NEW JERSEY RESOURCES CORP 10-K

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES NJR’s Common Stock is traded on the New York Stock Exchange under the ticker symbol NJR. As of November 7, 2022, NJR had 74,653 holders of record of its common stock. Dividends are subject to declaration by the Board of Directors. In September 2022, the Board of Directors declared dividends payable October 3, 2022 of $0.39 per share of common stock to shareowners of record on September 26, 2022. We review our dividend policy on a regular basis. Although subject to any contractual or regulatory restrictions or other limitations on the payment of dividends, future dividends will be at the discretion of the Board of Directors and will depend upon, among other factors, earnings, financial condition and other requirements. Performance Graph The performance graph and table below illustrates a five-year comparison of cumulative total returns based on an initial investment of $100 in our common stock, as compared with the S&P 500 Stock Index, the S&P 500 Utilities Industry Index and the customized peer company group listed below, referred to herein as the Peer Group. The Peer Group companies were selected based on similarities to the Company’s business model, size and other growth and business factors. Cumulative Total Return 2017 2018 2019 2020 2021 2022 NJR $100.00 $112.28 $112.86 $70.23 $93.72 $107.90 S&P 500 Utilities $100.00 $102.93 $130.82 $124.32 $138.01 $145.71 S&P 500 $100.00 $117.91 $122.93 $141.55 $184.02 $155.55 Peer Group $100.00 $104.62 $121.14 $92.10 $100.75 $115.19 The 10 companies in the Peer Group are: Atmos Energy Corporation; Avista Corporation; Black Hills Corporation; National Fuel Gas Company; NiSource Inc.; Northwest Natural Holding Company; ONE Gas, Inc.; South Jersey Industries, Inc.; Southwest Gas Corporation; and Spire Inc. This performance graph and accompanying information shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any of the Company’s filings under the Securities Act, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. In 1996, the Board of Directors authorized the Company to implement a share repurchase program, which has been expanded seven times since the inception of the program, authorizing a total of 19.5 million shares of common stock for repurchase. The share repurchase plan allows us to purchase our outstanding shares on the open market or in negotiated transactions, based on market and other conditions. We are not required to purchase any specific number of shares and may discontinue or suspend the program at any time. The share repurchase plan will expire when we have repurchased all shares authorized for repurchase thereunder, unless it is terminated earlier by action of our Board of Directors or additional shares are authorized for repurchase. The following table sets forth NJR’s repurchase activity for the quarter ended September 30, 2022: Period Total Number of Shares (or Units) Purchased Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs 07/01/22 - 07/31/22 — $ — — 1,685,053 08/01/22 - 08/31/22 — $ — — 1,685,053 09/01/22 - 09/30/22 — $ — — 1,685,053 Total — $ — — 1,685,053 ITEM 6. [RESERVED] Page 29 New Jersey Resources Corporation Part II ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Critical Accounting Estimates We prepare our financial statements in accordance with GAAP. Application of these accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingencies during the reporting period. We regularly evaluate our estimates, including those related to the calculation of the fair value of derivative instruments, acquisitions, regulatory assets, income taxes, pension and postemployment benefits other than pensions and contingencies related to environmental matters and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. In the normal course of business, estimated amounts are subsequently adjusted to actual results that may differ from estimates. Regulatory Accounting NJNG and Adelphia Gateway maintain their accounts in accordance with the FERC Uniform System of Accounts and recognize the impact of regulatory decisions on their financial statements. As a result of the ratemaking process, NJNG and Adelphia Gateway are required to apply the accounting principles in ASC 980, Regulated Operations , which differ in certain respects from those applied by unregulated businesses. Specifically, NJNG and Adelphia Gateway record regulatory assets when it is probable that certain operating costs will be recoverable from customers in future periods and record regulatory liabilities associated with probable future obligations to customers. Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment, and the timing and amount of assets to be recovered by rates. For NJNG, the BPU’s regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. Decisions to be made by the BPU in the future will impact the accounting for regulated operations, including decisions about the amount of allowable costs and return on invested capital included in rates and any refunds that may be required. If the BPU indicates that recovery of all or a portion of a regulatory asset is not probable or does not allow for recovery of and a reasonable return on investments in property plant and equipment, a charge to income would be made in the period of such determination. Environmental Costs At the end of each fiscal year, NJNG, with the assistance of an independent consulting firm, updates the environmental review of its MGP sites, including its potential liability for investigation and remedial action. From this review, NJNG estimates expenditures necessary to remediate and monitor these MGP sites. NJNG’s estimate of these liabilities is developed from then-currently available facts, existing technology and current laws and regulations. In accordance with accounting standards for contingencies, NJNG’s policy is to record a liability when it is probable that the cost will be incurred and can be reasonably estimated. NJNG will determine a range of liabilities and will record the most likely amount. If no point within the range is more likely than any other, NJNG will accrue the lower end of the range. Since we believe that recovery of these expenditures, as well as related litigation costs, is possible through the regulatory process, we record a regulatory asset corresponding to the related accrued liability. Accordingly, NJNG records an MGP remediation liability and a corresponding regulatory asset on the Consolidated Balance Sheets, which is based on the most likely amount. The actual costs to be incurred by NJNG are dependent upon several factors, including final determination of remedial action, changing technologies and governmental regulations and the ultimate ability of other responsible parties to pay, as well as the potential impact of any litigation and any insurance recoveries. Previously incurred remediation costs, net of recoveries from customers and insurance proceeds received are included in regulatory assets on the Consolidated Balance Sheets. If there are changes in the regulatory position surrounding these costs, or should actual expenditures vary significantly from estimates in that these costs are disallowed for recovery by the BPU, such costs would be charged to income in the period of such determination. See the Legal Proceedings section in Note 15. Commitments and Contingent Liabilities for more details. Page 30 New Jersey Resources Corporation Part II ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Postemployment Employee Benefits Our costs of providing postemployment employee benefits are dependent upon numerous factors, including actual plan experience and assumptions of future experience. Postemployment employee benefit costs are affected by actual employee demographics including age, compensation levels and employment periods, the level of contributions made to the plans, changes in long-term interest rates and the return on plan assets. Changes made to the provisions of the plans or healthcare legislation may also impact current and future postemployment employee benefit costs. Postemployment employee benefit costs may also be significantly affected by changes in key actuarial assumptions, including anticipated rates of return on plan assets, changes in mortality tables, health care cost trends and discount rates used in determining the PBO. In determining the PBO and cost amounts, assumptions can change from period to period and could result in material changes to net postemployment employee benefit periodic costs and the related liability recognized. The remeasurement of plan assets and obligations for a significant event should occur as of the date of the significant event. We may use a practical expedient to remeasure the plan assets and obligations as of the nearest calendar month-end date. When performing interim remeasurements, we obtain new asset values, roll forward the obligation to reflect population changes and review the appropriateness of all assumptions, regardless of the reason for performing the interim remeasurement. Our postemployment employee benefit plan assets consist primarily of U.S. equity securities, international equity securities, fixed-income investments and other assets, with a targeted allocation of 34 percent, 17 percent, 33 percent and 16 percent, respectively. Fluctuations in actual market returns, as well as changes in interest rates, may result in increased or decreased postemployment employee benefit costs in future periods. Postemployment employee benefit expenses are included in O&M and other income, net on the Consolidated Statements of Operations. The following is a summary of a sensitivity analysis for each actuarial assumption as of and for the fiscal year ended September 30, 2022: Pension Plans Actuarial Assumptions Increase/ (Decrease) Estimated Increase/(Decrease) on PBO (Thousands) Estimated Increase/(Decrease) to Expense (Thousands) Discount rate 1.00 % $ (30,196) $ (4,599) Discount rate (1.00) % $ 36,650 $ 5,489 Rate of return on plan assets 1.00 % n/a $ (3,153) Rate of return on plan assets (1.00) % n/a $ 3,153 Other Postemployment Benefits Actuarial Assumptions Increase/ (Decrease) Estimated Increase/(Decrease) on PBO (Thousands) Estimated Increase/(Decrease) to Expense (Thousands) Discount rate 1.00 % $ (21,498) $ (3,475) Discount rate (1.00) % $ 26,748 $ 4,265 Rate of return on plan assets 1.00 % n/a $ (1,123) Rate of return on plan assets (1.00) % n/a $ 1,122 Actuarial Assumptions Increase/ (Decrease) Estimated Increase/(Decrease) on PBO (Thousands) Estimated Increase/(Decrease) to Expense (Thousands) Health care cost trend rate 1.00 % $ 26,710 $ 6,992 Health care cost trend rate (1.00) % $ (21,853) $ (5,537) Acquisitions The Company follows the guidance in ASC 805, Business Combinations, for determining the appropriate accounting treatment for acquisitions. ASU No. 2017-01, Clarifying the Definition of a Business , provides an initial fair value screen to determine if substantially all of the fair value of the assets acquired is concentrated in a single asset or group of similar assets. If the initial screening test is not met, the set is considered a business based on whether there are inputs and substantive processes in place. Based on the results of this analysis and conclusion on an acquisition’s classification of a business combination or an asset acquisition, the accounting treatment is derived. Page 31 New Jersey Resources Corporation Part II