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NJR > SEC Filings for NJR > Form 10-Q on 4-Aug-2014All Recent SEC Filings

Show all filings for NEW JERSEY RESOURCES CORP

Form 10-Q for NEW JERSEY RESOURCES CORP


4-Aug-2014

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Critical Accounting Policies

A summary of NJR's critical accounting policies is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of its Annual Report on Form 10-K for the period ended September 30, 2013. NJR's critical accounting policies have not changed from those reported in the 2013 Annual Report on Form 10-K.

Recently Issued Accounting Standards

Refer to Note 2. Summary of Significant Accounting Policies for discussion of recently issued accounting standards.

Management's Overview

Consolidated

NJR is an energy services holding company providing retail natural gas service in New Jersey and wholesale natural gas and related energy services to customers primarily in the U.S. and Canada, through two of its subsidiaries, NJNG and NJRES. In addition, NJR invests in distributed power projects, midstream assets and provides various repair, sales and installations services. A more detailed description of NJR's organizational structure can be found in Item 1. Business of NJR's 2013 Annual Report on Form 10-K.


New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(Continued)

Business Segments

NJR has four primary business segments as presented in the chart below:

[[Image Removed]]
In addition to the business segments above, NJR has non-utility operations that provide corporate support services or do not meet management's criteria to be treated as a separate business segment. These operations, which comprise Retail and Other, include: appliance repair services, sales and installations at NJRHS; energy-related ventures at NJR Energy and commercial real estate holdings at CR&R.

A summary of the company's consolidated results is as follows:

                         Three Months Ended                 Nine Months Ended
                              June 30,                          June 30,
(Thousands)           2014       2013    % change      2014         2013     % change
Operating revenues $ 688,257  $ 767,469   (10.3 )% $ 3,146,231  $ 2,464,373     27.7 %
Gas purchases      $ 639,076  $ 649,242    (1.6 )% $ 2,609,624  $ 2,016,597     29.4 %

The primary drivers of the changes noted above, which are described in more detail in the individual segment discussions, are as follows:

Operating revenues and gas purchases decreased during the three months ended June 30, 2014, compared with the three months ended June 30, 2013, due primarily to:

a decrease at NJRES due primarily to a decrease in overall sales volumes; and

a decrease at NJNG as a result of lower off-system sales and BGSS rates.

Operating revenues and gas purchases increased during the nine months ended June 30, 2014, compared with the nine months ended June 30, 2013, due primarily to:

increased sales volumes at NJRES due to increased demand for natural gas in regions affected by the extreme cold weather, coupled with higher average commodity prices; and

an increase in firm sales at NJNG as a result of colder weather, customer growth, coupled with higher off-system sales, partially offset by lower BGSS rates.


                        New Jersey Resources Corporation
                                     Part I

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
(Continued)

Net income (loss) by business segment and operations are as follows:
                                   Three Months Ended                      Nine Months Ended
                                        June 30,                                June 30,
(Thousands)                     2014                2013                2014               2013
Net income (loss)
Natural Gas Distribution $   4,882   (34 )%   $  5,528    19  %   $  79,564   48 %   $  76,937    57 %
Energy Services            (28,254 ) 198        22,222    76         62,996   38        42,812    32
Clean Energy Ventures        5,029   (35 )      (1,381 )  (5 )       17,193   10         9,078     7
Midstream                    1,896   (13 )       1,541     5          5,584    3         5,600     4
Retail and Other             2,485   (18 )       1,944     7            708    1           813     -
Eliminations (1)              (312 )   2          (699 )  (2 )          345    -          (410 )   -
Total                    $ (14,274 ) 100  %   $ 29,155   100  %   $ 166,390  100 %   $ 134,830   100 %

(1) Consists of transactions between subsidiaries that are eliminated in consolidation.

The decrease in net income during the three months ended June 30, 2014, compared with the three months ended June 30, 2013 was primarily driven by:

a decrease at NJRES due primarily to greater losses on derivative instruments as a result of timing differences in the settlement of certain economic hedges; and

a decrease at NJNG due primarily to an increase in O&M, interest expense and income tax provision, which is partially offset by increased utility gross margin; partially offset by

an increase at NJRCEV due to the receipt of a one-time credit support payment related to a change in ownership at the site of one of NJRCEV's commercial solar projects.

The increase in net income during the nine months ended June 30, 2014, compared with the nine months ended June 30, 2013 was primarily driven by:

an increase at NJRES due primarily to higher gross margin due to increased demand caused by the extreme cold weather;

an increase at NJNG due primarily to higher gross margin related to customer growth and infrastructure investments; and

an increase at NJRCEV due to the receipt of a one-time credit support payment as discussed above.

Assets by business segment and operations are as follows:

                               June 30,            September 30,
(Thousands)                      2014                   2013
Assets
Natural Gas Distribution $ 2,123,260    68  %   $ 2,094,940    70  %
Energy Services              463,597    15          468,096    16
Clean Energy Ventures        362,240    12          253,663     8
Midstream                    153,214     5          153,536     5
Retail and Other              85,148     3           85,293     3
Intercompany assets (1)      (81,552 )  (3 )        (50,745 )  (2 )
Total                    $ 3,105,907   100  %   $ 3,004,783   100  %

(1) Consists of transactions between subsidiaries that are eliminated in consolidation.

The increase in assets during the nine months ended June 30, 2014, included additional utility plant expenditures at our Natural Gas Distribution segment and solar and wind expenditures at Clean Energy Ventures.


New Jersey Resources Corporation
Part I

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(Continued)

Management of the Company uses NFE, a non-GAAP financial measure, when evaluating its operating results of its Energy Services segment related to financial derivative instruments that have settled and are designed to economically hedge natural gas still in inventory. NFE is a measure of the earnings based on eliminating timing differences surrounding the recognition of certain gains or losses to effectively match the earnings effects of the economic hedges with the physical sale of gas and, therefore, eliminates the impact of volatility to GAAP earnings associated with the derivative instruments. NJR also calculates a quarterly tax adjustment based on an estimated annual effective tax rate for NFE purposes. Any resulting quarterly tax adjustments are applied to its Clean Energy Ventures segment, as such adjustments relate to tax credits generated by NJRCEV. Non-GAAP financial measures are not in accordance with, or an alternative to GAAP, and should be considered in addition to, and not as a substitute for the comparable GAAP measure.

The following is a reconciliation of consolidated net income, the most directly comparable GAAP measure, to NFE:

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