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New Jersey
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22-2376465
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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1415 Wyckoff Road, Wall, New Jersey 07719
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732-938-1480
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(Address of principal
executive offices)
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(Registrant’s telephone number,
including area code)
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Securities registered pursuant to Section 12 (b) of the Act:
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Common Stock - $2.50 Par Value
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New York Stock Exchange
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(Title of each class)
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(Name of each exchange on which registered)
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(Do not check if a smaller
reporting company)
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Page
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1
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PART I – FINANCIAL INFORMATION
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ITEM 1.
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2
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7
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7
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7
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9
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13
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16
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18
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19
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20
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21
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21
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22
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24
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26
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ITEM 2.
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27
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ITEM 3.
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49
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ITEM 4.
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51
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PART II – OTHER INFORMATION
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ITEM 1.
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52
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ITEM 1A.
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52
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ITEM 2.
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52
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ITEM 4.
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52
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ITEM 6.
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53
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54
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INFORMATION
CONCERNING FORWARD-LOOKING STATEMENTS
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Ÿ
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weather and economic conditions;
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Ÿ
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NJR’s dependence on operating subsidiaries;
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Ÿ
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demographic changes in the New Jersey Natural Gas (NJNG) service territory;
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Ÿ
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the rate of NJNG customer growth;
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Ÿ
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volatility of natural gas and other commodity prices and their impact on customer usage, NJR Energy Services’ (NJRES) operations and on the Company’s risk management efforts;
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Ÿ
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changes in rating agency requirements and/or credit ratings and their effect on availability and cost of capital to the Company;
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Ÿ
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the impact of volatility in the credit markets that would result in the increased cost and/or limit the availability of credit at NJR to fund and support physical gas inventory purchases and other working capital needs at NJRES, and all other non-regulated subsidiaries, as well as negatively affect cost and access to the commercial paper market and other short-term financing markets by NJNG to allow it to fund its commodity purchases, capital expenditures and meet its short-term obligations as they come due;
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Ÿ
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the ability to comply with debt covenants;
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continued failures in the market for auction rate securities;
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the impact to the asset values and resulting higher costs and funding obligations of NJR’s pension and postemployment benefit plans as a result of downturns in the financial markets, and impacts associated with the Patient Protection and Affordable Care Act;
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the ability to maintain effective internal controls;
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accounting effects and other risks associated with hedging activities and use of derivatives contracts;
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commercial and wholesale credit risks, including the availability of creditworthy customers and counterparties and liquidity in the wholesale energy trading market;
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the ability to obtain governmental approvals and/or financing for the construction, development and operation of certain non-regulated energy investments;
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risks associated with the management of the Company’s joint ventures and partnerships;
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the level and rate at which costs and expenses are incurred and the extent to which they are allowed to be recovered from customers through the regulatory process in connection with constructing, operating and maintaining NJNG’s natural gas distribution system;
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Ÿ
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dependence on third-party storage and transportation facilities for natural gas supply;
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operating risks incidental to handling, storing, transporting and providing customers with natural gas;
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Ÿ
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access to adequate supplies of natural gas;
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the regulatory and pricing policies of federal and state regulatory agencies;
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the costs of compliance with present and future environmental laws, including potential climate change-related legislation;
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the ultimate outcome of pending regulatory proceedings;
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the disallowance of recovery of environmental-related expenditures and other regulatory changes; and
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environmental-related and other litigation and other uncertainties.
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Three Months Ended
March 31,
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Six Months Ended
March 31,
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(Thousands, except per share data)
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2010
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2009
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2010
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2009
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OPERATING REVENUES
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Utility
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$430,706
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$469,261
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$689,181
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$810,169
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Nonutility
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487,640
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468,255
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838,711
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928,651
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Total operating revenues
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918,346
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937,516
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1,527,892
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1,738,820
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OPERATING EXPENSES
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Gas purchases:
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Utility
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276,104
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314,091
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431,054
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544,543
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Nonutility
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427,273
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473,827
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721,716
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914,465
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Operation and maintenance
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37,018
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37,365
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73,309
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73,773
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Regulatory rider expenses
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21,184
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20,744
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34,857
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34,305
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Depreciation and amortization
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7,931
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7,508
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15,800
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14,869
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Energy and other taxes
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26,824
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31,981
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43,759
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55,614
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Total operating expenses
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796,334
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885,516
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1,320,495
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1,637,569
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OPERATING INCOME
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122,012
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52,000
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207,397
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101,251
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Other income
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1,028
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1,058
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2,147
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1,916
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Interest expense, net of capitalized interest
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5,291
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4,219
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10,708
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10,766
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INCOME BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF AFFILIATES
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117,749
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48,839
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198,836
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92,401
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Income tax provision
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45,258
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17,638
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76,187
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33,442
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Equity in earnings of affiliates, net of tax
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1,726
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787
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3,470
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1,301
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NET INCOME
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$ 74,217
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$ 31,988
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$126,119
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$ 60,260
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EARNINGS PER COMMON SHARE
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BASIC
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$1.79
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$0.76
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$3.04
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$1.43
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DILUTED
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$1.78
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$0.75
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$3.02
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$1.41
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DIVIDENDS PER COMMON SHARE
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$0.34
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$0.31
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$0.68
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$0.62
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WEIGHTED AVERAGE SHARES OUTSTANDING
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BASIC
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41,418
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42,305
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41,517
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42,238
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DILUTED
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41,726
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42,693
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41,824
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42,598
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ITEM 1. FINANCIAL STATEMENTS (Continued)
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Six Months Ended
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March 31,
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(Thousands)
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2010
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2009
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net income
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$126,119
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$60,260
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Adjustments to reconcile net income to cash flows from operating activities:
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Unrealized (gain) loss on derivative instruments and related transactions
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(19,208
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)
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17,867
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Depreciation and amortization
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16,267
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15,303
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Allowance for equity used during construction
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(917
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)
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—
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Allowance for bad debt expense
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1,716
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3,801
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Deferred income taxes
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48,979
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(14,128
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)
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Manufactured gas plant remediation costs
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(1,755
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)
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(9,851
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)
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Equity in earnings of affiliates, net of distributions
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(2,222
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)
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(1,301
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)
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Cost of removal – asset retirement obligations
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(280
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)
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(463
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)
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Contributions to postemployment benefit plans
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(6,187
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)
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(563
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)
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Changes in:
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Components of working capital
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90,359
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254,081
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Other noncurrent assets
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17,518
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(17,426
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)
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Other noncurrent liabilities
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(25,394
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)
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38,290
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Cash flows from operating activities
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244,995
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345,870
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CASH FLOWS USED IN INVESTING ACTIVITIES
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Expenditures for:
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Utility plant
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(27,738
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)
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(37,802
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Real estate properties and other
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(93
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(240
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)
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Cost of removal
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(4,432
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(3,583
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)
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Investments in equity investees
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(4,300
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)
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(28,525
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)
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Release from restricted cash construction fund
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—
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4,200
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Cash flows used in investing activities
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(36,563
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)
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(65,950
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)
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CASH FLOWS USED IN FINANCING ACTIVITIES
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Proceeds from issuance of common stock
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6,371
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6,959
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Tax benefit from stock options exercised
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230
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993
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Proceeds from sale-leaseback transaction
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4,925
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6,268
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Payments of long-term debt
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(3,204
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)
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(57,594
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)
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Purchases of treasury stock
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(24,729
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)
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(3,291
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Payments of common stock dividends
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(27,395
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)
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(24,384
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)
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Net payments of short-term debt
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(44,700
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)
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(168,200
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)
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Cash flows used in financing activities
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(88,502
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(239,249
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)
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Change in cash and temporary investments
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119,930
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40,671
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Cash and temporary investments at beginning of period
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36,186
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42,626
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Cash and temporary investments at end of period
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$156,116
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$83,297
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CHANGES IN COMPONENTS OF WORKING CAPITAL
|
||||
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Receivables
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$(126,345
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)
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$ (25,651
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)
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Inventories
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123,460
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378,188
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Recovery of gas costs
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(49,637
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)
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41,865
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Gas purchases payable
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79,468
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(144,421
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)
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Prepaid and accrued taxes
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49,699
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115,528
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Accounts payable and other
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(9,154
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)
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(3,140
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)
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Restricted broker margin accounts
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53,225
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(65,546
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)
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Customers’ credit balances and deposits
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(50,460
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)
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(49,203
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)
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Other current assets
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20,103
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6,461
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Total
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$ 90,359
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$254,081
|
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SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
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||||
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Cash paid for:
|
||||
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Interest (net of amounts capitalized)
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$ 8,944
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$12,277
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Income taxes
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$23,775
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$ 9,227
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||
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ITEM 1. FINANCIAL STATEMENTS (Continued)
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March 31,
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September 30,
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|||
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(Thousands)
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2010
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2009
|
||
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PROPERTY, PLANT AND EQUIPMENT
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||||
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Utility plant, at cost
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$1,467,547
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$1,438,945
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Real estate properties and other, at cost
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30,088
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30,195
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1,497,635
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1,469,140
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Accumulated depreciation and amortization
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(414,192
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)
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(404,701
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)
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Property, plant and equipment, net
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1,083,443
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1,064,439
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CURRENT ASSETS
|
||||
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Cash and temporary investments
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156,116
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36,186
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Customer accounts receivable
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Billed
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202,802
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101,945
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Unbilled revenues
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29,583
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8,616
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Allowance for doubtful accounts
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(3,258
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)
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(6,064
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)
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Regulatory assets
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19,715
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5,878
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Gas in storage, at average cost
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174,246
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297,464
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Materials and supplies, at average cost
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5,784
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6,026
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Prepaid state taxes
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4,075
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37,886
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Derivatives, at fair value
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198,842
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131,070
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Restricted broker margin account
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6,989
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26,250
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Deferred taxes
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297
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20,801
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Other
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20,908
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18,131
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Total current assets
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816,099
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684,189
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NONCURRENT ASSETS
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||||
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Investments in equity investees
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168,450
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160,508
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Regulatory assets
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406,957
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391,025
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Derivatives, at fair value
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11,607
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9,536
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Other
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10,427
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11,333
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Total noncurrent assets
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597,441
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572,402
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Total assets
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$2,496,983
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$2,321,030
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ITEM 1. FINANCIAL STATEMENTS (Continued)
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March 31,
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September 30,
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(Thousands)
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2010
|
2009
|
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CAPITALIZATION
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|||||
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Common stock equity
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$ 768,918
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$ 689,726
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Long-term debt
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436,474
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455,492
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Total capitalization
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1,205,392
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1,145,218
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CURRENT LIABILITIES
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|||||
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Current maturities of long-term debt
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27,249
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6,510
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Short-term debt
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98,700
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143,400
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Gas purchases payable
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209,580
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130,112
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Accounts payable and other
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35,427
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44,448
|
|||
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Dividends payable
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14,059
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13,026
|
|||
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Deferred and accrued taxes
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19,363
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3,475
|
|||
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Regulatory liabilities
|
—
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36,203
|
|||
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New Jersey clean energy program
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11,591
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10,920
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|||
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Derivatives, at fair value
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172,718
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94,853
|
|||
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Restricted broker margin account
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33,964
|
—
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Customers’ credit balances and deposits
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22,759
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73,218
|
|||
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Total current liabilities
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645,410
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556,165
|
|||
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NONCURRENT LIABILITIES
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|||||
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Deferred income taxes
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272,068
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243,593
|
|||
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Deferred investment tax credits
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6,710
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6,870
|
|||
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Deferred revenue
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7,287
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8,203
|
|||
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Derivatives, at fair value
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5,667
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6,250
|
|||
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Manufactured gas plant remediation
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146,700
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146,700
|
|||
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Postemployment employee benefit liability
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89,555
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89,035
|
|||
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Regulatory liabilities
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61,785
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56,450
|
|||
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New Jersey clean energy program
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23,804
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28,449
|
|||
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Asset retirement obligation
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25,599
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25,097
|
|||
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Other
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7,006
|
9,000
|
|||
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Total noncurrent liabilities
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646,181
|
619,647
|
|||
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Commitments and contingent liabilities (Note 13)
|
|||||
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Total capitalization and liabilities
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$2,496,983
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$2,321,030
|
|||
|
ITEM 1. FINANCIAL STATEMENTS (Continued)
|
|
Three Months Ended
|
Six Months Ended
|
|||||||
|
March 31,
|
March 31,
|
|||||||
|
(Thousands)
|
2010
|
2009
|
2010
|
2009
|
||||
|
Net income
|
$74,217
|
$31,988
|
$126,119
|
$60,260
|
||||
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Unrealized gain (loss) on available for sale securities, net of tax of $(349), $444, $(613) and $64, respectively
(1)
|
501
|
(637
|
)
|
879
|
(92
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)
|
||
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Net unrealized (loss) on derivatives, net of tax of $21, $15, $43 and $34, respectively
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(29
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)
|
(22
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)
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(62
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)
|
(48
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)
|
|
Other comprehensive income
|
472
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(659
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)
|
817
|
(140
|
)
|
||
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Comprehensive income
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$74,689
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$31,329
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$126,936
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$60,120
|
||||
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(1)
|
Available for sale securities are included in Investments in equity investees in the Unaudited Condensed Consolidated Balance Sheets.
|
|
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
NATURE OF THE BUSINESS
|
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
March 31,
|
September 30,
|
|||
|
2010
|
2009
|
|||
|
($ in thousands)
|
Assets
|
Bcf
|
Assets
|
Bcf
|
|
NJNG
|
$ 19,972
|
2.3
|
$175,201
|
21.9
|
|
NJRES
|
154,274
|
32.6
|
122,263
|
36.3
|
|
Total
|
$174,246
|
34.9
|
$297,464
|
58.2
|
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
March 31,
|
September 30,
|
|||||||
|
(Thousands)
|
2010
|
2009
|
||||||
|
NJNG
|
$ 66,565
|
33
|
%
|
$ 21,239
|
21
|
%
|
||
|
NJRES
|
127,709
|
63
|
73,451
|
72
|
||||
|
NJRHS and other
|
8,528
|
4
|
7,255
|
7
|
||||
|
Total
|
$202,802
|
100
|
%
|
$101,945
|
100
|
%
|
||
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||
|
(Thousands)
|
2010
|
2009
|
2010
|
2009
|
||||
|
AFUDC:
|
||||||||
|
Debt
|
$249
|
$172
|
$400
|
$429
|
||||
|
Equity
|
$533
|
$ —
|
$917
|
$ —
|
||||
|
Weighted average rate
|
7.76
|
%
|
2.00
|
%
|
7.13
|
%
|
3.00
|
%
|
|
Investments in equity investees:
|
||||||||
|
Capitalized interest
|
$ —
|
$827
|
$ —
|
$1,670
|
||||
|
Weighted average interest rates
|
—
|
%
|
5.34
|
%
|
—
|
%
|
5.44
|
%
|
|
Total capitalized costs
|
$782
|
$999
|
$1,317
|
$2,099
|
||||
|
Net weighted average rate
|
7.76
|
%
|
3.67
|
%
|
7.13
|
%
|
4.22
|
%
|
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
REGULATION
|
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
Ÿ
|
October 2008 – The BPU provisionally approved, effective October 3, 2008, NJNG’s CIP petition filed in May 2008 requesting an additional $6.8 million and modification to its CIP recovery rates. The additional amount brought the total recovery requested to $22.4 million and included amounts accrued and estimated through September 30, 2008.
|
|
Ÿ
|
April 2009 – NJNG submitted a proposal to extend its CIP mechanism, as currently structured, until October 1, 2010. The extension was requested due to the continuing nature of energy efficiency programs at the state and federal levels in concert with the issuance of the economic stimulus programs. As a result of no action being taken by the BPU as of September 30, 2009, the CIP remained in effect for an additional year or until a final order was issued by the BPU.
|
|
Ÿ
|
June 2009 – The BPU issued their final order approving NJNG’s recovery of $6.8 million of CIP rates for fiscal 2008. In addition, NJNG filed its annual BGSS and CIP filing (2010 BGSS/CIP filing) for recoverable CIP amounts for fiscal 2009, requesting approval to modify its CIP recovery rates effective October 1, 2009, resulting in total annual recovery requested for fiscal 2009 of $6.9 million, representing amounts accrued and estimated through September 30, 2009. NJNG also included a request to reduce the WNC rate to facilitate recovery of its remaining balance in fiscal 2010. The rates included in the filing were provisionally approved on September 16, 2009.
|
|
Ÿ
|
December 2009 – NJNG submitted a petition requesting approval from the BPU for an extension of its CIP mechanism, as currently structured, through September 30, 2013. On January 20, 2010, the BPU approved an extension to NJNG’s CIP through September 30, 2013.
In addition, NJNG and NJRES entered into an asset management agreement that began in January 2010 and ends in March 2013. Under the terms of this agreement, NJNG released certain transportation and storage contracts to NJRES for the entire term of the agreement. NJNG also sold approximately 1 Bcf of natural gas in storage at cost to NJRES. In return, NJNG will have the option to purchase index priced gas from NJRES at NJNG’s city gate and other delivery locations to maintain operational reliability.
These capacity release payments provide BGSS savings pursuant to the terms of the CIP as approved in the January 20, 2010 BPU Board Order, and reduces costs to NJNG’s BGSS customers.
|
|
Ÿ
|
December 2008 – NJNG provided notice that it would implement a $30 million BGSS-related rate credit that would lower residential and small commercial sales customers’ bills in January and February 2009. This rate credit was due primarily to a decline in wholesale commodity costs subsequent to the October 2008 BGSS price change. On February 20, 2009, NJNG provided notice to the BPU that its BGSS-related rate credit would be extended through March 31, 2009, to reduce BGSS charges by an additional $15 million.
|
|
Ÿ
|
June 2009 – NJNG proposed a decrease of 17.6 percent for the average residential heating customer in its 2010 BGSS/CIP filing of which 15.7 percent was due to the reduction in commodity costs based on the continuing decline in the wholesale natural gas market. The balance of the rate change was related to changes to the CIP rate, as discussed above, and a minor reduction to the rate related to collecting the remaining balance under the Weather Normalization Clause (WNC). In September 2009, the BPU approved on a provisional basis a stipulation in that case which included a decrease of approximately 19 percent to the average residential heating customer of which 17.2 percent was due to the reduction to the BGSS price and the balance of rate change was related to the CIP and WNC rates as discussed above.
|
|
Ÿ
|
October 2009 – NJNG provided refunds of approximately $37.4 million to residential and small commercial customers due to the decline in the wholesale price of natural gas.
|
|
Ÿ
|
January 2010 – NJNG notified the BPU that bill credits would be provided to residential and small commercial customers, based on individual customer usage, in February 2010 and March 2010. NJNG provided credits of approximately $35.3 million.
|
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
Ÿ
|
March 2010 – NJNG notified the BPU that it would extend the BGSS bill credit for residential and small business customers through April 30, 2010 and increase the overall savings by an additional $21.4 million.
|
|
Ÿ
|
October 2008 - The BPU released a final Order in the NJCEP, updating state utilities’ funding obligations for the period from January 1, 2009, to March 31, 2012. As a result, NJNG recorded an obligation and a corresponding regulatory asset at a present value of $44.3 million in the Unaudited Condensed Consolidated Balance Sheets. As of March 31, 2010, NJNG had a $35.4 million obligation remaining.
|
|
Ÿ
|
January 2009 - NJNG filed an application (January 2009 SBC filing) regarding its SBC to increase its MGP factor and its NJCEP factor while maintaining its effective rate on USF. This filing, if approved, will result in an overall increase of approximately 0.48 percent per month for an average residential bill.
|
|
Ÿ
|
June 2009 – Natural gas utilities in the State of New Jersey collectively filed with the BPU to decrease the statewide USF rate, which was approved by the BPU on a provisional basis, effective October 12, 2009. The USF change decreased the average monthly bill of a residential heating customer by 0.6 percent.
In addition, the BPU approved NJNG’s February 2008 SBC filing, which included recovery of MGP remediation expenditures incurred through June 30, 2007, resulting in an expected total annual recovery of $17.7 million.
|
|
Ÿ
|
March 2010 - NJNG, BPU Staff and Rate Counsel executed a Settlement for the January 2009 SBC filing to allow for an increase in the MGP and NJCEP factors, while maintaining the current statewide USF factor. The new MGP factor recovers MGP incurred costs through September 30, 2008, resulting in an expected total annual recovery of approximately $20 million. The Stipulation was approved by the BPU in a Final Decision and Order on April 28, 2010.
|
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(Thousands)
|
March 31,
2010
|
September 30,
2009
|
Recovery
|
|||
|
Regulatory assets–current
|
||||||
|
Underrecovered gas costs
|
$ 13,434
|
$
—
|
(1)
|
|||
|
CIP
|
6,250
|
5,800
|
(1)
|
|||
|
WNC
|
31
|
78
|
(2)
|
|||
|
Total current
|
$ 19,715
|
$ 5,878
|
||||
|
Regulatory assets–noncurrent
|
||||||
|
Remediation costs (Note 13)
|
||||||
|
Expended, net of recoveries
|
$ 75,656
|
$ 85,461
|
(3)
|
|||
|
Liability for future expenditures
|
146,700
|
146,700
|
(4)
|
|||
|
CIP
|
1,575
|
—
|
(2)
|
|||
|
Deferred income and other taxes
|
11,527
|
11,560
|
(1)
|
|||
|
Derivatives, net (Note 4)
|
36,724
|
8,073
|
(5)
|
|||
|
Energy Efficiency Program
|
—
|
1,174
|
(6)
|
|||
|
New Jersey Clean Energy Program
|
35,396
|
39,369
|
(6)
|
|||
|
Pipeline Integrity Management (PIM)
|
448
|
448
|
(7)
|
|||
|
Postemployment benefit costs (Note 10)
|
97,803
|
94,305
|
(8)
|
|||
|
Other regulatory assets
|
1,128
|
3,935
|
(6)
|
|||
|
Total noncurrent
|
$406,957
|
$391,025
|
||||
|
(1)
|
Recoverable, subject to BPU approval, without interest.
|
|||||
|
(2)
|
Recoverable as a result of BPU approval in October 2008, without interest. This balance reflects the net results from winter period of fiscal 2006. No new WNC activity is being recorded since October 1, 2006 due to the existence of the CIP.
|
|||||
|
(3)
|
Recoverable, subject to BPU approval, with interest over rolling 7-year periods.
|
|||||
|
(4)
|
Estimated future expenditures. Recovery will be requested when actual expenditures are incurred (see
Note 13. Commitments and Contingent Liabilities).
|
|||||
|
(5)
|
Recoverable, subject to BPU approval, through BGSS, without interest.
|
|||||
|
(6)
|
Recoverable with interest, subject to BPU approval.
|
|||||
|
(7)
|
Recoverable, subject to BPU review and approval in the next base rate case. NJNG is limited annually to recording a regulatory asset that does not exceed $700,000. In addition, to the extent that project costs are lower than the approved PIM annual expense of $1.4 million, NJNG will record a regulatory liability that will be refundable as a credit to customer’s gas costs when the net cumulative liability exceeds $1.0 million.
|
|||||
|
(8)
|
Recoverable, subject to BPU approval, without interest. Includes unrecognized service costs recorded, that NJNG has determined are recoverable in rates charged to customers (see
Note 10. Employee B
enefit Plans
). Amount as of March 31, 2010 includes approximately $3.3 million related to changes in the tax treatment for Medicare Subsidy D expenses as a result of the Patient Protection and Affordable Care Act enacted in March 2010.
|
|||||
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
(Thousands)
|
March 31, 2010
|
September 30, 2009
|
|||
|
Regulatory liabilities–current
|
|||||
|
Overrecovered gas costs
(1)
|
$
—
|
$36,203
|
|||
|
Total current
|
$
—
|
$36,203
|
|||
|
Regulatory liabilities–noncurrent
|
|||||
|
Cost of removal obligation
(2)
|
$57,681
|
$56,450
|
|||
|
Energy Efficiency Program
(3)
|
2,234
|
—
|
|||
|
SBC and other regulatory liabilities
(3)
|
1,870
|
—
|
|||
|
Total noncurrent
|
$61,785
|
$56,450
|
|||
|
(1)
|
Refundable, subject to BPU approval, through BGSS with interest.
|
||||
|
(2)
|
NJNG accrues and collects for cost of removal in rates. This liability represents collections in excess of actual expenditures. Approximately $23.2 million, including accretion of $391,000 for the six months ended March 31, 2010, of regulatory assets relating to asset retirement obligations have been netted against the cost of removal obligation as of March 31, 2010 (see
Note 11. Asset Retirement Obligations
).
|
||||
|
(3)
|
Refundable with interest, subject to BPU approval
.
|
||||
|
DERIVATIVE INSTRUMENTS
|
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
Fair Value
|
||||||
|
March 31, 2010
|
September 30, 2009
|
|||||
|
(Thousands)
|
Balance Sheet Location
|
Asset
Derivatives
|
Liability
Derivatives
|
Asset
Derivatives
|
Liability
Derivatives
|
|
|
Derivatives not designated as hedging instruments under ASC 815:
|
||||||
|
NJNG:
|
||||||
|
Financial derivative commodity contracts
|
Derivatives - current
|
$ 35,431
|
$ 70,992
|
$ 15,801
|
$ 24,274
|
|
|
Derivatives - noncurrent
|
—
|
1,163
|
1,077
|
677
|
||
|
NJRES:
|
||||||
|
Physical forward commodity contracts
|
Derivatives - current
|
17,867
|
9,253
|
22,674
|
10,044
|
|
|
Derivatives - noncurrent
|
7,253
|
54
|
3,878
|
214
|
||
|
Financial derivative commodity contracts
|
Derivatives - current
|
145,542
|
92,008
|
89,140
|
60,054
|
|
|
Derivatives - noncurrent
|
4,354
|
4,450
|
4,157
|
5,316
|
||
|
NJR Energy:
|
||||||
|
Financial derivative commodity contracts
|
Derivatives - current
|
2
|
465
|
3,455
|
481
|
|
|
Derivatives - noncurrent
|
—
|
—
|
424
|
43
|
||
|
Total fair value of derivatives
|
$210,449
|
$178,385
|
$140,606
|
$101,103
|
||
|
(Thousands)
|
Location of
Gain or (Loss)
Recognized
in Income
on Derivative
|
Amount of Gain or (Loss) Recognized
in Income on Derivative
|
||||||||
|
Three Months Ended
March 31,
|
Six Months Ended
March 31
,
|
|||||||||
|
2010
|
2009
|
2010
|
2009
(1)
|
|||||||
|
Derivatives not designated as hedging instruments under ASC 815:
|
||||||||||
|
NJRES:
|
||||||||||
|
Physical commodity contracts
|
Operating revenues
|
$23,028
|
$ 8,039
|
$22,674
|
$ 8,039
|
|||||
|
Physical commodity contracts
|
Gas purchases
|
773
|
8,926
|
154
|
8,926
|
|||||
|
Financial derivatives
|
Gas purchases
|
41,179
|
32,157
|
65,117
|
32,157
|
|||||
|
Subtotal NJRES
|
64,980
|
49,122
|
87,945
|
49,122
|
||||||
|
NJR Energy:
|
||||||||||
|
Financial derivatives
|
Operating revenues
|
(4,762
|
)
|
(10,010
|
)
|
(6,506
|
)
|
(10,010
|
)
|
|
|
Total NJRES and NJR Energy unrealized and realized gains
|
$60,218
|
$39,112
|
$81,439
|
$39,112
|
||||||
|
(1)
|
Since the provisions of ASC 815-10-50 did not become effective for NJR until January 1, 2009, amounts for the six months ended March 31, 2009 only include gains and losses for the January 1, 2009 through March 31, 2009 period, therefore, is not comparative to the six months ended March 31, 2010.
|
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
Volume (Bcf)
|
|||||
|
March 31, 2010
|
September 30, 2009
|
||||
|
NJNG
|
Futures
|
2.7
|
21.4
|
||
|
Swaps
|
20.8
|
(14.5
|
)
|
||
|
Options
|
2.9
|
8.0
|
|||
|
NJRES
|
Futures
|
(20.4
|
)
|
(19.8
|
)
|
|
Swaps
|
11.8
|
(23.2
|
)
|
||
|
Options
|
1.3
|
4.0
|
|||
|
Physical
|
93.2
|
58.6
|
|||
|
NJR Energy
|
Swaps
|
1.4
|
2.6
|
||
|
(Thousands)
|
Balance Sheet Location
|
March 31, 2010
|
September 30, 2009
|
||
|
NJNG broker margin deposit
|
Broker margin – Current assets
|
$ 6,989
|
$16,458
|
||
|
NJRES broker margin deposit
|
Broker margin – Current (liabilities) assets
|
$(33,964
|
)
|
$ 9,792
|
|
|
(Thousands)
|
Gross Credit
Exposure
|
|
|
Investment grade
|
$144,794
|
|
|
Noninvestment grade
|
10,132
|
|
|
Internally rated investment grade
|
24,090
|
|
|
Internally rated noninvestment grade
|
7,393
|
|
|
Total
|
$186,409
|
|
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
FAIR VALUE
|
|
March 31,
|
September 30,
|
|
|
(Thousands)
|
2010
|
2009
|
|
Carrying value
|
$463,700
|
$462,000
|
|
Fair market value
|
$480,100
|
$477,900
|
|
Level 1
|
Unadjusted quoted prices for identical assets or liabilities in active markets; NJR’s Level 1 assets and liabilities include exchange traded financial derivative contracts, listed equities, and money market funds.
|
|
Level 2
|
Price data, other than Level 1 quotes, that is observed either directly or indirectly from publications or pricing services; NJR’s Level 2 assets and liabilities include over-the-counter physical forward commodity contracts and swap contracts or derivatives that are initially valued using observable quotes and are subsequently adjusted to include time value, credit risk or estimated transport pricing components. These additional adjustments are not considered to be significant to the ultimate recognized values.
|
|
Level 3
|
Inputs derived from a significant amount of unobservable market data; these include NJR’s best estimate of fair value and are derived primarily through the use of internal valuation methodologies. Certain of NJR’s physical commodity contracts that are to be delivered to inactively traded points on a pipeline are included in this category.
|
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
Quoted Prices in Active
Markets for Identical
Assets
|
Significant Other
Observable Inputs
|
Significant
Unobservable
Inputs
|
|||||
|
(Thousands)
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
Total
|
|||
|
As of March 31, 2010
:
|
|||||||
|
Assets:
|
|||||||
|
Physical forward commodity contracts
|
$ —
|
$25,120
|
$ —
|
$ 25,120
|
|||
|
Financial derivative contracts
|
122,778
|
62,551
|
—
|
185,329
|
|||
|
Available for sale securities
(1)
|
9,363
|
—
|
—
|
9,363
|
|||
|
Other assets
|
1,056
|
—
|
—
|
1,056
|
|||
|
Total assets at fair value
|
$133,197
|
$87,671
|
$
—
|
$220,868
|
|||
|
Liabilities:
|
|||||||
|
Physical forward commodity contracts
|
$ —
|
$ 9,307
|
$ —
|
$ 9,307
|
|||
|
Financial derivative contracts
|
92,316
|
76,762
|
—
|
169,078
|
|||
|
Other liabilities
|
905
|
—
|
—
|
905
|
|||
|
Total liabilities at fair value
|
$93,221
|
$86,069
|
$ —
|
$179,290
|
|||
|
As of September 30, 2009
:
|
|||||||
|
Assets:
|
|||||||
|
Physical forward commodity contracts
|
$ —
|
$26,552
|
$ —
|
$ 26,552
|
|||
|
Financial derivative contracts
(2)
|
47,065
|
66,989
|
—
|
114,054
|
|||
|
Available for sale securities
(1)
|
7,872
|
—
|
—
|
7,872
|
|||
|
Other assets
|
1,467
|
—
|
—
|
1,467
|
|||
|
Total assets at fair value
|
$56,404
|
$93,541
|
$ —
|
$149,945
|
|||
|
Liabilities:
|
|||||||
|
Physical forward commodity contracts
|
$ —
|
$10,258
|
$ —
|
$ 10,258
|
|||
|
Financial derivative contracts
(2)
|
40,313
|
50,532
|
—
|
90,845
|
|||
|
Other liabilities
|
1,467
|
—
|
—
|
1,467
|
|||
|
Total liabilities at fair value
|
$41,780
|
$60,790
|
$ —
|
$102,570
|
|||
|
(1)
|
Included in Investments in equity investees in the Unaudited Condensed Consolidated Balance Sheets.
|
||||||
|
(2)
|
Subsequent to the issuance of our 2009 Form 10-K we determined that the fair value table as of September 30, 2009, improperly classified certain exchange cleared financial instruments as Level 1 financial derivative contracts assets and liabilities. Accordingly, we have corrected the classification of such amounts previously reported in our 2009 Form 10-K as of September 30, 2009 by decreasing Level 1 financial derivative contracts-assets $34.2 million with a corresponding increase in Level 2, and decreasing Level 1 financial derivative contracts-liabilities $28.1 million with a corresponding increase in Level 2. These changes in the disclosed classification of the basis of valuation had no effect on the reported fair values of the related assets and liabilities.
|
||||||
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
Fair Value Measurements Using
|
||||
|
Significant Unobservable Inputs
|
||||
|
(Level 3)
|
||||
|
(Thousands)
|
Three Months Ended
|
Six Months Ended
|
||
|
Beginning balance
|
$123
|
$937
|
||
|
Total gains realized and unrealized
(1)
|
79
|
320
|
||
|
Purchases, sales, issuances and settlements, net
|
(200
|
)
|
(772
|
)
|
|
Net transfers in and/or out of level 3
|
—
|
(483
|
)
|
|
|
Ending balance
|
$ 2
|
$ 2
|
||
|
Net unrealized gains included in net income relating to
|
||||
|
derivatives still held at March 31, 2009
|
$2
|
$2
|
||
|
(1)
|
Gains recognized in Operating revenues and Gas purchases for the three months ended March 31, 2009 are $77,000 and $2,000, respectively and for the six months ended March 31, 2009 are $77,000 and $243,000, respectively.
|
|
INVESTMENTS IN EQUITY INVESTEES
|
|
(Thousands)
|
March 31,
2010
|
September 30,
2009
|
||
|
Steckman Ridge
|
$135,754
|
$131,555
|
||
|
Iroquois
|
23,333
|
21,081
|
||
|
Other
|
9,363
|
7,872
|
||
|
Total
|
$168,450
|
$160,508
|
||
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
EARNINGS PER SHARE
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||
|
(Thousands, except per share amounts)
|
2010
|
2009
|
2010
|
2009
|
||||
|
Net income, as reported
|
$74,217
|
$31,988
|
$126,119
|
$60,260
|
||||
|
Basic earnings per share
|
||||||||
|
Weighted average shares of common stock outstanding–basic
|
41,418
|
42,305
|
41,517
|
42,238
|
||||
|
Basic earnings per common share
|
$1.79
|
$0.76
|
$3.04
|
$1.43
|
||||
|
Diluted earnings per share
|
||||||||
|
Weighted average shares of common stock outstanding–basic
|
41,418
|
42,305
|
41,517
|
42,238
|
||||
|
Incremental shares
(1)
|
308
|
388
|
307
|
360
|
||||
|
Weighted average shares of common stock outstanding–diluted
(2)
|
41,726
|
42,693
|
41,824
|
42,598
|
||||
|
Diluted earnings per common share
|
$1.78
|
$0.75
|
$3.02
|
$1.41
|
||||
|
(2)
|
There were no anti-dilutive shares excluded from the calculation of diluted earnings per share for the three and six months ended March 31, 2010 and March 31, 2009.
|
|
DEBT
|
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
March 31,
|
September 30,
|
|||
|
(Thousands)
|
2010
|
2009
|
||
|
NJR
|
||||
|
Long - term debt
|
$ 50,000
|
$ 50,000
|
||
|
Bank credit facilities
(1)
|
$325,000
|
$325,000
|
||
|
Amount outstanding at end of period
|
||||
|
Notes payable to banks
|
$ 98,700
|
$143,400
|
||
|
Weighted average interest rate at end of period
|
||||
|
Notes payable to banks
|
0.52
|
%
|
0.57
|
%
|
|
NJNG
|
||||
|
Long - term debt
(2)
|
$349,800
|
$349,800
|
||
|
Bank credit facilities
(1)
|
$200,000
|
$250,000
|
||
|
Amount outstanding at end of period
|
||||
|
Commercial paper
|
$
—
|
$
—
|
||
|
Weighted average interest rate at end of period
|
||||
|
Commercial paper
|
—
|
%
|
—
|
%
|
|
NJRES
|
||||
|
Bank credit facilities
(3)
|
$
—
|
$30,000
|
||
|
Amount outstanding at end of period
|
||||
|
Notes payable to banks
|
$
—
|
$
—
|
||
|
Weighted average interest rate at end of period
|
||||
|
Notes payable to banks
|
—
|
%
|
—
|
%
|
|
(1)
Company is subject to commitment fees on outstanding and unused amounts.
|
||||
|
(2)
Long-term debt excludes lease obligations of $63.9 million and $62.2 million at March 31, 2010 and September 30, 2009, respectively.
|
||||
|
(3)
Facility expired in October 2009 and was not renewed.
|
||||
|
STOCK-BASED COMPENSATION
|
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
EMPLOYEE BENEFIT PLANS
|
|
Pension
|
OPEB
|
|||||||||||||||
|
Three Months
Ended
March 31,
|
Six Months
Ended
March 31,
|
Three Months
Ended
March 31,
|
Six Months
Ended
March 31,
|
|||||||||||||
|
(Thousands)
|
2010
|
2009
|
2010
|
2009
|
2010
|
2009
|
2010
|
2009
|
||||||||
|
Service cost
|
$ 992
|
$ 678
|
$1,984
|
$1,356
|
$ 704
|
$ 280
|
$1,408
|
$ 864
|
||||||||
|
Interest cost
|
2,049
|
1,937
|
4,098
|
3,874
|
1,204
|
1,023
|
2,408
|
2,029
|
||||||||
|
Expected return on plan assets
|
(2,577
|
)
|
(2,188
|
)
|
(5,154
|
)
|
(4,376
|
)
|
(485
|
)
|
(351
|
)
|
(970
|
)
|
(998
|
)
|
|
Recognized actuarial loss
|
681
|
139
|
1,362
|
278
|
570
|
215
|
1,140
|
534
|
||||||||
|
Prior service cost amortization
|
14
|
14
|
28
|
28
|
19
|
19
|
38
|
39
|
||||||||
|
Transition obligation amortization
|
—
|
—
|
—
|
—
|
89
|
90
|
178
|
179
|
||||||||
|
Net periodic cost
|
$1,159
|
$ 580
|
$2,318
|
$1,160
|
$2,101
|
$1,276
|
$4,202
|
$2,647
|
||||||||
|
ASSET RETIREMENT OBLIGATIONS (ARO)
|
|
Balance at October 1, 2009
|
$25,097
|
|
|
Accretion
|
782
|
|
|
Additions
|
—
|
|
|
Retirements
|
(280
|
)
|
|
Balance at March 31, 2010
|
$25,599
|
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
INCOME TAXES
|
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
|
(Thousands)
|
2010
|
2011
|
2012
|
2013
|
2014
|
Thereafter
|
|
NJRES:
|
||||||
|
Natural gas purchases
|
$308,679
|
$205,973
|
$187,208
|
$ 64,687
|
$ —
|
$ —
|
|
Storage demand fees
|
20,688
|
24,294
|
15,205
|
10,040
|
4,865
|
12,621
|
|
Pipeline demand fees
|
19,727
|
30,232
|
18,884
|
11,657
|
7,631
|
23,998
|
|
Sub-total NJRES
|
$349,094
|
$260,499
|
$221,297
|
$ 86,384
|
$12,496
|
$ 36,619
|
|
NJNG:
|
||||||
|
Natural gas purchases
|
$ 97,228
|
$ 14,024
|
$ —
|
$ —
|
$ —
|
$ —
|
|
Storage demand fees
|
15,622
|
27,728
|
22,622
|
19,748
|
14,860
|
52,316
|
|
Pipeline demand fees
|
35,180
|
80,221
|
74,461
|
74,664
|
70,045
|
258,682
|
|
Sub-total NJNG
|
$148,030
|
$121,973
|
$ 97,083
|
$ 94,412
|
$84,905
|
$310,998
|
|
Total
|
$497,124
|
$382,472
|
$318,380
|
$180,796
|
$97,401
|
$347,617
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||
|
(Millions)
|
2010
|
2009
|
2010
|
2009
|
||||
|
NJRES
|
$30.5
|
$28.9
|
$ 59.8
|
$ 57.8
|
||||
|
NJNG
|
25.1
|
22.3
|
48.3
|
42.8
|
||||
|
Total
|
$55.6
|
$51.2
|
$108.1
|
$100.6
|
||||
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
BUSINESS SEGMENT AND OTHER OPERATIONS DATA
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||
|
(Thousands)
|
2010
|
2009
|
2010
|
2009
|
||||
|
Operating revenues
|
||||||||
|
Natural Gas Distribution
|
$438,753
|
$469,261
|
$ 697,228
|
$ 810,169
|
||||
|
Energy Services
|
494,889
|
472,763
|
842,366
|
935,857
|
||||
|
Midstream Assets
|
—
|
—
|
—
|
—
|
||||
|
Segment subtotal
|
933,642
|
942,024
|
1,539,594
|
1,746,026
|
||||
|
Retail and Other
|
3,701
|
(2,350
|
)
|
9,745
|
(5,004
|
)
|
||
|
Eliminations
|
(18,997
|
)
|
(2,158
|
)
|
(21,447
|
)
|
(2,202
|
)
|
|
Total
|
$918,346
|
$937,516
|
$1,527,892
|
$1,738,820
|
||||
|
Depreciation and amortization
|
||||||||
|
Natural Gas Distribution
|
$7,722
|
$7,291
|
$15,382
|
$14,452
|
||||
|
Energy Services
|
49
|
51
|
99
|
102
|
||||
|
Midstream Assets
|
2
|
—
|
3
|
—
|
||||
|
Segment subtotal
|
7,773
|
7,342
|
15,484
|
14,554
|
||||
|
Retail and Other
|
158
|
166
|
316
|
315
|
||||
|
Total
|
$7,931
|
$7,508
|
$15,800
|
$14,869
|
||||
|
Interest income
(1)
|
||||||||
|
Natural Gas Distribution
|
$426
|
$504
|
$900
|
$1,162
|
||||
|
Energy Services
|
2
|
210
|
4
|
337
|
||||
|
Midstream Assets
|
211
|
—
|
431
|
—
|
||||
|
Segment subtotal
|
639
|
714
|
1,335
|
1,499
|
||||
|
Retail and Other
|
7
|
13
|
7
|
19
|
||||
|
Eliminations
|
(209
|
)
|
(209
|
)
|
(426
|
)
|
(319
|
)
|
|
Total
|
$437
|
$518
|
$916
|
$1,199
|
||||
|
Interest expense, net of capitalized interest
|
||||||||
|
Natural Gas Distribution
|
$4,155
|
$4,204
|
$ 8,406
|
$10,664
|
||||
|
Energy Services
|
230
|
85
|
492
|
171
|
||||
|
Midstream Assets
|
827
|
33
|
1,657
|
64
|
||||
|
Segment subtotal
|
5,212
|
4,322
|
10,555
|
10,899
|
||||
|
Retail and Other
|
79
|
106
|
153
|
186
|
||||
|
Eliminations
|
—
|
(209
|
)
|
—
|
(319
|
)
|
||
|
Total
|
$5,291
|
$4,219
|
$10,708
|
$10,766
|
||||
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||
|
(Thousands)
|
2010
|
2009
|
2010
|
2009
|
||||
|
Income tax provision (benefit)
|
||||||||
|
Natural Gas Distribution
|
$24,801
|
$24,767
|
$39,245
|
$38,103
|
||||
|
Energy Services
|
21,537
|
(3,072
|
)
|
38,822
|
3,760
|
|||
|
Midstream Assets
|
(186
|
)
|
—
|
(534
|
)
|
(37
|
)
|
|
|
Segment subtotal
|
46,152
|
21,695
|
77,533
|
41,826
|
||||
|
Retail and Other
|
(1,248
|
)
|
(4,057
|
)
|
(2,020
|
)
|
(8,339
|
)
|
|
Eliminations
|
354
|
—
|
674
|
(45
|
)
|
|||
|
Total
|
$45,258
|
$17,638
|
$76,187
|
$33,442
|
||||
|
Equity in earnings of affiliates, net of taxes
|
||||||||
|
Natural Gas Distribution
|
$
—
|
$
—
|
$
—
|
$
—
|
||||
|
Energy Services
|
—
|
—
|
—
|
—
|
||||
|
Midstream Assets (net of taxes of $1.6 million, $537,000, $3.2 million and $891,000, respectively)
|
2,200
|
815
|
4,535
|
1,353
|
||||
|
Segment subtotal
|
2,200
|
815
|
4,535
|
1,353
|
||||
|
Retail and Other
|
—
|
—
|
—
|
—
|
||||
|
Eliminations
|
(474
|
)
|
(28
|
)
|
(1,065
|
)
|
(52
|
)
|
|
Total
|
$1,726
|
$787
|
$3,470
|
$1,301
|
||||
|
Net financial earnings (loss)
|
||||||||
|
Natural Gas Distribution
|
$40,476
|
$41,588
|
$63,978
|
$ 64,662
|
||||
|
Energy Services
|
23,517
|
31,078
|
26,011
|
40,461
|
||||
|
Midstream Assets
|
1,514
|
725
|
3,390
|
1,179
|
||||
|
Segment subtotal
|
65,507
|
73,391
|
93,379
|
106,302
|
||||
|
Retail and Other
|
(1,496
|
)
|
(963
|
)
|
(1,955
|
)
|
(1,396
|
)
|
|
Total
|
$64,011
|
$72,428
|
$91,424
|
$104,906
|
||||
|
Three Months Ended
|
Six Months Ended
|
|||||||
|
March 31,
|
March 31,
|
|||||||
|
(Thousands)
|
2010
|
2009
|
2010
|
2009
|
||||
|
Consolidated net financial earnings
|
$64,011
|
$72,428
|
$ 91,424
|
$104,906
|
||||
|
Less:
|
||||||||
|
Unrealized (gain) loss from derivative instruments and related transactions, net of
taxes
(1)
|
(7,845
|
)
|
25,763
|
(11,950
|
)
|
31,879
|
||
|
Effects of economic hedging related to natural gas inventory, net of taxes
|
(2,361
|
)
|
14,677
|
(22,745
|
)
|
12,767
|
||
|
Consolidated net income
|
$74,217
|
$31,988
|
$126,119
|
$ 60,260
|
||||
|
(1)
|
Excludes unrealized loss (gain) of $30,000 and $(128,000) related to an intercompany transaction between NJNG and NJRES that has been eliminated in consolidation for the three and six months ended March 31, 2010.
|
|
Ÿ
|
Unrealized gains and losses on derivatives are recognized in reported earnings in periods prior to physical gas inventory flows; and
|
|
Ÿ
|
Unrealized gains and losses of prior periods are reclassified as realized gains and losses when derivatives are settled in the same period as physical gas inventory movements occur.
|
|
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
March 31,
|
September 30,
|
|||
|
(Thousands)
|
2010
|
2009
|
||
|
Assets at end of period:
|
||||
|
Natural Gas Distribution
|
$1,829,197
|
$1,797,165
|
||
|
Energy Services
|
468,884
|
327,532
|
||
|
Midstream Assets
|
159,978
|
153,609
|
||
|
Segment Subtotal
|
2,458,059
|
2,278,306
|
||
|
Retail and Other
|
63,686
|
69,411
|
||
|
Intercompany assets
(1)
|
(24,762
|
)
|
(26,687
|
)
|
|
Total
|
$2,496,983
|
$2,321,030
|
||
|
(1)
Consists of transactions between subsidiaries that are eliminated and reclassified in consolidation.
|
||||
|
RELATED PARTY TRANSACTIONS
|
|
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
(Thousands)
|
March 31,
2010
|
September 30,
2009
|
||||||
|
Assets:
|
||||||||
|
Natural Gas Distribution
|
$1,829,197
|
73
|
%
|
$1,797,165
|
77
|
%
|
||
|
Energy Services
|
468,884
|
19
|
327,532
|
14
|
||||
|
Midstream Assets
|
159,978
|
6
|
153,609
|
7
|
||||
|
Retail and Other
|
63,686
|
3
|
69,411
|
3
|
||||
|
Intercompany assets
(1)
|
(24,762
|
)
|
(1
|
)
|
(26,687
|
)
|
(1
|
)
|
|
Total
|
$2,496,983
|
100
|
%
|
$2,321,030
|
100
|
%
|
||
|
(1)
Consists of transactions between subsidiaries that are eliminated and reclassified in consolidation.
|
||||||||
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
|
March 31,
|
March 31,
|
|||||||||||||||
|
(Thousands)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
|
Net income (loss)
|
||||||||||||||||
|
Natural Gas Distribution
|
$40,476
|
54
|
%
|
$41,588
|
130
|
%
|
$ 63,978
|
50
|
%
|
$64,662
|
107
|
%
|
||||
|
Energy Services
|
35,441
|
48
|
(4,540
|
)
|
(14
|
)
|
63,085
|
50
|
6,342
|
11
|
||||||
|
Midstream Assets
|
1,514
|
2
|
725
|
2
|
3,390
|
3
|
1,179
|
2
|
||||||||
|
Retail and Other
|
(3,244
|
)
|
(4
|
)
|
(5,785
|
)
|
(18
|
)
|
(4,206
|
)
|
(3
|
)
|
(11,923
|
)
|
(20
|
)
|
|
Intercompany net income
(1)
|
30
|
—
|
—
|
—
|
(128
|
)
|
—
|
—
|
—
|
|||||||
|
Total
|
$74,217
|
100
|
%
|
$31,988
|
100
|
%
|
$126,119
|
100
|
%
|
$60,260
|
100
|
%
|
||||
|
(1)
Consists of transactions between subsidiaries that are eliminated and reclassified in consolidation.
|
||||||||||||||||
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
Ÿ
|
Earning a reasonable rate of return on the investments in its natural gas distribution system, as well as recovery of all prudently incurred costs in order to provide safe and reliable service throughout NJNG’s service territory;
|
|
Ÿ
|
Working with the BPU and the Department of the Public Advocate, Division of Rate Counsel (Rate Counsel) on the implementation and continuing review of the Conservation Incentive Program (CIP). The CIP allows NJNG to promote conservation programs to its customers while maintaining protection of its utility gross margin against potential losses associated with reduced customer usage. CIP usage differences are calculated annually and are recovered one year following the end of the CIP usage year;
|
|
Ÿ
|
Managing the new customer growth rate which is expected to be approximately 1.2 percent annually over the next two years. In fiscal 2010 and 2011, NJNG currently expects to add, in total, approximately 12,000 to 14,000 new customers. The Company believes that this stable growth would increase utility gross margin under its base rates by approximately $3.4 million annually, as calculated under NJNG’s CIP tariff;
|
|
Ÿ
|
Generating earnings from various BPU-authorized gross margin-sharing incentive programs; and
|
|
Ÿ
|
Managing the volatility of wholesale natural gas prices through a hedging program designed to keep customers’ Basic Gas Supply Service (BGSS) rates as stable as possible.
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
Ÿ
|
Identifying and benefiting from variations in pricing of natural gas transportation and storage assets due to location or timing differences of natural gas prices to generate gross margin;
|
|
Ÿ
|
Providing natural gas portfolio management services to nonaffiliated utilities and electric generation facilities;
|
|
Ÿ
|
Leveraging transactions for the delivery of natural gas to customers by aggregating the natural gas commodity costs and transportation costs in order to minimize the total cost required to provide and deliver natural gas to NJRES’ customers by identifying the lowest cost alternative with the natural gas supply, transportation availability and markets to which NJRES is able to access through its business footprint and contractual asset portfolio; and
|
|
Ÿ
|
Managing economic hedging programs that are designed to mitigate adverse market price fluctuations in natural gas transportation and storage commitments.
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||||||
|
(Thousands)
|
2010
|
2009
|
% Change
|
2010
|
2009
|
% Change
|
||||||
|
Operating revenues
|
$918,346
|
$937,516
|
(2.0
|
)%
|
$1,527,892
|
$1,738,820
|
(12.1
|
)%
|
||||
|
Gas purchases
|
$703,377
|
$787,918
|
(10.7
|
)%
|
$1,152,770
|
$1,459,008
|
(21.0
|
)%
|
||||
|
Ÿ
|
a decrease in operating revenues of $30.5 million and gas purchases of $25.3 million at NJNG primarily as a result of a decrease in Firm sales due to a decrease in the average periodic BGSS rate for residential and small commercial customers ; partially offset by
|
|
Ÿ
|
an increase in operating revenues of $22.1 million at NJRES stemming from higher average sales and a decrease in gas purchases of $41.5 million due primarily to a favorable change of $57.5 million in the value of derivatives, partially offset by a net $16.2 million increase in gas purchases as a result of an increase in volumes purchased and the economic effects of hedging related to natural gas in storage; and
|
|
Ÿ
|
an increase in operating revenues of $6.1 million at Retail and Other due primarily to lower unrealized losses at NJR Energy, as a result of the settlement of certain natural gas swap contracts, which reduced NJR Energy’s exposure to shifts in market pricing during the three months ended March 31, 2010. NJR Energy had open swap contracts representing 1.4 Bcf’s and 3.8 Bcf’s as of March 31, 2010 and 2009, respectively.
|
|
Ÿ
|
a decrease in operating revenues of $112.9 million and gas purchases of $100.5 million at NJNG as a result of a decrease in Firm sales and a customer refund in the first quarter of fiscal 2010 that did not occur in the same period in the prior year;
|
|
Ÿ
|
a decrease in operating revenues of $93.5 million and gas purchases of $184.7 million at NJRES stemming from lower average sales and gas purchase prices, which correlate to the lower price levels on the NYMEX that averaged $4.46 during the six months ended March 31, 2010 compared with $6.27 during the six months ended March 31, 2009
.
The decrease in gas costs is also due to a favorable change of $69.9 million in the value of derivatives, an increase of $57.7 million in physical gas purchases and a decrease of $56.7 million relating to the effects of economic hedging related to natural gas in storage; partially offset by
|
|
Ÿ
|
an increase in operating revenues of $14.7 million at Retail and Other due primarily to lower unrealized losses at NJR Energy, as a result of the settlement of certain natural gas swap contracts as noted above.
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||
|
(Thousands)
|
2010
|
2009
|
2010
|
2009
|
||||
|
Utility gross margin
|
||||||||
|
Operating revenues
|
$438,753
|
$469,261
|
$697,228
|
$810,169
|
||||
|
Less:
|
||||||||
|
Gas purchases
|
288,814
|
314,091
|
444,088
|
544,543
|
||||
|
Energy and other taxes
|
24,685
|
29,791
|
39,217
|
51,378
|
||||
|
Regulatory rider expense
|
21,208
|
20,744
|
34,920
|
34,305
|
||||
|
Total utility gross margin
|
104,046
|
104,635
|
179,003
|
179,943
|
||||
|
Operation and maintenance expense
|
26,817
|
26,836
|
51,695
|
51,786
|
||||
|
Depreciation and amortization
|
7,722
|
7,291
|
15,382
|
14,452
|
||||
|
Other taxes not reflected in utility gross margin
|
1,094
|
977
|
2,242
|
1,988
|
||||
|
Operating income
|
68,413
|
69,531
|
109,684
|
111,717
|
||||
|
Other income
|
1,019
|
1,028
|
1,945
|
1,712
|
||||
|
Interest charges, net
|
4,155
|
4,204
|
8,406
|
10,664
|
||||
|
Income tax provision
|
24,801
|
24,767
|
39,245
|
38,103
|
||||
|
Net income
|
$ 40,476
|
$ 41,588
|
$ 63,978
|
$ 64,662
|
||||
|
Three Months Ended
|
Six Months Ended
|
|||||||
|
March 31,
|
March 31,
|
|||||||
|
2010
|
2009
|
2010
|
2009
|
|||||
|
($ in thousands)
|
Margin
|
Bcf
|
Margin
|
Bcf
|
Margin
|
Bcf
|
Margin
|
Bcf
|
|
Residential
|
$ 71,878
|
20.5
|
$ 72,060
|
21.4
|
$121,828
|
32.9
|
$121,747
|
34.7
|
|
Commercial, industrial & other
|
16,681
|
4.1
|
17,966
|
4.7
|
29,672
|
6.7
|
31,347
|
7.9
|
|
Transportation
|
12,466
|
4.4
|
10,420
|
3.9
|
21,960
|
7.7
|
18,851
|
6.9
|
|
Total utility firm gross margin
|
101,025
|
29.0
|
100,446
|
30.0
|
173,460
|
47.3
|
171,945
|
49.5
|
|
Incentive programs
|
2,943
|
22.0
|
4,119
|
20.1
|
5,381
|
44.1
|
7,843
|
32.3
|
|
Interruptible
|
78
|
1.0
|
70
|
0.7
|
162
|
1.8
|
155
|
1.6
|
|
Total utility gross margin/throughput
|
$104,046
|
52.0
|
$104,635
|
50.8
|
$179,003
|
93.2
|
$179,943
|
83.4
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
Ÿ
|
Utility firm gross margin, which is derived from residential and commercial customers who receive natural gas service from NJNG through either sales or transportation tariffs;
|
|
Ÿ
|
Incentive programs, where margins generated or savings achieved from BPU-approved Off-system Sales, Capacity Release, Financial Risk Management (defined in Incentive Programs) or Storage Incentive programs are shared between customers and NJNG; and
|
|
Ÿ
|
Utility gross margin from interruptible customers who have the ability to switch to alternative fuels.
|
|
Ÿ
|
a decrease in operating revenues and gas purchases related to firm sales in the amount of $63.7 million and $61.5 million, respectively, as a result of a decrease in the average periodic BGSS rate for residential customers of $0.226 per therm and a decrease of $0.222 per therm for small commercial customers, offset by an increase of $0.038 per therm for large commercial customers and an increase in riders of $0.004 per therm; and
|
|
Ÿ
|
a decrease in operating revenues and gas purchases related to firm sales in the amount of $17.2 million and $12.4 million, respectively, due to lower therm usage due primarily to customer conservation and weather being 6 percent warmer than the same period of the prior fiscal year, partially offset by an increase in operating revenue of $3.5 million, as a result of higher accruals relating to the CIP during the three months ended March 31, 2010; partially offset by
|
|
Ÿ
|
an increase in operating revenues and gas purchases related to off-system sales in the amount of $34.6 million and $35.1 million, respectively, as a result of 27.9 percent higher volumes due primarily to greater opportunities in the wholesale energy market;
|
|
Ÿ
|
an increase in operating revenues and gas purchases in the amount of $11.8 million and $12.9 million, respectively, related to lower BGSS bill credits in the second quarter of fiscal 2010 in the amount of $35.3 million, including sales tax in the amount of $2.3 million as compared with the second quarter of fiscal 2009 in the amount of $47.1 million, including sales tax in the amount of $1.3 million.
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
Ÿ
|
a decrease in operating revenues and gas purchases related to firm sales in the amount of $106.8 million and $102.9 million, respectively, as a result of a decrease in the average periodic BGSS rate as noted above;
|
|
Ÿ
|
a decrease in operating revenues and gas purchases in the amount of $25.6 million and $22.1 million, respectively, due to a combination of refunds and bill credits in fiscal 2010 of $72.7 million compared with bill credits of $47.1 million, inclusive of sales tax refunds of $4.7 million and $1.3 million, respectively. NJNG extends refunds and credits to customers to manage reductions in the cost to acquire wholesale natural gas, as compared with the established rate included in its BGSS tariff ;
|
|
Ÿ
|
a decrease in operating revenues and gas purchases related to firm sales in the amount of $37.9 million and $27.4 million, respectively, due to lower therm usage due primarily to customer conservation and weather being 6.5 percent warmer than the same period of the prior fiscal year, partially offset by an increase in operating revenue of $7 million, as a result of higher accruals relating to the CIP during the six months ended March 31, 2010; partially offset by
|
|
Ÿ
|
an increase in operating revenues and gas purchases related to off-system sales in the amount of $49.4 million and $49 million, respectively, as a result of 50.2 percent higher volumes due primarily to greater opportunities in the wholesale energy market.
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
Ÿ
|
decreased bad debt expense of $1.6 million and $2.2 million, during the three months ended March 31, 2010 and the six months ended March 31, 2010, respectively, due primarily to lower reserve requirements during fiscal 2010 as a result of BGSS customer credits; offset by
|
|
Ÿ
|
increased pension and OPEB costs in the amount of $830,000 and $1.7 million, during the three months ended March 31, 2010 and the six months ended March 31, 2010, respectively, due primarily to the impact of a decline in the returns on plan assets and the decline in the discount rate used to measure plan liabilities; and
|
|
Ÿ
|
increased charitable contributions of $500,000 during the three and six months ended March 31, 2010.
|
|
Ÿ
|
a decrease in total utility gross margin of $589,000, as discussed above; and
|
|
Ÿ
|
an increase in depreciation expense of $431,000, as a result of additional utility plant being placed into service.
|
|
Ÿ
|
a decrease in total utility gross margin of $940,000, as discussed above; and
|
|
Ÿ
|
an increase in depreciation expense of $930,000, as a result of additional utility plant being placed into service.
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
Ÿ
|
a decrease of $1.2 million associated with long-term debt due to lower interest rates on variable rate debt bonds and the repayment of a $30 million bond in November 2008; and
|
|
Ÿ
|
a decrease of $1 million associated with short-term debt due primarily to lower average interest rates and balances related to NJNG’s commercial paper program.
|
|
Ÿ
|
Storage:
NJRES attempts to take advantages of differences in market prices occurring over different time periods (time spreads) as follows:
|
|
|
|
||
|
|
*
|
NJRES can purchase gas to inject into storage and concurrently lock in gross margin with a contract to sell the natural gas at a higher price at a future date;
|
|
|
||
|
|
*
|
NJRES can purchase a future contract with an early delivery date at a lower price and simultaneously sell another future contract with a later delivery date having a higher price; and
|
|
*
|
NJRES can “borrow” gas from a pipeline or storage operator and repay that gas at a later date, and earn a margin by selling the gas at a later date at a higher price and/or by receiving a fee.
|
|
|
|
||
|
Ÿ
|
Transportation (Basis):
Similarly, NJRES benefits from pricing differences between various receipt and delivery points along a natural gas pipeline as follows:
|
|
|
|
||
|
|
*
|
NJRES can utilize its pipeline capacity by purchasing natural gas at a lower price location and transporting to a higher value location. NJRES can enter into a basis swap contract, a financial commodity derivative based on the price of natural gas at two different locations, when it will lead to positive cash flows and financial margin for NJRES.
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||
|
(Thousands)
|
2010
|
2009
|
2010
|
2009
|
||||
|
Operating revenues
|
$494,889
|
$472,763
|
$842,366
|
$935,857
|
||||
|
Gas purchases
|
434,537
|
475,989
|
731,994
|
916,666
|
||||
|
Gross margin
|
60,352
|
(3,226
|
)
|
110,372
|
19,191
|
|||
|
Operation and maintenance expense
|
2,745
|
3,868
|
6,978
|
8,228
|
||||
|
Depreciation and amortization
|
49
|
51
|
99
|
102
|
||||
|
Other taxes
|
353
|
596
|
900
|
925
|
||||
|
Operating (loss) income
|
57,205
|
(7,741
|
)
|
102,395
|
9,936
|
|||
|
Other income
|
3
|
214
|
4
|
337
|
||||
|
Interest expense
|
230
|
85
|
492
|
171
|
||||
|
Income tax (benefit) provision
|
21,537
|
(3,072
|
)
|
38,822
|
3,760
|
|||
|
Net income (loss)
|
$ 35,441
|
$ (4,540
|
)
|
$ 63,085
|
$ 6,342
|
|||
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
Ÿ
|
26.9 Bcf of net short futures contracts and fixed swap positions; and
|
|
Ÿ
|
18.3 Bcf of net long basis swap positions.
|
|
Ÿ
|
6.3 Bcf of net short futures contracts and fixed swap positions; and
|
|
Ÿ
|
39.9 Bcf of net short basis swap positions.
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
Ÿ
|
Unrealized gains and losses on derivatives are recognized in reported earnings in periods prior to physical gas inventory flows; and
|
|
Ÿ
|
Unrealized gains and losses of prior periods are reclassified as realized gains and losses when derivatives are settled in the same period as physical gas inventory movements occur.
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||
|
(Thousands)
|
2010
|
2009
|
2010
|
2009
|
||||
|
Operating revenues
|
$494,889
|
$472,763
|
$842,366
|
$935,857
|
||||
|
Less: Gas purchases
|
434,537
|
475,989
|
731,994
|
916,666
|
||||
|
Add:
|
||||||||
|
Unrealized (gain) loss on derivative instruments and related instruments
|
(15,493
|
)
|
34,348
|
(23,235
|
)
|
36,165
|
||
|
Effects of economic hedging related to natural gas inventory
|
(3,773
|
)
|
24,072
|
(36,886
|
)
|
19,797
|
||
|
Financial margin
|
$ 41,086
|
$ 55,194
|
$ 50,251
|
$ 75,153
|
||||
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||
|
(Thousands)
|
2010
|
2009
|
2010
|
2009
|
||||
|
Operating income (loss)
|
$57,205
|
$ (7,741
|
)
|
$102,395
|
$ 9,936
|
|||
|
Add:
|
||||||||
|
Operation and maintenance expense
|
2,745
|
3,868
|
6,978
|
8,228
|
||||
|
Depreciation and amortization
|
49
|
51
|
99
|
102
|
||||
|
Other taxes
|
353
|
596
|
900
|
925
|
||||
|
Subtotal – Gross margin
|
60,352
|
(3,226
|
)
|
110,372
|
19,191
|
|||
|
Add:
|
||||||||
|
Unrealized (gain) loss on derivative instruments and related instruments
|
(15,493
|
)
|
34,348
|
(23,235
|
)
|
36,165
|
||
|
Effects of economic hedging related to natural gas inventory
|
(3,773
|
)
|
24,072
|
(36,886
|
)
|
19,797
|
||
|
Financial margin
|
$41,086
|
$55,194
|
$50,251
|
$75,153
|
||||
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||
|
(Thousands)
|
2010
|
2009
|
2010
|
2009
|
||||
|
Net income (loss)
|
$35,441
|
$ (4,540
|
)
|
$63,085
|
$ 6,342
|
|||
|
Add:
|
||||||||
|
Unrealized (gain) loss on derivative instruments and related transactions, net of taxes
|
(9,563
|
)
|
20,941
|
(14,329
|
)
|
21,352
|
||
|
Effects of economic hedging related to natural gas, net of taxes
|
(2,361
|
)
|
14,677
|
(22,745
|
)
|
12,767
|
||
|
Net financial earnings
|
$23,517
|
$31,078
|
$26,011
|
$40,461
|
||||
|
·
|
a decrease in opportunities to optimize transportation assets because of the lack of volatility in the marketplace caused by a decrease in the demand for natural gas in the second quarter of fiscal 2010 as compared with the prior year. The decrease in demand is attributed to lower industrial consumption as a result of the economy; and
|
|
·
|
a decrease overall in basis spreads, which lowered the overall value of the transportation portfolio.
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||
|
(Thousands)
|
2010
|
2009
|
2010
|
2009
|
||||
|
Equity in earnings of affiliates
(1)
|
$3,763
|
$1,352
|
$7,723
|
$2,244
|
||||
|
Operation and maintenance expense
|
$ 254
|
$ 109
|
$ 449
|
$ 214
|
||||
|
Interest expense
|
$ 827
|
$ 33
|
$1,657
|
$ 64
|
||||
|
Net income
|
$1,514
|
$ 725
|
$3,390
|
$1,179
|
||||
|
(1)
|
Excludes taxes of $505,000 and $537,000 for Iroquois for the three months ended March 31, 2010 and 2009, respectively, and $918,000 and $891,000 for Iroquois for the six months ended March 31, 2010 and 2009, respectively and $1.1million and $2.3 million for Steckman Ridge for the three and six months ended March 31, 2010.
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||
|
(Thousands)
|
2010
|
2009
|
2010
|
2009
|
||||
|
Operating revenues
|
$ 3,701
|
$(2,350
|
)
|
$ 9,745
|
$ (5,004
|
)
|
||
|
Operation and maintenance expense
|
$ 7,270
|
$ 6,603
|
$14,306
|
$ 13,648
|
||||
|
Net (loss)
|
$(3,244
|
)
|
$(5,785
|
)
|
$ (4,206
|
)
|
$(11,923
|
)
|
|
Three Months Ended
March 31,
|
Six Months Ended
March 31,
|
|||||||
|
(Thousands)
|
2010
|
2009
|
2010
|
2009
|
||||
|
Net (loss)
|
$(3,244
|
)
|
$(5,785
|
)
|
$(4,206
|
)
|
$(11,923
|
)
|
|
Add:
|
||||||||
|
Unrealized loss on derivative instruments, net of taxes
|
1,748
|
4,822
|
2,251
|
10,527
|
||||
|
Net financial (loss)
|
$(1,496
|
)
|
$ (963
|
)
|
$(1,955
|
)
|
$ (1,396
|
)
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
March 31,
|
September 30,
|
|||
|
2010
|
2009
|
|||
|
Common stock equity
|
58
|
%
|
53
|
%
|
|
Long-term debt
|
33
|
35
|
||
|
Short-term debt
|
9
|
12
|
||
|
Total
|
100
|
%
|
100
|
%
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
(Thousands)
|
Total
|
Up to
1 Year
|
2-3
Years
|
4-5
Years
|
After
5 Years
|
|
|
Long-term debt
(1)
|
$ 552,964
|
$ 36,283
|
$ 31,190
|
$ 88,328
|
$397,163
|
|
|
Capital lease obligations
(1)
|
83,326
|
10,976
|
22,702
|
16,357
|
33,291
|
|
|
Operating leases
(1)
|
9,147
|
2,745
|
3,602
|
1,379
|
1,421
|
|
|
Short-term debt
|
98,700
|
98,700
|
—
|
—
|
—
|
|
|
New Jersey Clean Energy Program
(1)
|
35,396
|
11,591
|
23,805
|
—
|
—
|
|
|
Construction obligations
|
3,238
|
3,238
|
—
|
—
|
—
|
|
|
Accelerated Infrastructure Program (AIP)
|
55,782
|
35,226
|
20,556
|
—
|
—
|
|
|
Remediation expenditures
(2)
|
146,700
|
12,741
|
31,000
|
11,100
|
91,859
|
|
|
Natural gas supply purchase obligations–NJNG
|
111,252
|
111,252
|
—
|
—
|
—
|
|
|
Demand fee commitments–NJNG
|
746,149
|
107,455
|
196,295
|
154,815
|
287,584
|
|
|
Natural gas supply purchase obligations–NJRES
|
766,547
|
429,436
|
326,539
|
10,572
|
—
|
|
|
Demand fee commitments–NJRES
|
199,842
|
74,909
|
66,960
|
25,712
|
32,261
|
|
|
Total contractual cash obligations
|
$2,809,043
|
$934,552
|
$722,649
|
$308,263
|
$843,579
|
|
|
(1)
|
These obligations include an interest component, as defined under the related governing agreements or in accordance with the applicable tax statute.
|
|||||
|
(2)
|
Expenditures are estimated.
|
|||||
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
Ÿ
|
seasonality of NJR’s business;
|
|
Ÿ
|
fluctuations in wholesale natural gas prices;
|
|
Ÿ
|
timing of storage injections and withdrawals;
|
|
Ÿ
|
management of the deferral and recovery of gas costs;
|
|
Ÿ
|
changes in contractual assets utilized to optimize margins related to natural gas transactions; and
|
|
Ÿ
|
timing of the collections of receivables and payments of current liabilities.
|
|
Ÿ
|
higher natural gas inventory cost at NJRES during the six months ended March 31, 2010, relative to the prior fiscal year coupled with a decrease in volumes during the six months ended March 31, 2009. NJRES average cost of gas during the six months ended March 31, 2010 increased approximately 40 percent from $3.37 to $4.73 as compared with a 45 percent reduction in average cost of gas during the comparable period in fiscal 2009 from $9.62 to $5.29;
|
|
Ÿ
|
a decrease in NJNG’s gas costs recovered during the six months ended March 31, 2010 due primarily to a BPU approved BGSS rate decrease, coupled with refunds and bill credits issued to customers totaling $72.7 million during the six months ended March 31, 2010 compared with bill credits of $47.1 million during fiscal 2009; offset by
|
|
Ÿ
|
a favorable change in margin requirements of $118.8 million as a result of higher NYMEX prices which allowed NJRES to withdraw cash as a result of an increase in realized and unrealized gains during the current fiscal year, whereas in the same period during the prior fiscal year unfavorable changes in NYMEX prices in relation to the fixed price on hedges related to NJNG’s storage incentive program resulted in additional margin deposits.
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
|
|
Standard and Poor’s
|
Moody’s
|
|
|
Corporate Rating
|
A
|
N/A
|
|
Commercial Paper
|
A-1
|
P-1
|
|
Senior Secured
|
A+
|
Aa3
|
|
Ratings Outlook
|
Stable
|
Stable
|
|
I
TEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
(Thousands)
|
Balance
September 30,
2009
|
Increase
(Decrease)
in Fair
Market Value
|
Less
Amounts
Settled
|
Balance
March 31,
2010
|
||||
|
NJNG
|
$ (8,073
|
)
|
$(39,268
|
)
|
$(10,617
|
)
|
$(36,724
|
)
|
|
NJRES
|
27,926
|
67,725
|
42,213
|
53,438
|
||||
|
NJR Energy
|
3,355
|
(6,507
|
)
|
(2,689
|
)
|
(463
|
)
|
|
|
Total
|
$23,208
|
$ 21,950
|
$ 28,907
|
$ 16,251
|
||||
|
(Thousands)
|
2010
|
2011
|
2012-2015
|
After 2015
|
Total
Fair Value
|
|||||
|
Price based on NYMEX
|
$16,978
|
$13,738
|
$ (189
|
)
|
—
|
$30,527
|
||||
|
Price based on other external data
|
(17,869
|
)
|
4,547
|
(954
|
)
|
—
|
(14,276
|
)
|
||
|
Total
|
$ (891
|
)
|
$18,285
|
$(1,143
|
)
|
—
|
$16,251
|
|||
|
Volume
(Bcf)
|
Price per
Mmbtu
|
Amounts included in Derivatives
(Thousands)
|
||||
|
NJNG
|
Futures
|
2.7
|
$3.87 - $6.35
|
$ (4,415
|
)
|
|
|
Swaps
|
20.8
|
$3.74 - $6.02
|
(32,375
|
)
|
||
|
Options
|
2.9
|
$0.08 - $0.08
|
66
|
|||
|
NJRES
|
Futures
|
(20.4
|
)
|
$3.86 - $10.35
|
34,867
|
|
|
Swaps
|
11.8
|
$2.89 - $10.38
|
18,561
|
|||
|
Options
|
1.3
|
$0.01 - $0.02
|
10
|
|||
|
NJR Energy
|
Swaps
|
1.4
|
$3.55 - $4.41
|
(463
|
)
|
|
|
Total
|
$16,251
|
|||||
|
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)
|
|
(Thousands)
|
Balance
September 30,
2009
|
Increase
(Decrease) in Fair
Market Value
|
Less
Amounts
Settled
|
Balance
March 31,
2010
|
||||
|
NJRES
|
$16,295
|
$11,840
|
$12,322
|
$15,813
|
||||
|
(Thousands)
|
Gross Credit
Exposure
|
Net Credit
Exposure
|
|||
|
Investment grade
|
$116,834
|
$83,853
|
|||
|
Noninvestment grade
|
10,055
|
937
|
|||
|
Internally rated investment grade
|
20,974
|
12,717
|
|||
|
Internally rated noninvestment grade
|
6,244
|
—
|
|||
|
Total
|
$154,107
|
$97,507
|
|||
|
(Thousands)
|
Gross Credit
Exposure
|
Net Credit
Exposure
|
|||
|
Investment grade
|
$27,960
|
$24,588
|
|||
|
Noninvestment grade
|
77
|
—
|
|||
|
Internally rated investment grade
|
3,116
|
2,836
|
|||
|
Internally rated noninvestment grade
|
1,149
|
—
|
|||
|
Total
|
$32,302
|
$27,424
|
|||
|
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)
|
|
ITE
M 4. CONTROLS AND PROCEDURES
|
|
ITEM 1.
LE
GAL PROCEEDINGS
|
|
|
|
|
|
Period
|
Total
Number of
Shares
Purchased
|
Average
Price
Paid
per Share
|
Total Number of Shares
Purchased as Part of
Publicly Announced Plans
or Programs
|
Maximum Number
of Shares That May
Yet be Purchased Under
the Plans or Programs
|
||||
|
01/01/10 – 01/31/10
|
281,200
|
$36.90
|
281,200
|
1,967,471
|
||||
|
02/01/10 – 02/28/10
|
25,000
|
$36.54
|
25,000
|
1,942,471
|
||||
|
03/01/10 – 03/31/10
|
120,400
|
$36.92
|
120,400
|
1,822,071
|
||||
|
Total
|
426,600
|
$36.88
|
426,600
|
1,822,071
|
|
|
|
|
|
31.1
|
|
|
31.2
|
|
|
32.1
|
|
|
32.2
|
|
NEW JERSEY RESOURCES CORPORATION
|
|
|
(Registrant)
|
|
|
Date: May 5, 2010
|
|
|
By:/s/ Glenn C. Lockwood
|
|
|
Glenn C. Lockwood
|
|
|
Senior Vice President and
|
|
|
Chief Financial Officer
|
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
No Customers Found
No Suppliers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|