WALL, N.J. - New Jersey Resources (NYSE: NJR) today announced its fiscal 2007 results, marking its 16th consecutive year of earnings growth. The company reported earnings per basic share of $3.17, compared with $2.82 last year. The increase was driven by a 42.8 percent increase in earnings at NJR Energy Services (NJRES), the company's wholesale energy subsidiary.
"Our constant focus on consistent performance made fiscal 2007 another strong year for New Jersey Resources," said Laurence M. Downes, chairman and CEO of NJR. "We were able to surpass our initial earnings guidance and achieve another year of higher earnings while helping our customers to save energy with aggressive education initiatives and enhancing our own environmental efforts through Conserve to Preserve™."
NJR also announced that its Board of Directors approved a 5.3 percent increase in the quarterly dividend rate to $.40 per share from $.38 per share. The new quarterly rate is effective with the dividend payable January 2, 2008 to shareowners of record on December 15, 2007. The new indicated annual dividend rate is $1.60 per share. NJR has now increased its dividend in each of the last 13 years and has paid quarterly dividends since 1952.
"We continue to deliver consistent results for our shareowners and appreciate the confidence they place in NJR," Downes said.
Share Repurchase Plan Increased
Yesterday, the NJR Board of Directors authorized an increase in the share repurchase plan from 3.5 million to 4.5 million shares. The plan authorizes NJR to purchase its shares on the open market or in negotiated transactions, based on prevailing market prices. NJR purchased 340,000 shares under its share repurchase plan during fiscal 2007. Since the share repurchase plan began in September 1996, NJR has invested over $144 million to repurchase 3.49 million shares at a spilt-adjusted, average price of $34.72.
Financial and operating highlights included:
For the 12 months ended September 30, 2007, NJR earned $88.4 million, or $3.17 per basic share, compared with $78.5 million, or $2.82 per basic share, last year. In the fourth quarter, NJR posted a consolidated loss of $15.3 million or $.55 per basic share, compared with a loss of $12 million, or $.43 per basic share last year. It should be noted that NJR believes a loss in this 3-month period is typical for the company and due primarily to the seasonal nature of NJR's primary businesses.
Earnings decreased at NJNG, which earned $44.5 million in fiscal 2007, compared with $46.9 million last year. NJNG lost $11.2 million in the quarter versus a loss of $7 million last year. The increase in net loss during the quarter was driven primarily by pre-tax settlement charge with the New Jersey Board of Public Utilities (BPU) of $4 million related to certain previously deferred remediation claims associated with a manufactured gas plant in Long Branch, N.J. These claims were determined to be related to personal injury and therefore not recoverable under NJNG's remediation adjustment clause.
In fiscal 2007, NJRES reported a 42.8 percent increase in earnings to $40.1 million, compared with $28.1 million last year. The increase was due primarily to higher gross margin from its portfolio of storage and transportation capacity assets. For the three months ended September 30, 2007, NJRES reported a loss of $5.9 million, compared with a loss of $7.4 million last year. The improvement was driven by a slight increase in gross margin resulting from the impact of warmer-than-normal weather on electric demand in the Southeast and a decrease in interest expense.
NJNG added 8,421 new customers in fiscal 2007, of which 39 percent converted from other fuels. NJNG also added natural gas heat and other services to 770 existing customers during the year. NJNG expects to maintain an approximate 1.8 percent annual customer growth rate in fiscal 2008, which it believes is above the national average for natural gas distribution companies.
"Normal" weather is based on 20-year average temperatures as calculated based on three reference areas representative of NJNG's service territory. Weather during the 12-month period ended September 30, 2007 was 5.6 percent warmer than normal and 2.6 percent colder than last year. As with the weather normalization clause which preceded it, the impact of weather is significantly offset by the Conservation Incentive Program (CIP). This program 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. Included in the total CIP accrual of $16.5 million was $8.2 million associated with the warmer-than-normal weather and $8.3 million associated with lower customer usage. On October 3, 2007, the BPU provisionally approved $15.6 million of CIP recovery reflecting actual balances through June 30, 2007 and estimated levels from July through September 30, 2007. Customers have already realized annual Basic Gas Supply Service savings of $10.6 million in fixed cost reductions through the CIP. Additionally, the lower level of gas usage in fiscal 2007 represents another estimated $37.6 million in commodity cost savings achieved by customers.
During the fiscal year, NJNG's utility gross margin-sharing incentive programs, which include off-system sales, capacity release, storage optimization and financial risk management programs, totaled 36.5 billion cubic feet (Bcf) and $8.1 million of utility gross margin, compared with 38.4 Bcf and $7.4 million of utility gross margin for the same period last year. For the three months ended September 30, 2007, these programs totaled 9.7 Bcf and $1.7 million of utility gross margin, compared with 8.4 Bcf and $876,000 of utility gross margin for the same period last year.
NJNG shares the utility gross margin earned from these incentive programs with customers and shareowners according to utility gross margin-sharing formulas. Since the establishment of these incentive programs in 1992, NJNG customers have saved over $338 million on their natural gas bills, or approximately 4 percent annually. In October 2007, the utility received regulatory approval for an extension of its incentive programs through October 31, 2008 with all but one mechanism remaining at its present sharing levels. The financial risk management program changed from an 80/20 sharing to an 85/15 sharing between customers and NJNG, respectively, effective November 1, 2007.
NJRES earned $40.1 million during fiscal 2007, compared with $28.1 million last year. The increase in earnings was primarily the result of favorable market-related conditions during fiscal 2007. These conditions included the ability to arbitrage storage positions and capitalize on seasonal pricing fluctuations, as well as the optimization of pipeline capacity with respect to geographic pricing differentials. The increase was due primarily to higher gross margin generated by colder-than-normal weather in the Northeast during the second fiscal quarter. This increase in gross margin offset higher labor costs and other operating expense increases.
This business segment consists of NJR Home Services (NJRHS), which provides service, sales and installation of appliances to over 149,000 customers; NJR Energy, which consists of a 5.53 percent equity investment in Iroquois Gas Transmission System, L.P. (Iroquois), a partnership of subsidiaries of energy companies that owns an interstate natural gas pipeline in the Northeast; a 50 percent equity investment, through two wholly-owned subsidiaries, in Steckman Ridge GP, LLC and Steckman Ridge LP, a natural gas storage facility under joint development with a partner in western Pennsylvania; and Commercial Realty & Resources, which develops commercial real estate. Earnings in fiscal 2007 were $3.7 million, compared with $3.5 million last year as a result of additional contracts at NJRHS and improved performance from the Iroquois investment. For the three months ended September 30, 2007, this business segment earned $1.8 million, compared with $2.4 million last year. The decrease in fourth-quarter earnings is primarily due to greater corporate overhead allocations, which were partially offset by increased earnings from the investment in Iroquois and greater earnings at NJRHS.
Fiscal 2008 Earnings Guidance
Assuming the continued positive impact of the CIP, 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 estimates earnings for fiscal 2008 will be in the $3.20 to $3.30 per basic share range.
Additional Non-GAAP Financial Information
NJRES' gross margin and NJNG's utility gross margin are included as supplemental disclosures because such items are the primary measures used by management in analyzing the results of their operations. NJRES' gross margin represents natural gas revenues and management fees less natural gas costs and fixed portfolio costs. NJNG's utility gross margin represents natural gas revenues less natural gas costs, sales and other taxes and regulatory rider expenses. These measurements represent the results of revenues less certain costs, which are key components of our operations and 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 more 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. 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 gross margin amounts are more reflective of our operations, provide transparency to investors and enable period-to-period comparability of financial performance. As an indicator of our operating performance, gross margin should not be considered an alternative to, or more meaningful than, operating income as determined in accordance with GAAP. Management's definition of NJRES' gross margin and NJNG's gross margin may not be comparable to the definition of gross margin used by other companies in either the natural gas distribution business or other industries.
A reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated and reported in accordance with GAAP, can be found below.
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, 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, 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, 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 November 22, 2006, its quarterly report filed on August 2, 2007 and its annual report for fiscal 2007 on Form 10-K to be filed on, or about, November 21, 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.
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.
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 478,000 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.