New Jersey Resources (NYSE: NJR) today reported a 2.8 percent
increase in earnings for the first quarter of fiscal 2008. For the
3-month period ended December 31, 2007, earnings were $30.2
million, or $1.09 per basic share, versus $29.4 million, or $1.06
per basic share, last year. Net financial earnings, a financial
measure not calculated in accordance with the generally accepted
accounting principles (GAAP) of the United States as discussed
below, rose to $36.3 million, or $1.31 per basic share, versus
$28.1 million, or $1.01 per basic share, in the same period last
year. Fiscal 2007 amounts have been restated to reflect a change in
accounting for certain derivative financial instruments. For a more
detailed discussion, please refer to NJR�s fiscal 2007 annual
report on Form 10-K. �From a financial perspective, fiscal 2008 is
off to a strong start,� said Laurence M. Downes, chairman and CEO
of NJR. �We remain focused on our commitment to growth at all of
our businesses as well as our ongoing efforts to promote
conservation and energy efficiency to our utility customers through
Conserve to Preserve.� Management believes that net financial
earnings, which exclude unrealized gains or losses on derivative
instruments related to the company�s unregulated subsidiaries and
certain realized gains and losses on derivative instruments related
to natural gas that has been placed into storage at NJR Energy
Services (NJRES), are reflective of NJR�s operations, provide
transparency to investors and enable period-to-period comparability
of financial performance. For further discussion of this financial
measure, as well as reconciliation to the most comparable GAAP
measure, please see the explanation below under �Additional
Non-GAAP Financial Information.� On January 22, 2008, the board of
directors of NJR approved a three-for-two stock split and a 5
percent dividend increase to the quarterly dividend. Shareowners of
record at the close of business on February 8, 2008 will receive
one additional share of NJR stock for every two shares of common
stock owned as of that date. The new shares resulting from the
split will be distributed following the close of business on March
3, 2008. NJR will commence trading at its split-adjusted price on
March 4, 2008. The quarterly dividend will increase for the second
time this year from its current level of $0.40 to $0.42, on a
pre-split basis. The resulting new quarterly rate of $0.28, on a
post-split basis, will be payable on April 1, 2008, to shareowners
of record on March 14, 2008. Financial and operating highlights at
NJR�s subsidiaries include: New Jersey Natural Gas Earnings at New
Jersey Natural Gas (NJNG), NJR�s utility subsidiary, were $16.7
million in the first quarter of fiscal 2008, declining from $19.9
million in the same period last year. The decrease was due
primarily to lower utility gross margin from incentive-based
programs and higher operation and maintenance expense. In November,
NJNG filed a request with the New Jersey Board of Public Utilities
(BPU) seeking an increase of $58.4 million to its base rates, which
cover the cost of constructing, operating and maintaining its
infrastructure. Based on the typical review for a base rate case,
any increase is unlikely to affect earnings in fiscal 2008. Weather
during the 3-month period ended December 31, 2007 was 8.2 percent
warmer than normal and 13.4 percent colder than last year. However,
the impact of weather is significantly offset by the Conservation
Incentive Program (CIP), which is designed to normalize
year-to-year fluctuations on both NJNG�s gross margin and
customers� bills that may result from changing weather and usage
patterns. A total of $6.1 million of utility gross margin was
accrued during the first quarter of fiscal 2008 under the CIP.
Included in the CIP accrual was $2.9 million associated with the
warmer-than-normal weather and $3.2 million associated with
non-weather factors. However, customers will realize annual savings
of $10.6 million in fixed-cost reductions and commodity cost
savings of approximately $13 million during the first quarter of
fiscal 2008. �Normal� weather is based on 20-year average
temperatures as calculated based on three reference areas
representative of NJNG�s service territory. Other BPU-approved
incentive programs allow NJNG to share utility gross margin earned
with customers and shareowners according to utility gross
margin-sharing formulas. These include off-system sales, capacity
release, storage optimization and financial risk management
programs. During the first quarter of fiscal 2008, sales and
utility gross margin from these incentive programs totaled 9.7
billion cubic feet (Bcf) and $1.4 million, compared with 10.6 Bcf
and $3.2 million for the same period last year. The decrease is due
primarily to opportunities that existed in the prior year to
generate gross margin from the storage incentive program that did
not exist this year. To date, customers have saved approximately
$346 million since the programs� inception in 1992. The utility
added 1,723 new customers during the first quarter, of which 43
percent converted from other fuels. NJNG expects to achieve a new
customer growth rate of approximately 1.6 to 1.8 percent in fiscal
2008. Operation and maintenance expense increased $3.6 million due
primarily to higher compensation costs associated with an increase
in the number of employees and annual wage increases. NJR Energy
Services NJRES, NJR�s wholesale energy services subsidiary, earned
$13.2 million in the 3-month period ended December 31, 2007,
compared with $11.5 million last year. This increase was primarily
driven by higher gross margin of $25.7 million in the first quarter
of fiscal 2008 compared with $24.8 million in the prior year.
Financial margin, a non-GAAP performance measure, was $35.8 million
for the 3-month period ended December 31, 2007 compared with $18.1
million in the same period last year. Alternatively, NJRES�
operating results are analyzed utilizing financial margin, a
non-GAAP financial measure, which NJR calculates by excluding from
gross margin the impact of unrealized gains or losses from
derivative instruments and certain realized gains or losses from
derivative instruments that are designed to economically protect
natural gas that has been purchased and stored, but has yet to be
sold. Management believes that financial margin better reflects the
economic performance of NJRES prior to the actual settlement of
certain forecasted transactions and related derivative instruments.
By using financial margin, along with the aforementioned net
financial earnings, NJR�s management reviews the results of
operations without the volatility of certain forecasted
transactions and related derivative instruments to measure the
economic impact of its businesses. Financial margin increased by
$17.7 million due primarily to increased transportation assets in
the Northeast region. This additional transportation capacity
allowed NJRES to transport greater volumes of natural gas to this
region. Additionally, temperatures in both the Northeast and
Mid-Continent regions of the United States were colder during the
first quarter of fiscal 2008 compared to the same period last year.
This created the opportunity to transact around existing natural
gas storage and transportation assets to increase financial margin
and enabled NJRES to take advantage of the higher demand for
natural gas in those areas. Retail and Other Retail and Other
consists of NJR Home Services, which provides service, sales and
installation of appliances to over 143,000 customers and Commercial
Realty & Resources, which develops commercial real estate. Also
included is NJR Energy Holdings, which consists of a 5.53 percent
equity investment in Iroquois Gas Transmission System, L.P., owner
of an interstate natural gas pipeline in the Northeast, and a 50
percent equity investment, through two wholly-owned subsidiaries,
Steckman Ridge GP, LLC and Steckman Ridge, LP, in a natural gas
storage facility under joint development with a partner in western
Pennsylvania, which is expected to contribute to earnings beginning
in fiscal 2010. This business segment earned $365,000 in the first
quarter of fiscal 2008, compared with a loss of $2 million last
year. The increase was due primarily to unrealized gains and losses
on derivative instruments related to two long-term natural gas
contracts at NJR Energy Corporation. Excluding the after-tax
unrealized loss of $180,000 for the three months ended December 31,
2007 and the after-tax unrealized loss of $2.4 million for the same
period last year, the business segment earned $545,000 and $402,000
during the first quarter of fiscal 2008 and 2007, respectively.
Fiscal 2008 Net Financial Earnings Guidance Assuming stable
economic conditions, continued customer growth at NJNG, continued
volatility in the wholesale natural gas markets affecting NJRES and
subject to the factors discussed below under �Forward-Looking
Statements,� NJR has increased its net financial earnings guidance
for fiscal 2008 by $.05 per basic share to $3.25 to $3.35 per basic
share. Webcast Information NJR will host a live webcast to discuss
its financial results today at 2 p.m. ET. A few minutes prior to
the webcast, go to njliving.com and select �New Jersey Resources�
from the top navigation bar. Choose �Investor Relations,� then
click just below the microphone under the heading �Latest Webcast�
on the Investor Relations home page. Additional Non-GAAP Financial
Information Financial margin, net financial earnings, NJNG�s
utility gross margin and NJRES� gross margin are non-GAAP financial
measures that are included as supplemental disclosures because such
items are the additional measures used by management in analyzing
the results of their operations. NJNG�s utility gross margin
represents the results of revenues less certain costs, which are
key components of our operations that move in relation to each
other and can be dramatically influenced by the changes in the
wholesale price of natural gas. In addition, management believes
that NJNG�s utility gross margin provides a meaningful basis for
evaluating utility operations than revenue, as natural gas costs,
sales and other taxes and regulatory rider expenses are passed
through to customers, and therefore have no effect on gross margin.
NJRES and NJR Energy Corporation use financial instruments to
economically hedge their forecasted gas purchases and sales. These
financial instruments, which are natural gas futures, forwards and
swaps, change in value over the time that they are economically
hedging the underlying natural gas sale or purchase. The change in
value associated with these financial instruments is recorded in
the income statement as part of gas purchases or operating
revenues, as appropriate. For changes in value associated with
transactions that have not settled, these are commonly referred to
as unrealized gains or losses. Changes in value associated with
settled transactions related to purchased natural gas that has been
placed into storage inventory and that has not yet been sold are
commonly referred to as realized gains or losses. NJRES also has
certain physical commodity contracts that represent natural gas
purchases or sales. Effective October 1, 2007, for all physical
commodity contracts that NJRES enters into, it has elected to treat
those contracts as derivative instruments. As a derivative
instrument the change in value over the time that the contracts
remain unsettled is recorded in the income statement as part of
operating revenues. These changes in value are also commonly
referred to as unrealized gains or losses. Volatility associated
with the change in value of these financial and physical commodity
contracts is reported in the income statement in the current
period. This volatility does not change the economic result of the
financial or physical contract in relation to the planned purchase
or sale transaction at NJRES, rather it shows changes in value
currently as opposed to when the planned transaction ultimately is
settled. In order to manage its business, NJR views its results
without the impacts of the unrealized gains and losses, and certain
realized gains and losses, caused by changes in value of these
financial instruments and physical commodity contracts prior to the
completion of the planned transaction. This is the first quarterly
earnings report in which NJR has referred to the non-GAAP measures
financial margin and net financial earnings. These performance
metrics are used by NJR to reflect the economic performance of its
businesses prior to the actual settlement of certain forecasted
transactions and related derivative instruments. Financial margin
represents operating revenues from the sale of natural gas less gas
purchases, and excludes the accounting impacts of unrealized gains
and losses from derivative instruments as well as realized gains
and losses of certain derivatives related to natural gas inventory.
These accounting impacts represent the change in fair value of
these financial instruments, which represent futures and swaps
designed to economically hedge forecasted natural gas purchases,
sales and transportation and are primarily open positions resulting
in unrealized gains or losses. Also included in the accounting
impacts are settled derivative positions related to natural gas
included in storage inventory. These settled instruments represent
realized gains and losses under GAAP, but result in economically
hedging the ultimate sale of natural gas. Net financial earnings
represent net income excluding the accounting impacts of realized
and unrealized gains and losses from these derivative instruments,
net of taxes. Management�s definition of these non-GAAP measures
may not be comparable to the definitions used by other companies in
either the natural gas distribution business or other industries.
Management uses these non-GAAP financial measures as supplemental
measures to other GAAP results to provide a more complete
understanding of our performance. Management believes these
non-GAAP measures are more reflective of our business model,
provide transparency to investors and enable period-to-period
comparability of financial performance. As an indicator of our
operating performance, these measures should not be considered an
alternative to, or more meaningful than, operating income as
determined in accordance with GAAP. A reconciliation of all
non-GAAP financial measures to the most directly comparable
financial measures calculated and reported in accordance with GAAP,
can be found below. Forward-Looking Statements This news release
contains estimates, net financial earnings guidance and other
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. NJR cautions readers that
the assumptions forming the basis for forward-looking statements
include many factors that are beyond NJR�s ability to control or
estimate precisely, such as estimates of future market conditions
and the behavior of other market participants. Other factors that
could cause actual results, including gross margin, earnings and
customer growth, to differ materially from the company�s
expectations include, but are not limited to, weather, economic
conditions and demographic changes in NJNG�s service territory,
rate of customer growth, volatility of natural gas commodity prices
and its impact on customer usage, and NJRES operations, the impact
of the company�s risk management efforts, including commercial and
wholesale credit risks, the company�s ability to obtain
governmental approvals, property rights and/or financing for the
construction, development and operation of its non-regulated energy
investments, risks associated with the management of the company�s
joint ventures and partnerships, the impact of regulation
(including the regulation of rates), the outcome of any future base
rate cases, fluctuations in energy-related commodity prices,
customer conversions, other marketing efforts, actual energy usage
patterns of NJNG�s customers, the pace of deregulation of retail
gas markets, access to adequate supplies of natural gas, the
regulatory and pricing policies of federal and state regulatory
agencies, changes due to legislation at the federal and state
level, an adequate number of appropriate counterparties, sufficient
liquidity in the energy trading market and continued access to the
capital markets, the disallowance of recovery of
environmental-related expenditures and other regulatory changes,
environmental and other litigation and other uncertainties. More
detailed information about these factors is set forth in NJR�s
filings with the Securities and Exchange Commission (SEC),
including its annual report on Form 10-K filed on December 10,
2007. NJR�s SEC documents are available at www.sec.gov. NJR does
not, by including this paragraph, assume any obligation to review
or revise any particular forward-looking statement referenced
herein in light of future events. About New Jersey Resources New
Jersey Resources (NYSE:NJR), a Fortune 1000 company, provides
reliable retail and wholesale energy services to customers in New
Jersey and in states from the Gulf Coast to New England, and
Canada. Its principal subsidiary, New Jersey Natural Gas, is one of
the fastest-growing local distribution companies in the United
States, serving more than 480,000 customers in central and northern
New Jersey. Other major NJR subsidiaries include NJR Energy
Services and NJR Home Services. NJR Energy Services provides
customer service and management of natural gas storage and capacity
assets in the energy services market. NJR Home Services offers
retail customers heating, air conditioning and appliance services.
NJR�s progress is a tribute to the more than 5,000 dedicated
employees who have shared their expertise and focus on quality
through more than 50 years of serving customers and the community
to make NJR a leader in the competitive energy marketplace. For
more information, visit NJR�s Web site at njliving.com.
Reconciliation of Non-GAAP Performance Measures � NEW JERSEY
RESOURCES � � � The following table is a computation of Financial
margin at NJR: Three Months Ended (Unaudited) December 31,
(Thousands) 2007 � 2006 Operating revenues $811,138 $737,401 Gas
purchases 684,694 621,935 Add: Unrealized loss (gain) from
derivative instruments 5,227 (3,975) Realized loss from derivative
instruments related to natural gas inventory 5,163 � 1,289
Financial margin $136,834 � $112,780 � � A reconciliation of
Operating income at NJR, the closest GAAP financial measure, to the
Financial margin is as follows: Three Months Ended December 31,
(Thousands) 2007 � 2006 Operating income $54,537 $54,830 Add:
Operation and maintenance expense 32,179 28,316 Regulatory rider
expenses 12,165 9,466 Depreciation and amortization 9,403 8,902
Other taxes 18,160 � 13,952 Subtotal � Gross margin $126,444 �
$115,466 Add: Unrealized loss (gain) from derivative instruments
5,227 (3,975) Realized loss from derivative instruments related to
natural gas inventory 5,163 � 1,289 Financial margin $136,834 �
$112,780 � � A reconciliation of Net income at NJR to Net financial
earnings, is as follows: Three Months Ended December 31,
(Thousands) 2007 � 2006 Net income $30,185 $29,434 Add: Unrealized
loss (gain) from derivative instruments, net of taxes 3,080 (2,069)
Realized loss from derivative instruments related to natural gas
inventory, net of taxes 3,042 � 759 Net financial earnings $36,307
� $28,124 � Weighted Average Shares Outstanding Basic 27,785 27,713
Diluted 27,952 � 27,904 � Net financial earnings per share $1.31 �
$1.01 NJR ENERGY SERVICES � � � The following table is a
computation of Financial margin at NJRES: � Three Months Ended
(Unaudited) December 31, (Thousands) 2007 � 2006 Operating revenues
$520,211 $495,787 Gas purchases 494,546 470,942 Add: Unrealized
loss (gain) from derivative instruments 4,922 (8,039) Realized loss
from derivative instruments related to natural gas inventory 5,163
� 1,289 Financial margin $35,750 � $18,095 � � A reconciliation of
Operating income at NJRES, the closest GAAP financial measure, to
the Financial margin for NJRES is as follows: Three Months Ended
December 31, (Thousands) 2007 � 2006 Operating income $22,563
$21,596 Add: Operation and maintenance expense 2,840 3,003
Regulatory rider expenses Depreciation and amortization 53 54 Other
taxes 209 � 192 Subtotal � Gross margin $25,665 � $24,845 Add:
Unrealized loss (gain) from derivative instruments 4,922 (8,039)
Realized loss from derivative instruments related to natural gas
inventory 5,163 � 1,289 Financial margin $35,750 � $18,095 � � A
reconciliation of Net income at NJRES to Net financial earnings, is
as follows: Three Months Ended December 31, (Thousands) 2007 � 2006
Net income $13,150 $11,524 Add: Unrealized loss (gain) from
derivative instruments, net of taxes 2,900 (4,464) Realized loss
from derivative instruments related to natural gas inventory, net
of taxes 3,042 � 759 Net financial earnings $19,092 � $7,819 NEW
JERSEY RESOURCES CONSOLIDATED STATEMENTS OF INCOME � � � Three
Months Ended (Unaudited) December 31, (Thousands, except per share
data) 2007 2006 OPERATING REVENUES $811,138 $737,401 � OPERATING
EXPENSES Gas purchases 684,694 621,935 Operation and maintenance
32,179 28,316 Regulatory rider expenses 12,165 9,466 Depreciation
and amortization 9,403 8,902 Energy and other taxes 18,160 13,952
Total operating expenses 756,601 682,571 � OPERATING INCOME 54,537
54,830 � Other income 1,528 1,296 � Interest charges, net 7,810
7,875 � INCOME BEFORE INCOME TAXES 48,255 48,251 � Income tax
provision 18,494 19,234 � Equity in earnings, net of tax 424 417 �
NET INCOME $30,185 $29,434 EARNINGS PER COMMON SHARE BASIC $1.09
$1.06 DILUTED $1.08 $1.05 � DIVIDENDS PER COMMON SHARE $0.40 $0.38
� AVERAGE SHARES OUTSTANDING BASIC 27,785 27,713 DILUTED 27,952
27,904 NEW JERSEY RESOURCES � � � � Three Months Ended (Unaudited)
December 31, (Thousands, except per share data) � 2007 2006
Operating Revenues New Jersey Natural Gas $284,360 $239,407 NJR
Energy Services 520,211 495,787 NJR Home Services and Other 6,631 �
2,276 � Sub-total 811,202 � 737,470 � Intercompany Eliminations (64
) (69 ) Total $811,138 � $737,401 � � � � � Operating Income New
Jersey Natural Gas $31,602 $36,716 NJR Energy Services 22,563
21,596 NJR Home Services and Other 372 � (3,482 ) Total $54,537 �
$54,830 � � � � � Net Income New Jersey Natural Gas $16,670 $19,908
NJR Energy Services 13,150 11,524 NJR Home Services and Other 365 �
(1,998 ) Total $30,185 � $29,434 � � � � � Throughput (Bcf) NJNG,
Core Customers 19.9 16.9 NJNG, Off System/Capacity Management 9.7
10.6 NJRES Fuel Mgmt. and Wholesale Sales 67.1 � 64.6 � Total 96.7
� 92.1 � � � � � Common Stock Data Yield at December 31 3.2 % 3.1 %
Market Price High $52.07 $53.16 Low $46.50 $48.46 Close at December
31 $50.02 $48.58 Shares Out. at December 31 27,816 27,760 Market
Cap. at December 31 � $1,391,356 � $1,348,581 � NEW JERSEY NATURAL
GAS � � � Three Months Ended (Unaudited) December 31, (Thousands,
except customer & weather data) 2007 2006 Utility Gross Margin
Operating revenues $284,360 $239,407 Less: Gas purchases 190,148
150,993 Energy and other taxes 16,363 12,520 Regulatory rider
expense 12,165 9,466 Total Utility Gross Margin $65,684 $66,428 � �
� Utility Gross Margin and Operating Income Residential &
Commercial $59,196 $58,368 Firm Transportation 4,934 4,566 Total
Firm Margin 64,130 62,934 Interruptible 134 216 Total System Margin
64,264 63,150 Off System/Capacity Management/FRM 1,420 3,278 TOTAL
UTILITY GROSS MARGIN 65,684 66,428 Operation and maintenance
expense 23,879 20,255 Depreciation and amortization 9,233 8,738
Other taxes not reflected in gross margin 970 719 OPERATING INCOME
$31,602 $36,716 � � � Throughput (Bcf) Residential & Commercial
15.5 13.3 Firm Transportation 2.8 2.5 Total Firm Throughput 18.3
15.8 Interruptible 1.6 1.1 Total System Throughput 19.9 16.9 Off
System/Capacity Management 9.7 10.6 TOTAL THROUGHPUT 29.6 27.5 � �
� Customers Residential & Commercial 466,474 461,473 Firm
Transportation 14,213 12,870 Total Firm Customers 480,687 474,343
Interruptible 45 48 Total System Customers 480,732 474,391 Off
System/Capacity Management 40 36 TOTAL CUSTOMERS 480,772 474,427 �
� � Degree Days Actual 1,545 1,363 Normal 1,682 1,669 Percent of
Normal 91.9% 81.7% NJR ENERGY SERVICES � � � Three Months Ended
(Unaudited) December 31, (Thousands, except customer) 2007 2006
Operating Revenues $520,211 $495,787 Gas Purchases 494,546 470,942
Gross Margin 25,665 24,845 Operation and maintenance expense 2,840
3,003 Depreciation and amortization 53 54 Energy and other taxes
209 192 Operating Income $22,563 $21,596 � Net Income $13,150
$11,524 � Gas Sold and Managed (Bcf) 67.1 64.6 NJR HOME SERVICES
AND OTHER � � � � Operating Revenues $6,631 � $2,276 � � Operating
Income $372 � ($3,482 ) � Net Income $365 � ($1,998 ) � Total
Customers at December 31 143,502 � 141,714 �
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