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 Quarter Ended December 31,
2008
|
OR
[
]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Commission
File Number
|
Registrant
|
State
of Incorporation
|
I.R.S.
Employer
Identification
Number
|
1-16681
|
The
Laclede Group, Inc.
|
Missouri
|
74-2976504
|
1-1822
|
Laclede
Gas Company
|
Missouri
|
43-0368139
|
720
Olive Street
St.
Louis, MO 63101
314-342-0500
Indicate
by check mark if 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 report) and (2)
have been subject to such filing requirements for the past
90 days.
The Laclede Group,
Inc.:
|
Yes
|
[
X ]
|
No
|
[
]
|
|
|
|
|
|
Laclede Gas
Company:
|
Yes
|
[
X ]
|
No
|
[
]
|
is
a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
The Laclede Group, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
Large
accelerated filer
|
[
X ]
|
|
Accelerated
filer
|
[
]
|
|
Non-accelerated
filer
|
[
]
|
|
Smaller
reporting company
|
[
]
|
|
|
|
|
|
|
Laclede Gas Company:
|
|
|
|
|
|
|
|
|
|
|
|
Large
accelerated filer
|
[
]
|
|
Accelerated
filer
|
[
]
|
|
Non-accelerated
filer
|
[
X ]
|
|
Smaller
reporting company
|
[
]
|
is
a shell company (as defined in Rule 12b-2 of the Exchange Act):
The Laclede Group,
Inc.:
|
Yes
|
[
]
|
No
|
[
X ]
|
|
|
|
|
|
Laclede Gas
Company:
|
Yes
|
[
]
|
No
|
[
X ]
|
Indicate
the number of shares outstanding of each of the issuer’s classes of common stock
as of the latest practicable date:
|
|
Shares
Outstanding At
|
Registrant
|
Description of Common Stock
|
January 29, 2009
|
The Laclede Group,
Inc.:
|
Common
Stock ($1.00 Par Value)
|
22,135,185
|
Laclede Gas
Company:
|
Common
Stock ($1.00 Par Value)
|
11,603 *
|
*
100% owned by The Laclede Group, Inc.
|
Page
No.
|
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|
The
Laclede Group, Inc.:
|
|
|
|
|
4
|
|
|
|
5
|
|
|
|
6-7
|
|
|
|
8
|
|
|
|
9-20
|
|
|
|
|
|
|
|
|
|
Statements
of Income
|
Ex.
99.1, p. 1
|
|
|
Statements
of Comprehensive Income
|
Ex.
99.1, p. 2
|
|
|
Balance
Sheets
|
Ex.
99.1, p. 3-4
|
|
|
Statements
of Cash Flows
|
Ex.
99.1, p. 5
|
|
|
Notes
to Financial Statements
|
Ex.
99.1, p. 6-12
|
|
|
|
|
|
|
|
|
|
|
21-31
|
|
Management’s
Discussion and Analysis of Financial Condition and
|
|
|
|
Results
of Operations (Laclede Gas Company)
|
Ex.
99.1, p. 13-22
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
33
|
|
|
|
|
|
34
|
|
|
|
|
|
35
|
|
|
|
|
|
36
|
This
Quarterly Report on Form 10-Q is a combined report being filed by two separate
registrants: The Laclede Group, Inc. (Laclede Group or the Company) and Laclede
Gas Company (Laclede Gas or the Utility).
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 fiscal year ended September 30, 2008.
Item 1. Financial Statements
|
THE
LACLEDE GROUP, INC.
|
|
(UNAUDITED)
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
December
31,
|
|
(Thousands,
Except Per Share Amounts)
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Operating
Revenues:
|
|
|
|
|
|
|
|
Regulated
Gas Distribution
|
|
$
|
358,101
|
|
$
|
320,892
|
|
Non-Regulated
Gas Marketing
|
|
|
315,040
|
|
|
181,798
|
|
Other
|
|
|
1,115
|
|
|
1,300
|
|
Total
Operating Revenues
|
|
|
674,256
|
|
|
503,990
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
Regulated
Gas Distribution
|
|
|
|
|
|
|
|
Natural
and propane gas
|
|
|
254,897
|
|
|
222,841
|
|
Other
operation expenses
|
|
|
36,301
|
|
|
35,213
|
|
Maintenance
|
|
|
6,534
|
|
|
6,235
|
|
Depreciation
and amortization
|
|
|
9,119
|
|
|
8,713
|
|
Taxes,
other than income taxes
|
|
|
18,358
|
|
|
16,681
|
|
Total
Regulated Gas Distribution Operating Expenses
|
|
|
325,209
|
|
|
289,683
|
|
Non-Regulated
Gas Marketing
|
|
|
291,601
|
|
|
172,872
|
|
Other
|
|
|
758
|
|
|
1,258
|
|
Total
Operating Expenses
|
|
|
617,568
|
|
|
463,813
|
|
Operating
Income
|
|
|
56,688
|
|
|
40,177
|
|
Other
Income and (Income Deductions) – Net
|
|
|
739
|
|
|
2,649
|
|
Interest
Charges:
|
|
|
|
|
|
|
|
Interest
on long-term debt
|
|
|
6,146
|
|
|
5,126
|
|
Interest
on long-term debt to unconsolidated affiliate trust
|
|
|
—
|
|
|
69
|
|
Other
interest charges
|
|
|
2,646
|
|
|
4,163
|
|
Total
Interest Charges
|
|
|
8,792
|
|
|
9,358
|
|
Income
from Continuing Operations Before Income Taxes
|
|
|
|
|
|
|
|
and
Dividends on Laclede Gas Redeemable Preferred Stock
|
|
|
48,635
|
|
|
33,468
|
|
Income
Tax Expense
|
|
|
17,321
|
|
|
11,922
|
|
Dividends
on Laclede Gas Redeemable Preferred Stock
|
|
|
8
|
|
|
10
|
|
Income
from Continuing Operations
|
|
|
31,306
|
|
|
21,536
|
|
Loss
from Discontinued Operations, Net of Income Tax (Note 2)
|
|
|
—
|
|
|
(633
|
)
|
Net
Income
|
|
$
|
31,306
|
|
$
|
20,903
|
|
|
|
|
|
|
|
|
|
Average
Number of Common Shares Outstanding:
|
|
|
|
|
|
|
|
Basic
|
|
|
21,857
|
|
|
21,554
|
|
Diluted
|
|
|
22,013
|
|
|
21,621
|
|
|
|
|
|
|
|
|
|
Basic
Earnings (Loss) Per Share of Common Stock:
|
|
|
|
|
|
|
|
Income
from Continuing Operations
|
|
$
|
1.43
|
|
$
|
1.00
|
|
Loss
from Discontinued Operations
|
|
|
—
|
|
|
(0.03
|
)
|
Net
Income
|
|
$
|
1.43
|
|
$
|
0.97
|
|
|
|
|
|
|
|
|
|
Diluted
Earnings (Loss) Per Share of Common Stock:
|
|
|
|
|
|
|
|
Income
from Continuing Operations
|
|
$
|
1.42
|
|
$
|
1.00
|
|
Loss
from Discontinued Operations
|
|
|
—
|
|
|
(0.03
|
)
|
Net
Income
|
|
$
|
1.42
|
|
$
|
0.97
|
|
|
|
|
|
|
|
|
|
Dividends
Declared Per Share of Common Stock
|
|
$
|
0.385
|
|
$
|
0.375
|
|
|
|
|
|
|
|
|
|
See
Notes to Consolidated Financial Statements.
|
|
|
|
|
|
|
|
THE
LACLEDE GROUP, INC.
(UNAUDITED)
|
|
Three
Months Ended
|
|
|
|
December
31,
|
|
(Thousands)
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$
|
31,306
|
|
$
|
20,903
|
|
Other
Comprehensive Income (Loss), Before Tax:
|
|
|
|
|
|
|
|
Net
gains (losses) on cash flow hedging derivative
instruments:
|
|
|
|
|
|
|
|
Net
hedging gain arising during the period
|
|
|
2,039
|
|
|
144
|
|
Reclassification
adjustment for gains included in net income
|
|
|
(8,272
|
)
|
|
(2,734
|
)
|
Net
unrealized losses on cash flow hedging derivative
instruments
|
|
|
(6,233
|
)
|
|
(2,590
|
)
|
Amortization
of actuarial loss included in net periodic pension and
|
|
|
|
|
|
|
|
postretirement
benefit cost
|
|
|
50
|
|
|
43
|
|
Other
Comprehensive Loss, Before Tax
|
|
|
(6,183
|
)
|
|
(2,547
|
)
|
Income
Tax Benefit Related to Items of Other Comprehensive Loss
|
|
|
(2,380
|
)
|
|
(984
|
)
|
Other
Comprehensive Loss, Net of Tax
|
|
|
(3,803
|
)
|
|
(1,563
|
)
|
Comprehensive
Income
|
|
$
|
27,503
|
|
$
|
19,340
|
|
|
|
|
|
|
|
|
|
See
Notes to Consolidated Financial Statements.
|
|
|
|
|
|
|
|
THE
LACLEDE GROUP, INC.
(UNAUDITED)
|
|
Dec.
31,
|
|
|
|
Sept.
30,
|
|
|
|
Dec.
31,
|
|
(Thousands)
|
|
2008
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utility
Plant
|
|
$
|
1,239,063
|
|
|
|
$
|
1,229,174
|
|
|
|
$
|
1,195,431
|
|
Less: Accumulated
depreciation and amortization
|
|
|
410,662
|
|
|
|
|
405,977
|
|
|
|
|
395,447
|
|
Net
Utility Plant
|
|
|
828,401
|
|
|
|
|
823,197
|
|
|
|
|
799,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-utility
property
|
|
|
4,055
|
|
|
|
|
3,793
|
|
|
|
|
4,093
|
|
Other
investments
|
|
|
42,995
|
|
|
|
|
43,314
|
|
|
|
|
45,305
|
|
Property
and investments of discontinued operations
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
41,955
|
|
Other
Property and Investments
|
|
|
47,050
|
|
|
|
|
47,107
|
|
|
|
|
91,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
30,080
|
|
|
|
|
14,899
|
|
|
|
|
66,930
|
|
Accounts
receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utility
|
|
|
208,744
|
|
|
|
|
98,708
|
|
|
|
|
211,568
|
|
Non-utility
|
|
|
115,290
|
|
|
|
|
102,389
|
|
|
|
|
68,630
|
|
Other
|
|
|
10,629
|
|
|
|
|
10,486
|
|
|
|
|
10,872
|
|
Allowances
for doubtful accounts
|
|
|
(8,479
|
)
|
|
|
|
(12,624
|
)
|
|
|
|
(8,644
|
)
|
Inventories:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
gas stored underground at LIFO cost
|
|
|
197,423
|
|
|
|
|
206,267
|
|
|
|
|
132,059
|
|
Propane
gas at FIFO cost
|
|
|
19,871
|
|
|
|
|
19,911
|
|
|
|
|
19,913
|
|
Materials,
supplies, and merchandise at average cost
|
|
|
5,353
|
|
|
|
|
5,301
|
|
|
|
|
5,041
|
|
Derivative
instrument assets
|
|
|
25,381
|
|
|
|
|
57,210
|
|
|
|
|
15,953
|
|
Unamortized
purchased gas adjustments
|
|
|
24,149
|
|
|
|
|
33,411
|
|
|
|
|
8,613
|
|
Prepayments
and other
|
|
|
11,460
|
|
|
|
|
25,950
|
|
|
|
|
11,679
|
|
Current
assets of discontinued operations
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
19,799
|
|
Total
Current Assets
|
|
|
639,901
|
|
|
|
|
561,908
|
|
|
|
|
562,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory
assets
|
|
|
354,274
|
|
|
|
|
334,755
|
|
|
|
|
288,868
|
|
Other
|
|
|
6,020
|
|
|
|
|
5,688
|
|
|
|
|
5,067
|
|
Total
Deferred Charges
|
|
|
360,294
|
|
|
|
|
340,443
|
|
|
|
|
293,935
|
|
Total
Assets
|
|
$
|
1,875,646
|
|
|
|
$
|
1,772,655
|
|
|
|
$
|
1,747,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE
LACLEDE GROUP, INC.
CONSOLIDATED
BALANCE SHEETS (Continued)
(UNAUDITED)
|
|
Dec.
31,
|
|
|
|
Sept.
30,
|
|
|
|
Dec.
31,
|
|
(Thousands,
except share amounts)
|
|
2008
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITALIZATION
AND LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock (70,000,000 shares authorized, 22,129,166
21,993,473,
and 21,761,629 shares issued, respectively)
|
|
$
|
22,129
|
|
|
|
$
|
21,993
|
|
|
|
$
|
21,762
|
|
Paid-in
capital
|
|
|
150,166
|
|
|
|
|
147,241
|
|
|
|
|
137,903
|
|
Retained
earnings
|
|
|
335,598
|
|
|
|
|
312,808
|
|
|
|
|
280,438
|
|
Accumulated
other comprehensive income
|
|
|
633
|
|
|
|
|
4,437
|
|
|
|
|
294
|
|
Total
Common Stock Equity
|
|
|
508,526
|
|
|
|
|
486,479
|
|
|
|
|
440,397
|
|
Laclede
Gas redeemable preferred stock
(less
current sinking fund requirements)
|
|
|
467
|
|
|
|
|
467
|
|
|
|
|
627
|
|
Long-term
debt to unconsolidated affiliate trust
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
46,400
|
|
Long-term
debt – Laclede Gas
|
|
|
389,196
|
|
|
|
|
389,181
|
|
|
|
|
309,138
|
|
Total
Capitalization
|
|
|
898,189
|
|
|
|
|
876,127
|
|
|
|
|
796,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
payable
|
|
|
263,500
|
|
|
|
|
215,900
|
|
|
|
|
294,450
|
|
Accounts
payable
|
|
|
175,285
|
|
|
|
|
159,580
|
|
|
|
|
141,093
|
|
Advance
customer billings
|
|
|
16,578
|
|
|
|
|
25,548
|
|
|
|
|
27,382
|
|
Current
portion of preferred stock
|
|
|
160
|
|
|
|
|
160
|
|
|
|
|
160
|
|
Wages
and compensation accrued
|
|
|
14,063
|
|
|
|
|
12,197
|
|
|
|
|
13,262
|
|
Dividends
payable
|
|
|
8,674
|
|
|
|
|
8,400
|
|
|
|
|
8,247
|
|
Customer
deposits
|
|
|
13,772
|
|
|
|
|
14,020
|
|
|
|
|
15,128
|
|
Interest
accrued
|
|
|
6,825
|
|
|
|
|
10,094
|
|
|
|
|
6,371
|
|
Taxes
accrued
|
|
|
37,557
|
|
|
|
|
11,387
|
|
|
|
|
18,935
|
|
Deferred
income taxes current
|
|
|
7,624
|
|
|
|
|
11,669
|
|
|
|
|
1,525
|
|
Other
|
|
|
16,680
|
|
|
|
|
10,249
|
|
|
|
|
6,077
|
|
Current
liabilities of discontinued operations
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
19,582
|
|
Total
Current Liabilities
|
|
|
560,718
|
|
|
|
|
479,204
|
|
|
|
|
552,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
Credits and Other Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
income taxes
|
|
|
216,234
|
|
|
|
|
222,761
|
|
|
|
|
231,115
|
|
Unamortized
investment tax credits
|
|
|
3,918
|
|
|
|
|
3,973
|
|
|
|
|
4,143
|
|
Pension
and postretirement benefit costs
|
|
|
103,507
|
|
|
|
|
98,513
|
|
|
|
|
67,648
|
|
Asset
retirement obligations
|
|
|
27,236
|
|
|
|
|
26,833
|
|
|
|
|
26,517
|
|
Regulatory
liabilities
|
|
|
42,639
|
|
|
|
|
42,191
|
|
|
|
|
39,687
|
|
Other
|
|
|
23,205
|
|
|
|
|
23,053
|
|
|
|
|
26,428
|
|
Deferred
credits and other liabilities of
discontinued
operations
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
3,373
|
|
Total
Deferred Credits and Other Liabilities
|
|
|
416,739
|
|
|
|
|
417,324
|
|
|
|
|
398,911
|
|
Total
Capitalization and Liabilities
|
|
$
|
1,875,646
|
|
|
|
$
|
1,772,655
|
|
|
|
$
|
1,747,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to Consolidated Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE
LACLEDE GROUP, INC.
(UNAUDITED)
|
|
Three
Months Ended
|
|
|
|
December
31,
|
|
(Thousands)
|
|
2008
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$
|
31,306
|
|
|
|
$
|
20,903
|
|
Adjustments
to reconcile net income to net cash provided by (used in)
operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation,
amortization, and accretion
|
|
|
9,193
|
|
|
|
|
9,672
|
|
Deferred
income taxes and investment tax credits
|
|
|
(11,566
|
)
|
|
|
|
1,884
|
|
Other
– net
|
|
|
2,113
|
|
|
|
|
630
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable – net
|
|
|
(127,225
|
)
|
|
|
|
(133,573
|
)
|
Unamortized
purchased gas adjustments
|
|
|
9,262
|
|
|
|
|
4,200
|
|
Deferred
purchased gas costs
|
|
|
(14,832
|
)
|
|
|
|
1,943
|
|
Accounts
payable
|
|
|
17,473
|
|
|
|
|
41,984
|
|
Advance
customer billings - net
|
|
|
(8,970
|
)
|
|
|
|
1,942
|
|
Taxes
accrued
|
|
|
26,170
|
|
|
|
|
(1,987
|
)
|
Natural
gas stored underground
|
|
|
8,844
|
|
|
|
|
6,197
|
|
Other
assets and liabilities
|
|
|
41,002
|
|
|
|
|
38,486
|
|
Net
cash used in operating activities
|
|
|
(17,230
|
)
|
|
|
|
(7,719
|
)
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(14,332
|
)
|
|
|
|
(13,369
|
)
|
Other
investments
|
|
|
(837
|
)
|
|
|
|
(1,194
|
)
|
Net
cash used in investing activities
|
|
|
(15,169
|
)
|
|
|
|
(14,563
|
)
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
Maturity
of First Mortgage Bonds
|
|
|
—
|
|
|
|
|
(40,000
|
)
|
Issuance
of short-term debt – net
|
|
|
47,600
|
|
|
|
|
83,050
|
|
Changes
in book overdrafts
|
|
|
6,115
|
|
|
|
|
—
|
|
Issuance
of common stock
|
|
|
2,245
|
|
|
|
|
1,305
|
|
Dividends
paid
|
|
|
(8,240
|
)
|
|
|
|
(7,897
|
)
|
Employees’
taxes paid associated with restricted shares withheld upon
vesting
|
|
|
(675
|
)
|
|
|
|
—
|
|
Excess
tax benefits from stock-based compensation
|
|
|
650
|
|
|
|
|
8
|
|
Other
|
|
|
(115
|
)
|
|
|
|
—
|
|
Net
cash provided by financing activities
|
|
|
47,580
|
|
|
|
|
36,466
|
|
|
|
|
|
|
|
|
|
|
|
Net
Increase in Cash and Cash Equivalents
|
|
|
15,181
|
|
|
|
|
14,184
|
|
Cash
and Cash Equivalents at Beginning of Period
|
|
|
14,899
|
|
|
|
|
52,746
|
|
Cash
and Cash Equivalents at End of Period
|
|
$
|
30,080
|
|
|
|
$
|
66,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Paid (Refunded) During the Period for:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
11,961
|
|
|
|
$
|
15,226
|
|
Income
taxes
|
|
|
(503
|
)
|
|
|
|
5,931
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to Consolidated Financial Statements.
|
|
|
|
|
|
|
|
|
|
THE
LACLEDE GROUP, INC.
1.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
These
notes are an integral part of the accompanying consolidated financial statements
of The Laclede Group, Inc. (Laclede Group or the Company) and its subsidiaries.
In the opinion of Laclede Group, this interim report includes all adjustments
(consisting of only normal recurring accruals) necessary for the fair
presentation of the results of operations for the periods presented. This Form
10-Q should be read in conjunction with the Notes to Consolidated Financial
Statements contained in the Company’s Fiscal Year 2008 Form
10-K.
The
consolidated financial position, results of operations, and cash flows of
Laclede Group are comprised primarily from the financial position, results of
operations, and cash flows
of Laclede Gas Company
(Laclede Gas or the Utility). Laclede Gas is a regulated natural gas
distribution utility having a material seasonal cycle. As a result, these
interim statements of income for Laclede Group are not necessarily indicative of
annual results or representative of succeeding quarters of the fiscal year. Due
to the seasonal nature of the business of Laclede Gas, earnings are typically
concentrated in the November through April period, which generally corresponds
with the heating season.
REVENUE RECOGNITION -
Laclede
Gas reads meters and bills its customers on monthly cycles. The Utility records
its regulated gas distribution revenues from gas sales and transportation
services on an accrual basis that includes estimated amounts for gas delivered,
but not yet billed. The accruals for unbilled revenues are reversed in the
subsequent accounting period when meters are actually read and customers are
billed. The amounts of accrued unbilled revenues at December 31, 2008
and 2007, for the Utility, were $69.0 million and $50.7 million, respectively.
The amount of accrued unbilled revenue at September 30, 2008 was $13.5
million.
CASH AND CASH EQUIVALENTS -
All highly liquid debt instruments purchased with original maturities of three
months or less are considered to be cash equivalents. Such instruments are
carried at cost, which approximates market value. Outstanding checks on the
Company’s controlled disbursement bank accounts in excess of funds on deposit
create book overdrafts (which are funded at the time checks are presented for
payment) and are classified as Other Current Liabilities on the Consolidated
Balance Sheets. Changes in book overdrafts between periods are reflected as
Financing Activities in the Statements of Consolidated Cash Flows.
GROSS RECEIPTS TAXES -
Gross
receipts taxes associated with Laclede Gas’ natural gas utility service are
imposed on the Utility and billed to its customers. These amounts are recorded
gross in the Statements of Consolidated Income. Amounts recorded in Regulated
Gas Distribution Operating Revenues for the quarters ended
December 31, 2008 and 2007 were $14.8 million, and $13.0 million,
respectively. Gross receipts taxes are expensed by the Utility and included in
the Taxes, Other Than Income Taxes line.
STOCK-BASED COMPENSATION -
Awards of stock-based compensation are made pursuant to The Laclede Group 2006
Equity Incentive Plan and the Restricted Stock Plan for Non-Employee Directors.
Refer to Note 1 of the Consolidated Financial Statements included in the
Company’s Form 10-K for the fiscal year ended September 30, 2008 for
descriptions of these plans.
Restricted
Stock Awards
During
the quarter ended December 31, 2008, the Company awarded 89,850
performance-contingent restricted shares and share units to executive officers
at a weighted average grant fair value of $47.17 per share. This number
represents the maximum shares that can be earned pursuant to the terms of the
awards. The shares and share units were awarded on November 5, 2008
and have a performance period ending September 30, 2011, during which
participants are entitled to receive full dividends and voting rights on the
target level, or 59,900 shares. The number of shares and share units that will
ultimately vest is dependent upon the attainment of certain levels of earnings
growth and portfolio development performance goals; further, under the terms of
the award, the Compensation Committee of the Board of Directors may reduce by up
to 25% the number that vest if the Company’s total shareholder return (TSR)
during the performance period ranks below the median relative to a comparator
group of companies. This TSR provision is considered a market condition under
generally accepted accounting principles.
On
November 2, 2008, 43,000 shares of performance-contingent restricted
stock, awarded on November 2, 2005, vested. On that date, the Company
withheld 12,615 of these vested shares at an average price of $53.48 per share
pursuant to elections by employees to satisfy tax withholding
obligations.
Performance-contingent
restricted stock and performance-contingent restricted stock unit activity for
the quarter ended December 31, 2008 is presented below:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Shares/
|
|
|
Grant
Date
|
|
|
|
Units
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested
at September 30, 2008
|
|
179,100
|
|
|
|
$
|
31.40
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
89,850
|
|
|
|
$
|
47.17
|
|
|
Vested
|
|
(43,000
|
)
|
|
|
$
|
30.46
|
|
|
Forfeited
|
|
—
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested
at December 31, 2008
|
|
225,950
|
|
|
|
$
|
37.85
|
|
During
the quarter ended December 31, 2008, the Company awarded 27,100 shares
of time-vested restricted stock to executives and key employees at a weighted
average grant date fair value of $50.89 per share. These shares were awarded on
November 5, 2008 and vest November 5, 2011. In the interim,
participants receive full dividends and voting rights.
Time-vested
restricted stock and time-vested restricted stock unit activity for quarter
ended December 31, 2008 is presented below:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Shares/
|
|
|
Grant
Date
|
|
|
|
Units
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested
at September 30, 2008
|
|
56,850
|
|
|
|
$
|
32.36
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
27,100
|
|
|
|
$
|
50.89
|
|
|
Vested
|
|
—
|
|
|
|
$
|
—
|
|
|
Forfeited
|
|
(800
|
)
|
|
|
$
|
42.57
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested
at December 31, 2008
|
|
83,150
|
|
|
|
$
|
38.30
|
|
Stock
Option Awards
Stock
option activity for the quarter ended December 31, 2008 is presented
below:
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
|
Average
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
|
Stock
|
|
|
Exercise
|
|
|
Term
|
|
|
Value
|
|
|
|
|
Options
|
|
|
Price
|
|
|
(Years)
|
|
|
($000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at September 30, 2008
|
|
415,850
|
|
|
$
|
30.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
(43,625
|
)
|
|
$
|
31.31
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
(1,500
|
)
|
|
$
|
33.45
|
|
|
|
|
|
|
|
|
|
Expired
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 31, 2008
|
|
370,725
|
|
|
$
|
30.78
|
|
|
6.1
|
|
|
$
|
5,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully
Vested and Expected to Vest
at
December 31, 2008
|
|
365,553
|
|
|
$
|
30.74
|
|
|
6.1
|
|
|
$
|
5,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at December 31, 2008
|
|
296,850
|
|
|
$
|
30.07
|
|
|
5.8
|
|
|
$
|
4,978
|
|
The
closing price of the Company’s common stock was $46.84 at
December 31, 2008.
Equity
Compensation Costs
The
amounts of compensation cost recognized for share-based compensation
arrangements for the quarters ended December 31, 2008 and 2007 are
presented below:
|
|
|
Three
Months Ended
|
|
|
|
|
|
December
31,
|
|
|
|
(Thousands)
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
compensation cost
|
|
$
|
842
|
|
$
|
656
|
|
|
|
Compensation
cost capitalized
|
|
|
(180
|
)
|
|
(135
|
)
|
|
|
Compensation
cost recognized in net income
|
|
|
662
|
|
|
521
|
|
|
|
Income
tax benefit recognized in net income
|
|
|
(256
|
)
|
|
(201
|
)
|
|
|
Compensation
cost recognized in net income, net of income tax
|
|
$
|
406
|
|
$
|
320
|
|
|
As
of December 31, 2008, there was $7.3 million of total unrecognized
compensation cost related to nonvested share-based compensation arrangements.
That cost is expected to be recognized over a weighted average period of
2.6 years.
NEW ACCOUNTING STANDARDS
– In
September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value
Measurements.” This Statement defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. The Statement applies to fair value
measurements required under other accounting guidance that require or permit
fair value measurements. Accordingly, this Statement does not require any new
fair value measurements. The guidance in this Statement does not apply to the
Company’s stock-based compensation plans accounted for in accordance with SFAS
No. 123(R), “Share-Based Payment.” The Company partially adopted SFAS No. 157 on
October 1, 2008 and elected the one-year deferral allowed by FASB
Staff Position (FSP) No. FAS 157-2, which permits delayed application of SFAS
No. 157 for nonfinancial assets and nonfinancial liabilities, except for those
recognized or disclosed at fair value on a recurring basis. The partial adoption
of SFAS No. 157 had no impact on the Company’s financial position or results of
operations. For disclosures required pursuant to SFAS No. 157, see Note 6, Fair
Value Measurements. The Company will adopt SFAS No. 157 for certain nonfinancial
assets and nonfinancial liabilities (primarily asset retirement obligations) as
of the beginning of fiscal year 2010 and does not anticipate that such adoption
will have a material impact on the Company’s financial position or results of
operations.
In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans.” Laclede Group adopted
the recognition and disclosure provisions of this Statement effective
September 30, 2007. The Statement also requires that plan assets and
benefit obligations be measured as of the date of the employer’s fiscal year-end
statement of financial position. In conjunction with adoption of this provision
of SFAS No. 158, the Company will be required to change its valuation
date for its pension and other postretirement plans from June 30 to
September 30. The Company will adopt this provision on
September 30, 2009. Adoption will require certain adjustments to
retained earnings and other comprehensive income, the total amounts of which
will not be known until the September 30, 2009 actuarial valuation of
the plans is complete. However, the majority of these adjustments, attributable
to the Company’s qualified pension plans and other postretirement benefit plans,
are expected to be deferred with entries to regulatory assets.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.” The Statement permits entities to
choose to measure many financial instruments and certain other items at fair
value that are not currently required to be measured at fair value. SFAS No. 159
also establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. This Statement does not affect any
existing accounting literature that requires certain assets and liabilities to
be carried at fair value. Upon adoption of SFAS No. 159, entities are permitted
to choose, at specified election dates, to measure eligible items at fair value
(fair value option). Unrealized gains and losses on items for which the fair
value option has been elected are reported in earnings at each reporting date.
The decision about whether to elect the fair value option is applied instrument
by instrument with few exceptions. The decision is also irrevocable (unless a
new election date occurs) and must be applied to entire instruments and not to
portions of instruments. SFAS No. 159 requires that cash flows related to items
measured at fair value be classified in the statement of cash flows according to
their nature and purpose as required by SFAS No. 95, “Statement of Cash Flows”
(as amended). The Company adopted SFAS No. 159 on October 1, 2008. The
Company did not elect the fair value option for any instruments not currently
reported at fair value. Therefore, the adoption of this Statement had no effect
on the Company’s financial position or results of operations.
In
June 2007, the FASB ratified the consensus reached in Emerging Issues Task
Force (EITF) Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends
on Share-Based Payment Awards.” This Issue addresses how an entity should
recognize the tax benefit received on dividends that are (a) paid to employees
holding equity-classified nonvested shares, equity-classified nonvested share
units, or equity-classified outstanding share options and (b) charged to
retained earnings under SFAS No. 123(R). The Task Force reached a consensus that
such tax benefits should be recognized as an increase in additional paid-in
capital. This EITF Issue also addresses how the accounting for these tax
benefits is affected if an entity’s estimate of forfeitures changes in
subsequent periods. With the adoption of this EITF issue on
October 1, 2008, the Company now records these income tax benefits as
increases to additional paid-in capital. Previously, the Company recorded these
income tax benefits as reductions to income tax expense. Adoption of this EITF
issue did not have a material effect on the Company’s financial position or
results of operations.
In
March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities.” This Statement amends SFAS No. 133, by
requiring enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. This Statement will be
effective for the Company’s interim and annual financial statements beginning in
the second quarter of fiscal year 2009. This Statement encourages, but does
not require, comparative disclosures for earlier periods at initial adoption.
The Company is currently evaluating the provisions of this
Statement.
In
May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally
Accepted Accounting Principles.” SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting principles to be used in
the preparation and presentation of financial statements in accordance with
generally accepted accounting principles. The Company adopted this Statement
effective November 15, 2008. The adoption of SFAS No. 162 did not have
any effect on the Company’s consolidated financial statements.
In
June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities.” This FSP addresses whether instruments granted in share-based
payment transactions are participating securities prior to vesting and,
therefore, need to be included in the earnings allocation in computing earnings
per share (EPS) under the two-class method described by SFAS No. 128, “Earnings
per Share.” The guidance in this FSP states that unvested share-based payment
awards that contain nonforfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and shall be included in
the computation of EPS pursuant to the two-class method. This FSP is effective
for Laclede Group as of the beginning of fiscal year 2010. The FSP requires that
the guidance be applied retrospectively to all prior-period EPS data presented.
The Company is currently assessing the potential impact of this FSP on its EPS
calculations.
In
December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures
about Postretirement Benefit Plan Assets.” This FSP provides guidance on an
employer’s disclosures about plan assets of a defined benefit pension or other
postretirement plan. The FSP requires disclosure of information regarding
investment policies and strategies, the categories of plan assets, fair value
measurements of plan assets, and significant concentrations of risk. The Company
will be required to provide the additional disclosures with its annual financial
statements for fiscal year 2010. The Company is currently evaluating the
provisions of this FSP.
2.
|
DISCONTINUED
OPERATIONS
|
On
March 31, 2008, the Company completed the sale of 100% of its interest
in its wholly-owned subsidiary, SM&P Utility Resources, Inc. (SM&P), to
Stripe Acquisition, Inc. (an affiliate of Kohlberg Management VI, LLC) for $85
million in cash, subject to certain closing and post-closing adjustments.
SM&P is an underground facilities locating and marking business that
previously comprised Laclede Group’s Non-Regulated Services operating segment.
The sales agreement included representations, warranties, and indemnification
provisions customary for such transactions and was filed as an exhibit to the
March 31, 2008 Form 10-Q. For information concerning Laclede Group’s
obligations under these provisions, see Note 9, Commitments and
Contingencies.
In
accordance with generally accepted accounting principles, the operating results
of SM&P have been aggregated and reported on the Statements of Consolidated
Income as Loss from Discontinued Operations, Net of Income Tax. The Company has
reported in discontinued operations interest expense based on amounts previously
recorded by SM&P. For the quarter ended December 31, 2007,
discontinued operations includes pre-tax interest expense of $0.8 million.
Discontinued operations does not include general corporate overhead expense.
Loss from Discontinued Operations reported in the Statements of Consolidated
Income consists of the following:
|
|
|
Three
Months Ended
|
|
|
|
|
December
31,
|
|
|
(Thousands)
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Operating
revenues
|
|
$
|
—
|
|
$
|
37,362
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
—
|
|
|
(954
|
)
|
|
Gain
on disposal
|
|
|
—
|
|
|
—
|
|
|
Pre-tax
loss
|
|
|
—
|
|
|
(954
|
)
|
|
Income
tax benefit
|
|
|
—
|
|
|
(321
|
)
|
|
Loss
from Discontinued Operations
|
|
$
|
—
|
|
$
|
(633
|
)
|
The
assets and liabilities of SM&P have been segregated from continuing
operations and have been reported as assets or liabilities of discontinued
operations on the Consolidated Balance Sheets. Assets and liabilities of
SM&P reported in the Consolidated Balance Sheets as discontinued operations
consist of the following:
|
|
|
Dec.
31,
|
|
|
(Thousands)
|
|
2007
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Property
and Investments:
|
|
|
|
|
|
Goodwill
|
|
$
|
33,595
|
|
|
Property,
plant, and equipment – net
|
|
|
6,561
|
|
|
Other
investments
|
|
|
1,799
|
|
|
Total
Property and Investments
|
|
|
41,955
|
|
|
Current
Assets:
|
|
|
|
|
|
Accounts
receivable – net
|
|
|
18,133
|
|
|
Other
|
|
|
1,666
|
|
|
Total
Current Assets
|
|
|
19,799
|
|
|
Total
Assets
|
|
$
|
61,754
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
$
|
4,489
|
|
|
Wages
and compensation accrued
|
|
|
4,528
|
|
|
Other
|
|
|
10,565
|
|
|
Total
Current Liabilities
|
|
|
19,582
|
|
|
Deferred
credits and other liabilities
|
|
|
3,373
|
|
|
Total
Liabilities
|
|
$
|
22,955
|
|
SFAS
No. 128 requires dual presentation of basic and diluted EPS. Basic EPS does not
include potentially dilutive securities and is computed by dividing net income
by the weighted average number of common shares outstanding during the period.
Diluted EPS assumes the issuance of common shares pursuant to the Company’s
stock-based compensation plans at the beginning of each respective period, or at
the date of grant or award, if later. Shares attributable to stock options and
time-vested restricted stock are excluded from the calculation of diluted
earnings per share if the effect would be antidilutive. For the quarter ended
December 31, 2008, no shares attributable to antidilutive outstanding
stock options were excluded from the calculation of diluted earnings per share.
For the quarter ended December 31, 2007, 105,500 shares attributable
to antidilutive outstanding stock options were excluded from the calculation of
diluted earnings per share. Performance-contingent restricted stock awards are
only included in the calculation of diluted earnings per share to the extent the
underlying performance conditions are satisfied (a) prior to the end of the
reporting period or (b) would be satisfied if the end of the reporting period
were the end of the related contingency period and the result would be dilutive.
For quarters ended December 31, 2008 and 2007, 193,050 and 191,100
shares and share units, respectively, of nonvested performance-contingent
restricted stock were excluded from the calculation of diluted earnings per
share.
|
|
|
Three
Months Ended
|
|
|
|
|
December
31,
|
|
|
(Thousands,
Except Per Share Amounts)
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS:
|
|
|
|
|
|
|
|
|
Income
from Continuing Operations
|
|
$
|
31,306
|
|
$
|
21,536
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding
|
|
|
21,857
|
|
|
21,554
|
|
|
Earnings
Per Share of Common Stock from
|
|
|
|
|
|
|
|
|
Continuing
Operations
|
|
$
|
1.43
|
|
$
|
1.00
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS:
|
|
|
|
|
|
|
|
|
Income
from Continuing Operations
|
|
$
|
31,306
|
|
$
|
21,536
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Shares Outstanding
|
|
|
21,857
|
|
|
21,554
|
|
|
Dilutive
Effect of Stock Options
|
|
|
|
|
|
|
|
|
and
Restricted Stock
|
|
|
156
|
|
|
67
|
|
|
Weighted
Average Diluted Shares
|
|
|
22,013
|
|
|
21,621
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
Per Share of Common Stock from
|
|
|
|
|
|
|
|
|
Continuing
Operations
|
|
$
|
1.42
|
|
$
|
1.00
|
|
4.
|
PENSION
PLANS AND OTHER POSTRETIREMENT
BENEFITS
|
Pension
Plans
Laclede
Gas has non-contributory defined benefit, trusteed forms of pension plans
covering substantially all employees. Benefits are based on years of service and
the participant’s compensation during the highest three years of the last ten
years of employment. Plan assets consist primarily of corporate and U.S.
government obligations and pooled equity funds.
Pension
costs for both the quarters ending December 31, 2008 and 2007 were
$1.5 million, including amounts charged to construction.
The
net periodic pension costs include the following components:
|
|
|
Three
Months Ended
|
|
|
|
|
December
31,
|
|
|
(Thousands)
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost – benefits earned
|
|
|
|
|
|
|
|
|
during
the period
|
|
$
|
3,485
|
|
$
|
3,242
|
|
|
Interest
cost on projected
|
|
|
|
|
|
|
|
|
benefit
obligation
|
|
|
5,268
|
|
|
4,670
|
|
|
Expected
return on plan assets
|
|
|
(5,235
|
)
|
|
(5,162
|
)
|
|
Amortization
of prior service cost
|
|
|
259
|
|
|
272
|
|
|
Amortization
of actuarial loss
|
|
|
774
|
|
|
791
|
|
|
Sub-total
|
|
|
4,551
|
|
|
3,813
|
|
|
Regulatory
adjustment
|
|
|
(3,002
|
)
|
|
(2,280
|
)
|
|
Net
pension cost
|
|
$
|
1,549
|
|
$
|
1,533
|
|
Pursuant
to the provisions of the Laclede Gas pension plans, pension obligations may be
satisfied by lump-sum cash payments. Pursuant to a Missouri Public Service
Commission (MoPSC or Commission) Order, lump-sum payments are recognized as
settlements (which can result in gains or losses) only if the total of such
payments exceeds 100% of the sum of service and interest costs. No lump-sum
payments were recognized as settlements during the three months ended
December 31, 2008 and December 31, 2007.
Pursuant
to a MoPSC Order, the return on plan assets is based on the market-related value
of plan assets implemented prospectively over a four-year period. Gains or
losses not yet includible in pension cost are amortized only to the extent that
such gain or loss exceeds 10% of the greater of the projected benefit obligation
or the market-related value of plan assets. Such excess is amortized over the
average remaining service life of active participants. The recovery in rates for
the Utility’s qualified pension plans is based on an allowance of $4.8 million
annually effective August 1, 2007. The difference between this amount
and pension expense as calculated pursuant to the above and that otherwise would
be included in the Statements of Consolidated Income and Consolidated
Comprehensive Income is deferred as a regulatory asset or regulatory
liability.
Postretirement
Benefits
Laclede
Gas provides certain life insurance benefits at retirement. Medical insurance is
available after early retirement until age 65. The transition obligation not yet
includible in postretirement benefit cost is being amortized over 20 years.
Postretirement benefit costs for both the quarters ended
December 31, 2008 and 2007 were $1.9 million, including amounts
charged to construction.
Net
periodic postretirement benefit costs consisted of the following
components:
|
|
|
Three
Months Ended
|
|
|
|
|
December
31,
|
|
|
(Thousands)
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost – benefits earned
|
|
|
|
|
|
|
|
|
during
the period
|
|
$
|
1,283
|
|
$
|
1,140
|
|
|
Interest
cost on accumulated
|
|
|
|
|
|
|
|
|
postretirement
benefit obligation
|
|
|
1,170
|
|
|
977
|
|
|
Expected
return on plan assets
|
|
|
(594
|
)
|
|
(510
|
)
|
|
Amortization
of transition obligation
|
|
|
34
|
|
|
34
|
|
|
Amortization
of prior service cost
|
|
|
(582
|
)
|
|
(582
|
)
|
|
Amortization
of actuarial loss
|
|
|
877
|
|
|
746
|
|
|
Sub-total
|
|
|
2,188
|
|
|
1,805
|
|
|
Regulatory
adjustment
|
|
|
(278
|
)
|
|
105
|
|
|
Net
postretirement benefit cost
|
|
$
|
1,910
|
|
$
|
1,910
|
|
Missouri
state law provides for the recovery in rates of SFAS No. 106, “Employers’
Accounting for Postretirement Benefits Other Than Pensions,” accrued costs
provided that such costs are funded through an independent, external funding
mechanism. Laclede Gas established Voluntary Employees’ Beneficiary Association
(VEBA) and Rabbi trusts as its external funding mechanisms. VEBA and Rabbi
trusts’ assets consist primarily of money market securities and mutual funds
invested in stocks and bonds.
Pursuant
to a MoPSC Order, the return on plan assets is based on the market-related value
of plan assets implemented prospectively over a four-year period. Gains and
losses not yet includible in postretirement benefit cost are amortized only to
the extent that such gain or loss exceeds 10% of the greater of the accumulated
postretirement benefit obligation or the market-related value of plan assets.
Such excess is amortized over the average remaining service life of active
participants. Previously, the recovery in rates for the postretirement benefit
costs was based on an alternative methodology for amortization of unrecognized
gains and losses as ordered by the MoPSC. The Commission ordered that the
recovery in rates be based on an annual allowance of $7.6 million, effective
August 1, 2007. The difference between this amount and postretirement
benefit cost based on the above and that otherwise would be included in the
Statements of Consolidated Income and Consolidated Comprehensive Income is
deferred as a regulatory asset or regulatory liability.
In
the course of its business, Laclede Group’s non-regulated gas marketing
affiliate, Laclede Energy Resources, Inc. (LER), enters into fixed-price
commitments associated with the purchase or sale of natural gas. LER manages the
price risk associated with these commitments by either closely matching the
offsetting physical purchase or sale of natural gas at fixed prices or through
the use of exchange-traded futures contracts to lock in margins. At
December 31, 2008, LER’s unmatched positions were not material to
Laclede Group’s financial position or results of operations.
Settled
and open exchange-traded futures positions were as follows at
December 31, 2008:
|
|
|
Position
Month
|
|
MMBtu
(millions)
|
|
Average
Price
per
MMBtu
|
|
|
Settled
short positions
|
|
January
2009
|
|
1.49
|
|
$
|
6.75
|
|
|
Settled
long positions
|
|
January
2009
|
|
0.51
|
|
|
6.85
|
|
|
|
|
|
|
|
|
|
|
|
|
Open
short futures positions
|
|
February
2009
|
|
0.31
|
|
|
9.74
|
|
|
|
|
March
2009
|
|
0.27
|
|
|
9.69
|
|
|
|
|
April
2009
|
|
1.04
|
|
|
8.22
|
|
|
|
|
May
2009
|
|
0.02
|
|
|
8.11
|
|
|
|
|
June
2009
|
|
0.39
|
|
|
6.62
|
|
|
|
|
August
2009
|
|
0.31
|
|
|
7.64
|
|
|
|
|
November
2009
|
|
0.10
|
|
|
8.80
|
|
|
|
|
December
2009
|
|
0.44
|
|
|
7.71
|
|
|
|
|
January
2010
|
|
0.15
|
|
|
8.83
|
|
|
|
|
February
2010
|
|
0.15
|
|
|
8.83
|
|
|
|
|
March
2010
|
|
0.10
|
|
|
8.80
|
|
|
|
|
|
|
|
|
|
|
|
|
Open
long futures positions
|
|
February
2009
|
|
0.52
|
|
|
7.86
|
|
|
|
|
March
2009
|
|
0.19
|
|
|
8.63
|
|
|
|
|
April
2009
|
|
0.41
|
|
|
9.22
|
|
|
|
|
May
2009
|
|
0.11
|
|
|
10.00
|
|
The
above futures contracts are derivative instruments, and management has
designated these items as cash flow hedges of forecasted transactions. The fair
values of the instruments are recognized on the Consolidated Balance Sheets. The
change in the fair value of the effective portion of these hedge instruments is
recorded, net of tax, in Other Comprehensive Income. Accumulated Other
Comprehensive Income is a component of Total Common Stock Equity. These amounts
will reduce or be charged to Non-Regulated Gas Marketing Operating Revenues or
Expenses in the Statements of Consolidated Income as the hedged transactions
occur. Based on market prices at December 31, 2008, it is expected
that approximately $3.3 million of pre-tax unrealized gains will be reclassified
into the Consolidated Statement of Income during the next twelve months. The
ineffective portions of these hedge instruments are charged or credited to
Non-Regulated Gas Marketing Operating Revenues or Expenses. The net amount of
pre-tax gains recognized in earnings for the ineffective portion of cash flow
hedges was $2.2 million for the quarter ended December 31, 2008 and
$0.3 million for the quarter ended December 31, 2007. Cash flows
from hedging transactions are classified in the same category as the cash flows
from the items that are being hedged in the Statements of Consolidated Cash
Flows.
6.
|
FAIR
VALUE MEASUREMENTS
|
As
discussed in the New Accounting Standards section of Note 1, effective
October 1, 2008, the Company partially adopted the provisions of SFAS
No. 157. This Statement establishes a three-level hierarchy for fair value
measurements that prioritizes the inputs used to measure fair value. Assessment
of the significance of a particular input to the fair value measurements may
require judgment and may affect the valuation of the asset or liability and its
placement within the fair value hierarchy.
The
following table categorizes the assets and liabilities in the Consolidated
Balance Sheets that are accounted for at fair value on a recurring basis in
periods subsequent to initial recognition.
|
|
|
As
of December 31, 2008
|
|
|
(Thousands)
|
|
Total
|
|
Quoted
Prices
in
Active
Markets
(Level
1)
|
|
Significant
Observable
Inputs
(Level
2)
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable
securities
|
|
$
|
8,918
|
|
$
|
8,918
|
|
$
|
—
|
|
$
|
—
|
|
|
Derivative
instruments
|
|
|
25,381
|
|
|
24,997
|
|
|
384
|
|
|
—
|
|
|
Total
|
|
$
|
34,299
|
|
$
|
33,915
|
|
$
|
384
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
instruments
|
|
$
|
7
|
|
$
|
—
|
|
$
|
7
|
|
$
|
—
|
|
Marketable
securities included in Level 1 are mutual funds valued based on quoted market
prices of identical securities that are provided by the trustees of these
securities. Derivative instruments included in Level 1 are valued using quoted
market prices on the New York Mercantile Exchange. Derivative instruments
included in Level 2 are non-exchange traded derivatives and are valued using
broker or dealer quotation services or by using observable market inputs.
Marketable securities are included in the Other investments line of the
Consolidated Balance Sheets. Liabilities for derivative instruments are included
in the Other line of the Current Liabilities section of the Consolidated Balance
Sheets.
7.
|
OTHER
INCOME AND (INCOME DEDUCTIONS) –
NET
|
|
|
|
Three
Months Ended
|
|
|
|
|
December
31,
|
|
|
(Thousands)
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
1,139
|
|
$
|
1,772
|
|
|
Other
income
|
|
|
411
|
|
|
537
|
|
|
Other
income deductions
|
|
|
(811
|
)
|
|
340
|
|
|
Other
Income and (Income Deductions) – Net
|
|
$
|
739
|
|
$
|
2,649
|
|
The
decrease in Other Income and (Income Deductions) – Net for the quarter ended
December 31, 2008, compared with the quarter ended
December 31, 2007, was primarily due to higher investment losses and
lower interest income.
8.
|
INFORMATION
BY OPERATING SEGMENT
|
All
of Laclede Group’s subsidiaries are wholly owned. The Regulated Gas Distribution
segment consists of the regulated operations of Laclede Gas and is the core
business segment of Laclede Group. Laclede Gas is a public utility engaged in
the retail distribution and sale of natural gas serving an area in eastern
Missouri, with a population of approximately 2.1 million, including the City of
St. Louis and parts of ten other counties in eastern Missouri. The Non-Regulated
Gas Marketing segment includes the results of LER, a subsidiary engaged in the
non-regulated marketing of natural gas and related activities. Other includes
Laclede Pipeline Company’s transportation of liquid propane regulated by the
Federal Energy Regulatory Commission (FERC) as well as non-regulated activities,
including real estate development, the compression of natural gas, and financial
investments in other enterprises. These operations are conducted through five
subsidiaries. Other also includes Laclede Gas’ non-regulated merchandise sales
business. Certain intersegment revenues with Laclede Gas are not eliminated in
accordance with the provisions of SFAS No. 71, “Accounting for the Effects of
Certain Types of Regulation.” Those types of transactions include sales of
natural gas from Laclede Gas to LER, sales of natural gas from LER to Laclede
Gas, and transportation services provided by Laclede Pipeline Company to Laclede
Gas. These revenues are shown on the Intersegment Revenues lines in the table
under Regulated Gas Distribution, Non-Regulated Gas Marketing, and Other
columns, respectively.
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Regulated
|
|
Regulated
|
|
|
|
Unallocated
|
|
|
|
|
|
Gas
|
|
Gas
|
|
|
|
&
|
|
|
|
(Thousands)
|
|
Distribution
|
|
Marketing
|
|
Other
|
|
Eliminations
|
|
Consolidated
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
from external
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
customers
|
|
$
|
356,623
|
|
$
|
305,133
|
|
$
|
855
|
|
$
|
—
|
|
$
|
662,611
|
|
Intersegment
revenues
|
|
|
1,478
|
|
|
9,907
|
|
|
260
|
|
|
—
|
|
|
11,645
|
|
Total
Operating Revenues
|
|
|
358,101
|
|
|
315,040
|
|
|
1,115
|
|
|
—
|
|
|
674,256
|
|
Income
from continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
|
16,148
|
|
|
14,701
|
|
|
457
|
|
|
—
|
|
|
31,306
|
|
Total
assets of continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
|
1,712,374
|
|
|
195,707
|
|
|
114,492
|
|
|
(146,927
|
)
|
|
1,875,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
from external
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
customers
|
|
$
|
319,674
|
|
$
|
178,660
|
|
$
|
1,040
|
|
$
|
—
|
|
$
|
499,374
|
|
Intersegment
revenues
|
|
|
1,218
|
|
|
3,138
|
|
|
260
|
|
|
—
|
|
|
4,616
|
|
Total
Operating Revenues
|
|
|
320,892
|
|
|
181,798
|
|
|
1,300
|
|
|
—
|
|
|
503,990
|
|
Income
(Loss) from continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
|
15,747
|
|
|
5,654
|
|
|
229
|
|
|
(94
|
)
|
|
21,536
|
|
Total
assets of continuing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
operations
|
|
|
1,529,861
|
|
|
123,363
|
|
|
97,021
|
|
|
(64,314
|
)
|
|
1,685,931
|
|
9.
|
COMMITMENTS
AND CONTINGENCIES
|
Commitments
Laclede
Gas and LER have entered into various contracts, expiring on dates through 2017,
for the storage, transportation, and supply of natural gas. Minimum payments
required under the contracts in place at December 31, 2008 are
estimated at approximately $2.1 billion. Additional contracts are generally
entered into prior to or during the heating season. Laclede Gas recovers its
costs from customers in accordance with the PGA Clause.
Leases
and Guarantees
Laclede
Gas has several operating leases for the rental of vehicles that contain
provisions requiring Laclede Gas to guarantee certain amounts related to the
residual value of the leased property. These leases have various terms, the
longest of which extends through 2014. At December 31, 2008, the
maximum guarantees under these leases are $1.8 million. As of
December 31, 2008, the Utility believes that it is unlikely that it
will be subject to the maximum payment amount because it estimates that the
residual value of the leased vehicles will be adequate to satisfy most of the
guaranteed amounts. At December 31, 2008, the carrying value of the
liability recognized for these guarantees was $0.3 million.
Laclede
Group had guarantees totaling $72 million for performance and payment of certain
wholesale gas supply purchases by LER, as of December 31, 2008. No
amounts have been recorded for these guarantees in the financial statements. As
of December 31, 2008, management believes the probability is low that
Laclede Group will be required to make payments under these
guarantees.
Contingencies
and Indemnifications
Laclede
Gas owns and operates natural gas distribution, transmission, and storage
facilities, the operations of which are subject to various environmental laws,
regulations, and interpretations. While environmental issues resulting from such
operations arise in the ordinary course of business, such issues have not
materially affected the Company’s or Laclede Gas’ financial position and results
of operations. As environmental laws, regulations, and their interpretations
change, however, Laclede Gas may be required to incur additional costs. See Note
15 to the Consolidated Financial Statements included in the Company’s Fiscal
Year 2008 Form 10-K for information relative to environmental matters
generally. There have been no significant changes relative to environmental
matters in the first quarter of 2009.
On
December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2
million related to Laclede Gas’ recovery of its purchased gas costs applicable
to fiscal 2005. On September 14, 2007, the Staff withdrew its pursuit
of $5.5 million of the disallowance it had originally proposed. Laclede Gas
believes that the remaining $1.7 million of the MoPSC Staff’s proposed
disallowance lacks merit and is vigorously opposing the adjustment in
proceedings before the MoPSC.
On
December 31, 2007, the MoPSC Staff proposed a disallowance of $2.8
million related to Laclede Gas’ recovery of its purchased gas costs applicable
to fiscal 2006. Laclede Gas believes that the MoPSC Staff’s position lacks merit
and intends to vigorously oppose the adjustment in proceedings before the MoPSC.
In addition, the MoPSC’s Staff raised questions regarding whether certain sales
and capacity release transactions subject to the FERC’s oversight were
consistent with the FERC’s regulations and policies regarding capacity release.
The Company commenced an internal review of the questions raised by the MoPSC
Staff and notified the FERC Staff that it took this action. Subsequently, as a
result of the internal review, the Company has provided the FERC Staff with a
report regarding compliance of sales and capacity release activities with the
FERC’s regulations and policies. On July 23, 2008, the FERC Staff
requested additional information which the Company provided on
August 22, 2008 and September 2, 2008.
On
December 31, 2008, the MoPSC Staff proposed a disallowance of $1.5
million related to Laclede Gas’ recovery of its purchased gas costs applicable
to fiscal 2007. Laclede Gas believes that the MoPSC Staff’s position lacks merit
and intends to vigorously oppose the adjustment in proceedings before the
MoPSC.
As
reported in Note 2, Discontinued Operations, during the quarter ended
March 31, 2008, the Company sold 100% of its interest in its
wholly-owned subsidiary SM&P. The sales agreement (Agreement) includes
representations and warranties customary for such transactions, including, among
others, representations and warranties of the parties as to brokers’ fees; of
SM&P as to its financial status, contracts, title to and condition of
personal and real property, taxes, legal compliance, environmental matters,
employee benefits, and intellectual property. The Agreement also includes
customary indemnification provisions under which Laclede’s aggregate
indemnification obligations are limited to a maximum of $7.0 million for most
claims. Obligations subject to this maximum apply only in the event claims
exceed a stated deductible, both individually and in the aggregate. However,
this maximum limitation and deductible do not apply to obligations associated
with taxes, employee benefits, title to personal property, and certain other
fundamental representations and warranties. A maximum potential future payment
amount cannot be estimated for these obligations. The terms of the
indemnifications in the Agreement are generally dependent upon the statute of
limitations applicable to the particular representations and warranties made by
the Company, although certain representations and warranties have an indefinite
life under the Agreement. As of December 31, 2008, the carrying amount
of the liability recognized for these indemnification obligations was $0.2
million, based on the Company’s assessment of risk, which is believed to be
low.
Laclede
Group is involved in other litigation, claims, and investigations arising in the
normal course of business. While the results of such litigation cannot be
predicted with certainty, management, after discussion with counsel, believes
that the final outcome will not have a material adverse effect on the
consolidated financial position or results of operations of the
Company.
Laclede
Gas Company’s Financial Statements and Notes to Financial Statements are
included in Exhibit 99.1 to this report.
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE
LACLEDE GROUP, INC.
This
management’s discussion analyzes the financial condition and results of
operations of The Laclede Group, Inc. (Laclede Group or the Company) and its
subsidiaries. It includes management’s view of factors that affect its business,
explanations of past financial results including changes in earnings and costs
from the prior year periods, and their effects on overall financial condition
and liquidity.
Certain
matters discussed in this report, excluding historical information, include
forward-looking statements. Certain words, such as “may,” “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “plan,” “seek,” and similar words and
expressions identify forward-looking statements that involve uncertainties and
risks. Future developments may not be in accordance with our expectations or
beliefs and the effect of future developments may not be those anticipated.
Among the factors that may cause results to differ materially from those
contemplated in any forward-looking statement are:
•
|
weather
conditions and catastrophic events, particularly severe weather in the
natural gas producing areas of the country;
|
•
|
volatility
in gas prices, particularly sudden and sustained changes in natural gas
prices, including the related impact on margin deposits associated with
the use of natural gas financial instruments;
|
•
|
the
impact of higher natural gas prices on our competitive position in
relation to suppliers of alternative heating sources, such as
electricity;
|
•
|
changes
in gas supply and pipeline availability; particularly those changes that
impact supply for and access to our market area;
|
•
|
legislative,
regulatory and judicial mandates and decisions, some of which may be
retroactive, including those affecting
|
|
•
|
allowed
rates of return
|
|
•
|
incentive
regulation
|
|
•
|
industry
structure
|
|
•
|
purchased
gas adjustment provisions
|
|
•
|
rate
design structure and implementation
|
|
•
|
franchise
renewals
|
|
•
|
environmental
or safety matters
|
|
•
|
taxes
|
|
•
|
pension
and other postretirement benefit liabilities and funding
obligations
|
|
•
|
accounting
standards;
|
•
|
the
results of litigation;
|
•
|
retention
of, ability to attract, ability to collect from, and conservation efforts
of, customers;
|
•
|
capital
and energy commodity market conditions, including the ability to obtain
funds with reasonable terms for necessary capital expenditures and general
operations and the terms and conditions imposed for obtaining sufficient
gas supply;
|
•
|
discovery
of material weakness in internal controls; and
|
•
|
employee
workforce issues.
|
Readers
are urged to consider the risks, uncertainties, and other factors that could
affect our business as described in this report. All forward-looking statements
made in this report rely upon the safe harbor protections provided under the
Private Securities Litigation Reform Act of 1995. We do not, by including this
statement, assume any obligation to review or revise any particular
forward-looking statement in light of future events.
The
Management’s Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Company’s Consolidated
Financial Statements and the Notes thereto.
THE
LACLEDE GROUP, INC.
RESULTS
OF OPERATIONS
Laclede
Group’s earnings are primarily derived from the regulated activities of its
largest subsidiary, Laclede Gas Company (Laclede Gas or the Utility), Missouri’s
largest natural gas distribution company. Laclede Gas is regulated by the
Missouri Public Service Commission (MoPSC or Commission) and serves the City of
St. Louis and parts of ten other counties in eastern Missouri. Laclede Gas
delivers natural gas to retail customers at rates and in accordance with tariffs
authorized by the MoPSC. The Utility’s earnings are primarily generated by the
sale of heating energy. The Utility’s innovative weather mitigation rate design
lessens the impact of weather volatility on Laclede Gas customers during cold
winters and stabilizes the Utility’s earnings by recovering fixed costs more
evenly during the heating season. Due to the seasonal nature of the business of
Laclede Gas, Laclede Group’s earnings are seasonal in nature and are typically
concentrated in the November through April period, which generally corresponds
with the heating season.
On
March 31, 2008, the Company completed the sale of 100% of its interest
in its wholly-owned subsidiary SM&P Utility Resources, Inc. (SM&P) to
Stripe Acquisition, Inc. (an affiliate of Kohlberg Management VI, LLC) for
$85 million in cash, subject to certain closing and post-closing
adjustments. SM&P is an underground facilities locating and marking business
that formerly comprised Laclede Group’s Non-Regulated Services operating
segment. The sales agreement included representations, warranties, and
indemnification provisions customary for such transactions and was filed as an
exhibit to the March 31, 2008 Form 10-Q. In accordance with generally
accepted accounting principles, the results of operations for SM&P are
reported as discontinued operations in the Consolidated Statements of Income and
its associated assets and liabilities are classified separately in the
Consolidated Balance Sheets.
Laclede
Energy Resources, Inc. (LER) is engaged in the marketing of natural gas and
related activities on a non-regulated basis. LER markets natural gas to both
on-system Utility transportation customers and customers outside of Laclede Gas’
traditional service territory, including large retail and wholesale customers.
As such, LER’s operations and customer base are subject to fluctuations in
market conditions.
Other
subsidiaries provide less than 10% of consolidated revenues.
Laclede
Group’s strategy continues to include efforts to stabilize and improve the
performance of its core Utility, while developing non-regulated businesses and
taking a measured approach in the pursuit of additional growth opportunities
that complement the Utility business.
As
for the Utility, mitigating the impact of weather fluctuations on Laclede Gas
customers while improving the ability to recover its authorized distribution
costs and return continues to be a fundamental component of Laclede Group’s
strategy. The Utility’s distribution costs are the essential, primarily fixed
expenditures it must incur to operate and maintain a more than 16,000 mile
natural gas distribution system and related storage facilities. With regard to
the storage facilities owned by Laclede Gas, management is currently undertaking
an evaluation of the Utility’s natural gas storage field, which was developed
more than 50 years ago, to assess the field’s current and future capabilities.
In addition, Laclede Gas is working continually to improve its ability to
provide reliable natural gas service at a reasonable cost, while maintaining and
building a secure and dependable infrastructure. The settlement of the Utility’s
2007 rate case resulted in enhancements to the Utility’s weather mitigation rate
design that better ensure the recovery of its fixed costs and margins despite
variations in sales volumes due to the impacts of weather and other factors that
affect customer usage. The Utility’s income from off-system sales remains
subject to fluctuations in market conditions. Effective
October 1, 2007, the Utility is allowed to retain 15% to 25% of the
first $6 million in annual income earned (depending on the level of income
earned) and 30% of income exceeding $6 million annually. Some of the factors
impacting the level of off-system sales include the availability and cost of the
Utility’s natural gas supply, the weather in its service area, and the weather
in other markets. When Laclede Gas’ service area experiences warmer-than-normal
weather while other markets experience colder weather or supply constraints,
some of the Utility’s natural gas supply is available for off-system sales and
there may be a demand for such supply in other markets.
Laclede
Gas continues to work actively to reduce the impact of higher costs associated
with wholesale natural gas prices by strategically structuring its natural gas
supply portfolio and through the use of financial instruments. Nevertheless, the
overall cost of purchased gas remains subject to fluctuations in market
conditions. The Utility’s Purchased Gas Adjustment (PGA) Clause allows Laclede
Gas to flow through to customers, subject to prudence review, the cost of
purchased gas supplies, including costs, cost reductions, and related carrying
costs associated with the use of financial instruments to hedge the purchase
price of natural gas, as well as gas inventory carrying costs. The Utility
believes it will continue to be able to obtain sufficient gas supply. High
natural gas prices and other economic conditions may affect sales volumes (due
to the conservation efforts of customers) and cash flows (associated with the
timing of collection of gas costs and related accounts receivable from
customers).
Laclede
Group continues to develop its other subsidiaries. LER continues to focus on
growing its markets on a long-term and sustainable basis by providing both
on-system Utility transportation customers and customers outside of Laclede Gas’
traditional service area with another choice in non-regulated natural gas
suppliers. LER is working to assemble the team, technology, and resources
necessary to expand its geographic service area and the range of services that
it now provides. Nevertheless, income from LER’s operations is subject to
fluctuations in market conditions.
Quarter
Ended December 31, 2008
Earnings
Overview
– Net Income (Loss) by Operating Segment
|
|
|
|
Quarter
Ended
|
|
|
|
|
|
December
31,
|
|
(Millions,
after-tax)
|
|
|
|
|
2008
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated
Gas Distribution
|
|
|
|
$
|
16.1
|
|
|
|
$
|
15.8
|
|
Non-Regulated
Gas Marketing
|
|
|
|
|
14.7
|
|
|
|
|
5.6
|
|
Other
|
|
|
|
|
0.5
|
|
|
|
|
0.1
|
|
Income
from Continuing Operations
|
|
|
|
|
31.3
|
|
|
|
|
21.5
|
|
Loss
from Discontinued Operations
|
|
|
|
|
—
|
|
|
|
|
(0.6
|
)
|
Net
Income
|
|
|
|
$
|
31.3
|
|
|
|
$
|
20.9
|
|
Laclede
Group’s consolidated net income was $31.3 million for the quarter ended
December 31, 2008, compared with $20.9 million for the quarter ended
December 31, 2007. Basic and diluted earnings per share for the
quarter ended December 31, 2008 were $1.43 and $1.42, respectively,
compared with basic and diluted earnings per share of $0.97 reported for the
same quarter last year. Results for the quarter ended
December 31, 2007 included the effect of SM&P’s seasonal operating
loss, reported as discontinued operations this year as a result of the sale of
SM&P on March 31, 2008. Consolidated earnings per share increased
compared to last year primarily due to strong performance reported by Laclede
Group’s Non-Regulated Gas Marketing segment.
Income
from Continuing Operations
Laclede
Group’s income from continuing operations was $31.3 million for the quarter
ended December 31, 2008, compared with $21.5 million for the quarter
ended December 31, 2007. Basic and diluted earnings per share from
continuing operations were $1.43 and $1.42, respectively, for the quarter ended
December 31, 2008, compared with basic and diluted earnings per share
of $1.00 for the quarter ended December 31, 2007. Earnings results
reported by both Laclede Group’s Non-Regulated Gas Marketing segment and its
Regulated Gas Distribution segment increased over the quarter ended
December 31, 2007. Variations in income from continuing operations
were primarily attributable to the factors described below.
Regulated
Gas Distribution net income increased by $0.3 million for the quarter ended
December 31, 2008, compared with the quarter ended
December 31, 2007. The increase in net income was primarily due to the
following factors, quantified on a pre-tax basis:
•
|
the
effect of higher system gas sales volumes, primarily due to colder
weather, and other variations totaling $2.7 million;
and,
|
•
|
higher
Infrastructure System Replacement Surcharge (ISRS) revenues totaling $0.9
million.
|
These
factors were partially offset by:
•
|
an
increase in investment losses totaling $1.6 million;
and,
|
•
|
increases
in operation and maintenance expenses totaling $1.4
million;
|
The
Non-Regulated Gas Marketing segment reported an increase in earnings of $9.1
million compared with the same period last year. This increase was primarily due
to LER’s increased sales volumes attributable to the contracting for additional
pipeline capacity and higher margins on sales of natural gas due to depressed
supply pricing in the Midwest from increased shale supply
production.
Regulated
Gas Distribution Operating Revenues
Laclede
Gas passes on to Utility customers (subject to prudence review) increases and
decreases in the wholesale cost of natural gas in accordance with its PGA
Clause. The volatility of the wholesale natural gas market results in
fluctuations from period to period in the recorded levels of, among other items,
revenues and natural gas cost expense. Nevertheless, increases and decreases in
the cost of gas associated with system gas sales volumes have no direct effect
on net revenues and net income.
Regulated
Gas Distribution Operating Revenues for the quarter ended
December 31, 2008 were $358.1 million, or $37.2 million more than
the same period last year. Temperatures experienced in the Utility’s service
area during the quarter were 12.6% colder than the same quarter last year and
4.6% colder than normal. Total system therms sold and transported were 0.31
billion for the quarter ended December 31, 2008 compared with 0.27
billion for the same period last year. Total off-system therms sold and
transported were 0.04 billion for the quarter ended December 31, 2008
compared with 0.05 billion for the same period last year. The increase in
Regulated Gas Distribution Operating Revenues was primarily attributable to the
following factors:
|
|
(Millions)
|
|
Higher
system sales volumes and other variations
|
|
$
|
37.9
|
|
Higher
wholesale gas costs passed on to Utility customers (subject to prudence
review by the MoPSC)
|
|
|
8.3
|
|
Lower
off-system sales volumes
|
|
|
(7.8
|
)
|
Lower
prices charged for off-system sales
|
|
|
(2.1
|
)
|
Higher
ISRS revenues
|
|
|
0.9
|
|
Total
Variation
|
|
$
|
37.2
|
|
Regulated
Gas Distribution Operating Expenses
Regulated
Gas Distribution Operating Expenses for the quarter ended
December 31, 2008 increased $35.5 million from the same quarter last
year. Natural and propane gas expense increased $32.1 million, or 14.4%, from
last year’s level, primarily attributable to increased system volumes purchased
for sendout and higher rates charged by our suppliers, partially offset by lower
off-system gas expense. Other operation and maintenance expenses increased $1.4
million, or 3.3%, primarily due to higher wage rates, increased charges for
outside services, and increased group insurance charges, partially offset by a
decrease in injuries and damages expense. Taxes, other than income taxes,
increased $1.7 million, or 10.1%, primarily due to increased gross receipts
taxes (attributable to the increased revenues).
Non-Regulated
Gas Marketing Operating Revenues and Operating Expenses
Non-Regulated
Gas Marketing Operating Revenues increased $133.2 million primarily due to 86%
higher sales volumes, partially offset by decreased per unit gas sales prices by
LER. The increase in Non-Regulated Gas Marketing Operating Expenses totaling
$118.7 million was primarily associated with increased volumes purchased,
partially offset by lower prices charged by suppliers.
Other
Income and (Income Deductions) - Net
Other
Income and (Income Deductions) – Net decreased $1.9 million primarily due to
higher investment losses and lower interest income.
Interest
Charges
The
$0.6 million decrease in interest charges was primarily due to lower interest on
short-term debt, partially offset by an increase in interest on long-term debt,
primarily attributable to the issuance of $80.0 million First Mortgage Bonds on
September 23, 2008. Average short-term interest rates were 3.0% for
the quarter ended December 31, 2008 compared with 5.1% for the quarter
ended December 31, 2007. Average short-term borrowings were $262.6
million for the quarter ended December 31, 2008 compared with $255.2
million for the quarter ended December 31, 2007.
Income
Taxes
The
$5.4 million increase in income taxes was primarily due to higher pre-tax
income.
Loss
from Discontinued Operations
Laclede
Group closed on the sale of 100% of its interest in SM&P on
March 31, 2008. Loss from Discontinued Operations for the quarter
ended December 31, 2007 was $0.6 million, attributable to SM&P’s
seasonal operating loss. Basic and diluted loss per share from discontinued
operations for the quarter ended December 31, 2007 was
$0.03.
REGULATORY
MATTERS
During
fiscal 2006, the MoPSC approved permanent modifications to the Cold Weather Rule
affecting the disconnection and reconnection practices of utilities during the
winter heating season. Those modifications included provisions to allow the
Utility to obtain accounting authorizations and defer for future recovery
certain costs incurred with the modifications. During fiscal 2007, the
Utility deferred for future recovery $2.7 million of costs associated with the
fiscal 2007 heating season. On October 31, 2007, the Utility
filed for determination and subsequent recovery of the deferred amount. On
November 16, 2007, the MoPSC directed the MoPSC Staff and the Missouri
Office of Public Counsel (Public Counsel) to submit their positions regarding
the Utility’s filing by February 28, 2008. On
February 28, 2008, the Utility and the MoPSC Staff filed a
Non-Unanimous Stipulation & Agreement in which these parties agreed to a
recovery of $2.5 million of costs. The Non-Unanimous Stipulation &
Agreement was opposed by Public Counsel, and a hearing in this matter was held
before the Commission on March 31, 2008. On April 17, 2008,
the Commission issued its Report and Order approving the $2.5 million cost
recovery recommended by the Utility and the MoPSC Staff. Consistent with the
approved amount, the Utility recorded a reduction in its deferral totaling $0.2
million during the quarter ended March 31, 2008. On
May 29, 2008, Public Counsel appealed the MoPSC’s April 17 Order
to the Cole County, Missouri Circuit Court. On January 6, 2009, the
Court issued its judgment affirming the Commission’s order approving the Cold
Weather Rule compliance cost amount that the Utility and Staff had recommended
over Public Counsel’s objection.
On
December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2
million related to Laclede Gas’ recovery of its purchased gas costs applicable
to fiscal 2005. On September 14, 2007, the Staff withdrew its pursuit
of $5.5 million of the disallowance it had originally proposed. Laclede Gas
believes that the remaining $1.7 million of the MoPSC Staff’s proposed
disallowance lacks merit and is vigorously opposing the adjustment in
proceedings before the MoPSC.
On
December 31, 2007, the MoPSC Staff proposed a disallowance of $2.8
million related to Laclede Gas’ recovery of its purchased gas costs applicable
to fiscal 2006. Laclede Gas believes that the MoPSC Staff’s position lacks
merit and is vigorously opposing the adjustment in proceedings before the MoPSC.
In addition, the MoPSC’s Staff raised questions regarding whether certain sales
and capacity release transactions, subject to the Federal Energy Regulatory
Commission (FERC)’s oversight, were consistent with the FERC’s regulations and
policies regarding capacity release. The Company commenced an internal review of
the questions raised by the MoPSC Staff and notified the FERC Staff that it took
this action. Subsequently, as a result of the internal review, the Company has
provided the FERC Staff with a report regarding compliance of sales and capacity
release activities with the FERC’s regulations and policies. On
July 23, 2008, the FERC Staff requested additional information, which
the Company provided on August 22, 2008 and
September 2, 2008.
On
July 9, 2008, Laclede Gas made a tariff filing with the MoPSC that
would make the payment provisions for the restoration of gas service under the
Utility’s Cold Weather Rule available to customers in the summer of 2008 and
enable the Utility to increase or decrease its PGA rates to correct for any
shortfall or surplus created by the difference between the gas cost portion of
the Utility’s actual net bad debt write-offs and the amount of such cost that is
embedded in its existing rates. The MoPSC suspended the tariff on
August 5, 2008 and established a procedural schedule to consider the
Utility’s filing. As a result, the Cold Weather Rule portion of the filing is
now moot. A formal hearing pertaining to the bad debt portion of the filing was
held on January 5, 2009. The matter is currently pending before the
MoPSC.
On
November 21, 2008, the Utility made an ISRS filing with the Commission
designed to increase revenues by $1.9 million annually. The filing is
pending Commission approval.
On
December 31, 2008, the MoPSC Staff proposed a disallowance of $1.5
million related to Laclede Gas’ recovery of its purchased gas costs applicable
to fiscal 2007. Laclede Gas believes that the MoPSC Staff’s position lacks merit
and intends to vigorously oppose the adjustment in proceedings before the
MoPSC.
CRITICAL
ACCOUNTING POLICIES
Our
discussion and analysis of our financial condition, results of operations,
liquidity, and capital resources is based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. Generally accepted
accounting principles require that we make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. We evaluate our estimates on an
ongoing basis. We base our estimates on historical experience and on various
other assumptions that we believe are reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates. We believe the following
represent the more significant items requiring the use of judgment and estimates
in preparing our consolidated financial statements:
|
Allowances for Doubtful
Accounts
– Estimates of the collectibility of trade accounts
receivable are based on historical trends, age of receivables, economic
conditions, credit risk of specific customers, and other
factors.
|
|
|
|
Employee Benefits and
Postretirement Obligations
– Pension and postretirement obligations
are calculated by actuarial consultants that utilize several statistical
factors and other assumptions provided by Management related to future
events, such as discount rates, returns on plan assets, compensation
increases, and mortality rates. For the Utility, the amount of expense
recognized and the amounts reflected in other comprehensive income are
dependent upon the regulatory treatment provided for such costs, as
discussed further below. Certain liabilities related to group medical
benefits and workers’ compensation claims, portions of which are
self-insured and/or contain “stop-loss” coverage with third-party insurers
to limit exposure, are established based on historical
trends.
|
Regulated Operations
–
Laclede Gas accounts for
its regulated operations in accordance with Statement of Financial Accounting
Standards (SFAS) No. 71, “Accounting for the Effects of Certain Types of
Regulation.” This Statement sets forth the application of accounting principles
generally accepted in the United States of America for those companies whose
rates are established by or are subject to approval by an independent
third-party regulator. The provisions of SFAS No. 71 require, among other
things, that financial statements of a regulated enterprise reflect the actions
of regulators, where appropriate. These actions may result in the recognition of
revenues and expenses in time periods that are different than non-regulated
enterprises. When this occurs, costs are deferred as assets in the balance sheet
(regulatory assets) and recorded as expenses when those amounts are reflected in
rates. Also, regulators can impose liabilities upon a regulated company for
amounts previously collected from customers and for recovery of costs that are
expected to be incurred in the future (regulatory liabilities). Management
believes that the current regulatory environment supports the continued use of
SFAS No. 71 and that all regulatory assets and regulatory liabilities are
recoverable or refundable through the regulatory process. Management believes
the following represent the more significant items recorded through the
application of SFAS No. 71:
|
The
Utility’s PGA Clause allows Laclede Gas to flow through to customers,
subject to prudence review, the cost of purchased gas supplies, including
the costs, cost reductions, and related carrying costs associated with the
Utility’s use of natural gas financial instruments to hedge the purchase
price of natural gas. The difference between actual costs incurred and
costs recovered through the application of the PGA are recorded as
regulatory assets and regulatory liabilities that are recovered or
refunded in a subsequent period. The PGA Clause also authorizes the
Utility to recover costs it incurs to finance its investment in gas
supplies that are purchased during the storage injection season for sale
during the heating season. The PGA Clause also permits the application of
carrying costs to all over- or under-recoveries of gas costs, including
costs and cost reductions associated with the use of financial
instruments. Effective October 1, 2007, the PGA Clause also
provides for a portion of income from off-system sales and capacity
release revenues to be flowed through to
customers.
|
|
The
Company records deferred tax liabilities and assets measured by enacted
tax rates for the net tax effect of all temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes, and the amounts used for income tax purposes. Changes in enacted
tax rates, if any, and certain property basis differences will be
reflected by entries to regulatory asset or regulatory liability accounts
for regulated companies, and will be reflected as income or loss for
non-regulated companies. Pursuant to the direction of the MoPSC, Laclede
Gas’ provision for income tax expense for financial reporting purposes
reflects an open-ended method of tax depreciation. Laclede Gas’ provision
for income tax expense also records the income tax effect associated with
the difference between overheads capitalized to construction for financial
reporting purposes and those recognized for tax purposes without recording
an offsetting deferred income tax expense. These two methods are
consistent with the regulatory treatment prescribed by the
MoPSC.
|
|
|
|
Asset
retirement obligations are recorded in accordance with SFAS No. 143,
“Accounting for Asset Retirement Obligations” and Financial Accounting
Standards Board Interpretation No. (FIN) 47, “Accounting for Conditional
Asset Retirement Obligations.” Asset retirement obligations are calculated
using various assumptions related to the timing, method of settlement,
inflation, and profit margins that third parties would demand to settle
the future obligations. These assumptions require the use of judgment and
estimates and may change in future periods as circumstances dictate. As
authorized by the MoPSC, Laclede Gas accrues future removal costs
associated with its property, plant and equipment through its depreciation
rates, even if a legal obligation does not exist as defined by SFAS No.
143 and FIN 47. The difference between removal costs recognized in
depreciation rates and the accretion expense and depreciation expense
recognizable under SFAS No. 143 and FIN 47 is a timing difference between
the recovery of these costs in rates and their recognition for financial
reporting purposes. Accordingly, consistent with SFAS No. 71, these
differences are deferred as regulatory liabilities.
|
|
|
|
The
amount of net periodic pension and other postretirement benefit cost
recognized in the financial statements related to the Utility’s qualified
pension plans and other postretirement benefit plans is based upon
allowances, as approved by the MoPSC, which have been established in the
rate-making process for the recovery of these costs from customers. The
differences between these amounts and actual pension and other
postretirement benefit costs incurred for financial reporting purposes are
deferred as regulatory assets or regulatory liabilities. SFAS No. 158,
“Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans,” requires that changes that affect the funded status
of pension and other postretirement benefit plans, but that are not yet
required to be recognized as components of pension and other
postretirement benefit cost, be reflected in other comprehensive income.
For the Utility’s qualified pension plans and other postretirement benefit
plans, amounts that would otherwise be reflected in other comprehensive
income are deferred with entries to regulatory assets or regulatory
liabilities.
|
For
further discussion of significant accounting policies, see Note 1 to the
Consolidated Financial Statements included in the Company’s Form 10-K for the
fiscal year ended September 30, 2008.
ACCOUNTING
PRONOUNCEMENTS
The
Company has evaluated or is in the process of evaluating the impact that
recently issued accounting standards will have on the Company’s financial
position or results of operations upon adoption. For disclosures related to the
adoption of new accounting standards, see the New Accounting Standards section
of Note 1 to the Consolidated Financial Statements.
FINANCIAL
CONDITION
CREDIT
RATINGS
As
of December 31, 2008, credit ratings for outstanding securities for
Laclede Group and Laclede Gas issues were as follows:
Type of Facility
|
S&P
|
Moody’s
|
Fitch
|
Laclede Group Issuer Rating
|
A
|
|
A-
|
Laclede Gas First Mortgage Bonds
|
A
|
A3
|
A+
|
Laclede Gas Commercial Paper
|
A-1
|
P-2
|
F1
|
The
Company has investment grade ratings, and believes that it will have adequate
access to the financial markets to meet its capital requirements. These ratings
remain subject to review and change by the rating agencies.
CASH
FLOWS
The
Company’s short-term borrowing requirements typically peak during colder months
when Laclede Gas borrows money to cover the lag between when it purchases its
natural gas and when its customers pay for that gas. Changes in the wholesale
cost of natural gas (including cash payments for margin deposits associated with
the Utility’s use of natural gas financial instruments), variations in the
timing of collections of gas cost under the Utility’s PGA Clause, the
seasonality of accounts receivable balances, and the utilization of storage gas
inventories cause short-term cash requirements to vary during the year and from
year to year, and can cause significant variations in the Utility’s cash
provided by or used in operating activities.
Net
cash used in operating activities for the three months ended
December 31, 2008 was $17.2 million, compared with $7.7 million for
the same period last year. The difference is primarily attributable to
variations associated with the timing of collections of gas cost under the
Utility’s PGA Clause, including the effects of this year’s increase in net cash
payments for margin deposits associated with the Utility’s use of natural gas
financial instruments.
Net
cash used in investing activities for the three months ended
December 31, 2008 was $15.2 million compared with $14.6 million for
the three months ended December 31, 2007. Cash used in investing
activities primarily reflected capital expenditures in both
periods.
Net
cash provided by financing activities was $47.6 million for the three months
ended December 31, 2008 compared with $36.5 million for the three
months ended December 31, 2007. The increase primarily reflects the
effect of the maturity of long-term debt last year, partially offset by the
reduced issuance of short-term debt this year.
LIQUIDITY
AND CAPITAL RESOURCES
Short-term
Debt
As
indicated above, the Company’s short-term borrowing requirements typically peak
during the colder months. These short-term cash requirements can be met through
the sale of commercial paper supported by lines of credit with banks or through
direct use of the lines of credit. Laclede Gas has a line of credit in place of
$320 million from 10 banks, with the largest portion provided by a single bank
being 17.5%. This line expires in December 2011. In November 2008, the
Utility established a seasonal line of credit of $75 million, which expires in
March 2009. Including both lines of credit, the largest portion
provided by a single bank is 26.8%. During the quarter ending December 31, 2008,
Laclede Gas utilized both its line of credit and commercial paper for short-term
funding. Commercial paper outstanding at December 31, 2008
was $73.5 million, while outstanding bank line advances were $190.0 million. The
weighted average interest rate on these short-term borrowings was 1.8% per annum
at December 31, 2008. Based on total short-term borrowings at
December 31, 2008, a change in interest rate of 100 basis points would
increase or decrease pre-tax earnings and cash flows of Laclede Group by
approximately $2.6 million on an annual basis. Portions of such increases or
decreases may be offset through the application of PGA carrying costs. In
addition, Laclede Gas had borrowings from Laclede Group totaling $52.6 million
at December 31, 2008. The Utility had short-term borrowings (including
borrowings from Laclede Group) aggregating to a maximum of $386.4 million at any
one time during the quarter. Excluding borrowings from Laclede Group, the
Utility’s maximum borrowings for the quarter were $309.9
million.
Laclede
Gas’ lines of credit include covenants limiting total debt, including short-term
debt, to no more than 70% of total capitalization and requiring earnings before
interest, taxes, depreciation and amortization (EBITDA) to be at least 2.25
times interest expense. On December 31, 2008, total debt was 63% of
total capitalization
.
For the twelve months ended December 31, 2008, EBITDA was 3.97
times interest expense.
Short-term
cash requirements outside of Laclede Gas have generally been met with
internally-generated funds. However, Laclede Group has $50 million in working
capital lines of credit, $40 million of which expires in August 2009 and
$10 million of which expires in October 2009, to meet short-term
liquidity needs of its subsidiaries. These lines of credit have covenants
limiting the total debt of the consolidated Laclede Group to no more than 70% of
the Company’s total capitalization. This ratio stood at 56% on
December 31, 2008. These lines have been used to provide for seasonal
funding needs of various subsidiaries from time to time. There were no
borrowings under Laclede Group’s lines during the quarter.
Long-term
Debt
At
December 31, 2008, Laclede Gas had fixed-rate long-term debt totaling
$390 million. While these long-term debt issues are fixed-rate, they are subject
to changes in fair value as market interest rates change. However, increases or
decreases in fair value would impact earnings and cash flows only if Laclede Gas
were to reacquire any of these issues in the open market prior to
maturity.
Equity
and Shelf Registrations
Laclede
Gas has on file with the Securities and Exchange Commission (SEC) an effective
shelf registration on Form S-3 for issuance of $350 million of First Mortgage
Bonds, unsecured debt, and preferred stock, of which $270 million remains
available to Laclede Gas at this time. The Utility has authority from the MoPSC
to issue up to $500 million in First Mortgage Bonds, unsecured debt, and equity
securities, of which $371.5 million remained available under this authorization
as of December 31, 2008. During the quarter ending December 31, 2008,
pursuant to this authority, the Utility sold 1,187 shares of its common stock to
Laclede Group for $40.9 million. The amount, timing, and type of
additional financing to be issued will depend on cash requirements and market
conditions.
Laclede
Group has on file an automatic shelf registration on Form S-3 with the SEC that
allows for the issuance of equity securities and debt securities. No securities
have been issued under this registration statement, which expires
November 26, 2011. The amount, timing, and type of financing to be
issued under this shelf registration will depend on cash requirements and market
conditions. In addition, Laclede Group has a registration statement on file on
Form S-3 for the issuance and sale of up to 400,000 shares of its common stock
under its Dividend Reinvestment and Stock Purchase Program. At
December 31, 2008, 399,868 shares remain available for issuance under
this Form S-3.
At
December 31, 2008, Laclede Gas had outstanding preferred stock
totaling $0.6 million, including current maturities. On
January 15, 2009, the Board of Directors of Laclede Gas approved the
final redemption of all of its outstanding 5% Series B and 4.56% Series C
preferred stock on March 31, 2009. The redemption price shall be its
par value of $25 per share, in addition to the dividend payable on
March 31, 2009.
Guarantees
Laclede
Gas has several operating leases for the rental of vehicles that contain
provisions requiring Laclede Gas to guarantee certain amounts related to the
residual value of the leased property. These leases have various terms, the
longest of which extends through 2014. At December 31, 2008, the
maximum guarantees under these leases were $1.8 million. However, the
Utility estimates that the residual value of the leased vehicles will be
adequate to satisfy most of the guaranteed amounts. At
December 31, 2008, the carrying value of the liability recognized for
these guarantees was $0.3 million.
Laclede
Group had guarantees totaling $72 million for performance and payment of certain
wholesale gas supply purchases by LER, as of December 31, 2008. No
amounts have been recorded for these guarantees in the financial
statements.
Other
Utility
capital expenditures were $14.0 million for the three months ended
December 31, 2008, compared with $13.0 million for the same
period last year. Non-utility capital expenditures were $0.3 million for the
three months ended December 31, 2008, compared with $0.4 million for
the three months ended December 31, 2007.
Consolidated
capitalization at December 31, 2008, excluding current obligations of
preferred stock, consisted of 56.6% Laclede Group common stock equity, 0.1%
Laclede Gas preferred stock equity, and 43.3% Laclede Gas long-term
debt.
It
is management’s view that the Company has adequate access to capital markets and
will have sufficient capital resources, both internal and external, to meet
anticipated capital requirements.
The
seasonal nature of Laclede Gas’ sales affects the comparison of certain balance
sheet items at December 31, 2008 and at September 30, 2008,
such as Accounts receivable - net, Gas stored underground, Notes payable,
Accounts payable, Regulatory assets and Regulatory liabilities, and Advance
customer billings. The Consolidated Balance Sheet at December 31, 2007
is presented to facilitate comparison of these items with the corresponding
interim period of the preceding fiscal year.
CONTRACTUAL
OBLIGATIONS
As
of December 31, 2008, Laclede Group had contractual obligations with
payments due as summarized below (in millions):
|
|
Payments
due by period
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
Fiscal
Years
|
|
Contractual
Obligations
|
|
Total
|
|
Fiscal
Year
2009
|
|
Fiscal
Years
2010-2011
|
|
Fiscal
Years
2012-2013
|
|
2014
and
thereafter
|
|
Principal
Payments on Long-Term Debt
|
|
$
|
390.0
|
|
$
|
—
|
|
$
|
25.0
|
|
$
|
25.0
|
|
$
|
340.0
|
|
Interest
Payments on Long-Term Debt
|
|
|
524.2
|
|
|
14.7
|
|
|
48.4
|
|
|
45.1
|
|
|
416.0
|
|
Operating
Leases (a)
|
|
|
16.4
|
|
|
3.9
|
|
|
7.7
|
|
|
3.4
|
|
|
1.4
|
|
Purchase
Obligations – Natural Gas (b)
|
|
|
2,118.6
|
|
|
640.1
|
|
|
931.1
|
|
|
503.3
|
|
|
44.1
|
|
Purchase
Obligations – Other (c)
|
|
|
111.6
|
|
|
13.7
|
|
|
25.4
|
|
|
17.5
|
|
|
55.0
|
|
Total
(d)
|
|
$
|
3,160.8
|
|
$
|
672.4
|
|
$
|
1,037.6
|
|
$
|
594.3
|
|
$
|
856.5
|
|
(a)
|
Operating
lease obligations are primarily for office space, vehicles, and power
operated equipment in the gas distribution segment. Additional payments
will be incurred if renewal options are exercised under the provisions of
certain agreements.
|
(b)
|
These
purchase obligations represent the minimum payments required under
existing natural gas transportation and storage contracts and natural gas
supply agreements in the utility gas distribution and non-regulated gas
marketing segments. These amounts reflect fixed obligations as well as
obligations to purchase natural gas at future market prices, calculated
using December 31, 2008 New York Mercantile Exchange futures
prices. Laclede Gas recovers the costs related to its purchases,
transportation, and storage of natural gas through the operation of its
PGA Clause, subject to prudence review; however, variations in the timing
of collections of gas costs from customers affect short-term cash
requirements. Additional contractual commitments are generally entered
into prior to or during the heating season.
|
(c)
|
These
purchase obligations reflect miscellaneous agreements for the purchase of
materials and the procurement of services necessary for normal
operations.
|
(d)
|
The
categories of Capital Leases and Other Long-Term liabilities have been
excluded from the table above because there are no applicable amounts of
contractual obligations under these categories. Also, commitments related
to pension and postretirement benefit plans have been excluded from the
table above. The Company expects to make contributions to its qualified,
trusteed pension plans totaling $2.0 million during the remainder of
fiscal year 2009. Laclede Gas anticipates a $1.1 million contribution
relative to its non-qualified pension plans during the remainder of fiscal
year 2009. With regard to the postretirement benefits, the Company
anticipates Laclede Gas will contribute $10.0 million to the qualified
trusts and $0.3 million directly to participants from Laclede Gas’ funds
during the remainder of fiscal year 2009. For further discussion of
the Company’s pension and postretirement benefit plans, refer to Note 4,
Pension Plans and Other Postretirement Benefits, of the Notes to
Consolidated Financial
Statements.
|
MARKET
RISK
Laclede
Gas has a risk management policy that allows for the purchase of natural gas
financial instruments with the goal of managing price risk associated with
purchasing natural gas on behalf of its customers. This policy prohibits
speculation. Costs and cost reductions, including carrying costs, associated
with the Utility’s use of natural gas financial instruments are allowed to be
passed on to the Utility’s customers through the operation of its PGA Clause,
through which the MoPSC allows the Utility to recover gas supply costs.
Accordingly, Laclede Gas does not expect any adverse earnings impact as a result
of the use of these financial instruments. However, the timing of recovery for
cash payments related to margin requirements may cause short-term cash
requirements to vary. Nevertheless, carrying costs associated with such
requirements are recovered through the PGA Clause. At
December 31, 2008, the Utility held 35.7 million MMBtu of futures
contracts at an average price of $8.78 per MMBtu. Additionally, 10.1 million
MMBtu of other price risk mitigation was in place through the use of
option-based strategies. These positions have various expiration dates, the
longest of which extends through October 2011.
In
the course of its business, Laclede Group’s non-regulated gas marketing
affiliate, LER, enters into fixed price commitments associated with the purchase
or sale of natural gas. As part of LER’s risk management policy, LER manages the
price risk associated with these commitments by either closely matching the
offsetting physical purchase or sale of natural gas at fixed-prices or through
the use of exchange-traded futures contracts to lock in margins. At
December 31, 2008, LER’s unmatched positions are not material to
Laclede Group’s financial position or results of operations. For details related
to LER’s exchange-traded futures contracts at December 31, 2008, see
Note 5 to the Consolidated Financial Statements.
ENVIRONMENTAL
MATTERS
Laclede
Gas owns and operates natural gas distribution, transmission and storage
facilities, the operations of which are subject to various environmental laws,
regulations and interpretations. While environmental issues resulting from such
operations arise in the ordinary course of business, such issues have not
materially affected the Company’s or Laclede Gas’ financial position and results
of operations. As environmental laws, regulations, and their interpretations
change, however, Laclede Gas may be required to incur additional costs. For
information relative to environmental matters, see Note 15 to the Consolidated
Financial Statements included in the Company’s Form 10-K for the fiscal year
ended September 30, 2008. There have been no significant changes
relative to environmental matters in the first quarter of fiscal
year 2009.
OFF-BALANCE
SHEET ARRANGEMENTS
Laclede
Group has no off-balance sheet arrangements.
Laclede
Gas Company’s Management’s Discussion and Analysis of Financial Condition is
included in Exhibit 99.1 of this report.
Item 3.
Quantitative and Qualitative Disclosures About Market
Risk
For
this discussion, see Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Market Risk, on page 31 of this
report.
As
of the end of the period covered by this report, we carried out an evaluation,
under the supervision and with participation of our management, including our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures pursuant to Rule
13a-15e and Rule 15d-15e under the Securities Exchange Act of 1934, as amended.
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are
effective.
There
have been no changes in our internal control over financial reporting that
occurred during our first fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
For
a description of environmental matters and legal proceedings, see Note 15 to the
Consolidated Financial Statements included in the Company’s Form 10-K for the
fiscal year ended September 30, 2008. For a description of pending
regulatory matters of Laclede Gas, see Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations - Regulatory Matters,
on page 25 of this report.
Laclede
Group and its subsidiaries are involved in litigation, claims and investigations
arising in the normal course of business. While the results of such litigation
cannot be predicted with certainty, management, after discussion with counsel,
believes that the final outcome will not have a material adverse effect on the
consolidated financial position or results of operations of the
Company.
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
On
November 20, 2008 and December 18, 2008, the Board of
Directors of Laclede Gas approved the sale of 1,161 shares and 26 shares,
respectively, of Laclede Gas common stock to Laclede Group. The proceeds from
the sale, totaling $40.0 million and $0.9 million, respectively, were used
to reduce short-term borrowings. Exemption from registration was claimed under
Section 4(2) of the Securities Act of 1933.
During
the quarter ended December 31, 2008, the only repurchases of our
common stock were pursuant to elections by employees to have shares of stock
withheld to cover employee tax withholding obligations upon the vesting of
performance-based restricted stock on November 2, 2008. The following
table provides information on those repurchases.
Period
|
Total
No. of
Shares
Purchased
|
Average
Price Paid
Per
Share
|
Total
No. of Shares
Purchased
as Part of
Publicly
Announced
Plans
|
Maximum
No. of
Shares
that May
Yet
be Purchased
Under
the Plans
|
October
1, 2008 –
October
31, 2008
|
-
|
-
|
-
|
-
|
November
1, 2008 –
November
30, 2008
|
12,615
|
$53.48
|
-
|
-
|
December
1, 2008 –
December
31, 2008
|
-
|
-
|
-
|
-
|
Total
|
12,615
|
|
-
|
-
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrants have
duly caused this report to be signed on their behalf by the undersigned
thereunto duly authorized.
|
|
|
The
Laclede Group, Inc.
|
|
|
|
|
Dated:
|
|
January
28, 2009
|
|
By:
|
/s/
Mark D. Waltermire
|
|
|
|
|
|
Mark
D. Waltermire
|
|
|
|
|
|
Chief
Financial Officer
|
|
|
|
|
|
(Authorized
Signatory and Chief Financial
Officer)
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrants have
duly caused this report to be signed on their behalf by the undersigned
thereunto duly authorized.
|
|
|
Laclede
Gas Company
|
|
|
|
|
Dated:
|
|
January
28, 2009
|
|
By:
|
/s/
Mark D. Waltermire
|
|
|
|
|
|
Mark
D. Waltermire
|
|
|
|
|
|
Senior
Vice President and
|
|
|
|
|
|
Chief
Financial Officer
|
|
|
|
|
|
(Authorized
Signatory and Chief Financial
Officer)
|
Exhibit
No.
|
|
|
|
|
|
|
-
|
Salient
Features of Laclede Gas Company Deferred Income Plan II for Directors and
Selected Executives (as amended and restated effective as of
January 1, 2005).
|
|
|
|
|
-
|
Salient
Features of The Laclede Group, Inc. Deferred Income Plan for Directors and
Selected Executives (effective as of
January 1, 2005).
|
|
|
|
|
-
|
Laclede
Gas Company Incentive Compensation Plan (amended and restated effective as
of January 1, 2005).
|
|
|
|
|
-
|
Laclede
Gas Company Incentive Compensation Plan II (effective as of
January 1, 2005).
|
|
|
|
|
-
|
The
Laclede Group Management Continuity Protection Plan (effective as of
January 1, 2005).
|
|
|
|
|
-
|
Form
of Management Continuity Protection Agreement.
|
|
|
|
|
-
|
Restated
Laclede Gas Company Supplemental Retirement Benefit Plan (as amended and
restated as of January 1, 2005).
|
|
|
|
|
-
|
Laclede
Gas Company Supplemental Retirement Benefit Plan II (effective as of
January 1, 2005).
|
|
|
|
|
-
|
Form
of Restricted Stock Award Agreement.
|
|
|
|
|
-
|
Form
of Performance Contingent Restricted Stock Award
Agreement.
|
|
|
|
|
-
|
Ratio
of Earnings to Fixed Charges.
|
|
|
|
|
-
|
CEO
and CFO Certifications under Exchange Act Rule 13a –
14(a).
|
|
|
|
|
-
|
CEO
and CFO Section 1350 Certifications.
|
|
|
|
|
-
|
Laclede
Gas Company - Financial Statements, Notes to Financial Statements, and
Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
|
|
|
|
Exhibit
10.1
SALIENT
FEATURES OF
LACLEDE
GAS COMPANY
DEFERRED
INCOME PLAN II FOR
DIRECTORS AND SELECTED
EXECUTIVES
(As
amended and restated, effective as of January 1, 2005)
Purpose of
Plan
Laclede Gas Company (the “Company”)
adopted the Deferred Income Plan II, which benefits earned and vested there
under as of December 31, 2004 are not subject to Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”) (the “Grandfathered
Plan”). As a result of the enactment of Code Section 409A, the
Company adopted, as of January 1, 2005, The Laclede Group, Inc.
Deferred Income Plan (“Group Plan”), which governs amounts earned and vested on
January 1, 2005 and thereafter. Effective as of
January 1, 2005, no additional amounts shall be deferrable to this
Grandfathered Plan. Unless otherwise stated, all references herein to
the “Plan” shall mean this “Grandfathered Plan.” The purpose of the
Grandfathered Plan is to further the long-term growth and earnings of the
Company by providing increased incentives to Directors and key executives
(including, but not limited to, Officers), thereby improving the Company’s
ability to attract and retain the services of outstanding
individuals.
The Plan
is designed to enhance the value of current compensation paid to such
individuals by permitting a portion of such compensation to be deferred with
such deferrals forming the basis for attractive retirement income benefits or,
in the case of death before retirement, annual survivor income
benefits.
Plan
Year
The Plan
shall have an initial short Plan Year of October 1, 1993 to
December 31, 1993 during which short Plan Year only Officers and other
key executive employees (but not non-employee Directors) shall be eligible to
make deferrals. After the initial short Plan Year, a Plan Year shall
be a calendar year and all Participants (regardless of whether they are
Officers, other key executives, or non-employee Directors) shall be eligible to
make deferrals.
Applicability
The Plan
will be made available to Directors, Officers and selected key executives of the
Company at salary level grade 9, 10,11 (now known as grade level 15 and higher)
for the respective periods described herein (“Participants”).
Amounts of
Deferral
The
Company’s Board of Directors shall determine on an annual basis the Plan Years
during which deferrals shall be allowed under the Plan. Non-employee
Directors will be permitted to defer up to 100% of fees and retainers in each
year in which deferrals for them are allowed. The deferral by other
Participants shall not exceed 15% of the Participant’s annual salary level
(excluding incentive compensation) as of August 31, 1993 in the case
of the Plan Years commencing October 1, 1993 and
January 1, 1994 and as of the November 1 immediately preceding
each other Plan Year. The minimum amount of deferral in any Plan Year
will be $3,000 for each Participant. Participants shall designate the
amount of scheduled deferrals for the upcoming Plan Year in which deferrals are
allowed and such designated deferral amounts shall not be changed without the
approval of the Compensation Committee; provided, however, that any such change
approved by the Compensation Committee shall apply only with respect to
deferrals of compensation earned after the date of the change, and amounts
already deferred under the Plan shall not be refunded or returned until payable
as Retirement Income Benefits or Survivor Income Benefits. An
election to defer must be made prior to October 1, 1993 in the case of
the short Plan Year commencing October 1, 1993, and prior to the
December 1 immediately preceding each other Plan Year; provided that: (i)
those persons eligible to make deferrals for the short Plan Year commencing
October 1, 1993 must make their deferral election for calendar year
1994 deferrals by October 1, 1993, and (2) a person who becomes a new
Participant after September 30, 1993 may, within 30 days following his
or her selection as a Participant, elect to defer compensation to be earned
after the date of such election. The annual salary deferral shall be
in uniform monthly amounts.
Retirement Income
Benefits
The
amount of annual retirement income benefit depends on the amount of the
compensation deferred, the ages at which deferrals are made and the
Participant’s age at time of retirement. Retirement income benefits
are normally level annual benefits payable to a Participant for a period of 15
years certain following retirement, but extending for life if retirement occurs
at age 65 or older, with the first annual benefit payable within 31 days after
retirement. If death occurs prior to the receipt of 15 annual
payments, the remaining payments will be made to the Participant’s designated
beneficiary. However, each non-employee Director may elect to receive
retirement income benefits payable forty (40) days, or less, prior to such
Director’s retirement in a lump-sum equal to the greater of: (a) such Director’s
actual deferred account accumulated through the date of payment (which income
growth computed in accordance with the table set forth under this heading on
page 3); or (b) the amount which would constitute such Director’s accumulated
deferred account balance at the date of payment computed by using the applicable
minimum retirement income growth percentages specified in the table on page 3
under the heading
“Minimum Retirement
Income”.
A non-employee Director’s election to receive the
lump-sum payment shall be irrevocable, and must be
made not
later than one year in advance of the date of the non-employee Director’s
retirement.
The
amount of each annual salary deferral shall be deemed to have been made at the
beginning of the Plan Year. Deferrals will earn income growth for
each year based on the following age-related percentages applied to the
aggregate amounts of deferrals and prior income growth existing at the beginning
of each Plan Year.
|
Age
at Beginning
Of
Plan Year
|
|
Income
Rate
|
|
|
|
|
|
Under
55
|
|
Moody’s
Plus 1%
|
|
55
- 60
|
|
Moody’s
Plus 2%
|
|
61
and older
|
|
Moody’s
Plus 3%
|
The level
annual retirement income benefit will be determined based on the accumulated
balance of deferrals and income growth at the time of retirement for each
Participant paid out by 15 annual payments with payment period interest computed
at the Moody’s Rate applicable to the year of retirement.
The
Moody’s Rate for each Plan Year shall be the Composite Average Yield on
Corporate Bonds as published by Moody’s Investor Service for the month ending
two months before the beginning of each Plan Year.
Minimum Retirement
Income
The
amount of annual retirement income benefit for each Participant shall not be
less than that produced as if the following income growth and amortization
period interest rate percentages had been applied to the deferrals:
|
Age
at Beginning
Of
Plan Year
|
|
Income
Rate
|
|
|
|
|
|
Under
55
|
|
6%
|
|
55
- 57
|
|
7%
|
|
58
- 60
|
|
8%
|
|
61
and older
|
|
9%
|
|
|
|
|
|
Minimum
Payout Period Interest Rate
|
7%
|
Survivor Income
Benefits
Survivor
income benefits are level annual benefits payable for a period of 15 years
following the death or total disability of a Participant prior to retirement,
with the first annual benefit payable within 60 days following the date of death
or date of cessation of employment with the Company due to total
disability.
The
amount of annual survivor income benefit shall be the same as the minimum
retirement income benefit which would have been payable based on retirement at
age 65 (age 70 for Directors) or, if death or total disability occurs after age
55, the amount of the annual retirement income benefit which would have been
payable had the Participant retired at that time, whichever is
greater.
The
annual survivor income benefit shall be payable to the Participant’s designated
beneficiary in the case of death or to the Participant in the case of total
disability, if living. If death occurs prior to the receipt of 15
annual payments by a totally-disabled Participant, the remaining payments shall
be made to the Participant’s designated beneficiary.
Terminations
Terminations
of employment at Laclede other than by reason of retirement, death or total
disability will result in a single payment to the Participant equal to the
amount of deferrals plus interest accrued at the Moody’s rate applicable to each
Plan Year. Payment shall be made within 31 days after such
termination of employment.
Change of
Control
In the
event a Participant is terminated, and such constitutes a termination following
change in control of the Company, such Participant shall be entitled to receive
a lump sum equal to the greater of (a) the present value of the deferred account
balance projected under the minimum retirement income formula through age 65
(age 70 for Directors) or (b) the actual deferred account accumulated through
the date of termination. The present value set forth under (a) shall
be computed using a discount factor equivalent to the minimum assured Moody’s
rate incorporated into the Plan (5%).
Moreover,
notwithstanding anything herein to the contrary, to the extent, if any, that any
payment or distribution of any portion of the benefit described above (together
with any other benefit under any other plan, policy or arrangement) would
trigger any adverse tax consequences under Section 280G of the Code, or Section
4999 of said Code, such as loss of deductions to the Company, or the payment of
an additional excise tax by the Participant, or both, then the benefit hereunder
(and to the extent necessary, under any other plan, policy, or arrangement
providing for “parachute payments” as defined under Code Section 280G) shall be
reduced (on a pro rata basis for all such plans, policies, or arrangements) to
$1 less than that extent, and to no greater extent. Parachute
payments
and/or
any cutback amount and any other determination with respect to Code Section 280G
shall be determined by the Company in good faith.
Miscellaneous
The Plan
shall be unfunded and payments hereunder shall be made solely from the general
assets of the Company. To the extent any person acquires the right to
receive payments hereunder, such right shall be no greater than that of an
unsecured general creditor of the Company. Notwithstanding the
foregoing, the Company may contribute to a trust fund under a “rabbi trust”
agreement between the Company and Boatmen’s Trust Company if such a trust fund
is hereafter established, and payments under the Plan may be made from any such
trust fund.
No right
or benefit under the Plan shall be subject to anticipation, alienation, sale,
assignment, pledge or encumbrance, and any attempt to anticipate, alienate,
sell, assign, pledge or encumber the same shall be void.
Illustrative
Benefits
Schedules
of typical benefits produced by the Plan are set forth in Appendix
A.
LACLEDE
GAS COMPANY
DEFERRED
INCOME PLAN II FOR DIRECTORS AND SELECTED EXECUTIVES
DESIGNATION
OF BENEFICIARY
PRIMARY
BENEFICIARY FOR BENEFITS PAYABLE UNDER THE PLAN IN THE EVENT OF MY
DEATH:
NAME:
ADDRESS:
RELATIONSHIP:
In the
event my primary beneficiary is not alive, or is a trust that has been
terminated, at the time of my death, then the benefits payable under the Plan in
the event of my death should be paid to:
CONTINGENT
BENEFICIARY:
NAME:
ADDRESS:
RELATIONSHIP:
This designation is intended to replace
all prior designations made by me under the above Plan. I reserve the
right to change any beneficiary named herein without the consent of such
beneficiary by properly completing and delivering a new written Designation of
Beneficiary to the Plan Administrator, or Plan Committee, administering the
Plan.
Exhibit
10.2
SALIENT
FEATURES OF
THE
LACLEDE GROUP, INC.
DEFERRED
INCOME PLAN FOR
DIRECTORS AND SELECTED
EXECUTIVES
(January
1, 2005)
Purpose of
Plan
To
further the long-term growth and earnings of the Laclede Gas Company (“Gas”),
Gas adopted the Deferred Income Plan and Deferred Income Plan II, which benefits
earned and vested thereunder as of December 31, 2004 are not subject
to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)
(the “Grandfathered Plans”). As a result of the enactment of Code
Section 409A, The Laclede Group, Inc. (the “Company”) adopted, as of
January 1, 2005, The Laclede Group, Inc. Deferred Income Plan (the
“Group Plan”), which governs amounts earned and vested on
January 1, 2005 and thereafter. Effective as of
January 1, 2005, no additional amounts shall be deferrable to the
Grandfathered Plans. Unless otherwise stated, all references herein
to the “Plan” shall mean this “Group Plan.”
The
Plan is designed to enhance the value of current compensation paid to such
individuals by permitting a portion of such compensation to be deferred with
such deferrals forming the basis for attractive benefits upon retirement or
death or disability before retirement.
Plan
Year
A
Plan Year shall be a calendar year and all Participants (regardless of whether
they are Officers, other key executives, or non-employee Directors) shall be
eligible to make deferrals.
Applicability
The
Plan will be made available to the Company’s Directors and Officers as well as
selected key executives of the Company and Gas (and such other Affiliates that
adopt the Plan) at a salary level of 9, 10 or 11 (hereinafter known as grade
level 15 or higher) for the respective periods described herein
(“Participants”). It is intended that the Plan constitute an unfunded
deferred compensation arrangement for the benefit of a select group of
management or highly compensated employees (and other service providers) of the
Company and its designated subsidiaries and affiliates for purposes of the
federal income tax laws and the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”) and all documents, agreements or instruments made or given
pursuant to the Plan shall be interpreted so as to effect such
intent.
For
purposes of the Plan, “Affiliate
”
shall mean (i) any
person or entity that directly or indirectly controls, is controlled by or is
under common control with the Company and/or (ii) to the extent provided by
the Company’s Compensation Committee, any person or entity in which the Company
has a significant interest. The term “control” (including, with
correlative meaning, the terms “controlled by” and “under common control with”),
as applied to any person or entity, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such person or entity, whether through the ownership of voting or
other securities, by contract or otherwise;
provided
,
however
, with respect
to any deferrals subject to Section 409A of the Code, the term “Affiliate” shall
mean any member of the Company’s control group within the meaning of U.S.
Treasury Regulation Section 1.409A-1(h)(3), as such may be modified or amended
from time to time, by applying the “at least 50 percent” provisions
thereof.
Amounts of
Deferral
The
Company’s Board of Directors shall determine on an annual basis the Plan Years
during which deferrals shall be allowed under the Plan. Non-employee
Directors will be permitted to defer up to 100% of fees and retainers in each
year in which deferrals for them are allowed. The deferral by other
Participants shall not exceed 15% of the Participant’s annual salary level
(excluding incentive compensation) as of the November 1 of the immediately
preceding Plan Year. The minimum amount of deferral in any Plan Year
will be $3,000 for each Participant. Participants shall designate the
amount of scheduled deferrals for the upcoming Plan Year in which deferrals are
allowed and such designated deferral amounts shall not be changed without the
approval of the Company’s Compensation Committee;
provided
,
however
,
that
(i) such change
shall apply only to the extent that it complies with Code Section 409A and Final
Treasury Regulation 1.409A-3(j)(4)(viii) with respect to deferrals following an
unforeseeable emergency or hardship distribution pursuant to Treasury Regulation
1.401(k)-1(d)(3) under the 401(k) plan in which such Participant is
participating or Final Treasury Regulation 1.409A-3(j)(4)(xii) with respect to
such Participant’s Disability, (ii) such change is approved by the Compensation
Committee, and (iii) such change shall apply only to deferrals of compensation
earned after the date of the change, and amounts already deferred under the Plan
shall not be refunded or returned until payable as otherwise provided in this
Plan. An election to defer must be made prior to the December 1
immediately preceding each Plan Year;
provided
,
that
a person who
becomes a new Participant in this Plan may, within 30 days following his or her
selection as a Participant, elect to defer compensation to be earned after the
date of such election (provided further that such Participant was not eligible
to participate in any plan that is required to be aggregated for this purpose
with this Plan for purposes of Code Section 409A and published guidance
thereunder, including the Grandfathered Plans). The annual salary
deferral shall be in uniform monthly amounts.
Income
Benefits
Generally
The
amount and timing of the income benefit hereunder depends on the amount of the
compensation deferred, the ages at which deferrals are made, the Participant’s
age at time of separation from service, and the reason for the Participant’s
separation from service.
Benefit
On or After Applicable Retirement Age
If
a Participant terminates employment with the Company and its Affiliates on or
after the Participant’s Applicable Retirement Age (as defined below) and the
Change in Control section below is not applicable, the Participant shall be
entitled to a benefit payable in 15 substantially equal annual installments
(each
not
being treated
separately for any purpose under Code Section 409A). “Applicable
Retirement Age” shall mean the attainment, for employees, of age 55; and for
directors, of age 65. The amount of the Participant’s benefit shall
be determined as the greater of the benefit calculated under subsections (a) and
(b) of the Earnings on Deferrals section of this
Plan. Notwithstanding that a Participant’s benefit has commenced in
the form of installments under this section, in the event that the Participant
dies after the commencement of such benefits but before all 15 installments have
been paid, the remaining balance shall be paid in the form of a lump sum as soon
as practicable upon the Participant’s death to such Participant’s beneficiary as
indicated in the Participant’s most recent designation of beneficiary form on
file with the Company and its Affiliate, or, if none is on file, to the
Participant’s estate.
Benefit
Following Change in Control
If
the Participant’s employment with the Company and its Affiliates terminates at
any age within two years following a “Change in Control” (as defined below), the
Participant shall be entitled to a lump sum benefit equal to the greater of (a)
the present value of the deferred account balance projected under the minimum
retirement income formula in subsection (b) of the Earnings on Deferrals section
of this Plan through age 65 (age 71 for Directors) (calculated using a discount
factor equivalent to the minimum assured Moody’s rate incorporated into the Plan
as then in effect) or (b) the actual deferred account balance accumulated
through the date of such termination.
For purposes of this Plan, “Change in
Control” shall mean a change in ownership of the Company, a change in effective
control of the Company, or a change in ownership of a substantial portion of the
Company’s assets as determined in accordance with the following:
(I) a change in ownership of
the Company shall occur on the date that any one person, or more than one person
acting as a group, acquires ownership of the Company stock that, together with
any Company stock held by such person or group, constitutes more than 50% of the
total fair market value or total voting power of the outstanding Company
stock. Notwithstanding the foregoing, if any person or group is
considered to own more than 50% of the total fair market value or the total
voting power of all
outstanding
Company stock, the acquisition of additional Company stock by the same person or
persons is not considered to cause a change in the ownership of the
Company;
(II) Notwithstanding that the Company
has not undergone a change in ownership as described in (I) above, a change in
effective control of the Company shall occur only on either of the following
dates:
(A) the date that any one person, or
more than one person acting as a group, acquires (or has acquired within the
preceding 12-month period ending on the date of the most recent acquisition)
ownership of Company stock possessing 30% or more of the total voting power of
all Company stock. Notwithstanding the foregoing, if any person or
group is considered to own more than 30% of the total voting power of all
outstanding Company stock, the acquisition of additional Company stock by the
same person or group is not considered to cause a change in the effective
control of the Company;
(B) the date a majority of members of
the Company’s Board of Directors is replaced during any 12-month period by
directors whose appointment or election is not endorsed by a majority of the
members of the Board before the date of the appointment or
election.
(III) a sale of all or
substantially all of the Company’s assets by any one person, or more than one
person acting as a group in a single acquisition or a series of acquisitions
within the preceding 12-month period ending on the date of the most recent
acquisition;
provided
,
however
,
that
transfers of
assets to a “related person” as determined under Final Treasury Regulation
1.409A-3(i)(5)(vii) shall not be considered for purposes of this subclause
(III).
In
no event shall an event qualify as a Change in Control hereunder if it fails to
constitute a change in ownership of the Company, a change in effective control
of the Company or a change in ownership of a substantial portion of the Company
assets as determined under Code Section 409A and Final Treasury Regulations and
applicable published guidance thereunder.
Benefit
Upon Participant’s Death
If
the Participant dies prior to the Participant’s Applicable Retirement Age, the
Participant’s designated beneficiary as indicated in the Participant’s most
recent designation of beneficiary form on file with the Company and its
Affiliates, or, if none is on file, the Participant’s estate shall be entitled
to a lump sum benefit equal to the benefit calculated under subsection (b) of
the Earnings on Deferrals section of this Plan that would have been payable had
Participant retired at age 65 (or age 71 for directors);
provided
,
however
,
that
in the event of
the Participant’s death after the Participant’s Applicable Retirement Age but
prior to retirement, such benefit shall equal the accumulated balance on the
date of death, if greater. Such calculations shall include actual
deferrals to the date of death plus deferrals authorized for the remainder of
the Plan year during which the Participant’s death occurs.
Benefit
in All Other Circumstances
Upon
any other termination of employment prior to the Applicable Retirement Age,
including termination due to disability, the Participant shall receive a lump
sum benefit. The lump sum shall be equal to the aggregate amount of
the Participant’s deferrals plus interest accrued at the Moody’s rate applicable
to each Plan Year; provided, however, that in the case of:
·
|
Termination
of a Participant due to disability prior to the Participant’s Applicable
Retirement Age, the Participant’s lump shall be equal to the benefit
calculated under subsection (b) of the Earnings on Deferrals section of
this Plan that would have been payable had the Participant retired at age
65, in the case of employees, or age 71, in the case of directors;
provided
,
however
,
that
in
the event of the Participant’s termination due to disability after the
Participant’s Applicable Retirement Age but prior to retirement, such
benefit shall equal the accumulated balance on the date of termination of
employment due to disability, if greater. Such calculations
shall include actual deferrals to the date of termination due to
disability plus deferrals authorized for the remainder of the Plan year
during which the Participant’s termination of employment due to disability
occurs.
|
280G
Limits
To
the extent a payment or distribution made under this Plan (together with the
Grandfathered Plan or any other plan, policy, or arrangement) is determined to
be a parachute payment under Code Section 280G notwithstanding the above, to the
extent, if any, that any such payment or distribution of any portion of the
benefit described above would trigger any adverse tax consequences under Code
Sections 280G or 4999, such as loss of deductions to the Company or its
affiliate, or the payment of an additional excise tax by the Participant, or
both, then the benefit hereunder (and to the extent necessary, under any other
plan, policy, or arrangement providing for “parachute payments” as defined under
Code Section 280G) shall be reduced (on a pro rata basis for all such plans,
policies, or arrangements) to $1 less than that extent, and to no greater
extent. Parachute payments and/or any cutback amount, and any other
determination with respect to Code Section 280G shall be determined by the
Company in good faith.
Timing
of Payment of Benefits
Benefits
under this Plan shall become payable within 31 days of the applicable
termination of employment or service.
Notwithstanding
anything in this Plan to the contrary, if it is determined that the Participant
is a “specified employee” as defined in Section 409A(a)(2)(B)(i) of the Code and
the regulations and other guidance issued thereunder, then payments (or portion
thereof) under this Plan shall commence no earlier than the first day of the
seventh month following the month in which Participant’s termination of
employment occurs (with the first such payment being a lump sum equal to the
aggregate benefit the Participant would
have
received during such period if no such payment delay had been imposed, together
with interest on such delayed amount during the period of such restriction at a
rate, per annum, equal to the applicable Income Rate in subsection (a) of the
Earnings of Deferrals section in effect in the Plan Year in which the
termination of employment occurs). For purposes of this Plan, a Participant
will not be deemed to have incurred a “termination of employment,” or to the
extent applicable, retirement, if the Participant has not incurred a “separation
from service” as defined in Final Treasury Regulation Section 1.409A-1(h),
including the default presumptions thereof.
Earnings
of Deferrals
(a) The
amount of each annual salary deferral shall be deemed to have been made at the
beginning of the Plan Year, except in the case of person who becomes a new
Participant in this Plan during the Plan Year in which case the total amount of
deferrals for the Plan Year shall be deemed to have been made at the date of the
Participant’s first deferral under the Plan. Deferrals will earn
income growth for each year based on the following age-related percentages
applied to the aggregate amounts of deferrals and prior income growth existing
at the beginning of each Plan Year.
|
Age
at Beginning
Of
Plan Year
|
|
Income
Rate
|
|
|
|
|
|
Under
55
|
|
Moody’s
Plus 1%
|
|
55
- 60
|
|
Moody’s
Plus 2%
|
|
61
and older
|
|
Moody’s
Plus 3%
|
The
level annual retirement income benefit will be determined based on the
accumulated balance of deferrals and income growth at the Participant’s
retirement date paid out by 15 annual payments with payment period interest
computed at the Moody’s Rate applicable to the year of
retirement. Such annuity shall be calculated as an annuity with the
initial payment assumed to occur one year after retirement, notwithstanding the
above.
The
Moody’s Rate for a Plan Year shall be the Composite Average Yield on Corporate
Bonds as published by Moody’s Investor Service for the month of the October
falling in the immediately prior Plan Year.
(b)
Minimum Retirement
Income
The
amount of annual retirement income benefit for each Participant shall not be
less than that produced as if the following income growth and amortization
period interest rate percentages had been applied to the deferrals:
|
Age
at Beginning
Of
Plan Year
|
|
Income
Rate
|
|
|
|
|
|
Under
55
|
|
6%
|
|
55
- 57
|
|
7%
|
|
58
- 60
|
|
8%
|
|
61
and older
|
|
9%
|
|
|
|
|
|
Minimum
Payout Period Interest Rate
|
7%
|
Change
in Time/Form of Payment
(a) Gas
and/or the Company (or any participating Affiliate) may permit a Participant to
elect to change the time and/or form of payment, subject to the following
conditions: (i) the election may not take effect until at least 12 months after
the date on which the election is made; (ii) except with respect to payments
made on account of a Participant’s death, payments of the benefit which a
Participant is eligible to receive must not commence earlier than five (5) years
from the date of the Participant’s originally scheduled payment date; and (iii)
the election must be made at least 12 months prior to the originally scheduled
payment date. Notwithstanding the foregoing, such election shall only
be permitted to the extent it complies with Code Section 409A, the Final
Treasury Regulations and other published guidance thereunder. During
the five years during which the payment of the Participant’s benefit is delayed,
the Participant’s benefit shall accrue interest amount at a rate, per annum,
equal to the applicable Moody’s Rate in subsection (a) of the Earnings of
Deferrals section in effect in the Plan Year in which the termination of
employment occurs
(b) Notwithstanding
any other provision contained herein, to the extent permitted by Gas and/or the
Company and Section 409A of the Code (including Q&A-19(c) of IRS Notice
2005-1, 2005-2 IRB 274 (12/20/2004), Final Treasury Regulations promulgated
under Section 409A of the Code, IRS Notice 2006-79 and IRS Notice 2007-86), Gas
and/or the Company (or any other participating employer) may permit
Participants, on or prior to December 31, 2008, to choose a new payment date(s)
for the payment of all or a portion of the benefits hereunder and/or make a new
election with respect to the form of payment of such benefit(s) and such
elections shall not be treated as a change in the form and timing of payment or
an acceleration of payment in violation of Section 409A of the Code;
provided
,
however
,
that
(i) the
Participant may not make an election hereunder during the 2008 calendar year
that would cause payments to be made outside the 2008 calendar year that, but
for the election, the Participant would otherwise receive during the 2008
calendar year
and
(ii) the Participant may not make an election hereunder during the 2008 calendar
year that would cause payments to be made during the 2008 calendar year that,
but for the election, the Participant would otherwise not receive during the
2008 calendar year. Notwithstanding the foregoing, such election
shall only be permitted to the extent it complies with Code Section 409A, the
Final Treasury Regulations and other published guidance thereunder.
Miscellaneous
(a) The
Company’s Board of Directors may amend or terminate this Plan at any time, and
from time to time. Notwithstanding the above, the Plan may not be
terminated and payments accelerated thereunder contrary to the provisions of
Section 409A of the Internal Revenue Code including, without limitation, Final
Treasury Regulation Section 1.409A-3(j)(4)(ix) with reference to Final Treasury
Regulation Section 1.409A-1(g).
(b) Participation
in the Plan shall in no way be deemed to constitute a right to continue in the
employment of the Company or any affiliate thereof.
(c) The
Plan Administrator shall be the Company’s Controller, or if none, the Controller
of Laclede Gas Company.
(d) Any
claim for benefits under this Plan shall be submitted to the Plan
administrator (the “Plan Administrator”). If the Plan
Administrator denies the claim for benefits, in whole or in part, the Plan
Administrator shall notify the claimant of the adverse benefit
determination no later than ninety (90) days after receipt of the
claim by the Plan, unless the Plan Administrator determines that special
circumstances require an extension of time, which may not exceed a further
ninety (90) days, for processing the claim and so notifies the
claimant in writing prior to the termination of the initial 90 day
period. In the event that a claim for benefits under this Plan
has been denied by the Plan Administrator, the decision shall be subject
to review by the Company upon written request of the claimant made to the
Plan Administrator within sixty (60) days of receipt by the claimant
of notice of such denial. Upon request and free of charge, the
Company shall provide the claimant with reasonably access to all pertinent
information, documents and records with respect to the
claim. The decision of the Company upon review shall be in
writing and shall state the reasons for the decision and the provisions of
this Plan on which the decision is based. Such decision shall
be made within sixty (60) days after the Company’s receipt of written
request for such review unless a hearing is necessitated to determine the
facts and circumstances, in which event a decision shall be rendered as
soon as possible, but not later than one hundred and twenty (120)
days after receipt of the claimant’s written request for
review. The decision of the Company upon review shall be final
and binding on all persons.
|
(e) The
illegality of any provision of this Plan shall not affect the enforceability of
any other provision of this Plan. The Plan shall be construed in
accordance with and governed by the substantive laws of the State of Missouri
without regard to conflict of law rules.
(f) All
payments made under the Plan to a Participant or his or her beneficiary shall be
subject to withholding of such amounts as the Company reasonably may determine
are required to be withheld pursuant to any applicable Federal, state, local, or
foreign law or regulation.
(g) The
rights of Participants and their beneficiaries to benefits under the Plan shall
be solely those of unsecured general creditors of the Company. The
Plan constitutes merely a promise by the Company to make benefit payments in the
future. The Plan is intended to be unfunded for purposes of the Code
and Title I of the Employee Retirement Income Security Act of 1974, as
amended. Notwithstanding the foregoing, the Company may contribute to
a trust fund under a “rabbi trust” agreement between the Company and a banking
organization, if such a trust fund is hereafter established, and payments under
the Plan may be made from any such trust fund. Any asset acquired or
held by the Company in connection with the Company’s liabilities under the Plan
shall not be deemed to be security for the performance of the Company’s
obligations under this Plan.
(h) The
rights and interests of Participants and their beneficiaries to benefit payments
under the Plan shall not be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by
creditors of the Participants or their beneficiaries, and any such rights and
interests under the Plan shall not be liable for or subject to any obligation or
liability of the Participant or beneficiary.
(i) Notwithstanding
any other provision of the Group Plan, this Group Plan is intended to comply
with Section 409A of the Code and shall at all times be interpreted in
accordance with such intent that amounts that may become payable to Participant
shall not be taxable to such Participants until such amounts are paid in
accordance with the terms of the Group Plan. To the extent that any
provision of the Group Plan violates Section 409A of the Code and the Final
Treasury Regulations promulgated thereunder such that amounts would be taxable
to a Participant prior to payment or otherwise subject to penalties under
Section 409A of the Code, such provision shall be automatically reformed or
stricken to preserve the intent hereof. Notwithstanding the
foregoing, in no event will the Company or any of its Affiliates have any
liability for any failure of the Group Plan to satisfy Section 409A of the Code
and such parties do not guarantee that the Group Plan complies with Section 409A
of the Code.
(j) Notwithstanding
the vesting and payment schedule set forth above, amounts may be paid under the
Group Plan prior to the scheduled payment date set forth above, if and to the
extent such amounts become subject to FICA taxes under Code Sections 3101,
3121(a) or 3121(v), and/or withholding taxes under Code Section 3401 or the
corresponding provisions of any state, local or foreign law as a result of the
payment of such FICA taxes;
provided
,
that
, such payment
shall not exceed the FICA amount and such other amount required to be withheld
on account of the payment of such FICA amount. Further, a payment
will be made under the Group Plan at any time the Group Plan fails to meet the
requirements of Section 409A of the Code;
provided
,
that
, such payment
shall not exceed the amount required to be included in income as a result of the
failure to comply with Section 409A of the Code.
THE
LACLEDE GROUP, INC.
DEFERRED
INCOME PLAN FOR DIRECTORS AND SELECTED EXECUTIVES
DESIGNATION
OF BENEFICIARY
PRIMARY
BENEFICIARY FOR BENEFITS PAYABLE UNDER THE PLAN IN THE EVENT OF MY
DEATH:
NAME:
ADDRESS:
RELATIONSHIP:
In
the event my primary beneficiary is not alive, or is a trust that has been
terminated, at the time of my death, then the benefits payable under the Plan in
the event of my death should be paid to:
CONTINGENT
BENEFICIARY:
NAME:
ADDRESS:
RELATIONSHIP:
This designation is intended to replace
all prior designations made by me under the above Plan. I reserve the
right to change any beneficiary named herein without the consent of such
beneficiary by properly completing and delivering a new written Designation of
Beneficiary to the Plan Administrator, or Plan Committee, administering the
Plan.
Exhibit
10.3
LACLEDE
GAS COMPANY
Incentive
Compensation Plan
(Amended
and Restated, Effective as of January 1, 2005)
I. Establishment
and Purposes
In
order to give officers and managerial employees of the Company an increased
incentive to outstanding performance, to reward such performance, and to attract
and retain highly qualified persons as officers and for managerial positions,
there was established the Laclede Gas Company Incentive Compensation Plan, which
amounts earned and vested thereunder as of December 31, 2004 are not subject to
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)
(“Plan”). As a result of the enactment of Code Section 409A, the
Company adopted as of the effective date hereof the Laclede Gas Company
Incentive Compensation Plan II (“Plan II”), which governs benefits earned and
vested on January 1, 2005 and thereafter. Effective as of January 1,
2005, no additional Share Units shall be awarded under the Plan.
II. Definitions
The
following terms, as used in this Plan, shall have the meaning set forth
below:
“Company”--
for the sake of clarity, the Laclede Gas Company
“Employee”--an
officer or managerial employee of the Company.
“Laclede--The
Laclede Group, Inc.
1
“Share
Unit”--an incentive compensation unit. No stock certificate will be
issued for a Share Unit.
No voting power
resides in a Share Unit.
“Dividend
Equivalent”--an amount in cash equivalent to the cash dividend paid on each
share of Laclede’s
common stock.
“Aggregate
Annual Dividend Equivalent”--an amount computed, at the time of the award of a
Share
Unit, at the then
current annual cash
dividend
rate on Laclede’s common stock.
“Awardee”--an
Employee awarded a Share Unit.
“Spouse”--a
spouse is that person who on the date of the Awardee’s death is lawfully
married to the
Awardee.
1
The
Laclede Group is a result of a reorganization described in Amendment No. 1 to
the Form S-4
of The
Laclede Group, Inc. filed on December 14, 2000.
“Consolidated
Retained Earnings”--consolidated retained earnings as stated in Laclede’s annual
report to stockholders for the fiscal year next preceding the date of any
calculation pursuant to Section VI hereof.
“Consolidated
Earnings”--consolidated earnings (or loss) applicable to common stock as stated
in Laclede’s annual report to stockholders for the fiscal year next preceding
the date of any calculation hereunder, subject to any adjustments thereto
pursuant to Paragraph VI hereof.
“Disability”--disability
is when, based on competent medical evidence, the Awardee is unable, by reason
of any medically determinable physical or mental impairment, to perform the
duties required by Awardee’s job; and Awardee is unable to perform any other
work available to Awardee within the Company, whether or not Awardee is eligible
for any other Company disability program.
“Deferred
Compensation”--an amount, allocable to each Share Unit outstanding at the end of
a fiscal year, equal to the per common share net increase, or decrease in
Consolidated retained Earnings for that fiscal year. However, no
Deferred Compensation Credits shall accrue on Share Units held by an Awardee
after the fiscal year in which his employment has terminated due to retirement,
disability, death or the election of the Awardee following a hostile Change in
Control.
“Change
of Control”--When any person, as such term is used in Sections 13(d) and
14(d)(2) of the Securities Act of 1934 becomes a beneficial owner, directly or
indirectly, of Laclede’s securities representing more than fifty percent (50%)
of the combined voting power of Laclede’s then outstanding securities, or when
any such person becomes a beneficial owner, directly or indirectly, of at least
thirty percent (30%) and no more than fifty percent (50%) of such securities and
a majority of the outside members of Laclede’s Board of Directors decides that a
de facto Change in Control has occurred. Change in Control approved
by a majority of the outside members of Laclede’s Board of Directors as
constituted immediately prior to the Change in Control is hereinafter referred
to as a friendly Change in Control and a Change in Control not approved by a
majority of the outside members of Laclede’s Board of Directors as constituted
immediately prior to the Change in Control is heretofore and hereinafter
referred to as a hostile Change in Control.
III.
Eligibility
No Awardee whose
employment with the Company shall be terminated other than by retirement,
disability, death or at his election following a hostile Change in Control or
who shall engage in any business which is competitive with the public utility
business of the Company shall be eligible to receive any payments under the
Plan. All Deferred Compensation accrued prior to such termination or
such competitive activity shall be forfeited.
IV. Administration
The Compensation
Committee of Laclede’s Board of Directors shall have authority to recommend to
the Board from time to time the award of Share Units to selected
Employees. Upon such recommendation, the Board of Directors,
exclusive of any Directors who are eligible to participate in the Plan, may
award Share Units to any or all such Employees. The Board of
Directors shall otherwise administer the Plan in all respects, and any decision
of the Board with respect to any question arising as to the Employees selected
for awards, the amount and form of awards and interpretations of the Plan shall
be final, conclusive, and binding.
V. Payment
of Dividend Equivalents
When Laclede pays a
cash dividend on its common stock, it shall, subject to the provisions of
Section III., pay a Dividend Equivalent to each Awardee for each Share Unit held
on the date of such payment. Dividend Equivalents will be paid to
each Awardee until his death. Upon the death of an Awardee leaving a Spouse
surviving, Dividend Equivalents shall be paid to such Spouse for
life.
Notwithstanding the
provisions of the final two sentences of the immediately preceding unnumbered
paragraph of this Section V, with respect to awards made on or after January 26,
1995, an Awardee who later retires before attaining the age of 65 years (other
than by reason of death or Disability, or following a hostile Change of Control)
shall not be entitled to post-retirement Dividend Equivalents payable at any
time after such Awardee’s retirement, unless the Awardee remains employed by the
Company for at least the following respective periods (based on the Awardee’s
age at the date of the award of the Share Units in question) subsequent to the
date upon which the Share Units are awarded:
Age
at Date of Award
|
|
Number
of Years of Service
Required
Following the
Date
of Such Award
|
|
|
|
61 and older
|
|
2
years
|
t least 55, but less than 61
|
|
4
years
|
less than 55
|
|
5
years
|
VI. Calculation
and Payment of Deferred Compensation
Each year, the
Company shall, subject to the provisions of Section III., credit or debit the
applicable Deferred Compensation amount to each Awardee for each Share Unit held
during such year; provided that with regard to Share Units awarded on or after
January 26, 1995 the Deferred Compensation amount reflecting the change in
Consolidated Retained Earnings for the first fiscal year taken into account in
computing the Deferred Compensation amount shall in no event be less than
zero. The calculation of Deferred Compensation shall be subject to
the power of Laclede’s Board of Directors from time to time to (i) adjust the
amount of Consolidated Retained Earnings to reflect events or transactions which
have a significant relation to the efforts and performance of any or all
Awardees, or (ii) exclude from the computation of Consolidated Retained Earnings
all or any portion of Consolidated Earnings deemed to reflect events or
transactions (including the effect of weather conditions) which have no
significant relation to the efforts and performance of any or all
Awardees. The aggregate of the annual Deferred Compensation amounts,
if any, credited to an Awardee shall accrue interest at a rate equal to the
prime rate charged by US Bank National Association at the time such interest
accrues, but only from and not before the date of retirement, disability, death
or the election of the Awardee to terminate employment following a hostile
Change in Control, and shall be payable in ten equal annual installments to the
Awardee or, if he dies before all such payments have been made, to his surviving
beneficiaries designated in writing, and filed with the Company, or if none,
then to his estate. Payments shall commence on the first day of the
fifth month following the month in which the earlier of the Awardee’s
retirement, disability, death or the election of the Awardee to terminate
employment following a hostile Change in Control occurs.
Notwithstanding any
of the other provisions of this Section VI, with respect to awards made on or
after January 26, 1995, an Awardee who later retires before attaining the age of
65 years (other than by reason of death or Disability, or following a hostile
Change of Control) shall not be entitled to post-retirement Deferred
Compensation payable at any time after such Awardee’s retirement, unless the
Awardee remains employed by the Company for at least the following respective
periods (based on the Awardee’s age at the date of the award of the Share Units
in question) subsequent to the date upon which the Share Units are
awarded.
Age at Date of Award
|
|
Number
of Years of Service
Required
Following the
Date
of Such Award
|
|
|
|
61 and older
|
|
2
years
|
t least 55, but less than 61
|
|
4
years
|
less
than 55
|
|
5
years
|
VII. Adjustments
In the event of any
stock dividend or stock split, the Board of Directors shall increase
proportionately each Awardee’s Share Units. In the event of any
combination of shares, reclassification of shares, or other similar change in
capitalization, or any distribution other than cash dividends to holders of
shares of Laclede common stock, the Board of Directors may make such
adjustments, in the light of the change in distributions, as it deems equitable
both to the Awardees and the Company, in the number of share Units outstanding
and in the calculation of Deferred Compensation amounts.
VIII. Nonassignability
All Share Units
awarded and all Dividend Equivalents and Deferred Compensation payable hereunder
shall be nonassignable. Neither any Share Unit awarded hereunder nor
any Dividend Equivalents or Deferred Compensation amounts payable hereunder
shall be subject to the debts or obligations of any person entitled thereto,
nor, except as provided herein, may any Share Units or the proceeds therefrom,
voluntarily or involuntarily, be transferred or assigned to, or availed of by,
any person other than the Awardee.
IX. Effective
Date and Termination
The Plan as amended
and restated shall be effective as of January 1, 2005 although no further awards
will be made under this Plan I on and after such date. The Board of
Directors shall have the right at any time and from time to time to discontinue
and reinstate the Plan in whole or in part or amend the Plan provided that no
share unit previously awarded nor any deferred compensation amount theretofore
accrued shall be diminished or forfeited by any discontinuance, reinstatement,
or amendment of the Plan except pursuant to the forfeiture provision in Section
III.
X. Limitations
The Board of
Directors shall not award, in any fiscal year, Share Units yielding Aggregate
Annual Dividend Equivalents which would reduce Consolidated Earnings by more
than ½%. The Board of Directors also shall not award, in any fiscal
year, Share Units yielding Aggregate Annual Dividend Equivalents which, with
Aggregate Annual Dividend Equivalents on outstanding Share Units plus any
Deferred Compensation payments made in the next preceding fiscal year, would
reduce Consolidated Earnings by more than 2 ½%. The Board of
Directors shall not award to any Employee a number of Share Units which would
cause the Aggregate Annual Dividend Equivalents on Share Units held by him to
exceed 25% of his then current annual salary from the Company.
XI.
General
Payments made to any
Awardee shall constitute special incentive compensation and will not be taken
into account in determining the amount of any pension under any pension or
retirement plan of the Company and will not affect the amount of any life
insurance coverage available to beneficiaries under any group life insurance
plan of the Company.
XII. Effect
of Change in Control
(a) In
the event of any Change in Control, the regular quarterly Dividend Equivalent
payments shall be continued to be made to each eligible Awardee until his death
and thereafter to his surviving spouse, and each quarterly Dividend Equivalent
payment shall be no less than the amount determined by applying the highest
quarterly Dividend Rate applicable to the Company’s common stock during the
twelve (12) months preceding such Change in Control, multiplied by not less than
the number of Share Units each Awardee had immediately preceding such Change in
Control. If a Change in Control occurs, then the annual Deferred
Compensation to be credited to each Awardee shall be no less than the per common
share change in the Company’s Consolidated Retained Earnings during the lower of
the last two (2) full fiscal years preceding such Change in Control applied to
the number of the Awardee’s Share Units existing immediately before such Change
in Control.
(b) After
any Change in Control an eligible Awardee who has elected to terminate his
employment or a retired or disabled Awardee, or a surviving spouse of an
Awardee, any of whom has elected in writing either: (i) within thirty days after
the employee became an Awardee under the Plan, or (ii) by September 22, 1990, in
the case of all Awardees who have received awards prior to August 23, 1990, to
be paid his or her benefits in a lump sum following a Change in Control, shall
be paid the present value of the future amounts due as Dividend Equivalent
payments in a lump sum, based on his and his spouse’s life expectancy, or a
surviving spouse’s life expectancy, as the case may be, utilizing the Pension
Benefit Guaranty Corporation rate and the Pension Benefit Guaranty Corporation
Mortality Tables existing at the time of such election, and/or, in the case of
Deferred Compensation, to receive the full amount due undiscounted but with
interest as heretofore provided to the date of payment.
XIII. Miscellaneous
(a) The
Plan shall be unfunded and payments hereunder shall be made solely from the
general assets of the Company. To the extent any person acquires the
right to receive payments hereunder, such right shall be no greater than that of
an unsecured general creditor of the Company. Notwithstanding the
foregoing, the Company may contribute to the Trust Fund established under the
Trust Agreement entered into as of the 7
th
day of
December, 1989, between the Company and Boatmen’s Trust Company and payments
under the Plan may be made from said Trust Fund.
(b) No
right or benefit under the Plan shall be subject to anticipation, alienation,
sale, assignment, pledge, or encumbrance, and any attempt to anticipate,
alienate, sell, assign, pledge or encumber the same shall be void.
(c) Notwithstanding
anything herein to the contrary, to the extent, if any, that any payment or
distribution of any portion of the benefit described above (together with any
other benefit under any other plan, policy or arrangement) would trigger any
adverse tax consequences under Section 280G of the Code, or Section 4999 of said
Code, such as loss of deductions to the Company, or the payment of an additional
excise tax by the Awardee, or both, then the benefit hereunder (and to the
extent necessary, under any other plan, policy, or arrangement providing for
“parachute payments” as defined under Code Section 280G) shall be reduced (on a
pro rata basis for all such plans, policies, or arrangements) to $1 less than
that extent, and to no greater extent. Parachute payments and/or any
cutback amount and any other determination with respect to Code Section 280G
shall be determined by the Company in good faith.
DESIGNATION
OF BENEFICIARY FOR CERTAIN BENEFITS UNDER
THE
LACLEDE GAS COMPANY INCENTIVE COMPENSATION PLAN
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I
hereby designate that my primary beneficiary under the Incentive
Compensation Plan for any "Deferred
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Compensation"
amounts payable after my death shall be:
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|
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In
the event my primary beneficiary is not alive at the time of my death or,
in the case of a trust, has been
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terminated,
then the remaining "Deferred Compensation" benefits payable under the Plan
shall be paid to:
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I
understand that the Incentive Compensation Plan does not allow me to designate a
beneficiary for “Dividend
Equivalents”
but that they will be paid to my spouse, if my spouse survives me, for my
spouse’s life.
Exhibit
10.4
LACLEDE
GAS COMPANY
Incentive
Compensation Plan II
(Effective
as of January 1, 2005)
I. Establishment
and Purposes
In order to give officers and
managerial employees of the Company an increased incentive to outstanding
performance, to reward such performance, and to attract and retain highly
qualified persons as officers and for managerial positions, there was
established the Laclede Gas Company Incentive Compensation Plan, which amounts
earned and vested thereunder as of December 31, 2004 are not subject to Section
409A of the Internal Revenue Code of 1986, as amended (the “Code”) (“Plan
I”). As a result of the enactment of Code Section 409A, the
Company adopted as of the effective date hereof this Laclede Gas Company
Incentive Compensation Plan II (“Plan II”), which governs benefits earned and
vested on January 1, 2005 and thereafter. Effective as of January 1,
2005, no additional Share Units shall be awarded under Plan I. Unless
otherwise stated, all references herein to the “Plan” shall mean this “Plan
II.”
II. Definitions
The following terms, as used in the
Plan, shall have the meaning set forth below:
“Company” -- The Laclede Gas Company
“Employee” -- an officer or managerial employee of the Company.
“Laclede” -- The Laclede Group, Inc.
“Share
Unit” -- an incentive compensation unit. No stock certificate will be
issued for a Share Unit. No voting power resides in a Share
Unit.
“Dividend
Equivalent” -- an amount in cash equivalent to the cash dividend paid on each
share of Laclede’s common stock.
“Aggregate
Annual Dividend Equivalent” -- an amount computed, at the time of the award of a
Share Unit, at the then current annual cash dividend rate on Laclede’s common
stock.
“Awardee”
-- an Employee awarded a Share Unit.
“Spouse”
-- a spouse is that person who on the date of the Awardee’s death is lawfully
married to the Awardee.
“Consolidated
Retained Earnings” -- consolidated retained earnings as stated in Laclede’s
annual report to stockholders for the fiscal year next preceding the date of any
calculation pursuant to Section VI hereof.
“Consolidated
Earnings” -- consolidated earnings (or loss) applicable to common stock as
stated in Laclede’s annual report to stockholders for the fiscal year next
preceding the date of any calculation hereunder, subject to any adjustments
thereto pursuant to Paragraph VI hereof.
“Disability”
-- disability is when the Employee is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months; or the Employee is, by
reason of any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months, receiving income replacement benefits for a period
of not less than three months under an accident and health plan covering
employees of the Company, whether it be offered through the Company or an
affiliate of the Company.
“Deferred
Compensation” -- an amount, allocable to each Share Unit outstanding at the end
of a fiscal year, equal to the per common share net increase, or decrease in
Consolidated retained Earnings for that fiscal year. However, no
Deferred Compensation Credits shall accrue on Share Units held by an Awardee
after the fiscal year in which his employment has terminated due to Retirement,
Disability, death or the election of the Awardee following a hostile Change in
Control.
“Change
of Control” -- When any person, as such term is used in Sections 13(d) and
14(d)(2) of the Securities Act of 1934, as amended, becomes a beneficial owner,
directly or indirectly, of Laclede’s securities representing more than fifty
percent (50%) of the combined voting power of Laclede’s then outstanding
securities, or when any such person becomes a beneficial owner, directly or
indirectly, of at least thirty percent (30%) and no more than fifty percent
(50%) of such securities and a majority of the outside members of Laclede’s
Board of Directors decides that a de facto Change in Control has
occurred. Change in Control approved by a majority of the outside
members of Laclede’s Board of Directors as constituted immediately prior to the
Change in Control is hereinafter referred to as a friendly Change in Control and
a Change in Control not approved by a majority of the outside members of
Laclede’s Board of Directors as constituted immediately prior to the Change in
Control is heretofore and hereinafter referred to as a hostile Change in
Control.
“Retirement”
-- the Awardee’s termination of employment with the Company on or after the
attainment of age 55.
III. Eligibility
No Awardee whose employment with the
Company shall be terminated other than by Retirement, Disability, death or at
his election following a hostile Change in Control or who shall engage in any
business which is competitive with the public utility business of the Company
shall be eligible to receive any payments under the Plan. All
Deferred Compensation accrued prior to such termination or such competitive
activity shall be forfeited. It is intended that the Plan constitute
an unfunded deferred compensation arrangement for the benefit of a select group
of management or highly compensated employees (and other service providers) of
the Company and its designated subsidiaries and affiliates for purposes of the
federal income tax laws and the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”) and all documents, agreements or instruments made or given
pursuant to the Plan shall be interpreted so as to effect such
intent.
IV. Administration
The Compensation Committee of Laclede’s
Board of Directors shall have authority to recommend to the Board from time to
time the award of Share Units to selected Employees. Upon such
recommendation, the Board of Directors, exclusive of any Directors who are
eligible to participate in the Plan, may award Share Units to any or all such
Employees. The Board of Directors shall otherwise administer the Plan
in all respects, and any decision of the Board with respect to any question
arising as to the Employees selected for awards, the amount and form of awards
and interpretations of the Plan shall be final, conclusive, and
binding.
V. Payment
of Dividend Equivalents
When Laclede pays a cash dividend on
its common stock, it shall, subject to the provisions of Section III, pay a
Dividend Equivalent to each Awardee for each Share Unit held on the date of such
payment. Dividend Equivalents will be paid to each Awardee until his
death. Upon the death of an Awardee leaving a Spouse surviving, Dividend
Equivalents shall be paid to such Spouse for life, after which no such Dividend
Equivalents shall be payable with respect to such Awardee.
Notwithstanding the provisions of the
final two sentences of the immediately preceding unnumbered paragraph of this
Section V, with respect to awards that are made on or after January 1, 2005 or
that were made prior to such date but are unvested as of such date, an Awardee
who separates from service on account of his or her Retirement before attaining
the age of 65 years (other than by reason of death or Disability, or following a
hostile Change of Control) shall not be entitled to post-Retirement Dividend
Equivalents payable at any time after such Awardee’s Retirement, unless the
Awardee
remains
employed by the Company for at least the following respective periods (based on
the Awardee’s age at the date of the award of the Share Units in question)
subsequent to the date upon which the Share Units are awarded:
Age
at Date of Award
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Number
of Years of Service
Required
Following the
Date
of Such Award
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61
and older
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2
years
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t least 55, but less than 61
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4
years
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less
than 55
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5
years
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VI. Calculation
and Payment of Deferred Compensation
Each year, the Company shall, subject
to the provisions of Section III, credit or debit the applicable Deferred
Compensation amount to each Awardee for each Share Unit held during such year;
provided that with regard to Share Units that are made on or after January 1,
2005 or that were made prior to such date but are unvested as of such date, the
Deferred Compensation amount reflecting the change in Consolidated Retained
Earnings for the first fiscal year taken into account in computing the Deferred
Compensation amount shall in no event be less than zero. The
calculation of Deferred Compensation shall be subject to the power of Laclede’s
Board of Directors from time to time to (i) adjust the amount of Consolidated
Retained Earnings to reflect events or transactions which have a significant
relation to the efforts and performance of any or all Awardees, or (ii) exclude
from the computation of Consolidated Retained Earnings all or any portion of
Consolidated Earnings deemed to reflect events or transactions (including the
effect of weather conditions) which have no significant relation to the efforts
and performance of any or all Awardees. The aggregate of the annual
Deferred Compensation amounts, if any, credited to an Awardee shall accrue
interest at a rate equal to the prime rate charged by US Bank National
Association at the time such interest accrues (or such other reasonable rate as
the Board of Directors determines), but only from and not before the date of
Retirement, Disability, death or the election of the Awardee to terminate
employment following a hostile Change in Control, and shall be payable in ten
equal annual installments to the Awardee or, if he dies before all such payments
have been made, to his surviving beneficiaries designated in writing, and filed
with the Company, or if none, then to his estate. Except as may be
provided below, payments shall commence on the first day of the fifth month
following the month in which the earlier of the Awardee’s Retirement,
Disability, death or the election of the Awardee to terminate employment
following a hostile Change in Control occurs.
Notwithstanding any of the other
provisions of this Section VI, with respect to awards that are made on or after
January 1, 2005 or that were made prior to such date but are unvested as of such
date, an Awardee who separates from service on account of his or her Retirement
before attaining the age of 65 years (other than by reason of death or
Disability, or following a hostile Change of Control) shall not be entitled to
post-Retirement Deferred Compensation payable at any time after such Awardee’s
Retirement, unless the Awardee remains employed by the Company for at least the
following respective periods (based on the Awardee’s age at the date of the
award of the Share Units in question) subsequent to the date upon which the
Share Units are awarded.
Age
at Date of Award
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|
Number
of Years of Service
Required
Following the
Date
of Such Award
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61
and older
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2
years
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at
least 55, but less than 61
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4
years
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less
than 55
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5
years
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Notwithstanding any provision of this
Section VI to the contrary, if the Company determines that an Awardee is a
“specified employee” as defined in Section 409A(a)(2)(B)(i) of the Code and
regulations and other guidance issued thereunder, then payment of Deferred
Compensation shall be paid no earlier than the first day of the seventh month
following the month of the Awardee’s separation from service (with the first
such payment being a lump sum equal to the aggregate benefit the Awardee would
have received during such period if no such payment delay had been imposed,
together with interest on such delayed amount during the period of such
restriction at a rate, per annum, equal to the applicable federal short-term
rate (compounded monthly) in effect under Section 1274(d) of the Code at the
time of such termination of employment). This Section 4.3 shall not
apply to any benefit payable on account of an Awardee’s death. All
references in the Plan II to “termination of employment” shall mean a
“separation from service” as defined in Final Treasury Regulation 1.409A-1(h),
including the default presumptions thereof.
For purposes of this Plan, an Awardee
shall not be deemed to have incurred a separation from service from if he or she
is employed by any successor of the Company (or with any Affiliate of the
Company, or Affiliate of such successor); whereby “Affiliate” shall mean
(i) any person or entity that directly or indirectly controls, is
controlled by or is under common control with the applicable entity and/or
(ii) to the extent provided by the Company, any person or entity in which
such entity has a significant interest. The term “control”
(including, with correlative meaning, the terms “controlled by” and “under
common control with”), as applied to any person or entity, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person or entity, whether through the ownership
of voting or other securities, by contract or otherwise;
provided
,
however
, with respect
to any deferred compensation subject to Section 409A of the Code, the term
“Affiliate” shall mean any member of the applicable entity’s control group
within the meaning of
Final
Treasury Regulation Section 1.409A-1(h)(3), as such may be modified or amended
from time to time, by applying the “at least 50 percent” provisions
thereof.
VII. Adjustments
In the event of any stock dividend or
stock split, the Board of Directors shall increase proportionately each
Awardee’s Share Units. In the event of any combination of shares,
reclassification of shares, or other similar change in capitalization, or any
distribution other than cash dividends to holders of shares of Laclede common
stock, the Board of Directors shall make such adjustments, in the light of the
change in distributions, as it deems equitable both to the Awardees and the
Company, in the number and type of share Units outstanding and in the
calculation of Deferred Compensation amounts.
VIII.
Nonassignability
All Share Units awarded and all
Dividend Equivalents and Deferred Compensation payable hereunder shall be
nonassignable. Neither any Share Unit awarded hereunder nor any
Dividend Equivalents or Deferred Compensation amounts payable hereunder shall be
subject to the debts or obligations of any person entitled thereto, nor, except
as provided herein, may any Share Units or the proceeds therefrom, voluntarily
or involuntarily, be transferred or assigned to, or availed of by, any person
other than the Awardee.
IX. Effective
Date and Termination
The Plan shall be effective as of
January 1, 2005. The Board of Directors shall have the right at any
time and from time to time to discontinue and reinstate the Plan in whole or in
part or amend the Plan provided that no share unit previously awarded nor any
deferred compensation amount theretofore accrued shall be diminished or
forfeited by any discontinuance, reinstatement, or amendment of the Plan except
pursuant to the forfeiture provision in Section III. Notwithstanding
the above, the Plan may not be terminated and payments accelerated contrary to
the provisions of Section 409A of the Code including, without limitation, Final
Treasury Regulation Section 1.409A-3(j)(4)(ix) with reference to Final Treasury
Regulation Section 1.409A-1(g).
X. Limitations
The Board of Directors shall not award,
in any fiscal year, Share Units yielding Aggregate Annual Dividend Equivalents
which would reduce Consolidated Earnings by more than ½%. The Board
of Directors also shall not award, in any fiscal year, Share Units yielding
Aggregate Annual Dividend Equivalents which, with Aggregate Annual Dividend
Equivalents on outstanding Share Units plus any Deferred Compensation payments
made in the next preceding fiscal year, would reduce Consolidated Earnings by
more than 2 ½%. The Board of Directors shall not award to any
Employee a number of
Share
Units which would cause the Aggregate Annual Dividend Equivalents on Share Units
held by him to exceed 25% of his then current annual salary from the
Company.
XI. General
Payments made to any Awardee shall
constitute special incentive compensation and will not be taken into account in
determining the amount of any pension under any pension or retirement plan of
the Company and will not affect the amount of any life insurance coverage
available to beneficiaries under any group life insurance plan of the
Company.
XII. Effect
of Change in Control
In the event of any Change in Control,
the regular quarterly Dividend Equivalent payments shall continue to be made to
each eligible Awardee until his death and thereafter to his surviving spouse
(until such spouse’s death), and each quarterly Dividend Equivalent payment
shall be no less than the amount determined by applying the highest quarterly
Dividend Rate applicable to the Company’s common stock during the twelve (12)
months preceding such Change in Control, multiplied by not less than the number
of Share Units each Awardee had immediately preceding such Change in
Control. If a Change in Control occurs, then the annual Deferred
Compensation to be credited to each Awardee shall be no less than the per common
share change in the Company’s Consolidated Retained Earnings during the lower of
the last two (2) full fiscal years preceding such Change in Control applied to
the number of the Awardee’s Share Units existing immediately before such Change
in Control.
XIII. Miscellaneous
(a) Any
claim for benefits under this Plan shall be submitted to the Plan administrator
(the “Plan Administrator”). If the Plan Administrator denies the
claim for benefits, in whole or in part, the Plan Administrator shall notify the
claimant of the adverse benefit determination no later than ninety (90)
days after receipt of the claim by the Plan, unless the Plan Administrator
determines that special circumstances require an extension of time, which may
not exceed a further ninety (90) days, for processing the claim and so
notifies the claimant in writing prior to the termination of the initial 90 day
period. In the event that a claim for benefits under this Plan has
been denied by the Plan Administrator, the decision shall be subject to review
by the Company upon written request of the claimant made to the Plan
Administrator within sixty (60) days of receipt by the claimant of notice
of such denial. Upon request and free of charge, the Company shall
provide the claimant with reasonably access to all pertinent information,
documents and records with respect to the claim. The decision of the
Company upon review shall be in writing and shall state the reasons for the
decision and the provisions of this Plan on which the decision is
based. Such decision shall be made within sixty (60) days after
the Company’s receipt of written request for such review unless a hearing is
necessitated to determine the facts and circumstances, in which event a decision
shall be rendered as soon as possible, but not later than one hundred and
twenty (120) days after receipt of the
claimant’s
written request for review. The decision of the Company upon review
shall be final and binding on all persons.
(b) The
illegality of any provision of this Plan shall not affect the enforceability of
any other provision of this Plan. The Plan shall be construed in
accordance with and governed by the substantive laws of the State of Missouri
without regard to conflict of law rules.
(c) All
payments made under the Plan to an Awardee or his or her beneficiary shall be
subject to withholding of such amounts as the Company reasonably may determine
are required to be withheld pursuant to any applicable Federal, state, local, or
foreign law or regulation.
(d) The
rights of Awardees and their beneficiaries to benefits under the Plan shall be
solely those of unsecured general creditors of the Company. The Plan
constitutes merely a promise by the Company to make benefit payments in the
future. The Plan is intended to be unfunded for purposes of the Code
and Title I of ERISA. Notwithstanding the foregoing, the Company may
contribute to a trust fund under a “rabbi trust” agreement between the Company
and a banking organization or trust company, if such a trust fund is hereafter
established, and payments under the Plan may be made from any such trust
fund. Any asset acquired or held by the Company in connection with
the Company’s liabilities under the Plan shall not be deemed to be security for
the performance of the Company’s obligations under this Plan.
(e) Nothing
contained in the Plan or in any documents related to the Plan or to any Share
Units shall confer upon any Awardee any right to continue in the employ of the
Company or constitute any contract or agreement of employment, or interfere in
any way with the right of the Company to reduce such person’s compensation, to
change the position held by such person or to terminate the employment of such
Awardee, with or without cause.
(f) Notwithstanding
any other provision of the Plan, the Plan is intended to comply with Section
409A of the Code and shall at all times be interpreted in accordance with such
intent that amounts that may become payable to Awardees shall not be taxable to
such Awardees until such amounts are paid in accordance with the terms of the
Plan. To the extent that any provision of the Plan violates Section
409A of the Code and the Final Treasury Regulations promulgated thereunder such
that amounts would be taxable to an Awardee prior to payment or otherwise
subject to penalties under Section 409A of the Code, such provision shall be
automatically reformed or stricken to preserve the intent
hereof. Notwithstanding the foregoing, in no event will the Company
or any of its Affiliates have any liability for any failure of the Plan to
satisfy Section 409A of the Code and such parties do not guarantee that the Plan
complies with Section 409A of the Code.
(g) Notwithstanding
the foregoing, amounts may be paid under the Plan prior to the scheduled payment
dates set forth above, if and to the extent such amounts become
subject
to FICA taxes under Code Sections 3101, 3121(a) or 3121(v), and/or withholding
taxes under Code Section 3401 or the corresponding provisions of any state,
local or foreign law as a result of the payment of such FICA taxes;
provided
,
that
, such payment
shall not exceed the FICA amount and such other amount required to be withheld
on account of the payment of such FICA amount. Further, a payment
will be made under the Plan at any time the Plan fails to meet the requirements
of Section 409A of the Code;
provided
,
that
, such payment
shall not exceed the amount required to be included in income as a result of the
failure to comply with Section 409A of the Code.
(h) Notwithstanding
anything herein to the contrary, to the extent, if any, that any payment or
distribution of any portion of the benefit described above (together with any
other benefit under any other plan, policy or arrangement) would trigger any
adverse tax consequences under Section 280G of the Code, or Section 4999 of said
Code, such as loss of deductions to the Company, or the payment of an additional
excise tax by the Awardee, or both, then the benefit hereunder (and to the
extent necessary, under any other plan, policy, or arrangement providing for
“parachute payments” as defined under Code Section 280G) shall be reduced (on a
pro rata basis for all such plans, policies, or arrangements) to $1 less than
that extent, and to no greater extent. Parachute payments and/or any
cutback amount and any other determination with respect to Code Section 280G
shall be determined by the Company in good faith.
DESIGNATION
OF BENEFICIARY FOR CERTAIN BENEFITS UNDER
THE
LACLEDE GAS COMPANY INCENTIVE COMPENSATION PLAN
|
I
hereby designate that my primary beneficiary under the Incentive
Compensation Plan II for any "Deferred
|
Compensation”
amounts payable after my death shall be:
|
|
|
|
|
|
|
|
|
|
|
In
the event my primary beneficiary is not alive at the time of my death or,
in the case of a trust, has been
|
terminated,
then the remaining “Deferred Compensation” benefits payable under the Plan
shall be paid to:
|
|
|
|
|
|
|
|
I
understand that the Incentive Compensation Plan II does not allow me to
designate a beneficiary for “Dividend Equivalents” but that they will be paid to
my spouse, if my spouse survives me, for my spouse’s life.
Exhibit
10.5
THE LACLEDE
GROUP
MANAGEMENT CONTINUITY
PROTECTION PLAN
(as
of January 1, 2005)
I.
|
Participants
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Participants
shall include all Officers of The Laclede Group, Inc. (the “Company”) and
Laclede Gas Company as well as certain other key officers of other Company
subsidiaries as may be determined from time to time. It is
contemplated that the features set forth below would be incorporated in
agreements to be entered into between the Company and each of such
officers.
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II.
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Change In Control
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Change
In Control occurs if and when any “person” (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) is or
becomes a beneficial owner, directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the combined voting
power of the Company’s then outstanding securities or when any such person
becomes a beneficial owner, directly or indirectly, of at least thirty
percent (30%) and no more than fifty percent (50%) of such securities and
a majority of the outside members of the Company’s Board of Directors
decides that a de facto Change in Control has occurred.
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III.
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Termination For “Cause”
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Termination
for “Cause” shall be limited to, and include, only the following:
(1) the irreversible incapacity or disability of a Participant for a
period of six (6) months which renders him unable to perform the services
for which he is employed; (2) any conduct of Participant in the
performance of the services to be rendered by him and for which he has
been employed which involves moral turpitude on his part; or (3) the death
of the Participant.
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IV.
|
Benefits
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If,
following a Change in Control, the Participant has experienced a
separation from service on account of his or her termination of employment
(other than for “Cause”), resignation or retirement, such Participant
shall be entitled to receive at such time (or such other time as provided
below) a non-discounted lump sum in an amount equal to the “average annual
compensation” as such term is referred to in Treasury Regulation Section
1.280G-1 Question and Answer 34 and such other guidance promulgated under
Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”)
paid to Participant for the five-year period (or if the Participant is
employed by the Company for less than five years, such
shorter
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|
period)
immediately preceding such termination of employment, resignation or
retirement (each a “separation from service” as shall be determined under
Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”), and Final Treasury Regulation 1.409A-1(h), including the default
presumptions thereof), multiplied by: (1) in the case of the President or
of the Executive Vice President, 2.99 times; or (2) in the case of all
other Participants, 2.00 times. In the event Participant
remains employed by the Company
1
subsequent to the Change In
Control for a period beyond six (6) months following such Change In
Control, the above benefit shall be reduced as follows: (1) in the case of
the President or of the Executive Vice President, for each month beyond
six months he is employed with the Company subsequent to a Change In
Control the benefit shall be reduced 1/48; or (2) in the case of all other
Participants, such benefit shall be reduced for each month beyond six
months he is employed with the Company subsequent to a Change In Control
by 1/36.
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However,
notwithstanding the above, in no event shall the benefit be greater than
an amount equal to the average monthly compensation paid to Participant
for the five-year period (or if employed by the Company for less than five
years, such shorter period) immediately preceding such separation from
service multiplied by the number of months remaining from such date of
separation from service until the date upon which the Participant would
have been 65 years of age.
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Notwithstanding
any provision herein to the contrary, if the Company determines that
Participant is a “specified employee” as defined in Section
409A(a)(2)(B)(i) of the Code and regulations and other guidance issued
thereunder, then such benefit (or portion thereof) shall be paid no
earlier than the first day of the seventh month following the month of
Participant’s separation from service (with the first such payment being a
lump sum equal to the aggregate benefit the Participant would have
received during such period if no such payment delay had been imposed,
together with interest on such delayed amount during the period of such
restriction at a rate, per annum, equal to the applicable federal
short-term rate (compounded monthly) in effect under Section 1274(d) of
the Code at the time of such separation from service).
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Moreover,
notwithstanding the above, to the extent, if any, that any payment or
distribution of any portion of the benefit described above (together with
any other benefit under any other plan, policy or arrangement) would
trigger any adverse tax consequences under Section 280G of the Code, or
Section 4999 of said Code, such as loss of deductions to the Company, or
the payment of an additional excise tax
by
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1
For purposes of this Plan,
employment with the Company shall also include employment with any successor of
the Company (or with any Affiliate of the Company, or Affiliate of such
successor) following a Change in Control.
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the
Participant, or both, then the benefit hereunder (and to the extent
necessary, under any other plan, policy, or arrangement proving for
“parachute payments” as defined under Code Section 280G) shall be reduced
(on a pro rata basis for all such plans, policies, or arrangements) to $1
less than that extent, and to no greater extent. Parachute
payments and/or any cutback amount and any other determination with
respect to Code Section 280G shall be determined by the Company in good
faith.
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V.
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Amendment/Termination of the
Plan
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The
Company may amend this Plan at any time, and from time to time; provided,
however, that no amendment adopted after the effective date of a Change in
Control shall have the effect of (i) removing a Participant from this
Plan, (ii) adding conditions for participation or the entitlement to
receive benefits under this Plan, (iii) reducing the amount of benefits
payable to a Participant, or (iv) otherwise restricting a Participant’s
right to receive benefits under the Plan, except as may otherwise be
required to conform such payments to the requirements of Section 409A of
the Code. The Company’s Board of Directors may terminate the
Plan at any time prior to a Change in Control. The Plan may not
be terminated after the effective date of a Change in Control, except that
the Plan shall automatically terminate upon payment of all benefits due
after such Change in Control. Notwithstanding the above, the
Plan may not be terminated and payments accelerated thereunder contrary to
the provisions of Section 409A of the Code including, without limitation,
Final Treasury Regulation Section 1.409A-3(j)(4)(ix) with reference to
Final Treasury Regulation Section 1.409A-1(g).
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VI.
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Administration
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The
Plan shall be administered by a person or committee appointed by the
Company’s Board of Directors (the “Plan Administrator”). In the
absence of such appointment, the Plan Administrator shall be the Board of
Directors.
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VII.
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Claim for Benefits
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Any
claim for benefits under this Plan shall be submitted to the Plan
Administrator. If the Plan Administrator denies the claim for
benefits, in whole or in part, the Plan Administrator shall notify the
claimant of the adverse benefit determination no later than
ninety (90) days after receipt of the claim by the Plan, unless the
Plan Administrator determines that special circumstances require an
extension of time, which may not exceed a further ninety (90) days,
for processing the claim and so notifies the claimant in writing prior to
the termination of the initial 90 day period. In the event that
a claim for benefits under this Plan has been denied by the Plan
Administrator, the decision shall be subject to review by the Company upon
written request of the claimant made to the Plan Administrator within
sixty (60)
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days
of receipt by the claimant of notice of such denial. Upon
request and free of charge, the Company shall provide the claimant with
reasonably access to all pertinent information, documents and records with
respect to the claim. The decision of the Company upon review
shall be in writing and shall state the reasons for the decision and the
provisions of this Plan on which the decision is based. Such
decision shall be made within sixty (60) days after the Company’s
receipt of written request for such review unless a hearing is
necessitated to determine the facts and circumstances, in which event a
decision shall be rendered as soon as possible, but not later than one
hundred and twenty (120) days after receipt of the claimant’s written
request for review. The decision of the Company upon review
shall be final and binding on all persons.
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VIII.
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Severability and Applicable
Law
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The
illegality of any provision of this Plan shall not affect the
enforceability of any other provision of this Plan. The Plan
shall be construed in accordance with and governed by the substantive laws
of the State of Missouri without regard to conflict of law
rules.
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IX.
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Withholding
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All
payments made under the Plan to a Participant or his or her beneficiary
shall be subject to withholding of such amounts as the Company reasonably
may determine are required to be withheld pursuant to any applicable
Federal, state, local, or foreign law or regulation.
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X.
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Miscellaneous
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For
purposes of the Plan, “Affiliate
”
shall mean
(i) any person or entity that directly or indirectly controls, is
controlled by or is under common control with the applicable entity and/or
(ii) to the extent provided by the Company, any person or entity in
which such entity has a significant interest. The term
“control” (including, with correlative meaning, the terms “controlled by”
and “under common control with”), as applied to any person or entity,
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person or
entity, whether through the ownership of voting or other securities, by
contract or otherwise;
provided
,
however
, with respect to any
deferrals subject to Section 409A of the Code, the term “Affiliate” shall
mean any member of the applicable entity’s control group within the
meaning of Final Treasury Regulation Section 1.409A-1(h)(3), as such may
be modified or amended from time to time, by applying the “at least 50
percent” provisions
thereof.
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The
rights of Participants and their beneficiaries to benefits under the Plan
shall be solely those of unsecured general creditors of the
Company. The Plan constitutes merely a promise by the Company
to make benefit payments in the future. The Plan is intended to
be unfunded for purposes of the Code and Title I of the Employee
Retirement Income Security Act of 1974, as
amended. Notwithstanding the foregoing, the Company may
contribute to a trust fund under a “rabbi trust” agreement between the
Company and a banking organization, if such a trust fund is hereafter
established, and payments under the Plan may be made from any such trust
fund. Any asset acquired or held by the Company in connection
with the Company’s liabilities under the Plan shall not be deemed to be
security for the performance of the Company’s obligations under this
Plan.
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The
rights and interests of Participants and their beneficiaries to benefit
payments under the Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment or garnishment by creditors of the Participants or their
beneficiaries, and any such rights and interests under the Plan shall not
be liable for or subject to any obligation or liability of the Participant
or beneficiary.
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Notwithstanding
any other provision of the Plan, the Plan is intended to comply with
Section 409A of the Code and shall at all times be interpreted in
accordance with such intent that amounts that may become payable to
Participant shall not be taxable to such Participants until such amounts
are paid in accordance with the terms of the Plan. To the
extent that any provision of the Plan violates Section 409A of the Code
and the Final Treasury Regulations promulgated thereunder such that
amounts would be taxable to a Participant prior to payment or otherwise
subject to penalties under Section 409A of the Code, such provision shall
be automatically reformed or stricken to preserve the intent
hereof. Notwithstanding the foregoing, in no event will the
Company or any of its Affiliates have any liability for any failure of the
Plan to satisfy Section 409A of the Code and such parties do not guarantee
that the Plan complies with Section 409A of the
Code.
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Exhibit
10.5a
MANAGEMENT CONTINUITY
PROTECTION AGREEMENT
This AGREEMENT is made as of the ___
day of _______________, 20__, between THE LACLEDE GROUP, INC., a Missouri
corporation (the “Company”), and ___________________________________ (the
“Executive”).
WHEREAS, upon recommendation of its
Chairman, the Board of Directors of the Company has adopted a Management
Continuity Protection Plan (the “Plan”) for all of the officers of the Company
and of Laclede Gas Company as well as certain other officers of the Company
subsidiaries as determined from time to time.
WHEREAS, the Plan was adopted in the
best interests of the Company and its stockholders for the purpose of
reinforcing and encouraging the continued attention and dedication of the Plan
Participants, including the Executive, to their assigned duties without
distraction in potentially disturbing circumstances arising from the possibility
of any future change in control of the Company; and
WHEREAS, as contemplated by the Plan,
the Executive and the Company are executing this Management Continuity
Protection Agreement; and
WHEREAS, subject only to the
“Termination Benefits” (as hereinafter defined) payable hereunder following
certain “Employment Terminations” (as hereinafter defined) subsequent to a
“Change in Control” (as defined in the Plan), the execution of this Agreement by
the Executive and the Company does not give rise to a claim by the Executive
that the Executive is entitled to continued employment with the
Company.
NOW, THEREFORE, in consideration of the
mutual agreements contained herein, the Company and the Executive agree as
follows:
1.
Term of
Agreement
. This Agreement shall terminate, except to the
extent that any obligation of the Company hereunder remains unpaid as of such
time, upon the earlier of: (a) the effective date of the Executive’s (i)
termination other than for Cause (as defined in the Plan), (ii) resignation, or
(iii) retirement with respect to the Company;
provided
,
that
, an event in
(i)- (iii) correlates with a “separation from service” under Final Treasury
Regulation Section 1.409A-1(h) (an event in (i)- (iii) hereinafter called an
“Employment Termination”), if such Employment Termination occurs prior to a
Change in Control; (b) the effective date of the Executive’s Termination for
Cause (as defined in the Plan); (c) the date the Executive ceases to serve as an
officer of the Company or any of its Affiliates prior to a Change in Control;
(d) forty-two (42) months after a Change in Control, if the Executive’s
Employment Termination has not yet occurred as of the end of such forty-two (42)
months; or (e) the date the Company’s Board of Directors terminates the Plan if
and only if such termination is prior to a Change in Control. For
purposes of this Agreement, employment with the Company shall also include
employment with any successor of the Company (or with any Affiliate of the
Company, or Affiliate of such successor) following a Change in
Control. No benefits shall be payable hereunder unless there shall
have been a Change in Control as defined in the Plan, and Executive’s Employment
Termination shall thereafter have occurred in accordance with Section 3
hereof.
2.
Termination Following Change
in Control
. If a Change in Control shall have occurred, the
Executive shall be entitled to the benefits provided in Section 3 hereof upon
the subsequent Employment Termination of the Executive.
3.
Benefits upon Employment
Termination
. (a) If, after a Change in Control shall have
occurred, there is a subsequent Employment Termination of the Executive, prior
to the expiration of the forty-two (42) month period specified in Section 1(b)
hereof, the Executive shall, subject to the provisions of Sections 3(b), 3(c)
and 4 hereof, be entitled to receive, upon the effective date of such Employment
Termination (or such other time as provided below and/or in the Plan in the
event of a separation of service of a “specified employee”), a non-discounted
lump sum amount (hereinafter called the “Termination Benefits”) equal to the
average annual compensation (as referenced in the Plan) of the Executive for the
five (5) year period (or if not employed for such five (5) year period, such
shorter period) immediately preceding the Executive’s Employment Termination
with the Company (as described in Section 280G(b)(3)(A) of the Internal Revenue
Code of 1986, as amended (the “Code”)), multiplied by 2.00.
1
Notwithstanding any provision
herein to the contrary, if the Company determines that the Executive is a
“specified employee” as defined in Section 409A(a)(2)(B)(i) of the Code and
regulations and other guidance issued thereunder, then payment of such amount
(or portion thereof) shall commence no earlier than the first day of the seventh
month following the month Executive’s “separation from service” (as referenced
below) occurs (with the first such payment being a lump sum equal to the
aggregate amount the Executive would have received during such period if no such
payment delay had been imposed, together with interest on such delayed amount
during the period of such restriction at a rate, per annum, equal to the
applicable federal short-term rate (compounded monthly) in effect
under
1
2.99 f
or President and
EVP.
Section
1274(d) of the Code at the time of such separation from service). For
purposes of this Agreement, an “Employment Termination” shall only have occurred
if a “separation from service” has occurred as defined in Final Treasury
Regulation 1.409A-1(h), including the default presumptions thereof.
(b) In
the event the Executive remains employed with the Company (which
for
this purpose, shall include employment with the Company, any of its Affiliates,
its successor or an Affiliate of its successor) subsequent to a Change in
Control beyond six (6) months following such Change in Control, the Termination
Benefits shall be reduced by 1/36 for each month beyond six months that the
Executive is so employed subsequent to a Change in Control.
2
(c) Notwithstanding
the provisions of paragraph (a) and (b) of this Section 3 above, in no event
shall the Termination Benefits be greater than an amount equal to the average
monthly compensation of the Executive for the five (5) year period (or such
shorter period, as set forth above) immediately preceding cessation of
employment with the Company referred to in paragraph (a) of this Section 3
above, multiplied by the number of months remaining from such date of cessation
of employment until the date upon which the Executive would have been sixty-five
(65) years of age.
4.
Limitation Upon Termination
Benefits Caused by Tax Implications
.
In
the event that any payment or benefit received or to be received by the
Executive in connection with a Change in Control, or the Executive’s Employment
Termination, including all amounts payable pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company (all of
the Termination Benefits, together
2
1/48
th
for
Pres. or EVP
with
all of such other payments or benefits being hereinafter called the “Total
Payments”), would not be deductible as a result of Section 280G of the Code, or
would trigger the payment of an additional excise tax by the Executive under
Section 4999 of the Code, the Termination Benefits (or such other Total Payments
to the extent necessary on a pro-rata basis) shall be reduced until no portion
of the Total Payments is rendered non-deductible under Section 280G of the Code
or is subject to the additional excise tax of Section 4999 of the Code, or the
Termination Benefits are reduced to zero. Parachute payments and/or
any cutback amount, and any other determination with respect to Code Section
280G shall be determined by the Plan Administrator in good faith.
5.
Non-exclusivity of
Rights
. Nothing in this Agreement shall prevent or limit the
Executive’s continuing or future participation in any benefit, bonus, incentive,
or other plan or program provided by the Company and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any other agreements with the
Company. Amounts that are vested benefits or that the Executive is
otherwise entitled to receive under any plan or program of the Company shall be
payable in accordance with the terms of such plan or program.
6.
Right to Terminate
Employment
. The Company expressly confirms and agrees that it
has entered into this Agreement and has assumed the obligations imposed on the
Company hereby in order to induce the Executive to continue employment with the
Company and acknowledges that the Executive is relying upon this Agreement in
such capacity. Notwithstanding the foregoing, the Company or the
Executive may terminate the employment of the Executive at any time, subject to
the Company’s
providing
the benefits specified under this Agreement (including, without limitation,
those benefits referred to in Sections 3 and 5 hereof) in accordance with the
terms hereof.
7.
Heirs, Successors and
Assigns
. This Agreement shall: (a) inure to the benefit of and
be enforceable by the Executive’s personal or legal representatives, executors,
administrators, heirs, devisees and legatees; and (b) be binding on the
successors and assigns of the Company.
8.
Severability
. If
any provision or aspect of this Agreement shall be held to be invalid, illegal
or unenforceable: (a) the validity, legality and enforceability of the remaining
provisions or aspects of this Agreement shall not be in any way affected or
impaired thereby; and (b) to the fullest extent possible, the provisions of this
Agreement shall be construed so as to give effect to the intent manifested by
the provision or aspect held invalid, illegal or unenforceable.
9.
Miscellaneous
.
(a) This Agreement shall be
governed by and construed in accordance with the laws of the State of Missouri,
without regard to choice of law principles. The captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified other than by a
written agreement executed by the parties hereto or by their respective
successors and legal representatives.
(b) For the purposes of this
Agreement, notices, demands or other communications necessitated by the
provisions of this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States Post Office Registered
Mail, return receipt requested, postage prepaid and addressed
as
follows: to
the Executive, ___________________________________, 720 Olive Street,
St. Louis, Missouri 63101; to the Company, The Laclede Group, Inc., Attention:
President, 720 Olive Street, St. Louis, Missouri 63101; or to such other address
as any party may have furnished to the other in writing in accordance therewith,
except that notices of change of address shall be effective only upon
receipt.
(c) This Agreement has been
authorized by the Board of Directors of the Company. It has not been
submitted to a shareholder vote of the Company or its parent company, nor is
such a shareholder vote contemplated or required. However, if, prior
to a Change in Control, the shareholders of the Company or its parent company
should adopt a shareholder proposal to reject part or all of the provisions of
this Agreement, then the Company shall have the right unilaterally to modify
this Agreement to the extent necessary to comply with such shareholder
vote.
(d) This Agreement (and the
Plan, as hereby expressly incorporated herein) contains the entire understanding
of the parties hereto with respect to the subject matter hereof.
(e) The Company may withhold
from any amounts payable under this Agreement such federal, state or local taxes
as shall be required to be withheld pursuant to any applicable law or
regulation.
(f) Notwithstanding anything
hereinabove, the Plan shall be incorporated by reference into this Agreement,
and any inconsistency between the Plan and this Agreement shall be construed in
favor of the Plan.
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the day and year first above
written.
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THE
LACLEDE GROUP, INC.
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By:
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“Company”
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“Executive”
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Exhibit
10.6
RESTATED
LACLEDE
GAS COMPANY
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
EFFECTIVE
August 25, 1977
with
amendments as of July 1, 1984, as of January 1, 1988,
as
of November 1, 1988, as of October 1, 1989, July 25, 1991, and amended and
restated as of
January
1, 2005
As
of January 1, 2005
TABLE
OF CONTENTS
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Pages
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1.
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General
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1.1
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Purpose
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1
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1.2
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Benefit
Limitations
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2
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1.3
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Effective
Date
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2
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1.4
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Exclusion
of Deferred Compensation Under the
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Laclede
Gas Company Incentive Compensation Plan
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2
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2.
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Administration
by Retirement Board
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2.1
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Board
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3
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3.
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Eligibility
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3.1
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Persons
Eligible to Receive Benefits
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3
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3.2
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Participant
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4
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3.3
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Beneficiary
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4
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4.
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Supplemental
Benefit
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4.1.1
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Amount
of Supplemental Benefit
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4
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4.1.2
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Amount
of Alternative Supplemental Benefit
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6
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4.2
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Payment
of Supplemental Benefit or
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Alternative
Supplemental Benefit
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8
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4.3
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Obligation
of the Company
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8
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5.
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Amendment
or Termination
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5.1
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Amendment
to Conform with Law
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9
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5.2
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Other
Amendments and Termination
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10
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5.3
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Form
of Amendment or Termination
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10
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5.4
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Notice
of Amendment or Termination
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10
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6.
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Miscellaneous
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6.1
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No
Guarantee of Employment, etc.
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11
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6.2
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Merger,
Consolidation, etc.
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11
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6.3
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Inalienability
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11
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6.4
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Incompetency
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11
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6.5
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No
Requirement to Fund
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12
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6.6
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Controlling
Law
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12
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6.7
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Severability
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12
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6.8
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Limitations
on Provision
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12
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6.9
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Gender
and Number
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12
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LACLEDE
GAS COMPANY
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
ARTICLE
1
General
1.1
Purpose
. It
is the intention of Laclede Gas Company (the "Company") to maintain appropriate
levels of retirement benefits for individuals who are entitled to benefits under
the Employees' Retirement Plan of Laclede Gas Company (the "Retirement
Plan"). Accordingly, the Retirement Board as authorized by the Board
of Directors of Laclede Gas Company, acting on behalf of the Company,
established the Laclede Gas Company Supplemental Retirement Benefit Plan (the
"Supplemental Plan"). The Supplemental Plan is intended to provide
benefits to or on behalf of an eligible person, which includes: (i)
any officer of the Company; or (ii) any Company employee with a salary level of
9 or higher (now known as salary grade 15 or higher); whose employment with the
Company ceases at a time when such person or his spouse or beneficiary is
entitled (or has become entitled) to an immediate or future benefit under the
Retirement Plan. Such benefits are to be provided in such a manner as
to maintain the level of total retirement benefits which would otherwise be
payable under the Retirement Plan, but for: (a) the limitations on
benefits imposed by the Internal Revenue Code, as said Code may be amended from
time to time (the "Internal Revenue Code"); (b) subject to Section 1.3 below,
the exclusion of deferred compensation from normal compensation under the
Retirement Plan; and (c) the amendment of the pension computation formula,
effective October 1, 1989. This Supplemental Plan shall also
provide an alternative benefit with respect to officers of the Company that, as
the result of action by the Board of Directors of the Company, continue in
employment beyond age 70; such alternative benefit to be provided in a manner
that will protect the values of benefits that would have been paid upon
retirement at age 70. The Supplemental Plan shall maintain the total
retirement benefit levels
described
above by means of supplemental payments made by the Company to the individuals
eligible for such payments as more fully described in Articles 3 and
4. All references herein to the “Plan” or “Supplemental Plan” shall
mean this Supplemental Plan, unless otherwise specified.
1.2
Benefit
Limitations
. As a result of the adoption of Section 409A of
the Internal Revenue Code, the Company amended and restated this Supplemental
Plan effective as of January 1, 2005. Notwithstanding anything to the
contrary in this Supplemental Plan, pursuant to Final Treasury Regulation
Section 1.409A-6(a)(3)(i), the Supplemental Benefit payable under this Plan
shall be limited to the benefits, to which Participants or Beneficiaries would
have been entitled under this Plan if such individuals voluntarily terminated
employment without cause on December 31, 2004, received payment of the benefits
available from this Supplemental Plan on the earliest possible date allowed
under this Supplemental Plan following a termination of service, and received
the benefit in the form available to the Participant or Beneficiary on December
31, 2004 with the maximum value (the “Grandfathered
Benefit”). Simultaneously, the Company adopted Supplemental Plan II,
which governs all other benefits accruing on or after January 1, 2005 and is
subject to Section 409A of the Internal Revenue Code.
1.3
Effective Date
. This
Supplemental Plan is effective as of August 25, 1977 and governs Grandfathered
Benefits vested and accrued through December 31, 2004.
1.4
Exclusion of Deferred
Compensation Under the Laclede Gas Company Incentive Compensation
Plan
. Notwithstanding anything to the contrary contained
elsewhere in this Supplemental Plan, deferred compensation under the Laclede Gas
Company Incentive Compensation Plan shall not be included in determining the
benefits to be paid under this Supplemental Plan.
ARTICLE
2
Administration by Retirement Board
2.1
Board
. The
Retirement Board (the "Board") which is responsible for the administration of
the Retirement Plan, will administer the Supplemental Plan. The Board
shall have the same responsibility and authority with respect to this
Supplemental Plan as it possesses with respect to the Retirement
Plan. It shall also proceed with respect to this Supplemental Plan in
a manner consistent with the manner in which it proceeds with respect to the
Retirement Plan. At least once each year, the Board shall make a full
report to the Board of Directors of the Company of the operation of this
Supplemental Plan and the Board's administration thereof.
ARTICLE
3
Eligibility
3.1
Persons Eligible to Receive Benefits
. Every
individual who had a vested and accrued benefit under the terms of the
Retirement Plan on or before December 31, 2004 either as a Participant or as a
Beneficiary of such a Participant, as those terms are defined in Sections 3.2
and 3.3 below:
(a) whose benefit pursuant to the
Retirement Plan is reduced by reason of: (1) the application of the
limitations imposed by the Internal Revenue Code; (2) subject to the provisions
of Section 1.3 hereof excluding deferred compensation under the Laclede Gas
Company Incentive Compensation Plan, by the exclusion of deferred compensation
from normal compensation; and/or (3) the application of the amendment of the
pension computation formula effective October 1, 1989; shall be eligible to
receive an amount (the "Supplemental Benefit") under the Supplemental Plan as
described in Section 4.1.1; or
(b) with respect to a Participant (and
the Beneficiary of such Participant) who is an officer of the Company that, as a
result of action by the Board of Directors of the Company, continues in
employment beyond age 70, such a Participant (or Beneficiary) shall be eligible
to receive, in lieu of the Supplemental Benefit described in Section 3.1(a)
above, an amount (the "Alternative Supplemental Benefit") under the Supplemental
Plan as described in Section 4.1.2.
3.2
Participant
. Every
individual described in Section 3.1 above, which
includes: (i) any officer of the Company; or (ii) any Company
employee having a salary level of 9, or higher (now known as salary grade level
14 or higher); who has a vested and accrued benefit under the Retirement Plan on
or before December 31, 2004 and is eligible to receive benefits under this
Supplemental Plan by reason of active service with the Company shall be known as
a "Participant."
3.3
Beneficiary
. Every
individual described in Section 3.1 above who is eligible to receive benefits
under the Supplemental Plan by reason of a Participant’s active service with the
Company shall be known as a "Beneficiary." The term "Beneficiary"
shall include spouses, heirs-at-law, legal representatives, and every other
person to whom benefits may be distributed, as determined under the Retirement
Plan.
ARTICLE
4
Supplemental Benefit
4.1.1
Amount of Supplemental Benefit
. Subject
to the limitations in Section 1.2 of this Supplemental Plan, the amount of
Supplemental Benefit which a Participant or Beneficiary, other than a
Participant described in Section 3.1(b) or the Beneficiary of such a
Participant, shall be entitled to receive hereunder shall be equal to the excess
of (a) over (b).
(a) The benefit the
Participant or Beneficiary would have been entitled to receive under any
provision of the Retirement Plan and in accordance with any option which is then
operative
under the terms of Sections 4.1, 4.3 or 5.5 of such Plan, if such benefit were
computed: (i) without giving effect to the limitations imposed by the
Internal Revenue Code, or its successor, and the regulations and rulings
thereunder or the terms of the Retirement Plan implementing those limitations;
(ii) by including, except for deferred compensation under the Laclede Gas
Company Incentive Compensation Plan, all other then deferred compensation
amounts in normal compensation; and (iii) by utilizing, for purposes of
computing the "Accrued Benefit" for the Participant under the Retirement Plan as
of the date of retirement, the greater of the "Accrued Benefit" determined in
accordance with the pension computation formula in effect: (A) at the
time of his retirement; or (B) as of September 30, 1989.
(b) The benefit (computed
using the pension computation formula then in effect at the date of retirement)
which such Participant or Beneficiary is entitled to receive under any provision
of the Retirement Plan and in accordance with any option which is then operative
under the terms of Sections 4.1, 4.3 or 5.5 of such Plan, including those terms
implementing the limitations of the Internal Revenue Code referred to above and
excluding all then deferred compensation (other than salary amounts deferred
under the Laclede Gas Company Salary Deferral Savings Plan, as the same may be
hereafter amended, supplemented or replaced) from normal
compensation.
In the event that a Beneficiary is the
initial recipient of a retirement benefit under the Retirement Plan, the amount
of Supplemental Benefit to which such Beneficiary will be entitled shall be
determined in accordance with (a) and (b) above, as of the date of death of the
individual whose active service with the Company produced the benefit, with
appropriate adjustment in accordance with the applicable provisions of the
Retirement Plan.
It is the intent of this Section 4.1.1
that the Supplemental Benefit as described above shall be
determined
at all times in a manner which construes all references in this Section 4.1.1 to
limitations of, or imposed by, the Internal Revenue Code, to refer to the then
current limitations of the Internal Revenue Code, or its successor, and any
regulations and rulings thereunder.
4.1.2
Amount of Alternative Supplemental Benefit
. Subject
to the limitations in section 1.2 of this Supplemental Plan, the amount of
Alternative Supplemental Benefit which a Participant, as described in Section
3.1(b), or the Beneficiary of such a Participant shall be entitled to receive
hereunder shall be the sum of (a) and (b) plus (c):
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(a)
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The
Supplemental Benefit, as determined under Section 4.1.1, that would have
been payable if the Participant had retired on his 70th birthday and had
selected his optional form of payment of his Supplemental Benefit at that
time.
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(b)
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An
amount equal to the excess of (i) over
(ii):
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(i)
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The
benefit described under Section 4.1.1(a) determined at
retirement;
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(ii)
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The
benefit described under Section 4.1.1(a) determined as if the Participant
had retired on his 70th birthday;
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in
either case, as if the Participant had selected his optional form of
payment of his Supplemental Benefit at that
time.
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(c)
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The
benefit amount, payable under the optional form of payment selected by the
Participant with respect to his Supplement Benefit, that is the Actuarial
Equivalent, determined at retirement, of the excess, if any, of (i) plus
(ii) over (iii):
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(i)
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The
lump-sum value of the Retirement Plan benefit that would have been payable
if the Participant had retired on his 70th birthday plus interest, at the
Actuarial Equivalence interest rate, as described in the Retirement Plan,
then in effect on the 1st day of the month following such 70th birthday,
from such
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1st
day of the month to the effective date of commencement of his Alternative
Supplemental Benefit.
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(ii)
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The
accumulated value of the Supplemental Benefits that would have been paid
prior to the actual Alternative Supplemental Benefit commencement date if
the Participant had retired on his 70th birthday and had selected his
optional form of payment of his Supplemental Benefit at that time, with
interest, at the Actuarial Equivalence interest rate, as described in the
Retirement Plan, then in effect on the 1st day of the month following such
70th birthday, from the date each payment would have been made to the
effective date of commencement of his Alternative Supplemental
Benefit.
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(iii)
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The
sum of (A) and (B):
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(A)
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the
sum of Retirement Plan Benefit payments made prior to retirement, pursuant
to Retirement Plan Section 15.5, with interest, at the Actuarial
Equivalence interest rate, as described in the Retirement Plan, then in
effect on the day such payments commenced, from the date such payment was
made to the effective date of commencement of his Alternative Supplemental
Benefit;
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(B)
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the
lump-sum value of the Participant's remaining Retirement Plan Benefit, if
any, determined at actual
retirement.
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In the event that a Beneficiary is the
initial recipient of a retirement benefit under the Retirement Plan, the amount
of Alternative Supplemental Benefit to which such Beneficiary will be entitled
shall be determined in accordance with the above provisions of this Section
4.1.2, as of the date of death of the individual whose active service with the
Company produced the benefit, with
appropriate
adjustment in accordance with the applicable provisions of the Retirement
Plan.
4.2
Payment of Supplemental
Benefit or Alternative Supplemental Benefit
. Payment of the
Supplemental Benefit or Alternative Supplemental Benefit which a Participant or
Beneficiary is eligible to receive shall be made in the same manner and
subject to the same conditions as is the benefit paid in accordance with the
Retirement Plan, unless the Participant or Beneficiary selects another form of
payment provided for in the Retirement Plan or the form of payment described in
the next paragraph of this Section 4.2; provided, however, that no Participant
who is an officer of the Company that, as a result of action by the Board of
Directors of the Company, continues in employment beyond age 70 may elect a
lump-sum distribution under this Supplemental Plan.
An additional optional form of payment
may be elected under which the Benefit payment under the 100 percent joint and
survivor option would be further reduced so as to provide for a form of payment
based on a guaranteed certain period with 100 percent joint and survivor benefit
thereafter. Such guaranteed period shall be that period for which the
actuarial present value of the 100 percent joint and survivor pension equals the
actuarial present value of a certain period pension of the same monthly
amount. Such guaranteed certain period payment amounts shall be
payable to a Beneficiary for the remaining guaranteed certain period or, at the
Beneficiary's option, be payable in a lump-sum equivalent upon the death of the
surviving spouse.
4.3
Obligation of the Company
.
(a) By the establishment of this
Supplemental Plan, the Company guarantees, subject to the qualifications and
limitations set forth in Article 5 below, a benefit equal to the amount
determined in accordance with Section 4.1.1 or 4.1.2, whichever is
applicable:
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(i)
to each Participant who shall have terminated service with the Company
under conditions of eligibility entitling such Participant (or which would
have
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entitled
such Participant) to benefits commencing at any time under the terms of
the Retirement Plan, and who is entitled to benefits in accordance with
Section 4.1.1 or 4.1.2, whichever is applicable, of this Supplemental
Plan; and
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(ii)
to each Beneficiary of a former employee whose service with the Company
shall have terminated, under conditions of eligibility entitling the
Participant (or which would have entitled the Participant) to benefits
commencing at any time under the terms of the Retirement Plan; provided,
however, that in the case of such Beneficiary, benefit payments qualify
the Beneficiary for benefits in accordance with Section 4.1.1 or 4.1.2,
whichever is applicable, of this Supplemental
Plan.
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(b) Except for Participants and
Beneficiaries described in subsection (a) above, future benefits under the
Supplemental Plan shall be subject to discontinuance or diminution pursuant to
Section 5.2. No other individual, including employees who have not
terminated service with the Company, shall have any entitlement to payment of
the Supplemental Benefit or Alternative Supplemental Benefit. It is
the intent that benefits shall, to the maximum extent permitted by law, be paid
to Participants and Beneficiaries under and pursuant to the terms of the
Retirement Plan and that termination, curtailment, or reduction of benefit
payments under that Plan shall not result in commencement of or increase in
benefits hereunder.
ARTICLE
5
Amendment or Termination
5.1
Amendment to Conform with Law
. The
Company, acting through its Board of Directors, or by authority delegated by
such Board of Directors, may by amendment make such changes in, additions to,
and substitutions for the provisions of the Supplemental Plan, to take effect
retroactively
or otherwise, as is deemed necessary or advisable for the purpose of conforming
the Supplemental Plan to any present or future federal law relating to plans of
this or similar nature, and to the administrative regulations and rulings
promulgated thereunder.
5.2
Other Amendments and Termination
. The
Company, acting through its Board of Directors, or by authority delegated by
such Board of Directors, may amend the Supplemental Plan at any time and from
time to time in any manner which is consistent with amendments made in the
Retirement Plan. The Company, acting through its Board of Directors,
may terminate the Supplemental Plan but only at such times and to the extent
that the Retirement Plan is terminated. Notwithstanding the
provisions of this Section 5.2, however, so long as full benefits are being paid
under the Retirement Plan, the Company shall not amend or terminate this
Supplemental Plan without providing each individual described in Section 4.3(a)
hereof who is then receiving, or then entitled to commence receiving in the
future, benefit payments under the terms of this Plan with a form of benefit
which is equivalent to but not greater than the value of the benefits he would
otherwise be entitled to receive in the absence of such amendment or termination
of this Plan. In the event the Retirement Plan is terminated or
curtailed with the result that payments to Participants and contingent payments
to Beneficiaries are discontinued or reduced, the benefits then being paid
pursuant to this Plan shall similarly be discontinued or reduced in the same
ratio as payments under the Retirement Plan are reduced.
5.3
Form of Amendment or Termination
. Any
such amendment, or termination or discontinuance or reduction of payments
shall be made by an instrument in writing, duly certified, reflecting that said
amendment or termination or discontinuance or reduction of payments has been
authorized by the Board of Directors.
5.4
Notice of Amendment or Termination
. The
Board shall notify Participants or
Beneficiaries
who are affected by any such amendment or termination or discontinuance or
reduction of payments within a reasonable time thereof.
ARTICLE
6
Miscellaneous
6.1
No Guarantee of Employment, etc
. Neither
the creation of the Supplemental Plan nor anything herein shall be
construed as giving any Participant hereunder or other employees of the
Company any right to remain in the employ of the Company.
6.2
Merger, Consolidation, etc
. The
Company will not merge or consolidate with any other corporation nor liquidate
or dissolve without making suitable arrangements for the payment of any benefits
under this Supplemental Plan to the individuals described in Section
4.3(a).
6.3
Inalienability
. Except
so far as may be contrary to the laws of any state having jurisdiction in the
premises, a Participant or Beneficiary shall have no right to assign, transfer,
hypothecate, encumber, commute or anticipate his interest in any payments under
this Supplemental Plan and such payments shall not in any way be subject to any
legal process to levy upon or attach the same for payment of any claim against
any Participant or Beneficiary.
6.4
Incompetency
. If
any Participant or Beneficiary is, in the opinion of the Board, legally
incapable of giving a valid receipt and discharge for any payment, the Board
may, at its option, direct that such payment or any part thereof be made in
monthly installments to such person or persons who in the opinion of the Board
are caring for and supporting such Participant or Beneficiary, unless it has
received due notice of claim from a duly appointed guardian, conservator or
committee of the Participant or Beneficiary. A payment so made will
be a complete discharge of the obligations under the Supplemental Plan to the
extent of and as to that payment, and neither the Board nor the Company will
have any obligation regarding the application of the payment.
6.5
No Requirement to Fund
. No
provisions in the Supplemental Plan shall be construed to require, either
directly or indirectly, the Company to reserve, or otherwise set aside, funds
for the payment of benefits hereunder.
6.6
Controlling Law
. To
the extent not preempted by the laws of the United States of America, the laws
of the State of Missouri shall be the controlling state law in all matters
relating to the Supplemental Plan and shall apply.
6.7
Severability
. If
any provisions of the Supplemental Plan shall be held illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining parts of
the Supplemental Plan, but this Supplemental Plan shall be construed and
enforced as if said illegal and invalid provisions had never been included
herein.
6.8
Limitations on Provisions
. The
provisions of the Supplemental Plan and any Supplemental Benefits or Alternative
Supplemental Benefits shall be limited as described herein. Any
benefit payable under the Retirement Plan shall be paid solely in accordance
with the terms and provisions of the Retirement Plan, and nothing in the
Supplemental Plan shall operate or be construed in any way to modify, amend, or
affect the terms and provisions of the Retirement Plan.
6.9
Gender and Number
. Masculine
gender shall include the feminine, the singular shall include the plural, and
the plural shall include the singular, unless the context clearly indicates
otherwise.
Exhibit
10.7
LACLEDE
GAS COMPANY
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
II
EFFECTIVE
as of January 1, 2005
TABLE
OF CONTENTS
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Pages
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1.
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General
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1.1
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Purpose
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1
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1.2
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Effective
Date
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2
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1.3
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Exclusion
of Deferred Compensation Under the
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Laclede
Gas Company Incentive Compensation Plan
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2
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2.
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Administration
by Retirement Board
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2.1
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Board
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2
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3.
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Eligibility
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3.1
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Persons
Eligible to Receive Benefits
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3
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3.2
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Participant
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3
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3.3
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Beneficiary
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4
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4.
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Supplemental
Benefit
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4.1
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Amount
of Supplemental Benefit
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4
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4.2
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Time
and Form of Payment of
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Supplemental
Benefit
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6
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4.3
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Delay
of Payment to a Specified Employee
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8
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5.
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Amendment
or Termination
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5.1
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Amendment
to Conform with Law
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8
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5.2
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Other
Amendments and Termination
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8
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5.3
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Form
of Amendment or Termination
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9
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5.4
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Notice
of Amendment or Termination
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9
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6.
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Miscellaneous
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6.1
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No
Guarantee of Employment, etc.
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10
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6.2
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Merger,
Consolidation, etc.
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10
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6.3
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Inalienability
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10
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6.4
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Incompetency
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10
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6.5
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No
Requirement to Fund
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11
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6.6
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Controlling
Law
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11
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6.7
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Severability
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11
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6.8
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Limitations
on Provision
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11
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6.9
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Gender
and Number
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11
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6.10
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Section
409A of the Internal Revenue Code
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11
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6.11
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Claims
Procedure
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12
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6.12
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Special
Distribution Events
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13
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LACLEDE
GAS COMPANY
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
II
ARTICLE
1
General
1.1
Purpose
. It
is the intention of Laclede Gas Company (the “Company”) to maintain appropriate
levels of retirement benefits for individuals who are entitled to benefits under
the Employees' Retirement Plan of Laclede Gas Company (the “Retirement
Plan”). Accordingly, the Company established the Laclede Gas Company
Supplemental Retirement Benefit Plan (the “Supplemental Plan”). The
Supplemental Plan is intended to provide benefits to or on behalf of an eligible
person, which includes: (i) any officer of the Company; or (ii) any
Company employee with a salary level of 9 or higher (hereinafter known as grade
level of 15 or higher); whose employment with the Company ceases at a time when
such person or his spouse or beneficiary is entitled (or has become entitled) to
an immediate or future benefit under the Retirement Plan. Such
benefits are to be provided in such a manner as to maintain the level of total
retirement benefits which would otherwise be payable under the Retirement Plan,
but for: (a) the limitations on benefits imposed by the Internal
Revenue Code of 1986, as said Code may be amended from time to time (the
“Internal Revenue Code”); (b) subject to Section 1.3 below, the exclusion of
deferred compensation from normal compensation under the Retirement Plan; and
(c) the amendment of the pension computation formula, effective October 1,
1989. The Supplemental Plan shall maintain the total retirement
benefit levels described above by means of supplemental payments made by the
Company to the individuals eligible for such payments as more fully described in
Articles 3 and 4.
As a result of the adoption of Section
409A of the Internal Revenue Code, the Company adopted this Supplemental Plan II
(“Plan II”), which applies to the benefits to which eligible
individuals
will be entitled, in the manner and at the time provided hereunder, other than
Grandfathered Benefits (as defined in the Supplemental Plan and as identified
below) (“Non-Grandfathered Supplemental Benefits”). Simultaneously,
the Company adopted changes to the Supplemental Plan that governs all of the
Grandfathered Benefits. All references herein to the “Plan II” or
“Supplemental Plan II” shall mean this Plan II, unless otherwise
specified. All references herein to the Supplemental Benefit shall
mean an amount, calculated in accordance with this Plan II, but which does not
exceed the Non-Grandfathered Supplemental Benefits.
1.2
Effective Date
. The
Supplemental Plan is effective as of August 25, 1977 and governs Grandfathered
Benefits. This Supplemental Plan II governs Non-Grandfathered
Benefits effective as of January 1, 2005.
1.3
Exclusion of Deferred
Compensation Under the Laclede Gas Company Incentive Compensation
Plan
. Notwithstanding anything to the contrary contained
elsewhere in this Supplemental Plan II, deferred compensation under the Laclede
Gas Company Incentive Compensation Plan (and any successor thereto) shall not be
included in determining the benefits to be paid under this Supplemental Plan
II.
ARTICLE
2
Administration by Retirement Board
2.1
Board
. The
Retirement Board (the “Board”) which is responsible for the administration of
the Retirement Plan, will administer this Supplemental Plan II. The
Board shall have the same responsibility and authority with respect to this
Supplemental Plan II as it possesses with respect to the Retirement
Plan. It shall also proceed with respect to this Supplemental Plan II
in a manner consistent with the manner in which it proceeds with respect to the
Retirement Plan, provided such manner complies with Section 409A of the Internal
Revenue Code. At least once
each
year, the Board shall make a full report to the Board of Directors of the
Company of the operation of this Supplemental Plan II and the Board's
administration thereof.
ARTICLE
3
Eligibility
3.1
Persons Eligible to Receive Benefits
. Every
individual who qualifies for a benefit under the terms of the Retirement Plan
during the period beginning on January 1, 2005 and ending at the close of
business on December 31, 2008 either as a Participant or as a Beneficiary of
such a Participant, as those terms are defined in Sections 3.2 and 3.3 below,
whose benefit pursuant to the Retirement Plan is reduced by reason
of: (1) the application of the limitations imposed by the Internal
Revenue Code; (2) subject to the provisions of Section 1.3 hereof excluding
deferred compensation under the Laclede Gas Company Incentive Compensation Plan,
by the exclusion of deferred compensation from normal compensation; and/or (3)
the application of the amendment of the pension computation formula effective
October 1, 1989; shall be eligible to receive an amount (the “Supplemental
Benefit”) (as calculated under this Plan II).
It is intended that this Supplemental
Plan II constitute an unfunded deferred compensation arrangement for the benefit
of a select group of management or highly compensated employees (and other
service providers) of the Company and its designated subsidiaries and affiliates
for purposes of the federal income tax laws and the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”) and all documents, agreements or
instruments made or given pursuant to this Supplemental Plan II shall be
interpreted so as to effect such intent.
3.2
Participant
. Every
individual described in Section 3.1 above, which
includes: (i) any officer of the Company; or (ii) any Company
employee having a grade level of 14 or higher;
who
is eligible to receive benefits under this Supplemental Plan II by reason of
active service with the Company shall be known as a “Participant.”
3.3
Beneficiary
. Every
individual described in Section 3.1 above who is eligible to receive benefits
under this Supplemental Plan II by reason of another individual's active service
with the Company shall be known as a “Beneficiary.” The term
“Beneficiary” shall include spouses, heirs-at-law, legal representatives, and
every other person to whom benefits may be distributed, as determined under the
Retirement Plan.
ARTICLE
4
Supplemental Benefit
4.1
Amount of
Supplemental Benefit
. The amount of the Supplemental
Benefit under this Plan II which a Participant or Beneficiary, other than a
Participant described in Section 3.1(b) or the Beneficiary of such a
Participant, shall be entitled to receive hereunder shall be equal to the excess
of (a) over the sum of (b) and (c).
(a) The present value
benefit the Participant or Beneficiary would have been entitled to receive under
any provision of the Retirement Plan using the applicable Grandfathered Formula,
as provided in the Retirement Plan and in accordance with Final Treasury
Regulation Section 1.409A-6(a)(3)(i), and in accordance with any option which is
then operative under the terms of Sections 4.1, 4.3 or 5.5 of such Plan, if such
benefit were computed: (i) without giving effect to the limitations
imposed by the Internal Revenue Code, or its successor, and the regulations and
rulings thereunder or the terms of the Retirement Plan implementing those
limitations; (ii) by including, except for deferred compensation under the
Laclede Gas Company Incentive Compensation Plan, all other then deferred
compensation amounts in normal compensation; and (iii) by utilizing, for
purposes of computing the “Accrued Benefit” for the Participant under the
Retirement Plan as of the
date
of retirement, the greater of the “Accrued Benefit” determined in accordance
with: (A) the Grandfathered Formula; or (B) the pension computation
formula in effect as of September 30, 1989.
(b) The present value
benefit (computed using the pension computation formula then in effect at the
date of retirement) which such Participant or Beneficiary is entitled to receive
under any provision of the Retirement Plan using the applicable Grandfathered
Formula, as provided in the Retirement Plan, and in accordance with any option
which is then operative under the terms of Sections 4.1, 4.3 or 5.5 of such
Plan, including those terms implementing the limitations of the Internal Revenue
Code referred to above and excluding all then deferred compensation (other than
salary amounts deferred under the Laclede Gas Company Salary Deferral Savings
Plan, as the same may be hereafter amended, supplemented or replaced) from
normal compensation.
(c) the Grandfathered
Benefit under the Supplemental Plan.
In the event that a Beneficiary is the
initial recipient of a retirement benefit under the Retirement Plan, the amount
of Supplemental Benefit under this Plan II to which such Beneficiary will be
entitled shall be determined in accordance with (a), (b) and (c) above, as of
the date of death of the individual whose active service with the Company
produced the benefit, with appropriate adjustment in accordance with the
applicable provisions of the Retirement Plan.
It is the intent of this Section 4.1
that the Supplemental Benefit as described above shall be determined at all
times in a manner which construes all references in this Section 4.1 to
limitations of, or imposed by, the Internal Revenue Code, to refer to the then
current limitations of the Internal Revenue Code, or its successor, and any
regulations and rulings thereunder.
4.1.2 All
determinations of the Company with respect to this 4.1 shall be final and
binding on all parties.
4.2
Time and Form of Payment of
Supplemental Benefit
. Except as otherwise (i) elected, (ii)
provided in Section 4.3, or (iii) permitted to be “linked” by IRS Notice 2007-86
and applicable published guidance under Section 409A of the Internal Revenue
Code, the Supplemental Benefit under this Plan II which a Participant or
Beneficiary is eligible to receive under this Plan II shall not be deemed to be
a series of separate payments for any purposes of Section 409A of the Internal
Revenue Code and shall be paid upon the Participant’s Separation from Service
from the Company (as defined below), as follow:
4.2.1 the
Supplemental Benefit under this Plan II, as the case may be, will be payable
upon the Participant’s death as a lump sum.
4.2.2 the
Supplemental Benefit under this Plan II, as the case may be, will be payable on
account of the Participant’s retirement on or after attainment of age 55, as a
lump sum on the effective date of such Separation from Service (or such other
date as provided below).
4.2.3 the
Supplemental Benefit under this Plan II, as the case may be, will be payable
upon any Separation from Service other than as described in 4.2.1 or 4.2.2 above
prior to attaining age 55 (including on account of the Participant’s disability)
as a lump sum at the time the Participant attains age 65.
For this Plan II, “Separation from
Service” shall mean a separation from service as set forth in Final Treasury
Regulation 1.409A-1(h), including the default presumptions
thereof. For purposes of determining whether a “Separation from
Service” has occurred, employment with a Company “Affiliate” (as defined below)
shall not be deemed to be a “Separation from
Service.” “Affiliate
”
shall mean shall mean any
member of the Company’s control group within the meaning of Final Treasury
Regulation Section 1.409A-1(h)(3), as such may be modified or amended from time
to time, by applying the “at least 50 percent” provisions thereof.
The Company may permit a Participant to
elect to change the time and/or form of payment, subject to the following
conditions: (i) the election may not take effect until at least 12 months after
the date on which the election is made; (ii) except with respect to payments
made on account of a Participant’s death, payment of the Supplemental Benefit
under this Plan II which a Participant is eligible to receive must not commence
earlier than five (5) years from the date of the Participant’s originally
scheduled payment date; and (iii) the election must be made at least 12 months
prior to the originally scheduled payment date.
Notwithstanding any other provision
contained herein, to the extent permitted by the Company and Section 409A of the
Internal Revenue Code (including Q&A-19(c) of IRS Notice 2005-1, 2005-2 IRB
274 (12/20/2004), Final Treasury Regulations promulgated under Section 409A of
the Internal Revenue Code, IRS Notice 2006-79 and IRS Notice 2007-86), the
Company may permit Participants, on or prior to December 31, 2008, to choose a
new payment date(s) for the payment of all or a portion of Supplemental Benefit
hereunder and/or make a new election with respect to the form of payment of such
benefit(s) and such elections shall not be treated as a change in the form and
timing of payment or an acceleration of payment in violation of Section 409A of
the Internal Revenue Code;
provided
,
however
,
that
(a) the
Participant may not make an election hereunder during the 2008 calendar year
that would cause payments to be made outside the 2008 calendar year that, but
for the election, the Participant would otherwise receive during the 2008
calendar year and (b) the Participant may not make an election hereunder during
the 2008 calendar year that would cause payments to be made during the 2008
calendar year that, but for the election, the Participant would otherwise not
receive during the 2008 calendar year.
Notwithstanding the foregoing, any
election under this Section 4.2 shall only be permitted to the extent it
complies with Internal Revenue Code Section 409A, the Final Treasury
Regulations
and other published guidance thereunder.
4.3
Delay of Payment to a
Specified Employee
. Notwithstanding Section 4.2
above, if the Company determines that a Participant is a “specified
employee” as defined in Section 409A(a)(2)(B)(i) of the Internal Revenue Code
and regulations and other guidance issued thereunder, then such benefit (or
portion thereof) shall be paid no earlier than the first day of the seventh
month following the month of the Participant’s separation from service (with the
first such payment being a lump sum equal to the aggregate benefit the
Participant would have received during such period if no such payment delay had
been imposed, together with interest on such delayed amount during the period of
such restriction at a rate, per annum, equal to the Composite Average Yield on
Corporate Bonds published by Moody’s Investor Services for the month of October
in the calendar year of the Participant’s termination of
employment). This Section 4.3 shall not apply to any benefit payable
on account of a Participant’s death.
ARTICLE
5
Amendment or Termination
5.1
Amendment to Conform with Law
. The
Company, acting through its Board of Directors, or by authority delegated by
such Board of Directors, may by amendment make such changes in, additions to,
and substitutions for the provisions of this Supplemental Plan II, to take
effect retroactively or otherwise, as is deemed necessary or advisable for the
purpose of conforming this Supplemental Plan II to any present or future federal
law relating to plans of this or similar nature, and to the administrative
regulations and rulings promulgated thereunder.
5.2
Other Amendments and Termination
. The
Company, acting through its Board of Directors, or by authority delegated by
such Board of Directors, may amend this Supplemental Plan II at any time and
from time to time in any manner which is consistent with amendments
made
in the Retirement Plan. The Company, acting through its Board
of Directors, may terminate this Supplemental Plan II but only at such times and
to the extent that the Retirement Plan is terminated. Notwithstanding
the provisions of this Section 5.2, however, so long as full benefits are being
paid under the Retirement Plan, the Company shall not amend or terminate this
Supplemental Plan II without providing each individual described in Section
4.3(a) hereof who is then receiving, or then entitled to commence receiving in
the future, benefit payments under the terms of this Plan II with a form of
benefit which is equivalent to but not greater than the value of the benefits he
would otherwise be entitled to receive in the absence of such amendment or
termination of this Plan II. In the event the Retirement Plan is
terminated or curtailed with the result that payments to Participants and
contingent payments to Beneficiaries are discontinued or reduced, the benefits
then being paid pursuant to this Plan II shall similarly be discontinued or
reduced in the same ratio as payments under the Retirement Plan are
reduced. Notwithstanding the above, this Plan II may not be
terminated and payments accelerated thereunder contrary to the provisions of
Section 409A of the Internal Revenue Code including, without limitation, Final
Treasury Regulation Section 1.409A-3(j)(4)(ix) with reference to Final Treasury
Regulation Section 1.409A-1(g).
5.3
Form of Amendment or Termination
. Any
such amendment, or termination or discontinuance or reduction of payments shall
be made by an instrument in writing, duly certified, reflecting that said
amendment or termination or discontinuance or reduction of payments has been
authorized by the Board of Directors.
5.4
Notice of Amendment or Termination
. The
Board shall notify Participants or Beneficiaries who are affected by any such
amendment or termination or discontinuance or reduction of payments within a
reasonable time thereof.
ARTICLE
6
Miscellaneous
6.1
No Guarantee of Employment, etc
. Neither
the creation of this Supplemental Plan II nor anything herein shall be construed
as giving any Participant hereunder or other employees of the Company any right
to remain in the employ of the Company, any subsidiary or any
Affiliate.
6.2
Merger, Consolidation, etc
. The
Company will not merge or consolidate with any other corporation nor liquidate
or dissolve without making suitable arrangements for the payment of any benefits
under this Supplemental Plan II to the individuals described in Section
4.3(a).
6.3
Inalienability
. Except
so far as may be contrary to the laws of any state having jurisdiction in the
premises, a Participant or Beneficiary shall have no right to assign, transfer,
hypothecate, encumber, commute or anticipate his interest in any payments under
this Supplemental Plan II and such payments shall not in any way be subject to
any legal process to levy upon or attach the same for payment of any claim
against any Participant or Beneficiary.
6.4
Incompetency
. If
any Participant or Beneficiary is, in the opinion of the Board, legally
incapable of giving a valid receipt and discharge for any payment, the Board
may, at its option, direct that such payment or any part thereof be made in
either a lump sum, or, if the Participant has elected another form of payment,
then in such form, to such person or persons who in the opinion of the Board are
caring for and supporting such Participant or Beneficiary, unless it has
received due notice of claim from a duly appointed guardian, conservator or
committee of the Participant or Beneficiary. A payment so made will
be a complete discharge of the obligations under the Supplemental Plan II to the
extent of and as to that payment, and neither the Board nor the Company will
have any obligation regarding the application of the payment.
6.5
No Requirement to Fund
. No
provisions in the Supplemental Plan II shall be construed to require, either
directly or indirectly, the Company to reserve, or otherwise set aside, funds
for the payment of benefits hereunder.
6.6
Controlling Law
. To
the extent not preempted by the laws of the United States of America, the laws
of the State of Missouri shall be the controlling state law in all matters
relating to the Supplemental Plan II and shall apply.
6.7
Severability
. If
any provisions of the Supplemental Plan II shall be held illegal or invalid for
any reason, said illegality or invalidity shall not affect the remaining parts
of the Supplemental Plan, but this Supplemental Plan II shall be construed and
enforced as if said illegal and invalid provisions had never been included
herein.
6.8
Limitations on Provisions
. The
provisions of the Supplemental Plan II and any Supplemental Benefits under this
Plan II shall be limited as described herein. Any benefit payable
under the Retirement Plan shall be paid solely in accordance with the terms and
provisions of the Retirement Plan, and nothing in this Supplemental Plan II
shall operate or be construed in any way to modify, amend, or affect the terms
and provisions of the Retirement Plan.
6.9
Gender and Number
. Masculine
gender shall include the feminine, the singular shall include the plural, and
the plural shall include the singular, unless the context clearly indicates
otherwise.
6.10
Section 409A of the Internal
Revenue Code
. Notwithstanding any other provision of the Plan
II, this Plan II is intended to comply with Section 409A of the Internal Revenue
Code and shall at all times be interpreted in accordance with such intent that
amounts that may become payable to Participant shall not be taxable to such
Participants until such amounts are paid in accordance with the terms of the
Plan II. To the extent that any provision of the Plan II
violates
Section
409A of the Internal Revenue Code and the Final Treasury Regulations promulgated
thereunder such that amounts would be taxable to a Participant prior to payment
or otherwise subject to penalties under Section 409A of the Internal Revenue
Code, such provision shall be automatically reformed or stricken to preserve the
intent hereof. Notwithstanding the foregoing, in no event will the
Company or any of its affiliates have any liability for any failure of the Plan
II to satisfy Section 409A of the Internal Revenue Code and such parties do not
guarantee that the Plan II complies with Section 409A of the Internal Revenue
Code.
6.11
Claims
Procedure
. Any claim for benefits under this Plan II shall be
submitted to the Retirement Board (as defined in the Retirement
Plan). If the Retirement Board denies the claim for benefits, in
whole or in part, the Retirement Board shall notify the claimant of the adverse
benefit determination no later than ninety (90) days after receipt of the
claim by the Plan II, unless the Retirement Board determines that special
circumstances require an extension of time, which may not exceed a further
ninety (90) days, for processing the claim and so notifies the claimant in
writing prior to the termination of the initial 90 day period. In the
event that a claim for benefits under this Plan II has been denied by the
Retirement Board, the decision shall be subject to further review by the
Retirement Board upon written request of the claimant made to the Retirement
Board within sixty (60) days of receipt by the claimant of notice of such
denial. Upon request and free of charge, the Retirement Board shall
provide the claimant with reasonably access to all pertinent information,
documents and records with respect to the claim. The decision of the
Retirement Board upon review shall be in writing and shall state the reasons for
the decision and the provisions of this Plan II on which the decision is
based. Such decision shall be made within sixty (60) days after
the Retirement Board’s receipt of written request for such review unless a
hearing is necessitated to determine the facts and circumstances, in which
event
a decision shall be rendered as soon as possible, but not later than one hundred
and twenty (120) days after receipt of the claimant’s written request for
review. The decision of the Retirement Board upon review shall be
final and binding on all persons.
6.12
Special Distribution
Events
. Notwithstanding the provisions set forth above with
respect to the payments of benefits under the Supplemental Plan II, amounts may
be paid under the Supplemental Plan II prior to the scheduled payment date set
forth above, if the Company determines that such amounts become subject to FICA
taxes under Internal Revenue Code Sections 3101, 3121(a) or 3121(v), and/or
withholding taxes under Internal Revenue Code Section 3401 or the corresponding
provisions of any state, local or foreign law as a result of the payment of such
FICA taxes;
provided
,
that
, such payment
shall not exceed the FICA amount and such other amount required to be withheld
on account of the payment of such FICA amount. Further, a payment
will be made under the Supplemental Plan II at any time the Supplemental Plan II
fails to meet the requirements of Section 409A of the Internal Revenue Code;
provided
,
that
, such payment
shall not exceed the amount required to be included in income as a result of the
failure to comply with Section 409A of the Internal Revenue
Code.
Exhibit
10.8
The
Laclede Group
2006
Equity Incentive Plan
Restricted
Stock Award Agreement
THIS AGREEMENT, made as of this 5
th
day of
November 2008, between The Laclede Group, Inc. (the “Company”) and «Name» (the
“Participant”).
Pursuant to the terms of the Company’s
2006 Equity Incentive Plan, as approved by shareholders in January 2006, (the
“Plan”), the Participant has been awarded shares of Restricted Stock conditioned
upon the execution and delivery by the Company and the Participant of this
Agreement setting forth the terms and conditions applicable to such
award.
NOW, THEREFORE, in consideration of the
mutual covenants set forth in this Agreement, the parties hereto hereby agree as
follows:
1.
Award of
Restricted Stock
. Pursuant and subject to the terms and
conditions set forth herein and in the Plan, the Company awards to the
Participant, effective as of the Award Date, «Grant» («Spelled_Out») shares of
Common Stock of the Company, subject to the terms, conditions and restrictions
described in this Agreement and in the Plan (the “Restricted
Stock”).
2.
Award
Date
. The Award Date of the Restricted Stock awarded under
this Agreement is November 5, 2008.
3.
Incorporation of
Plan
. All terms, conditions and restrictions of the Plan are
incorporated herein and made part hereof as if stated herein. If
there is any conflict between the terms and conditions of the Plan and this
Agreement, the terms and conditions of the Plan, as interpreted by the
Administrator, shall govern. All capitalized terms used herein, but
not otherwise defined, shall have the meaning given to such terms in the
Plan.
4.
Restrictions and
Conditions
. Except as otherwise provided in this Agreement,
Participant shall forfeit, for no consideration, any and all right to the
Restricted Stock under this Award upon Participant’s termination of employment
with the Company and any of its subsidiaries for any reason prior to November 5,
2011 (“Vesting Date”).
5.
Lapse of
Restrictions
. The Participant accepts this Restricted Stock
Award and agrees that the restrictions relative to the Award shall lapse and all
Shares of Restricted Stock shall vest in Participant on the Vesting
Date.
|
Notwithstanding
the foregoing, vesting shall be accelerated upon the following
circumstances:
|
(a)
|
unless
the Administrator determines otherwise at a later date, if within two
years following a Change in Control the Participant’s employment is
terminated by the Company or a subsidiary of the Company without Cause (a
“Change in Control Termination”), the restrictions shall lapse as to all
Restricted Shares upon the earlier of the Vesting Date or the date of the
Change in Control Termination; or
|
(b)
|
if
a Participant leaves employment of the Company and its subsidiaries due to
mandatory retirement requirements prior to the Vesting Date, the
restrictions shall lapse as to such number of shares of Restricted Stock
determined by multiplying the total number of Restricted Shares subject to
this Award by a fraction the numerator of which is the number of full
months from the Award Date to the Participant’s mandatory retirement date
and the denominator of which is thirty-six
(36).
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6.
Shareholder
Rights
. Participant shall have all of the rights of a
shareholder of the Company with respect to shares of Restricted Stock, including
the right to vote and to receive dividends, but the Restricted Stock remains
subject to the non-transferability restrictions set forth in Section 8 of this
Agreement.
7.
How Shares are
Held.
The Restricted Stock shall be held by a Company
custodian until all of the restrictions have lapsed and all applicable terms and
conditions have been met. The Company shall cause the shares of
Restricted Stock to be issued without a restrictive legend when all restrictions
lapse as provided in Section 5.
8.
Shares
Non-Transferable
. The Restricted Stock shall not be
transferable by Participant and may not be, sold, assigned, disposed of, or
pledged or hypothecated as collateral for a loan or as security for performance
of any obligation or for any other purpose until after the restrictions have
lapsed as provided in Section 5.
9.
No Right to
Continued Employment
. Nothing in this Agreement shall confer
on the Participant any right to continuance of employment by the Company or a
subsidiary nor shall it interfere in any way with the right of Participant’s
employer to terminate Participant’s employment at any time.
10.
Tax Withholding
and Tax Election
. The Company shall not be obligated to
deliver any shares of Restricted Stock until Participant pays to the Company in
cash, or any other form of property acceptable to the Company, the amount
required to be withheld for any federal, state or local income, FICA or other
taxes of any kind with respect to such shares. The Participant may,
by notice to the Company, elect to have such withholding satisfied by a
reduction of the number of shares otherwise so deliverable, such reduction to be
calculated based on the Fair Market Value of the Common Stock on the date the
restrictions lapse as provided in Section 5. The value of shares
withheld will not exceed the minimum amount of tax required to be withheld by
law. The Company and its subsidiaries shall, to the extent permitted
by law, have the right to deduct such taxes, from any payment of any kind
otherwise due to Participant. Until the restrictions have lapsed as
provided in Section 5, any dividends paid relative to the Restricted Stock shall
be treated as compensation and subject to tax withholdings in accordance with
tax laws then in effect.
The Participant may, but is not
required to, elect to apply the rules of Section 83(b) of the Internal Revenue
Code, as amended (“Code”) to the issuance of the shares of Restricted Stock that
is subject to a substantial risk of forfeiture. If the Participant
makes an affirmative election under Section 83(b) of the Code, the Participant
must file such election within 30 days after the date of this Agreement with the
Internal Revenue Service and notify the Company within 30 days after making such
election. The decision to make an affirmative election under Section
83(b) of the Internal Revenue Code depends upon a wide variety of facts and
circumstances and as such the Participant should consult his or her tax
advisor. The Company will not provide guidance to Participants on
determining if an affirmative election is appropriate.
11.
Confidential
Information and Restrictions on Soliciting Employees
.
Notwithstanding any
provision of this Agreement to the contrary, the Participant shall pay to the
Company the Fair Market Value of the Restricted Stock that vests under this
Award, if, during the period beginning on the date hereof and ending eighteen
months following the date the Participant’s employment with the Company and its
subsidiaries terminates provided that such termination is other than a Change in
Control Termination, the Participant: (1) discloses Confidential Information, as
defined below, to any person not employed by the Company or any of its
subsidiaries or not engaged to render services to the Company or any of its
subsidiaries; or (2) Solicits Employees, as defined below. Fair
Market Value shall be calculated on the date of the first violation of this
Section 11.
For purposes of this Section 11,
“Confidential Information” means information concerning the Company, its
subsidiaries and their business that is not generally known outside the Company,
and includes (A) trade secrets; (B) intellectual property;
(C) methods of operation and processes; (D) information regarding
present and/or future products, developments, processes and systems;
(E) information on customers or potential customers, including customers’
names, sales records, prices, and other terms of sales and cost information;
(F) personnel data; (G) business plans, marketing plans, financial
data and projections; and (H) information received in confidence from third
parties. This provision shall not preclude the Participant from use or
disclosure of information known generally to the public or of information not
considered confidential by persons engaged in the business conducted by the
Company or subsidiary or from disclosure required by law or court
order.
“Solicits Employees” means the
Participant’s direct or indirect hire, solicit to hire, or attempt to induce any
employee of the Company or a subsidiary (who is an employee of the Company or a
subsidiary as of the time of such hire or solicitation or attempt to hire) or
any former employee of the Company or a subsidiary (who was employed by the
Company or a subsidiary within the 12-month period immediately preceding the
date of such hire or solicitation or attempt to hire) to leave the employment of
the Company or a subsidiary.
12.
Integration
. This
Agreement, and the other documents referred to herein or delivered pursuant
hereto which form a part hereof, contain the entire understanding of the parties
with respect to its subject matter. There are no restrictions,
agreements, promises, representations, warranties, covenants or undertakings
with respect to the subject matter hereof other than those expressly set forth
herein. This Agreement, including without limitation the Plan,
supersedes all prior agreements and understandings between the parties with
respect to its subject matter and may only be amended by mutual written consent
of the parties.
13.
Governing
Law
. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Missouri, without regard to
the provisions governing conflict of laws.
14.
Compliance with
Laws and Regulations
.
The obligation
of the Company to deliver shares of Common Stock hereunder shall be subject to
all applicable federal and state laws, rules and regulations and to such
approvals by any government or regulatory agency as may be
required.
Exhibit
10.9
The
Laclede Group
2006
Equity Incentive Plan
Performance
Contingent
Restricted
Stock Award Agreement
THIS AGREEMENT, made as of this 5th day
of November 2008, between The Laclede Group, Inc. (the “Company”) and «Name»
(the “Participant”).
Pursuant to the terms of the Company’s
2006 Equity Incentive Plan, as approved by shareholders in January 2006, (the
“Plan”), this Award allows the Participant to earn up to
«Grant__High_Performance» shares of Common Stock conditioned upon the execution
and delivery by the Company and the Participant of this Agreement setting forth
the terms and conditions applicable to such award.
NOW, THEREFORE, in consideration of the
mutual covenants set forth in this Agreement, the parties hereto hereby agree as
follows:
1.
Award of
Restricted Stock
. Pursuant and subject to the terms and
conditions set forth herein and in the Plan, the Company awards to the
Participant, effective as of the Award Date, a maximum of
«Grant__High_Performance» («Spelled_Out») shares of Common Stock of the Company,
subject to the terms, conditions and restrictions described in this Agreement
and in the Plan (the “Performance Contingent Restricted Stock”). Of
the Performance Contingent Restricted Stock,
·
|
«Grant__Target»
shares (“Performance Restricted Shares”) are issued on the Award Date and
Participant shall have all of the rights of a shareholder of the Company
with respect to such shares, including the right to vote and to receive
dividends, but such shares remain subject to the performance contingencies
in Section 5 and non-transferability restrictions in Section 7 of this
Agreement
|
·
|
«Delta»
shares (“Potential Performance Restricted Shares”) represent shares, all
or some of which the Participant may earn if performance exceeds Target,
but as to which Participant shall have no rights of a
shareholder. Such rights shall only be obtained, if at all,
once performance during the Performance Period has exceeded Target, the
Board has certified to such attainment, and one or more Potential
Performance Restricted Shares are delivered to the
Participant.
|
2.
Award
Date
. The Award Date of the Performance Contingent Restricted
Stock awarded under this Agreement is November 5, 2008.
3.
Incorporation of
Plan
. All terms, conditions and restrictions of the Plan are
incorporated herein and made part hereof as if stated herein. If
there is any conflict between the terms and conditions of the Plan and this
Agreement, the terms and conditions of the Plan, as interpreted by the
Administrator, shall govern. All capitalized terms used herein, but
not otherwise defined, shall have the meaning given to such terms in the
Plan.
4.
Restrictions and
Conditions
. Except as otherwise provided in this Agreement,
Participant shall forfeit any and all right to the Performance Contingent
Restricted Stock upon Participant’s termination of employment with the Company
and its subsidiaries for any reason prior to the end of the Performance
Period.
5.
Lapse of
Restrictions
. The Participant accepts this Performance
Contingent Restricted Stock Award and agrees that the restrictions relative to
such Award shall lapse only following the conclusion of the Performance Period
and only to the extent that one or more of the Performance Contingencies set
forth in Appendix A have been met or exceeded. If performance on
neither Performance Contingency has been achieved at or above Threshold, then
all Performance Contingent Restricted Stock is forfeited. If
performance on one or more of the Performance Contingencies has been achieved
between the Threshold and Target or Target and High Performance levels of
performance, the Administrator shall interpolate for performance between the
applicable levels and shall determine the number of shares of Performance
Contingent Restricted Stock as to which the restrictions shall
lapse. Because the Company cannot issue fractional shares, the
Administrator will round down to the nearest whole number of shares of
Performance Contingent Restricted Stock in such interpolations.
The Award will be subject to forfeiture
of up to 25% of the shares earned based upon performance relative to the
Performance Contingencies, as determined by the Administrator in its sole
discretion, if the Company’s Total Shareholder Return, as defined in Appendix A,
for the Performance Period is below the median relative to the defined
comparator group identified by the Administrator.
Vesting of any Performance Restricted
Shares as well as the issuance, if any, of Potential Performance Restricted
Shares under this Agreement shall occur on the business day immediately
following the date of the certification by the Compensation Committee
(“Certification Date”) of (a) the satisfaction of one or more of the Performance
Contingencies and (b) the number of shares of Performance Contingent Restricted
Stock to be vested or issued;
provided
,
that
no Performance
Contingent Restricted Stock shall vest or be issued if Participant is terminated
with or without Cause or if the Participant voluntarily terminates employment
with the Company and all of its subsidiaries prior to the Certification
Date. Any Potential Performance Restricted Shares that the Committee
certifies are earned will be issued and delivered to the Participant in no event
later than March 15 of the year following the end of the Performance
Period. Any Performance Restricted Shares or Potential Performance
Restricted Shares as to which any or all of the respective Performance
Contingencies has not been satisfied shall be forfeited.
|
Notwithstanding
the foregoing,
|
(i)
|
In
the event of a Change in Control, the Performance Contingent Restricted
Stock shall be deemed earned at Target prorated based on the number of
months in the Performance Period to the date of the Change in Control and
all restrictions as to such number of shares shall lapse
if
:
|
(a)
|
the
Award has not otherwise been forfeited and
|
|
|
(b)
|
the
successor or surviving corporation (or parent thereof) does not assume
this Award or replace it with a comparable award, provided further that if
the Award is assumed or replaced, such assumed or replaced Award shall
provide that the restrictions shall lapse if Participant is involuntarily
terminated without Cause within 24 months of the Change in Control (a
“Change in Control
Termination”);
|
(ii)
|
if
a Participant leaves the employment of the Company and its subsidiaries
due to death, Disability or retirement (including early retirement and
disability retirement) prior to the end of the Performance Period, the
Participant will be eligible to earn a prorated Award, as the
Administrator may determine, based on the number of full months as a
Participant during the Performance Period and will be eligible to receive
the underlying shares if the Performance Contingencies are satisfied and
the restrictions lapse as outlined
above.
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6.
How Shares are
Held.
The Performance Restricted Shares shall be held by a
Company custodian until all of the restrictions have lapsed and all applicable
terms and conditions have been met. The Company shall deliver to the
Participant the number of whole shares of Performance Restricted Shares as to
which the Administrator has determined the restrictions have lapsed as provided
in Section 5. Potential Performance Restricted Shares, when earned,
shall be issued and delivered as provided in Section 5.
7.
Shares
Non-Transferable
. The Performance Contingent Restricted Stock
shall not be transferable by Participant and may not be, sold, assigned,
disposed of, or pledged or hypothecated as collateral for a loan or as security
for performance of any obligation or for any other purpose until, with respect
to the Performance Restricted Shares, after the restrictions have lapsed as
provided in Section 5 and, with respect to the Potential Performance Restricted
Shares, after such shares have been issued and delivered to the
Participant.
8.
No Right to
Continued Employment
. Nothing in this Agreement shall confer
on the Participant any right to continuance of employment by the Company or a
subsidiary, nor shall it interfere in any way with the right of Participant’s
employer to terminate Participant’s employment at any time.
9.
Tax Withholding
and Tax Election
. The Company shall not be obligated to
deliver any shares of Performance Contingent Restricted Stock until Participant
pays to the Company in cash, or any other form of property acceptable to the
Company, the amount required to be withheld for any federal, state or local
income, FICA or other taxes of any kind with respect to such
shares. The Participant may, by notice to the Company, elect to have
such withholding satisfied by a reduction of the number of whole shares
otherwise so deliverable, such reduction to be calculated based on the Fair
Market Value of the Common Stock on the date the restrictions lapse as provided
in Section 5. The value of shares withheld will not exceed the
minimum amount of tax required to be withheld by law. The Company and
its subsidiaries shall, to the extent permitted by law, have the right to deduct
such taxes, from any payment of any kind otherwise due to
Participant. Until the restrictions have lapsed as provided in
Section 5, any dividends paid relative to the Performance Restricted Shares
shall be treated as compensation and subject to tax withholdings in accordance
with tax laws then in effect.
The Participant may, but is not
required to, elect to apply the rules of Section 83(b) of the Internal Revenue
Code, as amended, (“Code”) to the issuance of Performance Restricted Shares that
is subject to a substantial risk of forfeiture. If the Participant
makes an affirmative election under Section 83(b) of the Code, the Participant
must file such election within 30 days after the date of this Agreement with the
Internal Revenue Service and notify the Company within 30 days after making such
election. The decision to make an affirmative election under Section
83(b) of the Internal Revenue Code depends upon a wide variety of facts and
circumstances and as such the Participant should consult his or her tax
advisor. The Company will not provide guidance to Participants on
determining if an affirmative election is appropriate.
10.
Confidential
Information and Restrictions on Soliciting Employees
.
Notwithstanding any
provision of this Agreement to the contrary, the Participant shall pay to the
Company the Fair Market Value of the Performance Contingent Restricted Stock
vested and issued to Participant under this Award if, during the period
beginning on the date hereof and ending eighteen months following the date the
Participant’s employment with the Company and its subsidiaries terminates
(provided that such termination is other than a Change in Control Termination),
the Participant: (1) discloses Confidential Information, as defined below, to
any person not employed by the Company or any of its subsidiaries or not engaged
to render services to the Company or any of its subsidiaries; or (2) Solicits
Employees, as defined below. Fair Market Value shall be calculated on
the date of the first violation of this Section 10.
For purposes of this Section 10,
“Confidential Information” means information concerning the Company, its
subsidiaries and their business that is not generally known outside the Company,
and includes (A) trade secrets; (B) intellectual property;
(C) methods of operation and processes; (D) information regarding
present and/or future products, developments, processes and systems;
(E) information on customers or potential customers, including customers’
names, sales records, prices, and other terms of sales and cost information;
(F) personnel data; (G) business plans, marketing plans, financial
data and projections; and (H) information received in confidence from third
parties. This provision shall not preclude the Participant from use or
disclosure of information known generally to the public other than by his or her
disclosure of such information or of information not considered confidential by
persons engaged in the business conducted by the Company or subsidiary or from
disclosure required by law or court order.
“Solicits Employees” means the
Participant’s direct or indirect hire of, solicit to hire, or attempt to induce
(or Participant’s assisting of any third party to hire, solicit or attempt to
induce) any employee of the Company or a subsidiary (who is an employee of the
Company or a subsidiary as of the time of such hire or solicitation or attempt
to hire) or any former employee of the Company or a subsidiary (who was employed
by the Company or a subsidiary within the 12-month period immediately preceding
the date of such hire or solicitation or attempt to hire) to leave the
employment of the Company or a subsidiary.
11.
Integration
. This
Agreement, and the other documents referred to herein or delivered pursuant
hereto which form a part hereof, contain the entire understanding of the parties
with respect to its subject matter. There are no restrictions,
agreements, promises, representations, warranties, covenants or undertakings
with respect to the subject matter hereof other than those expressly set forth
herein. This Agreement, including without limitation the Plan,
supersedes all prior agreements and understandings between the parties with
respect to its subject matter and may only be amended by mutual written consent
of the parties.
12.
Governing
Law
. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Missouri, without regard to
the provisions governing conflict of laws.
13.
Compliance with
Laws and Regulations
.
The obligation
of the Company to deliver shares of Common Stock under this Award shall be
subject to all applicable federal and state laws, rules and regulations and to
such approvals by any government or regulatory agency as may be
required.
14.
Participant
Acknowledgment
. By accepting these Awards, the Participant
acknowledges receipt of a copy of the Plan, and acknowledges that all decisions,
determinations and interpretations of the Administrator in respect of the Plan
and this Agreement shall be final and conclusive.
In addition, the Participant expressly
acknowledges that violation by the Participant of Section 10 of this Agreement
will obligate the Participant to pay to the Company the Fair Market Value of the
Performance Contingent Restricted Stock that becomes vested or is issued
pursuant to Section 5.
|
The
Laclede Group, Inc.
|
|
|
|
|
By:
|
|
|
|
D.H.
Yaeger
|
|
Title:
|
Chairman
of the Board, President and Chief
|
|
|
Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
«Name»
|
|
Appendix
A to Stock Award
Performance
Period
. The “Performance Period” for this Award shall be the
period beginning October 1, 2008 and ending September 30, 2011.
Performance
Contingencies
. The “Performance Contingencies” for this Award
include two performance measures: EPS Growth and Portfolio
Development as specified below:
EPS
Growth
– EPS Growth is measured as the average of the annual earnings per
share of Common Stock for the Company’s fiscal years 2009, 2010 and
2011. The Threshold, Target, and High Performance levels of
performance and performance contingent restricted stock (PCRS) as to which
restrictions may lapse are as follows:
|
Threshold
|
Target
|
High Performance
|
Level
of Performance
|
Average
of $ per share or above
|
Average
of $ per share or above
|
Average
of $ per share or above
|
Number
of PCRS as to which restrictions lapse
|
[1/3
of PCRS in grant x 80%]
|
[2/3
of PCRS in grant x 80%]
|
[#
of PCRS in grant x
80%]
|
Portfolio
Development
– Portfolio Development is measured by organic earnings
(other than Laclede Energy Resources or Laclede Gas Company) and/or investments
or acquisitions made in new businesses entered into within the Performance
Period. The Threshold, Target and High Performance levels of
performance and PCRS as to which restrictions may lapse are as
follows:
|
Threshold
|
Target
|
High Performance
|
Level
of Performance
|
Investment
of $ million or earnings added of $ per
share or above
|
Investment
of $ million or earnings added of $ per
share or above
|
Investment
of $ million or earnings added of $ per
share or above
|
Number
of PCRS as to which restrictions lapse
|
[1/3
of PCRS in grant x 20%]
|
[2/3
of PCRS in grant x 20%]
|
[#
of PCRS in grant x
20%]
|
Total
Shareholder Return
for the Company or for a comparator company shall be
calculated as follows:
|
Average
share price for the 7/1/2011 – 9/30/2011 quarter
|
+
|
value
of reinvested dividends
|
=
|
Total
end of performance period value
|
|
|
–
|
average share price
for the 7/1/2008 – 9/30/2008 quarter
|
=
|
Total
value created in performance period
|
|
|
÷
|
average share price for the 7/1/2008 –
9/30/2008 quarter
|
=
|
Total
Shareholder Return
|
Illustration
: If
a Participant received an award of 150 shares of Performance Contingent
Restricted Stock with 100 shares being Performance Restricted Shares and 50
shares being Potential Performance Restricted Shares and if the Administrator
determines that the Company attained Target Performance on the EPS Performance
Contingency, midway between Target and High Performance on the Portfolio
Development Performance Contingency, and TSR exceeded the median of the
comparator group, then upon the Committee’s certification of such performance
the 100 Performance Restricted Shares would vest and 5 shares of the 50
Potential Performance Restricted Shares would be issued and delivered to the
Participant.
Exhibit
12
THE
LACLEDE GROUP, INC. AND SUBSIDIARY COMPANIES
|
|
|
|
SCHEDULE
OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve
Months Ended
|
|
|
|
|
|
Dec.
31,
|
|
|
|
September
30,
|
|
|
(Thousands
of Dollars)
|
|
|
2008
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing
operations
before interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
charges
and income taxes
|
|
$
|
127,828
|
|
|
|
$
|
113,228
|
|
$
|
101,867
|
|
$
|
100,080
|
|
$
|
78,676
|
|
$
|
78,604
|
|
|
Add:
One third of applicable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
rentals
charged to operating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expense
(which approximates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
the
interest factor)
|
|
|
1,714
|
|
|
|
|
1,691
|
|
|
1,485
|
|
|
1,291
|
|
|
938
|
|
|
538
|
|
|
Total
Earnings
|
|
$
|
129,542
|
|
|
|
$
|
114,919
|
|
$
|
103,352
|
|
$
|
101,371
|
|
$
|
79,614
|
|
$
|
79,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on long-term debt –
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Laclede
Gas
|
|
$
|
20,871
|
|
|
|
$
|
19,851
|
|
$
|
22,502
|
|
$
|
22,329
|
|
$
|
22,835
|
|
$
|
22,010
|
|
|
Other
interest
|
|
|
8,039
|
|
|
|
|
9,626
|
|
|
11,432
|
|
|
10,555
|
|
|
4,418
|
|
|
3,511
|
|
|
Add:
One third of applicable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
rentals
charged to operating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expense
(which approximates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
the
interest factor)
|
|
|
1,714
|
|
|
|
|
1,691
|
|
|
1,485
|
|
|
1,291
|
|
|
938
|
|
|
538
|
|
|
Total
Fixed Charges
|
|
$
|
30,624
|
|
|
|
$
|
31,168
|
|
$
|
35,419
|
|
$
|
34,175
|
|
$
|
28,191
|
|
$
|
26,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of Earnings to Fixed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges
|
|
|
4.23
|
|
|
|
|
3.69
|
|
|
2.92
|
|
|
2.97
|
|
|
2.82
|
|
|
3.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LACLEDE
GAS COMPANY
|
|
|
|
|
SCHEDULE
OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve
Months Ended
|
|
|
|
|
Dec.
31,
|
|
|
|
September
30,
|
|
|
(Thousands
of Dollars)
|
|
|
2008
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
charges
and income taxes
|
|
$
|
84,950
|
|
|
|
$
|
84,684
|
|
$
|
80,134
|
|
$
|
72,077
|
|
$
|
72,092
|
|
$
|
73,956
|
|
|
Add:
One third of applicable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
rentals
charged to operating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expense
(which approximates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
the
interest factor)
|
|
|
1,714
|
|
|
|
|
1,691
|
|
|
1,485
|
|
|
1,291
|
|
|
938
|
|
|
538
|
|
|
Total
Earnings
|
|
$
|
86,664
|
|
|
|
$
|
86,375
|
|
$
|
81,619
|
|
$
|
73,368
|
|
$
|
73,030
|
|
$
|
74,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on long-term debt
|
|
$
|
20,871
|
|
|
|
$
|
19,851
|
|
$
|
22,502
|
|
$
|
22,329
|
|
$
|
22,835
|
|
$
|
22,010
|
|
|
Other
interest
|
|
|
9,536
|
|
|
|
|
10,363
|
|
|
11,101
|
|
|
10,236
|
|
|
4,076
|
|
|
3,192
|
|
|
Add:
One third of applicable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
rentals
charged to operating
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expense
(which approximates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
the
interest factor)
|
|
|
1,714
|
|
|
|
|
1,691
|
|
|
1,485
|
|
|
1,291
|
|
|
938
|
|
|
538
|
|
|
Total
Fixed Charges
|
|
$
|
32,121
|
|
|
|
$
|
31,905
|
|
$
|
35,088
|
|
$
|
33,856
|
|
$
|
27,849
|
|
$
|
25,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of Earnings to Fixed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges
|
|
|
2.70
|
|
|
|
|
2.71
|
|
|
2.33
|
|
|
2.17
|
|
|
2.62
|
|
|
2.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit
31
CERTIFICATION
I,
Douglas H. Yaeger, certify that:
1.
|
I
have reviewed this quarterly report on Form 10-Q of The Laclede Group,
Inc.;
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
|
4.
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
|
|
|
b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
|
|
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
|
|
|
|
|
d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize, and report financial information;
and
|
|
|
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
|
|
January
28, 2009
|
Signature:
|
|
/s/
Douglas H. Yaeger
|
|
|
|
|
|
Douglas
H. Yaeger
|
|
|
|
|
|
Chairman
of the Board,
|
|
|
|
|
|
President
and Chief
|
|
|
|
|
|
Executive
Officer
|
CERTIFICATION
I,
Mark D. Waltermire, certify that:
1.
|
I
have reviewed this quarterly report on Form 10-Q of The Laclede Group,
Inc.;
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
|
4.
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
|
|
|
b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
|
|
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
|
|
|
|
|
d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize, and report financial information;
and
|
|
|
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
|
|
January
28, 2009
|
Signature:
|
|
/s/
Mark D. Waltermire
|
|
|
|
|
|
Mark
D. Waltermire
|
|
|
|
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
CERTIFICATION
I,
Douglas H. Yaeger, certify that:
1.
|
I
have reviewed this quarterly report on Form 10-Q of Laclede Gas
Company;
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
|
4.
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
|
|
|
b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
|
|
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
|
|
|
|
|
d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize, and report financial information;
and
|
|
|
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
|
|
January
28, 2009
|
Signature:
|
|
/s/
Douglas H. Yaeger
|
|
|
|
|
|
Douglas
H. Yaeger
|
|
|
|
|
|
Chairman
of the Board,
|
|
|
|
|
|
President
and Chief
|
|
|
|
|
|
Executive
Officer
|
CERTIFICATION
I,
Mark D. Waltermire, certify that:
1.
|
I
have reviewed this quarterly report on Form 10-Q of Laclede Gas
Company;
|
|
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
|
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
|
|
4.
|
The
registrant’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
|
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
|
|
|
|
b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
|
|
|
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
|
|
|
|
|
d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize, and report financial information;
and
|
|
|
|
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
|
|
January
28, 2009
|
Signature:
|
|
/s/
Mark D. Waltermire
|
|
|
|
|
|
Mark
D. Waltermire
|
|
|
|
|
|
Senior
Vice President and
|
|
|
|
|
|
Chief
Financial Officer
|
Exhibit
32
Section
1350 Certification
Pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act
of 2002, I, Douglas H. Yaeger, Chairman of the Board, President and Chief
Executive Officer of The Laclede Group, Inc., hereby certify that
|
(a)
|
To
the best of my knowledge, the accompanying report on Form 10-Q for the
quarter ended December 31, 2008 fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, and
|
|
|
|
|
(b)
|
To
the best of my knowledge, the information contained in the accompanying
report on Form 10-Q for the quarter ended December 31, 2008
fairly presents, in all material respects, the financial condition and
results of operations of The Laclede Group,
Inc.
|
Date:
|
|
January
28, 2009
|
|
|
/s/
Douglas H. Yaeger
|
|
|
|
|
|
Douglas
H. Yaeger
|
|
|
|
|
|
Chairman
of the Board, President
|
|
|
|
|
|
and
Chief Executive Officer
|
|
|
|
|
|
|
Section
1350 Certification
Pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act
of 2002, I, Mark D. Waltermire, Chief Financial Officer of The Laclede Group,
Inc., hereby certify that
|
(a)
|
To
the best of my knowledge, the accompanying report on Form 10-Q for the
quarter ended December 31, 2008 fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, and
|
|
|
|
|
(b)
|
To
the best of my knowledge, the information contained in the accompanying
report on Form 10-Q for the quarter ended December 31, 2008
fairly presents, in all material respects, the financial condition and
results of operations of The Laclede Group,
Inc.
|
Date:
|
|
January
28, 2009
|
|
|
/s/
Mark D. Waltermire
|
|
|
|
|
|
Mark
D. Waltermire
|
|
|
|
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
Section
1350 Certification
Pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act
of 2002, I, Douglas H. Yaeger, Chairman of the Board, President and Chief
Executive Officer of Laclede Gas Company, hereby certify that
|
(a)
|
To
the best of my knowledge, the accompanying report on Form 10-Q for the
quarter ended December 31, 2008 fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, and
|
|
|
|
|
(b)
|
To
the best of my knowledge, the information contained in the accompanying
report on Form 10-Q for the quarter ended December 31, 2008
fairly presents, in all material respects, the financial condition and
results of operations of Laclede Gas
Company.
|
Date:
|
|
January
28, 2009
|
|
|
/s/
Douglas H. Yaeger
|
|
|
|
|
|
Douglas
H. Yaeger
|
|
|
|
|
|
Chairman
of the Board, President
|
|
|
|
|
|
and
Chief Executive Officer
|
|
|
|
|
|
|
Section
1350 Certification
Pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act
of 2002, I, Mark D. Waltermire, Senior Vice President and Chief Financial
Officer of Laclede Gas Company, hereby certify that
|
(a)
|
To
the best of my knowledge, the accompanying report on Form 10-Q for the
quarter ended December 31, 2008 fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934, and
|
|
|
|
|
(b)
|
To
the best of my knowledge, the information contained in the accompanying
report on Form 10-Q for the quarter ended December 31, 2008
fairly presents, in all material respects, the financial condition and
results of operations of Laclede Gas
Company.
|
Date:
|
|
January
28, 2009
|
|
|
/s/
Mark D. Waltermire
|
|
|
|
|
|
Mark
D. Waltermire
|
|
|
|
|
|
Senior
Vice President and
|
|
|
|
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
Exhibit
99.1
LACLEDE
GAS COMPANY
STATEMENTS
OF INCOME
(UNAUDITED)
|
|
Three
Months Ended
|
|
|
|
|
|
December
31,
|
|
|
|
(Thousands)
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Revenues:
|
|
|
|
|
|
|
|
|
|
Utility
|
|
$
|
358,101
|
|
$
|
320,892
|
|
|
|
Other
|
|
|
597
|
|
|
786
|
|
|
|
Total
Operating Revenues
|
|
|
358,698
|
|
|
321,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
Utility
|
|
|
|
|
|
|
|
|
|
Natural
and propane gas
|
|
|
254,897
|
|
|
222,841
|
|
|
|
Other
operation expenses
|
|
|
36,301
|
|
|
35,213
|
|
|
|
Maintenance
|
|
|
6,534
|
|
|
6,235
|
|
|
|
Depreciation
and amortization
|
|
|
9,119
|
|
|
8,713
|
|
|
|
Taxes,
other than income taxes
|
|
|
18,358
|
|
|
16,681
|
|
|
|
Total
Utility Operating Expenses
|
|
|
325,209
|
|
|
289,683
|
|
|
|
Other
|
|
|
530
|
|
|
725
|
|
|
|
Total
Operating Expenses
|
|
|
325,739
|
|
|
290,408
|
|
|
|
Operating
Income
|
|
|
32,959
|
|
|
31,270
|
|
|
|
Other
Income and (Income Deductions) – Net
|
|
|
610
|
|
|
2,032
|
|
|
|
Interest
Charges:
|
|
|
|
|
|
|
|
|
|
Interest
on long-term debt
|
|
|
6,146
|
|
|
5,126
|
|
|
|
Other
interest charges
|
|
|
3,189
|
|
|
4,016
|
|
|
|
Total
Interest Charges
|
|
|
9,335
|
|
|
9,142
|
|
|
|
Income
Before Income Taxes
|
|
|
24,234
|
|
|
24,160
|
|
|
|
Income
Tax Expense
|
|
|
8,037
|
|
|
8,365
|
|
|
|
Net
Income
|
|
|
16,197
|
|
|
15,795
|
|
|
|
Dividends
on Redeemable Preferred Stock
|
|
|
8
|
|
|
10
|
|
|
|
Earnings
Applicable to Common Stock
|
|
$
|
16,189
|
|
$
|
15,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
LACLEDE
GAS COMPANY
STATEMENTS
OF COMPREHENSIVE INCOME
(UNAUDITED)
|
|
Three
Months Ended
|
|
|
|
December
31,
|
|
(Thousands)
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$
|
16,197
|
|
$
|
15,795
|
|
Other
Comprehensive Income, Before Tax:
|
|
|
|
|
|
|
|
Amortization
of actuarial loss included in net periodic pension cost
|
|
|
50
|
|
|
43
|
|
Income
Tax Expense Related to Items of Other Comprehensive Income
|
|
|
17
|
|
|
17
|
|
Other
Comprehensive Income, Net of Tax
|
|
|
33
|
|
|
26
|
|
Comprehensive
Income
|
|
$
|
16,230
|
|
$
|
15,821
|
|
|
|
|
|
|
|
|
|
See
Notes to Financial Statements.
|
|
|
|
|
|
|
|
LACLEDE
GAS COMPANY
BALANCE
SHEETS
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec.
31,
|
|
|
|
Sept.
30,
|
|
|
|
Dec.
31,
|
|
(Thousands)
|
|
2008
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utility
Plant
|
|
$
|
1,239,063
|
|
|
|
$
|
1,229,174
|
|
|
|
$
|
1,195,431
|
|
Less: Accumulated
depreciation and amortization
|
|
|
410,662
|
|
|
|
|
405,977
|
|
|
|
|
395,447
|
|
Net
Utility Plant
|
|
|
828,401
|
|
|
|
|
823,197
|
|
|
|
|
799,984
|
|
Other
Property and Investments
|
|
|
37,239
|
|
|
|
|
37,570
|
|
|
|
|
38,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
1,821
|
|
|
|
|
3,163
|
|
|
|
|
4,038
|
|
Accounts
receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utility
|
|
|
208,744
|
|
|
|
|
98,708
|
|
|
|
|
211,568
|
|
Non-utility
|
|
|
1,640
|
|
|
|
|
1,601
|
|
|
|
|
1,578
|
|
Associated
companies
|
|
|
3,478
|
|
|
|
|
3,028
|
|
|
|
|
325
|
|
Other
|
|
|
4,991
|
|
|
|
|
4,852
|
|
|
|
|
4,891
|
|
Allowances
for doubtful accounts
|
|
|
(8,331
|
)
|
|
|
|
(12,476
|
)
|
|
|
|
(8,373
|
)
|
Inventories:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural
gas stored underground at LIFO cost
|
|
|
197,360
|
|
|
|
|
206,194
|
|
|
|
|
132,006
|
|
Propane
gas at FIFO cost
|
|
|
19,871
|
|
|
|
|
19,911
|
|
|
|
|
19,913
|
|
Materials,
supplies, and merchandise at average cost
|
|
|
5,227
|
|
|
|
|
5,176
|
|
|
|
|
4,915
|
|
Derivative
instrument assets
|
|
|
23,203
|
|
|
|
|
54,578
|
|
|
|
|
13,924
|
|
Unamortized
purchased gas adjustments
|
|
|
24,149
|
|
|
|
|
33,411
|
|
|
|
|
8,613
|
|
Deferred
income taxes
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
392
|
|
Prepayments
and other
|
|
|
6,300
|
|
|
|
|
6,635
|
|
|
|
|
6,971
|
|
Total
Current Assets
|
|
|
488,453
|
|
|
|
|
424,781
|
|
|
|
|
400,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory
assets
|
|
|
354,274
|
|
|
|
|
334,755
|
|
|
|
|
288,868
|
|
Other
|
|
|
5,844
|
|
|
|
|
5,512
|
|
|
|
|
3,525
|
|
Total
Deferred Charges
|
|
|
360,118
|
|
|
|
|
340,267
|
|
|
|
|
292,393
|
|
Total
Assets
|
|
$
|
1,714,211
|
|
|
|
$
|
1,625,815
|
|
|
|
$
|
1,531,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LACLEDE
GAS COMPANY
BALANCE
SHEETS (Continued)
(UNAUDITED)
|
|
Dec.
31,
|
|
|
|
Sept.
30,
|
|
|
|
Dec.
31,
|
|
(Thousands,
except share amounts)
|
|
2008
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITALIZATION
AND LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock and Paid-in capital (11,603, 10,416, and
10,337
shares issued, respectively)
|
|
$
|
200,001
|
|
|
|
$
|
157,883
|
|
|
|
$
|
153,010
|
|
Retained
earnings
|
|
|
210,205
|
|
|
|
|
202,535
|
|
|
|
|
203,800
|
|
Accumulated
other comprehensive loss
|
|
|
(1,757
|
)
|
|
|
|
(1,790
|
)
|
|
|
|
(1,701
|
)
|
Total
Common Stock Equity
|
|
|
408,449
|
|
|
|
|
358,628
|
|
|
|
|
355,109
|
|
Redeemable
preferred stock (less current sinking fund
requirements)
|
|
|
467
|
|
|
|
|
467
|
|
|
|
|
627
|
|
Long-term
debt
|
|
|
389,196
|
|
|
|
|
389,181
|
|
|
|
|
309,138
|
|
Total
Capitalization
|
|
|
798,112
|
|
|
|
|
748,276
|
|
|
|
|
664,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
payable
|
|
|
263,500
|
|
|
|
|
215,900
|
|
|
|
|
294,450
|
|
Notes
payable – associated companies
|
|
|
52,594
|
|
|
|
|
89,216
|
|
|
|
|
—
|
|
Accounts
payable
|
|
|
71,584
|
|
|
|
|
58,483
|
|
|
|
|
83,575
|
|
Accounts
payable – associated companies
|
|
|
6
|
|
|
|
|
—
|
|
|
|
|
3,341
|
|
Advance
customer billings
|
|
|
16,578
|
|
|
|
|
25,548
|
|
|
|
|
27,382
|
|
Current
portion of preferred stock
|
|
|
160
|
|
|
|
|
160
|
|
|
|
|
160
|
|
Wages
and compensation accrued
|
|
|
14,063
|
|
|
|
|
12,197
|
|
|
|
|
13,262
|
|
Dividends
payable
|
|
|
8,676
|
|
|
|
|
8,407
|
|
|
|
|
8,280
|
|
Customer
deposits
|
|
|
13,772
|
|
|
|
|
14,020
|
|
|
|
|
15,128
|
|
Interest
accrued
|
|
|
6,825
|
|
|
|
|
10,094
|
|
|
|
|
6,073
|
|
Taxes
accrued
|
|
|
30,118
|
|
|
|
|
10,434
|
|
|
|
|
16,130
|
|
Deferred
income taxes current
|
|
|
5,791
|
|
|
|
|
7,781
|
|
|
|
|
—
|
|
Other
|
|
|
16,386
|
|
|
|
|
8,720
|
|
|
|
|
5,664
|
|
Total
Current Liabilities
|
|
|
500,053
|
|
|
|
|
460,960
|
|
|
|
|
473,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
Credits and Other Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
income taxes
|
|
|
215,860
|
|
|
|
|
222,379
|
|
|
|
|
230,840
|
|
Unamortized
investment tax credits
|
|
|
3,918
|
|
|
|
|
3,973
|
|
|
|
|
4,143
|
|
Pension
and postretirement benefit costs
|
|
|
103,507
|
|
|
|
|
98,513
|
|
|
|
|
67,648
|
|
Asset
retirement obligations
|
|
|
27,220
|
|
|
|
|
26,817
|
|
|
|
|
26,445
|
|
Regulatory
liabilities
|
|
|
42,639
|
|
|
|
|
42,191
|
|
|
|
|
39,687
|
|
Other
|
|
|
22,902
|
|
|
|
|
22,706
|
|
|
|
|
24,610
|
|
Total
Deferred Credits and Other Liabilities
|
|
|
416,046
|
|
|
|
|
416,579
|
|
|
|
|
393,373
|
|
Total
Capitalization and Liabilities
|
|
$
|
1,714,211
|
|
|
|
$
|
1,625,815
|
|
|
|
$
|
1,531,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LACLEDE
GAS COMPANY
STATEMENTS
OF CASH FLOWS
(UNAUDITED)
|
|
Three
Months Ended
|
|
|
|
December
31,
|
|
(Thousands)
|
|
2008
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
$
|
16,197
|
|
|
|
$
|
15,795
|
|
Adjustments
to reconcile net income to net cash
provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
9,119
|
|
|
|
|
8,713
|
|
Deferred
income taxes and investment tax credits
|
|
|
(11,900
|
)
|
|
|
|
1,914
|
|
Other
– net
|
|
|
1,950
|
|
|
|
|
426
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable – net
|
|
|
(114,809
|
)
|
|
|
|
(109,500
|
)
|
Unamortized
purchased gas adjustments
|
|
|
9,262
|
|
|
|
|
4,200
|
|
Deferred
purchased gas costs
|
|
|
(14,832
|
)
|
|
|
|
1,943
|
|
Accounts
payable
|
|
|
14,875
|
|
|
|
|
37,767
|
|
Advance
customer billings – net
|
|
|
(8,970
|
)
|
|
|
|
1,942
|
|
Taxes
accrued
|
|
|
19,660
|
|
|
|
|
(3,080
|
)
|
Natural
gas stored underground
|
|
|
8,834
|
|
|
|
|
6,192
|
|
Other
assets and liabilities
|
|
|
33,907
|
|
|
|
|
13,251
|
|
Net
cash used in operating activities
|
|
|
(36,707
|
)
|
|
|
|
(20,437
|
)
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(13,997
|
)
|
|
|
|
(13,012
|
)
|
Other
investments
|
|
|
(824
|
)
|
|
|
|
(1,122
|
)
|
Net
cash used in investing activities
|
|
|
(14,821
|
)
|
|
|
|
(14,134
|
)
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
Maturity
of First Mortgage Bonds
|
|
|
—
|
|
|
|
|
(40,000
|
)
|
Issuance
of short-term debt – net
|
|
|
10,978
|
|
|
|
|
83,050
|
|
Changes
in book overdrafts
|
|
|
6,115
|
|
|
|
|
—
|
|
Dividends
paid
|
|
|
(8,255
|
)
|
|
|
|
(7,909
|
)
|
Issuance
of common stock to Laclede Group
|
|
|
40,868
|
|
|
|
|
1,006
|
|
Excess
tax benefits from stock-based compensation
|
|
|
595
|
|
|
|
|
8
|
|
Other
|
|
|
(115
|
)
|
|
|
|
—
|
|
Net
cash provided by financing activities
|
|
|
50,186
|
|
|
|
|
36,155
|
|
|
|
|
|
|
|
|
|
|
|
Net
Increase (Decrease) in Cash and Cash Equivalents
|
|
|
(1,342
|
)
|
|
|
|
1,584
|
|
Cash
and Cash Equivalents at Beginning of Period
|
|
|
3,163
|
|
|
|
|
2,454
|
|
Cash
and Cash Equivalents at End of Period
|
|
$
|
1,821
|
|
|
|
$
|
4,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Paid During the Period for:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
12,503
|
|
|
|
$
|
14,360
|
|
Income
taxes
|
|
|
76
|
|
|
|
|
4,119
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
LACLEDE
GAS COMPANY
NOTES
TO FINANCIAL STATEMENTS
1.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
These
notes are an integral part of the accompanying financial statements of Laclede
Gas Company (Laclede Gas or the Utility). In the opinion of Laclede Gas, this
interim report includes all adjustments (consisting of only normal recurring
accruals) necessary for the fair presentation of the results of operations for
the periods presented. This Form 10-Q should be read in conjunction with the
Notes to Financial Statements contained in Laclede Gas’ Fiscal Year 2008
Form 10-K.
Laclede
Gas is a regulated natural gas distribution utility having a material seasonal
cycle. As a result, these interim statements of income for Laclede Gas are not
necessarily indicative of annual results or representative of succeeding
quarters of the fiscal year. Due to the seasonal nature of the business of
Laclede Gas, earnings are typically concentrated in the November through April
period, which generally corresponds with the heating season.
BASIS OF PRESENTATION -
In
compliance with generally accepted accounting principles, transactions between
Laclede Gas and its affiliates as well as intercompany balances on Laclede Gas’
Balance Sheet have not been eliminated from the Laclede Gas financial
statements.
Laclede
Gas provides administrative and general support to affiliates. All such costs,
which are not material, are billed to the appropriate affiliates. Also, Laclede
Group may charge or reimburse Laclede Gas for certain tax-related amounts.
Unpaid balances relating to these activities are reflected in the Laclede Gas
Balance Sheets as Accounts receivable-Associated companies or as Accounts
payable-associated companies. Additionally, Laclede Gas may, on occasion, borrow
funds from or lend funds to affiliated companies. Unpaid balances relating to
these arrangements, if any, are reflected in Notes receivable-associated
companies or Notes payable-associated companies.
REVENUE RECOGNITION -
Laclede
Gas reads meters and bills its customers on monthly cycles. The Utility records
its utility operating revenues from gas sales and transportation services on an
accrual basis that includes estimated amounts for gas delivered, but not yet
billed. The accruals for unbilled revenues are reversed in the subsequent
accounting period when meters are actually read and customers are billed. The
amounts of accrued unbilled revenues at December 31, 2008 and 2007,
for the Utility, were $69.0 million and $50.7 million, respectively. The amount
of accrued unbilled revenue at September 30, 2008 was $13.5
million.
CASH AND CASH EQUIVALENTS -
All highly liquid debt instruments purchased with original maturities of three
months or less are considered to be cash equivalents. Such instruments are
carried at cost, which approximates market value. Outstanding checks on the
Utility’s controlled disbursement bank accounts in excess of funds on deposit
create book overdrafts (which are funded at the time checks are presented for
payment) and are classified as Other Current Liabilities on the Balance Sheets.
Changes in book overdrafts between periods are reflected as Financing Activities
in the Statements of Cash Flows.
GROSS RECEIPTS TAXES -
Gross
receipts taxes associated with Laclede Gas’ natural gas utility service are
imposed on the Utility and billed to its customers. These amounts are recorded
gross in the Statements of Income. Amounts recorded in Utility Operating
Revenues for the quarters ended December 31, 2008 and 2007 were $14.8
million, and $13.0 million, respectively. Gross receipts taxes are expensed by
the Utility and included in the Taxes, Other Than Income Taxes
line.
STOCK-BASED COMPENSATION –
Officers and employees of Laclede Gas, as determined by the Compensation
Committee of Laclede Group’s Board of Directors, are eligible to be selected for
awards under the Laclede Group 2006 Equity Incentive Plan. For Laclede Group’s
non-employee directors, shares are awarded under the Restricted Stock Plan for
Non-Employee Directors. Refer to Note 1 of the Financial Statements included in
the Utility’s Form 10-K for the fiscal year ended September 30, 2008
for descriptions of these plans. For awards made to its employees, the Utility
records its allocation of compensation cost from Laclede Group with a
corresponding increase to additional paid-in capital.
The
amounts of compensation cost allocated to the Utility for share-based
compensation arrangements for the quarters ended December 31, 2008 and
2007 are presented below:
|
|
|
Three
Months Ended
|
|
|
|
|
|
December
31,
|
|
|
|
(Thousands
)
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
compensation cost
|
|
$
|
739
|
|
$
|
540
|
|
|
|
Compensation
cost capitalized
|
|
|
(180
|
)
|
|
(135
|
)
|
|
|
Compensation
cost recognized in net income
|
|
|
559
|
|
|
405
|
|
|
|
Income
tax benefit recognized in net income
|
|
|
(215
|
)
|
|
(156
|
)
|
|
|
Compensation
cost recognized in net income, net of income tax
|
|
$
|
344
|
|
$
|
249
|
|
|
As
of December 31, 2008, there was $6.4 million in unrecognized
compensation cost related to nonvested share-based compensation arrangements
that is expected to be allocated to the Utility over a weighted average period
of 2.5 years.
NEW ACCOUNTING STANDARDS
– In
September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value
Measurements.” This Statement defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. The Statement applies to fair value
measurements required under other accounting guidance that require or permit
fair value measurements. Accordingly, this Statement does not require any new
fair value measurements. The guidance in this Statement does not apply to
Laclede Group’s stock-based compensation plans accounted for in accordance with
SFAS No. 123(R), “Share-Based Payment.” The Utility partially adopted SFAS No.
157 on October 1, 2008 and elected the one-year deferral allowed by
FASB Staff Position (FSP) No. FAS 157-2, which permits delayed application of
SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for
those recognized or disclosed at fair value on a recurring basis. The partial
adoption of SFAS No. 157 had no impact on the Utility’s financial position or
results of operations. For disclosures required pursuant to SFAS No. 157, see
Note 3, Fair Value Measurements. The Utility will adopt SFAS No. 157 for certain
nonfinancial assets and nonfinancial liabilities (primarily asset retirement
obligations) as of the beginning of fiscal year 2010 and does not anticipate
that such adoption will have a material impact on the Utility’s financial
position or results of operations.
In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans.” Laclede Gas adopted the
recognition and disclosure provisions of this Statement effective
September 30, 2007. The Statement also requires that plan assets and
benefit obligations be measured as of the date of the employer’s fiscal year-end
statement of financial position. In conjunction with adoption of this provision
of SFAS No. 158, the Utility will be required to change its valuation
date for its pension and other postretirement plans from June 30 to
September 30. The Utility will adopt this provision on
September 30, 2009. Adoption will require certain adjustments to
retained earnings and other comprehensive income, the total amounts of which
will not be known until the September 30, 2009 actuarial valuation of
the plans is complete. However, the majority of these adjustments, attributable
to the Utility’s qualified pension plans and other postretirement benefit plans,
are expected to be deferred with entries to regulatory assets.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.” The Statement permits entities to
choose to measure many financial instruments and certain other items at fair
value that are not currently required to be measured at fair value. SFAS No. 159
also establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. This Statement does not affect any
existing accounting literature that requires certain assets and liabilities to
be carried at fair value. Upon adoption of SFAS No. 159, entities are permitted
to choose, at specified election dates, to measure eligible items at fair value
(fair value option). Unrealized gains and losses on items for which the fair
value option has been elected are reported in earnings at each reporting date.
The decision about whether to elect the fair value option is applied instrument
by instrument with few exceptions. The decision is also irrevocable (unless a
new election date occurs) and must be applied to entire instruments and not to
portions of instruments. SFAS No. 159 requires that cash flows related to items
measured at fair value be classified in the statement of cash flows according to
their nature and purpose as required by SFAS No. 95, “Statement of Cash Flows”
(as amended). The Utility adopted SFAS No. 159 on October 1, 2008. The
Utility did not elect the fair value option for any instruments not currently
reported at fair value. Therefore, the adoption of this Statement had no effect
on the Utility’s financial position or results of operations.
In
June 2007, the FASB ratified the consensus reached in Emerging Issues Task
Force (EITF) Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends
on Share-Based Payment Awards.” This Issue addresses how an entity should
recognize the tax benefit received on dividends that are (a) paid to employees
holding equity-classified nonvested shares, equity-classified nonvested share
units, or equity-classified outstanding share options and (b) charged to
retained earnings under SFAS No. 123(R). The Task Force reached a consensus that
such tax benefits should be recognized as an increase in additional paid-in
capital. This EITF Issue also addresses how the accounting for these tax
benefits is affected if an entity’s estimate of forfeitures changes in
subsequent periods. With the adoption of this EITF issue on
October 1, 2008, the Utility now records these income tax benefits as
increases to additional paid-in capital. Previously, the Utility recorded these
income tax benefits as reductions to income tax expense. Adoption of this EITF
issue did not have a material effect on the Utility’s financial position or
results of operations.
In
March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities.” This Statement amends SFAS No. 133, by
requiring enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. This Statement will be
effective for the Utility’s interim and annual financial statements beginning in
the second quarter of fiscal year 2009. This Statement encourages, but does
not require, comparative disclosures for earlier periods at initial adoption.
The Utility is currently evaluating the provisions of this
Statement.
In
May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally
Accepted Accounting Principles.” SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting principles to be used in
the preparation and presentation of financial statements in accordance with
generally accepted accounting principles. The Utility adopted this Statement
effective November 15, 2008. The adoption of SFAS No. 162 did not have
any effect on the Company’s consolidated financial statements.
In
December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures
about Postretirement Benefit Plan Assets.” This FSP provides guidance on an
employer’s disclosures about plan assets of a defined benefit pension or other
postretirement plan. The FSP requires disclosure of information regarding
investment policies and strategies, the categories of plan assets, fair value
measurements of plan assets, and significant concentrations of risk. The Utility
will be required to provide the additional disclosures with its annual financial
statements for fiscal year 2010. The Utility is currently evaluating the
provisions of this FSP.
2.
|
PENSION
PLANS AND OTHER POSTRETIREMENT
BENEFITS
|
Pension
Plans
Laclede
Gas has non-contributory defined benefit, trusteed forms of pension plans
covering substantially all employees. Benefits are based on years of service and
the participant’s compensation during the highest three years of the last ten
years of employment. Plan assets consist primarily of corporate and U.S.
government obligations and pooled equity funds.
Pension
costs for both the quarters ending December 31, 2008 and 2007 were
$1.5 million, including amounts charged to construction.
The
net periodic pension costs include the following components:
|
|
|
Three
Months Ended
|
|
|
|
|
December
31,
|
|
|
(Thousands)
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost – benefits earned
|
|
|
|
|
|
|
|
|
during
the period
|
|
$
|
3,485
|
|
$
|
3,242
|
|
|
Interest
cost on projected
|
|
|
|
|
|
|
|
|
benefit
obligation
|
|
|
5,268
|
|
|
4,670
|
|
|
Expected
return on plan assets
|
|
|
(5,235
|
)
|
|
(5,162
|
)
|
|
Amortization
of prior service cost
|
|
|
259
|
|
|
272
|
|
|
Amortization
of actuarial loss
|
|
|
774
|
|
|
791
|
|
|
Sub-total
|
|
|
4,551
|
|
|
3,813
|
|
|
Regulatory
adjustment
|
|
|
(3,002
|
)
|
|
(2,280
|
)
|
|
Net
pension cost
|
|
$
|
1,549
|
|
$
|
1,533
|
|
Pursuant
to the provisions of the Laclede Gas pension plans, pension obligations may be
satisfied by lump-sum cash payments. Pursuant to a Missouri Public Service
Commission (MoPSC or Commission) Order, lump-sum payments are recognized as
settlements (which can result in gains or losses) only if the total of such
payments exceeds 100% of the sum of service and interest costs. No lump-sum
payments were recognized as settlements during the three months ended
December 31, 2008 and December 31, 2007.
Pursuant
to a MoPSC Order, the return on plan assets is based on the market-related value
of plan assets implemented prospectively over a four-year period. Gains or
losses not yet includible in pension cost are amortized only to the extent that
such gain or loss exceeds 10% of the greater of the projected benefit obligation
or the market-related value of plan assets. Such excess is amortized over the
average remaining service life of active participants. The recovery in rates for
the Utility’s qualified pension plans is based on an allowance of $4.8 million
annually effective August 1, 2007. The difference between this amount
and pension expense as calculated pursuant to the above and that otherwise would
be included in the Statements of Income and Comprehensive Income is deferred as
a regulatory asset or regulatory liability.
Postretirement
Benefits
Laclede
Gas provides certain life insurance benefits at retirement. Medical insurance is
available after early retirement until age 65. The transition obligation not yet
includible in postretirement benefit cost is being amortized over 20 years.
Postretirement benefit costs for both the quarters ended
December 31, 2008 and 2007 were $1.9 million, including amounts
charged to construction.
Net
periodic postretirement benefit costs consisted of the following
components:
|
|
|
Three
Months Ended
|
|
|
|
|
December
31,
|
|
|
(Thousands)
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost – benefits earned
|
|
|
|
|
|
|
|
|
during
the period
|
|
$
|
1,283
|
|
$
|
1,140
|
|
|
Interest
cost on accumulated
|
|
|
|
|
|
|
|
|
postretirement
benefit obligation
|
|
|
1,170
|
|
|
977
|
|
|
Expected
return on plan assets
|
|
|
(594
|
)
|
|
(510
|
)
|
|
Amortization
of transition obligation
|
|
|
34
|
|
|
34
|
|
|
Amortization
of prior service cost
|
|
|
(582
|
)
|
|
(582
|
)
|
|
Amortization
of actuarial loss
|
|
|
877
|
|
|
746
|
|
|
Sub-total
|
|
|
2,188
|
|
|
1,805
|
|
|
Regulatory
adjustment
|
|
|
(278
|
)
|
|
105
|
|
|
Net
postretirement benefit cost
|
|
$
|
1,910
|
|
$
|
1,910
|
|
Missouri
state law provides for the recovery in rates of SFAS No. 106, “Employers’
Accounting for Postretirement Benefits Other Than Pensions,” accrued costs
provided that such costs are funded through an independent, external funding
mechanism. Laclede Gas established Voluntary Employees’ Beneficiary Association
(VEBA) and Rabbi trusts as its external funding mechanisms. VEBA and Rabbi
trusts’ assets consist primarily of money market securities and mutual funds
invested in stocks and bonds.
Pursuant
to a MoPSC Order, the return on plan assets is based on the market-related value
of plan assets implemented prospectively over a four-year period. Gains and
losses not yet includible in postretirement benefit cost are amortized only to
the extent that such gain or loss exceeds 10% of the greater of the accumulated
postretirement benefit obligation or the market-related value of plan assets.
Such excess is amortized over the average remaining service life of active
participants. Previously, the recovery in rates for the postretirement benefit
costs was based on an alternative methodology for amortization of unrecognized
gains and losses as ordered by the MoPSC. The Commission ordered that the
recovery in rates be based on an annual allowance of $7.6 million, effective
August 1, 2007. The difference between this amount and postretirement
benefit cost based on the above and that otherwise would be included in the
Statements of Income and Comprehensive Income is deferred as a regulatory asset
or regulatory liability.
3.
|
FAIR
VALUE MEASUREMENTS
|
As
discussed in the New Accounting Standards section of Note 1, effective
October 1, 2008, the Utility partially adopted the provisions of SFAS
No. 157. This Statement establishes a three-level hierarchy for fair value
measurements that prioritizes the inputs used to measure fair value. Assessment
of the significance of a particular input to the fair value measurements may
require judgment and may affect the valuation of the asset or liability and its
placement within the fair value hierarchy.
The
following table categorizes the assets and liabilities in the Balance Sheets
that are accounted for at fair value on a recurring basis in periods subsequent
to initial recognition.
|
|
|
As
of December 31, 2008
|
|
|
(Thousands)
|
|
Total
|
|
Quoted
Prices
in
Active
Markets
(Level
1)
|
|
Significant
Observable
Inputs
(Level
2)
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable
securities
|
|
$
|
8,918
|
|
$
|
8,918
|
|
$
|
—
|
|
$
|
—
|
|
|
Derivative
instruments
|
|
|
23,203
|
|
|
23,203
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$
|
32,121
|
|
$
|
32,121
|
|
$
|
—
|
|
$
|
—
|
|
Marketable
securities included in Level 1 are mutual funds valued based on quoted market
prices of identical securities that are provided by the trustees of these
securities. Derivative instruments included in Level 1 are valued using quoted
market prices on the New York Mercantile Exchange. Marketable securities are
included in the Other investments line of the Balance Sheets.
4.
|
OTHER
INCOME AND (INCOME DEDUCTIONS) –
NET
|
|
|
|
Three
Months Ended
|
|
|
|
|
December
31,
|
|
|
(Thousands)
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
1,010
|
|
$
|
1,155
|
|
|
Other
income
|
|
|
411
|
|
|
537
|
|
|
Other
income deductions
|
|
|
(811
|
)
|
|
340
|
|
|
Other
Income and (Income Deductions) – Net
|
|
$
|
610
|
|
$
|
2,032
|
|
The
decrease in Other Income and (Income Deductions) – Net for the quarter ended
December 31, 2008, compared with the quarter ended
December 31, 2007, was primarily due to higher investment losses and
lower interest income.
5.
|
INFORMATION
BY OPERATING SEGMENT
|
The
Regulated Gas Distribution segment consists of the regulated operations of
Laclede Gas. The Non-Regulated Other segment includes the retail sale of gas
appliances. There are no material intersegment revenues.
|
|
Regulated
|
|
Non-
|
|
Adjustments
|
|
|
|
|
|
Gas
|
|
Regulated
|
|
&
|
|
|
|
(
Thousands)
|
|
Distribution
|
|
Other
|
|
Eliminations
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
revenues
|
|
$
|
358,101
|
|
$
|
597
|
|
$
|
—
|
|
$
|
358,698
|
|
Net
income
|
|
|
16,156
|
|
|
41
|
|
|
—
|
|
|
16,197
|
|
Total
assets
|
|
|
1,712,374
|
|
|
1,837
|
|
|
—
|
|
|
1,714,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
revenues
|
|
$
|
320,892
|
|
$
|
786
|
|
$
|
—
|
|
$
|
321,678
|
|
Net
income
|
|
|
15,757
|
|
|
38
|
|
|
—
|
|
|
15,795
|
|
Total
assets
|
|
|
1,529,861
|
|
|
1,831
|
|
|
—
|
|
|
1,531,692
|
|
6.
|
COMMITMENTS
AND CONTINGENCIES
|
Commitments
Laclede
Gas has entered into various contracts, expiring on dates through 2017, for the
storage, transportation, and supply of natural gas. Minimum payments required
under the contracts in place at December 31, 2008 are estimated at
approximately $529 million. Additional contracts are generally entered into
prior to or during the heating season. Laclede Gas recovers its costs from
customers in accordance with the PGA Clause.
Leases
and Guarantees
Laclede
Gas has several operating leases for the rental of vehicles that contain
provisions requiring Laclede Gas to guarantee certain amounts related to the
residual value of the leased property. These leases have various terms, the
longest of which extends through 2014. At December 31, 2008, the
maximum guarantees under these leases are $1.8 million. As of
December 31, 2008, the Utility believes that it is unlikely that it
will be subject to the maximum payment amount because it estimates that the
residual value of the leased vehicles will be adequate to satisfy most of the
guaranteed amounts. At December 31, 2008, the carrying value of the
liability recognized for these guarantees was $0.3 million.
Contingencies
Laclede
Gas owns and operates natural gas distribution, transmission, and storage
facilities, the operations of which are subject to various environmental laws,
regulations, and interpretations. While environmental issues resulting from such
operations arise in the ordinary course of business, such issues have not
materially affected Laclede Gas’ financial position and results of operations.
As environmental laws, regulations, and their interpretations change, however,
Laclede Gas may be required to incur additional costs. See Note 12 to the
Financial Statements included in Laclede Gas’ Fiscal Year 2008 Form 10-K
for information relative to environmental matters generally. There have been no
significant changes relative to environmental matters in the first quarter of
2009.
On
December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2
million related to Laclede Gas’ recovery of its purchased gas costs applicable
to fiscal 2005. On September 14, 2007, the Staff withdrew its pursuit
of $5.5 million of the disallowance it had originally proposed. Laclede Gas
believes that the remaining $1.7 million of the MoPSC Staff’s proposed
disallowance lacks merit and is vigorously opposing the adjustment in
proceedings before the MoPSC.
On
December 31, 2007, the MoPSC Staff proposed a disallowance of $2.8
million related to Laclede Gas’ recovery of its purchased gas costs applicable
to fiscal 2006. Laclede Gas believes that the MoPSC Staff’s position lacks merit
and intends to vigorously oppose the adjustment in proceedings before the MoPSC.
In addition, the MoPSC’s Staff raised questions regarding whether certain sales
and capacity release transactions subject to the Federal Energy Regulatory
Commission (FERC)’s oversight were consistent with the FERC’s regulations and
policies regarding capacity release. Laclede Group commenced an internal review
of the questions raised by the MoPSC Staff and notified the FERC Staff that it
took this action. Subsequently, as a result of the internal review, Laclede
Group has provided the FERC Staff with a report regarding compliance of sales
and capacity release activities with the FERC’s regulations and policies. On
July 23, 2008, the FERC Staff requested additional information which
Laclede Group provided on August 22, 2008 and
September 2, 2008.
On
December 31, 2008, the MoPSC Staff proposed a disallowance of $1.5
million related to Laclede Gas’ recovery of its purchased gas costs applicable
to fiscal 2007. Laclede Gas believes that the MoPSC Staff’s position lacks merit
and intends to vigorously oppose the adjustment in proceedings before the
MoPSC.
Laclede
Gas is involved in other litigation, claims, and investigations arising in the
normal course of business. While the results of such litigation cannot be
predicted with certainty, management, after discussion with counsel, believes
that the final outcome will not have a material adverse effect on the financial
position or results of operations of the Utility.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LACLEDE
GAS COMPANY
This
management’s discussion analyzes the financial condition and results of
operations of Laclede Gas Company (Laclede Gas or the Utility). It includes
management’s view of factors that affect its business, explanations of past
financial results including changes in earnings and costs from the prior year
periods, and their effects on overall financial condition and
liquidity.
Certain
matters discussed in this report, excluding historical information, include
forward-looking statements. Certain words, such as “may,” “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “plan,” “seek,” and similar words and
expressions identify forward-looking statements that involve uncertainties and
risks. Future developments may not be in accordance with our expectations or
beliefs and the effect of future developments may not be those anticipated.
Among the factors that may cause results to differ materially from those
contemplated in any forward-looking statement are:
•
|
weather
conditions and catastrophic events, particularly severe weather in the
natural gas producing areas of the country;
|
•
|
volatility
in gas prices, particularly sudden and sustained changes in natural gas
prices, including the related impact on margin deposits associated with
the use of natural gas financial instruments;
|
•
|
the
impact of higher natural gas prices on our competitive position in
relation to suppliers of alternative heating sources, such as
electricity;
|
•
|
changes
in gas supply and pipeline availability; particularly those changes that
impact supply for and access to our service area;
|
•
|
legislative,
regulatory and judicial mandates and decisions, some of which may be
retroactive, including those affecting
|
|
•
|
allowed
rates of return
|
|
•
|
incentive
regulation
|
|
•
|
industry
structure
|
|
•
|
purchased
gas adjustment provisions
|
|
•
|
rate
design structure and implementation
|
|
•
|
franchise
renewals
|
|
•
|
environmental
or safety matters
|
|
•
|
taxes
|
|
•
|
pension
and other postretirement benefit liabilities and funding
obligations
|
|
•
|
accounting
standards;
|
•
|
the
results of litigation;
|
•
|
retention
of, ability to attract, ability to collect from and conservation efforts
of customers;
|
•
|
capital
and energy commodity market conditions, including the ability to obtain
funds with reasonable terms for necessary capital expenditures and general
operations and the terms and conditions imposed for obtaining sufficient
gas supply;
|
•
|
discovery
of material weakness in internal controls; and
|
•
|
employee
workforce issues.
|
Readers
are urged to consider the risks, uncertainties, and other factors that could
affect our business as described in this report. All forward-looking statements
made in this report rely upon the safe harbor protections provided under the
Private Securities Litigation Reform Act of 1995. We do not, by including this
statement, assume any obligation to review or revise any particular
forward-looking statement in light of future events.
The
Management’s Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Utility’s Financial Statements
and the Notes thereto.
LACLEDE
GAS COMPANY
RESULTS
OF OPERATIONS
Laclede
Gas is regulated by the Missouri Public Service Commission (MoPSC or Commission)
and serves the City of St. Louis and parts of ten other counties in eastern
Missouri. Laclede Gas delivers natural gas to retail customers at rates and in
accordance with tariffs authorized by the MoPSC. The Utility’s earnings are
primarily generated by the sale of heating energy. The Utility’s innovative
weather mitigation rate design lessens the impact of weather volatility on
Laclede Gas customers during cold winters and stabilizes the Utility’s earnings
by recovering fixed costs more evenly during the heating season. Due to the
seasonal nature of the business of Laclede Gas, earnings are typically
concentrated in the November through April period, which generally corresponds
with the heating season.
Mitigating
the impact of weather fluctuations on Laclede Gas customers while improving the
ability to recover its authorized distribution costs and return continues to be
a fundamental component of Laclede Gas’ strategy. The Utility’s distribution
costs are the essential, primarily fixed expenditures it must incur to operate
and maintain a more than 16,000 mile natural gas distribution system and related
storage facilities. With regard to the storage facilities owned by Laclede gas,
management is currently undertaking an evaluation of the Utility’s natural gas
storage field which was developed more than 50 years ago, to assess the field’s
current and future capabilities. In addition, Laclede Gas is working continually
to improve its ability to provide reliable natural gas service at a reasonable
cost, while maintaining and building a secure and dependable infrastructure. The
settlement of the Utility’s 2007 rate case resulted in enhancements to the
Utility’s weather mitigation rate design that better ensure the recovery of its
fixed costs and margins despite variations in sales volumes due to the impacts
of weather and other factors that affect customer usage. The Utility’s income
from off-system sales remains subject to fluctuations in market conditions.
Effective October 1, 2007, the Utility is allowed to retain 15% to 25%
of the first $6 million in annual income earned (depending on the level of
income earned) and 30% of income exceeding $6 million annually. Some of the
factors impacting the level of off-system sales include the availability and
cost of the Utility’s natural gas supply, the weather in its service area, and
the weather in other markets. When Laclede Gas’ service area experiences
warmer-than-normal weather while other markets experience colder weather or
supply constraints, some of the Utility’s natural gas supply is available for
off-system sales and there may be a demand for such supply in other
markets.
Laclede
Gas continues to work actively to reduce the impact of higher costs associated
with wholesale natural gas prices by strategically structuring its natural gas
supply portfolio and through the use of financial instruments. Nevertheless, the
overall cost of purchased gas remains subject to fluctuations in market
conditions. The Utility’s Purchased Gas Adjustment (PGA) Clause allows Laclede
Gas to flow through to customers, subject to prudence review, the cost of
purchased gas supplies, including costs, cost reductions, and related carrying
costs associated with the use of financial instruments to hedge the purchase
price of natural gas, as well as gas inventory carrying costs. The Utility
believes it will continue to be able to obtain sufficient gas supply. High
natural gas prices and other economic conditions may continue to affect sales
volumes (due to the conservation efforts of customers) and cash flows
(associated with the timing of collection of gas costs and related accounts
receivable from customers).
Quarter
Ended December 31, 2008
Earnings
Laclede
Gas’ net income for the quarter ended December 31, 2008 was $16.2
million, compared with net income of $15.8 million for the quarter ended
December 31, 2007. The increase in net income was primarily due to the
following factors, quantified on a pre-tax basis:
•
|
the
effect of higher system gas sales volumes, primarily due to colder
weather, and other variations totaling $2.7 million;
and,
|
•
|
higher
Infrastructure System Replacement Surcharge (ISRS) revenues totaling $0.9
million.
|
These
factors were partially offset by:
•
|
an
increase in investment losses totaling $1.6 million;
and,
|
•
|
increases
in operation and maintenance expenses totaling $1.4
million;
|
Utility
Operating Revenues
Laclede
Gas passes on to Utility customers (subject to prudence review) increases and
decreases in the wholesale cost of natural gas in accordance with its PGA
Clause. The volatility of the wholesale natural gas market results in
fluctuations from period to period in the recorded levels of, among other items,
revenues and natural gas cost expense. Nevertheless, increases and decreases in
the cost of gas associated with system gas sales volumes have no direct effect
on net revenues and net income.
Utility
Operating Revenues for the quarter ended December 31, 2008 were $358.1
million, or $37.2 million more than the same period last year. Temperatures
experienced in the Utility’s service area during the quarter were 12.6% colder
than the same quarter last year and 4.6% colder than normal. Total system therms
sold and transported were 0.31 billion for the quarter ended
December 31, 2008 compared with 0.27 billion for the same period last
year. Total off-system therms sold and transported were 0.04 billion for the
quarter ended December 31, 2008 compared with 0.05 billion for the
same period last year. The increase in Utility Operating Revenues was primarily
attributable to the following factors:
|
|
(Millions)
|
|
Higher
system sales volumes and other variations
|
|
$
|
37.9
|
|
Higher
wholesale gas costs passed on to Utility customers (subject to prudence
review by the MoPSC)
|
|
|
8.3
|
|
Lower
off-system sales volumes
|
|
|
(7.8
|
)
|
Lower
prices charged for off-system sales
|
|
|
(2.1
|
)
|
Higher
ISRS revenues
|
|
|
0.9
|
|
Total
Variation
|
|
$
|
37.2
|
|
Utility
Operating Expenses
Utility
Operating Expenses for the quarter ended December 31, 2008 increased
$35.5 million from the same quarter last year. Natural and propane gas expense
increased $32.1 million, or 14.4%, from last year’s level, primarily
attributable to increased system volumes purchased for sendout and higher rates
charged by our suppliers, partially offset by lower off-system gas expense.
Other operation and maintenance expenses increased $1.4 million, or 3.3%,
primarily due to higher wage rates, increased charges for outside services, and
increased group insurance charges, partially offset by a decrease in injuries
and damages expense. Taxes, other than income taxes, increased $1.7 million, or
10.1%, primarily due to increased gross receipts taxes (attributable to the
increased revenues).
Other
Income and (Income Deductions) - Net
Other
Income and (Income Deductions) – Net decreased $1.4 million primarily due to
higher investment losses and lower interest income.
Interest
Charges
The
$0.2 million increase in interest charges was primarily due to an increase in
interest on long-term debt, primarily attributable to the issuance of $80.0
million First Mortgage Bonds on September 23, 2008, largely offset by
lower interest on short-term debt. Average short-term interest rates were 3.0%
for the quarter ended December 31, 2008 compared with 5.1% for the
quarter ended December 31, 2007. Average short-term borrowings were
$335.4 million for the quarter ended December 31, 2008 compared with
$255.2 million for the quarter ended
December 31, 2007.
REGULATORY
MATTERS
During
fiscal 2006, the MoPSC approved permanent modifications to the Cold Weather Rule
affecting the disconnection and reconnection practices of utilities during the
winter heating season. Those modifications included provisions to allow the
Utility to obtain accounting authorizations and defer for future recovery
certain costs incurred with the modifications. During fiscal 2007, the
Utility deferred for future recovery $2.7 million of costs associated with the
fiscal 2007 heating season. On October 31, 2007, the Utility
filed for determination and subsequent recovery of the deferred amount. On
November 16, 2007, the MoPSC directed the MoPSC Staff and the Missouri
Office of Public Counsel (Public Counsel) to submit their positions regarding
the Utility’s filing by February 28, 2008. On
February 28, 2008, the Utility and the MoPSC Staff filed a
Non-Unanimous Stipulation & Agreement in which these parties agreed to a
recovery of $2.5 million of costs. The Non-Unanimous Stipulation & Agreement
was opposed by Public Counsel, and a hearing in this matter was held before the
Commission on March 31, 2008. On April 17, 2008, the
Commission issued its Report and Order approving the $2.5 million cost recovery
recommended by the Utility and the MoPSC Staff. Consistent with the approved
amount, the Utility recorded a reduction in its deferral totaling $0.2 million
during the quarter ended March 31, 2008. On May 29, 2008,
Public Counsel appealed the MoPSC’s April 17 Order to the Cole County,
Missouri Circuit Court. On January 6, 2009, the Court issued its
judgment affirming the Commission’s order approving the Cold Weather Rule
compliance cost amount that the Utility and Staff had recommended over Public
Counsel’s objection.
On
December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2
million related to Laclede Gas’ recovery of its purchased gas costs applicable
to fiscal 2005. On September 14, 2007, the Staff withdrew its pursuit
of $5.5 million of the disallowance it had originally proposed. Laclede Gas
believes that the remaining $1.7 million of the MoPSC Staff’s proposed
disallowance lacks merit and is vigorously opposing the adjustment in
proceedings before the MoPSC.
On
December 31, 2007, the MoPSC Staff proposed a disallowance of $2.8
million related to Laclede Gas’ recovery of its purchased gas costs applicable
to fiscal 2006. Laclede Gas believes that the MoPSC Staff’s position lacks
merit and is vigorously opposing the adjustment in proceedings before the MoPSC.
In addition, the MoPSC’s Staff raised questions regarding whether certain sales
and capacity release transactions, subject to the Federal Energy Regulatory
Commission (FERC)’s oversight, were consistent with the FERC’s regulations and
policies regarding capacity release. Laclede Group commenced an internal review
of the questions raised by the MoPSC Staff and notified the FERC Staff that it
took this action. Subsequently, as a result of the internal review, Laclede
Group has provided the FERC Staff with a report regarding compliance of sales
and capacity release activities with the FERC’s regulations and policies. On
July 23, 2008, the FERC Staff requested additional information, which
Laclede Group provided on August 22, 2008 and
September 2, 2008.
On
July 9, 2008, Laclede Gas made a tariff filing with the MoPSC that
would make the payment provisions for the restoration of gas service under the
Utility’s Cold Weather Rule available to customers in the summer of 2008 and
enable the Utility to increase or decrease its PGA rates to correct for any
shortfall or surplus created by the difference between the gas cost portion of
the Utility’s actual net bad debt write-offs and the amount of such cost that is
embedded in its existing rates. The MoPSC suspended the tariff on
August 5, 2008 and established a procedural schedule to consider the
Utility’s filing. As a result, the Cold Weather Rule portion of the filing is
now moot. A formal hearing pertaining to the bad debt portion of the filing was
held on January 5, 2009. The matter is currently pending before the
MoPSC.
On
November 21, 2008, the Utility made an ISRS filing with the Commission
designed to increase revenues by $1.9 million annually. The filing is pending
Commission approval.
On
December 31, 2008, the MoPSC Staff proposed a disallowance of $1.5
million related to Laclede Gas’ recovery of its purchased gas costs applicable
to fiscal 2007. Laclede Gas believes that the MoPSC Staff’s position lacks merit
and intends to vigorously oppose the adjustment in proceedings before the
MoPSC.
CRITICAL
ACCOUNTING POLICIES
Our
discussion and analysis of our financial condition, results of operations,
liquidity, and capital resources is based upon our financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. Generally accepted accounting principles
require that we make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. We evaluate our estimates on an ongoing basis. We base
our estimates on historical experience and on various other assumptions that we
believe are reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates. We believe the following represent the more significant items
requiring the use of judgment and estimates in preparing our consolidated
financial statements:
|
Allowances for Doubtful
Accounts
– Estimates of the collectibility of trade accounts
receivable are based on historical trends, age of receivables, economic
conditions, credit risk of specific customers, and other
factors.
|
|
|
|
Employee Benefits and
Postretirement Obligations
– Pension and postretirement obligations
are calculated by actuarial consultants that utilize several statistical
factors and other assumptions provided by Management related to future
events, such as discount rates, returns on plan assets, compensation
increases, and mortality rates. For the Utility, the amount of expense
recognized and the amounts reflected in other comprehensive income are
dependent upon the regulatory treatment provided for such costs, as
discussed further below. Certain liabilities related to group medical
benefits and workers’ compensation claims, portions of which are
self-insured and/or contain “stop-loss” coverage with third-party insurers
to limit exposure, are established based on historical
trends.
|
Regulated Operations
– Laclede
Gas accounts for its regulated operations in accordance with Statement of
Financial Accounting Standards (SFAS) No. 71, “Accounting for the Effects of
Certain Types of Regulation.” This Statement sets forth the application of
accounting principles generally accepted in the United States of America for
those companies whose rates are established by or are subject to approval by an
independent third-party regulator. The provisions of SFAS No. 71 require, among
other things, that financial statements of a regulated enterprise reflect the
actions of regulators, where appropriate. These actions may result in the
recognition of revenues and expenses in time periods that are different than
non-regulated enterprises. When this occurs, costs are deferred as assets in the
balance sheet (regulatory assets) and recorded as expenses when those amounts
are reflected in rates. Also, regulators can impose liabilities upon a regulated
company for amounts previously collected from customers and for recovery of
costs that are expected to be incurred in the future (regulatory liabilities).
Management believes that the current regulatory environment supports the
continued use of SFAS No. 71 and that all regulatory assets and regulatory
liabilities are recoverable or refundable through the regulatory process.
Management believes the following represent the more significant items recorded
through the application of SFAS No. 71:
|
The
Utility’s PGA Clause allows Laclede Gas to flow through to customers,
subject to prudence review, the cost of purchased gas supplies, including
the costs, cost reductions, and related carrying costs associated with the
Utility’s use of natural gas financial instruments to hedge the purchase
price of natural gas. The difference between actual costs incurred and
costs recovered through the application of the PGA are recorded as
regulatory assets and regulatory liabilities that are recovered or
refunded in a subsequent period. The PGA Clause also authorizes the
Utility to recover costs it incurs to finance its investment in gas
supplies that are purchased during the storage injection season for sale
during the heating season. The PGA Clause also permits the application of
carrying costs to all over- or under-recoveries of gas costs, including
costs and cost reductions associated with the use of financial
instruments. Effective October 1, 2007, the PGA Clause also
provides for a portion of income from off-system sales and capacity
release revenues to be flowed through to
customers.
|
|
|
|
Laclede
Gas records deferred tax liabilities and assets measured by enacted tax
rates for the net tax effect of all temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes, and the amounts used for income tax purposes. Changes in enacted
tax rates, if any, and certain property basis differences will be
reflected by entries to regulatory asset or regulatory liability accounts.
Pursuant to the direction of the MoPSC, Laclede Gas’ provision for income
tax expense for financial reporting purposes reflects an open-ended method
of tax depreciation. Laclede Gas’ provision for income tax expense also
records the income tax effect associated with the difference between
overheads capitalized to construction for financial reporting purposes and
those recognized for tax purposes without recording an offsetting deferred
income tax expense. These two methods are consistent with the regulatory
treatment prescribed by the MoPSC.
|
|
|
|
Asset
retirement obligations are recorded in accordance with SFAS No. 143,
“Accounting for Asset Retirement Obligations” and Financial Accounting
Standards Board Interpretation No. (FIN) 47, “Accounting for Conditional
Asset Retirement Obligations.” Asset retirement obligations are calculated
using various assumptions related to the timing, method of settlement,
inflation, and profit margins that third parties would demand to settle
the future obligations. These assumptions require the use of judgment and
estimates and may change in future periods as circumstances dictate. As
authorized by the MoPSC, Laclede Gas accrues future removal costs
associated with its property, plant and equipment through its depreciation
rates, even if a legal obligation does not exist as defined by SFAS No.
143 and FIN 47. The difference between removal costs recognized in
depreciation rates and the accretion expense and depreciation expense
recognizable under SFAS No. 143 and FIN 47 is a timing difference between
the recovery of these costs in rates and their recognition for financial
reporting purposes. Accordingly, consistent with SFAS No. 71, these
differences are deferred as regulatory
liabilities.
|
|
The
amount of net periodic pension and other postretirement benefit cost
recognized in the financial statements related to the Utility’s qualified
pension plans and other postretirement benefit plans is based upon
allowances, as approved by the MoPSC, which have been established in the
rate-making process for the recovery of these costs from customers. The
differences between these amounts and actual pension and other
postretirement benefit costs incurred for financial reporting purposes are
deferred as regulatory assets or regulatory liabilities. SFAS No. 158,
“Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans,” requires that changes that affect the funded status
of pension and other postretirement benefit plans, but that are not yet
required to be recognized as components of pension and other
postretirement benefit cost, be reflected in other comprehensive income.
For the Utility’s qualified pension plans and other postretirement benefit
plans, amounts that would otherwise be reflected in other comprehensive
income are deferred with entries to regulatory assets or regulatory
liabilities.
|
For
further discussion of significant accounting policies, see Note 1 to the
Financial Statements included in Exhibit 99.1 of the Laclede Group’s Form 10-K
for the fiscal year ended September 30, 2008.
ACCOUNTING
PRONOUNCEMENTS
Laclede
Gas has evaluated or is in the process of evaluating the impact that recently
issued accounting standards will have on the Utility’s financial position or
results of operations upon adoption. For disclosures related to the adoption of
new accounting standards, see the New Accounting Standards section of Note 1 to
the Financial Statements.
FINANCIAL
CONDITION
CREDIT
RATINGS
As
of December 31, 2008, credit ratings for outstanding securities for
Laclede Gas issues were as follows:
Type of Facility
|
S&P
|
Moody’s
|
Fitch
|
Laclede Gas Issuer Rating
|
A
|
|
A-
|
Laclede Gas First Mortgage Bonds
|
A
|
A3
|
A+
|
Laclede Gas Commercial Paper
|
A-1
|
P-2
|
F1
|
The
Utility has investment grade ratings, and believes that it will have adequate
access to the financial markets to meet its capital requirements. These ratings
remain subject to review and change by the rating agencies.
CASH
FLOWS
Laclede
Gas’ short-term borrowing requirements typically peak during colder months when
Laclede Gas borrows money to cover the lag between when it purchases its natural
gas and when its customers pay for that gas. Changes in the wholesale cost of
natural gas (including cash payments for margin deposits associated with the
Utility’s use of natural gas financial instruments), variations in the timing of
collections of gas cost under the Utility’s PGA Clause, the seasonality of
accounts receivable balances, and the utilization of storage gas inventories
cause short-term cash requirements to vary during the year and from year to
year, and can cause significant variations in the Utility’s cash provided by or
used in operating activities.
Net
cash used in operating activities for the three months ended
December 31, 2008 was $36.7 million, compared with $20.4 million for
the same period last year. The difference is primarily attributable to
variations associated with the timing of the collections of gas cost under the
Utility’s PGA Clause, including the effects of this year’s increases in net cash
payments for margin deposits associated with the Utility’s use of natural gas
financial instruments.
Net
cash used in investing activities for the three months ended
December 31, 2008 was $14.8 million compared with $14.1 million for
the three months ended December 31, 2007. Cash used in investing
activities primarily reflected capital expenditures in both
periods.
Net
cash provided by financing activities was $50.2 million for the three months
ended December 31, 2008 compared with $36.2 million for the three
months ended December 31, 2007. The increase primarily reflects the
effect of the maturity of long-term debt last year and the sale of additional
shares of common stock to Laclede Group this year, partially offset by the
reduced issuance of short-term debt this year.
LIQUIDITY
AND CAPITAL RESOURCES
Short-term
Debt
As
indicated above, the Utility’s short-term borrowing requirements typically peak
during the colder months. These short-term cash requirements have traditionally
been met through the sale of commercial paper supported by lines of credit with
banks. Laclede Gas has a line of credit in place of $320 million from 10 banks,
with the largest portion provided by a single bank being 17.5%. This line
expires in December 2011. In November 2008, the Utility established a
seasonal line of credit of $75 million, which expires in March 2009.
Including both lines of credit, the largest portion provided by a single bank is
26.8%. During the quarter ending December 31, 2008, Laclede Gas utilized both
its line of credit and commercial paper for short-term funding. Commercial paper
outstanding at December 31, 2008 was $73.5 million, while outstanding
bank line advances were $190.0 million. The weighted average interest rate on
these short-term borrowings was 1.8% per annum at December 31, 2008.
Based on total short-term borrowings at December 31, 2008, a change in
interest rate of 100 basis points would increase or decrease pre-tax earnings
and cash flows by approximately $2.6 million on an annual basis. Portions of
such increases or decreases may be offset through the application of PGA
carrying costs. In addition, Laclede Gas had borrowings from Laclede Group
totaling $52.6 million at December 31, 2008. The Utility had
short-term borrowings (including borrowings from Laclede Group) aggregating to a
maximum of $386.4 million at any one time during the quarter. Excluding
borrowings from Laclede Group, the Utility’s maximum borrowing for the quarter
were $309.9 million.
Laclede
Gas’ lines of credit include covenants limiting total debt, including short-term
debt, to no more than 70% of total capitalization and requiring earnings before
interest, taxes, depreciation, and amortization (EBITDA) to be at least 2.25
times interest expense. On December 31, 2008, total debt was 63% of
total capitalization. For the twelve months ended December 31, 2008,
EBITDA was 3.97 times interest expense.
Long-term
Debt
At
December 31, 2008, Laclede Gas had fixed-rate long-term debt totaling
$390 million. While these long-term debt issues are fixed-rate, they are subject
to changes in fair value as market interest rates change. However, increases or
decreases in fair value would impact earnings and cash flows only if Laclede Gas
were to reacquire any of these issues in the open market prior to
maturity.
Equity
and Shelf Registration
Laclede
Gas has on file with the Securities and Exchange Commission an effective shelf
registration on Form S-3 for issuance of $350 million of First Mortgage Bonds,
unsecured debt, and preferred stock, of which $270 million remains available to
Laclede Gas at this time. The Utility has authority from the MoPSC to issue up
to $500 million in First Mortgage Bonds, unsecured debt, and equity securities,
of which $371.5 million remained available under this authorization as of
December 31, 2008. During the quarter ending December 31, 2008,
pursuant to this authority, the Utility sold 1,187 shares of its common stock to
Laclede Group for $40.9 million. The amount, timing, and type of
additional financing to be issued will depend on cash requirements and market
conditions.
At
December 31, 2008, Laclede Gas had outstanding preferred stock
totaling $0.6 million, including current maturities. On
January 15, 2009, the Board of Directors of Laclede Gas approved the
final redemption of all of its outstanding 5% Series B and 4.56% Series C
preferred stock on March 31, 2009. The redemption price shall be its
par value of $25 per share, in addition to the dividend payable on
March 31, 2009.
Guarantees
Laclede
Gas has several operating leases for the rental of vehicles that contain
provisions requiring Laclede Gas to guarantee certain amounts related to the
residual value of the leased property. These leases have various terms, the
longest of which extends through 2014. At December 31, 2008, the
maximum guarantees under these leases were $1.8 million. However, the Utility
estimates that the residual value of the leased vehicles will be adequate to
satisfy most of the guaranteed amounts. At December 31, 2008, the
carrying value of the liability recognized for these guarantees was $0.3
million.
Other
Utility
capital expenditures were $14.0 million for the three months ended
December 31, 2008, compared with $13.0 million for the same period
last year.
Capitalization
at December 31, 2008, excluding current obligations of preferred
stock, consisted of 51.2% common stock equity, 0.1% preferred stock, and 48.7%
long-term debt.
It
is management’s view that Laclede Gas has adequate access to capital markets and
will have sufficient capital resources, both internal and external, to meet
anticipated capital requirements.
The
seasonal nature of Laclede Gas’ sales affects the comparison of certain balance
sheet items at December 31, 2008 and at September 30, 2008,
such as Accounts receivable – net, Gas stored underground, Notes payable,
Accounts payable, Regulatory assets and Regulatory liabilities, and Advance
customer billings. The Balance Sheet at December 31, 2007 is presented
to facilitate comparison of these items with the corresponding interim period of
the preceding fiscal year.
CONTRACTUAL
OBLIGATIONS
As
of December 31, 2008, Laclede Gas had contractual obligations with
payments due as summarized below (in millions):
|
|
Payments
due by period
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
Fiscal
Years
|
|
Contractual
Obligations
|
|
Total
|
|
Fiscal
Year
2009
|
|
Fiscal
Years
2010-2011
|
|
Fiscal
Years
2012-2013
|
|
2014
and
thereafter
|
|
Principal
Payments on Long-Term Debt
|
|
$
|
390.0
|
|
$
|
—
|
|
$
|
25.0
|
|
$
|
25.0
|
|
$
|
340.0
|
|
Interest
Payments on Long-Term Debt
|
|
|
524.2
|
|
|
14.7
|
|
|
48.4
|
|
|
45.1
|
|
|
416.0
|
|
Operating
Leases (a)
|
|
|
16.4
|
|
|
3.9
|
|
|
7.7
|
|
|
3.4
|
|
|
1.4
|
|
Purchase
Obligations – Natural Gas (b)
|
|
|
528.7
|
|
|
229.7
|
|
|
164.2
|
|
|
100.8
|
|
|
34.0
|
|
Purchase
Obligations – Other (c)
|
|
|
111.0
|
|
|
13.1
|
|
|
25.4
|
|
|
17.5
|
|
|
55.0
|
|
Total
(d)
|
|
$
|
1,570.3
|
|
$
|
261.4
|
|
$
|
270.7
|
|
$
|
191.8
|
|
$
|
846.4
|
|
(a)
|
Operating
lease obligations are primarily for office space, vehicles, and power
operated equipment. Additional payments will be incurred if renewal
options are exercised under the provisions of certain
agreements.
|
(b)
|
These
purchase obligations represent the minimum payments required under
existing natural gas transportation and storage contracts and natural gas
supply agreements. These amounts reflect fixed obligations as well as
obligations to purchase natural gas at future market prices, calculated
using December 31, 2008 New York Mercantile Exchange futures
prices. Laclede Gas recovers the costs related to its purchases,
transportation, and storage of natural gas through the operation of its
PGA Clause, subject to prudence review; however, variations in the timing
of collections of gas costs from customers affect short-term cash
requirements. Additional contractual commitments are generally entered
into prior to or during the heating season.
|
(c)
|
These
purchase obligations reflect miscellaneous agreements for the purchase of
materials and the procurement of services necessary for normal
operations.
|
(d)
|
The
categories of Capital Leases and Other Long-Term liabilities have been
excluded from the table above because there are no applicable amounts of
contractual obligations under these categories. Also, commitments related
to pension and postretirement benefit plans have been excluded from the
table above. The Utility expects to make contributions to its qualified,
trusteed pension plans totaling $2.0 million during the remainder of
fiscal year 2009. Laclede Gas anticipates a $1.1 million contribution
relative to its non-qualified pension plans during the remainder of fiscal
year 2009. With regard to the postretirement benefits, the Utility
anticipates it will contribute $10.0 million to the qualified trusts and
$0.3 million directly to participants from Laclede Gas’ funds during the
remainder of fiscal year 2009. For further discussion of the
Utility’s pension and postretirement benefit plans, refer to Note 2,
Pension Plans and Other Postretirement Benefits, of the Notes to Financial
Statements.
|
MARKET
RISK
Laclede
Gas has a risk management policy that allows for the purchase of natural gas
financial instruments with the goal of managing price risk associated with
purchasing natural gas on behalf of its customers. This policy prohibits
speculation. Costs and cost reductions, including carrying costs, associated
with the Utility’s use of natural gas financial instruments are allowed to be
passed on to the Utility’s customers through the operation of its PGA Clause,
through which the MoPSC allows the Utility to recover gas supply costs.
Accordingly, Laclede Gas does not expect any adverse earnings impact as a result
of the use of these financial instruments. However, the timing of recovery for
cash payments related to margin requirements may cause short-term cash
requirements to vary. Nevertheless, carrying costs associated with such
requirements are recovered through the PGA Clause. At
December 31, 2008, the Utility held 35.7 million MMBtu of futures
contracts at an average price of $8.78 per MMBtu. Additionally, 10.1 million
MMBtu of other price risk mitigation was in place through the use of
option-based strategies. These positions have various expiration dates, the
longest of which extends through October 2011.
ENVIRONMENTAL
MATTERS
Laclede
Gas owns and operates natural gas distribution, transmission, and storage
facilities, the operations of which are subject to various environmental laws,
regulations, and interpretations. While environmental issues resulting from such
operations arise in the ordinary course of business, such issues have not
materially affected Laclede Gas’ financial position and results of operations.
As environmental laws, regulations, and their interpretations change, however,
Laclede Gas may be required to incur additional costs. For information relative
to environmental matters, see Note 12 to the Financial Statements included in
the Utility’s Form 10-K for the fiscal year ended September 30, 2008.
There have been no significant changes relative to environmental matters in the
first quarter of fiscal year 2009.
OFF-BALANCE
SHEET ARRANGEMENTS
Laclede
Gas has no off-balance sheet arrangements.