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