☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-08359
NEW JERSEY RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey
22-2376465
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
1415 Wyckoff Road
(732)
938‑1480
Wall
New Jersey
07719
(Registrant's telephone number,
including area code)
(Address of principal executive offices)
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered)
Common Stock - $2.50 Par Value
NJR
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes: ☒ No: ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes: ☒ No: ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes: ☐ No: ☒
The number of shares outstanding of $2.50 par value Common Stock as of August 2, 2019 was 89,980,410.
Dominion Energy Midstream Partners, L.P., a master limited partnership
DM Common Units
Common units representing limited partnership interests in DM
DRP
NJR Direct Stock Purchase and Dividend Reinvestment Plan
Dths
Dekatherms
EE
Energy Efficiency
FASB
Financial Accounting Standards Board
FCM
Futures Commission Merchant
FERC
Federal Energy Regulatory Commission
Financial margin
A non-GAAP financial measure, which represents revenues earned from the sale of natural gas less costs of natural gas sold including any transportation and storage costs, and excludes any accounting impact from the change in the fair value of certain derivative instruments
Fitch
Fitch Ratings Company
FMB
First Mortgage Bond
GAAP
Generally Accepted Accounting Principles of the United States
Home Services and Other
Home Services and Other Operations
ICE
Intercontinental Exchange
IEC
Interstate Energy Company, LLC
IIP
Infrastructure Investment Program
IRS
Internal Revenue Service
ISDA
The International Swaps and Derivatives Association
ITC
Federal Investment Tax Credit
MGP
Manufactured Gas Plant
Moody's
Moody's Investors Service, Inc.
Mortgage Indenture
The Amended and Restated Indenture of Mortgage, Deed of Trust and Security Agreement between NJNG and U.S. Bank National Association dated as of September 1, 2014
MW
Megawatts
MWh
Megawatt Hour
NAESB
The North American Energy Standards Board
NFE
Net Financial Earnings
NJ RISE
New Jersey Reinvestment in System Enhancement
NJCEP
New Jersey's Clean Energy Program
NJDEP
New Jersey Department of Environmental Protection
NJNG
New Jersey Natural Gas Company
1
New Jersey Resources Corporation
GLOSSARY OF KEY TERMS (cont.)
NJNG Credit Facility
NJNG's $250 million unsecured committed credit facility expiring in December 2023
NJR Credit Facility
NJR's $425 million unsecured committed credit facility expiring in December 2023
NJR or The Company
New Jersey Resources Corporation
NJRHS
NJR Home Services Company
Non-GAAP
Not in accordance with Generally Accepted Accounting Principles of the United States
NPNS
Normal Purchase/Normal Sale
NYMEX
New York Mercantile Exchange
O&M
Operation and Maintenance
OPEB
Other Postemployment Benefit Plans
PennEast
PennEast Pipeline Company, LLC
PPA
Power Purchase Agreement
PTC
Federal Production Tax Credit
RAC
Remediation Adjustment Clause
REC
Renewable Energy Certificate
S&P
Standard & Poor's Financial Services, LLC
SAFE
Safety Acceleration and Facility Enhancement
SAVEGREEN
The SAVEGREEN Project®
SBC
Societal Benefits Charge
SEC
U.S. Securities and Exchange Commission
SREC
Solar Renewable Energy Certificate
SRL
Southern Reliability Link
Steckman Ridge
Collectively, Steckman Ridge GP, LLC and Steckman Ridge, LP
Talen
Talen Energy Marketing, LLC
Tetco
Texas Eastern Transmission
The Exchange Act
The Securities Exchange Act of 1934, as amended
The Tax Act
An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018, previously known as The Tax Cuts and Jobs Act of 2017
Trustee
U.S. Bank National Association
U.S.
The United States of America
USF
Universal Service Fund
2
New Jersey Resources Corporation
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements contained in this report, including, without limitation, statements as to management expectations, assumptions and beliefs presented in Part I, Item 2. “Management's Discussion and Analysis of Financial Condition and Results of Operations,” Part I, Item 3. “Quantitative and Qualitative Disclosures About Market Risk,” Part II, Item I. “Legal Proceedings” and in the notes to the financial statements are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements can also be identified by the use of forward-looking terminology such as “anticipate,” “estimate,” “may,” “could,” “might,” “intend,” “expect,” “believe,” “will” “plan,” or “should,” or comparable terminology and are made based upon management's current expectations, assumptions and beliefs as of this date concerning future developments and their potential effect on us. There can be no assurance that future developments will be in accordance with management's expectations, assumptions or beliefs, or that the effect of future developments on us will be those anticipated by management.
We caution readers that the expectations, assumptions and beliefs that form the basis for forward-looking statements regarding customer growth, customer usage, qualifications for ITCs and SRECs, future rate case proceedings, completion of infrastructure projects, financial condition, results of operations, cash flows, capital requirements, future capital expenditures, market risk, effective tax rate and other matters for fiscal 2019 and thereafter include many factors that are beyond our ability to control or estimate precisely, such as estimates of future market conditions, the behavior of other market participants and changes in the debt and equity capital markets. The factors that could cause actual results to differ materially from our expectations, assumptions and beliefs include, but are not limited to, those discussed in Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended September 30, 2018, as well as the following:
•
risks associated with our investments in clean energy projects, including the availability of regulatory incentives and federal tax credits, the availability of viable projects, our eligibility for ITCs, the future market for SRECs and electricity prices, and operational risks related to projects in service;
•
our ability to obtain governmental and regulatory approvals, land-use rights, electric grid connection (in the case of clean energy projects) and/or financing for the construction, development and operation of our unregulated energy investments, pipeline transportation systems and NJNG and Midstream infrastructure projects, including NJ RISE, SRL, PennEast and Adelphia, in a timely manner;
•
risks associated with acquisitions and the related integration of acquired assets with our current operations, including our planned Adelphia acquisition;
•
volatility of natural gas and other commodity prices and their impact on NJNG customer usage, NJNG’s BGSS incentive programs, our Energy Services segment operations and our risk management efforts;
•
our ability to comply with current and future regulatory requirements;
•
the level and rate at which NJNG’s costs and expenses are incurred and the extent to which they are approved for recovery from customers through the regulatory process, including through future base rate case filings;
•
the impact of a disallowance of recovery of environmental-related expenditures and other regulatory changes;
•
the performance of our subsidiaries;
•
operating risks incidental to handling, storing, transporting and providing customers with natural gas;
•
access to adequate supplies of natural gas and dependence on third-party storage and transportation facilities for natural gas supply;
•
the regulatory and pricing policies of federal and state regulatory agencies;
•
timing of qualifying for ITCs due to delays or failures to complete planned solar projects and the resulting effect on our effective tax rate and earnings;
•
the results of legal or administrative proceedings with respect to claims, rates, environmental issues, gas cost prudence reviews and other matters;
•
changes in rating agency requirements and/or credit ratings and their effect on availability and cost of capital to our Company;
•
risks related to cyberattacks or failure of information technology systems;
•
the impact of volatility in the equity and credit markets on our access to capital;
•
the impact to the asset values and resulting higher costs and funding obligations of our pension and postemployment benefit plans as a result of potential downturns in the financial markets, lower discount rates, revised actuarial assumptions or impacts associated with the Patient Protection and the Affordable Care Act;
•
commercial and wholesale credit risks, including the availability of creditworthy customers and counterparties, and liquidity in the wholesale energy trading market;
•
accounting effects and other risks associated with hedging activities and use of derivatives contracts;
•
our ability to optimize our physical assets;
•
weather and economic conditions;
•
changes to tax laws and regulations;
•
any potential need to record a valuation allowance for our deferred tax assets;
•
our ability to comply with debt covenants;
•
demographic changes in ourservice territory and their effect on our customer growth;
•
the impact of natural disasters, terrorist activities and other extreme events on our operations and customers;
•
the costs of compliance with present and future environmental laws, including potential climate change-related legislation;
•
environmental-related and other uncertainties related to litigation or administrative proceedings;
•
risks related to our employee workforce; and
•
risks associated with the management of our joint ventures and partnership.
While we periodically reassess material trends and uncertainties affecting our results of operations and financial condition in connection with the preparation of management's discussion and analysis of results of operations and financial condition contained in our Quarterly and Annual Reports on Form 10-Q and Form 10-K, respectively, we do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events.
3
New Jersey Resources Corporation
Part I
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended
Nine Months Ended
June 30,
June 30,
(Thousands, except per share data)
2019
2018
2019
2018
OPERATING REVENUES
Utility
$
120,782
$
104,538
$
622,167
$
631,389
Nonutility
314,160
438,897
1,490,797
1,636,394
Total operating revenues
434,942
543,435
2,112,964
2,267,783
OPERATING EXPENSES
Gas purchases:
Utility
54,861
53,080
280,627
227,268
Nonutility
289,757
422,734
1,370,408
1,489,041
Related parties
2,126
2,156
6,455
6,392
Operation and maintenance
62,559
68,496
185,620
179,453
Regulatory rider expenses
4,136
5,542
32,159
36,915
Depreciation and amortization
23,149
20,320
67,292
64,634
Energy and other taxes
2,373
7,822
8,678
45,855
Total operating expenses
438,961
580,150
1,951,239
2,049,558
OPERATING (LOSS) INCOME
(4,019
)
(36,715
)
161,725
218,225
Other income, net
1,829
1,731
5,456
8,735
Interest expense, net of capitalized interest
11,648
11,037
37,643
34,740
(LOSS) INCOME BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF AFFILIATES
(13,838
)
(46,021
)
129,538
192,220
Income tax benefit
(1,941
)
(28,534
)
(11,854
)
(47,801
)
Equity in earnings of affiliates
3,495
3,213
10,027
9,670
NET (LOSS) INCOME
$
(8,402
)
$
(14,274
)
$
151,419
$
249,691
(LOSS) EARNINGS PER COMMON SHARE
Basic
$(0.09)
$(0.16)
$1.70
$2.85
Diluted
$(0.09)
$(0.16)
$1.69
$2.84
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic
89,600
87,888
88,995
87,493
Diluted
89,600
87,888
89,402
87,884
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
Three Months Ended
Nine Months Ended
June 30,
June 30,
(Thousands)
2019
2018
2019
2018
Net (loss) income
$
(8,402
)
$
(14,274
)
$
151,419
$
249,691
Other comprehensive income (loss), net of tax
Unrealized loss on investments in equity securities, net of tax of $0, $854, $0 and $9,071, respectively
—
(2,364
)
—
(25,055
)
Reclassifications of losses to net income on investments in equity securities, net of tax of $0, $0, $0 and $(858), respectively
—
—
—
11,647
Adjustment to postemployment benefit obligation, net of tax of $(118), $(104), $(333) and $(344), respectively
305
272
844
784
Other comprehensive income (loss)
$
305
$
(2,092
)
$
844
$
(12,624
)
Comprehensive (loss) income
$
(8,097
)
$
(16,366
)
$
152,263
$
237,067
See Notes to Unaudited Condensed Consolidated Financial Statements
4
New Jersey Resources Corporation
Part I
ITEM 1. FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
June 30,
(Thousands)
2019
2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
151,419
$
249,691
Adjustments to reconcile net income to cash flows from operating activities
Unrealized (gain) loss on derivative instruments
(25,353
)
25,904
Realized and unrealized gains on investments in equity securities
(1,567
)
(5,332
)
Gain on sale of businesses
(645
)
(4,687
)
Depreciation and amortization
67,292
64,634
Amortization of acquired wholesale energy contracts
7,813
17,813
Allowance for equity used during construction
(6,135
)
(3,730
)
Allowance for doubtful accounts
1,686
1,672
Deferred income taxes
(29,092
)
17,351
Deferred income tax benefit due to the Tax Act
—
(73,784
)
Manufactured gas plant remediation costs
(9,582
)
(13,624
)
Equity in earnings, net of distributions received from equity investees
(2,700
)
(935
)
Cost of removal - asset retirement obligations
(194
)
(93
)
Contributions to postemployment benefit plans
(5,994
)
(4,708
)
Tax benefit from stock-based compensation
1,289
2,841
Changes in:
Components of working capital
(14,829
)
64,527
Other noncurrent assets
16,906
41,793
Other noncurrent liabilities
15,476
13,224
Cash flows from operating activities
165,790
392,557
CASH FLOWS USED IN INVESTING ACTIVITIES
Expenditures for:
Utility plant
(207,357
)
(130,727
)
Solar equipment
(91,333
)
(88,416
)
Midstream and other
(13,116
)
(4,879
)
Cost of removal
(32,212
)
(42,683
)
Distribution from equity investees in excess of equity in earnings
1,473
2,515
Investments in equity investees
(2,696
)
(14,496
)
Cash paid related to acquisition
—
(10,000
)
Proceeds from sale of businesses, net of closing costs
205,745
27,916
Proceeds from sale of investments in equity securities, net
34,484
6,616
Cash flows used in investing activities
(105,012
)
(254,154
)
CASH FLOWS USED IN FINANCING ACTIVITIES
Proceeds from long-term debt
35,800
225,000
Payments of long-term debt
(15,001
)
(133,717
)
Payments of short-term debt, net
(52,650
)
(208,900
)
Proceeds from sale-leaseback transaction
9,895
7,820
Payments of common stock dividends
(77,730
)
(71,334
)
Proceeds from waiver discount issuance of common stock
57,391
41,677
Proceeds from issuance of common stock
13,199
13,572
Tax withholding payments related to net settled stock compensation
(6,704
)
(13,625
)
Cash flows used in financing activities
(35,800
)
(139,507
)
Change in cash, cash equivalents and restricted cash
24,978
(1,104
)
Cash, cash equivalents and restricted cash at beginning of period
1,710
2,469
Cash, cash equivalents and restricted cash at end of period
$
26,688
$
1,365
CHANGES IN COMPONENTS OF WORKING CAPITAL
Receivables
$
28,385
$
(5,757
)
Inventories
51,833
63,838
Recovery of gas costs
(14,870
)
28,524
Gas purchases payable
(66,060
)
28,041
Prepaid and accrued taxes
10,110
(22,993
)
Accounts payable and other
(31,883
)
5,213
Restricted broker margin accounts
13,092
(29,497
)
Customers' credit balances and deposits
(7,832
)
(745
)
Other current assets
2,396
(2,097
)
Total
$
(14,829
)
$
64,527
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
Cash paid for:
Interest (net of amounts capitalized)
$
42,107
$
35,295
Income taxes
$
8,550
$
4,195
Accrued capital expenditures
$
32,143
$
30,019
Inception gain on natural gas swap contract recognized as non-cash proceeds from sale of business
$
—
$
14,579
See Notes to Unaudited Condensed Consolidated Financial Statements
5
New Jersey Resources Corporation
Part I
ITEM 1. FINANCIAL STATEMENTS (Continued)
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
ASSETS
(Thousands)
June 30, 2019
September 30, 2018
PROPERTY, PLANT AND EQUIPMENT
Utility plant, at cost
$
2,549,347
$
2,368,914
Construction work in progress
219,570
192,481
Nonutility plant and equipment, at cost
784,763
697,406
Construction work in progress
64,000
45,690
Total property, plant and equipment
3,617,680
3,304,491
Accumulated depreciation and amortization, utility plant
(568,996
)
(530,753
)
Accumulated depreciation and amortization, nonutility plant and equipment
(147,248
)
(122,689
)
Property, plant and equipment, net
2,901,436
2,651,049
CURRENT ASSETS
Cash and cash equivalents
26,297
1,458
Customer accounts receivable
Billed
174,670
205,490
Unbilled revenues
7,413
7,199
Allowance for doubtful accounts
(6,347
)
(5,704
)
Regulatory assets
32,920
18,297
Gas in storage, at average cost
132,635
184,633
Materials and supplies, at average cost
14,075
13,910
Prepaid and accrued taxes
24,533
23,047
Derivatives, at fair value
28,337
27,396
Restricted broker margin accounts
44,827
53,719
Assets held for sale
—
206,905
Other
30,611
33,730
Total current assets
509,971
770,080
NONCURRENT ASSETS
Investments in equity method investees
197,660
190,866
Regulatory assets
388,769
368,592
Derivatives, at fair value
14,476
10,560
Investments in equity securities
—
32,917
Intangible assets, net
15,261
23,375
Other noncurrent assets
95,839
96,225
Total noncurrent assets
712,005
722,535
Total assets
$
4,123,412
$
4,143,664
See Notes to Unaudited Condensed Consolidated Financial Statements
6
New Jersey Resources Corporation
Part I
ITEM 1. FINANCIAL STATEMENTS (Continued)
CAPITALIZATION AND LIABILITIES
(Thousands, except share data)
June 30, 2019
September 30, 2018
CAPITALIZATION
Common stock, $2.50 par value; authorized 150,000,000 shares; outstanding June 30, 2019 — 89,917,854; September 30, 2018 — 88,292,956
$
226,627
$
226,196
Premium on common stock
290,414
274,748
Accumulated other comprehensive loss, net of tax
(15,212
)
(12,610
)
Treasury stock at cost and other; shares June 30, 2019 — 732,777; September 30, 2018 — 2,185,013