SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994 Commission file number 1-8359
NEW JERSEY RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-2376465
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
1415 Wyckoff Road, Wall, New Jersey - 07719 908-938-1480
(Address of principal executive offices) (Registrant's telephone
number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days
YES: X No:
The number of shares outstanding of $2.50 par value Common Stock as of
May 2, 1994 was 17,156,677.
-1-
NEW JERSEY RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
1994 1993(A) 1994 1993(A)
(Thousands, except per share data)
OPERATING REVENUES . . . . . . . . . . . . . . . . . $222,784 $189,465 $358,929 $322,112
-------- -------- -------- --------
OPERATING EXPENSES
Gas purchases . . . . . . . . . . . . . . . . . . . 129,755 105,485 207,473 179,155
Operation and maintenance . . . . . . . . . . . . . 18,824 15,883 34,374 31,589
Depreciation and amortization . . . . . . . . . . . 7,714 6,573 14,450 13,034
Exploratory dry hole costs . . . . . . . . . . . . . - 935 29 1,229
Gross receipts tax, etc. . . . . . . . . . . . . . . 25,209 23,362 40,238 39,508
Federal income taxes . . . . . . . . . . . . . . . . 12,146 9,468 17,312 14,393
------- -------- ------- -------
Total operating expenses . . . . . . . . . . . . . 193,648 161,706 313,876 278,908
------- ------- ------- -------
OPERATING INCOME . . . . . . . . . . . . . . . . . . 29,136 27,759 45,053 43,204
OTHER INCOME (EXPENSE), NET . . . . . . . . . . . . . 97 142 (249) 119
INTEREST CHARGES, NET . . . . . . . . . . . . . . . . 5,543 5,355 10,176 10,423
------ ------- ------- -------
INCOME BEFORE PREFERRED STOCK DIVIDENDS OF SUBSIDIARY 23,690 22,546 34,628 32,900
Preferred stock dividends . . . . . . . . . . . . . . 416 573 833 1,187
------ ------- ------- -------
NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES . . . . . . . . . . . . . 23,274 21,973 33,795 31,713
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME
TAXES . . . . . . . . . . . . . . . . . . . . . . . . - - 721 -
--------- --------- -------- ---------
NET INCOME AVAILABLE FOR COMMON STOCK . . . . . . . . $23,274 $21,973 $34,516 $31,713
======= ======= ======= =======
EARNINGS PER COMMON SHARE BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING FOR INCOME TAXES . . . . . . . . $1.37 $1.33 $1.99 $1.92
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME
TAXES . . . . . . . . . . . . . . . . . . . . . . . - - .04 -
------- ------- ------- -------
EARNINGS PER COMMON SHARE . . . . . . . . . . . . . . $1.37 $1.33 $2.03 $1.92
===== ===== ===== =====
DIVIDENDS PER COMMON SHARE . . . . . . . . . . . . . $.38 $.38 $.76 $.76
==== ==== ==== ====
AVERAGE SHARES OUTSTANDING . . . . . . . . . . . . . 17,034 16,547 16,973 16,478
====== ====== ====== ======
See Notes to Consolidated Financial Statements
----------------------------------------------------------------------------------------------------------------------
(A) Restated to reflect the change in accounting principle by NJR
Energy for its oil and gas operations to the successful efforts
method from the full cost method.
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NEW JERSEY RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
March 31,
1994 1993(A)
(Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income available for common stock . . . . . . . . . . . . . . . . . . . . . . . . $34,516 $31,713
Adjustments to reconcile net income to cash flows
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,450 13,034
Exploratory dry hole costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 1,229
Amortization of deferred charges . . . . . . . . . . . . . . . . . . . . . . . . . . 1,267 708
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,746 1,073
Cumulative effect of change in accounting for income taxes . . . . . . . . . . . . . (721) -
Change in working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,277 11,914
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,745) 913
------- -------
Net cash flows from operating activities . . . . . . . . . . . . . . . . . . . . . . . 68,819 60,584
------ ------
CASH FLOWS USED IN FINANCING ACTIVITIES
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,250 29,150
Proceeds from common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,374 6,743
Payments of long-term debt and preferred stock . . . . . . . . . . . . . . . . . . . . (15,206) (21,065)
Payments of common stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . (12,828) (11,780)
Net change in short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . (54,900) -
-------- ---------
Net cash flows used in financing activities . . . . . . . . . . . . . . . . . . . . . . (31,310) 3,048
-------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES
Expenditures for
Utility plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,321) (18,937)
Contribution from cogeneration developer . . . . . . . . . . . . . . . . . . . . . . - 4,850
Real estate properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,230) (1,702)
Oil and gas properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,163) (2,336)
Cost of removal and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,339) (678)
-------- ---------
Net cash flows used in investing activities . . . . . . . . . . . . . . . . . . . . . . (25,053) (18,803)
-------- --------
Net change in cash and temporary investments . . . . . . . . . . . . . . . . . . . . . 12,456 44,829
Cash and temporary investments at September 30 . . . . . . . . . . . . . . . . . . . . 1,555 1,811
------- -------
Cash and temporary investments at March 31 . . . . . . . . . . . . . . . . . . . . . . $14,011 $46,640
======= =======
CHANGES IN COMPONENTS OF WORKING CAPITAL
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(74,701) $(67,495)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,249 23,587
Deferred gas costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,933 14,024
Purchased gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,607 3,977
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,788 48,039
Customers' credit balances and deposits . . . . . . . . . . . . . . . . . . . . . . . 196 (7,876)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,795) (2,342)
--------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,277 $11,914
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid for
Interest (net of amounts capitalized) . . . . . . . . . . . . . . . . . . . . . . . . $8,950 $9,105
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,101 $6,485
See Notes to Consolidated Financial Statements
-----------------------------------------------------------------------------------------------------------
(A) Restated to reflect the change in accounting principle by NJR
Energy for its oil and gas operations to the successful efforts
method from the full cost method.
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NEW JERSEY RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, September 30, March 31,
1994 1993(A) 1993(A)
(unaudited) (unaudited)
(Thousands)
PROPERTY, PLANT AND EQUIPMENT
Utility plant . . . . . . . . . . . . . . . . $659,359 $637,580 $600,426
Real estate properties . . . . . . . . . . . . 103,599 102,369 101,204
Oil and gas properties . . . . . . . . . . . . 65,718 64,576 57,775
-------- -------- --------
828,676 804,525 759,405
Accumulated depreciation and amortization . . (211,428) (198,875) (190,386)
--------- --------- ---------
Property, plant and equipment, net . . . . . 617,248 605,650 569,019
-------- -------- --------
CURRENT ASSETS
Cash and temporary investments . . . . . . . . 14,011 1,555 46,640
Customer accounts receivable . . . . . . . . . 79,754 16,719 65,855
Unbilled revenues . . . . . . . . . . . . . . 22,805 10,037 27,994
Allowance for doubtful accounts . . . . . . . (1,808) (684) (1,875)
Gas in storage, at average cost . . . . . . . 7,314 37,282 4,882
Materials and supplies, at average cost . . . 7,810 7,091 7,530
Deferred gas costs . . . . . . . . . . . . . . - 22,891 -
Other . . . . . . . . . . . . . . . . . . . . 6,951 6,250 5,787
-------- -------- --------
Total current assets . . . . . . . . . . . . 136,837 101,141 156,813
------- ------- -------
DEFERRED CHARGES AND OTHER 42,479 31,871 31,228
-------- -------- --------
Total assets . . . . . . . . . . . . . . . . $796,564 $738,662 $757,060
======== ======== ========
See Notes to Consolidated Financial Statements
----------------------------------------------------------------------------------------------------------------------
(A) Restated to reflect the change in accounting principle by NJR
Energy for its oil and gas operations to the successful efforts
method from the full cost method.
-4-
NEW JERSEY RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
March 31, September 30, March 31,
1994 1993(A) 1993(A)
(unaudited) (unaudited)
(Thousands)
CAPITALIZATION
Common stock equity . . . . . . . . . . . $258,360 $230,313 $240,787
Redeemable preferred stock . . . . . . . . 22,340 22,340 22,610
Long-term debt . . . . . . . . . . . . . . 306,964 310,996 270,275
------- ------- -------
Total capitalization . . . . . . . . . . 587,664 563,649 533,672
------- ------- -------
CURRENT LIABILITIES
Current maturities of long-term debt . . . 4,514 4,650 4,730
Short-term debt . . . . . . . . . . . . . - 20,900 -
Purchased gas . . . . . . . . . . . . . . 27,422 24,815 23,834
Accounts payable and other . . . . . . . . 28,558 33,571 28,155
Accrued taxes . . . . . . . . . . . . . . 55,034 11,246 80,164
Overrecovered gas costs . . . . . . . . . 6,795 - 10,699
Customers' credit balances and deposits . 11,835 11,639 5,345
------- -------- --------
Total current liabilities . . . . . . . . 134,158 106,821 152,927
------- -------- -------
DEFERRED CREDITS
Deferred income taxes . . . . . . . . . 45,369 39,344 41,397
Deferred investment tax credits . . . . . 12,225 12,419 12,633
Other . . . . . . . . . . . . . . . . . . 17,148 16,429 16,431
-------- -------- --------
Total deferred credits . . . . . . . . . 74,742 68,192 70,461
-------- -------- --------
Total capitalization and liabilities . . $796,564 $738,662 $757,060
======== ======== ========
See Notes to Consolidated Financial Statements
----------------------------------------------------------------------------------------------------------------------
(A) Restated to reflect the change in accounting principle by NJR
Energy for its oil and gas operations to the successful efforts
method from the full cost method.
-5-
NEW JERSEY RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The preceding financial statements have been prepared without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission (the SEC). The September 30, 1993 balance sheet data is
derived from audited financial statements. Although management believes
that the disclosures are adequate to make the information presented not
misleading, it is recommended that these financial statements be read in
conjunction with the financial statements and the notes thereto included
in New Jersey Resources Corporation's (the Company) 1993 Annual Report on
Form 10-K/A.
In the opinion of management, the information furnished reflects all
adjustments (consisting only of normal recurring adjustments) necessary
for a fair statement of the results of the interim periods. Because of
the seasonal nature of the Company's utility operations and other
factors, the results of operations for the interim periods presented are
not indicative of the results to be expected for the entire year.
2. Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries - New Jersey Natural Gas Company (NJNG) and
Paradigm Resources Corporation (Paradigm). Commercial Realty & Resources
Corp. (CR&R), NJR Energy Corporation (NJR Energy) and Paradigm Power,
Inc. (Paradigm Power) are wholly owned subsidiaries of Paradigm. New
Jersey Natural Resources Company (NJNR), NJNR Pipeline Company
(Pipeline), Natural Resources Compressor Company (Compressor) and NJRE
Operating Company are wholly owned subsidiaries of NJR Energy. Lighthouse
One, Inc. and Lighthouse II, Inc. are wholly owned subsidiaries of
Paradigm Power. Significant intercompany accounts and transactions have
been eliminated.
3. Changes in Accounting
a. Oil and Natural Gas Properties
---------------------------------
As disclosed on Form 8-K, filed on April 27, 1994, NJR Energy changed
its method of accounting for its oil and gas operations to the successful
efforts method from the full cost method. On April 28, 1994, the Company
filed Form 10-K/A for the fiscal year ended September 30, 1993 and Form
10-Q/A for the quarterly period ended December 31, 1993, which filings
restated the Company's financial statements to reflect the change in
accounting principle by NJR Energy.
Under the successful efforts method of accounting, proved leasehold
costs are capitalized and amortized over the proved developed and
undeveloped reserves on a units-of-production basis. Successful drilling
costs and developmental dry holes are capitalized and amortized over the
proved developed reserves on a units-of-production basis. Unproved
leasehold costs are capitalized and are not amortized, pending an
evaluation of their exploration potential. Unproved leasehold costs are
assessed periodically to determine if an impairment of the cost of
significant individual properties has occurred. The cost of an
impairment is charged to expense in the period in which it occurs. Costs
incurred for exploratory dry holes, geological and geophysical work and
delay rentals are charged to expense as incurred.
The Consolidated Balance Sheets as of September 30, 1993 and March 31,
1993 and related notes to the consolidated financial statements have been
restated to show the effects of NJR Energy's change in accounting
principle to the successful efforts method of accounting for oil and gas
properties from the full cost method. The change to the successful
efforts method of accounting resulted in a decrease of $17.2 million in
retained earnings as of September 30, 1993 by restating previously issued
financial statements.
-6-
b. Income Taxes
---------------
Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires the implementation of a liability method for the
financial reporting of income taxes, as compared with the deferred
method. Under the liability method, deferred tax balances must be
recorded irrespective of ratemaking treatment and are adjusted to reflect
changes in tax rates. Previously, deferred tax balances were not
recorded for certain ratemaking items and were not adjusted to reflect
changes in tax rates. The cumulative effect of adopting SFAS 109 on the
Company's nonregulated operations was a credit to net income of $721,000,
or $.04 per share. The effect on NJNG was to decrease its deferred tax
liability by $375,000 with an offsetting regulatory liability as the
Company believes it is probable that the effects of SFAS 109 on NJNG will
be payable to customers in the future.
The tax effects of significant temporary differences comprising the
Company's net deferred income tax liability at October 1, 1993, upon
adoption of SFAS 109, were as follows:
Property related items $58,093
Customer contributions (4,589)
Capitalized overhead and interest (4,720)
Unamortized investment tax credits (4,347)
Alternative minimum taxes (7,882)
Deferred charges and other 1,693
--------
Total net deferred tax liability $38,248
========
The provision for federal income taxes for the six months ended March
31, 1994 is composed of the following:
Current expense $18,453
Deferred expense (1,085)
Amortization of investment tax credits (194)
--------
Total provision $17,174
========
Charged to:
Operating expenses $17,312
Other income (expense), net (138)
-------
Total provision $17,174
========
c. Other Postretirement Benefits
--------------------------------
Effective October 1, 1993, the Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
(SFAS 106). SFAS 106 requires an accrual method of accounting for
postretirement benefits, similar to that presently in effect for pension
plans. Previously, certain health care and life insurance benefits were
charged to expense when paid. Under the accrual method, the cost of
providing postretirement benefits will be recognized over the employee's
service period. The Company's transition obligation associated with SFAS
106 is $8.6 million, which will be amortized over 20 years, and its
annual expense will increase from approximately $400,000 to $1.5 million,
of which over 95% relates to NJNG. As part of its January 1994 base rate
order, NJNG is permitted to recover approximately 50% of its SFAS 106
expense currently and defer the balance with ultimate recovery of the
deferred portion no later than that prescribed by generally accepted
accounting principles. At March 31, 1994, $443,000 of SFAS 106 expenses
were deferred and are included in Deferred charges and other on the
Consolidated Balance Sheet.
-7-
The components of the accumulated postretirement benefit obligation as
of October 1, 1993 and the estimated cost in fiscal 1994 are as follows:
Accumulated Postretirement Benefits Obligation (APBO)
Retirees $1,648
Fully eligible participants 2,648
Other active participants 4,304
-------
Total APBO $8,600
=======
There were no plan assets as of October 1, 1993.
Annual Net Postretirement Benefit Cost
Service cost $ 369
Interest cost 678
Amortization of transition obligation 430
Deferral of current expense (797)
-----
Total annual net expense $ 680
=====
The assumed health care cost trend rate used in measuring the APBO as
of October 1, 1993 was 12% in 1994 declining 1% each year to 7% in 1999
and then remaining constant at 6.5% in 2000 and thereafter for
participants under age 65. For participants age 65 and older the trend
rate was 9% in 1994 declining 1% each year to 7% in 1996 and then
remaining constant at 6.5% in 1997 and thereafter. A 1% increase in the
trend rates would increase the APBO as of October 1, 1993 by $1.4 million
and would increase the annual service and interest costs by $200,000.
The assumed discount rate used in determining the APBO was 8%.
4. Capitalized Interest
Capitalized interest and total interest charges for the six months
ended March 31, 1994 and 1993, respectively, are as follows:
Three Months Ended Six Months Ended
March 31, March 31,
1994 1993 1994 1993
-----------------------------------------
(Thousands)
Capitalized Interest $741 $620 $1,675 $1,270
==== ==== ====== ======
Total Interest Charges $6,284 $5,975 $11,851 $11,693
====== ====== ======= =======
-8-
5. Legal and Regulatory Proceedings
a. Base Rate Case
-----------------
In April 1993, NJNG filed a petition with the Board of Regulatory
Commissioners (BRC) seeking additional annual revenues of approximately
$26.9 million, or 7.1%, in base rates. The filing reflected primarily the
incremental capital and operating costs associated with NJNG's continued
customer growth, general system expansion and New Jersey tax law changes.
The filing included a 12.5% return on equity and a rate base of $541
million, compared with 12.2% return on equity and a $389 million rate base
previously reflected in its base rates. On January 5, 1994, the BRC
approved a stipulated agreement which authorized a $7.5 million base rate
increase and included an 11.5% return on common equity and a rate base of
$492 million. Also included in the stipulation was a continuation of
NJNG's margin sharing formula for sales to JCP&L and other interruptible
customers and transportation services and, effective January 5, 1994, the
margin sharing formula for off-system and capacity release sales was
established to credit 80% to firm customers and 20% to be retained by NJNG.
b. Levelized Gas Adjustment Clause (LGA)
- ----------------------------------------
In July 1993, NJNG filed a petition with the BRC to increase its annual
LGA revenues by $4.8 million, or 1.3%, reflecting primarily higher-than-
expected natural gas prices. On November 24, 1993, the BRC approved the
$4.8 million increase effective December 1, 1993, which included recovery
of NJNG's share of transition costs paid through September 1993 associated
with interstate natural gas pipelines complying with Federal Energy
Regulatory Commission Order 636, over two years. Accordingly, $9.8 million
of deferred gas costs has been classified as Deferred charges and other on
the Consolidated Balance Sheet at March 31, 1994.
c. Manufactured Gas Plant (MGP) Sites
- -------------------------------------
NJNG has identified eleven former manufactured gas plant (MGP) sites,
dating back to the late 1800's and early 1900's, which it acquired from
predecessors, and which contain contaminated residues from former gas
manufacturing operations. All of the gas manufacturing operations ceased
at these sites at least since the mid-1950's and in some cases had been
discontinued many years earlier, and all of the old gas manufacturing
facilities were subsequently dismantled by NJNG or its predecessors. NJNG
is currently involved in administrative proceedings with the New Jersey
Department of Environmental Protection and Energy (the NJDEPE) and local
government authorities with respect to the plant sites in question, and is
participating in various studies and investigations by outside consultants
to determine the nature and extent of any such contaminated residues and to
develop appropriate programs of remedial action, where warranted. Since
October 1989, NJNG has entered into Administrative Consent Orders or
Memoranda of Agreement with the NJDEPE covering all eleven sites. These
documents establish the procedures to be followed by NJNG in developing a
final remedial clean-up plan for each site.
Most of the cost of such studies and investigations is being shared
under an agreement with the former owner and operator of ten of the MGP
sites. NJNG's expenditures through June 1993 for environmental
investigations and preparation of proposals for remedial action at the
former gas plant sites are being recovered through a remediation rider,
which was approved by the BRC in its June 1992 base rate order. Costs
incurred subsequent to June 30, 1993 will be reviewed annually and, subject
to BRC approval, recovered over seven-year periods.
NJNG estimates that it will incur additional expenditures of
approximately $10 million over the next five years for further
investigation and remedial action at these sites. Accordingly, this amount
is reflected in both Deferred charges and other and Other deferred credits
in the Consolidated Balance Sheets.
d. Aberdeen
- ------------
In December 1993, a complaint was filed against NJNG, its contractor and
as yet unidentified parties by persons alleging injuries caused by a
natural gas explosion and fire on June 9, 1993 at a residential building in
Aberdeen Township, New Jersey. The plaintiffs (a decedent, his
-9-
administratrix ad prosequendum and his guardian) are seeking to recover
compensatory and punitive damages in unspecified amounts from the
defendants. The complaint alleges, among other things, that the defendants
were negligent or are strictly liable in tort for their alleged failure to
control, repair and maintain natural gas facilities at such building. In
February 1994, an additional complaint was filed in New Jersey Superior
Court against NJNG and its contractor by a person (individually and as
general administratrix and administratrix ad prosequendum of a decedent)
alleging injuries arising out of the natural gas explosion and fire at the
Aberdeen Township building. The plaintiff alleges, among other things,
that the defendants were negligent or are strictly liable in tort in
connection with their controlling, maintaining or inspecting natural gas
lines to such building. The plaintiff seeks unspecified compensatory and
punitive damages from NJNG, its contractor and as yet unidentified parties.
Reference is made to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1993 for information relating to four
complaints previously filed against NJNG arising out of the Aberdeen fire.
NJNG has notified its liability insurance carriers of these matters.
NJNG is unable to predict the extent to which other claims will be asserted
against, or liability imposed on, NJNG. The Company does not believe that
the ultimate resolution of these matters will have a material adverse
effect on its consolidated financial condition or results of operations.
e. Carnegie
- ------------
In March 1993, NJNG was named a defendant in a civil action commenced by
Carnegie Natural Gas Company (Carnegie) in the U.S. District Court for the
Western District of Pennsylvania. This action challenges NJNG's decision
to terminate the June 18, 1986 "Service Agreement for Sales Service under
Rate Schedule LVWS" (LVWS Service Agreement) between Carnegie and NJNG
effective March 31, 1994, pursuant to a "market-out" clause. The LVWS
Service Agreement would otherwise have expired on March 31, 2001. Carnegie
seeks, among other things, a declaratory judgment that the contract
termination was void. Claims of tortious interference with contractual
relations and abuse of process are also asserted and unspecified damages
and punitive damages are also sought. In April 1993, Carnegie filed a
motion for summary judgment on the contract termination claim. In May
1993, NJNG filed a response opposing Carnegie's motion, as well as a cross
motion for summary judgment on all claims. On January 21, 1994 a federal
magistrate issued a recommended decision denying Carnegie's motion for
summary judgment. In addition, the magistrate granted NJNG's motion for
summary judgment on Carnegie's tortious interference claim and denied
NJNG's motion for summary judgment on the contract termination and abuse of
process claims. Both parties filed objections to various aspects of the
magistrate's recommended decision, which were denied by order of a federal
district court judge on March 18, 1994. NJNG is unable to predict the
outcome of this matter. The Company does not believe that the ultimate
resolution of this matter will have a material adverse effect on its
consolidated financial condition or results of operations.
f. South Brunswick Asphalt, L.P.
- --------------------------------
NJNG has been named a defendant in a civil action commenced in New
Jersey Superior Court by South Brunswick Asphalt, L.P. (SBA) and its
affiliated companies seeking damages arising from alleged environmental
contamination at three sites owned or occupied by SBA and its affiliated
companies. Specifically, the suit charges that tar emulsion removed from
1979 through 1983 by an affiliate of SBA (Seal Tite, Inc.) from NJNG's
former gas manufacturing plant sites has been alleged by the NJDEPE to
constitute a hazardous waste and that the tar emulsion has contaminated the
soil and ground water at the three sites in question. In February 1991,
the NJDEPE issued letters classifying the tar emulsion/sand and gravel
mixture at each site as dry industrial waste, a non-hazardous
classification. NJNG is presently exploring various disposal methods for
the tar emulsion/sand and gravel mixture.
NJNG's liability insurance carrier has assumed defense of this action
but has denied coverage for SBA's claims. Although management is
considering legal action against the carrier, NJNG believes that the total
cost to remove and dispose of the tar emulsion/sand and gravel mixture from
all three sites would be immaterial. Based upon the gas remediation rider
approved by the BRC in June 1992, NJNG believes that such costs should be
-10-
recoverable through the ratemaking process.
One of the SBA sites is the subject of a NJDEPE Directive and Notice
alleging that the tar emulsion/sand and gravel mixture was a contributing
factor to the contamination of ground water at a residential community.
The NJDEPE is seeking reimbursement under the New Jersey Spill Compensation
and Control Act of cleanup, remediation and related costs, estimated by the
NJDEPE at approximately $20 million. NJNG is contesting the NJDEPE
directive on the grounds, among others, that any such alleged ground water
contamination was not caused by tar emulsions removed from NJNG's former
gas plant manufacturing sites. NJNG's liability insurance carriers, which
have been defending the civil action, have denied coverage for these claims
and NJNG intends to contest this position. NJNG would attempt to seek
recovery through the ratemaking process of any such cleanup or remediation
payments it might ultimately be required to make, but recognizes that such
recovery is not assured. There can be no assurance as to the outcome of
these proceedings. The Company does not believe that the ultimate
resolution of these matters will have a material adverse effect on its
consolidated financial condition or results of operations.
g. Bridgeport Rental and Oil Service
- -------------------------------------
In January 1992, NJNG was advised of allegations that certain waste oil
from its former manufactured gas plant site in Wildwood, New Jersey may
have been sent by a demolition contractor to the Bridgeport Rental and Oil
Service site in Logan Township, New Jersey. That site has been designated
a Superfund site and is currently the subject of two lawsuits pending in
the U.S. District Court in New Jersey. NJNG has notified its insurance
carriers and is investigating this matter. NJNG is currently unable to
predict the extent, if any, to which it may have cleanup or other liability
with respect to this matter, but would seek recovery of any such costs
through the ratemaking process. However, no assurance can be given as to
the timing or extent of the ultimate recovery of such costs. The Company
does not believe that the ultimate resolution of these matters will have a
material adverse effect on its consolidated financial condition or results
of operations.
h. Iroquois
- -----------
Pipeline owns a 2.8% equity interest in the Iroquois Gas Transmission
System, L.P. (Iroquois) which has constructed and is operating a 375-mile
pipeline from the Canadian border in Upstate New York to Long Island.
Iroquois has been informed by the U.S. Attorney's Offices for the
Northern, Southern and Eastern Districts of New York that an investigation
is underway to determine whether or not Iroquois committed civil violations
of the Federal Clean Water Act and/or its Corps of Engineers permit during
construction of the pipeline.
In addition, in conjunction with the Environmental Protection Agency
(EPA), a criminal investigation has been initiated by the U.S. Attorney's
Office for the Northern District of New York. To date, no criminal charges
have been filed.
On December 3, 1993, Iroquois received notification from the Enforcement
Staff of the Federal Energy Regulatory Commission Office of the General
Counsel (Enforcement) that Enforcement has commenced a preliminary, non-
public investigation concerning matters related to Iroquois' construction
of certain of its pipeline facilities. Enforcement has requested
information regarding certain aspects of the pipeline construction. In
addition, on December 27, 1993, Iroquois received a similar communication
from the Army Corps of Engineers requesting information regarding permit
compliance in connection with certain aspects of the pipeline construction.
Iroquois is evaluating and responding to these requests for information and
intends to work with these agencies to allay their concerns. To date, no
proceedings have been commenced against Iroquois in connection with these
agency inquiries.
Iroquois has publicly stated that it believes the pipeline construction
and right-of-way activities were conducted in a responsible manner and that
its environmental program complied with or exceeded applicable standards
for the industry. The foregoing proceedings and investigations have not
affected the pipeline's operations.
-11-
Pipeline is unable to predict the outcome of these proceedings and
investigations. Based upon information currently available to the Company
concerning the above matters involving Iroquois, the Company does not
believe that their ultimate resolution will have a material adverse effect
on the Company's consolidated financial condition or results of operations.
Pipeline's investment in Iroquois as of March 31, 1994 was $5.4 million.
i. Bessie-8
-----------
Reference is made to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1993 and the Company's Form 10-Q/A for the
quarterly period ended December 31, 1993 for information relating to legal
proceedings against NJNR and others (the Joint Venture, et al.) in
-- ---
connection with the Bessie-8 joint venture activities.
In January 1992, Bethlehem Steel Corporation announced its intention to
sell the Johnstown plant and, effective June 1, 1993, Bethlehem discontinued
gas purchases from the Joint Venture, et al. The portion of the pipeline
-- ---
used to provide gas to Bethlehem was shut-in to preserve its structural
integrity. Field production is currently being sold into the interstate
natural gas market at spot prices.
In January 1994, the owners of the plant previously served by the Bessie-
8 pipeline entered into a three-year natural gas contract with another
supplier. In March 1994, NJNR concluded that, based on meetings with its
partners to discuss various alternatives for the pipeline, the recovery of
NJNR's net investment of $1 million is doubtful. Accordingly, as disclosed
on Form 8-K filed by the Company on April 27, 1994, the results for the
three and six months ended March 31, 1994 include an after-tax charge to
earnings of $650,000, or $.04 per share.
j. Real Estate Properties
-------------------------
CR&R is the owner of certain parcels of land located in Monmouth County,
New Jersey which it is in the process of developing. The development of the
land is subject to the Freshwater Wetlands Protection Act (the Act), which
restricts building in or near certain protected geographic areas designated
as "freshwater wetlands' and their transition areas. CR&R's land parcels
were exempt from the provisions of the Act until assumption of the Federal
404 freshwater wetlands program by the State of New Jersey on March 2, 1994.
As of that date, the New Jersey Department of Environmental Protection and
Energy (DEPE) has jurisdiction over any freshwater wetlands and may classify
all or part of the remaining developable area as freshwater wetlands. It is
probable that CR&R will be precluded from developing any land classified by
the DEPE as freshwater wetlands. CR&R is currently determining what portion
of the land parcels may be classified as freshwater wetlands by the DEPE and
the effect, if any, that such classification will have on its further
development.
k. Various
----------
The Company is party to various claims, legal actions and complaints
arising in the ordinary course of business. In management's opinion, the
ultimate disposition of these matters will not have a material adverse
effect on its financial condition or results of operations.
6. Long-Term Debt
In March 1994, under its loan agreement with the New Jersey Economic
Development Authority, NJNG issued an additional $4 million of its 7.25%
Series U Bonds.
7. Other
At March 31, 1994, there were 17,056,184 common shares outstanding and
book value per share was $15.15.
Certain reclassifications have been made of previously reported amounts
to conform with current year classifications.
-12-
NEW JERSEY RESOURCES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED MARCH 31, 1994
RESULTS OF OPERATIONS
Earnings for the six months ended March 31, 1994 include the cumulative
effect of adopting Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes", which was a non-cash credit to consolidated
net income of $721,000, or $.04 per share. See Note 3. Changes in
Accounting -b.) Income Taxes on page 6 for a discussion of this change in
------------------
accounting principle.
Consolidated net income for the three and six months ended March 31,
1994, before the effect of adopting SFAS 109, increased by $1.3 million, or
6%, to $23.3 million and by $2.1 million, or 7%, to $33.8 million,
respectively.
Earnings per share for the three and six months ended March 31, 1994,
before the effect of SFAS 109, were $1.37 compared with $1.33, and were
$1.99 compared with $1.92, respectively.
The increase in consolidated earnings before the effect of SFAS 109 was
attributable primarily to the higher financial results of the Company's
principal subsidiary, New Jersey Natural Gas Company (NJNG).
UTILITY OPERATIONS
NJNG's financial results are summarized as follows:
Three Months Ended Six Months Ended
March 31, March 31,
1994 1993 1994 1993
------------------ ----------------
(Thousands)
Gross margin
Residential and commercial $62,916 $56,286 $101,053 $94,813
JCP&L and other interruptible 249 277 398 395
Off system and capacity release 1,390 650 2,596 1,334
------ ------ ------- ------
Total gross margin 64,555 57,213 104,047 96,542
Operating expenses 23,287 20,567 43,787 40,918
Interest charges, net 4,033 3,661 7,191 7,044
Federal income taxes 12,790 10,557 17,931 15,673
Preferred dividends and other, net 319 426 663 986
------ ------ ------- ------
Net income $24,126 $22,002 $34,475 $31,921
======= ======= ======= =======
Gross Margin
Gross margin, defined as gas revenues less gas costs and gross receipts
and franchise taxes (GRFT), provides a more meaningful basis for evaluating
utility operations since gas costs and GRFT are passed through to customers
and, therefore, have no effect on earnings. Gas costs are charged to
operating expenses on the basis of therm sales at the base and Levelized Gas
Adjustment (LGA) cost rates included in NJNG's tariff. The LGA clause
allows NJNG to recover gas costs that exceed the level reflected in its base
rates. GRFT are also calculated on a per-therm basis (excluding sales to
other utilities).
-13-
Residential and Commercial Sales
In NJNG's June 1992 base rate order, the BRC approved a weather-
normalization clause on a two-year experimental basis effective October 1,
1992. Such clause provides for a revenue adjustment if the weather varies
by more than one-half of one percent from normal, or 10-year average,
weather. The accumulated adjustment from one heating season (October-April)
is billed or credited to customers in the subsequent heating season. This
clause reduces the weather-sensitivity of gross margin from firm (i.e.
residential and commercial) customers.
Gross margin from sales to firm customers increased by $6.6 million, or
12%, to $62.9 million during the second fiscal quarter and by $6.2 million,
or 7%, to $101 million during the six months, compared with the same periods
last year.
These increases were due primarily to a 13% and 7% increase in firm therm
sales in the quarter and six months ended March 31, 1994, respectively, as
well as a $7.5 million base rate increase which became effective January 5,
1994. Firm therm sales increased due to the weather, which was 5% colder
than last year, and the addition of approximately 9,700 customers during the
twelve months ended March 31, 1994.
The weather for the six months ended March 31, 1994, was 9% colder than
normal which, due to the aforementioned weather-normalization clause, did
not significantly impact gross margin. Instead, $5.8 million of gross
margin was deferred and included in Customers' credit balances and deposits.
For the six months ended March 31, 1993, colder than normal weather resulted
in $1.8 million of gross margin being deferred due to the weather
normalization clause.
Off-System and Capacity Release Sales
In order to reduce the overall cost of its gas supply commitments, NJNG
has entered into contracts to sell gas to customers who are outside of the
state and not connected to its system. These sales enable NJNG to spread
its fixed demand costs, which are charged by pipelines to access their
supplies year-round, over a larger and more diverse customer base. NJNG
also participates in the capacity release market where it sells capacity on
the interstate pipeline network which is not needed for its own system
requirements.
NJNG's off-system sales totaled 91 million and 169 million therms and
generated $944,000 and $1.9 million of gross margin in the three and six
months ended March 31, 1994, respectively, compared with 66 million and 111
million therms and $650,000 and $1.3 million of gross margin in the same
periods last year. Off-system sales improved due primarily to increased
marketing efforts, while the margin per therm declined due to a change in
the regulated margin-sharing formula and increased competition. Effective
January 1994, NJNG retains 20% of the gross margin from off-system sales.
Capacity release sales generated $446,000 and $727,000 of gross margin in
the three and six months ended March 31, 1994, respectively.
Operating Expenses
Operating expenses increased by $2.7 million, or 13%, and by $2.9
million, or 7%, for the three and six months ended March 31, 1994,
respectively. These increases were due primarily to higher depreciation
associated with NJNG's growing plant investment needed to support the
customer growth and general system expansion, higher payroll associated with
the colder weather, rate case related expenses and an inventory adjustment.
Interest Charges, Net
Interest charges, net increased by $372,000, or 10%, and $147,000, or 2%,
for the three and six months ended March 31, 1994, due primarily to higher
debt levels associated with its ongoing construction program.
-14-
REAL ESTATE OPERATIONS
CR&R's financial results are summarized as follows:
Three Months Ended Six Months Ended
March 31, March 31,
1994 1993 1994 1993
-------------------- -----------------
(Thousands)
Revenues $3,213 $3,126 $6,342 $6,190
Operating expenses
Depreciation 483 498 965 959
Other 1,311 1,091 2,376 2,225
----- ----- ----- -----
Operating income 1,419 1,537 3,001 3,006
Other expenses - - 653 116
Interest charges,net 1,042 1,305 2,042 2,607
Federal income taxes 130 75 103 87
---- ----- ---- -----
Net income before SFAS 109 247 157 203 196
Effect of SFAS 109 - - 660 -
---- ----- ---- -----
Net income $247 $ 157 $863 $ 196
==== ===== ==== =====
Earnings for the six months ended March 31, 1994 include the cumulative
effect of adopting SFAS 109 which was a non-cash credit to net income of
$660,000. See Note 3. Changes in Accounting -b.) Income Taxes on page 6
------------------
for a discussion of this change in accounting principle.
In evaluating the results of real estate operations, it is appropriate
to analyze net income adjusted for depreciation which better reflects the
cash flow being generated by its income-producing properties. This
approach is common in the real estate industry since cash flow is generally
used to evaluate asset performance.
Other expenses represent the costs associated with the October 1993
redemption of CR&R's remaining $13.8 million outstanding principal of its
11 5/8% mortgage and the December 1992 redemption of its remaining $2.1
million outstanding principal of its 12.75% mortgage.
Excluding redemption costs from both periods, net income before the
effect of SFAS 109, adjusted for depreciation, increased by 11%, to
$730,000, and by 27%, to $1.6 million, for the three and six months ended
March 31, 1994, respectively, reflecting lower financing costs resulting
from the mortgage redemption activity and the maintenance of a high
occupancy rate.
Since March 1993, CR&R's inventory of completed space has remained
unchanged at 914,200 square feet and the occupancy rate has remained at
96%.
Interest charges, net decreased by $263,000, or 20%, and $565,000, or
22%, for the three and six months ended March 31, 1994, respectively, due
to lower average interest rates resulting from the abovementioned mortgage
redemption activity.
-15-
EXPLORATION AND PRODUCTION OPERATIONS
NJR Energy's financial results are summarized as follows:
Three Months Ended Six Months Ended
March 31, March 31,
1994 1993(A) 1994 1993(A)
-------------------- -----------------
(Thousands)
Revenues $2,515 $2,381 $5,236 $4,742
Operating expenses 3,660 3,441 5,931 6,015
----- ----- ----- -----
Operating loss (1,145) (1,060) (695) (1,273)
Interest charges, net 383 311 776 619
Federal income taxes (654) (1,158) (823) (1,421)
----- ------- ----- -------
Net loss before SFAS 109 (874) (213) (648) (471)
Effect of SFAS 109 - - 79 -
------ ------ ------ ------
Net loss $(874) $ (213) $(569) $ (471)
====== ======= ====== =======
(A) Restated to reflect the change in accounting principle by NJR Energy
for its oil and gas operations to the successful efforts method from the
full cost method.
Earnings for the six months ended March 31, 1994 include the cumulative
effect of adopting SFAS 109 which was a non-cash credit to net income of
$79,000. See Note 3. Changes in Accounting -b.) Income Taxes on page 6 for
-----------------
a discussion of this change in accounting principle.
NJR Energy's operating loss increased by $85,000, or 8%, for the three
months ended March 31, 1994, due primarily to the $1 million write-down of
its investment in the Bessie-8 pipeline. See Note 5. Legal and Regulatory
Proceedings -i.) Bessie-8 on page 11 for a discussion of this write-down.
-------------
The operating loss for the six months ended March 31, 1994 decreased by
$578,000, or 45%, as higher revenues from increased production and lower
exploratory dry hole costs more than offset the Bessie-8 write-down.
Natural gas production increased to 1.9 billion cubic feet (bcf) for the
six months compared with 1.6 bcf a year ago, and oil production increased
to 62,700 barrels compared with 47,000 barrels. These increases were due
primarily to the impact of the $5 million acquisition of 56 properties from
Marathon Oil Company in August 1993. In conjunction with the strategic
shift in capital allocation as discussed in Liquidity and Capital Resources
- Exploration and Production on page 16, NJNR has removed 7.6 bcf and
290,000 barrels of oil of proved undeveloped reserves from its reserve
base. NJR Energy's proved reserves at March 31, 1994 totaled 32 bcf of
natural gas and 1.9 million barrels of oil.
Average natural gas and oil prices for the six months were $1.84 per
thousand cubic feet (mcf) and $15.07 per barrel compared with $1.81 per mcf
and $19.71 per barrel, respectively, during the same period a year ago.
NJR Energy's interest charges, net for the three and six months ended
March 31, 1994, increased by $72,000, or 23%, and by $157,000, or 25%,
respectively, due to higher average debt levels associated with the
Marathon acquisition.
Federal income taxes were favorably impacted by permanent tax benefits
associated with the development of properties eligible for the tight sands
tax credit.
NJR Energy's ability to improve its earnings in the future is dependent
on several factors including changes in natural gas and oil prices, the
performance of reserve acquisitions and other investments, the amount and
type of which will be determined by market and other conditions.
-16-
LIQUIDITY AND CAPITAL RESOURCES
In order to meet the working capital and external debt financing
requirements of its non-regulated subsidiaries, as well as its own working
capital needs, the Company maintains committed bank credit facilities
totaling $145 million and has a $10 million credit facility available on an
offering basis. At March 31, 1994, $123.7 million was outstanding under
these facilities.
UTILITY
The seasonal nature of NJNG's operations creates large short-term cash
requirements, primarily to finance gas purchases and customer accounts
receivable. NJNG obtains working capital for these requirements, as well
as for the temporary financing of construction expenditures, sinking fund
needs and accelerated GRFT payments mandated by changes in New Jersey law,
through the issuance of commercial paper and short-term bank loans. To
support the issuance of commercial paper, NJNG maintains committed credit
facilities totaling $71 million with a number of commercial banks and has
an additional $15 million in lines of credit available on an offering
basis. NJNG's lines of credit are adjusted quarterly based upon its
projected cash needs.
Remaining fiscal 1994 construction expenditures are estimated at $30
million. These expenditures will be incurred for services, mains and
meters to support NJNG's continued customer growth, and general system
renewals and improvements. NJNG also has additional capital requirements
in 1994 of approximately $25 million resulting from the acceleration of
GRFT payments to the State of New Jersey. NJNG expects to finance these
expenditures through internal generation, the issuance of short-term debt
and proceeds from the Company's Dividend Reinvestment and Customer Stock
Purchase Plan (DRP), the amount and timing of which will be affected by
market conditions and other factors.
NJNG will also pursue the refinancing of existing long-term debt, the
amount and timing of which will be affected by market conditions and other
factors.
INDEPENDENT POWER
In July 1993, the Company announced that Lighthouse One, Inc. entered
into an agreement with a subsidiary of Destec Energy, Inc. to jointly
develop a 57 megawatt, natural gas fired cogeneration project in Harriman,
New York (the Northway Project). No significant development expenditures
for this project are expected in fiscal 1994. The Northway Project has
entered into a twenty-year gas supply agreement with NJNG. Pending various
regulatory approvals, the project is currently scheduled to begin
construction in 1995, and commence operation in 1996.
REAL ESTATE
As a result of the Company's strategic re-evaluation, CR&R's capital
expenditures are expected to be limited to the fit-up of existing tenant
space and the development of previously committed projects, subject to
additional investments, approved by the Board of Directors, made for the
purpose of preserving the value of particular real estate holdings, or made
on a build-to-suit basis in accordance with acceptable commitments from
existing or prospective tenants or buyers. Such remaining capital
expenditures for fiscal 1994 are estimated at $2 million and are expected
to be funded through internal generation and bank loans obtained by the
Company.
EXPLORATION & PRODUCTION
On April 27, 1994, the Company announced that it plans to reallocate
much of the capital previously dedicated to the development of natural gas
and oil reserves to investments with closer strategic ties to the rest of
its energy businesses. No further exploration is planned. Potential
investment opportunities may include gas gathering, storage and marketing,
as well as other investments designed to capitalize on the post - Order 636
-17-
investment environment. In connection with this strategic shift, as
discussed in Note 3 to the Consolidated Financial Statements, Changes in
Accounting -a.) Oil and Natural Gas Properties on page 5, NJR Energy has
------------------------------------
changed the method by which it accounts for its oil and gas operations from
the full cost method to the successful efforts method.
Such remaining capital expenditures for fiscal 1994 are expected to total
up to $2 million, depending on market conditions and other factors. These
expenditures are expected to be funded through bank loans obtained by the
Company, proceeds from the Company's DRP and internal generation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Information required by this Item is incorporated by reference to
Note 5 - Legal and Regulatory Proceedings beginning on Page 8.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K, under Item 5 - Other
Events, dated January 5, 1994, with respect to the settlement of New Jersey
Natural Gas Company's base rate case.
The Company filed a Current Report on Form 8-K, under Item 5 - Other
Events, dated April 27, 1994, with respect to (a) the change in accounting
principle for its oil and gas operations from the full cost method to the
successful efforts method and (b) the write-down of its investment in the
Bessie-8 pipeline.
-18-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW JERSEY RESOURCES CORPORATION
--------------------------------
Date: May 13, 1994 /s/Laurence M. Downes
------------ ------------------------------
Laurence M. Downes
Senior Vice President and
Chief Financial Officer
Date: May 13, 1994 /s/Glenn C. Lockwood
------------ -------------------------------
Glenn C. Lockwood
Vice President, Controller
and Chief Accounting Officer