XML 18 R7.htm IDEA: XBRL DOCUMENT v3.19.2
Summary Of Significant Accounting Policies
 9 Months Ended
Jun. 30, 2019
Accounting Policies [Abstract]  
Summary Of Significant Accounting Policies Summary of Significant Accounting Policies
 
Principles of Consolidation.  The Company consolidates all entities in which it has a controlling financial interest.  All significant intercompany balances and transactions are eliminated. The Company uses proportionate consolidation when accounting for drilling arrangements related to oil and gas producing properties accounted for under the full cost method of accounting.
 
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Reclassifications.  In November 2016, the FASB issued authoritative guidance related to the presentation of restricted cash on the statement of cash flows. The new guidance requires restricted cash and cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows, and requires disclosure of how cash and cash equivalents on the statement of cash flows reconciles to the balance sheet. The Company considers Hedging Collateral Deposits to be restricted cash. The Company adopted this guidance effective October 1, 2018 on a retrospective basis. As a result, prior periods have been reclassified to conform to the current year presentation. Additional discussion is provided below at Consolidated Statement of Cash Flows.

In March 2017, the FASB issued authoritative guidance related to the presentation of net periodic pension cost and net periodic postretirement benefit cost. The new guidance requires segregation of the service cost component from the other components of net periodic pension cost and net periodic postretirement benefit cost for financial reporting purposes. The service cost component is to be presented on the income statement in the same line items as other compensation costs included within Operating Expenses and the other components of net periodic pension cost and net periodic postretirement benefit cost are to be presented on the income statement below the subtotal labeled Operating Income (Loss). Under this guidance, the service cost component is eligible to be capitalized as part of the cost of inventory or property, plant and equipment while the other components of net periodic pension cost and net periodic postretirement benefit cost are generally not eligible for capitalization, unless allowed by a regulator. The Company adopted this guidance effective October 1, 2018. The Company applied the guidance retrospectively for the pension and postretirement benefit costs using amounts disclosed in prior period financial statement notes as estimates for the reclassifications in accordance with a practical expedient allowed under the guidance. For the quarter and nine months ended June 30, 2018, Operating Income increased $6.2 million and $28.6 million, respectively, and Other Income (Deductions) decreased by the same amounts as a result of the reclassifications. For the quarter and nine months ended June 30, 2019, Other Income (Deductions) includes $5.7 million and $25.5 million, respectively, of pension and postretirement benefit costs.

Earnings for Interim Periods.  The Company, in its opinion, has included all adjustments (which consist of only normally recurring adjustments, unless otherwise disclosed in this Form 10-Q) that are necessary for a fair statement of the results of operations for the reported periods. The consolidated financial statements and notes thereto, included herein, should be read in conjunction with the financial statements and notes for the years ended September 30, 2018, 2017 and 2016 that are included in the Company's 2018 Form 10-K.  The consolidated financial statements for the year ended September 30, 2019 will be audited by the Company's independent registered public accounting firm after the end of the fiscal year.
 
The earnings for the nine months ended June 30, 2019 should not be taken as a prediction of earnings for the entire fiscal year ending September 30, 2019.  Most of the business of the Utility and Energy Marketing segments is seasonal in nature and is influenced by weather conditions.  Due to the seasonal nature of the heating business in the Utility and Energy Marketing segments, earnings during the winter months normally represent a substantial part of the earnings that those segments are expected to achieve for the entire fiscal year.  The Company’s business segments are discussed more fully in Note 8 – Business Segment Information.
 
Consolidated Statements of Cash Flows.  The components, as reported on the Company’s Consolidated Balance Sheets, of the total cash, cash equivalents, and restricted cash presented on the Statement of Cash Flows are as follows (in thousands):
 
Nine Months Ended 
 June 30, 2019
 
Nine Months Ended 
 June 30, 2018
 
Balance at October 1, 2018
 
Balance at June 30, 2019
 
Balance at October 1, 2017
 
Balance at June 30, 2018
 
 
 
 
 
 
 
 
Cash and Temporary Cash Investments
$
229,606

 
$
87,515

 
$
555,530

 
$
313,307

Hedging Collateral Deposits
3,441

 
6,835

 
1,741

 
2,283

Cash, Cash Equivalents, and Restricted Cash
$
233,047

 
$
94,350

 
$
557,271

 
$
315,590



The Company considers all highly liquid debt instruments purchased with a maturity date of generally three months or less to be cash equivalents. The Company’s restricted cash is composed entirely of amounts reported as Hedging Collateral Deposits on the Consolidated Balance Sheets. Hedging Collateral Deposits is an account title for cash held in margin accounts funded by the Company to serve as collateral for hedging positions. In accordance with its accounting policy, the Company does not offset hedging collateral deposits paid or received against related derivative financial instruments liability or asset balances.

Gas Stored Underground.  In the Utility segment, gas stored underground is carried at lower of cost or net realizable value, on a LIFO method.  Gas stored underground normally declines during the first and second quarters of the year and is replenished during the third and fourth quarters.  In the Utility segment, the current cost of replacing gas withdrawn from storage is recorded in the Consolidated Statements of Income and a reserve for gas replacement is recorded in the Consolidated Balance Sheets under the caption “Other Accruals and Current Liabilities.”  Such reserve, which amounted to $16.3 million at June 30, 2019, is reduced to zero by September 30 of each year as the inventory is replenished.
 
Property, Plant and Equipment.  In the Company’s Exploration and Production segment, oil and gas property acquisition, exploration and development costs are capitalized under the full cost method of accounting. Under this methodology, all costs associated with property acquisition, exploration and development activities are capitalized, including internal costs directly identified with acquisition, exploration and development activities. The internal costs that are capitalized do not include any costs related to production, general corporate overhead, or similar activities. The Company does not recognize any gain or loss on the sale or other disposition of oil and gas properties unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves of oil and gas attributable to a cost center.
 
Capitalized costs include costs related to unproved properties, which are excluded from amortization until proved reserves are found or it is determined that the unproved properties are impaired.  Such costs amounted to $82.0 million and $62.2 million at June 30, 2019 and September 30, 2018, respectively.  All costs related to unproved properties are reviewed quarterly to determine if impairment has occurred. The amount of any impairment is transferred to the pool of capitalized costs being amortized.
 
Capitalized costs are subject to the SEC full cost ceiling test. The ceiling test, which is performed each quarter, determines a limit, or ceiling, on the amount of property acquisition, exploration and development costs that can be capitalized. The ceiling under this test represents (a) the present value of estimated future net cash flows, excluding future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, using a discount factor of 10%, which is computed by applying prices of oil and gas (as adjusted for hedging) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet, less estimated future expenditures, plus (b) the cost of unevaluated properties not being depleted, less (c) income tax effects related to the differences between the book and tax basis of the properties. The natural gas and oil prices used to calculate the full cost ceiling are based on an unweighted arithmetic average of the first day of the month oil and gas prices for each month within the twelve-month period prior to the end of the reporting period. If capitalized costs, net of accumulated depreciation, depletion and amortization and related deferred income taxes, exceed the ceiling at the end of any quarter, a permanent impairment is required to be charged to earnings in that quarter.  At June 30, 2019, the ceiling exceeded the book value of the oil and gas properties by approximately $566.8 million. In adjusting estimated future cash flows for hedging under the ceiling test at June 30, 2019, estimated future net cash flows were decreased by $23.9 million.
    
Accumulated Other Comprehensive Loss.  The components of Accumulated Other Comprehensive Loss and changes for the nine months ended June 30, 2019 and 2018, net of related tax effect, are as follows (amounts in parentheses indicate debits) (in thousands): 
 
Gains and Losses on Derivative Financial Instruments
 
Gains and Losses on Securities Available for Sale
 
Funded Status of the Pension and Other Post-Retirement Benefit Plans
 
Total
Three Months Ended June 30, 2019
 
 
 
 
 
 
 
Balance at April 1, 2019
$
4,562

 
$
—

 
$
(58,848
)
 
$
(54,286
)
Other Comprehensive Gains and Losses Before Reclassifications
24,376

 
—

 
—

 
24,376

Amounts Reclassified From Other Comprehensive Income (Loss)
(2,756
)
 
—

 
—

 
(2,756
)
Balance at June 30, 2019
$
26,182

 
$
—

 
$
(58,848
)
 
$
(32,666
)
Nine Months Ended June 30, 2019
 
 
 
 
 
 
 
Balance at October 1, 2018
$
(28,611
)
 
$
7,437

 
$
(46,576
)
 
$
(67,750
)
Other Comprehensive Gains and Losses Before Reclassifications
38,185

 
—

 
—

 
38,185

Amounts Reclassified From Other Comprehensive Income (Loss)
14,742

 
—

 
—

 
14,742

Reclassification Adjustment for the Cumulative Effect of Adoption of Authoritative Guidance for Financial Assets and Liabilities
—

 
(7,437
)
 
—

 
(7,437
)
Reclassification of Stranded Tax Effects Related to the 2017 Tax Reform Act
1,866

 
—

 
(12,272
)
 
(10,406
)
Balance at June 30, 2019
$
26,182

 
$
—

 
$
(58,848
)
 
$
(32,666
)
Three Months Ended June 30, 2018
 
 
 
 
 
 
 
Balance at April 1, 2018
$
3,841

 
$
6,885

 
$
(58,486
)
 
$
(47,760
)
Other Comprehensive Gains and Losses Before Reclassifications
(27,036
)
 
(163
)
 
—

 
(27,199
)
Amounts Reclassified From Other Comprehensive Income (Loss)
2,563

 
—

 
—

 
2,563

Balance at June 30, 2018
$
(20,632
)
 
$
6,722

 
$
(58,486
)
 
$
(72,396
)
Nine Months Ended June 30, 2018
 
 
 
 
 
 
 
Balance at October 1, 2017
$
20,801

 
$
7,562

 
$
(58,486
)
 
$
(30,123
)
Other Comprehensive Gains and Losses Before Reclassifications
(39,294
)
 
(568
)
 
—

 
(39,862
)
Amounts Reclassified From Other Comprehensive Income (Loss)
(2,139
)
 
(272
)
 
—

 
(2,411
)
Balance at June 30, 2018
$
(20,632
)
 
$
6,722

 
$
(58,486
)
 
$
(72,396
)

In February 2018, the FASB issued authoritative guidance that allows an entity to elect a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the 2017 Tax Reform Act and requires certain disclosures about stranded tax effects. The Company adopted this authoritative guidance effective January 1, 2019 and recorded a cumulative effect adjustment related to deferred income taxes associated with hedging activities and pension and post-retirement benefit obligations during the quarter ended March 31, 2019 to increase retained earnings by $10.4 million and decrease accumulated other comprehensive income by the same amount.

In January 2016, the FASB issued authoritative guidance regarding the recognition and measurement of financial assets and liabilities. The authoritative guidance primarily affects the accounting for equity investments and the presentation and disclosure requirements for financial instruments. All equity investments in unconsolidated entities will be measured at fair value through earnings rather than through accumulated other comprehensive income. The Company adopted this authoritative guidance effective
October 1, 2018 and, as called for by the modified retrospective method of adoption, recorded a cumulative effect adjustment during the quarter ended December 31, 2018 to increase retained earnings by $7.4 million and decrease accumulated other comprehensive income by the same amount.
    
Reclassifications Out of Accumulated Other Comprehensive Loss.  The details about the reclassification adjustments out of accumulated other comprehensive loss for the nine months ended June 30, 2019 and 2018 are as follows (amounts in parentheses indicate debits to the income statement) (in thousands):
Details About Accumulated Other Comprehensive Loss Components
 
Amount of Gain or (Loss) Reclassified from
Accumulated Other Comprehensive Loss
 
Affected Line Item in the Statement Where Net Income is Presented
 
Three Months Ended June 30,
 
Nine Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
 
Gains (Losses) on Derivative Financial Instrument Cash Flow Hedges:
 
 
 
 
 
 
 
 
 
 
     Commodity Contracts
 

$4,091

 

($3,249
)
 

($18,692
)
 

$6,125

 
Operating Revenues
     Commodity Contracts
 
—

 
5

 
(1,182
)
 
952

 
Purchased Gas
     Foreign Currency Contracts
 
(222
)
 
(527
)
 
(624
)
 
(1,500
)
 
Operating Revenues
Gains (Losses) on Securities Available for Sale
 
—

 
—

 
—

 
430

 
Other Income (Deductions)
 
 
3,869

 
(3,771
)
 
(20,498
)
 
6,007

 
Total Before Income Tax
 
 
(1,113
)
 
1,208

 
5,756

 
(3,596
)
 
Income Tax Expense
 
 

$2,756

 

($2,563
)
 

($14,742
)
 

$2,411

 
Net of Tax

Other Current Assets.  The components of the Company’s Other Current Assets are as follows (in thousands):
                            
At June 30, 2019
 
At September 30, 2018
 
 
 
 
Prepayments
$
13,777

 
$
10,770

Prepaid Property and Other Taxes
11,501

 
14,444

Federal Income Taxes Receivable
6,554

 
22,457

State Income Taxes Receivable
8,773

 
8,822

Fair Values of Firm Commitments
5,618

 
1,739

Regulatory Assets
9,829

 
9,792

 
$
56,052

 
$
68,024



Other Assets.  The components of the Company’s Other Assets are as follows (in thousands):
                            
At June 30, 2019
 
At September 30, 2018
 
 
 
 
Federal Income Taxes Receivable
$
42,546

 
$
—

Other
86

 
102

 
$
42,632

 
$
102


 
Other Accruals and Current Liabilities.  The components of the Company’s Other Accruals and Current Liabilities are as follows (in thousands):
                            
At June 30, 2019
 
At September 30, 2018
 
 
 
 
Accrued Capital Expenditures
$
60,082

 
$
38,354

Regulatory Liabilities
50,233

 
57,425

Reserve for Gas Replacement
16,251

 
—

Liability for Royalty and Working Interests
19,846

 
12,062

Other
33,651

 
24,852

 
$
180,063

 
$
132,693


 
Earnings Per Common Share.  Basic earnings per common share is computed by dividing income or loss by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.  For purposes of determining earnings per common share, the potentially dilutive securities the Company had outstanding were SARs, restricted stock units and performance shares.  For the quarter and nine months ended June 30, 2019, the diluted weighted average shares outstanding shown on the Consolidated Statements of Income reflects the potential dilution as a result of these securities as determined using the Treasury Stock Method.  SARs, restricted stock units and performance shares that are antidilutive are excluded from the calculation of diluted earnings per common share. There were 120,546 securities and 122,327 securities excluded as being antidilutive for the quarter and nine months ended June 30, 2019, respectively. There were 1,095,838 securities and 316,279 securities excluded as being antidilutive for the quarter and nine months ended June 30, 2018, respectively.
 
Stock-Based Compensation.  The Company granted 244,734 performance shares during the nine months ended June 30, 2019. The weighted average fair value of such performance shares was $55.67 per share for the nine months ended June 30, 2019. Performance shares are an award constituting units denominated in common stock of the Company, the number of which may be adjusted over a performance cycle based upon the extent to which performance goals have been satisfied.  Earned performance shares may be distributed in the form of shares of common stock of the Company, an equivalent value in cash or a combination of cash and shares of common stock of the Company, as determined by the Company. The performance shares do not entitle the participant to receive dividends during the vesting period.
 
Half of the performance shares granted during the nine months ended June 30, 2019 must meet a performance goal related to relative return on capital over a three-year performance cycle.  The performance goal over the performance cycle is the Company’s total return on capital relative to the total return on capital of other companies in a group selected by the Compensation Committee (“Report Group”).  Total return on capital for a given company means the average of the Report Group companies’ returns on capital for each twelve month period corresponding to each of the Company’s fiscal years during the performance cycle, based on data reported for the Report Group companies in the Bloomberg database.  The number of these performance shares that will vest and be paid will depend upon the Company’s performance relative to the Report Group and not upon the absolute level of return achieved by the Company.  The fair value of these performance shares is calculated by multiplying the expected number of shares that will be issued by the average market price of Company common stock on the date of grant reduced by the present value of forgone dividends over the vesting term of the award.  The fair value is recorded as compensation expense over the vesting term of the award.  The other half of the performance shares granted during the nine months ended June 30, 2019 must meet a performance goal related to relative total shareholder return over a three-year performance cycle.  The performance goal over the performance cycle is the Company’s three-year total shareholder return relative to the three-year total shareholder return of the other companies in the Report Group.  Three-year total shareholder return for a given company will be based on the data reported for that company (with the starting and ending stock prices over the performance cycle calculated as the average closing stock price for the prior calendar month and with dividends reinvested in that company’s securities at each ex-dividend date) in the Bloomberg database.  The number of these total shareholder return performance shares ("TSR performance shares") that will vest and be paid will depend upon the Company’s performance relative to the Report Group and not upon the absolute level of return achieved by the Company.  The fair value price at the date of grant for the TSR performance shares is determined using a Monte Carlo simulation technique, which includes a reduction in value for the present value of forgone dividends over the vesting term of the award.  This price is multiplied by the number of TSR performance shares awarded, the result of which is recorded as compensation expense over the vesting term of the award.
 
The Company granted 112,608 nonperformance-based restricted stock units during the nine months ended June 30, 2019.  The weighted average fair value of such nonperformance-based restricted stock units was $49.70 per share for the nine months ended June 30, 2019.  Restricted stock units represent the right to receive shares of common stock of the Company (or the
equivalent value in cash or a combination of cash and shares of common stock of the Company, as determined by the Company) at the end of a specified time period. These nonperformance-based restricted stock units do not entitle the participant to receive dividends during the vesting period. The accounting for nonperformance-based restricted stock units is the same as the accounting for restricted share awards, except that the fair value at the date of grant of the restricted stock units must be reduced by the present value of forgone dividends over the vesting term of the award.
 
New Authoritative Accounting and Financial Reporting Guidance. In February 2016, the FASB issued authoritative guidance, which has subsequently been amended, requiring organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by all leases, regardless of whether they are considered to be capital leases or operating leases. The FASB’s previous authoritative guidance required organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by capital leases while excluding operating leases from balance sheet recognition. The new authoritative guidance will be effective as of the Company’s first quarter of fiscal 2020, with early adoption permitted. The Company does not anticipate early adoption.

The Company will adopt the new authoritative guidance using the optional transition method, which permits an entity to initially apply the new lease accounting standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company plans to apply practical expedients provided in the authoritative guidance that allow, among other things, an entity not to reassess contracts that commenced prior to the adoption date and to exclude all land easement arrangements that exist prior to the adoption date from treatment under the guidance. The Company also expects to elect a policy not to recognize right of use assets and lease liabilities related to short-term leases.

The Company has finalized a plan for the adoption and implementation of the authoritative guidance and performed an initial assessment of its existing leasing arrangements and other contractual obligations. The Company also continues to evaluate and document technical accounting issues, policy considerations, financial reporting and disclosure implications, and changes to internal controls and businesses processes. While the Company continues to assess the impact on its financial statements, the Company expects that adoption of the authoritative guidance will result in an increase to its assets and liabilities on its consolidated balance sheet.

In August 2017, the FASB issued authoritative guidance which changes the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities and to simplify the application of hedge accounting. The new guidance will be effective as of the Company’s first quarter of fiscal 2020, with early adoption permitted. The Company does not expect adoption of this guidance to have a significant impact on its consolidated financial statements and is currently evaluating the impact of this guidance.