-----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, RrKFeoqhpZ34jUUYSi3TgmrZc3n2Le2pghRJ07xsX3PGaf3es6kz8Mic6CnJJx+Y QBIS0h70JLiEr4zdIyyDLA== 0000950130-99-002519.txt : 19990503 0000950130-99-002519.hdr.sgml : 19990503 ACCESSION NUMBER: 0000950130-99-002519 CONFORMED SUBMISSION TYPE: 424B1 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19990430 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: 424B1 SEC ACT: SEC FILE NUMBER: 333-74423 FILM NUMBER: 99605850 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 424B1 1 FINAL PROSPECTUS RULE NO. 424(b)(1) REGISTRATION NO. 333-74423 PROSPECTUS 1,100,000 Shares Laclede Gas Company Common Stock ---------------- We are offering 1,100,000 shares of our common stock as described in this prospectus. Our shares are listed on the New York and Chicago Stock Exchanges under the symbol "LG."
Per Share Total --------- ----------- Public offering price... $20.1875 $22,206,250 Underwriting discount... $.80 $880,000 Proceeds, before expenses, to Laclede Gas Company............ $19.3875 $21,326,250
The underwriters may also purchase up to an additional 150,000 shares from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover over-allotments. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The shares of our common stock will be ready for delivery in New York, New York on or about May 5, 1999. ---------------- Merrill Lynch & Co. A.G. Edwards & Sons, Inc. ---------------- The date of this prospectus is April 29, 1999. Table of Contents
Page ---- Summary ................................................................... 1 Forward-Looking Statements................................................. 4 Service Area and Transmission Pipelines ................................... 5 Use of Proceeds ........................................................... 6 Laclede Gas Company ....................................................... 6 Where You Can Find More Information ....................................... 12 Price Range of Common Stock and Dividends ................................. 13 Description of Common Stock ............................................... 14 Underwriting .............................................................. 18 Legal Opinions ............................................................ 20 Experts ................................................................... 20
---------------- Summary This summary highlights material information contained elsewhere in this prospectus. Before making an investment decision, you should read this entire prospectus as well as the documents incorporated by reference. Unless indicated otherwise, the information in this prospectus assumes that the underwriters' over-allotment option is not exercised. Laclede Gas Company Our Business................... A public utility organized in 1857 primarily engaged in natural gas distribution Our Service Territory.......... The City of St. Louis, St. Louis County and parts of eight other counties in eastern Missouri Population of Our Service Territory..................... Approximately 2.0 million Customers as of March 31, 1999................ Approximately 633,000 Our Address and Telephone Laclede Gas Company Number........................ 720 Olive Street St. Louis, Missouri 63101 314-342-0500 The Offering Common Stock Offered........... 1,100,000 shares, par value $1.00 per share Common Stock Outstanding as of March 31, 1999................ 17,627,987 shares Common Stock Outstanding as of March 31, 1999, Adjusted for the Offering.................. 18,727,987 shares Listing........................ New York and Chicago Stock Exchanges (Symbol: LG) Common Stock Price Range from April 29, 1998 to April 29, 1999.......................... $20 1/8 to $27 Current Indicated Annual Dividend Rate................. $1.34 per share Cash Dividends paid since...... 1946 Use of Proceeds................ Repayment of short-term debt Delivery Date.................. May 5, 1999
1 Selected Consolidated Financial Information (Dollar amounts in thousands, except per share data)
Three Months Ended Fiscal Year Ended September 30 March 31 -------------------------------------------------- --------------------- 1994 1995 1996 1997 1998 1998 1999 -------- -------- -------- -------- -------- --------- --------- Income Statement Data Operating Revenues...... $523,866 $431,917 $556,456 $602,832 $547,229 $ 213,826 $ 206,956 Utility Operating Income................. 37,618 38,330 48,410 49,725 46,666 23,275 25,003 Earnings Applicable to Common Stock........... 22,120 20,804 32,727 32,369 27,795 18,345 20,113 Average Number of Common Shares Outstanding (in thousands)......... 15,619 16,344 17,523 17,558 17,598 17,594 17,628 Earnings Per Common Share.................. 1.42 1.27 1.87 1.84 1.58 1.04 1.14 Dividends Declared Per Common Share........... 1.22 1.24 1.26 1.30 1.32 .33 .335 As of September 30 As of March 31 -------------------------------------------------- --------------------- 1994 1995 1996 1997 1998 1998 1999 -------- -------- -------- -------- -------- --------- --------- Balance Sheet Data Total Assets............ $608,295 $636,694 $689,395 $720,710 $771,147 $ 764,693 $ 800,167 Net Utility Plant....... 411,677 434,336 452,165 467,573 490,585 476,821 503,668 Short-Term Debt (Including Current Maturities)............ 53,500 59,500 59,600 99,000 98,500 59,500 86,000 Long-Term Debt (Excluding Current Maturities)............ 154,211 154,279 179,346 154,413 179,238 179,128 179,280 Redeemable Preferred Stock.................. 1,960 1,960 1,960 1,960 1,960 1,960 1,960 Common Stock Equity..... 194,939 227,253 240,843 250,387 256,785 271,718 274,771 Three Months Ended Fiscal Year Ended September 30 March 31 -------------------------------------------------- --------------------- 1994 1995 1996 1997 1998 1998 1999 -------- -------- -------- -------- -------- --------- --------- Other Data Heating Degree Days..... 4,694 4,005 4,880 4,953 4,404 2,191 2,343 Percent Colder (Warmer) than Normal............ (1)% (15)% 4% 6% (6)% (14)% (8)%
The table below reflects our actual capitalization and short-term debt as of March 31, 1999 and as adjusted to reflect net proceeds from the sale of 1,100,000 shares of common stock to be issued in this offering and the application of these net proceeds to repay our short-term debt. For more information on our use of the net proceeds from this offering, see "Use of Proceeds" in this prospectus. If the underwriters exercise their over-allotment option in full, Short-Term Debt as adjusted would be approximately $61,916,000, Common Stock Equity as adjusted would be approximately $298,855,000 and Total Capitalization and Short-Term Debt as adjusted would be approximately $542,011,000. See "Underwriting."
As of March 31, 1999 ------------------------------ Actual As Adjusted -------------- -------------- Capitalization and Short-Term Debt Short-Term Debt................................ $ 86,000 15.8% $ 64,824 11.9% Long-Term Debt................................. 179,280 33.1 179,280 33.1 Redeemable Preferred Stock..................... 1,960 .4 1,960 .4 Common Stock Equity............................ 274,771 50.7 295,947 54.6 -------- ----- -------- ----- Total Capitalization and Short-Term Debt....... $542,011 100.0% $542,011 100.0% ======== ===== ======== =====
2 Recent Developments Our earnings for the second quarter--the three months ended March 31, 1999--were $1.14 per share compared to $1.04 per share for our same quarter last year. The improved earnings reflect higher sales volumes resulting from temperatures in our service area that were 7% colder than last year yet still 8% warmer than normal. Although our second quarter results were improved over the same period a year ago, our first quarter earnings were depressed by significantly warmer weather, with temperatures 20% warmer than the previous year and 14% warmer than normal. For the entire six-month period encompassing the first half of our current fiscal year, temperatures were 6% warmer than last year and 11% warmer than normal. As a result, our earnings for that period--from October 1, 1998 through March 31, 1999--were $1.69 per share compared with $1.82 per share last year. Further, due to the seasonal nature of our business, earnings are typically concentrated in the first six months of our fiscal year, which generally corresponds with the heating season. Our 1999 fiscal year earnings will likely be lower than our earnings during the first six months, reflecting typically low summer sales volumes, partially offset by anticipated lower operating expenses. 3 Forward-Looking Statements Certain statements in this prospectus are forward-looking statements made based upon our expectations and beliefs concerning future developments and their potential effect on us. 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 our expectations or beliefs and the effect of future developments on us may not be those we anticipated. Among the factors that may cause our 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 --purchase gas adjustment provisions --franchise renewal and --environmental or safety requirements
. the effects of any industry or corporate restructuring . 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 . our 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 . changes in accounting standards and . the effectiveness of Year 2000 computer system remediation efforts by third parties and unknown Year 2000 related problems We do not, by including this statement, assume any obligation to review or revise any particular forward-looking statement referenced herein in light of future events. 4 Service Area and Transmission Pipelines The large map depicts the counties in the eastern portion of Missouri in which we provide service, together with transmission pipelines owned by: . Mississippi River Transmission Corporation . Missouri Pipeline Company and . Williams Gas Pipeline Central, Inc. These transmission pipelines connect to our distribution system. The small map depicts Missouri and other states through which Mississippi River Transmission Corporation's pipeline system runs. [LACLEDE GAS SERVICE AREA MAP APPEARS HERE] 5 Use of Proceeds The net proceeds from the sale of the shares, excluding the over- allotment option, will be approximately $21 million. We will use the net proceeds to repay short-term debt. At March 31, 1999, we had outstanding short-term debt of approximately $86 million at an average interest rate of 4.926%. During the past year, we used the proceeds of short-term debt to: . redeem $25 million of 9 5/8% first mortgage bonds . pay gas supply costs and . pay capital expenditures for assets acquired in the ordinary course of business, including construction and office equipment Laclede Gas Company General We are a public utility that distributes and transports natural gas. We are subject to the jurisdiction of the Missouri Public Service Commission and serve the following Missouri areas: . City of St. Louis . St. Louis County . City of St. Charles and . parts of the following counties: --St. Charles --Franklin --Jefferson --St. Francois --Ste. Genevieve --Iron --Madison and --Butler In addition, we operate underground natural gas storage fields and transport and store liquid propane. We have also invested in other minor, non-utility businesses. Generally, we sell gas for househeating, certain other household uses, and commercial and industrial space heating. Our gas prices are generally lower than those charged for competitive fuels and other energy forms. While coal is competitive as a fuel source for very large boiler plant loads, environmental concerns have restrained any significant market inroads. Oil and propane can be used to fuel boiler loads and certain direct-fired process applications, but these fuels vary widely in price throughout the year, thus limiting the competitiveness of these fuels. In certain cases, steam has been competitive with gas for downtown area heating users. In the past five years, we have made a net conversion of 27 steam customers to natural gas service. 6 We have approximately 633,000 customers, 94% of which are residential customers using natural gas for heating and other household purposes. With regard to the space and water heating market, our management believes that we have the predominant share of: . the existing residential market in areas in which we currently provide gas service and . the new single home construction market in such areas. These market shares have not materially changed in a number of years. For the three months ended March 31, 1999, approximately 68% of our utility operating revenues came from sales to residential customers and 27% from sales to commercial and industrial customers. The balance of our utility operating revenues are primarily attributable to our off-system sales, gas supply incentive plan and transportation service. The tariff approved for transportation service produces a margin similar to that which we would have received under our regular sales rates. We have been able to maintain our market position in the residential, space-heating and water-heating markets, despite the price competition that exists in these markets. Competition exists primarily in the large industrial and commercial boiler fuel market where coal is the principal competing form of energy. To a lesser extent, electricity is a competing form of energy in the residential market. While several states have recently enacted legislation to deregulate the electric utility industry in an effort to increase competition and reduce the cost of electric energy, the Missouri Legislature has not to date adopted legislation of this nature. The tables below reflect our utility operating revenues contributed by each class of our customers, as well as the number of customers and therms sold and transported in each class of our customers. One billion cubic feet of gas represents ten million therms.
Three Months Ended Fiscal Year Ended September 30 March 31 ---------------------------------------------------- ----------------- 1994 1995 1996 1997 1998 1998 1999 ---------- -------- ---------- ---------- ---------- -------- -------- Utility Operating Revenues (In Thousands) Residential................ $ 363,058 $302,770 $ 376,818 $ 395,250 $ 365,768 $141,996 $140,591 Commercial and Industrial.. 142,042 109,270 145,466 152,222 132,504 55,193 55,073 Interruptible.............. 1,966 1,655 2,035 2,098 2,254 631 640 Transportation............. 14,898 13,211 15,375 13,042 12,734 3,462 4,158 Off-System and Other Incentive................. -- -- 11,640 34,288 29,852 11,093 5,046 Exploration and Development............... 1,600 1,447 856 1,273 -- -- -- Provision for Refunds and Other..................... 302 3,564 4,266 4,659 4,117 1,451 1,448 ---------- -------- ---------- ---------- ---------- -------- -------- Total.................... $ 523,866 $431,917 $ 556,456 $ 602,832 $ 547,229 $213,826 $206,956 ========== ======== ========== ========== ========== ======== ======== Customers (At End of Period) Residential................ 559,225 566,421 569,818 572,794 577,224 589,121 592,584 Commercial and Industrial.. 36,684 37,409 37,735 37,985 38,519 39,623 39,995 Interruptible.............. 14 16 16 16 15 14 14 Transportation............. 124 129 130 142 149 147 153 ---------- -------- ---------- ---------- ---------- -------- -------- Total.................... 596,047 603,975 607,699 610,937 615,907 628,905 632,746 ========== ======== ========== ========== ========== ======== ======== Therms Sold and Transported (In Thousands) Residential................ 610,858 541,781 642,367 606,327 560,732 253,544 268,245 Commercial and Industrial.. 289,168 256,905 309,477 296,222 259,205 112,897 121,917 Interruptible.............. 5,760 5,692 5,766 5,718 5,838 1,637 1,954 Transportation............. 164,318 173,735 186,400 176,622 190,811 57,578 59,269 Off-System................. -- -- 33,101 126,149 104,763 44,709 24,677 ---------- -------- ---------- ---------- ---------- -------- -------- Total.................... 1,070,104 978,113 1,177,111 1,211,038 1,121,349 470,365 476,062 ========== ======== ========== ========== ========== ======== ========
7 As a result of the large proportion of our residential heating sales relative to our total sales, our operations are highly sensitive to seasonal weather conditions. Historically, most of our revenues and related operating expenses occur during the winter heating season. Accordingly, we accrue most of our annual revenues during our first and second fiscal quarters, which are the six months ending March 31. Results for the third and fourth fiscal quarters frequently show net losses, reflecting significantly lower gas consumption during the nonheating season. Natural Gas Supply Our gas supply strategy has the twofold objectives of: .ensuring that our gas supplies are dependable and will be delivered when needed and .to the extent compatible with that dependability, purchasing gas that is economically priced. We obtain the majority of our gas from two different areas of the country. One area consists generally of Arkansas, Kansas, Oklahoma and northern Texas, which is referred to as the mid-continent producing area. The other area consists of southern Louisiana and southeastern Texas, which is referred to as the Gulf coast producing area. The gas is then transported from these areas through several interstate pipelines to our service area. We transport the majority of our natural gas through Mississippi River Transmission Corporation's pipelines. We are the predominant shipper on Mississippi River Transmission Corporation's pipeline system, using about two-thirds of its capacity into the St. Louis service area. Gas also reaches the western portion of our service area from the mid-continent producing area by running through Panhandle Eastern Pipeline Company's pipelines to Missouri Pipeline's system, which in turn connects to our system. Recently, we obtained a direct connection to the mid-continent producing area through Williams Gas Pipeline Central, Inc. Williams converted to natural gas service an existing approximately 200-mile petroleum products pipeline that crosses Missouri and connects directly to the mid-continent producing area. We have purchased the entire capacity of the converted pipeline, and natural gas began flowing in September 1998. This pipeline enables us to transport gas directly to the western portion of our service area, a fast-growing segment of our service area, as well as to access diverse reserves on the Williams system. Ultimately, we anticipate the new pipeline will transport about 10% of our annual natural gas purchases. We have a contractual right to use capacity on several pipelines that deliver gas from the various onshore and offshore gas-producing basins to Mississippi River Transmission Corporation's system, which in turn connects to our system. During fiscal year 1998, we released portions of this pipeline capacity to which we had a contractual right to other shippers when we did not need the capacity. During fiscal 1998, we purchased natural gas from a diverse group of 37 suppliers to meet our current gas sales and storage requirements. We purchased a total of 78.0 billion cubic feet of natural gas for delivery through Mississippi River Transmission Corporation's system during fiscal year 1998 and another 10.0 billion cubic feet of gas for delivery through the pipelines of Panhandle Eastern Pipeline Company and Missouri Pipeline Company during fiscal 1998. Also, during fiscal 1998, certain commercial and industrial customers purchased their own gas and transported 19.1 billion cubic feet of gas through our distribution system. We also have a contractual right to store 23.1 billion cubic feet of gas in Mississippi River Transmission Corporation's storage system located in Unionville, Louisiana. In addition, we supplement flowing pipeline gas with natural gas withdrawn from our underground storage field located in St. Louis and St. Charles Counties. Because our transportation and storage contracts with Mississippi River Transmission Corporation will expire on October 31, 1999, we are currently negotiating new arrangements. Propane Supply Laclede Pipeline Company, our wholly-owned subsidiary, owns and operates a propane pipeline which connects our 800,000-barrel, or approximately 33 million gallon, propane storage facilities in St. Louis 8 County, Missouri, to propane supply terminal facilities located at Wood River and Cahokia, Illinois. Laclede Pipeline Company transports liquid propane through this pipeline to us for storage. We ultimately vaporize and use the propane to supplement our natural gas supply to meet the peak demands on the distribution system. Laclede Pipeline Company's contract with Phillips Petroleum Company, which provided for delivery of up to 35 million gallons of propane annually, expired on March 31, 1999. We will not be adversely affected by this termination, as Laclede Pipeline Company has signed an agreement to purchase the pipeline from Phillips for about $1.4 million. Regulatory Matters At the state level, there have been several important developments affecting us, some of which are still pending. On January 26, 1999, we filed a request with the Missouri Public Service Commission for a general rate increase to recover costs related to the operation of our gas distribution system. We do not anticipate higher rate levels during the current fiscal year, because the Missouri Public Service Commission generally suspends a general rate increase request until it has reviewed and audited the filing, held hearings and reached its determination whether and to what extent the rate increase request should be granted. By statute, the Missouri Public Service Commission process may take no longer than 11 months. We have requested a rate adjustment that would increase annual revenues by $30.5 million and increase a typical residential heating customer's bill by about 5.8% or about $3.37 a month. The Missouri Public Service Commission has set August 9, 1999 as the date to begin hearings on the request. Historically, the Missouri Public Service Commission has not granted our rate increase requests in full. On October 15, 1998, the Missouri Public Service Commission approved an agreement with us in a general rate case we had filed in February 1998. We had sought rates that would increase revenues by $25.4 million annually. The approved settlement provided that rates charged to the vast majority of our customers, including all residential and commercial heating customers, remained unchanged. However, the settlement also permitted us to record substantially lower expenses in two areas effective July 1, 1998: . depreciation, by establishing lower depreciation rates, and . pension expense, by changing the regulatory accounting treatment for the recovery of our pension costs. The expected annualized effect of these accounting changes should result in a reduction of booked expenses of $16.8 million. Our currently filed rate case described above may impact the expected effect of these accounting changes. In addition, the Missouri Public Service Commission extended its previous authorization of certain cost-deferral mechanisms. These mechanisms allow us to include in future rates certain expenses related to pensions and retirement. In addition, these mechanisms allow us to apply for future rate recovery of certain other costs related to our gas safety replacement program and our environmental costs related to former manufactured gas plants. Further, the Missouri Public Service Commission authorized us to capitalize the costs incurred in connection with making our information systems ready for Year 2000 operations for consideration in future rates. On another matter, we sought and obtained re-authorization from the Missouri Public Service Commission to purchase a limited amount of specific financial instruments for the purpose of capping our cost of gas in the event of any unusually large gas price increases during the 1998-1999 winter season. The full cost of purchasing these instruments is being recovered from customers. In June 1998, we proposed program modifications that are designed to give us greater flexibility to trade in and out of these instruments when warranted by market conditions, to give us a financial incentive to increase the gas cost savings to be realized by customers and to reduce the overall cost of purchasing such instruments. The staff of the Missouri Public Service Commission and the Office of the Public Counsel have opposed our proposal. The Missouri Public Service Commission had formal hearings on this issue in late July 1998, but it has not yet issued a decision. 9 Fiscal 1998 also was the second year of operation for our gas supply incentive plan, which has provided significant benefits for our customers and stockholders. The Missouri Public Service Commission approved the incentive plan in our 1996 rate case for a three-year period ending September 30, 1999. Under this plan, we and our customers share as follows: . sales of gas outside of our traditional service area, of which 70% of the income is allocated to our customers and the balance to us . releases of pipeline capacity, of which 70-90% of the revenues is allocated to our customers and the balance is allocated to us . savings from discounts off of maximum pipeline transportation rates, of which 80-90% of the savings is allocated to our customers and the balance to us and . gains and losses as measured against a bench-mark level of gas cost, of which we are allocated 50%. We include incentive plan revenues in the utility operating revenues line of our financial statements. We include any related expenses to this plan in our natural and propane gas expense line. During fiscal 1998, we achieved overall net benefits of about $31.0 million, resulting in savings to our customers of $24.6 million and contributing about $6.4 million to our pre-tax income. In September 1997, the staff of the Missouri Public Service Commission recommended that we refund $3.6 million to our ratepayers in connection with our sale of gas outside of Missouri during fiscal 1996, prior to the approval of our incentive plan. We believe we had full authority to enter into these transactions in part under the implementation of the Federal Energy Regulatory Commission's Order No. 636. We filed testimony opposing the recommendation made by the staff of the Missouri Public Service Commission. Formal hearings were held on this issue in October 1998. On April 20, 1999, the Missouri Public Service Commission issued its order rejecting the proposal of the staff. This order will become effective on April 30, 1999 and is subject to request for rehearing before April 30, 1999. On October 30, 1998, the Missouri Public Service Commission issued an order opening a docket addressing the adequacy of our copper service line replacement program. Under this docket, the staff must advise the Missouri Public Service Commission of the status of its investigation by April 30, 1999. We currently face one lawsuit and two claims relative to incidents where gas has apparently leaked from direct buried copper service lines. We are unable to predict at this time what action, if any, the Missouri Public Service Commission may take in this docket or the outcome of this lawsuit or any of these claims. Year 2000 Under the mainframe portion of our year 2000 readiness plan, we are upgrading, converting and replacing: . mainframe computer hardware . attendant operating system software and . key mainframe systems and applications. The majority of these systems and applications have been completely converted and upgraded as well as tested on an initial basis. These systems include customer records, billing and accounting systems. Our critical conversions, upgrades and testing, on an in-house basis as well as with third parties on an integrated basis, will be complete in July 1999. With regard to the few personal computer applications which may be important, their replacements/upgrades will also be complete in July 1999. Additionally, we have conducted a company-wide program to inventory, evaluate, remediate and test significant equipment, products, services and supplies that we use. We completed the inventory of these items 10 and services in August 1998, and the evaluation of their importance in September 1998. Under our year 2000 readiness plan, we will test and, to the extent problems are discovered, fix those problems or replace the item. To date, we have discovered a minor number of problems which we have addressed. The remediation and testing of those relatively few important items with problems will be complete in July 1999. We have developed and continue to refine our contingency plans for unforeseen critical system or equipment failures. With regard to a temporary loss of electrical and/or communication services, it would at most impair our ability remotely to operate a small number of pressure regulator stations. We will place trained employees at each of our remotely controlled pressure regulator stations to make any adjustments needed on a manual basis. In addition, we will use an in-house radio relay system to maintain any needed communications with our employees in the field. With regard to any temporary natural gas supply interruptions, we operate a large, local natural gas underground storage facility as well as a local propane storage facility which we would use if needed. Any remaining refinement of critical contingency plans will be completed in July 1999. We have directly contacted and received assurances from many of our vendors. This group of vendors includes our natural gas suppliers and transporting pipelines who have assured us that they will be able to supply natural gas to us after 1999 without interruption. We continue to actively pursue on a case-by-case basis any necessary verification of the vendors' ability to continue to supply the items and services to us in the year 2000. We have included the natural gas suppliers and pipelines in the group needing further verification. We plan to complete this verification process in July 1999. If we do not believe a vendor will be able to provide a needed item or service in the year 2000, we will use alternate vendors and develop contingency plans for any prospective unavailability of the needed item or service. As of March 31, 1999, we have incurred total costs of approximately $14.6 million for replacements and modifications of various computer systems. Of this amount, we capitalized $13.1 million and charged $1.5 million to expense. We have used funds from internally generated cash flows and short-term borrowings to pay these costs. We currently estimate that costs remaining to be incurred during fiscal 1999 will amount to approximately $4.0 million. In our 1998 rate case, the Missouri Public Service Commission authorized us to capitalize the costs incurred in connection with making our information systems ready for year 2000 operations. It also authorized us to defer any interim property tax, depreciation or carrying cost expenses that we may incur in connection with these capitalized items. We may apply for recovery of these interim expenses in rate proceedings. Environmental Matters We are subject to various environmental laws and regulations. To date they have not materially affected our financial position and results of operations. In the past, we operated various manufactured gas plants which produced certain by-products and residuals. At the request of the United States Environmental Protection Agency, we performed an investigation of one of our former manufactured gas plant sites in Shrewsbury, Missouri. Subsequently, we and the state and federal environmental regulatory agencies agreed upon the actions needed at this site. We currently estimate the overall costs of these actions will be approximately $1,135,000. As of March 31, 1999, we have paid $638,000 and reserved $497,000 for these actions. If the regulatory agencies require any additional actions, we will incur additional costs. In a separate matter, we applied to place the site of a different former manufactured gas plant in the City of St. Louis, Missouri in the Missouri voluntary cleanup program. We ceased our operations at and sold this site in 1950. Subsequent owners of this site used it as a coke manufacturing facility. The Missouri Department of Natural Resources accepted our application. Acceptance provides opportunities to minimize costs of remediation and maximize possibilities of site development. We submitted a sampling plan to the Missouri Department of Natural Resources on November 16, 1998. We are completing the sampling plan. We currently estimate that the cost of the investigation, oversight costs and legal and engineering consulting costs for this site may be approximately $534,000. Currently, we have paid $263,000 and reserved an additional $271,000. We have requested that other former site owners or operators participate in the cost of any site 11 investigation, but none has yet agreed to do so. We plan to seek proportionate reimbursement of all costs relative to this site from those parties or any other potentially responsible parties if practicable. While the scope or costs relative to the site in Shrewsbury will not be material, the scope or costs relative to the City of St. Louis site are unknown and may be material. We notified our insurers that we intend to seek reimbursement from them of our costs at both of these sites. None of our insurers have agreed that our insurance covers the costs for which we intend to seek reimbursement. The majority of our insurers have sent us letters reserving their rights with respect to the manufactured gas plant issues addressed in our notices to them. While some of the insurers have denied coverage with respect to these issues, we continue to seek reimbursement from them. With regard to the Shrewsbury site, the denial of coverage will not have a material impact on us. With regard to the City of St. Louis site, since the scope or costs relative to this site are unknown and may be material, the denial of coverage may have a material impact on us. In our 1998 rate case, the Missouri Public Service Commission approved our continued use of a cost deferral mechanism for these costs. Through this, we may apply for appropriate rate recovery of these costs. The recovery of these costs, however, may be challenged in future rate proceedings. Where You Can Find More Information We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy any document that we file at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for information on the operation of the Public Reference Room. Our SEC filings also are available to you at the SEC's website at "http://www.sec.gov." The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus, and information we file later with the SEC will automatically update and may supersede this information. We incorporate by reference the documents listed below and any future filings made by us with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until all of the shares of Common Stock that we have registered are sold: . Annual Report on Form 10-K for the fiscal year ended September 30, 1998. . Quarterly Reports on Form 10-Q for the fiscal quarters ended December 31, 1998 and March 31, 1999. . Current Report on Form 8-K dated January 28, 1999. . The description of the Common Stock contained in our registration under Section 12 of the Securities Exchange Act of 1934, including any amendment or report updating such description. . The description of our Common Stock Purchase Rights contained in our Form 8-A Registration Statement dated April 3, 1996. You may request a copy of these filings, at no cost, by writing or telephoning us at the following address and phone number: Corporate Secretary Laclede Gas Company 720 Olive Street St. Louis, Missouri 63101 314-342-0531 You should rely only on the information contained in, or incorporated by reference in, this prospectus. We have not, and the underwriters have not, authorized anyone else to provide you with different information. We are not, and the underwriters are not, making an offer of these securities in any state where the offer is not permitted. You should not assume that the information incorporated in this prospectus is accurate as of any date other than the date on the front of those documents. 12 Price Range of Common Stock and Dividends Our common stock is listed on the New York and Chicago Stock Exchanges and is traded under the symbol "LG." The high and low sales prices for the common stock as reported on the New York Stock Exchange composite transactions reporting system and dividends declared for fiscal years 1997, 1998 and 1999 to date are as follows:
Quarterly Cash Price Range Fiscal Year Dividends Declared High Low - ----------- ------------------ --------- --------- 1997: First Quarter ......................... $ .32-1/2 $24-7/8 $22-1/4 Second Quarter......................... .32-1/2 24-5/8 20-7/8 Third Quarter.......................... .32-1/2 23-1/8 20-1/4 Fourth Quarter......................... .32-1/2 24-5/8 21-5/8 --------- $1.30 ========= 1998: First Quarter.......................... $ .33 $28-5/8 $23-5/8 Second Quarter......................... .33 27-15/16 23-15/16 Third Quarter.......................... .33 25-7/16 22-15/16 Fourth Quarter......................... .33 25 22-3/8 --------- $1.32 ========= 1999: First Quarter.......................... $ .33-1/2 $27 $23 Second Quarter......................... .33-1/2 27 20-5/8 Third Quarter (through April 29)....... 21 20-1/8
- -------- On April 29, 1999, the last reported sale price of our common stock on the New York Stock Exchange was $20 3/16 per share. As of April 29, 1999, we had 9,407 common stockholders of record. Cash dividends on our common stock have been paid each year since 1946. Our board of directors' current policy is to pay cash dividends on our common stock on a quarterly basis. Future cash dividends will depend on our earnings, financial condition, capital requirements and other factors deemed relevant by our board of directors. See "Description of Common Stock" in this prospectus for certain restrictions upon our ability to pay cash dividends. We have a Dividend Reinvestment and Stock Purchase Plan. Under this plan, stockholders may automatically reinvest, at the then current market price, their common stock cash dividends in shares of our common stock. Participants in this plan may make optional cash purchases of common stock at market prices in amounts up to $30,000 per year. Additional information about this plan is contained in its prospectus, which may be obtained from the plan agent, UMB Bank, National Association, or from us: UMB Bank, National Association Laclede Gas Company Securities Transfer Division Corporate Secretary P. O. Box 410064 720 Olive Street Kansas City, Missouri 64141- 0064 St. Louis, Missouri 63101 1-800-884-4225 314-342-0531
13 Description of Common Stock The following description of the terms of our common stock sets forth material terms and provisions of our common stock. You should read our current articles of incorporation, for more detailed terms of our common stock. The total number of shares of capital stock which we have authority to issue is 51,480,000 shares, consisting of 50,000,000 shares of common stock, par value $1 per share, and 1,480,000 shares of preferred stock, par value $25 per share. Dividend Rights and Limitations Subject to the limitations referred to below, our board of directors may declare and pay dividends on our common stock out of funds legally available for this purpose. Our Mortgage and Deed of Trust, dated as of February 1, 1945, which has been amended and supplemented by 23 supplemental indentures over the years and which secures our first mortgage bonds, contains several restrictions on our ability to pay dividends on our common stock. Under the most restrictive of these provisions, we may not declare or pay any dividend if, after the dividend, the aggregate net amount spent for all dividends after September 30, 1953 would exceed a maximum amount determined by using a formula in our mortgage, which is described below. This provision does not, however, restrict dividends paid in our common stock. In addition, the amount we have spent on the acquisition or retirement of our common stock since that date is added to the aggregate net amount spent for dividends. Under the formula, the maximum amount is the sum of $8 million plus our earnings applicable to common stock for the period from September 30, 1953 to the last day of the quarter before the declaration or payment date for the dividend. As of March 31, 1999, however, this restriction did not impair our ability to pay dividends. Using the formula, up to approximately $235 million was available for distribution as of March 31, 1999. Payment of dividends on our common stock is also subject to the preferential rights of the holders of preferred stock to receive full cumulative dividends, both past and current. Also, we may not pay dividends on or acquire any of our common stock if our sinking fund obligations for our preferred stock are not met. These preferential rights and requirements do not currently impair our ability to pay common stock dividends since: .we have paid and continue to pay the preferred stock dividends as required and . we have satisfied our sinking fund obligations to date, including those for the period ending March 31, 1999. Our articles of incorporation also limit our ability to pay dividends on our common stock if the amount of stated capital for our common stock plus paid-in capital, capital surplus and retained earnings is less than 25% of our total capitalization. This, too, does not currently impair our ability to pay dividends on our common stock. At March 31, 1999, the amount of our stated capital for our common stock plus paid-in capital, capital surplus and retained earnings was approximately 60% of total capitalization, thus exceeding 25% of our total capitalization. Voting Rights Our common stockholders are entitled to one vote per share at all stockholder meetings. If, however, we default on six quarterly preferred stock dividends, the holders of all series of our preferred stock will be entitled to one vote per share on all matters other than the election of our directors. At an election of our 14 directors after such default, our preferred stockholders, voting as a separate class, will have the right to elect the minimum number of our directors required to constitute a majority of our full board. In those circumstances, the remainder of our full board will be elected by our common stockholders, voting as a separate class. Cumulative voting is applicable to all elections of our directors. Our board of directors is divided into three classes and each year one class is elected to serve a three-year term. Change in Control and Business Combination Provisions In addition, our articles of incorporation: . provide for the classification of our directors, with three-year staggered terms . generally require an affirmative vote of holders of at least two- thirds of the outstanding shares of our common stock to remove all or less than all of the members of our board of directors . require an affirmative vote of holders of at least two-thirds of the outstanding shares of our common stock to change the provision relating to the classified board of directors, and . require the affirmative vote of holders of at least 80% of the outstanding shares of our common stock to approve certain business combinations with some large shareholders, including those who own more than 10% of our outstanding shares of common stock. These provisions may have significant effects on stockholders' ability to change the composition of an incumbent board of directors or to benefit from transactions which may be opposed by an incumbent board of directors. Also, these provisions may discriminate against some shareholders because of their ownership of more than 10% of our common stock. In addition, we, as a Missouri corporation, are subject to Missouri corporate statutes which restrict the voting rights of a person who acquires 20% or more of our outstanding common stock as well as such person's ability to enter into a business combination with us. Preferred Stock Our board of directors, without further action by our common stockholders, may issue one or more series of preferred stock from time to time, which may have terms more favorable than our common stock, including preferential dividend, liquidation and redemption rights. As of April 22, 1999, there were 71,820 shares of preferred stock Series B and 6,510 shares of preferred stock Series C outstanding. Common Stock Purchase Rights The following description sets forth the material terms of our common stock purchase rights. On May 1, 1996, we distributed a dividend of one common stock purchase right for each share of our common stock outstanding at the close of business on May 1, 1996. Each share issued in this offering will also include one purchase right. For a more detailed description of the purchase rights, their use and the meanings of the various terms used in relation to the purchase rights, you should read the Rights Agreement between us and the rights agent. UMB Bank, National Association is the current rights agent. Each purchase right, when it becomes exercisable, as described below, will entitle the registered holder to purchase a number of shares of our common stock, at a purchase price of $60. This $60 purchase price will be adjusted for: . stock dividends . subdivision of our common stock 15 . combination of our common stock into a smaller number of shares or . issuance of any shares in a reclassification of our common stock Initially, the purchase rights are evidenced by our common stock certificates and are transferred with, and only with, our common stock. The purchase rights become exercisable upon the occurrence of a distribution date. The rights agreement defines a distribution date as the earlier of: . the tenth business day or a later date fixed by our board of directors, after the date on which any person, who is generally referred to as an acquiring person, commences a tender or exchange offer which may result in that person and certain related persons acquiring beneficial ownership of 20% or more of our outstanding common stock and . the tenth business day after: --the first public announcement date by us or an acquiring person that a person has become an acquiring person or --the date on which we first have notice or otherwise determine that a person has become an acquiring person. The stock acquisition date is the date on which a person becomes an acquiring person. An acquiring person excludes, however, those who inadvertently acquire beneficial ownership of 20% or more of our outstanding common stock if that person promptly and irrevocably commits to divest and does promptly divest sufficient shares to reduce that person's percentage of beneficial ownership below 20%. After a distribution date, each purchase right generally represents the right to purchase that number of shares of our common stock having a total current market price equal to twice the current purchase price. The holder must pay a cash amount equal to that purchase price for the shares. The current market price on any date is the average of the daily closing prices per share for the 30 consecutive trading days immediately prior to that date. For example, if the market price is $20 per share, and using the current purchase price of $60 per share, then each purchase right would allow its holder to purchase six shares for $60: $120 (2 X $60 purchase price) ----------------------------- = 6 $20 (market price) Purchase rights owned by the acquiring person and certain related persons, however, will become void after a distribution date. In addition, our board of directors may, at its option, elect to exchange all or part of the outstanding purchase rights for shares of our common stock. The board may make this decision after a distribution date and before an acquiring person and related persons obtain 50% or more of our outstanding common stock. The exchange ratio would be one share of our common stock per purchase right, with adjustments to reflect any stock split, stock dividend or similar transaction after the date of the rights agreement. Immediately upon this action by our board of directors, the exercisability of the purchase rights would terminate. Also each purchase right would represent only the right to receive that number of shares of common stock equal to the number of purchase rights held by such holder multiplied by the exchange ratio. None of the purchase rights of the acquiring person or related persons may be exchanged since they will have become void. If we are acquired in a merger or other similar business combination where we are not the surviving corporation, or where our common stock is exchanged or changed, or 50% or more of our assets or earning power is sold, we will take such action as necessary to ensure that the purchase rights flip- over. With a flip-over, each purchase right would entitle each holder to purchase common stock of the acquiring corporation 16 having an aggregate market price equal to twice the current purchase price of our common stock, as determined under the terms of our rights agreement, for a cash amount equal to that purchase price. For example, if the current market price of the acquiring corporation's stock is $30, and using the current purchase price of $60 per share, each purchase right would allow its holder to purchase four shares for $60: $120 (2 X $60 purchase price) ----------------------------- = 4 $30 (market price) Here, too, the purchase rights of the acquiring person and certain related persons will have become void. Our board of directors may redeem the purchase rights in whole, but not in part, at a price of $0.01 per right at any time prior to the earlier of: . the tenth business day following a stock acquisition date, as defined in the rights agreement, and . the close of business on May 1, 2006. Under certain circumstances our rights agreement may be amended by our board of directors without approval of our stockholders. The purchase rights have certain anti-takeover effects. The purchase rights may cause substantial dilution to a person or group that attempts to acquire us without board approval. The purchase rights will not interfere with any merger or other business combination with a third party approved by our board of directors since the board of directors may, at its option, redeem all but not less than all of the then outstanding purchase rights as described above. Miscellaneous Our outstanding common stock is, and our common stock to be issued in the offering will be, fully paid and non-assessable. Holders of our common stock have limited preemptive rights. Our articles of incorporation generally give holders of our common stock preemptive rights if our common stock is to be sold solely for money and other than: . by a public offering . through underwriters who agree to promptly make a public offering or . with the authorization of the holders of a majority of our common stock. On liquidation, after payment of the liquidation preferences of our preferred stock, the holders of our common stock will be entitled to receive all amounts remaining for distribution to our stockholders. The transfer agent and registrar for our common stock is UMB Bank, National Association, Kansas City, Missouri. Our outstanding common stock is, and the shares of our common stock to be issued in this offering will be, listed on the New York and Chicago Stock Exchanges. 17 Underwriting General Merrill Lynch, Pierce, Fenner & Smith Incorporated and A.G. Edwards & Sons, Inc. are acting as representatives of the underwriters named below. Subject to the terms and conditions set forth in the underwriting agreement, we have agreed to sell to the underwriters, and the underwriters severally have agreed to purchase from us, the respective number of shares of our common stock indicated below:
Number of Underwriter Shares ----------- --------- Merrill Lynch, Pierce, Fenner & Smith Incorporated............................................ 325,000 A.G. Edwards & Sons, Inc. ....................................... 325,000 BT Alex. Brown Incorporated...................................... 50,000 CIBC Oppenheimer Corp. .......................................... 50,000 Edward D. Jones & Co., L.P....................................... 50,000 Morgan Stanley & Co. Incorporated................................ 50,000 PaineWebber Incorporated......................................... 50,000 Prudential Securities Incorporated............................... 50,000 Salomon Smith Barney Inc. ....................................... 50,000 George K. Baum & Company......................................... 25,000 Huntleigh Securities Corporation................................. 25,000 Smith, Moore & Co. .............................................. 25,000 Stifel, Nicolaus & Company, Incorporated......................... 25,000 --------- Total ...................................................... 1,100,000 =========
In the underwriting agreement, the several underwriters have each agreed, subject to the terms and conditions set forth in the agreement, to purchase all of the shares of common stock being sold under the agreement, if any of the shares of our common stock being sold under the agreement are purchased. Under some circumstances involving a defaulting underwriter, the commitments of non- defaulting underwriters may be increased. Commissions and Discounts The representatives of the underwriters have advised us that they propose initially to offer the shares of our common stock to the public at the public offering price set forth on the cover page of this prospectus, and to some dealers at the public offering price less a concession not in excess of $.40 per share. The underwriters may allow, and these dealers may reallow, a discount not in excess of $.10 per share of our common stock on sales to other dealers. After the initial public offering, the public offering price, concession and discount may be changed. Over-Allotment Option We have granted an option to the underwriters, exercisable for 30 days after the date of this prospectus, to purchase up to an aggregate of 150,000 additional shares of our common stock at the public offering price set forth on the cover page of this prospectus less the underwriting discount. The underwriters may exercise this option solely to cover over-allotments, if any, made on the sale of our common stock to be issued in this offering. If the underwriters exercise this option, each underwriter will be obligated, subject to certain conditions, to purchase a number of additional shares of our common stock proportionate to that underwriter's initial amount reflected in the table above. 18 The following table shows the per share and total underwriting discount to be paid by us to the underwriters. This information is presented assuming either no exercise or full exercise by the underwriters of their over-allotment option.
Without Per Share Option With Option --------- ----------- ----------- Public offering price ....................... $20.1875 $22,206,250 $25,234,375 Underwriting discount ....................... $.80 $880,000 $1,000,000 Proceeds, before expenses, to us ............ $19.3875 $21,326,250 $24,234,375
The expenses of this offering are estimated at $150,000 and are payable by us. No Sales of Similar Securities The shares of our common stock are being offered by the several underwriters, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of certain legal matters by counsel for the underwriters and subject to certain other conditions. The underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. We have agreed not to offer or sell any other shares of our common stock or securities convertible into or exchangeable for our common stock for 120 days after the date of this prospectus. There are some exceptions to this restriction, including the issuance of our common stock in connection with our employee benefit plans, our Restricted Stock Plan for Non-Employee Directors and the Drip Plan. We have agreed to indemnify the underwriters against certain liabilities, including certain liabilities under the Securities Act of 1933, or to contribute to payments the underwriters may be required to make because of those liabilities. Price Stabilization and Short Positions Until the distribution of the shares of our common stock is completed, rules of the SEC may limit the ability of the underwriters and certain selling group members to bid for and purchase the shares of our common stock. As an exception to these rules, the representatives of the underwriters are permitted to engage in certain transactions that stabilize the price of our common stock. Such transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of our common stock. If the underwriters create a short position in our common stock by selling more than 1,100,000 shares, the representatives of the underwriters may reduce that short position by purchasing our common stock in the open market. The representatives may also elect to reduce any short position by exercising all or part of the over-allotment option described above. The representatives of the underwriters may also impose a penalty bid on certain underwriters and selling group members. This means that if the representatives purchase shares of our common stock in the open market to reduce the underwriters' short position or to stabilize the price of our common stock, they may reclaim the amount of the selling concession from the underwriters and selling group members who sold those shares as part of this offering. In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases. The imposition of a penalty bid might also have an effect on the price of our common stock to the extent that it discourages resales of our common stock. Neither we nor any of the underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor any of the underwriters makes any representation that the representatives of the underwriters will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice. Some of the underwriters or their affiliates have provided investment or commercial banking services to us in the past and are likely to do so in the future. They receive customary fees and commissions for these services. 19 Legal Opinions Opinions as to the legality of the shares of our common stock to be issued in this offering will be delivered by Gerald T. McNeive, Jr., our Senior Vice President-Finance and General Counsel, and by Winthrop, Stimson, Putnam & Roberts, New York, New York, counsel for the underwriters. Experts The financial statements and the related financial statement schedule incorporated in this prospectus by reference from our Annual Report on Form 10- K for the year ended September 30, 1998 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report, which is incorporated herein by reference and has been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 20 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1,100,000 Shares Laclede Gas Company Common Stock ----------------- PROSPECTUS ----------------- Merrill Lynch & Co. A.G. Edwards & Sons, Inc. April 29, 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----