Business Context and Reporting Period
Company: New Jersey Resources Corporation (NJR)
Filing Type: Form 10-K (Annual Report)
Period Ended: September 30, 2002
Business Overview: NJR is an energy services holding company operating primarily in New Jersey and the Northeast. Its core subsidiary, New Jersey Natural Gas Company (NJNG), is a regulated utility serving over 430,000 customers. Other segments include unregulated Energy Services (wholesale marketing), Retail and Other (home services, real estate, and energy investments), and shared administrative services.
Key Financial Metrics
Revenue: Total operating revenues for NJNG were $774,541,000 for the fiscal year ended September 30, 2002. This includes $480,534,000 from system sales and $294,007,000 from off-system sales. The filing text does not provide consolidated revenue, profit, or cash flow figures for the entire holding company, as the detailed financial statements are incorporated by reference from the 2002 Annual Report.
Debt and Liquidity: NJNG's bonded debt totaled approximately $218 million as of September 30, 2002. Under its indenture, NJNG had the capacity to issue approximately $250 million in additional first mortgage bonds. The filing does not provide specific consolidated liquidity ratios or total debt figures for the parent company.
Market Data: As of December 11, 2002, the aggregate market value of non-affiliate common stock was $885,208,962 (based on a closing price of $33.00). There were 26,991,489 shares of common stock outstanding.
Material Changes and Operational Highlights
- Customer Growth: NJNG added 11,282 new customers and converted 979 existing customers in 2002, representing an annual growth rate of approximately 3 percent.
- Throughput: Total system throughput was 62.1 Bcf, with off-system sales accounting for 96.5 Bcf (61% of total throughput).
- Real Estate Transaction: In June 2002, the Commercial Realty & Resources Corp. (CR&R) subsidiary sold a 20,000-square-foot building for $4.3 million, generating a pre-tax gain of approximately $885,000.
- Regulatory Adjustments: NJNG implemented various rate adjustments, including a $15.7 million decrease in the Basic Gas Supply Service (BGSS) effective February 2002 and the elimination of the Prior Gas Cost Adjustment (PGCA) surcharge in January 2002.
Outlook, Risks, and Contingencies
Guidance and Outlook: Management projects the addition of approximately 24,500 new customers over the next two years (2003-2004), with 40% of this growth expected to come from fuel conversions. NJNG expects to meet current and projected gas requirements, though this depends on supplier availability and regulatory policies.
Legal Proceedings and Contingencies:
- Environmental Remediation: NJNG is involved in remediation of 11 former Manufactured Gas Plant (MGP) sites. Costs incurred after June 30, 1998, are subject to annual review and recovery over rolling seven-year periods. A trial is set for April 7, 2003, regarding a claim against Kaiser-Nelson Steel and Salvage Company for damages related to MGP site demolition.
- Insurance Settlement: NJNG reached a favorable settlement with a major insurance carrier in September 2001 regarding coverage for MGP sites, involving significant cash payments to be tendered in four installments.
Risks: Key risks include weather sensitivity (mitigated partially by a Weather Normalization Clause), volatility in wholesale natural gas prices, regulatory changes regarding the Universal Service Fund (USF) and Basic Gas Supply Service (BGSS), and the pace of energy market deregulation.
Investor Verification Checklist
- Verify consolidated revenue, net income, and cash flow figures in the 2002 Annual Report to Shareowners, as they are not explicitly detailed in this 10-K text.
- Review the status of the Universal Service Fund (USF) permanent program decision expected in 2003.
- Monitor the outcome of the April 7, 2003, trial against Kaiser-Nelson regarding MGP site liabilities.
- Assess the impact of the $29.9 million Gas Cost Underrecovery Adjustment (GCUA) on future rate filings.
- Confirm the execution of the projected 24,500 new customer additions and the associated capital expenditure program for 2003-2004.