-----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, Sv2WQCNQH1Xmfpn/wrB7fyDn+9L1ImD1VWuSszWBOCOrwJai1wn09N504/GnONnJ dcu2CA6Qh6rdGeGFnM9Rkw== /in/edgar/work/20000728/0000057183-00-000019/0000057183-00-000019.txt : 20000921 0000057183-00-000019.hdr.sgml : 20000921 ACCESSION NUMBER: 0000057183-00-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LACLEDE GAS CO CENTRAL INDEX KEY: 0000057183 STANDARD INDUSTRIAL CLASSIFICATION: [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: 681454 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 0001.txt QUARTERLY REPORT ON FORM 10-Q, 7/28/00 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 June 30, 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 7/28/00. 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 Nine Months Ended June 30, June 30, 2000 1999 2000 1999 ---- ---- ---- ---- Operating Revenues: Utility operating revenues $86,134 $ 66,012 $460,788 $423,302 Non-utility operating revenues 9,180 4,385 24,294 12,539 ------------------- -------------------- Total Operating Revenues 95,314 70,397 485,082 435,841 ------------------- -------------------- Operating Expenses: Utility operating expenses Natural and propane gas 40,274 24,629 263,660 232,393 Other operation expenses 21,007 18,976 66,049 64,939 Maintenance 4,296 4,853 13,947 14,681 Depreciation and amortization 6,390 5,389 18,340 16,019 Taxes, other than income taxes 8,786 8,563 35,282 35,345 ------------------- -------------------- Total utility operating expenses 80,753 62,410 397,278 363,377 Non-utility operating expenses 8,929 4,245 23,703 12,101 ------------------- -------------------- Total Operating Expenses 89,682 66,655 420,981 375,478 ------------------- -------------------- Operating Income 5,632 3,742 64,101 60,363 Other Income and Income Deductions-Net (Note 5) (5) 382 736 2,547 ------------------- -------------------- Income Before Interest and Income Taxes 5,627 4,124 64,837 62,910 ------------------- -------------------- Interest Charges: Interest on long-term debt 3,784 3,488 11,353 10,182 Other interest charges 1,878 1,300 6,365 5,418 ------------------- -------------------- Total Interest Charges 5,662 4,788 17,718 15,600 ------------------- -------------------- Income (Loss) Before Income Taxes (35) (664) 47,119 47,310 Income Tax Expense (Benefit) (Note 3) (357) (859) 17,762 17,270 ------------------- -------------------- Net Income 322 195 29,357 30,040 Dividends on Preferred Stock 22 24 70 73 ------------------- -------------------- Earnings Applicable to Common Stock $ 300 $ 171 $ 29,287 $ 29,967 =================== ==================== Average Number of Common Shares Outstanding 18,878 18,411 18,878 17,889 Earnings Per Share of Common Stock $.02 $.01 $1.55 $1.68 Dividends Declared Per Share of Common Stock $.335 $.335 $1.005 $1.005 See notes to consolidated financial statements.
Page 3 LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET
June 30 Sept. 30 2000 1999 ---- ---- (Thousands of Dollars) (UNAUDITED) ASSETS Utility Plant $908,637 $876,431 Less: Accumulated depreciation and amortization 369,129 357,053 -------------------- Net Utility Plant 539,508 519,378 -------------------- Other Property and Investments 26,044 26,122 -------------------- Current Assets: Cash and cash equivalents 4,198 9,352 Accounts receivable - net 52,545 42,028 Materials, supplies, and merchandise at avg cost 6,061 5,680 Natural gas stored underground for current use at LIFO cost 39,292 64,112 Propane gas for current use at FIFO cost 12,201 11,697 Prepayments and other 4,020 2,309 Delayed customer billings 2,930 - Deferred income taxes 6,745 10,216 -------------------- Total Current Assets 127,992 145,394 -------------------- Deferred Charges: Prepaid pension cost 93,932 80,994 Regulatory assets 60,079 58,024 Other 2,224 1,707 -------------------- Total deferred charges 156,235 140,725 -------------------- Total Assets $849,779 $831,619 ==================== See notes to consolidated financial statements.
Page 4 LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (Continued)
June 30 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 85,838 85,826 Retained earnings 210,162 199,848 Accumulated other comprehensive income (77) (77) Treasury stock, at cost (1,865,638 shares held) (24,017) (24,017) -------------------- Total common stock equity 292,650 282,324 Redeemable preferred stock 1,763 1,923 Long-term debt (less sinking fund requirements) 204,387 204,323 -------------------- Total Capitalization 498,800 488,570 -------------------- Current Liabilities: Notes payable 96,000 84,700 Accounts payable 36,536 31,716 Refunds due customers 167 1,425 Advance customer billings - 15,665 Current portion of preferred stock 53 35 Taxes accrued 15,015 5,804 Unamortized purchased gas adjustments 2,415 8,956 Other 20,679 25,104 -------------------- Total Current Liabilities 170,865 173,405 -------------------- Deferred Credits and Other Liabilities: Deferred income taxes 132,340 124,756 Unamortized investment tax credits 6,326 6,586 Pension and postretirement benefit costs 22,239 19,259 Regulatory liabilities 366 259 Other 18,843 18,784 -------------------- Total Deferred Credits and Other Liabilities 180,114 169,644 -------------------- Total Capitalization and Liabilities $849,779 $831,619 ==================== See notes to consolidated financial statements.
Page 5 LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
Nine Months Ended June 30, 2000 1999 ---- ---- (Thousands of Dollars) Operating Activities: Net Income $ 29,357 $ 30,040 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,407 16,151 Deferred income taxes and investment tax credits 11,117 4,460 Other - net 488 (2,181) Changes in assets and liabilities: Accounts receivable - net (10,517) 111 Unamortized purchased gas adjustments (6,541) (11,921) Deferred purchased gas costs (1,076) 28,178 Delayed customer billings - net (18,595) (8,016) Accounts payable 4,820 1,730 Refunds due customers (1,258) (6,189) Taxes accrued 9,211 6,254 Natural gas stored underground 24,820 26,028 Other assets and liabilities (18,008) (16,151) -------------------- Net cash provided by operating activities $ 42,225 $ 68,494 -------------------- Investing Activities: Construction expenditures (36,826) (38,121) Investments - non-utility (485) 2,855 Employee benefit trusts (43) (330) Other (2,155) (677) -------------------- Net cash used in investing activities $(39,509) $(36,273) -------------------- Financing Activities: Issuance (Repayment) of short-term debt - net 11,300 (56,000) Issuance of common stock - 24,235 Dividends paid (19,040) (17,700) Issuance of first mortgage bonds - 25,000 Preferred stock reacquired and other (130) (2) --------------------- Net cash used in financing activities $ (7,870) $(24,467) --------------------- Net Increase (Decrease) in Cash and Cash Equivalents $ (5,154) $ 7,754 Cash and Cash Equivalents at Beg of Period 9,352 3,718 -------------------- Cash and Cash Equivalents at End of Period $ 4,198 $ 11,472 ==================== Supplemental Disclosure of Cash Paid (Refunded) During the Period for: Interest $20,351 $17,727 Income taxes (3,295) 5,076 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 the succeeding quarter 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 (credited) as follows during the periods set forth below:
Three Months Ended Nine Months Ended June 30, June 30, ------------------ ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- (Thousands of Dollars) Federal Current $(7,964) $(9,626) $ 5,505 $10,933 Deferred 7,567 8,783 9,545 3,769 State and Local Current (1,065) (1,579) 1,140 1,877 Deferred 1,105 1,563 1,572 691 ----------------- ----------------- Total $ (357) $ (859) $17,762 $17,270 ================= =================
4. Under the Company's Gas Supply Incentive Plan as modified and approved by the Missouri Public Service Commission (MoPSC or Commission) 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 $7.3 million for its customers and $3.0 million in pretax income to its shareholders during the quarter ended June 30, 2000. For the nine months ended June 30, 2000, Laclede's efforts resulted in cost savings of $19.6 million for its customers and $8.2 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. On June 8, 2000, the MoPSC issued an Order approving a recommendation made by the Company, the MoPSC staff and other parties to extend the Gas Supply Incentive Plan as modified for another year. As a result, the term of the incentive plan now runs through September 30, 2001. 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 Nine Months Ended June 30, June 30, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (Thousands of Dollars) Net Benefits to Customers and Shareholders $10,337 $ 7,774 $27,822 $20,123 --------------------------------------------------------------------- Shareholder Benefits Off system and Incentive Plan Revenues $ 9,254 $ 3,040 $38,696 $14,184 Off system and Incentive Plan Expense 6,276 1,506 30,492 10,674 ------- ------- ------- ------- Company Share - Pretax Income $ 2,978 $ 1,534 $ 8,204 $ 3,510 ======= ======= ======= =======
5. Other Income and Income Deductions - Net
Three Months Ended Nine Months Ended June 30, June 30, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- (Thousands of Dollars) Investment Losses $ - $ - $ - $ (163) Gain on Sale of Property - 364 - 2,275 Allowance for Funds Used During Construction 53 250 318 538 Other (58) (232) 418 (103) ------- ------- ------- ------- Other Income and Income Deductions - Net $ (5) $ 382 $ 736 $ 2,547 ======= ======= ======= =======
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 primarily 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 June 30, 2000 Operating revenues $ 86,134 $ 9,180 $ - $ 95,314 Net income (loss) 190 132 - 322 Total assets 846,442 17,173 (13,836) 849,779 Nine Months Ended June 30, 2000 Operating revenues $460,788 $ 24,294 $ - $485,082 Net income (loss) 29,217 140 - 29,357 Total assets 846,442 17,173 (13,836) 849,779 Three Months Ended June 30, 1999 Operating revenues $ 66,012 $ 4,385 $ - $ 70,397 Net income (loss) 110 85 - 195 Total assets 785,366 14,379 (7,219) 792,526 Nine Months Ended June 30, 1999 Operating revenues $423,302 $ 12,539 $ - $435,841 Net income 29,156 884 - 30,040 Total assets 785,366 14,379 (7,219) 792,526
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 $1,417,000. As of June 30, 2000, the Company has paid $773,000 and reserved $644,000 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 $430,000 and reserved an additional $79,000. 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 $150,000. The Company anticipates additional reimbursement from this party of approximately $29,000. 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 pretax 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. A hearing on a portion of staff's recommendation was held in April, 2000 and the matter is awaiting Commission decision. The Company continues to believe that there is no basis for such 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 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 the Office of the Public Counsel submitted a settlement to the Commission in which they jointly recommended a program for direct-buried copper service lines that, in the Company's opinion, will promote public safety while ensuring the economical replacement and/or renewal of such lines over a reasonable period of time. On May 18, 2000, the Commission approved the settlement and it is currently being implemented by the Company. Costs associated with the program are either being deferred through a deferral mechanism approved by the MoPSC or capitalized through the normal course of business. 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 Consistently warm-weather patterns, including some of the warmest winters in recorded history, continue to have a negative impact on the sales and earnings of Laclede Gas Company. Last year the warm temperatures experienced during the nine-month period ended June 30, 1999 resulted in one of the warmest years on record. Despite the extreme experience of that period, the weather during the comparable period this year, the nine months ended June 30, 2000, has proven to be even warmer. Temperatures during the nine months ended June 30, 2000 were 16% warmer than normal and 5% warmer than last year, and resulted in the third warmest such period on record. Such abnormally warm weather has a marked impact on Laclede because our core business - the distribution and sale of heating energy - is highly weather sensitive. Quarter Ended June 30, 2000 - ---------------------------- Earnings per share based on average shares outstanding were $.02 per share for the quarter ended June 30, 2000 compared with earnings of $.01 per share for the comparable quarter last year. The increase is attributable to the benefit of the Company's general rate increase which became effective December 27, 1999 and higher income related to the Gas Supply Incentive Plan and off system sales. These factors were largely offset by higher costs of doing business. Utility operating revenues for the quarter ended June 30, 2000 were $86.1 million compared with $66.0 million for the quarter ended June 30, 1999. The $20.1 million, or 30.5%, 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. System therms sold and transported increased by 1.5 million therms, or 1.1%, above those sold and transported in the quarter ended June 30, 1999. Non-utility operating revenues for this quarter increased $4.8 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 June 30, 2000 increased by $18.3 million, or 29.4%, above such expenses for the same quarter last year. Natural and propane gas expense this quarter increased $15.6 million, or 63.5%, above that for last year primarily due to higher rates charged by the Company's suppliers and increased off system sales gas expense. Other operation and maintenance expenses increased $1.5 million, or 6.2%, principally due to higher net pension costs, increased group insurance charges and higher wage rates. These factors were partially offset by lower charges for distribution and maintenance. Depreciation and amortization expense increased $1.0 million, or 18.6%, primarily due to additional depreciable property. Taxes, other than income taxes, increased 2.6% mainly due to higher gross receipts taxes, reflecting the increased gas sales revenues, partially offset by lower real estate and personal property taxes. Non-utility operating expenses increased $4.7 million this quarter mainly due to increased gas expense associated with gas marketing sales by Laclede Energy Resources, Inc. Page 12 Other income and income deductions - net decreased $.4 million compared to that for the same quarter last year due to a gain recognized last year on a minor sale of land. The $.9 million, or 18.3% 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 attributable to increased rates and higher borrowings. Nine Months Ended June 30, 2000 - ------------------------------- Earnings per share based on average shares outstanding were $1.55 per share for the nine months ended June 30, 2000 compared with $1.68 per share for the comparable period last year. The decrease in earnings was primarily due to lower gas sales reflecting 5% warmer weather than the nine months ended June 30, 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 $37.5 million, or 8.9%, 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 58.2 million therms, or 6.6%, below the level experienced during the nine months ended June 30, 1999. Non-utility operating revenues for this period increased $11.8 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 $33.9 million, or 9.3%, above last year. Natural and propane gas expense increased by $31.3 million, or 13.5%, 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 increased $.4 million, or .5%, primarily due to higher wage rates, increased group insurance charges, and higher net pension costs. These factors were essentially offset by a lower provision for uncollectible accounts reflective of reduced revenues and lower distribution and maintenance expenses. Depreciation and amortization expense increased $2.3 million, or 14.5%, primarily due to additional depreciable property. Taxes, other than income taxes, decreased by .2% principally due to lower real estate and personal property taxes, partially offset by higher gross receipts taxes, mainly reflecting increased gas sales revenues. Non-utility operating expenses increased $11.6 million this period mainly due to increased gas expense associated with gas marketing sales by Laclede Energy Resources, Inc. Other income and income deductions - net decreased $1.8 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 $2.1 million, or 13.6%, increase in interest expense is mainly due to the issuance of $25 million of 7% first mortgage bonds in June 1999 and Page 13 increased short-term interest expense primarily due to increased rates and higher borrowings. Updated Regulatory Matters - -------------------------- At the state level, there have been several important developments during the fiscal year affecting Laclede, some of which are still pending. On December 14, 1999 the Missouri Public Service Commission (MoPSC or Commission) 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. On May 11, 2000, the Company appealed to the Circuit Court of Cole County, Missouri the MoPSC's decision on one of the contested issues mentioned in item (2) above relating to the calculation of the Company's depreciation rates. The Company believes that any decision on this appeal will have no impact on the $11.24 million increase in rates or on the Company's earnings; however, a favorable decision would be expected to benefit the Company's cash flow. 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 $7.3 million for its customers and $3.0 million in pretax income to its shareholders during the quarter ended June 30, 2000. For the nine months ended June 30, 2000, Laclede's efforts resulted in cost savings of $19.6 million for its customers and $8.2 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. On June 8, 2000, the MoPSC issued an Order approving a recommendation made by the Company, staff and other parties to extend the Gas Supply Incentive Plan as modified for another year. As a result, the term of the incentive plan now runs through September 30, 2001. On July 21, 1999, the MoPSC approved Laclede's existing Price Stabilization Program which authorizes the Company to purchase certain financial instruments to protect its customers during the heating season from unusually large increases in the unregulated cost of natural gas. Because of unexpected increases in the cost of such financial instruments, the Company notified the Commission on June 2, 2000, that it would not be participating this year in one of the program's incentive features. The Company also made a filing on July 7, 2000 requesting that the MoPSC approve certain temporary revisions to the program in order to enhance the Company's opportunity to obtain price protection for its customers under current market conditions. The Company has requested that such changes be made effective August 1, 2000. On July 19, 2000, the staff of the Commission filed its response to the Company's June 2, 2000 notification and its July 7, 2000 request for temporary revisions to the program. In its response, the staff acknowledged the Company's right to withdraw from the incentive Page 14 feature of the program but suggested that it might nevertheless pursue a prudence review of that action. The Company disagrees with the applicability of such a review. The staff also recommended that the Commission authorize some, but not all, of the proposed temporary revisions to the program, but did so on terms that may prove to be unacceptable to the Company. In order to better match customer billings with higher than anticipated natural gas prices, the Company also requested and received approval to implement a special unscheduled summer Purchased Gas Adjustment filing allowing the Company to increase rates charged to its customers effective July 15, 2000. Increases and decreases in wholesale gas costs are passed on to customers in accordance with the Purchased Gas Adjustment Clause. 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. 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 $96.0 million at June 30, 2000. On June 29, 2000, the Company filed a registration statement with the Securities and Exchange Commission (SEC) in connection with the sale of up to $350 million of first mortgage bonds, debt securities and common stock. The SEC has permitted the registration statement to become effective July 24, 2000. We previously had applied with the MoPSC for authority to issue debt and equity, and at this writing, the MoPSC is still reviewing our filing. The amount, timing, and type of financing to be issued under this shelf registration will depend on cash requirements and market conditions. Construction expenditures for utility purposes for the nine months ended June 30, 2000 were $36.8 million compared with $38.1 million for such expenditures for the same period last year. Capitalization at June 30, 2000 increased $10.2 million since September 30, 1999 and consisted of 58.7% common stock equity, .3% preferred stock equity and 41.0% long-term debt. The seasonal nature of the Company's sales affects the comparison of certain balance sheet items at June 30, 2000 and at September 30, 1999 such as Accounts Receivable - Net, Gas Stored Underground, Notes Payable, Accounts Payable and Advance and Delayed Customer Billings. Page 15 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 - ------------- In October 1999, the staff of the MoPSC recommended that the Company credit ratepayers with $2.5 million of pretax 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. A hearing on a portion of staff's recommendation was held in April, 2000 and the matter is awaiting Commission decision. The Company continues to believe that there is no basis for such recommendation and is confident that the Company will ultimately prevail on the merits. 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 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 the Office of the Public Counsel submitted a settlement to the Commission in which they jointly recommended a program for direct-buried copper service lines that, in the Company's opinion, will promote public safety while ensuring the economical replacement and/or renewal of such lines over a reasonable period of time. On May 18, 2000, the Commission approved the settlement and it is currently being implemented by the Company. Costs associated with the program are either being deferred through a deferral mechanism approved by the MoPSC or capitalized through the normal course of business. 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. Page 16 Accounting Pronouncements - ------------------------- The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities" in June 1998. SFAS 133 would have been effective in fiscal 2000; however, its effective date was delayed until fiscal 2001 as a result of the issuance of SFAS No. 137. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and hedging activities. The issuance of SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" in June 2000 amends portions of SFAS No. 133. Management is continuing to evaluate the impact that adoption of these standards will have on the Company's financial position and results of operations. At this writing, no material effect is anticipated based on current circumstances. 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 workforce 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 17 LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES Part II OTHER INFORMATION Page 18 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 16. 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: July 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 - ------- ------- ------------ 27 Financial Data Schedule UT 22 Page 21 EX-27 2 0002.txt
UT 1,000 9-MOS SEP-30-2000 JUN-30-2000 PER-BOOK 539,508 26,044 127,992 156,235 0 849,779 20,744 61,821 210,162 292,650 1,763 0 204,387 0 0 96,000 0 53 0 0 254,926 849,779 485,082 17,762 420,981 438,743 46,339 736 47,075 17,718 29,357 70 29,287 18,972 11,353 42,225 1.55 1.55 Capital-surplus-paid-in is net of $24,017 of treasury stock. Page 22
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