New Jersey Resources Announces Delay in Filing Form 10-K, Anticipated Restatement of Financial Statements

Business Wire,  Nov 30, 2007  

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WALL, N.J. -- New Jersey Resources (NYSE: NJR) today announced that it will delay filing its annual report on Form 10-K for the fiscal year ended September 30, 2007, with the Securities and Exchange Commission (SEC) in order to allow for the completion of a review of the accounting treatment for its derivative instruments under Statement of Financial Accounting Standards 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), the requirements of which are highly technical, complex and have been subject to an evolving interpretation by the accounting community.

NJR initiated this review in connection with the finalization of the audit of its financial statements for the fiscal year ended September 30, 2007. As a result of this accounting assessment, NJR has determined that certain of these derivative instruments associated with its unregulated subsidiaries did not qualify as "cash flow hedges" under SFAS 133 and, as such, the change in the fair value of these instruments must be reflected in its consolidated statements of income. Accordingly, the company will amend and restate certain historical consolidated financial statements and make appropriate changes in the preparation of its consolidated financial statements for the year ended September 30, 2007.

Glenn C. Lockwood, NJR's senior vice president and chief financial officer, said, "New Jersey Resources implemented hedge accounting pursuant to SFAS 133 and its related interpretations in good faith, and we are working through the necessary changes in order to meet those very complex standards."

"In evaluating the impact of the anticipated adjustments, we believe it is very important to emphasize that nothing in the economics of NJR's day-to-day operations, liquidity, cash flows or the overall strength of our financial profile will be impacted as a result of this accounting change," said Laurence M. Downes, NJR's chairman and chief executive officer.

The change in the accounting treatment of the derivative instruments that did not qualify as cash flow hedges requires that the mark to market gains or losses on the derivative instruments be reflected in the consolidated statements of income for each period rather than recorded as a component of comprehensive income, which is included in "accumulated other comprehensive income" (AOCI), a component of total common stock equity, on NJR's consolidated balance sheet.

Recognizing changes in the fair value of derivative instruments in net income in each period during the existence of the derivative instrument, rather than when the forecasted transaction is settled, will result in quarterly changes to previously reported AOCI, retained earnings, operating income and net income. Over the life of the derivative instruments, however, there is no cumulative change in operating income, net income or total common stock equity. Importantly, total cash flows from operating activities are the same in any accounting period under either accounting treatment. NJR will now recognize the changes in the fair value of these derivative instruments in accounting periods earlier than those in which the related purchases, sales or transportation of the natural gas actually occur.

The decision to delay the filing of the annual report on Form 10-K for the year ended September 30, 2007, will provide time for management and the Audit Committee to complete the company's financial statements for fiscal 2007 and for the company's independent registered public accounting firm to complete its audit of the restatement. NJR is working diligently on this process and intends to complete the restatement of its financial statements as expeditiously as possible, but cannot predict when the audit of the restated financial statements by its independent registered accounting firm will be completed or when the company's fiscal 2007 Form 10-K will be filed with the SEC.

In light of the restatement, investors should no longer rely on the following documents as being in compliance with Generally Accepted Accounting Principles (GAAP): NJR's previously filed financial statements and financial information for the fiscal years ended September 30, 2006, and September 30, 2005, and the reports of its independent registered accounting firm on those financial statements; the quarterly reports for the periods ended June 30, 2007, March 31, 2007, and December 31, 2006; selected financial data for the fiscal years 2002 through 2006; and, NJR's previously announced unaudited results for the fourth quarter and fiscal year ended September 30, 2007. Investors should also no longer rely on NJR's previously issued earnings guidance for fiscal year 2008 of $3.20 to $3.30 per basic share on a GAAP basis.

The company cannot at this time estimate what its earnings per basic share for the year ended September 30, 2007, will ultimately be on a GAAP basis. NJR is in the process of determining the impact on any individual year or quarter. Based upon the changes to its accounting treatment of these derivative instruments, NJR estimates that the results of the restatement will significantly decrease net income for the year ended September 30, 2007, will significantly increase net income for the year ended September 30, 2006 and will significantly decrease net income for the year ended September 30, 2005. Total cash flows from operating activities, however, are the same in any accounting period under either accounting treatment.