Item 1. Business
NUI Corporation (NUI or the Company) was incorporated in New Jersey in 1969. NUI is a multi-state energy sales, services and distribution
company. Its utility operations distribute natural gas and related services in six states along the eastern seaboard and comprise Elizabethtown Gas (New Jersey), City Gas Company of Florida, North Carolina Gas, Elkton Gas (Maryland), Valley Cities Gas (Pennsylvania) and Waverly Gas (New York). The Company's subsidiaries include NUI Energy, Inc. (NUI Energy), an energy retailer; NUI Energy Brokers, Inc. (NUI Energy Brokers), an energy wholesaler; NUI Energy Solutions, Inc., an energy project development and consulting entity; NUI Environmental Group, Inc., an environmental project development subsidiary; Utility Business Services, Inc. (UBS), a customer and geographic information systems and services subsidiary; and International Telephone Group, Inc. (ITG), a telecommunications services subsidiary (see Note 2 of the Notes to the Consolidated Financial Statements). The Company also provides sales and marketing outsourcing through its 49% equity interest in TIC Enterprises, LLC (TIC).
The principal executive offices of the Company are located at 550 Route 202-206, Box 760, Bedminster, NJ 07921-0760; telephone: (908) 781-0500.
The Company's operations are organized and managed under three primary segments: Distribution Services, Energy Sales and Services and Customer Services. The Company also has corporate operations that do not currently generate operating revenues. Reference is made to Note 10, "Business Segment Information" of the "Notes to the Consolidated Financial Statements" for a discussion regarding financial information about the business segments of the Company. See also Item 6 - "Selected Financial Data-Summary Consolidated Operating Data" for summary information by customer class with respect to operating revenues, gas volumes sold or transported and average number of utility customers served. A discussion of the business of each segment follows.
Distribution Services Segment
Products and Services
The Distribution Services segment distributes natural gas in six states through the Company's regulated utility divisions. Such distribution services are regulated as to price, safety and return by the regulatory commissions of the states in which in the Company operates (see Regulation). The Distribution Services segment serves approximately 372,000 customers, of which 67% are in New Jersey and 33% are in other states. Most of the Company's utility customers are residential and commercial customers who purchase gas primarily for space heating. Distribution Services' operating revenues for fiscal 1999 amounted to approximately $378.1 million, of which 78% was generated by utility operations in New Jersey and 22% was generated by utility operations in other states. Gas volumes sold or transported in fiscal 1999 amounted to 83.7 million Mcf, of which approximately 79% was sold or transported in New Jersey and 21% was sold or transported in other states. An Mcf is a basic unit of measurement for natural gas comprising 1,000 cubic feet of gas. A description of each of the Company's utility divisions follows.
Elizabethtown Gas. The Company, through Elizabethtown Gas (Elizabethtown), provides gas service to approximately 248,000 customers in franchised territories within seven counties in central and northwestern New Jersey. Elizabethtown's 1,300 square-mile service territory has a total population of approximately 950,000. Most of the
state's customers are located in densely-populated central New Jersey, where increases in the number of customers are primarily from conversions to gas heating from alternative forms of heating.
Elizabethtown's regulated gas volumes sold or transported and customers served for the past three fiscal years were as follows:
Regulated Gas Volumes Sold or Transported (in thousands of Mcf)
1999 1998 1997 Firm Sales: Residential 18,818 18,299 19,485 Commercial 6,802 7,587 9,333 Industrial 732 3,903 4,085 Interruptible Sales 15,477 11,927 12,886 Transportation Sales 24,586 23,367 22,510 ------ ------ ------ Total 66,415 65,083 68,299 ====== ====== ====== Utility Customers Served (twelve-month average)
1999 1998 1997 Firm Sales: Residential - Heating 172,406 168,475 165,305 Residential - Non-heating 55,946 56,358 57,380 Commercial 15,821 15,907 16,922 Industrial 208 229 262 Interruptible Sales 25 72 72 Transportation Services 3,155 2,773 1,373 ------- ------- ------- Total 247,561 243,814 241,314 ======= ======= =======
Gas volumes sold to the Company's firm customers are sensitive to the weather in New Jersey. In fiscal 1999, the weather in New Jersey was 16% warmer than normal and 1% colder than the prior year. Additionally, weather in fiscal 1998 was 17% warmer than normal and 9% warmer than fiscal 1997. While the effect of the warm weather has caused sales of gas to decline, Elizabethtown's tariff contains a weather normalization clause that is designed to help stabilize the Company's results by increasing amounts charged to customers when weather has been warmer than normal and decreasing amounts charged when weather has been colder than normal. As a result of weather normalization clauses, operating margins were approximately $5.4 million and $5.6 million higher in fiscal 1999 and 1998, respectively, than they would have been without such clauses. For a further discussion on variations in revenues, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations".
The growth in the number of residential heating customers principally reflects the Company's marketing emphasis to convert residential non- heating customers to full gas heating service. Approximately 70% of the residential heating customers added in New Jersey since 1991 represented homes that were converted to gas heating from other forms of space heating and the remainder consisted of new homes.
The Company's commercial and industrial customers currently have the ability to utilize transportation service and purchase their gas from
other suppliers. The rate charged to transportation customers remains regulated as to price and returns. Tariffs for transportation service have been designed to provide the same margins as bundled sales tariffs. Therefore, except for the regulatory risk of full recovery of gas costs, the Company is financially indifferent as to whether it transports gas or sells gas and transportation together.
On April 30, 1999, the Company made a filing with the New Jersey Board of Public Utilities (NJBPU) which will enable all customers in New Jersey (including residential customers) to choose an alternative supplier of natural gas. This filing was a result of the "Electric Discount and Energy Competition Act" legislation, which was signed into law in New Jersey on February 9, 1999. The legislation has several provisions that affect gas utilities. It provides all gas customers with the ability to choose an alternate natural gas supplier by December 31, 1999. At the same time, the utility will continue to provide basic gas service through December 2002 when the NJBPU will decide if the gas supply function should be made competitive. The NJBPU will also conduct proceedings to determine whether customers should be afforded the option of contracting with an alternative provider of billing, meter reading and other customer account services that may be deemed competitive by December 31, 2000. A NJBPU decision on the Company's April 30th filing is expected in early fiscal 2000.
Elizabethtown's "interruptible" customers have alternative energy sources and use gas on an "as available" basis. Variations in the volume of gas sold or transported to these customers do not have a significant effect on the Company's earnings because in accordance with New Jersey regulatory requirements, 80% of the margins that otherwise would be realized on gas sold or transported to interruptible customers are used to reduce gas costs charged to firm sales customers.
City Gas Company of Florida. City Gas Company of Florida (City Gas) is the second largest natural gas utility in Florida, supplying gas to over 99,000 customers in Dade and Broward Counties in south Florida, and in Brevard, Indian River and St. Lucie Counties in central Florida. City Gas' service areas cover approximately 3,000 square miles and have a population of approximately 1.7 million.
City Gas' regulated gas volumes sold or transported and customers served for the past three fiscal years were as follows:
Regulated Gas Volumes Sold or Transported (in thousands of Mcf)
1999 1998 1997 Firm Sales: Residential 1,738 1,880 1,850 Commercial 3,353 3,572 3,944 Interruptible Sales 111 461 1,162 Transportation Sales 4,174 3,388 2,277 ----- ----- ----- Total 9,376 9,301 9,233 ===== ===== =====
Utility Customers Served (twelve-month average)
1999 1998 1997 Firm Sales:
Residential 94,784 93,227 92,724 Commercial 4,699 4,748 4,706 Interruptible Sales 4 10 16 Transportation Services 315 125 51 ------ ------ ------ Total 99,802 98,110 97,497 ====== ====== ======
City Gas' residential customers purchase gas primarily for water heating, clothes drying and cooking. Some customers, principally in central Florida, also purchase gas to provide space heating during the relatively mild winter season. Year-to-year growth in the average number of residential customers primarily reflects new construction. On March 31, 1998, City Gas purchased a city-owned and operated propane distribution system from Port St. Lucie. The system was converted to natural gas during the year and added 1,200 residential homes and one major commercial property.
City Gas' commercial business consists primarily of schools, businesses and public facilities, of which the number of customers tends to increase concurrently with the continuing growth in population within its service areas. As with its residential markets, the Company is seeking to maximize the utilization of its existing mains by emphasizing marketing efforts toward potential commercial business along these lines.
Certain commercial and industrial customers have converted their natural gas service from a sales basis to a transportation basis. City Gas' transportation tariff provides margins on transportation services that are substantially the same as margins earned on gas sales. In November 1997, the Florida Public Service Commission (FPSC) approved City Gas' proposal to offer unbundled gas service to certain small commercial customers, in a manner similar to that currently in place in the Company's New Jersey service territory.
North Carolina Gas. The Company, through North Carolina Gas, provides gas service to approximately 13,800 customers in Rockingham and Stokes Counties in North Carolina, which territories comprise approximately 560 square miles. During fiscal 1999, the regulated operations of North Carolina Gas sold or transported approximately 3.8 million Mcf of gas as follows: 20% sold to residential customers, 13% sold to commercial customers, 28% sold to industrial customers and 39% transported to commercial and industrial customers.
Elkton Gas Service ("Elkton"). The Company, through Elkton, provides gas service to approximately 4,000 customers in franchised territories comprising approximately 14 square miles within Cecil County, Maryland. During fiscal 1999, Elkton sold approximately 849,000 Mcf of gas as follows: 22% sold to residential customers, 18% sold to commercial customers and 60% sold to industrial customers.
Valley Cities Gas Service ("VCGS") and Waverly Gas Service ("WGS"). VCGS and WGS provide gas service to approximately 6,300 customers in franchised territories comprising 104 square miles within Bradford County, Pennsylvania and the Village of Waverly, New York and surrounding areas, respectively. During fiscal 1999, the regulated operations of VCGS and WGS sold or transported approximately 3.3 million Mcf of gas as follows: 17% sold to residential customers, 8% sold to commercial customers, 3% sold to industrial customers and 72% transported to commercial and industrial customers.
Gas Supply and Operations
In recent years, the gas industry has been undergoing structural changes in response to policies of the Federal Energy Regulatory Commission (FERC) and local regulatory commissions designed to increase competition. Traditionally, interstate pipelines were wholesalers of natural gas to local distribution companies and generally did not provide separate transportation or other services for specific customers. In 1992, the FERC issued Order No. 636 that, among other things, mandated the separation or "unbundling" of interstate pipeline sales, transportation and storage services and established guidelines for capacity management effective in 1993. In fiscal 1995, the NJBPU unbundled the services provided and the rates charged to New Jersey commercial and small industrial customers as well. The transition to more competitive rates and services has the effect of increasing the opportunity for local gas distribution companies, and industrial and commercial customers to purchase natural gas from alternative sources, while increasing the potential business and regulatory risk borne by a local gas distribution company with respect to the acquisition and management of natural gas services.
The Company endeavors to utilize its pipeline capacity efficiently by matching capacity to its load profile to the extent feasible. To this end, the Company has had a broad unbundled service tariff for certain of its customers since 1987. The Company continues to avail itself of opportunities to improve the utilization of its pipeline capacity by pursuing broad based customer growth, including off-peak markets and utilizing capacity release and off-system sales opportunities afforded by Order No. 636 when operationally feasible.
The Company's gas supply during fiscal 1999 came from the following sources: approximately 18% from purchases under contracts with primary pipeline suppliers and additional purchases under their filed tariffs; approximately 82% from purchases from various producers and gas marketers, and purchases under long-term contracts with independent producers and less than 1% from propane and liquefied natural gas ("LNG"). The Company manages its gas supply portfolio to assure a diverse, reliable and secure supply of natural gas at the lowest reasonable cost. In fiscal 1999, the Company's largest single supplier accounted for approximately 10% of the Company's total gas purchases.
The Company has long-term gas delivery contracts with seven interstate pipeline companies. Under these contracts, the Company has a right to deliver, on a firm year-round basis, of up to 93.7 million Mcf of natural gas annually with a maximum of approximately 277,000 Mcf per day. Both the price and conditions of service under these contracts are regulated by the FERC.
The Company has long-term gas purchase contracts for the supply of natural gas for its system with six suppliers, including one interstate pipeline company and five gas marketers. Under these contracts, the Company has a right to purchase, on a firm year-round basis, up to 18.8 million Mcf of natural gas annually with a maximum of approximately 70,000 Mcf per day. In order to achieve greater supply flexibility, and to more closely match its gas supply portfolio to changes in the market it serves, the Company recently allowed a long-term gas supply contract to expire at the conclusion of its primary terms. As a result, the Company has reduced its fixed gas cost obligations. The Company has replaced the supply with both spot market gas and shorter-term, seasonal firm supply, thus reducing the average term of its long-term obligations. In addition, the Company has access to spot market gas through the interstate pipeline system to
supplement or replace, on a short-term basis, portions of its long- term gas purchase contracts when such actions can reduce overall gas costs or are necessary to supply interruptible customers. In fiscal 1995, the Company, along with seven other Northeastern and Mid- Atlantic gas distribution companies, formed the East Coast Natural Gas Cooperative LLC (the "Co-op"). The Co-op was formed with the goal of jointly managing certain portions of the members' gas supply portfolios, to increase reliability and reduce costs of service to customers, and to improve the competitive position of the member companies. Participation in and reliance upon certain contractual arrangements among Co-op members has allowed the Company to reduce costs associated with winter services.
In order to have available sufficient quantities of gas during the heating season, the Company stores gas during non-peak periods and purchases supplemental gas, including propane, LNG and gas available under contracts with certain large cogeneration customers, as it deems necessary. The storage contracts provide the Company with an aggregate of 14 million Mcf of natural gas storage capacity and provide the Company with the right to receive a maximum daily quantity of 162,462 Mcf. The contracts with cogeneration customers provide 26,200 Mcf of daily gas supply to meet peak loads by allowing the Company to take back capacity and supply that otherwise is dedicated to serve those customers.
The Company has an LNG storage and vaporization facility in New Jersey for handling peak gas demand. It has a daily delivery capacity of 29,800 Mcf and storage capacity of 131,000 Mcf.
The Company's maximum daily sendout in fiscal 1999 was approximately 409,300 Mcf in New Jersey and 97,242 Mcf in the other service territories combined. The Company maintains sufficient gas supply and delivery capacity for a maximum daily sendout capacity for New Jersey of approximately 408,140 Mcf and approximately 128,000 Mcf for the other service territories combined.
Certain of the Company's long-term contracts for the supply, storage and delivery of natural gas include fixed charges that amount to approximately $68.6 million annually. The Company currently recovers, and expects to continue to recover, such fixed charges through its purchased gas adjustment clauses. The Company also is committed to purchase, at market-related prices, minimum quantities of gas that, in the aggregate, are approximately 2.7 billion cubic feet per year or to pay certain costs in the event the minimum quantities are not taken. The Company expects that minimum demand on its systems for the duration of these contracts will continue to exceed these minimum purchase obligations.
The Company distributes gas through approximately 6,200 miles of steel, cast iron and plastic mains. The Company has physical interconnections with five interstate pipelines in New Jersey and one interstate pipeline in Florida. In addition, the Company has physical interconnections in North Carolina and Pennsylvania with interstate pipelines, which also connect to New Jersey. Common interstate pipelines along the Company's operating system provide the Company with greater flexibility in managing pipeline capacity and supply, and thereby optimizing system utilization.
Regulation
The Company is subject to regulation with respect to, among other matters, rates, service, accounting and the issuance of securities. The Company is subject to regulation as an operating utility by the public utility commissions of the states in which it operates. The Company is also subject to regulation by the United States Department of Transportation under the Natural Gas Pipeline Safety Act of 1968, with respect to the design, installation, testing, construction and maintenance of pipeline facilities. Natural gas purchases, transportation service and storage service provided to the Company by interstate pipeline companies are subject to regulation by the FERC (see "Gas Supply and Operations"). In addition, the Company is subject to federal and state legislation with respect to water, air quality, solid waste disposal and employee health and safety matters, and to environmental regulations issued by the United States Environmental Protection Agency, the New Jersey Department of Environmental Protection and other federal and state agencies.
The Company's current rates and tariffs for New Jersey reflect a rate case that was settled in October 1991, under which the Company obtained a weather normalization clause - see "Elizabethtown Gas". In December 1994, the NJBPU authorized new tariffs which are designed to provide for unbundling of natural gas transportation and sales services for Elizabethtown's commercial and industrial customers. The new tariffs became effective on January 1, 1995 and are designed to be neutral as to the operating margins of the Company. On April 30, 1999, the Company made a filing with the NJBPU which will enable all customers in New Jersey to choose an alternative supplier of natural gas. This filing was a result of the "Electric Discount and Energy Competition Act" legislation, which was signed into law in New Jersey on February 9, 1999 (see Item 7 - "Management's Discussion and Analysis - Regulatory Matters" for a further discussion of this filing).
The current rates and tariffs for the Florida operations were authorized on October 29, 1996. The FPSC voted to authorize the Company to increase its base rates in Florida by $3.75 million annually. The rate increase reflected a rate base amounting to $91.9 million, which includes the addition of investments in system improvements and expansion projects. Under the approval, the allowed return on equity is 11.3% with an overall after-tax rate of return of 7.9%. The increase became effective on November 28, 1996. The FPSC order also gives the Company the flexibility to negotiate rates with certain business customers that have access to other energy sources.
The current rates and tariffs for the North Carolina, Maryland, Pennsylvania and New York operations were authorized between October 1988 and September 1995. These operations serve approximately 20,000 customers in aggregate. The tariff for NCGS reflects a weather normalization clause for its temperature sensitive residential and commercial customers.
The Company's tariffs for each state in which it operates contain adjustment clauses that enable the Company to recover purchased gas costs. The adjustment clauses provide for periodic reconciliations of actual recoverable gas costs with the estimated amounts that have been billed. Under or over recoveries at the reconciliation date are recovered from or refunded to customers in subsequent periods.
Franchises
The Company holds non-exclusive municipal franchises and other consents which enable it to provide natural gas in the territories it serves. The Company intends to seek to renew these franchises and consents as they expire.
Seasonal Aspects
Sales of gas to some classes of customers are affected by variations in demand due to changes in weather conditions, including normal seasonal variations throughout the year. The demand for gas for heating purposes is closely related to the severity of the winter heating season. Seasonal variations affect short-term cash requirements.
Competition
The Company competes with distributors of other fuels and forms of energy, including electricity, fuel oil and propane, in all portions of the territories in which it has distribution mains. In addition, in 1992, the FERC issued Order No. 636 (see "Gas Supply and Operations"). Subsequently, initiatives were sponsored in various states, the purposes of which were to "unbundle" or separate into distinct transactions, the purchase of the gas commodity from the purchase of transportation services for the gas. To that end, as discussed under "Regulation", several of the Company's operating divisions have unbundled commercial and industrial gas purchase and transportation rates.
The unbundled sale of gas to customers is subject to competition from unregulated marketers and brokers, which generally do not bear the obligations or costs related to operating a regulated utility. Tariffs for transportation service have generally been designed to provide the same margins as bundled sales tariffs. Therefore, except for the regulatory risk of full recovery of gas costs, the Company is financially indifferent as to whether it transports gas, or sells gas and transportation together. The Company also faces the risk of loss of transportation service for large industrial customers which may have the ability to build connections to interstate gas pipelines and bypass the Company's distribution system. Gas distributors can also expect increased competition from electricity as deregulation in that industry decreases prices and increases supply sources. Alternatively, opportunities may increase for gas service to fuel generators for large industrial customers, replacing electric utility service.
Environment
Reference is made to Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations- Capital Expenditures and Commitments" and Note 11, "Commitments and Contingencies" of the "Notes to the Consolidated Financial Statements" for information regarding environmental matters affecting the Company.
Energy Sales & Services Segment
Products and Services
The Energy Sales and Services segment reflects the operations of the Company's NUI Energy, NUI Energy Brokers and NUI Energy Solutions subsidiaries, as well as off-system sales by the utility divisions. Together, this segment offers wholesale and retail energy sales, energy portfolio management, risk management, utility asset management, project development and energy consulting services.
NUI Energy, Inc. (NUI Energy) provides retail energy sales and related services to unbundled retail commercial and industrial customers. NUI Energy's operating margins were $4.1 million in fiscal 1999 as compared with $2.5 million in fiscal 1998 and $2.4 million in fiscal 1997.
NUI Energy Brokers, Inc. (NUI Energy Brokers) was formed in 1996 to provide the wholesale energy trading, brokering, and risk management activities of the Company. In addition to providing these services to third parties, NUI Energy Brokers is also responsible for the supply acquisition activity for NUI's Distribution Services segment. NUI Energy Brokers trades physical natural gas in four geographic regions: the Northeast, Southeast, Gulf Coast, and Mid Continent. In addition, NUI Energy Brokers trades futures and options contracts on the New York Mercantile Exchange. The risk associated with trading activities is closely monitored on a daily basis and controlled in accordance with the Company's Risk Management Policy. As in any commodity brokerage activity, however, there are risks pertaining to market changes and credit exposure that can be managed but not eliminated. Therefore, the earnings from NUI Energy Brokers are likely to be more volatile than the Company's utility distribution business (see Item 7, _Management's Discussion and Analysis-Market Risk Exposure_). NUI Energy Brokers generated margins of $8.3 million in fiscal 1999, $2.8 million in fiscal 1998 and $3.6 million in fiscal 1997.
NUI Energy Solutions, Inc. (NUI Energy Solutions) was formed by the Company in fiscal 1998 to provide energy management and consulting services to existing and new customers. Due to start-up costs associated with this business, NUI Energy Solutions recorded a loss in both fiscal 1999 and 1998.
Another business line within Energy Sales and Services is off-system sales, or the use of utility-owned gas assets to make sales to customers outside of NUI's service areas. Such assets include pipeline capacity and gas storage facilities. These assets are managed separately from non-utility assets, and their use is monitored and regulated by state regulatory commissions. Pursuant to regulatory agreements in some states in which the Company operates, the Company is able to retain a portion of the margins from these sales in varying percentages depending on the state in which the assets are owned. Off- system sales margins totaled $771,000 in fiscal 1999, $453,000 in fiscal 1998 and $681,000 in fiscal 1997.
Customer Services Segment
Products and Services
The Customer Services segment is comprised of the Company's Utility Business Service subsidiary and the appliance business operations. Together this segment provides appliance repair, maintenance, installation and leasing; customer information system services including bill printing, mailing, collection and payment processing;
network analysis; facilities database management; and operations mapping and field computing for other utilities.
During fiscal 1999, the Company completed the separation of its appliance servicing and leasing business from its Distribution Services segment. This group performed more than 74,000 revenue- producing appliance service jobs in fiscal 1999. The appliance group generated revenues of $15.5 million in fiscal 1999, $14.0 million in fiscal 1998 and $12.8 million in fiscal 1997.
Utility Business Services, Inc. (UBS) provides customer information systems and geographic information system services to investor-owned and municipal utilities, as well as third-party providers in the gas, water and wastewater markets. WINS CIS, the premiere customer information system developed and maintained by UBS, is presently serving approximately 30 clients with state-of-the-art capabilities in support of more than 620,000 customers. In addition to generating over three million bills each year, UBS assists clients in allied areas such as automatic meter reading, payment processing, and account recovery. In fiscal 1999, UBS introduced a natural gas version of WINS CIS by converting three of the Company's Distribution Services utility divisions to the new system. UBS is currently working on a web-enabled version of WINS CIS and plans to address the needs of the electric industry in the near term. Geographic information services are currently provided to nine clients. UBS had margins of $3.7 million in fiscals 1999 and 1998 and $2.4 million in fiscal 1997.
Other NUI Operations
NUI Environmental Group, Inc. (NUI Environmental) was formed by the Company in fiscal 1996 to develop a solution to the rapidly decreasing accessibility of the New York/New Jersey harbor to international commercial shipping traffic. On December 23, 1998, NUI Environmental was selected from a group of sixteen firms that responded to a request for proposal by the State of New Jersey to participate in a Sediment Decontamination Demonstration Project designed to identify new technologies for the productive dredging of the harbor. NUI Environmental must demonstrate the effectiveness of its technology through the pilot scale project, in which it must treat 200 gallons of dredged material from the harbor. If successful in the pilot program, NUI Environmental will contract with the State of New Jersey to treat between 30,000 and 150,000 cubic yards of material.
On May 18, 1997, the Company closed on its acquisition of a 49% interest in TIC Enterprises, LLC (TIC), a newly formed limited liability company, for a purchase price of $22 million. The acquisition was effective as of January 1, 1997 and is being accounted for under the equity method. TIC engages in the business of recruiting, training and managing sales professionals and serving as sales and marketing representatives for various businesses. Among these businesses are Lucent Technologies, Nextel Communications, Qwest Communications, AT&T and the United States Postal Service. In early December 1999, TIC was awarded a national contract from the United States Postal Service (USPS) to market its expedited delivery services. TIC contributed $1.2 million of equity earnings in fiscal 1999, was flat in fiscal 1998, and contributed $1.3 million in fiscal 1997.
On November 12, 1999, the Company closed on its acquisition of International Telephone Group, Inc. The acquisition was treated as a
merger whereby ITG merged with and into a subsidiary of the Company. The purchase price totaled $3.8 million and included the issuance of 113,200 shares of NUI common stock, with the remainder paid in cash. ITG is a full service telephone company that provides its customers with a single service solution for all their telecommunication requirements including local, long distance, cellular, internet, and data communications services (see Note 2 of the Notes to the Consolidated Financial Statements).
Persons Employed
As of September 30, 1999, the Company employed a total of 1,049 persons, of which 269 employees in New Jersey were represented by the Utility Workers Union of America (Local 424); 87 employees in Florida (Locals 769 and 385) and 14 employees in Pennsylvania (Local 529) were represented by the Teamsters Union; and 36 employees in North Carolina were represented by the International Brotherhood of Electrical Workers (Local 2291). The current collective bargaining agreement with the New Jersey union was negotiated effective December 10, 1998 and expires on November 20, 2001. The North Carolina union collective bargaining agreement was negotiated on August 20, 1998, and expires on August 20, 2001. The collective bargaining agreement in Pennsylvania is currently being negotiated. The union is currently working without a contract. A final resolution is expected shortly. The collective bargaining agreement in Florida was negotiated on March 31, 1998 and expires on March 31, 2001.
Persons employed by segment are as follows: Distribution Services segment- 673; Energy Sales and Services- 37; and Customer Services- 181 persons. In addition, the Corporate office of NUI employed a total of 158 persons, which employees primarily work in shared services for the entire corporation.
Available Information
The Company files annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission. Any document the Company files with the Commission may be read or copied at the Commission's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the public reference room. The Company's Commission filings are also available at the Commission's Web site at http://www.sec.gov or the Company's Web site at http://www.nui.com.
Item 2.
Item 2. Properties
The Company owns approximately 6,200 miles of steel, cast iron and plastic gas mains, together with gate stations, meters and other gas equipment. In addition, the Company owns peak shaving plants, including a LNG storage facility in Elizabeth, New Jersey.
The Company also owns real property in Union, Middlesex, Warren, Sussex and Hunterdon counties in New Jersey, and in Dade, Broward, Brevard and St. Lucie counties in Florida, portions of which are under lease to others. The Company's properties include office buildings in Hialeah and Rockledge, Florida that serve as the principal operating offices for the Florida operations; and office buildings in both Reidsville, North Carolina and Sayre, Pennsylvania that serve as operating offices for the North Carolina and the Pennsylvania and New
York operations, respectively. The Company also owns various service centers in New Jersey, Florida, North Carolina, Maryland and Pennsylvania from which the Company dispatches service crews and conducts construction and maintenance activities.
The Company leases office space in Bedminster, New Jersey that serves as its corporate headquarters, and leases certain other facilities in New Jersey and Florida that are operated as customer business offices or operating offices. The Company also leases approximately 160,000 square feet in an office building in Union, New Jersey.
Subject to minor exceptions and encumbrances, all other property materially important to the Company and all principal plants are owned in fee simple, except that most of the mains and pipes are installed in public streets under franchise or statutory rights or are constructed on rights of way acquired from the apparent owner of the fee.
Item 3.
Item 3. Legal Proceedings
The Company is involved in various claims and litigation incidental to its business. In the opinion of management, none of these claims and litigation will have a material adverse effect on the Company's results of operations or its financial condition.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was presented for submission to a vote of security holders through the solicitation of proxies or otherwise during the last quarter of fiscal 1999.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
NUI common stock is listed on the New York Stock Exchange and is traded under the symbol "NUI". The quarterly cash dividends paid and the reported price range per share of NUI common stock for the two years ended September 30, 1999 were as follows:
Quarterly Price Range Cash Dividend High Low
Fiscal 1999: First Quarter $0.245 $27.00 $21.563 Second Quarter 0.245 27.06 20.375 Third Quarter 0.245 25.62 20.813 Fourth Quarter 0.245 28.06 24.625
Fiscal 1998: First Quarter $0.245 $29.62 $21.375 Second Quarter 0.245 28.62 25.188 Third Quarter 0.245 29.43 23.313 Fourth Quarter 0.245 25.93 20.313
There were 6,045 shareholders of record of NUI common stock at November 30, 1999.
It is the Company's intent to continue to pay quarterly dividends in the foreseeable future. NUI's dividend policy is reviewed on an ongoing basis and is dependent upon the Company's expectation of future earnings, cash flow, financial condition, capital requirements and other factors.
The Company's long-term debt agreements include, among other things, restrictions as to the payment of cash dividends. Under the most restrictive of these provisions, the Company was permitted to pay $54 million of cash dividends at September 30, 1999.
Item 6.
Item 6. Selected Financial Data
Selected Consolidated Financial Data (in thousands, except per share amounts)
Fiscal Years Ended September 30, 1999 1998 1997 1996 1995
Operating Revenues $828,174 $828,036 $608,596 $469,499 $376,884 Net Income $ 24,560 $ 12,314 $ 19,649 $ 14,896 $ 5,517 Net Income Per Share $ 1.93 $0.98 $1.75 $1.52 $0.60 Dividends Paid Per Share $0.98 $0.98 $0.94 $0.90 $0.90
Total Assets $844,226 $776,847 $803,665 $677,662 $610,165 Capital Lease Obligations $ 2,599 $ 8,566 $ 9,679 $ 10,503 $ 11,114 Long-Term Debt $268,911 $229,098 $229,069 $230,100 $222,060 Common Shareholders' $237,318 $222,992 $218,291 $179,107 $140,912 Equity Common Shares 12,750 12,680 12,429 11,086 9,201 Outstanding
Notes to the Selected Consolidated Financial Data: Net income for fiscal 1999 includes a pension settlement gain and other non-recurring items. The effect of these items increased net income by $2.3 million (after tax), or $0.18 per share.
Net income for fiscal 1998 includes restructuring and other non- recurring charges amounting to $5.9 million (after tax), or $0.47 per share.
Net income for fiscal 1995 includes restructuring and other non- recurring charges amounting to $5.6 million (after tax), or $0.61 per share.
Summary Consolidated Operating Data
Fiscal Years Ended September 30, 1999 1998 1997 1996 1995
Operating Revenues (Dollars in thousands) Firm Sales: Residential $197,868 $198,072 $201,757 $194,332 $173,395 Commercial 83,409 91,970 106,234 107,067 98,541 Industrial 8,694 19,684 23,263 25,321 20,083 Interruptible Sales 49,138 45,594 55,844 50,539 48,282 Unregulated Sales 432,810 421,751 177,881 55,678 7,498 Transportation Services 37,634 33,338 28,617 23,085 17,696 Customer Service, Appliance Leasing and Other 18,621 17,627 15,000 13,477 11,389 ------- ------- ------ ------ ------ $828,174 $828,036 $608,596 $469,499 $376,884 ======= ======= ======= ======= ======= Gas Sold or Transported (MMcf) Firm Sales: Residential 22,064 21,771 22,956 24,810 21,276 Commercial 11,058 12,076 14,254 16,575 15,455 Industrial 1,584 4,463 4,819 5,407 5,217 Interruptible Sales 16,420 13,183 15,074 16,003 18,365 Unregulated Sales 168,748 163,418 62,819 17,804 3,398 Transportation Services 32,601 30,831 28,294 25,051 22,154 ------- ------- ------ ------ ------ 252,475 245,742 148,216 105,650 85,865 ======= ======= ======= ======= ====== Average Utility Customers Served Firm Sales: Residential 344,448 338,958 335,632 332,440 328,644 Commercial 23,320 23,407 24,312 24,484 24,519 Industrial 254 275 306 338 43 Interruptible Sales 56 111 121 120 118 Transportation Services 3,535 2,948 1,460 668 184 ------- ------- ------ ------ ------ 371,613 365,699 361,831 358,050 353,895 ======= ======= ======= ======= ======= Degree Days in New Jersey 4,381 4,356 4,772 5,343 4,333
Employees (year end) 1,049 1,081 1,126 1,086 1,079
Ratio of Earnings to Fixed Charges 2.64 1.85 2.11 2.00 1.37
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis refers to NUI Corporation and all its operating divisions and subsidiaries (collectively referred to as the Company). The Company is a multi-state energy sales, services and distribution, and telecommunications company. Its utility operations distribute natural gas and related services in six states along the eastern seaboard and comprise Elizabethtown Gas (New Jersey), City Gas Company of Florida, North Carolina Gas, Elkton Gas (Maryland), Valley Cities Gas (Pennsylvania) and Waverly Gas (New York). The Company's non-regulated subsidiaries include NUI Energy, Inc. (NUI Energy), an energy retailer; NUI Energy Brokers, Inc. (NUI Energy Brokers), an energy wholesaler; NUI Energy Solutions, Inc., an energy project development and consulting entity; NUI Environmental Group, Inc., an environmental project development subsidiary; Utility Business Services, Inc. (UBS), a customer and geographic information systems and services subsidiary; and International Telephone Group, Inc. (ITG), a telecommunications services subsidiary (see Note 2 of the Notes to the Consolidated Financial Statements). The Company also provides sales outsourcing through its 49 percent equity interest in TIC Enterprises, LLC (TIC).
Results of Operations
The results for the 1999 and 1998 fiscal years reflect changes in the New Jersey tax law, which resulted in variations in certain line items on the consolidated statement of income. Effective January 1, 1998, New Jersey Gross Receipts and Franchise Taxes (GRAFT) were replaced by a combination of a New Jersey Sales and Use Tax (Sales Tax), a New Jersey Corporate Business Tax (CBT) and a temporary Transitional Energy Facilities Assessment (TEFA). In prior periods, GRAFT was recorded as a single line item as a reduction of operating margins. Effective January 1, 1998, TEFA is recorded in the energy taxes line item as a reduction of operating margins, CBT is recorded in the income taxes line item and Sales Tax is recorded as a reduction of operating revenues. The legislation was designed to be net income
neutral over a 12-month period, however, variations of certain line items on the consolidated statement of income exist. For fiscal 1999 as compared to fiscal 1998, the three new taxes had the effect of reducing operating revenues by approximately $3.4 million, reducing energy taxes by approximately $4.1 million and increasing income tax expense by approximately $1.2 million. For fiscal 1998 as compared to fiscal 1997, these changes had the effect of reducing operating revenues by approximately $9.9 million, reducing energy taxes by approximately $11.8 million and increasing income tax expense by approximately $1.9 million.
Fiscal Years Ended September 30, 1999 and 1998
Net Income. Net income for fiscal 1999 was $24.6 million, or $1.93 per share, as compared with net income of $12.3 million, or $0.98 per share in fiscal 1998. Net income in both fiscal periods includes non- recurring items incurred mainly as a result of the Company's 1998 reorganization (see Note 3 of the Notes to the Consolidated Financial Statements). The after-tax non-recurring items in fiscal 1999 resulted in a net gain of approximately $2.3 million, or $0.18 per share, as compared to after-tax charges of approximately $5.9 million, or $0.47 per share, incurred during fiscal 1998. Absent these non-recurring items, net income would have been $22.2 million, or $1.75 per share in fiscal 1999 as compared to $18.2 million, or $1.45 per share in fiscal 1998. The increase in recurring earnings was mainly attributed to higher operating margins, other income and lower other taxes, partially offset by higher operations and maintenance expenses, depreciation and interest expense.
Operating Revenues and Operating Margins. The Company's operating revenues include amounts billed for the cost of purchased gas pursuant to purchased gas adjustment clauses. Such clauses enable the Company to pass through to its utility customers, via periodic adjustments to customers' bills, increased or decreased costs incurred by the Company for purchased gas without affecting operating margins. Since the Company's utility operations do not earn a profit on the sale of the gas commodity, the Company's level of regulated operating revenues is not necessarily indicative of financial performance.
The Company's operating revenues remained relatively flat between fiscal 1999 and fiscal 1998, despite fluctuations within the Company's operating segments. Energy Sales and Services revenue increased by approximately $10.7 million mainly due to increased operations by NUI Energy Brokers, while Customer Services revenue increased $1.4 million primarily due to increases in the Company's appliance leasing business. These increases were partially offset by a decrease of approximately $11.9 million in the Company's Distribution Services revenue primarily resulting from changes in the New Jersey tax law noted earlier as well as a refund to New Jersey customers of approximately $4.4 million in September 1999 (see Regulatory Matters). Weather in New Jersey was approximately 16 percent warmer than normal in fiscal 1999 and relatively flat compared to the 1998 period.
The Company's operating margins increased by $13.1 million, or 7 percent, in fiscal 1999 as compared with fiscal 1998. The increase was primarily attributable to an increase of approximately $3.9 million in the Company's Distribution Services segment as a result of customer growth, the effects of changes in the New Jersey tax law previously described and the recovery of previously deferred post-retirement benefit expenses through rates (see Regulatory Matters). These
increases were partially offset by the effect of warmer weather in fiscal 1999 in several of the Company's service territories, part of which was not fully recovered from customers under weather normalization clauses. The Company has weather normalization clauses in its New Jersey and North Carolina tariffs, which are designed to help stabilize the Company's results by increasing amounts charged to customers when weather has been warmer than normal and by decreasing amounts charged when weather has been colder than normal. As a result of weather normalization clauses, operating margins were approximately $5.4 million and $5.6 million higher in fiscal 1999 and 1998, respectively, than they would have been without such clauses. Operating margins increased in the Customer Services segment by approximately $1.4 million due to an increase in the appliance leasing rates in Florida and increased customer service activity in New Jersey. Operating margins from the Company's Energy Sales and Services segment increased by approximately $7.9 million primarily due to increases in the Company's wholesale trading and retail energy operations.
Other Operating Expenses. Operations and maintenance expenses increased by approximately $4.6 million, or 5 percent, in fiscal 1999 as compared with fiscal 1998. The increase was primarily the result of previously deferred post-retirement benefit expenses which are being expensed and recovered through rates, higher levels of accrued incentives associated with the improved performance of the Company's unregulated wholesale trading and retail energy businesses and a lower pension credit in the current year. These increases were partially offset by labor and benefit savings from the Company's reorganization efforts over the past year.
The Company recognized approximately $4.0 million of pre-tax, non- recurring income in fiscal 1999, as compared to non-recurring expenses of approximately $9.7 million recognized in fiscal 1998. These items are mainly the result of the Company's 1998 reorganization. (See Note 3 of the Notes to the Consolidated Financial Statements for a further description of these items.)
Depreciation and amortization increased approximately $2.0 million in fiscal 1999 as compared to the prior year, primarily due to additional plant in service.
The decrease in other general taxes of approximately $0.6 million was primarily due to a decrease in the average number of employees during fiscal 1999.
Income tax expense increased by approximately $8.2 million in fiscal 1999 as compared to fiscal 1998 as a result of higher pre-tax income and the change in the New Jersey tax law noted earlier.
Interest Expense. Interest expense increased by approximately $0.7 million in fiscal 1999 as compared to fiscal 1998. This increase was primarily due to interest on the Company's $40 million bond issuance in December 1998. These increases were partially offset by an increase in interest income on funds held by trustee as a result of the $40 million issuance noted above being put into trust for use on qualified expenditures (see Financing Activities and Resources - Long-Term Debt and Funds for Construction Held by Trustee).
Other Income and (Expense), Net. Other income and expense, net, increased by approximately $0.4 million in fiscal 1999 as compared to
fiscal 1998. The increase reflects improved results from TIC of approximately $1.3 million as a result of higher revenues from TIC's various sales programs as well as contributions from additional product lines. This increase was partially offset by a gain of approximately $0.7 million recognized in the prior year period due to the sale of marketable securities.
Fiscal Years Ended September 30, 1998 and 1997
Net Income. Net income for fiscal 1998 was $12.3 million, or $.98 per share, as compared with net income of $19.6 million, or $1.75 per share in fiscal 1997. The decrease in 1998 was primarily due to after-tax, non-recurring charges of approximately $5.9 million, or $.47 per share, associated with the Company's reorganization efforts which included an early retirement program and other workforce reductions (see Note 3 of the Notes to the Consolidated Financial Statements). Absent these non-recurring charges, net income would have been $18.2 million, or $1.45 per share. The decrease in recurring earnings was mainly attributed to higher depreciation, operations and maintenance expenses, other taxes and lower other income, partially offset by higher operating margins.
Net income per share in the current year was also affected by the increased average number of outstanding shares of common stock over the prior year, principally reflecting the Company's issuance of 1.0 million additional shares in September 1997 (see Financing Activities and Resources-Common Stock).
Operating Revenues and Operating Margins. The Company's operating revenues increased by $219.4 million, or 36 percent, in fiscal 1998 as compared with fiscal 1997. The increase was principally due to an increase in the Company's Energy Sales and Services segment of approximately $247.2 million, mainly due to increased operations by NUI Energy Brokers, and increased activity in the Customer Services segment. These increases were partially offset by lower revenues from the Company's Distribution Services segment mainly due to the effect of warmer weather in fiscal 1998 in all of the Company's service territories, primarily in New Jersey where it was 17 percent warmer than normal and 9 percent warmer than the prior year, as well as the effect of the New Jersey tax law changes previously described.
The Company's operating margins increased by $6.7 million, or 4 percent, in fiscal 1998 as compared with fiscal 1997. The increase was primarily attributable to an increase of approximately $5.3 million in the Company's Distribution Services segment as a result of customer growth and the effects of changes in the New Jersey tax law previously described. These increases were partially offset by the effect of warmer weather in fiscal 1998 in all of the Company's Distribution Services territories, part of which was not fully recovered from customers under weather normalization clauses. As a result of weather normalization clauses, operating margins were approximately $5.6 million and $2.0 million higher in fiscals 1998 and 1997, respectively, than they would have been without such clauses. Operating margins increased in the Customer Services segment by approximately $2.4 million due to customer additions by UBS and related increases in system conversion revenues, an increase in the appliance leasing rates in Florida and increased customer service activity in New Jersey. Operating margins from the Company's Energy Sales and Services segment decreased by approximately $1.0 million primarily due to a lack of market volatility, which negatively
impacted margins, and lower off-system sales associated with warm temperatures of the 1998 heating season.
Other Operating Expenses. Operations and maintenance expenses increased by approximately $1.1 million, or 1 percent, in fiscal 1998 as compared with fiscal 1997. The increase was primarily due to expenses associated with the continued growth of the Company's unregulated operations. These increases were partially offset by a higher pension credit due to the investment performance of pension plan assets.
The Company incurred approximately $9.7 million of non-recurring charges in the fourth quarter of fiscal 1998 associated with the reorganization of the Company's operations which included an early retirement program for non-bargaining unit personnel and other workforce reductions (see Note 3 of the Notes to the Consolidated Financial Statements).
Depreciation and amortization increased approximately $1.9 million in fiscal 1998 as compared to 1997, primarily due to additional plant in service.
The increase in other general taxes of approximately $0.5 million was primarily due to higher payroll-related taxes as a result of a higher average number of employees in fiscal 1998 as compared to fiscal 1997.
Income tax expense decreased by approximately $1.0 million in fiscal 1998 as compared to fiscal 1997 as a result of lower pre-tax income, partially offset by the change in the New Jersey tax law noted above.
Other Income and (Expense), Net. Other income and expense, net, decreased by approximately $1.5 million in fiscal 1998 as compared to fiscal 1997. The decrease was primarily due to the lower results from TIC in 1998 as a result of additional investments made by TIC to grow its sales programs and increase its product lines. Additionally, the fiscal 1997 results reflected a pre-tax gain of approximately $0.7 million from the sale of certain property in Florida.
Regulatory Matters
On April 30, 1999, the Company made a filing with the New Jersey Board of Public Utilities (NJBPU) which will enable all customers in New Jersey to choose an alternative supplier of natural gas. This filing was a result of the "Electric Discount and Energy Competition Act" legislation, which was signed into law in New Jersey on February 9, 1999. The legislation has several provisions that affect gas utilities. It provides all gas customers with the ability to choose an alternate natural gas supplier by December 31, 1999. At the same time, the utility will continue to provide basic gas service through December 2002 when the NJBPU will decide if the gas supply function should be made competitive. The NJBPU will also conduct proceedings to determine whether customers should be afforded the option of contracting with an alternative provider of billing, meter reading and other customer account services that may be deemed competitive by December 31, 2000. A NJBPU decision on the Company's April 30 filing is expected in early fiscal 2000.
On July 7, 1999, the NJBPU approved a final stipulation on the Company's New Jersey Purchased Gas Adjustment Clause filing in which
the Company would continue to charge rates approved in an interim stipulation and approved by the NJBPU on March 3, 1999. In addition, the stipulation provided that the Company would refund to customers $10 million of previously over-recovered gas costs. Of this amount, $5.6 million was applied against a Weather Normalization Clause under- recovery and the balance was credited to customer bills in late fiscal 1999. The stipulation also allows the Company to defer the costs of its undepreciated propane-air plant, presently not in use, for rate recovery in its next base rate case.
On September 23, 1998, the NJBPU issued an order approving the Company's petition to increase base rates in New Jersey by approximately $2.4 million to recover postretirement benefits computed under Statement of Financial Accounting Standards No. 106, _Employers' Accounting for Postretirement Benefits Other than Pensions_ (SFAS 106). The rate increase was effective October 1, 1998 and allows for previously deferred costs, as well as future SFAS 106 costs, to be recovered over a rolling 15-year period.
Financing Activities and Resources
The Company's net cash provided by operating activities was $59.0 million in fiscal 1999, $20.9 million in fiscal 1998 and $40.5 million in fiscal 1997. The increase in fiscal 1999 as compared with fiscal 1998 was primarily due to additional collections of gas costs through the Company's purchased gas adjustment clauses and the timing of payment to gas suppliers. The decrease in fiscal 1998 as compared with fiscal 1997 was primarily due to the timing of payments to gas suppliers, as well as the timing of payments relating to energy taxes.
Because the Company's primary business is highly seasonal, short-term debt is used to meet seasonal working capital requirements. The Company also borrows under its bank lines of credit to finance portions of its capital expenditures, pending refinancing through the issuance of equity or long-term indebtedness at a later date depending upon prevailing market conditions.
Short-Term Debt. The weighted average daily amounts outstanding of notes payable to banks and the weighted average interest rates on those amounts were $68.2 million at 5.3 percent in fiscal 1999, $66.8 million at 5.7 percent in fiscal 1998 and $66.0 million at 5.5 percent in fiscal 1997.
At September 30, 1999, the Company had outstanding notes payable to banks amounting to $73.6 million and available unused lines of credit amounting to $62.4 million.
Long-Term Debt and Funds for Construction Held by Trustee. On December 8, 1998, the Company issued $40 million of tax-exempt Gas Facilities Revenue Bonds at an interest rate of 5.25 percent. These bonds will mature in November 2033 and the proceeds will be used to finance a portion of the Company's capital expenditure program in New Jersey.
The Company deposits in trust the unexpended portion of the net proceeds from its Gas Facilities Revenue Bonds until drawn upon for eligible expenditures. As of September 30, 1999 and September 30, 1998, the total unexpended portions of all of the Company's Gas Facilities Revenue Bonds were $32.0 million and $7.1 million, respectively, and are classified on the Company's consolidated balance
sheet, including interest earned thereon, as funds for construction held by trustee.
Common Stock. The Company periodically issues shares of common stock in connection with NUI Direct, the Company's dividend reinvestment and stock purchase plan, and various employee benefit plans. The proceeds from such issuances amounted to approximately $0.7 million, $4.0 million and $5.7 million in fiscals 1999, 1998 and 1997, respectively, and were used primarily to reduce outstanding short-term debt. Effective May 26, 1998, several of these plans commenced purchasing shares on the open market to fulfill the plans' requirements. Under the terms of these plans, the Company may periodically change the method of purchasing shares from open market purchases to purchases directly from the Company, or vice versa. The decrease in proceeds received in fiscal 1999 as compared to fiscals 1998 and 1997 reflects that the plans commenced purchasing shares directly in the open market rather than from Company.
The Company's long-term debt agreements include, among other things, restrictions as to the payment of cash dividends. Under the most restrictive of these provisions, the Company is permitted to pay approximately $54 million of cash dividends at September 30, 1999.
On September 25, 1997, the Company issued an additional 1.0 million shares of common stock. The net proceeds from the offering totaled $22.6 million and were used to reduce outstanding short-term debt incurred to finance the Company's acquisition of a 49 percent interest in TIC and for other general corporate purposes.
Capital Expenditures and Commitments
Capital expenditures, which consist primarily of expenditures to expand and upgrade the Company's gas distribution systems, were $47.9 million in fiscal 1999, $60.9 million in fiscal 1998 and $52.3 million in fiscal 1997. The decrease in fiscal 1999 was primarily due to special projects in fiscal 1998 to expand operations of two large industrial customers in New Jersey. The Company's capital expenditures are expected to be approximately $51 million in fiscal 2000.
The Company owns or previously owned six former manufactured gas plant (MGP) sites in the state of New Jersey and ten former MGP sites in the states of North Carolina, South Carolina, Pennsylvania, New York and Maryland. Based on the Company's most recent assessment, the Company has recorded a total reserve for environmental investigation and remediation costs of approximately $34 million, which is the minimum amount that the Company expects it will expend in the next 20 years to remediate the Company's MGP sites. Of this reserve, approximately $30 million relates to New Jersey MGP sites and approximately $4 million relates to the MGP sites located outside New Jersey. However, the Company believes that it is possible that costs associated with conducting investigative activities and implementing remedial actions, if necessary, with respect to all of its MGP sites may exceed this reserve by an amount that could range up to an additional $24 million and be incurred during a future period of time that may range up to 50 years. Of this $24 million in possible additional expenditures, approximately $12 million relates to the New Jersey MGP sites and approximately $12 million relates to the remaining MGP sites. As compared with the $34 million reserve currently recorded on the Company's books as discussed above, the Company believes that it is less likely that this additional $24 million will be incurred and
therefore has not recorded it on its books. The Company believes that all costs associated with the New Jersey MGP sites will be recoverable in rates or from insurance carriers. In New Jersey, the Company is currently recovering environmental costs on an annual basis through base rates and over a rolling seven-year period through its MGP Remediation Adjustment Clause. As a result, the Company has begun rate recovery of approximately $5.5 million of environmental costs incurred through June 30, 1998. Recovery of an additional $2.0 million in environmental costs incurred between July 1, 1998 and June 30, 1999 is currently pending NJBPU approval. With respect to costs that may be associated with the MGP sites located outside the state of New Jersey, the Company intends to pursue recovery from ratepayers, former owners and operators of the sites and from insurance carriers. However, the Company is not able, at this time, to express a belief as to whether any or all of these recovery efforts will ultimately be successful.
Certain of the Company's long-term contracts for the supply, storage and delivery of natural gas include fixed charges that amount to approximately $68.6 million annually. The Company currently recovers, and expects to continue to recover, such fixed charges through its purchased gas adjustment clauses. As a result of the forthcoming unbundling of natural gas services in New Jersey, these contracts may result in the realization of stranded costs by the Company. Management believes the outcome of these actions will not have a material adverse effect on the Company's results. The Company also is committed to purchase, at market-related prices, minimum quantities of gas that, in the aggregate, are approximately 2.7 billion cubic feet (Bcf) per year or to pay certain costs in the event the minimum quantities are not taken. The Company expects that minimum demand on its systems for the duration of these contracts will continue to exceed these minimum purchase obligations.
The Company is scheduled to repay $20 million of Medium-Term Notes in August 2002.
Market Risk Exposure
The Company's wholesale trading subsidiary, NUI Energy Brokers, uses derivatives for multiple purposes: i) to hedge price commitments and minimize the risk of fluctuating gas prices, ii) to take advantage of market information and opportunities in the marketplace, and iii) to fulfill its trading strategies and, therefore, ensure favorable prices and margins. These derivative instruments include forwards, futures, options and swaps.
The risk associated with uncovered derivative positions is closely monitored on a daily basis, and controlled in accordance with NUI Energy Brokers' Risk Management Policy. This policy has been approved by the Company's Board of Directors and dictates policies and procedures for all trading activities. The policy defines both value- at-risk (VaR) and loss limits, and all traders are required to read and follow this policy. At the end of each day, all trading positions are marked-to-market and a VaR is calculated. This information, as well as the status of all limits, is disseminated to senior management daily.
NUI Energy Brokers utilizes the variance/covariance VaR methodology. Using a 95 percent confidence interval and a one day time horizon, as of September 30, 1999, NUI Energy Brokers' VaR was $295,000.
Year 2000
Many existing computer programs and systems with embedded digital microcontrollers, use only two digits to identify a year in the date field, or were not designed in other ways to provide for the upcoming change in the century. If not corrected, many systems that use digital technology could fail or create errors that may result in a significant adverse impact on NUI's ability to provide service, its regulatory relations and financial condition.
NUI has developed a Risk Mitigation Plan (the Plan) as an internal guide to its systems readiness program. The purpose of the program is to mitigate the risks associated with Year 2000 technology issues. The Plan includes the following phases: (i) development of a detailed inventory of all information technology (IT) and non-IT systems that incorporate any technology component including embedded microprocessors and microcontrollers (Inventory Phase); (ii) assessment of those systems for Year 2000 vulnerability (Assessment Phase); (iii) remediation of the affected systems (Remediation Phase); and (iv) testing of sub-systems, hardware, operating and application software running as integrated systems (Testing Phase). In addition, the Plan requires (v) an analysis of the risk of system failure and the consequences of failure in order to focus testing resources and prioritization of resources under contingency plans (Risk Analysis). The Inventory, Assessment and the Risk Analysis Phases include material direct third-party suppliers and vendors. The final phase is (vi) contingency planning, which is described below.
Under the Plan, NUI has established an executive level Year 2000 Committee (the Committee) to monitor the Company's Year 2000 progress. The Committee is chaired by NUI's Senior Vice President, Chief Operating Officer and Chief Financial Officer, and includes the senior management of all NUI's business units, the Chief Information Officer, Chief Administrative Officer, General Counsel and Secretary and the Vice President of Corporate Development and Treasurer. The Committee receives monthly reports from a project coordinator and team. Members of the team are responsible for NUI gas distribution system controls, computer hardware, operating and communication systems, and for critical suppliers. The Chairman of the Committee reports to NUI's Board of Directors on Year 2000 issues on a periodic basis.
The Company has largely completed the first five phases referred to above. In addition, contingency plans, supplementing existing disaster recovery and business continuity plans, have been developed as necessary for the Company's own systems and its third-party relationships, in response to its assessments, remediation and testing activities. The specific actions identified include measures such as manual workarounds, deployment of backup or secondary technologies, rearranging work schedules, and substitution of suppliers, as appropriate.
NUI's systems and customers are vulnerable to systems operated by third parties that may not be Year 2000 ready. NUI has identified its critical direct suppliers and vendors and relies on its business partners/third parties to be responsible for the Year 2000 readiness of their offerings. These include, at the very highest level of importance, interstate pipeline suppliers, telecommunications carriers and electric suppliers. Interstate pipeline suppliers must appropriately schedule and control gas supplies to NUI's own distribution systems. Telecommunications carriers' digital circuits
are used to control and monitor NUI's gas distribution system with voice circuits as emergency backup and for customers' reporting of emergencies. Electricity supplies are critical to NUI's customers for natural gas heating equipment and industrial process control.
NUI is assessing the Year 2000 readiness of its critical suppliers through face-to-face meetings and correspondence. Although numerous third parties have indicated to the Company in writing that they are addressing their Year 2000 issues on a timely basis, NUI will continue to work with these suppliers through the remainder of 1999 to gain greater assurance that appropriate steps are being taken to ensure security of supply and the continued accurate exchange of critical data.
The total estimated costs of assessing, remediating and testing NUI's systems for Year 2000 readiness is approximately $3.5 million, of which approximately $3.1 million has been incurred through September 30, 1999. Approximately 50 percent of these costs will relate to capital projects. The Company has and will continue to fund these costs from the operations of the Company.
Customers are dependent on NUI's reliable and secure gas supply, emergency response and billing services. Each of these services relies on the Company's computer systems. A failure in these systems could materially interrupt the normal flow of these services and significantly impact human safety and physical property and have a significant adverse financial impact on NUI, its customers and suppliers. NUI and third-party critical suppliers are also interdependent, and failure of third-party suppliers to be Year 2000 ready could significantly impact the Company's ability to serve its customers. Due to the general uncertainty of the Year 2000 problem, resulting in part from the uncertainty of the Year 2000 readiness of third-parties, the Company is unable to determine at this time whether the consequences of Year 2000 failures will have a material impact on the Company's results of operations or financial condition. The Plan is expected to significantly reduce the Company's level of uncertainty about the Year 2000 problem and the readiness of third parties. The Company believes that due to its Plan, the likelihood of major consequences should be reduced.
Effects of Inflation
The Company's tariffs provide purchased gas adjustment clauses through which rates charged to customers are adjusted for changes in the cost of gas on a reasonably current basis. Increases in other utility costs and expenses not otherwise offset by increases in revenues or reductions in other expenses could have an adverse effect on earnings due to the time lag associated with obtaining regulatory approval to recover such increased costs and expenses, and the uncertainty of whether regulatory commissions will allow full recovery of such increased costs and expenses.
Forward-Looking Statements
This document contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The Company cautions that, while it believes such statements to be reasonable and are made in good faith, such forward-looking statements almost always vary from actual results, and the differences between assumptions made in making such statements and actual results can be
material, depending upon the circumstances. Factors, which may make the actual results differ from anticipated results include, but are not limited to, economic conditions; unforeseen competition; weather conditions; fluctuations in the price of natural gas and other forms of energy; the outcome of certain assumptions made in regard to Year 2000 issues; and other uncertainties, all of which are difficult to predict and many of which are beyond the control of the Company. Accordingly, investors should not rely upon these forward-looking statements in making investment decisions.
Item 8.
Item 8. Financial Statements and Supplementary Data
Consolidated financial statements of the Company as of September 30, 1999 and 1998 and for each of the three years in the period ended September 30, 1999, the auditors' report thereon, and the unaudited quarterly financial data for the two-year period ended September 30, 1999, are included herewith as indicated on "Index to Financial Statements and Schedule" on page.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
Information concerning directors and officers of the Company is included in the definitive Proxy Statement for the Company's Annual Meeting of Stockholders, which is incorporated herein by reference. Such Proxy Statement was filed with the Securities and Exchange Commission on December 27, 1999.
Item 11.
Item 11. Executive Compensation
Information concerning executive compensation is included in the definitive Proxy Statement for the Company's Annual Meeting of Stockholders, which is incorporated herein by reference. Such Proxy Statement was filed with the Securities and Exchange Commission on December 27, 1999.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning security ownership of certain beneficial owners and management is included in the definitive Proxy Statement for the Company's Annual Meeting of Stockholders, which is incorporated herein by reference. Such Proxy Statement was filed with the Securities and Exchange Commission on December 27, 1999.
Item 13.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions is included in the definitive Proxy Statement for the Company's Annual Meeting of Stockholders, which is incorporated herein by reference.
Such Proxy Statement was filed with the Securities and Exchange Commission on December 27, 1999.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Consolidated financial statements of the Company as of September 30, 1999 and 1998 and for each of the three years in the period ended September 30, 1999 and the auditors' report thereon, and the unaudited quarterly financial data for the two-year period ended September 30, 1999 are included herewith as indicated on the "Index to Financial Statements and Schedule" on page.
(2) The applicable financial statement schedule for the fiscal years 1999, 1998 and 1997 is included herewith as indicated on the "Index to Financial Statements and Schedule" on page.
(3) Exhibits: Exhibit Description Reference No. 2(i) Letter Agreement, dated June Incorporated by 29, 1993, by and between NUI reference to Exhibit Corporation and Pennsylvania & 2(i) to Registration Southern Gas Company Statement No. 33-50561 2(ii) Agreement and Plan of Merger, Incorporated by dated as of July 27, 1993, by reference to Exhibit and between NUI Corporation 2(ii) to Registration and Pennsylvania & Southern Statement No. 33-50561 Gas Company 3(i) Certificate of Incorporation, Incorporated by amended and restated as of reference to Exhibit December 1, 1995 3(i) of NUI's Form 10- K Report for Fiscal 3(ii) By-Laws, amended and restated Incorporated by as of September 23, 1997 reference to Exhibit 3(ii) of NUI's Form 10-K Report for Fiscal 4(i) Rights Agreement between NUI Incorporated by Corporation and Mellon reference to NUI's Securities Trust Company dated Form 8-K dated November 28, 1995 December 1, 1995 10(i) Service Agreement by and Incorporated by between Transcontinental Gas reference to Exhibit Pipe Line Corporation and 10(i) to Registration Elizabethtown Gas Company Statement No. 33- ("EGC"), dated February 1, 50561 1992 (#3686) 10(ii) Service Agreement under Rate Incorporated by Schedule GSS by and between reference to Exhibit Transcontinental Gas Pipe Line 10(ii) of NUI's Form Corporation and EGC, dated 10-K Report for Fiscal July 1, 1996 1997 10(iii) Service Agreement under Rate Filed herewith. Schedule LG-A by and between Transcontinental Gas Pipe Line Corporation and EGC, dated
Exhibit Description Reference No. January 12, 1971, as amended 5/15/96 10(iv) Service Agreement by and Incorporated by between Transcontinental Gas reference to Exhibit Pipe Line Corporation and EGC, 10(iv) of NUI's Form dated November 1, 1995 10-K Report for Fiscal (Contract #1.1997) 1996 10(v) Service Agreement by and Incorporated by between Transcontinental Gas reference to Exhibit Pipe Line Corporation and EGC, 10(v) of NUI's Form dated November 1, 1995 10-K Report for Fiscal (Contract #1.1995) 1996 10(vi) Firm Gas Transportation Incorporated by Agreement by and among reference to Exhibit Transcontinental Gas Pipe Line 10(vi) to Registration Corporation, EGC and National Statement No. 33- Fuel Gas Supply Corporation, 50561 dated November 1, 1984 10(vii) Service Agreement by and among Incorporated by Transcontinental Gas Pipe Line reference to Exhibit Corporation and EGC, dated 10(vii) of NUI's Form November 1, 1995 (Contract 10-K Report for Fiscal #1.1998) 1996 10(viii) Service Agreement for Rate Incorporated by Schedule CDS by and between reference to Exhibit Texas Eastern Transmission 10(viii) to NUI's Form Corporation and EGC, dated 10-K Report for Fiscal December 1, 1993 (Contract 1994 #800361) 10(ix) Service Agreement under Rate Incorporated by Schedule FTS-7 by and between reference to Exhibit Texas Eastern Transmission 10(ix) to NUI's Form Corporation and EGC, dated 10-K Report for Fiscal October 25, 1994 (Contract 1994 #331720) 10(x) Service Agreement for Rate Incorporated by Schedule FTS-5 by and between reference to Exhibit Texas Eastern Transmission 10(x) of NUI's Form Corporation and EGC, dated 10-K Report for Fiscal March 18, 1996 (Contract 1997 #331501) 10(xi) Service Agreement under Rate Incorporated by Schedule FTS-8 by and between reference to Exhibit Texas Eastern Transmission 10(xi) to NUI's Form Corporation and EGC, dated 10-K Report for Fiscal June 28, 1994 (Contract 1994 #331013) 10(xii) Firm Transportation Service Incorporated by Agreement under FTS-2 Rate reference to Exhibit Schedule by and between City 10(xii) of NUI's Form Gas and Florida Gas 10-K Report for Fiscal Transmission, dated August 12, 1997 10(xiii) Service Agreement for Rate Incorporated by Schedule FTS-2 by and between reference to Exhibit Texas Eastern Transmission 10(xiii) to Corporation and EGC, dated Registration Statement June 1, 1993 (Contract No. 33-50561
Exhibit Description Reference No. #330788) 10(xiv) Service Agreement under NTS Incorporated by Rate Schedule by and between reference to Exhibit Columbia Gas Transmission 10(xiv) to NUI's Form Corporation and EGC, dated 10-K Report for Fiscal November 1, 1993 (Contract 1993 #39275) 10(xv) Service Agreement under SST Incorporated by Rate Schedule by and between reference to Exhibit Columbia Gas Transmission 10(xv) to NUI's Form Corporation and EGC, dated 10-K Report for Fiscal November 1, 1993 (Contract 1993 #38045) 10(xvi) Service Agreement under FTS Incorporated by Rate Schedule by and between reference to Exhibit Columbia Gas Transmission 10(xvi) to NUI's Form Corporation and EGC, dated 10-K Report for Fiscal November 1, 1993 (Contract 1993 #37882) 10(xvii) Gas Transportation Agreement Incorporated by under FT-G Rate Schedule by reference to Exhibit and between Tennessee Gas 10(xvii) to NUI's Form Pipeline Company and EGC 10-K Report for Fiscal (Contract #597), dated 1993 September 1, 1993 10(xviii) Gas Transportation Agreement Incorporated by under FT-G Rate Schedule by reference to Exhibit and between Tennessee Gas 10(xviii) to NUI's Pipeline Company and EGC Form 10-K Report for (Contract #603), dated Fiscal 1993 September 1, 1993 10(xix) Service Agreement by and Incorporated by between Transcontinental Gas reference to Exhibit Pipe Line Company and EGC, 10(xix) of NUI's Form dated November 1, 1995 10-K Report for Fiscal (Contract #3832) 1996 10(xx) Firm Transportation Service Incorporated by Agreement under FTS-1 Rate reference to Exhibit Schedule by and between City 10(xx) of NUI's Form Gas and Florida Gas 10-K Report for Fiscal Transmission dated October 1, 1993 1993 (Contract # 5034) 10(xxi) Lease Agreement between EGC Incorporated by and Liberty Hall Joint reference to Exhibit Venture, dated August 17, 1987 10(vi) of EGC's Form 10-K Report for Fiscal 10(xxii) 1988 Stock Plan Incorporated by reference to Exhibit 10(viii) to Registration Statement No. 33-21525 10(xxii) First Amendment to 1988 Stock Incorporated by Plan reference to Exhibit 10(xxxiii) to Registration Statement No. 33-46162 10(xxiii) Form of Termination of Incorporated by
Exhibit Description Reference No. Employment and Change in reference to Exhibit Control Agreements 10(xxiii) of NUI's Form 10-K Report for Fiscal 1995 10(xxiv) Firm Transportation Service Incorporated by Agreement under FTS-2 Rate reference to Exhibit Schedule by and between City 10(xxiv) of NUI's Form Gas and Florida Gas 10-K Report for Fiscal Transmission, dated December 1994 12, 1991 and Amendment dated November 12, 1993 (Contract #3608) 10(xxv) Service Agreement under Rate Incorporated by Schedule LG-A by and between reference to Exhibit Transcontinental Gas Pipeline 10(xxv) of NUI's Form and North Carolina Gas Service 10-K Report for Fiscal Division of Pennsylvania & 1994 Southern Gas Company, dated August 5, 1971 10(xxvi) Service Agreement under Rate Incorporated by Schedule GSS by and between reference to Exhibit Transcontinental Gas Pipeline 10(xxvi) of NUI's Form and North Carolina Gas 10-K Report for Fiscal Service, dated July 1, 1996 1997 10(xxvii) 1996 Employee Stock Purchase Incorporated by Plan reference to Exhibit 10(xxvii) of NUI's Form 10-K Report for Fiscal 1996 10(xxviii) Service Agreement under Rate Incorporated by Schedule FT by and between reference to Exhibit Transcontinental Gas Pipeline 10(xxviii) of NUI's and North Carolina Gas Service Form 10-K Report for Division of Pennsylvania & Fiscal 1994 Southern Gas Company, dated February 1, 1992 (Contract # 0.3922) 10(xxix) 1996 Directors Stock Purchase Incorporated by Plan reference to Exhibit 10(xxix) of NUI's Form 10-K Report for Fiscal 10(xxx) Gas Storage Contract under Incorporated by Rate Schedule FS by and reference to Exhibit between Tennessee Gas Pipeline 10(xxx) of NUI's Form Company and Pennsylvania & 10-K Report for Fiscal Southern Gas Company, dated 1994 September 1, 1993 (Contract #2277) 10(xxxi) Gas Transportation Agreement Incorporated by under Rate Schedule FT-A by reference to Exhibit and between Tennessee Gas 10(xxxi) of NUI's Form Pipeline Co. and Pennsylvania 10-K Report for Fiscal & Southern Gas Company, dated 1994 September 1, 1993 (Contract #935) 10(xxxii) Gas Transportation Agreement Incorporated by under Rate Schedule FT-A by reference to Exhibit
Exhibit Description Reference No. and between Tennessee Gas 10(xxxii) of NUI's Pipeline Co. and Pennsylvania Form 10-K Report for & Southern Gas Company, dated Fiscal 1994 September 1, 1993 (Contract #936) 10(xxxiii) Gas Transportation Agreement Incorporated by under Rate Schedule FT-A by reference to Exhibit and between Tennessee Gas 10(xxxiii) of NUI's Pipeline Co. and Pennsylvania Form 10-K Report for & Southern Gas Company, dated Fiscal 1994 September 1, 1993 (Contract #959) 10(xxxiv) Gas Transportation Agreement Incorporated by under Rate Schedule FT-A by reference to Exhibit and between Tennessee Gas 10(xxxiv) of NUI's Pipeline Co. and Pennsylvania Form 10-K Report for & Southern Gas Company, dated Fiscal 1994 September 1, 1993 (Contract #2157) 10(xxxv) Employment Agreement, dated as Incorporated by of July 29, 1988, between NUI reference to Exhibit Corporation and Jack Langer 10(xxxv) of NUI's Form 10-K Report for Fiscal 10(xxxvi) Service Agreement for Rate Incorporated by Schedule FT by and reference to Exhibit between Transcontinental Gas 10(xxxvi) of NUI's Pipe Line Corporation and EGC Form 10-K Report for (Contract #1.0431) dated April Fiscal 1995 1, 1995 10(xxxvii) Service Agreement for Rate Incorporated by Schedule FT by and reference to Exhibit between Transcontinental Gas 10(xxxvii) of NUI's Pipe Line Corporation and EGC Form 10-K Report for (Contract #1.0445) dated April Fiscal 1995 1, 1995 10(xxxviii) Service Agreement for Rate Incorporated by Schedule SS-1 by and between reference to Exhibit Texas Eastern Transmission 10(xxxviii) of NUI's Corporation and EGC (Contract Form 10-K Report for (#400196) dated September 23, Fiscal 1995 10(xxxix) Gas Storage Agreement Incorporated by reference under Rate Schedule FS by to Exhibit 10(xxxix) of and between Tennessee Gas NUI's Form 10-K Report for Pipeline Company and EGC Fiscal 1995 (Contract #8703) dated November 1, 1994 10(xl) Consulting Agreement, Incorporated by reference dated as of March 24, to Exhibit 10(xl) of NUI's 1995, between NUI Form 10-K Report for Fiscal Corporation and John Kean 1995 10(xli) Form of Deferred Filed herewith. Compensation Agreement 10(xlii) 1996 Stock Option and Incorporated by reference Stock Award Plan to Exhibit 10(xlii) of NUI's Form 10-K Report for Fiscal 1996
Exhibit Description Reference No. 10(xliii) Service Agreement under Incorporated by reference Rate Schedule FT by and to Exhibit 10(xliii) of between Elkton Gas and NUI's Form 10-K Report for Eastern Shore Natural Gas Fiscal 1997 Company, dated as of November 1, 1997 (Contract #010003) 10(xliv) Service Agreement under Incorporated by reference Rate Schedule FT by and to Exhibit 10(xliv) of between Elkton Gas and NUI's Form 10-K Report for Eastern Shore Natural Gas Fiscal 1997 Company, dated as of November 1, 1997 (Contract #010011) 10(xlv) Service Agreement under Incorporated by reference Rate Schedule FT by and to Exhibit 10(xlv) of NUI's between Elkton Gas and Form 10-K Report for Fiscal Eastern Shore Natural Gas 1997 Company, dated as of November 1, 1997 (Contract #010012) 10(xlvi) Service Agreement under Incorporated by reference Rate Schedule FT by and to Exhibit 10(xlvi) of between Elkton Gas and NUI's Form 10-K Report for Eastern Shore Natural Gas Fiscal 1997 Company, dated as of November 1, 1997 (Contract #010013) 10(xlvii) Service Agreement under Incorporated by reference Rate Schedule FT by and to Exhibit 10(xlvii) of between Elkton Gas and NUI's Form 10-K Report for Eastern Shore Natural Gas Fiscal 1997 Company, dated as of November 1, 1997 (Contract #020003) 10(xlviii) Service Agreement under Incorporated by reference Rate Schedule FT by and to Exhibit 10(xlviii) of between Elkton Gas and NUI's Form 10-K Report for Eastern Shore Natural Gas Fiscal 1997 Company, dated as of November 1, 1997 (Contract #020005) 10(xlix) Service Agreement under Filed herewith Rate Schedule FT by and between Elkton Gas and Eastern Shore Natural Gas Company, dated as of November 1, 1998 (Contract #010032) 10(l) Agreement between T.I.C. Incorporated by reference Enterprises, L.L.C and to Exhibit 10(i) of NUI's United States Postal Form 8-K filed 12/15/99. Service 12 Consolidated Ratio of Filed herewith Earnings to Fixed Charges 21 Subsidiaries of NUI Filed herewith Corporation 23 Consent of Independent Filed herewith
Exhibit Description Reference No. Public Accountants 27 Financial Data Schedule Filed herewith
Exhibits listed above which have heretofore been filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, and which were designated as noted above and have not been amended, are hereby incorporated by reference and made a part hereof with the same effect as if filed herewith.
The Company is a party to various agreements with respect to long-term indebtedness to which the total amount of indebtedness authorized under each agreement, respectively, does not exceed 10% of the total assets of the Company on a consolidated basis. The Company hereby agrees to furnish to the Securities and Exchange Commission copies of such agreements upon request.
(b) Reports on Form 8-K:
On December 15, 1999, the Company filed a Form 8-k, Item 5, Other Events, reporting an agreement between its affiliate T.I.C. Enterprises, L. L. C and the United States Postal Service.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Consolidated Financial Statements of NUI Corporation and Subsidiaries:
Report of Independent Public Accountants
Consolidated Financial Statements as of September 30, 1999 and 1998 and for each of the Three Years in the Period Ended September 30, 1999
Unaudited Quarterly Financial Data for the Two-Year Period Ended September 30, 1999 (Note 12 of the Notes to the Company's Consolidated Financial Statements)
Financial Statement Schedule of NUI Corporation and Subsidiaries:
Report of Independent Public Accountants
Schedule II - Valuation and Qualifying Accounts for each of the Three Years in the Period Ended September 30, 1999
All other schedules are omitted because they are not required, are inapplicable or the information is otherwise shown in the financial statements or notes thereto.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To NUI Corporation:
We have audited the accompanying consolidated balance sheet and statement of consolidated capitalization of NUI Corporation (a New Jersey corporation) and Subsidiaries as of September 30, 1999 and 1998, and the related consolidated statements of income, cash flows and shareholders' equity, for each of the three years in the period ended September 30, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NUI Corporation and Subsidiaries as of September 30, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1999, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in Item 14(a)(2) is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York November 9, 1999
NUI Corporation and Subsidiaries Consolidated Statement of Income (Dollars in thousands, except per share amounts)
Years Ended September 30,
1999 1998 1997 Operating Margins Operating revenues $828,174 $828,036 $608,596 Less- Purchased gas and 621,363 629,608 402,160 fuel Energy taxes 14,148 18,852 33,598 -------- -------- -------- 192,663 179,576 172,838 -------- -------- -------- Other Operating Expenses
Operations and 100,490 95,881 94,799 maintenance
Depreciation and 26,939 24,952 23,032 amortization
Restructuring and other (3,954) 9,686 -- non-recurring items
Other taxes 9,101 9,733 9,189 Income taxes 16,604 8,390 9,377 -------- -------- -------- 149,180 148,642 136,397 -------- -------- -------- Operating Income 43,483 30,934 36,441 -------- -------- -------- Other Income and Expense, Net Equity in earnings 1,223 (56) 1,334 (losses) of TIC Enterprises, LLC, net Other 360 969 1,940 Income taxes (554) (320) (1,146) ------- ------- ------- 1,029 593 2,128 ------- ------- ------- Interest Expense 19,952 19,213 18,920 ------- ------- ------- Net Income $24,560 $12,314 $19,649 ------- ------- ------- Net Income Per Share of Common Stock $ 1.93 $ .98 $ 1.75 ======== ======== ======== Dividends Per Share of Common Stock $ .98 $ .98 $ .94 ======== ======== ======== Weighted Average Number of Shares of Common Stock 12,715,300 12,584,335 11,253,513 Outstanding ========== ========== ==========
See the notes to the consolidated financial statements.
NUI Corporation and Subsidiaries Consolidated Balance Sheet (Dollars in thousands) September 30, 1999 1998 ASSETS Utility Plant Utility plant, at original cost $779,131 $737,323
Accumulated depreciation and (256,898) (234,484) amortization
Unamortized plant acquisition 30,242 30,904 adjustments, net ------- ------- 552,475 533,743 ------- ------- Funds for Construction Held by Trustee 37,413 12,254 ------- ------- Investment in TIC Enterprises, LLC 24,905 23,874 ------- ------- Other Investments 1,385 1,687 ------- ------- Current Assets Cash and cash equivalents 1,561 929
Accounts receivable (less allowance for doubtful accounts of $1,697 in 1999 85,056 62,673 and $1,714 in 1998)
Fuel inventories, at average cost 28,573 34,937
Unrecovered purchased gas costs 901 8,061
Prepayments and other 50,108 37,790 -------- -------- 166,199 144,390 Other Assets -------- -------- Regulatory assets 51,615 50,475 Deferred assets 10,234 10,424 -------- -------- 61,849 60,899 -------- -------- $844,226 $776,847 ======= ======= CAPITALIZATION AND LIABILITIES Capitalization (See accompanying statements) Common shareholders' equity $237,318 $222,992 Preferred stock -- -- Long-term debt 268,911 229,098 ------- ------- 506,229 452,090 ------- ------- Capital Lease Obligations 2,599 8,566 ------- ------- Current Liabilities Notes payable to banks 73,615 87,630
Current portion of capital lease 7,776 1,810 obligations
Accounts payable, customer deposits and accrued liabilities 108,023 87,158
Federal income and other taxes 4,359 5,635 ------- ------- 193,773 182,233 Other Liabilities ------- ------- Deferred Federal income taxes 69,951 62,497 Unamortized investment tax credits 5,251 5,710 Environmental remediation reserve 33,981 33,981 Regulatory and other liabilities 32,442 31,770 ------- ------- 141,625 133,958 ------- ------- $844,226 $776,847 ======= =======
See the notes to the consolidated financial statements.
NUI Corporation and Subsidiaries Consolidated Statement of Cash Flows (Dollars in thousands)
Years Ended September 30, 1999 1998 1997
Operating Activities Net Income $24,560 $12,314 $19,649 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 28,914 26,050 24,040 Deferred Federal income taxes 7,454 357 3,246 Non-cash portion of restructuring (4,726) 7,301 - and other non-recurring items Amortization of deferred investment tax credits (459) (461) (464) Other 3,237 1,743 1,020 Effects of changes in: Accounts receivable, net (22,383) 1,826 (20,911) Fuel inventories 6,364 (3,869) (1,877) Accounts payable, deposits and accruals 20,865 (7,347) 28,133 Over (under) recovered purchased gas costs 7,160 1,541 (2,614) Other (12,030) (18,604) (9,707) ------ ------ ------ Net cash provided by operating activities 58,956 20,851 40,515 ------ ------ ------ Financing Activities Proceeds from sales of common stock, net of treasury stock purchased 340 3,658 28,204 Dividends to shareholders (12,443) (12,311) (10,575)
Proceeds from issuance of long-term 39,813 -- 53,569 debt
Funds for construction held by trustee, net (24,871) 16,670 18,784 Repayments of long-term debt -- (54,600) (950) Principal payments under capital lease obligations (1,810) (1,792) (1,730) Net short-term (repayments) borrowings (14,015) 33,202 (467) ------ ------ ------ Net cash (used for) provided by financing activities (12,986) (15,173) 86,835 ------ ------ ------ Investing Activities Cash expenditures for utility plant (47,213) (59,969) (51,366) Investment in TIC Enterprises, LLC -- -- (22,584) Other 1,875 (3,573) 1,657 ------ ------ ------ Net cash used in investing (45,338) (63,542) (72,293) activities ------ ------ ------ Net Increase (Decrease) in Cash and Cash Equivalents $ 632 $(57,864) $55,057 ======= ======= ====== Cash and Cash Equivalents At beginning of period $ 929 $58,793 $ 3,736 At end of period $1,561 $ 929 $58,793
Supplemental Disclosures of Cash Flows Income taxes paid, net $7,695 $ 6,482 $ 5,008 Interest paid 20,732 $22,094 $19,760
See the notes to the consolidated financial statements.
NUI Corporation and Subsidiaries Consolidated Statement of Capitalization (Dollars in thousands)
September 30, 1999 1998 Long-Term Debt Gas facilities revenue bonds 6.35% due October 1, 2022 $46,500 $46,500 6.40% due October 1, 2024* 20,000 20,000 Variable rate due June 1, 2026* 39,000 39,000 5.70% due June 1, 2032 54,600 54,600 5.25% due November 1, 2033* 40,000 -- Medium-term notes 7.125% due August 1, 2002 20,000 20,000 8.35% due February 1, 2005 50,000 50,000 ------- ------- 270,100 230,100 Unamortized debt discount (1,189) (1,002) ------- ------- 268,911 229,098
Preferred Stock, 5,000,000 shares authorized; none issued -- --
Common Shareholders' Equity Common Stock, no par value; shares authorized: 30,000,000; shares outstanding: 12,750,270 in 1999 and 12,680,398 in 1998 209,984 207,356 Shares held in treasury: 122,219 in 1999 and 106,739 in 1998 (2,311) (1,932) Retained earnings 31,380 19,263 Unearned employee compensation (1,735) (1,695) ------- ------- 237,318 222,992 ------- ------- Total Capitalization $506,229 $452,090 ======= =======
* The total unexpended portions of the net proceeds from these bonds, amounting to $32.0 million and $7.1 million as of September 30, 1999 and September 30, 1998, respectively, are carried on the Company's consolidated balance sheet as funds for construction held by trustee, including interest earned thereon, until drawn upon for eligible construction expenditures.
See the notes to the consolidated financial statements.
* Represents common stock issued in connection with NUI Direct and various employee benefit plans.
See the notes to the consolidated financial statements.
NUI Corporation and Subsidiaries Notes to the Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include all operating divisions and subsidiaries of NUI Corporation (collectively referred to as the Company). The Company is a multi- state energy sales, services and distribution, and telecommunications company. Its utility operations distribute natural gas and related services in six states along the eastern seaboard and comprise Elizabethtown Gas (New Jersey), City Gas Company of Florida, North Carolina Gas, Elkton Gas (Maryland), Valley Cities Gas (Pennsylvania) and Waverly Gas (New York). The Company's non-regulated subsidiaries include NUI Energy, Inc. (NUI Energy), an energy retailer; NUI Energy Brokers, Inc. (NUI Energy Brokers), an energy wholesaler; NUI Energy Solutions, Inc., an energy project development and consulting entity; NUI Environmental Group, Inc., an environmental project development subsidiary; Utility Business Services, Inc. (UBS), a customer and geographic information systems and services subsidiary; and International Telephone Group, Inc. (ITG), a telecommunications services subsidiary (see Note 2). The Company also provides sales outsourcing through its 49 percent equity interest in TIC Enterprises, LLC (TIC). All intercompany accounts and transactions have been eliminated in consolidation.
The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Certain reclassifications have been made to the prior year financial statements to conform with the current year presentation.
Regulation. The Company is subject to regulation as an operating utility by the public utility commissions of the states in which it operates.
Utility Plant. Utility plant is stated at its original cost. Depreciation is provided on a straight-line basis over the remaining estimated lives of depreciable property by applying rates as approved by the state commissions. The composite average annual depreciation rate was 3 percent in fiscal 1999, fiscal 1998, and fiscal 1997. At the time properties are retired, the original cost plus the cost of retirement, less salvage, is charged to accumulated depreciation.
Repairs of all utility plant and replacements and renewals of minor items of property are charged to maintenance expense as incurred.
The net unamortized plant acquisition adjustments represent the remaining portion of the excess of the purchase price over the book value of net assets acquired. The excess is being amortized on a straight-line basis over 30 years from the date of acquisition. The results of operations of acquired entities have been included in the accompanying consolidated financial statements for the periods subsequent to their acquisition.
Operating Revenues and Purchased Gas and Fuel Costs. Operating revenues include accrued unbilled revenues through the end of each accounting period. Operating revenues also reflect adjustments attributable to weather normalization clauses that are accrued during the winter heating season and billed or credited to customers in the following year.
Costs of purchased gas and fuel for the Company's regulated utilities are recognized as expenses in accordance with the purchased gas adjustment clause applicable in each state. Such clauses provide for periodic reconciliations of actual recoverable gas costs and the estimated amounts that have been billed to customers. Under- or over- recoveries are deferred when they arise and are recovered from or refunded to customers in subsequent periods.
The Company's subsidiaries, NUI Energy Brokers and NUI Energy, mark- to-market through the income statement all trading positions, including forward sales and purchase commitments. (See Note 7 for a further description of the Company's use of derivative financial instruments.)
Environmental Reserve. The Company, with the aid of environmental consultants, regularly assesses the potential future costs associated with conducting investigative activities at each of the Company's sites and implementing appropriate remedial actions, as well as the likelihood of whether such actions will be necessary. The Company records a reserve if it is probable that a liability will be incurred and the amount of the liability can be reasonably estimated.
Stock Compensation. The Company follows the accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations in accounting for its employee stock-based compensation. The Company has elected to adopt the disclosure-only provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" (SFAS 123), which requires proforma disclosure of the effect of adopting the accounting under SFAS 123. If the Company had adopted SFAS 123, there would not have been a material effect on the results of operations or financial position.
Income Taxes. The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", which requires the liability method to be used to account for deferred income taxes. Under this method, deferred income taxes related to tax and accounting basis differences are recognized at the statutory income tax rates in effect when the tax is expected to be paid.
Investment tax credits, which were generated principally in connection with additions to utility plant made prior to January 1, 1986, are being amortized over the estimated service lives of the properties that gave rise to the credits.
Regulatory Assets and Liabilities. The Company's utility operations follow the accounting for regulated enterprises prescribed by Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS 71). In general, SFAS 71 requires deferral of certain costs and obligations, based upon orders received from regulators, to be recovered from or refunded to customers in future periods. The following represents the Company's regulatory assets and liabilities deferred in the accompanying consolidated balance sheet as of September 30, 1999 and 1998 (in thousands):
1999 1998 Regulatory Assets Environmental investigation and $35,950 $34,686 remediation costs Unrecovered gas costs 1,082 2,265 Postretirement and other employee 8,877 10,663 benefits Deferred piping allowances 1,692 2,108 Other 4,014 753 ------- ------- $51,615 $50,475 ======= ======= Regulatory Liabilities Net overcollection of income taxes $5,183 $5,425 Refunds to customers 2,928 2,478 Other 426 302 ------- ------- $8,537 $8,205 ======= =======
In the event that the provisions of SFAS 71 were no longer applicable, the Company would recognize a write-off of net regulatory assets (regulatory assets less regulatory liabilities) that would result in a charge to net income, which would be classified as an extraordinary item. However, although the gas distribution industry is becoming increasingly competitive, the Company's utility operations continue to recover their costs through cost-based rates established by the public utility commissions. As a result, the Company believes that the accounting prescribed under SFAS 71 remains appropriate.
Cash Equivalents. Cash equivalents consist of a money market account which invests in securities with original maturities of three months or less.
Net Income Per Share of Common Stock. Net income per share of common stock is based on the weighted average number of shares of NUI common stock outstanding. The Company follows the provisions of Statement of Financial Accounting Standards No. 128, "Earnings per Share", which requires computing and presenting basic and diluted earnings per share. The Company does not have other classes of stock or dilutive common stock equivalents. As such, there is no difference between basic and diluted earnings per share.
New Accounting Standards. In June 1999, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of Effective Date of FASB Statement No. 133". The Statement defers for one year the effective date of FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). The rule requires that the Company adopt SFAS 133 in fiscal 2001. SFAS 133 was issued in June 1998 and establishes accounting and reporting standards regarding derivative instruments. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value as either an asset or liability, and that changes in the fair value be recognized currently in earnings unless certain criteria are met. At this time, the Company has elected not to adopt SFAS 133 prior to its effective date. Since both NUI Energy Brokers and NUI Energy currently utilize mark-to-market accounting, it is not anticipated that the adoption of SFAS 133 will have a material impact on net income when adopted.
2. Purchase of ITG
On November 12, 1999, the Company closed on its acquisition of International Telephone Group, Inc. (ITG). The acquisition was treated as a merger whereby ITG merged with and into a subsidiary of the Company. The purchase price totaled $3.8 million and included the issuance of 113,200 shares of NUI common stock, with the remainder paid in cash. ITG is a full service telephone company that provides its customers with a single service solution for all their telecommunication requirements including local, long distance, cellular, internet, and data communications services. The Agreement and Plan of Merger contains a provision whereby the previous shareholders of ITG will receive an additional $1.0 million in NUI common stock if ITG achieves certain revenue targets no later than December 31, 2003.
The acquisition is being accounted for as a purchase. The excess of the purchase price over the net assets of ITG is estimated to be approximately $4.5 million, which includes the additional earnings contingency noted above, and is expected to be amortized on a straight-line basis over a 20-year period.
3. Restructuring and Other Non-Recurring Items
In 1998, the Company commenced a reorganization effort that included early retirement programs for both non-bargaining and bargaining unit employees, as well as other workforce reductions. The reorganization efforts resulted in accounting charges and gains that were incurred in both fiscal 1999 and 1998. In fiscal 1999, the Company recognized approximately $4.0 million of pre-tax, non-recurring gains primarily relating to these reorganization efforts. In fiscal 1998, the Company incurred approximately $9.7 million of pre-tax, non-recurring charges primarily related to the reorganization effort. Specific detail on these non-recurring items follows.
In June 1998, the Company offered an early retirement program to its non-bargaining unit personnel. The program was accepted by 74 of the eligible 77 employees. In accordance with Statement of Financial Accounting Standards No. 88, "Employers' Accounting for Settlements
and Curtailments of Defined Benefit Pension Plans and for Termination Benefits" (SFAS 88), the Company recorded a special termination charge of approximately $7.3 million during fiscal 1998 when the cost was recognizable. In March 1999, the Company recorded a settlement gain of approximately $6.8 million as a result of satisfaction of all future liabilities associated with these employees.
In January 1999, the Company offered an early retirement program to its bargaining unit employees in New Jersey. The program was accepted by 32 of the eligible 35 employees. In accordance with SFAS 88, the Company recorded a special termination charge of approximately $1.8 million in the second quarter of fiscal 1999 associated with these retirements. In June 1999, the Company recorded a settlement gain of approximately $3.2 million as the result of satisfaction of all future liabilities associated with these employees. Also in June 1999, the Company recorded an additional $0.6 million of other benefit expenses associated with these employees.
In fiscal 1999, the Company also recorded approximately $1.8 million of charges relating to the write-off of certain regulatory assets which will not be recovered through rates, as well as $1.8 million of charges relating to other items which were deemed to be separate from recurring earnings.
In fiscal 1998, the Company also recorded approximately $1.5 million of other benefit expenses associated with employees that accepted the early retirement program and approximately $0.9 million of other charges associated with the reorganization of the Company.
4.Capitalization
Long-Term Debt. On December 8, 1998, the Company issued $40 million of tax-exempt Gas Facilities Revenue Bonds at an interest rate of 5.25 percent. These bonds will mature in November 2033 and the proceeds will be used to finance a portion of the Company's capital expenditure program in New Jersey.
The Company deposits in trust the unexpended portion of the net proceeds from its Gas Facilities Revenue Bonds until drawn upon for eligible expenditures. As of September 30, 1999 and September 30, 1998, the total unexpended portions of all of the Company's Gas Facilities Revenue Bonds were $32.0 million and $7.1 million, respectively, and are classified on the Company's consolidated balance sheet, including interest earned thereon, as funds for construction held by trustee.
The Company is scheduled to repay $20 million of Medium-Term Notes in August 2002.
Preferred Stock. The Company has 5,000,000 shares of authorized but unissued preferred stock. Shares of Series A Junior Participating Preferred Stock have been reserved for possible future issuance in connection with the Company's Shareholder Rights Plan, described below.
Shareholder Rights Plan. In November 1995, the Company's Board of Directors adopted a Shareholder Rights Plan under which shareholders of NUI common stock were issued as a dividend one right to buy one one-hundredth of a share of Series A Junior Participating Preferred
Stock at a purchase price of $50 (Right) for each share of common stock held. The Rights initially attach to the shares of NUI common stock and can be exercised or transferred only if a person or group (an Acquirer), with certain exceptions, acquires, or commences a tender offer to acquire beneficial ownership of 15 percent or more of NUI common stock. Each Right, except those held by the Acquirer, may be used by the non-acquiring shareholders to purchase, at the Right's exercise price, shares of NUI common stock having a market value equivalent to twice the Right's exercise price, thus substantially reducing the Acquirer's ownership percentage.
The Company may redeem the Rights at $0.001 per Right at any time prior to the occurrence of any such event. All Rights expire on November 27, 2005.
Common Stock. The Company periodically issues shares of common stock in connection with NUI Direct, the Company's dividend reinvestment and stock purchase plan, and various employee benefit plans. Effective May 26, 1998, several of these plans commenced purchasing shares on the open market to fulfill the plans' requirements. Under the terms of these plans, the Company may periodically change the method of purchasing shares from open market purchases to purchases directly from the Company, or vice versa.
At September 30, 1999, shares reserved for issuance under the Company's common stock plans were: NUI Direct, 62,855; Savings and Investment Plan, 122,135; 1996 Stock Option and Stock Award Plan, 383,004; 1996 Employee Stock Purchase Plan, 122,253; and the 1996 Director Stock Purchase Plan, 23,083.
Stock Plans. The Company's Board of Directors believes that the interests of both directors and management should be closely aligned with those of shareholders. As a result, under the 1996 Stock Option and Stock Award Plan, and the 1996 Director Stock Purchase Plan, the Company has a long-term compensation program for directors, executive officers and key employees involving shares of NUI common stock.
Restricted shares of stock granted as long-term compensation for executive officers and key employees amounted to 75,900 in fiscal 1999, 74,600 in fiscal 1998 and 69,800 shares in fiscal 1997. As of September 30, 1999, a total of 147,809 shares of restricted stock that have been granted as long-term compensation are subject to future vesting requirements, and are restricted from resale.
Executive officers and key employees are eligible to be granted options for the purchase of NUI common stock at prices equal to the market price per share on the date of grant. The option must be exercised within 10 years from the date of grant. As of September 30, 1999 there were 5,000 options outstanding and exercisable at a price of $17.625 per share. During fiscal 1998, 4,800 options were exercised at a price of $15.77 per share. There were no other transactions during the last three fiscal years.
Dividend Restrictions. The Company's long-term debt agreements include, among other things, restrictions as to the payment of cash dividends. Under the most restrictive of these provisions, the Company was permitted to pay approximately $54 million of cash dividends at September 30, 1999.
5. Notes Payable to Banks
At September 30, 1999, the Company's outstanding notes payable to banks were $73.6 million with a combined weighted average interest rate of 5.8 percent. Unused lines of credit at September 30, 1999 were approximately $62.4 million.
The weighted average daily amounts outstanding of notes payable to banks and the weighted average interest rates on those amounts were $68.2 million at 5.3 percent in fiscal 1999, $66.8 million at 5.7 percent in fiscal 1998 and $66.0 million at 5.5 percent in fiscal 1997.
6. Leases
Utility plant held under capital leases amounted to $24.3 million at September 30, 1999 and $24.6 million at September 30, 1998, with related accumulated amortization of $15.6 million and $14.3 million, respectively. These properties consist principally of leasehold improvements and office furniture and fixtures. A summary of future minimum payments for properties held under capital leases follows (in thousands):
2000 $7,981 2001 1,316 2002 1,093 2003 574 2004 126 2005 and thereafter -- ----- Total future minimum payments 11,090 Amount representing interest (715) Current portion of capital lease obligations (7,776) ------ Capital lease obligations $2,599 ======
Minimum payments under noncancelable operating leases, which relate principally to office space, are approximately $3.3 million in each of fiscal years 2000 through 2004. Rents charged to operations expense were $5.1 million in fiscal 1999, $5.8 million in fiscal 1998 and $5.5 million in fiscal 1997.
7. Financial Instruments
Derivatives. The Company's wholesale trading subsidiary, NUI Energy Brokers, utilizes the following financial instruments to provide competitive energy supplies and enhance the Company's profitability: forward contracts, which commit the Company to purchase or sell physical natural gas in the future; swap agreements, which require payments to (or receipt of payments from) counterparties based on the differential between a fixed price and an index price of natural gas; and futures and options contracts, bought on the New York Mercantile
Exchange (NYMEX), to buy or sell natural gas at a fixed price in the future.
NUI Energy Brokers accounts for its risk management activities by marking-to-market all trading positions, and calculating a value-at- risk, on a daily basis. The values used for these calculations reflect NYMEX settlement prices, established pricing models, and quoted market volatilities. The Company manages open positions with a strict Risk Management Policy that limits its exposure to market risks and requires that any breach of policy be reported to senior management.
Margin requirements for natural gas futures contracts are recorded in other current assets. Realized and unrealized gains and losses are recorded in the consolidated statement of income under purchased gas and fuel. At September 30, 1999, NUI Energy Brokers' futures positions consisted of 2,793 long contracts and 2,715 short contracts at prices ranging from $2.080 to $3.223 per Mcf, none of which extend beyond December 2001, representing 55,080 MMcf of natural gas. Their options positions consisted of 1,339 puts and calls at varying strike prices, none of which extend beyond August 2000. In addition, NUI Energy Brokers has forward sales and purchase commitments associated with contracts totaling approximately 192,000 MMcf of natural gas, with terms extending through December 2005. During fiscal 1999, NUI Energy Brokers reduced their margin deposits with brokers by approximately $1.2 million to $4.3 million. Net realized and unrealized gains on derivative trading for fiscals 1999 and 1998 totaled $9.0 million and $2.8 million, respectively, which have been included in income.
The Company is exposed to credit risk in the event of default or non- performance by one of its trading partners. The Company adheres to credit policies that management believes minimizes overall credit risk.
Other Financial Instruments. The fair value of the Company's cash equivalents, funds for construction held by trustee and notes payable to banks are approximately equivalent to their carrying value. The carrying value of the Company's long-term debt exceeded its fair value by approximately $2 million as of September 30, 1999, while the carrying value was lower than its fair value by approximately $19 million as of September 30, 1998. The fair value of long-term debt was estimated based on quoted market prices for the same or similar issues.
8. Consolidated Taxes
The provision for Federal and State income taxes was comprised of the following (in thousands):
1999 1998 1997 Currently payable - Federal $5,759 $6,747 $7,205 State 4,265 2,166 595 Deferred - Federal 7,454 357 3,246 State 139 (99) (59) Amortization of investment tax credits (459) (461) (464) ------ ------ ------ Total provision for income $17,158 $8,710 $10,523
======= ====== =======
The components of the Company's net deferred Federal tax liability (asset) as of September 30, 1999 and 1998 are as follows (in thousands):
1999 1998 Depreciation and other utility plant differences $59,434 $55,093 Plant acquisition adjustments 9,627 10,023 Alternative minimum tax credit (3,614) (5,008) Unamortized investment tax credit (2,140) (1,823) Deferred charges and regulatory assets 3,948 5,522 Energy taxes 580 1,953 Pension 4,723 2,491 Other (2,607) (5,754) ------- ------- $69,951 $62,497 ======= =======
The alternative minimum tax credit can be carried forward indefinitely to reduce the Company's future tax liability.
The Company's effective income tax rates differ from the statutory Federal income tax rates due to the following (in thousands):
1999 1998 1997
Pre-tax income $41,718 $21,024 $30,172 ------- ------- ------- Federal income taxes computed at Federal statutory tax rate of 35% 14,601 7,358 10,560 Increase (reduction) resulting from: Excess of book over tax depreciation 341 357 354 Amortization of investment tax credits (459) (461) (464) Federal benefit of state tax provision (1,541) (723) (188) Other, net (188) 112 (275) ------- ----- -------- Total provision for Federal income 12,754 6,643 9,987 Provision for State income taxes 4,404 2,067 536 ------- ------ ------- Total provision for income taxes 17,158 8,710 10,523 (Less) provision included in other (554) (320) (1,146) ------- ----- ------- Provision for income taxes included $16,604 $8,390 $9,377 ======= ====== =======
9. Retirement Benefits
During the current year, the Company was required to adopt Statement of Financial Accounting Standards No. 132, "Employers' Disclosures about Pension and Other Postretirement Benefits" (SFAS 132). SFAS 132
amended the disclosure requirements of the Company's pension and postretirement benefits information, while not changing the manner in which these items are recorded.
Pension Benefits. The Company has non-contributory defined benefit retirement plans which cover all of its employees other than the City Gas of Florida union employees who participate in a union-sponsored multi-employer plan. The Company funds its plans in accordance with the requirements of the Employee Retirement Income Security Act of 1974 and makes contributions to the union sponsored plan in accordance with its contractual obligations. Benefits paid under the Company's plans are based on years of service and levels of compensation. The Company's actuarial calculation of pension expense is based on the projected unit cost method.
The changes in the pension benefit obligation for the Company's plans were as follows (in thousands):
1999 1998 Benefit obligation at beginning of year $114,233 $ 88,942 Service cost 2,446 2,370 Interest cost 6,281 6,459 Amendments 5,990 8,583 Actuarial (gain) loss (9,603) 14,797 Benefits paid (38,502) (6,918) -------- -------- Benefit obligation at end of year $80,845 $114,233 ======== ========
The change in the Company's plan assets were as follows (in thousands):
1999 1998 Fair value of plan assets at beginning of year $140,975 $137,290 Actual return on plan assets 46,450 10,603 Benefits paid (38,502) (6,918) ------- ------- Fair value of plan assets at end of year $148,923 $140,975 ======== ========
The reconciliation of the funded status of the Company's funded plans as of September 30, 1999 and 1998 was as follows (in thousands):
1999 1998
Funded status $ 80,845 $114,233 Market value of plan assets 148,923 140,975 -------- -------- Plan assets in excess of projected benefit obligation 68,078 26,742 Unrecognized net gain (52,484) (20,973) Unrecognized prior service cost 3,361 543 Unrecognized net transition (967) (1,967) asset -------- -------- Pension prepayment $ 17,988 $ 4,345
======== ========
The projected benefit obligation was calculated using a discount rate of 7.5 percent in fiscal 1999 and 6.5 percent in fiscal 1998, and an assumed annual increase in compensation levels of 4 percent in both fiscal 1999 and fiscal 1998. The expected long-term rate of return on assets was calculated at 9.75 percent in both fiscal 1999 and 1998. The assets of the Company's funded plans are invested primarily in publicly traded fixed income and equity securities.
The components of pension expense for the Company's plans were as follows (in thousands):
1999 1998 1997 Service cost $2,446 $2,370 $1,849 Interest cost 6,281 6,459 6,480 Expected return on plan assets (13,048) (13,111) (36,984) Net amortization and deferral (1,069) (2,407) 26,089 Special termination benefits 1,799 7,301 1,150 Settlement gain (10,051) - - ------- ------- ------- Pension (credit) $(13,642) $ 612 $(1,416) expense ======== ======= =======
Certain key employees also participate in an unfunded supplemental retirement plan. The projected benefit obligation under this plan was $6.5 million as of September 30, 1999 and $5.8 million as of September 30, 1998, and the expense for this plan was approximately $0.7 million in both fiscals 1999 and 1998, and $0.6 million in fiscal 1997.
Postretirement Benefits Other Than Pensions. The Company provides certain health care benefits to all retirees receiving benefits under a Company pension plan other than the City Gas Company of Florida plan, who reach retirement age while working for the Company.
The Company accounts for these plans under Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS 106), which, among other things, requires companies to accrue the expected cost of providing other postretirement benefits to employees and their beneficiaries during the years that eligible employees render the necessary service. The Company does not currently fund these future benefits.
The changes in the postretirement benefit obligation for the Company's plans were as follows (in thousands):
1999 1998 Benefit obligation at beginning of year $31,421 $22,933 Service cost 1,243 813 Interest cost 2,087 1,683 Actuarial (gain) loss (4,174) 6,997 Benefits paid (1,345) (1,035) Other 15 30 ------- -------
Benefit obligation at end of year $29,247 $31,421 ======= =======
The change in the Company's plan assets were as follows (in thousands):
1999 1998 Fair value of plan assets at $ - $ - beginning of year Employer contributions 2,830 1,014 Plan participants' 15 contributions 21 Benefits paid (1,345) (1,035) --------- -------- Fair value of plan assets at end of year $ 1,500 $ - ========= ========
The reconciliation of the funded status of the Company's postretirement plans other than pensions as of September 30, 1999 and 1998, was as follows (in thousands):
1999 1998 Funded status $27,747 $31,421 Unrecognized transition obligation (9,616) (11,603) Unrecognized net (loss) (3,568) (8,204) -------- -------- Accrued postretirement benefit obligation $14,563 $11,614 ======= =======
The components of postretirement benefit expense other than pensions for the years ended September 30, 1999 and 1998, were as follows (in thousands):
1999 1998 Service cost $1,242 $ 813 Interest cost 2,089 1,683 Amortization of transition obligation 730 774 Other 217 8 ------ ------ Net postretirement expense $4,278 $3,278 ====== ======
The health care trend rate assumption is 9.4 percent in 2000 gradually decreasing to 5.5 percent for the year 2006 and later. The discount rate used to compute the accumulated postretirement benefit obligation was 7.5 percent in fiscal 1999 and 6.5 percent in fiscal 1998. An increase in the health care trend rate assumption by one percentage point in all years would increase the accumulated postretirement benefit obligation by approximately $4.7 million and the aggregate annual service and interest costs by approximately $0.8 million.
On September 23, 1998, the New Jersey Board of Public Utilities (NJBPU) issued an order approving the Company's petition to increase
its base rates in New Jersey by approximately $2.4 million annually to recover postretirement benefits computed under SFAS 106. The rate increase was effective October 1, 1998 and allows for previously deferred costs, as well as future SFAS 106 costs, to be recovered over a rolling 15-year period. The Company has previously received an order from the North Carolina Utilities Commission to include in rates the amount of postretirement benefit expense other than pensions computed under SFAS 106.
The Company continually evaluates alternative ways to manage these benefits and control their costs. Any changes in the plan or revisions to assumptions that affect the amount of expected future benefit may have a significant effect on the amount of the reported obligation and the annual deferral and expense.
10. Business Segment Information
During the current fiscal year, the Company adopted Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131). SFAS 131 is based on disclosing information under the "management approach" which relates to the way management uses information to evaluate performance, make operating decisions and allocate resources among the various segments. The adoption of SFAS 131 did not affect the results of operations or financial position of the Company, but did affect the disclosure of segment information for each of the fiscal years presented.
The Company's operations are organized and managed by three primary segments: Distribution Services, Energy Sales and Services and Customer Services. The Distribution Services segment distributes natural gas in six states through the Company's regulated utility divisions. The Energy Sales and Services segment reflects the operations of the Company's NUI Energy, NUI Energy Brokers and NUI Energy Solutions subsidiaries, as well as off-system sales by the utility divisions. The Customer Services segment provides appliance repair and maintenance, mapping services to outside utilities and payment processing and collections primarily for water and waste-water usage. The Company also has corporate operations that do not generate any revenues or operating margins.
The following table provides information concerning the major segments of the Company for each of the three fiscal years ended September 30, 1999, 1998 and 1997. Revenues and operating margins include intersegment sales to affiliated entities, which are eliminated in consolidation. Identifiable assets include only those attributable to the operations of each segment. All of the Company's operations are in the United States and therefore do not need separate disclosure by geographic region. Certain reclassifications have been made to prior year segment data to conform with the current year's presentation.
(Dollars in thousands) 1999 1998 1997
Revenues: Distribution Services $378,099 $390,046 $417,422 Energy Sales & Services 462,415 427,300 180,111 Customer Services 19,112 17,696 15,209 Intersegment Revenues (31,452) (7,006) (4,146) -------- -------- --------
Total Revenues $828,174 $828,036 $608,596 ======== ======== ======== Operating Margins: Distribution Services $162,264 $158,412 $153,115 Energy Sales & Services 13,319 5,441 6,429 Customer Services 19,112 17,696 15,209 Intersegment Operating Margins (2,032) (1,973) (1,915) -------- -------- -------- Total Operating Margins $192,663 $179,576 $172,838
Pre-Tax Operating Income: Distribution Services $ 49,551 $ 50,704 $ 45,646 Energy Sales & Services 6,585 (1,744) 1,081 Customer Services 1,404 726 (1,032) -------- ------- -------- Total Pre-Tax Operating Income $ 57,540 $ 49,686 $ 45,695 ======== ======== ======== Depreciation & Amortization: Distribution Services $ 22,577 $ 20,904 $ 20,024 Energy Sales & Services 238 243 50 Customer Services 2,140 2,221 2,006 -------- -------- -------- Total Depreciation & Amortization $ 24,955 $ 23,368 $ 22,080 ======== ======== ======== Identifiable Assets: Distribution Services $710,743 $678,776 $714,161 Energy Sales & Services 70,220 39,849 28,638 Customer Services 14,976 14,866 14,885 -------- -------- -------- Total Identifiable Assets $795,939 $733,491 $757,684
Capital Expenditures: Distribution Services $ 39,471 $ 54,809 $ 41,223 Energy Sales & Services 495 457 506 Customer Services 2,440 1,682 1,289 -------- -------- -------- Total Capital $ 42,406 $ 56,948 $ 43,018 Expenditures ======== ======== ========
A reconciliation of the Company's segment pre-tax operating income, depreciation and amortization, identifiable assets and capital expenditures to amounts reported on the consolidated financial statements is as follows:
(Dollars in thousands) 1999 1998 1997
Segment Pre-Tax Operating $57,540 $49,686 $45,695 Income Non-segment pre-tax operating (loss) income (1,407) (676) 123 Non-recurring items 3,954 (9,686) - Operating income taxes (16,604) (8,390) (9,377) ------- ------ ------
Operating income $43,483 $30,934 $36,441 ======= ======= ======= Segment Depreciation & Amortization $24,955 $23,368 $22,080 Non-segment depreciation & amortization 1,984 1,584 952 ------- ------- ------- Depreciation & Amortization $26,939 $24,952 $23,032 ======= ======= ======= Segment Identifiable Assets $795,939 $733,491 $757,684 Non-segment identifiable assets 48,287 43,356 45,981 ------- ------- ------- Total Assets $844,226 $776,847 $803,665 ======== ======== ======== Segment Capital Expenditures $42,406 $56,948 $43,018 Non-segment capital expenditures 5,523 3,918 9,261 ------- ------- ------- Total Capital Expenditures $47,929 $60,866 $52,279 ======= ======= =======
11. Commitments and Contingencies
Commitments. Capital expenditures are expected to be approximately $51 million in fiscal 2000.
Environmental Matters. The Company is subject to federal and state laws with respect to water, air quality, solid waste disposal and employee health and safety matters, and to environmental regulations issued by the United States Environmental Protection Agency (EPA), the New Jersey Department of Environmental Protection (NJDEP) and other federal and state agencies.
The Company owns, or previously owned, certain properties on which manufactured gas plants (MGP) were operated by the Company or by other parties in the past. In New Jersey, the Company has reported the presence of the six MGP sites to the EPA, the NJDEP and the New Jersey Board of Public Utilities (NJBPU). In 1991, the NJDEP issued an Administrative Consent Order for the MGP site located at South Street in Elizabeth, New Jersey, wherein the Company agreed to conduct a remedial investigation and to design and implement a remediation plan. In 1992 and 1993, the Company entered into a Memorandum of Agreement with the NJDEP for each of the other five New Jersey MGP sites. Pursuant to the terms and conditions of the Administrative Consent Order and the Memoranda of Agreement, the Company is conducting remedial activities at all six sites with oversight from the NJDEP.
The Company also owns, or previously owned, 10 former MGP facilities located in the states of North Carolina, South Carolina, Pennsylvania, New York and Maryland. The Company has joined with other North Carolina utilities to form the North Carolina Manufactured Gas Plant Group (the MGP Group). The MGP Group has entered into a Memorandum of Understanding with the North Carolina Department of Environment, Health and Natural Resources (NCDEHNR) to develop a uniform program
and framework for the investigation and remediation of MGP sites in North Carolina. The Memorandum of Understanding contemplates that the actual investigation and remediation of specific sites will be addressed pursuant to Administrative Consent Orders between the NCDEHNR and the responsible parties. The NCDEHNR has sought the investigation and remediation of sites owned by members of the MGP Group and has entered into Administrative Consent Orders with respect to four such sites. None of these four sites are currently or were previously owned by the Company.
Based on the most recent assessment, the Company has recorded a total reserve for environmental investigation and remediation costs of approximately $34 million, which is the minimum amount that the Company expects to expend during the next 20 years. The reserve is net of approximately $4 million, which will be borne by a prior owner and operator of two of the New Jersey sites in accordance with a cost sharing agreement. Of this reserve, approximately $30 million relates to the six New Jersey MGP sites and approximately $4 million relates to the 10 sites located outside New Jersey. However, the Company believes that it is possible that costs associated with conducting investigative activities and implementing remedial activities, if necessary, with respect to all of its MGP sites may exceed this reserve by an amount that could range up to an additional $24 million and be incurred during a future period of time that may range up to 50 years. Of this additional $24 million in possible future expenditures, approximately $12 million relates to the New Jersey MGP sites and approximately $12 million relates to the sites located outside New Jersey. As compared with the $34 million reserve currently recorded on the Company's books as discussed above, the Company believes that it is less likely that this additional $24 million will be incurred and therefore has not recorded it on its books.
The Company's prudently incurred remediation costs for the New Jersey MGP sites have been authorized by the NJBPU to be recoverable in rates. The most recent NJBPU base rate order permits the Company to utilize full deferred accounting for expenditures related to its New Jersey sites and provides for the recovery of $130,000 annually. As of July 1996, the Company is also able to recover MGP expenditures over a rolling seven-year period through its NJBPU approved MGP Remediation Adjustment Clause. As a result, the Company has begun rate recovery of approximately $5.5 million of environmental costs incurred through June 30, 1998. Recovery of an additional $2.0 million in environmental costs incurred between July 1, 1998 and June 30, 1999 is currently pending NJBPU approval. Accordingly, the Company has recorded a regulatory asset of approximately $34 million as of September 30, 1999, reflecting the future recovery of environmental remediation liabilities related to New Jersey MGP sites. The Company has also been successful in recovering a portion of MGP remediation costs incurred for the New Jersey sites from the Company's insurance carriers and continues to pursue additional recovery. With respect to costs associated with the remaining MGP sites located outside New Jersey, the Company intends to pursue recovery from ratepayers, former owners and operators, and insurance carriers, although the Company is not able to express a belief as to whether any or all of these recovery efforts will be successful. The Company is working with the regulatory agencies to prudently manage its MGP costs so as to mitigate the impact of such costs on both ratepayers and shareholders.
Gas Procurement Contracts. Certain of the Company's long-term contracts for the supply, storage and delivery of natural gas include
fixed charges that amount to approximately $68.6 million annually. The Company currently recovers, and expects to continue to recover, such fixed charges through its purchased gas adjustment clauses. As a result of the forthcoming unbundling of natural gas services in New Jersey, these contracts may result in the realization of stranded costs by the Company. Management believes the outcome of these actions will not have a material adverse effect on the Company's results. The Company also is committed to purchase, at market-related prices, minimum quantities of gas that, in the aggregate, are approximately 2.7 billion cubic feet (Bcf) per year or to pay certain costs in the event the minimum quantities are not taken. The Company expects that minimum demand on its systems for the duration of these contracts will continue to exceed these minimum purchase obligations.
Other. The Company is involved in various claims and litigation incidental to its business. In the opinion of management, none of these claims and litigation will have a material adverse effect on the Company's results of operations or its financial condition.
12. Unaudited Quarterly Financial Data
The quarterly financial data presented below reflects the seasonal nature of the Company's operations which normally results in higher earnings during the heating season, which is primarily in the first two fiscal quarters. (in thousands, except per share amounts):
Fiscal Quarters First Second Third Fourth
1999: Operating Revenues $229,598 $254,562 $160,678 $183,336 Operating Income 12,416 22,556 6,575 1,936 Net Income (Loss) 6,918 17,762 2,424 (2,544) Net Income (Loss) Per Share 0.55 1.40 0.19 (0.20)
1998: Operating Revenues $235,938 $258,798 $169,004 $164,296 Operating Income (Loss) 11,907 19,673 4,009 (4,655) Net Income (Loss) 7,421 15,063 (432) (9,738) Net Income (Loss) Per Share 0.60 1.20 (0.03) (0.77)
During the second quarter of fiscal 1999, the company recorded after- tax non-recurring income and other non-recurring items totaling $1.3 million ($2.1 million before income taxes), or $0.10 per share (see Note 3).
During the third quarter of fiscal 1999, the company recorded after- tax non-recurring income and other non-recurring items totaling $1.1 million ($1.9 million before income taxes), or $0.08 per share (see Note 3).
During the fourth quarter of fiscal 1998, the Company recorded after- tax restructuring and other non-recurring charges totaling $5.9 million ($9.7 million before income taxes), or $0.47 per share (see Note 3).
Quarterly net income (loss) per share in both fiscal 1999 and fiscal 1998 does not total to the annual amounts due to rounding and to changes in the average common shares outstanding.
SCHEDULE II
NUI Corporation and Subsidiaries Valuation and Qualifying Accounts For each of the Three Years in the Period Ended September 30, 1999 (Dollars in thousands)
Additions Balance, Charged to Balance, Beginning Costs and End of Description of Period Expenses Other Deductions Period
Allowance for doubtful accounts $1,714 $1,832 $699(a) $2,514(b) $1,697 Environmental remediation reserve $33,981 -- -- -- $33,981 Restructuring reserve $ 556 $ 149 -- 705 $ 0
Allowance for doubtful accounts $2,318 $ 2,942 $224(a) $3,770(b) $ 1,714 Environmental remediation reserve $33,981 -- -- -- $33,981 Restructuring reserve $ 0 $ 1,008 -- 452 $ 556
Allowance for doubtful accounts $ 2,288 $ 2,30 $1,088(a) $3,363(b) $ 2,318 Environmental remediation $33,981 -- -- -- $33,981 reserve
(a) Recoveries
(b) Uncollectible amounts written off.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the Township of Bedminster, State of New Jersey, on the day of December 20, 1999
NUI CORPORATION
By: JAMES R. VAN HORN Chief Administrative Officer, General Counsel and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
JOHN KEAN, JR. President, Chief December 20 , 1999 Executive Officer and Director (Principal executive officer)
JOHN KEAN Chairman and Director December 20, 1999
A. MARK ABRAMOVIC Senior Vice December 20, 1999 President, Chief Operating Officer and Chief Financial Officer (Principal financial and accounting officer)
JAMES J. FORESE Director December 20 , 1999
DR. VERA KING FARRIS Director December 20, 1999
J. RUSSELL HAWKINS Director December 20, 1999
BERNARD S. LEE Director December 20, 1999
R. V. WHISNAND Director December 20, 1999
JOHN WINTHROP Director December 20, 1999