New Jersey Resources Corporation — Form 10-Q Summary
Business context and reporting period
Fiscal 2024 first quarter, the three months ended December 31, 2023, compared with the three months ended December 31, 2022. NJR operates a regulated New Jersey natural gas utility, clean energy projects, wholesale energy services, gas storage and transportation assets, and home services. Results are seasonal; management cautions that interim results are not necessarily indicative of full-year performance.
Key financial metrics
| Metric | Quarter ended Dec. 31, 2023 | Prior-year quarter |
|---|---|---|
| Operating revenue | $467.2 million | $723.6 million |
| Operating income | $135.8 million | $172.8 million |
| Net income | $89.4 million | $115.9 million |
| Diluted EPS | $0.91 | $1.19 |
| Net financial earnings (non-GAAP) | $72.4 million | $110.3 million |
| Operating cash flow | $46.4 million | $(88.9) million |
| Investing cash flow | $(113.8) million | $(145.6) million |
| Financing cash flow | $69.3 million | $235.9 million |
Operating margin percentages are not presented as a single comparable company measure in the filing. NJNG’s non-GAAP Utility Gross Margin was $155.8 million, up from $154.7 million. ES non-GAAP Financial Margin was $19.0 million, down from $72.6 million.
At December 31, 2023, total assets were $6.75 billion. Debt comprised approximately $2.74 billion of long-term debt, $219.6 million of current maturities and $268.7 million of short-term debt. Cash and cash equivalents were $2.7 million on the balance sheet; cash, cash equivalents and restricted cash totaled $3.4 million. Available borrowing capacity was approximately $476.0 million under NJR’s facility and $145.8 million under NJNG’s facility. The company reported compliance with debt covenants.
Material changes versus the prior-year quarter
- Revenue fell about 35% and net income fell about 23%. The largest earnings driver was ES: its net income declined $40.6 million, primarily because the prior-year quarter benefited from natural-gas price volatility during Winter Storm Elliott. Gas prices were substantially lower in the current quarter.
- CEV net income improved by $14.1 million to $10.5 million, mainly from higher SREC sales.
- NJNG net income declined $3.2 million to $51.4 million. Higher O&M and depreciation partly offset higher Utility Gross Margin and lower income tax expense. Utility Gross Margin increased $1.1 million; warmer-than-normal weather was 8.2% versus the 20-year average.
- Operating cash flow improved by $135.3 million, primarily due to lower working-capital requirements associated with lower natural-gas prices. Investing outflows decreased mainly because of lower solar and S&T expenditures.
- Net financial earnings, a non-GAAP measure that adjusts for derivative and inventory-hedging timing effects, decreased $37.8 million. It should be considered alongside, not instead of, GAAP net income.
Outlook, commentary, risks and unusual items
- NJR filed a NJNG base-rate case on January 31, 2024, requesting a $222.6 million natural-gas revenue increase and a 7.57% overall rate of return on rate base. The request is subject to BPU review and approval.
- Fiscal 2024 estimated capital expenditures include $387–$440 million for NJNG and $140–$204 million for solar projects. Management says capital spending estimates may change with regulatory, construction, permitting, interconnection and financing conditions. The filing does not provide a clear consolidated fiscal 2024 earnings guidance figure.
- NJNG expects annual new-customer growth of approximately 1.9%. Its SAVEGREEN extension and proposed 2025–2027 program were pending BPU approval; the proposed program totals $482.4 million.
- NJNG recorded a $165.3 million liability and corresponding regulatory asset for former manufactured-gas-plant remediation. Estimated total future costs range from $137.3 million to $201.5 million; recovery is pursued through a BPU-approved mechanism, but actual costs and recovery remain uncertain.
- ES earnings remain exposed to natural-gas price volatility, weather, market spreads, derivative accounting timing, counterparty credit and wholesale-market liquidity. The filing also identifies clean-energy project execution, incentive and REC markets, regulatory approvals, inflation, interest rates, environmental obligations and access to capital as risks.
- In January 2024, NJR announced postretirement medical-plan changes expected to reduce the projected benefit obligation by approximately $82 million and reduce remaining fiscal 2024 postretirement benefit costs by $11–$13 million.
Important facts for investors to verify
- Progress and outcome of NJNG’s $222.6 million rate request and the pending SAVEGREEN filings.
- Whether ES earnings recover from the unusually volatile prior-year comparison, and how GAAP results compare with non-GAAP Financial Margin and NFE.
- Actual capital spending, funding needs and borrowing availability as the company executes its utility and solar investment plans.
- Changes in MGP remediation estimates, regulatory recovery and any resulting earnings or cash-flow exposure.
- CEV’s SREC revenue, project execution and access to tax incentives, including the effects of sale-leaseback financing.