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Note 1 - Summary of Significant Accounting Policies
Principles of Consolidation. The Company consolidates all entities in which it has a controlling financial interest. All significant intercompany balances and transactions are eliminated.
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications and Revisions. Certain prior year amounts have been reclassified to conform with current year presentation.
Revisions were made on the Consolidated Statement of Cash Flows for the nine months ended June 30, 2012 to reflect non-cash investing activities embedded in Accounts Payable on the Consolidated Balance Sheets at June 30, 2012 and September 30, 2011. These revisions increased the operating cash flows related to the change in Accounts Payable for the nine months ended June 30, 2012 by $32.8 million and decreased investing cash flows related to Capital Expenditures by the same amounts.
In the subsequent period, revisions will be made on the Consolidated Statement of Cash Flows for the fiscal years ended September 30, 2012 and September 30, 2011 to reflect non-cash investing activities embedded in Accounts Payable on the Consolidated Balance Sheets for the respective periods. The revisions for the fiscal years ended September 30, 2012 and September 30, 2011 will decrease operating cash flows by $1.8 million and $6.6 million, respectively, and increase investing cash flows related to Capital Expenditures by the same amounts. The revisions in the Consolidated Statement of Cash Flows noted above represent errors that are not deemed material, individually or in the aggregate, to the prior period consolidated financial statements.
Earnings for Interim Periods. The Company, in its opinion, has included all adjustments (which consist of only normally recurring adjustments, unless otherwise disclosed in this Form 10-Q) that are necessary for a fair statement of the results of operations for the reported periods. The consolidated financial statements and notes thereto, included herein, should be read in conjunction with the financial statements and notes for the years ended September 30, 2012, 2011 and 2010 that are included in the Company's 2012 Form 10-K. The consolidated financial statements for the year ended September 30, 2013 will be audited by the Company's independent registered public accounting firm after the end of the fiscal year.
The earnings for the nine months ended June 30, 2013 should not be taken as a prediction of earnings for the entire fiscal year ending September 30, 2013. Most of the business of the Utility and Energy Marketing segments is seasonal in nature and is influenced by weather conditions. Due to the seasonal nature of the heating business in the Utility and Energy Marketing segments, earnings during the winter months normally represent a substantial part of the earnings that those segments are expected to achieve for the entire fiscal year. The Company’s business segments are discussed more fully in Note 7 – Business Segment Information.
Consolidated Statement of Cash Flows. For purposes of the Consolidated Statement of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity of generally three months or less to be cash equivalents.
The Company has accounts payable and accrued liabilities recorded on its Consolidated Balance Sheets that are related to capital expenditures. These amounts represent non-cash investing activities at the balance sheet date. Accordingly, they are excluded from the Consolidated Statement of Cash Flows when they are recorded as liabilities and included in the Consolidated Statement of Cash Flows when they are paid in the subsequent period. The following table summarizes the Company’s non-cash capital expenditures recorded as Accounts Payable and Other Accruals and Current Liabilities on the Consolidated Balance Sheet:
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|
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|
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|
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|
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At June 30, |
|
|
At September 30, |
||||||||||
|
|
|
2013 |
|
|
2012 |
|
|
2012 |
|
|
2011 |
||||
|
|
|
|
(Thousands) |
||||||||||||
Non-cash Capital Expenditures |
|
|
$ |
58,632 |
|
|
$ |
118,624 |
|
|
$ |
67,503 |
|
|
$ |
125,115 |
Hedging Collateral Deposits. This is an account title for cash held in margin accounts funded by the Company to serve as collateral for hedging positions. The Company had hedging collateral deposits of $0.7 million and $0.4 million related to its exchange-traded futures contracts at June 30, 2013 and September 30, 2012, respectively. In accordance with its accounting policy, the Company does not offset hedging collateral deposits paid or received against related derivative financial instruments liability or asset balances.
Gas Stored Underground - Current. In the Utility segment, gas stored underground – current is carried at lower of cost or market, on a LIFO method. Gas stored underground – current normally declines during the first and second quarters of the year and is replenished during the third and fourth quarters. In the Utility segment, the current cost of replacing gas withdrawn from storage is recorded in the Consolidated Statements of Income and a reserve for gas replacement is recorded in the Consolidated Balance Sheets under the caption “Other Accruals and Current Liabilities.” Such reserve, which amounted to $22.0 million at June 30, 2013, is reduced to zero by September 30 of each year as the inventory is replenished.
Property, Plant and Equipment. In the Company’s Exploration and Production segment, oil and gas property acquisition, exploration and development costs are capitalized under the full cost method of accounting. Under this methodology, all costs associated with property acquisition, exploration and development activities are capitalized, including internal costs directly identified with acquisition, exploration and development activities. The internal costs that are capitalized do not include any costs related to production, general corporate overhead, or similar activities. The Company does not recognize any gain or loss on the sale or other disposition of oil and gas properties unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves of oil and gas attributable to a cost center.
Capitalized costs include costs related to unproved properties, which are excluded from amortization until proved reserves are found or it is determined that the unproved properties are impaired. Such costs amounted to $143.8 million and $146.1 million at June 30, 2013 and September 30, 2012, respectively. All costs related to unproved properties are reviewed quarterly to determine if impairment has occurred. The amount of any impairment is transferred to the pool of capitalized costs being amortized.
Capitalized costs are subject to the SEC full cost ceiling test. The ceiling test, which is performed each quarter, determines a limit, or ceiling, on the amount of property acquisition, exploration and development costs that can be capitalized. The ceiling under this test represents (a) the present value of estimated future net cash flows, excluding future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, using a discount factor of 10%, which is computed by applying prices of oil and gas (as adjusted for hedging) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet, less estimated future expenditures, plus (b) the cost of unevaluated properties not being depleted, less (c) income tax effects related to the differences between the book and tax basis of the properties. The natural gas and oil prices used to calculate the full cost ceiling are based on an unweighted arithmetic average of the first day of the month oil and gas prices for each month within the twelve-month period prior to the end of the reporting period. If capitalized costs, net of accumulated depreciation, depletion and amortization and related deferred income taxes, exceed the ceiling at the end of any quarter, a permanent impairment is required to be charged to earnings in that quarter. At June 30, 2013, the ceiling exceeded the book value of the oil and gas properties by approximately $199.1 million.
Accumulated Other Comprehensive Loss. The components of Accumulated Other Comprehensive Loss, net of related tax effect, are as follows (in thousands):
|
|
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|
|
|
|
|
|
At June 30, 2013 |
|
At September 30, 2012 |
||
Funded Status of the Pension and Other Post-Retirement |
|
|
|
|
|
|
Benefit Plans |
|
$ |
(100,561) |
|
$ |
(100,561) |
Net Unrealized Gain (Loss) on Derivative Financial Instruments |
|
|
36,865 |
|
|
(1,602) |
Net Unrealized Gain on Securities Available for Sale |
|
|
5,087 |
|
|
3,143 |
Accumulated Other Comprehensive Loss |
|
$ |
(58,609) |
|
$ |
(99,020) |
Other Current Assets. The components of the Company’s Other Current Assets are as follows (in thousands):
|
|
|
|
|
|
|
|
|
At June 30, 2013 |
|
At September 30, 2012 |
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|
|
|
|
|
|
|
Prepayments |
|
$ |
10,472 |
|
$ |
8,316 |
Prepaid Property and Other Taxes |
|
|
10,461 |
|
|
14,455 |
Federal Income Taxes Receivable |
|
|
- |
|
|
268 |
State Income Taxes Receivable |
|
|
1,058 |
|
|
2,065 |
Fair Values of Firm Commitments |
|
|
1,384 |
|
|
1,291 |
Regulatory Assets |
|
|
22,830 |
|
|
29,726 |
|
|
$ |
46,205 |
|
$ |
56,121 |
Other Accruals and Current Liabilities. The components of the Company’s Other Accruals and Current Liabilities are as follows (in thousands):
|
|
|
|
|
|
|
|
|
At June 30, 2013 |
|
At September 30, 2012 |
||
|
|
|
|
|
|
|
Accrued Capital Expenditures |
|
$ |
49,348 |
|
$ |
36,460 |
Regulatory Liabilities |
|
|
13,318 |
|
|
18,289 |
Reserve for Gas Replacement |
|
|
22,032 |
|
|
- |
Other |
|
|
25,235 |
|
|
24,350 |
|
|
$ |
109,933 |
|
$ |
79,099 |
Earnings Per Common Share. Basic earnings per common share is computed by dividing net income available for common stock by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For purposes of determining earnings per common share, the only potentially dilutive securities the Company has outstanding are stock options, SARs and restricted stock units. The diluted weighted average shares outstanding shown on the Consolidated Statements of Income reflects the potential dilution as a result of these securities as determined using the Treasury Stock Method. Stock options, SARs and restricted stock units that are antidilutive are excluded from the calculation of diluted earnings per common share. There were 180,552 and 196,121 securities excluded as being antidilutive for the quarter and nine months ended June 30, 2013, respectively. There were 976,870 and 833,170 securities excluded as being antidilutive for the quarter and nine months ended June 30, 2012, respectively.
Stock-Based Compensation. During the nine months ended June 30, 2013, the Company granted 412,970 SARs having a weighted average exercise price of $53.05 per share. The weighted average grant date fair value of these SARs was $10.66 per share. These SARs may be settled in cash, in shares of common stock of the Company, or in a combination of cash and shares of common stock of the Company, as determined by the Company. These SARs are considered equity awards under the current authoritative guidance for stock-based compensation. The accounting for those SARs is the same as the accounting for stock options. The SARs granted during the nine months ended June 30, 2013 vest and become exercisable annually in one-third increments. The weighted average grant date fair value of these SARs granted during the nine months ended June 30, 2013 was estimated on the date of grant using the same accounting treatment that is applied for stock options. There were no stock options granted during the nine months ended June 30, 2013.
The Company granted 255,604 performance based restricted stock units during the nine months ended June 30, 2013. The weighted average fair value of such performance based restricted stock units was $49.51 per share for the nine months ended June 30, 2013. The performance based restricted stock units granted during the nine months ended June 30, 2013 must meet a performance condition over the performance cycle of October 1, 2012 to September 30, 2015. The performance condition over the performance cycle, generally stated, is the Company’s total return on capital as compared to the same metric for companies in the Natural Gas Distribution and Integrated Natural Gas Companies group as calculated and reported in the Monthly Utility Reports of AUS, Inc., a leading industry consultant. The number of performance based restricted stock units that will vest will depend upon the Company’s performance relative to the report group and not upon the absolute level of return achieved by the Company. The Company also granted 39,700 non-performance based restricted stock units during the nine months ended June 30, 2013. The weighted average fair value of such non-performance based restricted stock units was $50.13 per share for the nine months ended June 30, 2013.
Restricted stock units, both performance based and non-performance based, represent the right to receive shares of common stock of the Company (or the equivalent value in cash or a combination of cash and shares of common stock of the Company, as determined by the Company) at the end of a specified time period. The performance based and non-performance based restricted stock units do not entitle the participant to receive dividends during the vesting period. The accounting for performance based and non-performance based restricted stock units is the same as the accounting for restricted share awards, except that the fair value at the date of grant of the restricted stock units must be reduced by the present value of forgone dividends over the vesting term of the award. There were no restricted share awards granted during the nine months ended June 30, 2013.
New Authoritative Accounting and Financial Reporting Guidance. In December 2011, the FASB issued authoritative guidance requiring enhanced disclosures regarding offsetting assets and liabilities. Companies are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. This authoritative guidance will be effective as of the Company’s first quarter of fiscal 2014 and is not expected to have a significant impact on the Company’s financial statements.
In February 2013, the FASB issued authoritative guidance requiring enhanced disclosures regarding the reporting of amounts reclassified out of accumulated other comprehensive income. The authoritative guidance requires parenthetical disclosure on the face of the financial statements or a single footnote that would provide more detail about the components of reclassification adjustments that are reclassified in their entirety to net income. If a component of a reclassification adjustment is not reclassified in its entirety to net income, a cross reference would be made to the footnote disclosure that provides a more thorough discussion of the component involved in that reclassification adjustment. This authoritative guidance will be effective as of the Company’s first quarter of fiscal 2014. The Company does not expect this guidance to have a material impact.
|
Note 2 – Fair Value Measurements
The FASB authoritative guidance regarding fair value measurements establishes a fair-value hierarchy and prioritizes the inputs used in valuation techniques that measure fair value. Those inputs are prioritized into three levels. Level 1 inputs are unadjusted quoted prices in active markets for assets or liabilities that the Company can access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly at the measurement date. Level 3 inputs are unobservable inputs for the asset or liability at the measurement date. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.
The following table sets forth, by level within the fair value hierarchy, the Company's financial assets and liabilities (as applicable) that were accounted for at fair value on a recurring basis as of June 30, 2013 and September 30, 2012. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Fair Value Measures |
|
At fair value as of June 30, 2013 |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Netting |
|
|
|
|
(Thousands of Dollars) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Adjustments(1) |
|
Total(1) |
|||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Equivalents – Money Market Mutual Funds |
|
$ |
122,024 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
122,024 |
Derivative Financial Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Futures Contracts – Gas |
|
|
2,252 |
|
|
- |
|
|
- |
|
|
(1,806) |
|
|
446 |
Over the Counter Swaps – Gas |
|
|
- |
|
|
63,255 |
|
|
- |
|
|
(5,093) |
|
|
58,162 |
Over the Counter Swaps – Oil |
|
|
- |
|
|
9,078 |
|
|
17 |
|
|
(3,260) |
|
|
5,835 |
Other Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balanced Equity Mutual Fund |
|
|
30,125 |
|
|
- |
|
|
- |
|
|
- |
|
|
30,125 |
Common Stock – Financial Services Industry |
|
|
6,331 |
|
|
- |
|
|
- |
|
|
- |
|
|
6,331 |
Other Common Stock |
|
|
295 |
|
|
- |
|
|
- |
|
|
- |
|
|
295 |
Hedging Collateral Deposits |
|
|
694 |
|
|
- |
|
|
- |
|
|
- |
|
|
694 |
Total |
|
$ |
161,721 |
|
$ |
72,333 |
|
$ |
17 |
|
$ |
(10,159) |
|
$ |
223,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Futures Contracts – Gas |
|
$ |
1,806 |
|
$ |
- |
|
$ |
- |
|
$ |
(1,806) |
|
$ |
- |
Over the Counter Swaps – Gas |
|
|
- |
|
|
2,626 |
|
|
- |
|
|
(5,093) |
|
|
(2,467) |
Over the Counter Swaps – Oil |
|
|
- |
|
|
- |
|
|
7,944 |
|
|
(3,260) |
|
|
4,684 |
Total |
|
$ |
1,806 |
|
$ |
2,626 |
|
$ |
7,944 |
|
$ |
(10,159) |
|
$ |
2,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Assets/(Liabilities) |
|
$ |
159,915 |
|
$ |
69,707 |
|
$ |
(7,927) |
|
$ |
- |
|
$ |
221,695 |
|
|
|
|
||||||||||||
Recurring Fair Value Measures |
|
At fair value as of September 30, 2012 |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Netting |
|
|
|
|
(Thousands of Dollars) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Adjustments(1) |
|
Total(1) |
|||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Equivalents – Money Market Mutual Funds |
|
$ |
46,113 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
46,113 |
Derivative Financial Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Futures Contracts – Gas |
|
|
4,348 |
|
|
- |
|
|
- |
|
|
(2,760) |
|
|
1,588 |
Over the Counter Swaps – Gas |
|
|
- |
|
|
41,751 |
|
|
- |
|
|
(15,723) |
|
|
26,028 |
Over the Counter Swaps – Oil |
|
|
- |
|
|
- |
|
|
559 |
|
|
(559) |
|
|
- |
Other Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balanced Equity Mutual Fund |
|
|
24,767 |
|
|
- |
|
|
- |
|
|
- |
|
|
24,767 |
Common Stock – Financial Services Industry |
|
|
4,758 |
|
|
- |
|
|
- |
|
|
- |
|
|
4,758 |
Other Common Stock |
|
|
272 |
|
|
- |
|
|
- |
|
|
- |
|
|
272 |
Hedging Collateral Deposits |
|
|
364 |
|
|
- |
|
|
- |
|
|
- |
|
|
364 |
Total |
|
$ |
80,622 |
|
$ |
41,751 |
|
$ |
559 |
|
$ |
(19,042) |
|
$ |
103,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Futures Contracts – Gas |
|
$ |
2,760 |
|
$ |
- |
|
$ |
- |
|
$ |
(2,760) |
|
$ |
- |
Over the Counter Swaps – Gas |
|
|
- |
|
|
19,932 |
|
|
- |
|
|
(15,723) |
|
|
4,209 |
Over the Counter Swaps – Oil |
|
|
- |
|
|
654 |
|
|
20,223 |
|
|
(559) |
|
|
20,318 |
Total |
|
$ |
2,760 |
|
$ |
20,586 |
|
$ |
20,223 |
|
$ |
(19,042) |
|
$ |
24,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Assets/(Liabilities) |
|
$ |
77,862 |
|
$ |
21,165 |
|
$ |
(19,664) |
|
$ |
- |
|
$ |
79,363 |
(1) Netting Adjustments represent the impact of legally-enforceable master netting arrangements that allow the Company to net gain and loss positions held with the same counterparties. The net asset or net liability for each counterparty is recorded as an asset or liability on the Company’s balance sheet. In the tables above, presenting asset and liability information by gas and oil positions may result in negative assets or negative liabilities in Total column when a counterparty has issued both gas and oil swaps to the Company.
Derivative Financial Instruments
At June 30, 2013 and September 30, 2012, the derivative financial instruments reported in Level 1 consist of natural gas NYMEX futures contracts used in the Company’s Energy Marketing segment. Hedging collateral deposits of $0.7 million (at June 30, 2013) and $0.4 million (at September 30, 2012), which are associated with these futures contracts, have been reported in Level 1 as well. The derivative financial instruments reported in Level 2 at June 30, 2013 and September 30, 2012 consist of natural gas price swap agreements used in the Company’s Exploration and Production and Energy Marketing segments and a portion of the crude oil price swap agreements used in the Company’s Exploration and Production segment. The fair value of the Level 2 price swap agreements is based on an internal, discounted cash flow model that uses observable inputs (i.e. LIBOR based discount rates and basis differential information, if applicable, at active natural gas and crude oil trading markets). The derivative financial instruments reported in Level 3 consist of a portion of the Company’s Exploration and Production segment’s crude oil price swap agreements at June 30, 2013 and September 30, 2012. The fair value of the Level 3 crude oil price swap agreements is based on an internal, discounted cash flow model that uses both observable (i.e. LIBOR based discount rates) and unobservable inputs (i.e. basis differential information of crude oil trading markets with low trading volume).
The significant unobservable input used in the fair value measurement of a portion of the Company’s over-the-counter crude oil swaps is the basis differential between Midway Sunset oil and NYMEX contracts. Significant changes in the assumed basis differential could result in a significant change in value of the derivative financial instruments. At June 30, 2013, it was assumed that Midway Sunset oil was valued at 109.3% of the value of oil priced at NYMEX. This is based on a historical twelve month average of Midway Sunset oil sales verses NYMEX settlements. During this twelve-month period, the price of Midway Sunset oil ranged from 102.3% to 112.4% of NYMEX. If the basis differential between Midway Sunset oil and NYMEX contracts used in the fair value measurement calculation at June 30, 2013 had been 10 percentage points lower, the fair value of the Level 3 crude oil price swap agreements would have changed from a net liability of $7.9 million to a net asset of $1.3 million. If the basis differential between Midway Sunset oil and NYMEX contracts used in the fair value measurement at June 30, 2013 had been 10 percentage points higher, the fair value measurement of the Level 3 crude oil price swap agreements liability would have been approximately $9.5 million higher. These calculated amounts are based solely on basis differential changes and do not take into account any other changes to the fair value measurement calculation.
The accounting rules for fair value measurements and disclosures require consideration of the impact of nonperformance risk (including credit risk) from a market participant perspective in the measurement of the fair value of assets and liabilities. At June 30, 2013, the Company determined that nonperformance risk would have no material impact on its financial position or results of operation. To assess nonperformance risk, the Company considered information such as any applicable collateral posted, master netting arrangements, and applied a market-based method by using the counterparty (for an asset) or the Company’s (for a liability) credit default swaps rates.
The tables listed below provide reconciliations of the beginning and ending net balances for assets and liabilities measured at fair value and classified as Level 3 for the quarters and nine months ended June 30, 2013 and 2012, respectively. For the quarters and nine months ended June 30, 2013 and June 30, 2012, no transfers in or out of Level 1 or Level 2 occurred. There were no purchases or sales of derivative financial instruments during the periods presented in the tables below. All settlements of the derivative financial instruments are reflected in the Gains/Losses Realized and Included in Earnings column of the tables below.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair Value Measurements Using Unobservable Inputs (Level 3) |
||||||||||||||||
(Thousands of Dollars) |
|
|
|
|
Total Gains/Losses |
|
|
|
|
|
|
|||||
|
|
|
|
|
(Gains)/ |
|
|
Gains/(Losses) |
|
|
|
|
|
|
||
|
|
|
|
|
Losses Realized |
|
|
Unrealized and Included |
|
Transfer |
|
|
|
|||
|
|
April 1, |
|
and Included |
|
|
in Other Comprehensive |
|
In/Out of |
|
June 30, |
|||||
|
|
2013 |
|
in Earnings |
|
|
Income (Loss) |
|
Level 3 |
|
2013 |
|||||
Derivative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments(2) |
|
$ |
(16,606) |
|
$ |
2,471 | (1) |
|
$ |
6,208 |
|
$ |
- |
|
$ |
(7,927) |
(1) Amounts are reported in Operating Revenues in the Consolidated Statement of Income for the three months ended June 30, 2013.
(2) Derivative Financial Instruments are shown on a net basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair Value Measurements Using Unobservable Inputs (Level 3) |
||||||||||||||||
(Thousands of Dollars) |
|
|
|
|
Total Gains/Losses |
|
|
|
|
|
|
|||||
|
|
|
|
|
(Gains)/ |
|
|
Gains/(Losses) |
|
|
|
|
|
|
||
|
|
|
|
|
Losses Realized |
|
|
Unrealized and Included |
|
Transfer |
|
|
|
|||
|
|
October 1, |
|
and Included |
|
|
in Other Comprehensive |
|
In/Out of |
|
June 30, |
|||||
|
|
2012 |
|
in Earnings |
|
|
Income (Loss) |
|
Level 3 |
|
2013 |
|||||
Derivative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments(2) |
|
$ |
(19,664) |
|
$ |
9,271 | (1) |
|
$ |
2,466 |
|
$ |
- |
|
$ |
(7,927) |
(1) Amounts are reported in Operating Revenues in the Consolidated Statement of Income for the nine months ended June 30, 2013.
(2) Derivative Financial Instruments are shown on a net basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair Value Measurements Using Unobservable Inputs (Level 3) |
||||||||||||||||
(Thousands of Dollars) |
|
|
|
|
Total Gains/Losses |
|
|
|
|
|
|
|||||
|
|
|
|
|
(Gains)/ |
|
|
Gains/(Losses) |
|
|
|
|
|
|
||
|
|
|
|
|
Losses Realized |
|
|
Unrealized and Included |
|
Transfer |
|
|
|
|||
|
|
April 1, |
|
and Included |
|
|
In Other Comprehensive |
|
In/Out of |
|
June 30, |
|||||
|
|
2012 |
|
in Earnings |
|
|
Income (Loss) |
|
Level 3 |
|
2012 |
|||||
Derivative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments(2) |
|
$ |
(68,754) |
|
$ |
10,392 | (1) |
|
$ |
41,814 |
|
$ |
- |
|
$ |
(16,548) |
(1) Amounts are reported in Operating Revenues in the Consolidated Statement of Income for the three months ended June 30, 2012.
(2) Derivative Financial Instruments are shown on a net basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair Value Measurements Using Unobservable Inputs (Level 3) |
||||||||||||||||
(Thousands of Dollars) |
|
|
|
|
Total Gains/Losses |
|
|
|
|
|
|
|||||
|
|
|
|
|
(Gains)/ |
|
|
Gains/(Losses) |
|
|
|
|
|
|
||
|
|
|
|
|
Losses Realized |
|
|
Unrealized and Included |
|
Transfer |
|
|
|
|||
|
|
October 1, |
|
and Included |
|
|
In Other Comprehensive |
|
In/Out of |
|
June 30, |
|||||
|
|
2011 |
|
in Earnings |
|
|
Income (Loss) |
|
Level 3 |
|
2012 |
|||||
Derivative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments(2) |
|
$ |
(5,410) |
|
$ |
36,526 | (1) |
|
$ |
(47,664) |
|
$ |
- |
|
$ |
(16,548) |
(1) Amounts are reported in Operating Revenues in the Consolidated Statement of Income for the nine months ended June 30, 2012.
(2) Derivative Financial Instruments are shown on a net basis.
|
Note 3 – Financial Instruments
Long-Term Debt. The fair market value of the Company’s debt, as presented in the table below, was determined using a discounted cash flow model, which incorporates the Company’s credit ratings and current market conditions in determining the yield, and subsequently, the fair market value of the debt. Based on these criteria, the fair market value of long-term debt, including current portion, was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013 |
|
September 30, 2012 |
||||||||
|
|
Carrying |
|
|
|
|
Carrying |
|
|
|
||
|
|
Amount |
|
Fair Value |
|
Amount |
|
Fair Value |
||||
Long-Term Debt |
|
$ |
1,649,000 |
|
$ |
1,790,040 |
|
$ |
1,399,000 |
|
$ |
1,623,847 |
The fair value amounts are not intended to reflect principal amounts that the Company will ultimately be required to pay. Carrying amounts for other financial instruments recorded on the Company’s Consolidated Balance Sheets approximate fair value. The fair value of long-term debt was calculated using observable inputs (U.S. Treasuries/LIBOR for the risk free component and company specific credit spread information – generally obtained from recent trade activity in the debt). As such, the Company considers the debt to be Level 2.
Temporary cash investments, notes payable to banks and commercial paper are stated at cost. Temporary cash investments are considered Level 1, while notes payable to banks and commercial paper are considered to be Level 2. Given the short-term nature of the notes payable to banks and commercial paper, the Company believes cost is a reasonable approximation of fair value.
Other Investments. Investments in life insurance are stated at their cash surrender values or net present value as discussed below. Investments in an equity mutual fund and the stock of an insurance company (marketable equity securities), as discussed below, are stated at fair value based on quoted market prices.
Other investments include cash surrender values of insurance contracts (net present value in the case of split-dollar collateral assignment arrangements) and marketable equity securities. The values of the insurance contracts amounted to $57.0 million at June 30, 2013 and September 30, 2012. The fair value of the equity mutual fund was $30.1 million at June 30, 2013 and $24.8 million at September 30, 2012. The gross unrealized gain on this equity mutual fund was $4.1 million at June 30, 2013 and $2.6 million at September 30, 2012. The fair value of the stock of an insurance company was $6.3 million at June 30, 2013 and $4.8 million at September 30, 2012. The gross unrealized gain on this stock was $3.9 million at June 30, 2013 and $2.3 million at September 30, 2012. The insurance contracts and marketable equity securities are primarily informal funding mechanisms for various benefit obligations the Company has to certain employees.
Derivative Financial Instruments. The Company uses or has used derivative instruments to manage commodity price risk in the Exploration and Production, Energy Marketing, and Pipeline and Storage segments. The Company enters into futures contracts and over-the-counter swap agreements for natural gas and crude oil to manage the price risk associated with forecasted sales of gas and oil. The Company also enters into futures contracts and swaps to manage the risk associated with forecasted gas purchases, forecasted gas sales, storage of gas, withdrawal of gas from storage to meet customer demand and the potential decline in the value of gas held in storage. The duration of the Company’s hedges does not typically exceed 5 years.
The Company has presented its net derivative assets and liabilities as “Fair Value of Derivative Financial Instruments” on its Consolidated Balance Sheets at June 30, 2013 and September 30, 2012. All of the derivative financial instruments reported on those line items relate to commodity contracts.
Cash flow hedges
For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (loss) and reclassified into earnings in the period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.
As of June 30, 2013, the Company’s Exploration and Production segment had the following commodity derivative contracts (swaps) outstanding to hedge forecasted sales (where the Company uses short positions (i.e. positions that pay-off in the event of commodity price decline) to mitigate the risk of decreasing revenues and earnings):
|
|
Commodity |
Units |
Natural Gas |
208.0 Bcf (all short positions) |
Crude Oil |
4,134,000 Bbls (all short positions) |
As of June 30, 2013, the Company’s Energy Marketing segment had the following commodity derivative contracts (futures contracts and swaps) outstanding to hedge forecasted sales (where the Company uses short positions to mitigate the risk associated with natural gas price decreases and its impact on decreasing revenues and earnings) and, when applicable, purchases (where the Company uses long positions (i.e. positions that pay-off in the event of commodity price increases) to mitigate the risk of increasing natural gas prices, which would lead to increased purchased gas expense and decreased earnings):
|
|
Commodity |
Units |
Natural Gas |
7.1 Bcf (5.6 Bcf short positions (mostly forecasted storage withdrawals) and 1.5 Bcf long positions (mostly forecasted storage injections)) |
As of June 30, 2013, the Company’s Exploration and Production segment had $61.6 million ($35.8 million after tax) of net hedging gains included in the accumulated other comprehensive income (loss) balance. It is expected that $40.1 million ($23.3 million after tax) of such unrealized gains will be reclassified into the Consolidated Statement of Income within the next 12 months as the expected sales of the underlying commodities occur.
As of June 30, 2013, the Company’s Energy Marketing segment had $1.7 million ($1.1 million after tax) of net hedging gains included in the accumulated other comprehensive income (loss) balance. It is expected that the full amount will be reclassified into the Consolidated Statement of Income (Loss) within the next 12 months as the expected sales of the underlying commodity occurs.
Refer to Note 1, under Accumulated Other Comprehensive Income (Loss), for the after-tax gain (loss) pertaining to derivative financial instruments for the Exploration and Production and Energy Marketing segments.
|
||||||||||||||||||||
The Effect of Derivative Financial Instruments on the Statement of Financial Performance for the |
||||||||||||||||||||
Three Months Ended June 30, 2013 and 2012 (Thousands of Dollars) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of |
|
|
Amount of |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
Derivative Gain |
|
|
Derivative Gain or |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
or (Loss) |
|
|
(Loss) |
Location of |
|
|
Derivative Gain |
||||||
|
|
|
Amount of |
Reclassified |
|
|
Reclassified from |
Derivative |
|
|
or (Loss) |
|||||||||
|
|
|
Derivative Gain or |
from |
|
|
Accumulated |
Gain or |
|
|
Recognized in |
|||||||||
|
|
|
(Loss) |
Accumulated |
|
|
Other |
(Loss) |
|
|
the |
|||||||||
|
|
|
Recognized in |
Other |
|
|
Comprehensive |
Recognized |
|
|
Consolidated |
|||||||||
|
|
|
Other |
Comprehensive |
|
|
Income (Loss) on |
in the |
|
|
Statement of |
|||||||||
|
|
|
Comprehensive |
Income (Loss) |
|
|
the Consolidated |
Consolidated |
|
|
Income |
|||||||||
|
|
|
Income (Loss) on |
on the |
|
|
Balance Sheet |
Statement of |
|
|
(Ineffective |
|||||||||
|
|
|
the Consolidated |
Consolidated |
|
|
into the |
Income |
|
|
Portion and |
|||||||||
|
|
|
Statement of |
Balance Sheet |
|
|
Consolidated |
(Ineffective |
|
|
Amount |
|||||||||
|
|
|
Comprehensive |
into the |
|
|
Statement of |
Portion and |
|
|
Excluded from |
|||||||||
|
|
|
Income (Loss) |
Consolidated |
|
|
Income (Effective |
Amount |
|
|
Effectiveness |
|||||||||
Derivatives in |
|
|
(Effective Portion) |
Statement of |
|
|
Portion) for the |
Excluded |
|
|
Testing) for the |
|||||||||
Cash Flow |
|
|
for the Three |
Income |
|
|
Three Months |
from |
|
|
Three Months |
|||||||||
Hedging |
|
|
Months Ended |
(Effective |
|
|
Ended |
Effectiveness |
|
|
Ended |
|||||||||
Relationships |
|
|
June 30, |
Portion) |
|
|
June 30, |
Testing) |
|
|
June 30, |
|||||||||
|
|
|
2013 |
|
|
2012 |
|
|
|
2013 |
|
|
2012 |
|
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration & |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
segment |
|
$ |
99,987 |
|
$ |
31,358 |
Revenue |
|
$ |
1,504 |
|
$ |
20,643 |
Revenue |
|
$ |
456 |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
Not |
|
|
|
|
|
|
segment |
|
$ |
1,879 |
|
$ |
(201) |
Purchased Gas |
|
$ |
(75) |
|
$ |
956 |
Applicable |
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pipeline & |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Storage |
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
Not |
|
|
|
|
|
|
segment(1) |
|
$ |
- |
|
$ |
(725) |
Revenue |
|
$ |
- |
|
$ |
- |
Applicable |
|
$ |
- |
|
$ |
- |
Total |
|
$ |
101,866 |
|
$ |
30,432 |
|
|
$ |
1,429 |
|
$ |
21,599 |
|
|
$ |
456 |
|
$ |
- |
|
||||||||||||||||||||
The Effect of Derivative Financial Instruments on the Statement of Financial Performance for the |
||||||||||||||||||||
Nine Months Ended June 30, 2013 and 2012 (Thousands of Dollars) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of |
|
|
Amount of |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
Derivative Gain |
|
|
Derivative Gain or |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
or (Loss) |
|
|
(Loss) |
Location of |
|
|
Derivative Gain |
||||||
|
|
|
Amount of |
Reclassified |
|
|
Reclassified from |
Derivative |
|
|
or (Loss) |
|||||||||
|
|
|
Derivative Gain or |
from |
|
|
Accumulated |
Gain or |
|
|
Recognized in |
|||||||||
|
|
|
(Loss) |
Accumulated |
|
|
Other |
(Loss) |
|
|
the |
|||||||||
|
|
|
Recognized in |
Other |
|
|
Comprehensive |
Recognized |
|
|
Consolidated |
|||||||||
|
|
|
Other |
Comprehensive |
|
|
Income (Loss) on |
in the |
|
|
Statement of |
|||||||||
|
|
|
Comprehensive |
Income (Loss) |
|
|
the Consolidated |
Consolidated |
|
|
Income |
|||||||||
|
|
|
Income (Loss) on |
on the |
|
|
Balance Sheet |
Statement of |
|
|
(Ineffective |
|||||||||
|
|
|
the Consolidated |
Consolidated |
|
|
into the |
Income |
|
|
Portion and |
|||||||||
|
|
|
Statement of |
Balance Sheet |
|
|
Consolidated |
(Ineffective |
|
|
Amount |
|||||||||
|
|
|
Comprehensive |
into the |
|
|
Statement of |
Portion and |
|
|
Excluded from |
|||||||||
|
|
|
Income (Loss) |
Consolidated |
|
|
Income (Effective |
Amount |
|
|
Effectiveness |
|||||||||
Derivatives in |
|
|
(Effective Portion) |
Statement of |
|
|
Portion) for the |
Excluded |
|
|
Testing) for the |
|||||||||
Cash Flow |
|
|
for the Nine |
Income |
|
|
Nine Months |
from |
|
|
Nine Months |
|||||||||
Hedging |
|
|
Months Ended |
(Effective |
|
|
Ended |
Effectiveness |
|
|
Ended |
|||||||||
Relationships |
|
|
June 30, |
Portion) |
|
|
June 30, |
Testing) |
|
|
June 30, |
|||||||||
|
|
|
2013 |
|
|
2012 |
|
|
|
2013 |
|
|
2012 |
|
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration & |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
Not |
|
|
|
|
|
|
segment |
|
$ |
86,237 |
|
$ |
40,897 |
Revenue |
|
$ |
25,550 |
|
$ |
38,633 |
Applicable |
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
Not |
|
|
|
|
|
|
segment |
|
$ |
3,628 |
|
$ |
6,337 |
Purchased Gas |
|
$ |
(905) |
|
$ |
10,440 |
Applicable |
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pipeline & |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Storage |
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
Not |
|
|
|
|
|
|
segment(1) |
|
$ |
- |
|
$ |
(149) |
Revenue |
|
$ |
(672) |
|
$ |
576 |
Applicable |
|
$ |
- |
|
$ |
- |
Total |
|
$ |
89,865 |
|
$ |
47,085 |
|
|
$ |
23,973 |
|
$ |
49,649 |
|
|
$ |
- |
|
$ |
- |
(1) There were no open hedging positions at June 30, 2013.
Fair value hedges
The Company’s Energy Marketing segment utilizes fair value hedges to mitigate risk associated with fixed price sales commitments, fixed price purchase commitments, and the decline in the value of certain natural gas held in storage. With respect to fixed price sales commitments, the Company enters into long positions to mitigate the risk of price increases for natural gas supplies that could occur after the Company enters into fixed price sales agreements with its customers. With respect to fixed price purchase commitments, the Company enters into short positions to mitigate the risk of price decreases that could occur after the Company locks into fixed price purchase deals with its suppliers. With respect to storage hedges, the Company enters into short positions to mitigate the risk of price decreases that could result in a lower of cost or market writedown of the value of natural gas in storage that is recorded in the Company’s financial statements. As of June 30, 2013, the Company’s Energy Marketing segment had fair value hedges covering approximately 7.8 Bcf (6.8 Bcf of fixed price sales commitments (mostly long positions) and 1.0 Bcf of fixed price purchase commitments (mostly short positions)). For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting gain or loss on the hedged item attributable to the hedged risk completely offset each other in current earnings, as shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of |
||
|
|
|
Amount of Gain |
|
Gain or (Loss) |
||
|
|
|
or (Loss) on |
|
on the Hedged |
||
|
|
|
Derivative |
|
Item |
||
|
Location of |
|
Recognized in |
|
Recognized in |
||
|
Gain or (Loss) |
|
the |
|
the |
||
|
on Derivative |
|
Consolidated |
|
Consolidated |
||
|
and Hedged |
|
Statement of |
|
Statement of |
||
|
Item |
|
Income for the |
|
Income for the |
||
|
Recognized |
|
Nine Months |
|
Nine Months |
||
|
in the |
|
Ended |
|
Ended |
||
Derivatives in Fair Value |
Consolidated |
|
June 30, |
|
June 30, |
||
Hedging Relationships – |
Statement of |
|
2013 |
|
2013 |
||
Energy Marketing segment |
Income |
|
(In Thousands) |
|
(In Thousands) |
||
|
|
|
|
|
|
|
|
Commodity Contracts – Hedge of fixed price sales |
Operating |
|
|
|
|
|
|
commitments of natural gas |
Revenues |
|
$ |
(1,720) |
|
$ |
1,720 |
|
|
|
|
|
|
|
|
Commodity Contracts – Hedge of fixed price |
Purchased |
|
|
|
|
|
|
purchase commitments of natural gas |
Gas |
|
$ |
(148) |
|
$ |
148 |
|
|
|
|
|
|
|
|
Commodity Contracts – Hedge of natural gas held in |
Purchased |
|
|
|
|
|
|
storage |
Gas |
|
$ |
10 |
|
$ |
(10) |
|
|
|
$ |
(1,858) |
|
$ |
1,858 |
The Company may be exposed to credit risk on any of the derivative financial instruments that are in a gain position. Credit risk relates to the risk of loss that the Company would incur as a result of nonperformance by counterparties pursuant to the terms of their contractual obligations. To mitigate such credit risk, management performs a credit check, and then on a quarterly basis monitors counterparty credit exposure. The majority of the Company’s counterparties are financial institutions and energy traders. The Company has over-the-counter swap positions with thirteen counterparties of which eleven are in a net gain position. On average, the Company had $5.8 million of credit exposure per counterparty in a gain position at June 30, 2013. The maximum credit exposure per counterparty in a gain position at June 30, 2013 was $12.2 million. As of June 30, 2013, the Company had not received any collateral from the counterparties. The Company’s gain position on such derivative financial instruments had not exceeded the established thresholds at which the counterparties would be required to post collateral, nor had the counterparties’ credit ratings declined to levels at which the counterparties were required to post collateral.
As of June 30, 2013, eleven of the thirteen counterparties to the Company’s outstanding derivative instrument contracts (specifically the over-the-counter swaps) had a common credit-risk related contingency feature. In the event the Company’s credit rating increases or falls below a certain threshold (applicable debt ratings), the available credit extended to the Company would either increase or decrease. A decline in the Company’s credit rating, in and of itself, would not cause the Company to be required to increase the level of its hedging collateral deposits (in the form of cash deposits, letters of credit or treasury debt instruments). If the Company’s outstanding derivative instrument contracts were in a liability position (or if the current liability were larger) and/or the Company’s credit rating declined, then additional hedging collateral deposits may be required. At June 30, 2013, the fair market value of the derivative financial instrument assets with a credit-risk related contingency feature was $48.8 million according to the Company’s internal model (discussed in Note 2 — Fair Value Measurements). At June 30, 2013, the fair market value of the derivative financial instrument liabilities with a credit-risk related contingency feature was $2.2 million according to the Company’s internal model (discussed in Note 2 — Fair Value Measurements). For its over-the-counter swap agreements, the Company was not required to post any hedging collateral deposits at June 30, 2013.
For its exchange traded futures contracts, which are in an asset position, the Company was required to post $0.7 million in hedging collateral deposits as of June 30, 2013. As these are exchange traded futures contracts, there are no specific credit-risk related contingency features. The Company posts hedging collateral based on open positions and margin requirements it has with its counterparties.
The Company’s requirement to post hedging collateral deposits is based on the fair value determined by the Company’s counterparties, which may differ from the Company’s assessment of fair value. Hedging collateral deposits may also include closed derivative positions in which the broker has not cleared the cash from the account to offset the derivative liability. The Company records liabilities related to closed derivative positions in Other Accruals and Current Liabilities on the Consolidated Balance Sheet. These liabilities are relieved when the broker clears the cash from the hedging collateral deposit account. This is discussed in Note 1 under Hedging Collateral Deposits.
|
Note 4 - Income Taxes
The components of federal and state income taxes included in the Consolidated Statements of Income are as follows (in thousands):
|
|
|
|
|||
|
|
Nine Months Ended |
||||
|
|
June 30, |
||||
|
|
2013 |
|
2012 |
||
Current Income Taxes |
|
|
|
|
|
|
Federal |
|
$ |
(518) |
|
$ |
- |
State |
|
|
3,934 |
|
|
6,878 |
|
|
|
|
|
|
|
Deferred Income Taxes |
|
|
|
|
|
|
Federal |
|
|
105,362 |
|
|
85,910 |
State |
|
|
35,645 |
|
|
19,038 |
|
|
|
144,423 |
|
|
111,826 |
Deferred Investment Tax Credit |
|
|
(320) |
|
|
(436) |
|
|
|
|
|
|
|
Total Income Taxes |
|
$ |
144,103 |
|
$ |
111,390 |
|
|
|
|
|
|
|
Presented as Follows: |
|
|
|
|
|
|
Other Income |
|
|
(320) |
|
|
(436) |
Income Tax Expense |
|
|
144,423 |
|
|
111,826 |
|
|
|
|
|
|
|
Total Income Taxes |
|
$ |
144,103 |
|
$ |
111,390 |
Total income taxes as reported differ from the amounts that were computed by applying the federal income tax rate to income before income taxes. The following is a reconciliation of this difference (in thousands):
|
|
|
|
|
|
|
|
|
Nine Months Ended |
||||
|
|
June 30, |
||||
|
|
2013 |
|
2012 |
||
|
|
|
|
|
|
|
U.S. Income Before Income Taxes |
|
$ |
356,262 |
|
$ |
282,665 |
|
|
|
|
|
|
|
Income Tax Expense, Computed at U.S. Federal |
|
|
|
|
|
|
Statutory Rate of 35% |
|
$ |
124,692 |
|
$ |
98,933 |
|
|
|
|
|
|
|
Increase (Reduction) in Taxes Resulting from: |
|
|
|
|
|
|
State Income Taxes |
|
|
25,726 |
|
|
16,845 |
Miscellaneous |
|
|
(6,315) |
|
|
(4,388) |
|
|
|
|
|
|
|
Total Income Taxes |
|
$ |
144,103 |
|
$ |
111,390 |
Significant components of the Company’s deferred tax liabilities and assets were as follows (in thousands):
|
|
|
|
|
|
|
|
|
At June 30, 2013 |
|
At September 30, 2012 |
||
Deferred Tax Liabilities: |
|
|
|
|
|
|
Property, Plant and Equipment |
|
$ |
1,465,567 |
|
$ |
1,333,574 |
Pension and Other Post-Retirement Benefit |
|
|
|
|
|
|
Costs |
|
|
244,453 |
|
|
236,431 |
Other |
|
|
64,365 |
|
|
43,294 |
Total Deferred Tax Liabilities |
|
|
1,774,385 |
|
|
1,613,299 |
|
|
|
|
|
|
|
Deferred Tax Assets: |
|
|
|
|
|
|
Pension and Other Post-Retirement Benefit |
|
|
|
|
|
|
Costs |
|
|
(276,056) |
|
|
(276,501) |
Tax Loss Carryforwards |
|
|
(194,138) |
|
|
(198,744) |
Other |
|
|
(81,612) |
|
|
(83,052) |
Total Deferred Tax Assets |
|
|
(551,806) |
|
|
(558,297) |
Total Net Deferred Income Taxes |
|
$ |
1,222,579 |
|
$ |
1,055,002 |
|
|
|
|
|
|
|
Presented as Follows: |
|
|
|
|
|
|
Net Deferred Tax Liability/(Asset) – Current |
|
|
(15,148) |
|
|
(10,755) |
Net Deferred Tax Liability – Non-Current |
|
|
1,237,727 |
|
|
1,065,757 |
Total Net Deferred Income Taxes |
|
$ |
1,222,579 |
|
$ |
1,055,002 |
During the quarter ended June 30, 2013, there was no change in the balance of unrecognized tax benefits. For nine months ended June 30, 2013, the balance of unrecognized tax benefits decreased by $9.3 million, primarily as a result of favorable settlements with taxing authorities (as discussed below), of which $2.1 million reduced the effective tax rate during the second quarter. Approximately $2.0 million of the remaining balance of unrecognized tax benefits would favorably impact the effective tax rate, if recognized. It is reasonably possible that a reduction of $2.0 million of the balance of uncertain tax positions may occur as a result of potential settlements with taxing authorities within the next twelve months.
As a result of certain realization requirements of the authoritative guidance on stock-based compensation, the table of deferred tax liabilities and assets shown above does not include certain deferred tax assets that arose directly from excess tax deductions related to stock-based compensation. Tax benefits of $4.3 million and $0.6 million relating to the excess stock-based compensation deductions were recorded in Paid in Capital during the nine months ended June 30, 2013 and the year ended September 30, 2012, respectively. Cumulative tax benefits of $33.6 million and $32.7 million remain as of June 30, 2013 and September 30, 2012, respectively, and will be recorded in Paid in Capital in future years when such tax benefits are realized.
Regulatory liabilities representing the reduction of previously recorded deferred income taxes associated with rate-regulated activities that are expected to be refundable to customers amounted to $65.1 million and $66.4 million at June 30, 2013 and September 30, 2012, respectively. Also, regulatory assets representing future amounts collectible from customers, corresponding to additional deferred income taxes not previously recorded because of prior ratemaking practices, amounted to $152.1 million and $150.9 million at June 30, 2013 and September 30, 2012, respectively.
The Internal Revenue Service (IRS) is currently conducting examinations of the Company for fiscal 2012 and fiscal 2013 in accordance with the Compliance Assurance Process (CAP). The CAP audit employs a real time review of the Company’s books and tax records by the IRS that is intended to permit issue resolution prior to the filing of the tax return. While the federal statute of limitations remains open for fiscal 2009 and later years, IRS examinations for fiscal 2008 and prior years have been completed and the Company believes such years are effectively settled. During fiscal 2009, consent was received from the IRS National Office approving the Company’s application to change its tax method of accounting for certain capitalized costs relating to its utility property. During the quarter ended March 31, 2013, local IRS examiners issued no-change reports for fiscal 2009, fiscal 2010 and fiscal 2011, but have reserved the right to re-examine these years, pending the anticipated issuance of IRS guidance addressing the issue for natural gas utilities. In addition, the Company negotiated a settlement of the fiscal 2011 Research Tax Credit.
The Company is also subject to various routine state income tax examinations. The Company’s principal subsidiaries operate mainly in four states which have statutes of limitations that generally expire between three to four years from the date of filing of the income tax return.
On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012 (the Relief Act). The Relief Act does not have a material effect on the Company’s financial statements.
|
Note 5 - Capitalization
Common Stock. During the nine months ended June 30, 2013, the Company issued 457,091 original issue shares of common stock as a result of stock option and SARs exercises. In addition, the Company issued 97,554 original issue shares of common stock for the Direct Stock Purchase and Dividend Reinvestment Plan. The Company also issued 12,380 original issue shares of common stock to the non-employee directors of the Company who receive compensation under the Company’s 2009 Non-Employee Director Equity Compensation Plan, as partial consideration for the directors’ services during the nine months ended June 30, 2013. Holders of stock options, SARs or restricted stock will often tender shares of common stock to the Company for payment of option exercise prices and/or applicable withholding taxes. During the nine months ended June 30, 2013, 309,307 shares of common stock were tendered to the Company for such purposes. The Company considers all shares tendered as cancelled shares restored to the status of authorized but unissued shares, in accordance with New Jersey law.
Current Portion of Long-Term Debt. Current Portion of Long-Term Debt at September 30, 2012 consisted of $250 million of 5.25% notes that matured in March 2013. None of the Company’s long-term debt at June 30, 2013 will mature within the following twelve-month period.
Long-Term Debt. On February 15, 2013, the Company issued $500.0 million of 3.75% notes due March 1, 2023. After deducting underwriting discounts and commissions, the net proceeds to the Company amounted to $495.4 million. The holders of the notes may require the Company to repurchase their notes at a price equal to 101% of the principal amount in the event of a change in control and a ratings downgrade to a rating below investment grade. The proceeds of this debt issuance were used to refund the $250 million of 5.25% notes that matured in March 2013, as well as for general corporate purposes, including the reduction of short-term debt.
|
Note 6 - Commitments and Contingencies
Environmental Matters. The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. The Company has established procedures for the ongoing evaluation of its operations to identify potential environmental exposures and to comply with regulatory policies and procedures. It is the Company’s policy to accrue estimated environmental clean-up costs (investigation and remediation) when such amounts can reasonably be estimated and it is probable that the Company will be required to incur such costs.
The Company has agreed with the NYDEC to remediate a former manufactured gas plant site located in New York. In February 2009, the Company received approval from the NYDEC of a Remedial Design Work Plan (RDWP) for this site. In October 2010, the Company submitted a RDWP addendum to conduct additional Preliminary Design Investigation field activities necessary to design a successful remediation. As a result of this work, the Company submitted to the NYDEC a proposal to amend the NYDEC’s Record of Decision remedy for the site. In April 2013, the NYDEC approved the Company’s proposed amendment. Final remedial design work for the site has begun. An estimated minimum liability for remediation of this site of $13.9 million has been recorded.
At June 30, 2013, the Company has estimated its remaining clean-up costs related to former manufactured gas plant sites and third party waste disposal sites (including the former manufactured gas plant site discussed above) will be approximately $16.8 million. This estimated liability, which includes the $13.9 million discussed above, has been recorded in Other Deferred Credits on the Consolidated Balance Sheet at June 30, 2013. The Company expects to recover its environmental clean-up costs through rate recovery over a period of approximately 11 years.
The Company is currently not aware of any material additional exposure to environmental liabilities. However, changes in environmental laws and regulations, new information or other factors could have an adverse financial impact on the Company.
Other. The Company is involved in other litigation and regulatory matters arising in the normal course of business. These other matters may include, for example, negligence claims and tax, regulatory or other governmental audits, inspections, investigations and other proceedings. These matters may involve state and federal taxes, safety, compliance with regulations, rate base, cost of service and purchased gas cost issues, among other things. While these other matters arising in the normal course of business could have a material effect on earnings and cash flows in the period in which they are resolved, an estimate of the possible loss or range of loss, if any, cannot be made at this time.
|
Note 7 – Business Segment Information
The Company reports financial results for four segments: Utility, Pipeline and Storage, Exploration and Production, and Energy Marketing. The division of the Company’s operations into reportable segments is based upon a combination of factors including differences in products and services, regulatory environment and geographic factors.
The data presented in the tables below reflect financial information for the segments and reconciliations to consolidated amounts. As stated in the 2012 Form 10-K, the Company evaluates segment performance based on income before discontinued operations, extraordinary items and cumulative effects of changes in accounting (when applicable). When these items are not applicable, the Company evaluates performance based on net income. There have not been any changes in the basis of segmentation nor in the basis of measuring segment profit or loss from those used in the Company’s 2012 Form 10-K. As for segment assets, there have been significant changes from the segment assets disclosed in the 2012 Form 10-K. A listing of segment assets at June 30, 2013 is shown in the tables below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Quarter Ended June 30, 2013 (Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
Pipeline |
|
Exploration |
|
|
|
|
Total |
|
|
|
|
Corporate and |
|
|
|
||||
|
|
|
|
|
and |
|
and |
|
Energy |
|
Reportable |
|
All |
|
Intersegment |
|
Total |
|||||||
|
|
Utility |
|
Storage |
|
Production |
|
Marketing |
|
Segments |
|
Other |
|
Eliminations |
|
Consolidated |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from External |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers |
|
$ |
141,257 |
|
$ |
43,055 |
|
$ |
195,213 |
|
$ |
59,128 |
|
$ |
438,653 |
|
$ |
1,121 |
|
$ |
234 |
|
$ |
440,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment Revenues |
|
$ |
3,305 |
|
$ |
21,708 |
|
$ |
- |
|
$ |
446 |
|
$ |
25,459 |
|
$ |
10,244 |
|
$ |
(35,703) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
7,630 |
|
$ |
14,075 |
|
$ |
31,734 |
|
$ |
963 |
|
$ |
54,402 |
|
$ |
4,499 |
|
$ |
(406) |
|
$ |
58,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Nine Months Ended June 30, 2013 (Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
Pipeline |
|
Exploration |
|
|
|
|
Total |
|
|
|
|
Corporate and |
|
|
|
||||
|
|
|
|
|
and |
|
and |
|
Energy |
|
Reportable |
|
All |
|
Intersegment |
|
Total |
|||||||
|
|
Utility |
|
Storage |
|
Production |
|
Marketing |
|
Segments |
|
Other |
|
Eliminations |
|
Consolidated |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from External |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers |
|
$ |
653,211 |
|
$ |
132,897 |
|
$ |
518,742 |
|
$ |
182,282 |
|
$ |
1,487,132 |
|
$ |
2,898 |
|
$ |
658 |
|
$ |
1,490,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment Revenues |
|
$ |
14,012 |
|
$ |
68,216 |
|
$ |
- |
|
$ |
1,080 |
|
$ |
83,308 |
|
$ |
23,622 |
|
$ |
(106,930) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
65,024 |
|
$ |
47,803 |
|
$ |
86,125 |
|
$ |
5,741 |
|
$ |
204,693 |
|
$ |
9,449 |
|
$ |
(1,983) |
|
$ |
212,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2013 (Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
Pipeline |
|
Exploration |
|
|
|
|
Total |
|
|
|
|
Corporate and |
|
|
|
||||
|
|
|
|
|
and |
|
and |
|
Energy |
|
Reportable |
|
All |
|
Intersegment |
|
Total |
|||||||
|
|
Utility |
|
Storage |
|
Production |
|
Marketing |
|
Segments |
|
Other |
|
Eliminations |
|
Consolidated |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Assets |
|
$ |
2,074,329 |
|
$ |
1,281,445 |
|
$ |
2,614,406 |
|
$ |
69,106 |
|
$ |
6,039,286 |
|
$ |
273,048 |
|
$ |
31,606 |
|
$ |
6,343,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Quarter Ended June 30, 2012 (Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
Pipeline |
|
Exploration |
|
|
|
|
Total |
|
|
|
|
Corporate and |
|
|
|
||||
|
|
|
|
|
and |
|
and |
|
Energy |
|
Reportable |
|
All |
|
Intersegment |
|
Total |
|||||||
|
|
Utility |
|
Storage |
|
Production |
|
Marketing |
|
Segments |
|
Other |
|
Eliminations |
|
Consolidated |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from External |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers |
|
$ |
117,240 |
|
$ |
36,631 |
|
$ |
138,549 |
|
$ |
35,377 |
|
$ |
327,797 |
|
$ |
824 |
|
$ |
240 |
|
$ |
328,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment Revenues |
|
$ |
2,703 |
|
$ |
22,076 |
|
$ |
- |
|
$ |
579 |
|
$ |
25,358 |
|
$ |
4,307 |
|
$ |
(29,665) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
5,096 |
|
$ |
12,627 |
|
$ |
21,915 |
|
$ |
923 |
|
$ |
40,561 |
|
$ |
2,815 |
|
$ |
(192) |
|
$ |
43,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Nine Months Ended June 30, 2012 (Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
Pipeline |
|
Exploration |
|
|
|
|
Total |
|
|
|
|
Corporate and |
|
|
|
||||
|
|
|
|
|
and |
|
and |
|
Energy |
|
Reportable |
|
All |
|
Intersegment |
|
Total |
|||||||
|
|
Utility |
|
Storage |
|
Production |
|
Marketing |
|
Segments |
|
Other |
|
Eliminations |
|
Consolidated |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from External |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers |
|
$ |
622,836 |
|
$ |
113,976 |
|
$ |
411,449 |
|
$ |
161,822 |
|
$ |
1,310,083 |
|
$ |
2,784 |
|
$ |
726 |
|
$ |
1,313,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment Revenues |
|
$ |
12,643 |
|
$ |
64,434 |
|
$ |
- |
|
$ |
1,135 |
|
$ |
78,212 |
|
$ |
10,828 |
|
$ |
(89,040) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
52,725 |
|
$ |
35,428 |
|
$ |
74,422 |
|
$ |
4,662 |
|
$ |
167,237 |
|
$ |
5,557 |
|
$ |
(1,519) |
|
$ |
171,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 8 – Retirement Plan and Other Post-Retirement Benefits
Components of Net Periodic Benefit Cost (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-Retirement |
||||
|
|
Retirement Plan |
|
Benefits |
||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Service Cost |
|
$ |
3,961 |
|
$ |
3,551 |
|
$ |
1,176 |
|
$ |
1,004 |
Interest Cost |
|
|
9,124 |
|
|
10,381 |
|
|
4,803 |
|
|
5,329 |
Expected Return on Plan Assets |
|
|
(14,336) |
|
|
(14,925) |
|
|
(8,218) |
|
|
(7,243) |
Amortization of Prior Service Cost |
|
|
60 |
|
|
67 |
|
|
(534) |
|
|
(534) |
Amortization of Transition Amount |
|
|
- |
|
|
- |
|
|
2 |
|
|
3 |
Amortization of Losses |
|
|
13,194 |
|
|
9,904 |
|
|
5,223 |
|
|
6,014 |
Net Amortization and Deferral for |
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory Purposes (Including |
|
|
|
|
|
|
|
|
|
|
|
|
Volumetric Adjustments) (1) |
|
|
(3,854) |
|
|
(2,252) |
|
|
2,393 |
|
|
718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Benefit Cost |
|
$ |
8,149 |
|
$ |
6,726 |
|
$ |
4,845 |
|
$ |
5,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-Retirement |
||||
|
|
Retirement Plan |
|
Benefits |
||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Service Cost |
|
$ |
11,884 |
|
$ |
10,652 |
|
$ |
3,529 |
|
$ |
3,012 |
Interest Cost |
|
|
27,373 |
|
|
31,144 |
|
|
14,409 |
|
|
15,986 |
Expected Return on Plan Assets |
|
|
(43,009) |
|
|
(44,776) |
|
|
(24,654) |
|
|
(21,728) |
Amortization of Prior Service Cost |
|
|
179 |
|
|
202 |
|
|
(1,604) |
|
|
(1,604) |
Amortization of Transition Amount |
|
|
- |
|
|
- |
|
|
6 |
|
|
8 |
Amortization of Losses |
|
|
39,582 |
|
|
29,711 |
|
|
15,669 |
|
|
18,043 |
Net Amortization and Deferral for |
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory Purposes (Including |
|
|
|
|
|
|
|
|
|
|
|
|
Volumetric Adjustments) (1) |
|
|
(5,813) |
|
|
(1,896) |
|
|
11,555 |
|
|
7,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Benefit Cost |
|
$ |
30,196 |
|
$ |
25,037 |
|
$ |
18,910 |
|
$ |
21,710 |
(1) The Company’s policy is to record retirement plan and other post-retirement benefit costs in the Utility segment on a volumetric basis to reflect the fact that the Utility segment experiences higher throughput of natural gas in the winter months and lower throughput of natural gas in the summer months.
Employer Contributions. During the nine months ended June 30, 2013, the Company contributed $42.0 million to its tax-qualified, noncontributory defined-benefit retirement plan (Retirement Plan) and $15.8 million to its VEBA trusts and 401(h) accounts for its other post-retirement benefits. In the remainder of 2013, the Company expects to contribute approximately $10.0 million to the Retirement Plan. Changes in the discount rate, other actuarial assumptions, and asset performance could ultimately cause the Company to fund larger amounts to the Retirement Plan in fiscal 2013 in order to be in compliance with the Pension Protection Act of 2006 (as impacted by the Moving Ahead for Progress in the 21st Century Act). In July 2012, the Surface Transportation Extension Act, which is also referred to as the Moving Ahead for Progress in the 21st Century Act (the Act), was passed by Congress and signed by the President. The Act included pension funding stabilization provisions. The Company is continually evaluating its future contributions in light of the provisions of the Act. In the remainder of 2013, the Company expects to contribute approximately $2.2 million to its VEBA trusts and 401(h) accounts.
|
Note 9 – Regulatory Matters
On March 27, 2013, Distribution Corporation filed a plan (“Plan”) with the NYPSC proposing to adopt an “earnings stabilization and sharing mechanism” that would allocate earnings above a rate of return on equity of 9.96% evenly between shareholders and an accounting reserve (“Reserve”). The Reserve would be utilized to stabilize Distribution Corporation’s earnings and to fund customer benefit programs. The Plan also proposed to increase capital spending and to aid new customer system expansion efforts. Discussions were held with NYPSC staff and others with respect to the Plan.
In a related development, on April 19, 2013, the NYPSC issued an order directing Distribution Corporation to either agree to make its rates and charges temporary subject to refund effective June 1, 2013, or show cause why its gas rates and charges should not be set on a temporary basis subject to refund (“Order”). The Order recognized Distribution Corporation’s Plan and determined that the Plan did not propose to adjust “existing rates . . . enough to compensate for the imbalance between ratepayer and shareholder interests that has developed since . . . 2007 . . .” Pursuant to the Order, the NYPSC commenced a “temporary rate” proceeding and, following hearings, on June 14, 2013, the NYPSC issued an order making Distribution Corporation’s rates and charges temporary and subject to refund pending the determination of permanent gas rates through further rate proceedings. Exploratory discussions for settlement of Distribution Corporation’s rates and charges were commenced and are expected to continue as the formal case to establish permanent rates proceeds along a parallel path.
In addition to authorizing a “temporary rate” proceeding, the Order also suggested an examination of the applicability of a provision of New York public utility law, PSL §66(20), that provides the NYPSC with stated authority to direct a refund of revenues received by a utility “in excess of its authorized rate of return for a period of twelve months.” On May 17, 2013, Distribution Corporation commenced an action in New York Supreme Court, Erie County, seeking the court’s declaration that PSL §66(20) is unconstitutional and enjoining the NYPSC from issuing any orders or rules under PSL §66(20) or making any attempts to otherwise enforce the statute. On June 20, 2013 and as anticipated, the NYPSC moved to dismiss Distribution Corporation’s complaint. Distribution Corporation is unable to predict the outcome of the proceedings at this time.
|
Principles of Consolidation. The Company consolidates all entities in which it has a controlling financial interest. All significant intercompany balances and transactions are eliminated.
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications and Revisions. Certain prior year amounts have been reclassified to conform with current year presentation.
Revisions were made on the Consolidated Statement of Cash Flows for the nine months ended June 30, 2012 to reflect non-cash investing activities embedded in Accounts Payable on the Consolidated Balance Sheets at June 30, 2012 and September 30, 2011. These revisions increased the operating cash flows related to the change in Accounts Payable for the nine months ended June 30, 2012 by $32.8 million and decreased investing cash flows related to Capital Expenditures by the same amounts.
In the subsequent period, revisions will be made on the Consolidated Statement of Cash Flows for the fiscal years ended September 30, 2012 and September 30, 2011 to reflect non-cash investing activities embedded in Accounts Payable on the Consolidated Balance Sheets for the respective periods. The revisions for the fiscal years ended September 30, 2012 and September 30, 2011 will decrease operating cash flows by $1.8 million and $6.6 million, respectively, and increase investing cash flows related to Capital Expenditures by the same amounts. The revisions in the Consolidated Statement of Cash Flows noted above represent errors that are not deemed material, individually or in the aggregate, to the prior period consolidated financial statements.
Earnings for Interim Periods. The Company, in its opinion, has included all adjustments (which consist of only normally recurring adjustments, unless otherwise disclosed in this Form 10-Q) that are necessary for a fair statement of the results of operations for the reported periods. The consolidated financial statements and notes thereto, included herein, should be read in conjunction with the financial statements and notes for the years ended September 30, 2012, 2011 and 2010 that are included in the Company's 2012 Form 10-K. The consolidated financial statements for the year ended September 30, 2013 will be audited by the Company's independent registered public accounting firm after the end of the fiscal year.
The earnings for the nine months ended June 30, 2013 should not be taken as a prediction of earnings for the entire fiscal year ending September 30, 2013. Most of the business of the Utility and Energy Marketing segments is seasonal in nature and is influenced by weather conditions. Due to the seasonal nature of the heating business in the Utility and Energy Marketing segments, earnings during the winter months normally represent a substantial part of the earnings that those segments are expected to achieve for the entire fiscal year. The Company’s business segments are discussed more fully in Note 7 – Business Segment Information.
Consolidated Statement of Cash Flows. For purposes of the Consolidated Statement of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity of generally three months or less to be cash equivalents.
The Company has accounts payable and accrued liabilities recorded on its Consolidated Balance Sheets that are related to capital expenditures. These amounts represent non-cash investing activities at the balance sheet date. Accordingly, they are excluded from the Consolidated Statement of Cash Flows when they are recorded as liabilities and included in the Consolidated Statement of Cash Flows when they are paid in the subsequent period. The following table summarizes the Company’s non-cash capital expenditures recorded as Accounts Payable and Other Accruals and Current Liabilities on the Consolidated Balance Sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, |
|
|
At September 30, |
||||||||||
|
|
|
2013 |
|
|
2012 |
|
|
2012 |
|
|
2011 |
||||
|
|
|
|
(Thousands) |
||||||||||||
Non-cash Capital Expenditures |
|
|
$ |
58,632 |
|
|
$ |
118,624 |
|
|
$ |
67,503 |
|
|
$ |
125,115 |
Hedging Collateral Deposits. This is an account title for cash held in margin accounts funded by the Company to serve as collateral for hedging positions. The Company had hedging collateral deposits of $0.7 million and $0.4 million related to its exchange-traded futures contracts at June 30, 2013 and September 30, 2012, respectively. In accordance with its accounting policy, the Company does not offset hedging collateral deposits paid or received against related derivative financial instruments liability or asset balances.
Gas Stored Underground - Current. In the Utility segment, gas stored underground – current is carried at lower of cost or market, on a LIFO method. Gas stored underground – current normally declines during the first and second quarters of the year and is replenished during the third and fourth quarters. In the Utility segment, the current cost of replacing gas withdrawn from storage is recorded in the Consolidated Statements of Income and a reserve for gas replacement is recorded in the Consolidated Balance Sheets under the caption “Other Accruals and Current Liabilities.” Such reserve, which amounted to $22.0 million at June 30, 2013, is reduced to zero by September 30 of each year as the inventory is replenished.
Property, Plant and Equipment. In the Company’s Exploration and Production segment, oil and gas property acquisition, exploration and development costs are capitalized under the full cost method of accounting. Under this methodology, all costs associated with property acquisition, exploration and development activities are capitalized, including internal costs directly identified with acquisition, exploration and development activities. The internal costs that are capitalized do not include any costs related to production, general corporate overhead, or similar activities. The Company does not recognize any gain or loss on the sale or other disposition of oil and gas properties unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves of oil and gas attributable to a cost center.
Capitalized costs include costs related to unproved properties, which are excluded from amortization until proved reserves are found or it is determined that the unproved properties are impaired. Such costs amounted to $143.8 million and $146.1 million at June 30, 2013 and September 30, 2012, respectively. All costs related to unproved properties are reviewed quarterly to determine if impairment has occurred. The amount of any impairment is transferred to the pool of capitalized costs being amortized.
Capitalized costs are subject to the SEC full cost ceiling test. The ceiling test, which is performed each quarter, determines a limit, or ceiling, on the amount of property acquisition, exploration and development costs that can be capitalized. The ceiling under this test represents (a) the present value of estimated future net cash flows, excluding future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, using a discount factor of 10%, which is computed by applying prices of oil and gas (as adjusted for hedging) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet, less estimated future expenditures, plus (b) the cost of unevaluated properties not being depleted, less (c) income tax effects related to the differences between the book and tax basis of the properties. The natural gas and oil prices used to calculate the full cost ceiling are based on an unweighted arithmetic average of the first day of the month oil and gas prices for each month within the twelve-month period prior to the end of the reporting period. If capitalized costs, net of accumulated depreciation, depletion and amortization and related deferred income taxes, exceed the ceiling at the end of any quarter, a permanent impairment is required to be charged to earnings in that quarter. At June 30, 2013, the ceiling exceeded the book value of the oil and gas properties by approximately $199.1 million.
Accumulated Other Comprehensive Loss. The components of Accumulated Other Comprehensive Loss, net of related tax effect, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
At June 30, 2013 |
|
At September 30, 2012 |
||
Funded Status of the Pension and Other Post-Retirement |
|
|
|
|
|
|
Benefit Plans |
|
$ |
(100,561) |
|
$ |
(100,561) |
Net Unrealized Gain (Loss) on Derivative Financial Instruments |
|
|
36,865 |
|
|
(1,602) |
Net Unrealized Gain on Securities Available for Sale |
|
|
5,087 |
|
|
3,143 |
Accumulated Other Comprehensive Loss |
|
$ |
(58,609) |
|
$ |
(99,020) |
Other Current Assets. The components of the Company’s Other Current Assets are as follows (in thousands):
|
|
|
|
|
|
|
|
|
At June 30, 2013 |
|
At September 30, 2012 |
||
|
|
|
|
|
|
|
Prepayments |
|
$ |
10,472 |
|
$ |
8,316 |
Prepaid Property and Other Taxes |
|
|
10,461 |
|
|
14,455 |
Federal Income Taxes Receivable |
|
|
- |
|
|
268 |
State Income Taxes Receivable |
|
|
1,058 |
|
|
2,065 |
Fair Values of Firm Commitments |
|
|
1,384 |
|
|
1,291 |
Regulatory Assets |
|
|
22,830 |
|
|
29,726 |
|
|
$ |
46,205 |
|
$ |
56,121 |
Other Accruals and Current Liabilities. The components of the Company’s Other Accruals and Current Liabilities are as follows (in thousands):
|
|
|
|
|
|
|
|
|
At June 30, 2013 |
|
At September 30, 2012 |
||
|
|
|
|
|
|
|
Accrued Capital Expenditures |
|
$ |
49,348 |
|
$ |
36,460 |
Regulatory Liabilities |
|
|
13,318 |
|
|
18,289 |
Reserve for Gas Replacement |
|
|
22,032 |
|
|
- |
Other |
|
|
25,235 |
|
|
24,350 |
|
|
$ |
109,933 |
|
$ |
79,099 |
Earnings Per Common Share. Basic earnings per common share is computed by dividing net income available for common stock by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For purposes of determining earnings per common share, the only potentially dilutive securities the Company has outstanding are stock options, SARs and restricted stock units. The diluted weighted average shares outstanding shown on the Consolidated Statements of Income reflects the potential dilution as a result of these securities as determined using the Treasury Stock Method. Stock options, SARs and restricted stock units that are antidilutive are excluded from the calculation of diluted earnings per common share. There were 180,552 and 196,121 securities excluded as being antidilutive for the quarter and nine months ended June 30, 2013, respectively. There were 976,870 and 833,170 securities excluded as being antidilutive for the quarter and nine months ended June 30, 2012, respectively.
Stock-Based Compensation. During the nine months ended June 30, 2013, the Company granted 412,970 SARs having a weighted average exercise price of $53.05 per share. The weighted average grant date fair value of these SARs was $10.66 per share. These SARs may be settled in cash, in shares of common stock of the Company, or in a combination of cash and shares of common stock of the Company, as determined by the Company. These SARs are considered equity awards under the current authoritative guidance for stock-based compensation. The accounting for those SARs is the same as the accounting for stock options. The SARs granted during the nine months ended June 30, 2013 vest and become exercisable annually in one-third increments. The weighted average grant date fair value of these SARs granted during the nine months ended June 30, 2013 was estimated on the date of grant using the same accounting treatment that is applied for stock options. There were no stock options granted during the nine months ended June 30, 2013.
The Company granted 255,604 performance based restricted stock units during the nine months ended June 30, 2013. The weighted average fair value of such performance based restricted stock units was $49.51 per share for the nine months ended June 30, 2013. The performance based restricted stock units granted during the nine months ended June 30, 2013 must meet a performance condition over the performance cycle of October 1, 2012 to September 30, 2015. The performance condition over the performance cycle, generally stated, is the Company’s total return on capital as compared to the same metric for companies in the Natural Gas Distribution and Integrated Natural Gas Companies group as calculated and reported in the Monthly Utility Reports of AUS, Inc., a leading industry consultant. The number of performance based restricted stock units that will vest will depend upon the Company’s performance relative to the report group and not upon the absolute level of return achieved by the Company. The Company also granted 39,700 non-performance based restricted stock units during the nine months ended June 30, 2013. The weighted average fair value of such non-performance based restricted stock units was $50.13 per share for the nine months ended June 30, 2013.
Restricted stock units, both performance based and non-performance based, represent the right to receive shares of common stock of the Company (or the equivalent value in cash or a combination of cash and shares of common stock of the Company, as determined by the Company) at the end of a specified time period. The performance based and non-performance based restricted stock units do not entitle the participant to receive dividends during the vesting period. The accounting for performance based and non-performance based restricted stock units is the same as the accounting for restricted share awards, except that the fair value at the date of grant of the restricted stock units must be reduced by the present value of forgone dividends over the vesting term of the award. There were no restricted share awards granted during the nine months ended June 30, 2013.
New Authoritative Accounting and Financial Reporting Guidance. In December 2011, the FASB issued authoritative guidance requiring enhanced disclosures regarding offsetting assets and liabilities. Companies are required to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. This authoritative guidance will be effective as of the Company’s first quarter of fiscal 2014 and is not expected to have a significant impact on the Company’s financial statements.
In February 2013, the FASB issued authoritative guidance requiring enhanced disclosures regarding the reporting of amounts reclassified out of accumulated other comprehensive income. The authoritative guidance requires parenthetical disclosure on the face of the financial statements or a single footnote that would provide more detail about the components of reclassification adjustments that are reclassified in their entirety to net income. If a component of a reclassification adjustment is not reclassified in its entirety to net income, a cross reference would be made to the footnote disclosure that provides a more thorough discussion of the component involved in that reclassification adjustment. This authoritative guidance will be effective as of the Company’s first quarter of fiscal 2014. The Company does not expect this guidance to have a material impact.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, |
|
|
At September 30, |
||||||||||
|
|
|
2013 |
|
|
2012 |
|
|
2012 |
|
|
2011 |
||||
|
|
|
|
(Thousands) |
||||||||||||
Non-cash Capital Expenditures |
|
|
$ |
58,632 |
|
|
$ |
118,624 |
|
|
$ |
67,503 |
|
|
$ |
125,115 |
|
|
|
|
|
|
|
|
|
At June 30, 2013 |
|
At September 30, 2012 |
||
Funded Status of the Pension and Other Post-Retirement |
|
|
|
|
|
|
Benefit Plans |
|
$ |
(100,561) |
|
$ |
(100,561) |
Net Unrealized Gain (Loss) on Derivative Financial Instruments |
|
|
36,865 |
|
|
(1,602) |
Net Unrealized Gain on Securities Available for Sale |
|
|
5,087 |
|
|
3,143 |
Accumulated Other Comprehensive Loss |
|
$ |
(58,609) |
|
$ |
(99,020) |
|
|
|
|
|
|
|
|
|
At June 30, 2013 |
|
At September 30, 2012 |
||
|
|
|
|
|
|
|
Prepayments |
|
$ |
10,472 |
|
$ |
8,316 |
Prepaid Property and Other Taxes |
|
|
10,461 |
|
|
14,455 |
Federal Income Taxes Receivable |
|
|
- |
|
|
268 |
State Income Taxes Receivable |
|
|
1,058 |
|
|
2,065 |
Fair Values of Firm Commitments |
|
|
1,384 |
|
|
1,291 |
Regulatory Assets |
|
|
22,830 |
|
|
29,726 |
|
|
$ |
46,205 |
|
$ |
56,121 |
|
|
|
|
|
|
|
|
|
At June 30, 2013 |
|
At September 30, 2012 |
||
|
|
|
|
|
|
|
Accrued Capital Expenditures |
|
$ |
49,348 |
|
$ |
36,460 |
Regulatory Liabilities |
|
|
13,318 |
|
|
18,289 |
Reserve for Gas Replacement |
|
|
22,032 |
|
|
- |
Other |
|
|
25,235 |
|
|
24,350 |
|
|
$ |
109,933 |
|
$ |
79,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Fair Value Measures |
|
At fair value as of June 30, 2013 |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Netting |
|
|
|
|
(Thousands of Dollars) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Adjustments(1) |
|
Total(1) |
|||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Equivalents – Money Market Mutual Funds |
|
$ |
122,024 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
122,024 |
Derivative Financial Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Futures Contracts – Gas |
|
|
2,252 |
|
|
- |
|
|
- |
|
|
(1,806) |
|
|
446 |
Over the Counter Swaps – Gas |
|
|
- |
|
|
63,255 |
|
|
- |
|
|
(5,093) |
|
|
58,162 |
Over the Counter Swaps – Oil |
|
|
- |
|
|
9,078 |
|
|
17 |
|
|
(3,260) |
|
|
5,835 |
Other Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balanced Equity Mutual Fund |
|
|
30,125 |
|
|
- |
|
|
- |
|
|
- |
|
|
30,125 |
Common Stock – Financial Services Industry |
|
|
6,331 |
|
|
- |
|
|
- |
|
|
- |
|
|
6,331 |
Other Common Stock |
|
|
295 |
|
|
- |
|
|
- |
|
|
- |
|
|
295 |
Hedging Collateral Deposits |
|
|
694 |
|
|
- |
|
|
- |
|
|
- |
|
|
694 |
Total |
|
$ |
161,721 |
|
$ |
72,333 |
|
$ |
17 |
|
$ |
(10,159) |
|
$ |
223,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Futures Contracts – Gas |
|
$ |
1,806 |
|
$ |
- |
|
$ |
- |
|
$ |
(1,806) |
|
$ |
- |
Over the Counter Swaps – Gas |
|
|
- |
|
|
2,626 |
|
|
- |
|
|
(5,093) |
|
|
(2,467) |
Over the Counter Swaps – Oil |
|
|
- |
|
|
- |
|
|
7,944 |
|
|
(3,260) |
|
|
4,684 |
Total |
|
$ |
1,806 |
|
$ |
2,626 |
|
$ |
7,944 |
|
$ |
(10,159) |
|
$ |
2,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Assets/(Liabilities) |
|
$ |
159,915 |
|
$ |
69,707 |
|
$ |
(7,927) |
|
$ |
- |
|
$ |
221,695 |
|
|
|
|
||||||||||||
Recurring Fair Value Measures |
|
At fair value as of September 30, 2012 |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
Netting |
|
|
|
|
(Thousands of Dollars) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Adjustments(1) |
|
Total(1) |
|||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Equivalents – Money Market Mutual Funds |
|
$ |
46,113 |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
46,113 |
Derivative Financial Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Futures Contracts – Gas |
|
|
4,348 |
|
|
- |
|
|
- |
|
|
(2,760) |
|
|
1,588 |
Over the Counter Swaps – Gas |
|
|
- |
|
|
41,751 |
|
|
- |
|
|
(15,723) |
|
|
26,028 |
Over the Counter Swaps – Oil |
|
|
- |
|
|
- |
|
|
559 |
|
|
(559) |
|
|
- |
Other Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balanced Equity Mutual Fund |
|
|
24,767 |
|
|
- |
|
|
- |
|
|
- |
|
|
24,767 |
Common Stock – Financial Services Industry |
|
|
4,758 |
|
|
- |
|
|
- |
|
|
- |
|
|
4,758 |
Other Common Stock |
|
|
272 |
|
|
- |
|
|
- |
|
|
- |
|
|
272 |
Hedging Collateral Deposits |
|
|
364 |
|
|
- |
|
|
- |
|
|
- |
|
|
364 |
Total |
|
$ |
80,622 |
|
$ |
41,751 |
|
$ |
559 |
|
$ |
(19,042) |
|
$ |
103,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Futures Contracts – Gas |
|
$ |
2,760 |
|
$ |
- |
|
$ |
- |
|
$ |
(2,760) |
|
$ |
- |
Over the Counter Swaps – Gas |
|
|
- |
|
|
19,932 |
|
|
- |
|
|
(15,723) |
|
|
4,209 |
Over the Counter Swaps – Oil |
|
|
- |
|
|
654 |
|
|
20,223 |
|
|
(559) |
|
|
20,318 |
Total |
|
$ |
2,760 |
|
$ |
20,586 |
|
$ |
20,223 |
|
$ |
(19,042) |
|
$ |
24,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Net Assets/(Liabilities) |
|
$ |
77,862 |
|
$ |
21,165 |
|
$ |
(19,664) |
|
$ |
- |
|
$ |
79,363 |
(1) Netting Adjustments represent the impact of legally-enforceable master netting arrangements that allow the Company to net gain and loss positions held with the same counterparties. The net asset or net liability for each counterparty is recorded as an asset or liability on the Company’s balance sheet. In the tables above, presenting asset and liability information by gas and oil positions may result in negative assets or negative liabilities in Total column when a counterparty has issued both gas and oil swaps to the Company.
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair Value Measurements Using Unobservable Inputs (Level 3) |
||||||||||||||||
(Thousands of Dollars) |
|
|
|
|
Total Gains/Losses |
|
|
|
|
|
|
|||||
|
|
|
|
|
(Gains)/ |
|
|
Gains/(Losses) |
|
|
|
|
|
|
||
|
|
|
|
|
Losses Realized |
|
|
Unrealized and Included |
|
Transfer |
|
|
|
|||
|
|
April 1, |
|
and Included |
|
|
in Other Comprehensive |
|
In/Out of |
|
June 30, |
|||||
|
|
2013 |
|
in Earnings |
|
|
Income (Loss) |
|
Level 3 |
|
2013 |
|||||
Derivative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments(2) |
|
$ |
(16,606) |
|
$ |
2,471 | (1) |
|
$ |
6,208 |
|
$ |
- |
|
$ |
(7,927) |
(1) Amounts are reported in Operating Revenues in the Consolidated Statement of Income for the three months ended June 30, 2013.
(2) Derivative Financial Instruments are shown on a net basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair Value Measurements Using Unobservable Inputs (Level 3) |
||||||||||||||||
(Thousands of Dollars) |
|
|
|
|
Total Gains/Losses |
|
|
|
|
|
|
|||||
|
|
|
|
|
(Gains)/ |
|
|
Gains/(Losses) |
|
|
|
|
|
|
||
|
|
|
|
|
Losses Realized |
|
|
Unrealized and Included |
|
Transfer |
|
|
|
|||
|
|
October 1, |
|
and Included |
|
|
in Other Comprehensive |
|
In/Out of |
|
June 30, |
|||||
|
|
2012 |
|
in Earnings |
|
|
Income (Loss) |
|
Level 3 |
|
2013 |
|||||
Derivative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments(2) |
|
$ |
(19,664) |
|
$ |
9,271 | (1) |
|
$ |
2,466 |
|
$ |
- |
|
$ |
(7,927) |
(1) Amounts are reported in Operating Revenues in the Consolidated Statement of Income for the nine months ended June 30, 2013.
(2) Derivative Financial Instruments are shown on a net basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair Value Measurements Using Unobservable Inputs (Level 3) |
||||||||||||||||
(Thousands of Dollars) |
|
|
|
|
Total Gains/Losses |
|
|
|
|
|
|
|||||
|
|
|
|
|
(Gains)/ |
|
|
Gains/(Losses) |
|
|
|
|
|
|
||
|
|
|
|
|
Losses Realized |
|
|
Unrealized and Included |
|
Transfer |
|
|
|
|||
|
|
April 1, |
|
and Included |
|
|
In Other Comprehensive |
|
In/Out of |
|
June 30, |
|||||
|
|
2012 |
|
in Earnings |
|
|
Income (Loss) |
|
Level 3 |
|
2012 |
|||||
Derivative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments(2) |
|
$ |
(68,754) |
|
$ |
10,392 | (1) |
|
$ |
41,814 |
|
$ |
- |
|
$ |
(16,548) |
(1) Amounts are reported in Operating Revenues in the Consolidated Statement of Income for the three months ended June 30, 2012.
(2) Derivative Financial Instruments are shown on a net basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair Value Measurements Using Unobservable Inputs (Level 3) |
||||||||||||||||
(Thousands of Dollars) |
|
|
|
|
Total Gains/Losses |
|
|
|
|
|
|
|||||
|
|
|
|
|
(Gains)/ |
|
|
Gains/(Losses) |
|
|
|
|
|
|
||
|
|
|
|
|
Losses Realized |
|
|
Unrealized and Included |
|
Transfer |
|
|
|
|||
|
|
October 1, |
|
and Included |
|
|
In Other Comprehensive |
|
In/Out of |
|
June 30, |
|||||
|
|
2011 |
|
in Earnings |
|
|
Income (Loss) |
|
Level 3 |
|
2012 |
|||||
Derivative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments(2) |
|
$ |
(5,410) |
|
$ |
36,526 | (1) |
|
$ |
(47,664) |
|
$ |
- |
|
$ |
(16,548) |
(1) Amounts are reported in Operating Revenues in the Consolidated Statement of Income for the nine months ended June 30, 2012.
(2) Derivative Financial Instruments are shown on a net basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2013 |
|
September 30, 2012 |
||||||||
|
|
Carrying |
|
|
|
|
Carrying |
|
|
|
||
|
|
Amount |
|
Fair Value |
|
Amount |
|
Fair Value |
||||
Long-Term Debt |
|
$ |
1,649,000 |
|
$ |
1,790,040 |
|
$ |
1,399,000 |
|
$ |
1,623,847 |
|
||||||||||||||||||||
The Effect of Derivative Financial Instruments on the Statement of Financial Performance for the |
||||||||||||||||||||
Three Months Ended June 30, 2013 and 2012 (Thousands of Dollars) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of |
|
|
Amount of |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
Derivative Gain |
|
|
Derivative Gain or |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
or (Loss) |
|
|
(Loss) |
Location of |
|
|
Derivative Gain |
||||||
|
|
|
Amount of |
Reclassified |
|
|
Reclassified from |
Derivative |
|
|
or (Loss) |
|||||||||
|
|
|
Derivative Gain or |
from |
|
|
Accumulated |
Gain or |
|
|
Recognized in |
|||||||||
|
|
|
(Loss) |
Accumulated |
|
|
Other |
(Loss) |
|
|
the |
|||||||||
|
|
|
Recognized in |
Other |
|
|
Comprehensive |
Recognized |
|
|
Consolidated |
|||||||||
|
|
|
Other |
Comprehensive |
|
|
Income (Loss) on |
in the |
|
|
Statement of |
|||||||||
|
|
|
Comprehensive |
Income (Loss) |
|
|
the Consolidated |
Consolidated |
|
|
Income |
|||||||||
|
|
|
Income (Loss) on |
on the |
|
|
Balance Sheet |
Statement of |
|
|
(Ineffective |
|||||||||
|
|
|
the Consolidated |
Consolidated |
|
|
into the |
Income |
|
|
Portion and |
|||||||||
|
|
|
Statement of |
Balance Sheet |
|
|
Consolidated |
(Ineffective |
|
|
Amount |
|||||||||
|
|
|
Comprehensive |
into the |
|
|
Statement of |
Portion and |
|
|
Excluded from |
|||||||||
|
|
|
Income (Loss) |
Consolidated |
|
|
Income (Effective |
Amount |
|
|
Effectiveness |
|||||||||
Derivatives in |
|
|
(Effective Portion) |
Statement of |
|
|
Portion) for the |
Excluded |
|
|
Testing) for the |
|||||||||
Cash Flow |
|
|
for the Three |
Income |
|
|
Three Months |
from |
|
|
Three Months |
|||||||||
Hedging |
|
|
Months Ended |
(Effective |
|
|
Ended |
Effectiveness |
|
|
Ended |
|||||||||
Relationships |
|
|
June 30, |
Portion) |
|
|
June 30, |
Testing) |
|
|
June 30, |
|||||||||
|
|
|
2013 |
|
|
2012 |
|
|
|
2013 |
|
|
2012 |
|
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration & |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
segment |
|
$ |
99,987 |
|
$ |
31,358 |
Revenue |
|
$ |
1,504 |
|
$ |
20,643 |
Revenue |
|
$ |
456 |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
Not |
|
|
|
|
|
|
segment |
|
$ |
1,879 |
|
$ |
(201) |
Purchased Gas |
|
$ |
(75) |
|
$ |
956 |
Applicable |
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pipeline & |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Storage |
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
Not |
|
|
|
|
|
|
segment(1) |
|
$ |
- |
|
$ |
(725) |
Revenue |
|
$ |
- |
|
$ |
- |
Applicable |
|
$ |
- |
|
$ |
- |
Total |
|
$ |
101,866 |
|
$ |
30,432 |
|
|
$ |
1,429 |
|
$ |
21,599 |
|
|
$ |
456 |
|
$ |
- |
|
||||||||||||||||||||
The Effect of Derivative Financial Instruments on the Statement of Financial Performance for the |
||||||||||||||||||||
Nine Months Ended June 30, 2013 and 2012 (Thousands of Dollars) |
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of |
|
|
Amount of |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
Derivative Gain |
|
|
Derivative Gain or |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
or (Loss) |
|
|
(Loss) |
Location of |
|
|
Derivative Gain |
||||||
|
|
|
Amount of |
Reclassified |
|
|
Reclassified from |
Derivative |
|
|
or (Loss) |
|||||||||
|
|
|
Derivative Gain or |
from |
|
|
Accumulated |
Gain or |
|
|
Recognized in |
|||||||||
|
|
|
(Loss) |
Accumulated |
|
|
Other |
(Loss) |
|
|
the |
|||||||||
|
|
|
Recognized in |
Other |
|
|
Comprehensive |
Recognized |
|
|
Consolidated |
|||||||||
|
|
|
Other |
Comprehensive |
|
|
Income (Loss) on |
in the |
|
|
Statement of |
|||||||||
|
|
|
Comprehensive |
Income (Loss) |
|
|
the Consolidated |
Consolidated |
|
|
Income |
|||||||||
|
|
|
Income (Loss) on |
on the |
|
|
Balance Sheet |
Statement of |
|
|
(Ineffective |
|||||||||
|
|
|
the Consolidated |
Consolidated |
|
|
into the |
Income |
|
|
Portion and |
|||||||||
|
|
|
Statement of |
Balance Sheet |
|
|
Consolidated |
(Ineffective |
|
|
Amount |
|||||||||
|
|
|
Comprehensive |
into the |
|
|
Statement of |
Portion and |
|
|
Excluded from |
|||||||||
|
|
|
Income (Loss) |
Consolidated |
|
|
Income (Effective |
Amount |
|
|
Effectiveness |
|||||||||
Derivatives in |
|
|
(Effective Portion) |
Statement of |
|
|
Portion) for the |
Excluded |
|
|
Testing) for the |
|||||||||
Cash Flow |
|
|
for the Nine |
Income |
|
|
Nine Months |
from |
|
|
Nine Months |
|||||||||
Hedging |
|
|
Months Ended |
(Effective |
|
|
Ended |
Effectiveness |
|
|
Ended |
|||||||||
Relationships |
|
|
June 30, |
Portion) |
|
|
June 30, |
Testing) |
|
|
June 30, |
|||||||||
|
|
|
2013 |
|
|
2012 |
|
|
|
2013 |
|
|
2012 |
|
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration & |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production |
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
Not |
|
|
|
|
|
|
segment |
|
$ |
86,237 |
|
$ |
40,897 |
Revenue |
|
$ |
25,550 |
|
$ |
38,633 |
Applicable |
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing |
|
|
|
|
|
|
|
|
|
|
|
|
|
Not |
|
|
|
|
|
|
segment |
|
$ |
3,628 |
|
$ |
6,337 |
Purchased Gas |
|
$ |
(905) |
|
$ |
10,440 |
Applicable |
|
$ |
- |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contracts – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pipeline & |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Storage |
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
Not |
|
|
|
|
|
|
segment(1) |
|
$ |
- |
|
$ |
(149) |
Revenue |
|
$ |
(672) |
|
$ |
576 |
Applicable |
|
$ |
- |
|
$ |
- |
Total |
|
$ |
89,865 |
|
$ |
47,085 |
|
|
$ |
23,973 |
|
$ |
49,649 |
|
|
$ |
- |
|
$ |
- |
(1) There were no open hedging positions at June 30, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of |
||
|
|
|
Amount of Gain |
|
Gain or (Loss) |
||
|
|
|
or (Loss) on |
|
on the Hedged |
||
|
|
|
Derivative |
|
Item |
||
|
Location of |
|
Recognized in |
|
Recognized in |
||
|
Gain or (Loss) |
|
the |
|
the |
||
|
on Derivative |
|
Consolidated |
|
Consolidated |
||
|
and Hedged |
|
Statement of |
|
Statement of |
||
|
Item |
|
Income for the |
|
Income for the |
||
|
Recognized |
|
Nine Months |
|
Nine Months |
||
|
in the |
|
Ended |
|
Ended |
||
Derivatives in Fair Value |
Consolidated |
|
June 30, |
|
June 30, |
||
Hedging Relationships – |
Statement of |
|
2013 |
|
2013 |
||
Energy Marketing segment |
Income |
|
(In Thousands) |
|
(In Thousands) |
||
|
|
|
|
|
|
|
|
Commodity Contracts – Hedge of fixed price sales |
Operating |
|
|
|
|
|
|
commitments of natural gas |
Revenues |
|
$ |
(1,720) |
|
$ |
1,720 |
|
|
|
|
|
|
|
|
Commodity Contracts – Hedge of fixed price |
Purchased |
|
|
|
|
|
|
purchase commitments of natural gas |
Gas |
|
$ |
(148) |
|
$ |
148 |
|
|
|
|
|
|
|
|
Commodity Contracts – Hedge of natural gas held in |
Purchased |
|
|
|
|
|
|
storage |
Gas |
|
$ |
10 |
|
$ |
(10) |
|
|
|
$ |
(1,858) |
|
$ |
1,858 |
|
|
|
|
|
|||
|
|
Nine Months Ended |
||||
|
|
June 30, |
||||
|
|
2013 |
|
2012 |
||
Current Income Taxes |
|
|
|
|
|
|
Federal |
|
$ |
(518) |
|
$ |
- |
State |
|
|
3,934 |
|
|
6,878 |
|
|
|
|
|
|
|
Deferred Income Taxes |
|
|
|
|
|
|
Federal |
|
|
105,362 |
|
|
85,910 |
State |
|
|
35,645 |
|
|
19,038 |
|
|
|
144,423 |
|
|
111,826 |
Deferred Investment Tax Credit |
|
|
(320) |
|
|
(436) |
|
|
|
|
|
|
|
Total Income Taxes |
|
$ |
144,103 |
|
$ |
111,390 |
|
|
|
|
|
|
|
Presented as Follows: |
|
|
|
|
|
|
Other Income |
|
|
(320) |
|
|
(436) |
Income Tax Expense |
|
|
144,423 |
|
|
111,826 |
|
|
|
|
|
|
|
Total Income Taxes |
|
$ |
144,103 |
|
$ |
111,390 |
|
|
|
|
|
|
|
|
|
Nine Months Ended |
||||
|
|
June 30, |
||||
|
|
2013 |
|
2012 |
||
|
|
|
|
|
|
|
U.S. Income Before Income Taxes |
|
$ |
356,262 |
|
$ |
282,665 |
|
|
|
|
|
|
|
Income Tax Expense, Computed at U.S. Federal |
|
|
|
|
|
|
Statutory Rate of 35% |
|
$ |
124,692 |
|
$ |
98,933 |
|
|
|
|
|
|
|
Increase (Reduction) in Taxes Resulting from: |
|
|
|
|
|
|
State Income Taxes |
|
|
25,726 |
|
|
16,845 |
Miscellaneous |
|
|
(6,315) |
|
|
(4,388) |
|
|
|
|
|
|
|
Total Income Taxes |
|
$ |
144,103 |
|
$ |
111,390 |
|
|
|
|
|
|
|
|
|
At June 30, 2013 |
|
At September 30, 2012 |
||
Deferred Tax Liabilities: |
|
|
|
|
|
|
Property, Plant and Equipment |
|
$ |
1,465,567 |
|
$ |
1,333,574 |
Pension and Other Post-Retirement Benefit |
|
|
|
|
|
|
Costs |
|
|
244,453 |
|
|
236,431 |
Other |
|
|
64,365 |
|
|
43,294 |
Total Deferred Tax Liabilities |
|
|
1,774,385 |
|
|
1,613,299 |
|
|
|
|
|
|
|
Deferred Tax Assets: |
|
|
|
|
|
|
Pension and Other Post-Retirement Benefit |
|
|
|
|
|
|
Costs |
|
|
(276,056) |
|
|
(276,501) |
Tax Loss Carryforwards |
|
|
(194,138) |
|
|
(198,744) |
Other |
|
|
(81,612) |
|
|
(83,052) |
Total Deferred Tax Assets |
|
|
(551,806) |
|
|
(558,297) |
Total Net Deferred Income Taxes |
|
$ |
1,222,579 |
|
$ |
1,055,002 |
|
|
|
|
|
|
|
Presented as Follows: |
|
|
|
|
|
|
Net Deferred Tax Liability/(Asset) – Current |
|
|
(15,148) |
|
|
(10,755) |
Net Deferred Tax Liability – Non-Current |
|
|
1,237,727 |
|
|
1,065,757 |
Total Net Deferred Income Taxes |
|
$ |
1,222,579 |
|
$ |
1,055,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Quarter Ended June 30, 2013 (Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
Pipeline |
|
Exploration |
|
|
|
|
Total |
|
|
|
|
Corporate and |
|
|
|
||||
|
|
|
|
|
and |
|
and |
|
Energy |
|
Reportable |
|
All |
|
Intersegment |
|
Total |
|||||||
|
|
Utility |
|
Storage |
|
Production |
|
Marketing |
|
Segments |
|
Other |
|
Eliminations |
|
Consolidated |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from External |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers |
|
$ |
141,257 |
|
$ |
43,055 |
|
$ |
195,213 |
|
$ |
59,128 |
|
$ |
438,653 |
|
$ |
1,121 |
|
$ |
234 |
|
$ |
440,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment Revenues |
|
$ |
3,305 |
|
$ |
21,708 |
|
$ |
- |
|
$ |
446 |
|
$ |
25,459 |
|
$ |
10,244 |
|
$ |
(35,703) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
7,630 |
|
$ |
14,075 |
|
$ |
31,734 |
|
$ |
963 |
|
$ |
54,402 |
|
$ |
4,499 |
|
$ |
(406) |
|
$ |
58,495 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Nine Months Ended June 30, 2013 (Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
Pipeline |
|
Exploration |
|
|
|
|
Total |
|
|
|
|
Corporate and |
|
|
|
||||
|
|
|
|
|
and |
|
and |
|
Energy |
|
Reportable |
|
All |
|
Intersegment |
|
Total |
|||||||
|
|
Utility |
|
Storage |
|
Production |
|
Marketing |
|
Segments |
|
Other |
|
Eliminations |
|
Consolidated |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from External |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers |
|
$ |
653,211 |
|
$ |
132,897 |
|
$ |
518,742 |
|
$ |
182,282 |
|
$ |
1,487,132 |
|
$ |
2,898 |
|
$ |
658 |
|
$ |
1,490,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment Revenues |
|
$ |
14,012 |
|
$ |
68,216 |
|
$ |
- |
|
$ |
1,080 |
|
$ |
83,308 |
|
$ |
23,622 |
|
$ |
(106,930) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
65,024 |
|
$ |
47,803 |
|
$ |
86,125 |
|
$ |
5,741 |
|
$ |
204,693 |
|
$ |
9,449 |
|
$ |
(1,983) |
|
$ |
212,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2013 (Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
Pipeline |
|
Exploration |
|
|
|
|
Total |
|
|
|
|
Corporate and |
|
|
|
||||
|
|
|
|
|
and |
|
and |
|
Energy |
|
Reportable |
|
All |
|
Intersegment |
|
Total |
|||||||
|
|
Utility |
|
Storage |
|
Production |
|
Marketing |
|
Segments |
|
Other |
|
Eliminations |
|
Consolidated |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Assets |
|
$ |
2,074,329 |
|
$ |
1,281,445 |
|
$ |
2,614,406 |
|
$ |
69,106 |
|
$ |
6,039,286 |
|
$ |
273,048 |
|
$ |
31,606 |
|
$ |
6,343,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Quarter Ended June 30, 2012 (Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
Pipeline |
|
Exploration |
|
|
|
|
Total |
|
|
|
|
Corporate and |
|
|
|
||||
|
|
|
|
|
and |
|
and |
|
Energy |
|
Reportable |
|
All |
|
Intersegment |
|
Total |
|||||||
|
|
Utility |
|
Storage |
|
Production |
|
Marketing |
|
Segments |
|
Other |
|
Eliminations |
|
Consolidated |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from External |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers |
|
$ |
117,240 |
|
$ |
36,631 |
|
$ |
138,549 |
|
$ |
35,377 |
|
$ |
327,797 |
|
$ |
824 |
|
$ |
240 |
|
$ |
328,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment Revenues |
|
$ |
2,703 |
|
$ |
22,076 |
|
$ |
- |
|
$ |
579 |
|
$ |
25,358 |
|
$ |
4,307 |
|
$ |
(29,665) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
5,096 |
|
$ |
12,627 |
|
$ |
21,915 |
|
$ |
923 |
|
$ |
40,561 |
|
$ |
2,815 |
|
$ |
(192) |
|
$ |
43,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Nine Months Ended June 30, 2012 (Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
Pipeline |
|
Exploration |
|
|
|
|
Total |
|
|
|
|
Corporate and |
|
|
|
||||
|
|
|
|
|
and |
|
and |
|
Energy |
|
Reportable |
|
All |
|
Intersegment |
|
Total |
|||||||
|
|
Utility |
|
Storage |
|
Production |
|
Marketing |
|
Segments |
|
Other |
|
Eliminations |
|
Consolidated |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from External |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers |
|
$ |
622,836 |
|
$ |
113,976 |
|
$ |
411,449 |
|
$ |
161,822 |
|
$ |
1,310,083 |
|
$ |
2,784 |
|
$ |
726 |
|
$ |
1,313,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment Revenues |
|
$ |
12,643 |
|
$ |
64,434 |
|
$ |
- |
|
$ |
1,135 |
|
$ |
78,212 |
|
$ |
10,828 |
|
$ |
(89,040) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
|
$ |
52,725 |
|
$ |
35,428 |
|
$ |
74,422 |
|
$ |
4,662 |
|
$ |
167,237 |
|
$ |
5,557 |
|
$ |
(1,519) |
|
$ |
171,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-Retirement |
||||
|
|
Retirement Plan |
|
Benefits |
||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Service Cost |
|
$ |
3,961 |
|
$ |
3,551 |
|
$ |
1,176 |
|
$ |
1,004 |
Interest Cost |
|
|
9,124 |
|
|
10,381 |
|
|
4,803 |
|
|
5,329 |
Expected Return on Plan Assets |
|
|
(14,336) |
|
|
(14,925) |
|
|
(8,218) |
|
|
(7,243) |
Amortization of Prior Service Cost |
|
|
60 |
|
|
67 |
|
|
(534) |
|
|
(534) |
Amortization of Transition Amount |
|
|
- |
|
|
- |
|
|
2 |
|
|
3 |
Amortization of Losses |
|
|
13,194 |
|
|
9,904 |
|
|
5,223 |
|
|
6,014 |
Net Amortization and Deferral for |
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory Purposes (Including |
|
|
|
|
|
|
|
|
|
|
|
|
Volumetric Adjustments) (1) |
|
|
(3,854) |
|
|
(2,252) |
|
|
2,393 |
|
|
718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Benefit Cost |
|
$ |
8,149 |
|
$ |
6,726 |
|
$ |
4,845 |
|
$ |
5,291 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-Retirement |
||||
|
|
Retirement Plan |
|
Benefits |
||||||||
|
|
2013 |
|
2012 |
|
2013 |
|
2012 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Service Cost |
|
$ |
11,884 |
|
$ |
10,652 |
|
$ |
3,529 |
|
$ |
3,012 |
Interest Cost |
|
|
27,373 |
|
|
31,144 |
|
|
14,409 |
|
|
15,986 |
Expected Return on Plan Assets |
|
|
(43,009) |
|
|
(44,776) |
|
|
(24,654) |
|
|
(21,728) |
Amortization of Prior Service Cost |
|
|
179 |
|
|
202 |
|
|
(1,604) |
|
|
(1,604) |
Amortization of Transition Amount |
|
|
- |
|
|
- |
|
|
6 |
|
|
8 |
Amortization of Losses |
|
|
39,582 |
|
|
29,711 |
|
|
15,669 |
|
|
18,043 |
Net Amortization and Deferral for |
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory Purposes (Including |
|
|
|
|
|
|
|
|
|
|
|
|
Volumetric Adjustments) (1) |
|
|
(5,813) |
|
|
(1,896) |
|
|
11,555 |
|
|
7,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Benefit Cost |
|
$ |
30,196 |
|
$ |
25,037 |
|
$ |
18,910 |
|
$ |
21,710 |
(1) The Company’s policy is to record retirement plan and other post-retirement benefit costs in the Utility segment on a volumetric basis to reflect the fact that the Utility segment experiences higher throughput of natural gas in the winter months and lower throughput of natural gas in the summer months.
|
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|
|
|
|
|
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|
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