1
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 December 31, 2000
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 of incorporation or organization) (I.R.S. Employer Identification Number)
1415 WYCKOFF ROAD, WALL, NEW JERSEY - 07719 732-938-1480
(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 February
9, 2001 was 17,698,302.
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PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
THREE MONTHS ENDED
DECEMBER 31,
(Thousands, except per share data) 2000 1999
---- ----
OPERATING REVENUES...................................................... $667,487 $263,438
-------- --------
OPERATING EXPENSES
Gas purchases......................................................... 585,657 193,981
Operation and maintenance............................................. 23,918 20,607
Depreciation and amortization......................................... 8,223 7,981
Energy and other taxes................................................ 13,424 10,044
------ ------
Total operating expenses................................................ 631,222 232,613
------- -------
OPERATING INCOME........................................................ 36,265 30,825
Other income............................................................ 593 701
Interest charges, net................................................... 5,669 5,176
----- -----
INCOME BEFORE INCOME TAXES............................................. 31,189 26,350
Income tax provision.................................................... 12,133 10,179
------ ------
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE 19,056 16,171
IN ACCOUNTING...........................................................
Cumulative effect of a change in accounting for derivatives, net of
tax of $930 ............................................................ (1,347) -
------- ------
NET INCOME.............................................................. $17,709 $16,171
======= =======
EARNINGS PER COMMON SHARE-BASIC
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING.................................................. $1.08 $.91
===== ====
NET INCOME..................................................... $1.00 $.91
===== ====
EARNINGS PER COMMON SHARE-DILUTED
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING.................................................. $1.07 $.90
===== ====
NET INCOME..................................................... $1.00 $.90
===== ====
DIVIDENDS PER COMMON SHARE.............................................. $.44 $.43
==== ====
AVERAGE SHARES OUTSTANDING
BASIC.......................................................... 17,628 17,780
====== ======
DILUTED........................................................ 17,743 17,914
====== ======
See Notes to Consolidated Financial Statements
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
THREE MONTHS ENDED
DECEMBER 31,
2000 1999
---- ----
CASH FLOWS USED IN OPERATING ACTIVITIES
Net income $ 17,709 $ 16,171
Adjustments to reconcile net income to cash flows
Depreciation and amortization 8,223 7,981
Amortization of deferred charges 1,459 1,512
Deferred income taxes 4,534 (2,905)
Manufactured gas plant remediation costs (2,517) (2,507)
Change in working capital (108,894) (41,224)
Other, net (275) 4,782
--------- ---------
Net cash flows used in operating activities (79,761) (16,190)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 72,800 5,300
Proceeds from common stock 3,289 2,056
Repurchase of treasury stock (1,643) (2,803)
Payments of common stock dividends (7,595) (7,465)
Net change in short-term debt 24,700 35,300
--------- ---------
Net cash flows from financing activities 91,551 32,388
--------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES
Expenditures for
Utility plant (10,326) (14,215)
Real estate properties and other (1,205) (118)
Cost of removal (423) (1,735)
Proceeds from asset sales 3,620 556
--------- ---------
Net cash flows used in investing activities (8,334) (15,512)
--------- ---------
Net change in cash and temporary investments 3,456 686
Cash and temporary investments at September 30 1,904 2,123
--------- ---------
Cash and temporary investments at December 31 $ 5,360 $ 2,809
========= =========
CHANGES IN COMPONENTS OF WORKING CAPITAL
Receivables $(226,296) $ (44,830)
Inventories 29,106 4,471
Underrecovered gas costs (509) 1,940
Purchased gas 92,029 (2,536)
Prepaid and accrued taxes, net 18,015 11,890
Customers' credit balances and deposits (939) 554
Accounts payable (21,640) (3,886)
Other, net 1,340 (8,827)
--------- ---------
Total $(108,894) $ (41,224)
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid for
Interest (net of amounts capitalized) $ 7,110 $ 6,742
Income taxes $ 70 $ 547
See Notes to Consolidated Financial Statements
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CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
2000 2000 1999
(unaudited) (unaudited)
------------ ------------- ------------
(Thousands)
PROPERTY, PLANT AND EQUIPMENT
Utility plant, at cost $ 986,515 $ 981,601 $ 954,751
Real estate properties and other, at cost 28,259 28,016 26,437
----------- ----------- -----------
1,014,774 1,009,617 981,188
Accumulated depreciation and amortization (282,838) (279,033) (267,695)
----------- ----------- -----------
Property, plant and equipment, net 731,936 730,584 713,493
----------- ----------- -----------
CURRENT ASSETS
Cash and temporary investments 5,360 1,904 2,809
Construction fund 7,600 7,600 12,100
Customer accounts receivable 300,108 103,618 101,080
.Unbilled revenues 33,811 3,189 28,061
Allowance for doubtful accounts (3,398) (2,555) (2,021)
Gas in storage, at average cost 35,332 63,799 31,451
Materials and supplies, at average cost 2,910 3,549 3,513
Prepaid state taxes -- 12,836 --
Underrecovered gas costs 10,656 12,436 --
Derivatives 61,470 -- --
Other 11,180 5,599 15,921
----------- ----------- -----------
Total current assets 465,029 211,975 192,914
----------- ----------- -----------
DEFERRED CHARGES AND OTHER
Equity investments 20,367 35,271 15,085
Regulatory assets 88,557 87,291 65,610
Underrecovered gas costs 2,557 268 6,781
Derivatives 29,363 -- --
Other 10,643 16,922 17,525
----------- ----------- -----------
Total deferred charges and other 151,487 139,752 105,001
----------- ----------- -----------
Total assets $ 1,348,452 $ 1,082,311 $ 1,011,408
=========== =========== ===========
See Notes to Consolidated Financial Statements
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CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
2000 2000 1999
(unaudited) (unaudited)
------------ ------------- ------------
(Thousands)
CAPITALIZATION
Common stock equity $ 363,780 $ 328,128 $ 310,426
Redeemable preferred stock 400 400 520
Long-term debt 414,328 291,528 313,023
---------- ---------- ----------
Total capitalization 778,508 620,056 623,969
---------- ---------- ----------
CURRENT LIABILITIES
Current maturities of long-term debt 495 495 318
Short-term debt 18,000 43,300 97,000
Purchased gas 245,488 153,459 75,328
Accounts payable and other 32,576 54,216 24,613
Dividends payable 7,762 7,595 7,649
Accrued taxes 12,588 5,964 7,928
Overrecovered gas costs -- -- 3,311
Customers' credit balances and deposits 15,347 16,286 16,024
---------- ---------- ----------
Total current liabilities 332,256 281,315 232,171
---------- ---------- ----------
DEFERRED CREDITS
Deferred income taxes 111,212 90,980 64,167
Deferred investment tax credits 9,758 9,845 10,106
Deferred revenue 20,514 21,009 22,514
Derivatives 24,207 -- --
Manufactured gas plant remediation 45,219 45,219 45,219
Regulatory liability and other 26,778 13,887 13,262
---------- ---------- ----------
Total deferred credits 237,688 180,940 155,268
---------- ---------- ----------
Total capitalization and liabilities $1,348,452 $1,082,311 $1,011,408
========== ========== ==========
See Notes to Consolidated Financial Statements
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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, 2000 balance sheet data is derived from the audited
financial statements of New Jersey Resources Corporation (the Company). 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 the Company's 2000 Annual Report on Form 10-K.
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.
Certain prior year amounts have been reclassified to conform with current
year reporting.
2. Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries - New Jersey Natural Gas Company (NJNG), NJR Energy
Services Company (Energy Services), formerly a wholly-owned subsidiary of NJR
Energy Holdings Corporation (Energy Holdings), NJR Retail Holdings Corporation
(Retail Holdings), NJR Capital Corporation (Capital), formerly NJR Development
Corporation, and NJR Service Corporation (Service Corp.).
NJR Home Services Company (Home Services), NJR Natural Energy Company
(Natural Energy), formerly New Jersey Natural Energy Company and a wholly-owned
subsidiary of Energy Holdings, and NJR Power Services Company (Power Services),
are wholly-owned subsidiaries of Retail Holdings.
Commercial Realty & Resources Corp. (CR&R), NJR Investment Corporation, and
Energy Holdings, formerly a sub-holding company of the Company, which includes
NJR Energy Corporation (NJR Energy), New Jersey Natural Resources Company
(NJNR), and NJNR Pipeline Company (Pipeline), are wholly-owned subsidiaries of
Capital. Significant intercompany accounts and transactions have been
eliminated.
On December 6, 2000, the BPU approved the transfer of NJNG's appliance
service business to Home Services. The Company commenced accounting for these
operations in Home Services, effective October 1, 2000, and all prior year
reporting has been reclassified to be consistent with current year
presentation.
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3. Derivative Activities
The regulated and unregulated natural gas businesses of the Company and its
subsidiaries are subject to market risk due to fluctuations in the price of
natural gas. To hedge against such fluctuations, the Company and its
subsidiaries have entered into futures contracts, options agreements and
over-the-counter swap agreements. The Company's natural gas businesses are
conducted through three of its operating subsidiaries. First, NJNG is a
regulated utility whose recovery of gas costs is protected by the LGA, but to
further hedge against price fluctuations, utilizes futures and options through
its financial risk management program. Second, Energy Services has hedged
its commitments to purchase natural gas for sale to retail marketers, purchases
and sales of storage gas and fixed price sales to wholesale customers. Finally,
NJR Energy has entered into swap agreements to hedge a long-term, fixed-price
contract.
The Company also utilizes interest rate caps and swaps to manage the risk
of variable interest rate debt.
Through September 30, 2000, the Company accounted for the results of its
derivative activities for hedging purposes utilizing the settlement method. The
settlement method provides for recognizing the gains or losses from derivatives
when the related physical transaction has been completed. Derivatives that were
not for hedging purposes were valued at fair value utilizing quoted market
prices. Changes in fair value were recorded in net income.
Effective October 1, 2000, the Company has adopted Statement of Financial
Accounting Standards (SFAS) No.133 "Accounting for Derivative Investments and
Hedging Activities, as amended" (SFAS 133). Under SFAS 133, the Company records
the fair value of derivatives held as assets and liabilities. The changes in
net value of the effective portion of derivatives qualifying as cash flow
hedges are recorded, net of tax, in other comprehensive income, a component of
Common stock equity. Under SFAS 133, the Company also has certain derivative
instruments that do not qualify as cash flow hedges. The changes in net value
of these derivatives are recorded in net income. In addition, the changes in
net value of the ineffective portion of derivatives qualifying for hedge
accounting are recorded as an increase or decrease in gas costs or interest
expense, as applicable, based on the nature of the derivatives. NJNG utilizes
derivatives to hedge its gas purchasing activities which are recoverable
through its Levelized Gas Adjustment (LGA) clause. Accordingly, the offset to
the changes in fair value of these derivatives is recorded as a regulatory
asset or liability. The Company has not designated any derivatives as fair
value hedges.
Fair value of the derivative investments is determined by reference to
quoted market prices of listed contracts, published quotations or quotations
from independent parties. In the absence thereof, the Company utilizes
mathematical models based on current and historical data.
4. Capitalized Interest
The Company's capitalized interest totaled $266,000 and $254,000 for the
three months ended December 31, 2000 and 1999, respectively.
5. Legal and Regulatory Proceedings
a. Energy Deregulation Legislation
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In February 1999, the Electric Discount and Energy Competition Act (Act),
which provides the framework for the restructuring of New Jersey's energy
markets, became law. In January 2000, the New Jersey Board of Public Utilities
(BPU), verbally approved a stipulation agreement among various parties to fully
open NJNG's residential markets to competition, restructure its rates to
segregate its Basic Gas Supply (BGS) service and Delivery (i.e., transportation)
service prices as required by the Act, and expand an incentive for residential
and small commercial customers to switch to transportation service.
The Act also allows continuation of each utility's role as a gas supplier
at least until December 31, 2002. The BPU must determine the ongoing role of
each utility in providing BGS service by January 1, 2002. The Act also allows
natural gas utilities to provide competitive services (e.g., appliance
services). In July 2000, NJNG filed a stipulation agreement among various
parties resolving the customer account service proceedings. The stipulation
continues NJNG's current third-party billing policies and delays until January
2003, absent a significant breakthrough in metering technology, any further
decision on meter reading and other potentially competitive services.
On December 6, 2000, the BPU signed a written Order resolving the customer
account service proceeding and also approving the transfer of NJNG's existing
appliance service business to Home Services, a newly formed unregulated
subsidiary of the Company.
b. LGA and Other Adjustment Clauses
In July 2000, NJNG amended a September 1999 LGA filing in response to a
significant increase in the wholesale cost of gas. The amended filing requested
an approximate 16 percent increase in rates for firm sales customers through an
increase in the Gas Cost Recovery (GCR) and Remediation Adjustment (RA) factors,
to be slightly offset by a decrease in the Prior Gas Cost Adjustment (PGCA) and
Transportation Education and Implementation (TEI) factors. The filing proposed
that the Demand Side Management (DSM) and Weather Normalization Clause (WNC)
factors remain the same. The rates for transportation customers would remain
relatively stable as a result of the changes requested in the filing. The filing
also requested that the monthly and annual limits of a Flexible Pricing
Mechanism (FPM), which allows NJNG to make additional pricing adjustments on a
monthly basis to reflect market changes, be expanded. In November 2000, the BPU
approved a 16 percent increase to the GCR and also authorized the expansion of
the FPM. The BPU has also approved increases of 2 percent each on December 1,
2000, January 1, 2001 and February 1, 2001 under the FPM. NJNG filed an updated
LGA filing on December 1, 2000, and held a public hearing in January 2001.
Subject to the results of the filing and the public hearing, NJNG would be able
to increase rates by up to an additional 2 percent on March 1 and April 1 of
2001. Additionally, NJNG has requested that the FPM be extended through July
2001. The BPU plans to rule on additional LGA increases in the first quarter
of 2001. The FPM also allows NJNG to decrease rates if market conditions allow.
Pursuant to a previous BPU Order, NJNG currently recovers its carrying
costs on its underrecovered gas costs balance through December 2001. NJNG has
requested that recovery of its carrying costs be extended.
In August 1999, NJNG filed a Comprehensive Resource Analysis (CRA) plan
pursuant to a BPU order. The CRA, which will replace NJNG's current DSM program,
includes funding for certain technologies that utilize renewable sources of
energy to produce electricity (e.g., fuel cells and solar), and
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has a program cost of $2.9 million recoverable through rates. The BPU is
currently evaluating two separate stipulations filed in this proceeding.
c. Gas Remediation
NJNG has identified eleven former manufactured gas plant (MGP) sites,
dating back to the late 1800's and early 1900's, which contain contaminated
residues from the former gas manufacturing operations. Ten of the eleven sites
in question were acquired by NJNG in 1952. All of the gas manufacturing
operations ceased at these sites at least by 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 the former owners. NJNG is
currently involved in administrative proceedings with the New Jersey Department
of Environmental Protection (NJDEP) 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 NJDEP 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.
NJNG had been sharing the cost of environmental investigations and remedial
actions at ten of the former MGP sites with the former owner. In September
2000, a revised agreement was executed whereby NJNG is responsible for two of
the sites, while the former owner is responsible for the remaining eight sites.
Also in September 2000, NJNG purchased a 20-year cost containment insurance
policy for these two sites. NJNG continues to participate in the investigation
and remedial action for one MGP site that was not originally shared.
Through a Remediation Rider approved by the BPU, NJNG is recovering its
expenditures incurred through June 30, 1998 over a seven-year period. Costs
incurred subsequent to June 30, 1998, including carrying costs on the deferred
expenditures will be reviewed annually and recovered over rolling seven-year
periods, subject to BPU approval. In September 1999, NJNG filed for recovery of
expenditures incurred through June 30, 1999 and a BPU decision is expected in
the spring of 2001. On January 11, 2001, NJNG filed for recovery of expenditures
incurred through June 30, 2000.
In March 1995, NJNG filed a complaint in New Jersey Superior Court against
various insurance carriers for declaratory judgment and for damages arising from
such defendants' breach of their contractual obligations to defend and/or
indemnify NJNG against liability for claims and losses (including defense costs)
alleged against NJNG relating to environmental contamination at the former MGP
sites and other sites. NJNG is seeking (i) a declaration of the rights, duties
and liabilities of the parties under various primary and excess liability
insurance policies purchased from the defendants by NJNG from 1951 through 1985,
and (ii) compensatory and other damages, including costs and fees arising out of
defendants' obligations under such insurance policies. The complaint was amended
in July 1996 to name Kaiser-Nelson Steel & Salvage Company (Kaiser-Nelson) and
its successors as additional defendants. The Company is seeking (a) a
declaration of the rights, duties and liabilities of the parties under
agreements with respect to claims against the Company that allege property
damage caused by various substances used, handled or generated by NJNG or the
predecessor in title that were removed from several of the MGP sites by
Kaiser-Nelson, and (b) money damages or compensatory relief for the harm caused
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by Kaiser-Nelson's aforementioned actions. Discovery is proceeding in this
matter. There can be no assurance as to the outcome of these proceedings.
d. South Brunswick Asphalt, L.P.
NJNG has been named as 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 to 1983 by
an affiliate of SBA (Seal Tite Corp.) from NJNG's former MGP sites has been
alleged by the NJDEP 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 NJDEP issued letters classifying the tar emulsion/sand and
gravel mixture at each site as dry industrial waste, a non-hazardous
classification. In April 1996, in a meeting with all parties to the litigation
and the judge assigned to the case, the NJDEP confirmed the non-hazardous
classification, which will allow for conventional disposal. In May 1997, SBA
submitted applications to NJDEP for permits to allow SBA to recycle the tar
emulsion/sand and gravel mixture at each site into asphalt, to be used as a
paving materials. In July 1998, SBA filed an amended complaint adding NJDEP to
the proceedings to facilitate the resolution of these applications. Following
service of SBA's amended complaint, NJDEP filed a motion for dismissal of the
amended complaint, but has not formally granted or denied SBA's permit
applications. In March 1999, the court granted NJDEP's motion in part and
denied NJDEP's motion in part, and directed SBA to file a more definite
statement of its claims for equitable relief against NJDEP, including its
request that a mandatory injunction be imposed compelling NJDEP to issue the
subject permits. SBA has filed a more definite statement of its claims, and
NJDEP has renewed its motion to dismiss the amended complaint. In its motion,
NJDEP alleges, among other things, that it has not acted upon SBA's
applications for permits to recycle the tar emulsion/sand and gravel mixture
because SBA has not submitted completed applications for these permits. This
allegation is denied by SBA. NJDEP's motion to dismiss is pending in the
Superior Court and it is not known when the Court will make a decision. 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. Combe Fill South Landfill
NJNG has been joined as a third-party defendant in two civil actions
commenced in October 1998 in the U.S. District Court for the District of New
Jersey by the U.S. Environmental Protection Agency and NJDEP. These two actions
seek recovery of costs expended in connection with, and for continuation of the
cleanup of the Combe Fill South Landfill, a Superfund site in Chester, New
Jersey. The plaintiffs claim that hazardous waste NJNG is alleged to have
generated was sent to the site. There are approximately 180 defendants and
third-party defendants in the actions thus far. Each third-party complaint seeks
damages under CERCLA Section 113 and the New Jersey Spill Act, declaratory
relief holding each third-party defendant strictly liable, and contribution and
indemnification under the common law of the United States and New Jersey. No
specific monetary demands or scope of cleanup work have been set forth to date.
NJNG is in the process of investigating the allegations, formulating its
position with respect thereto and has agreed to participate in an alternate
dispute resolution process encouraged by the Court. Its insurance carriers have
been notified and one has agreed to assume responsibility for the legal
expenses, while reserving its rights with regard to liability. NJNG is currently
unable to predict the extent, if any, to which it may have cleanup or other
liability with respect to these civil actions, but would
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seek recovery of any such costs through the ratemaking process. No assurance can
be given as to the timing or extent of the ultimate recovery of any such costs.
f. Various
The Company is party to various other 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. Earnings Per Share
The incremental shares required for inclusion in the denominator for the
diluted EPS calculation were 115,080 and 133,620 for the three months ended
December 31, 2000 and 1999, respectively. These shares relate to stock options
and restricted stock and were calculated using the treasury stock method. The
numerator for each applicable basic and diluted calculation was income before
cumulative effect of a change in accounting and net income, respectively.
7. Long-Term Debt
On January 5, 2001, the Company closed on $260 million of revolving credit
agreements with several banks. The parent company facility consists of $135
million with a three-year term and will be used to finance non-regulated
operations. The $125 million NJNG facility consists of $50 million with a
364-day term and $75 million with a three-year term. The NJNG facility will be
used to support its commercial paper borrowings. Consistent with management's
intent to maintain its commercial paper on a long-term basis, and as supported
by its long-term revolving credit facility, at December 31, 2000, the Company
included $50 million of commercial paper borrowings as Long-term debt on the
Consolidated Balance Sheet.
In April 1998, NJNG entered into a loan agreement whereby the New Jersey
Economic Development Authority (EDA) loaned NJNG the proceeds from its $18
million Natural Gas Facilities Revenue Bonds, Series 1998C, which were deposited
into a construction fund. NJNG may draw down these funds in reimbursement for
certain qualified expenditures. NJNG drew down $4.5 million and $3.9 million
from the construction fund and issued a like amount of its Series GG Bonds in
2000 and 1999, respectively.
8. Segment Reporting
The segment data has been reclassified to reflect the new business segments
that are discussed in Note 2: Principles of Consolidation. The Natural gas
distribution segment consists of the regulated energy and the off-system and
capacity management operations. The Energy Services segment consists primarily
of unregulated fuel capacity management and other wholesale marketing services.
The Retail Holdings segment consists primarily of appliance service repair and
contract services and unregulated retail marketing. The NJR Capital and Other
segment consists of CR&R, which develops commercial real estate, NJR Energy,
which invests in energy-related ventures and NJR Investment Company, which makes
energy-related equity investments. It also includes Service Corp., which
provides shared administrative services and the parent company's operations.
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Three Months Ended
December 31,
(Thousands) 2000 1999
---- ----
Operating Revenues
Natural gas distribution $ 324,799 $ 197,440
Energy Services 338,344 62,672
Retail Holdings 5,424 7,191
NJR Capital and Other 905 619
--------- ---------
Subtotal 669,472 267,922
Intersegment revenues (1,985) (4,484)
--------- ---------
Total $ 667,487 $ 263,438
========= =========
Operating Income
Natural gas distribution $ 31,193 $ 28,936
Energy Services 4,071 895
Retail Holdings (287) (68)
NJR Capital and Other 1,288 1,062
--------- ---------
Total $ 36,265 $ 30,825
========= =========
As of As of As of
December 31, 2000 September 30, 2000 December 31, 1999
----------------- ------------------ -----------------
(Thousands)
Assets
Natural gas distribution $ 1,063,269 $ 940,725 $ 940,413
Energy Services 220,208 63,775 23,691
Retail Holdings 6,522 1,982 4,719
NJR Capital and Other 58,453 75,829 42,585
---------------- ---------------- ----------------
Total $ 1,348,452 $ 1,082,311 $ 1,011,408
================ ================ ================
9. Investments
Equity investments, which were purchased as long-term investments, are
classified as available for sale and are carried at the estimated fair value
with any unrealized gains or losses included in other comprehensive income, a
component of Common stock equity. Joint ventures and investments in which the
Company can exercise a significant influence over operations and management are
accounted for under the equity method. For investments in which significant
influence does not exist the cost method of accounting is applied. Included in
Equity investments on the Consolidated Balance Sheet is the Company's less than
1 percent ownership interest in the Capstone Turbine Corporation, a developer of
microturbines, which completed its initial public offering in June 2000. Other
comprehensive income for the three months ended December 31, 2000, includes an
after-tax unrealized loss of $8.7 million associated with the Capstone
investment. Through December 31, 2000, accumulated other comprehensive income
includes an after-tax unrealized gain of $4.5 million related to Capstone.
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10. Comprehensive Income
Three Months Ended
December 31,
2000 1999
-------- --------
(Thousands)
Net income $ 17,709 $ 16,171
-------- --------
Other comprehensive income:
Change in fair value of equity investments, net
of tax of $(5,971) and $162 $ (8,649) $ 196
Change in fair value of derivatives, net
of tax of $8,040 11,840 --
Cumulative effect of a change in accounting for
derivatives, net of tax of $14,177 20,530 --
-------- --------
Total other comprehensive income $ 23,721 $ 196
-------- --------
Comprehensive income $ 41,430 $ 16,367
======== ========
11. Change in accounting
Effective October 1, 2000, the Company adopted SFAS 133 (See Note 3: Derivative
Activities).
At October 1, 2000, the effect of adopting of SFAS 133 was as follows:
(Thousands)
Increase/
(Decrease)
Fair value of derivative assets $ 56,963
Fair value of derivative liabilities $ 17,657
Regulatory liability $ 6,834
Cumulative effect of a change in
accounting on net income, net of tax of $930 $ (1,347)
Cumulative effect of a change in accounting for
on other comprehensive income, net of tax
of $14,177 $ 20,530
The cumulative effect on net income from a change in accounting resulted
from derivatives that do not qualify for hedge accounting.
The amounts included in other comprehensive income related to natural gas
instruments will reduce or be charged to gas costs as the related transaction
occurs. Based on the amount recorded to other comprehensive income on the
October 1, 2000 transition date, $9.8 million is expected to be recorded as a
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reduction in gas costs in 2001. In the quarter ended December 31, 2000, $1
million pre-tax was charged to gas costs. Those amounts related to interest rate
instruments will reduce or be charged to interest expense as the future
transaction occurs. In the quarter ended December 31, 2000 there is a $113,000
charge to other comprehensive income related to interest rate instruments which
will reverse by September 30, 2001.
The cash flow hedges described above cover various periods of time ranging
from February 2001 to October 2010.
12. Other
At December 31, 2000 there were 17,657,259 shares of common stock
outstanding and the book value per share was $20.60.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2000
A. RESULTS OF OPERATIONS
Consolidated income before cumulative effect of a change in accounting for
the quarter ended December 31, 2000 increased 17.9 percent to $19.1 million,
compared with $16.2 million for the same period last year. Basic EPS before
cumulative effect of a change in accounting increased 18.7 percent to $1.08,
compared with $.91 last year. Diluted EPS before cumulative effect of a change
in accounting also increased 18.9 percent to $1.07, compared with $.90 last
year.
The increase in consolidated earnings before cumulative effect of a change
in accounting was primarily attributable to continued profitable customer growth
at the Company's principal subsidiary, NJNG, and improved wholesale natural gas
marketing results.
Consolidated net income for the quarter ended December 31, 2000 includes a
charge of $1.3 million, or $.08 per share, resulting from the cumulative effect
of a change in accounting for derivatives under SFAS 133.
NJNG OPERATIONS
NJNG is a local natural gas distribution company that provides regulated
energy service to more than 411,000 residential and commercial customers in
central and northern New Jersey and participates in the off-system sales and
capacity release markets.
NJNG's financial results are summarized as follows:
Three Months Ended
December 31,
2000 1999
------- -------
(Thousands)
Gross margin
Residential and commercial $49,357 $44,300
=======
Firm transportation 9,550 9,249
======= -------
Total firm margin 58,907 53,549
Interruptible 192 220
Off-system and capacity management 1,325 1,564
======= -------
Total gross margin $60,424 $55,333
======= =======
Operating income $31,193 $28,936
======= =======
Income before cumulative effect of a change in
accounting $16,726 $15,341
======= =======
Net income $16,451 $15,341
======= =======
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Gross Margin
Gross margin is defined as gas revenues less gas costs, sales tax and a
Transitional Energy Facilities Assessment (TEFA). Gross margin provides a more
meaningful basis for evaluating utility operations, since gas costs, sales tax
and TEFA 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 rates included in NJNG's tariff. The LGA clause allows NJNG to
recover gas costs that exceed the level reflected in its base rates. Sales tax
is calculated at 6 percent of revenue and excludes off-system sales, sales to
other utilities and federal accounts. TEFA is calculated on a per therm basis
and excludes sales to other utilities, off-system sales and federal accounts.
Firm Margin
Residential and commercial (i.e., firm) gross margin is subject to the WNC,
which provides for a revenue adjustment if the weather varies by more than
one-half of 1 percent from normal, or 20-year average, weather. The WNC does not
fully protect NJNG from factors such as unusually warm weather and declines in
customer usage patterns, which were set at the conclusion of NJNG's last base
rate case in January 1994. The accumulated adjustment from one heating season
(i.e., October-May) is billed or credited to customers in subsequent periods.
This mechanism reduces the variability of both customer bills and NJNG's
earnings due to weather fluctuations.
The components of gross margin from firm customers are affected by
customers switching between sales service and firm transportation service.
NJNG's total gross margin is not negatively impacted by customers who utilize
its firm transportation service and purchase their gas from another supplier.
This is due to NJNG's tariff, which is designed such that no profit is earned on
the commodity portion of sales to firm customers, while all customers who
purchase gas from another supplier continue to utilize NJNG for transportation
service.
Total firm margin increased $5.4 million, or 10 percent for the three
months ended December 31, 2000, compared with the same periods last year,
reflecting customer growth and higher average customer usage.
The weather for the three months ended December 31, 2000 was 15.6 percent
colder than normal, which, in accordance with the WNC, resulted in $3.2 million
of gross margin being deferred for future refunds to customers. At December 31,
2000, NJNG had $14.3 million in accrued WNC margin to be collected from its
customers in fiscal 2001 and 2002, due primarily to warmer weather in prior
fiscal years.
Gross margin from sales to firm customers increased $5.1 million, or 11.4
percent, for the three months ended December 31, 2000, compared with the same
period last year. Sales to firm customers were 16.8 billion cubic feet (Bcf) for
the three months ended December 31, 2000, compared with 12.6 Bcf for the same
period last year. The increase in gross margin and sales was due primarily to
the impact of 13,127 customer additions during the twelve months ended December
31, 2000, and the colder weather.
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Gross margin from firm transportation increased $300,000, or 3.3 percent,
for the three months ended December 31, 2000, compared with the same period last
year. NJNG transported 3.6 Bcf and 3.2 Bcf for the three months ended December
31, 2000 and 1999, respectively. The increase in margin was due primarily to the
colder weather, which more than offset customers switching back to sales
service.
NJNG had 24,967 and 30,527 residential customers and 3,632 and 4,248
commercial customers using transportation service at December 31, 2000 and 1999,
respectively. The decrease in the number of transportation customers was due
primarily to higher wholesale commodity prices, which resulted in customers
returning to sales service from transportation service.
Interruptible
NJNG services 54 customers through interruptible sales and/or
transportation tariffs. Sales made under the interruptible sales tariff are
priced on market-sensitive oil and gas parity rates. Although therms sold and
transported to interruptible customers represented 5 percent and 4 percent of
total therm throughput in the three months ended December 31, 2000 and 1999,
respectively, they accounted for less than 1 percent of the total gross margin
in each period due to the regulated margin-sharing formulas that govern these
sales. Under these formulas, NJNG retains 10 percent of the gross margin from
the interruptible sales and 5 percent of the gross margin from transportation
sales, with the balance credited to firm sales customers through the LGA clause.
Off-System and Capacity Management
In order to reduce the overall cost of its gas supply commitments, NJNG has
entered into contracts to sell gas to customers outside its franchise territory
when the gas is not needed for system requirements. These off-system 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 on the interstate pipeline
network when the capacity is not needed for its firm system requirements.
Effective October 1, 1998 through December 31, 2002, NJNG retains 15 percent of
the gross margin from these sales, with the balance credited to firm sales
customers through the LGA clause.
A new incentive mechanism designed to reduce the fixed cost of NJNG's gas
supply portfolio became effective October 1, 1998. Any savings achieved through
the permanent reduction or replacement of capacity or other services will be
shared between customers and shareowners. Under this program, NJNG retains 40
percent of the savings for the first 12 months following any transaction and
retains 15 percent for the remaining period through December 31, 2002, with the
balance credited to firm sales customers through the LGA clause.
NJNG's off-system and capacity management sales totaled 29.2 Bcf and
generated $1.3 million of gross margin, for the three months ended December 31,
2000, compared with 36 Bcf and $1.6 million of gross margin for the respective
period last year. The decrease in margin and volume was attributable to the
colder weather, as more supplies were needed for core customers.
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Operating Income
Operating income increased $2.3 million, or 7.8 percent, for the three
months ended December 31, 2000, compared with the same periods last year, due
primarily to the increase in gross margin which more than offset a $2.6 million,
or 12.7 percent, increase in operation and maintenance (O&M) expenses. O&M
expenses were higher due to a $600,000 increase in bad debt expense, which is
attributable to increased revenues. Revenues increased by $124.2 million, or
38.2 percent, reflecting a significant increase in the wholesale cost of gas.
Net Income
Net income increased $1.1 million, or 7.2 percent, for the three months
ended December 31, 2000, compared with the same periods last year, due primarily
to the higher operating income discussed above, which more than offset a
$275,000 charge related to the cumulative effect of a change in accounting and
lower other income.
ENERGY SERVICES OPERATIONS
Energy Services, formerly a wholly-owned subsidiary of Energy Holdings,
it provides unregulated fuel capacity management and other wholesale marketing
services.
Energy Service's financial results are summarized as follows:
Three Months Ended
December 31,
2000 1999
-------- --------
(Thousands)
Revenues $338,344 $ 62,672
======== ========
Operating income $ 4,071 $ 895
======== ========
Income before cumulative effect of a change
in accounting $ 2,625 $ 652
======== ========
Net income $ 1,937 $ 652
======== ========
Energy Services' revenues, operating income and net income increased for
the three months ended December 31, 2000, compared with the same period last
year, due primarily to a three-fold increase in wholesale natural gas prices and
a more than two-fold increase in volume which generated higher margins.
Energy Services' gas under management totaled 55.7 Bcf and 25.5 Bcf for the
three months ended December 31, 2000 and 1999, respectively.
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RETAIL HOLDINGS OPERATIONS
Retail Holdings consist of Home Services, which provide appliance service
repair and contract services, Natural Energy, which participates in unregulated
retail marketing of natural gas, and Power Services, which is involved in the
distribution of alternative sources of energy.
Retail Holdings consolidated financial results are summarized as follows:
Three Months Ended
December 31,
2000 1999
------- -------
(Thousands)
Revenues $ 5,424 $ 7,191
======= =======
Operating loss $ (287) $ (68)
======= =======
Net (loss) income $ (133) $ 153
======= =======
Retail Holdings' revenues have decreased due primarily to the sale of
Natural Energy's commercial accounts in November 1999 and a reduction in the
number of retail and interruptible customers, which was partially offset by
increased revenue at Home Services. Operating loss and net loss have increased
due primarily to lower margins experienced by Natural Energy's' retail sales.
Home Services provides approximately 130,000 customers with home-appliance
repair and contract warranty services. Natural Energy currently serves
approximately 8,000 residential customers.
Retail Holdings' retail gas totaled .6 Bcf and 1.2 Bcf for the three months
ended December 31, 2000 and 1999, respectively.
NJR CAPITAL AND OTHER OPERATIONS
NJR Capital and Other operations include Capital, formerly NJR Development
Corporation, which consists of CR&R, which develops commercial real estate, NJR
Energy, an investor in energy-related ventures, which consist primarily of its
equity investments in the Capstone Turbine Corporation (Capstone) and the
Iroquois Gas Transmission System, L.P. (Iroquois), NJR Investment Company, which
makes certain energy-related equity investments, Service Corp., which provides
shared administrative services for all of the subsidiaries, and the parent
company's operations.
NJR Capital and Others consolidated financial results are summarized as
follows:
Three Months Ended
December 31,
2000 1999
------- -------
(Thousands)
Revenues $ 905 $ 619
======= =======
Operating income $ 1,288 $ 1,062
======= =======
Income before cumulative effect of a change
in accounting $ (162) $ 25
======= =======
Net (loss) income $ (546) $ 25
======= =======
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20
In December 2000, CR&R sold 11 acres of vacant land for $1.2 million, which
approximated book value.
NJR Energy's results include interest expense related to debt remaining
after the discontinuance of the oil and natural gas production business in 1995.
The Company plans to further reduce such debt from cash flow generated by its
equity investments.
In 1996, CR&R entered into a sale-leaseback transaction which generated a
pre-tax gain of $17.8 million, which is included in Deferred revenue and is
being amortized to Other income over 25 years, the term of the lease. The
primary tenant of the facility, NJNG, is leasing the building under a long-term
master lease agreement and continues to occupy a majority of the space in the
building.
B. LIQUIDITY AND CAPITAL RESOURCES'
In order to meet the working capital and external debt financing
requirements of its unregulated subsidiaries, as well as its own working capital
needs, the Company maintains committed credit facilities with a number of banks
totaling $135 million. At December 31, 2000, $115.9 million was outstanding
under these agreements. NJNG satisfies its debt needs by issuing short-term and
long-term debt based upon its own financial profile. The Company meets the
common equity requirements of each subsidiary, if any, through new issuances of
the Company's common stock, including the proceeds from its Automatic Dividend
Reinvestment Plan (DRP). The DRP also allows for the purchase of shares in the
open market to satisfy the plan's needs. The Company can switch funding options
every 90 days.
The use of futures and options in NJNG and Energy Services hedging
activities necessitates the use of margin accounts. Fluctuations in the prices
of the underlying natural gas commodity may have an impact on cash requirements
for margin calls.
NJNG
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
energy tax payments, through the issuance of commercial paper and short-term
bank loans. To support the issuance of commercial paper, NJNG maintains
committed credit facilities totaling $125 million.
Remaining fiscal 2001 construction expenditures are estimated at $38.5
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 has incurred $2.5 million in remediating its former
manufactured gas plants during the three months ended December 31, 2000. NJNG
estimates additional remediation expenditures of approximately $19.2 million,
exclusive of any insurance recoveries, for the remaining nine months of fiscal
2001.
NJNG expects to finance these expenditures through internal generation, the
issuance of short-term debt and the draw down of approximately $4 million from
its EDA construction fund. The timing and mix of any external financings will be
geared toward maintaining a common equity ratio, which is consistent with
maintaining its current short- and long-term credit ratings.
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ENERGY SERVICES
Energy Services does not currently expect any material capital expenditures
or external financing requirements in fiscal 2001.
RETAIL HOLDINGS
Retail Holdings does not currently expect any material capital expenditures
or external financing requirements in fiscal 2001.
NJR CAPITAL AND OTHER
CR&R's remaining capital expenditures in connection with the construction
of a 35,000 square-foot build-to-suit office building are projected to be $1.5
million in 2001. CR&R has contracted to sell the building, subject to obtaining
a certificate of occupancy, and adjacent undeveloped acreage. CR&R expects that
the proceeds of the sale will at least recover the construction costs and land
investment.
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ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
FINANCIAL RISK MANAGEMENT
Commodity Market Risks
The regulated and unregulated natural gas businesses of the Company and its
subsidiaries are subject to market risk due to fluctuations in the price of
natural gas. To hedge against such fluctuations, the Company and its
subsidiaries have entered into futures contracts, options agreements and
over-the-counter swap agreements. The Company's natural gas businesses are
conducted through three of its operating subsidiaries. First, NJNG is a
regulated utility whose recovery of gas costs is protected by the LGA, but to
further hedge against price fluctuations, utilizes futures and options through
its financial risk management program. Second, Energy Services has hedged
its commitments to purchase natural gas for sale to retail marketers, purchases
and sales of storage gas and fixed price sales to wholesale customers. Finally,
NJR Energy has entered into swap agreements to hedge a long-term, fixed-price
contract to sell approximately 22.6 Bcf of natural gas to a gas marketing
company at prices ranging from $2.87 to $4.41 per Mmbtu.
Natural gas is a nationally traded commodity, and its prices are effectively
determined by the New York Mercantile Exchange (NYMEX) and over-the-counter
markets. The prices on the NYMEX and over- the-counter markets generally reflect
the notional balance of natural gas supply and demand, but are also influenced
significantly from time to time by other events.
Summary of commodity derivatives as of December 31, 2000:
Amounts included in
Volume Price per Derivatives
in Bcf Mmbtu in Thousands
------ ----- ------------
NJNG
Futures 5.3 $2.84-$8.80 $24,222
Swaps (41.2) $(6,164)
Options .1 $2.258-$25.00 $(6,402)
Energy Services
Futures 11.9 $2.45-$9.82 $33,876
Swaps 10.5 $18,365
NJR Energy
Swaps 22.6 $2.87-$4.41 $2,643
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23
NJR Energy has hedged both its price and physical delivery risks associated
with its long-term, fixed-price sales contract with a gas marketing company (the
"Gas Sale Contract"). To hedge its price risk, NJR Energy entered into two swap
agreements. Under the terms of these two swap agreements, NJR Energy will pay to
the counterparties the identical fixed price it receives from the gas marketing
company in exchange for the payment by the counterparties of an index price plus
a spread per Mmbtu for the total volumes under the Gas Sale Contract. The swap
agreements were effective as of November 1995. In order to hedge its physical
delivery risk, NJR Energy entered into a purchase contract with a second gas
marketing company for the identical volumes it is obligated to sell under the
Gas Sale Contract. NJR Energy has agreed to pay this second gas marketing
company the identical floating price it receives under the swap agreements
mentioned above.
To manage these instruments, the Company has well-defined risk management
policies and procedures, which include volumetric limits and monetary
guidelines.
With respect to the futures contracts, options and swap agreements described
above, the Company has performed a sensitivity analysis to estimate its exposure
to market risk arising from natural gas price fluctuations using the net futures
positions and the net swaps positions. Futures contracts, options and swap
agreements are substantially all settled at the NYMEX settlement date and the
related natural gas quantity is purchased or sold in the physical market and,
therefore, their notional values, which represent the absolute sum of all
outstanding natural gas futures contracts or swap agreements, as the case may
be, are not accurate measurements of risk to the Company from those futures
contracts or swap agreements.
Summary of effects of theoretical 10 percent change in market value:
December 31,
2000 1999
---- ----
(Thousands)
Futures $16,008 $800
Swaps $ 2,159 $100
Options $ 2,987 $106
Any such additional changes in value under the futures contracts and the
swap agreements would be substantially offset by a corresponding change on the
related underlying contracts that are being hedged.
Interest Rate Risk
NJNG has total variable rate, long-term debt of $147 million, of which $56
million has been hedged by the purchase of a 6.5 percent interest rate cap
through 2003. According to the Company's sensitivity analysis, NJNG's annual
interest rate exposure on the $56 million, based on the difference between
current average rates and the 6.5 percent interest rate cap, is limited to $1
million, net of tax. If interest rates were to change by 100 basis points on the
remaining $91 million of variable rate debt, NJNG's interest expense, net of
tax, would change by $537,000. The Company also has variable rate debt of $115.9
million, of which $20 million is being hedged through an interest rate swap
agreement which fixes
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24
interest at 6.97 percent through September 30, 2001. According to the Company's
sensitivity analysis, if interest rates were to change by 100 basis points on
the remaining $95.9 million, annual interest expense, net of tax, would change
by $566,000. Subsequent to the expiration of the interest rate swap agreement in
September 2001, a 100 basis point change would result in an additional $118,000
annual change in interest expense, net of tax.
INFORMATION CONCERNING FORWARD LOOKING STATEMENTS
Certain of the statements contained in this report (other than the financial
statements and other statements of historical fact), including, without
limitation, expected disposition of legal and regulatory proceedings, effect of
new accounting standards, expected capital expenditures and expected sale of the
office building are forward-looking statements. Forward-looking statements can
also be identified by the use of forward-looking terminology such as "may,"
"intend," "expect," or "continue" or comparable terminology and are made based
upon management's expectations and beliefs concerning future developments and
their potential effect upon the Company. There can be no assurance that future
developments will be in accordance with management's expectations or that the
effect of future developments on the Company will be those anticipated by
management.
The Company wishes to caution readers that the assumptions which form the
basis for forward-looking statements with respect to or that may impact earnings
for fiscal 2001 and thereafter include many factors that are beyond the
Company's ability to control or estimate precisely, such as estimates of future
market conditions, the behavior of other market participants and changes in
interest rates. Among the factors that could cause actual results to differ
materially from estimates reflected in such forward-looking statements are
weather conditions, economic conditions in NJNG's service territory,
fluctuations in energy-related commodity prices, conversion activity and other
marketing efforts, the conservation efforts of NJNG's customers, the pace of
deregulation of retail gas markets, competition for the acquisition of gas, the
regulatory and pricing policies of federal and state regulatory agencies,
changes due to legislation at the federal and state levels, the availability of
Canada's reserves for export to the United States and other regulatory changes.
While the Company periodically reassesses material trends and uncertainties
affecting the Company's results of operations and financial condition in
connection with its preparation of management's discussion and analysis of
results of operations and financial condition contained in its quarterly and
annual reports, the Company does not, by including this statement, assume any
obligation to review or revise any particular forward-looking statement
referenced herein in light of future events.
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
Information required by this Item is incorporated herein by reference
to Part I, Item 1, Note 5 - Legal and Regulatory Proceedings.
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) An annual meeting of stockholders was held on January 24, 2001.
(c) The stockholders voted upon the following matters at the January
24, 2001 annual stockholders meeting:
(i) The election of four (4) directors, each to serve for three-year
terms expiring in 2004, and until their respective successors are duly elected
and are qualified. The results of the voting were as follows:
Director For Withheld
-------- --- --------
Lawrence R. Codey 14,007,628 488,121
Laurence M. Downes 13,967,211 528,538
Joe B. Foster 14,020,230 475,519
William H. Turner 14,004,650 491,099
(ii) The amendment to the Restricted Stock and Stock Option Program for
Outside Directors. The results of the voting were as follows:
For Against Abstain
---- ------- -------
12,544,529 1,347,509 603,711
(iii) The approval of the action to retain Deloitte & Touche LLP as
auditors for the fiscal year ending September 30, 2001. The votes were as
follows:
For Against Abstain
--- ------- -------
14,024,734 73,614 397,401
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
On December 12, 2000, a report on Form 8-K was filed by the Company
furnishing under Item 9 information disclosed pursuant to Regulation FD.
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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: February 14, 2001 /s/Glenn C. Lockwood
---------------------------
Glenn C. Lockwood
Senior Vice President
and Chief Financial Officer
25