-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cn8LaQwUoWiNFoyXOq5m6Pu957p7/td2hDdEFjitGsBCKbdRTvgif6keGgI+TWtf WDjGCaFkPBvZf8/c7cxJsA== 0000057183-00-000013.txt : 20000501 0000057183-00-000013.hdr.sgml : 20000501 ACCESSION NUMBER: 0000057183-00-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LACLEDE GAS CO CENTRAL INDEX KEY: 0000057183 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 430368139 STATE OF INCORPORATION: MO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01822 FILM NUMBER: 613003 BUSINESS ADDRESS: STREET 1: 720 OLIVE ST CITY: ST LOUIS STATE: MO ZIP: 63101 BUSINESS PHONE: 3143420500 MAIL ADDRESS: STREET 1: 720 OLIVE ST CITY: ST LOUIS STATE: MO ZIP: 63101 10-Q 1 QUARTERLY REPORT ON FORM 10-Q, 4/28/00 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period ended March 31, 2000 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 1-1822 LACLEDE GAS COMPANY (Exact name of registrant as specified in its charter) Missouri 43-0368139 (State of Incorporation) (I.R.S. Employer Identification Number) 720 Olive Street, St. Louis, Missouri 63101 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 314-342-0500 Indicate by check mark whether the registrant (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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 18,877,987 shares, Common Stock, par value $1 per share at 4/28/00. Page 1 LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES PART I FINANCIAL INFORMATION The interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Form 10-K for the year ended September 30, 1999. Page 2 LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED) (In Thousands, Except Per Share Amounts)
Three Months Ended Six Months Ended March 31, March 31, 2000 1999 2000 1999 ---- ---- ---- ---- Operating Revenues: Utility operating revenues $229,995 $207,531 $374,654 $357,290 Non-utility operating revenues 8,339 4,401 15,114 8,154 ------------------- -------------------- Total Operating Revenues 238,334 211,932 389,768 365,444 ------------------- -------------------- Operating Expenses: Utility operating expenses Natural and propane gas 141,790 121,060 223,386 207,764 Other operation expenses 22,389 22,296 45,042 45,963 Maintenance 4,943 4,746 9,651 9,828 Depreciation and amortization 6,455 5,343 11,950 10,630 Taxes, other than income taxes 16,124 16,262 26,496 26,782 ------------------- -------------------- Total utility operating expenses 191,701 169,707 316,525 300,967 Non-utility operating expenses 8,179 4,216 14,774 7,856 ------------------- -------------------- Total Operating Expenses 199,880 173,923 331,299 308,823 ------------------- -------------------- Operating Income 38,454 38,009 58,469 56,621 Other Income and Income Deductions-Net (Note 5) (35) 200 741 2,164 ------------------- -------------------- Income Before Interest and Income Taxes 38,419 38,209 59,210 58,785 ------------------- -------------------- Interest Charges: Interest on long-term debt 3,785 3,347 7,569 6,694 Other interest charges 2,298 2,161 4,487 4,118 ------------------- -------------------- Total Interest Charges 6,083 5,508 12,056 10,812 ------------------- -------------------- Income Before Income Taxes 32,336 32,701 47,154 47,973 Income Taxes (Note 3) 12,882 12,563 18,119 18,128 ------------------- -------------------- Net Income 19,454 20,138 29,035 29,845 Dividends on Preferred Stock 24 25 48 49 ------------------- -------------------- Earnings Applicable to Common Stock $ 19,430 $ 20,113 $ 28,987 $ 29,796 =================== ==================== Average Number of Common Shares Outstanding 18,878 17,628 18,878 17,628 Earnings Per Share of Common Stock $1.03 $1.14 $1.54 $1.69 Dividends Declared Per Share of Common Stock $.335 $.335 $.67 $.67 See notes to consolidated financial statements.
Page 3 LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET
Mar. 31 Sept. 30 2000 1999 ---- ---- (Thousands of Dollars) (UNAUDITED) ASSETS Utility Plant $898,781 $876,431 Less: Accumulated depreciation and amortization 366,117 357,053 -------------------- Net Utility Plant 532,664 519,378 -------------------- Other Property and Investments 26,320 26,122 -------------------- Current Assets: Cash and cash equivalents 4,434 9,352 Accounts receivable - net 91,022 42,028 Materials, supplies, and merchandise at avg cost 5,849 5,680 Natural gas stored underground for current use at LIFO cost 22,734 64,112 Propane gas for current use at FIFO cost 12,200 11,697 Prepayments and other 3,788 2,309 Delayed customer billings 12,009 - Deferred income taxes 7,990 10,216 -------------------- Total Current Assets 160,026 145,394 -------------------- Deferred Charges: Prepaid pension cost 90,145 80,994 Regulatory assets 54,499 58,024 Other 1,453 1,707 -------------------- Total deferred charges 146,097 140,725 -------------------- Total Assets $865,107 $831,619 ==================== See notes to consolidated financial statements.
Page 4 LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (Continued)
Mar. 31 Sept. 30 2000 1999 ---- ---- (Thousands of Dollars) (UNAUDITED) CAPITALIZATION AND LIABILITIES Capitalization: Common stock (20,743,625 shares issued) $ 20,744 $ 20,744 Paid-in capital 85,831 85,826 Retained earnings 216,187 199,848 Accumulated other comprehensive income (77) (77) Treasury stock, at cost (1,865,638 shares held) (24,017) (24,017) -------------------- Total common stock equity 298,668 282,324 Redeemable preferred stock 1,763 1,923 Long-term debt (less sinking fund requirements) 204,365 204,323 -------------------- Total Capitalization 504,796 488,570 -------------------- Current Liabilities: Notes payable 93,100 84,700 Accounts payable 34,511 31,716 Refunds due customers 416 1,425 Advance customer billings - 15,665 Current portion of preferred stock 150 35 Taxes accrued 21,051 5,804 Unamortized purchased gas adjustments 3,085 8,956 Other 25,127 25,104 -------------------- Total Current Liabilities 177,440 173,405 -------------------- Deferred Credits and Other Liabilities: Deferred income taxes 123,790 124,756 Unamortized investment tax credits 6,413 6,586 Pension and postretirement benefit costs 23,648 19,259 Regulatory liabilities 9,989 259 Other 19,031 18,784 -------------------- Total Deferred Credits and Other Liabilities 182,871 169,644 -------------------- Total Capitalization and Liabilities $865,107 $831,619 ==================== See notes to consolidated financial statements.
Page 5 LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Six Months Ended March 31, 2000 1999 ---- ---- (Thousands of Dollars) Operating Activities: Net Income $ 29,035 $ 29,845 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,986 10,690 Deferred income taxes and investment tax credits 2,444 (5,887) Other - net 248 (1,926) Changes in assets and liabilities: Accounts receivable - net (48,994) (37,553) Unamortized purchased gas adjustments (5,871) (9,723) Deferred purchased gas costs 12,719 39,708 Delayed customer billings - net (27,674) (21,481) Accounts payable 2,795 5,649 Refunds due customers (1,009) (6,357) Taxes accrued 15,247 15,750 Natural gas stored underground 41,378 36,710 Other assets and liabilities (6,543) (4,435) -------------------- Net cash provided by operating activities $ 25,761 $ 50,990 -------------------- Investing Activities: Construction expenditures (24,549) (23,105) Investments - non-utility (443) 2,990 Employee benefit trusts (109) (168) Other (1,244) (533) -------------------- Net cash used in investing activities $(26,345) $(20,816) -------------------- Financing Activities: Issuance (Repayment) of short-term debt - net 8,400 (12,500) Dividends paid (12,694) (11,771) Preferred stock reacquired and other (40) - --------------------- Net cash used in financing activities $ (4,334) $(24,271) --------------------- Net Increase (Decrease) in Cash and Cash Equivalents $ (4,918) $ 5,903 Cash and Cash Equivalents at Beg of Period 9,352 3,718 -------------------- Cash and Cash Equivalents at End of Period $ 4,434 $ 9,621 ==================== Supplemental Disclosure of Cash Paid (Refunded) During the Period for: Interest $11,465 $10,099 Income taxes (3,277) 5,055 See notes to consolidated financial statements.
Page 6 LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of management, this interim report includes all adjustments (consisting only of normal recurring accruals) necessary for the fair presentation of the results of the periods covered. 2. Laclede Gas Company is a natural gas distribution utility having a material seasonal cycle. As a result, this interim statement of consolidated income is not necessarily indicative of annual results nor representative of succeeding quarters of the fiscal year. Due to the seasonal nature of the Company's business, earnings are typically concentrated in the first six months of the fiscal year, which generally corresponds with the heating season. Fiscal year earnings will likely be lower than earnings during the first six months of the fiscal year, reflecting typically lower summer sales volumes. 3. Net provisions for income taxes were charged as follows during the periods set forth below:
Three Months Ended Six Months Ended March 31, March 31, ------------------ ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- (Thousands of Dollars) Federal Current $13,257 $17,944 $13,469 $20,559 Deferred (2,224) (7,134) 1,977 (5,014) State and Local Current 2,180 3,024 2,206 3,456 Deferred (331) (1,271) 467 (873) ----------------- ----------------- Total $12,882 $12,563 $18,119 $18,128 ================= =================
4. Under the Company's Gas Supply Incentive Plan as modified and approved by the Missouri Public Service Commission (MoPSC) effective October 1, 1999 for a one-year period, the Company continues to share with its customers certain gains and losses related to the acquisition of its gas supply assets. Additionally, Laclede is now permitted to retain all income resulting from sales made outside its traditional service area. These activities continue to provide benefits to both the Company's customers and shareholders. Laclede's efforts resulted in cost savings of $5.9 million for its customers and $2.7 million in pretax income to its shareholders during the quarter ended March 31, 2000. For the six months ended March 31, 2000, Laclede's efforts resulted in cost savings of $12.3 million for its customers and $5.2 million in pretax income to its shareholders. On February 1, 2000, the Company submitted a filing with the MoPSC requesting that the incentive plan be extended beyond September 30, 2000. Currently, the Company has reached an agreement with the MoPSC's staff to extend - subject to the MoPSC's approval - the incentive plan for another year. Page 7 Results of the Plan and off system sales activities are set forth below. These results may not be representative of results in future periods due to the volatile and seasonal nature of these efforts.
Three Months Ended Six Months Ended March 31, March 31, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (Thousands of Dollars) Net Benefits to Customers and Shareholders $ 8,615 $ 5,553 $17,485 $12,349 --------------------------------------------------------------------- Shareholder Benefits Off system and Incentive Plan Revenues $20,428 $ 5,046 $29,442 $11,144 Off system and Incentive Plan Expense 17,714 4,283 24,216 9,168 ------- ------- ------- ------- Company Share - Pretax Income $ 2,714 $ 763 $ 5,226 $ 1,976 ======= ======= ======= =======
5. Other Income and Income Deductions - Net
Three Months Ended Six Months Ended March 31, March 31, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (Thousands of Dollars) Investment Losses $ - $ (163) $ - $ (163) Gain on Sale of Property - - - 1,911 Allowance for Funds Used During Construction 8 167 265 288 Other (43) 196 476 128 ------- ------- ------- ------- Other Income and Income Deductions - Net $ (35) $ 200 $ 741 $ 2,164 ======= ======= ======= =======
A pre-tax gain of $1.9 million was recognized in the quarter ended December 31, 1998 by the Company's wholly-owned subsidiary, Laclede Development Company, on the November 1998 sale of property known as Centre Park 40. Laclede Development owned its interest in Centre Park 40 through a real estate partnership. Page 8 6. Laclede Gas Company is a public utility engaged in the retail distribution of natural gas. The Company has also made investments in some non-utility businesses as part of a diversification program, none of which are reportable segments. These non-regulated operations are conducted through five wholly-owned subsidiaries. There are no material intersegment revenues.
Gas All Other (Thousands of Dollars) Utility (Non-Utility) Eliminations Consolidated ----------------------------------------------------------------------- Three Months Ended March 31, 2000 Operating revenues $229,995 $ 8,339 $ - $238,334 Net income (loss) 19,403 51 - 19,454 Total assets 862,280 16,432 (13,605) 865,107 Six Months Ended March 31, 2000 Operating revenues $374,654 $ 15,114 $ - $389,768 Net income (loss) 29,068 (33) - 29,035 Total assets 862,280 16,432 (13,605) 865,107 Three Months Ended March 31, 1999 Operating revenues $207,531 $ 4,401 $ - $211,932 Net income (loss) 20,019 119 - 20,138 Total assets 793,634 13,922 (7,389) 800,167 Six Months Ended March 31, 1999 Operating revenues $357,290 $ 8,154 $ - $365,444 Net income 29,046 799 - 29,845 Total assets 793,634 13,922 (7,389) 800,167
7. The Company is subject to various environmental laws and regulations. To date they have not materially affected the Company's financial position and results of operations. In the past, the Company operated various manufactured gas plants which produced certain by-products and residuals. With regard to the Company's former manufactured gas plant site located in Shrewsbury, Missouri, the Company and the state and federal environmental regulatory agencies have agreed upon the actions needed at this site. The Company currently estimates the overall costs of these actions will be approximately $1,355,000. As of March 31, 2000, the Company has paid $693,000 and reserved $662,000 for these actions. If the regulatory agencies require any additional actions, Laclede will incur additional costs. Another site in the City of St. Louis previously owned by the Company is in the Missouri Voluntary Cleanup Program. Laclede currently estimates that the cost of the investigation, oversight costs and legal and engineering consulting costs for this site may be approximately $509,000. Currently, the Company has paid $404,000 and reserved an additional $105,000. The Company has requested that other former site owners and operators participate in the cost of any site investigation. One former owner and operator agreed to participate in these costs and has reimbursed the Company to date for $127,000. The Company anticipates additional reimbursement from this party of approximately $52,000. The Company plans to seek proportionate reimbursement of all Page 9 costs relative to this site from any other potentially responsible parties if practicable. While the scope of costs relative to the site in Shrewsbury will not be material, the scope of costs relative to the City of St. Louis site are unknown and may be material. The Company has notified its insurers that it intends to seek reimbursement from them of its costs at both these sites. None of the Company's insurers have agreed that its insurance covers the costs for which the Company intends to seek reimbursement. The majority of the insurers have sent Laclede letters reserving their rights with respect to the manufactured gas plant issues addressed in the Company's notices to them. While some of the insurers have denied coverage with respect to these issues, the Company continues to seek reimbursement from them. With regard to the Shrewsbury site, the denial of coverage will not have any material impact on the Company. With regard to the City of St. Louis site, since the scope of costs relative to this site are unknown and may be material, the denial of coverage may have a material impact on the Company. Previously, the MoPSC approved the Company's use of a cost deferral mechanism for these costs. Deferral of such costs terminated July 31, 1999, and any subsequent costs are being charged to expense. The Commission authorized previously deferred costs to be included in rates without return on investment and amortized over a fifteen-year period, effective with the implementation of new rates on December 27, 1999. 8. In October 1999, the staff of the MoPSC recommended that the Company credit ratepayers with $2.5 million of pre-tax income the Company had realized in fiscal 1997 and fiscal 1998 in connection with its treatment of a gas supply contract under the operation of the Company's Gas Supply Incentive Plan. The Company filed motions and testimony in opposition to the staff's recommendation, and hearings regarding part of the adjustment were held before the MoPSC in April 2000. Laclede believes that there is no basis for staff's recommendation and is confident that the Company will ultimately prevail on the merits. 9. On October 30, 1998, the MoPSC issued an order opening a docket addressing the adequacy of Laclede's copper service line replacement program. The staff filed its report on August 31, 1999 and its direct testimony on January 5, 2000, containing a modified replacement schedule for such service lines. In response, the Company proposed an alternative program based upon the evaluation of recent survey data. On February 18, 2000, the Company, MoPSC staff and Office of the Public Counsel filed a unanimous Stipulation and Agreement recommending the adoption of an effective yet cost-efficient alternative copper service line program. The agreement must be approved by the MoPSC. The Company currently faces one lawsuit relative to direct buried copper service lines. 10. In January 2000, Laclede Energy Resources, Inc. (LER), a wholly-owned non-utility subsidiary, finalized a multi-year arrangement with UtiliCorp United, Inc. (UtiliCorp) to provide a significant portion of the gas supply for a natural gas fired power plant currently under construction in Pleasant Hill, Missouri. The four-year agreement is scheduled to go into effect June 1, 2001. LER will provide UtiliCorp with up to 5 billion cubic feet of natural gas annually - the equivalent of about 5% of the annual sendout of Laclede Gas Company in a normal year - and will manage fluctuations in UtiliCorp's gas-purchase requirements on an as-needed basis to satisfy summer power needs. Page 10 11. Certain prior-period amounts have been reclassified to conform to current-period presentation. These reclassifications did not affect consolidated net income for the periods presented. 12. This Form 10-Q should be read in conjunction with the Notes to Consolidated Financial Statements contained in the Company's 1999 Form 10-K. Page 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS A warm-weather pattern including some of the warmest winters in recorded history continues to have a negative impact on the sales and earnings of Laclede Gas Company. For example, the six months ended March 31, 1999 was 11% warmer than normal, and the comparable period this year is 8% warmer than that. Such abnormally warm weather has a marked impact on Laclede because our core business - the distribution and sale of heating energy - is extremely weather-sensitive. Quarter Ended March 31, 2000 - ---------------------------- Earnings per share based on average shares outstanding were $1.03 per share this quarter compared with $1.14 per share for the comparable quarter last year. The decrease resulted from lower gas sales and higher costs of doing business. The lower gas sales reflected the warm weather, which was 10% warmer than the weather in the same period last year. These adverse effects were partially offset by the Company's general rate increase which became effective December 27, 1999, higher income related to the Gas Supply Incentive Plan and off system sales, and a lower provision for uncollectible accounts. Utility operating revenues for the quarter ended March 31, 2000 were $230.0 million compared with $207.5 million for the quarter ended March 31, 1999. The $22.5 million, or 10.8%, increase was principally due to higher wholesale gas costs, increased off system sales revenues this period, and the general rate increase. Wholesale gas costs are passed on to Laclede's customers under its Purchased Gas Adjustment Clause. These increases were partially offset by lower gas sales volumes due to the warmer weather. System therms sold and transported decreased by 45.3 million therms, or 10.0%, below those sold and transported in the quarter ended March 31, 1999. Non-utility operating revenues for this quarter increased $3.9 million over such revenues for the same quarter last year mainly due to increased gas marketing sales by Laclede Energy Resources, Inc., a wholly-owned non- utility subsidiary of the Company. Utility operating expenses for the quarter ended March 31, 2000 increased by $22.0 million, or 13.0%, above such expenses for the same quarter last year. Natural and propane gas expense this quarter increased $20.7 million, or 17.1%, above that for last year primarily due to higher rates charged by the Company's suppliers and increased off system sales gas expense, partially offset by reduced volumes purchased for sendout, mainly due to the warmer weather. Other operation and maintenance expenses increased $.3 million, or 1.1%, principally due to higher net pension costs, increased group insurance charges and higher wage rates. These increases were largely offset by a lower provision for uncollectible accounts due to reduced revenues. Depreciation and amortization expense increased $1.1 million, or 20.8%, primarily due to additional depreciable property. Taxes, other than income taxes, decreased .8% mainly due to lower real estate and personal property taxes and slightly lower gross receipts taxes, reflecting the decreased gas sales revenues. Page 12 Non-utility operating expenses increased $4.0 million this quarter mainly due to increased gas expense associated with gas marketing sales by Laclede Energy Resources, Inc. Other income and income deductions-net decreased $.2 million compared to that for the same quarter last year due to minor variations in several areas. The 10.4% increase in interest expense mainly reflects the higher interest on long-term debt resulting from the issuance of $25 million of 7% first mortgage bonds in June 1999 and the increased short-term interest expense primarily attributable to higher rates. Six Months Ended March 31, 2000 - ------------------------------- Due to the seasonal nature of the Company's business, earnings are typically concentrated in the first six months of the fiscal year, which generally corresponds with the heating season. Fiscal year 2000 earnings will likely be lower than earnings during the first six months of this fiscal year, reflecting typically lower summer sales volumes. Earnings per share based on average shares outstanding were $1.54 per share for the six-months ended March 31, 2000 compared with $1.69 per share for the comparable period last year. The decrease in earnings was primarily due to lower gas sales reflecting 8% warmer weather than the six months ended March 31, 1999, the effect of a one-time $.07 per share gain from the sale of property recorded by a non-utility subsidiary in the comparable period last year, and higher costs of doing business. These decreases were partially offset by the benefit of general rate relief, higher income related to the incentive plan and off system sales, and a lower provision for uncollectible accounts. Utility operating revenues increased $17.4 million, or 4.9%, above those for the corresponding period of fiscal year 1999. This increase was primarily due to higher wholesale gas costs, higher off system sales revenues, and the general rate increase. These increases were partially offset by lower gas sales volumes arising from the warmer weather. System therms sold and transported decreased by 59.7 million therms, or 8.0%, below the level experienced during the six months ended March 31, 1999. Non-utility operating revenues for this period increased $7.0 million from those revenues for the same period last year mainly due to increased gas marketing sales by Laclede Energy Resources, Inc. Utility operating expenses increased by $15.6 million, or 5.2%, above last year. Natural and propane gas expense increased by $15.6 million, or 7.5%, above last year mainly due to higher rates charged by our suppliers and higher off system sales gas expense, partially offset by reduced gas purchases due to the warmer weather. Other operation and maintenance expenses decreased $1.1 million, or 2.0%, primarily due to a lower provision for uncollectible accounts reflective of reduced revenues and to lower distribution and maintenance expenses. These decreases were largely offset by higher wage rates, increased group insurance charges, and higher net pension costs. Depreciation and amortization expense increased $1.3 million, or 12.4%, primarily due to additional depreciable property. Taxes, other than income taxes, decreased by 1.1% principally due to lower gross receipts taxes, mainly reflecting decreased gas sales revenues. Non-utility operating expenses increased $6.9 million this period mainly due to increased gas expense associated with gas marketing sales by Laclede Energy Resources, Inc. Page 13 Other income and income deductions - net decreased $1.4 million below the same period last year primarily due to a one-time pre-tax gain of approximately $1.9 million, or $.07 per share, recognized last year by the Company's wholly-owned subsidiary, Laclede Development Company, on the sale of undeveloped property known as Centre Park 40. Laclede Development owned its interest in Centre Park 40 through a real estate partnership. The 11.5% increase in interest expense is mainly due to the issuance of $25 million of 7% first mortgage bonds in June 1999 and increased short-term interest expense primarily due to higher rates. Updated Regulatory Matters - -------------------------- On December 14, 1999 the Missouri Public Service Commission (MoPSC) issued its report and order in the Company's 1999 rate case, in which the MoPSC: (1) approved a partial settlement reached earlier in the year by the parties on some issues (2) determined certain contested issues and (3) authorized the Company to increase its rates for gas service by $11.24 million on an annual basis. The new rates and settlement became effective for service rendered on and after December 27, 1999. Under the partial settlement, the Company discontinued deferring certain costs for future recovery. As approved by the MoPSC, previously deferred costs will be recovered, without return on investment, beginning with implementation of the new rates. The deferral of certain costs was eliminated going forward, as the ongoing expenses associated with those specific areas are included in the newly approved rates. Under the Company's Gas Supply Incentive Plan as modified and approved by the MoPSC effective October 1, 1999 for a one-year period, the Company continues to share with its customers certain gains and losses related to the acquisition of its gas supply assets. Additionally, Laclede is now permitted to retain all income resulting from sales made outside its traditional service area. These activities continue to provide benefits to both the Company's customers and shareholders. Laclede's efforts resulted in cost savings of $5.9 million for its customers and $2.7 million in pretax income to its shareholders during the quarter ended March 31, 2000. For the six months ended March 31, 2000, Laclede's efforts resulted in cost savings of $12.3 million for its customers and $5.2 million in pretax income to its shareholders. On February 1, 2000, the Company submitted a filing with the MoPSC requesting that the incentive plan be extended beyond September 30, 2000. Currently, the Company has reached an agreement with the MoPSC's staff to extend - subject to the MoPSC's approval - the incentive plan for another year. Liquidity and Capital Resources - ------------------------------- The Company's short-term borrowing requirements typically peak during colder months when the Company borrows money to cover the gap between when the Company purchases its natural gas and when the Company's customers pay for that gas. These short-term cash requirements have traditionally been met through the sale of commercial paper supported by lines of credit with banks. In January 2000, the Company renewed three primary lines of bank credit under which it may borrow up to an aggregate of $30 million prior to January 31, 2001, with repayment of any loans outstanding on that date permitted from April 30, 2001 to June 30, 2001. These, along with $140 million of previously obtained supplemental lines of credit extending through the fall of 2000, provided total lines of credit of $170 million for the 1999-2000 heating season. Page 14 During fiscal 2000 to date, the Company sold commercial paper aggregating to a maximum of $158.2 million at any one time, but did not borrow from the banks under the aforementioned lines of credit. Short-term borrowings amounted to $93.1 million at March 31, 2000. Construction expenditures for utility purposes for the six months ended March 31, 2000 were $24.5 million compared with $23.1 million for such expenditures for the same period last year. Capitalization at March 31, 2000 increased $16.2 million since September 30, 1999 and consisted of 59.2% common stock equity, .3% preferred stock equity and 40.5% long-term debt. The seasonal nature of the Company's sales affects the comparison of certain balance sheet items at March 31, 2000 and at September 30, 1999 such as Accounts Receivable - Net, Gas Stored Underground, Notes Payable, Accounts Payable and Advance and Delayed Customer Billings. Environmental Matters - --------------------- The Company is subject to various environmental laws and regulations. To date these laws and regulations and the Company's involvement with environmental regulatory agencies relative to two sites, one currently owned and one previously owned, have not materially affected the Company's financial position and results of operations. Previously, the MoPSC approved the Company's use of a cost deferral mechanism for its costs relative to environmental matters. Deferral of such costs terminated July 31, 1999, and any subsequent costs are being charged to expense. The MoPSC authorized previously deferred costs to be included in rates, without return on investment, and amortized over a fifteen-year period, effective with the implementation of new rates on December 27, 1999. For a more detailed discussion of these matters, see Note 7 to the unaudited Notes to Consolidated Financial Statements on page 9. Other Matters - ------------- On October 30, 1998 the MoPSC issued an order opening a docket addressing the adequacy of Laclede's copper service line replacement program. The staff filed its report on August 31, 1999 and its direct testimony on January 5, 2000, containing a modified replacement schedule for such service lines. In response, the Company proposed an alternative program based upon the evaluation of recent survey data. On February 18, 2000, the Company, MoPSC staff and Office of the Public Counsel filed a unanimous Stipulation and Agreement recommending the adoption of an effective yet cost-efficient alternative copper service line program. The agreement must be approved by the MoPSC. The Company currently faces one lawsuit relative to direct buried copper service lines. Page 15 In October 1999, the staff of the MoPSC recommended that the Company credit ratepayers with $2.5 million of pre-tax income the Company had realized in fiscal 1997 and fiscal 1998 in connection with its treatment of a gas supply contract under the operation of the Company's Gas Supply Incentive Plan. The Company filed motions and testimony in opposition to the staff's recommendation, and hearings regarding part of the adjustment were held before the MoPSC in April 2000. Laclede believes that there is no basis for staff's recommendation and is confident that it will ultimately prevail on the merits. In January 2000, Laclede Energy Resources, Inc., (LER) finalized a multi- year arrangement with UtiliCorp United, Inc. (UtiliCorp) to provide a significant portion of the gas supply for a natural gas fired power plant currently under construction in Pleasant Hill, Missouri. The four-year agreement is scheduled to go into effect June 1, 2001. LER will provide UtiliCorp with up to 5 billion cubic feet of natural gas annually - the equivalent of about 5% of the annual sendout of Laclede Gas Company in a normal year - and will manage fluctuations in UtiliCorp's gas-purchase requirements on an as-needed basis to satisfy summer power needs. Forward-Looking Statements - -------------------------- Certain statements in this 10-Q are forward-looking statements made based upon the Company's expectations and beliefs concerning future developments and their potential effect on Laclede. These statements, however, do not include financial statements and other statements of historical fact. The forward-looking statements may be identified by the use of such terms as "anticipate," "believe," "estimate," "expect," "intend," "plan," "seek" and similar expressions. Future developments may not be in accordance with the Company's expectations or beliefs and the effect of future developments on Laclede may not be those anticipated. Among the factors that may cause actual results to differ materially from those contemplated in any forward- looking statements are: - weather conditions and catastrophic events - changes in transportation and gas supply costs or availability - regulatory actions and initiatives of federal and state regulatory agencies, some of which could be retroactive, including those affecting: -- financings -- allowed rates of return -- incentive regulation -- industry and rate structure -- purchased gas adjustment provisions -- franchise renewal -- environmental or safety requirements - the effects of any industry or corporate restructuring - the results of litigation - conservation efforts of our customers - economic factors such as changes in the conditions of capital markets, interest rates and rates of inflation - inability to retain existing customers or to attract new customers - ability to obtain funds from operations or the sale of debt or equity to finance necessary capital expenditures and other investments - employee work force issues - statutory or tax changes and - changes in accounting standards The Company does not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events. Page 16 LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES Part II OTHER INFORMATION Page 17 LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES Item 1. Legal Proceedings For a description of the Company's environmental matters, see Note 7 to the unaudited Notes to Consolidated Financial Statements on page 9. For a description of the Company's pending regulatory matters, see "Updated Regulatory Matters" and "Other Matters" in the "Management's Discussion and Analysis" section on pages 14 and 15. Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Shareholders of Laclede Gas Company was held on January 27, 2000 for the purpose of electing three directors to the Board of Directors and ratifying the appointment of independent auditors. Proxies for the meeting were solicited pursuant to Section 14(a) of the Exchange Act of 1934. Management's three nominees for directors listed in the proxy statement were unopposed and were elected upon the following votes: Name of Shares Director Nominee Voted For Voted Withheld ---------------- --------- -------------- Andrew B. Craig, III 14,101,126 253,820 C. Ray Holman 14,284,260 253,820 William E. Nasser 14,310,637 253,820 The proposal to ratify the appointment of Deloitte & Touche LLP, Certified Public Accountants, to audit the accounts of the Company for the fiscal year ending September 30, 2000 was passed upon the following vote: Shares Voted: ------------- For the proposal 14,308,013 Against the proposal 71,479 Abstain regarding the proposal 105,988 Page 18 Item 6. Exhibits and Reports on Form 8-K (a) See Exhibit Index (b) Reports on Form 8-K The Company filed a Form 8-K during the quarter ended March 31, 2000. Item Reported: On January 27, 2000 the Company issued its news release announcing financial results as of December 31, 1999. The news release was attached as Exhibit 1 to the Form 8-K. On December 28, 1999 the Company issued its news release regarding the Missouri Public Service Commission's order which authorized, among other things, a general rate increase. The news release was attached as Exhibit 2 to the Form 8-K. Date of Report (Date of Earliest Event Reported): December 28, 1999 Page 19 LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES SIGNATURES Pursuant to the requirements 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 Date: April 28, 2000 G. T. McNeive, Jr. ---------------------------- G. T. McNeive, Jr. Sr. Vice President - Finance and General Counsel (Authorized Signatory and Chief Financial Officer) Page 20 Index to Exhibits Sequentially Exhibit Numbered Number Exhibit Page - ------- ------- ------------ 10.1 Line of Credit Agreement dated January 21, 2000 with UMB Bank 22 10.2 Line of Credit Agreement dated January 24, 2000 with Commerce Bank 23 10.3 Line of Credit Agreement dated January 20, 2000 with Bank of America, N.A. 25 27 Financial Data Schedule UT 28 Page 21 EX-10.1 2 Exhibit 10.1 UMB January 21, 2000 Bank Mr. Ronald L. Krutzman Treasurer and Assistant Secretary Laclede Gas Company 720 Olive Street St. Louis, MO 63101 Dear Ron: UMB Bank, n.a. (the "Bank") is pleased to provide a $10,000,000.00 line of credit maturing January 31, 2001 to Laclede Gas Company ("Laclede") for general corporate purposes and for commercial paper backup. The Bank will consider requests for advances under the line of credit until January 31, 2001. Our officers may, at their discretion, make short-term loans to Laclede under the following terms. All borrowings will be priced at Laclede's option at: (i) Bank's prime rate, (ii) at Libor for a similar principal amount and maturity adjusted +1/4%, or (iii) CD's adjusted +1/2% for available maturities up to 90 days. Notes issued under this line shall not exceed 90 days. If a whole note is outstanding with maturity after January 31, 2001, the note shall be renewed in whole or in part provided no note shall mature later than May 1, 2001. Interest shall be payable at maturity or on date of repayment. Interest shall be computed on the basis of actual 365/366 days for prime borrowings and on actual 360 day basis for LIBOR or CD loans. Notes issued may be prepaid at any time without penalty. It is understood that any loans obtained by any subsidiary of Laclede Gas Company, whether or not they are guaranteed by Laclede Gas Company, are excluded from this agreement and shall not be charged against the line of credit described above. Very truly yours, s/Ken E. Kotiza Ken E. Kotiza Regional President Main Office 6 South Broadway P. O. Box 66919 St. Louis, Missouri 63166-6919 (314) 621-1000 Page 22 EX-10.2 3 Exhibit 10.2 Commerce Bank Ann E. Steck Vice President 8000 Forsyth Boulevard (314) 746-3943 St. Louis, Missouri 63105-1797 Fax: (314) 746-3783 (314) 726-2255 January 24, 2000 Mr. Ronald Krutzman, Treasurer Laclede Gas Company 720 Olive St. Louis, MO 63101 Dear Mr. Krutzman: Commerce Bank, N.A. ("Bank") is pleased to offer a discretionary line of credit to Laclede Gas Company ("Borrower") under the following terms and conditions. A discretionary line of credit is not a commitment and there is no obligation on Bank's part to grant credit nor any obligation on Borrower's part to request advances. Accordingly, our officers may, at their discretion, make short-term loans to Borrower, up to Ten Million Dollars ($10,000,000), on such terms as may be mutually agreed upon from time to time. PURPOSE: Working Capital AMOUNT: Maximum of $10,000,000 (Ten Million Dollars) INTEREST RATE: Prime Rate or such lesser rate that may be agreed upon at the time of funding TERM: Advances may be requested up to and including January 31, 2001, with a final maturity of all sums outstanding on June 30, 2001. METHOD OF BORROWING AND REPAYMENT: Advances, if approved by Bank in its sole discretion, shall be evidenced by separate notes and each note issued under this arrangement shall mature not more than ninety (90) days from note date. Notes maturing after January 31, 2001, may be renewed in whole or part provided no note will mature later than June 30, 2001. Interest shall be payable at maturity or on the date of any prepayment. Notes issued under this arrangement may be prepaid at any time without penalty. Page 23 Mr. Ronald Krutzman January 21, 2000 Page 2 COLLATERAL: Unsecured OTHER: Execution of note(s) in form acceptable to Bank. It is understood that any loans obtained by any subsidiary of Borrower, whether or not they are guaranteed by Borrower, are excluded from this arrangement and shall not be charged against the amount stated above. Oral agreements or commitments to loan money, extend credit or to forbear from enforcing repayment of a debt, including promises to extend or renew such debt, are not enforceable. To protect you (borrower(s)) and us (creditor) from misunderstanding or disappointment, any agreements we reach covering such matters are contained in this writing, which is the complete and exclusive statement of the agreement between us except as we may later agree in writing to modify it. If the aforementioned terms and conditions are satisfactory, please indicate the Borrower's acceptance and approval of same by signing and returning the original of this letter within fifteen (15) days from the date of this letter. We are pleased to be able to provide this service and look forward to expanding our relationship. Very truly yours, s/Ann E. Steck Ann E. Steck Vice President :pds Accepted this 24th day of January, 2000. LACLEDE GAS COMPANY By: s/Ronald L. Krutzman Title: Treasurer and Asst. Secretary Page 24 EX-10.3 4 Exhibit 10.3 Ronald L. Krutzman Treasurer and Assistant Secretary January 20, 2000 Bank of America, N.A. 100 North Tryon St., 16th Floor NC1-007-16-13 Charlotte, NC 28255 Attention: Shelly Schoenfeld Re: $10,000,000 Committed Line of Credit Gentlemen: In order to provide a line of credit primarily for commercial paper backup and for other general corporate purposes, Laclede Gas Company (the "Borrower") is asking Bank of America, N.A., formerly known as NationsBank, N.A. (the "Bank") to make available to the Borrower from January 31, 2000 until January 31, 2001 (the "Termination Date"), a committed line of credit in the amount of $10,000,000. This letter outlines the terms and conditions of this committed line of credit. The Borrower shall pay to the Bank a nonrefundable commitment fee equal to 5.0 basis points (0.05%) per annum calculated on the unused amount of this committed line of credit, from time to time. The commitment fee shall be (i) calculated on a daily basis, and (ii) due and payable quarterly in arrears on March 31, June 30, September 30 and December 31, 2000 and on the Termination Date. The commitment fee shall be calculated on the basis of a 365-day year and actual days elapsed. If the Borrower wishes to request advances under this line of credit ("Advances"), it shall first satisfy all conditions precedent under this commitment letter, including but not limited to the execution and delivery to the Bank of a promissory note or notes ("Notes") in form and substance satisfactory to the Bank, which will include other standard material terms including events of default. Notes issued under this commitment letter shall mature not more than three (3) months from the date of execution, and no Advance evidenced thereby shall have a maturity of more than three (3) months. Each Advance shall bear interest at the applicable rate requested by the Borrower in its notice of borrowing to be given to the Bank substantially in the form, and in accordance with the dates and times, required by Section 2.02 and other relevant provisions of the $120,000,000 Loan Agreement dated as of October 22, 1999, between the Borrower, Mercantile Bank National Association as Agent for the banks thereunder, and the banks party thereto (including Bank of America, N.A. as a bank and syndication agent), as Page 25 modified, amended or supplemented from time to time (the "Syndicated Loan Agreement"). The Borrower may request Advances under this committed line of credit to bear interest at the "Floating Rate" or the "LIBOR Rate" as defined and provided in the Syndicated Loan Agreement, and all such applicable provisions of the Syndicated Loan Agreement are hereby incorporated by reference for purposes of this commitment letter, including and subject to the following provisions: (i) If the Bank ceases to be a party to the Syndicated Loan Agreement, or the Syndicated Loan Agreement is terminated, cancelled or accelerated, or the "Revolving Credit Commitment" or other facility provided thereunder is terminated or suspended, then the interest rate options described above shall no longer be effective or available hereunder, and the Advances hereunder shall thereafter commence to accrue interest at a rate of interest per annum quoted to the Borrower by the Bank and accepted by the Borrower from such date forward, subject to other acceleration or termination of this line of credit. (ii) Subject to the maximum maturity of three (3) months for any Advances, the Borrower may select the interest period and maturity of Advances hereunder in accordance with Sections 2.02, 2.04 and 2.05 of the Syndicated Loan Agreement, and all interest on Advances shall be computed in accordance with Section 2.06 thereof. (iii) In addition, the following Sections of the Syndicated Loan Agreement are also incorporated herein by reference, mutatis mutandis, for all purposes of this committed line of credit: Sections 2.10, 2.11, 2.12, 2.13, 2.14, 2.15 and 2.16. (iv) All references to "the Agent" or "the Agent and each Bank" in the sections incorporated herein from the Syndicated Loan Agreement shall be deemed changed to read "the Bank" for purposes hereof. All applicable defined terms and definitions contained in the Syndicated Loan Agreement are also incorporated herein by reference, mutatis mutandis, as necessary to carry out the Sections otherwise incorporated herein. The Borrower may, upon at least one business day's notice to the Bank, prepay any Advance in whole at any time, or from time to time in part; provided, that the Borrower shall at the time of prepayment compensate the Bank for any actual loss, cost or expense that the Bank incurs as a result of such prepayment. Further conditions precedent. The making of each Advance hereunder is also subject to: (i) the Borrower's execution and delivery to the Bank of the Notes as provided above, and such evidence of the Borrower's corporate power and authority for the Notes and Advances as the Bank may request; (ii) all representations and warranties made by the Borrower and set forth in Section 4 of the Syndicated Loan Agreement shall be true and correct in all material respects on and as of the date of such Advance as if made on and as of the date of such Advance; and (iii) the absence of any material adverse change since September 30, 1999 in the properties, assets, liabilities, business, operations, prospects, income or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole. Page 26 The Bank may terminate this agreement at anytime if the Bank determines in good faith, that it is not satisfied with the Borrower's condition, business operations or performance, financial or otherwise. It is understood that any loans obtained by any subsidiary of the Borrower, whether or not they are guaranteed by the Borrower, are excluded from the scope of this agreement and shall not be charged against the line of credit described above. Nothing in this commitment letter is intended to alter the arrangements set forth in the Syndicated Loan Agreement, between the Borrower, the agent or the banks party thereto, or the availability of certain "Loans" thereunder from the Bank on the terms set forth in such agreement. If the foregoing is acceptable to the Bank, will you kindly sign in the space indicated below to evidence this agreement between us. Yours very truly, LACLEDE GAS COMPANY By: s/ Ronald L. Krutzman Treasurer & Assistant Secretary Accepted and Agreed to: BANK OF AMERICA, N.A. By: s/Michael A. Schonfeld Title: Vice President Page 27 EX-27 5
UT 1,000 6-MOS SEP-30-2000 MAR-31-2000 PER-BOOK 532,664 26,320 160,026 146,097 0 865,107 20,744 61,814 216,187 298,668 1,763 0 204,365 0 0 93,100 0 150 0 0 267,061 865,107 389,768 18,119 331,299 349,418 40,350 741 41,091 12,056 29,035 48 28,987 12,648 7,569 25,761 1.54 1.54 Capital-surplus-paid-in is net of $24,017 of treasury stock. Page 28
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