NEW JERSEY RESOURCES REPORTS FOURTH-QUARTER AND FISCAL 2021 RESULTS

AFFIRMS FISCAL 2022 GUIDANCE AND UPDATES LONG-TERM PROJECTED GROWTH RATE

Fourth-quarter fiscal 2021 net (loss)/income totaled $(1.1) million, or $(0.01) per share, compared with $32.7 million, or $0.34 per share, during the same period in fiscal 2020. Fiscal 2021 net income totaled $117.9 million, or $1.23 per share, compared with $163.0 million, or $1.72 per share, for fiscal 2020.

Fourth-quarter fiscal 2021 NFE totaled $6.6 million, or $0.07 per share, compared to NFE of $43.4 million, or $0.45 per share, during the same period in fiscal 2020. Fiscal 2021 NFE totaled $207.7 million, or $2.16 per share, compared with $165.3 million, or $1.74 per share, for fiscal 2020. The difference between GAAP earnings and NFE is due primarily to a $92.0 million impairment ($74.5 million after considering the related tax effects) of NJR's investment in the PennEast Project, which is excluded from NFE.

"Fiscal 2021 results exceeded the expectations we laid out at our Analyst Day last November, " said Steve Westhoven, President and CEO of NJR. "Strong execution against our plan positions our diversified portfolio of infrastructure assets for long-term growth, creating value for shareowners and meeting the needs of our customers."

Key Performance Metrics

 

Effective October 1, 2020, NJR changed its method of accounting for Investment Tax Credits (ITCs) from the flow through method to the deferral method. Our historical financial reporting presented herein has been retrospectively revised to apply this change. For additional details, please refer to our Form 10-K.

A reconciliation of net income to NFE for the three and twelve months ended September 30, 2021, and 2020, is provided below.

NFE is a measure of earnings based on the elimination of timing differences to effectively match the earnings effects of the economic hedges with the physical sale of natural gas, SRECs and foreign currency contracts. Consequently, to reconcile net income and NFE, current-period unrealized gains and losses on the derivatives are excluded from NFE as a reconciling item. Realized derivative gains and losses are also included in current-period net income. However, NFE includes only realized gains and losses related to natural gas sold out of inventory, effectively matching the full earnings effects of the derivatives with realized margins on physical natural gas flows. NFE also excludes impairment charges associated with equity method investments, which are non-cash charges considered unusual in nature that occur infrequently and are not indicative of the Company's performance for its ongoing operations. Included in the tax effects are current and deferred income tax expense corresponding with the components of NFE.

A table detailing NFE for the three and twelve months ended September 30, 2021, and 2020, is provided below.

 

Fiscal 2022 NFE Guidance:

NJR reaffirmed fiscal 2022 NFE guidance of $2.20 to $2.30 per share and, as a result of the progress on our major infrastructure projects, narrowed the expected long-term NFEPS growth range to 7 to 9 percent, from the previous range of 6 to 10 percent, subject to the risk and uncertainties identified below under "Forward-Looking Statements." The following chart represents NJR’s current expected contributions from its subsidiaries for fiscal 2022:

 

In providing fiscal 2022 NFE guidance and narrowing our expected long-term NFEPS growth range, management is aware there could be differences between reported GAAP earnings and NFE due to matters such as, but not limited to, the positions of our energy-related derivatives. Management is not able to reasonably estimate the aggregate impact or significance of these items on reported earnings and, therefore, is not able to provide a reconciliation to the corresponding GAAP equivalent for its operating earnings guidance without unreasonable efforts.

New Jersey Natural Gas

NJNG reported fiscal 2021 NFE of $107.4 million, compared to NFE of $126.9 million during fiscal 2020. Fourth-quarter fiscal 2021 net financial loss was $24.2 million, compared to net financial loss of $15.3 million during the same period in fiscal 2020. The decrease for both periods was due to higher O&M expenses primarily related to increased bad debt.

Customer Growth:

Base Rate Filing:

Infrastructure Update:

BGSS Incentive Programs:

BGSS incentive programs contributed $13.4 million to utility gross margin, compared with $9.5 million during  fiscal 2020. The higher results for fiscal 2021 were due to improved margins in off-system sales and storage incentives compared to fiscal 2020.

For more information on utility gross margin, please see "Non-GAAP Financial Information" at the end of the press release.

Energy-Efficiency Programs:

Clean Energy Ventures (CEV)

CEV reported fiscal 2021 NFE of $16.8 million, compared with NFE of $22.1 million during  fiscal 2020.

Fourth-quarter fiscal 2021 NFE was $40.9 million, compared with NFE of $44.8 million during the same period in fiscal 2020.  The decrease in NFE for both periods was due primarily to lower SREC revenue, partially offset by lower depreciation expense. The decrease in depreciation expense is due to an increase in the useful life of CEV's assets.

Storage and Transportation

Storage and Transportation, formerly known as our Midstream reporting segment, reported fiscal 2021 NFE of $13.0 million, compared with NFE of $18.3 million during fiscal 2020. Fourth-quarter fiscal 2021 NFE were $2.4 million, compared with NFE of $7.4 million during the same period in fiscal 2020. The decrease in NFE for both periods was due primarily to lower equity in earnings contributions from our investments in Steckman Ridge and PennEast, and  higher O&M, which was partially offset by increased operating revenues at Leaf River and Adelphia Gateway.

The NFE results exclude a $74.5 million after-tax impairment charge related to NJR's investment in the PennEast Project.

Infrastructure Updates:

Energy Services

Energy Services reported fiscal 2021 NFE of $71.1 million, compared with a net financial loss of $7.9 million in fiscal 2020. The increase was due primarily to higher natural gas price volatility in February 2021, as a result of cold weather in regions where Energy Services had contracted rights to storage assets. Fourth-quarter fiscal 2021 net financial loss was $14.4 million, compared with NFE of $1.4 million for the same period last fiscal year. The decrease was due primarily to increased compensation expense and higher O&M expenses related to charitable contributions compared to the same period a year ago.

Home Services and Other Operations

Home Services and Other Operations reported fiscal 2021 net financial loss of $0.8 million, compared with NFE of $5.8 million during fiscal 2020. Fourth-quarter fiscal 2021 net financial loss was $(1.1) million compared with NFE of $5.1 million for the same period in fiscal 2020. The decrease in both periods was due primarily to higher O&M related to increased compensation and technology expenses and one-time income tax benefits that occurred in the fourth quarter of fiscal 2020 that did not reoccur in fiscal 2021.

Capital Expenditures and Cash Flows:

NJR is committed to maintaining a strong financial profile.

Forward-Looking Statements:

This earnings release contains 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. 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. Words such as “anticipates,” “estimates,” “expects,” “projects,” “may,” “will,” “intends,” “plans,” “believes,” “should” and similar expressions may identify forward-looking statements and such forward-looking statements are made based upon management’s current expectations, assumptions and beliefs as of this date concerning future developments and their potential effect upon NJR. There can be no assurance that future developments will be in accordance with management’s expectations, assumptions and beliefs or that the effect of future developments on NJR will be those anticipated by management. Forward-looking statements in this earnings release include, but are not limited to, certain statements regarding NJR’s NFEPS guidance for fiscal 2022, projected NFEPS growth rate, results of future rate cases, forecasted contribution of business segments to NJR’s NFE for fiscal 2022, future NJR and NJNG capital expenditures, infrastructure programs and investments such as SRL, IIP, the Howell Green Hydrogen Project and energy efficiency programs, the ability to operate the Adelphia Gateway Pipeline project, and other legal and regulatory expectations.

Additional information and factors that could cause actual results to differ materially from NJR’s expectations are contained in NJR’s filings with the SEC, including NJR’s Annual Reports on Form 10-K and subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other SEC filings, which are available at the SEC’s web site, http://www.sec.gov. Information included in this earnings release is representative as of today only and while NJR periodically reassesses material trends and uncertainties affecting NJR's results of operations and financial condition in connection with its preparation of management's discussion and analysis of results of operations and financial condition contained in its Quarterly and Annual Reports filed with the SEC, NJR does not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events.

Non-GAAP Financial Information:

This earnings release includes the non-GAAP financial measures NFE/net financial loss, NFE per basic share, financial margin and utility gross margin. 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. As an indicator of NJR’s operating performance, these measures should not be considered an alternative to, or more meaningful than, net income or operating revenues as determined in accordance with GAAP. This information has been provided pursuant to the requirements of SEC Regulation G.

NFE and financial margin exclude unrealized gains or losses on derivative instruments related to NJR’s unregulated subsidiaries and certain realized gains and losses on derivative instruments related to natural gas that has been placed into storage at Energy Services and the impairment on NJR's investments in the PennEast Project, net of applicable tax adjustments as described below. Volatility associated with the change in value of these financial instruments and physical commodity reported on the income statement in the current period. 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 because it shows changes in value currently instead of when the planned transaction ultimately is settled. An annual estimated effective tax rate is calculated for NFE purposes and any necessary quarterly tax adjustment is applied to NJR Energy Services Company.

NJNG’s utility gross margin represents the results of revenues less natural gas costs, sales, expenses and other taxes and regulatory rider expenses, which are key components of NJR’s operations. Natural gas costs, sales, expenses and other taxes and regulatory rider expenses are passed through to customers and, therefore, have no effect on utility gross margin. Management uses these non-GAAP financial measures as supplemental measures to other GAAP results to provide a more complete understanding of NJR’s performance. Management believes these non-GAAP financial measures are more reflective of NJR’s business model, provide transparency to investors and enable period-to-period comparability of financial performance. 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. For a full discussion of NJR’s non-GAAP financial measures, please see NJR’s most recent Report on Form 10-K, Item 7.

About New Jersey Resources

 

NJR and its nearly 1,200 employees are committed to helping customers save energy and money by promoting conservation and encouraging efficiency through Conserve to Preserve^® and initiatives such as The SAVEGREEN Project^® and The Sunlight Advantage^®.

 

For more information about NJR:

Follow us on Twitter @NJNaturalGas.

“Like” us on facebook.com/NewJerseyNaturalGas.

NEW JERSEY RESOURCES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

RECONCILIATION OF NON-GAAP PERFORMANCE MEASURES

(Unaudited)

		Three Months Ended								Twelve Months Ended
		September 30,								September 30,
(Thousands)		2021				2020				2021				2020
NEW JERSEY RESOURCES
A reconciliation of net (loss) income, the closest GAAP financial measurement, to net financial earnings is as follows:
Net (loss) income		$	(1,133	)		$	32,707			$	117,890			$	163,007
Add:
Unrealized loss (gain) on derivative instruments and related transactions			40,576				12,183				54,203				(9,644	)
Tax effect			(9,647	)			(2,893	)			(12,887	)			2,296
Effects of economic hedging related to natural gas inventory			(30,150	)			2,216				(42,405	)			12,690
Tax effect			7,166				(527	)			10,078				(3,016	)
Impairment of equity method investment			—				—				92,000				—
Tax effect			767				—				(11,167	)			—
Net income to NFE tax adjustment			(980	)			(257	)			—				—
Net financial (loss) earnings		$	6,599			$	43,429			$	207,712			$	165,333
Weighted Average Shares Outstanding
Basic			96,198				95,933				96,227				94,798
Diluted			96,198				95,933				96,560				95,103
A reconciliation of basic earnings per share, the closest GAAP financial measurement, to basic net financial earnings per share is as follows:
Basic (loss) earnings per share		$	(0.01	)		$	0.34			$	1.23			$	1.72
Add:
Unrealized loss (gain) on derivative instruments and related transactions		$	0.42			$	0.13			$	0.56			$	(0.10	)
Tax effect		$	(0.10	)		$	(0.03	)		$	(0.13	)		$	0.02
Effects of economic hedging related to natural gas inventory		$	(0.31	)		$	0.02			$	(0.44	)		$	0.13
Tax effect		$	0.07			$	(0.01	)		$	0.10			$	(0.03	)
Impairment of equity method investment		$	—			$	—			$	0.96			$	—
Tax effect		$	0.01			$	—			$	(0.12	)		$	—
Net income to NFE tax adjustment		$	(0.01	)		$	—			$	—			$	—
Basic NFE per share		$	0.07			$	0.45			$	2.16			$	1.74
NATURAL GAS DISTRIBUTION
A reconciliation of operating revenue, the closest GAAP financial measurement, to utility gross margin is as follows:
Operating revenues		$	98,274			$	84,548			$	731,796			$	729,923
Less:
Gas purchases			38,842				29,113				260,714				287,307
Regulatory rider expense			3,734				1,993				38,304				34,529
Utility gross margin		$	55,698			$	53,442			$	432,778			$	408,087

		Three Months Ended								Twelve Months Ended
(Unaudited)		September 30,								September 30,
(Thousands)		2021				2020				2021				2020
ENERGY SERVICES
The following table is a computation of financial margin:
Operating revenues		$	334,780			$	212,760			$	1,228,420			$	1,030,419
Less: Gas purchases			357,133				220,882				1,098,261				1,024,579
Add:
Unrealized loss (gain) on derivative instruments and related transactions			45,011				12,723				58,362				(8,583	)
Effects of economic hedging related to natural gas inventory			(30,150	)			2,216				(42,405	)			12,690
Financial margin		$	(7,492	)		$	6,817			$	146,116			$	9,947
A reconciliation of operating income, the closest GAAP financial measurement, to financial margin is as follows:
Operating (loss) income		$	(32,186	)		$	(12,216	)		$	79,163			$	(11,651	)
Add:
Operation and maintenance expense			9,805				4,055				50,885				17,368
Depreciation and amortization			28				39				111				123
Subtotal			(22,353	)			(8,122	)			130,159				5,840
Add:
Unrealized loss (gain) on derivative instruments and related transactions			45,011				12,723				58,362				(8,583	)
Effects of economic hedging related to natural gas inventory			(30,150	)			2,216				(42,405	)			12,690
Financial margin		$	(7,492	)		$	6,817			$	146,116			$	9,947
A reconciliation of net income to net financial earnings is as follows:
Net (loss) income		$	(24,731	)		$	(9,753	)		$	58,957			$	(11,008	)
Add:
Unrealized loss (gain) on derivative instruments and related transactions			45,011				12,723				58,362				(8,583	)
Tax effect			(10,700	)			(3,021	)			(13,875	)			2,044
Effects of economic hedging related to natural gas			(30,150	)			2,216				(42,405	)			12,690
Tax effect			7,166				(527	)			10,078				(3,016	)
Net income to NFE tax adjustment			(980	)			(257	)			—				—
Net financial (loss) earnings		$	(14,384	)		$	1,381			$	71,117			$	(7,873	)
STORAGE AND TRANSPORTATION
A reconciliation of net income to net financial earnings is as follows:
Net (loss) income		$	1,673			$	7,434			$	(67,787	)		$	18,311
Add:
Impairment of equity method investment			—				—				92,000				—
Tax effect			767				—				(11,167	)			—
Net financial earnings		$	2,440			$	7,434			$	13,046			$	18,311

FINANCIAL STATISTICS BY BUSINESS UNIT

(Unaudited)