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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1995 Commission file number 1-8359
NEW JERSEY RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-2376465
(State or other jurisdiction oF (I.R.S. Employer
incorporation or organization) Identification Number)
1415 Wyckoff Road, Wall, New Jersey - 07719 908-938-1480
(Address of principal executive offices) (Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12 (b) of the Act:
Common Stock - $2.50 Par Value New York Stock Exchange
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12 (g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES: X No:
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
YES: No: X
The aggregate market value of the Registrant's Common Stock held by
non-affiliates was $511,244,659 based on the closing price of $28.75 per share
on December 15, 1995.
The number of shares outstanding of $2.50 par value Common Stock as of December
15, 1995 was 17,928,239.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1995 Annual Report to Stockholders are incorporated
by reference into Part I and Part II of this report.
Portions of the Registrant's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held February 14, 1996, are incorporated by reference into
Part I and Part III of this report.
TABLE OF CONTENTS
PART I Page
----
ITEM 1 - Business 1
Business Segments
New Jersey Natural Gas Company
General 2
Throughput 2
Seasonality of Gas Revenues 3
Gas Supply 3
Regulation and Rates 5
Environment 8
Franchises 8
Competition 9
New Jersey Natural Energy Company 9
NJR Energy Corporation 9
Commercial Realty & Resources Corp. 10
Paradigm Power, Inc. 11
Employee Relations 12
Executive Officers of the Registrant 12
ITEM 2 - Properties 13
ITEM 3 - Legal Proceedings 15
ITEM 4 - Submission of Matters to a Vote of Security Holders 21
PART II
ITEM 5 - Market for the Registrant's Common Stock and Related
Stockholder Matters 22
ITEM 6 - Selected Financial Data 22
ITEM 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 22
ITEM 8 - Financial Statements and Supplementary Data 22
ITEM 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 22
PART III
ITEMS 10, 11, 12, and 13 22
PART IV
ITEM 14 - Exhibits, Financial Statement Schedules
and Reports on Form 8-K 23
Index to Financial Statement Schedules 24
Signatures 26
Report of Independent Public Accountants 27
Consent of Independent Public Accountants 27
Exhibit Index 28
1
PART I
ITEM 1. BUSINESS
New Jersey Resources Corporation (the Company or NJR) is a New Jersey
corporation formed in 1982 pursuant to a corporate reorganization. The Company
is an energy holding company and its subsidiaries are engaged primarily in
natural gas distribution, unregulated marketing of natural gas and fuel and
capacity management services, oil and natural gas transportation and storage and
commercial real estate development as follows:
1) New Jersey Natural Gas Company (NJNG), a public utility that distributes
natural gas to more than 352,000 residential, commercial and industrial
customers throughout virtually all of Monmouth and Ocean counties, and parts of
Morris and Middlesex counties in New Jersey;
2) NJR Energy Services Corporation (Energy Services), a sub-holding company of
NJR formed in 1995 to better segregate the Companies energy-related operations
which includes the following wholly-owned subsidiaries:
New Jersey Natural Energy Company (Natural Energy), formed in 1995 to
participate in the unregulated marketing of natural gas and fuel and capacity
management services; and
NJR Energy Corporation (NJR Energy), a participant in oil and natural gas
development, production, transportation, storage and other energy related
ventures in various locations in the United States through its subsidiaries, New
Jersey Natural Resources Company (NJNR), NJNR Pipeline Company (Pipeline), NJR
Storage Corporation (Storage), Natural Resources Compressor Company (Compressor)
and NJRE Operating Company (NJRE Operating);
3) NJR Development Corporation, formerly Paradigm Resources Corporation, a
sub-holding company of NJR which includes the Company's remaining non-regulated
subsidiaries, as follows:
Paradigm Power, Inc. (PPI), which was formed to develop and invest in
natural gas-fueled cogeneration and independent power production projects and
its subsidiaries, Lighthouse One, Inc. and Lighthouse II, Inc.;
Commercial Realty & Resources Corp. (CR&R), which develops and owns
commercial office and mixed-use commercial/industrial real estate projects
located in New Jersey; and
NJR Computer Technologies, Inc., which has invested in certain information
technologies.
See Note 2 to the Consolidated Financial Statements - Discontinued
Operations in the Company's 1995 Annual Report, filed as Exhibit 13-1 hereto,
for a discussion of the Company's decision to exit the oil and gas production
business and no longer pursue investments in cogeneration and independent power
production facilities. See Item 1. Business - Commercial Realty & Resources
Corp. below and Note 12 to the Consolidated Financial Statements - Subsequent
Event in the Company's 1995 Annual Report, filed as Exhibit 13-1 hereto, for a
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discussion of the sale of certain real estate assets.
The Company is an exempt holding company under Section 3(a)(1) of the
Public Utility Holding Company Act of 1935 (PUHCA).
BUSINESS SEGMENTS
See Note 11 to the Consolidated Financial Statements - Business Segment
Data in the Company's 1995 Annual Report, filed as Exhibit 13-1 hereto, for
business segment financial information.
NEW JERSEY NATURAL GAS COMPANY
General
NJNG provides natural gas service to more than 352,000 customers. Its
service territory encompasses 1,436 square miles, covering 104 municipalities
with an estimated population of 1.3 million.
NJNG's service territory is primarily suburban, with a wide range of
cultural and recreational activities, highlighted by approximately 100 miles of
New Jersey seacoast. NJNG's service territory is in proximity to New York,
Philadelphia and the metropolitan areas of northern New Jersey and is accessible
through a network of major roadways and mass transportation. These factors have
contributed to NJNG adding 12,465, 11,222 and 9,306 new customers in 1995, 1994
and 1993, respectively. This growth rate of more than 3% is expected to continue
with projected additions of 60,700 new customers over the next five years. See
Liquidity and Capital Resources-NJNG in the Company's 1995 Annual Report, filed
as Exhibit 13-1 hereto, for a discussion of NJNG's projected capital expenditure
program associated with this growth in 1996 and 1997.
In assessing the potential for future growth in its service area, NJNG uses
information derived from county and municipal planning boards which describes
housing development in various stages of approval. In addition, builders in
NJNG's service area are surveyed to determine their development plans for future
time periods. Finally, NJNG uses information concerning its service territory
and projected population growth rates from a study prepared by outside
consultants. In addition to customer growth through new construction, NJNG's
business strategy includes aggressively pursuing conversions from other fuels,
such as oil. It is estimated that approximately 35% of NJNG's projected customer
growth will consist of conversions. NJNG will also continue to pursue off-system
sales and non-peak sales, such as natural gas-fueled electric generating
projects.
Throughput
For the fiscal year ended September 30, 1995, operating revenues and
throughput by customer
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class were as follows:
Throughput
(Thousands) Operating Revenues (Thousands of Therms)
- ----------- ------------------ ---------------------
Residential ...................... $282,015 66% 339,254 28%
Commercial, industrial and other . 76,483 18 102,910 9
Firm transportation .............. 4,864 1 16,007 1
-------- --- --------- ---
Total firm ....................... 363,362 85 458,171 38
Interruptible and agency ......... 6,512 2 103,714 9
JCP&L ............................ 4,357 1 20,542 1
-------- --- --------- ---
Total system ..................... 374,231 88 582,427 48
Off system and capacity release .. 52,431 12 625,984 52
-------- --- --------- ---
Total ........................... $426,662 100% 1,208,411 100%
======== === ========= ===
See Utility Operations in the Company's 1995 Annual Report, filed as
Exhibit 13-1 hereto, for a discussion of gas and transportation sales. Also see
NJNG Operating Statistics in the Company's 1995 Annual Report, filed as Exhibit
13-1 hereto, for information on operating revenues and throughput for the past
six years. During this period, no single customer represented more than 10% of
operating revenues.
Seasonality of Gas Revenues
As a result of the heat-sensitive nature of NJNG's residential customer
base, therm sales are largely affected by weather conditions. Specifically,
customer demand substantially increases during the winter months when natural
gas is used for heating purposes. See Liquidity and Capital Resources - NJNG in
the Company's 1995 Annual Report, filed as Exhibit 13-1 hereto, for a discussion
of the effect of seasonality on cash flow.
The impact of weather on the level and timing of NJNG's revenues and cash
flows is affected by a weather-normalization clause (WNC) in its tariff which
became effective for two years on an experimental basis in October 1992. NJNG
received approval from the New Jersey Board of Public Utilities (the BPU) in
November 1995 to continue the clause. The WNC provides for a revenue adjustment
if the weather varies by more than one-half of 1% from the ten-year average. The
accumulated adjustment from one heating season (i.e., October-May) will be
billed or credited to customers in the subsequent heating season. See Note 8 to
the Consolidated Financial Statements -- Regulatory Issues in the Company's 1995
Annual Report, filed as Exhibit 13-1 hereto, for additional information with
regard to the weather-normalization clause.
Gas Supply
A) Firm Natural Gas Supplies
Due to Order Nos. 636, 636A and 636B, issued by the Federal Energy
Regulatory Commission (FERC) in 1992, (collectively, Order No. 636), NJNG has
had to change the manner in which it purchases natural gas supplies. Before
Order No. 636, NJNG purchased a significant percentage of
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its gas supplies from its interstate pipeline suppliers. As a result of Order
636, NJNG's pipeline suppliers no longer provide a bundled transportation and
sales services, but instead only transport natural gas supplies on behalf of
others. Accordingly, NJNG has been required to replace the natural gas supplies
formerly purchased from interstate pipelines.
NJNG currently purchases gas from a diverse gas supply portfolio consisting
of both long-term (over six months), winter-term (for the five winter months)
and short-term contracts. In 1995, NJNG purchased gas from 34 suppliers under
contracts ranging from less than one month to seventeen years. NJNG has seven
long-term firm gas purchase contracts. NJNG purchased approximately 17.7% of its
total gas purchases in 1995 under one long-term firm gas purchase contract with
Alberta Northeast Gas Limited (Alberta Northeast). The Alberta Northeast
contract expires in 2007. NJNG does not purchase more than 10% of its total gas
supplies under any other single long-term firm gas purchase contract. NJNG
believes that its supply strategy should adequately meet its expected firm load
over the next several years.
B) Firm Transportation and Storage Capacity
In order to deliver the above supplies, NJNG maintains agreements for firm
transportation and storage capacity with several interstate pipeline companies.
The pipeline companies that provide firm transportation service to NJNG's city
gate, the daily deliverability of that capacity and the contract expiration
dates are as follows:
Daily
Pipeline Deliverability (Dths) Expiration Date
- -------- --------------------- ---------------
Texas Eastern Transmission Corp. ............ 288,497 Various dates after 2000
Iroquois Gas Transmission System, L.P. ..... 40,000 2011
Transcontinental Gas Pipe Line Corp. ....... 21,769 1998
Tennessee Gas Pipeline Co. .................. 10,835 2003
Columbia Gas Transmission Corp. ............ 10,000 2009
-------
371,101
In addition, NJNG has storage and transportation contracts that provide
additional daily deliverability of 59,666 Dths from storage fields in
Pennsylvania to its market area. The significant storage suppliers, the peak day
deliverability of this storage capacity and the contract expiration dates are as
follows:
Peak Day
Pipeline Deliverability Expiration Date
- -------- -------------- ---------------
Texas Eastern Transmission Corp. ............ 51,566 Various dates after 1995
Transcontinental Pipeline Corp. ............ 8,100 2005
------
59,666
NJNG also has significant storage contracts with CNG Transmission
Corporation (peak day deliverability of 90,661) and Equitrans, Inc. (peak day
deliverability of 9,995), but utilizes its existing transportation contracts to
transport that gas from the storage fields to its city gate.
5
C) Peaking Supply
To meet its increased winter peak day demand, NJNG maintains two liquefied
natural gas (LNG) facilities and purchases firm storage services. See Item 2 -
Properties - NJNG for additional information regarding the storage facilities
from various interstate pipeline companies. NJNG presently has LNG storage
deliverability of 165,000 Dths per day which represents approximately 26% of its
peak day sendout.
D) Summary
NJNG expects to be able to meet the current level of gas requirements of
its existing and projected firm customers for the foreseeable future.
Nonetheless, NJNG's ability to provide supply for its present and projected
sales will depend upon its suppliers' ability to obtain and deliver additional
supplies of natural gas, as well as NJNG's ability to acquire supplies directly
from new sources. Factors beyond the control of NJNG and its suppliers may
affect its ability to obtain such supplies. These factors include other parties
having control over the drilling of new wells and the facilities to transport
gas to NJNG's city gate, competition for the acquisition of gas, regulatory
policies (e.g., FERC Orders 436, 451, 500, 636, 636A and 636B), priority
allocations, the pricing policies of federal and state regulatory agencies, as
well as the availability of Canadian reserves for export to the United States.
Regulation and Rates
A) State
NJNG is subject to the jurisdiction of the BPU with respect to a wide range
of matters, such as rates, the issuance of securities, the adequacy of service,
the manner of keeping its accounts and records, the sufficiency of gas supply
and the sale or encumbrance of its properties.
Over the last five years, NJNG has been granted three increases in its base
tariff rates, and two increases and two decreases in its Levelized Gas
Adjustment clause (LGA). Through its LGA, which is reviewed annually, NJNG
recovers purchased gas costs that are in excess of the level included in its
base rates. LGA recoveries do not include an element of profit and, therefore,
have no effect on earnings.
6
The following table sets forth information with respect to these rate changes:
Annualized Annualized
Amount Amount
Per Filing Granted
Date of Filing Type (000's) (000's) Effective Date
- -------------- ---- ------- ------- --------------
April 1993 Base Rates $26,900 $7,500 January 1994
August 1991 Base Rates 15,772 2,200 June 1992
August 1990 Base Rates 14,787 8,300 February 1991
July 1995 LGA (4,800) (5,200) December 1995
July 1994 LGA 8,800 0 December 1994
July 1993 LGA 4,800 4,800 December 1993
July 1992 LGA (15,814) (17,400)(A) January 1993
July 1991 LGA 33,407 17,100 November 1991
August 1990 LGA 0 0 October 1990
(A) Comprised of a $12 million billing credit and a $5.4 million reduction in
annual LGA revenues.
See Note 8 to the Consolidated Financial Statements - Regulatory Issues in
the Company's 1995 Annual Report, filed as Exhibit 13-1 hereto, for additional
information regarding NJNG's rate proceedings.
On September 25, 1991, the BPU adopted a conservation incentive rule which
provides utilities with the opportunity to recover conservation program costs
and lost revenues, and to earn a return on investments in energy efficiency
programs based upon a sharing of savings between utilities and customers. NJNG
filed its "Demand Side Management Resource Plan" (DSM) addressing these issues
with the BPU in February 1992. In June 1995, the BPU approved a Stipulation
Agreement approving NJNG's DSM plan. The Stipulation calls for recovery of
approximately $2.6 million in annual plan expenses plus the underrecovered
balance in NJNG's prior conservative plan, which was $1.9 million at September
30, 1995, through a Demand Side Management Adjustment Clause (DSMAC). The
initial DSMAC was approved by the BPU in November 1995.
In November 1992, NJNG filed a petition with the BPU for approval of a Gas
Service Agreement (GSA) executed between NJNG and Freehold Cogeneration
Associates L.P. (Freehold) in September 1992. The GSA would provide for NJNG to
supply Freehold with between 21,800 and 26,000 Dths of natural gas per day over
a twenty-year period. In February 1994, the BPU approved the GSA conditioned by
a side letter agreement in which Freehold and NJNG agree to negotiate in good
faith to amend the pricing terms of the GSA to conform it to changes, if any, in
the power purchase agreement between Freehold and Jersey Central Power and Light
Company (JCP&L) if it is renegotiated. In November 1993, the BPU ruled that
Freehold and JCP&L should attempt to reach a settlement on the power purchase
agreement within 30 days of receipt of a written order. The power purchase
contract has been the subject of litigation, not involving
7
NJNG as a party, in various jurisdictions. To date Freehold has been successful
in these various proceedings.
On November 22, 1995, the BPU approved a Stipulation Agreement relating to
the 1995 Remediation Rider (RA), WNC, DSMAC and LGA. The approval of the
Stipulation allows recovery over seven years of $1 million of gas remediation
costs incurred through June 1995, the collection of the net $1.5 million of
gross margin relating to the impact of the fiscal 1995 winter on the WNC and
implementation of the initial DSMAC discussed above.
The Stipulation also settles our LGA filing and includes a reduction of
$5.2 million in gas costs, the continuation of NJNG's current margin sharing
formulae associated with its non-firm sales until the effective date of the BPU
Order in NJNG's 1997-98 LGA and approval for an extension of the Financial Risk
Management (FRM) Pilot Program designed to provide price stability to NJNG's
system supply portfolio. All of the costs and results of the FRM program are to
be recovered through the LGA.
As a result of the approval of the RA, WNC, DSMAC and LGA Stipulation,
NJNG's rates will not change.
B) Federal
Since the mid-1980's, the FERC has issued a series of orders, regulations
and policy statements (e.g., FERC Orders 380, 436, 451, 500, and 528) intended
to transform the natural gas industry from a highly regulated industry to a less
regulated, market-oriented industry. The culmination of the FERC's deregulatory
effort was the issuance of Order 636 which established new rules mandating the
unbundling of interstate pipeline sales for resale and transportation services.
The FERC instituted proceedings through which NJNG's interstate pipeline
suppliers have restructured their services in response to Order 636.
The transition to a more market-oriented interstate pipeline market may
offer long-term benefits. Order 636 has provided NJNG with increased
opportunities to purchase and manage its own, specifically-tailored gas supply
portfolio and to resell its interstate pipeline capacity to other potential
customers during off-peak periods. However, these long-term benefits have been
offset by increases in interstate pipeline demand charges required by Order 636,
in addition to the flow-through of transition costs that pipeline companies have
incurred as a result of the restructuring of their existing gas purchase and
sales arrangements. In the individual pipeline restructuring proceedings
resulting from Order 636, all but one of NJNG's pipeline suppliers have settled
transition cost recovery issues with their customers. These settlements provide
for partial cost absorption by some of NJNG's pipeline suppliers and the orderly
recovery of remaining costs from pipeline customers, including NJNG. The
transition costs of one of NJNG's pipeline suppliers is currently being
litigated before the FERC; however, at this time, NJNG does not expect to be
adversely affected by the outcome of that proceeding.
NJNG continually reviews its gas supply portfolio requirements in the
post-Order 636 environment. Because of its interconnections with multiple
interstate pipelines, NJNG believes
8
that the Order 636 proceedings will not have a material impact on its ability to
obtain adequate gas supplies at market rates. However, no assurance can be given
in this regard.
Environment
The Company and its subsidiaries are subject to legislation and regulation
by federal, state and local authorities with respect to environmental matters.
NJNG has identified eleven former manufactured gas plant (MGP) sites,
dating back to the late 1800's and early 1900's, which it acquired from
predecessors, and which contain contaminated residues from the former gas
manufacturing operations. Ten of the eleven sites in question were acquired by
NJNG from a predecessor in 1952, and the eleventh site was acquired by a
predecessor of NJNG in 1922. All of the gas manufacturing operations ceased at
these sites at least since the mid-1950's and in some cases had been
discontinued many years earlier, and all of the old gas manufacturing facilities
were subsequently dismantled by NJNG or its predecessors. NJNG is currently
involved in administrative proceedings with the New Jersey Department of
Environmental Protection and Energy (NJDEPE) and local government authorities
with respect to the plant sites in question, and is participating in various
studies and investigations by outside consultants to determine the nature and
extent of any such contaminated residues and to develop appropriate programs of
remedial action, where warranted. Since October 1989, NJNG has entered into
Administrative Consent Orders or Memoranda of Agreement with the NJDEPE covering
all eleven sites. These documents establish the procedures to be followed by
NJNG in developing a final remedial clean-up plan for each site.
Most of the cost of such studies and investigations is being shared under
an agreement with the former owner and operator of ten of the MGP sites. See
Note 10 to the Consolidated Financial Statements - Commitments and Contingent
Liabilities in the Company's 1995 Annual Report, filed as Exhibit 13-1 hereto,
for a discussion of the regulatory treatment of gas remediation costs incurred
and anticipated expenditures over the next five years.
NJNG is named as a defendant in a civil action alleging environmental
contamination at three sites owned or occupied by a contractor and the
contractor's affiliated companies which removed tar emulsion from NJNG's former
MGP sites to its three sites. See Item 3d. - Legal Proceedings for additional
information regarding these actions.
Other than as discussed above, the Company does not presently anticipate
any additional significant future expenditures for compliance with existing
environmental laws and regulations which would have a material effect upon the
capital expenditures, earnings or competitive position of the Company or its
subsidiaries.
Franchises
NJNG holds non-exclusive franchises granted by the 104 municipalities it
serves which gives it the right to lay, maintain and operate public utility
property in order to provide natural gas service within these municipalities. Of
these franchises, 47 are perpetual and the balance expire between 1999 and 2038.
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Competition
Although its franchises are non-exclusive, NJNG is not currently subject to
competition from other natural gas distribution utilities with regard to the
transportation of natural gas in its service territory. Due to significant
distances between NJNG's current large industrial customers and the nearest
interstate natural gas pipelines, as well as the availability of its
transportation tariff, NJNG currently does not believe it has significant
exposure to the risk that its distribution system will be bypassed. Competition
does exist from suppliers of oil, coal, electricity and propane. At the present
time, natural gas enjoys an advantage over alternate fuels as the preferred
choice of fuels in over 95% of new construction due to its efficiency and
reliability. As deregulation of the natural gas industry continues, prices will
be determined by market supply and demand, and while NJNG believes natural gas
will remain competitive with alternate fuels, no assurance can be given in this
regard.
In October 1994, the BPU approved a Stipulation Agreement that provides
NJNG's commercial and industrial customers an expanded menu of transportation
and supplier choices. As a result of the BPU approval, NJNG's sales to its
commercial and industrial customers are subject to competition from other
suppliers of natural gas; however, NJNG continues to provide transportation
service to these customers. Based on its rate design, NJNG's profits would not
be affected by a customer's decision to utilize a sales and transportation or
transportation only service.
NEW JERSEY NATURAL ENERGY COMPANY
Natural Energy was formed in 1995 to facilitate the unregulated marketing
of natural gas and fuel and capacity management services. At September 30, 1995,
Natural Energy markets gas to 776 customers. In August 1995, Natural Energy
signed a three-year agreement with GPU Service Corporation (GPU) to assist GPU
in the management of natural gas procurement and transportation costs.
NJR ENERGY CORPORATION
NJR Energy and its subsidiaries: NJNR, Pipeline, Storage, Compressor and
NJRE Operating, are involved in oil and natural gas development, production,
transportation, storage and other energy-related ventures.
In May 1995, the Company adopted a plan to exit the oil and natural gas
production business and pursue the sale of the reserves and related assets of
its affiliates, NJR Energy and NJNR. As discussed in Note 2 to the Consolidated
Financial Statements - Discontinued Operations in the Company's 1995 Annual
Report, filed as Exhibit 13-1 hereto, the Company is accounting for this segment
as a discontinued operation.
On December 21, 1995, NJNR completed the sale of its interests in all of
its oil and gas properties located in Western Oklahoma, Kansas and Texas. The
sale price was $7.75 million which will be adjusted for certain post-closing
adjustments. The proceeds were used to reduce outstanding debt. The Company has
executed sales contracts for its remaining properties located in Eastern
Oklahoma, Arkansas and Utah. It is anticipated that the sale of these properties
will be completed by January 31, 1996.
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NJR Energy's continuing operations consist of its equity investments in the
Iroquois Gas Transmission System, L.P. (Iroquois) and the Market Hub Partners
L.P. (MHP).
Pipeline is a 2.8% equity participant in Iroquois, a 375-mile natural gas
pipeline from the Canadian border to Long Island. Initial deliveries commenced
in December 1991. See Item 3f.-Legal Proceedings for additional information
regarding the Iroquois pipeline.
Storage, which was formed in December 1994, is a 5.66% equity participant
in MHP, which it is intended will develop, own and operate a system of five
natural gas market centers with high deliverability salt cavern storage
facilities in Texas, Louisiana, Mississippi, Michigan and Pennsylvania.
See Non-Utility Operations - NJR Energy in the Company's 1995 Annual
Report, filed as Exhibit 13-1 hereto, for a discussion of NJR Energy's financial
results from continuing operations.
COMMERCIAL REALTY & RESOURCES CORP.
CR&R develops and owns commercial office and mixed-use
commercial/industrial real estate projects primarily in Monmouth and Atlantic
Counties, New Jersey. At September 30, 1995, CR&R had completed 17 buildings
totaling approximately 914,200 square feet, of which 97% was occupied. In
addition, CR&R had one project under construction, an approximately 76,300
square feet flex building on 10 acres of land in its Monmouth Shores Corporate
Park. Completion of this project is expected in early fiscal 1996. CR&R also has
approximately 215 acres of undeveloped land that was master planned for
development.
Consistent with the Company's previously disclosed strategy to realign its
asset base more closely with its core energy business, the Company announced on
October 12, 1995 that CR&R had executed a contract to sell a substantial portion
of its developed real estate assets to Cali Realty Acquisition Corp. (together
with its affiliates, successors and assigns, "Cali"), and that the Company was
pursuing alternatives for its remaining real estate assets.
The closing of the Cali transaction was completed on November 8, 1995 and
included the sale of 14 buildings containing approximately 582,000 square feet
of space, representing over 60 percent of CR&R's office and flex space in
business parks in Monmouth and Atlantic Counties, New Jersey. The all-cash sale
price received at the closing was $52.65 million. The contract of sale for the
transaction contained certain conditions that will survive the closing, and CR&R
will remain subject to certain indemnity and other obligations with respect to
the properties that were sold.
The Company used the sale proceeds from the transaction to pay down
outstanding debt
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incurred to develop the real estate assets. The Company's future earnings from
continuing operations will not be materially affected by the sale based upon the
historical earnings generated by the real estate subsidiary.
In addition to the sale of the 14 buildings, the transaction included the
grant of options to Cali to purchase approximately 181 of CR&R's approximately
215 acres of undeveloped land generally adjacent to these buildings. CR&R has
retained limited rights to sell and develop the lands that are subject to the
options.
Separately, CR&R entered into a sale-leaseback transaction with Cali
pursuant to which it conveyed fee title to all of Jumping Brook Corporate Office
Park, including the undeveloped land portion thereof, to Cali in exchange for a
$5.8 million promissory note and mortgage on the undeveloped land and a ground
lease of such undeveloped land to CR&R for approximately 99 years, with options
to renew. In the event that CR&R obtains a subdivision of the undeveloped land
portion from the improved portion of such office park, Cali would be obliged to
convey fee title to the undeveloped land back to CR&R, and the ground lease,
promissory note and mortgage would be terminated. CR&R is currently seeking such
subdivision.
On December 22, 1995, CR&R sold its Monmonth Shores Corporate Office Park
(MSCOP) facility in a sale-leaseback transaction for $31.85 million. MSCOP is
the corporate headquarters building for NJNG and NJR. NJNG has entered into a
long-term master lease for the entire building. Prior to this transaction NJNG
leased approximately 79% of the building under a long-term lease. The proceeds
were used to pay down debt. CR&R's pre-tax gain of approximately $18 million
will be deferred and amortized to income over 25 years in accordance with
generally accepted accounting principles.
The Company will continue to pursue alternatives for its remaining real
estate assets. See Item 2 - Properties - CR&R for additional information
regarding CR&R's remaining real estate assets.
It is anticipated that any future or further development by CR&R of its
remaining real estate assets will be consistent with CR&R's development strategy
of concentrating on a high percentage of build-to-suit projects. This
concentration has served to put CR&R in a relatively strong position with regard
to both occupancy rate and remaining lease terms, and to lessen the impact on
CR&R caused by the downturn in the Northeast commercial real estate market which
had been characterized by speculative development and relatively high vacancy
rates. See Non-Utility Operations - Real Estate Operations in the Company's 1995
Annual Report, filed as Exhibit 13-1 hereto, for a discussion of CR&R's
financial results.
PARADIGM POWER, INC.
PPI was formed in April 1992 to pursue investment opportunities in natural
gas-fueled cogeneration and independent power production projects. As of
September 30, 1995, PPI had no project investments. As discussed in Note 2 to
the Consolidated Financial Statements - Discontinued Operations in the Company's
1995 Annual Report, filed as Exhibit 13-1 hereto, the Company has decided to no
longer pursue investments in cogeneration and independent power production
facilities and has treated this segment as a discontinued operation.
12
EMPLOYEE RELATIONS
The Company and its subsidiaries employed 880 and 864 employees at
September 30, 1995 and 1994, respectively. NJNG had 522 and 500 union employees
at September 30, 1995 and 1994, respectively. NJNG has reached agreement with
the union on a new two-year collective bargaining agreement which provides,
among other things, for annual wage increases of 3.5% and 3.75%, effective
December 7, 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
First Elected
Office(1) Name Age an Officer
- -------- ---- --- -------------
President and
Chief Executive Officer ....... Laurence M. Downes 38 1/86
Senior Vice President and
Corporate Secretary ........... Oleta J. Harden 46 6/84
Vice President and
Chief Financial Officer ....... Glenn C. Lockwood 34 1/90
(1) All terms of office
are one year.
There is no arrangement or understanding between the officers listed above
and any other person pursuant to which they were selected as an officer. The
following is a brief account of their business experience during the past five
years:
Laurence M. Downes
President and Chief Executive Officer
Mr. Downes has held his present position since July 1995. From January 1990
to July 1995, he held the position of Senior Vice President and Chief Financial
Officer.
Oleta J. Harden
Senior Vice President and Corporate Secretary
Mrs. Harden has held her present position since January 1987.
Glenn C. Lockwood
Vice President and Chief Financial Officer
Mr. Lockwood has held his present position since September 1995. From
January 1994 to September 1995, he held the position of Vice President,
Controller and Chief Accounting Officer. From January 1990 to January 1994, he
held the position of Assistant Vice President, Controller and Chief Accounting
Officer.
13
ITEM 2. PROPERTIES
NJNG (All properties are in New Jersey)
NJNG owns 10,385 miles of distribution main and services, 325 miles of
transmission main and approximately 369,000 meters. Mains are primarily located
under public roads. Where mains are located under private property, NJNG has
obtained easements from the owners of record.
In addition to mains and services, NJNG owns and operates two LNG storage
plants located in Stafford Township, Ocean County, and Howell Township, Monmouth
County. The two LNG plants have an estimated effective capacity of 19,200 and
150,000 Dths per day, respectively. These facilities are used for peaking supply
and emergencies.
NJNG owns four service centers located in Rockaway Township, Morris County;
Atlantic Highlands and Wall Township, Monmouth County; and Lakewood, Ocean
County. These service centers house storerooms, garages, gas distribution and
appliance service operations and administrative offices. NJNG leases its
headquarters facilities in Wall Township, customer service offices located in
Asbury Park and Wall Township, Monmouth County and a service center in
Manahawkin, Ocean County. These customer service offices support customer
contact, marketing and other functions. NJNG also owns a storage facility in
Long Branch, Monmouth County.
Substantially all of NJNG's properties, not expressly excepted or duly
released, are subject to the lien of an Indenture of Mortgage and Deed of Trust
to Harris Trust and Savings Bank, Chicago, Illinois, dated April 1, 1952, as
amended by twenty-five supplemental indentures, as security for NJNG's bonded
debt, which totaled approximately $202.9 million at September 30, 1995. In
addition, under the terms of its Indenture, NJNG could have issued approximately
$154 million of additional first mortgage bonds as of September 30, 1995. In
October 1995, NJNG issued $20 million of bonds, which was the remaining portion
of its Medium-Term Notes, Series A, consisting of its 6 7/8% Series CC First
Mortgage Bonds due 2010 under its Indenture, as amended by the twenty-sixth
supplemental indenture.
NJNG completed construction of the Monmouth-Ocean Transmission (MOT) line
in 1993. The MOT line is providing service to a cogeneration plant in Lakewood
Township, Ocean County and is helping NJNG meet the future energy needs
associated with the expected customer growth in Monmouth and Ocean counties.
NJNG has entered into an agreement to provide the cogeneration project with at
least 50,000 Dths per day of pipeline capacity on the MOT line, subject to
NJNG's right to utilize this capacity for up to 30 days per year to help meet
its peak-day requirements.
NJR Energy
At September 30, 1995, NJR Energy, as a working-interest participant, had
interests in oil and gas leases in Louisiana, New York, West Virginia and Texas.
Additionally, NJNR had working interests in oil and gas leases in Texas,
Oklahoma, Kansas, Arkansas, Utah and Pennsylvania, and is a participant in a
21-mile natural gas transportation pipeline joint venture, located in Cambria
County and Indiana County, Pennsylvania. NJNR also owned a natural gas gathering
system and is a
14
participant in a 16-mile natural gas pipeline joint venture located in Utah.
Pipeline has a 2.8% equity interest in the Iroquois Gas Transmission
System, L.P. which owns and operates the Iroquois pipeline project, a 375-mile
pipeline from the Canadian border in upstate New York to Long Island.
Storage, which was formed in December 1994, has a 5.66% equity interest in
Market Hub Partners, L.P. which it is intended will develop, own and operate a
system of five natural gas market centers with high deliverability salt cavern
storage facilities in Texas, Louisiana, Mississippi, Michigan and Pennsylvania.
CR&R (All properties are in New Jersey)
At September 30, 1995, CR&R owned and operated 17 buildings consisting of
914,200 square feet of commercial office and mixed-use commercial/industrial
space, of which 886,000 square feet, or 97%, were occupied. CR&R and affiliated
companies, including NJNG, occupied approximately 149,800 square feet in four of
these buildings. These properties were located in Monmouth and Atlantic Counties
in various business parks. These business parks included the Monmouth Shores
Corporate Office Park (MSCOP), Monmouth Shores Corporate Park (MSCP), Jumping
Brook Corporate Office Park (JBCOP), Central Monmouth Business Park (CMBP) and
Expressway Corporate Center (ECC). See Item 3g. - Legal Proceedings - Real
Estate Properties for a discussion of regulatory matters concerning MSCP. A
summary of these business parks with pertinent data is as follows:
MSCOP MSCP JBCOP CMBP ECC Other
----- ---- ----- ---- --- -----
Completed buildings ......... 1 9 1 3 2 1
Buildings under
construction .............. -- 1 -- -- -- --
Acres developed to date ..... 22 91 20 9 10 4
Acres under construction .... -- 10 -- -- -- --
Acres undeveloped ........... 33 64 26 -- 52 40
Sq. ft. developed to date ... 160,400 417,500 181,100 69,000 82,200 4,000
Sq. ft. under construction .. -- 76,300 -- -- -- --
Sq. ft. undeveloped ......... 235,000 569,300 300,000 -- 495,000 366,400
15
Major tenants included:
MSCOP NJNG, NatWest Home Mortgage and Prudential Insurance
MSCP Waterford/Wedgwood, American Press, CoreStates Bank, The Law Office of
Stephen E. Gertler and AT&T Information Systems
JBCOP USLIFE
CMBP State Farm Insurance, Beacon Tool and NJNG.
ECC Social Security Administration and Computer Science Corporation
The November 8, 1995 transaction with Cali (see Item 1 - Business -
Commercial Realty & Resources Corp.) resulted in the sale to Cali of 8 of the 9
completed buildings in MSCP, the 1 completed building in JBCOP, the 3 completed
buildings in CMBP, and the 2 completed buildings in ECC, and the grant of
options to Cali to purchase approximately 181 of the approximately 215
undeveloped acres owned by CR&R and described in the above chart. Also see Note
12 to the Consolidated Financial Statements - Subsequent Event in the Company's
1995 Annual Report, filed as Exhibit 13-1 hereto, for a further discussion of
such sale. The December 22, 1995 transaction (See Item 1 -- Business --
Commercial Realty and Resources Corp.) resulted in the sale of MSCOP.
Capital Expenditure Program
See Liquidity and Capital Resources in the Company's 1995 Annual Report,
filed as Exhibit 13-1 hereto, for a discussion of the Company's anticipated 1996
and 1997 capital expenditures for each business segment.
ITEM 3. LEGAL PROCEEDINGS
a. Aberdeen
Since June 1993, a total of six complaints have been filed in New Jersey
Superior Court against NJNG and its contractor by persons alleging injuries
arising out of a natural gas explosion and fire on June 9, 1993, at a
residential building in Aberdeen Township, New Jersey. The plaintiffs allege in
their respective actions, among other things, that the defendants were negligent
or are strictly liable in tort in connection with their maintaining, replacing
or servicing natural gas facilities at such building. The plaintiffs separately
seek compensatory damages from NJNG and its contractor. To date, NJNG and its
contractors have received demands for damages totaling $25.2 million from
various plantiffs.
In May 1994, the New Jersey Superior Court ordered that all causes of
action relating to the Aberdeen Township explosion be consolidated for purposes
of discovery.
NJNG's liability insurance carriers are participating in the defense of
these matters. NJNG is unable to predict the extent to which other claims will
be asserted against, or liability imposed on,
16
NJNG. The Company does not believe that the ultimate resolution of these matters
will have a material adverse effect on its consolidated financial condition or
results of operations.
b. Carnegie
In March 1993, NJNG was named a defendant in a civil action commenced by
Carnegie Natural Gas Company (Carnegie) in the U.S. District Court for the
Western District of Pennsylvania. This action challenged NJNG's decision to
terminate the June 18, 1986 "Service Agreement for Sales Service under Rate
Schedule LVWS" (LVWS Service Agreement) between Carnegie and NJNG effective
March 31, 1994, pursuant to a "market-out" clause. The LVWS Service Agreement
otherwise would have expired on March 31, 2001. Carnegie sought, among other
things, a declaratory judgment that the contract termination was void. Claims of
tortious interference with contractual relations and abuse of process were also
asserted and unspecified damages and punitive damages were also sought. On
November 3, 1995, an agreement between NJNG and Carnegie to settle and resolve
the lawsuit became effective. In conjunction with this agreement, Carnegie and
NJNG filed a Joint Stipulation with the court in which Carnegie's lawsuit would
be dismissed with prejudice. On December 4, 1995, the court issued an order
dismissing Carnegie's civil action with prejudice. The ultimate resolution of
this matter will not have a material adverse effect on the Company's
consolidated financial condition or results of operations.
c. South Brunswick Asphalt, L.P.
NJNG has been named a defendant in a civil action commenced in New Jersey
Superior Court by South Brunswick Asphalt, L.P. (SBA) and its affiliated
companies seeking damages arising from alleged environmental contamination at
three sites owned or occupied by SBA and its affiliated companies. Specifically,
the suit charges that tar emulsion removed from 1979 through 1983 by an
affiliate of SBA (Seal Tite, Inc.) from NJNG's former gas manufacturing plant
sites has been alleged by the NJDEPE to constitute a hazardous waste and that
the tar emulsion has contaminated the soil and ground water at the three sites
in question. In February 1991, the NJDEPE issued letters classifying the tar
emulsion/sand and gravel mixture at each site as dry industrial waste, a
non-hazardous classification. NJNG continues to explore various disposal methods
for the tar emulsion/sand and gravel mixture.
One of the SBA sites is the subject of a NJDEPE Directive and Notice
alleging that the tar emulsion/sand and gravel mixture was a contributing factor
to the contamination of ground water at a residential community. The NJDEPE is
seeking reimbursement under the New Jersey Spill Compensation and Control Act of
cleanup, remediation and related costs, estimated by the NJDEPE at approximately
$20 million. NJNG is contesting the NJDEPE directive on the grounds, among
others, that any such alleged ground water contamination was not caused by tar
emulsions removed from NJNG's former gas plant manufacturing sites.
NJNG's liability insurance carriers, which have been defending the civil
action, have denied coverage for these claims. In March 1995, NJNG filed a
complaint in New Jersey Superior Court against various insurance carriers for
declaratory judgment and for damages arising from such
17
defendants' breach of their contractual obligations to defend and/or indemnify
NJNG against liability for claims and losses (including defense costs) alleged
against NJNG relating to environmental contamination at the former MGP sites and
other sites. NJNG is seeking (i) a declaration of the rights, duties and
liabilities of the parties under various primary and excess liability insurance
policies purchased from the defendants by NJNG from 1951 through 1985, and (ii)
compensatory and other damages, including costs and fees, arising out of
defendants' obligations under such insurance policies. There can be no assurance
as to the outcome of these proceedings.
Based upon the gas remediation rider approved by the BPU in June 1992, NJNG
would attempt to seek recovery through the ratemaking process of any such
cleanup or remediation payments it might ultimately be required to make, but
recognizes that such recovery is not assured. There can be no assurance as to
the outcome of these proceedings. The Company does not believe that the ultimate
resolution of these matters will have a material adverse effect on its
consolidated financial condition or results of operations.
d. Bridgeport Rental and Oil Service
In January 1992, NJNG was advised of allegations that certain waste oil
from its former manufactured gas plant site in Wildwood, New Jersey may have
been sent by a demolition contractor to the Bridgeport Rental and Oil Service
site in Logan Township, New Jersey. That site has been designated a Superfund
site and is currently the subject of two lawsuits pending in the U.S. District
Court in New Jersey. NJNG has notified its insurance carriers and NJNG has
agreed to participate in settlement discussions as a non-party litigant. See
above, 3c. South Brunswick Asphalt, L.P., for a description of an action brought
by NJNG against various insurance carriers relating to insurance coverage of
liability arising out of these sites. NJNG is currently unable to predict the
extent, if any, to which it may have cleanup or other liability with respect to
this matter, but would seek recovery of any such costs through the ratemaking
process. However, no assurance can be given as to the timing or extent of the
ultimate recovery of such costs. The Company does not believe that the ultimate
resolution of these matters will have a material adverse effect on its
consolidated financial condition or results of operations.
e. Iroquois
Pipeline owns a 2.8% equity interest in the Iroquois Gas Transmission
System, L.P. (Iroquois) which has constructed and is operating a 375-mile
pipeline from the Canadian border in upstate New York to Long Island.
Iroquois has been informed by the U.S. Attorney's Offices for the Northern,
Southern and Eastern Districts of New York that an investigation is underway to
determine whether or not Iroquois committed civil violations of the Federal
Clean Water Act and/or its Corps of Engineers permit during construction of the
pipeline. No proceedings in connection with this civil investigation have been
commenced by the federal government against Iroquois.
In addition, in conjunction with the Environmental Protection Agency, a
criminal investigation has
18
been initiated by the U.S. Attorney's Office for the Northern District of New
York. To date, no criminal charges have been filed.
Iroquois has publicly stated that it believes the pipeline construction and
right-of-way activities were conducted in a responsible manner. Nevertheless,
Iroquois deems it probable that the U.S. Attorney will seek indictments and, in
them, substantial fines and other sanctions.
In December 1993, Iroquois received notification from the Enforcement Staff
of the Federal Energy Regulatory Commission Office of the General Counsel
(Enforcement) that Enforcement has commenced a preliminary, non-public
investigation concerning matters related to Iroquois' construction of certain of
its pipeline facilities. Enforcement has requested information regarding certain
aspects of the pipeline construction. In addition, in December 1993, Iroquois
received a similar communication from the Army Corps of Engineers requesting
information regarding permit compliance in connection with certain aspects of
the pipeline construction. Iroquois is providing information to these agencies
in response to their requests.
Iroquois and its counsel have met with those conducting the civil and
criminal investigations, from time to time, both to gain an informed
understanding of the focus and direction of the investigations in order to
defend itself and, if and when appropriate, to explore a range of possible
resolutions acceptable to all parties.
Although no agreements have been reached regarding the disposition of these
matters, in October 1995, Iroquois informed its partners that it intended to
record a provision in its 1995 financial statements for an estimated liability
associated with these proceedings to reflect its current understanding of the
probable outcome. Accordingly, in September 1995, the Company recorded a
provision of $560,000, or $.03 per share, reflecting its proportionate share of
this probable liability.
Pipeline is unable to predict the outcome of these proceedings and
investigations. Based upon information currently available to the Company
concerning the above matters involving Iroquois, the Company does not believe
that their ultimate resolution will have a material adverse effect on the
Company's consolidated financial condition or results of operations. Pipeline's
investment in Iroquois as of September 30, 1995 was $5.7 million.
f. Real Estate Properties
CR&R is the owner of Monmouth Shores Corporate Park (MSCP), located in
Monmouth County, New Jersey. The land comprising MSCP was exempt from the
provisions of the Freshwater Wetlands Protection Act (the Act) until assumption
of the Federal 404 freshwater wetlands program by the New Jersey Department of
Environmental Protection and Energy (NJDEPE) on March 2, 1994. MSCP is now
regulated by the provisions of the Act. The Act restricts building in areas
defined as "freshwater wetlands" and their transition areas. CR&R has hired an
environmental engineer to delineate the wetlands and transition areas of MSCP in
accordance with the provision of the Act.
19
Based upon the environmental engineer's delineation of the wetland and
transition areas, CR&R has filed for and received a Letter of Interpretation
(LOI) from NJDEPE on one parcel of land. CR&R has also filed for a LOI with
NJDEPE regarding a second parcel and will file additional LOI's with NJDEPE as
the remaining parcels of land are selected for development.
Based upon the environmental engineer's delineation, it is anticipated that
the developable yield of MSCP would be reduced by approximately 7% compared with
the original master plan. The actual yield achieved will be dictated by market
and other conditions. Based upon the revised estimated developable yield for
MSCP, the Company does not believe that a reserve against this property was
necessary as of September 30, 1995.
g. Bessie-8
NJNR and others (the Joint Venture, et al.) were named in a complaint filed
by the People's Natural Gas Company (People's) before the Pennsylvania Public
Utility Commission (PaPUC). People's sought a determination that the Joint
Venture, et al. were a public utility subject to the jurisdiction of the PaPUC
and an order prohibiting natural gas service until proper PaPUC authorization
was obtained.
In April 1988, an Administrative Law Judge (ALJ) issued an initial decision
denying and dismissing People's complaint, "because the demonstrated activities
of the Bessie-8 joint venture are not within the jurisdiction of the PaPUC to
regulate". An initial decision is subject to adoption, modification or rejection
by the full PaPUC. In April 1989, alternative motions to adopt the ALJ's initial
decision or to subject the Joint Venture, et al. to the jurisdiction of the
PaPUC failed due to 2-2 tie votes. In October 1992, the PaPUC, on its own
initiative and without notice to any of the parties, determined in a 3-0 vote
that the Joint Venture, et al. are a "public utility" under the Pennsylvania
Public Utility Code and granted People's exceptions to the ALJ's April 1988
initial decision. In December 1992, the PaPUC issued a Final Order requiring the
Joint Venture, et al. to apply for a certificate of public convenience or to
cease and desist from providing service through the pipeline.
In October 1992, the Joint Venture, et al. filed a Petition for Review in
the nature of a declaratory judgment action in the Commonwealth Court of
Pennsylvania (Commonwealth Court) seeking among other things, a declaratory
order that the April 1989 tie vote constituted a final action dismissing
Peoples' complaint. In January 1993, the Joint Venture, et al. filed a second
Petition for Review with the Commonwealth Court challenging the merits of the
PaPUC's determination that the Joint Venture, et al. are a "public utility"
under the Pennsylvania Public Utility Code. In February 1993, the Commonwealth
Court stayed the PaPUC's order requiring the Joint Venture, et al. to file for a
certificate of public convenience and necessity, pending the outcome of the
declaratory judgment action. On December 16, 1993, the Commonwealth Court
granted the Joint Venture, et al. a declaratory judgment that the April 1989 tie
vote constituted a final action dismissing Peoples' complaint. In July 1995,
upon appeal, the Pennsylvania Supreme Court reversed the Commonwealth Court,
holding that the tie vote by the PaPUC cannot constitute final action on
Peoples' complaint and that the PaPUC was not prohibited from taking its vote in
October 1992.
20
In September 1995, Peoples filed an application to lift the court's
February 1993 stay of the effectiveness of the PaPUC's December 1992 order. Also
in September 1995, the Joint Venture, et al. filed a Petition for Rescission or
Amendment of an Order (Petition for Rescission) with the PaPUC, requesting that
the PaPUC reconsider and rescind its December 1992 order. In addition, the Joint
Venture, et al. filed an Application for Continuance with the Commonwealth
Court, asking for a continuance of the February 1993 stay pending the outcome of
the PaPUC's consideration of the Petition for Rescission, and an Application for
Remand requesting that the Commonwealth Court remand the Joint Venture, et al.'s
appeal to the PaPUC for further consideration.
On November 29, 1995, the Commonwealth Court issued orders denying all of
the Joint Venture, et al.'s various requests.On November 30, 1995, the
Commonwealth Court granted Peoples' application to lift the court's February
1993 stay. Also, on December 12, 1995, the PaPUC issued an opinion and order
denying the Joint Venture et al.'s Petition for Rescission. The Joint Venture,
et al. are currently examining their options in light of the recent Commonwealth
Court and PaPUC orders.
In September 1993, Peoples instituted an action in the Court of Common
Pleas of Allegheny County against the Joint Venture, et al. by filing a Praecipe
for Writ of Summons. The Praecipe for Writ of Summons cannot and does not
contain any description of the claim being asserted by Peoples. It merely tolls
the statute of limitations and preserves any claim Peoples may have against the
defendants until resolution of the actions discussed above. This action may
concern a claim by Peoples for losses allegedly sustained as a result of the
activities of the Joint Venture, et al. However, there has been no activity in
this action and the nature of the action has not yet been determined. NJNR is
unable to predict the outcome of these matters. The Company does not believe
that the ultimate resolution of these matters will have a material adverse
effect on its consolidated financial condition or results of operations.
In 1994, the Company wrote-off its $1 million investment in the Bessie-8
pipeline.
h. Securities and Exchange Commission (SEC)
On October 18, 1995, the SEC issued an Order Directing Private
Investigation and Designating Officers to Take Testimony in connection with
certain transactions engaged in by subsidiaries of the Company in early 1992. An
SEC investigation is a fact-finding inquiry and not an adversarial proceeding.
No adversarial proceedings have been commenced by the SEC. The Company is
cooperating with the Staff of the SEC in its investigation.
i. Long Branch Pier
In August 1988 and 1989, NJNG and an electric utility were named defendants
in civil actions in New Jersey Superior Court commenced by the owners of several
businesses and stores destroyed in a fire at the Long Branch Amusement Pier in
New Jersey, which actions were subsequently consolidated. The plaintiffs allege,
among other things, that NJNG had lines beneath a boardwalk which, the
plaintiffs assert, reacted with faulty electric cables to cause the fire that
damaged the Pier. The several plaintiffs assert compensatory damages against the
defendants in an aggregate amount of approximately $35 million. Pre-trial
settlement conferences were unsuccessful and a trial on the issues of liability
commenced in October 1995.
21
NJNG is vigoroutly defending these matters and its liability insurance
carriers are participating in its defense. NJNG is unable to predict the outcome
of such matters but does not believe that their ultimate resolution will have a
material adverse effect on its consolidated financial condition or results of
operations.
j. Various
The Company is party to various other claims, legal actions and complaints
arising in the ordinary course of business. In management's opinion, the
ultimate disposition of these matters will not have a material adverse effect on
its financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
22
PART II
Information for Items 5 through 8 of this report appears in the Company's
1995 Annual Report, filed as Exhibit 13-1 hereto, as indicated on the following
table and is incorporated herein by reference, as follows:
Annual Report
Page
-------------
ITEM 5. Market for the Registrant's Common
Equity and Related Stockholder Matters
Market Information - Exchange 46
- Stock Prices & Dividends 25
Dividend Restrictions 38
Holders of Common Stock 24
ITEM 6. Selected Financial Data 24
ITEM 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations 26-30
ITEM 8. Financial Statements and Supplementary Data 31-43
ITEM 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure - None
PART III
ITEM 10. Directors and Executive Officers of the Registrant
ITEM 11. Executive Compensation
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
ITEM 13. Certain Relationships and Related Transactions
Information for Items 10 through 13 of this report is incorporated herein
by reference to the Company's definitive proxy statement for the Annual Meeting
of Shareholders to be held February 14, 1996, which is expected to be filed with
the SEC pursuant to Regulation 14A not later than January 6, 1996.
23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) (1) The following Financial Statements of the Registrant and
Independent Auditors' Report, included in the Company's 1995 Annual Report, are
incorporated by reference in Item 8 above:
Consolidated Balance Sheets as of September 30, 1995 and 1994
Consolidated Statements of Income for the Years Ended
September 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1995, 1994 and 1993
Consolidated Statements of Capitalization as of September 30, 1995
and 1994
Consolidated Statements of Common Stock Equity for the Years
Ended September 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Independent Auditors' Report
(2) Financial Statement Schedules - See Index to Financial Statement
Schedules on page 24.
(3) Exhibits - See Exhibit Index on page 28.
(b) The Company did not file a Form 8-K during the quarter ended
September 30, 1995.
On October 12, 1995, the Company filed a Form 8-K regarding CR&R's
execution of a contract to sell certain of its real estate
assets.
On December 1, 1995, the Company filed a Form 8-K regarding certain
amendments to its By-laws.
24
NEW JERSEY RESOURCES CORPORATION
INDEX TO FINANCIAL STATEMENT SCHEDULES
Page
----
Schedule II - Valuation and qualifying accounts and
reserves for each of the three years in the period
ended September 30, 1995 24
Schedules other than those listed above are omitted because they are not
required or are not applicable, or the required information is shown in the
financial statements or notes thereto.
25
Schedule II
NEW JERSEY RESOURCES CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED SEPTEMBER 30, 1995, 1994 and 1993
BALANCE ADDITIONS BALANCE
AT CHARGED AT END
BEGINNING TO OF
CLASSIFICATION OF YEAR EXPENSE OTHER YEAR
- -------------- --------- -------- ----- -------
($000)
1995:
Reserves deducted
from assets to which
they apply
Doubtful Accounts $657 $1,487 $(1,722)(1) $422
==== ====== =========== ====
Materials and Supplies $151 $ 12 $ 9 (2) $172
==== ====== =========== ====
1994:
Reserves deducted
from assets to which
they apply
Doubtful Accounts $684 $1,762 $(1,789)(1) $657
==== ====== =========== ====
Materials and Supplies $ 48 $1,181 $(1,078)(2) $151
==== ====== =========== ====
1993:
Reserves deducted
from assets to which
they apply
Doubtful Accounts $598 $1,397 $(1,311)(1) $684
==== ====== =========== ====
Materials and Supplies $ 48 $ -- $ -- $ 48
==== ====== =========== ====
Notes: (1) Uncollectible accounts written off, less recoveries.
(2) Obsolete inventory written off, less salvage.
26
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.
NEW JERSEY RESOURCES CORPORATION
--------------------------------
(Registrant)
Date: December 28, 1995 By:/s/Glenn C. Lockwood
--------------------
Glenn C. Lockwood
Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, on behalf of the
Registrant in the capacities and on the dates included:
Dec. 28, 1995 /s/Bruce G. Coe Dec. 28, 1995 /s/Warren R. Haas
---------------- -----------------
Bruce G. Coe Warren R. Haas
Chairman and Director Director
Dec. 28, 1995 /s/Laurence M. Downes Dec. 28, 1995 /s/Dorothy K. Light
-------------------------- -------------------
Laurence M. Downes Dorothy K. Light
President, Chief Executive Director
Officer and Director
Dec. 28, 1995 /s/Glenn C. Lockwood Dec. 28, 1995 /s/Donald E. O'Neill
-------------------------- --------------------
Glenn C. Lockwood Donald E. O'Neill
Vice President and Director
Chief Financial Officer
(Principal Accounting
Officer)
Dec. 28, 1995 /s/Roger E. Birk Dec. 28, 1995 /s/Richard S. Sambol
-------------------------- --------------------
Roger E. Birk Richard S. Sambol
Director Director
Dec. 28, 1995 /s/Leonard S. Coleman Dec. 28, 1995 /s/Charles G. Stalon
-------------------------- --------------------
Leonard S. Coleman Charles G. Stalon
Director Director
Dec. 28, 1995 /s/Joe B. Foster Dec. 28, 1995 /s/Thomas B. Toohey
-------------------------- -------------------
Joe B. Foster Thomas B. Toohey
Director Director
Dec. 28, 1995 /s/Hazel F. Gluck Dec. 28, 1995 /s/John J. Unkles, Jr.
-------------------------- ----------------------
Hazel F. Gluck John J. Unkles, Jr.
Director Director
27
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of New Jersey Resources Corporation:
We have audited the consolidated financial statements of New Jersey
Resources Corporation as of September 30, 1995 and 1994 and for each of the
three years in the period ended September 30, 1995, and have issued our report
thereon dated October 31, 1995 (Except for Note 12 as to which the date is
November 8, 1995); such consolidated financial statements and report are
included in your 1995 Annual Report to Shareholders and are incorporated herein
by reference. Our audits also included the consolidated financial statement
schedule of New Jersey Resources Corporation, listed in Item 14. This
consolidated financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
October 31, 1995
-------------------------------------------
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-52409 and No. 33-57711 of New Jersey Resources Corporation on Forms S-8 and
S-3, respectively, of our reports dated October 31, 1995 (Except for Note 12 as
to which the date is November 8, 1995), appearing in and incorporated by
reference in this Annual Report on Form 10-K of New Jersey Resources Corporation
for the year ended September 30, 1995.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
December 28, 1995
28
EXHIBIT INDEX
Previous Filing
Reg. S-K --------------------------------
Exhibit Item 601 Registration
No. Reference Document Description Number Exhibit
- ------ --------- -------------------- ------------ -------
3-1 3 Restated Certificate of Incorporation of the The Company's 3-1
Company, as amended Quarterly Report
on Form 10-Q for
the quarter ended
March 31, 1992
3-2 By-laws of the Company, as presently in effect The Company's 5-1
Form 8-K filed on
December 1, 1995
4-1 4 Specimen Common Stock Certificates 33-21872 4-1
4-2 Indenture of Mortgage and Deed of Trust 2-9569 4(g)
with Harris Trust and Savings Bank, as
Trustee, dated April 1, 1952
4-2L Twelfth Supplemental Indenture, Note (3) 4-2L
dated as of August 1, 1984
4-2M Thirteenth Supplemental Indenture, Note (4) 4-2M
dated as of September 1, 1985
4-2N Fourteenth Supplemental Indenture, Note (5) 4-2N
dated as of May 1, 1986
4-2O Fifteenth Supplemental Indenture, Note (6) 4-2O
dated as of March 1, 1987
4-2P Sixteenth Supplemental Indenture, Note (6) 4-2P
dated as of December 1, 1987
4-2Q Seventeenth Supplemental Indenture, Note (7) 4-2Q
dated as of June 1, 1988
4-2R Eighteenth Supplemental Indenture, 33-30034 4-2R
dated as of June 1, 1989
4-2S Nineteenth Supplemental Indenture, Note (10) 4-2S
dated as of March 1, 1991
4-2T Twentieth Supplemental Indenture, Note (11) 4-2T
dated as of December 1, 1992
4-2U Twenty-First Supplemental Indenture, Note (12) 4-2U
dated as of August 1, 1993
29
EXHIBIT INDEX
Previous Filing
Reg. S-K --------------------------------
Exhibit Item 601 Registration
No. Reference Document Description Number Exhibit
- ------ --------- -------------------- ------------ -------
4-2V Twenty-Second Supplemental Indenture, Note (12) 4-2V
dated as of October 1, 1993
4-2W Twenty-Third Supplemental Indenture, Note (13) 4-2W
dated as of August 15, 1994
4-2X Twenty-Fourth Supplemental Indenture, Note (13) 4-2X
dated as of October 1, 1994
4-2Y Twenty-Fifth Supplemental Indenture
dated as of July 15, 1995
4-2Z Twenty-Sixth Supplemental Indenture
dated as of October 1, 1995
4-3 Term Loan Agreement between New Jersey Note (8) 4-3
Resources Corporation and Union Bank of
Switzerland, dated January 31, 1987
4-4 Revolving Credit Agreement between New Jersey Note (8) 4-4
Resources Corporation and Swiss Bank Corporation,
dated September 6, 1989
4-5 Amended and Restated Note and Credit The Company's 4-5
Agreement between New Jersey Resources Quarterly Report
Corporation and First Fidelity Bank, on Form 10-Q for
dated May 7, 1993 the quarter ended
June 30, 1993
4-6 Revolving Credit Agreement between New Jersey Note (10) 4-6
Resources Corporation and Union Bank of
Switzerland, dated September 28, 1990
4-7 Revolving Credit and Term Loan Agreement Note (10) 4-7
between New Jersey Resources Corporation and
Midlantic National Bank, dated December 20, 1990
4-8 Revolving Credit Agreement between New Jersey Note (10) 4-8
Resources Corporation and Union Bank of
Switzerland, dated December 31, 1990
30
EXHIBIT INDEX
Previous Filing
Reg. S-K --------------------------------
Exhibit Item 601 Registration
No. Reference Document Description Number Exhibit
- ------ --------- -------------------- ------------ -------
4-9 Credit Agreement between New Jersey Resources Note (10) 4-9
Corporation and J.P. Morgan Delaware,
dated August 1, 1991
4-10 Revolving Credit Agreement between New Jersey Note (10) 4-10
Resources Corporation and Swiss Bank Corporation,
dated September 30, 1991
10-2 10 Agreements between NJNG and Algonquin Gas
Transmission Company:
10-2A Dated September 8, 1967 2-38344 4(d)
10-2B Dated September 8, 1967 2-38344 4(e)
10-2C Dated June 20, 1986 33-12437 10-2C
10-2D Dated June 20, 1986 33-12437 10-2D
10-4 Agreements between NJNG and Consolidated
Gas Transmission Corporation:
Dated November 16, 1983 Note (3) 10-6
10-4A Dated July 12, 1985 Note (4) 10-6A
10-4B Dated January 30, 1984 33-12437 10-4L
10-6 Agreement between NJNG and Boundary Gas Inc., Note (3) 10-8
dated March 6, 1984
10-7 Retirement Plan for Represented Employees, as 2-73181 10(f)
amended October 1, 1984
10-8 Retirement Plan for Non-Represented Employees, 2-73181 10(g)
as amended October 1, 1985
31
EXHIBIT INDEX
Previous Filing
Reg. S-K --------------------------------
Exhibit Item 601 Registration
No. Reference Document Description Number Exhibit
- ------ --------- -------------------- ------------ -------
10-9 Supplemental Retirement Plans covering all Note (5) 10-9
Executive Officers as described in the
Registrant's definitive proxy statement
incorporated herein by reference
10-11 Agreements between NJNG and Transcontinental
Gas Pipe Line Corporation:
Dated April 1, 1989 Note (9) 10-11
10-11A Dated October 30, 1989 Note (9) 10-11A
0-13 Agreements between NJNG and Alberta Northeast Note (11) 10-13
Gas Limited, dated February 7, 1991
10-14 Agreement between NJNG and Iroquois Gas Note (11) 10-14
Transmission System, L.P., dated February 7, 1991
10-15 Agreement between NJNG and CNG Energy The Company's 10-15
Company, dated November 23, 1988 Quarterly Report
on Form 10-Q for
the quarter ended
December 31, 1992
13-1 13 1995 Annual Report to Stockholders. Such
Exhibit includes only those portions thereof
which are expressly incorporated by reference
in this Form 10-K.
21-1 21 Subsidiaries of the Registrant
23-1 23 Consent of Independent Accountants See page 26
27-1 27 Financial Data Schedule
Note (1) 1982 Form 10-K File No. 1-8359
Note (2) 1983 Form 10-K File No. 1-8359
Note (3) 1984 Form 10-K File No. 1-8359
Note (4) 1985 Form 10-K File No. 1-8359
Note (5) 1986 Form 10-K File No. 1-8359
Note (6) 1987 Form 10-K File No. 1-8359
Note (7) 1988 Form 10-K File No. 1-8359
Note (8) 1989 Form 10-K File No. 1-8359
Note (9) 1990 Form 10-K File No. 1-8359
Note (10) 1991 Form 10-K File No. 1-8359
Note (11) 1992 Form 10-K File No. 1-8359
Note (12) 1993 Form 10-K File No. 1-8359
Note (13) 1994 Form 10-K File No. 1-8359