SPIRE INC - Annual Report: 2009 (Form 10-K)
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SECURITIES
AND EXCHANGE COMMISSION
Washington,
D. C.
FORM
10-K
ANNUAL
REPORT
For
the Fiscal Year Ended September 30, 2009
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SECURITIES
AND EXCHANGE COMMISSION
Washington,
D. C. 20549
FORM
10-K
[
X ]
|
ANNUAL
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE
ACT
OF 1934 For the Fiscal Year Ended
September 30, 2009
|
OR
[
]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934 For the Transition Period from __________ to
__________
|
Commission
File Number
|
Registrant
|
State
of Incorporation
|
I.R.S.
Employer
Identification
Number
|
1-16681
|
The
Laclede Group, Inc.
|
Missouri
|
74-2976504
|
1-1822
|
Laclede
Gas Company
|
Missouri
|
43-0368139
|
720
Olive Street
St.
Louis, MO 63101
314-342-0500
Securities
registered pursuant to Section 12(b) of the Act
Name
of Registrant
|
Title
of Each Class
|
Name
of Each Exchange On Which Registered
|
The
Laclede Group, Inc.
|
Common
Stock $1.00 par value
|
New
York Stock Exchange
|
The
Laclede Group, Inc.
|
Preferred
Share Purchase Rights
|
New
York Stock Exchange
|
Laclede
Gas Company
|
None
|
Securities
registered pursuant to Section 12(g) of the Act: None.
Indicate
by check mark if the registrant:
is
a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.
The
Laclede Group, Inc.:
|
Yes
|
[
X ]
|
No
|
[
]
|
Laclede
Gas Company:
|
Yes
|
[
]
|
No
|
[
X ]
|
is
not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.
The
Laclede Group, Inc.:
|
Yes
|
[
]
|
No
|
[
X ]
|
Laclede
Gas Company:
|
Yes
|
[
]
|
No
|
[
X ]
|
(1)
has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such report) and (2) has
been subject to such filing requirements for the past 90 days.
The
Laclede Group, Inc.:
|
Yes
|
[
X ]
|
No
|
[
]
|
Laclede
Gas Company:
|
Yes
|
[
X ]
|
No
|
[
]
|
has
submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
The Laclede Group,
Inc.:
|
Yes
|
[
]
|
No
|
[
]
|
Laclede Gas
Company:
|
Yes
|
[
]
|
No
|
[
]
|
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
Indicate
by check mark whether the registrant:
is
a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act
The Laclede Group,
Inc.:
|
|||||
Large
accelerated filer
|
[
X ]
|
Accelerated
filer
|
[
]
|
||
Non-accelerated
filer
|
[
]
|
Smaller
reporting company
|
[
]
|
||
Laclede Gas
Company:
|
|||||
Large
accelerated filer
|
[
]
|
Accelerated
filer
|
[
]
|
||
Non-accelerated
filer
|
[
X ]
|
Smaller
reporting company
|
[
]
|
is
a shell company (as defined in Rule 12b-2 of the Exchange Act).
The
Laclede Group, Inc.:
|
Yes
|
[
]
|
No
|
[
X ]
|
Laclede
Gas Company:
|
Yes
|
[
]
|
No
|
[
X ]
|
The
aggregate market value of the voting stock held by non-affiliates of The Laclede
Group, Inc.
amounted
to $806,025,946 as of March 31, 2009.
Number
of shares outstanding of each of the issuer’s classes of common stock as of the
latest practicable date:
Shares
Outstanding At
|
||
Registrant
|
Description of Common
Stock
|
November 19, 2009
|
The
Laclede Group, Inc.:
|
Common
Stock ($1.00 Par Value)
|
22,250,225
|
Laclede
Gas Company:
|
Common
Stock ($1.00 Par Value)
|
11,634*
|
* 100%
owned by The Laclede Group, Inc.
Document
Incorporated by Reference:
Portions
of Proxy Statement dated December 18, 2009 —
Part III
Index to Exhibits is found on page 92.
This
combined Form 10-K is separately filed by The Laclede Group, Inc. and Laclede
Gas Company. Each registrant hereto is filing on its own behalf all of the
information contained in this annual report that relates to such registrant.
Each registrant hereto is not filing any information that does not relate to
such registrant, and therefore makes no representation as to any such
information.
Note:
Laclede Gas Company Selected Financial Data, Management’s Discussion and
Analysis of Financial Condition and Results of Operations, Financial Statements,
Notes to Financial Statements, Management Report on Internal Control Over
Financial Reporting, and Reports of Independent Registered Public Accounting
Firm are included as Exhibit 99.1.
Page
No.
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85
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86
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86
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87
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88
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92
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Certain
matters discussed in this report, excluding historical information, include
forward-looking statements. Certain words, such as “may,” “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “plan,” “seek,” and similar words and
expressions identify forward-looking statements that involve uncertainties and
risks. Future developments may not be in accordance with our expectations or
beliefs and the effect of future developments may not be those anticipated.
Among the factors that may cause results to differ materially from those
contemplated in any forward-looking statement are:
•
|
weather
conditions and catastrophic events, particularly severe weather in the
natural gas producing areas of the country;
|
|
•
|
volatility
in gas prices, particularly sudden and sustained changes in natural gas
prices, including the related impact on margin deposits associated with
the use of natural gas derivative instruments;
|
|
•
|
the
impact of higher natural gas prices on our competitive position in
relation to suppliers of alternative heating sources, such as
electricity;
|
|
•
|
changes
in gas supply and pipeline availability; particularly those changes that
impact supply for and access to our market area;
|
|
•
|
legislative,
regulatory and judicial mandates and decisions, some of which may be
retroactive, including those affecting
|
|
•
|
allowed
rates of return
|
|
•
|
incentive
regulation
|
|
•
|
industry
structure
|
|
•
|
purchased
gas adjustment provisions
|
|
•
|
rate
design structure and implementation
|
|
•
|
regulatory
assets
|
|
•
|
franchise
renewals
|
|
•
|
environmental
or safety matters
|
|
•
|
taxes
|
|
•
|
pension
and other postretirement benefit liabilities and funding
obligations
|
|
•
|
accounting
standards;
|
|
•
|
the
results of litigation;
|
|
•
|
retention
of, ability to attract, ability to collect from, and conservation efforts
of, customers;
|
|
•
|
capital
and energy commodity market conditions, including the ability to obtain
funds with reasonable terms for necessary capital expenditures and general
operations and the terms and conditions imposed for obtaining sufficient
gas supply;
|
|
•
|
discovery
of material weakness in internal controls; and
|
|
•
|
employee
workforce issues.
|
Readers
are urged to consider the risks, uncertainties, and other factors that could
affect our business as described in this report. All forward-looking statements
made in this report rely upon the safe harbor protections provided under the
Private Securities Litigation Reform Act of 1995. We do not, by including this
statement, assume any obligation to review or revise any particular
forward-looking statement in light of future events.
Item
1. Business
Overview
The
Laclede Group, Inc. (Laclede Group or the Company) is a public utility holding
company formed through a corporate restructuring that became effective
October 1, 2001. Laclede Group is committed to providing reliable
natural gas service through its regulated core utility operations while engaging
in non-regulated activities that provide sustainable growth. All of Laclede
Group’s subsidiaries are wholly owned. The Regulated Gas Distribution segment
includes Laclede Gas Company (Laclede Gas or the Utility), Laclede Group’s
largest subsidiary and core business unit. Laclede Gas is a public utility
engaged in the retail distribution and sale of natural gas. Laclede Gas is the
largest natural gas distribution utility in Missouri, serving approximately
630,000 residential, commercial, and industrial customers in the City of St.
Louis and parts of ten counties in eastern Missouri. The Non-Regulated Gas
Marketing segment includes Laclede Energy Resources, Inc. (LER), a wholly-owned
subsidiary engaged in the marketing of natural gas and related activities on a
non-regulated basis. LER markets natural gas to both on-system Utility
transportation customers and customers outside of Laclede Gas'
traditional
service territory, including large retail and wholesale customers. As such,
LER’s operations and customer base are subject to fluctuations in market
conditions. Other subsidiaries provide less than 10% of consolidated revenues.
As of September 30, 2009, Laclede Group had 1,762 employees, including
13 part-time employees.
On
March 31, 2008, the Company completed the sale of 100% of its interest
in its wholly-owned subsidiary SM&P Utility Resources, Inc. (SM&P) to
Stripe Acquisition, Inc. (an affiliate of Kohlberg Management VI, LLC) for $85
million in cash, subject to certain closing and post-closing adjustments.
SM&P was an underground facilities locating and marking business that
formerly comprised Laclede Group’s Non-Regulated Services operating segment. The
sales agreement included representations, warranties, and indemnification
provisions customary for such transactions and was filed as an exhibit to the
March 31, 2008 Form 10-Q. In accordance with generally accepted
accounting principles, the results of operations for SM&P are reported as
discontinued operations in the Statements of Consolidated Income.
Operating
Revenues (from continuing operations) contributed by each segment for the last
three fiscal years are presented below. For more detailed financial information
regarding the segments, see Note 16 of the Notes to
Consolidated Financial Statements.
(Thousands)
|
2009
|
2008
|
2007
|
|||||||
Regulated
Gas Distribution
|
$
|
1,053,993
|
$
|
1,128,287
|
$
|
1,131,554
|
||||
Non-Regulated
Gas Marketing
|
836,865
|
1,075,845
|
718,704
|
|||||||
Other
|
4,340
|
4,841
|
5,603
|
|||||||
Total
Operating Revenues
|
$
|
1,895,198
|
$
|
2,208,973
|
$
|
1,855,861
|
The
consolidated financial statements included in this report present the
consolidated financial position, results of operations, and cash flows of
Laclede Group. The financial statements, notes to financial statements, and
management’s discussion and analysis for Laclede Gas are included in this report
as Exhibit 99.1.
The
following chart illustrates the organization structure of The Laclede Group,
Inc. at September 30, 2009:
Organization
Structure
|
|||||||||||
The
Laclede
Group,
Inc.
|
|||||||||||
Laclede
Gas
Company
|
Laclede
Investment
LLC
|
Laclede
Development
Company
|
Laclede
Pipeline
Company
|
||||||||
Laclede
Energy
Resources,
Inc.
|
Laclede
Venture
Corp.
|
||||||||||
Laclede
Gas
Family
Services,
Inc.
|
|||||||||||
Laclede
Group common stock is listed on The New York Stock Exchange and trades under the
ticker symbol “LG.”
During
fiscal year 2009, Laclede Group issued 47,037 shares of common stock under its
Dividend Reinvestment and Stock Purchase Plan and 127,610 shares of common stock
(including 73,485 shares of restricted stock) under its Equity Incentive Plan.
During fiscal year 2008, Laclede Group issued 106,436 shares of common stock
under its Dividend Reinvestment and Stock Purchase Plan and 241,400 shares of
common stock (including 62,650 shares of restricted stock) under its Equity
Incentive Plan.
The
information we file or furnish to the Securities and Exchange Commission (SEC),
including annual reports on Form 10-K, quarterly reports on Form 10-Q, and
current reports on Form 8-K and their amendments, are available on our website,
www.thelacledegroup.com,
in the Investor Services section under SEC Filings as soon as reasonably
practical after the information is filed or furnished to the SEC.
REGULATED
GAS DISTRIBUTION
NATURAL
GAS SUPPLY
The
Utility focuses its gas supply portfolio around a number of large natural gas
suppliers with equity ownership or control of assets strategically situated to
complement Laclede’s regionally diverse firm transportation
arrangements.
Laclede
Gas’ fundamental gas supply strategy is to meet the two-fold objective of 1)
ensuring that the gas supplies it acquires are dependable and will be delivered
when needed and, 2) insofar as is compatible with that dependability, purchasing
gas that is economically priced. In structuring its natural gas supply
portfolio, Laclede Gas continues to focus on natural gas assets that are
strategically positioned to meet the Utility’s primary objectives. Laclede Gas
utilizes both Mid-Continent and Gulf Coast gas sources to provide a level of
supply diversity that facilitates the optimization of pricing differentials as
well as protecting against the potential of regional supply
disruptions.
In
fiscal year 2009, Laclede Gas purchased natural gas from 26 different suppliers
to meet current gas sales and storage injection requirements. In addition to
working with major producers, the Utility has entered into agreements with
suppliers that are taking advantage of improved drilling techniques and
advancing technologies, which allow Laclede Gas to be flexible in meeting the
needs of its customers. Natural gas purchased by Laclede Gas for delivery to our
utility service area through the Mississippi River Transmission Corporation
(MRT) system totaled 60.2 billion cubic feet (Bcf). The Utility also holds firm
transportation on several other interstate pipeline systems that provide access
to gas supplies upstream of MRT. In addition to deliveries from MRT, 10.0 Bcf of
gas was purchased on the Panhandle Eastern Pipe Line Company system, and 10.8
Bcf on the Southern Star Central Pipeline system. Some of the Utility’s
commercial and industrial customers purchased their own gas and delivered 15.5
Bcf to Laclede Gas for transportation to them through the Utility’s distribution
system.
The
fiscal year 2009 peak day sendout of natural gas to utility customers, including
transportation customers, occurred on January 15, 2009, when the
average temperature was 5 degrees Fahrenheit. On that day, our customers
consumed 0.984 Bcf of natural gas. About 75% of this peak day demand was met
with natural gas transported to St. Louis through the MRT, Panhandle, and
Southern Star transportation systems, and the other 25% was met from the
Utility’s on-system storage and peak shaving resources.
UNDERGROUND
NATURAL GAS STORAGE
Laclede
Gas has a contractual right to store 23.1 Bcf of gas in MRT’s storage facility
located in Unionville, Louisiana. MRT’s tariffs allow injections into storage
from May 16 through November 15 and require the withdrawal from
storage of all but 2.2 Bcf from November 16 through
May 15.
In
addition, Laclede Gas supplements flowing pipeline gas with natural gas
withdrawn from its own underground storage field located in St. Louis and St.
Charles Counties in Missouri. The field is designed to provide 0.30 Bcf of
natural gas withdrawals on a peak day and annual withdrawals of approximately 4
Bcf of gas based on the inventory level that Laclede plans to
maintain.
REGULATORY
MATTERS
There
were several significant regulatory developments over the past year. For more
details, please see the Regulatory Matters
discussion in the Management’s Discussion and Analysis of Financial Condition
and Results of Operations, on page 31 of this Form 10-K.
OTHER
PERTINENT MATTERS
The
business of Laclede Gas has monopoly characteristics in that it is the only
distributor of natural gas within its franchised service area. The principal
competition is the local electric company. Other competitors in Laclede Gas’
service area include suppliers of fuel oil, coal, propane in outlying areas,
natural gas pipelines which can directly connect to large volume customers, and
in a portion of downtown St. Louis, a district steam system.
Laclede
Gas’ residential, commercial, and small industrial markets represent
approximately 85% of the Utility’s revenue. Given the current adequate level of
natural gas supply and market conditions, Laclede believes that the relative
comparison of natural gas equipment and operating costs with those of
competitive fuels will not change significantly in the foreseeable future, and
that these markets will continue to be supplied by natural gas. In the new
multi-family and commercial rental markets, Laclede Gas’ competitive exposure is
presently limited to space and water heating applications. Certain alternative
heating systems can be cost competitive in traditional markets, but the
performance and reliability of natural gas systems have contained the growth of
these alternatives.
Coal
is price competitive as a fuel source for very large boiler plant loads, but
environmental requirements for coal have shifted the economic advantage to
natural gas. Oil and propane can be used to fuel boiler loads and certain
direct-fired process applications, but these fuels require on-site storage, thus
limiting their competitiveness. In certain cases, district steam has been
competitive with gas for downtown St. Louis area heating users. Laclede Gas
offers gas transportation service to its large user industrial and commercial
customers. The tariff approved for that type of service produces a margin
similar to that which Laclede Gas would have received under its regular sales
rates.
*****
Laclede
Gas is subject to various environmental laws and regulations that, to date, have
not materially affected the Company’s financial position and results of
operations. For a detailed discussion of environmental matters, see Note 17 of the Notes to Consolidated Financial Statements on
page 80.
*****
Laclede
Gas has labor agreements with Locals 11-6 and 11-194 of the United Steel, Paper
and Forestry, Rubber, Manufacturing, Energy, Allied-Industrial and Service
Workers International Union, which represent approximately 64% of Laclede Gas’
employees. The agreements expire at midnight on
July 31, 2012.
The
Missouri Natural Division of Laclede Gas has labor agreements with Local 884 of
the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy,
Allied-Industrial and Service Workers International Union, which represents
approximately 5% of Laclede Gas’ employees. On April 15, 2009, new
four-year labor agreements were reached replacing the prior agreements which
expired on that same date. The agreements, which expire at midnight on
April 14, 2013, include revisions to the defined benefit pension plan
formula, changes in wage rates and work rules, and other modifications that
enable the Utility to provide high quality service to its customers and control
operating costs while continuing to provide competitive wages, pension, and
healthcare benefits to its employees.
*****
The
business of Laclede Gas is subject to seasonal fluctuations with the peak period
occurring in the winter season.
Revenues,
therms sold and transported, and customers of Laclede Gas for the last three
fiscal years are as follows:
Regulated
Gas Distribution Operating Revenues
|
||||||||||
(Thousands)
|
2009
|
2008
|
2007
|
|||||||
Residential
|
$
|
684,533
|
$
|
696,919
|
$
|
675,756
|
||||
Commercial
& Industrial
|
255,912
|
267,639
|
271,872
|
|||||||
Interruptible
|
5,301
|
4,704
|
3,771
|
|||||||
Transportation
|
14,394
|
16,008
|
15,601
|
|||||||
Off-System
and Capacity Release
|
85,822
|
132,145
|
156,103
|
|||||||
Provision
for Refunds and Other
|
8,031
|
10,872
|
8,451
|
|||||||
Total
|
$
|
1,053,993
|
$
|
1,128,287
|
$
|
1,131,554
|
||||
Regulated
Gas Distribution Therms Sold and Transported
|
||||||||||
(Thousands)
|
2009
|
2008
|
2007
|
|||||||
Residential
|
509,025
|
514,450
|
496,297
|
|||||||
Commercial
& Industrial
|
238,675
|
242,122
|
231,390
|
|||||||
Interruptible
|
5,678
|
5,020
|
4,019
|
|||||||
Transportation
|
154,603
|
172,985
|
175,191
|
|||||||
System Therms Sold and Transported
|
907,981
|
934,577
|
906,897
|
|||||||
Off
system
|
163,020
|
143,686
|
212,911
|
|||||||
Total
Therms Sold and Transported
|
1,071,001
|
1,078,263
|
1,119,808
|
|||||||
Regulated
Gas Distribution Customers (End of Period)
|
||||||||||
2009
|
2008
|
2007
|
||||||||
Residential
|
588,792
|
588,228
|
590,337
|
|||||||
Commercial
& Industrial
|
40,608
|
40,801
|
41,062
|
|||||||
Interruptible
|
17
|
17
|
15
|
|||||||
Transportation
|
146
|
144
|
145
|
|||||||
Total
Customers
|
629,563
|
629,190
|
631,559
|
*****
Laclede
Gas has franchises in the more than 90 communities where it provides service
with terms varying from five years to an indefinite duration. Generally, a
franchise allows Laclede Gas, among other things, to install pipes and construct
other facilities in the community. The Utility has franchises for all but one of
the communities in which it serves. All of the franchises are free from unduly
burdensome restrictions and are adequate for the conduct of Laclede Gas’ current
public utility business in the State of Missouri. The Utility is currently
working to renew its franchise with the community in which it currently does not
have one and does not anticipate any interruption in service to this
community.
NON-REGULATED
GAS MARKETING
LER,
a wholly-owned subsidiary of Laclede Investment, LLC, and Laclede Group’s
primary non-regulated business, is engaged in the marketing of natural gas and
providing energy services to both on-system Utility transportation customers and
customers outside of Laclede Gas’ traditional service area. During fiscal year
2009, LER utilized 13 interstate pipelines and more than 70 suppliers to
market natural gas to its customers, including large retail and wholesale
customers in the Midwest. Furthermore, LER served more than 100 retail
customers and 80 wholesale customers. Through its retail operations, LER offers
natural gas marketing services to large industrial customers, while its
wholesale business consists of buying and selling natural gas to other
marketers, producers, local distribution companies, pipelines, and
municipalities.
As
part of its long-term strategy to grow within its current geographic footprint
in the Midwest, LER has continued to increase its pipeline transportation
capacity to accommodate customer demand for access to natural gas supplies
across the region. These supplies are necessary for fulfilling seasonal needs
such as heating and power generation and year-round needs such as an industrial
fuel source. LER’s wholesale business, which continues to grow, currently
represents approximately 85% of LER’s operating revenues. Although fiscal year
2009 operating revenues were significantly lower than in fiscal year 2008, due
to overall lower wholesale natural gas prices, LER reported significantly higher
sales volumes, largely as a result of the acquisition of pipeline transportation
capacity prior to the 2008-2009 winter. The last six months of fiscal year 2009
was a particularly active period in the upstream markets, as major industry
pipelines expanded to connect gas supplies in the large gas-producing states
such as Colorado, Texas, and Oklahoma to states such as Louisiana, Alabama, and
Ohio. This new infrastructure is impacting the pricing dynamics of the
marketplace. These changes are likely to create both challenges and new
opportunities for LER in the future. LER is committed to respond to these recent
changes and continue its business-building activities. LER’s revenues and sales
volumes for the last three fiscal years are as follows:
(Thousands)
|
2009
|
2008
|
2007
|
|||||||
Non-Regulated
Gas Marketing Revenues
|
$
|
836,865
|
$
|
1,075,845
|
$
|
718,704
|
||||
Non-Regulated
Gas Marketing Therms Sold
|
1,826,465
|
1,229,221
|
1,064,747
|
OTHER
SUBSIDIARIES
Laclede
Pipeline Company, a wholly-owned subsidiary of Laclede Group, operates a
pipeline under Federal Energy Regulatory Commission (FERC) jurisdiction. This
pipeline connects the propane storage and vaporization facilities of Laclede Gas
to third-party propane supply terminal facilities located in Illinois, which
allows Laclede Gas to receive propane that is vaporized to supplement its
natural gas supply and meet peak demands on its distribution system. Laclede
Pipeline also provides transportation services to third parties.
Laclede
Investment LLC, a wholly-owned subsidiary of Laclede Group, invests in other
enterprises and has made loans to several joint ventures engaged in real estate
development.
Laclede
Gas Family Services, Inc., a wholly-owned subsidiary of Laclede Energy
Resources, Inc., is a registered insurance agency in the State of
Missouri.
Laclede
Development Company, a wholly-owned subsidiary of Laclede Group, participates in
real estate development, primarily through joint ventures.
Laclede
Venture Corp., a wholly-owned subsidiary of Laclede Development Company, offers
services for the compression of natural gas to third parties who desire to use
or to sell compressed natural gas for use in vehicles.
The
lines of business that constitute the Other activities of the corporate family
are not considered separately reportable operating segments as defined by
current accounting standards.
Item
1A. Risk Factors
Laclede
Group’s business and financial results are subject to a number of risks and
uncertainties, including those set forth below. The risks described below are
those the Company considers to be the most material.
RISKS
AND UNCERTAINTIES THAT RELATE TO THE BUSINESS AND FINANCIAL RESULTS OF LACLEDE
GROUP AND ITS SUBSIDIARIES
As
a holding company, Laclede Group depends on its operating subsidiaries to meet
its financial obligations.
Laclede
Group is a holding company with no significant assets other than cash
investments and the stock of its operating subsidiaries. Laclede Group, and
Laclede Gas prior to Laclede Group’s formation, have paid dividends continuously
since 1946. However, Laclede Group relies exclusively on dividends from its
subsidiaries, on intercompany loans from its non-regulated subsidiaries, and on
the repayments of principal and interest from intercompany loans made to its
subsidiaries for its cash flows. Laclede Group’s ability to pay dividends to its
shareholders is dependent on the ability of its subsidiaries to generate
sufficient net income and cash flows to pay upstream dividends and make loans or
loan repayments to Laclede Group. Laclede Group’s cash flows for fiscal year
2008 included proceeds from the sale of its wholly-owned subsidiary,
SM&P.
A
downgrade in Laclede Group’s credit ratings could negatively affect its ability
to access capital.
Currently,
Laclede Group’s corporate ratings are A by Standard & Poor’s and A- by
Fitch. Laclede Group has working capital lines of credit to meet the short-term
liquidity needs of its subsidiaries. If the rating agencies lowered Laclede
Group’s credit rating, particularly below investment grade, it might
significantly limit its ability to borrow and would increase its costs of
borrowing. Laclede Group’s ability to borrow and costs of borrowing have a
direct impact on its subsidiaries’ ability to execute operating
strategies.
Risk
of unexpected losses may adversely affect Laclede Group’s financial position and
results of operations.
As
with most businesses, there are operations and business risks inherent in the
activities of Laclede Group’s subsidiaries. If, in the normal course of
business, Laclede Group becomes a party to litigation, such litigation could
result in substantial monetary judgments, fines, or penalties or be resolved on
unfavorable terms. In accordance with customary practice, Laclede Group and its
subsidiaries maintain insurance against a significant portion of, but not all,
risks and losses. To the extent a loss is not fully covered by insurance, that
loss could adversely affect the Company’s financial position and results of
operations.
RISKS
THAT RELATE TO THE REGULATED GAS DISTRIBUTION SEGMENT
Risks
related to the regulation of the Utility business could impact rates it is able
to charge, costs, and profitability.
The
Missouri Public Service Commission (MoPSC or Commission) regulates many aspects
of the Utility’s distribution operations, including construction and maintenance
of facilities, operations, safety, the rates that the Utility may charge
customers, the terms of service to its customers, and the rate of return that it
is allowed to realize; as well as the accounting treatment for certain aspects
of its operations. For further discussion of these accounting matters, see Critical Accounting Policies pertaining to
Laclede Gas, beginning on page 28. Laclede Gas’ ability to obtain rate increases
and rate supplements to maintain the current rate of return depends upon
regulatory discretion. There can be no assurance that it will be able to obtain
rate increases or rate supplements or continue earning the current authorized
rates of return. In addition, the FERC regulates the interstate transportation
of natural gas from the wellhead to the Utility’s city gate and establishes the
terms and conditions under which it may use interstate gas pipeline and storage
capacity to purchase, store, and transport natural gas.
Laclede
Gas’ liquidity and, in certain circumstances, its results of operations could be
adversely affected by the cost of purchasing natural gas during periods in which
natural gas prices are rising significantly.
Laclede
Gas’ tariff rate schedules contain Purchased Gas Adjustment (PGA) Clauses that
permit the Utility to file for rate adjustments to recover the cost of purchased
gas. Changes in the cost of purchased gas are flowed through to customers and
may affect uncollectible amounts and cash flows and can therefore impact the
amount of capital resources. Currently, Laclede Gas is allowed to adjust the gas
cost component of its rates up to four times each year. The Utility must make a
mandatory gas cost adjustment at the beginning of the winter, in November, and
during the next twelve months it may make up to three additional discretionary
gas cost adjustments, so long as each of these adjustments is separated by at
least two months.
The
MoPSC typically approves the Utility’s PGA changes on an interim basis, subject
to refund and the outcome of a subsequent audit and prudence review. Due to such
review process, there is a risk of a disallowance of full recovery of these
costs. Any material disallowance of purchased gas costs would adversely affect
revenues. Increases in the prices the Utility charges for gas may also adversely
affect revenues because they could lead customers to reduce usage and cause some
customers to have trouble paying the resulting higher bills. These higher prices
may increase bad debt expenses and ultimately reduce earnings. Laclede Gas has
used short-term borrowings in the past to finance storage inventories and
purchased gas costs, and expects to do so in the future.
Laclede
Gas may be adversely affected by economic conditions.
Periods
of slowed economic activity, such as that currently being experienced, generally
result in decreased energy consumption, particularly by industrial and large
commercial companies. As a consequence, national or regional recessions or other
downturns in economic activity could adversely affect Laclede Gas’ revenues and
cash flows or restrict its future growth. Economic conditions in its service
territory may also adversely impact the Utility’s ability to collect its
accounts receivable resulting in an increase to bad debt expenses.
Hedging
procedures may not fully protect Laclede Gas sales and results of operations
from volatility, and the use of derivative contracts in the normal course of
business could result in financial losses.
To
lower financial exposure to commodity price fluctuations, Laclede Gas enters
into contracts to hedge the forward commodity price of its natural gas supplies.
As part of this strategy, the Utility may use fixed-price, forward, physical
purchase contracts, futures, and option contracts traded on the New York
Mercantile Exchange. However, the Utility does not hedge the entire exposure of
energy assets or positions to market price volatility, and the coverage will
vary over time. Any costs, gains, or losses experienced through hedging
procedures, including carrying costs, generally flow through the PGA Clause,
thereby limiting the Utility’s exposure to earnings volatility. However,
variations in the timing of collections of such gas costs under the PGA Clause
and the effect of cash payments for margin deposits associated with the
Utility’s use of natural gas derivative instruments may cause short-term cash
requirements to vary. These procedures remain subject to prudence review by the
MoPSC.
Laclede
Gas is dependent on bank lines of credit and continued access to capital markets
to successfully execute its operating strategies.
In
addition to longer term debt that is issued to the public by the Utility under
its mortgage and deed of trust dated February 1, 1945, Laclede Gas has
relied, and continues to rely, upon shorter term bank borrowings or commercial
paper supported by bank lines of credit to finance the execution of a portion of
its operating strategies. The Utility is dependent on these capital sources to
purchase its natural gas supply and maintain its properties. The availability
and cost of these credit sources is cyclical and these capital sources may not
remain available to the Utility, or it may not be able to obtain funds at a
reasonable cost in the future. Laclede Gas’ ability to borrow under its existing
lines of credit depends on its compliance with the Utility’s obligations under
the lines of credit. Laclede Gas’ ability to issue commercial paper supported by
its lines of credit, to issue long-term bonds, or to obtain new lines of credit
also depends on current conditions in the credit markets.
A
downgrade in the Utility’s credit rating could negatively affect its ability to
access capital.
Standard
& Poor’s rating group, Moody’s Investors Service, and Fitch Ratings from
time to time implement new requirements for various ratings levels. To maintain
its current credit ratings in light of any new requirements, Laclede Gas may
find it necessary to take steps to change its business plans in ways that may
affect its results of operations.
The
following table shows the current ratings assigned by S&P, Moody’s, and
Fitch to certain of our outstanding debt:
Type
of Facility
|
S&P
|
Moody’s
|
Fitch
|
Laclede
Gas First Mortgage Bonds
|
A
|
A2
|
A+
|
Laclede
Gas Commercial Paper
|
A-1
|
P-2
|
F1
|
If
the rating agencies lowered the Utility’s ratings, particularly below investment
grade, it could significantly limit its access to the commercial paper market
and would increase its costs of borrowing. In addition, Laclede Gas would likely
be required to pay a higher interest rate in future financings and the Utility’s
potential pool of investors and funding sources would likely decrease. Credit
ratings are an independent assessment of the Utility’s ability to pay its
obligations. Consequently, real or anticipated changes in credit ratings will
generally affect the market value of the specific debt instruments that are
rated.
Transporting,
distributing, and storing natural gas involves numerous risks that may result in
accidents and other operating risks and costs.
There
are inherent in gas distribution activities a variety of hazards and operations
risks, such as leaks, accidental explosions, and mechanical problems, that could
cause substantial financial losses. In addition, these risks could result in
loss of human life, significant damage to property, environmental pollution,
impairment of operations, and substantial losses to Laclede Gas. The location of
pipelines and storage facilities near populated areas, including residential
areas, commercial business centers, and industrial sites, could increase the
level of damages resulting from these risks. These activities may subject the
Utility to litigation or administrative proceedings from time to time. Such
litigation or proceedings could result in substantial monetary judgments, fines,
or penalties against the Utility or be resolved on unfavorable terms. In
accordance with customary industry practices, Laclede Gas maintains insurance
against a significant portion, but not all, of these risks and losses. To the
extent that the occurrence of any of these events is not fully covered by
insurance, it could adversely affect the Utility’s financial position and
results of operations.
Increases
in the wholesale costs of purchased natural gas supplies may adversely impact
the Utility’s competitive position compared with alternative energy
sources.
Laclede
Gas is the only distributor of natural gas within its franchised service area.
Nevertheless, rising wholesale natural gas prices compared with prices for
electricity, fuel oil, coal, propane, or other energy sources may affect the
Utility’s retention of natural gas customers and adversely impact its financial
position and results of operations.
Significantly
warmer-than-normal weather conditions, the effects of global warming and climate
change, and other factors that influence customer usage may affect the Utility’s
sale of heating energy and adversely impact its financial position and results
of operations.
Laclede
Gas’ earnings are primarily generated by the sale of heating energy. The Utility
has a weather mitigation rate design, approved by the MoPSC, that provides
better assurance of the recovery of the Utility’s fixed costs and margins during
winter months despite variations in sales volumes due to the impacts of weather
and other factors that affect customer usage. However, significantly
warmer-than-normal weather conditions in the Utility’s service area and other
factors, such as global warming and climate change, may result in reduced
profitability and decreased cash flows attributable to lower gas sales levels.
Furthermore, continuation of the weather mitigation rate design is subject to
regulatory discretion. In addition, the promulgation of regulations by the U.S.
Environmental Protection Agency or the potential enactment of Congressional
legislation addressing global warming and climate change may result in future
additional compliance costs that could impact the Utility’s financial position
and results of operations.
Regional
supply/demand fluctuations and changes in national pipeline infrastructure, as
well as regulatory discretion, may adversely affect Laclede Gas’ ability to
profit from off-system sales and capacity release.
Laclede
Gas’ income from off-system sales and capacity release is subject to
fluctuations in market conditions and changing supply and demand conditions in
areas the Utility holds pipeline capacity rights. Specific factors impacting the
Utility’s income from off-system sales and capacity release include the
availability of attractively-priced natural gas supply, availability of pipeline
capacity, and market demand. Income from off-system sales and capacity release
is shared with customers. Effective October 1, 2007, the Utility is
allowed to retain 15% to 25% of the first $6 million in annual income earned
(depending on the level of income earned) and 30% of income exceeding $6 million
annually. The Utility’s ability to retain such income in the future is subject
to regulatory discretion in a base rate proceeding.
Workforce
risks could affect Laclede Gas’ financial results.
Laclede
Gas is subject to various workforce risks, including, but not limited to, the
risk that it will be unable to attract and retain qualified personnel; that it
will be unable to effectively transfer the knowledge and expertise of an aging
workforce to new personnel as those workers retire; and that it will be unable
to reach collective bargaining arrangements with the unions that represent
certain of its workers, which could result in work stoppages.
Catastrophic
events could adversely affect Laclede Gas’ facilities and
operations.
Catastrophic
events such as fires, earthquakes, explosions, floods, tornados, terrorists
acts, or other similar occurrences could adversely affect Laclede Gas’
facilities, operations, financial condition, and results of
operations.
RISKS
THAT RELATE TO THE NON-REGULATED GAS MARKETING SEGMENT
Risks
of increased competition, regional fluctuations in natural gas commodity prices,
and new national pipeline infrastructure projects may adversely impact LER’s
future profitability.
Competition
in the marketplace and regional fluctuations in natural gas commodity prices
have a direct impact on LER’s business. Changing market conditions caused by new
pipeline infrastructure may adversely impact LER’s sales margins or affect LER’s
ability to serve certain wholesale customers, thereby reducing wholesale sales
profitability and/or increasing certain credit requirements caused by reductions
in netting capability. Although the FERC regulates the interstate transportation
of natural gas and establishes the general terms and conditions under which LER
may use interstate gas pipeline capacity to purchase and transport natural gas,
LER must occasionally re-negotiate its transportation agreements with a
concentrated group of pipeline companies. Re-negotiated terms of new agreements
may impact LER’s future profitability.
Risks of reduced access to credit
and/or capital markets may prevent LER from executing operating
strategies.
LER
relies on its cash flows, parental guarantees, and netting capability to satisfy
its credit and working capital requirements. Reduced access to credit or
increased credit requirements may limit LER’s ability to enter into certain
transactions. In addition, LER has concentrations of counterparty credit risk in
that a significant portion of its transactions are with (or are associated with)
energy producers, utility companies, and pipelines. These concentrations of
counterparties have the potential to affect the Company’s overall exposure to
credit risk, either positively or negatively, in that each of these three groups
may be affected similarly by changes in economic, industry, or other conditions.
LER closely monitors its credit exposure and, although uncollectible amounts
have not been significant, increased counterparty defaults are possible and may
result in financial losses and/or capital limitations.
Risk
management policies, including the use of derivative instruments, may not fully
protect LER’s sales and results of operations from volatility and may result in
financial losses.
LER
manages the price risk associated with fixed-price commitments for the purchase
or sale of natural gas by either closely matching the offsetting physical
purchase or sale of natural gas at fixed prices or through the use of
exchange-traded futures contracts to lock in margins. These exchange-traded
futures contracts are generally designated as cash flow hedges of forecasted
transactions. However, market conditions and regional price changes may cause
ineffective portions of matched positions to result in financial losses.
Additionally, to the extent that LER’s natural gas commitments do not qualify
for the normal purchases or normal sales designation (or the designation is not
elected), the contracts are recorded as derivatives at fair value each period.
Accordingly, the associated gains and losses are reported directly in earnings
and may cause volatility in reported results of operations.
Item
1B. Unresolved Staff Comments
None.
Item
2. Properties
The
principal utility properties of Laclede Gas consist of more than 16,000 miles of
gas main and related service pipes, meters, and regulators. Other physical
properties include regional office buildings and a holder station. Extensive
underground natural gas and propane storage facilities and equipment are located
in an area in North St. Louis County extending under the Missouri River into St.
Charles County. Substantially all of Laclede Gas’ utility plant is subject to
the liens of its mortgage.
All
of the utility properties of Laclede Gas are held in fee, or by easement, or
under lease agreements. The principal lease agreements include underground
storage rights that are of indefinite duration and the headquarters office
building. The current lease on the headquarters office building extends through
February 2015 with the option to renew for up to five additional
years.
For
further information on Laclede Gas’ leases see Note 17 of
the Notes to Consolidated Financial Statements on page 80.
Other
properties of Laclede Group, including LER, do not constitute a significant
portion of its properties.
Item
3. Legal Proceedings
For
a description of environmental matters, see Note 17 of the
Notes to Consolidated Financial Statements on page 80. For a description of
pending regulatory matters of Laclede Gas, see the Regulatory Matters discussion in the Management’s
Discussion and Analysis of Financial Condition and Results of Operations, on
page 31.
Laclede
Group and its subsidiaries are involved in litigation, claims, and
investigations arising in the normal course of business. While the results of
such litigation cannot be predicted with certainty, management, after discussion
with counsel, believes the final outcome will not have a material adverse effect
on the consolidated financial position or results of operations reflected in the
consolidated financial statements presented herein.
There
were no matters submitted to a vote of security holders during the fourth
quarter of fiscal year 2009.
EXECUTIVE OFFICERS OF
REGISTRANTS – Listed below are executive officers as defined by the
SEC for Laclede Group. Their ages, at September 30, 2009, and
positions are listed below along with their business experience during the past
five years.
Name,
Age, and Position with Company *
|
Appointed
(1)
|
||
D.
H. Yaeger, Age 60
|
|||
Laclede
Group
|
|||
Chairman,
President and Chief Executive Officer
|
October
2000
|
||
Laclede
Gas
|
|||
Chairman,
President and Chief Executive Officer
|
January
1999
|
||
LER
|
|||
President
|
January
1999
|
||
K.
J. Neises, Age 68
|
|||
Laclede
Gas
|
|||
Executive
Vice President
|
October
2007
|
||
Executive
Vice President – Energy and Administrative Services
|
January
2002
|
||
LER
|
|||
Vice
President
|
February
2002
|
||
M.
D. Waltermire, Age 51
|
|||
Laclede
Group
|
|||
Chief
Financial Officer
|
October
2007
|
||
Laclede
Gas
|
|||
Senior
Vice President and Chief Financial Officer
|
October
2007
|
||
Vice
President – Operations & Marketing
|
April
2003
|
||
LER
|
|||
Vice
President
|
October
2007
|
||
M.
C. Darrell, Age 51
|
|||
Laclede
Group
|
|||
General
Counsel
|
May
2004
|
||
Laclede
Gas
|
|||
Senior
Vice President and General Counsel
|
October
2007
|
||
General
Counsel
|
May
2004
|
||
R.
A. Skau, Age 52
|
|||
Laclede
Gas
|
|||
Senior
Vice President – Human Resources
|
October
2007
|
||
Vice
President – Human Resources
|
February
2004
|
||
M.
R. Spotanski, Age 49
|
|||
Laclede
Gas
|
|||
Senior
Vice President – Operations and Marketing
|
October
2007
|
||
Vice
President – Finance
|
January
2001
|
M.
C. Kullman, Age 49
|
|||
Laclede
Group
|
|||
Chief
Governance Officer and Corporate Secretary
|
February
2004
|
||
Laclede
Gas
|
|||
Chief
Governance Officer and Corporate Secretary
|
February
2004
|
||
LER
|
|||
Secretary
|
February
1998
|
||
D.
P. Abernathy, Age 48
|
|||
Laclede
Gas
|
|||
Vice
President – Industrial Relations and Claims Management
|
October
2007
|
||
Vice
President – Associate General Counsel
|
September
2004
|
||
M.
C. Geiselhart, Age 50
|
|||
Laclede
Group
|
|||
Vice
President – Strategic Development and Planning (2)
|
August
2006
|
||
Laclede
Gas
|
|||
Vice
President – Strategic Development and Planning
|
August
2006
|
||
S.
F. Mathews, Age 51
|
|||
Laclede
Gas
|
|||
Vice
President – Gas Supply
|
February
2003
|
||
M.
C. Pendergast, Age 53
|
|||
Laclede
Gas
|
|||
Vice
President – Associate General Counsel
|
January
2002
|
||
J.
A. Fallert, Age 54
|
|||
Laclede
Gas
|
|||
Controller
|
February
1998
|
||
S.
E. Jaskowiak, Age 47
|
|||
LER
|
|||
Vice
President and General Manager
|
February
2005
|
||
Managing
Director
|
May
2003
|
||
*
|
The
information provided relates to the Company and its principal
subsidiaries. Many of the executive officers have served or currently
serve as officers or directors for other subsidiaries of the
Company.
|
(1)
|
Officers
of Laclede are normally reappointed at the Annual Meeting of the Board of
Directors in January of each year to serve at the pleasure of the Board of
Directors for the ensuing year and until their successors are elected and
qualify.
|
(2)
|
Mr.
Geiselhart served as the Corporate Finance Consultant for Callaway
Partners, LLC since 2003. During that time, he also served as Chief
Financial Officer for both TowerLink Corporation, Inc. and Transcender
Telecom Acquisition Corporation,
Inc.
|
Item 5. Market for Registrant’s Common Equity, Related
Stockholder Matters, and Issuer Purchases of Equity Securities
Laclede
Group’s common stock trades on The New York Stock Exchange under the symbol
“LG”. The high and the low sales price for the common stock for each quarter in
the two most recent fiscal years are:
Fiscal
2009
|
Fiscal
2008
|
|||
High
|
Low
|
High
|
Low
|
|
1st
Quarter
|
55.81
|
33.55
|
35.72
|
31.48
|
2nd
Quarter
|
48.33
|
35.23
|
36.45
|
31.86
|
3rd
Quarter
|
39.90
|
29.26
|
41.96
|
35.36
|
4th
Quarter
|
35.24
|
30.85
|
50.88
|
37.78
|
The
number of holders of record as of September 30, 2009 was
4,952.
Dividends
declared on the common stock for the two most recent fiscal years
were:
Fiscal
2009
|
Fiscal
2008
|
|
1st
Quarter
|
$0.385
|
$0.375
|
2nd
Quarter
|
$0.385
|
$0.375
|
3rd
Quarter
|
$0.385
|
$0.375
|
4th
Quarter
|
$0.385
|
$0.375
|
For
disclosures relating to securities authorized for issuance under equity
compensation plans, see Item 12, page 85.
Laclede
Group periodically purchases common stock of Laclede Gas with the price set at
the book value of Laclede Gas common stock as of the most recently completed
fiscal quarter. The details on sales of common stock of Laclede Gas to Laclede
Group during the past three fiscal years are set forth below:
Aggregate
|
||||||||
Purchase
Price
|
Number
|
|||||||
Date
of Sale
|
(millions)
|
of
Shares
|
||||||
FY
2007
|
||||||||
March
23, 2007
|
$
|
1.9
|
55
|
|||||
May
21, 2007
|
1.0
|
27
|
||||||
August
10, 2007
|
1.0
|
28
|
||||||
FY
2008
|
||||||||
December
20, 2007
|
1.0
|
30
|
||||||
February
14, 2008
|
1.0
|
28
|
||||||
May
12, 2008
|
0.9
|
26
|
||||||
August
18, 2008
|
0.9
|
25
|
||||||
FY
2009
|
||||||||
November
20, 2008
|
40.0
|
1,161
|
||||||
December
18, 2008
|
0.9
|
26
|
||||||
February
10, 2009
|
0.4
|
11
|
||||||
May
20, 2009
|
0.3
|
9
|
||||||
August
14, 2009
|
0.4
|
11
|
The
proceeds from Laclede Gas’ sales of stock were used to reduce its short-term
borrowings. Exemption from registration was claimed under Section 4(2) of the
Securities Act of 1933.
Item 6. Selected Financial Data
The
Laclede Group, Inc.
Fiscal
Years Ended September 30
|
||||||||||||||||
(Thousands,
Except Per Share Amounts)
|
2009
|
2008
|
2007
|
2006
|
2005
|
|||||||||||
Summary
of Operations
|
||||||||||||||||
Operating
Revenues:
|
||||||||||||||||
Regulated
Gas Distribution
|
$
|
1,053,993
|
$
|
1,128,287
|
$
|
1,131,554
|
$
|
1,141,011
|
$
|
978,195
|
||||||
Non-Regulated
Gas Marketing
|
836,865
|
1,075,845
|
718,704
|
689,572
|
469,559
|
|||||||||||
Other
|
4,340
|
4,841
|
5,603
|
4,445
|
7,800
|
|||||||||||
Total
Operating Revenues
|
1,895,198
|
2,208,973
|
1,855,861
|
1,835,028
|
1,455,554
|
|||||||||||
Operating
Expenses:
|
||||||||||||||||
Regulated
Gas Distribution
|
||||||||||||||||
Natural
and propane gas
|
699,984
|
770,097
|
797,924
|
821,721
|
676,931
|
|||||||||||
Other
operation expenses
|
146,542
|
144,611
|
131,798
|
128,180
|
125,364
|
|||||||||||
Maintenance
|
27,818
|
25,827
|
24,306
|
21,198
|
19,226
|
|||||||||||
Depreciation
and amortization
|
36,751
|
35,303
|
34,080
|
30,904
|
23,036
|
|||||||||||
Taxes,
other than income taxes
|
68,639
|
69,023
|
68,361
|
71,038
|
62,859
|
|||||||||||
Total
Regulated Gas Distribution
Operating
Expenses
|
979,734
|
1,044,861
|
1,056,469
|
1,073,041
|
907,416
|
|||||||||||
Non-Regulated
Gas Marketing
|
787,056
|
1,048,162
|
698,962
|
662,391
|
462,348
|
|||||||||||
Other
|
3,344
|
4,603
|
5,376
|
5,024
|
8,720
|
|||||||||||
Total
Operating Expenses
|
1,770,134
|
2,097,626
|
1,760,807
|
1,740,456
|
1,378,484
|
|||||||||||
Operating
Income
|
125,064
|
111,347
|
95,054
|
94,572
|
77,070
|
|||||||||||
Allowance
for Funds Used During Construction
|
(152
|
)
|
(72
|
)
|
(17
|
)
|
(45
|
)
|
(100
|
)
|
||||||
Other
Income and (Income Deductions) - Net
|
1,605
|
1,953
|
6,830
|
5,553
|
|
1,706
|
||||||||||
Interest
Charges:
|
||||||||||||||||
Interest
on long-term debt
|
24,583
|
19,851
|
22,502
|
22,329
|
22,835
|
|||||||||||
Interest
on long-term debt to unconsolidated
affiliate
trust
|
—
|
486
|
277
|
277
|
277
|
|||||||||||
Other
interest charges
|
5,163
|
9,140
|
11,155
|
10,278
|
4,141
|
|||||||||||
Total
Interest Charges
|
29,746
|
29,477
|
33,934
|
32,884
|
27,253
|
|||||||||||
Income
from Continuing Operations Before Income
|
||||||||||||||||
Taxes
and Dividends on Laclede Gas Redeemable
|
||||||||||||||||
Preferred
Stock
|
96,771
|
83,751
|
67,933
|
67,196
|
51,423
|
|||||||||||
Income
Tax Expense
|
32,509
|
26,190
|
22,146
|
21,301
|
16,914
|
|||||||||||
Dividends
on Laclede Gas Redeemable
|
||||||||||||||||
Preferred
Stock
|
15
|
35
|
43
|
48
|
55
|
|||||||||||
Income
from Continuing Operations
|
64,247
|
57,526
|
45,744
|
45,847
|
34,454
|
|||||||||||
Income
from Discontinued Operations, Net
|
||||||||||||||||
of
Income Tax
|
—
|
20,396
|
4,027
|
3,142
|
5,616
|
|||||||||||
Net
Income
|
$
|
64,247
|
$
|
77,922
|
$
|
49,771
|
$
|
48,989
|
$
|
40,070
|
||||||
Average
Number of Common Shares Outstanding:
|
||||||||||||||||
Basic
|
21,893
|
21,657
|
21,455
|
21,247
|
21,080
|
|||||||||||
Diluted
|
22,024
|
21,763
|
21,503
|
21,286
|
21,120
|
|||||||||||
Basic
Earnings Per Share of Common Stock:
|
||||||||||||||||
Income
from Continuing Operations
|
$
|
2.93
|
$
|
2.66
|
$
|
2.13
|
$
|
2.16
|
$
|
1.63
|
||||||
Income
from Discontinued Operations
|
—
|
0.94
|
0.19
|
0.15
|
0.27
|
|||||||||||
Net
Income
|
$
|
2.93
|
$
|
3.60
|
$
|
2.32
|
$
|
2.31
|
$
|
1.90
|
||||||
Diluted
Earnings Per Share of Common Stock:
|
||||||||||||||||
Income
from Continuing Operations
|
$
|
2.92
|
$
|
2.64
|
$
|
2.12
|
$
|
2.15
|
$
|
1.63
|
||||||
Income
from Discontinued Operations
|
—
|
0.94
|
0.19
|
0.15
|
0.27
|
|||||||||||
Net
Income
|
$
|
2.92
|
$
|
3.58
|
$
|
2.31
|
$
|
2.30
|
$
|
1.90
|
Item
6. Selected Financial Data (continued)
The
Laclede Group, Inc.
Fiscal
Years Ended September 30
|
||||||||||||||||||
(Thousands,
Except Per Share Amounts)
|
2009
|
2008
|
2007
|
2006
|
2005
|
|||||||||||||
Dividends
Declared –
|
||||||||||||||||||
Common
Stock
|
$
|
34,100
|
$
|
32,776
|
$
|
31,505
|
$
|
30,045
|
$
|
29,002
|
||||||||
Dividends
Declared Per
|
||||||||||||||||||
Share
of Common Stock
|
$
|
1.54
|
$
|
1.50
|
$
|
1.46
|
$
|
1.41
|
$
|
1.375
|
||||||||
Utility
Plant
|
||||||||||||||||||
Gross
Plant – End of Period
|
$
|
1,280,238
|
$
|
1,229,174
|
$
|
1,187,828
|
$
|
1,149,104
|
$
|
1,105,733
|
||||||||
Net
Plant – End of Period
|
855,929
|
823,197
|
793,794
|
763,827
|
728,481
|
|||||||||||||
Capital
Expenditures
|
51,384
|
55,304
|
56,434
|
57,925
|
54,621
|
|||||||||||||
Property
Retirements
|
9,732
|
15,629
|
16,331
|
22,588
|
19,410
|
|||||||||||||
Non-Utility
Property
|
4,061
|
3,793
|
4,065
|
4,263
|
3,899
|
|||||||||||||
Other
Investments
|
44,973
|
43,314
|
43,635
|
41,354
|
36,851
|
|||||||||||||
Total
Assets of Discontinued Operations
|
—
|
—
|
73,357
|
76,353
|
67,206
|
|||||||||||||
Total
Assets – End of Period
|
1,762,018
|
1,772,655
|
1,641,153
|
1,570,160
|
1,434,101
|
|||||||||||||
Capitalization
– End of Period
|
||||||||||||||||||
Common
Stock and Paid-In Capital
|
$
|
176,386
|
$
|
169,234
|
$
|
157,707
|
$
|
148,487
|
$
|
142,677
|
||||||||
Retained
Earnings
|
342,810
|
312,808
|
268,761
|
250,495
|
231,551
|
|||||||||||||
Accumulated
Other Comprehensive Income (Loss)
|
(2,166
|
)
|
4,437
|
1,857
|
3,655
|
(7,703
|
)
|
|||||||||||
Common
Stock Equity
|
517,030
|
486,479
|
428,325
|
402,637
|
366,525
|
|||||||||||||
Laclede
Gas Redeemable Preferred Stock
|
—
|
467
|
627
|
787
|
948
|
|||||||||||||
Long-Term
Debt to Unconsolidated Affiliate Trust
|
—
|
—
|
46,400
|
46,400
|
46,400
|
|||||||||||||
Long-Term
Debt – Laclede Gas
|
389,240
|
389,181
|
309,122
|
349,041
|
294,033
|
|
||||||||||||
Total
Capitalization
|
$
|
906,270
|
$
|
876,127
|
$
|
784,474
|
$
|
798,865
|
$
|
707,906
|
||||||||
Shares
of Common Stock
|
||||||||||||||||||
Outstanding
– End of Period
|
22,168
|
21,993
|
21,646
|
21,362
|
21,172
|
|||||||||||||
Book
Value Per Share – End of Period
|
$
|
23.32
|
$
|
22.12
|
$
|
19.79
|
$
|
18.85
|
$
|
17.31
|
||||||||
Note:
|
Certain
prior-period amounts have been reclassified to discontinued operations as
a result of the sale of SM&P Utility Resources, Inc.
(SM&P)
|
on
March 31, 2008. Income from Discontinued Operations does not
include general corporate overhead expenses previously
recorded
|
|
by
SM&P. Associated assets are classified
separately.
|
Laclede
Gas Company’s Selected Financial Data is included in Exhibit 99.1.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE
LACLEDE GROUP, INC.
INTRODUCTION
This
management’s discussion analyzes the financial condition and results of
operations of The Laclede Group, Inc. (Laclede Group or the Company) and its
subsidiaries. It includes management’s view of factors that affect its business,
explanations of past financial results including changes in earnings and costs
from the prior year periods, and their effects on the Company’s overall
financial condition and liquidity.
The
Management’s Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Company’s consolidated
financial statements and the notes thereto.
RESULTS
OF OPERATIONS
Overview
Laclede
Group’s earnings are primarily derived from the regulated activities of its
largest subsidiary, Laclede Gas Company (Laclede Gas or the Utility), Missouri’s
largest natural gas distribution company. Laclede Gas is regulated by the
Missouri Public Service Commission (MoPSC or Commission) and serves the City of
St. Louis and parts of ten counties in eastern Missouri. Laclede Gas delivers
natural gas to retail customers at rates and in accordance with tariffs
authorized by the MoPSC. The Utility’s earnings are primarily generated by the
sale of heating energy. The Utility’s weather mitigation rate design lessens the
impact of weather volatility on Laclede Gas customers during cold winters and
stabilizes the Utility’s earnings by recovering fixed costs more evenly during
the heating season. Due to the seasonal nature of the business of Laclede Gas,
Laclede Group’s earnings are seasonal in nature and are typically concentrated
in the November through April period, which generally corresponds with the
heating season.
On
March 31, 2008, the Company completed the sale of 100% of its interest
in its wholly-owned subsidiary SM&P Utility Resources, Inc. (SM&P) to
Stripe Acquisition, Inc. (an affiliate of Kohlberg Management VI, LLC) for $85
million in cash, subject to certain closing and post-closing adjustments.
SM&P was an underground facilities locating and marking business that
formerly comprised Laclede Group’s Non-Regulated Services operating segment. The
sales agreement included representations, warranties, and indemnification
provisions customary for such transactions and was filed as an exhibit to the
March 31, 2008 Form 10-Q. In accordance with generally accepted
accounting principles, the results of operations for SM&P are reported as
discontinued operations in the Statements of Consolidated Income.
Laclede
Energy Resources, Inc. (LER) is engaged in the marketing of natural gas and
related activities on a non-regulated basis. LER markets natural gas to both
on-system Utility transportation customers and customers outside of Laclede Gas’
traditional service territory, including large retail and wholesale customers.
LER’s operations and customer base are more subject to fluctuations in market
conditions than the Utility.
Other
subsidiaries provide less than 10% of consolidated revenues.
Based
on the nature of the business of the Company and its subsidiaries, as well as
current economic conditions, management focuses on the following key variables
in evaluating the financial condition and results of operations and managing the
business:
Regulated
Gas Distribution Segment:
•
|
the
Utility’s ability to recover the costs of distribution of natural gas to
its customers;
|
•
|
the
impact of weather and other factors, such as customer conservation, on
revenues and expenses;
|
•
|
changes
in the regulatory environment at the federal, state, and local levels, as
well as decisions by regulators, that impact the Utility’s ability to earn
its authorized rate of return;
|
•
|
the
Utility’s ability to access credit markets and maintain working capital
sufficient to meet operating requirements; and,
|
•
|
the
effect of natural gas price volatility on the
business.
|
Non-Regulated
Gas Marketing Segment:
•
|
the
risks of competition;
|
•
|
regional
fluctuations in natural gas prices;
|
•
|
new
national pipeline infrastructure projects;
|
•
|
credit
and/or capital market access;
|
•
|
counterparty
risks; and,
|
•
|
the
effect of natural gas price volatility on the
business.
|
Further information regarding how
management seeks to manage these key variables is discussed below.
Laclede
Group’s strategy continues to include efforts to improve the performance of its
core Utility, while developing non-regulated businesses and taking a measured
approach in the pursuit of additional growth opportunities that complement the
Utility business.
As
for the Utility, improving performance and mitigating the impact of weather
fluctuations on Laclede Gas’ customers while improving the ability to recover
its authorized distribution costs and return continue to be a fundamental
component of Laclede Group’s strategy. The Utility’s distribution costs are the
essential, primarily fixed expenditures it must incur to operate and maintain
more than 16,000 miles of mains and services comprising its natural gas
distribution system and related storage facilities. The Utility’s distribution
costs include wages and employee benefit costs, depreciation and maintenance
expenses, and other regulated utility operating expenses, excluding natural and
propane gas expense. Distribution costs are considered in the ratemaking process
and recovery of these types of costs is included in revenues generated through
the Utility’s tariff rates, as approved by the MoPSC. As previously reported,
Laclede Gas has undertaken an evaluation of the Utility’s natural gas storage
field, which was developed more than 50 years ago, to assess the field’s current
and future capabilities. While not yet complete, the assessment has provided
information that should result in improved efficiencies in managing the
operation of the field. Based on this initial assessment, inventory balances
included in the Consolidated Balance Sheet as of September 30, 2009
have been reclassified consistent with the results of the evaluation and
management’s expectations regarding the future operation of the storage field.
In addition, Laclede Gas is working continually to improve its ability to
provide reliable natural gas service at a reasonable cost, while maintaining and
building a secure and dependable infrastructure. The settlement of the Utility’s
2007 rate case resulted in enhancements to the Utility’s weather mitigation rate
design that better ensure the recovery of its fixed costs and margins despite
variations in sales volumes due to the impacts of weather and other factors that
affect customer usage.
The
Utility’s income from off-system sales and capacity release remains subject to
fluctuations in market conditions. Effective October 1, 2007, the
Utility is allowed to retain 15% to 25% of the first $6 million in annual income
earned (depending on the level of income earned) and 30% of income exceeding $6
million annually. Some of the factors impacting the level of off-system sales
include the availability and cost of the Utility’s natural gas supply, the
weather in its service area, and the weather in other markets. When Laclede Gas’
service area experiences warmer-than-normal weather while other markets
experience colder weather or supply constraints, some of the Utility’s natural
gas supply is available for off-system sales and there may be a demand for such
supply in other markets. See the Regulatory
Matters section on page 31 of this report for additional information on
regulatory issues relative to the Utility.
While
the price of natural gas has moderated recently, Laclede Gas continues to work
actively to reduce the impact of wholesale natural gas prices on its costs by
strategically structuring its natural gas supply portfolio to increase its gas
supply availability and pricing alternatives and through the use of derivative
instruments to protect its customers from significant changes in the commodity
price of natural gas. Nevertheless, the overall cost of purchased gas remains
subject to fluctuations in market conditions. The Utility’s Purchased Gas
Adjustment (PGA) Clause allows Laclede Gas to flow through to customers, subject
to prudence review, the cost of purchased gas supplies, including costs, cost
reductions, and related carrying costs associated with the use of derivative
instruments to hedge the purchase price of natural gas, as well as gas inventory
carrying costs. The Utility believes it will continue to be able to obtain
sufficient gas supply. The price of natural gas supplies and other economic
conditions may affect sales volumes, due to the conservation efforts of
customers, and cash flows associated with the timing of collection of gas costs
and related accounts receivable from customers. Long-term increases in the
wholesale cost of natural gas supplies may adversely impact the Utility’s
competitive position compared with alternative energy sources.
The
Utility relies on both short-term credit and long-term capital markets, as well
as cash flows from operations, to satisfy its seasonal cash requirements and
fund its cost of capital expenditures. Laclede Gas’ ability to issue commercial
paper supported by lines of credit, to issue long-term bonds, or to obtain new
lines of credit is dependent on current conditions in the credit and capital
markets. Management continues to focus on maintaining a strong balance sheet and
believes it currently has adequate access to credit and capital markets and will
have sufficient capital resources to meet its foreseeable obligations. See the
Liquidity and Capital Resources section on page 33 for
additional information.
LER
continues to focus on growing its markets on a long-term and sustainable basis
by providing both on-system Utility transportation customers and customers
outside of Laclede Gas’ traditional service area with another choice in
non-regulated natural gas suppliers. LER is working to assemble the team,
technology, and resources necessary to expand its geographic service area and
the range of services that it now provides. Nevertheless, income from LER’s
operations is more subject to fluctuations in market conditions than the
Utility’s operations. LER’s business is directly impacted by the effects of
competition in the marketplace and the impact of new pipeline infrastructure on
regional commodity prices of natural gas.
In
addition to its operating cash flows, LER relies on parental guarantees to
secure its purchase and sales obligations of natural gas. A large portion of
LER’s receivables are from customers in the energy industry. In addition, LER
may enter into netting arrangements with its energy counterparties to reduce
overall credit and collateral exposure. Although LER’s uncollectible amounts are
closely monitored and have not been significant, increases in uncollectible
amounts from customers are possible and could adversely affect LER’s liquidity
and results.
LER
carefully monitors the creditworthiness of counterparties to its transactions.
LER performs in-house credit reviews of potential customers and requires
prepayments or letters of credit from non-investment grade customers. Credit
limits for customers are established and monitored.
EARNINGS
Overview
– Net Income (Loss) by Operating Segment
(Millions,
After-tax )
Years
Ended September 30
|
2009
|
2008
|
2007
|
||||||||||||
Regulated
Gas Distribution
|
$
|
33.2
|
$
|
39.1
|
$
|
32.1
|
|||||||||
Non-Regulated
Gas Marketing
|
31.4
|
19.3
|
13.3
|
||||||||||||
Other
|
(0.4
|
)
|
(0.9
|
)
|
0.4
|
||||||||||
Income
from Continuing Operations
|
64.2
|
57.5
|
45.8
|
||||||||||||
Income
from Discontinued Operations
|
—
|
20.4
|
4.0
|
||||||||||||
Net
Income
|
$
|
64.2
|
$
|
77.9
|
$
|
49.8
|
Laclede
Group’s consolidated net income was $64.2 million in fiscal year 2009, compared
with $77.9 million in fiscal year 2008, and $49.8 million in fiscal year 2007.
Net income decreased $13.7 million, or 17.6%, in fiscal year 2009 (compared with
fiscal year 2008) primarily due to the net effect of the one-time gain on the
March 31, 2008 sale and operations of SM&P, partially offset by
increased income from continuing operations. Net income increased $28.1 million,
or 56.4%, in fiscal year 2008 (compared with fiscal year 2007) primarily due to
the fiscal year 2008 gain on the sale of SM&P and increased income from
continuing operations.
Basic
and diluted earnings per share were $2.93 and $2.92, respectively, for fiscal
year 2009 compared with basic and diluted earnings per share of $3.60 and $3.58,
respectively, for fiscal year 2008, and $2.32 and $2.31, respectively for fiscal
year 2007. The year-to-year variations in earnings per share were primarily due
to the changes in net income in each period.
Income
from Continuing Operations
Laclede
Group’s income from continuing operations was $64.2 million in fiscal year 2009,
compared with $57.5 million in fiscal year 2008, and $45.8 million in fiscal
year 2007. Income from continuing operations increased $6.7 million, or 11.7%,
in fiscal year 2009 (compared with fiscal year 2008) primarily due to improved
results reported by Laclede Group’s Non-Regulated Gas Marketing segment,
partially offset by lower earnings reported by Laclede Group’s Regulated Gas
Distribution segment. Income from continuing operations increased $11.7 million
in fiscal year 2008 (compared with fiscal year 2007) primarily due to improved
results reported by both Laclede Group’s Regulated Gas Distribution segment and
its Non-Regulated Gas Marketing segment.
Basic
and diluted earnings per share from continuing operations were $2.93 and $2.92,
respectively, for fiscal year 2009, compared with basic and diluted earnings per
share of $2.66 and $2.64, respectively, for fiscal year 2008, and $2.13 and
$2.12, respectively, for fiscal year 2007. Variations in income from continuing
operations were primarily attributable to the factors described
below.
2009 vs.
2008
Regulated
Gas Distribution net income decreased by $5.9 million in 2009, compared with
2008. The decrease in net income was primarily due to the following factors
(quantified on a pre-tax basis, except for the income tax item):
•
|
increases
in operation and maintenance expenses, excluding the provision for
uncollectible accounts, totaling $4.9 million;
|
|
•
|
the
effect of lower system gas sales volumes and other variations totaling
$2.0 million;
|
|
•
|
the
effect of the recognition of previously unrecognized tax benefits and the
reversal of related expenses recorded during fiscal year 2008, totaling
$1.6 million; and,
|
|
•
|
an
increase in depreciation and amortization expense totaling $1.4
million.
|
These
factors were partially offset by higher Infrastructure System Replacement
Surcharge (ISRS) revenues totaling $3.8 million.
The
Non-Regulated Gas Marketing segment reported earnings totaling $31.4 million for
fiscal year 2009, an increase in earnings of $12.1 million compared with fiscal
year 2008. The increased earnings were primarily due to LER’s increased sales
volumes primarily attributable to its acquisition of additional firm pipeline
transportation capacity prior to the 2008 – 2009 winter. This
capacity, along with favorable natural gas costs, supported 49% higher sales
volumes and greater margins in fiscal year 2009 as compared with fiscal year
2008. These factors were partially offset by the effect of a benefit from the
reversal of certain tax-related expenses totaling $1.3 million during fiscal
year 2008.
2008 vs.
2007
Regulated
Gas Distribution net income increased by $7.0 million in 2008, compared with
2007. The increase in net income was primarily due to the following factors
(quantified on a pre-tax basis, except for the income tax item):
•
|
the
benefit of the general rate increase, effective August 1, 2007, totaling
$32.9 million;
|
|
•
|
the
recognition of previously unrecognized tax benefits and the reversal of
related expenses, totaling $1.6 million; and,
|
|
•
|
the
effect of higher system gas sales volumes and other variations totaling
$1.1 million.
|
These
factors were partially offset by:
•
|
lower
income from off-system sales and capacity release, totaling $10.2 million,
primarily due to a reduction in the Utility’s share of such income
(pursuant to the 2007 rate case);
|
|
•
|
increases
in operation and maintenance expenses, excluding the provision for
uncollectible accounts, totaling $8.3 million; and,
|
|
•
|
an
increase in the provision for uncollectible accounts, totaling $6.0
million.
|
The
Non-Regulated Gas Marketing segment reported earnings totaling $19.3 million for
fiscal year 2008, an increase in earnings of $6.0 million compared with fiscal
year 2007. The increased earnings were primarily due to improved margins on
sales of natural gas by LER, 15% higher sales volumes, and the effect of a
reversal of tax-related expenses during fiscal year 2008.
Regulated
Gas Distribution Operating Revenues
2009 vs.
2008
Laclede
Gas passes on to Utility customers (subject to prudence review) increases and
decreases in the wholesale cost of natural gas in accordance with its PGA
Clause. The volatility of the wholesale natural gas market results in
fluctuations from period to period in the recorded levels of, among other items,
revenues and natural gas cost expense. Nevertheless, increases and decreases in
the cost of gas associated with system gas sales volumes have no direct effect
on net revenues and net income.
Regulated
Gas Distribution Operating Revenues for fiscal year 2009 decreased $74.3 million
compared to fiscal year 2008. Temperatures experienced in the Utility’s service
area during 2009 were 1.8% warmer than the same period last year and 1.5% warmer
than normal. Total system therms sold and transported were 0.91 billion for
fiscal year 2009 compared with 0.93 billion for fiscal year 2008. Total
off-system therms sold and transported were 0.16 billion for fiscal year 2009
compared with 0.14 billion for fiscal year 2008. The decrease in Regulated Gas
Distribution Operating Revenues was primarily attributable to the following
factors:
(Millions)
|
||||
Lower
prices charged for off-system sales
|
$
|
(64.2
|
)
|
|
Lower
wholesale gas costs passed on to Utility customers (subject to prudence
review by the MoPSC)
|
(19.0
|
)
|
||
Higher
off-system sales volumes (reflecting more favorable market conditions as
described in greater
detail
in the Results of Operations)
|
16.6
|
|||
Lower
system sales volumes and other variations
|
(11.5
|
)
|
||
Higher
ISRS revenues
|
3.8
|
|||
Total
Variation
|
$
|
(74.3
|
)
|
2008 vs.
2007
Regulated
Gas Distribution Operating Revenues for fiscal year 2008 decreased $3.3 million
compared to fiscal year 2007. Temperatures experienced in the Utility’s service
area during 2008 were 6.8% colder than fiscal year 2007, but 1.1% warmer than
normal. Total system therms sold and transported were 0.93 billion for fiscal
year 2008 compared with 0.91 billion for fiscal year 2007. Total off-system
therms sold and transported were 0.14 billion for fiscal year 2008 compared with
0.21 billion for fiscal year 2007. The decrease in Regulated Gas Distribution
Operating Revenues was primarily attributable to the following
factors:
(Millions)
|
||||
Lower
off-system sales volumes
|
$
|
(47.9
|
)
|
|
Lower
wholesale gas costs passed on to Utility customers (subject to prudence
review by the MoPSC)
|
(38.2
|
)
|
||
General
rate increase, effective August 1, 2007
|
32.9
|
|||
Higher
system sales volumes, primarily due to colder weather and other
variations
|
27.3
|
|||
Higher
prices charged for off-system sales
|
24.0
|
|||
Lower
ISRS revenues
|
(1.4
|
)
|
||
Total
Variation
|
$
|
(3.3
|
)
|
Regulated
Gas Distribution Operating Expenses
2009 vs.
2008
Regulated
Gas Distribution Operating Expenses in fiscal year 2009 decreased $65.1 million,
or 6.2%, from fiscal year 2008. Natural and propane gas expense decreased $70.1
million from last year’s level, primarily attributable to lower off-system gas
expense, decreased rates charged by our suppliers, and lower volumes purchased
for sendout. Other operation and maintenance expenses increased $3.9 million, or
2.3%, primarily due to increases in compensation expenses, higher maintenance
charges, and increased injuries and damages expense, partially offset by a
decrease in distribution charges, a lower provision for uncollectible accounts,
and a gain on the disposal of assets in fiscal year 2009. Depreciation and
amortization expense increased $1.4 million, or 4.1%, primarily due to
additional depreciable property.
2008 vs.
2007
Regulated
Gas Distribution Operating Expenses in fiscal year 2008 decreased $11.6 million,
or 1.1%, from fiscal year 2007. Natural and propane gas expense decreased $27.8
million from fiscal year 2007, primarily attributable to lower rates charged by
our suppliers and lower off-system gas expense, partially offset by higher
system volumes purchased for sendout. Other operation and maintenance expenses
increased $14.3 million, or 9.2%, primarily due to a higher provision for
uncollectible accounts, increased maintenance and distribution expenses,
increased wage rates, higher legal fees, increased pension costs, and the effect
of a gain on the disposal of assets recorded during fiscal year 2007.
Depreciation and amortization expense increased $1.2 million, or 3.6%, primarily
due to additional depreciable property.
Non-Regulated
Gas Marketing Operating Revenues and Operating Expenses
Non-Regulated
Gas Marketing Operating Revenues decreased $239.0 million in fiscal year 2009
from those revenues for fiscal year 2008 primarily due to lower per unit gas
sales prices charged by LER, partially offset by higher sales volumes. The
decrease in Non-Regulated Gas Marketing Operating Expenses of $261.1 million was
primarily associated with lower prices charged by suppliers, partially offset by
increased volumes purchased.
Non-Regulated
Gas Marketing Operating Revenues increased $357.1 million in fiscal year 2008
from those revenues for fiscal year 2007 primarily due to higher per unit gas
sales prices charged by LER and increased sales volumes. The increase in
Non-Regulated Gas Marketing Operating Expenses of $349.2 million was primarily
associated with higher prices charged by suppliers and increased volumes
purchased.
Other
Income and (Income Deductions)-Net
Other
Income and (Income Deductions)-Net decreased $0.4 million in fiscal year 2009
(compared to fiscal year 2008), due to lower interest income and the effect of a
benefit recognized during fiscal year 2008 from the reversal of certain
tax-related expenses. These factors were largely offset by the effect of a loss
on the redemption of long-term debt (primarily unamortized issuance costs)
recognized during fiscal year 2008 and increased income associated with carrying
costs applied to under-recoveries of gas costs. Carrying costs on
under-recoveries of gas costs are recovered through the Utility’s PGA
Clause.
Other
Income and (Income Deductions)-Net decreased $4.9 million in fiscal year 2008
(compared to fiscal year 2007), due to higher net investment losses, a loss on
the redemption of long-term debt (primarily unamortized issuance costs), lower
income associated with carrying costs applied to under-recoveries of gas costs,
and increased charitable donations. These factors were partially offset by a
reversal of tax-related expenses and additional proceeds related to the
Company’s interest, as a policyholder, in the sale of a mutual insurance
company.
Interest
Charges
The
$0.3 million increase in interest charges in fiscal year 2009 (over fiscal year
2008) was primarily due to higher interest on long-term debt, primarily
attributable to the issuance of $80.0 million principal amount of 6.35% First
Mortgage Bonds on September 23, 2008. This increase was largely offset
by lower interest on short-term debt. The $4.5 million decrease in interest
charges in fiscal year 2008 (over fiscal year 2007) was primarily due to a
reduction in interest on long-term debt resulting from the November 2007
maturity of $40 million principal amount of 7 1/2% First Mortgage Bonds, lower
interest on short-term debt, and the reversal of tax-related expenses. Average
short-term interest rates were 1.5% this year compared with 4.1% in fiscal year
2008 and 5.4% in fiscal year 2007. Average short-term borrowings were $207.6
million, $180.7 million, and $156.2 million for fiscal years 2009, 2008, and
2007, respectively.
Income
Taxes
Income
tax expense increased $6.3 million in fiscal year 2009 (over fiscal year 2008)
and $4.0 million in fiscal year 2008 (over fiscal year 2007). These increases
are primarily due to higher pre-tax income. The year-to-year variations also
reflect the effect of lower income tax expense in fiscal year 2008 due to the
recognition of previously unrecognized tax benefits.
Income
from Discontinued Operations
The
sale of SM&P on March 31, 2008 resulted in after-tax earnings of
$25.4 million, net of associated costs of disposal. Income from Discontinued
Operations for fiscal year 2008 was $20.4 million, consisting of the net effect
of the sale and SM&P’s seasonal operating loss through the March 31
sale date. Income from Discontinued Operations for fiscal year 2007 was $4.0
million reflecting SM&P’s operating income for the period.
Basic
and diluted earnings per share from discontinued operations were $0.94 for
fiscal year 2008 and $0.19 for fiscal year 2007.
Labor
Agreement
Laclede
Gas has labor agreements with Locals 11-6 and 11-194 of the United Steel, Paper
and Forestry, Rubber, Manufacturing, Energy, Allied-Industrial and Service
Workers International Union, which represent approximately 64% of Laclede Gas’
employees. The agreements expire at midnight on
July 31, 2012.
The
Missouri Natural Division of Laclede Gas has labor agreements with Local 884 of
the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy,
Allied-Industrial and Service Workers International Union, which represents
approximately 5% of Laclede Gas’ employees. On April 15, 2009, new
four-year labor agreements were reached replacing the prior agreements which
expired on that same date. The new agreements, which expire at midnight on
April 14, 2013, include revisions to the defined benefit pension plan
formula, changes in wage rates and work rules, and other modifications that
enable the Utility to provide high quality service to its customers and control
operating costs while continuing to provide competitive wages, pension, and
healthcare benefits to its employees.
Our
discussion and analysis of our financial condition, results of operations,
liquidity, and capital resources is based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. Generally accepted
accounting principles (GAAP) require that we make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. We evaluate our
estimates on an ongoing basis. We base our estimates on historical experience
and on various other assumptions that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates. We believe the
following represent the more significant items requiring the use of judgment and
estimates in preparing our consolidated financial statements:
Allowances for Doubtful
Accounts – Estimates of the collectibility of trade accounts
receivable are based on historical trends, age of receivables, economic
conditions, credit risk of specific customers, and other factors. The
Utility’s provision for uncollectible accounts is dependent on the
regulatory treatment provided for such costs. As approved by the MoPSC,
the Utility was allowed to defer for future recovery uncollectible
expenses associated with amendments to the Cold Weather Rule for fiscal
year 2007.
|
Employee Benefits and
Postretirement Obligations – Pension and postretirement obligations
are calculated by actuarial consultants that utilize several statistical
factors and other assumptions provided by Management related to future
events, such as discount rates, returns on plan assets, compensation
increases, and mortality rates. For the Utility, the amount of expense
recognized and the amounts reflected in other comprehensive income are
dependent upon the regulatory treatment provided for such costs, as
discussed further below. Certain liabilities related to group medical
benefits and workers’ compensation claims, portions of which are
self-insured and/or contain “stop-loss” coverage with third-party insurers
to limit exposure, are established based on historical
trends.
|
The
table below reflects the sensitivity of Laclede’s plans to potential changes in
key assumptions:
Pension
Plan Benefits:
|
||||||||||||
Estimated
|
Estimated
|
|||||||||||
Increase/
|
Increase/
|
|||||||||||
(Decrease)
to
|
(Decrease)
to
|
|||||||||||
Projected
|
Annual
|
|||||||||||
Benefit
|
Net
Pension
|
|||||||||||
Increase/
|
Obligation
|
Cost*
|
||||||||||
Actuarial
Assumptions
|
(Decrease)
|
(Thousands)
|
(Thousands)
|
|||||||||
Discount
Rate
|
0.25
|
%
|
$
|
(9,420
|
)
|
$
|
(1
|
)
|
||||
(0.25
|
)
|
9,620
|
(20
|
)
|
||||||||
Rate
of Future Compensation Increase
|
0.25
|
%
|
6,700
|
590
|
||||||||
(0.25
|
)
|
(6,600
|
)
|
(570
|
)
|
|||||||
Expected
Return on Plan Assets
|
0.25
|
%
|
—
|
(630
|
)
|
|||||||
(0.25
|
)
|
—
|
630
|
|||||||||
Postretirement
Benefits:
|
||||||||||||
Estimated
|
Estimated
|
|||||||||||
Increase/
|
Increase/
|
|||||||||||
(Decrease)
to
|
(Decrease)
to
|
|||||||||||
Projected
|
Annual
Net
|
|||||||||||
Postretirement
|
Postretirement
|
|||||||||||
Benefit
|
Benefit
|
|||||||||||
Increase/
|
Obligation
|
Cost*
|
||||||||||
Actuarial
Assumptions
|
(Decrease)
|
(Thousands)
|
(Thousands)
|
|||||||||
Discount
Rate
|
0.25
|
%
|
$
|
(1,960
|
)
|
$
|
(97
|
)
|
||||
(0.25
|
)
|
2,010
|
97
|
|||||||||
Expected
Return on Plan Assets
|
0.25
|
%
|
—
|
(85
|
)
|
|||||||
(0.25
|
)
|
—
|
85
|
|||||||||
Annual
Medical Cost Trend
|
1.00
|
%
|
4,870
|
1,090
|
||||||||
(1.00
|
)
|
(4,390
|
)
|
(970
|
)
|
|||||||
*
Excludes the impact of regulatory deferral mechanism. See Note 3, Pension Plans and Other Postretirement Benefits,
of the Notes to Consolidated Financial Statements for information
regarding the regulatory treatment of these
costs.
|
Regulated Operations – Laclede
Gas accounts for its regulated operations in accordance with Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic
980, “Regulated Operations.” This Topic sets forth the application of GAAP for
those companies whose rates are established by or are subject to approval by an
independent third-party regulator. The provisions of this accounting guidance
require, among other things, that financial statements of a regulated enterprise
reflect the actions of regulators, where appropriate. These actions may result
in the recognition of revenues and expenses in time periods that are different
than non-regulated enterprises. When this occurs, costs are deferred as assets
in the balance sheet (regulatory assets) and recorded as expenses when those
amounts are reflected in rates. Also, regulators can impose liabilities upon a
regulated company for amounts previously collected from customers and for
recovery of costs that are expected to be incurred in the future (regulatory
liabilities). Management believes that the current regulatory environment
supports the continued use of these regulatory accounting principles and that
all regulatory assets and regulatory liabilities are recoverable or refundable
through the regulatory process. Management believes the following represent the
more significant items recorded through the application of this accounting
guidance:
The
Utility’s PGA Clause allows Laclede Gas to flow through to customers,
subject to prudence review, the cost of purchased gas supplies, including
the costs, cost reductions, and related carrying costs associated with the
Utility’s use of natural gas derivative instruments to hedge the purchase
price of natural gas. The difference between actual costs incurred and
costs recovered through the application of the PGA are recorded as
regulatory assets and regulatory liabilities that are recovered or
refunded in a subsequent period. The PGA Clause also authorizes the
Utility to recover costs it incurs to finance its investment in gas
supplies that are purchased during the storage injection season for sale
during the heating season. The PGA Clause also permits the application of
carrying costs to all over- or under-recoveries of gas costs, including
costs and cost reductions associated with the use of derivative
instruments. Effective October 1, 2007, the PGA Clause also
provides for a portion of income from off-system sales and capacity
release revenues to be flowed through to customers.
|
|
The
Company records deferred tax liabilities and assets measured by enacted
tax rates for the net tax effect of all temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes, and the amounts used for income tax purposes. Changes in enacted
tax rates, if any, and certain property basis differences will be
reflected by entries to regulatory asset or regulatory liability accounts
for regulated companies, and will be reflected as income or loss for
non-regulated companies. Pursuant to the direction of the MoPSC, Laclede
Gas’ provision for income tax expense for financial reporting purposes
reflects an open-ended method of tax depreciation. Laclede Gas’ provision
for income tax expense also records the income tax effect associated with
the difference between overheads capitalized to construction for financial
reporting purposes and those recognized for tax purposes without recording
an offsetting deferred income tax expense. These two methods are
consistent with the regulatory treatment prescribed by the
MoPSC.
|
|
Asset
retirement obligations are recorded in accordance with GAAP using various
assumptions related to the timing, method of settlement, inflation, and
profit margins that third parties would demand to settle the future
obligations. These assumptions require the use of judgment and estimates
and may change in future periods as circumstances dictate. As authorized
by the MoPSC, Laclede Gas accrues future removal costs associated with its
property, plant and equipment through its depreciation rates, even if a
legal obligation does not exist as defined by GAAP. The difference between
removal costs recognized in depreciation rates and the accretion expense
and depreciation expense recognizable pursuant to GAAP is a timing
difference between the recovery of these costs in rates and their
recognition for financial reporting purposes. Accordingly, these
differences are deferred as regulatory
liabilities.
|
The
amount of net periodic pension and other postretirement benefit cost
recognized in the financial statements related to the Utility’s qualified
pension plans and other postretirement benefit plans is based upon
allowances, as approved by the MoPSC, which have been established in the
rate-making process for the recovery of these costs from customers. The
differences between these amounts and actual pension and other
postretirement benefit costs incurred for financial reporting purposes are
deferred as regulatory assets or regulatory liabilities. GAAP also
requires that changes that affect the funded status of pension and other
postretirement benefit plans, but that are not yet required to be
recognized as components of pension and other postretirement benefit cost,
be reflected in other comprehensive income. For the Utility’s qualified
pension plans and other postretirement benefit plans, amounts that would
otherwise be reflected in other comprehensive income are deferred with
entries to regulatory assets or regulatory
liabilities.
|
For
further discussion of significant accounting policies, see Note
1 of the Notes to Consolidated Financial Statements included on page
49.
There
have been several significant regulatory developments affecting Laclede
Gas.
During
fiscal year 2006, the MoPSC approved permanent modifications to the Cold Weather
Rule affecting the disconnection and reconnection practices of utilities during
the winter heating season. Those modifications included provisions to allow the
Utility to obtain accounting authorizations and defer for future recovery
certain costs incurred with the modifications. During fiscal year 2007, the
Utility deferred for future recovery $2.7 million of costs associated with the
fiscal year 2007 heating season. On October 31, 2007, the Utility
filed for determination and subsequent recovery of the deferred amount. On
November 16, 2007, the MoPSC directed the MoPSC Staff and the Missouri
Office of Public Counsel (Public Counsel) to submit their positions regarding
the Utility’s filing and on February 28, 2008, the Utility and the
MoPSC Staff filed a Non-Unanimous Stipulation & Agreement in which these
parties agreed to a recovery of $2.5 million of costs. Public Counsel opposed
the Non-Unanimous Stipulation & Agreement and a hearing in this matter was
held before the Commission. On April 17, 2008, the Commission issued
its Report and Order approving the $2.5 million cost recovery recommended by the
Utility and the MoPSC Staff. Consistent with the approved amount, the Utility
recorded a reduction in its deferral totaling $0.2 million during the quarter
ended March 31, 2008. On May 29, 2008, Public Counsel
appealed the MoPSC’s Order to the Cole County, Missouri Circuit Court and on
January 6, 2009, the Court issued its judgment affirming the
Commission’s Order approving the Cold Weather Rule compliance cost amount that
the Utility and Staff had recommended over Public Counsel’s objection. On
February 9, 2009, Public Counsel appealed the Circuit Court’s
affirmation of the MoPSC’s April 17, 2008 Order to the Court of
Appeals for the Western District of Missouri.
On
December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2
million related to Laclede Gas’ recovery of its purchased gas costs applicable
to fiscal year 2005. On September 14, 2007, the Staff withdrew its
pursuit of $5.5 million of the disallowance it had originally proposed. The
remaining $1.7 million pertains to Laclede Gas’ purchase of gas from a marketing
affiliate, LER. Laclede Gas believes that the remaining portion of the proposed
disallowance lacks merit and is vigorously opposing the adjustment in
proceedings before the MoPSC. As such, no amount has been recorded in the
financial statements for this proposed disallowance.
The
MoPSC Staff has also proposed disallowances of gas costs relating to Laclede Gas
purchases of gas supply from LER for fiscal years 2006 and 2007. On
December 31, 2007, the MoPSC Staff proposed a disallowance of $2.8
million applicable to fiscal year 2006, and on December 31, 2008, the
MoPSC Staff proposed a disallowance of $1.5 million applicable to fiscal year
2007. Laclede Gas believes that these proposed disallowances also lack merit and
is vigorously opposing them in proceedings before the MoPSC. As such, no amount
has been recorded in the financial statements for these proposed
disallowances.
In
the December 31, 2007 filing, the MoPSC Staff also raised questions
regarding whether certain sales and capacity release transactions, subject to
the Federal Energy Regulatory Commission (FERC)’s oversight, were consistent
with the FERC’s regulations and policies regarding capacity release. The Company
commenced an internal review of the questions raised by the MoPSC Staff and
notified the FERC Staff that it took this action. Subsequently, as a result of
the internal review, the Company has provided the FERC Staff with a report
regarding compliance of sales and capacity release activities with the FERC’s
regulations and policies. On July 23, 2008, the FERC Staff requested
additional information, which the Company provided and on
February 11, 2009, the FERC Staff submitted follow-up questions to
which the Company responded on February 25, 2009. On
March 2, 2009, FERC Staff requested clarification of certain aspects
of the Company’s February 25, 2009 response, which the Company
clarified on March 4, 2009.
On
July 9, 2008, Laclede Gas made a tariff filing with the MoPSC that
would make the payment provisions for the restoration of gas service under the
Utility’s Cold Weather Rule available to customers in the summer of 2008 and
enable the Utility to increase or decrease its PGA rates to correct for any
shortfall or surplus created by the difference between the gas cost portion of
the Utility’s actual net bad debt write-offs and the amount of such cost that is
embedded in its existing rates. The MoPSC suspended the tariff on
August 5, 2008 and established a procedural schedule to consider the
Utility’s filing. As a result, the Cold Weather Rule portion of the filing is
now moot. A formal hearing pertaining to the bad debt portion of the filing was
held on January 5, 2009. On April 15, 2009, the Commission
issued its Order rejecting the Utility’s tariffs. On May 28, 2009,
Laclede Gas filed for a petition with the Circuit Court of Cole County seeking
judicial review of the Commission’s decision.
On
November 21, 2008, the Utility made an ISRS filing with the Commission
designed to increase revenues by $1.9 million annually. After the Utility
updated the filing, on February 4, 2009, the MoPSC approved an annual
increase of $2.1 million that became effective February 6, 2009. On
April 28, 2009, the Utility made an ISRS filing with the Commission
designed to increase revenues by an additional $2.5 million annually. On
July 15, 2009, the MoPSC approved the increase, which became effective
July 16, 2009.
ACCOUNTING
PRONOUNCEMENTS
The
Company has evaluated or is in the process of evaluating the impact that
recently issued accounting standards will have on the Company’s financial
position or results of operations upon adoption. For disclosures related to the
adoption of new accounting standards, see the New Accounting Standards section of Note 1 of the Notes to Consolidated Financial
Statements.
INFLATION
The
accompanying consolidated financial statements reflect the historical costs of
events and transactions, regardless of the purchasing power of the dollar at the
time. Due to the capital-intensive nature of the business of Laclede Gas, the
most significant impact of inflation is on the depreciation of utility plant.
Rate regulation, to which Laclede Gas is subject, allows recovery through its
rates of only the historical cost of utility plant as depreciation. While no
plans exist to undertake replacements of plant in service other than normal
replacements and those under existing replacement programs, Laclede Gas believes
that any higher costs experienced upon replacement of existing facilities would
be recovered through the normal regulatory process.
CREDIT
RATINGS
Current
credit ratings for Laclede Group and Laclede Gas issues are as
follows:
Type
of Facility
|
S&P
|
Moody’s
|
Fitch
|
Laclede
Group Issuer Rating
|
A
|
A-
|
|
Laclede
Gas First Mortgage Bonds
|
A
|
A2
|
A+
|
Laclede
Gas Commercial Paper
|
A-1
|
P-2
|
F1
|
The
Company has investment grade ratings and believes that it will have adequate
access to the financial markets to meet its capital requirements. These ratings
remain subject to review and change by the rating agencies.
CASH
FLOWS
The
Company’s short-term borrowing requirements typically peak during colder months
when Laclede Gas borrows money to cover the lag between when it purchases its
natural gas and when its customers pay for that gas. Changes in the wholesale
cost of natural gas (including cash payments for margin deposits associated with
the Utility’s use of natural gas derivative instruments), variations in the
timing of collections of gas cost under the Utility’s PGA Clause, and the
utilization of storage gas inventories cause short-term cash requirements to
vary during the year and from year to year, and can cause significant variations
in the Utility’s cash provided by or used in operating activities.
Net
cash provided by operating activities for fiscal year 2009 was $228.8 million.
Net cash used in operating activities for fiscal year 2008 was $36.5 million.
Net cash provided by operating activities was $81.3 million for fiscal year
2007. The improvement in cash flows provided by operating activities in fiscal
year 2009 (over fiscal year 2008) was primarily attributable to reduced payments
for natural gas storage inventories, other variations in the timing of the
collection of gas costs under the PGA Clause, and reduced cash paid for income
taxes. The reduction in cash flows from operating activities in fiscal year 2008
(over fiscal year 2007) was primarily attributable to increased payments for
natural gas storage inventories, other variations in the timing of the
collection of gas costs under the PGA Clause, and increased cash paid for income
taxes, partially offset by higher operating income.
Net
cash used in investing activities was $52.3 million for fiscal year 2009. Net
cash provided by investing activities for fiscal year 2008 was $26.9 million.
Net cash used in investing activities was $58.7 million for fiscal year 2007.
Net cash provided by investing activities in fiscal year 2008 is primarily
attributable to the proceeds from the sale of SM&P, partially offset by
capital expenditures. Net cash used in investing activities in fiscal years 2009
and 2007 primarily reflected capital expenditures.
Net
cash used in financing activities for fiscal years 2009, 2008, and 2007 was
$116.8 million, $28.3 million and $20.6 million, respectively. The variation in
net cash used in financing activities in fiscal year 2009 (over fiscal year
2008) primarily reflects an increase in the repayments of short-term debt this
year, partially offset by the net effect of changes in long-term debt during
fiscal year 2008. The variation in net cash used in financing activities in
fiscal year 2008 (over fiscal year 2007) was primarily attributable to the
redemption of the Company’s long-term debt to an unconsolidated affiliate trust
and the maturity of long-term debt, partially offset by the issuance of
additional long-term debt in fiscal year 2008. The Company used a portion of the
proceeds from the aforementioned sale of SM&P to fund the redemption of the
long-term debt to the unconsolidated affiliate trust.
Short-term
Debt
As
indicated above, the Company’s short-term borrowing requirements typically peak
during the colder months. These short-term cash requirements can be met through
the sale of commercial paper supported by lines of credit with banks or through
direct use of the lines of credit. Laclede Gas has a syndicated line of credit
in place of $320 million from 10 banks, with the largest portion provided by a
single bank being 17.5%. This line expires in December 2011. In
November 2008, the Utility established a seasonal line of credit of $75
million, which expired in March 2009. Including both lines of credit, the
largest portion provided by a single bank was 26.8%. During fiscal year 2009,
Laclede Gas utilized both its syndicated line of credit and commercial paper for
short-term funding. Commercial paper outstanding at September 30, 2009
was $129.8 million, and there were no outstanding bank line advances. The
weighted average interest rate on the short-term borrowings was 0.24% per annum
at September 30, 2009. Based on total short-term borrowings at
September 30, 2009, an increase in interest rate of 100 basis points
would decrease pre-tax earnings and cash flows of Laclede Group by approximately
$1.3 million on an annual basis. Portions of such increases or decreases may be
offset through the application of PGA carrying costs. Although Laclede Gas
borrowed funds from Laclede Group from time to time within fiscal year 2009,
there were no such borrowings outstanding at September 30, 2009. The
Utility had short-term borrowings (including borrowings from Laclede Group)
aggregating to a maximum of $386.4 million at any one time during the fiscal
year. Excluding borrowings from Laclede Group, the Utility’s maximum borrowings
for the year were $309.9 million.
Laclede
Gas’ lines of credit include covenants limiting total debt, including short-term
debt, to no more than 70% of total capitalization and requiring earnings before
interest, taxes, depreciation and amortization (EBITDA) to be at least 2.25
times interest expense. On September 30, 2009, total debt was 56% of
total capitalization.
For the fiscal year ended September 30, 2009, EBITDA was 3.76
times interest expense.
Short-term
cash requirements outside of Laclede Gas have generally been met with
internally-generated funds. However, Laclede Group has $50 million in working
capital lines of credit which expire in October 2010, to meet short-term
liquidity needs of its subsidiaries. These lines of credit have covenants
limiting the total debt of the consolidated Laclede Group to no more than 70% of
the Company’s total capitalization. This ratio stood at 50% on
September 30, 2009. These lines have been used to provide for seasonal
funding needs of various subsidiaries from time to time. There were no
borrowings under Laclede Group’s lines during the fiscal year.
Long-term
Debt
At
September 30, 2009, Laclede Gas had fixed-rate long-term debt totaling
$390 million. While these long-term debt issues are fixed-rate, they are subject
to changes in fair value as market interest rates change. However, increases or
decreases in fair value would impact earnings and cash flows only if Laclede Gas
were to reacquire any of these issues in the open market prior to
maturity.
Equity
and Shelf Registrations
Laclede
Gas has on file with the Securities and Exchange Commission (SEC) an effective
shelf registration on Form S-3 for issuance of $350 million of First Mortgage
Bonds, unsecured debt, and preferred stock, of which $270 million remains
available to Laclede Gas at this time. The Utility has authority from the MoPSC
until February 15, 2010 to issue up to $500 million in First Mortgage
Bonds, unsecured debt, and equity securities, of which $370.4 million remains
available under this authorization as of November 20, 2009. During
fiscal year 2009, pursuant to this authority, the Utility sold 1,218 shares of
its common stock to Laclede Group for $42.0 million. On June 30, 2009,
the Utility filed an application with the MoPSC requesting authority to issue
debt securities and preferred stock, including on a private placement basis, as
well as to issue common stock, receive paid-in capital, and enter into capital
lease agreements, all for a total of up to $600 million over the next three
years. This application is under review by the Commission at this time. The
amount, timing, and type of additional financing to be issued will depend on
cash requirements and market conditions, as well as future MoPSC
authorizations.
Laclede
Group has on file an automatic shelf registration on Form S-3 with the SEC that
allows for the issuance of equity securities and debt securities. No securities
have been issued under this registration statement, which expires
November 26, 2011. The amount, timing, and type of additional
financing to be issued under this shelf registration will depend on cash
requirements and market conditions. In addition, Laclede Group has a
registration statement on file on Form S-3 for the issuance and sale of up to
400,000 shares of its common stock under its Dividend Reinvestment and Stock
Purchase Program. There were 370,514 shares and 360,260 shares at
September 30, 2009 and November 20, 2009, respectively,
remaining available for issuance under this Form S-3.
On
March 31, 2009, Laclede Gas redeemed all of its outstanding 5% Series
B and 4.56% Series C preferred stock, totaling $0.6 million, at its par value of
$25 per share in addition to the dividend paid on that same date.
Guarantees
Laclede
Gas has several operating leases for the rental of vehicles that contain
provisions requiring Laclede Gas to guarantee certain amounts related to the
residual value of the leased property. These leases have various terms, the
longest of which extends into 2014. At September 30, 2009, the maximum
guarantees under these leases were $1.7 million. However, the Utility estimates
that the residual value of the leased vehicles will be adequate to satisfy most
of the guaranteed amounts. At September 30, 2009, the carrying value
of the liability recognized for these guarantees was $0.4 million.
Laclede
Group had guarantees totaling $86.8 million for performance and payment of
certain wholesale gas supply purchases by LER, as of
September 30, 2009. Since that date, total guarantees issued by
Laclede Group on behalf of LER increased by $1.0 million bringing the total to
$87.8 million in guarantees outstanding at November 20, 2009. No amounts have
been recorded for these guarantees in the financial statements.
Other
Utility
capital expenditures were $51.4 million in fiscal year 2009, compared with $55.3
million and $56.4 million for fiscal years 2008 and 2007, respectively. Utility
capital expenditures are expected to be approximately $67 million in fiscal year
2010. The increase in capital expenditures expected for fiscal year 2010,
compared with prior periods, is primarily attributable to anticipated additional
purchases associated with software and technology enhancements, as well as other
planned improvements to the Utility’s natural gas storage facilities.
Non-utility capital expenditures for fiscal year 2009 were $1.0 million compared
with $1.3 million in fiscal year 2008 and $2.5 million in fiscal year 2007, and
are estimated to be approximately $0.3 million in fiscal
year 2010.
Consolidated
capitalization at September 30, 2009 consisted of 57.1% Laclede Group
common stock equity and 42.9% Laclede Gas long-term debt.
Laclede
Group’s ratio of earnings (from continuing operations) to fixed charges was 4.1
for fiscal year 2009, 3.7 for fiscal year 2008, and 2.9 for fiscal year
2007.
It
is management’s view that the Company has adequate access to capital markets and
will have sufficient capital resources, both internal and external, to meet its
anticipated capital requirements, which primarily include capital expenditures,
scheduled maturities of long-term debt, short-term seasonal needs, and
dividends.
CONTRACTUAL
OBLIGATIONS
As
of September 30, 2009, Laclede Group had contractual obligations with
payments due as summarized
below
(in millions):
Payments
due by period
|
||||||||||||||||
Less
than
|
1-3
|
3-5
|
More
than
|
|||||||||||||
Contractual
Obligations
|
Total
|
1
Year
|
Years
|
Years
|
5
Years
|
|||||||||||
Principal
Payments on Long-Term Debt
|
$
|
390.0
|
$
|
—
|
$
|
25.0
|
$
|
25.0
|
$
|
340.0
|
||||||
Interest
Payments on Long-Term Debt
|
509.5
|
24.6
|
46.7
|
43.5
|
394.7
|
|||||||||||
Operating
Leases (a)
|
15.4
|
5.1
|
6.7
|
3.2
|
0.4
|
|||||||||||
Purchase
Obligations – Natural Gas (b)
|
1,474.3
|
705.5
|
599.9
|
147.4
|
21.5
|
|||||||||||
Purchase
Obligations – Other (c)
|
98.3
|
16.2
|
20.9
|
16.7
|
44.5
|
|||||||||||
Total
(d)
|
$
|
2,487.5
|
$
|
751.4
|
$
|
699.2
|
$
|
235.8
|
$
|
801.1
|
(a)
|
Operating
lease obligations are primarily for office space, vehicles, and power
operated equipment in the Regulated Gas Distribution segment. Additional
payments will be incurred if renewal options are exercised under the
provisions of certain agreements.
|
(b)
|
These
purchase obligations represent the minimum payments required under
existing natural gas transportation and storage contracts and natural gas
supply agreements in the Regulated Gas Distribution and Non-Regulated Gas
Marketing segments. These amounts reflect fixed obligations as well as
obligations to purchase natural gas at future market prices, calculated
using September 30, 2009 forward market prices. Laclede Gas
recovers the costs related to its purchases, transportation, and storage
of natural gas through the operation of its PGA Clause, subject to
prudence review; however, variations in the timing of collections of gas
costs from customers affect short-term cash requirements. Additional
contractual commitments are generally entered into prior to or during the
heating season.
|
(c)
|
These
purchase obligations reflect miscellaneous agreements for the purchase of
materials and the procurement of services necessary for normal
operations.
|
(d)
|
The
categories of Capital Leases and Other Long-Term Liabilities have been
excluded from the table above because there are no material amounts of
contractual obligations under these categories. Long-term liabilities
associated with unrecognized tax benefits, totaling $1.4 million, have
been excluded from the table above because the timing of future cash
outflows, if any, cannot be reasonably estimated. Also, commitments
related to pension and postretirement benefit plans have been excluded
from the table above. The Company expects to make contributions to its
qualified, trusteed pension plans totaling $1.6 million in fiscal year
2010. Laclede Gas anticipates a $1.9 million contribution relative to its
non-qualified pension plans during fiscal year 2010. With regard to
the postretirement benefits, the Company anticipates Laclede Gas will
contribute $11.6 million to the qualified trusts and $0.4 million directly
to participants from Laclede Gas’ funds during fiscal year 2010. For
further discussion of the Company’s pension and postretirement benefit
plans, refer to Note 3, Pension Plans and Other
Postretirement Benefits, of the Notes to Consolidated Financial
Statements.
|
Laclede
Gas’ commodity price risk, which arises from market fluctuations in the price of
natural gas, is primarily managed through the operation of its PGA Clause. The
PGA Clause allows Laclede Gas to flow through to customers, subject to prudence
review, the cost of purchased gas supplies. The Utility is allowed the
flexibility to make up to three discretionary PGA changes during each year, in
addition to its mandatory November PGA change, so long as such changes are
separated by at least two months. The Utility is able to mitigate, to some
extent, changes in commodity prices through the use of physical storage supplies
and regional supply diversity. Laclede Gas also has a risk management policy
that allows for the purchase of natural gas derivative instruments with the goal
of managing its price risk associated with purchasing natural gas on behalf of
its customers. This policy prohibits speculation. Costs and cost reductions,
including carrying costs, associated with the Utility’s use of natural gas
derivative instruments are allowed to be passed on to the Utility’s customers
through the operation of its PGA Clause. Accordingly, Laclede Gas does not
expect any adverse earnings impact as a result of the use of these derivative
instruments. However, the timing of recovery for cash payments related to margin
requirements may cause short-term cash requirements to vary. Nevertheless,
carrying costs associated with such requirements, as well as other variations in
the timing of collections of gas costs, are recovered through the PGA Clause.
For more information about the Utility’s natural gas derivative instruments, see
Note 11, Derivative Instruments and Hedging Activities, of
the Notes to the Consolidated Financial Statements.
In
the course of its business, Laclede Group’s non-regulated gas marketing
affiliate, LER, enters into fixed-price commitments associated with the purchase
or sale of natural gas. As part of LER’s risk management policy, LER manages the
price risk associated with these commitments by either closely matching the
offsetting physical purchase or sale of natural gas at fixed-prices or through
the use of exchange-traded/cleared futures contracts and swaps contracts to lock
in margins. At September 30, 2009, LER’s unmatched positions were not
material to Laclede Group’s financial position or results of operations. For
details related to LER’s derivatives and hedging activities, see Note 11, Derivative Instruments and Hedging Activities, of
the Notes to Consolidated Financial Statements.
LER
has concentrations of counterparty credit risk in that a significant portion of
its transactions are with (or are associated with) energy producers, utility
companies, and pipelines. These concentrations of counterparties have the
potential to affect the Company’s overall exposure to credit risk, either
positively or negatively, in that each of these three groups may be affected
similarly by changes in economic, industry, or other conditions. LER closely
monitors its credit exposure and, although uncollectible amounts have not been
significant, increased counterparty defaults are possible and may result in
financial losses and/or capital limitations. For more information on these
concentrations of credit risk, including how LER manages these risks, see Note 12, Concentrations of Credit Risk, of the Notes to
Consolidated Financial Statements.
The
Company is also subject to interest rate risk associated with its long-term and
short-term debt issuances. Refer to the Liquidity and
Capital Resources section of this Management’s Discussion and Analysis of
Financial Condition and Results of Operations for information about the effect
of changes in interest rates.
ENVIRONMENTAL
MATTERS
Laclede
Gas owns and operates natural gas distribution, transmission, and storage
facilities, the operations of which are subject to various environmental laws,
regulations, and interpretations. While environmental issues resulting from such
operations arise in the ordinary course of business, such issues have not
materially affected the Company’s or Laclede Gas’ financial position and results
of operations. As environmental laws, regulations, and their interpretations
change, however, Laclede Gas may be required to incur additional costs. For a
description of environmental matters, see Note 17,
Commitments and Contingencies, of the Notes to Consolidated Financial
Statements.
OFF-BALANCE
SHEET ARRANGEMENTS
Laclede
Group has no off-balance sheet arrangements.
Laclede
Gas Company’s Management’s Discussion and Analysis of Financial Condition and
Results of Operations is included in Exhibit 99.1 of
this report.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
For
this discussion, see Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Market Risk, on
page 36 of this report.
2009 10-K
Page
|
|||
39
|
|||
40-41
|
|||
Financial
Statements:
|
|||
The
Laclede Group, Inc.:
|
|||
For
Years Ended September 30, 2009, 2008, and 2007:
|
|||
42
|
|||
43
|
|||
47
|
|||
48
|
|||
As
of September 30, 2009 & 2008:
|
|||
44-45
|
|||
46
|
|||
Notes
to Consolidated Financial Statements:
|
|||
49
|
|||
60
|
|||
60
|
|||
68
|
|||
69
|
|||
69
|
|||
70
|
|||
70
|
|||
71
|
|||
72
|
|||
72
|
|||
75
|
|||
76
|
|||
76
|
|||
78
|
|||
78
|
|||
80
|
|||
83
|
Management Report on Internal Control Over Financial
Reporting
Management
is responsible for establishing and maintaining adequate internal controls over
financial reporting. The Company’s internal control over financial reporting is
a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements and can provide
only reasonable assurance with respect to financial statement preparation and
presentation. Also, projections of any evaluation of effectiveness to future
periods are subject to the risks that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
The
Company’s management, including our Chief Executive Officer and Chief Financial
Officer, conducted an assessment of the effectiveness of the Company’s internal
control over financial reporting as of September 30, 2009. In making
this assessment, management used the criteria in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on that assessment, management concluded that the
Company’s internal control over financial reporting was effective as of
September 30, 2009. Deloitte & Touche LLP, an independent
registered public accounting firm, has issued an attestation report on the
Company’s internal control over financial reporting, which is included
herein.
To
the Board of Directors and Shareholders of
The
Laclede Group, Inc.
St.
Louis, Missouri
We
have audited the internal control over financial reporting of The Laclede Group,
Inc. and its subsidiaries (the “Company”) as of September 30, 2009,
based on criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. The Company’s management is responsible for maintaining
effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the
accompanying Management Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A
company’s internal control over financial reporting is a process designed by, or
under the supervision of, the company’s principal executive and principal
financial officers, or persons performing similar functions, and effected by the
company’s board of directors, management, and other personnel to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of the inherent limitations of internal control over financial reporting,
including the possibility of collusion or improper management override of
controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In
our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of September 30, 2009,
based on the criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
We
have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated financial
statements and financial statement schedule as of and for the year ended
September 30, 2009 of the Company and our report dated
November 20, 2009 expressed an unqualified opinion on those financial
statements and financial statement schedule and included an explanatory
paragraph regarding the Company’s adoption of Financial Accounting Standards
Board Interpretation No. 48, Accounting for Uncertainty in Income
Taxes—an Interpretation of FASB Statement No. 109 (ASC 740, Income
Taxes), effective October 1, 2007.
/s/
DELOITTE & TOUCHE LLP
St.
Louis, Missouri
November
20, 2009
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholders of
The
Laclede Group, Inc.
St.
Louis, Missouri
We
have audited the accompanying consolidated balance sheets and statements of
consolidated capitalization of The Laclede Group, Inc. and its subsidiaries (the
“Company”) as of September 30, 2009 and 2008, and the related
consolidated statements of income, common shareholders’ equity, comprehensive
income, and cash flows for each of the three years in the period ended
September 30, 2009. Our audits also included the financial statement
schedule listed in the Index at Part IV, Item 15(a) 2. These consolidated
financial statements and financial statement schedule are the responsibility of
the Company’s management. Our responsibility is to express an opinion on the
consolidated financial statements and financial statement schedule based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of The Laclede Group, Inc. and its
subsidiaries as of September 30, 2009 and 2008, and the results of
their operations and cash flows for each of the three years in the period ended
September 30, 2009, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
As
discussed in Note 14 to the consolidated financial statements, the Company
adopted the provisions of Financial Accounting Standards Board Interpretation
No. 48, Accounting for
Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109
(ASC 740, Income Taxes), effective October 1, 2007.
We
have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the Company’s internal control over
financial reporting as of September 30, 2009, based on the criteria
established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated
November 20, 2009 expressed an unqualified opinion on the Company’s
internal control over financial reporting.
/s/
DELOITTE & TOUCHE LLP
St.
Louis, Missouri
November
20, 2009
THE
LACLEDE GROUP, INC.
|
||||||||||||||||
(Thousand,
Except Per Share Amounts)
|
||||||||||||||||
Years
Ended September 30
|
2009
|
2008
|
2007
|
|||||||||||||
Operating
Revenues:
|
||||||||||||||||
Regulated
Gas Distribution
|
$
|
1,053,993
|
$
|
1,128,287
|
$
|
1,131,554
|
||||||||||
Non-Regulated
Gas Marketing
|
836,865
|
1,075,845
|
718,704
|
|||||||||||||
Other
|
4,340
|
4,841
|
5,603
|
|||||||||||||
Total
Operating Revenues
|
1,895,198
|
2,208,973
|
1,855,861
|
|||||||||||||
Operating
Expenses:
|
||||||||||||||||
Regulated
Gas Distribution
|
||||||||||||||||
Natural
and propane gas
|
699,984
|
770,097
|
797,924
|
|||||||||||||
Other
operation expenses
|
146,542
|
144,611
|
131,798
|
|||||||||||||
Maintenance
|
27,818
|
25,827
|
24,306
|
|||||||||||||
Depreciation
and amortization
|
36,751
|
35,303
|
34,080
|
|||||||||||||
Taxes,
other than income taxes
|
68,639
|
69,023
|
68,361
|
|||||||||||||
Total
Regulated Gas Distribution Operating Expenses
|
979,734
|
1,044,861
|
1,056,469
|
|||||||||||||
Non-Regulated
Gas Marketing
|
787,056
|
1,048,162
|
698,962
|
|||||||||||||
Other
|
3,344
|
4,603
|
5,376
|
|||||||||||||
Total
Operating Expenses
|
1,770,134
|
2,097,626
|
1,760,807
|
|||||||||||||
Operating
Income
|
125,064
|
111,347
|
95,054
|
|||||||||||||
Other
Income and (Income Deductions) – Net
|
1,453
|
1,881
|
6,813
|
|||||||||||||
Interest
Charges:
|
||||||||||||||||
Interest
on long-term debt
|
24,583
|
19,851
|
22,502
|
|||||||||||||
Interest
on long-term debt to unconsolidated affiliate trust
|
—
|
486
|
277
|
|||||||||||||
Other
interest charges
|
5,163
|
9,140
|
11,155
|
|||||||||||||
Total
Interest Charges
|
29,746
|
29,477
|
33,934
|
|||||||||||||
Income
from Continuing Operations Before Income Taxes
|
||||||||||||||||
and
Dividends on Laclede Gas Redeemable Preferred Stock
|
96,771
|
83,751
|
67,933
|
|||||||||||||
Income
Tax Expense
|
32,509
|
26,190
|
22,146
|
|||||||||||||
Dividends
on Laclede Gas Redeemable Preferred Stock
|
15
|
35
|
43
|
|||||||||||||
Income
from Continuing Operations
|
64,247
|
57,526
|
45,744
|
|||||||||||||
Income
from Discontinued Operations, Net of Income Tax (Note
2)
|
—
|
20,396
|
4,027
|
|||||||||||||
Net
Income
|
$
|
64,247
|
$
|
77,922
|
$
|
49,771
|
||||||||||
Average
Number of Common Shares Outstanding:
|
||||||||||||||||
Basic
|
21,893
|
21,657
|
21,455
|
|||||||||||||
Diluted
|
22,024
|
21,763
|
21,503
|
|||||||||||||
Basic
Earnings Per Share of Common Stock:
|
||||||||||||||||
Income
from Continuing Operations
|
$
|
2.93
|
$
|
2.66
|
$
|
2.13
|
||||||||||
Income
from Discontinued Operations
|
—
|
0.94
|
0.19
|
|||||||||||||
Net
Income
|
$
|
2.93
|
$
|
3.60
|
$
|
2.32
|
||||||||||
Diluted
Earnings Per Share of Common Stock:
|
||||||||||||||||
Income
from Continuing Operations
|
$
|
2.92
|
$
|
2.64
|
$
|
2.12
|
||||||||||
Income
from Discontinued Operations
|
—
|
0.94
|
0.19
|
|||||||||||||
Net
Income
|
$
|
2.92
|
$
|
3.58
|
$
|
2.31
|
||||||||||
See
the accompanying Notes to Consolidated Financial
Statements.
|
THE
LACLEDE GROUP, INC.
|
||||||||||||||||
(Thousands)
|
||||||||||||||||
Years
Ended September 30
|
2009
|
2008
|
2007
|
|||||||||||||
Net
Income
|
$
|
64,247
|
$
|
77,922
|
$
|
49,771
|
||||||||||
Other
Comprehensive Income (Loss), Before Tax:
|
||||||||||||||||
Net
gains (losses) on cash flow hedging derivative
instruments:
|
||||||||||||||||
Net
hedging gain arising during the period
|
6,019
|
8,091
|
7,976
|
|||||||||||||
Reclassification
adjustment for gains included in net income
|
(15,270
|
)
|
(3,814
|
)
|
(9,451
|
)
|
||||||||||
Net
unrealized gains (losses) on cash flow hedging
|
||||||||||||||||
derivative
instruments
|
(9,251
|
)
|
4,277
|
(1,475
|
)
|
|||||||||||
Defined
benefit pension and other postretirement benefit plans:
|
||||||||||||||||
Minimum
pension liability adjustment
|
—
|
—
|
377
|
|||||||||||||
Net
actuarial loss arising during the period
|
(1,728
|
)
|
(271
|
)
|
—
|
|||||||||||
Amortization
of actuarial loss included in net periodic pension and
|
||||||||||||||||
postretirement
benefit cost
|
199
|
171
|
—
|
|||||||||||||
Net
defined benefit pension and other postretirement benefit
plans
|
(1,529
|
)
|
(100
|
)
|
377
|
|||||||||||
Other
Comprehensive Income (Loss), Before Tax
|
(10,780
|
)
|
4,177
|
(1,098
|
)
|
|||||||||||
Income
Tax Expense (Benefit) Related to Items
|
||||||||||||||||
of
Other Comprehensive Income (Loss)
|
(4,146
|
)
|
1,597
|
(424
|
)
|
|||||||||||
Other
Comprehensive Income (Loss), Net of Tax
|
(6,634
|
)
|
2,580
|
(674
|
)
|
|||||||||||
Comprehensive
Income
|
$
|
57,613
|
$
|
80,502
|
$
|
49,097
|
||||||||||
See
the accompanying Notes to Consolidated Financial
Statements.
|
THE
LACLEDE GROUP, INC.
|
|||||||||||
(Thousands)
|
|||||||||||
September
30
|
2009
|
2008
|
|||||||||
ASSETS
|
|||||||||||
Utility
Plant
|
$
|
1,280,238
|
$
|
1,229,174
|
|||||||
Less
– Accumulated depreciation and amortization
|
424,309
|
405,977
|
|||||||||
Net
Utility Plant
|
855,929
|
823,197
|
|||||||||
Non-utility
property (net of accumulated depreciation and
|
|||||||||||
amortization,
2009, $3,508, 2008, $4,035)
|
4,061
|
3,793
|
|||||||||
Other
investments
|
44,973
|
43,314
|
|||||||||
Other
Property and Investments
|
49,034
|
47,107
|
|||||||||
Current
Assets:
|
|||||||||||
Cash
and cash equivalents
|
74,591
|
14,899
|
|||||||||
Accounts
receivable:
|
|||||||||||
Utility
|
81,262
|
98,708
|
|||||||||
Non-utility
|
42,382
|
102,389
|
|||||||||
Other
|
7,511
|
10,486
|
|||||||||
Allowances
for doubtful accounts
|
(11,160
|
)
|
(12,624
|
)
|
|||||||
Inventories:
|
|||||||||||
Natural
gas stored underground at LIFO cost
|
93,313
|
206,267
|
|||||||||
Propane
gas at FIFO cost
|
19,847
|
19,911
|
|||||||||
Materials,
supplies, and merchandise at average cost
|
4,158
|
5,301
|
|||||||||
Natural
gas receivable
|
28,344
|
16,257
|
|||||||||
Derivative
instrument assets
|
17,178
|
57,210
|
|||||||||
Unamortized
purchased gas adjustments
|
—
|
33,411
|
|||||||||
Deferred
income taxes
|
1,707
|
—
|
|||||||||
Prepayments
and other
|
9,650
|
9,693
|
|||||||||
Total
Current Assets
|
368,783
|
561,908
|
|||||||||
Deferred
Charges:
|
|||||||||||
Regulatory
assets
|
482,999
|
334,755
|
|||||||||
Other
|
5,273
|
5,688
|
|||||||||
Total
Deferred Charges
|
488,272
|
340,443
|
|||||||||
Total
Assets
|
$
|
1,762,018
|
$
|
1,772,655
|
THE
LACLEDE GROUP, INC.
|
|||||||||||
CONSOLIDATED
BALANCE SHEETS (Continued)
|
|||||||||||
(Thousands)
|
|||||||||||
September
30
|
2009
|
2008
|
|||||||||
CAPITALIZATION
AND LIABILITIES
|
|||||||||||
Capitalization:
|
|||||||||||
Common
stock equity
|
$
|
517,030
|
$
|
486,479
|
|||||||
Laclede
Gas redeemable preferred stock (less current sinking fund
requirements)
|
—
|
467
|
|||||||||
Long-term
debt – Laclede Gas
|
389,240
|
389,181
|
|||||||||
Total
Capitalization
|
906,270
|
876,127
|
|||||||||
Current
Liabilities:
|
|||||||||||
Notes
payable
|
129,800
|
215,900
|
|||||||||
Accounts
payable
|
72,765
|
159,580
|
|||||||||
Advance
customer billings
|
21,140
|
25,548
|
|||||||||
Current
portion of preferred stock
|
—
|
160
|
|||||||||
Wages
and compensation accrued
|
12,682
|
12,197
|
|||||||||
Dividends
payable
|
8,687
|
8,400
|
|||||||||
Customer
deposits
|
12,400
|
14,020
|
|||||||||
Interest
accrued
|
9,943
|
10,094
|
|||||||||
Taxes
accrued
|
15,951
|
11,387
|
|||||||||
Unamortized
purchased gas adjustments
|
3,130
|
—
|
|||||||||
Deferred
income taxes current
|
—
|
11,669
|
|||||||||
Other
|
12,642
|
10,249
|
|||||||||
Total
Current Liabilities
|
299,140
|
479,204
|
|||||||||
Deferred
Credits and Other Liabilities:
|
|||||||||||
Deferred
income taxes
|
256,196
|
222,761
|
|||||||||
Unamortized
investment tax credits
|
3,754
|
3,973
|
|||||||||
Pension
and postretirement benefit costs
|
202,681
|
98,513
|
|||||||||
Asset
retirement obligations
|
25,503
|
26,833
|
|||||||||
Regulatory
liabilities
|
44,225
|
42,191
|
|||||||||
Other
|
24,249
|
23,053
|
|||||||||
Total
Deferred Credits and Other Liabilities
|
556,608
|
417,324
|
|||||||||
Commitments
and Contingencies (Note 17)
|
|||||||||||
Total
Capitalization and Liabilities
|
$
|
1,762,018
|
$
|
1,772,655
|
|||||||
See
the accompanying Notes to Consolidated Financial
Statements.
|
THE
LACLEDE GROUP, INC.
|
|||||||||||
(Thousands,
Except for Shares and Per Share Amounts)
|
|
||||||||||
September
30
|
2009
|
2008
|
|||||||||
Common
Stock Equity:
|
|||||||||||
Common
stock, par value $1 per share:
|
|||||||||||
Authorized
– 2009 and 2008, 70,000,000 shares
|
|||||||||||
Issued
– 2009, 22,168,120 shares; and 2008, 21,993,473 shares
|
$
|
22,168
|
$
|
21,993
|
|||||||
Paid-in
capital
|
154,218
|
147,241
|
|||||||||
Retained
earnings
|
342,810
|
312,808
|
|||||||||
Accumulated
other comprehensive income (loss)
|
(2,166
|
)
|
4,437
|
||||||||
Total
Common Stock Equity
|
517,030
|
486,479
|
|||||||||
Laclede
Gas Redeemable Preferred Stock, par value $25 per share
|
|||||||||||
(1,480,000
shares authorized) issued and outstanding:
|
|||||||||||
5%
Series B – 2008, 19,200 shares
|
—
|
320
|
|||||||||
4.56%
Series C – 2008, 5,894 shares
|
—
|
147
|
|||||||||
Total
Redeemable Preferred Stock
|
—
|
467
|
|||||||||
Long-Term
Debt – Laclede Gas:
|
|||||||||||
First
Mortgage Bonds:
|
|||||||||||
6-1/2%
Series, due November 15, 2010
|
25,000
|
25,000
|
|||||||||
6-1/2%
Series, due October 15, 2012
|
25,000
|
25,000
|
|||||||||
5-1/2%
Series, due May 1, 2019
|
50,000
|
50,000
|
|||||||||
7%
Series, due June 1, 2029
|
25,000
|
25,000
|
|||||||||
7.90%
Series, due September 15, 2030
|
30,000
|
30,000
|
|||||||||
6%
Series, due May 1, 2034
|
100,000
|
100,000
|
|||||||||
6.15%
Series, due June 1, 2036
|
55,000
|
55,000
|
|||||||||
6.35%
Series, due October 15, 2038
|
80,000
|
80,000
|
|||||||||
Total
|
390,000
|
390,000
|
|||||||||
Unamortized
discount, net of premium, on long-term debt
|
(760
|
)
|
(819
|
)
|
|||||||
Total
Long-Term Debt – Laclede Gas
|
389,240
|
389,181
|
|||||||||
Total
Capitalization
|
$
|
906,270
|
$
|
876,127
|
|||||||
Long-term
debt and preferred stock dollar amounts are exclusive of current
portion.
|
|||||||||||
See
the accompanying Notes to Consolidated Financial
Statements.
|
THE
LACLEDE GROUP, INC.
|
||||||||||||||||||
Common
Stock Issued
|
Paid-in
|
Retained
|
Accum.
Other
Comp.
|
|||||||||||||||
(Thousands,
Except for Shares and Per Share Amounts)
|
Shares
|
Amount
|
Capital
|
Earnings
|
Income
|
Total
|
||||||||||||
BALANCE
OCTOBER 1, 2006
|
21,361,639
|
$
|
21,362
|
$
|
127,125
|
$
|
250,495
|
$
|
3,655
|
$
|
402,637
|
|||||||
Net
income
|
—
|
—
|
—
|
49,771
|
—
|
49,771
|
||||||||||||
Dividend
reinvestment plan
|
116,973
|
117
|
3,690
|
—
|
—
|
3,807
|
||||||||||||
Stock-based
compensation costs
|
—
|
—
|
2,388
|
—
|
—
|
2,388
|
||||||||||||
Employee
stock options exercised
|
108,025
|
108
|
2,946
|
—
|
—
|
3,054
|
||||||||||||
Employee
restricted stock awards
|
59,000
|
59
|
(59
|
)
|
—
|
—
|
—
|
|||||||||||
Non-employee
directors’ restricted stock awards
|
—
|
—
|
(292
|
)
|
—
|
—
|
(292
|
)
|
||||||||||
Tax
benefit – stock compensation
|
—
|
—
|
263
|
—
|
—
|
263
|
||||||||||||
Dividends
declared:
|
||||||||||||||||||
Common
stock ($1.46 per share)
|
—
|
—
|
—
|
(31,505
|
)
|
—
|
(31,505
|
)
|
||||||||||
Other
comprehensive loss, net of tax
|
—
|
—
|
—
|
—
|
(674
|
)
|
(674
|
)
|
||||||||||
Adoption
of SFAS No. 158, as codified in
ASC
Topic 715, net of tax
|
—
|
—
|
—
|
—
|
(1,124
|
)
|
(1,124
|
)
|
||||||||||
BALANCE
SEPTEMBER 30, 2007
|
21,645,637
|
21,646
|
136,061
|
268,761
|
1,857
|
428,325
|
||||||||||||
Adoption
of FIN 48, as codified in
ASC
Topic 740, as of October 1, 2007
|
—
|
—
|
—
|
(1,099
|
)
|
—
|
(1,099
|
)
|
||||||||||
Net
income
|
—
|
—
|
—
|
77,922
|
—
|
77,922
|
||||||||||||
Dividend
reinvestment plan
|
106,436
|
106
|
3,681
|
—
|
—
|
3,787
|
||||||||||||
Stock-based
compensation costs
|
—
|
—
|
2,615
|
—
|
—
|
2,615
|
||||||||||||
Employee
stock options exercised
|
178,750
|
179
|
4,833
|
—
|
—
|
5,012
|
||||||||||||
Employee
restricted stock awards
|
62,650
|
62
|
(62
|
)
|
—
|
—
|
—
|
|||||||||||
Non-employee
directors’ restricted stock awards
|
—
|
—
|
(421
|
)
|
—
|
—
|
(421
|
)
|
||||||||||
Tax
benefit – stock compensation
|
—
|
—
|
534
|
—
|
—
|
534
|
||||||||||||
Dividends
declared:
|
||||||||||||||||||
Common
stock ($1.50 per share)
|
—
|
—
|
—
|
(32,776
|
)
|
—
|
(32,776
|
)
|
||||||||||
Other
comprehensive income, net of tax
|
—
|
—
|
—
|
—
|
2,580
|
2,580
|
||||||||||||
BALANCE
SEPTEMBER 30, 2008
|
21,993,473
|
21,993
|
147,241
|
312,808
|
4,437
|
486,479
|
||||||||||||
Net
income
|
—
|
—
|
—
|
64,247
|
—
|
64,247
|
||||||||||||
Dividend
reinvestment plan
|
47,037
|
47
|
1,969
|
—
|
—
|
2,016
|
||||||||||||
Stock-based
compensation costs
|
—
|
—
|
3,981
|
—
|
—
|
3,981
|
||||||||||||
Employee
stock options exercised
|
54,125
|
54
|
1,604
|
—
|
—
|
1,658
|
||||||||||||
Employee
restricted stock awards
|
73,485
|
74
|
(74
|
)
|
—
|
—
|
—
|
|||||||||||
Employees’
taxes paid associated with restricted
shares
withheld upon vesting
|
—
|
—
|
(675
|
)
|
—
|
—
|
(675
|
)
|
||||||||||
Non-employee
directors’ restricted stock awards
|
—
|
—
|
(570
|
)
|
—
|
—
|
(570
|
)
|
||||||||||
Tax
benefit – stock compensation
|
—
|
—
|
742
|
—
|
—
|
742
|
||||||||||||
Dividends
declared:
|
||||||||||||||||||
Common
stock ($1.54 per share)
|
—
|
—
|
—
|
(34,100
|
)
|
—
|
(34,100
|
)
|
||||||||||
Other
comprehensive loss, net of tax
|
—
|
—
|
—
|
—
|
(6,634
|
)
|
(6,634
|
)
|
||||||||||
Adoption
of SFAS No. 158, as codified in
ASC
Topic 715, net of tax
|
—
|
—
|
—
|
(145
|
)
|
31
|
(114
|
)
|
||||||||||
BALANCE
SEPTEMBER 30, 2009
|
22,168,120
|
$
|
22,168
|
$
|
154,218
|
$
|
342,810
|
$
|
(2,166
|
)
|
$
|
517,030
|
||||||
See
the accompanying Notes to Consolidated Financial
Statements.
|
THE
LACLEDE GROUP, INC.
|
||||||||||
(Thousands)
|
||||||||||
Years
Ended September 30
|
2009
|
2008
|
2007
|
|||||||
Operating
Activities:
|
||||||||||
Net
Income
|
$
|
64,247
|
$
|
77,922
|
$
|
49,771
|
||||
Adjustments
to reconcile net income to
|
||||||||||
net
cash provided by (used in) operating activities:
|
||||||||||
Gain
on sale of discontinued operations
|
—
|
(44,401
|
)
|
—
|
||||||
Depreciation,
amortization and accretion
|
37,041
|
36,913
|
38,308
|
|||||||
Deferred
income taxes and investment tax credits
|
17,937
|
5,786
|
(16,144
|
)
|
||||||
Other
- net
|
3,682
|
5,494
|
2,118
|
|||||||
Changes
in assets and liabilities:
|
||||||||||
Accounts
receivable – net
|
78,964
|
(50,106
|
)
|
(15,927
|
)
|
|||||
Unamortized
purchased gas adjustments
|
36,541
|
(20,598
|
)
|
31,568
|
||||||
Deferred
purchased gas costs
|
(45,234
|
)
|
(19,614
|
)
|
13,381
|
|||||
Accounts
payable
|
(86,184
|
)
|
59,161
|
2,181
|
||||||
Advance
customer billings – net
|
(4,408
|
)
|
108
|
(6,003
|
)
|
|||||
Taxes
accrued
|
4,546
|
(6,886
|
)
|
5,404
|
||||||
Natural
gas stored underground
|
102,868
|
(68,011
|
)
|
(780
|
)
|
|||||
Other
assets and liabilities
|
18,753
|
(12,300
|
)
|
(22,586
|
)
|
|||||
Net
cash provided by (used in) operating activities
|
228,753
|
(36,532
|
)
|
81,291
|
||||||
Investing
Activities:
|
||||||||||
Proceeds
from sale of discontinued operations
|
—
|
83,554
|
—
|
|||||||
Capital
expenditures
|
(52,384
|
)
|
(56,621
|
)
|
(58,870
|
)
|
||||
Other
investments
|
130
|
(1,393
|
)
|
153
|
||||||
Proceeds
from unconsolidated affiliate trust’s redemption of its common
securities
|
—
|
1,400
|
—
|
|||||||
Net
cash (used in) provided by investing activities
|
(52,254
|
)
|
26,940
|
(58,717
|
)
|
|||||
Financing
Activities:
|
||||||||||
Issuance
of First Mortgage Bonds
|
—
|
80,000
|
—
|
|||||||
Maturity
of First Mortgage Bonds
|
—
|
(40,000
|
)
|
—
|
||||||
Redemption
of long-term debt to unconsolidated affiliate trust
|
—
|
(46,400
|
)
|
—
|
||||||
(Repayment)
issuance of short-term debt - net
|
(86,100
|
)
|
4,500
|
4,100
|
||||||
Change
in book overdrafts
|
652
|
—
|
—
|
|||||||
Issuance
of common stock
|
3,674
|
8,799
|
6,861
|
|||||||
Non-employee
directors’ restricted stock awards
|
(570
|
)
|
(421
|
)
|
(292
|
)
|
||||
Dividends
paid
|
(33,806
|
)
|
(32,430
|
)
|
(31,193
|
)
|
||||
Preferred
stock redeemed/reacquired
|
(627
|
)
|
(160
|
)
|
(159
|
)
|
||||
Employees’
taxes paid associated with restricted shares withheld upon
vesting
|
(675
|
)
|
—
|
—
|
||||||
Excess
tax benefits from stock-based compensation
|
761
|
387
|
77
|
|||||||
Other
|
(116
|
)
|
(2,530
|
)
|
—
|
|||||
Net
cash used in financing activities
|
(116,807
|
)
|
(28,255
|
)
|
(20,606
|
)
|
||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
59,692
|
(37,847
|
)
|
1,968
|
||||||
Cash
and Cash Equivalents at Beginning of Year
|
14,899
|
52,746
|
50,778
|
|||||||
Cash
and Cash Equivalents at End of Year
|
$
|
74,591
|
$
|
14,899
|
$
|
52,746
|
||||
Supplemental
Disclosure of Cash Paid During the Year for:
|
||||||||||
Interest
|
$
|
29,266
|
$
|
32,687
|
$
|
35,241
|
||||
Income
taxes
|
5,936
|
47,572
|
26,191
|
|||||||
See
the accompanying Notes to Consolidated Financial
Statements.
|
THE
LACLEDE GROUP, INC.
BASIS OF CONSOLIDATION - The
consolidated financial statements include the accounts of The Laclede Group,
Inc. (Laclede Group or the Company) and its subsidiary companies. All
subsidiaries are wholly owned. Laclede Gas Company (Laclede Gas or the Utility)
and other subsidiaries of Laclede Group may engage in related party transactions
during the ordinary course of business. All intercompany balances have been
eliminated from the consolidated financial statements of Laclede Group except
that certain intercompany transactions with Laclede Gas are not eliminated in
accordance with the provisions of Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) Topic 980, “Regulated Operations.” Those
types of transactions include sales of natural gas from Laclede Gas to Laclede
Energy Resources, Inc. (LER), sales of natural gas from LER to Laclede Gas, and
transportation services provided by Laclede Pipeline Company to Laclede Gas.
These revenues are shown on the Intersegment revenues lines in the table
included in Note 16 under Regulated Gas Distribution,
Non-Regulated Gas Marketing, and Other columns, respectively.
DISCONTINUED OPERATIONS - On
March 31, 2008, Laclede Group sold 100% of its interest in SM&P
Utility Resources, Inc. (SM&P), its wholly-owned subsidiary, which comprised
the Non-Regulated Services segment. In accordance with generally accepted
accounting principles, the results of operations for SM&P are reported as
discontinued operations in the statement of income. The operating results of
SM&P have been aggregated and reported on the Statements of Consolidated
Income as Income from Discontinued Operations, Net of Income Tax. The Company
has reported in discontinued operations interest expense based on amounts
previously recorded by SM&P. Discontinued operations does not include
general corporate overheads previously recorded by SM&P. Prior periods have
been reclassified to conform to the current-period presentation. For additional
information relative to the Company’s sale of SM&P, refer to Note 2, Discontinued Operations.
INVESTMENT IN UNCONSOLIDATED
AFFILIATE TRUST - In fiscal year 2003, Laclede Group formed Laclede
Capital Trust I (Trust), its affiliated, nonconsolidated trust, for the sole
purpose of issuing trust securities and investing the gross proceeds of the sale
of the trust securities in debt securities of Laclede Group. All of the Trust
securities had a liquidation value of $25 per share and a dividend rate of
7.70%, with all of its common securities being owned by Laclede Group and all of
its preferred securities being sold to the public. The Trust’s sole asset was
the Company’s $46.4 million aggregate principal amount of 7.70% debentures due
December 1, 2032, which had the same economic terms as the Trust
securities and were reflected as Long-term debt to unconsolidated affiliate
trust on the Consolidated Balance Sheets. The Company’s investment in the Trust
common securities was included on the Other investments line on the Consolidated
Balance Sheets.
On
May 5, 2008, Laclede Group redeemed in full its $46.4 million
subordinated debentures, which also triggered the redemption of all of the Trust
common and preferred securities on the same date. Interest on the debentures and
distributions on the Trust securities ceased on and after the redemption date.
Upon redemption, Laclede Group recognized a pre-tax loss of $1.4 million,
primarily attributable to unamortized issuance costs. A portion of the proceeds
received from the sale of SM&P was used to fund the redemption. The Trust
was dissolved on June 16, 2008.
NATURE OF OPERATIONS - Laclede
Group is a public utility holding company under the Public Utility Holding
Company Act of 2005. All subsidiaries are wholly owned by Laclede Group. The
Regulated Gas Distribution segment includes Laclede Gas, Laclede Group’s largest
subsidiary and core business unit. Laclede Gas is a public utility engaged in
the retail distribution and sale of natural gas. Laclede Gas serves an area in
eastern Missouri, with a population of approximately 2.1 million, including the
City of St. Louis and parts of ten counties in eastern Missouri. As an adjunct
to its gas distribution business, Laclede Gas operates an underground natural
gas storage field. The Non-Regulated Gas Marketing segment includes LER, a
subsidiary engaged in the marketing of natural gas and related activities on a
non-regulated basis. The activities of other subsidiaries are described in Note 16, Information by Operating Segment, and are included
in the Other column.
USE OF ESTIMATES - The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
SYSTEM OF ACCOUNTS - The
accounts of Laclede Gas are maintained in accordance with the Uniform System of
Accounts prescribed by the Missouri Public Service Commission (MoPSC or
Commission), which system substantially conforms to that prescribed by the
Federal Energy Regulatory Commission (FERC). The accounts of Laclede Pipeline
Company are maintained in accordance with the Uniform System of Accounts
prescribed by the FERC.
UTILITY PLANT, DEPRECIATION AND
AMORTIZATION - Utility plant is stated at original cost. The cost of
additions to utility plant includes contracted work, direct labor and materials,
allocable overheads, and an allowance for funds used during construction. The
costs of units of property retired, replaced, or renewed are removed from
utility plant and are charged to accumulated depreciation. Maintenance and
repairs of property and replacement and renewal of items determined to be less
than units of property are charged to maintenance expenses.
Utility
plant is depreciated on a straight-line basis at rates based on estimated
service lives of the various classes of property. In fiscal years 2009, 2008,
and 2007, annual depreciation and amortization expense averaged 3.1% of the
original cost of depreciable and amortizable property.
The
Utility’s capital expenditures were $51.4 million, $55.3 million, and $56.4
million for fiscal years 2009, 2008, and 2007, respectively. Additionally, the
Utility had recorded accruals for capital expenditures totaling $1.7 million for
September 30, 2009 and $2.3 million for September 30, 2008.
Accrued capital expenditures at September 30, 2007 were not material.
Accrued capital expenditures are excluded from the Statements of Consolidated
Cash Flows.
ASSET RETIREMENT OBLIGATIONS -
Laclede Group records legal obligations associated with the retirement of
long-lived assets in the period in which the obligations are incurred, if
sufficient information exists to reasonably estimate the fair value of the
obligations. Obligations are recorded as both a cost of the related long-lived
asset and as a corresponding liability. Subsequently, the asset retirement costs
are depreciated over the life of the asset and the asset retirement obligations
are accreted to the expected settlement amounts. The Company has recorded asset
retirement obligations associated with certain safety requirements to purge and
seal gas distribution mains upon retirement, the plugging and abandonment of
storage wells and other storage facilities, specific service line obligations,
and certain removal and disposal obligations related to components of Laclede
Gas’ distribution system and general plant. Asset retirement obligations
recorded by Laclede Group’s non-regulated subsidiaries are not material. As
authorized by the MoPSC, Laclede Gas accrues future asset removal costs
associated with its property, plant and equipment even if a legal obligation
does not exist. Such accruals are provided for through depreciation expense and
are recorded with corresponding credits to regulatory liabilities. When Laclede
Gas retires depreciable utility plant and equipment, it charges the associated
original costs to accumulated depreciation and amortization, and any related
removal costs incurred are charged to regulatory liabilities. The difference
between removal costs recognized in depreciation rates and the accretion expense
and depreciation expense recognized for financial reporting purposes is a timing
difference between recovery of these costs in rates and their recognition for
financial reporting purposes. Accordingly, these differences are deferred as
regulatory liabilities. In the rate setting process, the regulatory liability is
deducted from the rate base upon which the Utility has the opportunity to earn
its allowed rate of return.
The
following table presents a reconciliation of the beginning and ending balances
of Asset retirement obligations at September 30 as reported in the
Consolidated Balance Sheets:
(Thousands)
|
2009
|
2008
|
||||||
Asset
retirement obligations, beginning of year
|
$
|
26,833
|
$
|
26,125
|
||||
Liabilities
incurred during the period
|
415
|
235
|
||||||
Liabilities
settled during the period
|
(2,776
|
)
|
(1,035
|
)
|
||||
Accretion
|
1,567
|
1,567
|
||||||
Revisions
in estimated cash flows
|
(536
|
)
|
(59
|
)
|
||||
Asset
retirement obligations, end of year
|
$
|
25,503
|
$
|
26,833
|
REGULATED OPERATIONS - Laclede
Gas accounts for its regulated operations in accordance with ASC Topic 980. This
Topic sets forth the application of generally accepted accounting principles
(GAAP) for those companies whose rates are established by or are subject to
approval by an independent third-party regulator. The provisions of this
accounting guidance require, among other things, that financial statements of a
regulated enterprise reflect the actions of regulators, where appropriate. These
actions may result in the recognition of revenues and expenses in time periods
that are different than non-regulated enterprises. When this occurs, costs are
deferred as assets in the balance sheet (regulatory assets) and recorded as
expenses when those amounts are reflected in rates. Also, regulators can impose
liabilities upon a regulated company for amounts previously collected from
customers and for recovery of costs that are expected to be incurred in the
future (regulatory liabilities).
The
following regulatory assets and regulatory liabilities were reflected in the
Consolidated Balance Sheets as of September 30:
(Thousands)
|
2009
|
2008
|
||||||
Regulatory
Assets:
|
||||||||
Future
income taxes due from customers
|
$
|
91,782
|
$
|
85,456
|
||||
Pension
and postretirement benefit costs
|
280,939
|
182,890
|
||||||
Unamortized
purchased gas adjustments
|
—
|
33,411
|
||||||
Purchased
gas costs
|
94,305
|
49,071
|
||||||
Compensated
absences
|
7,425
|
7,253
|
||||||
Cold
weather rule
|
5,264
|
6,074
|
||||||
Other
|
3,284
|
4,011
|
||||||
Total
Regulatory Assets
|
$
|
482,999
|
$
|
368,166
|
||||
Regulatory
Liabilities:
|
||||||||
Unamortized
purchased gas adjustments
|
$
|
3,130
|
$
|
—
|
||||
Unamortized
investment tax credits
|
3,754
|
3,973
|
||||||
Accrued
cost of removal
|
41,590
|
35,922
|
||||||
Other
|
2,635
|
6,269
|
||||||
Total
Regulatory Liabilities
|
$
|
51,109
|
$
|
46,164
|
As
authorized by the MoPSC, Laclede Gas discontinued deferring certain costs for
future recovery, as expenses associated with those specific areas were included
in approved rates effective December 27, 1999. Previously deferred
costs of $10.5 million are being recovered and amortized on a straight-line
basis over a fifteen-year period, without return on investment. Amortization of
these costs totaled $6.9 million from December 27, 1999 through
September 30, 2009. Previously deferred costs of $2.1 million are
being recovered and amortized on a straight-line basis over a 10 year period,
without return on investment. Amortization of these costs totaled $2.0 million
from December 27, 1999 through
September 30, 2009.
NATURAL GAS STORED UNDERGROUND
- Inventory of Utility natural gas in storage is priced on a last-in,
first-out (LIFO) basis. The replacement cost of natural gas stored underground
for current use at September 30, 2009 and September 30, 2008
was less than the LIFO cost by $33.1 million and $21.8 million, respectively.
The inventory carrying value is not adjusted to the lower of cost or market
prices because, pursuant to the Laclede Gas Purchased Gas Adjustment (PGA)
Clause, actual gas costs are recovered in customer rates.
REVENUE RECOGNITION - Laclede
Gas reads meters and bills its customers on monthly cycles. The Utility records
its regulated gas distribution revenues from gas sales and transportation
services on an accrual basis that includes estimated amounts for gas delivered,
but not yet billed. The accruals for unbilled revenues are reversed in the
subsequent accounting period when meters are actually read and customers are
billed. The amounts of accrued unbilled revenues at September 30, 2009
and 2008, for the Utility, were $12.7 million and $13.5 million,
respectively.
LER
and Laclede Group’s other subsidiaries record revenues when earned, either when
the product is delivered or when services are performed.
In
the course of its business, LER enters into commitments associated with the
purchase or sale of natural gas. Most of LER’s derivative natural gas contracts
are designated as normal purchases or normal sales, and, as such, are excluded
from the scope of ASC Topic 815, “Derivatives and Hedging.” As such, those
contracts are accounted for as executory contracts and recorded on an accrual
basis. Revenues are recorded using a gross presentation.
PURCHASED GAS ADJUSTMENTS AND
DEFERRED ACCOUNT – As authorized by the
MoPSC, the PGA Clause allows Laclede Gas to flow through to customers, subject
to prudence review, the cost of purchased gas supplies. To better match customer
billings with market natural gas prices, the Utility is allowed to file to
modify, on a periodic basis, the level of gas costs in its PGA. Laclede Gas has
a risk management policy that allows for the purchase of natural gas derivative
instruments with the goal of managing price risk associated with purchasing
natural gas on behalf of its customers. The MoPSC clarified that costs, cost
reductions, and carrying costs associated with the Utility’s use of natural gas
derivative instruments are gas costs recoverable through the PGA mechanism.
Certain other provisions of the PGA Clause are included below:
•
|
The
tariffs allow the Utility flexibility to make up to three discretionary
PGA changes during each year, in addition to its mandatory November PGA
change, so long as such changes are separated by at least two
months.
|
|
•
|
The
Utility is authorized to recover gas inventory carrying costs through its
PGA rates to recover costs it incurs to finance its investment in gas
supplies that are purchased during the storage injection season for sale
during the heating season. The Utility is also authorized to apply
carrying costs to all over- or under-recoveries of gas costs, including
costs and cost reductions associated with the use of derivative
instruments, including cash payments for margin
deposits.
|
|
•
|
Previously,
the MoPSC approved a plan applicable to the Utility’s gas supply commodity
costs under which it could retain up to 10% of cost savings associated
with the acquisition of natural gas below an established benchmark level
of gas cost. This gas supply cost management program required that if
Laclede Gas’ retention of cost savings reached $5 million, the Utility
would retain 1% of any remaining cost savings. The settlement of the
Utility’s 2007 rate case provides certain modifications to the plan,
including a provision that allows the Utility to retain 10% of cost
savings, up to a maximum of $3.0 million annually, commencing
October 1, 2007. The Utility recorded $0.6 million in pre-tax
income under the plan in fiscal year 2008. Laclede Gas did not record any
income under the plan during fiscal years 2009 and 2007. Income recorded
under the plan is included in Regulated Gas Distribution Operating
Revenues on the Statements of Consolidated
Income.
|
Pursuant
to the provisions of the PGA Clause, the difference between actual costs
incurred and costs recovered through the application of the PGA (including costs
and cost reductions associated with the use of derivative instruments and gas
inventory carrying costs), amounts due to or from customers related to operation
of the gas supply cost management program, refunds received from the Company’s
suppliers in connection with gas supply, transportation, and storage services,
and carrying costs on such over- or under-recoveries are reflected as a deferred
charge or credit until fiscal year end. At that time, the balance is classified
as a current asset or current liability and recovered from or credited to
customers over an annual period commencing in November. The balance in the
current account is amortized as amounts are reflected in customer billings.
Effective October 1, 2007, the PGA Clause also provides for the
treatment of income from off-system sales and capacity release revenues, as
described below.
OFF-SYSTEM SALES - In
conjunction with the settlement of the 2005 rate case, effective
October 1, 2005, the Utility retained all pre-tax income from
off-system sales and capacity release revenues up to $12 million annually.
Pre-tax amounts in excess of $12 million were shared with customers, with the
Utility retaining 50% of amounts exceeding that threshold. Pursuant to the
settlement of the 2007 rate case, the pre-tax amounts in excess of $12 million
to be shared with customers resulting from amounts earned in fiscal years 2006
and 2007, totaling approximately $7 million, were flowed back to customers over
an annual period commencing in November 2007. In addition, the portion of
pre-tax income to be shared with customers was increased beginning
October 1, 2007. The customer share of such income is determined in
accordance with the table below. The difference between the actual amount
allocated to customers for each fiscal year and the estimated amount assumed in
PGA rates is recovered from or credited to customers over an annual period
commencing in the subsequent November.
Pre-tax
Income
|
Customer
Share
|
Company
Share
|
||
First
$2 million
|
85%
|
15%
|
||
Next
$2 million
|
80%
|
20%
|
||
Next
$2 million
|
75%
|
25%
|
||
Amounts
exceeding $6 million
|
70%
|
30%
|
INCOME TAXES - Laclede Group
and its subsidiaries have elected, for tax purposes only, various accelerated
depreciation provisions of the Internal Revenue Code. In addition, certain other
costs are expensed currently for tax purposes while being deferred for book
purposes. Effective October 1, 2007, generally accepted accounting
principles require that tax benefits be recognized in the financial statements
as determined by new recognition and measurement provisions. These provisions
permit the benefit from a tax position to be recognized only if, and to the
extent that, it is more likely than not that the tax position will be sustained
upon examination by the taxing authority, based on the technical merits of the
position. Unrecognized tax benefits and related interest and penalties, if any,
are recorded as liabilities or as a reduction to deferred tax assets. Laclede
Group companies record deferred tax liabilities and assets measured by enacted
tax rates for the net tax effect of all temporary differences between the
carrying amounts of assets and liabilities in the financial statements, and the
related tax basis. Changes in enacted tax rates, if any, and certain property
basis differences will be reflected by entries to regulatory asset or regulatory
liability accounts for regulated companies, and will be reflected as income or
loss for non-regulated companies.
Laclede
Gas’ investment tax credits utilized prior to 1986 have been deferred and are
being amortized in accordance with regulatory treatment over the useful life of
the related property.
CASH AND CASH EQUIVALENTS -
All highly liquid debt instruments purchased with original maturities of three
months or less are considered to be cash equivalents. Such instruments are
carried at cost, which approximates market value. Outstanding checks on the
Company’s controlled disbursement bank accounts in excess of funds on deposit
create book overdrafts (which are funded at the time checks are presented for
payment) and are classified as Other in the Current Liabilities section of the
Consolidated Balance Sheets. Changes in book overdrafts between periods are
reflected as Financing Activities in the Statements of Consolidated Cash
Flows.
NATURAL GAS RECEIVABLE – From
time to time, LER enters into natural gas transactions with natural gas pipeline
companies known as park and loan arrangements. Under the terms of the
arrangements, LER purchases natural gas from a third party and delivers that
natural gas to the pipeline company for the right to receive the same quantity
of natural gas from the pipeline company at the same location in a specified
future period. These arrangements are accounted for as non-monetary transactions
under GAAP and are recorded at the carrying amount. As such, natural gas
receivables are reflected on the Consolidated Balance Sheets at cost, which
includes related pipeline fees associated with the transactions. In the period
that the natural gas is returned to LER, concurrent with the sale of the natural
gas to a third party, the related natural gas receivable is expensed in the
Statements of Consolidated Income. In conjunction with these transactions, LER
usually enters into New York Mercantile Exchange (NYMEX) natural gas futures
contracts or fixed price sales agreements to protect against market changes in
future sales prices.
EARNINGS PER COMMON SHARE -
Basic earnings per common share is computed by dividing Net Income by the
weighted average number of shares outstanding for the period. Diluted earnings
per common share reflects the potential dilution that could occur if securities
or other contracts to issue common stock were exercised or converted into common
stock. The only potentially dilutive securities the Company had outstanding at
September 30, 2009, were stock options and nonvested restricted stock
and restricted stock units. The diluted weighted average shares outstanding, as
shown in Note 4, reflects the potential dilution as a
result of these stock options and nonvested restricted stock/units as determined
using the Treasury Stock Method. Securities that are antidilutive are excluded
from the calculation of diluted earnings per share.
GOODWILL - The Company
previously reported goodwill separately on the Consolidated Balance Sheets, the
total of which was fully attributable to SM&P, and was included in the
Non-Regulated Services operating segment. During the quarter ended
March 31, 2008, the Company sold 100% of its interest in SM&P,
thereby reducing Goodwill to zero at March 31, 2008. For further
information on the sale of SM&P, see Note 2,
Discontinued Operations.
GROSS RECEIPTS AND SALES TAXES
- Gross receipts taxes associated with Laclede Gas’ natural gas utility
service are imposed on the Utility and billed to its customers. These amounts
are recorded gross in the Statements of Consolidated Income. Amounts recorded in
Regulated Gas Distribution Operating Revenues were $51.6 million, $52.5 million,
and $51.8 million for fiscal years 2009, 2008, and 2007, respectively. Gross
receipts taxes are expensed by the Utility and included in the Taxes, other than
income taxes line.
Sales
taxes imposed on applicable Company sales are billed to customers. These amounts
are not recorded in the Statements of Consolidated Income, but are recorded as
tax collections payable and included in the Other line of the Current
Liabilities section of the Consolidated Balance Sheets.
ALLOWANCES FOR DOUBTFUL ACCOUNTS
- Estimates of the collectibility of trade accounts receivables are based
on historical trends, age of receivables, economic conditions, credit risk of
specific customers, and other factors. The Utility’s provision for uncollectible
accounts is dependent on the regulatory treatment provided for such costs. The
Utility was allowed to defer for future recovery uncollectible expenses
associated with amendments to the Cold Weather Rule for fiscal year 2007, as
approved by the MoPSC.
GROUP MEDICAL AND WORKERS’
COMPENSATION RESERVES - The Company self-insures its group medical and
workers’ compensation costs and carries stop-loss coverage in relation to
medical claims and workers’ compensation claims. Reserves for amounts incurred
but not reported are established based on historical cost levels and lags
between occurrences and reporting.
SUBSEQUENT EVENTS - The
preparation of financial statements in accordance with generally accepted
accounting principles requires the consideration of events or transactions that
occur after the balance sheet date but before the financial statements are
issued. Depending on the nature of the subsequent event, financial statement
recognition or disclosure of the subsequent event is required. In preparing its
consolidated financial statements, the Company has evaluated subsequent events
known through the time of this filing on November 20, 2009, the date
the consolidated financial statements were issued.
STOCK-BASED COMPENSATION - The
Laclede Group 2006 Equity Incentive Plan (the 2006 Plan) was approved at the
annual meeting of shareholders of Laclede Group on January 26, 2006.
The purpose of the 2006 Plan is to encourage officers and employees of the
Company and its subsidiaries to contribute to the Company’s success and align
their interests with that of shareholders. To accomplish this purpose, the
Compensation Committee (Committee) of the Board of Directors may grant awards
under the 2006 Plan that may be earned by achieving performance objectives
and/or other criteria as determined by the Committee. Under the terms of the
2006 Plan, officers and employees of the Company and its subsidiaries, as
determined by the Committee, are eligible to be selected for awards. The 2006
Plan provides for restricted stock, restricted stock units, qualified and
non-qualified stock options, stock appreciation rights, and performance shares
payable in stock, cash, or a combination of both. The 2006 Plan generally
provides a minimum vesting period of at least three years for each type of
award. The maximum number of shares reserved for issuance under the 2006 Plan is
1,250,000. The 2006 Plan replaced the Laclede Group Equity Incentive Plan (the
2003 Plan). Shares reserved under the 2003 Plan, other than those needed for
currently outstanding awards, were canceled upon shareholder approval of the
2006 Plan.
The
Company’s Restricted Stock Plan for Non-Employee Directors (Plan) was approved
by shareholders in January 2003. The principal purpose of the Plan is to
attract and retain qualified persons who are not employees or former employees
of the Company or any of its subsidiaries for service as members of the Board of
Directors and to encourage ownership in the Company by such non-employee
directors by granting shares of common stock subject to restrictions. Shares
vest depending on the participant’s age upon entering the Plan and years of
service as a director. The total number of shares of common stock that may be
issued under the Restricted Stock Plan for Non-Employee Directors was 50,000. In
January 2009, shareholders approved an amendment to the Restricted Stock
Plan for Non-Employee Directors, increasing the number of shares of common stock
available under the Plan to 150,000.
The
Company issues new shares to satisfy employee restricted stock awards and stock
option exercises. Shares for non-employee directors are purchased on the open
market.
Restricted
Stock Awards
During
fiscal year 2009, the Company awarded 89,850 performance-contingent restricted
shares and share units to executive officers at a weighted average grant date
fair value of $47.17 per share. This number represents the maximum shares that
can be earned pursuant to the terms of the awards. The shares and share units
were awarded on November 5, 2008 and have a performance period ending
September 30, 2011, during which participants are entitled to receive
full dividends and voting rights on the target level, or 59,900 shares. The
number of shares and share units that will ultimately vest is dependent upon the
attainment of certain levels of earnings growth and portfolio development
performance goals; further, under the terms of the award, the Compensation
Committee of the Board of Directors may reduce by up to 25% the number that vest
if the Company’s total shareholder return (TSR) during the performance period
ranks below the median relative to a comparator group of companies. This TSR
provision is considered a market condition under generally accepted accounting
principles and is discussed further below.
The
weighted average grant date fair value of performance-contingent restricted
stock awarded during fiscal years 2008 and 2007 was $29.99 and $34.95,
respectively.
On
November 2, 2008, 43,000 shares of performance-contingent restricted
stock, awarded on November 2, 2005, vested. On that date, the Company
withheld 12,615 of these vested shares at an average price of $53.48 per share
pursuant to elections by employees to satisfy tax withholding
obligations.
Performance-contingent
restricted stock and performance-contingent restricted stock unit activity for
fiscal year 2009 is presented below:
Weighted
|
|||||||||
Average
|
|||||||||
Shares/
|
Grant
Date
|
||||||||
Units
|
Fair
Value
|
||||||||
Nonvested
at September 30, 2008
|
179,100
|
$
|
31.40
|
||||||
Granted
|
89,850
|
$
|
47.17
|
||||||
Vested
|
(43,000
|
)
|
$
|
30.46
|
|||||
Forfeited
|
—
|
$
|
—
|
||||||
Nonvested
at September 30, 2009
|
225,950
|
$
|
37.85
|
During
fiscal year 2009, the Company awarded 27,100 shares of time-vested restricted
stock to executives and key employees at a weighted average grant date fair
value of $50.89 per share. These shares were awarded on
November 5, 2008 and vest November 5, 2011. On
March 31, 2009, the Company also awarded 800 shares of time-vested
restricted stock to key employees at a weighted average grant date fair value of
$38.98 per share. These shares vest April 1, 2012. In the interim,
participants receive full dividends and voting rights. The weighted average
grant date fair value of time-vested restricted stock and restricted stock units
awarded to employees during fiscal year 2008 was $31.99 per share.
During
fiscal year 2009, the Company awarded 12,500 shares of time-vested restricted
stock to non-employee directors at a weighted average grant date fair value of
$46.52 per share. The weighted average grant date fair value of restricted stock
awarded to non-employee directors during fiscal years 2008 and 2007 was $33.77
and $32.74 per share, respectively. These shares vest depending on the
participant’s age upon entering the plan and years of service as a director. The
plan’s trustee acquires the shares for the awards in the open market and holds
the shares as trustee for the benefit of the non-employee directors until the
restrictions expire. In the interim, the participants receive full dividends and
voting rights.
Time-vested
restricted stock and time-vested restricted stock unit activity for fiscal year
2009 is presented below:
Weighted
|
|||||||||
Average
|
|||||||||
Shares/
|
Grant
Date
|
||||||||
Units
|
Fair
Value
|
||||||||
Nonvested
at September 30, 2008
|
56,850
|
$
|
32.36
|
||||||
Granted
|
40,400
|
$
|
49.30
|
||||||
Vested
|
(5,400
|
)
|
$
|
42.36
|
|||||
Forfeited
|
(1,700
|
)
|
$
|
46.97
|
|||||
Nonvested
at September 30, 2009
|
90,150
|
$
|
39.08
|
The
total fair value of restricted stock (performance-contingent and time-vested)
vested during fiscal years 2009, 2008, and 2007 was $2.6 million, $98,000, and
$83,000, respectively, and the related actual tax benefit realized was
$1.0 million, $38,000, and $32,000, respectively.
Stock
Option Awards
No
stock options were granted during fiscal years 2009 and 2008. The weighted
average fair value of stock options granted during fiscal year 2007 was $8.07
per option.
Stock
option activity for fiscal year 2009 is presented below:
Weighted
|
|||||||||||||||
Average
|
|||||||||||||||
Weighted
|
Remaining
|
Aggregate
|
|||||||||||||
Average
|
Contractual
|
Intrinsic
|
|||||||||||||
Exercise
|
Term
|
Value
|
|||||||||||||
Shares
|
Price
|
(Years)
|
($000)
|
||||||||||||
Outstanding
at September 30, 2008
|
415,850
|
$
|
30.84
|
||||||||||||
Granted
|
—
|
$
|
—
|
||||||||||||
Exercised
|
(54,125
|
)
|
$
|
30.63
|
|||||||||||
Forfeited
|
(3,000
|
)
|
$
|
33.45
|
|||||||||||
Expired
|
(2,500
|
)
|
$
|
32.26
|
|||||||||||
Outstanding
at September 30, 2009
|
356,225
|
$
|
30.84
|
5.4
|
$
|
699
|
|||||||||
Fully
Vested and Expected to Vest
at
September 30, 2009
|
351,158
|
$
|
30.80
|
5.4
|
$
|
697
|
|||||||||
Exercisable
at September 30, 2009
|
283,850
|
$
|
30.14
|
5.0
|
$
|
663
|
Exercise
prices of options outstanding at September 30, 2009 range from $23.27
to $34.95. During fiscal year 2009, cash received from the exercise of stock
options was $1.7 million, the intrinsic value of the options exercised was $0.9
million and the related actual tax benefit realized was $0.4 million. During
fiscal year 2008, cash received from the exercise of stock options was $5.0
million, the intrinsic value of the options exercised was $2.0 million and the
related actual tax benefit realized was $0.8 million. During fiscal year 2007,
cash received from the exercise of stock options was $3.1 million, the intrinsic
value of the options exercised was $0.8 million and the related actual tax
benefit realized was $0.3 million.
The
closing price of the Company’s common stock was $32.16 at
September 30, 2009.
Equity
Compensation Costs
Compensation
cost for performance-contingent restricted stock awards is based upon the
probable outcome of the performance conditions. For shares that do not vest or
are not expected to vest due to the outcome of the performance conditions, no
compensation cost is recognized and any previously recognized compensation cost
is reversed.
The
fair value of awards of performance-contingent and time-vested restricted stock
and restricted stock units, not subject to the TSR provision, is estimated using
the closing price of the Company’s stock on the date of the grant. For those
awards that do not pay dividends during the vesting period, the estimate of fair
value is reduced by the present value of the dividends expected to be paid on
the Company’s common stock during the performance period, discounted using an
appropriate U.S. Treasury yield. For shares subject to the TSR provision, the
estimated impact of this market condition is reflected in the grant date fair
value per share of the awards. Accordingly, compensation cost is not reversed to
reflect any actual reductions in the awards that may result from the TSR
provision. However, if the Company’s TSR during the performance period ranks
below the level specified in the award agreements, relative to a comparator
group of companies, and the Committee elects not to reduce the award (or reduce
by a lesser amount), this election would be accounted for as a modification of
the original award and additional compensation cost would be recognized at that
time. The grant date fair value per share of the awards subject to the TSR
provision awarded during fiscal years 2009 and 2008 was valued by a Monte Carlo
simulation model that assessed the probabilities of various TSR outcomes. The
significant assumptions used in the Monte Carlo simulations are as
follows:
2009
|
2008
|
2007
|
|||||
Risk
free interest rate
|
1.61%
|
2.89%
|
Not
applicable
|
||||
Expected
dividend yield of stock
|
—
|
—
|
Not
applicable
|
||||
Expected
volatility of stock
|
31.8%
|
24.96%
|
Not
applicable
|
||||
Vesting
period
|
2.9
years
|
2.8
years
|
Not
applicable
|
The
risk free interest rate was based on the yield on U.S. Treasury securities
matching the vesting period. The expected volatility is based on the historical
volatility of the Company’s stock. Volatility assumptions were also made for
each of the companies included in the comparator group. The vesting period is
equal to the performance period set forth in the terms of the
award.
The
fair value of the options granted during fiscal year 2007 was estimated at the
date of grant using a binomial option-pricing model based on the assumptions
noted in the following table. Expected volatility was based on the historical
volatility of the Company’s stock. The risk-free rate was based on U.S. Treasury
yields at the grant date. The expected life of options was based on generalized
expectations regarding the behavior of option holders since the Company’s
experience was not yet sufficient to develop an assumption specific to its
employees.
2009
|
2008
|
2007
|
|||||
Risk
free interest rate
|
Not
applicable
|
Not
applicable
|
4.60%
|
||||
Expected
dividend yield of stock
|
Not
applicable
|
Not
applicable
|
4.20%
|
||||
Expected
volatility of stock
|
Not
applicable
|
Not
applicable
|
25.00%
|
||||
Expected
life of option
|
Not
applicable
|
Not
applicable
|
96
months
|
The
amounts of compensation cost recognized for share-based compensation
arrangements are presented below:
(Thousands)
|
2009
|
2008
|
2007
|
||||||||
Total
compensation cost
|
$
|
3,990
|
$
|
2,651
|
$
|
2,401
|
|||||
Compensation
cost capitalized
|
(815
|
)
|
(578
|
)
|
(524
|
)
|
|||||
Compensation
cost recognized in net income
|
3,175
|
2,073
|
1,877
|
||||||||
Income
tax benefit recognized in net income
|
(1,225
|
)
|
(799
|
)
|
(725
|
)
|
|||||
Compensation
cost recognized in net income, net of income tax
|
$
|
1,950
|
$
|
1,274
|
$
|
1,152
|
As
of September 30, 2009, there was $5.2 million of total unrecognized
compensation cost related to nonvested share-based compensation arrangements.
That cost is expected to be recognized over a weighted average period of
2.3 years.
NEW
ACCOUNTING STANDARDS - In September 2006, the
FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair
Value Measurements,” as codified in ASC Topic 820, “Fair Value Measurements and
Disclosures.” This Statement defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. The Statement applies to fair value
measurements required under other accounting guidance that require or permit
fair value measurements. Accordingly, this Statement does not require any new
fair value measurements. The guidance in this Statement does not apply to the
Company’s stock-based compensation plans accounted for in accordance with ASC
Topic 718, “Compensation-Stock Compensation.” The Company partially adopted SFAS
No. 157 on October 1, 2008 and elected the one-year deferral allowed
by FASB Staff Position (FSP) No. FAS 157-2, which permits delayed application of
this Statement for nonfinancial assets and nonfinancial liabilities, except for
those recognized or disclosed at fair value on a recurring basis. The partial
adoption of this Statement had no impact on the Company’s financial position or
results of operations. For disclosures required pursuant to ASC Topic 820, see
Note 10, Fair Value Measurements. The Company will adopt
SFAS No. 157 for certain nonfinancial assets and nonfinancial liabilities
(primarily asset retirement obligations) as of the beginning of fiscal year 2010
and does not anticipate that such adoption will have a material impact on the
Company’s financial position or results of operations.
In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plan,” as codified in ASC Topic
715, “Compensation-Retirement Benefits.” Laclede Group adopted the recognition
and disclosure provisions of this Statement effective
September 30, 2007. The Statement also requires that plan assets and
benefit obligations be measured as of the date of the employer’s fiscal year-end
statement of financial position. As a result of adopting this provision on
September 30, 2009, the Company changed the measurement date for its
pension and other postretirement benefit plans from June 30 to
September 30. Adoption required certain adjustments to retained earnings
and accumulated other comprehensive income. However, the majority of these
adjustments, attributable to the Company’s qualified pension plans and other
postretirement benefit plans, were deferred with entries to regulatory assets.
For details on the effect of adoption, refer to Note 3,
Pension Plans and Postretirement Benefits.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities,” as codified in ASC Topic 825,
“Financial Instruments.” The Statement permits entities to choose to measure
many financial instruments and certain other items at fair value that are not
currently required to be measured at fair value. The Statement also establishes
presentation and disclosure requirements designed to facilitate comparisons
between entities that choose different measurement attributes for similar types
of assets and liabilities. This Statement does not affect any existing
accounting literature that requires certain assets and liabilities to be carried
at fair value. Upon adoption, entities are permitted to choose, at specified
election dates, to measure eligible items at fair value (fair value option).
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings at each reporting date. The decision about
whether to elect the fair value option is applied instrument by instrument with
few exceptions. The decision is also irrevocable (unless a new election date
occurs) and must be applied to entire instruments and not to portions of
instruments. SFAS No. 159 requires that cash flows related to items measured at
fair value be classified in the statement of cash flows according to their
nature and purpose as required by ASC Topic 230, “Statement of Cash Flows.” The
Company adopted SFAS No. 159 on October 1, 2008. The Company did not
elect the fair value option for any instruments not currently reported at fair
value. Therefore, the adoption of this Statement had no effect on the Company’s
financial position or results of operations.
In
June 2007, the FASB ratified the consensus reached in Emerging Issues Task
Force (EITF) Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends
on Share-Based Payment Awards.” This EITF Issue is codified in ASC Topic 718.
This Issue addresses how an entity should recognize the tax benefit received on
dividends that are (a) paid to employees holding equity-classified nonvested
shares, equity-classified nonvested share units, or equity-classified
outstanding share options and (b) charged to retained earnings. The Task Force
reached a consensus that such tax benefits should be recognized as an increase
in additional paid-in capital. This Issue also addresses how the accounting for
these tax benefits is affected if an entity’s estimate of forfeitures changes in
subsequent periods. With the adoption of this EITF Issue on
October 1, 2008, the Company now records these income tax benefits as
increases to additional paid-in capital. Previously, the Company recorded these
income tax benefits as reductions to income tax expense. Adoption of this EITF
Issue did not have a material effect on the Company’s financial position or
results of operations.
In
March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities.” This Statement is codified in ASC Topic 815
and requires enhanced disclosures about (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged items
are accounted for under ASC Topic 815, and (c) how derivative instruments and
related hedged items affect an entity’s financial position, financial
performance, and cash flows. This Statement was effective for the Company’s
interim and annual financial statements beginning with the second quarter of
fiscal year 2009. The Statement does not require disclosures for periods
prior to initial adoption. The adoption of this standard had no effect on the
Company’s financial position or results of operations. For disclosures required
pursuant to ASC Topic 815, see Note 11, Derivative
Instruments and Hedging Activities.
In
June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities,” as codified in ASC Topic 260, “Earnings per Share.” This FSP
addresses whether instruments granted in share-based payment transactions are
participating securities prior to vesting and, therefore, need to be included in
the earnings allocation in computing earnings per share (EPS) under the
two-class method described in ASC Topic 260. The guidance in this FSP states
that unvested share-based payment awards that contain nonforfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating
securities and shall be included in the computation of EPS pursuant to the
two-class method. This FSP will be effective for Laclede Group as of the
beginning of fiscal year 2010. The FSP requires that the guidance be applied
retrospectively to all prior-period EPS data presented. Certain of the Company’s
stock-based compensation awards pay nonforfeitable dividends to the participants
during the vesting period and, as such, will be deemed participating securities
under this FSP. Upon adoption of this FSP, application of the two-class method
will result in reductions to previously reported basic and diluted EPS. The
Company believes such reductions will not be more than $0.03 per share annually.
Reported net income and cash flows will be unaffected. The Company will
retrospectively adjust comparative prior-period EPS amounts beginning in the
first quarter of fiscal year 2010.
In
December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’
Disclosures about Postretirement Benefit Plan Assets,” as codified in ASC Topic
715. This FSP provides guidance on an employer’s disclosures about plan assets
of a defined benefit pension or other postretirement plan. The FSP requires
disclosure of information regarding investment policies and strategies, the
categories of plan assets, fair value measurements of plan assets, and
significant concentrations of risk. The Company will be required to provide the
additional disclosures with its annual financial statements for fiscal year
2010. The Company is currently evaluating the provisions of this
FSP.
In
April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments,” as codified in ASC Topic
820 and ASC Topic 270, “Interim Reporting.” This FSP requires entities to
provide disclosure of the fair value of all financial instruments for which it
is practicable to estimate that value, whether recognized or not recognized in
the balance sheet, in interim reporting periods. Prior to the issuance of this
FSP, such disclosures were required only in annual reporting periods. The FSP
does not require disclosures for earlier periods presented for comparative
purposes at initial adoption. Laclede Group adopted this FSP in the third
quarter of fiscal year 2009.
In
May 2009, the FASB issued SFAS No. 165, “Subsequent Events,” as codified in
ASC Topic 855, “Subsequent Events.” Subsequent events are events or transactions
that occur after the balance sheet date but before financial statements are
issued or are available to be issued. The Statement carries forward the guidance
on this topic that is currently contained in the auditing literature with
certain minor changes that are not expected to significantly affect current
practice. The Company adopted the Statement on a prospective basis in the third
quarter of fiscal year 2009. The adoption of this Statement had no effect on the
Company’s financial statements. For disclosure of the date through which the
Company has evaluated subsequent events, see the Subsequent Events section
above.
In
June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards
Codification™ and the Hierarchy of Generally Accepted Accounting Principles.”
This Statement, also known as Accounting Standards Update (ASU) No. 2009-01, is
a replacement of SFAS No. 162, “The Hierarchy of Generally Accepted Accounting
Principles,” which the Company previously adopted on November 15, 2008
without any effect on the consolidated financial statements. SFAS No. 168
establishes the FASB Accounting Standards Codification™ (Codification) as the
source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with GAAP. Laclede Group adopted SFAS No. 168 in the fourth
quarter of fiscal year 2009. The Codification does not change GAAP, but it
reorganizes the guidance into approximately 90 different topics using a
consistent structure. Accordingly, the Company’s adoption of SFAS No. 168 had no
effect on its financial position, results of operations, or cash flows. Upon
adoption of SFAS No. 168, essentially all existing non-Securities and Exchange
Commission (SEC) accounting guidance not included in the Codification was
superseded and deemed nonauthoritative. As such, the Company has modified
certain references to specific accounting standards included in this
filing.
In
August 2009, the FASB issued ASU No. 2009-05, “Measuring Liabilities at
Fair Value,” to update ASC Topic 820. The guidance provides clarification on
measuring liabilities at fair value when a quoted price in an active market is
not available. In such circumstances, the ASU specifies that a valuation
technique should be applied that uses either the quote of the identical
liability when traded as an asset, the quoted prices for similar liabilities or
similar liabilities when traded as assets, or another valuation technique
consistent with existing fair value measurement guidance. This ASU is effective
for Laclede Group in the first quarter of fiscal year 2010 and is not expected
to have a material impact on the Company’s financial position or results of
operations.
On
March 31, 2008, the Company completed the sale of 100% of its interest
in its wholly-owned subsidiary, SM&P, to Stripe Acquisition, Inc. (an
affiliate of Kohlberg Management VI, LLC) for $85 million in cash, subject to
certain closing and post-closing adjustments. SM&P was an underground
facilities locating and marking business that previously comprised Laclede
Group’s Non-Regulated Services operating segment. The sales agreement included
representations, warranties, and indemnification provisions customary for such
transactions and was filed as an exhibit to the March 31, 2008 Form
10-Q. For information concerning Laclede Group’s obligations under these
provisions, see Note 17, Commitments and
Contingencies.
In
accordance with generally accepted accounting principles, the operating results
of SM&P have been aggregated and reported on the Statements of Consolidated
Income as Income from Discontinued Operations, Net of Income Tax. The Company
has reported in discontinued operations interest expense based on amounts
previously recorded by SM&P. Discontinued operations includes pre-tax
interest expense of $1.6 million for fiscal year 2008 and $3.3 million for
fiscal year 2007. Discontinued operations does not include general corporate
overhead expense. Income from Discontinued Operations reported in the Statements
of Consolidated Income consists of the following:
(Thousands)
|
2008
|
2007
|
||||||
Operating
revenues
|
$
|
65,423
|
$
|
165,733
|
||||
Income
(loss) from operations
|
(9,434
|
)
|
6,916
|
|||||
Gain
on disposal
|
44,401
|
—
|
||||||
Pre-tax
income
|
34,967
|
6,916
|
||||||
Income
tax expense
|
14,571
|
2,889
|
||||||
Income
from Discontinued Operations
|
$
|
20,396
|
$
|
4,027
|
Cash
flows from SM&P’s operations were not material.
In
September 2009, the Company adopted the measurement date provisions in ASC
Topic 715. ASC Topic 715 requires that plan assets and benefit obligations be
measured as of the date of the employer’s fiscal year-end statement of financial
position. The Company previously used a June 30 valuation date for its
benefit plans. To change to a September 30 measurement date, the Company
elected to use the 15-month alternative transition approach, wherein benefit
costs for the period between June 30, 2008 and
September 30, 2009 are allocated proportionately between a retained
earnings adjustment and periodic benefit cost for the period. As a result of
changing the measurement date, excluding the effect of income taxes, the Company
recorded a one-time cumulative effect adjustment to reduce retained earnings by
$0.2 million, increase accumulated other comprehensive income by $50,000, and,
pursuant to ASC Topic 980, increase net regulatory assets by $5.1 million. In
conjunction with the adoption, the Company recorded increases to benefit
liabilities totaling $5.3 million.
Pension
Plans
Laclede
Gas has non-contributory defined benefit, trusteed forms of pension plans
covering substantially all employees. Effective January 1, 2009, the
Company modified the calculation of future benefits under the primary plan from
a years of service and final average compensation formula to a cash balance
formula, which accrues benefits based on a percentage of compensation. Benefits
attributable to plan participation prior to January 1, 2009 will be
based on final average compensation at the date of termination of employment and
years of service earned through January 1, 2009. Plan assets consist
primarily of corporate and U.S. government obligations and equity
investments.
Pension
costs in 2009, 2008, and 2007 amounted to $6.2, $6.1, and $5.5 million,
respectively, including amounts charged to construction.
The
net periodic pension costs include the following components:
(Thousands)
|
2009
|
2008
|
2007
|
||||||||
Service
cost – benefits earned during the period
|
$
|
8,936
|
$
|
12,970
|
$
|
12,422
|
|||||
Interest
cost on projected benefit obligation
|
20,957
|
18,680
|
17,929
|
||||||||
Expected
return on plan assets
|
(20,938
|
)
|
(20,650
|
)
|
(20,295
|
)
|
|||||
Amortization
of prior service cost
|
1,035
|
1,088
|
1,143
|
||||||||
Amortization
of actuarial loss
|
3,096
|
3,165
|
3,673
|
||||||||
Sub-total
|
13,086
|
15,253
|
14,872
|
||||||||
Loss
on lump-sum settlement
|
—
|
—
|
803
|
||||||||
Regulatory
adjustment
|
(6,890
|
)
|
(9,120
|
)
|
(10,131
|
)
|
|||||
Net
pension cost
|
$
|
6,196
|
$
|
6,133
|
$
|
5,544
|
Other
changes in plan assets and pension benefit obligations recognized in other
comprehensive income include the following:
(Thousands)
|
2009
|
2008
|
||||||
Current
year actuarial loss
|
$
|
84,187
|
$
|
18,050
|
||||
Amortization
of actuarial loss
|
(3,096
|
)
|
(3,165
|
)
|
||||
Amortization
of prior service cost
|
(1,035
|
)
|
(1,088
|
)
|
||||
Sub-total
|
80,056
|
13,797
|
||||||
Regulatory
adjustment
|
(78,527
|
)
|
(13,697
|
)
|
||||
Total
recognized in other comprehensive income
|
$
|
1,529
|
$
|
100
|
Changes
in the minimum pension liability resulted in credits to other comprehensive
income of $0.4 million in fiscal year 2007, excluding the effect of regulatory
treatment. After the effect of regulatory treatment, credits recognized in other
comprehensive income for fiscal year 2007 were also $0.4 million.
Pursuant
to the provisions of the Laclede Gas pension plans, pension obligations may be
satisfied by lump-sum cash payments. Pursuant to a MoPSC Order, lump-sum
payments are recognized as settlements (which can result in gains or losses)
only if the total of such payments exceeds 100% of the sum of service and
interest costs. No lump-sum payments were recognized as settlements during
fiscal years 2009 and 2008. Lump-sum payments recognized as settlements during
fiscal year 2007 were $3.0 million.
Pursuant
to a MoPSC Order, the return on plan assets is based on the market-related value
of plan assets implemented prospectively over a four-year period. Gains or
losses not yet includible in pension cost are amortized only to the extent that
such gain or loss exceeds 10% of the greater of the projected benefit obligation
or the market-related value of plan assets. Such excess is amortized over the
average remaining service life of active participants. The recovery in rates for
the Utility’s qualified pension plans is based on an allowance of $4.1 million
annually effective October 1, 2005 and $4.8 million annually effective
August 1, 2007. The difference between this amount and pension expense
as calculated pursuant to the above and that otherwise would be included in the
Statements of Consolidated Income and Statements of Consolidated Comprehensive
Income is deferred as a regulatory asset or regulatory
liability.
The
following table sets forth the reconciliation of the beginning and ending
balances of the pension benefit obligation at September 30:
(Thousands)
|
2009
*
|
2008
|
||||||
Benefit
obligation at beginning of year
|
$
|
308,736
|
$
|
293,265
|
||||
Service
cost
|
12,371
|
12,970
|
||||||
Interest
cost
|
26,150
|
18,680
|
||||||
Actuarial
loss (gain)
|
54,769
|
(19
|
)
|
|||||
Gross
benefits paid
|
(23,994
|
)
|
(16,160
|
)
|
||||
Benefit
obligation at end of year
|
$
|
378,032
|
$
|
308,736
|
||||
Accumulated
benefit obligation at end of year
|
$
|
305,255
|
$
|
238,769
|
||||
* |
Due
to the change in measurement date, fiscal year 2009 amounts reflect 15
months of activity from July 1, 2008 to
September 30, 2009.
|
The
following table sets forth the reconciliation of the beginning and ending
balances of the fair value of plan assets at September 30:
(Thousands)
|
2009
*
|
2008
|
||||||
Fair
value of plan assets at beginning of year
|
$
|
248,346
|
$
|
260,280
|
||||
Actual
return on plan assets
|
(3,245
|
)
|
2,581
|
|||||
Employer
contributions
|
2,581
|
1,645
|
||||||
Gross
benefits paid
|
(23,994
|
)
|
(16,160
|
)
|
||||
Fair
value of plan assets at end of year
|
$
|
223,688
|
$
|
248,346
|
||||
Funded
status of plans
|
$
|
(154,344
|
)
|
$
|
(60,390
|
)
|
||
Fourth
quarter contribution adjustment
|
—
|
56
|
||||||
Funded
status, end of year
|
$
|
(154,344
|
)
|
$
|
(60,334
|
)
|
||
*
|
Due
to the change in measurement date, fiscal year 2009 amounts reflect 15
months of activity from July 1, 2008 to
September 30, 2009.
|
The
following table sets forth the amounts recognized in the Consolidated Balance
Sheets at September 30:
(Thousands)
|
2009
|
2008
|
||||||
Noncurrent
assets
|
$
|
—
|
$
|
—
|
||||
Current
liabilities
|
(1,920
|
)
|
(1,460
|
)
|
||||
Noncurrent
liabilities
|
(152,424
|
)
|
(58,874
|
)
|
||||
Total
|
$
|
(154,344
|
)
|
$
|
(60,334
|
)
|
||
Pre-tax
amounts recognized in accumulated other comprehensive
income
|
||||||||
not
yet recognized as components of net periodic pension cost consist
of:
|
||||||||
Net
actuarial loss
|
$
|
162,689
|
$
|
82,371
|
||||
Prior
service costs
|
9,950
|
11,244
|
||||||
Sub-total
|
172,639
|
93,615
|
||||||
Adjustments
for amounts included in Regulatory Assets
|
(168,246
|
)
|
(90,701
|
)
|
||||
Total
|
$
|
4,393
|
$
|
2,914
|
At
September 30, 2009, the following pre-tax amounts are expected to be
amortized from accumulated other comprehensive income into net periodic pension
cost during fiscal year 2010:
(Thousands)
|
|||||
Amortization
of net actuarial loss
|
$
|
8,139
|
|||
Amortization
of prior service cost
|
1,035
|
||||
Sub-total
|
9,174
|
||||
Regulatory
adjustment
|
(8,781
|
)
|
|||
Total
|
$
|
393
|
The
assumptions used to calculate net periodic pension costs are as
follows:
2009
|
2008
|
2007
|
||||
Weighted
average discount rate
|
6.60%
|
6.25%
|
6.25%
|
|||
Weighted
average rate of future compensation increase
|
3.75%
|
3.50%
|
3.50%
|
|||
Expected
long-term rate of return on plan assets
|
8.25%
|
8.25%
|
8.25%
|
The
weighted average discount rate is based on long-term, high quality bond indices
at the measurement date. The expected long-term rate of return on plan assets is
based on historical and projected rates of return for current and planned asset
classes in the investment portfolio. Assumed projected rates of return for each
asset class were selected after analyzing historical experience and future
expectations of the returns. The overall expected rate of return for the
portfolio was developed based on the target allocation for each class. The
expected return is a long-term assumption that generally does not change
annually.
The
assumptions used to calculate the benefit obligations are as
follows:
2009
|
2008
|
|||
Weighted
average discount rate
|
5.25%
|
6.60%
|
||
Weighted
average rate of future compensation increase
|
3.25%
|
3.75%
|
Following
are the projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for plans that have a projected benefit obligation and an
accumulated benefit obligation in excess of plan assets:
(Thousands)
|
2009
|
2008
|
||||||
Projected
benefit obligation
|
$
|
378,032
|
$
|
308,736
|
||||
Fair
value of plan assets
|
223,688
|
248,346
|
||||||
Accumulated
benefit obligation
|
305,255
|
24,938
|
||||||
Fair
value of plan assets
|
223,688
|
12,727
|
Following
are the targeted and actual plan assets by category:
2010
|
2009
|
2008
|
||||
Target
|
Actual
|
Actual
|
||||
Equity
Securities
|
50%
|
50%
|
46%
|
|||
Debt
Securities
|
50%
|
50%
|
54%
|
|||
Total
|
100%
|
100%
|
100%
|
Laclede
Gas’ investment policy is designed to preserve, to the extent possible, the
current funded status of the plan and minimize contributions to the trusts. The
policy seeks to maximize investment returns consistent with these objectives and
Laclede Gas’ tolerance for risk. Outside investment management specialists are
utilized in each asset class. Such specialists are provided with guidelines,
where appropriate, designed to ensure that the investment portfolio is managed
in accordance with the policy. Performance and compliance with the guidelines is
regularly monitored. Laclede Gas generally rebalances plan assets quarterly if
the actual allocation deviates from the target allocation by more than
2%.
Following
are expected pension benefit payments for the succeeding five fiscal years, and
in aggregate for the five years thereafter:
(Millions)
|
Pensions
from
Qualified
Trust
|
Pensions
from
Laclede
Gas
Funds
|
||||||||||
2010
|
$
|
17.3
|
$
|
1.9
|
||||||||
2011
|
18.6
|
2.5
|
||||||||||
2012
|
19.3
|
1.2
|
||||||||||
2013
|
23.0
|
0.9
|
||||||||||
2014
|
25.6
|
0.7
|
||||||||||
2015
– 2019
|
176.6
|
3.2
|
The
funding policy of Laclede Gas is to contribute an amount not less than the
minimum required by government funding standards, nor more than the maximum
deductible amount for federal income tax purposes. Contributions to the pension
plans in fiscal year 2010 are anticipated to be $1.6 million into the qualified
trusts, and $1.9 million into the non-qualified plans.
Postretirement
Benefits
Laclede
Gas provides certain life insurance benefits at retirement. Medical insurance is
available after early retirement until age 65. The transition obligation not yet
includible in postretirement benefit cost is being amortized over 20 years.
Postretirement benefit costs in 2009, 2008, and 2007 amounted to $7.6 million,
$7.6 million, and $7.8 million, respectively, including amounts charged to
construction.
Net
periodic postretirement benefit costs consisted of the following
components:
(Thousands)
|
2009
|
2008
|
2007
|
||||||||
Service
cost – benefits earned during the period
|
$
|
5,132
|
$
|
4,560
|
$
|
4,063
|
|||||
Interest
cost on accumulated postretirement
|
|||||||||||
benefit
obligation
|
4,679
|
3,909
|
3,599
|
||||||||
Expected
return on plan assets
|
(2,376
|
)
|
(2,039
|
)
|
(1,723
|
)
|
|||||
Amortization
of transition obligation
|
136
|
136
|
136
|
||||||||
Amortization
of prior service credit
|
(2,328
|
)
|
(2,328
|
)
|
(2,328
|
)
|
|||||
Amortization
of actuarial loss
|
3,509
|
2,985
|
3,245
|
||||||||
Sub-total
|
8,752
|
7,223
|
6,992
|
||||||||
Regulatory
adjustment
|
(1,110
|
)
|
419
|
851
|
|||||||
Net
postretirement benefit cost
|
$
|
7,642
|
$
|
7,642
|
$
|
7,843
|
Other
changes in plan assets and postretirement benefit obligations recognized in
other comprehensive income include the following:
(Thousands)
|
2009
|
2008
|
||||||
Current
year actuarial loss
|
$
|
11,137
|
$
|
9,772
|
||||
Amortization
of actuarial loss
|
(3,509
|
)
|
(2,985
|
)
|
||||
Amortization
of prior service credit
|
2,328
|
2,328
|
||||||
Amortization
of transition obligation
|
(136
|
)
|
(136
|
)
|
||||
Sub-total
|
9,820
|
8,979
|
||||||
Regulatory
adjustment
|
(9,820
|
)
|
(8,979
|
)
|
||||
Total
recognized in other comprehensive income
|
$
|
—
|
$
|
—
|
Pursuant
to the Commission’s Order in the Utility’s 2002 rate case and affirmed in the
2005 and 2007 rate cases, the return on plan assets is based on the
market-related value of plan assets implemented prospectively over a four-year
period. Gains and losses not yet includible in postretirement benefit cost are
amortized only to the extent that such gain or loss exceeds 10% of the greater
of the accumulated postretirement benefit obligation or the market-related value
of plan assets. Such excess is amortized over the average remaining service life
of active participants. Also in the 2002 and 2005 rate cases, the Commission
ordered that the recovery in rates for the postretirement benefit costs be based
on the accounting methodology as ordered in the 1999 rate case, which based the
amortization of gains and losses on a five-year average of gains and losses. The
difference between this amount and postretirement benefit expense as calculated
pursuant to the above was deferred as a regulatory asset or regulatory
liability. In the 2007 rate case, the Commission recognized that the recovery in
rates is based on an annual allowance of $7.6 million, effective
August 1, 2007. The difference between this amount and postretirement
benefit cost based on the above and that otherwise would be included in the
Statements of Consolidated Income and Statements of Consolidated Comprehensive
Income is deferred as a regulatory asset or regulatory liability.
The
following table sets forth the reconciliation of the beginning and ending
balances of the postretirement benefit obligation at
September 30:
(Thousands)
|
2009
*
|
2008
|
||||||
Benefit
obligation at beginning of year
|
$
|
69,714
|
$
|
60,111
|
||||
Service
cost
|
6,415
|
4,560
|
||||||
Interest
cost
|
5,848
|
3,909
|
||||||
Actuarial
loss
|
7,298
|
6,356
|
||||||
Gross
benefits paid
|
(5,644
|
)
|
(5,222
|
)
|
||||
Benefit
obligation at end of year
|
$
|
83,631
|
$
|
69,714
|
||||
*
|
Due
to the change in measurement date, fiscal year 2009 amounts reflect 15
months of activity from July 1, 2008 to
September 30, 2009.
|
The
following table sets forth the reconciliation of the beginning and ending
balances of the fair value of plan assets at September 30:
(Thousands)
|
2009
*
|
2008
|
||||||
Fair
value of plan assets at beginning of year
|
$
|
26,082
|
$
|
24,997
|
||||
Actual
return on plan assets
|
(869
|
)
|
(1,378
|
)
|
||||
Employer
contributions
|
13,992
|
7,685
|
||||||
Gross
benefits paid
|
(5,644
|
)
|
(5,222
|
)
|
||||
Fair
value of plan assets at end of year
|
$
|
33,561
|
$
|
26,082
|
||||
Funded
status of plans
|
$
|
(50,070
|
)
|
$
|
(43,632
|
)
|
||
Fourth
quarter contribution adjustment
|
—
|
4,068
|
||||||
Funded
status, end of year
|
$
|
(50,070
|
)
|
$
|
(39,564
|
)
|
||
*
|
Due
to the change in measurement date, fiscal year 2009 amounts reflect 15
months of activity from July 1, 2008 to
September 30, 2009.
|
The
following table sets forth the amounts recognized in the Consolidated Balance
Sheets at September 30:
(Thousands)
|
2009
|
2008
|
||||||
Noncurrent
assets
|
$
|
—
|
$
|
—
|
||||
Current
liabilities
|
(280
|
)
|
(300
|
)
|
||||
Noncurrent
liabilities
|
(49,790
|
)
|
(39,264
|
)
|
||||
Total
|
$
|
(50,070
|
)
|
$
|
(39,564
|
)
|
||
Pre-tax
amounts recognized in accumulated other comprehensive
income
|
||||||||
not
yet recognized as components of net periodic postretirement
cost
|
||||||||
consist
of:
|
||||||||
Net
actuarial loss
|
$
|
46,709
|
$
|
39,957
|
||||
Prior
service credit
|
(6,751
|
)
|
(9,660
|
)
|
||||
Transition
obligation
|
501
|
671
|
||||||
Sub-total
|
40,459
|
30,968
|
||||||
Adjustments
for amounts included in Regulatory Assets
|
(40,459
|
)
|
(30,968
|
)
|
||||
Total
|
$
|
—
|
$
|
—
|
At
September 30, 2009, the following pre-tax amounts are expected to be
amortized from accumulated other comprehensive income into net periodic
postretirement benefit cost during fiscal year 2010:
(Thousands)
|
|||||
Amortization of net actuarial loss
|
$
|
3,981
|
|||
Amortization of prior service credit
|
(2,328
|
)
|
|||
Amortization of transition obligation
|
136
|
||||
Sub-total
|
1,789
|
||||
Regulatory adjustment
|
(1,789
|
)
|
|||
Total
|
$
|
—
|
The
assumptions used to calculate net periodic postretirement benefit costs are as
follows:
2009
|
2008
|
2007
|
||||
Weighted
average discount rate
|
6.35%
|
6.25%
|
6.25%
|
|||
Weighted
average rate of future compensation increase
|
3.75%
|
3.50%
|
3.50%
|
|||
Expected
long-term rate of return on plan assets
|
8.25%
|
8.25%
|
8.25%
|
The
weighted average discount rate is based on long-term, high quality bond indices
at the measurement date. The expected long-term rate of return on plan assets is
based on historical and projected rates of return for current and planned asset
classes in the investment portfolio. Assumed projected rates of return for each
asset class were selected after analyzing historical experience and future
expectations of the returns. The overall expected rate of return for the
portfolio was developed based on the target allocation for each class. The
expected return is a long-term assumption that generally does not change
annually.
The
assumptions used to calculate the accumulated postretirement benefit obligations
are as follows:
2009
|
2008
|
|||
Weighted
average discount rate
|
5.15%
|
6.35%
|
||
Weighted
average rate of future compensation increase
|
3.25%
|
3.75%
|
The
assumed medical cost trend rates at September 30 are as
follows:
2009
|
2008
|
|||
Medical
cost trend assumed for next year
|
8.00%
|
8.50%
|
||
Rate
to which the medical cost trend rate is assumed to decline
|
||||
(the
ultimate medical cost trend rate)
|
5.00%
|
5.00%
|
||
Year
that the rate reaches the ultimate trend
|
2016
|
2016
|
The
following table presents the effect of an assumed 1% change in the assumed
medical cost trend rate:
(Thousands)
|
1%
Increase
|
1%
Decrease
|
||||||||
Effect
on net periodic postretirement benefit cost
|
$
|
1,090
|
$
|
(970
|
)
|
|||||
Effect
on accumulated postretirement benefit obligation
|
4,870
|
(4,390
|
)
|
Following
are the targeted and actual plan assets by category:
2010
|
2009
|
2008
|
||||
Target
|
Actual
|
Actual
|
||||
Equity
Securities
|
60%
|
58%
|
54%
|
|||
Debt
Securities
|
40%
|
42%
|
46%
|
|||
Total
|
100%
|
100%
|
100%
|
Missouri
state law provides for the recovery in rates of costs accrued pursuant to GAAP
provided that such costs are funded through an independent, external funding
mechanism. Laclede Gas established Voluntary Employees’ Beneficiary Association
and Rabbi trusts as its external funding mechanisms. Laclede Gas’ investment
policy seeks to maximize investment returns consistent with Laclede Gas’
tolerance for risk. Outside investment management specialists are utilized in
each asset class. Such specialists are provided with guidelines, where
appropriate, designed to ensure that the investment portfolio is managed in
accordance with policy. Performance and compliance with the guidelines is
regularly monitored. Laclede Gas’ current investment policy targets an asset
allocation of 60% to equity securities and 40% to debt securities, excluding
cash held in short-term debt securities for the purpose of making benefit
payments. Laclede Gas currently invests in a mutual fund which is rebalanced on
an ongoing basis to the target allocation.
Following
are expected postretirement benefit payments for the succeeding five fiscal
years, and in aggregate for the five years thereafter:
(Millions)
|
Benefits
Paid
from
Qualified
Trust
|
|
Benefits
Paid
from
Laclede Gas
Funds
|
|||||||||
2010
|
$
|
4.6
|
$
|
0.3
|
||||||||
2011
|
4.8
|
0.3
|
||||||||||
2012
|
4.9
|
0.3
|
||||||||||
2013
|
5.2
|
0.3
|
||||||||||
2014
|
5.6
|
0.3
|
||||||||||
2015
– 2019
|
38.6
|
1.8
|
Laclede
Gas’ funding policy is to contribute amounts to the trusts equal to the periodic
benefit cost calculated pursuant to GAAP as recovered in rates. Contributions to
the postretirement plans in fiscal year 2010 are anticipated to be $11.6 million
to the qualified trusts, and $0.4 million paid directly to participants from
Laclede Gas funds.
Other
Plans
Laclede
Gas sponsors 401(k) plans that cover substantially all employees. The plans
allow employees to contribute a portion of their base pay in accordance with
specific guidelines. Laclede Gas provides a match of such contributions within
specific limits. The cost of the defined contribution plans of Laclede Gas
amounted to $3.5 million, $3.1 million, and $3.0 million for fiscal years 2009,
2008, and 2007, respectively.
GAAP
requires dual presentation of basic and diluted EPS. Basic EPS does not include
potentially dilutive securities and is computed by dividing net income by the
weighted average number of common shares outstanding during the period. Diluted
EPS assumes the issuance of common shares pursuant to the Company’s stock-based
compensation plans at the beginning of each respective period, or at the date of
grant or award, if later. Shares attributable to stock options and time-vested
restricted stock/units are excluded from the calculation of diluted earnings per
share if the effect would be antidilutive. Performance-contingent restricted
stock awards are only included in the calculation of diluted earnings per share
to the extent the underlying performance and/or market conditions are satisfied
(a) prior to the end of the reporting period or (b) would be satisfied if the
end of the reporting period were the end of the related contingency period and
the result would be dilutive.
(Thousands,
Except Per Share Amounts)
|
2009
|
2008
|
2007
|
||||||||
Basic
EPS:
|
|||||||||||
Income
from Continuing Operations
|
$
|
64,247
|
$
|
57,526
|
$
|
45,744
|
|||||
Weighted
Average Shares Outstanding
|
21,893
|
21,657
|
21,455
|
||||||||
Earnings
Per Share of Common Stock from
|
|||||||||||
Continuing
Operations
|
$
|
2.93
|
$
|
2.66
|
$
|
2.13
|
|||||
Diluted
EPS:
|
|||||||||||
Income
from Continuing Operations
|
$
|
64,247
|
$
|
57,526
|
$
|
45,744
|
|||||
Weighted
Average Shares Outstanding
|
21,893
|
21,657
|
21,455
|
||||||||
Dilutive
Effect of Stock Options
|
|||||||||||
and
Restricted Stock/Units
|
131
|
106
|
48
|
||||||||
Weighted
Average Diluted Shares
|
22,024
|
21,763
|
21,503
|
||||||||
Earnings
Per Share of Common Stock from
|
|||||||||||
Continuing
Operations
|
$
|
2.92
|
$
|
2.64
|
$
|
2.12
|
|||||
Outstanding
Shares Excluded from the
|
|||||||||||
Calculation
of Diluted EPS Attributable to:
|
|||||||||||
Antidilutive
stock options
|
—
|
—
|
108
|
||||||||
Antidilutive
time-vested restricted stock
|
9
|
—
|
—
|
||||||||
Performance-contingent
restricted stock
|
144
|
136
|
110
|
||||||||
Total
|
153
|
136
|
218
|
Total
shares of common stock outstanding were 22.17 million and 21.99 million at
September 30, 2009 and 2008, respectively.
Common
stock and paid-in capital increased $7.2 million in fiscal year 2009. The
issuance of 47,037 common shares under the Dividend Reinvestment and Stock
Purchase Plan increased common stock and paid-in capital by $2.0 million.
The remaining $5.2 million increase was primarily due to stock-based
compensation costs and the issuance of 127,610 shares of common stock under the
Equity Incentive Plan. Common stock and paid-in capital increased $11.5 million
in fiscal year 2008. The issuance of 106,436 common shares issued under the
Dividend Reinvestment and Stock Purchase Plan increased common stock and paid-in
capital by $3.8 million. The remaining $7.7 million increase was primarily due
to stock-based compensation costs and the issuance of 241,400 shares of common
stock under the Equity Incentive Plan.
On
August 23, 2001, Laclede Group declared a dividend of one preferred
share purchase right for each outstanding share of common stock. Each preferred
share purchase right entitles the registered holder to purchase from Laclede
Group one one-hundredth of Series A junior participating preferred stock for a
purchase price of $90, subject to adjustment. The value of one one-hundredth of
a preferred share purchasable upon the exercise of each right should, because of
the nature of the preferred shares’ dividend, liquidation, and voting rights,
approximate the value of one common share. The rights expire on
October 1, 2011 and may be redeemed by Laclede Group for one cent each
at any time before they become exercisable. The rights will not be exercisable
or transferable apart from the common stock until ten business days after (i)
public announcement that a person or group has acquired beneficial ownership of
20% or more of the common stock, or (ii) commencement of, or announcement of an
intention to make, a tender or exchange offer for beneficial ownership of 20% or
more of the common stock. Following such an event, a right will entitle its
holder to purchase, for the purchase price, the number of shares equal to the
purchase price divided by one-half of the market price. Alternatively, Laclede
Group may exchange each right for one one-hundredth of a preferred share. The
number of rights outstanding is the same as the number of shares of common stock
outstanding on any date prior to rights becoming exercisable or transferable
apart from the common stock.
Laclede
Group has on file an automatic shelf registration on Form S-3 with the SEC that
allows for the issuance of equity securities and debt securities. No securities
have been issued under this registration statement, which expires
November 26, 2011. The amount, timing, and type of additional
financing to be issued under this shelf registration will depend on cash
requirements and market conditions. In addition, Laclede Group has a
registration statement on file on Form S-3 for the issuance and sale of up to
400,000 shares of its common stock under its Dividend Reinvestment and Stock
Purchase Program. There were 370,514 shares and 360,260 shares at
September 30, 2009 and November 20, 2009, respectively,
remaining available for issuance under this Form S-3.
Laclede
Gas preferred stock, which was non-voting except in certain circumstances, was
redeemable at the option of the Laclede Gas Board of Directors. The redemption
price was equal to par of $25.00 per share. On March 31, 2009, Laclede
Gas redeemed all of its outstanding 5% Series B and 4.56% Series C preferred
stock, totaling $0.6 million at its par value of $25 per share in addition to
the dividend paid on that same date. This redemption included 19,200 shares of
5% Series B and 5,894 shares of 4.56% Series C preferred stock.
During
fiscal year 2008, 6,400 shares of 5% Series B preferred stock were called to
meet sinking fund requirements.
Maturities
on long-term debt for the five fiscal years subsequent to September 30, 2009
are as follows:
2010
|
—
|
|
2011
|
$25
million
|
|
2012
|
—
|
|
2013
|
$25
million
|
|
2014
|
—
|
On
November 1, 2007, Laclede Gas paid at maturity $40 million principal
amount of 7 1/2% First Mortgage Bonds. This maturity was funded through
short-term borrowings.
On
September 23, 2008, Laclede Gas issued $80 million of First Mortgage
Bonds, due October 15, 2038, at an interest rate of 6.35%. The bonds
are callable at par at the Utility’s option on or after
October 15, 2013.
At
September 30, 2009, Laclede Gas had fixed-rate long-term debt totaling
$390 million. While these long-term debt issues are fixed-rate, they are subject
to changes in fair value as market interest rates change. However, increases or
decreases in fair value would impact earnings and cash flows only if Laclede Gas
were to reacquire any of these issues in the open market prior to
maturity.
Laclede
Gas has on file with the SEC an effective shelf registration on Form S-3 for
issuance of $350 million of First Mortgage Bonds, unsecured debt, and preferred
stock, $270 million of which remains available to Laclede Gas at this time. The
Utility has authority from the MoPSC until February 15, 2010 to issue
up to $500 million in First Mortgage Bonds, unsecured debt, and equity
securities, of which $370.4 million remained under this authorization as of
September 30, 2009. The amount, timing, and type of additional
financing to be issued will depend on cash requirements and market
conditions.
Substantially
all of the utility plant of Laclede Gas is subject to the liens of its mortgage.
The mortgage contains several restrictions on Laclede Gas’ ability to pay cash
dividends on its common stock. These provisions are applicable regardless of
whether the stock is publicly held or, as has been the case since the formation
of Laclede Group, held solely by the Utility’s parent company. Under the most
restrictive of these provisions, no cash dividend may be declared or paid if,
after the dividend, the aggregate net amount spent for all dividends after
September 30, 1953, would exceed a maximum amount determined by a
formula set out in the mortgage. Under that formula, the maximum amount is the
sum of $8 million plus earnings applicable to common stock (adjusted for stock
repurchases and issuances) for the period from September 30, 1953, to
the last day of the quarter before the declaration or payment date for the
dividends. As of September 30, 2009 and 2008, the amount under the
mortgage’s formula that was available to pay dividends was $274 million and $273
million, respectively. Thus, all of the Utility’s retained earnings were free
from such restrictions as of those dates.
On
May 5, 2008, Laclede Group redeemed in full its $46.4 million
subordinated debentures, which also triggered the redemption of all of the Trust
common and preferred securities on the same date. Interest on the debentures and
distributions on the Trust securities ceased on and after the redemption date.
Upon redemption, Laclede Group recognized a pre-tax loss of $1.4 million,
primarily attributable to unamortized issuance costs. A portion of the proceeds
received from the sale of SM&P was used to fund the redemption. The Trust
was dissolved on June 16, 2008.
The
Company’s short-term borrowing requirements typically peak during the colder
months. These short-term cash requirements can be met through the sale of
commercial paper supported by lines of credit with banks or through direct use
of the lines of credit. Laclede Gas has a syndicated line of credit in place of
$320 million from 10 banks, with the largest portion provided by a single bank
being 17.5%. This line expires in December 2011. In November 2008, the
Utility established a seasonal line of credit of $75 million, which expired in
March 2009. Including both lines of credit, the largest portion provided by
a single bank was 26.8%. During fiscal year 2009, Laclede Gas utilized both its
syndicated line of credit and commercial paper for short-term funding.
Commercial paper outstanding at September 30, 2009 was $129.8 million,
and there were no outstanding bank line advances. The weighted average interest
rate on the short-term borrowings was 0.24% per annum at
September 30, 2009.
Although
Laclede Gas borrowed funds from Laclede Group from time to time within fiscal
year 2009, there were no such borrowings outstanding at
September 30, 2009. The Utility had short-term borrowings (including
borrowings from Laclede Group) aggregating to a maximum of $386.4 million at any
one time during the fiscal year. Excluding borrowings from Laclede Group, the
Utility’s maximum borrowings for the year were $309.9 million.
During fiscal year 2008, the Utility’s
short-term borrowing requirements, which peaked at $328.8 million, were
generally met by the sale of commercial paper. However, due to unfavorable terms
in the commercial paper markets near the end of fiscal year 2008, Laclede Gas
utilized its line of credit as a more economical source of short-term financing.
The Utility had $61.7 million in commercial paper and $154.2 million of bank
line advances outstanding as of September 30, 2008, at a weighted
average interest rate of 4.0% per annum, and $89.2 million of borrowings from
Laclede Group.
Laclede
Gas’ lines of credit include covenants limiting total debt, including short-term
debt, to no more than 70% of total capitalization and requiring earnings before
interest, taxes, depreciation, and amortization (EBITDA) to be at least 2.25
times interest expense. On September 30, 2009, total debt was 56% of
total capitalization.
For the fiscal year ended September 30, 2009, EBITDA was 3.76
times interest expense.
Short-term
cash requirements outside of Laclede Gas have generally been met with
internally-generated funds. However, Laclede Group has $50 million in
working-capital lines of credit, which expire in October 2010, to meet
short-term liquidity needs of its subsidiaries. These lines of credit have
covenants limiting the total debt of the consolidated Laclede Group to no more
than 70% of the Company’s total capitalization. This ratio stood at 50% on
September 30, 2009. These lines have been used to provide for seasonal
funding needs of various subsidiaries from time to time. There were no
borrowings under Laclede Group’s lines during the fiscal year.
The
carrying amounts and estimated fair values of financial instruments at
September 30, 2009 and 2008 are as follows:
(Thousands)
|
Carrying
Amount
|
Fair
Value
|
||||||
2009:
|
||||||||
Cash
and cash equivalents
|
$
|
74,591
|
$
|
74,591
|
||||
Marketable
securities
|
11,110
|
11,110
|
||||||
Derivative
instrument assets
|
17,178
|
17,178
|
||||||
Derivative
instrument liabilities
|
976
|
976
|
||||||
Short-term
debt
|
129,800
|
129,800
|
||||||
Long-term
debt
|
389,240
|
423,375
|
||||||
2008:
|
||||||||
Cash
and cash equivalents
|
$
|
14,899
|
$
|
14,899
|
||||
Marketable
securities
|
10,059
|
10,059
|
||||||
Derivative
instrument assets
|
57,210
|
57,210
|
||||||
Short-term
debt
|
215,900
|
215,900
|
||||||
Long-term
debt
|
389,181
|
356,421
|
||||||
Redeemable
preferred stock, including current sinking fund
requirements
|
627
|
431
|
The
carrying amounts for cash and cash equivalents and short-term debt approximate
fair value due to the short maturity of these instruments. The fair values of
long-term debt and preferred stock are estimated based on market prices for
similar issues. The fair values of marketable securities, derivative instruments
assets, and derivative instrument liabilities are valued as described in Note 10, Fair Value Measurements.
As
discussed in the New Accounting Standards
section of Note 1, effective October 1, 2008, the
Company partially adopted the provisions of SFAS No. 157, as codified in ASC
Topic 820. This Statement establishes a three-level hierarchy for fair value
measurements that prioritizes the inputs used to measure fair value. Assessment
of the significance of a particular input to the fair value measurements may
require judgment and may affect the valuation of the asset or liability and its
placement within the fair value hierarchy.
The
following table categorizes the assets and liabilities in the Consolidated
Balance Sheet that are accounted for at fair value on a recurring basis in
periods subsequent to initial recognition.
As
of September 30, 2009
|
|||||||||||||||||
(Thousands)
|
Quoted
Prices
in
Active
Markets
(Level
1)
|
Significant
Observable
Inputs
(Level
2)
|
Significant
Unobservable
Inputs
(Level
3)
|
Effects
of Netting and Cash Margin Receivables
/Payables
|
Total
|
||||||||||||
Assets
|
|||||||||||||||||
Marketable
securities
|
$
|
11,110
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
11,110
|
|||||||
Derivative
instruments
|
11,081
|
1,688
|
558
|
3,851
|
17,178
|
||||||||||||
Total
|
$
|
22,191
|
$
|
1,688
|
$
|
558
|
$
|
3,851
|
$
|
28,288
|
|||||||
Liabilities
|
|||||||||||||||||
Derivative
instruments
|
$
|
55,170
|
$
|
522
|
$
|
659
|
$
|
(55,375
|
)
|
$
|
976
|
Marketable
securities included in Level 1 are mutual funds valued based on quoted market
prices of identical securities that are provided by the trustees of these
securities. Derivative instruments included in Level 1 are valued using quoted
market prices on the NYMEX. Derivative instruments included in Level 2 are
valued using broker or dealer quotation services or by using observable market
inputs. Derivative instruments included in Level 3 are valued using generally
unobservable inputs that are based upon the best information available and
reflect management’s assumptions about how market participants would price the
asset or liability. At October 1, 2008, the beginning net balance of
derivatives measured using Level 3 inputs was zero. During fiscal year 2009, the
balance decreased by $109,000 due to the net issuance of derivatives and
increased $8,000 due to net gains included in earnings, leaving an ending net
balance of $(101,000) at September 30, 2009. The total amount of net
gains recognized in earnings during fiscal year 2009 for Level 3 measurements is
attributable to derivatives still held at
September 30, 2009.
Marketable
securities are included in the Other investments line of the Consolidated
Balance Sheets. Liabilities for derivative instruments, if any, are included in
the Other line of the Current Liabilities section of the Consolidated Balance
Sheets. Derivative assets and liabilities, including receivables and payables
associated with cash margin requirements, are presented net in the Consolidated
Balance Sheets when a legally enforceable netting agreement exists between the
Company and the counterparty to a derivative contract.
Laclede
Gas has a risk management policy that allows for the purchase of natural gas
derivative instruments with the goal of managing price risk associated with
purchasing natural gas on behalf of its customers. This policy prohibits
speculation. The policy permits the Utility to hedge up to 70% of its normal
volumes purchased for up to a 36-month period. Costs and cost reductions,
including carrying costs, associated with the Utility’s use of natural gas
derivative instruments are allowed to be passed on to the Utility’s customers
through the operation of its PGA Clause, through which the MoPSC allows the
Utility to recover gas supply costs, subject to prudence review. Accordingly,
Laclede Gas does not expect any adverse earnings impact as a result of the use
of these derivative instruments. The Utility does not designate these
instruments as hedging instruments for financial reporting purposes because
gains or losses associated with the use of these derivative instruments are
deferred and recorded as regulatory assets or regulatory liabilities pursuant to
ASC Topic 980 and, as a result, have no direct impact on the Statements of
Consolidated Income. The timing of the operation of the PGA clause may cause
interim variations in short-term cash flows because the Utility is subject to
cash margin requirements associated with changes in the values of these
instruments. Nevertheless, carrying costs associated with such requirements are
recovered through the PGA Clause.
From
time to time, Laclede Gas purchases NYMEX futures contracts to help stabilize
operating costs associated with forecasted purchases of gasoline and diesel
fuels used to power vehicles and equipment used in the course of its business.
At September 30, 2009, Laclede Gas held 0.5 million gallons of
gasoline futures contracts at an average price of $1.34 per gallon. Most of
these futures contracts, the longest of which extends to October 2010, are
designated as cash flow hedges of forecasted transactions pursuant to ASC Topic
815. The gains or losses on these derivative instruments are not subject to the
Utility’s PGA Clause.
In
the course of its business, Laclede Group’s non-regulated gas marketing
affiliate, LER, enters into commitments associated with the purchase or sale of
natural gas. Most of LER’s derivative natural gas contracts are designated as
normal purchases or normal sales and, as such, are excluded from the scope of
ASC Topic 815 and are accounted for as executory contracts on an accrual basis.
Any of LER’s derivative natural gas contracts that are not designated as normal
purchases or normal sales are accounted for at fair value. At
September 30, 2009, LER had 24.1 million MMBtu of non-exchange traded
natural gas commodity contracts for which the normal purchases and normal sales
scope exception was not elected. Of these contracts, 22.5 million MMBtu will
settle during fiscal year 2010, while the remaining 1.6 million MMBtu will
settle during fiscal year 2011. These contracts have not been designated as
hedges; therefore, changes in the fair value of these contracts are reported in
earnings each period. Furthermore, LER manages the price risk associated with
its fixed-priced commitments by either closely matching the offsetting physical
purchase or sale of natural gas at fixed prices or through the use of NYMEX
futures contracts to lock in margins. At September 30, 2009, LER’s
unmatched fixed-price positions were not material to Laclede Group’s financial
position or results of operations. LER’s NYMEX natural gas futures contracts
used to lock in margins are generally designated as cash flow hedges of
forecasted transactions for financial reporting purposes.
Derivative
instruments designated as cash flow hedges of forecasted transactions are
recognized on the Consolidated Balance Sheets at fair value and the change in
the fair value of the effective portion of these hedge instruments is recorded,
net of tax, in other comprehensive income (OCI). Accumulated other comprehensive
income (AOCI) is a component of Total Common Stock Equity. Amounts are
reclassified from AOCI into earnings when the hedged items affect net income,
using the same revenue or expense category that the hedged item impacts. Based
on market prices at September 30, 2009, it is expected that
approximately $1.1 million of pre-tax unrealized gains will be reclassified into
the Statements of Consolidated Income during fiscal year 2010. The net amount of
pre-tax gains recognized in earnings for the ineffective portion of cash flow
hedges was $2.9 million for fiscal year 2009. The net amount of pre-tax losses
recognized in earnings for the ineffective portion of cash flow hedges was $2.8
million for fiscal year 2008 and $0.5 million for fiscal year 2007. Cash flows
from hedging transactions are classified in the same category as the cash flows
from the items that are being hedged in the Statements of Consolidated Cash
Flows.
The
Company’s exchange-traded/cleared derivative instruments consist primarily of
NYMEX positions. The NYMEX is the primary national commodities exchange on which
natural gas derivatives are traded. NYMEX-traded contracts are supported by the
financial and credit quality of the clearing members of the NYMEX and have
nominal credit risk. Open NYMEX natural gas futures positions at
September 30, 2009 were as follows:
Laclede
Gas Company
|
Laclede
Energy
Resources,
Inc.
|
|||||||||||
MMBtu
(millions)
|
Avg.
Price
Per
MMBtu
|
MMBtu
(millions)
|
Avg.
Price
Per
MMBtu
|
|||||||||
Open
short futures positions
|
||||||||||||
Fiscal
2010
|
—
|
$
|
—
|
7.72
|
$
|
5.73
|
||||||
Fiscal
2011
|
—
|
—
|
0.34
|
5.99
|
||||||||
Open
long futures positions
|
||||||||||||
Fiscal
2010
|
12.47
|
8.78
|
1.96
|
5.16
|
||||||||
Fiscal
2011
|
6.58
|
8.55
|
3.34
|
6.55
|
||||||||
Fiscal
2012
|
0.60
|
8.31
|
1.29
|
7.23
|
At
September 30, 2009, Laclede Gas also had 19.1 million MMBtu of other
price mitigation in place through the use of NYMEX natural gas option-based
strategies.
The
Effect of Derivative Instruments on the Statements of Consolidated Income
and Statements of Consolidated Comprehensive Income
|
|||||||
(Thousands)
|
Location
of Gain (Loss) Recorded in Income
|
Nine
Months Ended
Sept.
30, 2009 (a)
|
|||||
Derivatives
in ASC Topic 815 Cash Flow Hedging
Relationships
|
|||||||
Effective
portion of gain (loss) recognized in OCI
|
|||||||
on
derivative:
|
|||||||
NYMEX
natural gas contracts
|
$
|
3,733
|
|||||
NYMEX
gasoline and heating oil contracts
|
248
|
||||||
Total
|
$
|
3,981
|
|||||
Effective
portion of gain (loss) reclassified from
|
|||||||
accumulated
OCI to income:
|
|||||||
NYMEX
natural gas contracts
|
Non-Regulated
Gas Marketing Operating Revenues
|
$
|
12,997
|
||||
Non-Regulated
Gas Marketing Operating Expenses
|
(6,117
|
)
|
|||||
Sub-total
|
6,880
|
||||||
NYMEX
gasoline and heating oil contracts
|
Other
Regulated Gas Distribution Operating Expenses
|
119
|
|||||
Total
|
$
|
6,999
|
|||||
Ineffective
portion of gain (loss) on derivative
|
|||||||
recognized
in income:
|
|||||||
NYMEX
natural gas contracts
|
Non-Regulated
Gas Marketing Operating Revenues
|
$
|
745
|
||||
Non-Regulated
Gas Marketing Operating Expenses
|
(258
|
)
|
|||||
Sub-total
|
487
|
||||||
NYMEX
gasoline and heating oil contracts
|
Other
Regulated Gas Distribution Operating Expenses
|
198
|
|||||
Total
|
$
|
685
|
|||||
Derivatives
Not Designated as Hedging Instruments
|
|||||||
Under
ASC Topic 815 (b)
|
|||||||
Gain
(loss) recognized in income on derivative:
|
|||||||
Natural
gas commodity contracts
|
Non-Regulated
Gas Marketing Operating Revenues
|
$
|
1,785
|
||||
Non-Regulated
Gas Marketing Operating Expenses
|
(46
|
)
|
|||||
NYMEX
natural gas contracts
|
Non-Regulated
Gas Marketing Operating Expenses
|
824
|
|||||
NYMEX
gasoline and heating oil contracts
|
Other
Income and (Income Deductions) – Net
|
17
|
|||||
Total
|
$
|
2,580
|
(a)
|
The
Company prospectively adopted SFAS No. 161, as codified in ASC Topic 815,
in the second quarter of fiscal year 2009. Accordingly, amounts disclosed
in this column exclude activity prior to
January 1, 2009.
|
(b)
|
Gains
and losses on Laclede Gas’ NYMEX natural gas derivative instruments, which
are not designated as hedging instruments for financial reporting
purposes, are deferred pursuant to the Utility's PGA Clause and recorded
as regulatory assets or regulatory liabilities. These gains and losses are
excluded from the table above because they have no direct impact on the
Statements of Consolidated
Income.
|
Fair
Value of Derivative Instruments in the Consolidated Balance Sheet at
September 30, 2009
|
||||||||||
Asset
Derivatives
|
Liability
Derivatives
|
|||||||||
(Thousands)
|
Balance
Sheet Location
|
Fair
Value
|
*
|
Balance
Sheet Location
|
Fair
Value
|
*
|
||||
Derivatives
designated as hedging instruments under ASC Topic 815
|
||||||||||
NYMEX
natural gas contracts
|
Derivative
Instrument Assets
|
$
|
3,001
|
Derivative
Instrument Assets
|
$
|
2,019
|
||||
NYMEX
gasoline and
heating
oil contracts
|
Derivative
Instrument Assets
|
278
|
Derivative
Instrument Assets
|
—
|
||||||
Sub-total
|
3,279
|
2,019
|
||||||||
Derivatives
not designated as hedging instruments under
ASC
Topic 815
|
||||||||||
NYMEX
natural gas contracts
|
Derivative
Instrument Assets
|
7,802
|
Derivative
Instrument Assets
|
53,151
|
||||||
Natural
gas commodity contracts
|
Derivative
Instrument Assets
|
2,062
|
Other
Current Liabilities
|
1,160
|
||||||
Other
Current Liabilities
|
184
|
Derivative
Instrument Assets
|
21
|
|||||||
Sub-total
|
10,048
|
54,332
|
||||||||
Total
derivatives
|
$
|
13,327
|
$
|
56,351
|
*
|
The
fair values of Asset Derivatives and Liability Derivatives exclude the
fair value of cash margin receivables or payables with counterparties
subject to netting arrangements. At September 30, 2009, the
amount excluded was $59.2 million in receivables, which was associated
with NYMEX contracts. Fair value amounts of derivative contracts
(including the fair value amounts of cash margin receivables and payables)
for which there is a legal right to set off are presented net on the
Consolidated Balance Sheets. As such, the gross balances presented in the
table above are not indicative of the Company’s net economic exposure.
Refer to Note 10, Fair Value Measurements, for
information on the valuation of derivative
instruments.
|
A
significant portion of LER’s transactions are with (or are associated with)
energy producers, utility companies, and pipelines. These concentrations of
transactions with these counterparties have the potential to affect the
Company’s overall exposure to credit risk, either positively or negatively, in
that each of these three groups may be affected similarly by changes in
economic, industry, or other conditions. To manage this risk, as well as credit
risk from large counterparties in other industries, LER has established
procedures to determine the creditworthiness of its counterparties. These
include obtaining credit ratings and credit reports, analyzing counterparty
financial statements to assess financial condition, and considering the industry
environment in which the counterparty operates. This information is monitored on
an ongoing basis. In some instances, LER may require credit assurances such as
prepayments, letters of credit, or parental guarantees. In addition, LER may
enter into netting arrangements to mitigate credit risk with counterparties in
the energy industry from which LER both sells and purchases natural gas. Sales
are typically made on an unsecured credit basis with payment due the month
following delivery. Accounts receivable amounts are closely monitored and
provisions for uncollectible amounts are accrued when losses are probable. To
date, losses have not been significant. LER records accounts receivable,
accounts payable, and prepayments for physical sales and purchases of natural
gas on a gross basis. The amount included in accounts receivable attributable to
energy producers and their marketing affiliates amounted to $16.7 million, or
41.1% of LER’s total accounts receivable at September 30, 2009. Net
receivable amounts from these customers on the same date, reflecting netting
arrangements, were $7.6 million. Accounts receivable attributable to utility
companies and their marketing affiliates comprised $17.1 million of LER’s total
accounts receivable, or 42.2% at September 30, 2009 and net receivable
amounts from these customers, reflecting netting arrangements, were $13.7
million. Additionally, LER has concentrations of credit risk with pipeline
companies associated with its natural gas receivable amounts. These transactions
are described in Note 1, Summary of Significant Accounting
Policies.
The
components of accumulated other comprehensive income (loss), net of income
taxes, recognized in the
Consolidated
Balance Sheets at September 30 were as follows:
(Thousands)
|
Net
Unrealized Gains (Losses) on Cash Flow Hedges
|
Defined
Benefit Pension and Other
Postretirement
Benefit
Plans
|
Total
|
|||||||||||
Balance,
September 30, 2007
|
$
|
3,584
|
$
|
(1,727
|
)
|
$
|
1,857
|
|||||||
Current-period
change
|
2,643
|
(63
|
)
|
2,580
|
||||||||||
Balance,
September 30, 2008
|
6,227
|
(1,790
|
)
|
4,437
|
||||||||||
Current-period
change
|
(5,695
|
)
|
(939
|
)
|
(6,634
|
)
|
||||||||
Adoption
of SFAS No. 158, as codified in
ASC
Topic 715
|
—
|
31
|
31
|
|||||||||||
Balance,
September 30, 2009
|
$
|
532
|
$
|
(2,698
|
)
|
$
|
(2,166
|
)
|
Income
tax expense (benefit) recorded for items of other comprehensive income reported
in the Statements of Consolidated Comprehensive Income is calculated by applying
statutory federal, state, and local income tax rates applicable to ordinary
income. The tax rates applied to individual items of other comprehensive income
are similar within each reporting period.
14.
|
The
net provisions for income taxes from continuing operations charged during the
fiscal years ended September 30, 2009, 2008, and 2007 are as
follows:
(Thousands)
|
2009
|
2008
|
2007
|
||||||||
Included
in Statements of Consolidated Income:
|
|||||||||||
Federal
|
|||||||||||
Current
|
$
|
12,614
|
$
|
17,584
|
$
|
32,863
|
|||||
Deferred
|
15,454
|
5,097
|
(13,454
|
)
|
|||||||
Investment
tax credits
|
(219
|
)
|
(227
|
)
|
(237
|
)
|
|||||
State
and local
|
|||||||||||
Current
|
1,958
|
2,743
|
5,427
|
||||||||
Deferred
|
2,702
|
993
|
(2,453
|
)
|
|||||||
Total
Income Tax Expense from Continuing Operations
|
$
|
32,509
|
$
|
26,190
|
$
|
22,146
|
For
the years ended September 30, 2008 and 2007, the Company recorded
current income tax expense totaling $14.6 million and $2.9 million,
respectively; and deferred income tax benefits totaling $77,000 and $55,000,
respectively, related to discontinued operations.
The
effective income tax rate varied from the federal statutory income tax rate for
continuing operations for each year due to the following:
2009
|
2008
|
2007
|
|||||||||
Federal
income tax statutory rate
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
|||||
State
and local income taxes, net of federal
|
|||||||||||
income
tax benefits
|
3.1
|
2.9
|
2.9
|
||||||||
Certain
expenses capitalized on books and
|
|||||||||||
deducted
on tax return
|
(2.9
|
)
|
(3.5
|
)
|
(4.1
|
)
|
|||||
Taxes
related to prior years
|
(0.6
|
)
|
(1.0
|
)
|
0.4
|
||||||
Other
items – net
|
(1.0
|
)
|
(2.1
|
)
|
(1.6
|
)
|
|||||
Effective
income tax rate
|
33.6
|
%
|
31.3
|
%
|
32.6
|
%
|
The
significant items comprising the net deferred tax liability recognized in the
Consolidated Balance Sheets as of September 30 are as follows with
additional detail provided as of September 30, 2008:
(Thousands)
|
2009
|
2008
|
||||||
Deferred
tax assets:
|
||||||||
Reserves
not currently deductible
|
$
|
19,418
|
$
|
18,850
|
||||
Pension
and other postretirement benefits
|
80,508
|
46,934
|
||||||
Unamortized
investment tax credits
|
2,358
|
2,495
|
||||||
Other
|
13,067
|
11,071
|
||||||
Total
deferred tax assets
|
115,351
|
79,350
|
||||||
Deferred
tax liabilities:
|
||||||||
Relating
to property
|
221,532
|
205,362
|
||||||
Regulatory
pension and other postretirement benefits
|
109,041
|
76,666
|
||||||
Deferred
gas costs
|
16,609
|
10,156
|
||||||
Other
|
22,658
|
21,596
|
||||||
Total
deferred tax liabilities
|
369,840
|
313,780
|
||||||
Net
deferred tax liability
|
254,489
|
234,430
|
||||||
Net
deferred tax asset (liability) – current
|
1,707
|
(11,669
|
)
|
|||||
Net
deferred tax liability – non-current
|
$
|
256,196
|
$
|
222,761
|
The
Company adopted the provisions of FASB Interpretation No. (FIN) 48, “Accounting
for Uncertainty in Income Taxes,” as codified in ASC Topic 740, “Income Taxes,”
as of October 1, 2007. This Interpretation clarifies the accounting
for uncertainty in income taxes recognized in an enterprise’s financial
statements in accordance with GAAP. Pursuant to this Interpretation, the Company
may recognize the tax benefit from a tax position only if it is at least more
likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position. The Company
records potential interest and penalties related to its uncertain tax positions
as interest expense and other income deductions, respectively. Unrecognized tax
benefits, accrued interest payable, and accrued penalties payable are included
in the Other line of the Deferred Credits and Other Liabilities section of the
Consolidated Balance Sheets.
A
reconciliation of the beginning and ending amount of unrecognized tax benefits
for each year is as follows:
(Thousands)
|
|||||
Balance
as of October 1, 2007
|
$
|
2,134
|
|||
Decreases
related to prior year tax positions
|
(270
|
)
|
|||
Increases
related to current year tax positions
|
419
|
||||
Settlements
with taxing authorities
|
(986
|
)
|
|||
Reductions
due to lapse of applicable statute of limitations
|
(264
|
)
|
|||
Balance
at September 30, 2008
|
1,033
|
||||
Increases
related to current year tax positions
|
333
|
||||
Balance
at September 30, 2009
|
$
|
1,366
|
The
entire amount of unrecognized tax benefits at September 30, 2009, if
recognized, would affect the Company’s effective tax rate. The Company does not
expect any significant change related to any of the above unrecognized tax
positions within the next twelve months.
Interest
accrued associated with the Company’s uncertain tax positions as of
September 30, 2009 and 2008 were immaterial and no penalties were
accrued as of those dates. During fiscal year 2009 an immaterial amount of
interest expense was accrued, and during fiscal year 2008 the Company reversed
$0.8 million of accrued interest expense and $0.9 million of accrued penalties
in the Statements of Consolidated Income.
The
Company is subject to U.S. federal income tax as well as income tax of state and
local jurisdictions. The Company is no longer subject to examination for fiscal
years prior to 2006. During fiscal year 2008, the Company effectively settled
with the Internal Revenue Service for fiscal years 2005 and 2006. However, the
federal statute of limitations remains open until June 15, 2010 for
fiscal year 2006.
(Thousands)
|
2009
|
2008
|
2007
|
||||||||
Interest
income
|
$
|
2,972
|
$
|
4,221
|
$
|
5,703
|
|||||
Net
investment (loss) gain
|
(1,019
|
)
|
(1,299
|
)
|
573
|
||||||
Other
income
|
423
|
68
|
25
|
||||||||
Other
income deductions
|
(923
|
)
|
(1,109
|
)
|
512
|
||||||
Other
Income and (Income Deductions) – Net
|
$
|
1,453
|
$
|
1,881
|
$
|
6,813
|
The
decrease in Other Income and (Income Deductions) – Net in fiscal year 2009
(compared to fiscal year 2008), is primarily due to lower interest income and
the effect of a benefit recognized during fiscal year 2008 from the reversal of
certain tax-related expenses. These factors were largely offset by the effect of
a loss on the redemption of long-term debt (primarily unamortized issuance
costs) recognized during fiscal year 2008 and increased income associated with
carrying costs applied to under-recoveries of gas costs. Carrying costs on
under-recoveries of gas costs are recovered through the Utility’s PGA
Clause.
The
decrease in Other Income and (Income Deductions) – Net in fiscal year 2008
(compared to fiscal year 2007) is primarily due to higher net investment losses,
a loss on the redemption of long-term debt (primarily unamortized issuance
costs), lower income associated with carrying costs applied to under-recoveries
of gas costs, and an increase in charitable donations. These factors were
partially offset by a reversal of tax-related expenses and additional proceeds
received related to the Company’s interest, as a policyholder, in the sale of a
mutual insurance company in fiscal year 2008.
All
of Laclede Group’s subsidiaries are wholly owned. The Regulated Gas Distribution
segment consists of the regulated operations of Laclede Gas and is the core
business segment of Laclede Group. Laclede Gas is a public utility engaged in
the retail distribution and sale of natural gas serving an area in eastern
Missouri, with a population of approximately 2.1 million, including the City of
St. Louis and parts of ten counties in eastern Missouri. The Non-Regulated Gas
Marketing segment includes the results of LER, a subsidiary engaged in the
non-regulated marketing of natural gas and related activities. Other includes
Laclede Pipeline Company’s transportation of liquid propane regulated by the
FERC as well as non-regulated activities, including real estate development, the
compression of natural gas, and financial investments in other enterprises.
These operations are conducted through five subsidiaries. Other also included
Laclede Gas’ non-regulated merchandise sales business, which was not material.
The merchandise sales business ceased operations on
September 30, 2009. Certain intersegment revenues with Laclede Gas are
not eliminated in accordance with the provisions of ASC Topic 980. Those types
of transactions include sales of natural gas from Laclede Gas to LER, sales of
natural gas from LER to Laclede Gas, and sales of propane and transportation
services provided by Laclede Pipeline Company to Laclede Gas. These revenues are
shown on the Intersegment revenues lines in the table under Regulated Gas
Distribution, Non-Regulated Gas Marketing, and Other columns,
respectively.
Non-
|
||||||||||||||||
Regulated
|
Regulated
|
Unallocated
|
||||||||||||||
Gas
|
Gas
|
&
|
||||||||||||||
(Thousands)
|
Distribution
|
Marketing
|
Other
|
Eliminations
|
Consolidated
|
|||||||||||
FISCAL
2009
|
||||||||||||||||
Revenues
from external
|
||||||||||||||||
customers
|
$
|
1,049,288
|
$
|
804,499
|
$
|
3,302
|
$
|
—
|
$
|
1,857,089
|
||||||
Intersegment
revenues
|
4,705
|
32,366
|
1,038
|
—
|
38,109
|
|||||||||||
Total
Operating Revenues
|
1,053,993
|
836,865
|
4,340
|
—
|
1,895,198
|
|||||||||||
Depreciation
& amortization
|
36,751
|
—
|
—
|
*
|
—
|
36,751
|
||||||||||
Interest
income
|
2,505
|
794
|
1,078
|
(1,405
|
)
|
2,972
|
||||||||||
Interest
charges
|
30,353
|
—
|
798
|
(1,405
|
)
|
29,746
|
||||||||||
Income
tax expense (benefit)
|
13,856
|
19,186
|
(533
|
)
|
—
|
32,509
|
||||||||||
Income
(Loss) from continuing
|
||||||||||||||||
operations
|
33,163
|
31,416
|
(332
|
)
|
—
|
64,247
|
||||||||||
Total
assets of continuing
|
||||||||||||||||
operations
|
1,598,600
|
148,248
|
105,237
|
(90,067
|
)
|
1,762,018
|
||||||||||
Capital
expenditures
|
51,384
|
820
|
180
|
—
|
52,384
|
|||||||||||
FISCAL
2008
|
||||||||||||||||
Revenues
from external
|
||||||||||||||||
customers
|
$
|
1,126,826
|
$
|
1,067,257
|
$
|
3,803
|
$
|
—
|
$
|
2,197,886
|
||||||
Intersegment
revenues
|
1,461
|
8,588
|
1,038
|
—
|
11,087
|
|||||||||||
Total
Operating Revenues
|
1,128,287
|
1,075,845
|
4,841
|
—
|
2,208,973
|
|||||||||||
Depreciation
& amortization
|
35,303
|
—
|
—
|
*
|
—
|
35,303
|
||||||||||
Interest
income
|
2,133
|
1,531
|
2,762
|
(2,205
|
)
|
4,221
|
||||||||||
Interest
charges
|
30,214
|
(614
|
)
|
2,222
|
(2,345
|
)
|
29,477
|
|||||||||
Income
tax expense (benefit)
|
15,244
|
11,404
|
(291
|
)
|
(167
|
)
|
26,190
|
|||||||||
Income
(Loss) from continuing
|
||||||||||||||||
operations
|
39,139
|
19,258
|
(607
|
)
|
(264
|
)
|
57,526
|
|||||||||
Total
assets of continuing
|
||||||||||||||||
operations
|
1,624,041
|
182,750
|
138,982
|
(173,118
|
)
|
1,772,655
|
||||||||||
Capital
expenditures
|
55,304
|
41
|
25
|
1,251
|
56,621
|
|||||||||||
FISCAL
2007
|
||||||||||||||||
Revenues
from external
|
||||||||||||||||
customers
|
$
|
1,093,372
|
$
|
669,464
|
$
|
4,565
|
$
|
—
|
$
|
1,767,401
|
||||||
Intersegment
revenues
|
38,182
|
49,240
|
1,038
|
—
|
88,460
|
|||||||||||
Total
Operating Revenues
|
1,131,554
|
718,704
|
5,603
|
—
|
1,855,861
|
|||||||||||
Depreciation
& amortization
|
34,080
|
—
|
—
|
*
|
—
|
34,080
|
||||||||||
Interest
income
|
3,499
|
1,796
|
2,265
|
(1,857
|
)
|
5,703
|
||||||||||
Interest
charges
|
33,603
|
—
|
2,105
|
(1,774
|
)
|
33,934
|
||||||||||
Income
tax expense
|
13,853
|
8,204
|
561
|
(472
|
)
|
22,146
|
||||||||||
Income
from continuing
|
||||||||||||||||
operations
|
32,133
|
13,334
|
1,024
|
(747
|
)
|
45,744
|
||||||||||
Total
assets of continuing
|
||||||||||||||||
operations
|
1,429,415
|
115,246
|
84,953
|
(61,818
|
)
|
1,567,796
|
||||||||||
Capital
expenditures
|
56,434
|
—
|
57
|
2,379
|
58,870
|
|||||||||||
*
|
Depreciation
& amortization for Other is included in the Other Operating Expenses
on the Statements of Consolidated Income ($0.3 million per year for fiscal
years 2009, 2008, and 2007).
|
Commitments
Laclede
Gas estimates fiscal year 2010 utility capital expenditures at approximately $67
million. Fiscal year 2010 capital expenditures for non-regulated subsidiaries
are estimated at approximately $0.3 million. There are no material contractual
commitments at September 30, 2009 related to these estimated capital
expenditures.
Laclede
Gas and LER have entered into various contracts, expiring on dates through 2017,
for the storage, transportation, and supply of natural gas. Minimum payments
required under the contracts in place at September 30, 2009 are
estimated at approximately $1.5 billion. Additional contracts are generally
entered into prior to or during the heating season. Laclede Gas estimates that
it will pay approximately $88 million annually, at present rate levels, for
fixed charges related to these or other contracts that are expected to be in
place for the upcoming year for the reservation of gas supplies and pipeline
transmission and storage capacity. The Utility recovers these costs from
customers in accordance with the PGA Clause.
Laclede
Pipeline Company (Pipeline), a wholly-owned subsidiary of Laclede Group, is
providing liquid propane transportation service to Laclede Gas pursuant to an
approved FERC tariff and a contractual arrangement between Pipeline and Laclede
Gas. In accordance with the terms of that agreement, Laclede Gas is obligated to
pay Pipeline approximately $1.0 million annually, at current rates. The
agreement renews at the end of each contract year, unless terminated by either
party upon provision of at least six months’ notice.
Leases
and Guarantees
The
lease agreement covering the headquarters office space of Laclede Gas extends
through February 2015 with the option to renew for up to five additional
years. The aggregate rental expense for fiscal years 2009, 2008, and 2007 was
$900,000, $891,000, and $882,000, respectively. The annual minimum rental
payment for fiscal year 2010 is anticipated to be approximately $909,000 with a
maximum annual rental payment escalation of $8,800 per year for each year
through fiscal year 2015. Laclede Gas has entered into various operating lease
agreements for the rental of vehicles and power operated equipment. The rental
costs will be approximately $3.7 million in fiscal year 2010, $2.6 million in
fiscal year 2011, $1.5 million in fiscal year 2012, $0.5 million in fiscal year
2013, and $0.1 million in fiscal year 2014. Laclede Gas has other relatively
minor rental arrangements that provide for minimum rental payments.
Laclede
Gas has several operating leases for the rental of vehicles that contain
provisions requiring Laclede Gas to guarantee certain amounts related to the
residual value of the leased property. These leases have various terms, the
longest of which extends through 2014. At September 30, 2009, the
maximum guarantees under these leases are $1.7 million. However, the Utility
estimates that the residual value of the leased vehicles will be adequate to
satisfy most of the guaranteed amounts. At September 30, 2009, the
carrying value of the liability recognized for these guarantees was $0.4
million.
Laclede
Group had guarantees totaling $86.8 million for performance and payment of
certain wholesale gas supply purchases by LER, as of
September 30, 2009. Since that date, total guarantees issued by
Laclede Group on behalf of LER increased by $1.0 million bringing the total to
$87.8 million in guarantees outstanding at November 20, 2009. No amounts have
been recorded for these guarantees in the financial statements.
A
consolidated subsidiary is a general partner in an unconsolidated partnership
that invests in real estate partnerships. The subsidiary and third parties are
jointly and severally liable for the payment of mortgage loans in the aggregate
outstanding amount of approximately $2.1 million incurred in connection with
various real estate ventures. Laclede Group has no reason to believe that the
other principal liable parties will not be able to meet their proportionate
share of these obligations. Laclede Group further believes that the asset values
of the real estate properties are sufficient to support these mortgage
loans.
Contingencies
and Indemnifications
Laclede
Gas owns and operates natural gas distribution, transmission, and storage
facilities, the operations of which are subject to various environmental laws,
regulations, and interpretations. While environmental issues resulting from such
operations arise in the ordinary course of business, such issues have not
materially affected the Company’s or Laclede Gas’ financial position and results
of operations. As environmental laws, regulations, and their interpretations
change, however, Laclede Gas may be required to incur additional
costs.
As
with other companies, Laclede Gas faces the risk of environmental liabilities.
In the natural gas industry, these are typically associated with sites formerly
owned or operated by gas distribution companies like Laclede Gas and/or its
predecessor companies at which manufactured gas operations took place. At this
time, Laclede Gas has identified three former manufactured gas plant (MGP)
sites: one in Shrewsbury and two in the City of St. Louis.
With
regard to the former MGP site located in Shrewsbury, Missouri, Laclede Gas and
state and federal environmental regulators agreed upon certain remedial actions
to a portion of the site in a 1999 Administrative Order on Consent (AOC), which
actions have been completed. On September 22, 2008, EPA Region VII
issued a letter of Termination and Satisfaction terminating the AOC. However, if
after termination of the AOC, regulators require additional remedial actions, or
additional claims are asserted, Laclede Gas may incur additional
costs.
The
site in the City of St. Louis, which is currently owned by the City, has been
enrolled in the Missouri Voluntary Cleanup Program (VCP). The VCP provides
potential opportunities to minimize the cost of site cleanup while maximizing
possibilities for site development. The City has selected a developer with whom
it is negotiating a final site development contract which contemplates
remediation and redevelopment of the property. In conjunction with the
redevelopment, Laclede Gas and another former site owner have entered into an
agreement with the owner and development agencies as well as their parent
agency, the private developer of the property, and an environmental consultant
(Remediation Agreement). Under the Remediation Agreement, the development agency
and the private developer agreed to remediate the site, and Laclede Gas and the
other former owner are to be released by the involved City agencies, the private
developer, and the environmental consultant from certain liabilities for the
past and current environmental condition of the property. Also under that
agreement Laclede Gas and the former site owner agreed to pay, at the closing of
the transaction, a small percentage of the cost of remediation (subject to a
maximum amount). The transactions contemplated by the Remediation Agreement are
expected to close during fiscal year 2010. The amount Laclede Gas expects
to pay under the Remediation Agreement is not material and will not have a
material impact on the future financial condition, results of operations, or
cash flows of Laclede Gas or the Company.
The
third former MGP site, also located in the City of St. Louis, is not currently
and has not been owned by Laclede Gas for many years. At this time, it is not
known whether Laclede Gas will incur any costs in connection with environmental
investigations of or remediation at the site, and if it does incur any such
costs, what the amount of those costs would be.
Laclede
Gas has notified its insurers that it seeks reimbursement for costs incurred in
the past and future potential liabilities associated with the three MGP sites
identified above. In response, the majority of insurers have reserved their
rights. While some of the insurers have denied coverage, Laclede Gas continues
to discuss potential reimbursements with them, with one insurer making a
settlement payment in exchange for a release of claims in June 2007. The
Utility’s outside consultant completed an analysis of the MGP sites to determine
cost estimates for a one-time contractual transfer of risk from each insurer to
the Utility of environmental coverage for the MGP sites. That analysis
demonstrated a range of possible future expenditures to investigate, monitor,
and remediate these MGP sites from $5.8 million to $36.3 million based upon then
currently available facts, technology, and laws and regulations. The actual
costs that Laclede Gas may incur could be materially higher or lower depending
upon several factors, including whether remedial actions will be required, final
selection and regulatory approval of any remedial actions, changing technologies
and governmental regulations, the ultimate ability of other potentially
responsible parties to pay, and any insurance recoveries. Costs associated with
environmental remediation activities are accrued when such costs are probable
and reasonably estimable.
The
amount of costs relative to future remedial actions at these and other sites is
unknown and may be material. Laclede Gas anticipates that any costs it may incur
in the future to remediate these sites, less any amounts received as insurance
proceeds or as contributions from other potentially responsible parties, would
be deferred and recovered in rates through periodic adjustments approved by the
MoPSC. Accordingly, potential liabilities associated with remediating these
sites are not expected to have a material impact on the future financial
position and results of operations of Laclede Gas or the Company.
On
December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2
million related to Laclede Gas’ recovery of its purchased gas costs applicable
to fiscal year 2005. On September 14, 2007, the Staff withdrew its
pursuit of $5.5 million of the disallowance it had originally proposed. The
remaining $1.7 million pertains to Laclede Gas’ purchase of gas from a marketing
affiliate, LER, Laclede Gas believes that the remaining portion of the proposed
disallowance lacks merit and is vigorously opposing the adjustment in
proceedings before the MoPSC. As such, no amount has been recorded in the
financial statements for this proposed disallowance.
The
MoPSC Staff has also proposed disallowance of gas costs relating to Laclede Gas
purchases of gas supply from LER for fiscal years 2006 and 2007. On
December 31, 2007, the MoPSC Staff proposed a disallowance of $2.8
million applicable to fiscal year 2006, and on December 31, 2008, the
MoPSC Staff proposed a disallowance of $1.5 million applicable to fiscal year
2007. Laclede Gas believes that these proposed disallowances also lack merit and
is vigorously opposing them in proceedings before the MoPSC. As such, no amount
has been recorded in the financial statements for these proposed
disallowances.
In
the December 31, 2007 filing, the MoPSC Staff also raised questions
regarding whether certain sales and capacity release transactions subject to the
FERC’s oversight were consistent with the FERC’s regulations and policies
regarding capacity release. The Company commenced an internal review of the
questions raised by the MoPSC Staff and notified the FERC Staff that it took
this action. Subsequently, as a result of the internal review, the Company has
provided the FERC Staff with a report regarding compliance of sales and capacity
release activities with the FERC’s regulations and policies. On
July 23, 2008, the FERC Staff requested additional information which
the Company provided and on February 11, 2009, the FERC Staff
submitted follow-up questions to which the Company responded on
February 25, 2009. On March 2, 2009, FERC Staff requested
clarification of certain aspects of the Company’s February 25, 2009
response, which the Company clarified on March 4, 2009.
As
reported in Note 2, Discontinued Operations, during the
quarter ended March 31, 2008, the Company sold 100% of its interest in
its wholly-owned subsidiary SM&P. The sales agreement (Agreement) includes
representations and warranties customary for such transactions, including, among
others, representations and warranties of the parties as to brokers’ fees; of
SM&P as to its financial status, contracts, title to and condition of
personal and real property, taxes, legal compliance, environmental matters,
employee benefits, and intellectual property. The Agreement also includes
customary indemnification provisions under which Laclede’s aggregate
indemnification obligations are limited to a maximum of $7.0 million for most
claims. Obligations subject to this maximum apply only in the event claims
exceed a stated deductible, both individually and in the aggregate. However,
this maximum limitation and deductible do not apply to obligations associated
with taxes, employee benefits, title to personal property, and certain other
fundamental representations and warranties. A maximum potential future payment
amount cannot be estimated for these obligations. The terms of the
indemnifications in the Agreement are generally dependent upon the statute of
limitations applicable to the particular representations and warranties made by
the Company, although certain representations and warranties have an indefinite
life under the Agreement. As of September 30, 2009, the carrying
amount of the liability recognized for these indemnification obligations was
$0.1 million, based on the Company’s assessment of risk, which is believed to be
low.
Laclede
Group is involved in other litigation, claims, and investigations arising in the
normal course of business. While the results of such litigation cannot be
predicted with certainty, management, after discussion with counsel, believes
that the final outcome will not have a material adverse effect on the
consolidated financial position, results of operations, or cash flows of the
Company.
In
the opinion of Laclede Group, the quarterly information presented below for
fiscal years 2009 and 2008 includes all adjustments (consisting of only normal
recurring accruals) necessary for a fair statement of the results of operations
for such periods. Variations in consolidated operations reported on a quarterly
basis primarily reflect the seasonal nature of the business of Laclede
Gas.
(Thousands,
Except Per Share Amounts)
|
|||||||||||||||
Three
Months Ended
|
Dec.
31
|
March
31
|
June
30
|
Sept.
30
|
|||||||||||
2009
|
|||||||||||||||
Total
Operating Revenues
|
$
|
674,256
|
$
|
659,068
|
$
|
309,944
|
$
|
251,930
|
|||||||
Operating
Income (Loss)
|
56,688
|
55,240
|
16,203
|
(3,067
|
)
|
||||||||||
Net
Income (Loss)
|
31,306
|
30,811
|
6,877
|
(4,747
|
)
|
||||||||||
Basic
Earnings (Loss) Per Share of Common Stock
|
$
|
1.43
|
$
|
1.41
|
$
|
0.31
|
$
|
(0.22
|
)
|
||||||
Diluted
Earnings (Loss) Per Share of Common Stock
|
$
|
1.42
|
$
|
1.40
|
$
|
0.31
|
$
|
(0.22
|
)
|
||||||
Three
Months Ended
|
Dec.
31
|
March
31
|
June
30
|
|
Sept.
30
|
||||||||||
2008
|
|||||||||||||||
Total
Operating Revenues
|
$
|
503,990
|
$
|
747,706
|
$
|
505,488
|
$
|
451,789
|
|||||||
Operating
Income
|
40,177
|
51,883
|
19,259
|
28
|
|||||||||||
Income
(Loss) from Continuing Operations
|
21,536
|
30,060
|
9,101
|
(3,171
|
)
|
||||||||||
Income
(Loss) from Discontinued Operations
|
(633
|
)
|
21,294
|
158
|
(423
|
)
|
|||||||||
Net
Income (Loss)
|
20,903
|
51,354
|
9,259
|
(3,594
|
)
|
||||||||||
Basic
Earnings (Loss) Per Share of Common Stock:
|
|||||||||||||||
Income
(Loss) from Continuing Operations
|
$
|
1.00
|
$
|
1.39
|
$
|
0.42
|
$
|
(0.14
|
)
|
||||||
Income
(Loss) from Discontinued Operations
|
(0.03
|
)
|
0.99
|
0.01
|
(0.02
|
)
|
|||||||||
Net
Income
|
$
|
0.97
|
$
|
2.38
|
$
|
0.43
|
$
|
(0.16
|
)
|
||||||
Diluted
Earnings (Loss) Per Share of Common Stock:
|
|||||||||||||||
Income
(Loss) from Continuing Operations
|
$
|
1.00
|
$
|
1.39
|
$
|
0.41
|
$
|
(0.14
|
)
|
||||||
Income
(Loss) from Discontinued Operations
|
(0.03
|
)
|
0.98
|
0.01
|
(0.02
|
)
|
|||||||||
Net
Income
|
$
|
0.97
|
$
|
2.37
|
$
|
0.42
|
$
|
(0.16
|
)
|
Income
from discontinued operations for the quarter ended March 31, 2008
included after-tax earnings of $25.8 million attributable to the gain on the
sale of SM&P, net of associated costs of disposal.
Laclede
Gas Company’s financial statements and Notes to Financial Statements are
included in Exhibit 99.1.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
There
have been no changes in and disagreements on accounting and financial disclosure
with Laclede’s outside auditors that are required to be disclosed.
Item 9A. Controls and Procedures
As
of the end of the period covered by this report, we carried out an evaluation,
under the supervision and with participation of our management, including our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures pursuant to Rule
13a-15e and Rule 15d-15e under the Securities Exchange Act of 1934, as amended.
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are
effective.
There
have been no changes in our internal control over financial reporting that
occurred during our fourth fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
The
Management Report on Internal Control Over Financial Reporting and the Reports
of Independent Registered Public Accounting Firm are included under Item 8,
pages 39 through 41.
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate
Governance
Information
about:
•
|
our
directors is incorporated by reference from the discussion under Proposal
1 of our proxy statement dated December 18, 2009 (2009 proxy
statement);
|
||
•
|
our
executive officers is reported in Part I of this Form
10-K;
|
||
•
|
compliance
with Section 16(a) of the Exchange Act is incorporated by reference from
the discussion in our 2009 proxy statement under the heading “Section
16(a) Beneficial Ownership Reporting Compliance”
|
||
•
|
Financial
Code of Ethics is posted on our website, www.thelacledegroup.com,
in the Investor Services section under Governance Documents;
and,
|
||
•
|
our
audit committee, our audit committee financial experts, and submitting
nominations to the Corporate Governance Committee is incorporated by
reference from the discussion in our 2009 proxy statement under the
heading “Corporate Governance.”
|
In
addition to our Financial Code of Ethics, our Code of Business Conduct,
Corporate Governance Guidelines, and charters for our audit, compensation and
corporate governance committees are available on our website, and a copy will be
sent to any shareholder upon written request.
Item 11. Executive Compensation
Information
about director and executive compensation is incorporated by reference from the
discussion in our 2009 proxy statement under the headings: “Directors’
Compensation,” “Compensation Discussion and Analysis,” and “Executive
Compensation.” The 2009 proxy statement also includes the “Compensation
Committee Report,” which is deemed furnished and not filed.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
Information
about security ownership of certain beneficial owners and management is
incorporated by reference from the discussion in our 2009 proxy statement under
“Beneficial Ownership of Laclede Group Common Stock.”
The
following table sets forth aggregate information regarding the Company’s equity
compensation plans as of September 30, 2009:
Number
of securities
|
||||||
remaining
available for
|
||||||
future
issuance under
|
||||||
Number
of securities to
|
Weighted
average
|
equity
compensation
|
||||
be
issued upon exercise
|
exercise
price of
|
plans
(excluding
|
||||
of
outstanding options,
|
outstanding
options,
|
securities
reflected in
|
||||
Plan
Category
|
warrants
and rights
|
warrants
and rights
|
column
(a))
|
|||
(a)
|
(b)
|
(c)
|
||||
Equity
compensation plans approved by
|
||||||
security
holders (1)
|
356,225
|
$30.84
|
961,150
|
|||
Equity
compensation plans not approved by
|
||||||
security
holders
|
—
|
—
|
—
|
|||
Total
|
356,225
|
$30.84
|
961,150
|
|||
(1)
|
Includes
the Company’s Equity Incentive Plan and Restricted Stock Plan for
Non-Employee Directors. Included in column (c) are 104,050 shares
remaining available to award under the Restricted Stock Plan for
Non-Employee Directors. Shares for the Restricted Stock Plan for
Non-Employee Directors are not original issue shares but are purchased by
the Plan’s trustee in the open
market.
|
Information
regarding the above referenced plans is set forth in Note 1
of the Notes to Consolidated Financial Statements in this report.
Item 13. Certain Relationships and Related Transactions, and
Director Independence
Information
about:
•
|
our
policy and procedures for related party transactions
and
|
||
•
|
the
independence of our directors
|
is
included in our 2009 proxy statement under “Corporate Governance” and is
incorporated by reference. There were no related party transactions in fiscal
year 2009.
Item 14. Principal Accounting Fees and Services
Information
about fees paid to our independent registered public accountant and our policy
for pre-approval of services provided by our independent registered public
accountant is incorporated by reference from our 2009 proxy statement under
“Fees of Independent Registered Public Accountant” and “Corporate Governance,”
respectively.
Item 15. Exhibits, Financial Statement
Schedules
|
|||
2009 10-K
Page
|
|||
(a)
|
1.
|
Financial
Statements:
|
|
The
Laclede Group, Inc.:
|
|||
See
Item
8. Financial Statements and Supplementary Data, filed herewith, for a
list of financial statements.
|
|||
For
Years Ended September 30, 2009, 2008, and 2007:
|
|||
Statements
of Income
|
Ex.
99.1, p. 20
|
||
Statements
of Comprehensive Income
|
Ex.
99.1, p. 21
|
||
Statements
of Common Shareholder’s Equity
|
Ex.
99.1, p. 25
|
||
Statements
of Cash Flows
|
Ex.
99.1, p. 26
|
||
As
of September 30, 2009 & 2008:
|
|||
Balance
Sheets
|
Ex.
99.1, pp. 22-23
|
||
Statements
of Capitalization
|
Ex.
99.1, p. 24
|
||
Ex.
99.1, pp. 27-52
|
|||
Ex.
99.1, p. 17
|
|||
Ex.
99.1, p. 18-19
|
|||
2.
|
Supplemental
Schedules
|
||
90
|
|||
91
|
|||
Schedules
not included have been omitted because they are not applicable or
the
|
|||
required
data has been included in the financial statements or notes to
financial
|
|||
statements.
|
|||
3.
|
Exhibits
|
||
Incorporated
herein by reference to Index
to Exhibits, page 92.
|
|||
Item
15(a)(3) See the marked exhibits in the Index
to Exhibits, page 92.
|
|||
(b)
|
Incorporated
herein by reference to Index
to Exhibits, page 92.
|
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
THE
LACLEDE GROUP, INC.
|
|||
November 20, 2009
|
By
/s/
|
Mark
D. Waltermire
|
|
Mark
D. Waltermire
|
|||
Chief
Financial Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Date
|
Signature
|
Title
|
|
11/20/09
|
/s/
|
Douglas
H. Yaeger
|
Chairman
of the Board,
|
Douglas
H. Yaeger
|
President
and Chief Executive Officer
|
||
(Principal
Executive Officer)
|
|||
11/20/09
|
/s/
|
Mark
D. Waltermire
|
Chief
Financial Officer
|
Mark
D. Waltermire
|
(Principal
Financial and
|
||
Accounting
Officer)
|
|||
11/20/09
|
/s/
|
Arnold
W. Donald
|
Director
|
Arnold
W. Donald
|
|||
11/20/09
|
/s/
|
Edward
L. Glotzbach
|
Director
|
Edward
L. Glotzbach
|
|||
11/20/09
|
/s/
|
Anthony
V. Leness
|
Director
|
Anthony
V. Leness
|
|||
11/20/09
|
/s/
|
W.
Stephen Maritz
|
Director
|
W.
Stephen Maritz
|
|||
11/20/09
|
/s/
|
William
E. Nasser
|
Director
|
William
E. Nasser
|
|||
11/20/09
|
/s/
|
Brenda
D. Newberry
|
Director
|
Brenda
D. Newberry
|
|||
11/20/09
|
/s/
|
John
P. Stupp, Jr.
|
Director
|
John
P. Stupp, Jr.
|
|||
11/20/09
|
/s/
|
MaryAnn
Van Lokeren
|
Director
|
MaryAnn
Van Lokeren
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
LACLEDE
GAS COMPANY
|
|||
November 20, 2009
|
By
/s/
|
Mark
D. Waltermire
|
|
Mark
D. Waltermire
|
|||
Senior
Vice President and
|
|||
Chief
Financial Officer
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Date
|
Signature
|
Title
|
|
11/20/09
|
/s/
|
Douglas
H. Yaeger
|
Chairman
of the Board,
|
Douglas
H. Yaeger
|
President
and Chief Executive Officer
|
||
(Principal
Executive Officer)
|
|||
11/20/09
|
/s/
|
Mark
D. Waltermire
|
Director,
Senior Vice President
|
Mark
D. Waltermire
|
and
Chief Financial Officer
|
||
(Principal
Financial and
|
|||
Accounting
Officer)
|
|||
11/20/09
|
/s/
|
Kenneth
J. Neises
|
Director,
Executive Vice President
|
Kenneth
J. Neises
|
|||
11/20/09
|
/s/
|
Michael
R. Spotanski
|
Director,
Senior Vice President
|
Michael
R. Spotanski
|
Operations
and Marketing
|
THE
LACLEDE GROUP, INC. AND SUBSIDIARY COMPANIES
RESERVES
FOR
THE YEARS ENDED SEPTEMBER 30, 2009, 2008, AND 2007
COLUMN
A
|
COLUMN
B
|
COLUMN
C
|
COLUMN
D
|
COLUMN
E
|
||||||||||||
BALANCE
AT
|
ADDITIONS
|
CHARGED
|
DEDUCTIONS
|
BALANCE
|
||||||||||||
BEGINNING
|
TO
|
TO
OTHER
|
FROM
|
AT
CLOSE
|
||||||||||||
DESCRIPTION
|
OF
PERIOD
|
INCOME
|
ACCOUNTS
|
RESERVES
|
OF
PERIOD
|
|||||||||||
(Thousands
of Dollars)
|
||||||||||||||||
YEAR
ENDED
|
||||||||||||||||
SEPTEMBER
30, 2009:
|
||||||||||||||||
DOUBTFUL
ACCOUNTS
|
$
|
12,624
|
$
|
12,408
|
$
|
11,138
|
(a)
|
$
|
25,010
|
(b)
|
$
|
11,160
|
||||
MISCELLANEOUS:
|
||||||||||||||||
Injuries
and
|
||||||||||||||||
property
damage
|
$
|
2,812
|
$
|
2,949
|
$
|
—
|
$
|
2,108
|
(c)
|
$
|
3,653
|
|||||
Deferred
compensation
|
11,164
|
1,649
|
—
|
908
|
11,905
|
|||||||||||
Group
medical claims
|
||||||||||||||||
incurred
but not reported
|
1,500
|
12,305
|
—
|
12,355
|
(c)
|
1,450
|
||||||||||
TOTAL
|
$
|
15,476
|
$
|
16,903
|
$
|
—
|
$
|
15,371
|
$
|
17,008
|
||||||
YEAR
ENDED
|
||||||||||||||||
SEPTEMBER
30, 2008:
|
||||||||||||||||
DOUBTFUL
ACCOUNTS
|
$
|
11,268
|
$
|
13,100
|
$
|
9,850
|
(a)
|
$
|
21,594
|
(b)(d)
|
$
|
12,624
|
||||
MISCELLANEOUS:
|
||||||||||||||||
Injuries
and
|
||||||||||||||||
property
damage
|
$
|
10,765
|
$
|
7,263
|
$
|
—
|
$
|
15,216
|
(c)(d)
|
$
|
2,812
|
|||||
Deferred
compensation
|
10,949
|
1,446
|
—
|
1,231
|
11,164
|
|||||||||||
Group
medical claims
|
||||||||||||||||
incurred
but not reported
|
2,571
|
15,777
|
—
|
16,848
|
(c)(d)
|
1,500
|
||||||||||
TOTAL
|
$
|
24,285
|
$
|
24,486
|
$
|
—
|
$
|
33,295
|
$
|
15,476
|
||||||
YEAR
ENDED
|
||||||||||||||||
SEPTEMBER
30, 2007:
|
||||||||||||||||
DOUBTFUL
ACCOUNTS
|
$
|
13,105
|
$
|
9,537
|
$
|
9,313
|
(a)
|
$
|
20,687
|
(b)
|
$
|
11,268
|
||||
MISCELLANEOUS:
|
||||||||||||||||
Injuries
and
|
||||||||||||||||
property
damage
|
$
|
11,342
|
$
|
12,948
|
$
|
—
|
$
|
13,525
|
(c)
|
$
|
10,765
|
|||||
Deferred
compensation
|
10,516
|
1,399
|
—
|
966
|
10,949
|
|||||||||||
Group
medical claims
|
||||||||||||||||
incurred
but not reported
|
1,940
|
18,801
|
—
|
18,170
|
(c)
|
2,571
|
||||||||||
TOTAL
|
$
|
23,798
|
$
|
33,148
|
$
|
—
|
$
|
32,661
|
$
|
24,285
|
||||||
(a)
|
Accounts
reinstated, cash recoveries, etc.
|
(b)
|
Accounts
written off.
|
(c)
|
Claims
settled, less reimbursements from insurance companies.
|
(d)
|
Deductions
include write-off of SM&P reserve balances at March 31, 2008
due to the sale of the subsidiary.
|
LACLEDE
GAS COMPANY
RESERVES
FOR
THE YEARS ENDED SEPTEMBER 30, 2009, 2008, AND 2007
COLUMN
A
|
COLUMN
B
|
COLUMN
C
|
COLUMN
D
|
COLUMN
E
|
||||||||||||
BALANCE
AT
|
ADDITIONS
|
CHARGED
|
DEDUCTIONS
|
BALANCE
|
||||||||||||
BEGINNING
|
TO
|
TO
OTHER
|
FROM
|
AT
CLOSE
|
||||||||||||
DESCRIPTION
|
OF
PERIOD
|
INCOME
|
ACCOUNTS
|
RESERVES
|
OF
PERIOD
|
|||||||||||
(Thousands
of Dollars)
|
||||||||||||||||
YEAR
ENDED
|
||||||||||||||||
SEPTEMBER
30, 2009:
|
||||||||||||||||
DOUBTFUL
ACCOUNTS
|
$
|
12,476
|
$
|
12,155
|
$
|
11,138
|
(a)
|
$
|
24,978
|
(b)
|
$
|
10,791
|
||||
MISCELLANEOUS:
|
||||||||||||||||
Injuries
and
|
||||||||||||||||
property
damage
|
$
|
2,812
|
$
|
2,949
|
$
|
—
|
$
|
2,108
|
(c)
|
$
|
3,653
|
|||||
Deferred
compensation
|
11,164
|
1,649
|
—
|
908
|
11,905
|
|||||||||||
Group
medical claims
|
||||||||||||||||
incurred
but not reported
|
1,500
|
12,305
|
—
|
12,355
|
(c)
|
1,450
|
||||||||||
TOTAL
|
$
|
15,476
|
$
|
16,903
|
$
|
—
|
$
|
15,371
|
$
|
17,008
|
||||||
YEAR
ENDED
|
||||||||||||||||
SEPTEMBER
30, 2008:
|
||||||||||||||||
DOUBTFUL
ACCOUNTS
|
$
|
10,961
|
$
|
13,034
|
$
|
9,850
|
(a)
|
$
|
21,369
|
(b)
|
$
|
12,476
|
||||
MISCELLANEOUS:
|
||||||||||||||||
Injuries
and
|
||||||||||||||||
property
damage
|
$
|
3,128
|
$
|
1,715
|
$
|
—
|
$
|
2,031
|
(c)
|
$
|
2,812
|
|||||
Deferred
compensation
|
10,949
|
1,446
|
—
|
1,231
|
11,164
|
|||||||||||
Group
medical claims
|
||||||||||||||||
incurred
but not reported
|
1,150
|
12,192
|
—
|
11,842
|
(c)
|
1,500
|
||||||||||
TOTAL
|
$
|
15,227
|
$
|
15,353
|
$
|
—
|
$
|
15,104
|
$
|
15,476
|
||||||
YEAR
ENDED
|
||||||||||||||||
SEPTEMBER
30, 2007:
|
||||||||||||||||
DOUBTFUL
ACCOUNTS
|
$
|
12,798
|
$
|
9,550
|
$
|
9,313
|
(a)
|
$
|
20,700
|
(b)
|
$
|
10,961
|
||||
MISCELLANEOUS:
|
||||||||||||||||
Injuries
and
|
||||||||||||||||
property
damage
|
$
|
4,124
|
$
|
1,473
|
$
|
—
|
$
|
2,469
|
(c)
|
$
|
3,128
|
|||||
Deferred
compensation
|
10,516
|
1,399
|
—
|
966
|
10,949
|
|||||||||||
Group
medical claims
|
||||||||||||||||
incurred
but not reported
|
800
|
11,909
|
—
|
11,559
|
(c)
|
1,150
|
||||||||||
TOTAL
|
$
|
15,440
|
$
|
14,781
|
$
|
—
|
$
|
14,994
|
$
|
15,227
|
||||||
(a)
|
Accounts
reinstated, cash recoveries, etc.
|
(b)
|
Accounts
written off.
|
(c)
|
Claims
settled, less reimbursements from insurance
companies.
|
Exhibit
|
||
No.
|
||
2.01*
|
-
|
Agreement
and Plan of Merger and Reorganization; filed as Appendix A to proxy
statement/prospectus contained in the Company’s registration statement on
Form S-4, No. 333-48794.
|
3.01(i)*
|
-
|
Laclede’s
Restated Articles of Incorporation effective March 18, 2002;
filed as Exhibit 3.3 to Form 8-K filed
May 29, 2002.
|
3.01(ii)*
|
-
|
Bylaws
of Laclede effective January 18, 2002; filed as Exhibit 3.4 to
Laclede’s Form 8-K filed May 29, 2002.
|
3.02(i)*
|
-
|
The
Company’s Articles of Incorporation, as amended; filed as Exhibit 3.1 to
the Company’s Form 8-K filed
January 26, 2006.
|
3.02(ii)*
|
-
|
The
Company’s Bylaws, as amended; filed as Exhibit 3.2 to the Company’s Form
8-K filed January 26, 2006.
|
4.01*
|
-
|
Mortgage
and Deed of Trust, dated as of February 1, 1945; filed as
Exhibit 7-A to registration statement No. 2-5586.
|
4.02*
|
-
|
Fourteenth
Supplemental Indenture, dated as of October 26, 1976; filed on
June 26, 1979 as Exhibit b-4 to registration statement No.
2-64857.
|
4.03*
|
-
|
Twenty-Second
Supplemental Indenture dated as of November 15, 1995; filed on
December 8, 1995 as Exhibit 4.01 to Laclede’s Form
8-K.
|
4.04*
|
-
|
Twenty-Third
Supplemental Indenture dated as of October 15, 1997; filed on
November 6, 1997 as Exhibit 4.01 to Laclede’s Form
8-K.
|
4.05*
|
-
|
Twenty-Fourth
Supplemental Indenture dated as of June 1, 1999; filed on
June 4, 1999 as Exhibit 4.01 to Laclede’s Form
8-K.
|
4.06*
|
-
|
Twenty-Fifth
Supplemental Indenture dated as of September 15, 2000; filed on
September 27, 2000 as Exhibit 4.01 to Laclede’s Form
8-K.
|
4.07*
|
-
|
Twenty-Seventh
Supplemental Indenture dated as of April 15, 2004; filed on
April 28, 2004 as Exhibit 4.01 to Laclede’s Form
8-K.
|
4.08*
|
-
|
Twenty-Eighth
Supplemental Indenture dated as of April 15, 2004; filed on
April 28, 2004 as Exhibit 4.02 to Laclede’s Form
8-K.
|
4.09*
|
-
|
Twenty-Ninth
Supplemental Indenture dated as of June 1, 2006; filed on
June 9, 2006, as Exhibit 4.1 to Laclede’s Form
8-K
|
4.10*
|
-
|
Thirtieth
Supplemental Indenture dated as of September 15, 2008; filed on
September 23, 2008 as Exhibit 4.1 to Laclede’s Form
8-K.
|
4.11*
|
-
|
Laclede
Gas Company Board of Directors’ Resolution dated August 28, 1986
which generally provides that the Board may delegate its authority in the
adoption of certain employee benefit plan amendments to certain designated
Executive Officers; filed as Exhibit 4.12 to the Company’s 1991
10-K.
|
4.11a*
|
-
|
Company
Board of Directors’ Resolutions dated March 27, 2003, updating
authority delegated pursuant to August 28, 1986 Laclede Gas
Company resolutions; filed as Exhibit 4.19(a) to the Company’s Form 10-K
for the year ended September 30, 2003.
|
4.12*
|
-
|
Rights
Agreement dated as of October 1, 2001; filed as Exhibit 4 to the
Company’s Form 8-A on
September 6, 2001.
|
*Incorporated
herein by reference and made a part hereof. Laclede’s File No. 1-1822; the
Company’s File No. 1-16681.
Bold
items reflect management, contract or compensatory plan or
arrangement.
INDEX TO
EXHIBITS
|
||
Exhibit
|
||
No.
|
||
10.01*
|
-
|
Laclede
Incentive Compensation Plan, amended and restated effective as of
January 1, 2005; filed as Exhibit 10.3 to the Company’s 10-Q for
the fiscal quarter ended December 31, 2008.
|
10.02*
|
-
|
Laclede
Incentive Compensation Plan II, effective as of January 1, 2005;
filed as Exhibit 10.4 to the Company’s 10-Q for the fiscal quarter ended
December 31, 2008.
|
10.03*
|
-
|
Senior
Officers’ Life Insurance Program of Laclede, as amended; filed as Exhibit
10.03 to the Company’s 1990 10-K.
|
10.03a*
|
-
|
Certified
copy of resolutions of Laclede’s Board of Directors adopted on
June 27, 1991 amending the Senior Officers’ Life Insurance
Program; filed as Exhibit 10.01 to the Company’s 10-Q for the fiscal
quarter ended June 30, 1991.
|
10.03b*
|
-
|
Certified
copy of resolutions of Laclede’s Board of Directors adopted on
January 28, 1993 amending the Senior Officers’ Life Insurance
Program; filed as Exhibit 10.03 to the Company’s 10-Q for the fiscal
quarter ended March 31, 1993.
|
10.04*
|
-
|
Restated
Laclede Gas Company Supplemental Retirement Benefit Plan, as amended and
restated effective as of November 1, 2005; filed as Exhibit
10.06 to the Company’s 10-Q for the fiscal quarter ended
December 31, 2008.
|
10.05*
|
-
|
Amended
and Restated Storage Service Agreement For Rate Schedule FSS, Contract
#3147 between Centerpoint Energy-Mississippi River Transmission
Corporation (MRT) and Laclede dated March 18, 2008; filed as
Exhibit 10.5 to the Company’s 10-Q for the fiscal quarter ended
March 31, 2008.
|
10.05a*
|
-
|
Amended
and Restated Transportation Service Agreement for Rate Schedule FTS,
Contract #3310 between Laclede and MRT dated March 18, 2008;
filed as Exhibit 10.6 to the Company’s 10-Q for the fiscal quarter ended
March 31, 2008.
|
10.05b*
|
-
|
Amended
and Restated Transportation Service Agreement for Rate Schedule FTS,
Contract #3311, between Laclede and MRT dated March 18, 2008;
filed as Exhibit 10.7 to the Company’s 10-Q for the fiscal quarter ended
March 31, 2008.
|
10.06*
|
-
|
Laclede
Supplemental Retirement Benefit Plan II, effective as of
January 1, 2005; filed as Exhibit 10.7 to the Company’s 10-Q for
the fiscal quarter ended December 31, 2008.
|
10.07*
|
-
|
Amendment
and Restatement of Retirement Plan for Non-Employee Directors as of
November 1, 2002; filed as Exhibit 10.08c to the Company’s 10-K
for the fiscal year ended September 30, 2002.
|
10.07a*
|
-
|
Amendment
to Terms of Retirement Plan for Non-Employee Directors as of
October 1, 2004; filed as Exhibit 10.w to the Company’s Form
10-Q for the fiscal quarter ended
June 30, 2004.
|
10.08*
|
-
|
Salient
Features of the Laclede Gas Company Deferred Income Plan for Directors and
Selected Executives, including amendments adopted by the Board of
Directors on July 26, 1990; filed as Exhibit 10.12 to the
Company’s 1991 10-K.
|
*Incorporated
herein by reference and made a part hereof. Laclede’s File No. 1-1822; the
Company’s File No. 1-16681.
Bold
items reflect management, contract or compensatory plan or
arrangement.
INDEX TO
EXHIBITS
|
||
Exhibit
|
||
No.
|
||
10.08a*
|
-
|
Amendment
to Laclede’s Deferred Income Plan for Directors and Selected Executives,
adopted by the Board of Directors on August 27, 1992; filed as
Exhibit 10.12a to the Company’s 1992 10-K.
|
10.09*
|
-
|
Form
of Indemnification Agreement between Laclede and its Directors and
Officers; filed as Exhibit 10.13 to the Company’s 1990
10-K.
|
10.10*
|
-
|
The
Laclede Group Management Continuity Protection Plan, effective as of
January 1, 2005; filed as Exhibit 10.5 to the Company’s 10-Q for
the fiscal quarter ended December 31, 2008.
|
10.10a*
|
-
|
Form
of Management Continuity Protection Agreement; Filed as Exhibit 10.05a to
the Company’s 10-Q for the fiscal quarter ended
December 31, 2008.
|
10.11*
|
-
|
Restricted
Stock Plan for Non-Employee Directors as amended and effective
January 29, 2009; filed as Exhibit 10.1 to the Company’s Form
10-Q for the fiscal quarter ended
March 31, 2009.
|
10.12*
|
-
|
Salient
Features of the Laclede Gas Company Deferred Income Plan II for Directors
and Selected Executives (as amended and restated effective as of
January 1, 2005); filed as Exhibit 10.1 to the Company’s 10-Q
for the fiscal quarter ended
December 31, 2008.
|
10.13*
|
-
|
Salient
Features of the Company’s Deferred Income Plan for Directors and Selected
Executives (effective as of January 1, 2005); filed as Exhibit
10.2 to the Company’s 10-Q for the fiscal quarter ended
December 31, 2008.
|
10.14*
|
-
|
Amended
and Restated Loan Agreement dated September 10, 2004 for Laclede
with U.S. Bank National Association as administrative agent and lead
arranger, Bank Hapoalim B.M., as syndication agent, and Southwest Bank of
St. Louis as documentation agent; filed as Exhibit 10.1 on Form 8-K filed
on September 13, 2004.
|
10.14a*
|
-
|
Amendment
to loan agreement in Exhibit 10.12, dated December 23, 2005;
filed as Exhibit 10.1 to Laclede’s Form 8-K filed
December 23, 2005.
|
10.14b*
|
-
|
Second
amendment dated February 8, 2008 to syndicated loan agreement of
Laclede Gas Company dated September 10, 2004 and first amended
December 23, 2005; filed as Exhibit 10.1 to Laclede’s Form 10-Q
for the fiscal quarter ended March 31, 2008.
|
10.15*
|
-
|
The
Laclede Group, Inc. 2002 Equity Incentive Plan; filed as Exhibit 10.22 to
the Company’s Form 10-K for the year ended
September 30, 2002.
|
10.15a*
|
-
|
Form
of Non-Qualified Stock Option Award Agreement with Mandatory Retirement
Provisions; filed as Exhibit 10.1 to the Company’s Form 8-K filed
November 5, 2004.
|
*Incorporated
herein by reference and made a part hereof. Laclede’s File No. 1-1822; the
Company’s File No. 1-16681.
Bold
items reflect management, contract or compensatory plan or
arrangement.
INDEX TO
EXHIBITS
|
||
Exhibit
|
||
No.
|
||
10.15b*
|
-
|
Form
of Non-Qualified Stock Option Award Agreement without Mandatory Retirement
Provisions; filed as Exhibit 10.2 to the Company’s Form 8-K filed
November 5, 2004.
|
10.15c*
|
-
|
Form
of Restricted Stock Award Agreement; filed as Exhibit 10.17 to the
Company’s 10-Q for the fiscal quarter ended
March 31, 2004.
|
10.15d*
|
-
|
Form
of Performance – Contingent Restricted Stock Award Agreement; filed as
Exhibit 10.2 to the Company’s Form 8-K filed
November 2, 2006.
|
10.16*
|
-
|
Lease
between Laclede Gas Company, as Lessee and First National Bank in St.
Louis, Trustee, as Lessor; filed as Exhibit 10.23 to the Company’s Form
10-K for the fiscal year ended
September 30, 2002.
|
10.17*
|
-
|
Automated
Meter Reading Services Agreement executed March 11, 2005; filed
as Exhibit 10.1 to the Company’s Form 10-Q for the fiscal quarter ended
March 31, 2005. Confidential portions of this exhibit have been
omitted and filed separately with the Securities and Exchange Commission
pursuant to a request for confidential treatment.
|
10.18*
|
-
|
Stock
Ownership Guidelines and Holding Requirements; filed as Exhibit 10.1 to
the Company’s Form 8-K filed
November 1, 2005.
|
10.19*
|
-
|
The
Laclede Group, Inc. Annual Incentive Plan; filed as Appendix 4 to the
Company’s proxy statement filed
December 19, 2005.
|
10.20*
|
-
|
The
Laclede Group, Inc. 2006 Equity Incentive Plan; filed as Appendix 5 to the
Company’s proxy statement, filed
December 19, 2005.
|
10.20a*
|
-
|
Form
of Restricted Stock Award Agreement; filed as Exhibit 10.1 to the
Company’s Form 10-Q for the fiscal quarter ended
December 31, 2007.
|
10.20b*
|
-
|
Form
of Performance Contingent Restricted Stock Award Agreement for all
participants except the Chief Executive Officer and the Executive Vice
President-Energy and Administrative Services; filed as Exhibit 10.2 to the
Company’s Form 10-Q for the fiscal quarter ended
December 31, 2007.
|
10.20c*
|
-
|
Forms
of Performance Contingent Restricted Stock Award Agreements for Chief
Executive Officer; filed as Exhibit 10.3 to the Company’s Form 10-Q for
the fiscal quarter ended December 31, 2007.
|
10.20d*
|
-
|
Form
of Performance Contingent Restricted Stock Award Agreement for Executive
Vice President-Energy and Administrative Services; filed as Exhibit 10.4
to the Company’s Form 10-Q for the fiscal quarter ended
December 31, 2007.
|
10.20e*
|
-
|
Restricted
Stock Unit Award Agreement with Douglas H. Yaeger dated
February 14, 2008; filed as Exhibit 10.2 to the Company’s Form
10-Q for the fiscal quarter ended
March 31, 2008.
|
*Incorporated
herein by reference and made a part hereof. Laclede’s File No. 1-1822; the
Company’s File No. 1-16681.
Bold
items reflect management, contract or compensatory plan or
arrangement.
INDEX TO
EXHIBITS
|
||
Exhibit
|
||
No.
|
||
10.20f*
|
-
|
Form
of Restricted Stock Award Agreement filed as Exhibit 10.8 to the Company’s
10-Q for the fiscal quarter ended
December 31, 2008.
|
10.20g*
|
-
|
Form
of Performance Contingent Restricted Stock Award Agreement; filed as
Exhibit 10.8 to the Company’s 10-Q for the fiscal quarter ended
December 31, 2008.
|
10.21*
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-
|
Supplemental
Pension Agreement between Laclede Gas Company and Kenneth J. Neises dated
March 7, 2008; filed as Exhibit 10.4 to the Company’s Form 10-Q
for the fiscal quarter ended March 31, 2008.
|
10.22*
|
-
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Amended
and Restated Firm (Rate Schedule FT) Transportation Service Agreement
between Laclede Energy Resources, Inc. and Centerpoint Energy Gas
Transmission Company TSA #1006667; filed as Exhibit 10.2 to the Company’s
10-Q for the fiscal quarter ended
March 31, 2009.
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-
|
Credit
Agreement between the Company and Bank of America, N. A., dated as of
October 2, 2009.
|
|
-
|
Credit
Agreement between the Company and UMB Bank, N. A., dated as of
October 2, 2009.
|
|
-
|
Ratio
of Earnings to Fixed Charges.
|
|
-
|
Subsidiaries
of the Registrant.
|
|
-
|
Consents
of Independent Registered Public Accounting Firm.
|
|
-
|
Certificates
under Rule 13a-14(a) of the CEO and CFO of The Laclede Group, Inc. and
Laclede Gas Company.
|
|
-
|
Section
1350 Certifications under Rule 13a-14(b) of the CEO and CFO of The Laclede
Group, Inc. and Laclede Gas Company.
|
|
-
|
Laclede
Gas Company – Selected Financial Data, Management’s Discussion and
Analysis of Financial Condition and Results of Operations, Notes to
Financial Statements, Management Report on Internal Control Over Financial
Reporting, and Reports of Independent Registered Public Accounting
Firm.
|
*Incorporated
herein by reference and made a part hereof. Laclede’s File No. 1-1822; the
Company’s File No. 1-16681.
Bold
items reflect management, contract or compensatory plan or
arrangement.
96