the result of the inclusion of PSGS for the entire 1995
period results, increases in the number of customers served and the base rate
and appliance leasing rate increases in Florida. Through the Company's
weather normalization clauses, operating margins were increased by
approximately $4.5 million for the twelve-month period ended June 30, 1995.
There was no adjustment to operating margins for the twelve-month period
ended June 30, 1994, as the weather fell within the normal range.
Other Operating Expenses. The Company's other operating expenses, before
income taxes, for the twelve-month period ended June 30, 1995 increased by
approximately $18.2 million, or 18%, as compared with the twelve-month period
ended June 30, 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 Southern Division restructuring
costs recorded in the fourth quarter of fiscal 1994). The increase also
includes an additional $6.5 million of other pre-tax operating expenses from
the inclusion of PSGS in the entire 1995 period results, and an increase in
depreciation expense. Partially offsetting these increases were lower labor and
employee benefits costs due to the Company's early retirement program and
other workforce reductions. 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 $1.6 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
June 30, 1995 increased by approximately $3.2 million as compared with the
twelve-month period ended June 30, 1994, for the reasons discussed under
"Three-Month Periods Ended June 30, 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 clause revenues by approximately $11.9 million. The decrease
reflected the Company's projections for lower gas costs in fiscal 1995 and
had no effect on the Company's operating margins. The NJBPU also approved
refunds to customers of approximately $2.6 million, which were made in the
first quarter of fiscal 1995, and $11.3 million, which were made in the third
quarter of fiscal 1995, as a result of lower than projected gas prices
incurred in fiscal 1994 and fiscal 1995. On July 27, 1995, the New Jersey
Division filed a petition with the NJBPU to further reduce its annual gas cost
adjustment clause revenues by approximately $13.7 million, and to refund to
customers approximately $2.8 million. The decrease reflects the Company's
projections for lower gas costs over the coming year. Action by the
NJBPU is expected in the Fall of 1995.
On November 29, 1994, the Florida Public Service Commission (the "FPSC")
voted to authorize the Company to increase its base rates in Florida 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 operation'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 new tariffs are designed 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 (the "NCUC") 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 by the NCUC on
the Company's request is expected during the fourth quarter of fiscal 1995.
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 $50.4 million
and $41.8 million for the nine- and twelve-month periods ended June 30, 1995,
respectively, as compared with $31.2 million and $17.4 million for the nine-
and twelve-month periods ended June, 1994, respectively. The improved cash
flows for the 1995 periods primarily reflect accelerated collections of customer
accounts receivable, and a lower level of payments in fiscal 1995 for New
Jersey Division gross receipts and franchise taxes; the 1994 payment included
an additional amount representing almost a half year's tax liability as a
result of a change in the payment schedule by the State.
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 $67.6 million at 5.9% for the nine-month period ended June 30, 1995
and $77.7 million at 3.8% for the nine-month period ended June 30, 1994.
The weighted average daily amount of notes payable to banks decreased
principally due to 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.
At June 30, 1995, the Company had outstanding notes payable to banks amounting
to $16.1 million and available unused lines of credit amounting to $151.9
million. Notes payable to banks as of June 30, 1995, decreased as compared
to the balance outstanding at September 30, 1994, due to the issuance of
the Medium-Term Notes 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%. On
May 25, 1995, the Company issued an additional $20 million of Medium-Term
Notes, Series A, with a stated maturity date of August 1, 2002 and an
interest rate of 7.125%. The net proceeds from these Medium-Term Notes were
used to repay short-term debt. The Company anticipates issuing additional
securities subject to the shelf registration from time to time, depending upon
the Company's needs and prevailing market conditions. The Company intends to
use the proceeds from the sale of any additional securities subject to the
shelf registration to discharge outstanding debt obligations of the Company,
to finance the Company's capital expenditures and for general corporate
purposes.
Long-Term Debt and Funds for Construction Held by Trustee. On July 17, 1995,
the Company completed an early redemption of its remaining $8.7 million of
First Mortgage Bonds. The Bonds carried coupon rates of 8% and 8.5% and were
redeemed with proceeds from short-term debt. The Company paid approximately
$0.3 million premium to complete the early redemption.
The Company deposits in trust the unexpended portion of the net proceeds
from its Gas Facilities Revenue Bonds until drawn upon for eligible
expenditures. As of June 30, 1995, the total unexpended portion of all of
the Company's Gas Facilities Revenue Bonds was $13.7 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 nine-month period ended June 30, 1995 and $4.6 million
for the nine-month period ended June 30, 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. Under the terms of the plans, the Company may change
the method of purchasing shares, no more frequently than every twelve months,
from open market purchases to purchases directly from the Company, or vice
versa.
Dividends. On October 26, 1994, January 24, 1995 and April 25, 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 $26 million for the nine-
month period ended June 30, 1995 as compared with $36.5 million for the nine-
month period ended June 30, 1994. Capital expenditures are expected to be
approximately $40 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
("MGP") sites in the New Jersey Division and ten MGP sites in the Southern
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 conducting 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 June 30, 1995,
the Company has recorded a total reserve for probable 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. 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 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 and former owners and operators of the sites.
Since the Company is not able at this time to determine the extent of recovery,
if any, as of June 30, 1995, the Company recorded $3.7 million as an
additional plant acquisition adjustment, of which approximately $1.8 million
was recorded during the second quarter of fiscal 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 $6.5 million
of such costs through June 30, 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 $9.7 million and will also be recovered through the Company's gas
cost adjustment clauses. This transition obligation is subject to possible
future FERC actions based upon filings by the Company's pipeline suppliers.
As of June 30, 1995, the scheduled repayments of the Company's long-term
debt over the next five years were as follows: $8.8 million for the remainder
of fiscal 1995, $0.1 million in fiscal 1996, $0.1 million in fiscal 1997,
$30.1 million in fiscal 1998 and $0.1 million in fiscal 1999. The remaining
balance due for fiscal 1995 includes approximately $8.7 million for the early
redemption of the Company's First Mortgage Bonds (see "Financing Activities and
Resources - Long-Term Debt and Funds for Construction Held by Trustee").
Accordingly, this amount is classified as a current liability in the
consolidated balance sheet.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit
No. Description of Exhibit Reference
27 Financial Data Schedule Filed herewith
(b) Reports on Form 8-K
None
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
August 11, 1995 JOHN KEAN, JR.
President and Chief Executive
Officer
August 11, 1995 ROBERT J. CLANCY, JR.
Principal Accounting Officer