Financial Instruments (Alabama Gas Corporation)

6 Months Ended

Jun. 30, 2014

Alabama Gas Corporation

Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]

FINANCIAL INSTRUMENTS

The stated value of cash, accounts receivable (net of allowance) and short-term debt approximates fair value due to the short maturity of the instruments. The fair value of Alagasco’s fixed-rate long-term debt, including the current portion, was approximately $266.6 million and $258.8 million and had a carrying value of $249.8 million and $249.9 million at June 30, 2014 and December 31, 2013, respectively. The fair values are based on market prices of similar debt issues having the same remaining maturities, redemption terms and credit rating. Short-term debt is classified as Level 1 fair value and long-term debt is classified as Level 2 fair value.

Finance Receivables: Alagasco finances third-party contractor sales of merchandise including gas furnaces and appliances. At June 30, 2014 and December 31, 2013, Alagasco’s finance receivable totaled $10.6 million and $10.8 million, respectively. These finance receivables currently have an average balance of approximately $3,000 with terms of up to 84 months. Financing is available only to qualified customers who meet creditworthiness thresholds for customer payment history and external agency credit reports. Alagasco relies upon ongoing payments as the primary indicator of credit quality during the term of each contract. The allowance for credit losses is recognized using an estimate of write-off percentages based on historical experience applied to an aging of the finance receivable balance. Delinquent accounts are evaluated on a case-by-case basis and, absent evidence of debt repayment after 90 days, are due in full and assigned to a third-party collection agency. The remaining finance receivable is written off approximately 12 months after being assigned to a third-party collection agency. Alagasco had finance receivables past due 90 days or more of $0.3 million and $0.4 million as of June 30, 2014 and December 31, 2013, respectively.

The following table sets forth a summary of changes in the allowance for credit losses as follows:



(in thousands)
Allowance for credit losses as of December 31, 2013	$	423
Provision	(118		)
Allowance for credit losses as of June 30, 2014	$	305