The Laclede Group Announces Results for Its Fiscal 2010 Second Quarter

Company Also Declares Quarterly Dividend

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Apr 30, 2010, 08:30 ET

ST. LOUIS, April 30 /PRNewswire-FirstCall/ -- The Laclede Group, Inc. (NYSE: LG) today announced quarterly net income for its fiscal second quarter ended March 31, 2010 totaling $28.0 million, or $1.26 diluted earnings per share, compared to $30.8 million, or $1.39 per share, for the same quarter last year. On a non-GAAP basis, The Laclede Group reported second-quarter net economic earnings of $27.3 million, or $1.23 per share, compared to $30.8 million, or $1.39 per share, for the same quarter last year. Please refer to "Net Economic Earnings" included below.

Additionally, the Company declared a quarterly dividend of 39.5 cents per share on its common stock, payable July 1, 2010 to shareholders of record on June 11, 2010.

"The natural-gas market trends we saw in our first quarter carried through into the second quarter," said Douglas H. Yaeger, chairman, president and chief executive officer of The Laclede Group. "Our core subsidiary, Laclede Gas, showed solid performance while our Laclede Energy Resources subsidiary grew its second-quarter sales volumes despite an environment characterized by lower margins when compared to last year, driven by new gas supply and additional pipeline infrastructure."

For the first half of fiscal 2010, The Laclede Group reported net income totaling $50.9 million, or $2.29 per share, compared to $62.1 million, or $2.80 per share, for the same period last year. The Laclede Group reported net economic earnings (non-GAAP) of $53.1 million, or $2.39 per share for the first half of fiscal 2010, compared to $59.9 million, or $2.70 per share, for the same period last year.

Performance in both the second-quarter and first-half reporting periods was primarily impacted by margin-driven lower earnings from LER, The Laclede Group's non-regulated natural gas commodity service provider. These results were partially offset by higher earnings reported by The Laclede Group's regulated natural gas distribution utility, Laclede Gas Company, which included a gain on a non-regulated sale of propane in the wholesale market during fiscal 2010's first quarter.

RESULTS OF OPERATIONS

Laclede Gas Company

Laclede Gas Company, Missouri's largest natural gas distribution utility, reported net income of $23.4 million for the second quarter of fiscal 2010, compared to $22.2 million for the same quarter last year. For the first half of fiscal 2010, Laclede Gas reported net income of $44.5 million, compared to $38.4 million for the same period last year.

The $6.1 million increase in net income for the first half of fiscal 2010 was primarily attributable to income totaling $3.7 million, or $0.16 diluted earnings per share, realized from a non-regulated sale of propane in the wholesale market during the first quarter. Other factors contributing to the increased earnings for both reporting periods were lower operating expenses, higher Infrastructure System Replacement Surcharge revenues, and increased net investment income, partially offset by reduced income from off-system sales.

Laclede Gas contributed $1.05 to consolidated diluted earnings per share for the second quarter, compared to $1.00 in the year-ago quarter. For the first half of fiscal 2010, Laclede Gas contributed $2.00 per share, compared to $1.73 in last year's first half.

Laclede Energy Resources

LER reported net income of $4.5 million for the second quarter of fiscal 2010, compared to $8.5 million for the same quarter last year. After adjustments for the net after-tax effect of unrealized gains and losses, LER's net economic earnings for the second quarter of fiscal 2010 were $3.8 million compared to $8.5 million for the same quarter last year.

For the first half of fiscal 2010, LER reported net income of $6.3 million, compared to $23.2 million for last year's first half. After adjustments for the net after-tax effect of unrealized gains and losses, LER's net economic earnings for the first half of fiscal 2010 were $8.4 million compared to $21.0 million for the same period last year.

In both periods, these decreases were mainly attributable to the effect of lower margins on sales of natural gas driven primarily by narrower regional price differentials that have recently prevailed in the marketplace, as compared to favorable market conditions that existed and LER was able to capture a year ago. While LER's sales volumes for the first half decreased 1 percent compared to last year's first half, LER's second-quarter sales volumes increased 6 percent compared to the year-ago quarter as a result of new-customer growth and higher wholesale volumes.

LER contributed $0.20 to consolidated diluted earnings per share for the second quarter, compared to $0.38 for the same period last year. For the first half of fiscal 2010, LER contributed $0.28 per share, compared to $1.05 in the year-ago quarter.

On a net economic earnings basis, LER contributed $0.17 per share for the second quarter, compared to $0.38 in the year-ago quarter. For the first half of fiscal 2010, LER contributed $0.38 per share, compared to $0.95 for the same period last year.

Net Economic Earnings

This press release includes the non-GAAP financial measures of "net economic earnings" and "net economic earnings per share." As LER continues to expand its business, the number of transactions accounted for through fair value measurements has increased. As a result, management also uses these non-GAAP measures internally when evaluating the Company's performance. Net economic earnings exclude from net income the after-tax impacts of net unrealized gains and losses on energy-related derivatives resulting from the current changes in the fair value of financial and physical transactions prior to their completion and settlement. Management believes that excluding these timing differences provides a useful representation of the economic impact of only the actual settled transactions and their effects on results of operations. These internal non-GAAP operating metrics should not be considered as an alternative to, or more meaningful than, GAAP measures such as net income.

The accompanying schedule provides a reconciliation of these non-GAAP measures to the most directly comparable GAAP measure:


(Millions, except per share amounts)		Net Economic Earnings (Non-GAAP)	Add: Unrealized Gain (Loss) (1)	Net Income (GAAP)

Quarter Ended March 31, 2010
	Non-Regulated Gas Marketing	$3.8	$0.7	$4.5
	Consolidated	$27.3	$0.7	$28.0
	Consolidated Per Share Amounts (2)	$1.23	$0.03	$1.26
Quarter Ended March 31, 2009
	Non-Regulated Gas Marketing	$8.5	$0.0	$8.5
	Consolidated	$30.8	$0.0	$30.8
	Consolidated Per Share Amounts (2)	$1.39	$0.00	$1.39


Six Months Ended March 31, 2010
	Non-Regulated Gas Marketing	$8.4	$(2.1)	$6.3
	Consolidated	$53.1	$(2.2)	$50.9
	Consolidated Per Share Amounts (2)	$2.39	$(0.10)	$2.29
Six Months Ended March 31, 2009
	Non-Regulated Gas Marketing	$21.0	$2.2	$23.2
	Consolidated	$59.9	$2.2	$62.1
	Consolidated Per Share Amounts (2)	$2.70	$0.10	$2.80

(1) Amounts presented net of income taxes. Income taxes are calculated by applying federal, state, and local income tax rates applicable to ordinary income to the amounts of unrealized gain (loss) on energy-related derivative contracts. For the quarter ended March 31, 2010, the amount of income tax expense included in the consolidated reconciling item above is $0.4 million. For the six months ended March 31, 2010 and 2009, the amounts of income tax expense (benefit) included in the consolidated reconciling items above are $(1.4) million and $1.4 million, respectively. (2) Consolidated net economic earnings per share is calculated by replacing consolidated net income with consolidated net economic earnings in the GAAP diluted earnings per share calculation.

ABOUT THE LACLEDE GROUP

The Laclede Group's earnings are seasonal in nature and generally correspond with the heating season for Laclede Gas Company, its largest subsidiary.

For additional details on The Laclede Group's results for the second quarter and first half of fiscal 2010, please see the accompanying unaudited Statements of Consolidated Income.

Headquartered in St. Louis, Missouri, The Laclede Group, Inc. is a public utility holding company committed to providing reliable natural gas service through its regulated core utility operations, while engaging in non-regulated activities that provide opportunities for sustainable growth. Its subsidiary Laclede Gas Company, the regulated operations of which are included in the Regulated Gas Distribution segment, serves approximately 630,000 residential, commercial and industrial customers in the City of St. Louis and parts of 10 counties in eastern Missouri. Laclede Group's primary non-regulated business, Laclede Energy Resources, Inc., is included within the Non-Regulated Gas Marketing segment. For more information about Laclede Group and its subsidiaries, visit www.thelacledegroup.com.

CAUTIONARY STATEMENTS ON FORWARD-LOOKING INFORMATION

This news release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The Company's future operating results may be affected by various uncertainties and risk factors, many of which are beyond the Company's control, including weather conditions, governmental and regulatory policy and action, the competitive environment and economic factors. For a more complete description of these uncertainties and risk factors, see the Company's Form 10-Q for the three months ended December 31, 2009, filed with the Securities and Exchange Commission.

UNAUDITED STATEMENTS OF CONSOLIDATED INCOME THE LACLEDE GROUP, INC. (Thousands, Except Per Share Amounts)
			Three Months Ended March 31,				Six Months Ended March 31,
			2010		2009		2010		2009

OPERATING REVENUES
		Regulated Gas Distribution	$	373,520	$	440,468	$	656,449	$	798,569
		Non-Regulated Gas Marketing		261,473		217,589		458,998		532,629
		Other		332		1,011		11,044		2,126
		Total Operating Revenues		635,325		659,068		1,126,491		1,333,324
OPERATING EXPENSES
		Regulated Gas Distribution
		Natural and propane gas		250,238		313,506		432,238		568,403
		Other operation expenses		37,779		40,251		75,242		76,552
		Maintenance		7,219		7,261		13,393		13,795
		Depreciation and amortization		9,385		9,180		18,748		18,299
		Taxes, other than income taxes		26,050		28,216		42,274		46,574
		Total Regulated Gas Distribution Operating Expenses		330,671		398,414		581,895		723,623
		Non-Regulated Gas Marketing		254,161		204,487		448,891		496,088
		Other		223		927		4,771		1,685
		Total Operating Expenses		585,055		603,828		1,035,557		1,221,396
Operating Income				50,270		55,240		90,934		111,928
Other Income and (Income Deductions) - Net				318		247		1,905		986
Interest Charges:
		Interest on long-term debt		6,145		6,145		12,291		12,291
		Other interest charges		526		1,168		1,089		3,814
		Total Interest Charges		6,671		7,313		13,380		16,105
Income Before Income Taxes and Dividends on Laclede Gas
		Redeemable Preferred Stock		43,917		48,174		79,459		96,809
Income Tax Expense				15,897		17,356		28,553		34,677
Dividends on Laclede Gas Redeemable Preferred Stock				—		7		—		15
Net Income			$	28,020	$	30,811	$	50,906	$	62,117

Average Number of Common Shares Outstanding:
	Basic			21,980		21,891		21,968		21,874
	Diluted			22,027		21,969		22,014		21,963

Basic Earnings Per Share of Common Stock			$	1.26	$	1.39	$	2.29	$	2.81
Diluted Earnings Per Share of Common Stock			$	1.26	$	1.39	$	2.29	$	2.80
Earnings per share (EPS) and diluted shares outstanding amounts for the quarter and six months ended March 31, 2009 have been restated to reflect the retrospective application of a new accounting standard that the Company adopted on October 1, 2009. The effect of adoption reduced basic EPS by $0.02 and $0.03 for the quarter and six months ended March 31, 2009, respectively, compared to originally reported amounts. Diluted EPS was reduced by $0.01 and $0.02 for the quarter and six months ended March 31, 2009, respectively, compared to originally reported amounts. On an annual basis, reductions to previously reported EPS will not be more than $0.03 per share. Reported net income was not affected by the adoption of this new accounting standard.