WALL, N.J. – New Jersey Resources (NYSE: NJR) has announced improved fiscal 2006 first quarter earnings of $1.24 per basic share, a 14 percent increase over the same period last year. NJR's earnings were $34.3 million, or $1.24 per basic share, versus $30.2 million, or $1.09 per basic share last year. On a diluted basis, earnings per share were $1.23 versus $1.06 last year, an increase of 16 percent. Last year's earnings included a $.21 per basic share gain on the sale of a commercial office building and a charge of $.05 per basic share associated with an early retirement program for officers. Net of these items, NJR's earnings in the first quarter of fiscal 2005 were $25.7 million, or $.93 per basic share, and $.91 per diluted share.
"We are off to a solid start in fiscal 2006. Our record of earnings consistency is supported by continued strong growth in our successful unregulated wholesale energy services business," said Laurence M. Downes, chairman and CEO of NJR.
NJR's successful first quarter earnings were driven by the company's wholesale energy services business unit, which saw earnings grow to $14.9 million, a 127 percent increase over the $6.6 million for the same period last year. These strong results more than offset the impact of lower customer usage at New Jersey Natural Gas (NJNG), NJR's largest subsidiary.
Customer Billing Credit Announced
In December, NJNG received approval from the New Jersey Board of Public Utilities (BPU) to implement a 23 percent price increase that helped cover the cost of obtaining natural gas necessary to meet the usual high demand of winter months. This adjustment was a direct result of the cost to purchase natural gas, and did not increase profits to the company. Recently, due in part to decreased usage resulting from warmer-than-normal weather, the wholesale cost of natural gas has declined, enabling NJNG to offer a credit of about $25 million to customers. The credit will save customers approximately 19 cents per therm while in effect for the months of February and March 2006. A typical residential customer using 325 therms over the 2-month period will receive a bill credit of approximately $61.
Share Repurchase Plan Increased
In January 2006, the NJR board of directors authorized an increase in the company's share repurchase plan from 2.5 million to 3.5 million shares. NJR was one of the first companies in the utility industry to offer a repurchase plan, which gives the company financial flexibility and is expected to create value for shareowners. NJR purchased 253,400 shares under the share repurchase plan during the quarter ended December 31, 2005. The plan allows NJR to purchase its shares on the open market or in negotiated transactions, based on market and other conditions. Since the plan began in September 1996, NJR has invested $91.8 million to repurchase 2.4 million shares.
Financial and operating highlights during the quarter included:
NJNG earned $18.7 million in the quarter, compared with $17.8 million last year. Last year's earnings included its share of the charge for an early retirement program for officers. Net of this item, NJNG earned $18.7 million last year. The flat earnings were due primarily to lower-than-expected customer usage, which offset the impact of higher gross margin from its incentive programs. The company believes that the lower usage was due primarily to the impact of higher wholesale natural gas prices, which offset continued strong customer growth.
NJR's unregulated wholesale energy services subsidiary, NJR Energy Services (NJRES), reported earnings of $14.9 million, compared with $6.6 million last year. This increase was due primarily to higher gross margin generated by its portfolio of storage and transportation capacity assets. Gross margin for NJRES is defined as natural gas revenues and management fees less natural gas costs.
NJNG's gross margin is defined as natural gas revenues less natural gas costs; sales tax; a Transitional Energy Facilities Assessment (TEFA), which is included in Energy and other taxes on the Consolidated Statements of Income; and regulatory rider expenses. Management believes that gross margin provides a more meaningful basis for evaluating utility operations than revenue since natural gas costs, sales tax, TEFA and regulatory rider expenses are passed through to customers, and therefore, has no effect on gross margin. Natural gas costs are charged to operating expenses on the basis of therm sales at the prices approved by the BPU through NJNG's Basic Gas Supply Service (BGSS) tariff. The BGSS allows NJNG to recover natural gas costs. Sales tax is calculated at 6 percent of revenue and excludes sales to cogeneration facilities, other utilities, off-system sales and federal accounts. TEFA is calculated on a per-therm basis and excludes sales to cogeneration facilities, other utilities and off-system sales. Regulatory rider expenses are calculated on a per-therm basis. NJNG's gross margin also includes benefits received by shareowners under its BGSS incentive programs.
Fiscal 2006 Earnings Guidance
Assuming normal weather and a continuation of lower customer usage, stable economic conditions, continued customer growth at NJNG and continued volatility in the wholesale natural gas markets at NJRES, and subject to the factors discussed below under "Forward-Looking Statements," NJR continues to estimate that earnings for fiscal 2006 will be in the $2.75–$2.85 per basic share range.
This news release contains estimates, 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, the impact of the company's risk management efforts, including commercial and wholesale credit risks, the impact of regulation (including the regulation of rates), fluctuations in energy-related commodity prices, conversion activity, 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, 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, including NJR's Annual Report on Form 10-K filed on November 29, 2005. NJR's Form 10-K is 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.
NJR will host a live webcast to discuss its financial results today at 2 p.m. ET. To listen to the call, logon to NJR's Web site, njliving.com, and select "Investor Relations," then click just below the microphone on the right side of the Investor Relations home page.
About New Jersey Resources
New Jersey Resources (NYSE:NJR), a Fortune 1000 company and a member of the Forbes Platinum 400, 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 465,000 customers in central and northern New Jersey. Other major NJR subsidiaries include NJR Energy Services and NJR Home Services. NJR Energy Services is a leader in the unregulated energy services market, providing customer service and management of natural gas storage and capacity assets. 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.