UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 1O-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File # 1-8353
September 30, 1996
NUI CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-1869941
(State of incorporation) (IRS employer identification no.)
(Address of principal executive offices, including zip code)
(908) 781-0500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, No Par Value New York Stock Exchange, Inc.
AND PREFERRED STOCK PURCHASE (Name of exchange on which
RIGHTS registered)
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 of 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:
X
Indicate by check mark if disclosure of delinquent filers, pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference to Part III of
this Form 10-K or any amendment to the Form 10-K:
X
The aggregate market value of 9,955,603 shares of common stock held by non-
affiliates of the registrant calculated using the $20 per share closing
price on November 30, 1996 was $199,112,060.
The number of shares outstanding or each of the registrant's classes of
common stock, as of November 30, 1996:
Common Stock, No Par Value: 11,167,915 shares outstanding.
Documents incorporated by reference: NUI Corporation's definitive Proxy
Statement for the Company's Annual Meeting of Stockholders, which is
expected to be filed with the Securities and Exchange Commission no
later than 120 days subsequent to September 30, 1996.
NUI Corporation
Annual Report on Form 10-K For The
Fiscal Year Ended September 30, 1996
TABLE OF CONTENTS
PART I
Page
Item 1. Business.................................................... 4
Item 2. Properties...................................................9
Item 3. Legal Proceedings............................................9
Item 4. Submission of Matters to a Vote of Security Holders..........9
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters .......................................10
Item 6. Selected Financial Data.....................................11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................13
Item 8. Financial Statements and Supplementary Data.................21
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................21
PART III
Item 10. Directors and Executive Officers of the Registrant.........21
Item 11. Executive Compensation.....................................21
Item 12. Security Ownership of Certain Beneficial Owners
and Management...........................................21
Item 13. Certain Relationships and Related Transactions.............21
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K............................................. 22
NUI Corporation
Annual Report on Form 10-K for the
Fiscal Year Ended September 30, 1996
PART I
Item 1. Business
NUI Corporation ("NUI" or the "Company") was incorporated in New Jersey
in 1969, and is engaged primarily in the sale and transportation of
natural gas. The Company serves more than 359,000 utility customers in
six states through its Northern and Southern operating divisions. The
Northern Division operates in New Jersey as Elizabethtown Gas Company.
The Southern Division was formed effective April 1, 1995 through the
consolidation of the Company's City Gas Company of Florida and
Pennsylvania & Southern Gas Company ("PSGS") operations (see Note 3 of
the Notes to the Consolidated Financial Statements). PSGS, which
operated as North Carolina Gas Service, Elkton Gas Service (Maryland),
Valley Cities Gas Service (Pennsylvania) and Waverly Gas Service (New
York), was acquired by the Company on April 19, 1994 (see Note 2 of the
Notes to the Consolidated Financial Statements).
In addition to gas distribution operations, the Company provides retail
gas sales and related services through its NUI Energy, Inc. subsidiary
(formerly Natural Gas Services, Inc.); bill processing and related
customer services for utilities and municipalities through its Utility
Business Services, Inc. subsidiary (formerly Utility Billing Services,
Inc.); and wholesale energy brokerage and related services through its
NUI Energy Brokers, Inc. subsidiary.
The principal executive offices of the Company are located at 550 Route
202-206, Box 760, Bedminster, NJ 07921-0760; telephone: (908) 781-0500.
Territory and Customers Served
See Item 6 - "Selected Financial Data-Summary Consolidated Operating
Data" for summary information by customer class with respect to
operating revenues, gas volumes sold or transported and average utility
customers served. The Company's utility operations serve more than
359,000 customers, of which approximately 67% are in New Jersey and 33%
are in the Southern Division states. Approximately 54% of the Company's
utility customers are residential and commercial customers that purchase
gas primarily for space heating. The Company's operating revenues for
fiscal 1996 amounted to $469 million, of which approximately 66% was
generated by utility operations in the Northern Division, 22% was
generated by utility operations in the Southern Division states and 12%
by the Company's unregulated activities. Gas volumes sold or transported
in fiscal 1996 amounted to 105.7 million Mcf, of which approximately 65%
was sold or transported in New Jersey, 17% was sold or transported in the
Southern Division states and 18% represented unregulated sales. An Mcf is
a basic unit of measurement for natural gas comprising 1,000 cubic feet of
gas.
Northern Division The Company, through its Northern Division, provides
gas service to approximately 239,000 customers in franchised territories
within seven counties in central and northwestern New Jersey. The
Northern Division's 1,300 square-mile service territory has a total
population of approximately 950,000. Most of the Northern Division's
customers are located in densely-populated central New Jersey, where
increases in the number of customers are primarily from conversions to
gas heating from alternative forms of heating.
The Northern Division's gas volumes sold or transported and customers
served for the past three fiscal years were as follows:
Gas Volumes Sold or Transported (in thousands of Mcf)
1996 1995 1994
Firm Sales:
Residential 20,862 17,855 20,315
Commercial 11,337 10,275 11,528
Industrial 4,709 4,595 5,025
Interruptible Sales 11,885 15,440 14,156
Unregulated Sales 7,062 1,044 --
Transportation Sales 19,793 17,202 14,367
------ ------ ------
Total 75,648 66,411 65,391
====== ====== ======
Utility Customers Served (twelve-month average)
1996 1995 1994
Firm Sales:
Residential - 162,156 159,164 155,317
Heating
Residential - 58,558 59,586 60,951
Non-heating
Commercial 17,232 17,359 16,966
Industrial 291 387 360
Interruptible Sales 72 75 74
Transportation
Services 600 130 94
------- ------- -------
Total 238,909 236,701 233,762
======= ======= =======
Gas volumes sold to the Company's firm customers are sensitive to the
weather in New Jersey. In fiscal 1996, the weather in New Jersey was 7%
colder than normal and 23% colder than the prior year, thereby
increasing gas sales. Weather in fiscal 1995 contributed to lower gas
sales as compared with fiscal 1994, as the weather was 13% warmer than
normal and 12% warmer than fiscal 1994. The Northern Division's tariff
contains a weather normalization clause that is designed to help
stabilize the Company's results by increasing amounts charged to
customers when weather has been warmer than normal and decreasing
amounts charged when weather has been colder than normal. For a further
discussion on variations in revenues, see Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of
Operations".
The growth in the number of residential heating customers principally
reflects the Company's marketing emphasis to convert residential non-
heating customers to full gas heating service. Approximately 70% of the
residential heating customers added in New Jersey since 1991 represented
homes that were converted to gas heating from other forms of space
heating and the remainder consisted of new homes. Approximately 40 new
residential developments are at various stages of the approval process
before municipal planning boards throughout the Northern Division's
service territory.
Effective January 1, 1995, the New Jersey Board of Public Utilities (the
"NJBPU") authorized new tariffs designed to provide for the unbundling
of natural gas transportation and sales service to commercial and
industrial customers. As of September 30, 1996, 845 commercial sales
customers had switched to transportation-only service under the new
tariff. Despite the transfer to transportation service, the commercial
sales market continues to grow. In fiscal 1996, 27 schools and 490
businesses converted to gas heating systems with the Company or switched
from interruptible service to commercial firm service. The
Company also has an economic development program to help spur economic
growth and jobs creation which provides grants and reduced rates for
qualifying businesses that start up, relocate or expand within
designated areas.
The Company's industrial customers also have the ability to switch to
transportation service and purchase their gas from other suppliers. The
rate charged to transportation customers is less than the rate charged
to firm industrial and commercial sales customers because the
transportation customer rate does not include any cost of gas component.
However, the operating margins from both rates are substantially the
same.
The Northern Division's "interruptible" customers have alternative
energy sources and use gas on an "as available" basis. Variations in the
volume of gas sold or transported to these customers do not have a
significant effect on the Company's earnings because, in accordance with
New Jersey regulatory requirements, 90% to 95% of the margins that
otherwise would be realized on gas sold or transported to interruptible
customers are used to reduce gas costs charged to firm sales customers.
The Company provides gas sales and transportation services comprising
twenty percent of the primary fuel requirements of a 614 megawatt
cogeneration facility that began commercial operation in New Jersey in
July 1992 to supply electric power to New York City. In fiscal 1996,
sales and transportation of gas to this customer accounted for
approximately 5% of the Company's operating revenues and approximately
7% of total gas sold or transported. The Company was authorized by the
NJBPU to retain a total of approximately $2.3 million of the operating
margins realized from these sales. The Company reached this maximum during
fiscal 1995 and, therefore, all margins realized from the sale of gas to
this customer in fiscal 1996 were used to reduce gas costs charged to
firm customers.
In order to maximize the value of the Company's gas supply portfolio, in
fiscal 1995 the Company began selling available gas supply and excess
interstate pipeline capacity to other gas service companies and to
customers located outside of the Company's service territories. The price
of gas sold to these customers is not regulated by the NJBPU, however the
NJBPU has authorized the Company to retain 20% of the margins realized
from these sales. The remaining 80% of these margins is used to reduce gas
costs charged to firm customers.
Southern Division
City Gas Company of Florida ("CGF"). CGF is the second largest natural
gas utility in Florida, supplying gas to over 97,000 customers in Dade
and Broward Counties in south Florida, and in Brevard, Indian River and
St. Lucie Counties in central Florida. CGF's service areas cover
approximately 3,000 square miles and have a population of approximately
1.7 million.
CGF's gas volumes sold or transported and customers served for the past
three fiscal years were as follows:
Gas Volumes Sold or Transported (in thousands of Mcf)
1996 1995 1994
Firm Sales:
Residential 2,130 1,982 1,983
Commercial 4,096 4,198 4,439
Interruptible Sales 1,259 1,533 1,958
Unregulated Sales 1,779 -- --
Transportation Sales 884 1,313 1,063
----- ----- -----
Total 10,148 9,026 9,443
====== ===== =====
Utility Customers Served (twelve-month average)
1996 1995 1994
Firm Sales:
Residential 92,179 90,960 87,194
Commercial 4,629 4,615 4,539
Interruptible Sales 18 20 28
Transportation
Services 36 24 8
------ ------ ------
Total 96,862 95,619 91,769
====== ====== ======
CGF's residential customers purchase gas primarily for water heating,
clothes drying and cooking. Some customers, principally in central
Florida, also purchase gas to provide space heating during the
relatively mild winter season. Year-to-year growth in the average number
of residential customers primarily reflects new construction. The rate
of residential market growth was lower in fiscal 1996 as compared with
fiscal 1995 reflecting the application of more selective investment
feasibility standards. The rate of residential market growth is expected
to increase in fiscal 1997 as more central Florida residential projects
have qualified for main extensions under the Company's investment
feasibility standards, principally reflecting lower Company costs to
complete projects and more effective marketing practices.
CGF's commercial business consists primarily of schools, businesses and
public facilities, of which the number of customers tends to increase
concurrently with the continuing growth in population within its service
areas. As with its residential markets, the Company is seeking to
maximize the utilization of its existing mains by emphasizing marketing
efforts toward potential commercial business along these lines.
CGF's industrial customers and certain commercial customers, are served
under tariffs applicable to "interruptible" customers. Unlike the
Company's Northern Division, CGF's interruptible customers do not
generally have alternative energy sources, although their service is on
an "as available" basis. The Company retains all of the operating
margins from sales to these customers.
Certain commercial and industrial customers have converted their natural
gas service from a sales basis to a transportation basis. CGF's
transportation tariff provides margins on transportation services that
are substantially the same as margins earned on gas sales. The Company
intends to submit a proposal in fiscal 1997 to the Florida Public Service
Commission ("FPSC") to offer unbundled gas service to all of its
commercial customers, in a manner similar to that currently in place in
the Company's Northern Division.
The Company initiated natural gas service to St. Lucie County in fiscal
1993 through the construction of a gate station interconnection with the
interstate pipeline system, acquisition and conversion of an existing
underground propane system and the extension of mains to potential
growth areas within the city of Port St. Lucie. The Company
substantially completed expansion of its mains in fiscal 1994. The net
investment in utility plant in the city as of September 30, 1996 was
$3.8 million and planned additional investment in fiscal 1997 will be
$1.0 million. All of the Company's net investment in utility plant in
St. Lucie County has been included in determining the rates authorized
by the FPSC in November 1996 (see "Regulation"), including portions
previously excluded in determining rates authorized by the FPSC in
November 1994.
During fiscal 1996, the Company began selling available gas supply and
excess interstate pipeline capacity to other gas service companies and to
customers located outside of the Company's service territories. The price
of gas sold to these customers is not regulated by the FPSC; however,
the FPSC has ordered that 50% of the margins realized from these sales
be used to reduce gas costs charged to firm customers.
North Carolina Gas Service ("NCGS"). The Company, through NCGS,
provides gas service to approximately 13,100 customers in Rockingham and
Stokes Counties in North Carolina, which territories comprise
approximately 560 square miles. During fiscal 1996, NCGS sold or
transported approximately 3.9 million Mcf of gas as follows: 24% sold to
residential customers, 14% sold to commercial customers, 44% sold to
industrial customers and 18% transported to commercial and industrial
customers.
Elkton Gas Service ("Elkton"). The Company, through Elkton, provides
gas service to approximately 3,400 customers in franchised territories
comprising approximately 14 square miles within Cecil County, Maryland.
During fiscal 1996, Elkton sold approximately 603,000 Mcf of gas as
follows: 34% sold to residential customers, 38% sold to commercial
customers and 28% sold to industrial customers.
Valley Cities Gas Service ("VCGS") and Waverly Gas Service ("WGS").
VCGS and WGS provide gas service to approximately 6,100 customers in
franchised territories comprising 104 square miles within Bradford
County, Pennsylvania and the Village of Waverly, New York and
surrounding areas, respectively. During fiscal 1996, VCGS and WGS sold
or transported approximately 3.9 million Mcf of gas as follows: 15% sold
to residential customers, 8% sold to commercial customers, 9% sold to
industrial customers and 68% transported to commercial and industrial
customers.
Gas Supply and Operations
In recent years, the gas industry has been undergoing structural changes
in response to policies of the Federal Energy Regulatory Commission (the
"FERC") and local regulatory commissions designed to increase
competition. Traditionally, interstate pipelines were wholesalers of
natural gas to local distribution companies and generally did not
provide separate transportation or other services for specific
customers. In 1985, the FERC adopted Order No. 436 that encouraged
interstate pipelines to make transportation of gas available to
customers on a non-discriminatory basis. Such voluntary "open access" by
certain interstate pipelines enhanced the opportunity for local gas
distribution companies and industrial customers to purchase natural gas
directly from gas producers and others. In 1992, the FERC issued Order
No. 636 that, among other things, mandated the separation or
"unbundling" of interstate pipeline sales, transportation and storage
services and established guidelines for capacity management effective in
1993. In fiscal 1995, the NJBPU unbundled the services provided and the
rates charged to New Jersey commercial and small industrial customers as
well. The transition to more competitive rates and services has the
effect of increasing the opportunity for local gas distribution
companies, and industrial and commercial customers to purchase natural
gas from alternative sources, while increasing the potential business
and regulatory risk borne by a local gas distribution company with
respect to the acquisition and management of natural gas services.
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 $11 million of such costs
through September 30, 1996. All of such costs, except for costs incurred
by the Company's Pennsylvania operation, have been authorized for
recovery through the Company's purchased gas adjustment clauses. The
Company has recently filed for and expects full recovery of such costs
in Pennsylvania. The Company currently estimates that its remaining
Order No. 636 transition obligation will be approximately $7 million,
which it expects also to recover through its purchased gas adjustment
clauses as these costs are incurred. This transition obligation is
subject to change based upon future FERC filings by the Company's
pipeline suppliers.
The Company endeavors to utilize its pipeline capacity efficiently by
matching capacity to its load profile to the extent feasible. To this
end, the Company has had a broad unbundled service tariff for certain of
its customers since 1987. The Company continues to avail itself of
opportunities to improve the utilization of its pipeline capacity by
pursuing broad based customer growth, including off-peak markets and
utilizing capacity release and off-system sales opportunities afforded
by Order No. 636 when operationally feasible.
The Company's gas supply during fiscal 1996 came from the following
sources: approximately 5% from purchases under contracts with primary
pipeline suppliers and additional purchases under their filed tariffs;
approximately 95% from purchases from various producers and gas
marketers, and purchases under long-term contracts with independent
producers and less than 1% from propane and liquefied natural gas
("LNG"). The Company manages its gas supply portfolio to assure a
diverse, reliable and secure supply of natural gas at the lowest
reasonable cost. In fiscal 1996, the Company's largest single supplier
accounted for 13% of the Company's total gas purchases.
The Company has long-term gas delivery contracts with seven interstate
pipeline companies. Under these contracts, the Company has a right to
delivery, on a firm year-round basis, of up to 92.2 million Mcf of
natural gas annually with a maximum of approximately 273,000 Mcf per
day. Both the price and conditions of service under these contracts are
regulated by the FERC.
The Company has long-term gas purchase contracts for the supply of
natural gas for its system with eight suppliers, including two
interstate pipeline companies, three gas marketers and three independent
producers. The Company also has a long-term supply and delivery contract
with an interstate pipeline. Under these contracts, the Company has a
right to purchase, on a firm year-round basis, up to 37.9 million Mcf of
natural gas annually with a maximum of approximately 112,000 Mcf per
day. In order to achieve greater supply flexibility, the Company
recently allowed three long-term gas supply contracts to expire at the
conclusion of their primary terms. As a result, the Company has reduced
its fixed gas cost obligations. The Company has replaced these supplies
with both spot market gas and shorter-term, seasonal firm supply, thus
reducing the average term of its long-term obligations. In addition, the
Company has access to spot market gas through the interstate pipeline
system to supplement or replace, on a short-term basis, portions of its
long-term gas purchase contracts when such actions can reduce overall
gas costs or are necessary to supply interruptible customers. In fiscal
1995, the Company, along with seven other Northeastern and Mid-Atlantic
gas distribution companies, formed the East Coast Natural Gas
Cooperative LLC (the "Co-op"). The Co-op was formed with the goal of
jointly managing certain portions of the members' gas supply portfolios,
to increase reliability and reduce costs of service to customers, and to
improve the competitive position of the member companies. Participation
in and reliance upon certain contractual arrangements among Co-op
members has allowed the Company to reduce costs associated with winter
services.
In order to have available sufficient quantities of gas during the
heating season, the Company stores gas during non-peak periods and
purchases supplemental gas, including propane, LNG and gas available
under contracts with certain large cogeneration customers, as it deems
necessary. The storage contracts provide the Company with an aggregate
of 15.4 million Mcf of natural gas storage capacity and provide the
Company with the right to receive a maximum daily quantity of 176,100
Mcf. The contracts with cogeneration customers provide 35,800 Mcf of
daily gas supply to meet peak loads by allowing the Company to take back
capacity and supply that otherwise is dedicated to serve those
customers.
The Company's peak load facilities in New Jersey include a propane-air
plant with a daily production capacity of 27,400 Mcf, fixed propane
storage totaling 674,000 gallons and rail car sidings capable of storing
an additional 300,000 gallons. The Company has an LNG storage and
vaporization facility with a daily delivery capacity of 24,300 Mcf and
storage capacity of 131,000 Mcf.
The Company's maximum daily sendout in fiscal 1996 was approximately
370,600 Mcf in its Northern Division and 93,000 Mcf in the Southern
Division states combined. The Company maintains sufficient gas supply
and delivery capacity for a maximum daily sendout capacity for the
Northern Division of approximately 392,750 Mcf and approximately 119,800
Mcf for the Southern Division states combined.
Certain of the Company's long-term contracts for the supply, storage and
delivery of natural gas include fixed charges that amount to
approximately $75 million annually. The Company currently recovers, and
expects to continue to recover, such fixed charges through its purchased
gas adjustment clauses. The Company also is committed to purchase, at
market-related prices, minimum quantities of gas that, in the aggregate,
are approximately 10 billion cubic feet per year or to pay certain costs
in the event the minimum quantities are not taken. The Company expects
that minimum demand on its systems for the duration of these contracts
will continue to exceed these minimum purchase obligations. In certain
of these contracts, the Company has recently negotiated terms with its
suppliers which will allow the Company to reduce its commitment to its
suppliers in connection with changes in the Company's markets that may
result from further unbundling initiatives.
The Company distributes gas through approximately 5,900 miles of steel,
cast iron and plastic mains. The Company has physical interconnections
with five interstate pipelines in New Jersey and one interstate pipeline
in Florida. In addition, the Company has physical interconnections in
North Carolina and Pennsylvania with interstate pipelines which also
connect to the Northern Division. Common interstate pipelines along the
Company's operating system provide the Company with greater flexibility
in managing pipeline capacity and supply, and thereby optimizing system
utilization.
Regulation
The Company is subject to regulation with respect to, among other
matters, rates, service, accounting and the issuance of securities. The
Company is subject to regulation as an operating utility by the public
utility commissions of the states in which it operates. The Company is
also subject to regulation by the United States Department of
Transportation under the Natural Gas Pipeline Safety Act of 1968, with
respect to the design, installation, testing, construction and
maintenance of pipeline facilities. Natural gas purchases,
transportation service and storage service provided to the Company by
interstate pipeline companies are subject to regulation by the FERC (see
"--Gas Supply and Operations"). In addition, 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 New Jersey Department of Environmental Protection
and other federal and state agencies.
The Company's current rates and tariffs for its Northern Division
reflect a rate case that was settled in October 1991, under which the
Company obtained a weather normalization clause - see "Territory and
Customers Served - Northern Division". In December 1994, the NJBPU
authorized new tariffs which are designed to provide for unbundling of
natural gas transportation and sales services for Northern Division
commercial and industrial customers. The new tariffs became effective on
January 1, 1995 and are designed to be neutral as to the operating
margins of the Company.
The current rates and tariffs for the Florida operations were authorized
on November 29, 1994. On October 29, 1996, the FPSC voted to authorize
the Company to increase its base rates in Florida by $3.75 million
annually. The rate increase reflects a rate base amounting to $91.9
million, reflecting the addition of investments in system improvements
and expansion projects. Under the approval, the allowed return on equity
will be 11.3% with an overall after-tax rate of return of 7.87%. The
Company had been granted interim rate relief of $2.2 million effective
in September 1996. The permanent increase, which is effective in
December 1996, includes the interim adjustment. The FPSC order also
gives the Company the flexibility to negotiate rates with certain
business customers that have access to other energy sources.
The current rates and tariffs for the North Carolina, Maryland,
Pennsylvania and New York operations were authorized between October
1988 and September 1995. These operations serve approximately 20,000
customers in aggregate. On September 20, 1995, the North Carolina
Utilities Commission approved a stipulation to increase the Company's
base rates in North Carolina by $385,000 annually. The tariff for NCGS
reflects a weather normalization clause for its heat sensitive
residential and commercial customers.
The Company's tariffs contain adjustment clauses that enable the Company
to recover purchased gas costs. The adjustment clauses provide for
periodic reconciliations of actual recoverable gas costs with the
estimated amounts that have been billed. Under or over recoveries at
the reconciliation date are recovered from or refunded to customers in
subsequent periods.
Seasonal Aspects
Sales of gas to some classes of customers are affected by variations in
demand due to changes in weather conditions, including normal seasonal
variations throughout the year. The demand for gas for heating purposes
is closely related to the severity of the winter heating season.
Seasonal variations affect short-term cash requirements.
Persons Employed
As of September 30, 1996, the Company employed 1,086 persons, of which
293 employees in the Northern Division were represented by the Utility
Workers Union of America (Local 424), 74 employees in Florida and 17
employees in Pennsylvania were represented by The Teamsters Union, and
43 employees in North Carolina were represented by the International
Brotherhood of Electrical Workers. The current collective bargaining
agreement with the Northern Division's union was negotiated effective
November 20, 1994 and expires on November 20, 1998. The North Carolina
union collective bargaining agreement was negotiated on August 20, 1995,
and expires on August 20, 1998. The collective bargaining agreement in
Pennsylvania was negotiated on November 30, 1996 and expires on September 30,
1997. The collective bargaining agreement in Florida expires on March 31,
1997.
Competition
The Company competes with distributors of other fuels and forms of
energy, including electricity, fuel oil and propane, in all portions of
the territories in which it has distribution mains. In addition, in
1992, the FERC issued Order No. 636 (see "Gas Supply and Operations").
Subsequently, initiatives were sponsored in various states, the purposes
of which were to "unbundle" or separate into distinct transactions, the
purchase of the gas commodity from the purchase of transportation
services for the gas. To that end, as discussed under "Regulation", New
Jersey has unbundled commercial and industrial gas purchase and
transportation rates.
The unbundled sale of gas to customers is subject to competition from
unregulated marketers and brokers, which generally do not bear the
obligations or costs related to operating a regulated utility. Tariffs
for transportation service have generally been designed to provide the
same margins as bundled sales tariffs. Therefore, except for the
regulatory risk of full recovery of gas costs, the Company is
financially indifferent as to whether it transports gas, or sells gas
and transportation together. The Company also faces the risk of loss of
transportation service for large industrial customers which may have the
ability to build connections to interstate gas pipelines and bypass the
Company's distribution system. Gas distributors can also expect
increased competition from electricity as deregulation in that industry
decreases prices and increases supply sources. Alternatively,
opportunities may increase for gas service to fuel generators for large
industrial customers, replacing electric utility service.
The Company believes that in order to compete effectively, it must offer
a greater variety of services at competitive prices. See Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results
of Operations - Competition and Outlook" for a discussion of the
Company's preparation for the impact of increased competition.
Franchises
The Company holds non-exclusive municipal franchises and other consents
which enable it to provide natural gas in the territories it serves. The
Company intends to seek to renew these franchises and consents as they
expire.
Environment
Reference is made to Item 7- "Management's Discussion and Analysis of
Financial Condition and Results of Operations- Capital Expenditures and
Commitments" and Note 10, "Commitments and Contingencies" of the "Notes
to the Consolidated Financial Statements" for information regarding
environmental matters affecting the Company.
Item 2. Properties
The Company owns approximately 5,900 miles of steel, cast iron and
plastic gas mains, together with gate stations, meters and other gas
equipment. In addition, the Company owns peak shaving plants, including
an LNG storage facility in Elizabeth, New Jersey.
The Company also owns real property in Union, Middlesex, Warren, Sussex
and Hunterdon Counties in New Jersey, and in Dade, Broward, Brevard and
St. Lucie Counties in Florida, portions of which are under lease to
others. The Company's owned properties include a general office building
in Hialeah, Florida, that serves as the Southern Division's
headquarters; another office facility in Rockledge, Florida; and office
buildings in both Reidsville, North Carolina and Sayre, Pennsylvania,
which serve as operating offices for the North Carolina and the
Pennsylvania and New York operations, respectively. The Company also
owns various service centers in New Jersey, Florida, North Carolina,
Maryland and Pennsylvania from which the Company dispatches service
crews and conducts construction and maintenance activities.
The Company leases office space in Bedminster, New Jersey, that serves
as its corporate headquarters and leases certain other facilities in New
Jersey and Florida that are operated as customer business offices or
operating offices. The Company also leases approximately 160,000 square
feet in an office building in Union, New Jersey, which serves as the
Northern Division's headquarters.
Subject to minor exceptions and encumbrances, all other property
materially important to the Company and all principal plants are owned
in fee simple, except that most of the mains and pipes are installed in
public streets under franchise or statutory rights or are constructed on
rights of way acquired from the apparent owner of the fee.
Item 3. Legal Proceedings
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.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was presented for submission to a vote of security holders
through the solicitation of proxies or otherwise during the last quarter
of fiscal 1996.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
NUI common stock is listed on the New York Stock Exchange and is traded
under the symbol "NUI". The quarterly cash dividends paid and the
reported high and low closing prices per share of NUI common stock for
the two years ended September 30, 1996 were as follows:
Quarterly Price Range
Cash
Dividend High Low
Fiscal 1996:
First Quarter $0.225 $17.75 $15.75
Second Quarter 0.225 19.25 17.125
Third Quarter 0.225 20.00 16.75
Fourth Quarter 0.225 20.00 16.50
Fiscal 1995:
First Quarter $0.225 $18.375 $13.50
Second Quarter 0.225 16.50 14.25
Third Quarter 0.225 17.50 14.625
Fourth Quarter 0.225 16.875 14.875
There were 6,999 shareholders of record of NUI common stock at
November 30, 1996.
It is the Company's intent to continue to pay quarterly dividends in the
foreseeable future. NUI's dividend policy is reviewed on an ongoing
basis and is dependent upon the Company's expectation of future
earnings, cash flow, financial condition, capital requirements and
other factors. On October 29, 1996, the Company increased its quarterly
dividend to $0.235 per share of common stock. The previous quarterly
rate was $0.225 per share of common stock.
The Company's long-term debt agreements include, among other things,
restrictions as to the payment of cash dividends. Under the most
restrictive of these provisions, the Company is permitted to pay $24
million of cash dividends at September 30, 1996.
Item 6. Selected Financial Data
Selected Consolidated Financial Data
(in thousands, except per share amounts)
Fiscal Years Ended September 30,
1996 1995 1994 1993 1992
Operating Revenues $468,978 $376,445 $405,240 $367,456 $302,429
Net Income $ 14,896 $ 5,517 $ 10,780 $ 13,810 $ 11,808
Net Income Per Share $ 1.52 $ 0.60 $ 1.25 $ 1.70 $ 1.68
Dividends Paid Per Share $ 0.90 $ 0.90 $ 1.60 $ 1.59 $ 1.58
Total Assets $677,966 $610,165 $601,648 $483,911 $467,321
Capital Lease $ 10,466 $ 11,114 $ 11,932 $ 12,290 $ 13,422
Obligations
Long-Term Debt $230,100 $222,060 $160,928 $142,090 $131,546
Common Shareholders' $179,107 $140,912 $142,768 $122,384 $116,933
Equity
Common Shares 11,086 9,201 9,157 8,210 8,036
Outstanding
____________________________________
Notes to the Selected Consolidated Financial Data:
Net Income for fiscal 1995 includes restructuring and other non-
recurring charges amounting to $5.6 million (after tax), or $0.61 per
share.
Net income for fiscal 1994 includes the reversal of $1.8 million of
income tax reserves and restructuring and other non-recurring charges
amounting to $0.6 million (after tax). The effect of these items
increased net income by $1.2 million, or $0.14 per share.
Summary Consolidated Operating Data
Fiscal Years Ended September 30,
1996 1995 1994 1993 1992
Operating Revenues
(Dollars in thousands)
Firm Sales;
Residential $193,842 $173,395 $191,297 $172,749 $147,650
Commercial 107,444 98,541 110,574 97,966 80,470
Industrial 25,321 20,083 25,809 23,066 21,928
Interruptible Sales 50,650 48,282 53,077 48,254 32,758
Unregulated Sales 54,845 7,498 1,426 1,757 --
Transportation Services 23,087 17,696 13,273 12,154 10,410
Customer Service,
Appliance Leasing and
Other 13,789 10,950 9,784 11,510 9,213
------- ------- ------- ------- -------
$468,978 $376,445 $405,240 $367,456 $302,429
======= ======= ======= ======= =======
Gas Sold or Transported
(MMcf)
Firm Sales:
Residential 24,810 21,276 22,558 21,019 20,251
Commercial 16,575 15,455 16,175 14,918 14,006
Industrial 5,407 5,217 5,323 4,781 5,052
Interruptible Sales 14,632 18,365 16,024 13,627 11,142
Unregulated Sales 19,175 3,398 689 904 --
Transportation Services 25,051 22,154 17,290 16,439 14,816
------- ------- ------ ------ ------
105,650 85,865 78,059 71,688 65,267
======= ====== ====== ====== ======
Average Utility Customers
Served
Firm Sales:
Residential 332,440 328,644 312,515 297,384 295,153
Commercial 24,484 24,519 22,638 20,995 20,649
Industrial 338 430 382 377 402
Interruptible Sales 120 118 101 105 104
Transportation Services 668 184 137 87 69
------- ------- ------- ------- -------
358,050 353,895 335,773 318,948 316,377
======= ======= ======= ======= =======
Degree Days in New Jersey
(normal: 4978) 5,343 4,333 4,944 4,703 4,880
Employees (year end) 1,086 1,079 1,186 1,011 979
Ratio of Earnings to Fixed
Charges 2.00 1.37 1.66 2.15 1.90
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis refers to NUI Corporation and all
of its operating divisions and subsidiaries (collectively referred to as
"NUI" or the "Company"). The Company distributes and sells natural gas
in six states through its Northern and Southern utility divisions. The
Northern Division operates in New Jersey as Elizabethtown Gas Company.
The Southern Division was formed effective April 1, 1995 through the
consolidation of the Company's City Gas Company of 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 (the "PSGS Merger") (see Note 2 of the Notes
to the Consolidated Financial Statements).
In addition to gas distribution operations, the Company provides retail
gas sales and related services through its NUI Energy, Inc. subsidiary
(formerly Natural Gas Services, Inc.); bill processing and related
customer services for utilities and municipalities through its Utility
Business Services, Inc. subsidiary (formerly Utility Billing Services,
Inc.); and wholesale energy brokerage and related services through its
NUI Energy Brokers, Inc. subsidiary.
Results of Operations
Fiscal Years Ended September 30, 1996 and 1995
Net Income. Net income for fiscal 1996 was $14.9 million, or $1.52 per
share, as compared with net income of $5.5 million, or $0.60 per share
in fiscal 1995. The increase in the current year was primarily due to
higher operating margins and approximately $5.6 million of after-tax
non-recurring charges incurred in fiscal 1995. These increases were
partially offset by higher operations and maintenance and depreciation
expenses.
Net income per share in the current year was also affected by the
increased average number of outstanding shares of common stock over the
prior year, principally reflecting the Company's issuance of 1.8 million
additional shares in May 1996 (see "Financing Activities and Resources-
Common Stock").
Operating Revenues and Operating Margins. The Company's operating
revenues include amounts billed for the cost of purchased gas pursuant
to purchased gas adjustment clauses. Such clauses enable the Company to
pass through to its utility customers, via periodic adjustments to
customers' bills, increased or decreased costs incurred by the Company
for purchased gas without affecting operating margins. Since the
Company's utility operations do not earn a profit on the sale of the gas
commodity, the Company's level of operating revenues is not necessarily
indicative of financial performance. The Company's operating revenues
increased by $92.5 million, or 25%, in fiscal 1996 as compared with
fiscal 1995. The increase principally reflects the effect of weather in
New Jersey that was 7% colder than normal and 23% colder than the prior
year, and additional refunds to Northern Division customers in fiscal
1995 totaling $11.2 million as a result of lower than projected gas
prices. Operating revenues also increased as a result of significantly
higher unregulated sales in the current year, increased revenues from
interruptible and industrial customers primarily as a result of higher
gas prices incurred, increased customer service revenues and customer
growth.
In order to take advantage of opportunities arising from increasing
deregulation within the natural gas industry, the Company has increased
its focus on transactions in which prices are established by competitive
markets rather than regulatory mandate. The Company has increased its
sales to commercial and industrial customers through its subsidiary, NUI
Energy, Inc. In addition, the Company recently formed NUI Energy
Brokers, Inc. for the purpose of enhancing margins through wholesale
energy brokerage activities. The Company's utility operations also make
sales of natural gas to customers outside of its franchise service
territories when opportunities exist to obtain additional value from its
supply and pipeline capacity under contract. While the prices charged
for these activities are not regulated, margins realized are shared with
customers of the utility operations as follows: New Jersey- 80%,
Florida- 50% and North Carolina- 75%. The Company's other utility
operations do not currently have margin sharing arrangements and
therefore any off-system sales margins are returned 100% to customers.
The Company's operating margins increased by $10.7 million, or 7%, in
fiscal 1996 as compared with fiscal 1995. The increase principally
reflects customer growth, higher sales to unregulated customers,
increased customer service revenues and the effect of colder-than-normal
weather not fully returned to customers through the weather
normalization clauses. The Company has weather normalization clauses in
its New Jersey and North Carolina tariffs which are designed to help
stabilize the Company's results by increasing amounts charged to
customers when weather has been warmer than normal and by decreasing
amounts charged when weather has been colder than normal. As a result of
these weather normalization clauses, operating margins were
approximately $2.2 million less in fiscal 1996 than they would have been
without such clauses. In fiscal 1995, operating margins were
approximately $4.5 million higher than they otherwise would have been
without such clauses.
Other Operating Expenses. The Company's other operating expenses,
excluding income taxes, decreased by approximately $3.3 million, or 3%,
in fiscal 1996 as compared with fiscal 1995. The decrease was primarily
the result of non-recurring pre-tax charges of $8.6 million incurred in
fiscal 1995 (see Note 3 of the Notes to the Consolidated Financial
Statements). Operations and maintenance expenses increased by
approximately $4.0 million, or 4%, primarily due to costs incurred as a
result of the colder weather in New Jersey during the current heating
season, higher expenses related to the start-up and growth of the
Company's non-regulated operations, and higher pension costs.
Depreciation and amortization expenses increased by approximately $1.4
million primarily due to additional plant in service.
Income tax expense increased by approximately $4.9 million in fiscal
1996 as compared with fiscal 1995, primarily due to higher pre-tax
income.
Interest Expense. Interest expense decreased by approximately $0.2
million, or 1%, in fiscal 1996 as compared with fiscal 1995. The
decrease was primarily due to lower average short-term debt outstanding
and short-term interest rates, and to approximately $0.6 million of
interest recorded in the prior year on the over-collection of gas costs
by the Northern Division. This decrease was partially offset by higher
average long-term interest rates due to the effect of a full year's
inclusion of $70 million of Medium-Term Notes that were issued in fiscal
1995.
Fiscal Years Ended September 30, 1995 and 1994
Net Income. Net income for fiscal 1995 was $5.5 million, or $0.60 per
share, as compared with net income of $10.8 million, or $1.25 per share
in fiscal 1994. The decrease was primarily due to non-recurring charges
which, on an after-tax basis, were approximately $5.6 million, or $0.61
per share, and the reversal in fiscal 1994 of approximately $1.8 million
of income tax reserves. Partially offsetting this decrease was
approximately $1.6 million of additional net income attributable to the
inclusion of PSGS in the entire fiscal 1995 results. Absent the non-
recurring charges, net income for fiscal 1995 would have been $11.1
million, or $1.21 per share.
Net income per share in fiscal 1995 was also reduced as a result of the
increased number of outstanding shares of NUI common stock as compared
with the prior year.
Operating Revenues and Operating Margins. The Company's operating
revenues decreased by $28.8 million, or 7%, in fiscal 1995 as compared
with fiscal 1994. The decrease principally reflects the effects of
weather in New Jersey that was 13% warmer than normal and 12% warmer
than the prior year, and refunds attributable to lower gas costs
totaling $13.9 million to Northern Division customers (see "Regulatory
Matters"). Operating revenues were also reduced by decreased sales to
interruptible customers due to lower gas prices and the effect of
purchased gas adjustment clauses. Partially offsetting these decreases
were approximately $19.5 million of additional operating revenues from
the inclusion of PSGS in the entire fiscal 1995 results, the effects of
base rate and appliance leasing rate increases in Florida, increased
sales to unregulated customers and other customer growth.
The Company's operating margins increased by $8.6 million, or 6%, in
fiscal 1995 as compared with fiscal 1994. The increase was principally
the result of the inclusion of PSGS for the entire fiscal 1995 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 fiscal 1995 not fully recovered through the weather normalization
clause. As a result of the weather normalization clauses, operating
margins were approximately $4.5 million higher in fiscal 1995 than they
otherwise would have been without such clauses. There was no adjustment
to operating margins in fiscal 1994 as the weather fell within the
normal range.
Other Operating Expenses. The Company's other operating expenses,
excluding income taxes, increased by $9.8 million, or 8%, in fiscal 1995
as compared with fiscal 1994. The increase was primarily the result of
non-recurring pre-tax charges of $8.6 million (see Note 3 of the Notes
to the Consolidated Financial Statements), an additional $4.6 million of
other pre-tax operating expenses from the inclusion of PSGS in the
entire fiscal 1995 results and an increase in depreciation expense due
to additional utility plant in service. Partially offsetting these
increases were lower labor, pension and other employee benefit costs as
a result of an early retirement program implemented by the Company in
fiscal 1995 and other work force reductions.
Income taxes increased by $0.8 million in fiscal 1995 due to the
reversal in 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, partially offset by the effect of lower pre-
tax income in fiscal 1995.
Interest Expense. Interest expense increased by $3.2 million in fiscal
1995 as compared with fiscal 1994. The increase was due to higher
average outstanding borrowings, higher short-term interest rates and an
increase of $0.6 million of interest recorded on the over collection of
gas costs by the Northern Division. 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%.
Regulatory Matters
Northern Division
On August 2, 1996, the Northern Division filed a petition with the New
Jersey Board of Public Utilities ("NJBPU") to increase its
annual purchased gas adjustment revenues by approximately $22 million
reflecting higher projected gas costs in the coming year.
On December 4, 1996, the NJBPU approved an interim order
authorizing the revenue increase effective in December 1996. The NJBPU
is still reviewing the Company's request to incorporate, in a two-year
pilot program, a performance-based mechanism whereby Northern Division
customers and the Company would benefit from the Company's ability to
secure gas at a cost more favorable than a market index benchmark. The
proposed performance mechanism would provide a 50/50 sharing of risk and
opportunity between the Northern Division customers and the Company on
the difference between a monthly market benchmark and the actual cost of
purchased gas, up to $1 million annually. Action by the NJBPU on the
Company's request and final revenue increase is expected this winter. On
November 3, 1995, the NJBPU approved a petition filed by the Northern
Division to reduce its annual purchased gas adjustment revenues by
approximately $13.7 million and to refund to customers approximately
$2.7 million, due to lower gas costs. None of such revenue reduction
and refund affects the operating margins of the Company.
On November 4, 1994, the NJBPU approved a petition filed by the Northern
Division to reduce its annual purchased gas adjustment revenues by
approximately $11.9 million. The decrease reflected the Company's
projections for lower gas costs in fiscal 1995. The NJBPU also approved
refunds 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
paid in fiscal 1994 and fiscal 1995. None of such revenue reductions or
refunds affected the operating margins of the Company.
Southern Division
On October 29, 1996, the Florida Public Service Commission (the
"FPSC") voted to authorize the Company to increase its base rates in
Florida by $3.75 million annually. The rate increase reflects a rate
base amounting to $91.9 million, reflecting the addition of investments
in system improvements and expansion projects. Under the approval, the
allowed return on equity will be 11.3% with an overall after-tax rate of
return of 7.87%. The Company had been granted interim rate relief of
$2.2 million effective in September 1996. The permanent increase, which
is effective in December 1996, includes the interim adjustment. The FPSC
order also gives the Company the flexibility to negotiate rates with
certain business customers that have access to other energy sources.
On November 29, 1994, the FPSC voted to authorize the Company to
increase its base rates in Florida by $1.6 million annually. The rate
increase reflected a rate base amounting to approximately $82.6 million
with an overall after-tax rate of return of 7.26%. In addition, it
provided 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.
On September 20, 1995, the North Carolina Utilities Commission approved
a stipulation to increase the Company's base rates in North Carolina by
$385,000 annually. The stipulation provides for a rate base amounting to
approximately $11.9 million with an overall after-tax rate of return of
7.89%. The rate increase was effective in October 1995.
Financing Activities and Resources
The Company's net cash provided by operating activities was $22.5
million in fiscal 1996, $47.9 million in fiscal 1995, and $22.5 million
in fiscal 1994. The decrease in net cash provided by operating
activities in fiscal 1996 as compared with fiscal 1995 principally
reflects a higher level of accounts receivable primarily due to the
colder weather and increased activity by the Company's unregulated
businesses, and an under collection of gas costs through the Company's
purchased gas adjustment clauses. The increase in net cash provided by
operating activities in fiscal 1995 as compared with fiscal 1994 was
primarily the result of lower accounts receivable due to accelerated
collections of budget billed customer accounts, lower gas costs and a
lower level of payments in fiscal 1995 for New Jersey gross receipts and
franchise taxes; the 1994 New Jersey gross receipts and franchise tax
payments included an additional amount representing almost a half year's
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 $39.9 million at 5.6% in fiscal 1996, $58.0 million at 5.9%
in fiscal 1995 and $82.0 million at 4.1% in fiscal 1994. The weighted
average daily amounts of notes payable to banks decreased in fiscal 1996
primarily due to the full effect of the issuance of $70 million of
Medium-Term Notes in fiscal 1995, which were used to repay short-term
debt, and the issuance of an additional 1.8 million shares of common
stock, of which part of the proceeds were used to repay short-term debt.
These decreases were partially offset by borrowings to finance portions
of the Company's construction expenditures. The weighted average daily
amount of notes payable decreased in fiscal 1995 as compared with fiscal
1994 principally due to the $70 million Medium-Term Note issuance.
At September 30, 1996, the Company had outstanding notes payable to
banks amounting to $54.9 million and available unused lines of credit
amounting to $76 million. Notes payable to banks increased as of
September 30, 1996 as compared with the balance outstanding as of
September 30, 1995, due to the use of short-term debt to finance
portions of the Company's capital expenditures and to the under-
collection of gas costs in the current year through the Company's
purchased gas adjustment clauses.
Long-Term Debt and Funds for Construction Held by Trustee. On June 12,
1996, the Company issued $39 million of floating rate tax exempt Gas
Facilities Revenue Bonds which mature on June 1, 2026. Under the terms
of the floating rate debt, the interest rate paid by the Company, which
averaged 3.1% since the date of issuance, is reset daily. The proceeds
of the bond issuance are being used to finance part of the Northern
Division's capital expenditure program.
In November 1994, the Company filed a shelf registration statement with
the Securities and Exchange Commission for an aggregate of up to $100
million of debt and equity securities. 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 may issue a portion of the remaining securities
subject to the shelf registration during fiscal 1997 to finance part of
the Company's capital expenditure program.
The Company expects to refinance approximately $55 million of its Gas
Facilities Revenue Bonds in fiscal 1997. Regulatory approval for such
refinancing has been sought, but has not yet been obtained.
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 deposits in trust the unexpended portion of the net proceeds
from its Gas Facilities Revenue Bonds until drawn upon for eligible
capital expenditures. As of September 30, 1996 and 1995, the total
unexpended portions of all of the Company's Gas Facilities Revenue Bonds
were $42.6 million and $13.6 million, respectively, and are classified
on the Company's consolidated balance sheet, including interest earned
thereon, as funds for construction held by trustee.
Common Stock. On May 20, 1996, the Company issued an additional 1.8
million shares of NUI common stock. The net proceeds from the offering
totaled $31.1 million and were used to reduce outstanding debt.
The Company periodically issues shares of common stock in connection
with NUI Direct, the Company's dividend reinvestment and stock purchase
plan, and various employee benefit plans. Effective in December 1994,
these plans commenced purchasing shares on the open market to fulfill
the plans' requirements, rather than purchasing the shares directly from
the Company. Under the terms of these plans, the Company may
periodically change the method of purchasing shares from open market
purchases to purchases directly from the Company, or vice versa. The
proceeds of such issuances amounted to $1.0 million and $6.3 million in
fiscal 1995 and 1994, respectively, and were used to reduce outstanding
short-term debt. Effective in October 1996, these plans began purchasing
shares directly from the Company. In addition, during fiscal 1996, the
Company began issuing shares of NUI common stock under three new stock
plans. The proceeds from such issuances amounted to $0.3 million in
fiscal 1996, and were used primarily to reduce outstanding short-term
debt.
On April 19, 1994, the Company issued 683,443 additional shares of NUI
common stock in connection with the PSGS Merger (see Note 2 of the Notes
to the Consolidated Financial Statements).
Dividends. On October 29, 1996, the Company increased its quarterly
dividend to $0.235 per share of common stock. The previous quarterly
rate was $0.225 per share of common stock.
Capital Expenditures and Commitments
Capital expenditures, which consist primarily of expenditures to expand
and upgrade the Company's gas distribution systems, were $37.1 million
in fiscal 1996, $37.9 million in fiscal 1995 and $55.8 million in fiscal
1994. The Company's capital expenditures are expected to be
approximately $57 million in fiscal 1997.
The Company owns or previously owned six former manufactured gas plant
("MGP") sites in the Northern Division and ten MGP sites in the Southern
Division states. The Company, with the aid of environmental consultants,
regularly assesses the potential future costs associated with conducting
remedial actions, as well as the likelihood of whether such actions will
be necessary. The Company records a reserve if it is probable that a
liability will be incurred and the amount of the liability is reasonably
estimable. Based on the Company's most recent assessment, as of
September 30, 1996, the Company has recorded a total reserve for
environmental investigation and remediation costs of approximately $34
million, which the Company expects it will expend in the next 20 years
to remediate seven of the Company's 16 MGP sites. Of this reserve,
approximately $30 million relates to Northern Division MGP sites and
approximately $4 million relates to Southern Division MGP sites. In
addition to these costs, the Company believes that it is possible that
costs associated with conducting investigative activities and
implementing remedial actions, if necessary, with respect to all of its
MGP sites may exceed the approximately $34 million reserve by an amount
that could range up to $21 million and be incurred during a future
period of time that may range up to fifty years. Of this $21 million in
possible future expenditures, approximately $10 million relates to the
Northern Division MGP sites and approximately $11 million relates to the
Southern Division MGP sites. As compared with the approximately $34
million reserve discussed above, the Company believes that it is less
likely that this additional $21 million will be incurred and therefore
has not recorded it on its books. The Company believes that its
remediation costs associated with the Northern Division MGP sites will
be recoverable in rates and from insurance carriers. In July 1996, the
NJBPU approved a petition filed by the Northern Division to establish an
MGP Remediation Adjustment Clause ("RAC"). The RAC enables the Company
to recover actual environmental expenditures incurred over a rolling
seven-year period. On September 3, 1996, the Company made its initial
filing under the RAC to begin recovery of $3.1 million of environmental
costs incurred from inception through June 30, 1996. A decision is
expected in fiscal 1997. With respect to costs which may be associated
with the Southern Division MGP sites, the Company intends to pursue
recovery from ratepayers, former owners and operators of the sites and
from insurance carriers. However, the Company is not able at this time
to express a belief as to whether any or all of these recovery efforts
related to Southern Division MGP sites will ultimately be successful.
For a further discussion of environmental matters, see Note 10 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 $75 million annually. The Company currently recovers, and
expects to continue to recover, such fixed charges through its purchased
gas adjustment clauses. The Company also is committed to purchase, at
market-related prices, minimum quantities of gas that, in the aggregate,
are approximately 10 billion cubic feet per year or to pay certain costs
in the event the minimum quantities are not taken. The Company expects
that minimum demand on its systems for the duration of these contracts
will continue to exceed these minimum purchase obligations.
The implementation of the Federal Energy Regulatory Commission's
("FERC") Order No. 636 required the restructuring of the Company's
contracts with certain pipeline companies that together supply less than
one-third of the Company's total firm gas supply. Under Order No. 636
the pipeline companies are passing through to their customers transition
costs associated with mandated restructuring, such as costs resulting
from buying out unmarketable gas purchase contracts. The Company has
been charged approximately $11 million of such costs through September
30, 1996. All of such costs, except for costs incurred by the Company's
Pennsylvania operation, have been authorized for recovery through the
Company's purchased gas adjustment clauses. The Company has recently
filed for and expects full recovery of such costs in Pennsylvania, as
well. The Company currently estimates that its remaining Order No. 636
transition obligation will be approximately $7 million, which it expects
also to recover through its purchased gas adjustment clauses as these
costs are incurred. This transition obligation is subject to possible
future FERC actions based upon filings by the Company's pipeline
suppliers.
As of September 30, 1996, the Company is scheduled to repay
approximately $1 million of long-term debt in fiscal 1997. No other
long-term debt is scheduled to be repaid over the next five years.
Competition and Outlook
The natural gas distribution industry is undergoing significant changes.
The sale of gas by utility companies to commercial and industrial
customers has been ``unbundled,'' or separated from the transportation
service component, by several state regulatory commissions, including
the NJBPU. In these states, while the sale of the gas commodity to
commercial and industrial customers is now fully competitive, the
transportation service remains regulated as to price and returns and
subject to various restrictions and franchise protections. It is
anticipated that additional states will unbundle these services for
commercial and industrial customers and that, in the near term, some
states will begin to unbundle these services for residential customers
as well.
NUI intends to submit proposals to state regulators in New Jersey and
Florida to continue the unbundling process within NUI's service
territories. In New Jersey, the Company plans to submit, during 1997, a
pilot program to unbundle gas service to certain residential customers.
As opposed to the commercial and industrial markets, the long-term
benefits of unbundling for the residential customer are not clear.
Accordingly, this program will provide valuable information to the
Company and to other gas marketing companies regarding the energy
choices of residential gas customers. The Company also intends to submit
a proposal to the FPSC to unbundle gas service to commercial customers,
in a manner similar to that currently in place in the Company's New
Jersey service territory. This proposal is expected to cover the
Company's entire Florida commercial customer base.
Tariffs for transportation service have generally been designed to
provide the same margins as bundled sales tariffs. Therefore, except for
the regulatory risk of full recovery of gas costs, the Company is
financially indifferent as to whether it transports gas or sells gas and
transportation together. Unbundling provides the Company with an
opportunity to make additional margins through its unregulated marketing
subsidiary, NUI Energy, Inc. by competing with other unregulated
marketers and brokers for sales of gas.
The Company also faces the risk of loss of transportation service for
large industrial customers who may have the ability to build connections
to interstate gas pipelines and thereby bypass the Company's
distribution system. Gas distributors can also expect increased
competition from electricity as deregulation in that industry decreases
prices and increases supply sources. Alternatively, opportunities may
increase for gas service to fuel generators for large industrial
customers, replacing electric utility service.
The Company believes that in order to successfully compete in the
deregulated energy markets, it must be able to provide customers with a
broad array of energy and other products and services. In addition to
the transportation and sale of gas, such products and services may
include electricity and other energy commodities, energy efficiency
services, comprehensive billing services, plant operations management,
and fuels management. In addition, the Company may offer non-energy
products and services to customers if such offerings are consistent with
the Company's business plan.
Most of the products and services described above are not currently
provided by the Company. Therefore, the Company intends to acquire the
skills and capabilities to provide some or all of them through various
means, including acquisitions of companies, hiring of experienced
employees, and alliances, partnerships and joint ventures. All such
products and services would likely be offered through the coordinated
marketing efforts of the Company.
Mergers and acquisitions within the energy industry, including the gas
distribution industry, have accelerated as many companies endeavor to
offer more varied services to customers. The Company believes that the
broadening of its product offerings and the expansion of its customer
base are important to its future success. As a result, the Company may
participate in one or more mergers and/or acquisitions if the Company
deems such actions consistent with its business plan.
The Company's operations are organized under three primary lines of
business: Distribution Services, Energy Sales and Services, and Customer
Services. The outlook for each is discussed below.
Distribution Services
Distribution Services is the core business of the Company, defined as
the distribution, or transportation, of energy to retail customers. Such
distribution service is regulated as to price, safety and return by the
regulatory commissions of the states in which the Company operates.
The Company has substantial growth opportunities in its distribution
business. Capital investments for the entire Company are expected to
increase to an estimated $57 million in fiscal 1997 from $37 million in
fiscal 1996, in large part to take advantage of these growth
opportunities. Almost half of the planned capital investment in fiscal
1997 is related to providing gas or transportation service to new
customers. The highest rate of expected growth compared to fiscal 1996
levels will occur in the Company's Southern Division, where population
growth rates are above the national average, and substantially higher
than those in the Northern Division. While the Company is confident that
these 1997 investments will earn a return in excess of its cost of
capital, there can be no assurance that the expected margins from each
capital investment will be fully realized.
Customer Services
The Customer Services unit provides repair and maintenance for customer-
owned gas facilities and appliances, and collects energy usage data for
billing purposes. The Company's strategy for its Customer Services unit
is to improve the quality and timeliness of customer services, and to
charge prices that fully reflect the quality of those services to its
customers.
The Company intends to implement several measures, including the use of
new metering and communications technology, to improve the accuracy and
timeliness of billing information. The Company is also working to lower
the response time to customer service requests and to increase the types
of services that are offered.
The Company has reviewed its rate schedules and has imposed new or
increased fees where appropriate for certain customer-initiated
services. NUI may request state regulatory agencies to approve other
service fee increases, thereby providing income to offset cost of
providing gas service to its general customer base.
Energy Sales and Services
The Company's primary operations in Energy Sales and Services are
composed of three business lines. First, in fiscal 1995 the Company
started Natural Gas Services, Inc., later renamed NUI Energy, Inc.
("NUI Energy") to market gas service to unbundled retail commercial
and industrial customers. The margins from NUI Energy in fiscal 1996
were approximately $1.1 million, but the expenses related to this start-
up operation resulted in a slight loss for the year. The Company plans
to capture market share and expand margins in its NUI Energy unit by
rapidly increasing the number and experience level of salespeople
dedicated to its target markets. The working capital investment planned
for NUI Energy's operations is not expected to exceed $4 million in
fiscal 1997. Due to the start-up nature of NUI Energy, it is not
expected to provide a meaningful contribution to earnings until fiscal
1998.
The second business line of Energy Sales and Services is wholesale sales
and brokering of energy, primarily to utilities and energy marketing
companies. The Company formed NUI Energy Brokers, Inc. ("Energy
Brokers") in fiscal 1996 to perform such activities. Energy Brokers
also is the provider of energy to the Company's retail marketing
subsidiary, NUI Energy. Energy Brokers generated margins of
approximately $1.6 million in fiscal 1996. Due to the start-up nature of
Energy Brokers, it did not provide a meaningful contribution to earnings
in fiscal 1996. The Company expects that margins will increase
substantially in future years as Energy Brokers enhances its gas
brokerage operations and expands into electric and other energy
brokerage activities. The Company intends to minimize its risks in this
business by limiting its financial and physical positions at any one
time. As in any commodity brokerage activity, however, there are risks
pertaining to market changes and credit exposure that can be managed but
not eliminated. The earnings from Energy Brokers are likely to be more
volatile, therefore, than the Company's distribution business.
The third business line within Energy Sales and Services is in "off-
system sales", or the use of utility-owned gas assets to make sales to
customers outside of NUI's service areas. Such assets include pipeline
capacity and gas storage facilities. These assets are managed separately
from non-utility assets, and their use is monitored and regulated by
state regulatory commissions. Pursuant to regulatory agreements in some
states in which the Company operates, the Company is able to retain a
portion of the margins from these sales in varying percentages depending
on the state in which the assets are owned. The Company's share of
margins from off-system sales were approximately $0.9 million in fiscal
1996. Such margins are likely to increase in fiscal 1997 as margin
sharing agreements in Florida and other states become fully implemented.
Effects of Inflation
The Company's tariffs provide purchased gas adjustment clauses through
which rates charged to customers are adjusted for changes in the cost of
gas on a reasonably current basis. Increases in other utility costs and
expenses not otherwise offset by increases in revenues or reductions in
other expenses could have an adverse effect on earnings due to the time
lag associated with obtaining regulatory approval to recover such
increased costs and expenses, and the uncertainty of whether regulatory
commissions will allow full recovery of such increased costs and
expenses.
Item 8. Financial Statements and Supplementary Data
Consolidated financial statements of the Company as of September 30,
1996 and 1995 and for each of the three years in the period ended
September 30, 1996, the auditors' report thereon, and the unaudited
quarterly financial data for the two-year period ended September 30,
1996, are included herewith as indicated on "Index to Financial
Statements and Schedule" on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning directors and officers of the Company is included
in the definitive Proxy Statement for the Company's Annual Meeting of
Stockholders, which is incorporated herein by reference. It is expected
that such Proxy Statement will be filed with the Securities and Exchange
Commission no later than January 28, 1997.
Item 11. Executive Compensation
Information concerning executive compensation is included in the
definitive Proxy Statement for the Company's Annual Meeting of
Stockholders, which is incorporated herein by reference. It is expected
that such Proxy Statement will be filed with the Securities and Exchange
Commission no later than January 28, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning security ownership of certain beneficial owners
and management is included in the definitive Proxy Statement for the
Company's Annual Meeting of Stockholders, which is incorporated herein
by reference. It is expected that such Proxy Statement will be filed
with the Securities and Exchange Commission no later than January 28,
1997.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions is
included in the definitive Proxy Statement for the Company's Annual
Meeting of Stockholders, which is incorporated herein by reference. It
is expected that such Proxy Statement will be filed with the Securities
and Exchange Commission no later than January 28, 1997.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Consolidated financial statements of the Company as of
September 30, 1996 and 1995 and for each of the three years in the
period ended September 30, 1996 and the auditors' report thereon, and
the unaudited quarterly financial data for the two-year period ended
September 30, 1996 are included herewith as indicated on the "Index to
Financial Statements and Schedule" on page F-1.
(2) The applicable financial statement schedule for the fiscal
years 1996, 1995 and 1994 is included herewith as indicated on the
"Index to Financial Statements and Schedule" on page F-1.
(3) Exhibits:
Exhibit Description Reference
No.
2(i) Letter Agreement, dated June 29, Incorporated by
1993, by and between NUI Corporation reference to Exhibit
and Pennsylvania & Southern Gas 2(i) to Registration
Company Statement No. 33-50561
2(ii) Agreement and Plan of Merger, dated Incorporated by
as of July 27, 1993, by and between reference to Exhibit
NUI Corporation and Pennsylvania & 2(ii) to Registration
Southern Gas Company Statement No. 33-50561
3(i) Certificate of Incorporation, amended Incorporated by
and restated as of December 1, 1995 reference to Exhibit
3(i) of NUI's Form 10-K
Report for Fiscal
1995
3(ii) By-Laws, amended and restated as of Incorporated by
October 24, 1995 reference to Exhibit
3(ii) of NUI's Form
10-K Report for Fiscal
1995
4(i) Rights Agreement between NUI Incorporated by
Corporation and Mellon Securities reference to NUI's
Trust Company dated November 28, Form 8-K dated
1995 December 1, 1995.
10(i) Service Agreement by and between Incorporated by
Transcontinental Gas Pipe Line reference to Exhibit
Corporation and Elizabethtown Gas 10(i) to Registration
Company ("EGC"), dated February 1, Statement No. 33-50561
1992 (#3686)
10(ii) Service Agreement under Rate Schedule Incorporated by
GSS by and between Transcontinental reference to Exhibit
Gas Pipe Line Corporation and EGC, 10(ii) to Registration
dated May 3, 1972 Statement No. 33-50561
10(iii) Service Agreement under Rate Schedule Incorporated by
LG-A by and between Transcontinental reference to Exhibit
Gas Pipe Line Corporation and EGC, 10(iii) to
dated January 12, 1971 Registration Statement
No. 33-50561
10(iv) Service Agreement by and between Filed herewith
Transcontinental Gas Pipe Line
Corporation and EGC, dated
November 1, 1995 (Contract #1.1997)
10(v) Service Agreement by and between Filed herewith
Transcontinental Gas Pipe Line
Corporation and EGC, dated
November 1, 1995 (Contract #1.1995)
10(vi) Firm Gas Transportation Agreement by Incorporated by
and among Transcontinental Gas Pipe reference to Exhibit
Line Corporation, EGC and National 10(vi) to Registration
Fuel Gas Supply Corporation, dated Statement No. 33-50561
November 1, 1984
10(vii) Service Agreement by and among Filed herewith
Transcontinental Gas Pipe Line
Corporation and EGC, dated
November 1, 1995 (Contract #1.1998)
10(viii) Service Agreement for Rate Schedule Incorporated by
CDS by and between Texas Eastern reference to Exhibit
Transmission Corporation and EGC, 10(viii) to NUI's Form
dated December 1, 1993 (Contract 10-K Report for Fiscal
#800361) 1994
10(ix) Service Agreement under Rate Schedule Incorporated by
FTS-7 by and between Texas Eastern reference to Exhibit
Transmission Corporation and EGC, 10(ix) to NUI's Form
dated October 25, 1994 (Contract 10-K Report for Fiscal
#331720) 1994
10(x) Service Agreement for Rate Schedule Incorporated by
FTS-5 by and between Texas Eastern reference to Exhibit
Transmission Corporation and EGC, 10(x) to Registration
dated June 1, 1993 (Contract #330917) Statement No. 33-50561
10(xi) Service Agreement under Rate Schedule Incorporated by
FTS-8 by and between Texas Eastern reference to Exhibit
Transmission Corporation and EGC, 10(xi) to NUI's Form
dated June 28, 1994 (Contract 10-K Report for Fiscal
#331013) 1994
10(xii) Service Agreement for Rate Schedule Incorporated by
FTS-5 by and between Texas Eastern reference to Exhibit
Transmission Corporation and EGC, 10(xii) to
dated June 1, 1993 (Contract #330212) Registration Statement
No.33-50561
10(xiii) Service Agreement for Rate Schedule Incorporated by
FTS-2 by and between Texas Eastern reference to Exhibit
Transmission Corporation and EGC, 10(xiii) to
dated June 1, 1993 (Contract #330788) Registration Statement
No. 33-50561
10(xiv) Service Agreement under NTS Rate Incorporated by
Schedule by and between Columbia Gas reference to Exhibit
Transmission Corporation and EGC, 10(xiv) to NUI's Form
dated November 1, 1993 (Contract 10-K Report for Fiscal
#39275) 1993
10(xv) Service Agreement under SST Rate Incorporated by
Schedule by and between Columbia Gas reference to Exhibit
Transmission Corporation and EGC, 10(xv) to NUI's Form
dated November 1, 1993 (Contract 10-K Report for Fiscal
#38045) 1993
10(xvi) Service Agreement under FTS Rate Incorporated by
Schedule by and between Columbia Gas reference to Exhibit
Transmission Corporation and EGC, 10(xvi) to NUI's Form
dated November 1, 1993 (Contract 10-K Report for Fiscal
#37882) 1993
10(xvii) Gas Transportation Agreement under Incorporated by
FT-G Rate Schedule by and between reference to Exhibit
Tennessee Gas Pipeline Company and 10(xvii) to NUI's Form
EGC (Contract #597), dated 10-K Report for Fiscal
September 1, 1993 1993
10(xviii) Gas Transportation Agreement under Incorporated by
FT-G Rate Schedule by and between reference to Exhibit
Tennessee Gas Pipeline Company and 10(xviii) to NUI's
EGC (Contract #603), dated Form 10-K Report for
September 1, 1993 Fiscal 1993
10(xix) Service Agreement by and between Filed herewith
Tennessee Gas Pipeline Company and
EGC, dated November 1, 1995 (Contract
#3832)
10(xx) Firm Transportation Service Agreement Incorporated by
under FTS-1 Rate Schedule by and reference to Exhibit
between City Gas and Florida Gas 10(xx) of NUI's Form
Transmission dated October 1, 1993 10-K Report for Fiscal
1993
10(xxi) Lease Agreement between EGC and Incorporated by
Liberty Hall Joint Venture, dated reference to Exhibit
August 17, 1987 10(vi) of EGC's Form
10-K Report for Fiscal
1987
10(xxii) 1988 Stock Plan Incorporated by
reference to Exhibit
10(viii) to
Registration Statement
No.33-21525
10(xxii) First Amendment to 1988 Stock Plan Incorporated by
reference to Exhibit
10(xxxiii) to
Registration Statement
No. 33-46162
10(xxiii) Form of Termination of Employment and Incorporated by
Change in Control Agreements reference to Exhibit
10(xxiii) of NUI's
Form 10-K Report for
Fiscal 1995
10(xxiv) Firm Transportation Service Agreement Incorporated by
under FTS-2 Rate Schedule by and reference to Exhibit
between City Gas and Florida Gas 10(xxiv) of NUI's Form
Transmission, dated December 12, 1991 10-K Report for Fiscal
and Amendment dated November 12, 1993 1994
10(xxv) Service Agreement under Rate Schedule Incorporated by
LG-A by and between Transcontinental reference to Exhibit
Gas Pipeline and North Carolina Gas 10(xxv) of NUI's Form
Service Division of Pennsylvania & 10-K Report for Fiscal
Southern Gas Company, dated August 5, 1994
1971
10(xxvi) Service Agreement under Rate Schedule Incorporated by
GSS by and between Transcontinental reference to Exhibit
Gas Pipeline and North Carolina Gas 10(xxvi) of NUI's Form
Service Division of Pennsylvania & 10-K Report for Fiscal
Southern Gas Company, dated April 13, 1994
1972
10(xxvii) 1996 Employee Stock Purchase Plan Filed herewith
10(xxviii) Service Agreement under Rate Schedule Incorporated by
FT by and between Transcontinental reference to Exhibit
Gas Pipeline and North Carolina Gas 10(xxviii) of NUI's
Service Division of Pennsylvania & Form 10-K Report for
Southern Gas Company, dated Fiscal 1994
February 1, 1992
10(xxix) 1996 Directors Stock Purchase Plan Filed herewith
10(xxx) Gas Storage Contract under Rate Incorporated by
Schedule FS by and between Tennessee reference to Exhibit
Gas Pipeline Company and Pennsylvania 10(xxx) of NUI's Form
& Southern Gas Company, dated 10-K Report for Fiscal
September 1, 1993 1994
10(xxxi) Gas Transportation Agreement under Incorporated by
Rate Schedule FT-A by and between reference to Exhibit
Tennessee Gas Pipeline Co. and 10(xxxi) of NUI's Form
Pennsylvania & Southern Gas Company, 10-K Report for Fiscal
dated September 1, 1993 (Contract 1994
#935)
10(xxxii) Gas Transportation Agreement under Incorporated by
Rate Schedule FT-A by and between reference to Exhibit
Tennessee Gas Pipeline Co. and 10(xxxii) of NUI's
Pennsylvania & Southern Gas Company, Form 10-K Report for
dated September 1, 1993 (Contract Fiscal 1994
#936)
10(xxxiii) Gas Transportation Agreement under Incorporated by
Rate Schedule FT-A by and between reference to Exhibit
Tennessee Gas Pipeline Co. and 10(xxxiii) of NUI's
Pennsylvania & Southern Gas Company, Form 10-K Report for
dated September 1, 1993 (Contract Fiscal 1994
#959)
10(xxxiv) Gas Transportation Agreement under Incorporated by
Rate Schedule FT-A by and between reference to Exhibit
Tennessee Gas Pipeline Co. and 10(xxxiv) of NUI's
Pennsylvania & Southern Gas Company, Form 10-K Report for
dated September 1, 1993 (Contract Fiscal 1994
#2157)
10(xxxv) Employment Agreement, dated as of Incorporated by
July 29, 1988, between NUI reference to Exhibit
Corporation and Jack Langer 10(xxxv) of NUI's Form
10-K Report for Fiscal
1994
10(xxxvi) Service Agreement for Rate Schedule Incorporated by
FT by and between Transcontinental reference to Exhibit
Gas Pipe Line Corporation and EGC 10(xxxvi) of NUI's
(Contract #1.0431) dated April 1, Form 10-K Report for
1995 Fiscal 1995
10(xxxvii) Service Agreement for Rate Schedule Incorporated by
FT by and between Transcontinental reference to Exhibit
Gas Pipe Line Corporation and EGC 10(xxxvii) of NUI's
(Contract #1.0445) dated April 1, Form 10-K Report for
1995 Fiscal 1995
10(xxxviii) Service Agreement for Rate Schedule Incorporated by
SS-1 by and between Texas Eastern reference to Exhibit
Transmission Corporation and EGC 10(xxxviii) of NUI's
(Contract (#400196) dated Form 10-K Report for
September 23, 1994 Fiscal 1995
10(xxxix) Gas Storage Agreement under Rate Incorporated by
Schedule FS by and between Tennessee reference to Exhibit
Gas Pipeline Company and EGC 10(xxxix) of NUI's
(Contract #8703) dated November 1, Form 10-K Report for
1994 Fiscal 1995
10(xl) Consulting Agreement, dated as of Incorporated by
March 24, 1995, between NUI reference to Exhibit
Corporation and John Kean 10(xl) of NUI's Form
10-K Report for Fiscal
1995
10(xli) Form of Deferred Compensation Incorporated by
Agreement reference to Exhibit
10(xli) ) of NUI's
Form 10-K Report for
Fiscal 1995
10(xlii) 1996 Stock Option and Stock Award Filed herewith
Plan
12 Consolidated Ratio of Earnings
to Fixed Charges Filed herewith
21 Subsidiaries of NUI Corporation Filed herewith
23 Consent of Independent Public Filed herewith
Accountants
27 Financial Data Schedule Filed herewith
Exhibits listed above which have heretofore been filed with the
Securities and Exchange Commission pursuant to the Securities Act of
1933 or the Securities Exchange Act of 1934, and which were designated
as noted above and have not been amended, are hereby incorporated by
reference and made a part hereof with the same effect as if filed
herewith.
The Company is a party to various agreements with respect to long-term
indebtedness to which the total amount of indebtedness authorized under
each agreement, respectively, does not exceed 10% of the total assets of
the Company on a consolidated basis. The Company hereby agrees to
furnish to the Securities and Exchange Commission copies of such
agreements upon request.
(b) Reports on Form 8-K:
None
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Consolidated Financial Statements of NUI Corporation and Subsidiaries:
Report of Independent Public Accountants.............F-2
Consolidated Financial Statements as of
September 30, 1996 and 1995 and for each
of the Three Years in the Period
Ended September 30, 1996.............................F-3
Unaudited Quarterly Financial Data for
the Two-Year Period Ended September 30, 1996
(Note 11 of the Notes to the Company's Consolidated
Financial Statements)...............................F-18
Financial Statement Schedule of NUI Corporation and Subsidiaries:
Report of Independent Public Accountants.............F-2
Schedule II --- Valuation and Qualifying Accounts
for each of the Three Years in the
Period Ended September 30, 1996.....................F-19
All other schedules are omitted because they are not required, are
inapplicable or the information is otherwise shown in the financial
statements or notes thereto.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To NUI Corporation:
We have audited the accompanying consolidated balance sheet and
consolidated statement of capitalization of NUI Corporation (a New
Jersey corporation) and subsidiaries as of September 30, 1996 and 1995,
and the related consolidated statements of income, cash flows and
shareholders' equity, for each of the three years in the period ended
September 30, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of NUI
Corporation and subsidiaries as of September 30, 1996 and 1995, and the
results of their operations and their cash flows for each of the three
years in the period ended September 30, 1996, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item
14(a)(2) is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic financial
statements. This schedule has been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
November 19, 1996
F-2
NUI Corporation and Subsidiaries
Consolidated Statement of Income
(Dollars in thousands, except per share amounts)
Years Ended September 30,
1996 1995 1994
Operating Margins
Operating revenues $468,978 $376,445 $405,240
Less- Purchased gas and fuel 268,123 189,510 223,421
Gross receipts and franchise
taxes 36,927 33,669 37,173
------- ------- -------
163,928 153,266 144,646
------- ------- -------
Other Operating Expenses
Operations and maintenance 94,497 90,523 90,904
Depreciation and amortization 21,134 19,750 17,446
Restructuring and other non-
recurring charges -- 8,591 923
Other taxes 7,605 7,657 7,435
Income taxes 7,811 2,886 2,098
------- ------- -------
131,047 129,407 118,806
------- ------- -------
Operating Income 32,881 23,859 25,840
------ ------ ------
Other Income and Expense, Net 625 439 506
------ ------ ------
Interest Expense 18,610 18,781 15,566
------ ------ ------
Net Income $14,896 $ 5,517 $10,780
====== ====== ======
Net Income Per Share of Common Stock $ 1.52 $ .60 $ 1.25
====== ====== ======
Dividends Per Share of Common Stock $ .90 $ .90 $ 1.60
====== ====== ======
Weighted Average Number of Shares
of Common Stock Outstanding 9,819,431 9,152,837 8,617,790
========= ========= =========
See the notes to the consolidated financial statements
F-3
NUI Corporation and Subsidiaries
Consolidated Balance Sheet
(Dollars in thousands)
September 30,
1996 1995
ASSETS
Utility Plant
Utility plant, at original cost $630,909 $597,360
Accumulated depreciation and
amortization (200,333) (184,558)
Unamortized plant acquisition
adjustments 33,724 35,269
------- -------
464,300 448,071
------- -------
Funds for Construction Held by Trustee 44,652 14,405
------- -------
Investments in Marketable Securities,
at market 4,417 2,723
------- -------
Current Assets
Cash and cash equivalents 3,736 3,601
Accounts receivable (less allowance for
doubtful accounts of $2,288 in 1996
and $1,689 in 1995) 43,664 30,293
Fuel inventories, at average cost 29,191 27,629
Unrecovered purchased gas costs 6,987 --
Prepayments and other 18,525 20,007
------- -------
102,103 81,530
------- -------
Other Assets
Regulatory assets 52,482 54,374
Deferred assets 10,012 9,062
------- -------
62,494 63,436
------- -------
$677,966 $610,165
======= =======
CAPITALIZATION AND LIABILITIES
Capitalization (See accompanying
statements)
Common shareholders' equity $179,107 $140,912
Preferred stock -- --
Long-term debt 230,100 222,060
------- -------
409,207 362,972
------- -------
Capital Lease Obligations 10,466 11,114
------- -------
Current Liabilities
Current portion of long-term debt and
capital lease obligations 2,584 1,759
Notes payable to banks 54,895 37,935
Accounts payable, customer deposits and
accrued liabilities 65,902 58,770
Overrecovered purchased gas costs -- 4,895
Federal income and other taxes 2,696 7,718
------- -------
126,077 111,077
------- -------
Other Liabilities
Deferred Federal income taxes 59,050 51,946
Unamortized investment tax credits 6,635 7,102
Environmental remediation reserve 33,981 33,981
Regulatory and other liabilities 32,550 31,973
------- -------
132,216 125,002
------- -------
$677,966 $610,165
======= =======
See the notes to the consolidated financial statements
F-4
NUI Corporation and Subsidiaries
Consolidated Statement of Cash Flows
(Dollars in thousands)
Years Ended September 30,
1996 1995 1994
Operating Activities
Net Income $14,896 $5,517 $10,780
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 22,315 20,932 18,733
Deferred Federal income taxes 7,569 2,005 6,893
Non-cash portion of restructuring
and other non-recurring charges -- 4,913 683
Amortization of deferred
investment tax credits (467) (468) (476)
Other 4,617 4,626 2,926
Effects of changes in:
Accounts receivable, net (13,371) 7,923 (5,724)
Fuel inventories (1,562) 987 (193)
Accounts payable, deposits
and accruals 8,310 7,775 2,627
Over (under) recovered
purchased gas costs (11,882) 2,949 4,332
Gross receipts and franchise
taxes 1,543 (4,152) (11,112)
Other (9,438) (5,088) (6,986)
Net cash provided by operating
activities 22,530 47,919 22,523
------ ------ ------
Financing Activities
Proceeds from sales of common stock, net
of treasury stock purchased 31,371 577 6,323
Dividends to shareholders (8,700) (8,296) (13,836)
Proceeds from issuance of long-term debt 39,000 70,000 66,500
Funds for construction held by trustee,
net (29,049) 10,125 (2,093)
Repayments of long-term debt (30,138) (9,902) (54,159)
Principal payments under capital lease
obligations (1,829) (1,844) (2,055)
Net short-term borrowings (repayments) 16,960 (72,190) 33,893
------ ------ ------
Net cash provided by (used for)
financing activities 17,615 (11,530) 34,573
-
Investing Activities
Cash expenditures for utility plant (37,053) (37,976) (53,601)
Proceeds from sales of marketable
securities 1,268 1,199 659
Purchases of marketable securities (2,343) -- --
Proceeds from sale of assets -- -- 1,610
Other (1,882) (1,648) (2,000)
------ ------ ------
Net cash (used for) investing
activities (40,010) (38,425) (53,332)
------ ------ ------
Net Increase (Decrease) in Cash and
Cash Equivalents $ 135 $(2,036) $ 3,764
===== ===== =====
Cash and Cash Equivalents
At beginning of period $ 3,601 $ 5,637 $ 1,873
At end of period 3,736 3,601 5,637
Supplemental Disclosures of Cash Flows
Income taxes paid (refunds received), net $ 2,612 $(1,129) $ 666
Interest paid 18,654 17,436 17,597
See the notes to the consolidated financial statements
F-5
NUI Corporation and Subsidiaries
Consolidated Statement of Capitalization
(Dollars in thousands)
September 30,
1996 1995
Long-Term Debt
Gas facilities revenue bonds
6.625% due October 1, 2021* $ 8,400 $ 8,400
6.75% due October 1, 2021* 46,200 46,200
6.35% due October 1, 2022 46,500 46,500
6.40% due October 1, 2024* 20,000 20,000
Variable rate due June 1, 2026* 39,000 --
Medium-term notes
7.125% due August 1, 2002 20,000 20,000
8.35% due February 1, 2005 50,000 50,000
Credit agreement indebtedness -- 30,000
ESOP indebtedness, 6% due May 31, 2002 950 1,088
------- -------
231,050 222,188
Current portion of long-term debt (950) (128)
------- -------
230,100 222,060
------- -------
Preferred Stock, 5,000,000 shares authorized; -- --
none issued
Common Shareholders' Equity
Common Stock, no par value; shares authorized:
30,000,000; shares outstanding: 11,085,876 in
1996 and 9,201,237 in 1995 171,968 139,093
Shares held in treasury: 92,731 shares in 1996 (1,564) (1,265)
and 90,397 in 1995
Retained earnings 10,117 3,921
Valuation of marketable securities 389 232
Unearned employee compensation (1,803) (1,069)
------- -------
179,107 140,912
------- -------
Total Capitalization $409,207 $362,972
======= =======
* The total unexpended portions of the net proceeds from these bonds,
amounting to $42.6 million and $13.6 million as of September 30, 1996
and September 30, 1995, respectively, are carried on the Company's
consolidated balance sheet as funds for construction held by trustee,
including interest earned thereon, until drawn upon for eligible
construction expenditures.
See the notes to the consolidated financial statements
F-6
NUI Corporation and Subsidiaries
Consolidated Statement of Shareholders' Equity
(Dollars in thousands)
Common Stock Unrealized
----------------------------- Gain (Loss)- Unearned
Shares Paid-in Held in Retained Marketable Employee
Outstanding Amount Treasury Earnings Securities Compensation Total
Balance,
September 30, 1993 8,201,096 $114,895 $(797) $ 9,718 $ (93) $ (1,339) $122,384
Common stock
issued:
PSGS
acquisition 683,443 16,864 16,864
Other* 272,556 6,323 6,323
Net income 10,780 10,780
Cash dividends (13,836) (13,836)
Unrealized gain 93 93
ESOP
transactions 38 122 160
--------- ------- ------ ------ ----- ------ -------
Balance,
September 30, 1994 9,157,095 $138,082 $(797) $6,700 $ -- $(1,217) $142,768
Common stock
issued* 74,499 1,045 1,045
Treasury stock
purchased (30,357) (468) (468)
Net income 5,517 5,517
Cash dividends (8,296) (8,296)
Unrealized gain 232 232
ESOP
transaction (34) (148) 114
--------- ------- ------ ------ ----- ------- -------
Balance,
September 30, 1995 9,201,237 $139,093 $(1,265) $3,921 $ 232 $(1,069) $142,912
Common stock
issued:
Public
offering 1,800,000 31,067 31,067
Other* 86,973 1,548 1,548
Treasury stock
transactions (2,334) 260 (299) (39)
Net income 14,896 14,896
Cash dividends (8,700) (8,700)
Unrealized gain 157 157
Unearned
compensation (734) (734)
---------- ------- ----- ------ ---- ------ -------
Balance,
September 30, 1996 11,085,868 $171,968 $(1,564) $10,117 $ 389 $ (1,803) $179,107
========== ======= ====== ====== ==== ====== =======
* Represents common stock issued in connection with NUI Direct and
various employee benefit plans.
See the notes to the consolidated financial statements.
F-7
NUI Corporation and Subsidiaries
Notes to the Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements
include all operating divisions and subsidiaries of NUI Corporation
(collectively referred to as "NUI" or the "Company"). The Company
distributes and sells natural gas and related services in six states
through its Northern and Southern utility Divisions. The Northern
Division operates in New Jersey as Elizabethtown Gas Company. The
Southern Division was formed effective April 1, 1995 through the
consolidation of the Company's City Gas Company of Florida ("CGF") 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. In addition to gas
distribution operations, the Company provides retail gas sales and
related services through its NUI Energy, Inc. subsidiary; bill
processing and related customer services for utilities and
municipalities through its Utility Business Services, Inc. subsidiary;
and wholesale energy brokerage and related services through its NUI
Energy Brokers, Inc. subsidiary. All intercompany accounts and
transactions have been eliminated in consolidation.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Certain reclassifications have been made to the prior year financial
statements to conform with the current year presentation.
Regulation. The Company is subject to regulation as an operating utility
by the public utility commissions of the states in which it operates.
Utility Plant. Utility plant is stated at its original cost.
Depreciation is provided on a straight-line basis over the remaining
estimated lives of depreciable property by applying composite average
annual rates as approved by the state commissions. The composite average
annual depreciation rate was 3% in fiscal 1996, 3.2% in fiscal 1995 and
3.1% in fiscal 1994. At the time properties are retired, the original
cost plus the cost of retirement, less salvage, is charged to
accumulated depreciation. Repairs of all utility plant and replacements
and renewals of minor items of property are charged to maintenance
expense as incurred.
The unamortized plant acquisition adjustments represent the remaining
portion of the excess of the purchase price over the book value of net
assets acquired. The excess is being amortized on a straight-line basis
over thirty years from the date of acquisition. The results of
operations of acquired entities have been included in the accompanying
consolidated financial statements for the periods subsequent to their
acquisition.
Operating Revenues and Purchased Gas and Fuel Costs. Operating revenues
include accrued unbilled revenues through the end of each accounting
period. Operating revenues also reflect adjustments attributable to
weather normalization clauses that are accrued during the winter heating
season and billed or credited to customers in the following year.
Costs of purchased gas and fuel are recognized as expenses in accordance
with the purchased gas adjustment clause applicable in each state. Such
clauses provide for periodic reconciliations of actual recoverable gas
costs and the estimated amounts that have been billed to customers.
Under or over recoveries are deferred when they arise and are recovered
from or refunded to customers in subsequent periods.
Restricted Cash. In accordance with certain regulatory requirements in
North Carolina, the Company is required to deposit pipeline supplier
refunds in an interest-bearing account. These funds, including interest
earned thereon, amounted to approximately $1.0 million and $0.9 million
as of September 30, 1996 and 1995, respectively, and are restricted for
uses as prescribed by North Carolina regulatory authorities. This
balance is classified in the Company's consolidated balance sheet in
deferred charges with a corresponding amount included in other
liabilities.
Income Taxes. The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes", which requires the liability method to be used to account
for deferred income taxes. Under this method, deferred income taxes
related to tax and accounting basis differences are recognized at the
statutory income tax rates in effect when the tax is expected to be
paid.
Investment tax credits, which were generated principally in connection
with additions to utility plant made prior to January 1, 1986, are being
amortized over the estimated service lives of the properties that gave
rise to the credits.
Regulatory Assets and Liabilities. The Company's utility operations
follow the accounting for regulated enterprises prescribed by Statement
of Financial Accounting Standards No. 71, "Accounting for the Effects of
Certain Types of Regulation" ("SFAS 71"). In general, SFAS 71 requires
deferral of certain costs and obligations, based upon orders received
from regulators, to be recovered from or refunded to customers in future
periods. The following represents the Company's regulatory assets and
liabilities deferred in the accompanying consolidated balance sheet as
of September 30, 1996 and 1995 (in thousands):
1996 1995
Regulatory Assets
Environmental investigation
and remediation costs $33,658 $32,967
Unrecovered gas costs 6,730 9,675
Postretirement and other
employee benefits 8,339 6,332
Deferred piping allowances 3,010 3,249
Other 745 2,151
------ ------
$52,482 $54,374
====== ======
Regulatory Liabilities
Net overcollection of income
taxes $ 5,208 $ 5,365
Gas supplier refunds 850 1,387
Other 88 222
----- -----
$ 6,146 $ 6,974
===== =====
Although the gas distribution industry is becoming increasingly
competitive, the Company's utility operations continue to recover their
costs through cost-based rates established by the public utility
commissions. As a result, the Company believes that the accounting
prescribed under SFAS 71 remains appropriate.
Cash Equivalents. Cash equivalents consist of a money market account
which invests in securities with original maturities of three months or
less.
Net Income Per Share of Common Stock. Net income per share of common
stock is based on the weighted average number of shares of NUI common
stock outstanding. The assumed exercise of outstanding employee stock
options would not have a dilutive effect on net income per share of
common stock.
New Accounting Standards. The Company is required to adopt Statement of
Financial Accounting Standards No. 121 ("SFAS 121") in fiscal 1997. SFAS
121 establishes accounting standards for the impairment of long-lived
assets. The adoption of this statement is not expected to have a
material impact on the Company's financial condition or results of
operations.
The Company is also required to adopt Statement of Financial Accounting
Standards No. 123 ("SFAS 123") in fiscal 1997. SFAS 123 establishes a
fair value method of accounting for or disclosing stock-based
compensation plans. The Company intends to adopt the disclosure
provisions of SFAS 123 only, which requires disclosing the pro-forma
consolidated net income and earnings per share amounts assuming the fair
value accounting provisions of SFAS 123 were adopted. This adoption will
not affect the Company's financial condition or results of operations.
2. Acquisition of Pennsylvania & Southern Gas Company
On April 19, 1994, the Company issued and exchanged 683,443 shares of
NUI common stock for all of the outstanding common shares of PSGS
pursuant to the merger of PSGS with and into NUI (the "PSGS Merger").
The transaction was valued at approximately $17 million. PSGS operates
as part of the Southern Division of NUI.
The PSGS Merger was accounted for as a purchase in accordance with
generally accepted accounting principles and the results of operations
of PSGS have been consolidated with those of NUI as of April 19, 1994.
Due to the effects of the regulatory process, the underlying net assets
of PSGS have been recorded at their historical net book value. The
excess of the purchase price over the historical net book value of the
underlying net assets of PSGS is included in utility plant as a "plant
acquisition adjustment" and is being amortized over a thirty year
period. On September 30, 1994, NUI sold its PSGS propane assets. The
excess of the purchase price over the net book value of the propane
assets sold reduced the plant acquisition adjustment by approximately
$1.4 million. As discussed further in Note 10, the Company, in
connection with the PSGS Merger, acquired former manufactured gas plant
facilities. No provision for environmental remediation had been made by
PSGS in its financial statements prior to the PSGS Merger. As a result,
during fiscal years 1994 and 1995, the Company recorded a total of $3.7
million additional plant acquisition adjustment to provide for probable
environmental remediation liabilities.
3. Restructuring and Other Non-Recurring Charges
In fiscal 1995, the Company incurred approximately pre-tax $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
certain 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. In addition, the
Company recorded approximately $0.8 million of other benefit expenses
associated with these employees. The Company also deferred, pending
regulatory recovery, a charge of approximately $0.6 million for special
termination benefits.
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 was closed effective December 31, 1995. 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, during fiscal 1995, 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.
The Company also incurred approximately $0.9 million of non-recurring
charges in fiscal 1994 related to the write-down of certain non-
recoverable regulatory assets and for certain restructuring costs in
Florida.
4. Capitalization
Long-Term Debt. On June 12, 1996, the Company issued $39 million of
floating rate tax exempt Gas Facilities Revenue Bonds which mature on
June 1, 2026. Under the terms of the floating rate debt, the interest
rate paid by the Company, which averaged 3.1% since the date of
issuance, is reset daily. The proceeds of the bond issuance are being
used to finance part of the Northern Division's capital expenditure
program.
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. 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 deposits in trust the unexpended portion of the net proceeds
from its Gas Facilities Revenue Bonds until drawn upon for eligible
expenditures. As of September 30, 1996 and 1995, the total unexpended
portions of all of the Company's Gas Facilities Revenue Bonds were $42.6
million and $13.6 million, respectively, and are classified on the
Company's consolidated balance sheet, including interest earned thereon,
as funds for construction held by trustee.
As of September 30, 1996, the Company is scheduled to repay
approximately $1 million of long-term debt in fiscal 1997. No other
long-term debt is scheduled to be repaid over the next five years.
Preferred Stock. The Company has 5,000,000 shares of authorized but
unissued preferred stock. Shares of Series A Junior Participating
Preferred Stock have been reserved for possible future issuance in
connection with the Company's Shareholder Rights Plan described below.
Shareholder Rights Plan. In November 1995, the Company's Board of
Directors adopted a Shareholder Rights Plan under which shareholders of
NUI common stock were issued as a dividend one right to buy one one-
hundredth of a share of Series A Junior Participating Preferred Stock at
a purchase price of $50 ("Right") for each share of common stock held.
The Rights initially attach to the shares of NUI common stock and can be
exercised or transferred only if a person or group (an "Acquirer"), with
certain exceptions, acquires, or commences a tender offer to acquire,
beneficial ownership of 15% or more of NUI common stock. Each Right,
except those held by the Acquirer, may be used by the non-acquiring
shareholders to purchase, at the Right's exercise price, shares of NUI
common stock having a market value equivalent to twice the Right's
exercise price, thus substantially reducing the Acquirer's ownership
percentage.
The Company may redeem the Rights at $0.001 per Right at any time prior
to the occurrence of any such event. All Rights expire on November 27,
2005.
Common Stock. On May 20, 1996, the Company issued an additional 1.8
million shares of NUI common stock. The net proceeds from the offering
totaled $31.1 million and were used to repay the Company's $30 million
credit agreement indebtedness with the remainder used to reduce
outstanding short-term debt.
As discussed in Note 2, the Company issued 683,443 shares of NUI common
stock in connection with the acquisition of PSGS on April 19, 1994.
The Company periodically issues shares of common stock in connection
with NUI Direct, the Company's dividend reinvestment and stock purchase
plan, and various employee benefit plans. Effective in December 1994,
these plans commenced purchasing shares on the open market to fulfill
the plans' requirements rather than purchasing the shares directly from
the Company. Under the terms of these plans, the Company may change the
method of purchasing shares from open market purchases to purchases
directly from the Company, or vice versa. Effective in October 1996, the
Company began purchasing shares directly from the Company for these
common stock plans. In addition, during fiscal 1996, the Company began
issuing new shares of NUI common stock under three new stock plans.
At September 30, 1996, shares reserved for issuance under the Company's
common stock plans were: NUI Direct, 202,325; Savings and Investment
Plan, 325,769; 1996 Stock Option and Stock Award Plan, 212,092; 1996
Employee Stock Purchase Plan, 123,038; and the 1996 Director Stock
Purchase Plan, 65,102.
Stock Plans. The Company's Board of Directors believes that both
directors' and management's interest should be closely aligned with that
of shareholders. As a result, under the 1996 Stock Option and Stock
Award Plan, the 1996 Director Stock Purchase Plan and the 1988 Stock
Plan, the Company has a long-term compensation program for directors,
executive officers and key employees involving shares of NUI common
stock.
Each non-employee director of the Company earns an annual retainer fee
that consists of a deferred grant of shares of NUI common stock. As of
September 30, 1996, such retainer fee was equivalent to a fair market
value of $15,000 on the date of grant. In addition, non-employee
directors who also chair committees of the Board receive additional
deferred grants with a fair market value of $2,500 on the date of grant.
Deferred stock grants are increased on each common stock dividend
payment date by an amount equal to the number of shares of NUI common
stock which would have been purchased had all deferred stock grants been
issued and the dividends reinvested in additional shares. As of
September 30, 1996, the total deferred grants for non-employee directors
were 27,681 shares of NUI common stock, an increase of 6,585 shares
during fiscal 1996.
Shares granted as long-term compensation for executive officers and key
employees amounted to 65,113 shares in fiscal 1996, 17,620 shares in
fiscal 1995 and 15,730 shares in fiscal 1994. As of September 30, 1996,
a total of 87,297 shares of restricted stock that have been granted as
long-term compensation are subject to future vesting requirements, and
are restricted from resale.
Executive officers and key employees are eligible to be granted options
for the purchase of NUI common stock at prices equal to the market price
per share on the date of grant. The option must be exercised within ten
years from the date of grant. Transactions during the last three fiscal
years involving stock options were as follows:
Number of Option Price
Shares per share
Options outstanding and exercisable
at September 30, 1993 16,450 $14.42-$17.625
Fiscal 1994
Exercised (2,300) $14.42
Canceled (1,150) $14.42
Fiscal 1995
Canceled (3,200) $15.77
-----
Options outstanding and exercisable
at September 30, 1996 9,800 $15.77-$17.625
=====
As of September 30, 1996, options with respect to 2,400 shares carry
stock appreciation rights with an exercise price of $15.77 per share.
During fiscal 1995, payment on 1,600 stock appreciation rights was made
at an exercise price of $15.77.
Employee Stock Ownership Plan. On March 30, 1995, the Company terminated
the employee stock ownership plan ("ESOP") which was provided for
certain employees of CGF. The ESOP is completing its allocation of plan
assets among participant's accounts in accordance with a private letter
ruling issued by the Internal Revenue Service in October 1996 at the
request of the Company. Upon completion of the allocations, which is
expected in fiscal 1997, the ESOP indebtedness will be satisfied.
The Company incurred ESOP expense amounting to $0.2 million in both
fiscal 1996 and 1995, and $0.9 million in fiscal 1994. As of September
30, 1996, the ESOP trust held 113,895 shares of NUI common stock, of
which 62,047 shares were allocated to participating employees.
Participating employees are entitled to vote the allocated shares and
the ESOP trustee votes the remainder of the shares.
Dividend Restrictions. The Company's long-term debt agreements include,
among other things, restrictions as to the payment of cash dividends.
Under the most restrictive of these provisions, the Company was permitted
to pay $24 million of cash dividends at September 30, 1996.
5. Notes Payable to Banks
At September 30, 1996, the Company's outstanding notes payable to banks
were $54.9 million with a combined weighted average interest rate of
5.8%. Unused lines of credit at September 30, 1996 were $76 million.
The weighted average daily amount outstanding of notes payable to banks
and the weighted average interest rate on that amount was $39.9 million
at 5.6% in fiscal 1996, $58 million at 5.9% in fiscal 1995 and $82
million at 4.1% in fiscal 1994.
6. Leases
Utility plant held under capital leases amounted to $23.5 million at
September 30, 1996 and $22.9 million at September 30, 1995, with related
accumulated amortization of $11.5 million and $10.3 million,
respectively. These properties consist principally of leasehold
improvements and office furniture and fixtures. A summary of future
minimum payments for properties held under capital leases follows (in
thousands):
1997 $2,582
1998 2,397
1999 8,875
2000 415
2001 300
2002 and thereafter 344
Total future minimum
payments 14,913
Amount representing
interest (2,813)
Current portion of
capital lease
obligations (1,634)
------
Capital lease obligation $10,466
======
Minimum payments under noncancelable operating leases, which relate
principally to office space, are approximately $4.1 million in fiscal
1997, $3.8 million in fiscal 1998, $3.7 million in fiscal 1999, $3.8
million in fiscal 2000 and $3.9 million in fiscal 2001.
Rents charged to operations expense were $4.6 million in both fiscal
1996 and fiscal 1995, and $4.3 million in fiscal 1994.
7. Financial Instruments
As of September 30, 1996 and 1995, the market value of the Company's
investments in marketable securities exceeded their cost by
approximately $623,000 and $372,000, respectively, which unrealized gain
is reflected net of deferred income taxes in the accompanying
consolidated balance sheet as a component of shareholders' equity.
The fair value of the Company's cash equivalents, funds for construction
held by trustee and notes payable to banks are approximately equivalent
to their carrying value. The fair value of the Company's long-term debt
exceeded its carrying value by approximately $11 million and $8 million
as of September 30, 1996 and 1995, respectively. The fair value of
long-term debt was estimated based on quoted market prices for the same
or similar issues.
8. Consolidated Taxes
The provision for Federal income taxes is comprised of the following (in
thousands):
1996 1995 1994
Currently payable $ 647 $ 833 $(4,102)
Deferred, net 7,569 2,005 6,893
Amortization of investment
tax credits (467) (468) (476)
----- ----- -----
Total provision for
Federal income taxes $7,749 $2,370 $ 2,315
===== ===== =====
The components of the Company's net deferred tax liability (asset) as of
September 30, 1996 and 1995 are as follows (in thousands):
1996 1995
Depreciation and other utility
plant differences $47,700 $45,142
Plant acquisition adjustments 11,254 11,650
Alternative minimum tax credit (2,984) (4,632)
Unamortized investment tax credit (2,306) (2,467)
Deferred charges and regulatory
assets 8,864 5,882
Gross receipts and franchise taxes 2,559 3,132
Other (6,037) (6,761)
------ ------
$59,050 $51,946
====== ======
The alternative minimum tax credit can be carried forward indefinitely
to reduce the Company's future tax liability.
The Company's effective income tax rates differ from the statutory
Federal income tax rates due to the following (in thousands):
1996 1995 1994
Income before Federal income
taxes $22,645 $ 7,888 $13,095
------ ------ ------
Federal income taxes computed at
statutory tax rate (35% in fiscal
1996 and 34% in both fiscal 1995
and 1994) 7,926 2,682 4,452
Increase (reduction) resulting
from:
Excess of book over tax
depreciation 360 367 373
Amortization of investment tax
credits (467) (468) (476)
Adjustments of prior years'
taxes -- -- (1,770)
Other, net (70) (211) (264)
----- ----- -----
Total provision for Federal
income taxes 7,749 2,370 2,315
Provision (benefit) for state
income taxes 395 756 (212)
----- ----- -----
Total provision for income taxes 8,144 3,126 2,103
(Less) provision included in
other income and expense (333) (240) (5)
Provision for income taxes
included in operating expenses $7,811 $2,886 $2,098
===== ===== =====
9. Retirement Benefits
Pension Benefits. The Company has non-contributory defined benefit
retirement plans which cover all of its employees other than the CGF
union employees who participate in a union sponsored multi-employer
plan. The Company funds its plans in accordance with the requirements of
the Employee Retirement Income Security Act of 1974 and makes
contributions to the union sponsored plan in accordance with its
contractual obligations. Benefits paid under the Company's plans are
based on years of service and levels of compensation. The Company's
actuarial calculation of pension expense is based on the projected unit
cost method.
The components of pension expense for the Company's plans were as
follows (in thousands):
1996 1995 1994
Service cost $1,973 $ 2,044 $2,579
Interest cost 6,103 5,290 5,016
Actual return on plan assets (15,076) (20,072) (163)
Net amortization and deferral 6,653 11,949 (7,035)
Special termination benefits -- 4,083 --
----- ----- -----
Pension expense (credit) $ (347) $ 3,294 $ 397
===== ===== =====
The status of the Company's funded plans as of September 30 was as
follows (in thousands):
1996 1995
Actuarial present value of benefit
obligations:
Vested benefits $67,142 $64,125
Non-vested benefits 2,531 2,626
------- -------
Accumulated benefit obligations 69,673 66,751
Projected increases in compensation
levels 11,725 15,658
------- -------
Projected benefit obligation 81,398 82,409
Market value of plan assets 109,952 96,910
------- -------
Plan assets in excess of projected
benefit obligation 28,554 14,501
Unrecognized net gain (22,756) (11,175)
Unrecognized prior service cost 773 888
Unrecognized net transition asset (3,272) ( 3,924)
Deferred special termination benefits -- (573)
------- -------
Pension prepayment (liability) $ 3,299 $ (283)
======= ======
The projected benefit obligation was calculated using a discount rate of
8% in fiscal 1996 and 7.5% in fiscal 1995 and an assumed annual increase
in compensation levels of 4% in fiscal 1996 and 5% in fiscal 1995. The
expected long-term rate of return on assets is 9%. The assets of the
Company's funded plans are invested primarily in publicly-traded fixed
income and equity securities.
Certain key employees also participate in an unfunded supplemental
retirement plan. The projected benefit obligation under this plan was
$2.6 million as of September 30, 1996 and $3.1 million as of September
30, 1995, and the expense for this plan was approximately $0.4 million
in both fiscal 1996 and fiscal 1995, and $0.5 million in fiscal 1994.
Postretirement Benefits Other Than Pensions. The Company provides
certain health care benefits to all retirees receiving benefits under a
Company pension plan other than the CGF plan, who reach retirement age
while working for the Company.
The Company accounts for these plans under Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("SFAS 106"), which, among other things,
requires companies to accrue the expected cost of providing other
postretirement benefits to employees and their beneficiaries during the
years that eligible employees render the necessary service. The Company
does not currently fund these future benefits.
The components of postretirement benefit expense other than pensions for
the years ended September 30, 1996 and 1995 were as follows (in
thousands):
1996 1995
Service cost $ 600 $ 518
Interest cost 2,096 1,713
Amortization of transition obligation 1,028 1,028
Other 115 132
Net postretirement expense 3,839 3,391
Benefits paid (1,284) (1,352)
----- -----
Increase in accrued postretirement
benefit obligations $2,555 $2,039
===== =====
The status of the Company's postretirement plans other than pensions as
of September 30, 1996 and 1995 was as follows (in thousands):
1996 1995
Accumulated postretirement benefit
obligation:
Retirees $19,905 $15,045
Fully eligible active plan
participants 3,095 3,729
Other active plan participants 6,721 6,725
------ ------
Total accumulated postretirement
benefit obligations 29,721 25,499
Unrecognized transition obligation (17,475) (18,503)
Unrecognized net (loss) (4,113) (1,844)
Unrecognized prior service cost (426) --
------ ------
Accrued postretirement benefit
obligation $7,707 $ 5,152
===== =====
The health care trend rate assumption is 11.85% in 1997 gradually
decreasing to 5.5% for the year 2006 and later. The discount rate used
to compute the accumulated postretirement benefit obligation was 8% in
fiscal 1996 and 7.5% in fiscal 1995. An increase in the health care
trend rate assumption by one percentage point in all years would
increase the accumulated postretirement benefit obligation by
approximately $4 million and the aggregate annual service and interest
costs by approximately $0.5 million.
The Company has received an order from the North Carolina Utilities
Commission to include the amount of postretirement benefit expense other
than pensions computed under SFAS 106 in rates. The Company has also
received an order from the New Jersey Board of Public Utilities (the
"NJBPU") permitting the Northern Division to defer the difference
between the amount of postretirement benefits expense other than
pensions computed as claims are incurred and the amount computed on the
accrual method in accordance with SFAS 106, pending ratemaking treatment
that would be considered in a base rate proceeding. The consensus issued
in 1993 by the Emerging Issues Task Force of the Financial Accounting
Standards Board (the "EITF") permits rate regulated companies to defer
such expenses for as long as five years when the ratemaking treatment
provides for full recovery within the succeeding fifteen years.
On August 1, 1996, the NJBPU issued a generic order setting forth
certain guidelines under which mechanisms would be established for New
Jersey utilities to recover postretirement benefits expense other than
pensions in accordance with SFAS 106 and the EITF consensus, without
being required to file a base rate case. The Company expects that this
proceeding will be concluded and an order will be issued by the NJBPU in
early 1997, pursuant to which the Company will be able to seek rate
recovery of these costs. The Company will also seek ratemaking treatment
consistent with the EITF consensus from the commissions in the other
states in which it operates.
The Company continually evaluates alternative ways to manage these
benefits and control their costs. Any changes in the plan or revisions
to assumptions that affect the amount of expected future benefit may
have a significant effect on the amount of the reported obligation and
the annual deferral and expense.
10. Commitments and Contingencies
Commitments. Capital expenditures are expected to be approximately $57
million in fiscal 1997.
Environmental Matters. The Company is subject to federal and state laws
with respect to water, air quality, solid waste disposal and employee
health and safety matters, and to environmental regulations issued by
the United States Environmental Protection Agency (the "EPA"), the New
Jersey Department of Environmental Protection (the "NJDEP"), and other
federal and state agencies.
The Company owns, or previously owned, certain properties on which
manufactured gas plants ("MGP") were operated by the Company or by other
parties in the past. Coal tar residues are present on the six MGP sites
located in the Northern Division. The Company has reported the presence
of the six MGP sites to the EPA, the NJDEP and the NJBPU. In 1991, the
NJDEP issued an Administrative Consent Order for an MGP site located at
South Street in Elizabeth, New Jersey, wherein the Company agreed to
conduct a remedial investigation and to design and implement a
remediation plan. In 1992 and 1993, the Company entered into a
Memorandum of Agreement with the NJDEP for each of the other five
Northern Division MGP sites. Pursuant to the terms and conditions of the
Administrative Consent Order and the Memoranda of Agreement, the Company
is conducting remedial activities at all six sites with oversight from
the NJDEP.
The Southern Division owned ten former MGP facilities, only three of
which it currently owns. The former MGP sites are located in the states
of North Carolina, South Carolina, Pennsylvania, New York and Maryland.
The Company has joined with other North Carolina utilities to form the
North Carolina Manufactured Gas Plant Group (the "MGP Group"). The MGP
Group has entered into a Memorandum of Understanding with the North
Carolina Department of Environment, Health and Natural Resources
("NCDEHNR") to develop a uniform program and framework for the
investigation and remediation of MGP sites in North Carolina. The
Memorandum of Understanding contemplates that the actual investigation
and remediation of specific sites will be addressed pursuant to
Administrative Consent Orders between the NCDEHNR and the responsible
parties. The NCDEHNR has recently sought the investigation and
remediation of sites owned by members of the MGP Group and has entered
into Administrative Consent Orders with respect to four such sites.
None of these four sites are currently or were previously owned by the
Southern Division.
The Company, with the aid of environmental consultants, regularly
assesses the potential future costs associated with conducting
investigative activities at each of the Company's sites and implementing
appropriate remedial actions, as well as the likelihood of whether such
actions will be necessary. The Company records a reserve if it is
probable that a liability will be incurred and the amount of the
liability is reasonably estimable. Based on the Company's most recent
assessment, as of September 30, 1996, the Company has recorded a total
reserve for environmental investigation and remediation costs of
approximately $34 million, which the Company expects to expend during
the next 20 years. The reserve, which includes remediation costs for
seven of the Company's 16 MGP sites, is net of approximately $5 million
which will be borne by a prior owner and operator of two of the Northern
Division sites in accordance with a cost sharing agreement. Of this
approximate $34 million reserve, approximately $30 million relates to
Northern Division MGP sites and approximately $4 million relates to
Southern Division MGP sites. The Company is not able at this time to
determine the requirement for remediation if contamination is present at
any of the other sites and, if present, the costs associated with such
remediation. The Company believes that it is possible that costs
associated with conducting investigative activities and implementing
remedial activities, if necessary, with respect to all of its MGP sites
may exceed the approximately $34 million reserve by an amount that could
range up to $21 million and be incurred during a future period of time
that may range up to fifty years. Of this $21 million in possible future
expenditures, approximately $10 million relates to the Northern Division
MGP sites and approximately $11 million relates to the Southern Division
MGP sites. As compared with the approximately $34 million reserve
discussed above, the Company believes that it is less likely that this
additional $21 million will be incurred and therefore has not recorded
it on its books.
The Company believes that its remediation costs for the Northern
Division MGP sites will be recoverable in rates and that a portion of
such costs may be recoverable from the Company's insurance carriers. The
last base rate order for the Northern Division permits the Company to
utilize full deferred accounting for expenditures related to MGP sites.
The order also provides for the recovery of $130,000 annually of MGP
related expenditures incurred prior to the rate order. Accordingly, the
Company has recorded a regulatory asset of approximately $33 million as
of September 30, 1996, reflecting the future recovery of environmental
remediation liabilities related to the Northern Division MGP sites. In
July 1996, the NJBPU approved a petition filed by the Northern Division
to establish an MGP Remediation Adjustment Clause ("RAC"). The RAC
enables the Company to recover actual MGP expenses over a rolling seven
year period. On September 3, 1996, the Company made its initial filing
under the RAC to begin recovery of $3.1 million of environmental costs
incurred from inception through June 30, 1996. A decision is expected in
early fiscal 1997. With respect to costs associated with the Southern
Division MGP sites, the Company intends to pursue recovery from
ratepayers, former owners and operators, and insurance carriers,
although the Company is not able to express a belief as to whether any
or all of these recovery efforts will be successful. Since the Company
is not able at this time to determine the extent of recovery, if any,
relating to the Southern Division MGP sites, the Company recorded
remediation costs of $3.7 million in fiscal 1994 and 1995 as an
additional plant acquisition adjustment (see Note 2). The Company is
working with the regulatory agencies to prudently manage its MGP costs
so as to mitigate the impact of such costs on both ratepayers and
shareholders.
Gas Procurement Contracts. Certain of the Company's long-term contracts
for the supply, storage and delivery of natural gas include fixed
charges that amount to approximately $75 million annually. The Company
currently recovers, and expects to continue to recover, such fixed
charges through its purchased gas adjustment clauses. The Company also
is committed to purchase, at market-related prices, minimum quantities
of gas that, in the aggregate, are approximately 10 billion cubic feet
per year or to pay certain costs in the event the minimum quantities are
not taken. The Company expects that minimum demand on its systems for
the duration of these contracts will continue to exceed these minimum
purchase obligations.
The implementation of the Federal Energy Regulatory Commission's
("FERC") Order No. 636 required the restructuring of the Company's
contracts with certain pipeline companies that together supply less than
one-third of the Company's total firm gas supply. Under Order No. 636
the pipeline companies are passing through to their customers transition
costs associated with mandated restructuring, such as costs resulting
from buying out unmarketable gas purchase contracts. The Company has
been charged approximately $11 million of such costs through September
30, 1996. All of such costs, except for costs incurred by the Company's
Pennsylvania operation, have been authorized for recovery through the
Company's purchased gas adjustment clauses. The Company has filed for
and expects full recovery of such costs in Pennsylvania, as well. The
Company currently estimates that its remaining Order No. 636 transition
obligation will be approximately $7 million, which it expects also to
recover through its purchased gas adjustment clauses as these costs are
incurred. This transition obligation is subject to possible future FERC
actions based upon filings by the Company's pipeline suppliers.
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.
11. Unaudited Quarterly Financial Data
The quarterly financial data presented below reflects the seasonal
nature of the Company's operations which normally results in higher
earnings during the heating season which is primarily in the first two
fiscal quarters (in thousands, except per share amounts):
Fiscal Quarters
First Second Third Fourth
1996:
Operating Revenues $124,650 $170,855 $95,370 $78,103
Operating Income (Loss) 11,420 19,161 3,372 (1,072)
Net Income (Loss) 6,446 14,455 (1,003) (5,002)
Net Income (Loss) Per Share 0.70 1.58 (0.10) (0.45)
1995:
Operating Revenues $105,852 $147,940 $62,137 $60,516
Operating Income 8,348 12,931 2,376 204
Net Income (Loss) 3,978 8,554 (2,196) (4,819)
Net Income (Loss) Per Share 0.44 0.93 (0.24) (0.53)
Quarterly net income (loss) per share in fiscal 1996 does not total to
the annual amounts due to rounding and to changes in the average common
shares outstanding.
In the first and second quarters of fiscal 1995, the Company incurred
after-tax restructuring and other non-recurring charges of approximately
$0.9 million and $4.7 million, respectively.
SCHEDULE II
NUI Corporation and Subsidiaries
Valuation and Qualifying Accounts
For each of the Three Years in the
Period Ended September 30, 1996
(Dollars in thousands)
Additions
------------------
Balance, Charged to Balance,
Beginning Costs and End of
Description of Period Expenses Other Deductions Period
1996
Allowance for doubtful
accounts $ 1,689 $ 3,369 $ 863(b) $3,633(b) $ 2,288
Environmental
remediation reserve(d) $ 33,981 -- -- -- $33,981
1995
Allowance for doubtful
accounts $ 1,368 $ 2,449 $1,127(a) $3,225(b) $ 1,689
Environmental
remediation reserve(d) $ 32,181 -- $1,800 -- $33,981
1994
Allowance for doubtful $970(a)
accounts $ 1,225 $ 2,771 $182(c) $3,780(b) $ 1,368
Environmental
remediation reserve(d) $ 24,700 -- $7,481(d -- $32,181
- ----------------------
<F1>
(a) Recoveries
<F2>
(b) Uncollectible amounts written off.
<F3>
(c) Added as a result of an acquisition.
<F4>
(d) The related cost of the reserve established in fiscal 1991, as well as
$5.6 million of fiscal 1994 additions, was recorded as a regulatory
asset. The remaining fiscal 1994 additions of $1.9 million and all of
fiscal 1995 additions was recorded as an additional utility plant
acquisition adjustment. See "Commitments and Contingencies -
Environmental Matters", Note 10 of the Notes to the Consolidated
Financial Statements.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the Township of Bedminster, State of New Jersey, on the
day of December 27, 1996
NUI CORPORATION
By: JAMES R. VAN HORN
Secretary
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
JOHN KEAN, JR. President, Chief December 27, 1996
Executive Officer and
Director (Principal
executive officer)
JOHN KEAN Chairman and Director December 27, 1996
STEPHEN M. LIASKOS Controller (Principal December 27, 1996
financial & accounting
officer)
C. R. CARVER Director December 27, 1996
DR. VERA KING FARRIS Director December 27, 1996
JAMES J. FORESE Director December 27, 1996
BERNARD S. LEE Director December 27, 1996
R. V. WHISNAND Director December 27, 1996
JOHN WINTHROP Director December 27, 1996
INDEX TO EXHIBITS
Exhibit Description
No.
10(iv) Service Agreement by and between Transcontinental
Gas Pipe Line Corporation and EGC, dated
November 1, 1995 (Contract #1.1997)
10(vi) Service Agreement by and between Transcontinental
Gas Pipe Line Corporation and EGC, dated
November 1, 1995 (Contract #1.1995)
10(vii) Service Agreement by and among Transcontinental
Gas Pipe Line Corporation and EGC, dated
November 1, 1995 (Contract #1.1998)
10(xix) Service Agreement by and between Tennessee Gas
Pipeline Company and EGC, dated November 1, 1995
(Contract #3832)
10(xxvii) 1996 Employee Stock Purchase Plan
10(xxix) 1996 Directors Stock Purchase Plan
10(xlii) 1996 Stock Option and Stock Award Plan
12 Consolidated Ratio of Earnings to Fixed Charges
21 Subsidiaries of NUI Corporation
23 Consent of Independent Public Accountants
27 Financial Data Schedule