4
Part I
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 derivative instruments;
the impact of changes and volatility in 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 the markets in which our subsidiaries transact business;
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
regulatory assets
franchise renewals
environmental or safety matters, including the potential impact of legislative and regulatory actions related to climate change
taxes
pension and other postretirement benefit liabilities and funding obligations
accounting standards, including the effect of potential changes relative to adoption of or convergence with international 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.
5
. Business
Overview
The Laclede Group, Inc. (Laclede Group or the Company) is a public utility holding company formed through a corporate restructuring that became effective October 1, 2001. Laclede Group is committed to providing reliable natural gas service through its regulated core utility operations while engaging in non-regulated activities that provide sustainable growth. All of Laclede Group’s subsidiaries are wholly owned. The Regulated Gas Distribution segment includes the regulated operations of Laclede Gas Company (Laclede Gas or the Utility), Laclede Group’s largest subsidiary and core business unit. Laclede Gas is a public utility engaged in the retail distribution and sale of natural gas. Laclede Gas is the largest natural gas distribution utility in Missouri, serving approximately 630,000 resi
dential, commercial, and industrial customers in the City of St. Louis and parts of ten counties in eastern Missouri. The Non-Regulated Gas Marketing segment includes Laclede Energy Resources, Inc. (LER), a wholly-owned subsidiary 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 more subject to fluctuations in market conditions than the Utility. Other subsidiaries provide less than 10% of consolidated revenues. As of September 30, 2010, Laclede Group had 1,697 employees, including 14 part-time employees.
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 was 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 Statements
of Consolidated Income.
Operating Revenues (from continuing operations) contributed by each segment for the last three fiscal years are presented below. For more detailed financial information regarding the segments, see of the Notes to Consolidated Financial Statements.
(Thousands)
2010
2009
2008
Regulated Gas Distribution
$
864,297
1,053,993
1,128,287
Non-Regulated Gas Marketing
858,782
836,865
1,075,845
Other
11,950
4,340
4,841
Total Operating Revenues
1,735,029
1,895,198
2,208,973
The consolidated financial statements included in this report present the consolidated financial position, results of operations, and cash flows of Laclede Group. The financial statements, notes to financial statements, and management’s discussion and analysis for Laclede Gas are included in this report as .
6
The following chart illustrates the organization structure of The Laclede Group, Inc. at September 30, 2010:
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Organization Structure
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The Laclede
Group, Inc.
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Laclede Gas
Company
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Laclede
Investment
LLC
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Laclede
Development
Company
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Laclede
Pipeline
Company
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Laclede
Energy
Resources,
Inc.
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Laclede
Venture Corp.
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Laclede Gas
Family
Services,
Inc.
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Organization Structure
The Laclede
Group, Inc.
Laclede Gas
Company
Laclede
Investment
LLC
Development
Company
Laclede
Pipeline
Company
Laclede
Energy
Resources,
Inc.
Venture Corp.
Family
Services,
Inc.