UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period ended June 30,December 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from ________ to ________
Commission File Number 1-1822
LACLEDE GAS COMPANY
(Exact name of registrant as specified in its charter)
Missouri 43-0368139
(State of Incorporation) (I.R.S. Employer
Identification Number)
720 Olive Street, St. Louis, Missouri 63101
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 314-342-0500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
17,557,54017,593,758 shares, Common Stock, par value $1 per share at 7/31/97.2/11/98.
Page 1
LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES
PART I
FINANCIAL INFORMATION
The interim financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. These financial statements should be
read in conjunction with the financial statements and the notes thereto
included in the Company's Form 10-K for the year ended September 30, 1996.1997.
Page 2
LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
(In Thousands, Except Per Share Amounts)
Three Months Ended
Nine Months Ended
June 30, June 30,December 31,
1997 1996 1997 1996
---- ----
---- ----
Utility Operating Revenues $84,191 $86,022 $542,087 $499,240
----------------- ------------------$199,667 $193,865
--------------------
Utility Operating Expenses:
Natural and propane gas 38,016 43,241 330,398 293,762126,309 120,248
Other operation expenses 21,217 20,301 65,464 63,50222,659 21,289
Maintenance 4,607 4,366 13,632 13,7994,942 4,507
Depreciation and amortization 6,426 6,223 19,375 18,4346,601 6,469
Taxes, other than income taxes 8,956 9,620 39,667 37,51512,742 11,416
Income taxes (Note 3) 244 (823) 22,101 22,227
----------------- ------------------8,153 9,393
--------------------
Total Utility Operating Expenses 79,466 82,928 490,637 449,239
----------------- ------------------181,406 173,322
--------------------
Utility Operating Income 4,725 3,094 51,450 50,00118,261 20,543
Miscellaneous Income and Income Deductions - Net
(less applicable income taxes) (Note 3) 602 621 1,458 2,996
----------------- ------------------867 531
--------------------
Income Before Interest Charges 5,327 3,715 52,908 52,997
----------------- ------------------19,128 21,074
--------------------
Interest Charges:
Interest on long-term debt 3,5433,853 3,542 10,627 10,396
Other interest charges 972 572 3,857 3,221
----------------- ------------------1,642 1,426
--------------------
Total Interest Charges 4,515 4,114 14,484 13,617
----------------- ------------------5,495 4,968
--------------------
Net Income (Loss) 812 (399) 38,424 39,38013,633 16,106
Dividends on Preferred Stock 24 24
73 73
----------------- --------------------------------------
Earnings Applicable to Common Stock $ 78813,609 $ (423) $ 38,351 $ 39,307
================== ==================16,082
====================
Average Number of Common Shares Outstanding 17,558 17,558
17,558 17,512
Earnings Per Share of Common Stock $ .04 $(.02) $2.18 $2.24.78 $ .92
Dividends Declared Per Share of Common Stock $.330 $.325 $.315 $.975 $.945
See notes to consolidated financial statements.
Page 3
LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
June 30Dec. 31 Sept. 30
1997 19961997
---- ----
(Thousands of Dollars)
(UNAUDITED)
ASSETS
Utility Plant $782,845 $780,001$802,668 $792,661
Less: Accumulated depreciation and amortization 320,494 327,836330,467 325,088
--------------------
Net Utility Plant 462,351 452,165472,201 467,573
--------------------
Other Property and Investments 25,647 24,26530,257 29,724
--------------------
Current Assets:
Cash and cash equivalents 4,778 4,3605,362 4,508
Accounts receivable - net 56,667 45,578118,185 47,932
Materials, supplies, and merchandise at avg cost 5,408 5,6345,444 5,216
Natural gas stored underground for current use
at LIFO cost 24,006 58,76954,766 56,867
Propane gas for current use at FIFO cost 12,463 12,65512,850 12,917
Prepayments 2,604 1,9103,128 1,986
Deferred income taxes 8,010 4,477
Delayed customer billings 8,464 -10,154 9,881
--------------------
Total Current Assets 122,400 133,383209,889 139,307
--------------------
Deferred Charges 97,373 79,58285,312 84,106
--------------------
Total Assets $707,771 $689,395$797,659 $720,710
====================
See notes to consolidated financial statements.
Page 4
LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET (Continued)
June 30Dec. 31 Sept. 30
1997 19961997
---- ----
(Thousands of Dollars)
(UNAUDITED)
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock (19,423,178 shares issued) $ 19,423 $ 19,423
Paid-in capital 61,205 61,205
Retained earnings 205,464 184,232201,591 193,776
Treasury stock, at cost (1,865,638 shares held) (24,017) (24,017)
--------------------
Total common stock equity 262,075 240,843258,202 250,387
Redeemable preferred stock 1,960 1,960
Long-term debt (less sinking fund requirements) 179,397 179,346179,105 154,413
--------------------
Total Capitalization 443,432 422,149439,267 406,760
--------------------
Current Liabilities:
Notes payable 34,500 59,600102,500 74,000
Accounts payable 29,280 20,63742,444 29,628
Refunds due customers 250 1,2488,883 731
Advance customer billings - 6,231675 12,700
Current portion of long-term debt 25,000 25,000
Taxes accrued 18,906 10,21210,056 6,848
Unamortized purchased gas adjustments 6,027 26,7445,874 13,022
Other 18,837 21,77620,621 22,509
--------------------
Total Current Liabilities 107,800 146,448216,053 184,438
--------------------
Deferred Credits and Other Liabilities:
Deferred income taxes 92,463 78,14982,888 85,013
Unamortized investment tax credits 7,367 7,6697,193 7,280
Other 56,709 34,98052,258 37,219
--------------------
Total Deferred Credits and Other Liabilities 156,539 120,798142,339 129,512
--------------------
Total Capitalization and Liabilities $707,771 $689,395$797,659 $720,710
====================
See notes to consolidated financial statements.
Page 5
LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
NineThree Months Ended
June 30,December 31,
1997 1996
---- ----
(Thousands of Dollars)
Operating Activities:
Net Income $ 38,42413,633 $ 39,38016,106
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 19,405 18,4756,625 6,480
Deferred income taxes and investment tax credits 3,065 (12,748)556 1,910
Other - net (116) 55(557) 148
Changes in assets and liabilities:
Accounts receivable - net (11,089) (13,271)(70,253) (75,792)
Unamortized purchased gas adjustments (20,717) 9,557(7,148) (5,510)
Deferred purchased gas costs 21,015 33,149
Delayed13,242 3,252
Advance customer billings - net (14,695) (26,671)(12,025) (6,198)
Accounts payable 8,643 3,62212,816 45,929
Refunds due customers (998) (2,763)8,152 (248)
Taxes accrued 8,694 13,5953,208 2,644
Natural gas stored underground 34,763 18,4332,101 5,288
Other assets and liabilities (13,889) (8,322)(5,748) (6,938)
--------------------
Net cash provided byused in operating activities $ 72,505 $ 72,491$(35,398) $(12,929)
--------------------
Investing Activities:
Construction expenditures (31,491) (32,231)(11,082) (9,830)
Investments - non-utility (1,708) 104(416) (727)
Employee benefit trusts 478 -(34) (197)
Other 2,750 (462)15 34
--------------------
Net cash used in investing activities $(29,971) $(32,589)$(11,517) $(10,720)
--------------------
Financing Activities:
RepaymentIssuance of short-term debt (25,100) (47,500)
Issuance of common stock - 2,972net 28,500 32,400
Dividends paid (17,016) (16,491)(5,731) (5,555)
Issuance of first mortgage bonds - 25,000 Other - (201)
--------------------_
---------------------
Net cash used inprovided by financing activities $(42,116) $ (36,220)47,769 $ 26,845
---------------------
Net Increase in Cash and Cash Equivalents $ 418854 $ 3,6823,196
Cash and Cash Equivalents at BeginningBeg of Period 4,508 4,360 1,555
--------------------
Cash and Cash Equivalents at End of PeriodYear $ 4,7785,362 $ 5,2377,556
====================
Supplemental Disclosure of Cash PaidPaid/(Refunded)
During the Period for:
Interest $17,115 $15,669$8,407 $8,222
Income taxes 9,249 19,399(148) -
See notes to consolidated financial statements.
Page 6
LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, this interim report includes all
adjustments (consisting only of normal recurring accruals) necessary
for the fair presentation of the results of the periods covered.
2. The registrant is a natural gas distribution utility having a material
seasonal cycle; therefore, this interim statement of consolidated
income is not necessarily indicative of annual results nor
representative of succeeding quarters of the fiscal year.
3. Net provisions for income taxes were charged (credited) as follows
during the periods set forth below:
Three Months Ended
Nine Months Ended
June 30, June 30,December 31,
------------------
-----------------
1997 1996 1997 1996
---- ----
---- ----
(Thousands of Dollars)
Utility Operations
Current:
Federal $(5,730) $ (880) $16,276 $29,7636,520 $ 6,416
State and local (974) (159) 2,742 4,9921,099 1,082
Deferred:
Federal 5,875 136 2,445 (10,834)400 1,561
State and local 1,073 80 638 (1,694)
----------------- -----------------134 334
--------------------
Subtotal $ 2448,153 $ (823) $22,101 $22,227
----------------- -----------------9,393
--------------------
Miscellaneous Income and
Income Deductions
Current:
Federal $ 57100 $ (207) $ 279 $ 50358
State and local 40 (17) 60 7416 3
Deferred:
Federal (50) (122) (16) (191)18 13
State and local (7) (18) (2) (29)
----------------- -----------------3 2
--------------------
Subtotal $ 40137 $ (364) $ 321 $ 357
----------------- -----------------76
--------------------
Total $ 2848,290 $ (1,187) $22,422 $22,584
================= =================9,469
====================
Page 7
4. The Company's Gas Supply Incentive Plan, which became effective October
1, 1996 as part of the settlement reached in the Company's last rate
case, continues to provide significant benefits for both the Company's
share owners and customers. Under the Plan, the Company and its
customers share in certain gains and losses as measured against
benchmark levels of gas costs as related to the acquisition, utilization
and management of the Company's gas supply assets. As part of this
Plan, the Company sells gas supply and pipeline capacity in markets
outside of its normal service territory. Results of the Plan are set
forth below:
Three Months Ended
Nine Months Ended
JuneDecember 31,
----------------------
1997 June 1997
------------------ -----------------1996
---- ----
(Thousands of Dollars)
Incentive Plan Revenues $6,916 $27,920$6,533 $8,535
Incentive Plan Gas Expense 5,229 22,6344,442 6,912
------ -------------
Income Before Income Taxes $1,687 $ 5,286$2,091 $1,623
====== =======
5. In the past, the Company operated various manufactured gas plants which
produced certain by-products and residuals. After performing, at the
request of the United States Environmental Protection Agency (EPA), an
investigation of one of the Company's former manufactured gas plant
sites located in Shrewsbury, Missouri (the Shrewsbury Site) and
reviewing the results of this investigation, the Company agreed to
perform a limited removal of some contaminants on small areas of the
site. As previously reported by the Company, the Company has been
discussing======
5. As part of its annual review of the Company's gas costs, the Staff of
the MoPSC has recommended an adjustment which, if approved by the MoPSC
and upheld by the courts, would require the Company to refund to its
customers approximately $3.6 million of gains realized by the Company
from various sales made outside of Missouri between November 1995 and
March 1996. The Company will vigorously oppose the Staff's recommended
adjustment before the MoPSC on the grounds that such adjustment violates
Missouri law, is impermissible under the Company's MoPSC-approved
tariffs, and is otherwise unlawful and unreasonable. The Company
believes that the outcome of this matter is unlikely to have a material
adverse impact on the Company.
6. The Company is subject to various laws and regulations relating to the
environment, which thus far have not had a material effect on the
Company's financial position and results of operations.
In the past, the Company operated various manufactured gas plants which
produced certain by-products and residuals. At the request of the
United States Environmental Protection Agency (EPA), Laclede performed
an investigation of one of the Company's former manufactured gas plant
sites located in Shrewsbury, Missouri (the Shrewsbury Site). As
previously reported by the Company, the Company has had lengthy
discussions with the EPA and the Missouri Department of Natural
Resources (MoDNR) on the question of what additional actions are
required for the site. On October 17, 1997, the Company submitted to
the EPA an Engineering Evaluation/Cost Analysis (EE/CA), together with
an accompanying letter (collectively the "Submitted EE/CA Documents"),
in which the Company proposed to maintain various institutional controls
at this site, to stabilize the bank of a drainageway located at the edge
of the site, and to perform a limited removal of some contaminants
located in certain small areas of the site. The EPA and the MoDNR have
proposed changes to the Submitted EE/CA Documents to which Laclede is
preparing a response. At this time, given the lack of final agreement
as to what additional actions should be taken, the ultimate costs to be
incurred regarding the Shrewsbury Site remain unclear. Assuming the
Page 8
Company performs the limited removal actions agreeddescribed in the Submitted EE/CA
Documents and the actions anticipated to withbe included in the EPACompany's
response to the EPA's and those ofMoDNR's proposed changes to the additional actions proposed by the EPA and MoDNR to which the Company
has no objection,submitted
EE/CA Documents, the Company estimates that the overall costs will be
approximately $740,000. Currently, $540,000As of December 31, 1997, $541,000 of such
overall costs havehad been paid, and an additional $200,000 has been$199,000 was reserved by
the Company. If the Company is required to take any additional actions
with regard to the site, the Company may have to incur additional costs,
the extent of which cannot practicably be estimated currently. The
Company has notified its insurers that it intends to seek reimbursement
from them of its investigation, remediation, clean-up and defense costs.
The Company intends to seek recovery, if practicable, from any other
potentially responsible parties.
Page 8
In a separate matter, MoDNR has accepted the Company's application to
place the site of a different former manufactured gas plant located in
the City of St. Louis, Missouri (which site was also used by subsequent
owners as the site of a coke manufacturing facility) in the Missouri
environmental remediation program.Voluntary Cleanup Program, for the purpose of characterizing the site.
MoDNR's preliminary tests conducted at the site reflect the presence of
coke and gas plant manufacturing wastes, as well as certain heavy metal
wastes. The Company and MoDNR have agreed upon the parametersscope of the
Company's initial investigation.investigation, which consists of the drilling of
monitoring wells to assess the condition of groundwater at this site.
The monitoring wells have been drilled, and the Company is evaluating
the results of the samples taken. The Company currently
estimates that the cost of such investigation, MoDNR oversight costs and
associated legal and engineering consulting costs relative to such
investigation of the site would together approximate $75,000.$96,000.
Currently, $36,000 has been paid and an additional $39,000$60,000 has been
reserved on the Company's books. The City of St. Louis, the current
owner of the site, has
recently received proposals from several different groups to
develop this site, and is in the process of evaluating such proposals.site. Various portions of the development proposals dealdealt
with the issue of the environmental condition of the site, and the
impact of such condition on possible development plans. Until aUnless and
until any development proposal is selected, the Company is unable to
determine the impact, if any, that any proposed development will have on
actions to be taken regarding the site, and the cost of any such
actions. The Company has notified its insurers that the Company intends
to seek reimbursement from them for investigation, remediation, clean-up
and defense costs. The Company has also requested that other former
site owners and/or operators participate in the cost of any site
investigation, but none has yet agreed to do so. The Company plans to
seek proportionate reimbursement of all costs incurred with respect to
this site from such parties and/or any other potentially responsible
parties, to the extent practicable.
The Company is presently unable to evaluate or quantify further the
scope or cost of any environmental response activity with regard to the
above two former manufactured gas plant sites.
In the Company's most recent rate case, the Missouri Public Service
Commission approved, effective September 1, 1996, the continued use of a
cost deferral mechanism, originally approved as part of a 1994 rate case
settlement, for the Company's use in applying for appropriate rate
recovery of various environmental costs in connection with former
manufactured gas plants. This authorization will be null and void if
the Company does not file to further adjust its rates by September 1,
1998; and, in any event, the recovery of costs thus deferred may be
challenged in future rate proceedings.
6. Certain prior-period amounts have been reclassified to conform to
current-period presentation.
7. This Form 10-Q should be read in conjunction with the Notes to
Consolidated Financial Statements contained in the Company's 19961997 Form
10-K.
Page 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
ForEarnings for the quarter ended June 30,December 31, 1997 the Company recorded a positive
earnings level of $.04were $.78 per share
compared with a loss of $.02$.92 per share for the same quarter last year. The $.06 per share increasedecrease
in earnings was directlyprimarily attributable to earnings produced by the Gas Supply Incentive Plan, which
became effective October 1, 1996, and includes the sale of gas and pipeline
capacity to non-traditional markets. The benefit of higher general rate
levels (placed in effect September 1, 1996) was essentially offset by higher operating expenses.expenses and
lower gas sales arising from slightly warmer weather this year.
Utility operating revenues for the quarter ended June 30,December 31, 1997 were
$84.2$199.7 million compared with $86.0$193.9 million for the quarter ended June 30,December
31, 1996. The $1.8$5.8 million, or 2.1%3.0%, decreaseincrease was principally due to
lowerincreased wholesale gas costs (which are passed on to Laclede's customers
under the Company's Purchased Gas Adjustment Clause), largelypartially offset by
revenues related tolower gas sales volumes arising mainly from the aforementioned Incentive Plan and higher general rate levels (placed in
effect September 1, 1996).slightly warmer weather.
System therms sold and transported decreased by 4.34.2 million therms, or 2.6%1.2%,
below the quarter ended June 30,December 31, 1996.
Utility operating expenses for the quarter ended June 30,December 31, 1997 decreasedincreased
by $3.5$8.1 million, or 4.2%4.7%, belowabove the same quarter last year. Natural and
propane gas expense this quarter decreased $5.2increased $6.1 million, or 12.1%5.0%, belowabove
last year mainly due to decreasedhigher rates charged by the Company'sour suppliers, and slightly lowerpartially
offset by decreased volumes purchased for sendout partially offset by gas
expense related to(primarily resulting from
the aforementioned Incentive Plan.warmer weather). Other operation and maintenance expenses increased
$1.2$1.8 million, or 4.7%7.0%, principally due to lower gains applicable to lump-sum pension settlements,increased distribution and
maintenance charges, higher wage rates, fewer gains on lump sum pension
settlements recognized and increased distribution charges and othergroup insurance expense. These
increases in the cost of doing
business. These factors were partially offset by lower net pension costs. Depreciation and
amortization expense increased 3.3% primarily due to
additional property. Taxes, other than income taxes, decreased 6.9% mainly
due to lower gross receipts taxes (reflecting decreased revenues), partially
offset by higher real estate and personal property taxes this quarter. The
$1.1 million increase in income taxes is principally due to higher taxable
income.
Miscellaneous income and income deductions was essentially the same as the
corresponding period last year. In May 1997, Laclede completed the sale of
certain oil and gas properties for $3.3 million, resulting in the
recognition of a modest gain on such sale. Most of the properties sold were
assets which had originally been acquired during the 1970s to provide a
source of gas for the Company during an era of gas shortages and
curtailments. Laclede has not been active in oil and gas exploration and
development for a number of years. The benefit of the gain was mostly
offset by reduced subsidiary income. The 9.7% increase in interest expense
is mainly due to increased short-term interest expense reflecting higher
borrowings.
Page 10
Earnings for the nine months ended June 30, 1997 were $2.18 per share
compared with $2.24 per share for the corresponding period last year. The
$.06 per share decrease in earnings was primarily due to lower consumption
by the Company's heating customers in response to sharply higher gas prices
which were in effect for the first part of the winter, the effect of income
from off system sales recorded during the same period last year and
increased operating expenses. These decreases were only partially offset by
the benefits of the Incentive Plan and last year's rate settlement (which
resulted in higher general rate levels effective September 1, 1996). The
Incentive Plan, which became effective October 1, 1996 as part of the
settlement reached in the Company's last rate case, continues to provide
significant benefits for both the Company's share owners and customers.
Under the Plan, Laclede and its customers share in certain gains and losses,
as measured against benchmark levels of gas costs, related to the
acquisition, utilization, and management of the Company's gas supply assets.
As part of this Plan, the Company sells gas supply and pipeline capacity in
markets outside of its normal service territory. Such activity has been
significant. For instance, gas purchases made for sales outside of the
Company's service territory during March 1997 exceeded the amount of gas
purchases made by the Company for consumption in its own service territory.
To date, the Company has achieved overall gas cost savings of about $24.2
million, resulting in savings to Laclede's customers of $18.9 million and
contributing about $5.3 million pre-tax income to the Company.
Utility operating revenues for the first nine months of fiscal year 1997
increased $42.8 million, or 8.6%, above the corresponding period of fiscal
year 1996. This increase was primarily due to higher wholesale gas costs
(which are passed on to Laclede's customers under the Company's Purchased
Gas Adjustment Clause), Incentive Plan revenues and the September 1, 1996
general rate increase. These increases were partially offset by lower gas
sales volumes (arising mainly from lower customer consumption patterns).
System therms sold and transported decreased by 54.2 million therms, or
5.2%, below the level experienced during the nine months ended June 30,
1996.
Utility operating expenses for the nine months ended June 30, 1997 increased
by $41.4 million, or 9.2%, above last year. Natural and propane gas expense
during the first nine months of fiscal year 1997 increased $36.6 million, or
12.5%, above last year mainly due to higher rates charged by our suppliers
and gas expense associated with the aforementioned Incentive Plan. These
increases were partially offset by reduced volumes purchased for sendout
(resulting from lower customer consumption patterns). Other operation and
maintenance expenses increased $1.8 million, or 2.3%, principally due to
lower gains applicable to lump-sum pension settlements, higher wage rates
and other increases in the costs of doing business. These increases were
partially offset by lower net pension costs, a lower provision for
uncollectible accounts and reduced maintenance charges. Depreciation and
amortization expense increased 5.1%2.0% primarily due to additional property.
Taxes, other than income taxes, increased 5.7% principally11.6% mainly due to higher real
estate and personal property taxes this quarter and higher gross receipts
taxes (mainly reflecting(reflecting increased revenues). Page 11The $1.2 million decrease in income
taxes is principally due to lower taxable income.
Miscellaneous income and income deductions for the first nine months of
fiscal 1997 decreased $1.5increased $.3 million below the same period last year primarily
due to reducedimproved subsidiary income (mainly lower non-utility gas marketing
income recognized by the Company's wholly-owned subsidiary, Laclede Energy
Resources, Inc.).results and minor variations in several areas.
The 6.4%10.6% increase in interest expense is mainly due to
higher short-term interest expense reflecting increased borrowings and higher interest on
long-term debt resulting from the issuance of $25 million of 6-1/2% First
Mortgage Bonds in November 1995.
On June 25, 1997, the Company and Union representatives reached a new three-
year labor agreement replacing the prior agreement which was to expire July
31,October 1997. The new contract extends through July 31, 2000. The settlement
resulted in wage increases of 2.5% in all three years, along with lump sum
payment provisions and other benefit improvements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term borrowing requirements typically peak during colder
months, principally because of required payments for natural gas made in
advance of the receipt of cash from the Company's customers for the sale of
that gas. Such short-term cash requirements have traditionally been met
through the sale of commercial paper supported by lines of credit with
banks. In January 1997,1998, the Company renewed its primary lines of bank
credit under which it may borrow up to $40 million prior to January 31,
1998,1999, with renewal of any loans outstanding on that date permitted to
June 30, 1998.1999. This, along with a previously obtained $90$70 million
supplemental line of credit which ranruns through March 1, 1997, providedAugust 30, 1998, provides a
total line of credit of $130$110 million for the 1996-19971997-1998 heating season.
Since seasonal cash needs typically decline at the end of the heating
season, the Company reduced the supplemental line of credit to $40 million
from March 1, 1997 through April 1, 1997 (the supplemental line was
increased to $45 million for March 1, 1997 through March 3, 1997). The
Company further reduced the supplemental line of credit to $25 million from
April 2, 1997 through April 14, 1997 and to $15 million from April 15, 1997
through July 31, 1997. Such line was increased to $25 million on August 1,
1997 and extends through August 31, 1997. Our basic credit line of $40
million along with a supplemental credit line of $25 million will be
sufficient to meet the Company's cash needs through the period ended August
31, 1997. During fiscal 19971998 to date, the Company sold commercial paper aggregating to
a maximum of $104.0$110.0 million at any one time, but did not borrow from the
banks under the aforementioned agreements. Short-term borrowings amounted
to $34.5$89.5 million at June 30, 1997.
The Missouri Public Service Commission approvedJanuary 31, 1998.
Page 10
As part of its annual review of the Company's application
seeking a two year extension,gas costs, the Staff of the
MoPSC has recommended an adjustment which, if approved by the MoPSC and
upheld by the courts, would require the Company to April 21, 1999, ofrefund to its previously granted
authority to sell up to $50customers
approximately $3.6 million of additional First Mortgage Bonds.gains realized by the Company from various
sales made outside of Missouri between November 1995 and March 1996. The
original authorization was for $100 millionCompany will vigorously oppose the Staff's recommended adjustment before the
MoPSC on the grounds that such adjustment violates Missouri law, is
impermissible under the Company's MoPSC-approved tariffs, and is otherwise
unlawful and unreasonable. The Company believes that the outcome of First Mortgage Bonds of which
$50 millionthis
matter is unlikely to have already been issued and sold.a material adverse impact on the Company.
The amount and timing of any
issuance will beCompany is subject to management's evaluationvarious laws and regulations relating to the
environment, which thus far have not had a material effect on the Company's
financial position and results of need, financial
market conditions, and other factors.
Page 12
In the past,operations. However, the Company operated varioushas
reported certain environmental liabilities in connection with two
manufactured gas plants operated by the Company in the past which produced
certain by-products and residuals. After performing, at the
request of the United States Environmental Protection Agency (EPA), an
investigation of one of the Company's former manufactured gas plant sites
located in Shrewsbury, Missouri (the Shrewsbury Site) and reviewing the
results of this investigation, the Company agreed to perform a limited
removal of some contaminants on small areas of the site. As previously
reported by the Company, theThe Company has been discussing witheither already paid or
reserved overall costs of $836,000 which are estimated to cover the
EPA and
the Missouri Departmentperformance of Natural Resources (MoDNR) what additionalcertain limited actions are required for the site. See the "OTHER PERTINENT MATTERS" Section of the
Company's most recent Form 10-K.at these locations. At this time, given the lack of final
agreement as to what additional actions should be taken,
the ultimate costs to be incurred regardingremain unclear, as does the Shrewsbury Site remain unclear. Assuming the
Company performs the limited removal actions agreed to with the EPA and
thoseamount of the additional actions proposed by the EPA and MoDNR toany
recovery which the Company has no objection, the Company estimates that the overall costs willmay be approximately $740,000. Currently, $540,000 of such overall costs have
been paid, and an additional $200,000 has been reserved by the Company. The
Company has notified its insurers that it intendsable to seek reimbursementobtain from them of its investigation, remediation, clean-up and defense costs. The
Company intends to seek recovery, if practicable, from any other potentially
responsible
parties.
In a separate matter, MoDNR has acceptedparties and/or the Company's application to place
the site of a different former manufactured gas plant located in the City of
St. Louis, Missouri (which site was also used by subsequent owners as the
site of a coke manufacturing facility) in the Missouri environmental
remediation program. MoDNR's preliminary tests at the site reflect the
presence of coke and gas plant manufacturing wastes, as well as certain
heavy metal wastes. The Company and MoDNR have agreed upon the parameters
of the Company's initial investigation. The Company currently estimates
that the cost of such investigation, MoDNR oversight costs and associated
legal and engineering consulting costs relative to the site would together
approximate $75,000. Currently, $36,000 has been paid and an additional
$39,000 has been reserved on the Company's books.
The City of St. Louis, the current owner of the site, has recently received
proposals from several different groups to develop this site, and is in the
process of evaluating such proposals. Various portions of the development
proposals deal with the issue of the environmental condition of the site,
and the impact of such condition on possible development plans. Until a
development proposal is selected, the Company is unable to determine the
impact, if any, that any proposed development will have on actions to be
taken regarding the site, and the cost of any such actions. The Company has
notified its insurers that the Company intends to seek reimbursement from
them for investigation, remediation, clean-up and defense costs. The
Company has also requested that other former site owners and/or operators
participate in the cost of any site investigation, but none has yet agreed
to do so. The Company plans to seek proportionate reimbursement of all
costs incurred with respect to this site from such parties and/or any other
potentially responsible parties, to the extent practicable.
The Company is presently unable to evaluate or quantify further the scope or
cost of any environmental response activity with regard to the above two
former manufactured gas plant sites.
Page 13insurers. In the Company's most recent rate
case, the Missouri Public Service
Commission (MoPSC)MoPSC approved, effective September 1, 1996, the continued use of
a cost deferral mechanism originally approved as part of a 1994 rate
case settlement, for the Company's use in applying for appropriate rate recovery of various
environmental costs in connection with former
manufactured gas plants. Thiswhich authorization will be null and void if the Company
does not file to further adjust its rates by September 1, 1998; and,
in1998. In any
event, the recovery of costs thus deferred may be challenged in future rate
proceedings. The Company's Purchased Gas Adjustment (PGA) Clause providesRefer to Note 6 of Notes to Consolidated Financial Statements
on page 8 for changes in
the prices of wholesale gas costs to be passedadditional information on to the Company's customers. Under new procedures approved by the Missouri Public Service
Commission (MoPSC) in July 1997, the Company will make only two scheduled
PGA filings each year, one for the winter period and one for the summer. In
addition, the Company may make one unscheduled adjustment during the winter
if significant, unforeseen increases or decreases in gas costs occur. The
new procedures also authorize the Company to purchase financial instruments
that should protect the Company and its customers from any unusually large
winter period gas price increases. The cost of purchasing these instruments
will be recoverable by the Company through the operation of the PGA Clause.
These new procedures will provide better gas price stability for the
Company's customers.environmental matters.
Construction expenditures for the nine months ended June 30, 1997quarter were $31.5$11.1 million compared with
$32.2$9.8 million for the same period last year.
Many of the Company's computer systems and applications will not recognize
the turn of the century and, thus, require programming modification or
replacement. For more than a year, the Company, through the use of internal
and external resources, has been involved in the process of modifying and
replacing significant portions of its computer systems in order to make such
systems operational in the year 2000 and beyond, as well as to provide
additional benefits. The costs associated with the replacement of certain
computer systems are being recorded as assets and will be amortized, while
the costs of modifying the remaining systems to fix the year 2000 problem
are being charged to expense. Currently, the Company estimates that the
costs remaining to be incurred and charged to expense during the next two
years are approximately $2 million.
Capitalization at June 30,December 31, 1997 increased $21.3$32.5 million since September
30, 19961997 and consisted of 59.1%58.8% common stock equity, .4% preferred stock
equity and 40.5%40.8% long-term debt.
The seasonal effect of the Company's financial position affects the
comparison of certain balance sheet items at December 31, 1997 and at
September 30, 1997 such as Accounts Receivable - Net, Notes Payable,
Accounts Payable and Advance Customer Billings.
Page 1411
LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES
Part II
OTHER INFORMATION
Page 1512
LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES
Item 1. Legal Proceedings
For a discussion of environmental matters, see Note 56 of the Notes
to Consolidated Financial Statements in Part I, Financial
Information.
During the quarter ended June 30,December 31, 1997, there were no new
legal proceedings required to be disclosed.
Item 5. Other Information
On May 22, 1997 the Board of Directors of Laclede Gas Company
selected ChaseMellon Shareholder Services, L.L.C. ("CMSS") to
serve, effective August 1, 1997, as transfer agent, as well as in
various other capacities including rights agent, with regard to
shareholders' stock interests in the Company. CMSS will succeed
Boatmen's Trust Company ("Boatmen's") in these capacities. This
change was necessitated by the fact that Boatmen's will no longer
be providing these types of services.
On July 24, 1997, the Company's Board of Directors amended the
Company's By-laws, effective at the close of business on July 24,
1997, by adding to Article III thereof a new Section 8, relating to
the nomination by shareholders of persons to stand for election as
directors, and a new Section 9, relating to proposals by
shareholders. Under these By-law provisions, notice of shareholder
proposals or nominations for annual meetings must, among other
things, normally be submitted in writing to the Corporate Secretary
not less than sixty (60) nor more than ninety (90) days prior to
the anniversary date of the prior year's annual meeting of
shareholders, and must contain certain specified items of pertinent
information. The amendments are included as Exhibit 3 to this
Report and are incorporated herein by reference. The foregoing
description of the By-Law amendments is qualified in its entirety
by reference to said Exhibit 3.
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index
(b) Reports on Form 8-K
The Company filed no reports ona Form 8-K during the quarter ended
June 30,December 31, 1997.
Item reported:
Pursuant to an Underwriting Agreement, effective October 16, 1997
(the "Underwriting Agreement"), Laclede Gas Company (the
"Registrant"), on October 21, 1997 sold to ABN AMRO Chicago
Corporation, the Underwriter named on Schedule I attached to the
Underwriting Agreement, $25,000,000 aggregate principal amount of
its First Mortgage Bonds, 6 1/2% Series due October 15, 2012 (the
"Bonds"). The Bonds have been issued under a Mortgage and Deed of
Trust, dated as of February 1, 1945, under which State Street Bank
and Trust Company of Missouri, N.A. is the present Trustee. Such
Mortgage and Deed of Trust had previously been amended and
supplemented and has been further supplemented by a Twenty-Third
Supplemental Indenture, dated as of October 15, 1997 (the
"Supplemental Indenture"). The registration statement on Form S-3
with respect to the First Mortgage Bonds of the Registrant,
including the Bonds (File No. 33-60996), was filed by the
Registrant on April 13, 1993 and declared effective by the
Securities and Exchange Commission on April 21, 1993. Copies of
the Underwriting Agreement and the Supplemental Indenture were
attached to the Form 8-K as Exhibits 1.01 and 4.01, respectively.
Financial Statements Filed: None.
Date of Report (Date of Earliest Event Reported):
October 16, 1997
Date Report Filed: November 6, 1997.
Page 1613
LACLEDE GAS COMPANY AND SUBSIDIARY COMPANIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LACLEDE GAS COMPANY
Date: July 31, 1997February 11, 1998 /s/ G. T. McNeive, Jr.
------------------------
G. T. McNeive, Jr.
Sr. Vice President - Finance
(Authorized Signatory and
Chief Financial Officer)
Page 1714
Index to Exhibits
Sequentially
Exhibit Numbered
Number Exhibit Page
- ------- ------- ------------
3.0 Amendments3.01(ii) Amendment to the Company's By-Laws, effective 19
at the close of business on July 24,November 20, 1997,
adopted by the Company's Board of Directors on
July 24,November 20, 1997. 4.1 Amendments to the Laclede Gas Company Salary 22
Deferral Savings Plan adopted April 21, 1997.
4.2 Amendments to the Laclede Gas Company Wage 27
Deferral Savings Plan adopted April 21, 1997.
4.3 Amendments to the Missouri Natural Gas Division 31
of Laclede Gas Company Dual Savings Plan adopted
April 21, 1997.
10.1 April 1, 1997 supplemental line of credit 36
agreement with The Chase Manhattan Bank.
10.2 April 15, 1997 supplemental line of credit 38
agreement with the Chase Manhattan Bank.
10.3 April 30, 1997 supplemental line of credit 40
agreement with The Chase Manhattan Bank.
10.4 July 1, 1997 supplemental line of credit agreement 42
with the Chase Manhattan Bank.16
27 Financial Data Schedule UT 4417
Page 1815