**UNITED STATES SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

 

# FORM 10-Q

(Mark One)      

       X            QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**For the quarterly periodended June 30, 2003**

OR

 

                 TRANSITION REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_________________ to______________________

Commission FileNumber     001-16385

##  

**NUI CORPORATION**(Exact name of registrant as specified in its charter)

 
| **New Jersey**(State of incorporation) | **22-3708029**(IRS employer identification no.) |
|----------------------------------------|-------------------------------------------------|

 

**550 Route 202-206, PO Box 760, Bedminster, NewJersey 07921-0760**(Address of principal executive offices, including zipcode)

**(908) 781-0500**(Registrant's telephone number, including area code)

Indicateby check mark whether the registrant: (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.        

Yes   X        No 

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of the Exchange Act):

Yes   X       No 

 

The number of shares outstanding of each of theregistrant's classes of common stock, as of July 31, 2003: Common Stock,No Par Value: 16,021,722 shares outstanding.

###### Item1. Financial Statements

**NUI Corporation andSubsidiariesConsolidatedStatements of Income (Unaudited)(Dollars inthousands, except per share amounts)**
| **                                                                                    ** | **Three Months Ended**

**June 30,**                             | **Nine Months Ended**

**June 30,**                              |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------|------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | **2003**                                                         | **2002**                                                         | **2003** | **2002** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                  | **(Restated- see Note 2)**                                       |  | **(Restated- see Note 2)** |
| **Operating Margins**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                  |                                                                  |  |  |
|    Operating revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | $130,537                                                         | $96,336                                                          | $549,612 | $428,177 |
|    Less - Purchased gas and fuel                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 84,902                                                           | 56,927                                                           | 348,698 | 252,701 |
|               Cost of sales and services                                                                                                                                                                                                                                                                                                                                                                                                                    | 2,475                                                            | 2,200                                                            | 8,082 | 6,748 |
|               Energy taxes                                                                                                                                                                                                                                                                                                                                                                                                                                  |    2,426                                               |    2,006                                               |    11,209 |      9,101 |
|     Total operating margins                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  40,734                                                     |  35,203                                                     |  181,623 |  159,627 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                             |                                                             |   |   |
| **Other Operating  Expenses**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                             |                                                             |   |   |
|    Operations and maintenance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 32,270                                                           | 25,493                                                           | 98,274 | 78,246 |
|    Restructuring costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | ---                                                              | ---                                                              | --- | 1,203 |
|    Depreciation and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 7,524                                                            | 8,456                                                            | 24,577 | 24,028 |
|    Taxes, other than income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |      879                                     |   2,112                                                     |     5,330 |     5,905 |
|     Total other operating expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | 40,673                                                           | 36,061                                                           | 128,181 | 109,382 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                             |                                                             |   |   |
| **Operating Income (Loss)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 61                                                               | (858)                                                            | 53,442 | 50,245 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                  |                                                                  |  |  |
| **Other Income and Expense,  net**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |      185                                     |   (350)                                                     |      813 |        140 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                  |                                                                  |  |  |
| **Income (Loss) from  Continuing Operations before Interest and Taxes**                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 246                                                              | (1,208)                                                          | 54,255 | 50,385 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                             |                                                             |   |   |
| ** **Interest expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   5,955                                                     |  4,866                                                      |   16,124 |   16,031 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                             |                                                             |   |   |
| I**ncome (Loss)  from Continuing Operations Before Income Taxes**                                                                                                                                                                                                                                                                                                                                                                                                                                                            | (5,709)                                                          | (6,074)                                                          | 38,131 | 34,354 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                             |                                                             |   |   |
|   **Income taxes**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   (1,883)                                                   |   (2,530)                                                   |   16,118 |   14,652 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                             |                                                             |   |   |
| **Income (loss)  from Continuing Operations Before Effect of Change in Accounting**                                                                                                                                                                                                                                                                                                                                                                                                                                          |  

  (3,826)                                           |  

  (3,544)                                           |  

  22,013 |  

  19,702 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                             |                                                             |   |   |
| **Discontinued Operations**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                             |                                                             |   |   |
|    Loss from discontinued  operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |     (26,007)                                      | (12,051)                                                         |     (27,119) | (14,030) |
|    Income tax benefit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |    (4,763)                                             |    (4,260)                                             |     (5,213) |   (5,077) |
| **Loss from Discontinued  Operations**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  (21,244)                                                   |    (7,791)                                             |   (21,906) |   (8,953) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                             |                                                             |   |   |
| **Income (Loss) before Effect  of Change in Accounting**                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | (25,070)                                                         | (11,335)                                                         | 107 | 10,749 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                             |                                                             |   |   |
|   Effect of change in accounting (net of tax    benefit of          $4,080  in 2003 and $9,500 in 2002)                                                                                                                                                                                                                                                                                                                                                                                   |            --- |            --- |     (5,869) |  (17,642) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                             |                                                             |   |   |
| **Net Loss**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | $(25,070)                                                        | $(11,335)                                                        | $ (5,762) | $ (6,893) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                             |                                                             |   |   |
| **Income (Loss) from  Continuing Operations Per Share of Common Stock**                                                                                                                                                                                                                                                                                                                                                                                                                                                 | $    (0.24)                                       | $   (0.23)                                             | $    1.37 | $   1.35 |
| **Net Loss Per Share of  Common Stock**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | $    (1.57)                                       | $   (0.72)                                             | $     (.36) | $  (0.47) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                             |                                                             |   |   |
| **Dividends Per  Share of Common Stock**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | $    0.245                                        | $    0.245                                        | $   0.735 | $   0.735 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                             |                                                             |   |   |
| ** Weighted Average Number of Shares of Common  Stock Outstanding**                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 16,021,477                                                       | 15,758,326                                                       | 16,039,573 | 14,632,307 |

*See the notes to the consolidated financialstatements.*

**NUI Corporationand SubsidiariesConsolidated Balance Sheets(Dollars in thousands)**

** **
|                                                                                                                                                    | **June 30,  2003(Unaudited)**                                                                                                                                                                     | **September 30,  2002(*)            ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------|
| **ASSETS**                                                                                                                                         |                                                                                                                                                                                                   |                                                                                               |
| **Current  Assets**                                                                                                                                |                                                                                                                                                                                                   |                                                                                                    |
|    Cash and  cash equivalents                                                                                                            | $26,796                                                                                                                                                                                           | $4,247                                                                                             |
|    Accounts  receivable (less allowance for doubtful accounts         of $8,704  and $4,237, respectively) |                                 90,473 | 71,956                                                                                             |
|    Accounts  receivable from affiliated companies                                                                                        | 12,752                                                                                                                                                                                            | ---                                                                                                |
|    Fuel  inventories, at average cost                                                                                                    | 35,162                                                                                                                                                                                            | 37,390                                                                                             |
|     Unrecovered purchased gas costs                                                                                                      | 19,812                                                                                                                                                                                            | 26,756                                                                                             |
|    Derivative assets                                                                                                                     | 21,558                                                                                                                                                                                            | 22,540                                                                                             |
|    Federal income tax  receivable                                                                                                        | ---                                                                                                                                                                                               | 7,819                                                                                              |
|     Prepayments and other                                                                                                                |      38,446                                                                                                                                                                   |       33,262                                                              |
|                                                                                                                                               |    244,999                                                                                                                                                                              |     203,970                                                                         |
| **Property,  Plant and Equipment**                                                                                                                 |                                                                                                                                                                                                   |                                                                                                    |
|    Property,  plant and equipment, at original cost                                                                                      | 940,494                                                                                                                                                                                           | 934,066                                                                                            |
|     Accumulated depreciation and amortization                                                                                            | (318,285)                                                                                                                                                                                         | (301,861)                                                                                          |
|     Unamortized plant acquisition adjustments, net                                                                                       |       13,639                                                                                                                                                             |        14,484                                                        |
|                                                                                                                                                    |     635,848                                                                                                                                                                        |      646,689                                                                   |
|                                                                                                                                                    |                                                                                                                                                                                                   |                                                                                                    |
| **Funds for  Construction Held by Trustee**                                                                                                        |   2,053                                                                                                                                                                                      | 3,884                                                                                              |
| **Investment in  Saltville Storage, LLC**                                                                                                          | 25,501                                                                                                                                                                                            | ---                                                                                                |
| **Other  Investments**                                                                                                                             |     214                                                                                                                                                                            | 117                                                                                                |
| **Assets  Held For Sale**                                                                                                                          | 18,227                                                                                                                                                                                            | 38,359                                                                                             |
|                                                                                                                                                    |                                                                                                                                                                                                   |                                                                                                    |
| **Other Assets**                                                                                                                                   |                                                                                                                                                                                                   |                                                                                                    |
|     Regulatory assets                                                                                                                    | 59,335                                                                                                                                                                                            | 75,845                                                                                             |
|    Long-term portion of  derivative assets                                                                                               | 6,721                                                                                                                                                                                             | 7,901                                                                                              |
|    Goodwill                                                                                                                              | 8,056                                                                                                                                                                                             | 19,126                                                                                             |
|    Other  assets                                                                                                                         |        36,624                                                                                                                                                       |        45,401                                                        |
|                                                                                                                                                    |      110,736                                                                                                                                                                  |      148,273                                                                   |
|                                                                                                                                                    | $1,037,578                                                                                                                                                                                        | $1,041,292                                                                                         |
|                                                                                                                                                    |                                                                                                                                                                                                   |                                                                                                    |
| **CAPITALIZATION  AND LIABILITIES**                                                                                                                |                                                                                                                                                                                                   |                                                                                                    |
| **Current  Liabilities**                                                                                                                           |                                                                                                                                                                                                   |                                                                                                    |
|    Notes  payable to banks                                                                                                               | $149,600                                                                                                                                                                                          | $128,690                                                                                           |
|    Notes  payable                                                                                                                        | 3,000                                                                                                                                                                                             | 3,000                                                                                              |
|    Current  portion of long term debt and capital lease          obligations                          | 2,249                                                                                                                                                                                             | 2,351                                                                                              |
|    Accounts  payable, customer deposits and accrued          liabilities                              | 106,935                                                                                                                                                                                           | 120,858                                                                                            |
|    Derivative liabilities                                                                                                                | ---                                                                                                                                                                                               | 852                                                                                                |
|    Federal  income and other taxes                                                                                                       | 22,928                                                                                                                                                                                            | 7,912                                                                                              |
|    Current portion of deferred Federal income  taxes                                                                                     |          6,439                                                                                                                                            |       18,738                                                              |
|                                                                                                                                                    |      291,151                                                                                                                                                                  |     282,401                                                                         |
| **Other Liabilities**                                                                                                                              |                                                                                                                                                                                                   |                                                                                                    |
|    Capital  lease obligations                                                                                                            | 10,229                                                                                                                                                                                            | 10,743                                                                                             |
|    Deferred  federal income taxes                                                                                                        | 56,776                                                                                                                                                                                            | 63,149                                                                                             |
|     Liabilities held for sale                                                                                                            | 5,426                                                                                                                                                                                             | 7,932                                                                                              |
|     Unamortized investment tax credits                                                                                                   | 3,550                                                                                                                                                                                             | 3,948                                                                                              |
|     Environmental remediation reserve                                                                                                    | 33,496                                                                                                                                                                                            | 33,852                                                                                             |
|     Regulatory and other liabilities                                                                                                     |       55,054                                                                                                                                                             |        41,998                                                        |
|                                                                                                                                                    |     164,531                                                                                                                                                                        |      161,622                                                                   |
| **Capitalization**                                                                                                                                 |                                                                                                                                                                                                   |                                                                                                    |
|    Common  shareholders' equity                                                                                                          | 272,852                                                                                                                                                                                           | 288,252                                                                                            |
|     Long-term debt                                                                                                                       |      309,044                                                                                                                                                                  |      309,017                                                                   |
|                                                                                                                                                    |      581,896                                                                                                                                                                  |      597,269                                                                   |
|                                                                                                                                                    | $1,037,578                                                                                                                                                                                        | $1,041,292                                                                                         |

**Derived from audited financial statements.See the notes to the consolidated financial statements.*

 

**NUI Corporation andSubsidiariesConsolidated Statements ofCash Flows (Unaudited)(Dollars in thousands)**

** **
|                                                                                                                                                                                      | **Nine Months EndedJune  30,**     |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------|
|                                                                                                                                                                                      | **2003**                           | **2002** |
|                                                                                                                                                                                      |                                    | **(Restated-  see Note 2)** |
| **Operating Activities**                                                                                                                                                             |                                    |  |
| Net  loss                                                                                                                                                                            | $(5,762)                           | $(6,893) |
| Adjustments  to reconcile net income to net cash provided by                                                                                                                         |                                    |  |
|     operating activities:                                                                                                                                             |                                    |  |
|           Depreciation and amortization                                                                                                 | 24,577                             | 24,028 |
|           Deferred Federal income taxes                                                                                                 | (18,672)                           | (15,908) |
|           Amortization of deferred  investment tax credits                                                                              | (398)                              | (329) |
|           Non-cash adjustment to implement  new accounting              standard | 9,949                              | 27,142 |
|           Derivative assets and liabilities                                                                                             | 3,084                              | 1,207 |
|           Regulatory assets and liabilities                                                                                             | 16,432                             | 5,152 |
|           Impairment charges                                                                                                            | 24,185                             | 3,485 |
|           Other                                                                                                                         | 6,247                              | 837 |
|           Effect of changes in:                                                                                                         |                                    |  |
|              Accounts receivable, net                                                                                    | (22,902)                           | (21,378) |
|              Accounts receivable from  affiliates                                                                        | (12,752)                           | --- |
|              Fuel inventories                                                                                            | 2,228                              | 35,676 |
|              Accounts payable, deposits and  accruals                                                                    | (13,923)                           | (22,946) |
|              Under-recovered purchased gas  costs                                                                        | 6,711                              | (3,410) |
|              Prepaids and other                                                                                          | (5,184)                            | 18,659 |
|              Federal and state income taxes                                                                              | 22,835                             | 19,580 |
|              Other                                                                                                       |   (5,449)                     |   (3,062) |
|      Net cash provided by operating  activities                                                                                                                  |  31,206                       |  61,840 |
|                                                                                                                                                                                      |                                    |  |
| **Financing Activities**                                                                                                                                                             |                                    |  |
| Proceeds  from sales of common stock                                                                                                                                                 | 633                                | 36,942 |
| Dividends  to shareholders                                                                                                                                                           | (11,801)                           | (10,722) |
| Funds  for construction held by trustee, net                                                                                                                                         | 1,852                              | 8,866 |
| Principal  payments under capital lease obligations                                                                                                                                  | (1,941)                            | (1,372) |
| Net  short-term borrowings (repayments)                                                                                                                                              |  20,910                       | (57,199) |
|   Net cash provided by (used in) financing  activities                                                                                                                          |    9,653                 | (23,485) |
|                                                                                                                                                                                      |                                    |  |
| **Investing Activities**                                                                                                                                                             |                                    |  |
| Cash  expenditures for property, plant and equipment                                                                                                                                 | (27,114)                           | (40,163) |
| Investment  in Saltville Storage, LLC                                                                                                                                                | (9,180)                            | --- |
| Acquisitions,  net of cash acquired                                                                                                                                                  | ---                                | (666) |
| Changes  in assets and liabilities held for sale                                                                                                                                     | 17,626                             | 2,136 |
| Other                                                                                                                                                                                |       358 |    1,096 |
|   Net cash used in investing activities                                                                                                                                         | (18,310)                           | (37,597) |
|                                                                                                                                                                                      |                                    |  |
| Net  increase in cash and cash equivalents                                                                                                                                           | $22,549                            | $     758 |
|                                                                                                                                                                                      |                                    |  |
| **Cash and Cash Equivalents**                                                                                                                                                        |                                    |  |
| At  beginning of period                                                                                                                                                              | $  4,247                      | $  2,601 |
| At end  of period                                                                                                                                                                    | $26,796                            | $  3,359 |
|                                                                                                                                                                                      |                                    |  |
| **Supplemental Disclosures of Cash Flows**                                                                                                                                           |                                    |  |
| Income  taxes paid (refunds received), net                                                                                                                                           | $     508      | $ (3,735) |
| Interest  paid                                                                                                                                                                       | $16,394                            | $16,862 |

*See the notes to the consolidated financialstatements.*

 

**NUI Corporation and SubsidiariesNotes to the Consolidated Financial Statements**

**1.     Basis of Presentation**

The consolidated financial statements include alloperating divisions and subsidiaries of NUI Corporation (collectively referredto as "NUI," the "company," "we," "our," or "us").  NUI is a diversified energy company that is primarily engaged inthe sale and distribution of natural gas, wholesale energy portfolio and riskmanagement, retail energy sales and telecommunications.  NUI's local utility operations are carriedout by NUI's wholly-owned subsidiary, NUI Utilities, Inc. (NUI Utilities) and asubsidiary of Virginia Gas Company (VGC), and serve more than 367,000 customersin four states along the eastern seaboard of the United States. NUI Utilitiesis comprised of Elizabethtown Gas Company (New Jersey), City Gas Company ofFlorida, and Elkton Gas (Maryland). The company sold its North Carolina Gas(NC) utility operation during September 2002, and sold its Valley Cities Gasand Waverly Gas (VCW) utility operations during November 2002. VGC is alsoengaged in other activities, such as pipeline operation and natural gasstorage. In addition, the company is also engaged in several non-regulatedbusinesses including NUI Energy, Inc. (NUI Energy), an energy retailer; NUIEnergy Brokers, Inc. (NUI Energy Brokers), a wholesale energy portfolio andrisk management subsidiary; NUI Environmental Group, Inc. (NUI Environmental),an environmental project development subsidiary; Utility Business Services,Inc., (UBS), a geospatial, billing and customer information systems andservices subsidiary; NUI Telecom, Inc. (NUI Telecom), a non-facilities-basedtelecommunications services subsidiary and TIC Enterprises, LLC (TIC), a salesoutsourcing subsidiary. All intercompany accounts and transactions have beeneliminated in consolidation. 

As discussed in Note 7, the company has classifiedthe results of NC, VCW, the billing services operations of UBS, NUIEnvironmental, NUI Telecom and TIC as Discontinued Operations in theConsolidated Statements of Income, as applicable. The assets and liabilities ofthese entities have been classified as Assets Held for Sale and LiabilitiesHeld for Sale in the Consolidated Balance Sheets, as applicable.

The consolidated financial statements contained hereinhave been prepared without audit in accordance with the rules and regulationsof the Securities and Exchange Commission and reflect all adjustments which, inthe opinion of management, are necessary for a fair statement of the resultsfor interim periods. With the exception of the adjustment to record the effectof a change in accounting discussed in Note 13, all adjustments made were of anormal recurring nature. The results of the three and nine-month periods endedJune 30, 2002 have been restated (see Note 2). The preparation of financialstatements in accordance with generally accepted accounting principles (GAAP)requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities, the disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. Actual results could differfrom those estimates. The consolidated financial statements should be read inconjunction with the consolidated financial statements and the notes theretothat are included in the company's Annual Report on Form 10-K for the fiscalyear ended September 30, 2002. 

NUI is a holding company and is exempt from registrationunder the Public Utility Holding Company Act of 1935. NUI Utilities is subjectto regulation as an operating utility by the public utility commissions of thestates in which it operates. Certain subsidiaries of VGC are regulated by theVirginia State Corporation Commission. Because of the seasonal nature of gasutility operations, the results for interim periods are not necessarilyindicative of the company's results for an entire year.

**2.     Restatement of Prior Year Results**

NUIhas restated its fiscal 2000 and 2001 consolidated financial statements, aswell as quarterly results for the first three quarters of fiscal 2002. Suchrestatements were reported in the company's Annual Report on Form 10-K for thefiscal year ended September 30, 2002. The consolidated financial statements forthe three and nine month periods ended June 30, 2002 contained herein have beenupdated to reflect these restatements, as well as certain reclassificationsdescribed below. The restatement adjustments were required either to reflectthe use of appropriate accounting methods or to reflect the correct recordingof account balances. The following tables summarize the impact of theseadjustments on the company's consolidated financial statements, as restated.Amounts contained in the "Results As Reclassified for EITF 02-03 and SFAS 144"include the amounts as originally reported and the required reclassificationsdue to the adoption of SFAS 144 (see Note 7) and the netting provision of EITF02-03 (see Note 13).

NUI Corporationand Subsidiaries

#### **Consolidated Statement of Income(Dollarsin thousands, except per share amounts)**

|                                                                                               | **Three  months ended June 30,  2002****Results  as Reclassified  for EITF 02-03and SFAS 144** | **           Adjust-  ments** | **Legend** | ** **

** Three  months ended June 30, 2002 As Restated**                            |
|-----------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------|
| **Operating Margins**                                                                         |                                                                                                |                                                                            |            |                                                                                                     |
|   Operating revenues                                                                     | $96,429                                                                                        | $(93)                                                                      | a          | $96,336                                                                                             |
|   Less- Purchased gas and fuel                                                           |  55,955                                                                                   | 972                                                                        | b, c       |  56,927                                                                                        |
|             Cost of sales and services |               2,200                | ---                                                                        |       |               2,200                     |
|             Energy taxes               |    2,006                                                                             |         ---                             |       |    2,006                                                                                  |
|       Total operating margins                                        |  36,268                                                                                   |  (1,065)                                                              |       |  35,203                                                                                        |
|                                                                                               |                                                                                           |                                                                       |       |                                                                                                |
| **Other Operating  Expenses**                                                                 |                                                                                           |                                                                       |       |                                                                                                |
|   Operations and maintenance                                                             | 25,175                                                                                         | 318                                                                        | d, e, f    | 25,493                                                                                              |
|   Depreciation and amortization                                                          | 8,456                                                                                          | ---                                                                        |       | 8,456                                                                                               |
|   Taxes, other than income taxes                                                         |   2,112                                                                                   |        ---                                   |       |   2,112                                                                                        |
|      Total operating expenses                                             | 35,743                                                                                         |      318                                               |       | 36,061                                                                                              |
|                                                                                               |                                                                                           |                                                                       |       |                                                                                                |
| **Operating Income (Loss)**                                                                   |       525                                                             | (1,383)                                                                    |       |   (858)                                                                                        |
|                                                                                               |                                                                                           |                                                                       |       |                                                                                                |
|  Other Income and Expense, net                                                           |    (350)                                                                             |         --                              |       |     (350)                                                                            |
|                                                                                               |                                                                                           |                                                                       |       |                                                                                                |
| **Income  (Loss) from Continuing Operations before Interest and Taxes**                       | 175                                                                                            | (1,383)                                                                    |       | (1,208)                                                                                             |
|                                                                                               |                                                                                           |                                                                       |       |                                                                                                |
|   Interest expense                                                                       |   4,866                                                                                   |        ---                                   |       |  4,866                                                                                         |
|                                                                                               |                                                                                           |                                                                       |       |                                                                                                |
| **Loss from Continuing  Operations before Income Taxes**                                      | (4,691)                                                                                        | (1,383)                                                                    |       | (6,074)                                                                                             |
|                                                                                               |                                                                                                |                                                                       |       |                                                                                                |
|   Income tax benefit                                                                     |   (1,963)                                                                                 |     (567)                                                   | k          | (2,530)                                                                                             |
|                                                                                               |                                                                                           |                                                                       |       |                                                                                                |
| **Loss from Continuing Operations**                                                           |  (2,728)                                                                                  | (816)                                                                      |       | (3,544)                                                                                             |
|                                                                                               |                                                                                           |                                                                       |       |                                                                                                |
| **Discontinued Operations**                                                                   |                                                                                           |                                                                       |       |                                                                                                |
| **  **Loss from discontinued  operations                                            | (11,834)                                                                                       | (217)                                                                      |  g, j | (12,051)                                                                                            |
|    Income tax benefit                                                               |     (4,171)                                                                     |      (89)                                              | k          |  (4,260)                                                                                       |
| **Loss from Discontinued Operations**                                                         |     (7,663)                                                                     |      (128)                                             |       | (7,791)                                                                                             |
|                                                                                               |                                                                                           |                                                                       |       |                                                                                                |
| **Net Loss**                                                                                  | $(10,391)                                                                                      | $(944)                                                                     |       | $(11,335)                                                                                           |
| **Net Loss Per Share of Common Stock**                                                        |            $     (0.66)       |        $  (0.06)                        |            |              $    (0.72) |
|                                                                                               |                                                                                                |                                                                            |            |                                                                                                     |

SeeLegend descriptions that follow.

**NUI Corporationand SubsidiariesConsolidated Statement of Income(Dollarsin thousands, except per share amounts)**

|                                                                                               | **Nine  months ended June 30,  2002****Results  as Reclassified  for EITF 02-03and SFAS 144**                              | **           Adjust-  ments** | **Legend**    | **Nine  months ended June 30, 2002 As Restated**                                   |
|-----------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------|---------------|-----------------------------------------------------------------------------------------|
| **Operating Margins**                                                                         |                                                                                                                            |                                                                            |               |                                                                                         |
|   Operating revenues                                                                     | $428,313                                                                                                                   | $(136)                                                                     | a             | $428,177                                                                                |
|   Less- Purchased gas and fuel                                                           |  251,879                                                                                                              | 822                                                                        | b, c          |  252,701                                                                           |
|             Cost of sales and services |               6,748                                            | ---                                                                        |          |               6,748         |
|             Energy taxes               |     9,101                                                                                                   |      -   --                                  |          |     9,101                                                                |
|       Total operating margins                                        |  160,585                                                                                                              |    (958)                                                         |          |  159,627                                                                           |
|                                                                                               |                                                                                                                       |                                                                       |          |                                                                                    |
| **Other Operating  Expenses**                                                                 |                                                                                                                       |                                                                       |          |                                                                                    |
|   Operations and maintenance                                                             | 76,870                                                                                                                     | 1,376                                                                      | d, e, f       | 78,246                                                                                  |
|   Restructuring charges                                                                  | 1,203                                                                                                                      |                                                                       |          | 1,203                                                                                   |
|   Depreciation and amortization                                                          | 24,028                                                                                                                     | ---                                                                        |          | 24,028                                                                                  |
|   Taxes, other than income taxes                                                         |   5,905                                                                                                               |        ---                                   |          |     5,905                                                                |
|      Total operating expenses                                             | 108,006                                                                                                                    |   1,376                                                               |          | 109,382                                                                                 |
|                                                                                               |                                                                                                                       |                                                                       |          |                                                                                    |
| **Operating Income**                                                                          |  52,579                                                                                                               | (2,334)                                                                    |          |   50,245                                                                           |
|                                                                                               |                                                                                                                       |                                                                       |          |                                                                                    |
|  Other Income and Expense, net                                                           |      140                                                                                               |         --                              |          |     140                                                                  |
|                                                                                               |                                                                                                                       |                                                                       |          |                                                                                    |
| **Income  from Continuing Operations before Interest and Taxes**                              | 52,719                                                                                                                     | (2,334)                                                                    |          | 50,385                                                                                  |
|                                                                                               |                                                                                                                       |                                                                       |          |                                                                                    |
|   Interest expense                                                                       |   16,031                                                                                                              |       ---                                         |          |  16,031                                                                            |
|                                                                                               |                                                                                                                       |                                                                       |          |                                                                                    |
| **Income from Continuing Operations before Income  Taxes**                                    |                      36,688 |         (2,334)                         |          |           34,354                           |
|                                                                                               |                                                                                                                            |                                                                       |          |                                                                                    |
|   Income taxes                                                                           |   14,999                                                                                                              |     (347)                                                   | k             | 14,652                                                                                  |
|                                                                                               |                                                                                                                       |                                                                       |          |                                                                                    |
| **Income from Continuing Operations before Effect of Change in  Accounting**                  |         21,689                                                                          |  

(1,987)                                                            |          | 19,702                                                                                  |
|                                                                                               |                                                                                                                       |                                                                       |          |                                                                                    |
| **Discontinued Operations**                                                                   |                                                                                                                       |                                                                       |          |                                                                                    |
| **  **Loss from discontinued  operations                                            | (13,542)                                                                                                                   | (488)                                                                      |  g, h, j | (14,030)                                                                                |
|    Income tax benefit                                                               |     (4,835)                                                                                                 |      (242)                                             | k             |  (5,077)                                                                           |
| **Loss from Discontinued Operations**                                                         |  (8,707)                                                                                                              |      (246)                                             |          | (8,953)                                                                                 |
|                                                                                               |                                                                                                                       |                                                                       |          |                                                                                    |
| **Income before Effect of  Change in Accounting**                                             | 12,982                                                                                                                     | (2,233)                                                                    |          | 10,749                                                                                  |
|                                                                                               |                                                                                                                       |                                                                       |          |                                                                                    |
| **Effect of Change in  Accounting**                                                           | (21,359)                                                                                                                   |   3,717                                                               | i             | (17,642)                                                                                |
|                                                                                               |                                                                                                                       |                                                                       |          |                                                                                    |
| **Net Loss**                                                                                  | $(8,377)                                                                                                                   | $1,484                                                                     |          | $ (6,893)                                                                               |
| **Net Loss Per Share of Common Stock**                                                        |            $   (0.57)                                               |         $  0.10                    |               |             $   (0.47) |
|                                                                                               |                                                                                                                            |                                                                            |               |                                                                                         |

SeeLegend descriptions below.

Restatement Adjustment Legend (dollars inthousands): 

a.     Recorded an adjustment to revenues of $19, $24 and $93 in thefirst, second and third quarters, respectively, in order to adjust theunrecorded gas costs balance to equal the underlying gas costs detail.

b.      Recordedan adjustment to purchased gas costs of $64, $86, and $53 in the first, secondand third quarters to record changes to mark-to-market transactions recorded byNUI Energy Solutions.

c.       Recordedan adjustment of $1,025 in the third quarter reversing a purchased gas costtransaction previously recorded by NUI Energy.

d.     Recorded an adjustment of $118 in each of the first threequarters to record rental expense for an operating lease on a straight-linebasis. Previously, the company had recognized rent expense as paid on anoperating lease.

e.     Recorded an adjustment to the pension credit of $349, $394 and$(1) in the first, second and third quarters to adjust the pension credit asdetermined by the company's actuaries.

f.      Recorded an adjustment to expense certain previously deferredstart-up costs related to various business projects of  $(25), $104, and $201 in the first, secondand third quarters.

g.     Recorded an adjustment to expense certain costs that hadpreviously been deferred related to pending utility asset sales of  $(191), $(49), and $(47) in the first,second and third quarters.

h.     Recorded an adjustment to revenue of $686 in the first quarter toappropriately recognize revenue on certain TIC equipment sales, which werepreviously recognized prior to the completion of required installationobligations.

i.      Recorded an adjustment to the cumulative effect of a change inaccounting for goodwill of $5,718 (net of taxes of $2,001) in the first quarteras a result of changes to TIC's goodwill recorded in fiscal 2001.

j.      Recorded an adjustment to expense previously deferreddevelopment costs related to NUI Environmental projects of $117, $1,080, and$264 in the first, second and third quarters.

k.     Represents the income tax effects of all adjustments
```
 
```

**3.     Common Shareholders' Equity**

The components of common shareholders' equity were asfollows (dollars in thousands):
| ** **                           | **June 30,  2003** | **September 30,  2002** |
|--------------------------------------|--------------------|-------------------------|
|                                      |                    |                         |
| Common stock, no par value           | $287,994           | $286,783                |
| Paid in capital                      | 70                 | --                      |
| Shares held in treasury              | (5,315)            | (4,384)                 |
| Retained earnings (deficit)          | (5,638)            | 11,925                  |
| Unearned employee compensation       | (3,242)            | (4,949)                 |
| Accumulated other comprehensive loss | (1,017)            | (1,123)                 |
| Total  common shareholders' equity   | $272,852           | $288,252                |

**4.      ****Sale of NUIEnergy**

On May 23, 2003,the company sold certain contracts of its NUI Energy subsidiary to Houston EnergyServices Company LLC (HESCO). The sale included more than 3,000 customeraccounts in New Jersey, Florida and North Carolina. In conjunction with thesale of these accounts, the company paid approximately $3.5 million to HESCO torelieve all future liabilities associated with the gas supply contracts assumedby HESCO. NUI Energy recorded this amount as a reduction of operating marginsduring the three months ended June 30, 2003. As a result of the sale of theseassets, the company realized a gain of approximately $5.3 million associatedwith closing the financial hedged positions associated with the forwardphysical sales contracts related to exiting the retail energy business. Thisgain was part of the unrealized gains recorded during the second quarter offiscal 2003 by NUI Energy Brokers.

**5.     Goodwill**

The excess of the cost overthe fair value of net assets of acquired businesses is recorded as goodwill. OnOctober 1, 2001, the company adoptedStatementof Financial Accounting Standards No. 142, "Goodwill and Intangible Assets"(SFAS 142). The carrying value of goodwill for each of the company'ssubsidiaries is no longer subject to amortization, but must be tested forimpairment annually or earlier under certain circumstances.  DuringApril 2003, the company paid a post-closing adjustment of approximately $3.8million to complete its acquisition of Telcorp, Ltd. During June 2003, thecompany recorded a write-down of approximately $15.0 million related to thecarrying values of the goodwill for NUI Telecom and TIC in conjunction with thecompany's decision to sell NUI Telecom. The fair value of the goodwill of NUITelecom and TIC was determined using a weighted average discounted cash flowmodel based on the operations of the company's telecommunications businesses.

The changes in the carryingamount of goodwill (net of amortization) for the nine months ended June 30,2003, are as follows (in thousands):
|                                   | **NUI Telecom**                                              | **NUIVirginia Gas**                | **TIC  Enterprises**                                                     | **Total**                            |
|-----------------------------------|--------------------------------------------------------------|------------------------------------|--------------------------------------------------------------------------|--------------------------------------|
| Balance  as of September 30, 2002 | $7,585                                                       | $8,056                             | $3,485                                                                   | $19,126                              |
| Additions  to goodwill            |      3,971                |       --- |       ---                                       |       3,971 |
| Write-offs                        | (11,556)                                                     |       --- |   (3,485)                                                           | (15,041)                             |
| Balance  as of June 30, 2003      |     $       --- | *   *$8,056         |     $        ---  |     $ 8,056           |

Thefollowing table sets forth the effect of SFAS 142 for the three and nine-monthperiods ended June 30 (in thousands, except per share amounts):

|  | **Three Months Ended** | **Nine Months Ended** |
|--|------------------------|-----------------------|
|  | **June 30,**           | **June 30,**          |
|  | **2003**               | **2002***             | **2003** | **2002*** |  
  Reported net loss

  $(25,070)

  $(11,335)

  $(5,762)

  $(6,893)

 
Add back: Transitional impairment loss (net      of tax)

           ---

          ---

        ---

  17,642

 
Net income (loss)

$(25,070)

$(11,335)

$(5,762)

$10,749

 
 

 

 

 

 
**Basic Earnings per Share:**

 

 

 

 

 
Reported net loss

       $(1.57)

    $(0.72)

    $(0.36)

  $(0.47)

 
Add back: Transitional impairment loss (net      of tax)

           ---

           ---

            ---

     1.21

 
Net income (loss)

$(1.57)

$(0.72)

$(0.36)

    $0.74

 
 

 

 

 

 
**Diluted Earnings per  Share:**

 

 

 

 

 
Reported net loss

       $(1.57)

    $(0.72)

   $(0.36)

  $(0.47)

 
Add back: Transitional impairment loss (net        of tax)

        ---

        ---

        ---

    1.20

 
Net income (loss)

$(1.57)

$(0.72)

$(0.36)

   $0.73

 
** **

*- As restated (seeNote 2)

**6.     AcquiredIntangible Assets**

Thecompany has approximately $2.1 million of acquired intangible assets fordevelopment rights held by its Virginia Gas subsidiary (net of accumulatedamortization of approximately $0.1 million), which are included in Other Assetson the Consolidated Balance Sheet at June 30, 2003. During June 2003, thecompany recorded a write-down of approximately $4.8 million related to thecarrying value of the acquired intangibleassets for customer relationships of NUI Telecom in conjunction with thecompany's decision to sell NUI Telecom. The fair value of the acquiredintangible assets of NUI Telecom was determined using a weighted averagediscounted cash flow model based on the operations of the company'stelecommunications businesses.

The aggregate amortizationof the acquired intangible assets for the three and nine months ended June 30,2003, was approximately $172,000 and $516,000, respectively, which is includedin Depreciation and Amortization in the Consolidated Statements of Income.Estimated annual amortization is expected to be approximately $534,000 for thefiscal year ending September 30, 2003 and approximately $73,000 for each fiscalyear through September 30, 2007.

**7.     DiscontinuedOperations**

The company has adopted the provisions of Statementof Financial Accounting Standards No. 144, "Accounting for the Impairment orDisposal of Long-Lived Assets" (SFAS 144). This statement excludes from thedefinition of long-lived assets goodwill and other intangibles that are notamortized in accordance with SFAS 142. SFAS 144 requires that long-lived assetsto be disposed of by sale be measured at the lower of their carrying amount orfair value less cost to sell, whether reported in continuing operations or indiscontinued operations. SFAS 144 also expands the reporting of discontinuedoperations to include components of an entity that have been or will bedisposed of rather than limiting such discontinuance to a segment of abusiness. Accordingly, the revenues, costs and expenses, assets, liabilities,and cash flows of NC, VCW, the billing services of UBS, NUI Environmental, NUITelecom, and TIC have been segregated and reported as discontinued operationsfor all periods presented, as applicable. The assets and liabilities held forsale include accounts receivable, prepaid and other current assets, netproperty, plant and equipment, other assets, accounts payable, and accruedexpenses.

On May 15, 2002, the companyagreed to sell the assets of its NC utility operation to Piedmont Natural Gasof North Carolina for approximately $24 million after post-closing adjustments.The transaction closed on September 30, 2002, after all regulatory approvalshad been obtained. NC had operating revenues of $14.6 million, operatingmargins of $5.1 million, and operating income of $1.4 million that have beenincluded in discontinued operations for the nine months ended June 30, 2002.

OnJuly 16, 2002, the company ceased the operations of its telephone equipment andUnited States Postal Service product lines of TIC. These product lines had operating revenuesof $8.3 million, operating margins of $3.2 million, and operating losses of$7.6 million that have been included in discontinued operations for the ninemonths ended June 30, 2002.

During September 2002, thecompany approved a plan to sell itsNUI Environmental subsidiary, at which time the company began to actively seeka buyer. NUI Environmental incurred operating losses of $0.9 million and$1.6 million that have been included in discontinued operations for the ninemonths ended June 30, 2003 and 2002, respectively.

During June 2003, thecompany approved a plan to sell thebilling services operations of its UBS subsidiary, at which time the companybegan to actively seek a buyer. The billing services operations of UBShad operating revenues of $3.7 million, operating margins of $2.2 million, andoperating income of $0.8 million that have been included in discontinuedoperations for the nine months ended June 30, 2003. The billing servicesoperations of UBS had operating revenues of $2.0 million, operating margins of$1.0 million, and operating income of $0.1 million that have been included indiscontinued operations for the nine months ended June 30, 2002.

During June 2003, thecompany approved a plan to sell itsNUI Telecom subsidiary, at which time the company began to actively seek abuyer. In conjunction with the decision, the company recorded a charge ofapproximately $18.1 million, after-tax, to adjust the assets of NUI Telecom toits estimated fair market value and a charge of approximately $2.3 million,after-tax, to write-off the remaining goodwill of TIC. Excluding the chargesnoted above, NUI Telecom had operating revenues of $38.6 million,operating margins of $13.7 million, and operating losses of $2.2 million thathave been included in discontinued operations for the nine months ended June30, 2003. NUI Telecom had operating revenues of $32.8 million, operatingmargins of $13.2 million, and operating losses of $7.2 million that have beenincluded in discontinued operations for the nine months ended June 30, 2002.
**8.     Earnings (Loss) per Share**
Thefollowing table summarizes the company's basic earnings per share calculationsfor the three and nine-month periods ended June 30 (amounts are in thousands,except per share amounts):

**                                                                                               **

**Three Months Ended**

**Nine Months Ended**

**June 30,**

**June 30,**

**2003**

**2002*******

**2003**

**2002*******

** **Income (loss) from continuing operations

$(3,826)

$(3,544)

$22,013

$19,702

** **Loss from discontinued operations

(21,244)

(7,791)

(21,906)

(8,953)

  Effect of change in accounting

         ---

         ---

   (5,869)

 (17,642)

  Net loss

$(25,070)

$(11,335)

$(5,762)

$ (6,893)

** **Weighted average shares outstanding

16,021

15,758

16,040

14,632

**  Earnings (loss) per share:**

   Income from continuing operations

$(0.24)

$(0.23)

$ 1.37

$1.35

   Loss  from discontinued operations

(1.33)

(0.49)

(1.36)

(0.61)

   Effect  of change in accounting

          ---  

              ---

 (0.37)

  (1.21)

   Net income

$(1.57)

$(0.72)

$(0.36)

$(0.47)

The company does not havedilutive shares as of June 30, 2003. The diluted earnings per share for thethree and nine-month periods ended June 30, 2002 were anti-dilutive and havebeen omitted.

*- As restated(see Note 2)

**9.     Comprehensive Income**

** **The components of Comprehensive Income are as follows(amounts in thousands):

** **

**Three Months Ended**

**Nine Months Ended**

**June 30,**

**June 30,**

**2003**

**2002*******

**2003**

**2002*******

 
** **Net loss

$(25,070)

$(11,335)

$(5,762)

$(6,893)

 
 
** **Other comprehensive income (loss):

 
  Derivatives qualifying as hedges, net

      (274)

         ---

       106

       ---

 
  Total comprehensive loss

$(25,344)

$(11,335)

$(5,656)

$(6,893)

 
*- As restated (see Note 2)

Accumulated other comprehensive income, included in CommonShareholders' Equity on the Consolidated Balance Sheet was ($1,017) at June 30,2003, and ($1,123) at September 30, 2002. Included in the balance at June 30,2003, was ($1,123) related to minimum pension liability (net of $780 in taxes)and $106 related to derivatives qualifying as hedges (net of $74 in taxes).

The derivativehedges described above cover various time periods ranging from July 2003 toJanuary 2005.

**10.  Stock Options**

The company measures compensation cost for stock-basedcompensation plans using the intrinsic value method of accounting as prescribedin Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued toEmployees," and related interpretations. The company has adopted thoseprovisions of Statement of Financial Accounting Standards No. 123, "Accountingfor Stock-Based Compensation" (SFAS 123) and Statement of Financial AccountingStandards No. 148, "Accounting for Stock-Based Compensation - Transition andDisclosure," which require disclosure of the pro forma effects on net earningsand earnings per share as if compensation cost had been recognized based uponthe fair value-based method at the date of grant for options awarded.

Had employee compensation expense been recognizedbased on the fair value of the stock options on the grant date under themethodology prescribed by SFAS 123, the company's net income and dilutedearnings per share for the periods ended June 30 would have been as shown inthe following table (in thousands, except for per share amounts):

**                                                                               **

**Three Months Ended**

**Nine Months Ended**

**June 30,**

**June 30,**

**2003**

**        2002***

**2003**

**         2002***

 
Net loss as reported

$(25,070)

$(11,335)

$(5,762)

$(6,893)

 
Deduct: Total  stock-based   employee compensation  expense   determined under fair  value based   method for all awards, net  of    related tax effects 

      (473)

             (482)

  (1,420)

     (943)

 
Pro forma net loss

$(25,543)

$(11,817)

$(7,182)

$(7,836)

 
 

 

 

 

 
**Earnings per Share:**

 

 

 

 

 
Basic & Diluted- as reported

        $(1.57)

          $(0.72)

      $(0.36)

         $(0.47)

 
 

 

 

 

 
Basic & Diluted- pro forma

$(1.59)  

           $(0.75) 

     $(0.45)

          $(0.54)

 
*- As restated (see Note 2)

**11.  NotesPayable to Banks**

On February 12, 2003, thecompany and NUI Utilities each entered into a new revolving credit facilitythat replaced their respective previous credit facilities.  The company's new credit facility consistsof a credit agreement that allows it to borrow up to approximately $38.1million, and NUI Utilities' new credit facility consisted of a credit agreementand a 364-day bridge loan, which collectively allowed NUI Utilities to borrowup to an aggregate of approximately $141.9 million.  On June 27, 2003, the NUI Utilities credit facility became fullysubscribed at an aggregate of $141.9 million, and the 364-day bridge loan wasterminated. These credit agreements mature on February 11, 2004, and may beextended in successive 364-day increments upon obtaining approval of all therespective lenders.  The creditagreements require the company and NUI Utilities to meet certain respectivecovenants and limitations as well as require the company and NUI Utilities,respectively, to maintain certain financial ratios.  Included in these covenants are provisions that limit the abilityof each of the company and NUI Utilities to incur future indebtedness, makecapital expenditures above certain levels, enter into sale-leasebacktransactions, pledge or sell assets, make acquisitions or investments, merge orpay dividends on common stock. In addition, the creation of guarantees, other thanthose in the normal course of business, is prohibited.  The company must maintain a fixed chargecoverage ratio of not less than 1.50x and NUI Utilities must maintain a fixedcharge coverage ratio of not less than 1.75x. The company and NUI Utilities eachmust maintain leverage ratios of not more than 0.65 from March 1 through August31 and not more than 0.70 from September 1 through February 28 (or 29, ifapplicable). The NUI Utilities' credit agreement limits the payment ofdividends from NUI Utilities to the company to not more than $100 million.  The credit agreements permit the company andNUI Utilities to enter into up to an aggregate $50 million of sale/leasebacktransactions to provide financing flexibility.

In August 2003, NUI Utilitiesentered into an amendment with the lenders under its credit agreement which,among other things, permits NUI Utilities to obtain an additional $50.0 millionof indebtedness, as well as to refinance such line indebtedness through certainfinancing transactions.  NUI Utilitiesis currently in discussions to obtain the additional $50.0 million, although noagreement has been reached as of the date of this report. 

At June 30, 2003, aggregate outstanding borrowingsunder the company's and NUI Utilities' credit agreements were $149.6 millionwith a combined weighted average interest rate of 3.2 percent. On thatdate, the company had outstanding borrowings under its credit facilityamounting to $25.7 million and unused borrowing capacity amounting to $12.4million, and NUI Utilities had outstanding borrowings under its credit facilityamounting to $123.9 million and unused borrowing capacity amounting to $18.0million. Also, as of June 30, 2003,approximately $11.5 million of cash was held as short-term investments, a substantialportion of which was being held toward repayment of short-term borrowings underthe credit agreements.

Theweighted average daily amounts of borrowings outstanding under the company'scredit facility and the weighted average interest rates on those amounts were$18.6 million and $35.8 million at 2.8 percent and 3.0 percent for the threeand nine-month periods ended June 30, 2003, respectively, and $58.2 million and$107.3 million at 2.6 percent and 3.5 percent for the three and nine-monthperiods ended June 30, 2002, respectively. The weighted average daily amountsoutstanding of borrowings under NUI Utilities' credit facility and the weightedaverage interest rates on those amounts were $126.8 million and $114.2 millionat 2.8 percent and 2.7 percent for the three and nine-month periods ended June30, 2003, respectively, and $66.2 million and $67.9 million at 2.5 percent and2.8 percent for the three and nine-month periods ended June 30, 2002,respectively.

** 12.  Contingencies**

*Joint Venture with Duke Energy*. OnApril 30, 2001, the company announced an agreement with a unit of Duke Energyto develop a natural gas storage facility in Saltville, Virginia. NUI SaltvilleStorage, Inc., a subsidiary of NUI Corporation, and Duke Energy GasTransmission (DEGT) have created a limited liability company, Saltville GasStorage Company LLC (LLC).  VGC receivedfinal regulatory approvals during January 2003 and contributed certain storageassets valued at approximately $16.3 million to the LLC. DEGT has contributedan equal amount (approximately $16.3 million) of capital required to expand thefacility for its intended purpose.  Tothe extent the LLC determines it needs additional funding (which decision canonly be made jointly by the company and DEGT), the company and DEGT areobligated to fund the development of the LLC equally.

The company has fundedapproximately $9.2 million toward the development of the LLC through June 30,2003, and currently estimates its share of funding needs to be approximately $9.1 million for the remainder offiscal 2003, $7.3 million in fiscal 2004, $0.8 million in fiscal 2005, $0.7million in fiscal 2006, and $0.8 million in fiscal 2007. The company isexploring various options to satisfy the remainder of its funding requirementsfor the joint venture during fiscal 2003, including a sale-leaseback by the LLCof a compressor station with a portion of the proceeds from such sale-leasebackbeing retained by the LLC.

*Guarantees*. Thecompany has guarantees of approximately $286.0 million to 67 counterparties asof June 30, 2003, in support of NUI Energy Brokers' trading activities. Theseguarantees are necessary to facilitate trading with a broad group of potentialcounterparties, although typically NUI Energy Brokers uses only a fraction ofthe issued guarantees at any given time. Further, since NUI Energy Brokers hasnetting agreements in place with most of its counterparties, the guaranteeswould apply only to net balances owed to its respective counterparties withwhich it has such agreements. As of June 30, 2003, the amount of purchasescovered by outstanding guarantees was approximately $19.6 million. 

NUI Telecom has a contractwith a service provider, which guarantees that NUI Telecom will purchase aminimum of $400,000 of services monthly through February 2004. The guaranteewas necessary to support NUI Telecom's purchase of capacity to use in theprovision of telecommunications services. The penalty for purchasing less thanthe minimum amount is 25 percent of each dollar below $400,000. NUI Telecom hashistorically purchased services in excess of $400,000 from the serviceprovider, and accordingly has not recorded any penalty amounts under theguarantee.

*EnvironmentalMatters.*The company owns, or previously owned, certain properties located in the statesof New Jersey, North Carolina, South Carolina, Pennsylvania, New York andMaryland on which manufactured gas plants (MGP) were operated by the company orby other parties in the past. In New Jersey, the company is currently conductingremedial activities at such properties with oversight from the New JerseyDepartment of Environmental Protection and anticipates the initiation of suchactivities in the state of North Carolina within the next five years.  Although the actual cost of futureenvironmental investigation and remediation efforts cannot be reasonablyestimated, the company has recorded a total reserve of approximately $33.5million, which the company believes is the probable minimum amount that thecompany may expend for environmental investigation and remediation efforts overthe next 30 years.  Of this reserve,approximately $29.8 million relates to remediation of the New Jersey MGPproperties and approximately $3.7 million relates to remediation of MGPproperties located outside the state of New Jersey.

The company's prudentlyincurred remediation costs for the New Jersey MGP properties have beenauthorized by the New Jersey Board of Public Utilities (NJBPU) to berecoverable in rates through its MGP Remediation Adjustment Clause. As aresult, the company has begun rate recovery of approximately $8.2 million ofenvironmental costs incurred through June 30, 2000. Recovery of an additional$1.7 million in environmental costs incurred between July 1, 2000, and June 30,2002, is currently pending NJBPU approval. Accordingly, the company hasrecorded a regulatory asset of approximately $35.9million as of June 30, 2003, reflecting the future recovery ofboth incurred costs and future environmental remediation liabilities in thestate of New Jersey.  The company hasalso been successful in recovering a portion of MGP remediation costs incurredin New Jersey from the company's insurance carriers and continues to pursueadditional recovery.  With respect tocosts associated with the MGP properties located outside New Jersey, thecompany is currently pursuing or intends to pursue recovery from former ownersand operators, and/or insurance carriers. Although the company has beensuccessful in recovering a portion of MGP remediation costs incurred outsideNew Jersey from the company's insurance carriers, the company is not able toexpress a belief as to the success of any additional recovery efforts. Thecompany is working with the regulatory agencies to prudently manage its MGPcosts so as to mitigate the impact of such costs on both ratepayers andshareholders.  

*Amendment of Senior Note Purchase Agreement.* In January 2003, the company became aware that it wasin technical default during fiscal 2002 under certain covenants contained inits Senior Note Purchase Agreement dated as of August 20, 2001. On January 24,2003, the company obtained a 30-day waiver from the holders of the notes (thenoteholders) of certain covenant violations in the Senior Note PurchaseAgreement, including entering into an agreement imposing restrictions onsubsidiaries' ability to pay dividends to the company and make advances to andinvestments in the company, entering into a debt agreement whereby subsidiariesguaranteed debt of NUI Corporation, the minimum fixed charge coverage ratio,restrictions on the ability to enter into sale and leaseback transactions, andthe requirement that the company deliver certain financial information andstatements of cash flows to the noteholders. 

On February 20, 2003, the company and the noteholdersamended the Senior Note Purchase Agreement for the purpose of curing all thecovenant violations. The amended agreement contained certain provisions thatwere subject to the approval of, or required action by, the banks participatingin the company's $38.1 million 364-day credit facility. These provisions were:1) the approval by the banks of an increase in the interest rate under each ofthe senior notes issued pursuant to the Senior Note Purchase Agreement (thesenior notes) of 50 basis points (or 0.50 percent), 2) the approval by thebanks of the execution by certain of the company's non-regulated subsidiaries(the "non-restricted subsidiaries" as defined in the company's bank creditfacility) of guarantees (the senior note guarantees) of prompt payment when dueof the indebtedness under the senior notes issued pursuant to the Senior NotePurchase Agreement, and 3) the execution by the banks of an Inter-creditorAgreement, reasonably satisfactory to the banks and noteholders, providing forthe pro-rata sharing by the lenders and the noteholders of any proceedsreceived by any of the lenders under any of the bank guarantees or the seniornote guarantees. The amendment to the Senior Note Purchase Agreement alsoprovided for the establishment of a "Priority Indebtedness" covenant requiringthe company to maintain a ratio of "priority debt" (all indebtedness of thecompany secured by liens plus all indebtedness of the restricted subsidiaries,as defined in the amendment) to consolidated assets of not more than 50percent, and not more than 40 percent for at least thirty consecutive daysduring the preceding twelve months. 

On March 31, 2003, thecompany and the banks amended the company's credit facility to approve theinterest rate change with respect to the senior notes, to approve the guaranteeby the non-restricted subsidiaries of the prompt payment when due of theindebtedness under the senior notes, and to approve the execution of theInter-creditor Agreement referenced above. This amendment to the company'scredit facility also provided for a new pricing grid, which increased thecompany's cost of borrowing under the credit facility by 25 basis points (0.25percent).

In addition, on April 1,2003, the company and the noteholders further amended the Note PurchaseAgreement to reflect the above changes to the company's credit facility and tomake certain conforming other amendments. 

*Agreement to Acquire Assetsof Norcom Agency Sales, Inc.* On March 22, 2002, the company entered into anagreement to acquire certain assets of Norcom Agency Sales, Inc. (NAS). Theagreement provides for the company to pay the seller, Norcom, a purchase priceequal to a multiple of total sales to new customers obtained by NAS as agentfor NUI Telecom during the period April 1, 2002, through October 31, 2003. Themultiple to be paid will be determined based on the actual new customerrevenues generated by NAS for the month of October 2003, and is subject topost-closing adjustments. 

The purchase price will bepaid in NUI common stock. The number ofshares of NUI common stock to be issued will be determined by dividing thetotal purchase price by the average closing price of NUI's common stock for thefirst 20 of the 25 consecutive trading days immediately preceding October 31,2003. The company expects to close on this transaction in or aroundFebruary 2004.

*GasProcurement Contracts.* Certain of the company's long-term contracts for the supply, storage anddelivery of natural gas include fixed charges that amount to approximately$53.3 million annually.  The companycurrently recovers, and expects to continue to recover, such fixed chargesthrough its purchased gas adjustment clauses. As a result of the unbundling of natural gas services in New Jersey,these contracts may result in the realization of stranded costs by thecompany.  Management believes theoutcome of these actions will not have a material adverse effect on thecompany's results.  The company also is committed to purchase from asingle supplier, at market-related prices, minimum quantities of gas that, inthe aggregate, are approximately 2.1 billion cubic feet (Bcf) per year. In theevent that the company does not purchase the minimum quantity in a given year,the company has until the next contract year to make up the difference or riska reduction in the contracted daily delivery quantity.  During the fiscal year ended September 30,2002, the company's continuing utility operations purchased a total of 36.0Bcf, and accordingly the company expects that minimum demand on its systems forthe duration of these contracts will continue to exceed this minimum purchaserequirement.

*Other.*Between October 28, 2002 and December 20, 2002, fivesubstantially similar civil actions were commenced in the United StatesDistrict Court for the District of New Jersey, in which the plaintiffs allegethat the company and its president and chief executive officer violated federalsecurities laws by issuing false statements and failing to disclose informationregarding the company's financial condition and current and future financialprospects in its earnings statements, press releases, and in statements toanalysts and others.  By orders datedDecember 19, 2002, January 22, 2003, and February 3, 2003, the five actionswere consolidated into one action captioned In re NUI Securities Litigation.  The five consolidated lawsuits include: (1)an action captioned Jack Klebanow, on behalf of himself and all otherssimilarly situated v. NUI Corporation and John Kean, Jr., filed in theUnited States District Court for the District of New Jersey on October 28,2002;  (2) an action captioned GiselaFriedman, on behalf of herself and all others similarly situated v. NUICorporation and John Kean, Jr., filed in the United States District Courtfor the District of New Jersey on October 31, 2002;  (3) an action captioned Thomas Davis, on behalf of himself andall others similarly situated v. NUI Corporation and John Kean, Jr., filedin the United States District Court for the District of New Jersey on November6, 2002; (4) an action captioned Marvin E. Russell, on behalf of himself andall others similarly situated v. NUI Corporation and John Kean, Jr., filedin the United States District Court for the District of New Jersey on December10, 2002; and (5) an action captioned Phyllis Waltzer, on behalf of herselfand all others similarly situated v. NUI Corporation and John Kean, Jr.,filed in the United States District Court for the District of New Jersey onDecember 20, 2002. By order dated February 3, 2003, a Lead Plaintiff, LeadCounsel and Liaison Counsel were appointed in the consolidated action. Bystipulation of the parties, an Amended Consolidated Class Action Complaint wasfiled on May 12, 2003, and subsequently plaintiffs were granted leave to file aSecond Amended Consolidated Complaint. By stipulation of the parties,responsive pleadings are to be served on our about August 28, 2003. Nodiscovery has yet occurred. The Second Amended Complaint, brought on behalf ofa putative class of purchasers of NUI's common stock between November 8, 2001and October 17, 2002, asserts claims under Section 10(b), including Rule 10b-5promulgated thereunder, and Section 20(a) of the Exchange Act against thecompany, its president and chief executive officer, and its chief financialofficer. Specifically, the Second Amended Complaint alleges that the defendants(i) failed to disclose material facts that would impair the company's currentand future earnings, including (a) the allegedly accurate amount andexplanation of the company's bad debts, (b) a purportedly illegal practice bythe company in "re-terminating" intrastate calls, (c) alleged accountingimproprieties in connection with purportedly unearned revenue, and (d)allegedly inaccurate earnings per share information, and (ii) inflated thecompany's earnings materially by (a) allegedly making misleading statementsconcerning, and failing to properly record bad debt costs, (b) allegedlyattributing the company's rising costs to incorrect and immaterial factors, and(c) purportedly pursuing illegal telecommunications billing practices. TheSecond Amended Complaint seeks unspecified monetary damages on behalf of theclass, including costs and attorneys fees. Furthermore, on December 23, 2002, alaw firm made a public announcement with respect to a lawsuit purportedly filedin the Southern District of New York on behalf of a putative class ofpurchasers of NUI's common stock between November 8, 2001 and October 17, 2002against NUI Corporation and John Kean, Jr., alleging violations under Section10(b), including Rule 10b-5 promulgated thereunder, and Section 20(a) of theExchange Act.  Specifically, theannouncement alleges that the company knowingly or recklessly failed toproperly record fixed cost expenses, accrue necessary pension expenses andreserve adequate amounts for its self-insured medical benefits in its quarterlyfinancial statements.  At this time, thecompany has not been served with the purported complaint. Although the companyintends to vigorously defend these lawsuits, it is not possible at this time todetermine a likely outcome.

Thecompany is involved in various other claims and litigation incidental to itsbusiness. In the opinion of management, none of these other claims andlitigation will have a material adverse effect on the company's results ofoperations or its financial condition.

**13. New Accounting Standards**

During fiscal 2002, thecompany adopted Statement of Financial Accounting Standards No. 144,"Accounting for Impairment and Disposal of Long-lived Assets" (SFAS 144). SFAS144 supersedes SFAS 121 and the provisions of APB Opinion No. 30, "Reportingthe Results of Operations- Reporting the Effects of Disposal of a Segment of aBusiness, and Extraordinary, Unusual and Infrequently Occurring Events andTransactions" with regard to reporting the effects of a disposal of a segmentof a business. SFAS 144 establishes a single accounting model for assets to bedisposed of by sale and addresses several SFAS 121 implementation issues. As aresult of the adoption of this standard, the company has classified theoperating results of subsidiaries to be disposed of as "DiscontinuedOperations" in the Consolidated Statements of Income; assets and liabilities ofthese subsidiaries as "Held for Sale" in the Consolidated Balance Sheets; and"Changes in Assets and Liabilities Held for Sale" in the ConsolidatedStatements of Cash Flows. See further discussion of the subsidiaries beingdisposed of in Note 7.

In August 2001, the FinancialAccounting Standards Board (FASB) issued Statement of Financial AccountingStandards No. 143, "Accounting for Asset Retirement Obligations" (SFAS 143).This statement establishes accounting standards for recognition and measurementof liabilities for asset retirement obligations and the associated assetretirement costs. The company adopted this statement on October 1, 2002, andrecorded an asset retirement obligation of approximately $5.6 million withoffsetting amounts to property, plant and equipment and regulatory assets. 

In June 2002, the Emerging Issues Task Force (EITF)issued EITF 02-03, "Issues Involved in Accounting for Contracts Under Issue 98-10," (EITF 02-03). The purpose of EITF 02-03is to address certain issues related to energy trading activities, including(a) gross versus net presentation in the income statement, (b) whether theinitial fair value of an energy trading contract can be other than the price atwhich it was exchanged (i.e., whether there is any profit at inception), and(c) additional disclosure requirements for energy trading activities. OnOctober 25, 2002, the EITF reached a consensus on EITF 02-03 that changes theaccounting for certain energy contracts. The main provisions of EITF 02-03 areas follows:

      -       The EITF rescinded EITF Issue 98-10, "Accounting for ContractsInvolved in Energy Trading and Risk Management Activities" (EITF 98-10), whichwas the authoritative accounting followed by NUI Energy Brokers and NUI Energy.Pursuant to EITF 98-10, an entity accounted for energy contracts at fair valuewith changes in fair value recognized in earnings if the energy contract wasdetermined to be part of an entity's trading activities. In contrast to EITF98-10, EITF 02-03 prohibits mark-to-market accounting for energy-relatedcontracts that do not meet the definition of a derivative under SFAS 133. Anycontracts not meeting the definition of a derivative under SFAS 133 must beaccounted for on the accrual basis. 

     -       The consensus applies immediately to non-derivative energy-relatedcontracts executed after October 25, 2002.

     -       The consensus applies to existing non-derivativeenergy-related contracts for fiscal periods beginning after December 15, 2002(January 1, 2003 for NUI) and the cumulative effect of a change in accountingprinciple must be reported upon initial application.

     -       The EITF indicated that an entity should not record unrealizedgains or losses at the inception of derivative contracts unless the fair valueof each contract in its entirety is evidenced by quoted market prices or othercurrent market transactions for contracts with similar terms andcounterparties.

     -       The EITF reaffirmed that EITF 02-03 requires gains and losseson derivative energy trading contracts (whether realized or unrealized) to bereported as revenue on a net basis in the income statement.

The EITF deliberations and consensus on EITF 02-03will not affect the company's cash flows. Additionally, the company continuedto mark all existing energy-related contracts to market based on EITF 98-10during the first quarter of fiscal 2003 prior to applying the new consensus.However, the consensus required NUI to record a cumulative effect adjustment toconvert any contracts that did not meet the definition of a derivative underSFAS 133 to accrual accounting effective January 1, 2003.

The primary contracts that are affected as a resultof applying the new consensus are the full requirements natural gas salescontracts associated with NUI Energy and a large natural gas storage contractwithin NUI Energy Brokers. However, the majority of NUI Energy Brokers'contracts are considered derivatives under SFAS 133 and continue to bemarked-to-market through earnings. The cumulative effect adjustment to convertthe contracts that did not meet the definition of a derivative under SFAS 133to accrual accounting effective on January 1, 2003, was a loss of approximately$9.9 million before taxes.

Additionally, in accordance with one of theprovisions of EITF 02-03, the company has recorded the margins earned under the previous accounting guidance of EITF 98-10 byboth NUI Energy Brokers and NUI Energy on a net basis. In previous periods,both NUI Energy Brokers and NUI Energy included both the cost of the purchasedgas and the operating margin earned for all physical transactions withinoperating revenues on the Consolidated Statement of Income. For financialtrades such as futures, options and swap transactions, NUI Energy Brokers andNUI Energy had historically recorded only the operating margin component, but withinthe purchased gas and fuel line item on the Consolidated Income Statement. Theadoption of net-basis reporting has no effect on these transactions or cashflows other than to reclassify and present total margins earned within theoperating revenues line item on the Consolidated Statement of Income. Inaccordance with EITF 02-03, all prior periods have been reclassified to conformto this presentation. As a result of net-basis reporting, NUI reduced operatingrevenues and purchased gas and fuelline items by $82.1 million and $235.1 million forthe three and nine months ended June 30, 2002, respectively, with no changes tototal operating margins.

In June 2002, the FASBissued Statement of Financial Accounting Standards No. 146, "Accounting forCosts Associated with Exit or Disposal Activities" (SFAS 146). This statementis effective for exit or disposal activities initiated after December 31, 2002.The adoption of this statement had no impact on the company's net income orfinancial position.

In November 2002, the FASB issued FASBInterpretation No. 45, "Guarantor's Accounting and Disclosure Requirements forGuarantees, Including Indirect Guarantees of Indebtedness of Others" (FIN45).  FIN 45 elaborates on thedisclosures to be made by a guarantor in its interim and annual financialstatements about its obligations under certain guarantees that it has issued.It also requires a guarantor to recognize, at the inception of a guarantee, aliability for the fair value of the obligation undertaken in issuing theguarantee. The initial recognition and measurement provisions of FIN 45 applyto guarantees issued or modified after December 31, 2002. The company hasincluded these disclosures under "Guarantees" in Note 12.

In December 2002, the FASB issued Statement ofFinancial Accounting Standards No. 148, "Accounting for Stock-BasedCompensation- Transition and Disclosure" (SFAS 148). This statement amendsStatement of Financial Accounting Standards No. 123, "Accounting forStock-Based Compensation," to provide alternative methods of transition for anentity that voluntarily changes to a fair value based method of accounting forstock-based employee compensation and amends disclosure provisions of thatStatement to require prominent disclosure about the effects on reported netincome of an entity's accounting policy decisions with respect to suchcompensation. The company continues to account for stock-based compensation inaccordance with Accounting Principles Board Opinion No. 25 and has provided theprominent disclosures required in Note 10.

In January 2003, the FASBissued FASB Interpretation No. 46, "Consolidation of Variable InterestEntities" (FIN 46). A variable interest entity is a corporation, partnership,trust or any other legal structure used for business purposes that either (a)does not have equity investors with voting rights, or (b) has equity investorsthat do not provide sufficient financial resources for the entity to supportits activities. Historically, entities generally were not consolidated unlessthe entity was controlled through voting interests. FIN 46 changes that, byrequiring a variable interest entity to be consolidated by a company if thatcompany is subject to a majority of the risk of loss from the variable interestentity's activities or entitled to receive a majority of the entity's residualreturns or both. A company that consolidates a variable interest entity iscalled the "primary beneficiary" of that entity. FIN 46 also requiresdisclosures about variable interest entities that a company is not required toconsolidate but in which it has a significant variable interest. Theconsolidation requirements of FIN 46 apply immediately to variable interestentities created after January 31, 2003. The consolidation requirements of FIN46 apply to existing entities in the first fiscal year or interim periodbeginning after June 15, 2003. Also, certain disclosure requirements apply toall financial statements issued after January 31, 2003, regardless of when thevariable interest entity was established. The company is currently evaluatingthe consolidation requirements with respect to its joint venture with DukeEnergy (see Note 12).

In April 2003, the FASB issuedStatement of Financial Accounting Standards No. 149, "Amendment of Statement133 on Derivative Instruments and Hedging Activities" (SFAS 149). Thisstatement amends and clarifies financial accounting and reporting forderivative instruments, including certain derivative instruments embedded inother contracts and hedging activities under SFAS 133. This statement iseffective for contracts entered into or modified after June 30, 2003. Thecompany does not expect the adoption of this statement will have a materialimpact on the company's net income or financial position.

In May 2003, the FASB issuedStatement of Financial Accounting Standards No. 150, "Accounting for CertainFinancial Instruments with Characteristics of both Liabilities and Equity"(SFAS 150). This statement establishes standards for how an issuer classifiesand measures certain financial instruments with characteristics of bothliabilities and equity. The standard requires that an issuer classify afinancial instrument that is within its scope as a liability (or an asset insome circumstances). Many of these instruments were previously classified asequity. The standard also revises the definition of liabilities to encompasscertain obligations that an entity can or must settle by issuing its ownshares, depending on the nature of the relationship established between theholder and the entity. This statement is effective for financial instrumentsentered into or modified after May 31, 2003 and otherwise is effective at thebeginning of the first interim period beginning after June 15, 2003. Thecompany does not expect the adoption of this statement will have a materialimpact on the company's net income or financial position.
**14.   Business Segment Information**
** **Thecompany's operations are organized and managed as three primary segments:Distribution Services, Energy Asset Management (formerly Wholesale Energy Marketing and Trading), and Retail andBusiness Services. The Distribution Services segment currently distributesnatural gas in three states through the company's regulated utility operations,as well as engaging in appliance leasing, repair and maintenance operations andoff-system gas sales. The Energy Asset Management segment reflects theoperations of the company's NUI Energy Brokers and all of the VGC subsidiaries.The Retail and Business Services segment reflects the operations of thecompany's NUI Energy subsidiary and OAS, the digital mapping business ofUBS.  The company also has corporateoperations that do not generate any revenues.

The following table providesinformation concerning the major segments of the company for the three andnine-month periods ended June 30, 2003 and 2002. Revenues include intersegmentsales to affiliated entities, which are eliminated in consolidation.  All of the company's operations are in theUnited States and therefore do not need separate disclosure by geographicregion. Certain reclassifications have been made to prior year segment data toconform with the current year's presentation.

**                                                                       **

**Three Months Ended**

**Nine Months Ended**

**June 30,**

**June 30,**

**(Dollars in thousands)**

**2003**

**2002*******

**2003**

**2002*******

 
**Revenues:**

 
** **Distribution Services

$127,243

$92,930

$524,690

$407,854

 
** **Energy Asset Management

3,245

4,147

24,671

19,694

 
** **Retail and Business Services

61

(364)

803

2,280

 
  Intersegment Revenues

          (12) 

     (377)

        (552)

     (1,651)

 
Total  Revenues

$130,537

$96,336

$549,612

$428,177

 
 
**Operating Margins:**

   Distribution Services
$38,055

$31,862

$158,065

$138,423

 
  Energy  Asset Management

2,871

3,705

23,438

18,924

 
  Retail  and Business Services

      (192)

      (364)

         120

       2,280

 
Total  Operating Margins

$40,734

$35,203

$181,623

$159,627

 
 
**Pre-Tax Operating Income  (Loss):**

 
** **Distribution Services

$2,766

$1,926

$49,457

$48,701

 
** **Energy Asset Management

(613)

231

13,402

8,590

 
  Retail and Business Services

   (1,912)

      (1,715)

     (7,769)

        (1,982)

 
Total  Pre-Tax Operating Income

$    241

$    442

$ 55,090

$55,309

 
 
*- As restated(see Note 2)

A reconciliation of thecompany's segment pre-tax operating income to amounts reported on theconsolidated financial statements is as follows:                                                                                                                                                                                                  **                   **

**Three Months Ended**

**Nine Months Ended**

**June 30,**

**June 30,**

**(Dollars in thousands)**

**2003**

**2002*******

**2003**

**2002*******
  
**Segment Pre-Tax Operating Income**

$ 241

$   442

$55,090

$55,309

Non-segment  pre-tax operating income      (loss)

   (180)

      (1,300)

       (1,648)

     (5,064)

 Pre-Tax Operating Income (Loss)

$    61

$ (858)

$53,442

$50,245
 
*-As restated (see Note 2)

 
**NUI Corporation and  Subsidiaries   Summary Consolidated Operating Data**

 

**      Three Months                 Ended               June 30,**

**    Nine Months             Ended            June 30,**

 

**2003**

**2002*******

**2003**

**2002*******

**Operating Revenues  (Dollars in thousands)**

 

 

 

 

Firm Sales:

 

 

 

 

Residential

$46,261

$36,882

$241,666

$205,786

Commercial and industrial

20,364

12,988

100,139

80,714

Interruptible Sales

18,330

11,751

49,222

29,712

Unregulated Sales 

26,206

21,220

98,012

72,539

Transportation Services

11,427

11,032

39,168

37,118

Customer Service, Appliance Leasing and Other

   22,122

  19,608

   64,261

   57,188

Total Revenues

144,710

 113,481

592,468

 483,057

Revenues by Discontinued Operations

 (14,173)

(17,145)

  (42,856)

  (54,880)

Operating Revenues from Continuing Operations

$130,537

$96,336

$549,612

$428,177

 

 

 

 

**Gas Sold or Transported  (in MMcf)**

 

 

 

 

Firm Sales:

 

 

 

 

Residential

3,625

3,299

23,438

19,254

Commercial and industrial

1,721

1,449

10,272

8,709

Interruptible Sales

2,608

2,598

7,629

7,689

Unregulated Sales 

17,287

28,642

75,579

86,135

Transportation Services

 7,749

 9,342

  28,036

  30,364

Total Gas Sold or Transported

32,990

 45,330

144,954

 152,151

Gas Sold or Transported by Discontinued Operations

       ---

(1,537)

    (239)

  (5,563)

Gas Sold or Transported by Continuing Operations

32,990

43,793

144,715

146,588

 

 

 

 

**Average Utility Customers  Served**

 

 

 

 

Firm Sales:

 

 

 

 

Residential

341,551

356,878

347,175

357,108

Commercial and industrial

22,123

24,339

22,961

24,381

Interruptible Sales

24

41

30

40

Transportation

    4,120

    4,076

     4,137

     4,052

Total Average Utility Customers Served

367,818

385,334

374,303

385,581

Average Utility Customers Served by Discontinued  Operations

         ---

(20,715)

  (6,548)

(20,733)

Average Utility Customers Served by Continuing  Operations

367,818

364,619

367,755

364,848

 

 

 

 

**Degree Days in New Jersey**

 

 

 

 

Actual

712

537

5,400

3,960

Normal

553

566

4,795

5,093

Percentage variance from normal

           29%  colder

        5%  warmer

        13%  colder

        22%  warmer

 

 

 

 

**Employees (period end)**

1,095

1,415

 

 

*-As restated (see Note 2 of the Notes to the Consolidated Financial Statements)
**Item 2.  Management's Discussion and Analysis ofFinancial Condition and Results of Operations**
The following discussion and analysis should be read inconjunction with the unaudited condensed consolidated financial statements ofNUI Corporation included elsewhere herein and with the company's Annual Reporton Form 10-K for the fiscal year ended September 30, 2002.

**Overview**

The following discussion and analysis refers to NUICorporation and its subsidiaries (collectively referred to as "NUI," the"company," "we," or "our"). The company is a diversified energy company that isprimarily engaged in the sale and distribution of natural gas, wholesale energyportfolio and risk management, retail energy sales and telecommunications. Itslocal utility operations are carried out by NUI Utilities, Inc. (NUI Utilities)and a subsidiary of Virginia Gas Company (VGC), and serve more than 367,000customers in four states along the easternseaboard of the United States. NUI Utilities is comprised Elizabethtown GasCompany (New Jersey), City Gas Company of Florida, and Elkton Gas (Maryland). Thecompany sold its North Carolina Gas (NC) utility operation during September2002, and sold its Valley Cities Gas and Waverly Gas (VCW) utility operationsduring November 2002. VGC is also engaged in other activities, such as pipelineoperation and natural gas storage. In addition, the company is also engaged inseveral non-regulated businesses including NUI Energy, Inc. (NUI Energy), anenergy retailer; NUI Energy Brokers, Inc. (NUI Energy Brokers), a wholesaleenergy portfolio and risk management subsidiary; NUI Environmental Group, Inc.(NUI Environmental), an environmental project development subsidiary; UtilityBusiness Services, Inc. (UBS), a geospatial, billing and customer informationsystems and services subsidiary; NUI Telecom, Inc. (NUI Telecom), anon-facilities based telecommunications services subsidiary; and TICEnterprises, LLC (TIC), a sales outsourcing subsidiary. 

The company has decided to narrow its business focusby concentrating on the company's core utility and energy asset managementbusinesses and by seeking to divest selected non-core assets. During June 2003,the company began to seek buyers for its NUI Telecom subsidiary and the billingservices operations of its UBS subsidiary. The company has classified NC, VCW,the billing services operations of UBS, NUI Environmental, NUI Telecom, and TICas discontinued operations (see Note 7 of the Notes to the ConsolidatedFinancial Statements).

**Resultsof Operations**

*Consolidated Reviewof Results of Operations*

Thefollowing discussion is intended to provide an overview of consolidated resultsfor the three and nine-month periods ended June 30, 2003 and 2002. Theresults of operations for fiscal 2001 and 2000, as well as the first threequarters of fiscal 2002 have been restated (see Note 2 of the Notes to theConsolidated Financial Statements). Followingthis discussion is a more detailed overview of the results for NUI's threebusiness segments.

**Net Income or Loss.**  NUIhad net losses of $25.1 million, or $1.57 per share, for the three months endedJune 30, 2003, as compared to net losses of $11.3 million, or $0.72 per share,for the three months ended June 30, 2002. The increase in net losses during the current three-month periodwas primarily due to a non-cash charge of approximately $20.3 million, or $1.27per share, after-tax, to adjust the carrying value of assets being held forsale to their fair market value, in conjunction with company's decision to sellits NUI Telecom subsidiary (see Note 7 to the Notes to the ConsolidatedFinancial Statements). Exclusive of this charge, net losses for the threemonths ended June 30, 2003, were approximately $4.7 million, or $6.6 millionless than the same period in the prior fiscal year. This decrease was primarilya result of reduced losses of approximately $6.9 million from discontinuedoperations during the three-month period ended June 30, 2003, as compared tothe prior fiscal year. The amount of net loss for the three months ended June30, 2003, exclusive of the charge discussed above is a non-GAAP financialmeasure, which management believes isuseful to readers because it provides a better comparison of the company'speriod-to-period results. The amount of net loss calculated under GAAP for thethree months ended June 30, 2003 totaled $25.1 million and includes thenon-cash charge of $20.3 million discussed above.

NUIhad net losses of $5.8 million, or $0.36 per share, for the nine months endedJune 30, 2003, as compared to net losses of $6.9 million, or $0.47 per share,for the nine months ended June 30, 2002. The decrease in losses duringthe current nine-month period was primarily due to improved income fromcontinuing operations of approximately $2.4 million, as a result of weatherthat was 36 percent colder than the prior fiscal year period, the effect of thecompany's base rate increase in New Jersey (see Regulatory Matters), and lowereffect of charges for changes in accounting of approximately $11.8 million duringthe current fiscal year period (see Notes 5 and 13 of the Notes to theConsolidated Financial Statements). These increases were partially offset byincreased losses by discontinued operations of approximately $13.1 millionduring the nine months ended June 30, 2003 (see discussion which follows).

On July 31, 2003, the companyissued an earnings release that excluded the mapping business of UBS fromcontinuing operations. The mapping business should have been included incontinuing operations and therefore the company's operating revenues for thethree months ended June 30, 2003, should have been reported as $130.537 millioninstead of $130.011 million, and operating income for the three months endedJune 30, 2003, should have been reported as $61,000 instead of $78,000. Thecompany's operating revenues for the three months ended June 30, 2002, shouldhave been reported as $96.336 million instead of $95.878 million, and operatinglosses for the three months ended June 30, 2002, should have been reported as$858,000 instead of $875,000. The company's operating revenues for the ninemonths ended June 30, 2003, should have been reported as $549.612 millioninstead of $548.090 million, and operating income for the nine months endedJune 30, 2003, should have been reported as $53.442 million instead of $53.395million. The company's operating revenues for the nine months ended June 30,2002, should have been reported as $428.177 million instead of $426.419million, and operating income for the nine months ended June 30, 2002, shouldhave been reported as $50.245 million instead of $50.025 million.

**Income or Losses from Continuing Operations.**  Losses from continuing operations were $3.8million, or $0.24 per share, for the three-month period ended June 30, 2003, comparedwith losses of $3.5 million, or $0.23 per share, for the same period in fiscal2002. The increase in losses from continuing operations during the three-monthperiod ended June 30, 2003, is primarily due to increased operations andmaintenance expenses of approximately $6.9 million, as a result of higher costsfor bad debts (approximately $2.1 million), labor (approximately $1.0 million),professional fees related to meeting the requirements of the Sarbanes-Oxley Act(approximately $1.0 million), bank fees (approximately $0.8 million), pensionexpenses (approximately $0.7 million), legal fees (approximately $0.7 million),insurance (approximately $0.6 million); and increased interest expense of $1.1million as a result of increased rates and additional borrowings during thecurrent three-month period, as compared to the same period in fiscal 2002 (seeLiquidity and Capital Resources). These increases were partially offset byincreased operating margins of approximately $5.5 million, primarily due to theeffect of weather that was 33 percent colder than the same period in the priorfiscal year, and the effect of the base rate increase discussed earlier.

Income from continuingoperations was $22.0 million, or $1.37 per share, for the nine-month period endedJune 30, 2003, compared with $19.7 million, or $1.35 per share, for the sameperiod in fiscal 2002. The increase in income from continuing operations duringthe nine-month period ended June 30, 2003, is primarily due to increasedoperating margins of approximately $22.0 million, mainly due to weather thatwas 36 percent colder than the nine-month period ended June 30, 2002(approximately $6.0 million); the base rate increase by the company's naturalgas distribution company in New Jersey previously noted (approximately $9.5million); and increased operating margins by NUI Energy Brokers which resultedfrom the gains associated with gas supply procurement contracts of NUI Energyand improved profitability from asset management opportunities during the currentfiscal year, as compared to the same period in the prior fiscal year. Theseincreases were partially offset by reduced operating margins by NUI Energy dueto a payment made to the purchaser of certain assets of NUI Energy; severanceand other costs associated with exiting the company's retail energy marketingbusiness; and higher costs for bad debts (approximately $6.7 million), labor(approximately $3.8 million), pension expenses due to lower discount rate andasset return assumptions (approximately $2.7 million), insurance (approximately$1.5 million), professional fees related to addressing the requirements of theSarbanes-Oxley Act (approximately $1.4 million), bank fees (approximately $1.3million), and legal fees (approximately $1.3 million).

**Discontinued Operations.**  After-taxlosses from discontinued operations for the three months ended June 30, 2003,were $21.2 million, or $1.33 per share, compared to $7.8 million, or $0.49 pershare during the prior fiscal year. The increased losses during the thirdquarter of fiscal 2003 were primarily due to a non-cash charge ofapproximately $20.3 million, after tax, to adjust the carrying value of assetsbeing held for sale to their fair market value, in conjunction with company'sdecision to exit the telecommunications business. Losses from discontinued operations during the three-months ended June30, 2003, include losses incurred by NUI Telecom (approximately $1.0 million,excluding the charge noted above) and NUI Environmental (approximately $0.3million), and income by UBS of approximately $0.3 million. Losses fromdiscontinued operations during the three months ended June 30, 2002 includelosses incurred by NUI Telecom (approximately $7.3 million), NC (approximately$0.3 million), UBS  (approximately $0.2million) and NUI Environmental (approximately $0.2 million), and income by VCWof approximately $0.2 million (see Note 7 of the Notes to the ConsolidatedFinancial Statements). 

After-taxlosses from discontinued operations for the nine months ended June 30, 2003,were $21.9 million, or $1.36 per share, compared to $9.0 million, or $0.61 pershare during the same period in fiscal 2002. The increased losses during fiscal2003 were primarily due to the $20.3 million charge related to the company's decisionto sell NUI Telecom discussed above. In addition, the losses from discontinuedoperations during the nine-month period ended June 30, 2003, include losses byNUI Telecom (approximately $1.1 million), NUI Environmental (approximately $0.5million), NC (approximately $0.4 million), and VCW (approximately $0.1million), and income by UBS of approximately $0.5 million. Losses fromdiscontinued operations during the nine-month period ended June 30, 2002,include losses by NUI Telecom (approximately $9.6 million) and NUIEnvironmental (approximately $0.9 million), and income by NC (approximately$0.6 million) and VCW (approximately $1.1 million).

*Business Segment Review ofResults of Operations*

The following is a discussion of the company'sbusiness segment results of operations and is presented based on Income fromContinuing Operations before Interest and Taxes. Included in operations andmaintenance expenses for each of NUI's business segments are allocations ofcorporate costs related to shared service functions such as human resources,accounting and information technology, which are allocated based on thecompany's cost allocation policy. In addition, the company has corporateoperations that incurred operations and maintenance expenses of $(0.1) millionand $1.0 million for the three-month periods ended June 30, 2003 and 2002,respectively, and $0.8 million and $3.1 million for the nine-month periodsended June 30, 2003 and 2002, respectively, principally related to thecompany's investment in various business ventures, which have not yet earnedrevenues. These costs are not allocated to our business segment results.
**Distribution Services Segment**
The company's DistributionServices segment distributes natural gas in three states through the company's regulatednatural gas utility operations.  Theseoperations are Elizabethtown Gas Company (New Jersey), City Gas Company ofFlorida, and Elkton Gas (Maryland). This segment also includes the company'sappliance leasing, repair, maintenance operations and service business as well as off-system sales. The company recently soldthree of its natural gas utility operations: NC was sold in September 2002, andVCW (New York and Pennsylvania operations) was sold in November 2002 (see Note7 of the Notes to the Consolidated Financial Statements). The results for theseoperations are reflected in Discontinued Operations in the ConsolidatedFinancial Statements for the three and nine-month periods ended June 30, 2003and 2002. The Income from Continuing Operations before Interest and Taxesresults for the segment is as follows:

*(Dollars in thousands)*

**Three  Months Ended  June  30, 2003**

**Three Months Ended June  30, 2002***

**Nine  Months Ended  June 30, 2003**

**Nine Months Ended  June  30, 2002***

Operating Revenues

$127,243

$92,877

$524,690

$407,299

Purchased  Gas and Fuel

84,540

56,809

348,017

253,027

Cost  of sales and services

2,222

2,200

7,399

6,748

Energy  Taxes

2,426

2,006

11,209

9,101

Operating Margins

38,055

31,862

158,065

138,423

**Operating Expenses:**

 

 

 

 

Operations  & Maintenance Expenses

27,780

20,685

81,940

63,337

Depreciation  & Amortization

7,149

7,742

22,869

21,856

Taxes  Other than Income

360

1,509

3,799

4,529

Total Operating Expenses

35,289

29,936

108,608

89,722

Other Income & Expense

82

(190)

399

(84)

Income from Continuing     Operations before Interest and     Taxes 

 

$2,848

 

$1,736

 

$49,856

 

$48,617

 

 

 

 

*** ****- As restated (seeNote 2 of the Notes to the Consolidated Financial Statements)

***Operating Revenues****.* Operating revenues includeamounts billed for the cost of purchased gas pursuant to purchased gasadjustment clauses utilized by the company's utility operations.  Such clauses enable the company to passthrough to its utility customers, via periodic adjustments during the year tocustomers' bills, changes in costs incurred by the company for purchased gaswithout affecting operating margins. These purchased gas adjustments areauthorized by regulatory authorities in the states in which the companyoperates. Since the company's utility operations do not earn a profit on thesale of the gas commodity, the company's level of regulated operating revenuesis not necessarily indicative of financial performance. 

Distribution Servicesoperating revenues increased by $34.3 million, or 37 percent, to $127.2 millionduring the three months ended June 30, 2003, as compared to $92.9 million inthe same period in fiscal 2002. The increase in revenues was primarilyattributable to the result of weather in New Jersey that was 29 percent colderthan normal and 33 percent colder than the same period in fiscal 2002, theeffect of a base rate increase in New Jersey, which went into effect onNovember 22, 2002 (see Regulatory Matters), increased off-system sales as aresult of higher natural gas prices, and customer growth. 

Distribution Servicesoperating revenues increased by $117.4 million, or 29 percent, to $524.7million during the nine months ended June 30, 2003, as compared to $407.3million in the same period in fiscal 2002. The increase in revenues wasprimarily attributable to the result of weather in New Jersey that was 13percent colder than normal and 36 percent colder than the same period in fiscal2002, the effect of a rate increase in New Jersey referred to above, increasedoff-system sales, and customer growth, consistent with the quarterly changespreviously noted.

***Operating Margins****.*Operating margins increased by $6.2 million, or 19 percent, to $38.1 millionfor the three months ended June 30, 2003, as compared to $31.9 million in thesame period in fiscal 2002. Of the factors previously discussed in operatingrevenues, the impact on operating margins of the colder weather contributedapproximately $1.2 million, the rate increase contributed approximately $3.7million, and  customer growthcontributed approximately $1.3 million. Total operating margins from off-systemgas sales were $0.3 million for the three-month periods ended June 30, 2003 and2002. The company has a weather normalization clause in its New Jersey tariff,which is designed to help stabilize the company's results by increasing amountscharged to customers when weather has been warmer than normal and by decreasingamounts charged when weather has been colder than normal. As a result ofweather normalization clauses, operating margins were approximately $1.3million lower and $0.5 million higher in the fiscal 2003 and 2002 periods,respectively, than they otherwise would have been without such clauses.Historically, the company's weather normalization clause in New Jersey wasbased on a 30-year weather average and did not fully protect the company fromthe adverse impacts of warm weather. As a result of the new base rate increasereferred to above, the weather normalization clause was adjusted to a 20-yearweather average to better reflect current weather trends and should providemore stability of operating results and improved cash flows for NUI's NewJersey utility throughout fiscal 2003. 

Operating margins increased by$19.7 million, or 14 percent, to $158.1 million for the nine months ended June30, 2003, as compared to $138.4 million in the same period in fiscal 2002. Ofthe factors previously discussed in operating revenues, the impact on operatingmargins of the colder weather contributed approximately $7.3 million, the rateincrease contributed approximately $9.5 million, and customer growthcontributed approximately $2.9 million. Total operating margins from off-systemgas sales were $1.1 million and $1.0 million for the nine months ended June 30,2003 and 2002, respectively. As a result of weather normalization clauses,operating margins were approximately $6.1 million lower and $8.5 million higherin the fiscal 2003 and 2002 periods, respectively, than they otherwise wouldhave been without such clauses. With the exception of demand caused by changesin weather, the company does not anticipate any significant changes in theeconomic outlook for natural gas sales in this segment for the remainder offiscal 2003.

***Operating Expenses.*** Operations and maintenanceexpenses increased by $7.1 million, or 34 percent, to $27.8 million for thethree months ended June 30, 2003, as compared with $20.7 million in the sameperiod in fiscal 2002. This was mainly due to increases in bad debt expenses(approximately $1.4 million), pension expenses due to lower discount rate andasset return assumptions (approximately $0.6 million), labor costs related towage increases and additional personnel (approximately $0.7 million), costs forutility programs such as energy conservation and customer education (approximately$0.5 million), insurance costs for general liability (approximately $1.0million), as well as increased allocated corporate expenses such as auditing,legal and bank fees (approximately $2.9 million).

Depreciation and amortization expense decreased to $7.1 million for thethree months ended June 30, 2003, as compared to $7.7 million in the sameperiod in fiscal 2002, as a result of reduced plant-in-service during thecurrent three-month period as compared to the prior year.

Taxes, other than income taxes, decreased to $0.4 million for the threemonths ended June 30, 2003, as compared to $1.5 million in the same period infiscal 2002, as a result of a true-up of a regulatory assessment during thecurrent three-month period as compared to the prior year.

Operations and maintenanceexpenses increased by $18.6 million, or 29 percent, to $81.9 million for thenine months ended June 30, 2003, as compared with $63.3 million in the sameperiod in fiscal 2002. The increase was mainly due to increases in bad debtexpenses (approximately $3.5 million), pension expenses due to lower discountrate and asset return assumptions (approximately $2.6 million), labor costsrelated to the rate case, wage increases, and additional personnel(approximately $2.7 million), costs for utility programs such as energyconservation and customer education (approximately $1.4 million), insurancecosts for general liability (approximately $1.8 million), materials andsupplies costs used by the appliance operations (approximately $0.6 million),as well as increased allocated corporate expenses (approximately $5.8 million).

Because of the increase inoperating revenues due to the colder than normal weather discussed earlier andthe base rate increase, the company has had increased exposure to bad debtsduring fiscal 2003. This could have an adverse effect on operating results forthis segment for the remainder of the fiscal year. The company also anticipatesincreased costs related to pension expense, insurance costs and allocated corporateexpenses resulting from additional auditing, legal, and treasury expenses, aswell and other costs incurred by the company associated with fulfilling therequirements of the Sarbanes-Oxley Act of 2002 during the remainder of fiscal2003.

Depreciation andamortization expense increased to $22.9 million for the nine months ended June30, 2003, as compared to $21.9 million in the same period in fiscal 2002, as aresult of additional plant-in-service.

**Energy AssetManagement Segment**

The Energy Asset Managementsegment (formerly Wholesale Energy Marketing and Trading) includes theoperations of the company's NUI Energy Brokers subsidiary, and thedistribution, storage and pipeline operations of VGC. Off-system gas sales,which were previously included in this segment, have been included within theDistribution Services segment.

*(Dollars in thousands)*

**Three  Months Ended  June  30, 2003**

**Three Months Ended June  30, 2002***

**Nine  Months Ended  June 30, 2003**

**Nine Months Ended June  30, 2002***

Operating Revenues

$3,233

$3,823

$24,119

$18,599

Purchased  Gas and Fuel

362

118

681

(325)

Operating Margins

2,871

3,705

23,438

18,924

**Operating Expenses:**

 

 

 

 

Operations  & Maintenance Expenses

2,998

2,519

7,995

7,892

Depreciation  & Amortization

268

623

1,429

1,918

Taxes  Other than Income

218

332

612

524

Total Operating Expenses

3,484

3,474

10,036

10,334

Other Income & Expense

121

(198)

356

166

Income (loss) from Continuing         Operations before Interest and       Taxes 

 

$(492)

 

$33

 

$13,758

 

$8,756

 

 

 

 

*-As restated (see Note 2 of the Notes to the Consolidated Financial Statements)

***Operating Revenues***. Asfurther discussed in Note 13 of the Notes to the Consolidated FinancialStatements, operating revenues for NUI Energy Brokers and NUI Energy (see below)have been restated for fiscal years 2000-2002 as a result of adopting aprovision in the Emerging Issues Task Force (EITF) Opinion 02-03, "IssuesInvolved in Accounting for Contracts Under Issue 98-10,"which requires that all energy companies that follow the accounting under EITF98-10 reflect their operating revenues on a net basis. In previous periods,NUI Energy Brokers included both the cost of purchased gas and the operatingmargin earned on all of its physical energy transactions (physical volumes ofgas bought and sold to third parties) in operating revenues and classified thecost of that gas as a component of purchased gas and fuel on the ConsolidatedStatements of Income. Historically, NUI Energy Brokers had recorded only theoperating margin component for all of its financial trades (futures, options,swaps) and had classified these amounts as a component of purchased gas andfuel on the Consolidated Income Statements. Adopting the netting provision ofEITF 02-03 had no net effect on these transactions other than to reclassifythem and to present total margins earned as operating revenues rather thanpurchased gas and fuel. As a result of net-basis reporting, NUI reducedoperating revenues and purchased gas and fuel line items by $56.1 million and$143.4 million for the three and nine month periods ended June 30, 2002,respectively, with no change to total operating margins.

Energy Asset Managementoperating revenues decreased approximately $0.6 million, or 15 percent, to $3.2million for the three months ended June 30, 2003, as compared to $3.8 millionin the same period in fiscal 2002. The decrease was primarily a result ofapproximately $1.7 million of losses related to a change in the market value offixed-price gas supply contracts previously recorded as unrealized marginsduring the three-month period ended March 31, 2003, and reduced revenues ofapproximately $0.2 million by VGC as a result of reduced volumes by itsdistribution company during the current three month period, as compared to thesame period in fiscal 2002. These decreases were partially offset by increasedoperating margins of approximately $1.3 million resulting from improved tradingactivities due to increased volatility during the current three month period ascompared to the prior fiscal year period. 

Operating revenues increasedapproximately $5.5 million, or 30 percent, to $24.1 million for the nine monthsended June 30, 2003, as compared to $18.6 million in the same period in fiscal2002. The increase was due to approximately $5.3 million of margins recorded byNUI Energy Brokers associated with gas supply procurement contracts related toforecasted sales by NUI Energy, improved margins from asset managementopportunities for the current nine-month period, as compared to the same periodin fiscal 2002 (approximately $2.0 million). Partially offsetting these increases was a significant reduction in themark-to-market valuation of a large storage contract in the NUI Energy Brokers portfolio(approximately $2.1 million).  Alsooffsetting the increase in the current fiscal year period was the effect ofadopting the provisions of EITF 02-03 on October 25, 2002, which required thecompany to account for energy contracts not falling under the provisions ofSFAS 133 on an accrual basis rather than mark-to-market accounting of suchnon-derivative contracts (see Note 13 of the Notes to the ConsolidatedFinancial Statements). The operating revenues of VGC increased approximately$0.3 million as a result of higher operating revenues by its distributioncompany due to an increase in the cost of natural gas during the nine monthsended June 30, 2003, as compared to the same period in fiscal 2002. 

***Operating Margins.*** Operating margins decreasedapproximately $0.8 million, or 23 percent, to $2.9 million for the three monthsended June 30, 2003, as compared to $3.7 million in the same period in fiscal2002. Because operating revenues for NUI Energy Brokers are recorded net of gascosts, the decrease in operating margins is primarily attributable to theeffects of the factors discussed above regarding operating revenues. 

Operating margins increasedapproximately $4.5 million, or 24 percent, to $23.4 million for the nine monthsended June 30, 2003, as compared to $18.9 million in the same period in fiscal2002. This increase was primarily attributable to the effects of the factorsdiscussed above in operating revenues. While natural gas prices have begun toincrease and volatility has increased, market conditions in the energy tradingindustry have been dampened due to fewer creditworthy trading partners. Thecompany anticipates credit issues in the industry will continue throughoutfiscal 2003, which may decrease or limit the growth in operating margins forNUI Energy Brokers. Also, the recent downgrades of the company's credit ratings(see Liquidity and Capital Resources) could increase the collateralrequirements of NUI Energy Brokers, as well as adversely affect the willingnessof counterparties to enter into transactions, which may decrease operatingmargins for the remainder of fiscal 2003. The effect of EITF 02-03 on theaccounting for NUI Energy Brokers' for the 2003 fiscal year is estimated to bea decrease in operating margins of approximately $1.0 million.  

***Operating Expenses.*** Operatingand maintenance expenses increased by approximately $0.5 million during thethree months ended June 30, 2003, as compared to the same period in fiscal2002, primarily due to increases in pension costs previously discussed(approximately $0.1 million), insurance costs for general liability(approximately $0.1 million), as well as increased allocated corporate expenses(approximately $0.2 million). 

Operating and maintenanceexpenses increased by approximately $0.1 million, to $8.0 million for the ninemonths ended June 30, 2003, as compared with $7.9 million in the same period infiscal 2002. This increase was primarily due to increases in pension costs(approximately $0.4 million), insurance costs for general liability(approximately $0.3 million), rent expenses (approximately $0.3 million), aswell as increased allocated corporate expenses (approximately $0.4 million).These increases were partially offset by reduced labor and commissions for NUIEnergy Brokers (approximately $0.6 million), general cost reductions related tosubsidiaries disposed of by VGC (approximately $0.4 million), and reduced bankfees (approximately $0.3 million).  

As previously noted, thecompany anticipates increased costs related to pension expense, insurance costsand allocated corporate expenses resulting from additional auditing, legal, andtreasury expenses, as well and other costs incurred by the company associatedwith fulfilling the requirements of the Sarbanes-Oxley Act of 2002 during theremainder of fiscal 2003.
**Retail andBusiness Services Segment**
The Retail and BusinessServices segment includes the operations of the company's NUI Energy subsidiaryand OAS, the digital mapping business of UBS. The billing services business of UBS, NUI Telecom, as well as the operationsof the network services and wireless divisions of TIC previously reported inthis segment have been reclassified to discontinued operations.

*(Dollars in thousands)*

**Three  Months Ended  June  30, 2003**

**Three Months Ended  June  30, 2002***

**Nine  Months Ended  June 30, 2003**

**Nine Months Ended  June  30, 2002***

Operating Revenues

$61

$(364)

$803

$2,280

Cost of Sales & Services

253

---

683

---

Operating Margins

(192)

(364)

120

2,280

**Operating Expenses:**

 

 

 

 

Operations  & Maintenance Expenses

1,595

1,226

7,518

3,906

Depreciation  & Amortization

86

71

218

201

Taxes  Other than Income

39

54

153

155

Total Operating Expenses

1,720

1,351

7,889

4,262

Loss from Continuing Operations   before    Interest and Taxes 

  $(1,912)

  $(1,715)

  $(7,769)

  $(1,982)

 

 

 

 

*-As restated (see Note 2 of the Notes to the Consolidated Financial Statements)

***Operating Revenues****.*Retail and Business Services operating revenuesincreased by approximately $0.4 million, to $0.1 million for the three monthsended June 30, 2003, from $(0.3) million in the same period in fiscal 2002. Theincrease during the three-month period ended June 30, 2003, was primarily dueto approximately $3.9 million of increased revenues on retail gas sales duringthe three months ended June 30, 2003, as compared to the same period in fiscal2002. This increase was partially offset by a reduction of revenues recordedduring May 2003 for a payment of approximately $3.5 million to HESCO, thepurchaser of certain contracts of NUI Energy, to relieve all future liabilitiesassociated with the gas supply contracts assumed by HESCO (see Note 4 of theNotes to the Consolidated Financial Statements). NUI Energy's revenues havebeen reflected on a net basis for the three and nine-month periods ended June30, 2002, due to the adoption of the netting provisions of EITF 02-03. Therevenues of OAS for the three months ended June 30, 2003, were comparable tothose of the same period during the prior fiscal year.

Operating revenues decreased by approximately $1.5 million, to $0.8million for the nine months ended June 30, 2003 from $2.3 million in the sameperiod in fiscal 2002. This decrease was primarily due to reduced volume ofcontracts as the company sought to exit the retail energy marketing businessand the effects of adopting the provisions of EITF 02-03 (see Note 13 of theNotes to the Consolidated Financial Statements). The revenues of OAS for thenine months ended June 30, 2003, declined approximately $0.2 million, as aresult of reduced billings for completed third party contracts as compared tothe same period in fiscal 2002. 

***Operating Margins****.*Retail and Business Services operating marginsincreased by approximately $0.2 million, to $(0.2) million for the three monthsended June 30, 2003 from $(0.4) million in the same period in fiscal 2002. Theunfavorable margins during the current three-month period were primarily due tothe factors discussed above in operating revenues.

Operating margins decreased by approximately $2.2 million, to $0.1million for the nine months ended June 30, 2003 from $2.3 million in the sameperiod in fiscal 2002. Approximately $1.3 million of this decrease wasprimarily due to the factors discussed above for NUI Energy. The operatingmargins for OAS decreased approximately $0.9 million, to $0.9 million for thenine months ended June 30, 2003, from $1.8 million for the same period infiscal 2002. This decrease was primarily attributable to the inclusion ofapproximately $0.7 million of costs classified as cost of sales and servicesduring the current fiscal year period. These costs were included as a componentof operating expenses during the same period in fiscal 2002.

***Operating Expenses****.*  Operations and maintenance expenses,depreciation and amortization, and taxes other than income for the Retail andBusiness Services segment increased in total by $0.4 million, to $1.7 millionduring the three months ended June 30, 2003, as compared with $1.3 million inthe same period in fiscal 2002. This was mainly a result of increases in baddebt reserves (approximately $0.6 million), as well as increased allocatedcorporate expenses (approximately $0.2 million). These increases were partiallyoffset by reduced labor costs from the elimination of employees as a result ofthe company's exit of its retail energy marketing business (approximately $0.2million) and the costs included as a reduction of operating margins duringfiscal 2003 discussed above (approximately $0.2 million).

Operations and maintenanceexpenses, depreciation and amortization, and taxes other than income increasedin total by $3.6 million, to $7.9 million during the nine months ended June 30,2003, as compared with $4.3 million in the same period in fiscal 2002. This wasprimarily a result of increased bad debt reserves (approximately $3.3 million),costs related to NUI Energy's billing system (approximately $0.5 million), aswell as increased allocated corporate expenses (approximately $0.5 million).These increases were partially offset by the costs included as a reduction ofoperating margins discussed above (approximately $0.7 million).

**Regulatory Matters  **

On November 22, 2002, Elizabethtown Gas Companyreceived approval from the New JerseyBoard of Public Utilities (NJBPU) to increase its base rates by anannual amount of $14.2 million, or approximately 5 percent.  The increase was effective immediately andcovered a portion of the costs of plant investments and higher operatingexpenses incurred since the company's last base rate increase twelve yearsago.  The new rates are based on areturn on equity of 10.0 percent and an overall rate of return on rate base of7.95 percent.  The rate order alsorevised the normal weather pattern upon which base rates and Elizabethtown'sWeather Normalization Clause were reset from a 30-year to a 20-year weatheraverage to better reflect current weather trends.  In addition, the company was allowed to increase service chargesto various rate classes of customers to better reflect the cost of providing serviceto these customers. 

On March 30, 2001, the NJBPU issued an orderallowing the company to establish a new Gas Cost Under-recovery Adjustment(GCUA) to recover the gas cost under-recovery balance as of October, 31, 2001,with associated interest at a fixed rate of 5.5 percent per annum over athree-year period from December 1, 2001 through November 30, 2004. In addition,pursuant to the order, the company was required to make a filing on November15, 2001, to establish a new purchased gas adjustment (PGA) clause ratedesigned to recover purchased gas costs for the period November 1, 2001 throughSeptember 30, 2002. In that filing, the company requested approval to decreaseits PGA rate and implement its GCUA rate, with a net effect representing adecrease of 12.7 percent in residential customer bills.  The NJBPU approved the company's request onan interim basis and these changes became effective on December 1, 2001.

In response to the Electric Discount and EnergyCompetition Act, which was signed into law in February 1999, on March 30, 2001,the NJBPU approved a stipulation which enabled all retail customers in NewJersey to choose a natural gas supplier, provided an incentive for thesecustomers to choose an alternate natural gas supplier and allowed the companyto continue offering basic gas supply service through December 2002. On January17, 2002, the NJBPU issued an order that continued the obligation of all NewJersey gas utilities to provide basic gas supplyservice until it has had an opportunity tofully investigate major policy issues relating to pricing structure and gassupply reliability.  No timetable hasbeen established for completion of such a review.  As of June 30, 2003, no residential customers in the company'sNew Jersey service territory have switched to an alternative gas supplier.

On March 20, 2003, the NJBPU announced theinitiation of a focused audit of NUI Corporation, NUI Utilities, Inc. andElizabethtown Gas Company. The NJBPU has expressed the belief that recentdowngrades of the senior unsecured debt of NUI Corporation and NUI Utilities,Inc., as well as negative credit rating agency comments, and concerns raisedduring a recent competitive services audit, substantiated the need for anin-depth review of the financial practices of the company and its subsidiaries.The NJBPU issued a Request for Proposal (RFP) for consulting firms to bid toperform the focused audit on behalf of the NJBPU. According to the RFP, thefocused audit will cover the following areas: corporate governance; strategicplanning; financial interactions; accounting and property records; executivecompensation and affiliate relations. On June 4, 2003, the NJBPU chose The Liberty Consulting Group to performthe audit. The RFP anticipates the audit report being filed with the NJBPU inlate October 2003. The company is not able to express a belief at this time asto the outcome of the focused audit.

On May 30, 2003, Elizabethtown filed a petition withthe NJBPU seeking an increase to its PGA rate to recover approximately $30million of higher gas costs. The increase equates to approximately 11 percentof an average residential customer's bill. The company requested the increaseto take effect September 1, 2003. While the company is optimistic that thisincrease will be granted, there can be no assurance that this amount will befully realized or implemented on the date requested.

**Liquidity and CapitalResources **

The company's cash provided byoperating activities was $31.2 million and $61.8 million for the nine-monthperiods ended June 30, 2003 and 2002, respectively.  The decrease of $30.6 million in operating cash flows for thenine months ended June 30, 2003, was due in part to the company maintaininghigher fuel inventories at June 30, 2003, as compared to the same period infiscal 2002, and the timing of advances to the joint venture with Duke. Thisdecrease was partially offset by the recovery of a portion of under-recoveredgas costs as a result of the company's ability to collect the largeunder-recovered gas balance that existed at September 30, 2001, includingassociated interest, over a period of three years. As noted in RegulatoryMatters, these under-recovered gas costs are now a component of regulatoryassets and will be recovered with associated interest over a three-year period.

Because the company's business is highly seasonal,short-term debt is used to meet seasonal working capital requirements. Thecompany also borrows under its bank lines of credit to finance portions of itscapital expenditures, pending refinancing through the issuance of equity orlong-term indebtedness at a later date, depending upon prevailing marketconditions. As of June 30, 2003, the company and NUI Utilities had drawnapproximately $149.6 million under their respective short-term creditfacilities and the company had overnight cash investments of approximately$11.5 million. The company will continue to focus on reducing short-termindebtedness during fiscal 2003 and fiscal 2004 through the collection ofunder-recovered gas costs discussed above, additional asset sales, andconsideration of opportunistic longer-term debt financing. 

Given theuncertainties in the energy industry, including the volatility of gas prices,NUI Utilities is planning to obtain additional unsecured short term financing.In August 2003, NUI Utilities entered into an amendment with the lenders underits credit agreement to permit NUI Utilities to obtain the additional $50million in financing.  As of the date ofthis report, NUI Utilities has commenced discussions to obtain the additional$50 million but has not reached a definitive agreement regarding suchadditional financing. Although management believes that NUI Utilities will beable to obtain such additional financing, if NUI Utilities is unable to obtainsuch additional financing, it could potentially have a negative effect on itsliquidity in fiscal 2003 and 2004.

The company currently does nothave any off-balance sheet financing; however, the company is a 50 percentmember of a joint venture that is developing natural gas storage assets and isrequired to provide funding toward the development of these assets for theirintended purpose, and such funding may be provided through a capital lease (seeCapital Expenditures and Commitments- JointVenture with Duke Energy for further discussion).

Thecompany's assets being held for sale are subject to impairment losses if marketvalues are less than carrying values. As a result of the charges totalingapproximately $18.1 million, after-tax, to reduce the carrying values of theassets of NUI Telecom (see Note 7 of the Notes to the Consolidated FinancialStatements), management believes the fair values of these assets are at leastequal to their market values, and the completion of these transactions will notbe material to the company's results of operations.

On May 7, 2003, Moody'sInvestors' Service (Moody's) downgraded NUI Corporation's debt rating from Ba-2to B-1. Moody's also downgraded the debt rating of NUI Utilities from Baa-3 toBa-1. Moody's cited reduced financial flexibility of NUI Corporation due tounder-performance of some of its unregulated businesses, as well as theeffective subordination of NUI Corporation's debtholders to those of NUIUtilities. Moody's also cited NUI Corporation's continued use of a centrallymanaged cash process at the corporate level, which effectively ties NUIUtilities' credit more closely to that of NUI Corporation. As a result of thesedowngrades, NUI Utilities' cost of borrowing under its short-term facilitiesincreased an additional 37.5 basis points or 0.375 percent and the cost ofborrowing for NUI Corporation was unchanged. Should NUI Utilities' current debtratings be downgraded further, this would adversely affect NUI Utilities' costof borrowing under its short-term credit facility.  Should NUI Corporation's or NUI Utilities' current debt rating befurther downgraded, it could potentially increase the collateral requirementsof NUI Corporation's energy portfolio and risk management business anddistribution services business, as the case may be, and could adversely affectthe willingness of counterparties to enter into transactions with the company.

Moody'sindicated that the downgrades on May 7, 2003, concluded its reviews of both thecompany and NUI Utilities. Even though the company is no longer on creditwatch,as a result of the rating actions taken by Moody's in recent months, thecompany is studying various options and strategic alternatives to improve itscapital structure in order to improve its credit ratings to investment grade, whichmay include additional asset sales and/or the issuance of additional equity. 

The company believes it has made significant progress inaddressing the factors cited by Moody's, including entering into the new creditagreements discussed below, divestiture or planned divestiture ofunder-performing subsidiaries, commencing the segregation of the cashmanagement functions of its NUI Utilities subsidiary from the cash managementfunctions of the company, which is required to be completed by November 12, 2003,in accordance with the NUI Utilities credit agreement, and conducting a reviewof the company's internal controls that is expected to be completed during thefourth quarter of fiscal 2003. 

In addition, as of June 30, 2003, a balance ofapproximately $112 million was owed by the company to NUI Utilities, whichmanagement expects to reduce to approximately $27 million by December 2003 andzero by June 2004, primarily as a result of applying the proceeds of plannedasset sales and other cash receipts.  

On February 4, 2003,Standard & Poor's Rating Services (S&P) reaffirmed its BBB investmentgrade rating and reiterated their stable outlook for NUI Utilities. 

There can be no assurancethat additional downgrades by Moody's and/or downgrades by S&P can beavoided. 

***Outlook for Fiscal 2003***. The company believes that the cash providedfrom its operations during fiscal 2003, including recovery of approximately $20million of under-recovered gas costs and $8 million of weather normalizationrecoveries, with cash from the already completed sale of VCW, the collection ofreceivables following the sale of NUI Energy, and cash available under thecredit agreements discussed below will enable the company to meet itsobligations for the current fiscal year. However, as discussed above,given the uncertainties in the energy industry, including the volatility of gasprices, NUI Utilities is planning to obtain additional unsecured short termfinancing. As of the date of this report, NUI Utilities has commenced discussionsto obtain the additional $50 million but has not reached a definitive agreementregarding such additional financing. Although management believes that NUI Utilities will be able to obtainsuch additional financing, if NUI Utilities is unable to obtain such additionalfinancing, it could potentially have a negative effect on its liquidity infiscal 2003 and 2004. Additional discussionof certain items noted above follows.

***Short-Term Debt*.**  OnFebruary 12, 2003, the company and NUI Utilities each entered into a newrevolving credit facility that replaced their respective previous creditfacilities.  The company's new creditfacility consists of a credit agreement that allows it to borrow up toapproximately $38.1 million, and NUI Utilities' new credit facility consistedof a credit agreement and a 364-day bridge loan, which collectively allowed NUIUtilities to borrow up to an aggregate of approximately $141.9 million.  On June 27, 2003, the NUI Utilities creditfacility became fully subscribed at an aggregate of $141.9 million, and the364-day bridge loan was terminated. These credit agreements mature on February11, 2004, and may be extended in successive 364-day increments upon obtainingapproval of all the respective lenders. The credit agreements require the company and NUI Utilities to meetcertain respective covenants and limitations as well as require the company andNUI Utilities, respectively, to maintain certain financial ratios.  Included in these covenants are provisionsthat limit the ability of each of the company and NUI Utilities to incur futureindebtedness, make capital expenditures above certain levels, enter intosale-leaseback transactions, pledge or sell assets, make acquisitions orinvestments, merge or pay dividends on common stock. In addition, the creationof guarantees, other than those in the normal course of business, isprohibited.  The company must maintain afixed charge coverage ratio of not less than 1.50x and NUI Utilities must maintaina fixed charge coverage ratio of not less than 1.75x. The company and NUIUtilities each must maintain leverage ratios of not more than 0.65 from March 1through August 31 and not more than 0.70 from September 1 through February 28(or 29, if applicable). The NUI Utilities' credit agreement limits the paymentof dividends from NUI Utilities to the company to not more than $100million.  The credit agreements permitthe company and NUI Utilities to enter into up to an aggregate $50 million ofsale/leaseback transactions to provide financing flexibility.

Borrowings under the new credit facilities bearinterest at a rate based on either the London Interbank Offered Rate (LIBOR) orthe Prime Rate as of the date of the advance. Pricing grids have been provided to the company and NUI Utilities by thebank syndication agent, which tier pricing to higher and lower credit ratingsshould a debt rating change occur. As of June 30, 2003, the total aggregateoutstanding borrowings under the company's and NUI Utilities' credit facilitieswere $149.6 million. On that date, the company had outstanding borrowings underits credit facility amounting to $25.7 million and unused borrowing capacityamounting to $12.4 million, and NUI Utilities had outstanding borrowings underits credit facility amounting to $123.9 million and unused borrowing capacityamounting to $18.0 million.  Also onthat date, the company had available cash in the form of overnight investmentsof approximately $11.5 million. The weighted average daily amounts outstandingof borrowings under the company's credit facility and the weighted averageinterest rates on those amounts were $18.6 million and $35.8 million at 2.8percent and 3.0 percent for the three and nine-month periods ended June 30,2003, respectively, and $58.2 million and $107.3 million at 2.6 percent and 3.5percent for the three and nine-month periods ended June 30, 2002, respectively.The weighted average daily amounts outstanding of borrowings under NUIUtilities' credit facility and the weighted average interest rates on thoseamounts were $126.8 million and $114.2 million at 2.8 percent and 2.7 percentfor the three and nine-month periods ended June 30, 2003, respectively, and$66.2 million and $67.9 million at 2.5 percent and 2.8 percent for the threeand nine-month periods ended June 30, 2002, respectively.

The company expects strong cash flow from operationsduring the remainder of fiscal 2003 as a result of the following factors: thecollection of approximately $20 million of under-recovered gas costs; thecollection of weather normalization recoveries of approximately $8 millionrelated to the warmer than normal weather experienced during fiscal 2002; thecollection of receivables following the sale of NUI Energy; improvedprofitability as a result of the outcome of the Elizabethtown Gas rate case;and reduced losses from discontinued operations related to the company's TICand NUI Environmental subsidiaries.  InNovember 2002, the company raised approximately $15 million from the sale ofits Valley Cities Gas and Waverly Gas subsidiaries. Because of the abovefactors that are expected to have a positive impact upon the company's cashflows, financial position and debt-servicing capabilities, the company believesthat it has sufficient amounts available under its credit agreement, and cashon hand, and that NUI Utilities has sufficient amounts available under itscredit agreement, to cover their respective projected cash needs for fiscal2003, as well as to provide a contingent cash reserve for potential unforeseenevents. However, as previously discussed, if NUI Utilities is unable to obtainthe additional $50 million in short term financing, it could potentially have anegative effect on the liquidity of NUI Utilities in fiscal 2003 and 2004.

***Long-Term Debt and Funds for ConstructionHeld by Trustee*****.**  The company is scheduled to repay $50million of medium-term notes on February 1, 2005.

The company's long-term debtagreements include, among other things, restrictions as to the payment of cashdividends. Under the most restrictive of these provisions, the company ispermitted to pay approximately $52.9 million of cash dividends at June 30,2003.

Asof June 30, 2002, all of the original net proceeds totaling approximately $38.5million in aggregate principal amount of the variable rate Gas FacilitiesRevenue Bonds (the "revenue bonds") issued by the New Jersey EconomicDevelopment Authority in June 1996 had been drawn upon by NUI Utilities foreligible expenditures.  Approximately$2.1 million of interest earned on the original net proceeds from the revenuebonds has been classified as "Funds for Construction Held by Trustee" on thecompany's Consolidated Balance Sheet at June 30, 2003.

NUIUtilities has entered into an amended and restated standby bond purchaseagreement (the "standby bond purchase agreement"), dated as of June 12, 2001,between NUI Utilities and The Bank of New York (the "bank"), which adjusted thestandby bond purchase agreement entered into in connection with the issuance ofits 1996 variable rate revenue bonds. Under the terms of the standby bond purchase agreement, as amended onJuly 21, 2003, the bank is obligated under certain circumstances to purchaserevenue bonds that are tendered by the holders thereof and not remarketed bythe remarketing agent.  Such obligationof the bank remains in effect until the expiration of the standby bond purchaseagreement on December 31, 2003, unless extended or earlier terminated.  If the standby bond purchase agreement isnot extended beyond its current expiration date, in accordance with the termsof the revenue bonds, all of the 1996 revenue bonds will be subject tomandatory tender at a purchase price of 100 percent of the principal amountplus accrued interest to the date of purchase. In accordance with the terms of the standby bond purchase agreement, ifany of the revenue bonds cannot be remarketed, the bank will be required topurchase the revenue bonds so tendered and not remarketed.  Revenue bonds which are held by the bank andnot remarketed will bear interest at a variable rate (not to exceed 18percent).  

Beginningsix months after the expiration or termination of the standby bond purchaseagreement, any revenue bonds still held by the bank must be redeemed orpurchased by NUI Utilities in ten equal, semi-annual installments.  In addition, while the standby bond purchaseagreement is in effect, any tendered revenue bonds that are purchased by thebank and are not remarketed within one year must be redeemed or purchased byNUI Utilities at such time, and every six months thereafter, in ten equal,semi-annual installments. 

NUI Utilities anticipates thatit will elect to terminate the standby bond purchase agreement and convert therevenue bonds to a fixed five-year interest rate mode during the first fiscalquarter of 2004.  If the standby bondpurchase agreement were to be terminated, NUI Utilities expects that the 1996revenue bonds would be supported by a surety bond issued by a municipal bondinsurance company at such time.  As ofJune 30, 2003, the aggregate principal and accrued interest on the outstanding1996 revenue bonds totaled approximately $39.0 million.  Principal and any unpaid interest on theoutstanding 1996 revenue bonds are due on June 1, 2026.

***Common Stock*****. **The company periodically issues shares of common stockin connection with NUI Direct, the company's dividend reinvestment and stockpurchase plan, and various employee benefit plans. Fromtime to time, the company may issue additional equity to reduce short-termindebtedness and for other general corporate purposes. The company sold 1.725million shares of its common stock for net proceeds of approximately $37.0million in March 2002. 

The company issued stock in conjunction withseveral acquisitions during fiscal 2002. This included 144,648 shares worthapproximately $3.1 million to acquire VGSC and VGDC (see Commitments andContingencies- Acquisition of Virginia Gas Storage Company (VGSC) and VirginiaGas Distribution Company (VGDC)), and 216,039 shares worth approximately $4.2million to acquire Norcom. In addition, the company issued 47,136 shares to theformer owners of NUI Telecom as payment of an incentive of $1.0 million under aprovision of the Agreement and Plan of Merger.

***Assets and Liabilities Held for Sale***.  During June2003, the company approved plans to sell the billing services operations of itsUBS and NUI Telecom subsidiaries, and has begun actively seeking a buyer foreach subsidiary (see Note 7 of the Notes to the Consolidated FinancialStatements). This follows the sales of NC and VCW in September and November2002, respectively. In accordance with the provisions of Statement of FinancialAccounting Standards No. 144, "Accounting for Impairment or Disposal ofLong-lived Assets," the company has reclassified the assets and liabilities ofUBS, NUI Telecom, NC and VCW as Held for Sale on the Consolidated BalanceSheets at June 30, 2003, and September 30, 2002.  

**Capital Expenditures and Commitments**

***Capital Expenditures***. Capital expenditures,which consist primarily of expenditures to expand and upgrade the company's gasdistribution systems, were $27.6 million for the nine months ended June 30,2003, and $40.2 million for the nine months ended June 30, 2002. Capitalexpenditures are expected to be approximately $62 million in fiscal 2003, whichwill be used primarily for the company's contribution toward the developmentand expansion of the Saltville Storage project (see additional discussionbelow), continued expansion and upkeep of the company's natural gas distributionsystem and certain information technology projects.

***JointVenture with Duke Energy***. OnApril 30, 2001, the company announced an agreement with a unit of Duke Energyto develop a natural gas storage facility in Saltville, Virginia. A NUISaltville Storage, Inc., a subsidiary of NUI Corporation and Duke Energy GasTransmission (DEGT) have created a limited liability company, Saltville GasStorage Company LLC (the LLC).  VGCreceived final regulatory approvals during January 2003 and contributed certainstorage assets valued at approximately $16.3 million to the LLC. DEGT hascontributed an equal amount (approximately $16.3 million) of capital requiredto expand the facility for its intended purpose.  To the extent the LLC determines it needs additional funding(which decision can only be made jointly by the company and DEGT), the companyand DEGT are obligated to fund the development of the LLC equally. 

The company has fundedapproximately $9.2 million toward the development of the LLC through June 30,2003, and currently estimates its share of funding needs to be approximately $9.1 million for the remainder offiscal 2003, $7.3 million in fiscal 2004,$0.8 million in fiscal 2005, $0.7 million in fiscal 2006, and $0.8 million infiscal 2007. The company is exploring various options to satisfy theremainder of its funding requirements for the joint venture during fiscal 2003,including a sale-leaseback by the LLC of a compressor station with a portion ofthe proceeds from such sale-leaseback being retained by the LLC.

The LLC plans to expand the present Saltvillestorage facility from its current capacity of 1 Bcf to approximately 12 Bcf andconnect it to DEGT's East Tennessee Natural Gas interstate system and DEGT'sPatriot pipeline, which is under construction. At full capacity, the Saltvillestorage field will be able to deliver up to 500 million cubic feet per day ofnatural gas to area markets. The Saltville facility features fast-injection andfast-withdrawal capabilities offered by salt cavern storage. The expansion willbe completed in phases starting in fiscal 2003, with the Phase I total of 6.1Bcf of working natural gas storage capacity to be completed by fiscal 2008. Themarket demand for additional storage will dictate the timing of the other phasesof the expansion.

Development of the Saltville facility is intended tocreate a strategically located energy-trading hub for Energy Brokers, andenable the company to capitalize on the energy supply and wholesale energyportfolio and risk management opportunities in the rapidly developingMid-Atlantic region. The additional storage capacitywould allow the company to meet the significant demandfrom local distribution companies as well as power plant development that isunderway in the region.

***Developmentof Trading Hubs***. The company'swholesale energy portfolio and risk management subsidiary, Energy Brokers, hasacquired options on the land and mineral rights for property located inRichton, Perry County, Mississippi, that the company plans to develop into anatural gas storage facility to help serve the Southeast United States. EnergyBrokers plans to develop a two-well salt dome storage facility in Richton thatwould have a working gas capacity of approximately 7.8 billion cubic feet. 

The first well and a 14-mile pipeline to bedeveloped by the company that will connect with the Destin Pipeline aretentatively scheduled to be operational in fiscal 2005. Implementation of thisdevelopment plan is dependent on favorable results from testing and other operationalissues that are currently under consideration by the company as well asobtaining sufficient financing to fund the development. Accordingly, there canbe no assurance that this project will be implemented. This project is notexpected to have any material capital requirements in fiscal 2003 or 2004 and,if the project proves feasible, will primarily impact the company's capitalexpenditure program in fiscal years 2005 and 2006 after the funding needs ofPhase I of the Saltville facility (discussed above) are essentially satisfied.

The benefits of the Richton site to customers andEnergy Brokers are: (1) its proximity to a number of major interstatepipelines, including Destin Pipeline and its connections to Williams GasPipeline-Transco, Florida Gas Transmission, Gulf South Pipeline, TennesseeNatural Gas, Southern Natural Gas and Gulfstream Pipeline; and (2) thequick-fill, quick-withdrawal capabilities offered by salt dome storage. 

***Gas Procurement Contracts****.*Certain of the company's long-term contracts for the supply, storage anddelivery of natural gas include fixed charges that amount to approximately$53.3 million annually. The company also is committed to purchase from a singlesupplier, at market-related prices, minimum quantities of gas that, in theaggregate, are approximately 2.1 Bcf per year. In the event that the company does not purchase theminimum quantity in a given year, the company has until the next contract yearto make up the difference or risk a reduction in the contracted daily deliveryquantity. Duringfiscal year ended September 30, 2002, the company's continuing utilityoperations purchased a total of 36.0 Bcf, and accordingly the company expectsthat minimum demand on its systems for the duration of these contracts will continueto exceed this minimum purchase requirement. As discussed earlier, thecompany's utility operations do not earn a profit on the sale of the gascommodity; therefore, changes to gas commodity prices have no effect onoperating margins.

***Environmental*.**  Thecompany owns or previously owned properties on which former manufactured gasplants (MGP) were operated in the states of New Jersey, North Carolina, SouthCarolina, Pennsylvania, New York and Maryland. Although theactual total cost of future environmental investigation and remediation efforts cannot bereasonably estimated, thecompany has recorded a total reserve of approximately $33.5 million, which thecompany believes represents the probable minimum amount the company may expendfor environmental investigation and remediation efforts over the next 30years.  Of this reserve, approximately $29.8million relates to theNew Jersey MGP properties and approximately $3.7 million relates to the MGP properties locatedoutside the state of New Jersey. The company believes that all costs associatedwith remediation of the New Jersey MGP properties will be recoverable in ratesor from insurance carriers. In New Jersey, the company has begun rate recovery of approximately $8.2 million of suchcosts and recovery of an additional $1.7 million is currently pending NJBPUapproval. With respect to costs that may beassociated with the MGP properties located outside the state of New Jersey, thecompany is currently pursuing or intends to pursue recovery from former ownersand operators, and/or insurance carriers. Although the company has beensuccessful in recovering a portion of MGP remediation costs incurred outsideNew Jersey from the company's insurance carriers, the company is not able, atthis time, to express a belief as to the success of additional recoveryefforts. 

***Agreement to Acquire Assets of NorcomAgency Sales, Inc.*** On March 22, 2002, the company entered into anagreement to acquire certain assets of Norcom Agency Sales, Inc. (NAS). Theagreement provides for the company to pay the seller, Norcom, a purchase priceequal to a multiple of total sales to new customers obtained by NAS as agentfor NUI Telecom during the period April 1, 2002, through October 31, 2003. Themultiple to be paid will be determined based on the actual new customerrevenues generated by NAS for the month of October 2003, and is subject topost-closing adjustments. 

Thepurchase price will be paid in NUI common stock. The number of shares of NUI common stock to be issued will be determinedby dividing the total purchase price by the average closing price of NUI'scommon stock for the first 20 of the 25 consecutive trading days immediatelypreceding October 31, 2003. The company expects to close on this transaction in or around February 2004. 

**Applicationof Critical Accounting Policies**

The preparation of financialstatements in accordance with generally accepted accounting principles (GAAP)requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities, the disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period. Management considersCritical Accounting Policies to be those that could result in materiallydifferent financial statement results if the assumptions regarding applicationof accounting principles were different. A description of the company's Critical Accounting Policies can be foundin the company's Annual Report filed on Form 10-K for the year ended September30, 2002. Other significant accounting policies are discussed in Note 1 of theNotes to the Consolidated Financial Statements- "Summary of SignificantAccounting Policies" of the company's Annual Report on Form 10-K for its fiscalyear ended September 30, 2002. Recently issued accounting standards are alsodiscussed in Note 13 of the Notes to the Consolidated Financial Statements-"New Accounting Standards."

**Forward-Looking Statements**

This document contains forward-looking statements.These statements are based on management's current expectations and informationcurrently available, are believed to be reasonable and are made in good faith.However, the forward-looking statements are subject to risks and uncertaintiesthat could cause actual results to differ materially from those projected inthe statements. Factors that may make the actual results differ fromanticipated results include, but are not limited to, the company's ability tocontrol operating expenses; the ability of the company to carry out itsstrategy of successfully divesting NUI Telecom and the billing servicesoperations of UBS; the level of uncollectible receivables; the volatility ofnatural gas prices; higher gas costs; the impact of transactions relating tothe company's exit of the retail energy marketing business; economicconditions; weather fluctuations; regulatory changes; competition from otherproviders of similar products; counterparty credit risk; access to capitalmarkets; the results of the focused audit being conducted by the NJBPU; theability of NUI Utilities to obtain additional financing under its creditagreement; interest rate changes; the effects of reducing amounts owed to NUIUtilities in connection with the segregation of cash management functions;future actions by ratings agencies; the company's and NUI Utilities' ability toextend its credit facilities; the willingness of counterparties to continue totrade with, and supply energy to the company and such counterpartieswillingness to do so on terms similar to those currently in place; and otheruncertainties, all of which are difficult to predict and many of which arebeyond our control. For these reasons, you should not rely on theseforward-looking statements when making investment decisions. The words"expect," "believe," "project," "anticipate," "intend," "should," "could,""will," "might," "estimate" and variations of such words and similarexpressions, are intended to identify forward-looking statements. We do notundertake any obligation to update publicly any forward-looking statement,either as a result of new information, future events or otherwise, except asrequired by securities laws.

For an additional discussion of factors that may affectthe company's business and results of operations, see "Risk Factors" in ourAnnual Report filed on Form 10-K for the fiscal year ended September 30, 2002.

**Item 3. Quantitative and Qualitative Disclosure About****Market Risk**

Energy Brokers uses derivatives for multiplepurposes: i) to hedge price commitments and minimize the risk of fluctuatinggas prices, ii) to fulfill its trading strategies and, therefore, ensurefavorable prices and margins, and iii) to take advantage of market informationand opportunities in the marketplace. These derivative instruments includeforwards, futures, options and swaps.The majority of Energy Brokers' positions are short-term in nature (up to 2years) and can be readily valued using New York Mercantile Exchange settlementprices and those from otherwell-established, third-party organizations.

Energy Brokers accounts for its tradingactivities in accordance with the provisions of SFAS 133, Accounting forDerivative Instruments and Hedging Activities. SFAS 133 requires that all derivatives be recognized on the balancesheet at fair value with changes in the value of derivatives that are nothedges recorded in earnings. 

At June 30, 2003, Energy Brokershad designated certain futures contracts and physical forwards associated withthe delivery and sale of natural gas into and from storage as cash flow hedgeswith the objective of fixing an acceptable return.  Under SFAS 133, the changes in the value of derivativesdesignated as hedges that are effective in offsetting the variability in cashflows of a forecasted transaction are recognized in other comprehensive incomeuntil the forecasted transactions occur and the ineffective portion of changesin fair value of derivatives is recognized immediately in earnings. 

At June 30, 2003, the value inother comprehensive income associated with these positions is $0.1 million, netof tax, which will be reclassified into earnings over the next twelvemonths.  However, the actual amountreclassified into earnings could differ based on fluctuations in marketprices.  At June 30, 2003 there was nohedge ineffectiveness recognized in earnings.

The risk associated with openpositions is closely monitored on a daily basis, and controlled in accordancewith NUI Energy Brokers' Risk Management Policy. This policy has been preparedby senior management and approved by the company's Board of Directors, anddictates policies and procedures for all trading activities. The policy definesboth value-at-risk (VaR) and loss limits, and all traders are required to read,sign, and follow this policy. At the end of each day, all trading positions aremarked-to-market and a VaR is calculated. This information, as well as thestatus of all limits, is disseminated to senior management daily. In addition,the Risk Management Policy is regularly reviewed by senior management to assurethat it is current and responsive to all marketplace risks, with any changesapproved by the Board of Directors.
The followingschedule summarizes the changes in derivative assets and liabilities for thenine-month period ended June 30, 2003 (in thousands). Amounts are shown net ofvaluation reserves.
Derivative  assets at September 30, 2002

$30,441

Derivative  liabilities at September 30, 2002

   (852)

   Fair value of contracts outstanding at  September 30,       2002

    $29,589

Contracts  realized or settled during the period

(48,521)

Change  in accounting 

(9,949)

Changes  in fair value attributable to market pricing

57,160

Derivative  assets at June 30, 2003

$28,279

Derivative  liabilities at June 30, 2003

        ---

   Fair value of contracts outstanding at  June 30, 2003

$28,279

Changesin the fair value attributable to market pricing represents the changes invalue of the company's unrealized mark-to-market net assets that relate tochanges in commodity pricing, volatility of options on commodities, and othermarket related changes.

Thefollowing table summarizes the fair value of the contracts comprising thecompany's net derivative assets by maturity date (amounts in thousands):

**Fair Value of Contracts at  Period-End**

 
**Source of Fair Value**

**Less than 1 Year**

**1-3 Years**

**4-5 Years**

**In Excess of 5 Years**

**Total**

Prices  actively quoted

$19,003

$3,426

$---

$---

$22,429

Prices  provided by other external sources

1,271

---

---

---

1,271

Prices  based on models and other valuation methods, net of valuation reserves

 

   1,284

 

 1,901

 

 1,394

 

 ---

 

   4,579

Total  Fair Value of Contracts

$21,558

$5,327

$1,394

$---

$28,279

Energy Brokers utilizes the variance/covariance VaRmethodology. Using a 95 percent confidence interval and a one-day time horizon,Energy Brokers' VaR was $45,000 and $210,000 at June 30, 2003 and 2002,respectively. The average, high, and low value at risk for the nine monthsended June 30, 2003 was $201,000, $743,000, and $14,000, respectively. 
**Item 4. Controls andProcedures**
(a)          Evaluation of Disclosure Controls and Procedures

Thecompany's Chief Executive Officer and Chief Financial Officer have eachevaluated the effectiveness of NUI's disclosure controls and procedures as of adate the period covered by this report. Based on their evaluation, the ChiefExecutive and Chief Financial Officer have concluded that the company'sdisclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)of the Securities Exchange Act) are effective to ensure that informationrequired to be disclosed by the company in reports that it files or submitsunder the Securities Exchange Act is recorded, processed, summarized andreported within required time periods.

(b)        Changes in Internal Controls

The company maintains a system of internal accountingcontrols that is designed to provide reasonable assurance that the company'sbooks and records accurately reflect the company's transactions and that thecompany's established policies and procedures are followed. In the course ofthe company's ongoing review of its internal controls over financial reporting,the company's management concluded that steps needed to be taken to improve theadequacy of its internal controls. Key modifications to the company's internalcontrols that the company is and will continue to implement include adoptingmore stringent cash management and accounting practices and procedures;mitigating the risk of internal control failures; implementing controlsdesigned to ensure compliance with legal and regulatory requirements; andincreasing management oversight and reviews of disclosures and reporting. Thecompany's management has assigned a high priority to the short- and long-termimprovement of the company's internal controls and continues to implementchanges to the company's policies, procedures, systems and personnel to improveits internal controls.

**PART II - OTHER INFORMATION**

**Item 1.    Legal Proceedings**

Between October 28, 2002 and December 20, 2002, fivesubstantially similar civil actions were commenced in the United StatesDistrict Court for the District of New Jersey, in which the plaintiffs allegethat the company and its president and chief executive officer violated federalsecurities laws by issuing false statements and failing to disclose informationregarding the company's financial condition and current and future financialprospects in its earnings statements, press releases, and in statements toanalysts and others.  By orders datedDecember 19, 2002, January 22, 2003, and February 3, 2003, the five actionswere consolidated into one action captioned In re NUI Securities Litigation.  The five consolidated lawsuits include: (1)an action captioned Jack Klebanow, on behalf of himself and all otherssimilarly situated v. NUI Corporation and John Kean, Jr., filed in theUnited States District Court for the District of New Jersey on October 28,2002;  (2) an action captioned GiselaFriedman, on behalf of herself and all others similarly situated v. NUICorporation and John Kean, Jr., filed in the United States District Courtfor the District of New Jersey on October 31, 2002;  (3) an action captioned Thomas Davis, on behalf of himself andall others similarly situated v. NUI Corporation and John Kean, Jr., filedin the United States District Court for the District of New Jersey on November6, 2002; (4) an action captioned Marvin E. Russell, on behalf of himself andall others similarly situated v. NUI Corporation and John Kean, Jr., filedin the United States District Court for the District of New Jersey on December10, 2002; and (5) an action captioned Phyllis Waltzer, on behalf of herselfand all others similarly situated v. NUI Corporation and John Kean, Jr.,filed in the United States District Court for the District of New Jersey onDecember 20, 2002. By order dated February 3, 2003, a Lead Plaintiff, LeadCounsel and Liaison Counsel were appointed in the consolidated action. Bystipulation of the parties, an Amended Consolidated Class Action Complaint wasfiled on May 7, 2003, and subsequently plaintiffs were granted leave to file aSecond Amended Consolidated Complaint. By stipulation of the parties,responsive pleadings are to be served on or about August 28, 2003. No discoveryhas yet occurred. The Second Amended Complaint, brought on behalf of a putativeclass of purchasers of NUI's common stock between November 8, 2001 and October17, 2002, asserts claims under Section 10(b), including Rule 10b-5 promulgatedthereunder, and Section 20(a) of the Exchange Act against the company, itspresident and chief executive officer, and its chief financial officer.Specifically, the Second Amended Complaint alleges that the defendants (i)failed to disclose material facts that would impair the company's current andfuture earnings, including (a) the allegedly accurate amount and explanation ofthe company's bad debts, (b) a purportedly illegal practice by the company in"re-terminating" intrastate calls, (c) alleged accounting improprieties in connectionwith purportedly unearned revenue, and (d) allegedly inaccurate earnings pershare information, and (ii) inflated the company's earnings materially by (a)allegedly making misleading statements concerning, and failing to properlyrecord bad debt costs, (b) allegedly attributing the company's rising costs toincorrect and immaterial factors, and (c) purportedly pursuing illegaltelecommunications billing practices. The Second Amended Complaint seeksunspecified monetary damages on behalf of the class, including costs andattorneys fees. Furthermore, on December 23, 2002, a law firm made a publicannouncement with respect to a lawsuit purportedly filed in the SouthernDistrict of New York on behalf of a putative class of purchasers of NUI'scommon stock between November 8, 2001 and October 17, 2002 against NUICorporation and John Kean, Jr., alleging violations under Section 10(b),including Rule 10b-5 promulgated thereunder, and Section 20(a) of the ExchangeAct.  Specifically, the announcementalleges that the company knowingly or recklessly failed to properly recordfixed cost expenses, accrue necessary pension expenses and reserve adequateamounts for its self-insured medical benefits in its quarterly financialstatements.  At this time, the companyhas not been served with the purported complaint. Although the company intendsto vigorously defend these lawsuits, it is not possible at this time todetermine a likely outcome.

The company is also involvedin other various claims and litigation incidental to its business. In theopinion of management, none of these other claims and litigation will have amaterial adverse effect on the company's results of operations or its financialcondition.

**Item 6.    Exhibits and Reports on Form 8-K**

**(a)           Exhibits**

10            First Amendment to Credit Agreement, dated as of August11, 2003, by and among NUI Utilities, Inc., and the lenders from time to timeand parties thereto (the Lenders), Fleet National Bank, as Agent for the Lenders, Citizens Bank ofMassachusetts, CIBC, Inc. as Co-Syndication Agents, and PNC Bank, NA, asDocumentation Agent.

31.1         Certification of the Chief ExecutiveOfficer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302of the Sarbanes-Oxley Act of 2002.

31.2         Certificationof the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1         Certificationsof the Chief Executive Officer and Chief Financial Officer pursuant to 18U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002.

**(b)    ****       Reports onForm 8-K**

(1)            On April 3, 2003, the company filed a Current Report onForm 8-K dated April 1, 2003, under Item 5, announcing the amendment of theNote Purchase Agreement between the company and the Senior Note Holders partythereto and an amendment to the Credit Agreement between the company and itsbank group.

(2)           On April 30, 2003, the company filed a CurrentReport on Form 8-K dated April 30, 2003, under Items 7 and 9, announcing resultsof operations for the period ending March 31, 2003.

(3)           On July 22, 2003, the company filed aCurrent Report on Form 8-K dated July 22, 2003, under Item 5, announcing theretirement of Michael J. Behan, Vice President, New Ventures, effective July23, 2003.

(4)           On July 31, 2003, the company furnished a CurrentReport on Form 8-K dated July 31, 2003, under Items 7 and 12, announcingresults of operations for the period ending June 30, 2003.

**SIGNATURES**
                Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

**NUI CORPORATION**

August 14, 2003

JOHN KEAN, JR.  President and Chief Executive Officer

August 14, 2003

A. MARK ABRAMOVIC  Sr. Vice President, Chief Operating Officer & Chief Financial Officer |