Delaware
|
75-0571592
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
5444
Westheimer Road
|
77056-5306
|
Houston,
Texas
|
(Zip
Code)
|
(Address
of principal executive offices)
|
417
Lackawanna Avenue
|
18503-2013
|
Scranton,
Pennsylvania
|
(Zip
Code)
|
(Former
address of principal executive offices)
|
Title
of each class
|
Name
of each exchange on which registered
|
Common
Stock, par value $1 per share
|
New
York Stock Exchange
|
7.55%
Depositary Shares
|
New
York Stock Exchange
|
5.75%
Corporate Units
|
New
York Stock Exchange
|
5.00%
Corporate Units
|
New
York Stock Exchange
|
Page
|
||
PART
I
|
||
Business.
|
2
|
|
Risk
Factors.
|
20
|
|
Unresolved
Staff Comments.
|
26
|
|
Properties.
|
26
|
|
Legal
Proceedings.
|
27
|
|
Submission
of Matters to a Vote of Security Holders.
|
27
|
|
PART
II
|
||
Market
for the Registrant’s Common Stock, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
|
28
|
|
Selected
Financial Data.
|
30
|
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
|
31
|
|
Quantitative
and Qualitative Disclosures About Market Risk.
|
50
|
|
Financial
Statements and Supplementary Data.
|
52
|
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure.
|
52
|
|
Controls
and Procedures.
|
52
|
|
Other
Information.
|
53
|
|
PART
III
|
||
Directors
and Executive Officers of the Registrant.
|
54
|
|
Executive
Compensation.
|
54
|
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
|
54
|
|
Certain
Relationships and Related Transactions.
|
54
|
|
Principal
Accountant Fees and Services.
|
54
|
|
PART
IV
|
||
Exhibits
and Financial Statement Schedules.
|
55
|
|
59
|
||
F-1
|
· |
The
Transportation and Storage segment, which is primarily engaged in
the
interstate transportation and storage of natural gas from gas producing
areas in Texas, Oklahoma, Colorado, the Gulf of Mexico and the Gulf
Coast
to markets throughout the Midwest, Southwest to California and to
Florida,
and also provides LNG terminalling and regasification services. Its
operations are conducted through Panhandle Energy and the Company’s equity
investment in CCE Holdings; and
|
· |
The
Distribution segment, which is primarily engaged in the local distribution
of natural gas in Missouri, Pennsylvania, Massachusetts and Rhode
Island.
Its operations are conducted through the Company’s three regulated utility
divisions: Missouri Gas Energy, PG Energy and New England Gas Company.
|
· |
items
that do not impact net earnings from continuing operations, such
as
extraordinary items, discontinued operations and the impact of accounting
changes;
|
· |
income
taxes;
|
· |
interest;
and
|
· |
dividends
on preferred stock.
|
Year
Ended
|
Six
Months Ended
|
Year
Ended
|
|||||||||||||||||||||||
December
31,
|
December
31,
|
June
30,
|
|||||||||||||||||||||||
2005
|
2004
|
2004
|
|||||||||||||||||||||||
Panhandle
Energy
|
|||||||||||||||||||||||||
Panhandle
Eastern Pipe Line
|
609
|
269
|
576
|
||||||||||||||||||||||
Trunkline
|
459
|
267
|
564
|
||||||||||||||||||||||
Sea
Robin
|
146
|
94
|
182
|
||||||||||||||||||||||
Trunkline
LNG Usage Volumes
|
108
|
92
|
217
|
||||||||||||||||||||||
CCE
Holdings (1)
|
|
|
|||||||||||||||||||||||
Transwestern
|
589
|
N/A
|
N/A
|
||||||||||||||||||||||
Florida
Gas
|
699
|
N/A
|
N/A
|
||||||||||||||||||||||
(1)
Represents
100 percent of Transwestern and Florida Gas versus the Company's
effective
equity ownership interest
|
|||||||||||||||||||||||||
of 50 percent and 25 percent, respectively.
|
Panhandle
Energy
|
||||||||||
Approximate Total Miles of Pipelines |
|
|||||||||
Panhandle
Eastern Pipe Line
|
6,500
|
|||||||||
Trunkline
|
3,500
|
|||||||||
Sea
Robin
|
450
|
|||||||||
Peak
Day Delivery Capacity (Bcf/d)
|
||||||||||
Panhandle
Eastern Pipe Line
|
2.8
|
|||||||||
Trunkline
|
1.5
|
|||||||||
Sea
Robin
|
1.0
|
|||||||||
Trunkline
LNG
|
1.3
|
|||||||||
Underground
Storage Capacity-Owned (Bcf)
|
72
|
|||||||||
Underground
Storage Capacity-Leased (Bcf)
|
16
|
|||||||||
Trunkline
LNG Terminal Storage Capacity (Bcf)
|
6.3
|
|||||||||
Average
Number of Transportation Customers
|
500
|
|||||||||
Weighted
Average Remaining Life of Firm Transportation Contracts
|
||||||||||
Panhandle
Eastern Pipe Line
|
3.0
|
|||||||||
Trunkline
|
10.5
|
|||||||||
Sea
Robin (1)
|
|
1.0
|
||||||||
Weighted
Average Remaining Life of Firm Storage Contracts
|
||||||||||
Panhandle
Eastern Pipe Line
|
2.5
|
|||||||||
Trunkline
|
0.3
|
|||||||||
CCE
Holdings (100 percent) (2)
|
||||||||||
Approximate
Total Miles of Pipelines
|
||||||||||
Transwestern
|
2,500
|
|||||||||
Florida
Gas
|
5,000
|
|||||||||
Peak
Day Delivery Capacity (Bcf/d)
|
||||||||||
Transwestern
|
2.1
|
|||||||||
Florida
Gas
|
2.1
|
|||||||||
Average
Number of Transportation Customers
|
||||||||||
Transwestern
|
55
|
|||||||||
Florida
Gas
|
110
|
|||||||||
Weighted
Average Remaining Life of Firm Transportation Contracts
|
||||||||||
Transwestern
|
3.6
|
|||||||||
Florida
Gas
|
10.3
|
|||||||||
(1)
Sea Robin firm transportation contracts have a one-year remaining
life but are evergreen
|
||||||||||
and are tied to the life of the gas reserves.
|
||||||||||
(2) Represents 100 percent of Transwestern and Florida Gas versus the Company's effective | ||||||||||
equity ownership interest of 50 percent and 25 percent,
respectively.
|
Percent
of
|
Weighted
|
||||||||||||
Revenues
|
average
life
|
||||||||||||
For
Year Ended
|
of
contracts at
|
||||||||||||
Customer
|
December
31, 2005 (5)
|
December
31, 2005
|
|||||||||||
BG
LNG Services (1)
|
17
|
%
|
18.1
|
||||||||||
ProLiance
|
16
|
2.7
|
|||||||||||
Ameren
Corp (2)
|
11
|
0.4
|
(4) |
|
|||||||||
CMS
Energy and affiliates (3)
|
8
|
3.3
|
|||||||||||
Other
top 10 customers
|
14
|
N/A
|
|||||||||||
Remaining
customers
|
34
|
N/A
|
|||||||||||
Total
percentage
|
100
|
%
|
(1) |
BG
LNG Services’ contracts will expand with the completion of Phase I and
Phase II. Phase I is currently expected to be completed late in the
first
quarter or early second quarter 2006. Phase II is expected to be
completed
by mid-2006. Phase I will provide an annual increase of gross reservation
revenues of approximately $39 million, $6 million of which was realized
during 2005 due to the expanded vaporization capacity associated
with the
Phase I project. Phase II will provide additional annual gross revenues
of
approximately $22 million. (See Item
8. Financial Statements and Supplementary Data, Note 16 - Regulation
and
Rates).
BG LNG Services’ transportation contract with Trunkline will increase in
volume proportionally with the Phase I and Phase II expansions and
is
expected to increase reservation revenues by $8 million and $5 million,
respectively, from 2005 firm transport levels.
|
(2) |
Primarily
these Ameren Corp subsidiaries are Union Electric, Central Illinois
Light
Company, Illinois Power and Central Illinois Public Service.
|
(3) |
Primarily
Consumers Energy contracts that originally were set to expire in
late 2005
but were amended and extended to 2008. These amended contracts will
result
in a reduction in CMS Energy’s revenue contribution to Panhandle Energy in
calendar year 2006, the first full year of effectiveness. If the
new
contract had been in effect for the full year ended December 31,
2005,
Panhandle Energy’s operating revenues would have been approximately $9
million lower.
|
(4) |
In
February 2006, certain expiring contracts with Ameren were renewed.
These
renewed contracts have a weighted average remaining life of 9.3
years.
|
(5) |
Panhandle
Energy has no single customer, or group of customers under common
control,
which accounted for ten percent or more of the Company’s total
consolidated operating revenues.
|
Percent
of
|
|||||||||||||
Transwestern's
|
|||||||||||||
Total
Operating
|
Remaining
|
||||||||||||
Revenues
|
average
life
|
||||||||||||
For
Year Ended
|
of
contracts at
|
||||||||||||
Customer
|
December
31, 2005 (1)
|
December
31, 2005
|
|||||||||||
Southern
California Gas Company
|
24
|
%
|
4.2
|
||||||||||
BP
Energy
|
14
|
4.0
|
|||||||||||
Pacific
Gas & Electric Company
|
11
|
1.2
|
|||||||||||
Other
top 10 customers
|
29
|
N/A
|
|||||||||||
Remaining
customers
|
22
|
N/A
|
|||||||||||
Total
percentage
|
100
|
%
|
|||||||||||
(1) |
The
Company accounts for its investment in CCE Holdings using the equity
method. Accordingly, it reports its share of CCE Holdings’ earnings,
including the Company’s share of Transwestern’s revenues, within
Earnings
from unconsolidated investments in
the Consolidated Statement of Operations.
|
Percent
of
|
|||||||||||||
Florida
Gas'
|
|||||||||||||
Total
Operating
|
Remaining
|
||||||||||||
Revenues
|
average
life
|
||||||||||||
For
Year Ended
|
of
contracts at
|
||||||||||||
Customer
|
December
31, 2005 (1)
|
December
31, 2005
|
|||||||||||
Florida
Power & Light
|
42
|
%
|
9.4
|
||||||||||
Tampa
Electric/Peoples Gas
|
16
|
11.0
|
|||||||||||
Other
top 10 customers
|
26
|
N/A
|
|||||||||||
Remaining
customers
|
16
|
N/A
|
|||||||||||
Total
percentage
|
100
|
%
|
|||||||||||
(1) |
The
Company accounts for its investment in CCE Holdings using the equity
method. Accordingly, it reports its share of CCE Holdings’ earnings,
including the Company’s share of Florida Gas’ revenues, within
Earnings
from unconsolidated investments
in
the Consolidated Statement of Operations.
|
Date
of Last
|
||||
Company
|
Rate
Filing
|
Status
|
||
Panhandle
Eastern Pipe Line
|
May
1992
|
Settlement
effective April 1997
|
||
Trunkline
|
January
1996
|
Settlement
effective May 2001
|
||
Sea
Robin
|
April
2001
|
Settlement
effective May 2002
|
||
Trunkline
LNG
|
June
2001
|
Settlement
effective January 2002
|
||
Southwest
Gas Storage
|
April
1989
|
Settlement
effective October 1989
|
||
Transwestern
|
November
1992
|
Settlement
effective April 1994; expected to file for new rates proposed
to be
effective November 2006
|
||
Florida
Gas
|
October
2003
|
Settlement
effective March 2005; moratorium in effect until October 2007,
required to
file by October 2009
|
Six
|
|||||||||||||
Year
Ended
|
Months
Ended
|
||||||||||||
December
31,
|
December
31,
|
Years
ended June 30,
|
|||||||||||
2005
|
2004
|
2004
|
2003
|
||||||||||
Average
number of customers:
|
|||||||||||||
Residential
|
432,627
|
429,292
|
432,037
|
430,861
|
|||||||||
Commercial
|
62,908
|
61,273
|
61,957
|
60,774
|
|||||||||
Industrial
|
101
|
98
|
95
|
99
|
|||||||||
Total
average customers served
|
495,636
|
490,663
|
494,089
|
491,734
|
|||||||||
Transportation
customers
|
931
|
879
|
786
|
461
|
|||||||||
Total
average gas sales and transportation customers
|
496,567
|
491,542
|
494,875
|
492,195
|
|||||||||
Gas
sales in millions of cubic feet (MMcf):
|
|||||||||||||
Residential
|
35,094
|
10,837
|
36,880
|
39,821
|
|||||||||
Commercial
|
15,335
|
5,082
|
16,026
|
17,399
|
|||||||||
Industrial
|
467
|
152
|
338
|
391
|
|||||||||
Gas
sales billed
|
50,896
|
16,071
|
53,244
|
57,611
|
|||||||||
Net
change in unbilled gas sales
|
308
|
3,503
|
112
|
61
|
|||||||||
Total
gas sales
|
51,204
|
19,574
|
53,356
|
57,672
|
|||||||||
Gas
transported
|
26,165
|
11,721
|
25,761
|
26,893
|
|||||||||
Total
gas sales and gas transported
|
77,369
|
31,295
|
79,117
|
84,565
|
|||||||||
Gas
sales revenues (In thousands of dollars):
|
|||||||||||||
Residential
|
$
|
441,897
|
$
|
139,086
|
$
|
395,350
|
$
|
337,293
|
|||||
Commercial
|
183,202
|
58,054
|
163,826
|
138,676
|
|||||||||
Industrial
|
9,633
|
1,923
|
3,943
|
3,930
|
|||||||||
Gas
revenues billed
|
634,732
|
199,063
|
563,119
|
479,899
|
|||||||||
Net
change in unbilled gas sales revenues
|
19,413
|
38,124
|
2,024
|
3,434
|
|||||||||
Total
gas sales revenues
|
654,145
|
237,187
|
565,143
|
483,333
|
|||||||||
Gas
transportation revenues
|
10,202
|
4,095
|
8,702
|
8,439
|
|||||||||
Other
revenues
|
7,665
|
4,261
|
7,013
|
5,017
|
|||||||||
Total
operating revenues
|
$
|
672,012
|
$
|
245,543
|
$
|
580,858
|
$
|
496,789
|
|||||
Weather:
|
|||||||||||||
Degree
days (a)
|
4,621
|
1,669
|
4,770
|
5,105
|
|||||||||
Percent
of 10-year measure (b)
|
89
|
%
|
81
|
%
|
92
|
%
|
98
|
%
|
|||||
Percent
of 30-year measure (b)
|
89
|
%
|
82
|
%
|
92
|
%
|
98
|
%
|
|||||
Six
|
|||||||||||||
Year
Ended
|
Months
Ended
|
||||||||||||
December
31,
|
December
31,
|
Years
ended June 30,
|
|||||||||||
2005
|
2004
|
2004
|
2003
|
||||||||||
Average
number of customers:
|
|||||||||||||
Residential
|
143,019
|
142,152
|
142,422
|
141,769
|
|||||||||
Commercial
|
14,735
|
14,469
|
14,384
|
14,141
|
|||||||||
Industrial
|
118
|
115
|
116
|
120
|
|||||||||
Public
authorities and other
|
347
|
345
|
340
|
337
|
|||||||||
Total
average customers served
|
158,219
|
157,081
|
157,262
|
156,367
|
|||||||||
Transportation
customers
|
575
|
586
|
602
|
613
|
|||||||||
Total
average gas sales and transportation customers
|
158,794
|
157,667
|
157,864
|
156,980
|
|||||||||
Gas
sales in millions of cubic feet (MMcf):
|
|||||||||||||
Residential
|
16,667
|
4,649
|
17,133
|
18,372
|
|||||||||
Commercial
|
6,631
|
2,130
|
6,505
|
6,732
|
|||||||||
Industrial
|
377
|
150
|
379
|
376
|
|||||||||
Public
authorities and other
|
314
|
99
|
290
|
334
|
|||||||||
Gas
sales billed
|
23,989
|
7,028
|
24,307
|
25,814
|
|||||||||
Net
change in unbilled gas sales
|
(159
|
)
|
1,955
|
34
|
4
|
||||||||
Total
gas sales
|
23,830
|
8,983
|
24,341
|
25,818
|
|||||||||
Gas
transported
|
23,935
|
11,679
|
26,007
|
28,366
|
|||||||||
Total
gas sales and gas transported
|
47,765
|
20,662
|
50,348
|
54,184
|
|||||||||
Gas
sales revenues (thousands of dollars):
|
|||||||||||||
Residential
|
$
|
207,823
|
$
|
60,119
|
$
|
183,941
|
$
|
175,337
|
|||||
Commercial
|
76,554
|
23,699
|
62,407
|
56,730
|
|||||||||
Industrial
|
4,158
|
1,512
|
3,376
|
2,895
|
|||||||||
Public
authorities and other
|
3,542
|
1,057
|
2,676
|
2,667
|
|||||||||
Gas
revenues billed
|
292,077
|
86,387
|
252,400
|
237,629
|
|||||||||
Net
change in unbilled gas sales revenues
|
6,514
|
20,310
|
929
|
135
|
|||||||||
Total
gas sales revenues
|
298,591
|
106,697
|
253,329
|
237,764
|
|||||||||
Gas
transportation revenues
|
12,861
|
5,968
|
13,872
|
15,389
|
|||||||||
Other
revenues
|
1,197
|
523
|
1,713
|
1,515
|
|||||||||
Total
operating revenues
|
$
|
312,649
|
$
|
113,188
|
$
|
268,914
|
$
|
254,668
|
|||||
Weather:
|
|||||||||||||
Degree
days (a)
|
6,288
|
2,301
|
6,240
|
6,654
|
|||||||||
Percent
of 10-year measure (b)
|
103
|
%
|
100
|
%
|
103
|
%
|
109
|
%
|
|||||
Percent
of 30-year measure (b)
|
100
|
%
|
98
|
%
|
100
|
%
|
106
|
%
|
Six
|
|||||||||||||
Year
Ended
|
Months
Ended
|
||||||||||||
December
31,
|
December
31,
|
Years
ended June 30,
|
|||||||||||
2005
|
2004
|
2004
|
2003
|
||||||||||
Average
number of customers:
|
|||||||||||||
Residential
|
269,463
|
270,051
|
269,926
|
268,312
|
|||||||||
Commercial
|
25,455
|
25,358
|
25,798
|
25,442
|
|||||||||
Industrial
and irrigation
|
205
|
207
|
226
|
225
|
|||||||||
Public
authorities and other
|
53
|
50
|
47
|
41
|
|||||||||
Total
average customers served
|
295,176
|
295,666
|
295,997
|
294,020
|
|||||||||
Transportation
customers
|
1,538
|
1,248
|
1,242
|
1,462
|
|||||||||
Total
average gas sales and transportation customers
|
296,714
|
296,914
|
297,239
|
295,482
|
|||||||||
Gas
sales in millions of cubic feet (MMcf):
|
|||||||||||||
Residential
|
23,154
|
6,633
|
24,194
|
25,481
|
|||||||||
Commercial
|
9,449
|
2,669
|
9,753
|
9,725
|
|||||||||
Industrial
and irrigation
|
2,135
|
1,234
|
1,968
|
2,055
|
|||||||||
Public
authorities and other
|
21
|
9
|
25
|
28
|
|||||||||
Gas
sales billed
|
34,759
|
10,545
|
35,940
|
37,289
|
|||||||||
Net
change in unbilled gas sales
|
(119
|
)
|
3,074
|
(1,366
|
)
|
1,336
|
|||||||
Total
gas sales
|
34,640
|
13,619
|
34,574
|
38,625
|
|||||||||
Gas
transported
|
9,392
|
3,859
|
9,080
|
10,959
|
|||||||||
Total
gas sales and gas transported
|
44,032
|
17,478
|
43,654
|
49,584
|
|||||||||
Gas
sales revenues (thousands of dollars):
|
|||||||||||||
Residential
|
$
|
341,329
|
$
|
97,734
|
$
|
307,534
|
$
|
290,370
|
|||||
Commercial
|
127,102
|
35,509
|
111,712
|
97,091
|
|||||||||
Industrial
and irrigation
|
24,494
|
11,581
|
16,542
|
15,045
|
|||||||||
Public
authorities and other
|
425
|
193
|
437
|
511
|
|||||||||
Gas
revenues billed
|
493,350
|
145,017
|
436,225
|
403,017
|
|||||||||
Net
change in unbilled gas sales revenues
|
8,427
|
36,914
|
5,231
|
(12,657
|
)
|
||||||||
Total
gas sales revenues
|
501,777
|
181,931
|
441,456
|
390,360
|
|||||||||
Gas
transportation revenues
|
15,021
|
5,952
|
11,835
|
14,906
|
|||||||||
Other
revenues
|
1,813
|
2,732
|
1,343
|
2,242
|
|||||||||
Total
operating revenues
|
$
|
518,611
|
$
|
190,615
|
$
|
454,634
|
$
|
407,508
|
|||||
Weather:
|
|||||||||||||
Degree
days (a)
|
5,801
|
2,004
|
5,644
|
6,143
|
|||||||||
Percent
of 10-year measure (b)
|
106
|
%
|
98
|
%
|
102
|
%
|
111
|
%
|
|||||
Percent
of 30-year measure (b)
|
101
|
%
|
96
|
%
|
98
|
%
|
107
|
%
|
Date
of Last
|
||||
Company
|
Rate
Filing
|
Status
|
||
Missouri
Gas Energy
|
September
2004
|
Effective
October 2004; potentially may file new rate case in April
2006
|
||
PG
Energy
|
December
2000
|
Effective
January 2001; potentially may file new rate case in April
2006
|
||
New
England Gas
|
May
2002
|
Effective
July 2002
|
||
Number
of employees
|
Expiration
of
|
||||
Company
|
Represented
by Unions
|
Current
Contract
|
|||
Missouri
Gas
|
|||||
Gas
Workers 781
|
193
|
April
30, 2009
|
|||
IBEW
Local 53
|
97
|
April
30, 2009
|
|||
PACE
Local 5-267
|
28
|
April
30, 2009
|
|||
USW
Local 12561, 14228
|
139
|
April
30, 2009
|
|||
PG
Energy
|
|||||
IBEW
Local 2244
|
57
|
July
31, 2006
|
|||
UWUA
Local 406, 407, 408, 529
|
117
|
March
31, 2007
|
|||
Panhandle
Energy
|
226
|
May
28, 2006
|
|||
New
England Gas
|
|||||
UWUA
Local 472, 431
|
133
|
April
1, 2006
|
|||
USWA
Local 12431-01, 12431-02
|
285
|
May
24, 2007
|
|||
· |
examine
and potentially acquire regulated or unregulated businesses, including
transportation and storage assets and gathering and processing businesses
within the natural gas industry;
|
· |
enter
into joint venture agreements and/or other transactions with other
industry participants or financial investors;
|
· |
selectively
divest parts of its business, including parts of its core operations;
and
|
· |
continue
expanding its existing operations.
|
· |
its
success in bidding for the opportunities;
|
· |
its
ability to assess the risks of the opportunities;
|
· |
its
ability to obtain regulatory approvals on favorable terms; and
|
· |
its
access to financing on acceptable terms.
|
· |
the
risk of diverting management's attention from day-to-day operations;
|
· |
the
risk that the acquired businesses will require substantial capital
and
financial investments;
|
· |
the
risk that the investments will fail to perform in accordance with
expectations; and
|
· |
the
risk of substantial difficulties in the transition and integration
process.
|
· |
future
weather conditions, including those that favor alternative energy
sources;
|
· |
the
market price of natural gas;
|
· |
price
competition;
|
· |
drilling
activity and supply availability;
|
· |
the
expiration of significant contracts;
|
· |
service
area competition; and
|
· |
regulatory
actions.
|
· |
changes
in demand for natural gas by the Company’s customers, in the composition
of the Company’s customer base and in the sources of natural gas available
to the Company;
|
· |
the
effects of inflation and the
timing and extent of changes in the prices and overall demand for
and
availability of natural gas as well as electricity, oil, coal and
other
bulk materials and chemicals;
|
· |
adverse
weather conditions, such as warmer than normal weather in the Company’s
service territories, and the operational impact of natural disasters
such
as Hurricanes Katrina and Rita;
|
· |
changes
in laws or regulations, third-party relations and approvals, decisions
of
courts, regulators and governmental bodies
affecting or involving Southern Union, including deregulation initiatives
and the impact of rate and tariff proceedings before FERC and various
state regulatory commissions;
|
· |
the
speed and degree to which additional competition is introduced to
Southern
Union’s business and the resulting effect on revenues;
|
· |
the
outcome of pending and future litigation;
|
· |
the
Company’s ability to comply with or to challenge successfully existing or
new environmental regulations;
|
· |
unanticipated
environmental liabilities;
|
· |
risks
relating to Southern Union’s recent acquisition of the Sid Richardson
Energy Services business, including without limitation, the Company’s
increased indebtedness resulting from that
acquisition;
|
· |
risks
relating to the completion of Southern Union’s pending divestitures of PG
Energy and the Rhode Island assets of New England Gas
Company;
|
· |
the
Company’s ability to acquire new businesses and assets and integrate those
operations into its existing operations, as well as its ability to
expand
its existing businesses and facilities;
|
· |
the
Company’s ability to control costs successfully and achieve operating
efficiencies, including the purchase and implementation of new
technologies for achieving such efficiencies;
|
· |
the
impact of factors affecting operations such as maintenance or repairs,
environmental incidents, gas pipeline system constraints and relations
with labor unions representing bargaining-unit employees;
|
· |
exposure
to customer concentration with a significant portion of revenues
realized
from a relatively small number of customers and any credit risks
associated with the financial position of those
customers;
|
· |
changes
in the ratings of the debt securities of Southern Union or any of
its
subsidiaries;
|
· |
changes
in interest rates and other general capital markets conditions, and
in
the Company’s ability to continue to access the capital
markets;
|
· |
acts
of nature, sabotage, terrorism or other acts causing damage greater
than
the Company’s insurance coverage limits;
|
· |
market
risks beyond the Company’s control affecting its risk management
activities including market liquidity, commodity price volatility
and
counterparty creditworthiness; and
|
· |
other
risks and unforeseen events.
|
$/Share
|
||||||||||
High
|
Low
|
|||||||||
January
1 to March 3, 2006
|
$25.21
|
$23.05
|
||||||||
(Quarter
Ended)
|
||||||||||
December
31, 2005
|
26.29
|
21.66
|
||||||||
September
30, 2005
|
25.82
|
23.35
|
||||||||
June
30, 2005
|
24.33
|
21.80
|
||||||||
March
31, 2005
|
25.48
|
20.77
|
||||||||
(Quarter
Ended)
|
||||||||||
December
31, 2004
|
23.78
|
19.52
|
||||||||
September
30, 2004
|
19.67
|
17.14
|
||||||||
June
30, 2004
|
19.37
|
17.12
|
||||||||
March
31, 2004
|
17.91
|
16.10
|
||||||||
Number
of Securities
|
Number
of Securities
|
||
to
be issued Upon
|
Weighted-Average
|
Remaining
Available for
|
|
Exercise
of
|
Exercise
Price of
|
Future
Issuance Under
|
|
Plan
Category
|
Outstanding
Options
|
Outstanding
Options
|
Equity
Compensation Plans
|
Plans
approved by stockholders
|
2,759,037
|
15.64
|
6,246,939
|
Period
|
Total
number of shares purchased
|
Average
price paid per share
|
Total
number of shares purchased as part of publicly announced plans
or
programs
|
Maximum
number (or approximate dollar value) of shares that may yet be
purchased
under the plans or programs
|
||||
11/9/2005
|
649,343
|
$23.15
|
N/A
|
N/A
|
||||
As
of and for the
|
As
of and for the
|
||||||||||||||||||
year
ended
|
six
months ended
|
||||||||||||||||||
December
31,
|
December
31,
|
As
of and for the years ended June 30,
|
|||||||||||||||||
2005
|
2004
(a)
|
2004
|
2003
(b)
|
2002
(c)
|
2001
(d)
|
||||||||||||||
(In
thousands of dollars, except per share amounts)
|
|||||||||||||||||||
Total
operating revenues
|
$
|
2,019,430
|
$
|
794,338
|
$
|
1,799,774
|
$
|
1,188,500
|
$
|
980,614
|
$
|
1,461,811
|
|||||||
Earnings
from unconsolidated
|
|||||||||||||||||||
investments
|
70,742
|
$
|
4,745
|
$
|
200
|
$
|
422
|
$
|
1,420
|
$
|
83
|
||||||||
Net
earnings:
|
|||||||||||||||||||
Continuing
operations (e)
|
3,318
|
6,088
|
101,339
|
43,669
|
1,520
|
40,159
|
|||||||||||||
Discontinued
operations (f)
|
-
|
-
|
-
|
32,520
|
18,104
|
16,524
|
|||||||||||||
Available
for common stockholders
|
3,318
|
6,088
|
101,339
|
76,189
|
19,624
|
57,285
|
|||||||||||||
Net
earnings per diluted
|
|||||||||||||||||||
common
share (g):
|
|||||||||||||||||||
Continuing
operations
|
0.03
|
0.07
|
1.24
|
0.66
|
0.02
|
0.60
|
|||||||||||||
Discontinued
operations
|
-
|
-
|
-
|
0.49
|
0.28
|
0.25
|
|||||||||||||
Available
for common stockholders
|
0.03
|
0.07
|
1.24
|
1.15
|
0.30
|
0.85
|
|||||||||||||
Total
assets
|
5,836,819
|
5,568,289
|
4,572,458
|
4,590,938
|
2,680,064
|
2,907,299
|
|||||||||||||
Stockholders’
equity
|
1,854,069
|
1,497,557
|
1,261,991
|
920,418
|
685,346
|
721,857
|
|||||||||||||
Current
portion of long-term debt and
|
|||||||||||||||||||
capital
lease obligation
|
126,648
|
89,650
|
99,997
|
734,752
|
108,203
|
5,913
|
|||||||||||||
Long-term
debt and capital lease
|
|||||||||||||||||||
obligation,
excluding current portion
|
2,049,141
|
2,070,353
|
2,154,615
|
1,611,653
|
1,082,210
|
1,329,631
|
|||||||||||||
Company-obligated
mandatorily
|
|||||||||||||||||||
redeemable
preferred securities
|
|||||||||||||||||||
of
subsidiary trust
|
-
|
-
|
-
|
100,000
|
100,000
|
100,000
|
|||||||||||||
Common
stock dividends (h)
|
-
|
-
|
-
|
-
|
-
|
-
|
(a) |
The
Company’s investment in CCE Holdings, which is accounted for using the
equity method, was included in the Company’s Consolidated Balance Sheet at
December 31, 2004. The Company’s share of net income from CCE Holdings has
been recorded as Earnings
from unconsolidated investments
in
the Company’s Consolidated Statement of Operations since its acquisition
on November 17, 2004. For these reasons, the Consolidated Statement
of
Operations for the periods subsequent to such acquisition is not
comparable to the year of acquisition.
|
(b) |
Panhandle
Energy was acquired on June 11, 2003 and was accounted for as a purchase.
The Panhandle Energy assets were included in the Company's Consolidated
Balance Sheet at June 30, 2003 and its results of operations have
been
included in the Company's Consolidated Statement of Operations since
its
acquisition on June 11, 2003. For these reasons, the Consolidated
Statement of Operations for the periods subsequent to such acquisition
is
not comparable to the year of
acquisition.
|
(c) |
Effective
July 1, 2001, the Company ceased amortization of goodwill pursuant
to the
FASB Statement No. 142,
Accounting for Goodwill and Other Intangible Assets. Goodwill,
which was previously classified on the Consolidated Balance Sheet
as
additional purchase cost assigned to utility plant and amortized
on a
straight-line basis over forty years, is now subject to at least
an annual
assessment for impairment by applying a fair-value based test.
Additionally, during the year ended June 30, 2002, the Company recorded
an
after-tax restructuring charge of $9 million. See Item
8. Financial Statements and Supplementary Data, Note 7 - Goodwill
and
Intangibles
and Note
14 - Employee Benefits.
|
(d) |
The
New England operations, formed through the acquisition of Providence
Energy Corporation and Fall River Gas Company on September 28, 2000,
and
Valley Resources, Inc. on September 20, 2000, were accounted for
as a
purchase. Their assets are included in the Company's Consolidated
Balance
Sheet at June 30, 2001 and their results of operations have been
included
in the Company's Consolidated Statement of Operations since their
respective acquisition dates. For these reasons, the Consolidated
Statement of Operations for the periods subsequent to such acquisitions
is
not comparable to the year of
acquisition.
|
(e) |
Net
earnings from continuing operations are net of dividends on preferred
stock of $17.4 million, $8.7 million and $12.7 million for the year
ended
December 31, 2005, the six months ended December 31, 2004 and the
year
ended June 30, 2004, respectively.
|
(f) |
On
January 1, 2003, ONEOK acquired the Company’s Texas Operations, which are
accounted for as discontinued operations in the Consolidated Statement
of
Operations for the respective periods presented in this document.
In
accordance with generally accepted accounting principles, Net
earnings from discontinued operations
do
not include any allocation of interest expense or other corporate
costs.
At the time of the sale, all outstanding debt of Southern Union Company
and subsidiaries was maintained at the corporate level, and no debt
was
assumed by ONEOK.
|
(g)
|
Earnings
per share for all periods presented were computed based on the
weighted
average number of shares of common stock and common stock equivalents
outstanding during the period adjusted for the five percent stock
dividends distributed on September 1, 2005, August 31, 2004, July
31,
2003, July 15, 2002 and August 30,
2001.
|
(h)
|
No
common stock cash dividends were paid during the periods reported.
See
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities -
Dividends.
|
· |
Effectively
managing the Company’s substantial base of energy infrastructure assets.
Southern
Union will continue to focus on increasing utilization and cost savings
while making prudent capital expenditures across its base of interstate
transmission assets. Since the Company’s acquisition of Panhandle Energy
and CCE Holdings’ acquisition of CrossCountry Energy, the Company has been
successful in reducing costs while integrating back-office and support
functions within the Company. Further, Southern Union will continue
to
focus each of its regulated operating units on meeting their allowable
rates of return by managing operating costs and capital spending,
without
sacrificing customer safety or quality of service. When appropriate,
the
Company will continue to seek rate increases within its interstate
transmission and gas distribution operations.
|
· |
Maintaining
an investment grade rating and credit profile while growing the business.
The
Company will continue to pursue opportunities to enhance its credit
profile through further diversification of both regulated and unregulated
cash flow and earnings sources and reduce its ratio of total debt
to total
capital over time in order to strengthen the Company’s balance sheet and
financial flexibility. In this regard, Southern Union’s acquisition of
Panhandle Energy in June 2003, CCE Holdings’ acquisition of
CrossCountry Energy in November 2004 and the acquisition of the Sid
Richardson Energy Services business in March 2006 diversified the
Company’s regulated and nonregulated cash flow and earnings sources. In
addition, the Company’s use of common stock, preferred stock and equity
units offerings and use of free cash flow has reduced the Company’s
indebtedness and enhanced its financial strength.
|
· |
Expanding
through development of the Company’s existing businesses.
To
complement the organic growth of its existing operations, the Company
will
continue to pursue growth opportunities through the expansion of
its
existing asset base. (See Item
1A. Risk Factors).
Following
is a summary of ongoing or planned expansion growth opportunities.
|
Estimated
|
Estimated
|
Company
|
Project
|
|||
Project
|
Annual
|
Projected
|
Ownership
|
Status
at
|
||
Project
Name
|
Capacity
|
Cost
(1)
|
EBIT
|
In
Service
|
Percentage
|
December
31, 2005
|
(In
thousands)
|
||||||
Projects
Related to Consolidated Operations
|
||||||
Trunkline
LNG Phase I
|
.57
Bcf/d
|
$137,000
|
$28,000
|
Late
first quarter or early
|
100%
|
Vaporization
in service,
|
2.7
Bcf storage
|
second
quarter 2006
|
remainder
under construction
|
||||
|
||||||
Trunkline
LNG Phase II
|
.6
Bcf/d
|
$82,000
|
$16,000
|
Mid
2006
|
100%
|
Under
construction
|
|
||||||
Trunkline
North Texas
|
.3
to .6 Bcf/d
|
$90,000
to $110,000
|
(2)
|
Late
2007
|
100%
|
Customer
negotiations
|
|
||||||
Trunkline
LNG Infrastructure
|
Ambient
Air
|
$250,000
to $280,000
|
(2)
|
Mid
2008
|
100%
|
Customer
negotiations
|
Enhancement
Project (IEP)
|
Vaporization
and
|
|||||
NGL
extraction
|
||||||
Projects
Related to Unconsolidated Investments
|
||||||
Florida
Gas Phase VII
|
.1
to .16 Bcf/d
|
$60,000
to $100,000
|
$6,000
to $14,000
|
Mid
2007
|
25%
|
Filed
with the FERC
|
Transwestern
Phoenix Expansion (3)
|
.5
Bcf/d
|
$500,000
to $600,000
|
(2)
|
Early
2008
|
50%
|
Commencing
development
|
(1)
Excludes capitalized interest and equity costs.
|
||||||
(2)
Amount is not currently determinable as related contractual discussions
are ongoing and/or the project economic analyses are still being
developed.
|
||||||
(3)
Project scope and structure under discussion with CCE Holdings
members.
|
||||||
· |
Selectively
acquiring businesses primarily within the natural gas industry.The
Company’s strategy for long-term growth includes acquiring assets that
will position it favorably in the evolving North American natural
gas
markets. Consistent with the Company’s acquisition of Panhandle Energy,
CCE Holdings’ acquisition of CrossCountry Energy and the March 1, 2006
acquisition of the Sid Richardson Energy Services business, the
Company
will continue to evaluate opportunities within the North American
energy
sector that will optimize stockholder value. As part of that evaluation,
the Company seeks to balance its ability to integrate newly acquired
assets with
its ability to maintain an investment grade rating while providing
growth
in earnings and cash flow.
|
Year
Ended December 31,
|
Six
Months Ended December 31,
|
Years
Ended June 30,
|
|||||||||||||||||
2004
|
2003
|
|
|||||||||||||||||
2005
|
(Unaudited)
|
2004
|
(Unaudited)
|
2004
|
2003
|
||||||||||||||
(In
thousands)
|
|||||||||||||||||||
EBIT:
|
|||||||||||||||||||
Transportation
and storage segment
|
$
|
281,344
|
$
|
198,422
|
$
|
94,971
|
$
|
96,212
|
$ |
200,912
|
$
|
9,699
|
|||||||
Distribution
segment
|
(43,928
|
)
|
106,178
|
19,330
|
34,953
|
120,838
|
144,971
|
||||||||||||
Corporate
and other
|
(10,699
|
)
|
(23,685
|
)
|
(20,705
|
)
|
(7,488
|
)
|
(10,755
|
)
|
6,095
|
||||||||
Total
EBIT
|
226,717
|
280,915
|
93,596
|
123,677
|
310,995
|
160,765
|
|||||||||||||
Interest
|
135,157
|
126,166
|
64,898
|
66,600
|
127,867
|
83,343
|
|||||||||||||
Dividends
on preferred securities of subsidiary trust
|
-
|
-
|
-
|
-
|
-
|
9,480
|
|||||||||||||
Earnings
from continuing operations before income taxes
|
91,560
|
154,749
|
28,698
|
57,077
|
183,128
|
67,942
|
|||||||||||||
Federal
and state income taxes
|
70,877
|
60,668
|
13,927
|
22,362
|
69,103
|
24,273
|
|||||||||||||
Net
earnings from continuing operations
|
20,683
|
94,081
|
14,771
|
34,715
|
114,025
|
43,669
|
|||||||||||||
Net
earnings from discontinued operations
|
-
|
-
|
-
|
-
|
-
|
32,520
|
|||||||||||||
Preferred
stock dividends
|
17,365
|
17,365
|
8,683
|
4,004
|
12,686
|
-
|
|||||||||||||
Net
earnings available for common stockholders
|
$
|
3,318
|
$
|
76,716
|
$
|
6,088
|
$
|
30,711
|
$ |
101,339
|
$
|
76,189
|
|||||||
Years
Ended
|
Six
Months Ended
|
Years
Ended
|
|||||||||||||||||
December
31,
|
December
31,
|
June
30,
|
|||||||||||||||||
2004
|
2003
|
||||||||||||||||||
Transportation
and Storage Segment
|
2005
|
(Unaudited)
|
2004
|
(Unaudited)
|
2004
|
2003
|
|||||||||||||
(In
thousands)
|
|||||||||||||||||||
Operating
revenues
|
$
|
505,233
|
$
|
489,164
|
$
|
242,743
|
$
|
244,473
|
$
|
490,883
|
$
|
24,522
|
|||||||
Operating
expenses
|
204,711
|
212,106
|
109,796
|
107,796
|
210,105
|
10,102
|
|||||||||||||
Depreciation
and amortization
|
62,171
|
56,989
|
30,159
|
33,158
|
59,988
|
3,197
|
|||||||||||||
Taxes
other than on income and revenues
|
28,196
|
26,867
|
12,667
|
13,089
|
27,288
|
1,595
|
|||||||||||||
Total
operating income
|
210,155
|
193,202
|
90,121
|
90,430
|
193,502
|
9,628
|
|||||||||||||
Earnings
from unconsolidated investments
|
70,618
|
4,861
|
4,761
|
90
|
200
|
7
|
|||||||||||||
Other
income (expense), net
|
571
|
359
|
89
|
5,692
|
7,210
|
64
|
|||||||||||||
EBIT
|
$
|
281,344
|
$
|
198,422
|
$
|
94,971
|
$
|
96,212
|
$
|
200,912
|
$
|
9,699
|
|||||||
· |
Higher
transportation and storage revenue of approximately $11.5 million
primarily due to:
|
o |
An
$8.8 million increase on Panhandle Eastern Pipe Line, reflecting
higher
average reservation rates on new contracts;
|
o |
A
$7.4 million increase in Trunkline reservation revenues primarily
related
to the pipeline loop facilities extending from the Trunkline LNG
terminal,
which went into service in the third quarter of
2005.
|
o |
Decreased
commodity revenues on Trunkline of $2.3 million due to a reduction
in
commodity volumes of six percent resulting from lower market spreads;
and
|
o |
Impacts
of Hurricane Rita, which significantly reduced volumes flowing on
Sea
Robin and caused shutdowns of liquids production, resulting in
approximately $3 million of revenue decreases. Management estimates
further revenue reductions of approximately $2 million will be experienced
in 2006 as a result of the hurricanes, plus an estimated $8 million
to $12
million in lost opportunity revenues from delayed LNG expansion in-service
dates which were affected by the hurricanes and other technical
issues;
|
· |
Higher
LNG terminalling revenue of $6 million primarily due to expanded
vaporization capacity and a base capacity increase on the BG LNG
contract,
partially offset by lower volumes resulting from fewer
cargoes;
|
· |
A
reduction in certain administrative and operating expenses of
approximately $6.9 million primarily due to synergies associated
with the
workforce reduction undertaken in the fourth quarter of 2004 associated
with the integration of CrossCountry Energy,
LLC;
|
· |
A
decrease of approximately $3.8 million in operating expenses due
to a
change in vacation pay practice and a corresponding accrual
reduction;
|
· |
A
decrease of approximately $3.4 million of benefit costs primarily
due to
headcount reductions and lower postretirement costs due to enactment
of
Medicare Part D reimbursements;
|
· |
Incurrence
of approximately $1.7 million of severance-related costs in 2004
associated with the CrossCountry Energy integration;
and
|
· |
Lower
LNG power costs of approximately $1.5 million due to lower LNG volumes
received in 2005.
|
· |
The
higher net recovery of previously under-recovered fuel volumes of
approximately $4.2 million in 2004;
|
· |
Higher
expense of approximately $7 million of damages directly associated
with
Hurricanes Katrina and Rita;
|
· |
Higher
depreciation and amortization of $5.2 million primarily due to normal
property, plant and equipment growth of approximately $2 million
and a
$3.2 million acquisition adjustment recorded by Southern Union in
2004
reducing customer contracts value and related amortization;
and
|
· |
An
increase of $1.4 million in property tax assessments related to higher
utility income.
|
· |
Recognition
of a $6.1 million non-recurring gain in 2003 on the early extinguishment
of debt;
|
· |
Reservation
revenues were $4.6 million lower in 2004 primarily due to the replacement
of expired Trunkline contracts during 2004 at lower average reservation
rates than were in effect in 2003 due to market driven
factors;
|
· |
LNG
terminalling revenues were $1.6 million lower due to decreased volumes
received;
|
· |
Net
commodity revenues increased in 2004 by $4.1 million primarily due
to
higher parking revenue of $6.5 million, partially offset by the impact
of
a six percent reduction in throughput volumes associated with a cooler
winter during 2003 versus 2004. Commodity revenues are dependent
upon a
number of variable factors, including weather, storage levels and
customer
demand for firm, interruptible and parking
services;
|
· |
Operating
expenses were higher by $2 million in 2004 primarily due to increased
insurance and severance-related costs of $3 million and $1.7 million,
respectively, partially offset by the net over-recovery of approximately
$2 million in 2004 of previously under-recovered fuel volumes and
a $1.3
million reduction in contract storage expenses due to a reduction
in
contracted storage capacity;
|
· |
Decrease
in depreciation and amortization expense of $3 million in 2004 versus
2003
was primarily due to preliminary purchase price allocations used
in 2003
that were subsequently revised in 2004;
and
|
· |
Realization
of equity earnings from CCE Holdings of $4.6 million for the period
subsequent to the acquisition on November 17,
2004.
|
Years
Ended
|
Six
Months Ended
|
Years
Ended
|
|||||||||||||||||
December
31,
|
December
31,
|
June
30,
|
|||||||||||||||||
2004
|
2003
|
||||||||||||||||||
Distribution
Segment
|
2005
|
(Unaudited)
|
2004
|
(Unaudited)
|
2004
|
2003
|
|||||||||||||
(In
thousands)
|
|||||||||||||||||||
Net
operating revenue (1)
|
$
|
411,547
|
$
|
402,505
|
$
|
170,420
|
$
|
163,288
|
$
|
395,373
|
$
|
394,760
|
|||||||
Operating
expense, excluding goodwill impairment
|
201,736
|
209,200
|
104,295
|
89,489
|
194,394
|
171,463
|
|||||||||||||
Depreciation
and amortization
|
63,278
|
60,849
|
32,511
|
29,263
|
57,601
|
56,396
|
|||||||||||||
Goodwill
impairment
|
175,000
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
Taxes
other than on income and revenues
|
14,009
|
27,082
|
14,218
|
11,620
|
24,484
|
24,139
|
|||||||||||||
Total
operating income (loss)
|
(42,476
|
)
|
105,374
|
19,396
|
32,916
|
118,894
|
142,762
|
||||||||||||
Other
income (expense), net
|
(1,452
|
)
|
804
|
(66
|
)
|
2,037
|
1,944
|
2,209
|
|||||||||||
EBIT
|
$
|
(43,928
|
)
|
$
|
106,178
|
$
|
19,330
|
$
|
34,953
|
$
|
120,838
|
$
|
144,971
|
||||||
(1)
Operating revenues for the Distribution segment are reported net
of
Cost
of gas and other energy
and Revenue-related
taxes,
|
|||||||||||||||||||
which are pass through costs.
|
|||||||||||||||||||
· |
Net
operating revenues increased by approximately $9 million primarily
due to
Missouri Gas Energy’s higher average rates in 2005 based on the $22.4
million MPSC base revenue rate order authorization in October
2004;
|
· |
Operating
expenses were lower by $7.5 million primarily due to the net deferral
of
approximately $6.6 million of pension expense for Missouri Gas Energy
associated with the October 2004 MPSC rate order authorization and
approximately $3.3 million of lower bad debt expense primarily as
a result
of more aggressive collection efforts in 2005, partially offset by
approximately $2.3 million of insurance costs primarily due to higher
claims in 2005;
|
· |
Depreciation
and amortization were higher by approximately $2.5 million primarily
due
to normal growth in plant and the implementation of certain financial
information systems in the first quarter of 2005;
and
|
· |
Taxes
other than on income and revenues were approximately $13.1 million
lower
primarily due to property tax refunds for the years 2002 to 2004
received
by Missour Gas Energy during 2005.
|
· |
Environmental
site remediation costs were higher in the 2004 period by approximately
$6.6 million primarily due to mercury remediation costs at New England
Gas
Company;
|
· |
Bad
debt expense increased $3.4 million resulting from the aging of higher
customer receivables due to higher gas
prices;
|
· |
Outside
service costs increased $2.5 million in the 2004 period for costs
related
to increased collection agency fees, distribution system inspection
fees
and fees associated with Sarbanes-Oxley documentation and compliance
efforts;
|
· |
An
increase of $2.3 million in other net operating costs primarily due
to
general wage increases, increased overtime costs associated with
distribution system maintenance and Sarbanes-Oxley related
costs;
|
· |
Higher
depreciation and amortization expense principally related to a charge
of
$3.2 million taken in the 2004 period to write off certain capitalized
software costs, in addition to normal plant
growth;
|
· |
Taxes
other than on income and revenues, principally consisting of property,
payroll and state franchise taxes, increased $2.6 million, primarily
due
to a $2 million increase in the 2004 period in property taxes in
the
Company’s Missouri service
territory.
|
· |
Pension
and other postretirement benefit costs increased $8.9 million in
the 2004
period primarily due to the impact of stock market volatility on
plan
assets;
|
· |
Bad
debt expense increased by $6.4 million in the 2004 period due to
higher
customer receivables resulting from increased gas prices;
and
|
· |
Increased
medical and insurance premiums of $1.6 million and $1.5 million,
respectively.
|
· |
Recognition
of a $4.3 million management fee for services provided under the
Management Agreement with CCE
Holdings;
|
· |
The
incurrence in 2004 of a charge of $16.4 million for an
other-than-temporary impairment of the Company’s investment in a
technology company;
|
· |
A
$1.5 million charge in 2004 related to a sales and use tax
audit;
|
· |
A
charge of $3 million recorded by PEI Power Corporation in 2004 to
provide
for estimated debt service payments in excess of projected tax revenues
for the incremental financing obtained for the development of PEI
Power
Park;
|
· |
Additional
charges of $6.3 million recorded in 2005 to reserve for an
other-than-temporary impairment of the Company’s investments in technology
companies;
|
· |
Noncash
compensation expense incurred in 2005 totaling $3.8 million related
to
separation agreements with former executives of the Company;
and
|
· |
Increased
pension expense incurred in 2005 of $3.1 million, including $1.3
million
of curtailment losses from a plan termination and a $1.1 million
curtailment loss associated with a payment obligation to a former
executive of the Company.
|
· |
A
charge of $16.4 million in 2004 for an other-than-temporary impairment
of
the Company’s investment in a technology company;
|
· |
A
charge of $1.5 million recorded by PEI Power Corporation in 2004
to
provide for estimated future debt service payments in excess of projected
tax revenues for the tax incremental financing obtained for the
development of PEI Power Park; and
|
· |
Charges
of $1.6 million and $1.2 million recorded in the 2003 period for
an
other-than-temporary impairment of the Company’s investments in a
technology company and an energy-related joint venture,
respectively.
|
· |
Gain
of $22.5 million recorded in fiscal year 2003 on the settlement of
the
Southwest litigation, partially offset by $6 million of related legal
costs; and
|
· |
Charges
of $3 million recorded by PEI Power Corporation in fiscal year 2004
to
provide for estimated future debt service payments in excess of projected
tax revenues for the tax incremental financing obtained for the
development of PEI Power Park.
|
· |
Increased
interest expense of $3.9 million related to the issuance of the Company’s
4.375% Senior Notes in February
2005;
|
· |
Increased
interest expense of $6.5 million related to increased costs for borrowings
under the Company’s credit agreements, primarily due to the increase in
the average amount of short-term debt outstanding from $125.8 million
in
2004 to $234.2 million in 2005, principally as a result of increases
in
the cost of natural gas purchased for the Distribution operations,
and the
increase in the average interest rate on such debt from 2.2% in 2004
to
4.0% in 2005;
|
· |
Increased
interest expense of $373,000 recorded in 2004 related to the $407
million
bridge loan used to finance a portion of the Company’s investment in CCE
Holdings; and
|
· |
Decreased
interest expense of $2.1 million on the $311.1 million bank note
(2002
Term Note)
primarily due to the $76.1 million payoff of the 2002 Term Note in
June
2005.
|
· |
Dividends
on Preferred Securities decreased $3.2 million due to the redemption
of
the Preferred Securities on October 31, 2003 (see
Item 8. Financial Statements and Supplementary Data, Note 12 - Preferred
Securities);
|
· |
Decreased
interest expense of $530,000 on the 2002 Term Note due to the
principal repayment of $85
million on the 2002 Term Note since December 31,
2003;
|
· |
Increased
interest expense of $2.7 million recorded in 2004 related to the
$407
million bridge loan used to finance a portion of the Company’s investment
in CCE Holdings;
|
· |
Increased
interest expense in 2004 on Panhandle Energy’s debt of $801,000 (net of
amortization of debt premiums established in purchase accounting
related
to the Panhandle Energy acquisition);
and
|
· |
Lower
interest expense on short-term debt primarily due to the decrease
in the
average amount of short-term debt outstanding from $240.3 million
during
2003 to $121.7 million during 2004. The decrease in the average amount
of
short-term debt outstanding was primarily due to cash generated from
operations and the excess proceeds from capital market issuances
over the
amounts used for the redemption of
securities.
|
· |
Interest
expense of $47.6 million (net of $10.8 million of amortization of
debt
premiums established in purchase accounting related to the Panhandle
Energy acquisition) on Panhandle Energy debt realized for the full
fiscal
year period versus $2.1 million applicable to the post-acquisition
period
of 19 days during fiscal year 2003 ;
and
|
· |
Dividends
on preferred securities of the Company’s subsidiary trust of $3.2 million,
which were required to be classified as interest expense pursuant
to FASB
Statement No. 150, Accounting
for Certain Financial Instruments with Characteristics of both Liabilities
and Equity,
upon adoption by the Company effective July 1, 2003.
|
Year
|
Six
months
|
Year
|
Year
|
||||||||||
Ended
|
Ended
|
Ended
|
Ended
|
||||||||||
December
31,
|
December
31,
|
June
30,
|
June
30,
|
||||||||||
Property,
Plant and Equipment Additions
|
2005
|
2004
|
2004
|
2003
|
|||||||||
(In
thousands)
|
|||||||||||||
Transportation
and Storage Segment
|
|||||||||||||
LNG
Terminal Expansions
|
$
|
75,263
|
$
|
51,751
|
$
|
65,260
|
$
|
-
|
|||||
Trunkline
LNG Loop
|
25,329
|
17,647
|
3,675
|
-
|
|||||||||
Pipeline
Integrity
|
21,816
|
11,278
|
18,378
|
-
|
|||||||||
System
Reliability
|
22,637
|
8,296
|
17,179
|
-
|
|||||||||
Information
Technology
|
6,162
|
2,762
|
10,696
|
-
|
|||||||||
Other
|
38,208
|
20,152
|
16,190
|
5,128
|
(1) | ||||||||
Total
|
189,415
|
111,886
|
131,378
|
5,128
|
|||||||||
Distribution
Segment
|
|||||||||||||
Missouri
Safety Program
|
11,426
|
4,653
|
6,878
|
9,094
|
|||||||||
Other,
primarily system replacement and expansion
|
73,470
|
51,789
|
71,913
|
58,233
|
|||||||||
Total
|
84,896
|
56,442
|
78,791
|
67,327
|
|||||||||
Corporate
and other
|
2,306
|
10,109
|
15,884
|
7,275
|
|||||||||
Total
(2)
|
$
|
276,617
|
$
|
178,437
|
$
|
226,053
|
$
|
79,730
|
|||||
(1)
Represents Panhandle Energy's property, plant and equipment additions
for
the period from June 12 to June 30, 2003.
|
|||||||||||||
(2)
Includes net capital accruals totaling $(3.1) million, $7.8 million,
$12.1
million and $(248,000) for the year ended
|
|||||||||||||
December
31, 2005, six-month period ended December 31, 2004 and years ended
June
30, 2004 and 2003, respectively.
|
|||||||||||||
Contractual
Obligations (In thousands)
|
||||||||||||||||||||||
2011
and
|
||||||||||||||||||||||
Total
|
2006
|
2007
|
2008
|
2009
|
2010
|
thereafter
|
||||||||||||||||
Long-term
debt,
|
||||||||||||||||||||||
including
capital leases (1) (2)
|
$
|
2,169,238
|
$
|
126,648
|
$
|
457,274
|
$
|
401,646
|
$
|
61,998
|
$
|
41,875
|
$
|
1,079,797
|
||||||||
Short-term
borrowing,
|
||||||||||||||||||||||
including
credit facilities (1)
|
420,000
|
420,000
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Gas
purchases (3)
|
1,778,806
|
602,564
|
444,262
|
283,041
|
239,058
|
185,913
|
23,968
|
|||||||||||||||
Missouri
Gas Energy Safety Program
|
144,801
|
10,453
|
9,729
|
9,826
|
9,924
|
10,024
|
94,845
|
|||||||||||||||
Transportation
contracts
|
398,014
|
67,629
|
66,368
|
66,368
|
62,504
|
48,395
|
86,750
|
|||||||||||||||
Storage
contracts (4)
|
348,365
|
65,122
|
63,330
|
53,937
|
48,574
|
45,674
|
71,728
|
|||||||||||||||
LNG
terminal expansion
|
32,091
|
32,091
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Operating
lease payments
|
107,237
|
21,676
|
19,524
|
14,472
|
11,604
|
10,822
|
29,139
|
|||||||||||||||
Interest
payments on debt
|
1,739,444
|
139,596
|
116,150
|
104,969
|
94,096
|
89,406
|
1,195,227
|
|||||||||||||||
Benefit
plan contributions
|
32,575
|
32,575
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||
Non-trading
derivative liabilities
|
5,725
|
3,244
|
2,481
|
-
|
-
|
-
|
-
|
|||||||||||||||
Total
contractual cash obligations
|
$
|
7,176,296
|
$
|
1,521,598
|
$
|
1,179,118
|
$
|
934,259
|
$
|
527,758
|
$
|
432,109
|
$
|
2,581,454
|
||||||||
(1) |
The
Company is party to certain debt agreements containing certain covenants
that if not satisfied would be an event of default that would cause
such
debt to become immediately due and payable. Such covenants require
the
Company to maintain a certain level of net worth, to meet certain
debt to
total capitalization ratios, and to meet certain ratios of earnings
before
depreciation, interest and taxes to cash interest expense. See
Item
8. Financial Statements and Supplementary Data, Note 13 - Debt and
Capital
Leases.
|
(2) |
The
long-term debt cash obligations exclude $12.2 million of unamortized
debt
premium as of December 31, 2005.
|
(3) |
The
Company has purchase gas tariffs in effect for all its utility service
areas that provide for recovery of its purchased gas costs under
defined
methodologies.
|
(4) |
Charges
for third party storage capacity.
|
· |
the
Redevelopment Authority of Lackawanna County raise $10.6 million
of funds
to be used for infrastructure improvements of PEI Power Park;
|
· |
the
Taxing Authorities create a tax increment district and use the incremental
tax revenues generated from new development to service the $10.6
million
debt; and
|
· |
PEI
Power Corporation, a subsidiary of the Company, guarantee the debt
service
payments.
|
· |
Pertain
to the maintenance of records in reasonable detail to accurately
and
fairly reflect the transactions and dispositions of the assets of
the
Company;
|
· |
Provide
reasonable assurance that transactions are recorded as necessary
to permit
preparation of financial statements in accordance with generally
accepted
accounting principles, and that receipts and expenditures of the
Company
are being made only in accordance with authorizations of management
and
directors of the Company; and
|
· |
Provide
reasonable assurance regarding the prevention or timely detection
of
unauthorized acquisition, use or disposition of the Company’s assets that
could have a material effect on the financial
statements.
|
Code
of Ethics and Business Conduct.
|
Independent
Registered Public Accounting Firm Preferability
Letter
|
Subsidiaries
of the Registrant.
|
Consent
of Independent Registered Public Accounting Firm.
|
Power
of Attorney.
|
Certificate
by Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)
promulgated under the Securities Exchange Act of 1934, as adopted
pursuant
to Section 302 of the Sarbanes-Oxley Act of
2002.
|
Certificate
by Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)
promulgated under the Securities Exchange Act of 1934, as adopted
pursuant
to Section 302 of the Sarbanes-Oxley Act of
2002.
|
32.1 |
Certificate
by Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b)
promulgated under the Securities Exchange Act of 1934 and Section
906 of
the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
1350.
|
32.2 |
Certificate
by Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b)
promulgated under the Securities Exchange Act of 1934 and Section
906 of
the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section
1350.
|
/s/
GEORGE L. LINDEMANN*
George
L. Lindemann
|
Chairman
of the Board, President and
Chief
Executive Officer
(Principal
Executive Officer)
|
/s/
Julie H. Edwards
Julie
H. Edwards
|
Senior
Vice President and Chief Financial Officer
(Principal
Financial Officer)
|
/s/
George E. Aldrich
George
E. Aldrich
|
Vice
President and Controller
(Chief
Accounting Officer)
|
/s/
David Brodsky *
David
Brodsky
|
Director
|
/s/ Frank W. Denius*
Frank W. Denius
|
Director |
/s/ Kurt A. Gitter,
M.D.*
Kurt
A. Gitter, M.D.
|
Director |
/s/ Herbert H. Jacobi*
Herbert
H. Jacobi
|
Director |
/s/ Adam M. Lindemann *
Adam M. Lindemann
|
Director |
/s/ Thomas N. McCarter,
III *
Thomas N. McCarter, III
|
Director |
/s/ George Rountree,
III*
George
Rountree,
III
|
Director |
/s/ Allan D. Scherer*
Allan
Scherer
|
Director |
*By:
/s/
JULIE H. EDWARDS
Julie
H. Edwards
Senior
Vice
President and
Chief Financial
Officer
Attorney-in-fact
|
*By: /s/
ROBERT M. KERRIGAN, III
Robert
M. Kerrigan, III
Vice President, Assistant General
Counsel
and
Secretary
Attorney-in-fact
|
Financial
Statements and Supplementary Data:
|
Page(s):
|
Consolidated
Statement of Operations - year ended December 31, 2005, six months
ended
|
|
December
31, 2004 and years ended June 30, 2004 and 2003
|
F-2
|
Consolidated
Balance Sheet - December 31, 2005 and December 31, 2004
|
F-3
- F-4
|
Consolidated
Statement of Cash Flows - year ended December 31, 2005, six months
ended
|
|
December
31, 2004 and years ended June 30, 2004 and 2003
|
F-5
|
Consolidated
Statement of Stockholders’ Equity and Comprehensive Income
-
|
|
year
ended December 31, 2005, six months ended December 31, 2004 and years
ended
|
|
June
30, 2004 and 2003
|
F-6
- F-7
|
Notes
to Consolidated Financial Statements
|
F-8
|
Report
of Independent Registered Public Accounting Firm
|
F-64
|
Year
Ended
|
Six
Months Ended
|
Year
Ended
|
Year
Ended
|
||||||||||
December
31,
|
December
31,
|
June
30,
|
June
30,
|
||||||||||
2005
|
2004
|
2004
|
2003
|
||||||||||
(In
thousands of dollars, except shares and per share amounts)
|
|||||||||||||
Operating
revenues:
|
|||||||||||||
Gas
distribution
|
$
|
1,503,272
|
$
|
549,346
|
$
|
1,304,405
|
$
|
1,158,964
|
|||||
Gas
transportation and storage
|
505,233
|
242,743
|
490,883
|
24,522
|
|||||||||
Other
|
10,925
|
2,249
|
4,486
|
5,014
|
|||||||||
Total
operating revenues
|
2,019,430
|
794,338
|
1,799,774
|
1,188,500
|
|||||||||
Operating
expenses:
|
|||||||||||||
Cost
of gas and other energy
|
1,040,956
|
361,256
|
864,438
|
724,611
|
|||||||||
Revenue-related
taxes
|
51,857
|
18,037
|
45,395
|
40,485
|
|||||||||
Operating,
maintenance and general
|
417,663
|
217,967
|
411,811
|
193,745
|
|||||||||
Depreciation
and amortization
|
126,393
|
63,376
|
118,755
|
60,642
|
|||||||||
Goodwill
impairment (Note 7)
|
175,000
|
-
|
-
|
-
|
|||||||||
Taxes,
other than on income and revenues
|
44,517
|
26,771
|
54,048
|
26,653
|
|||||||||
Total
operating expenses
|
1,856,386
|
687,407
|
1,494,447
|
1,046,136
|
|||||||||
Operating
income
|
163,044
|
106,931
|
305,327
|
142,364
|
|||||||||
Other
income (expenses):
|
|||||||||||||
Interest
|
(135,157
|
)
|
(64,898
|
)
|
(127,867
|
)
|
(83,343
|
)
|
|||||
Earnings
from unconsolidated investments
|
70,742
|
4,745
|
200
|
422
|
|||||||||
Dividends
on preferred securities of subsidiary trust
|
-
|
-
|
-
|
(9,480
|
)
|
||||||||
Other,
net (Note 4)
|
(7,069
|
)
|
(18,080
|
)
|
5,468
|
17,979
|
|||||||
Total
other expenses, net
|
(71,484
|
)
|
(78,233
|
)
|
(122,199
|
)
|
(74,422
|
)
|
|||||
Earnings
from continuing operations before income taxes
|
91,560
|
28,698
|
183,128
|
67,942
|
|||||||||
Federal
and state income taxes
|
70,877
|
13,927
|
69,103
|
24,273
|
|||||||||
Net
earnings from continuing operations
|
20,683
|
14,771
|
114,025
|
43,669
|
|||||||||
Discontinued
operations (Note 19):
|
|||||||||||||
Earnings
from discontinued operations before
|
|||||||||||||
income
taxes
|
-
|
-
|
-
|
84,773
|
|||||||||
Federal
and state income taxes
|
-
|
-
|
-
|
52,253
|
|||||||||
Net
earnings from discontinued operations
|
-
|
-
|
-
|
32,520
|
|||||||||
Net
earnings
|
20,683
|
14,771
|
114,025
|
76,189
|
|||||||||
Preferred
stock dividends
|
(17,365
|
)
|
(8,683
|
)
|
(12,686
|
)
|
-
|
||||||
Net
earnings available for common stockholders
|
$
|
3,318
|
$
|
6,088
|
$
|
101,339
|
$
|
76,189
|
|||||
Net
earnings available for common stockholders from
|
|||||||||||||
continuing
operations per share (Note 5):
|
|||||||||||||
Basic
|
$
|
0.03
|
$
|
0.07
|
$
|
1.26
|
$
|
0.67
|
|||||
Diluted
|
$
|
0.03
|
$
|
0.07
|
$
|
1.24
|
$
|
0.66
|
|||||
Net
earnings available for common stockholders per
|
|||||||||||||
share
(Note 5):
|
|||||||||||||
Basic
|
$
|
0.03
|
$
|
0.07
|
$
|
1.26
|
$
|
1.17
|
|||||
Diluted
|
$
|
0.03
|
$
|
0.07
|
$
|
1.24
|
$
|
1.15
|
|||||
Weighted
average shares outstanding (Note 5):
|
|||||||||||||
Basic
|
109,395,418
|
87,313,787
|
80,431,988
|
64,949,776
|
|||||||||
Diluted
|
112,794,210
|
89,717,427
|
81,479,503
|
66,025,488
|
December
31,
|
December
31,
|
||||||
2005
|
2004
|
||||||
(In
thousands of dollars)
|
|||||||
Property,
plant and equipment (Note 6):
|
|||||||
Plant
in service
|
$
|
4,183,280
|
$
|
3,869,221
|
|||
Construction
work in progress
|
184,423
|
237,283
|
|||||
|
4,367,703
|
4,106,504
|
|||||
Less
accumulated depreciation and amortization
|
(881,763
|
)
|
(778,876
|
)
|
|||
Net
property, plant and equipment
|
3,485,940
|
3,327,628
|
|||||
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
16,938
|
30,053
|
|||||
Accounts
receivable, billed and unbilled,
|
|||||||
net
of allowances of $15,893 and $15,424, respectively
|
428,735
|
322,888
|
|||||
Accounts
receivable – affiliates
|
8,827
|
10,604
|
|||||
Inventories
|
295,658
|
267,136
|
|||||
Gas
imbalances - receivable
|
105,233
|
36,122
|
|||||
Prepayments
and other assets
|
68,382
|
45,705
|
|||||
Total
current assets
|
923,773
|
712,508
|
|||||
|
|||||||
Goodwill
(Note 7)
|
465,547
|
640,547
|
|||||
|
|||||||
Deferred
charges:
|
|||||||
Regulatory
assets (Note 8)
|
112,963
|
102,955
|
|||||
Deferred
charges
|
113,793
|
96,109
|
|||||
Total
deferred charges
|
226,756
|
199,064
|
|||||
|
|||||||
Unconsolidated
investments (Note 9)
|
682,834
|
631,893
|
|||||
|
|||||||
Other
|
51,969
|
56,649
|
|||||
|
|||||||
Total
assets
|
$
|
5,836,819
|
$
|
5,568,289
|
|||
December
31,
|
December
31,
|
|||||||||
2005
|
2004
|
|||||||||
(In
thousands of dollars)
|
||||||||||
Stockholders’
equity (Note 10):
|
||||||||||
Common
stock, $1 par value; authorized 200,000,000 shares;
|
||||||||||
issued
112,529,872 shares at December 31, 2005
|
$
|
112,530
|
$
|
90,763
|
||||||
Preferred
stock, no par value; authorized 6,000,000 shares;
|
||||||||||
issued
920,000 shares at December 31, 2005 (Note 12)
|
230,000
|
230,000
|
||||||||
Premium
on capital stock
|
1,681,167
|
1,204,590
|
||||||||
Less
treasury stock: 1,053,879 and 404,536
|
||||||||||
shares,
respectively, at cost
|
(27,566
|
)
|
(12,870
|
)
|
||||||
Less
common stock held in trust: 1,216,221
|
||||||||||
and
1,033,150 shares, respectively
|
(12,910
|
)
|
(17,980
|
)
|
||||||
Deferred
compensation plans
|
10,173
|
14,128
|
||||||||
Accumulated
other comprehensive loss
|
(56,272
|
)
|
(59,118
|
)
|
||||||
Retained
earnings (deficit)
|
(83,053
|
)
|
48,044
|
|||||||
Total
stockholders' equity
|
1,854,069
|
1,497,557
|
||||||||
|
||||||||||
Long-term
debt and capital lease obligation (Note 13)
|
2,049,141
|
2,070,353
|
||||||||
|
||||||||||
Total
capitalization
|
3,903,210
|
3,567,910
|
||||||||
|
||||||||||
Current
liabilities:
|
||||||||||
Long-term
debt and capital lease obligation
|
||||||||||
due
within one year (Note 13)
|
126,648
|
89,650
|
||||||||
Notes
payable
|
420,000
|
699,000
|
||||||||
Accounts
payable and accrued liabilities
|
206,504
|
183,018
|
||||||||
Federal,
state and local taxes payable
|
47,195
|
33,946
|
||||||||
Accrued
interest
|
40,688
|
36,934
|
||||||||
Customer
deposits
|
16,096
|
13,156
|
||||||||
Deferred
gas purchases
|
83,147
|
3,709
|
||||||||
Gas
imbalances - payable
|
124,297
|
102,567
|
||||||||
Other
|
158,555
|
151,856
|
||||||||
Total
current liabilities
|
1,223,130
|
1,313,836
|
||||||||
|
||||||||||
Deferred
credits:
|
||||||||||
Regulatory
liabilities (Note 8)
|
10,070
|
10,885
|
||||||||
Deferred
credits
|
303,919
|
310,164
|
||||||||
Total
deferred credits
|
313,989
|
321,049
|
||||||||
|
||||||||||
Accumulated
deferred income taxes (Note 15)
|
396,490
|
365,494
|
||||||||
|
||||||||||
Commitments
and contingencies (Note 18)
|
||||||||||
|
||||||||||
Total
stockholders' equity and liabilities
|
$
|
5,836,819
|
$
|
5,568,289
|
||||||
Year
Ended
|
Six
Months Ended
|
Year
Ended
|
Year
Ended
|
||||||||||
December
31,
|
December
31,
|
June
30,
|
June
30,
|
||||||||||
2005
|
2004
|
2004
|
2003
|
||||||||||
(In
thousands of dollars)
|
|||||||||||||
Cash
flows provided by (used in) operating activities:
|
|||||||||||||
Net
earnings
|
$
|
20,683
|
$
|
14,771
|
$
|
114,025
|
$
|
76,189
|
|||||
Adjustments
to reconcile net earnings to net cash flows
|
|||||||||||||
provided
by (used in) operating activities:
|
|||||||||||||
Depreciation
and amortization
|
126,393
|
63,376
|
118,755
|
60,642
|
|||||||||
Goodwill
impairment
|
175,000
|
-
|
-
|
-
|
|||||||||
Amortization
of debt premium
|
(2,484
|
)
|
(1,510
|
)
|
(14,243
|
)
|
(1,307
|
)
|
|||||
Deferred
income taxes
|
61,211
|
12,082
|
67,455
|
78,747
|
|||||||||
Provision
for bad debts
|
22,519
|
11,649
|
21,216
|
17,873
|
|||||||||
Provision
for impairment of other assets
|
2,338
|
16,425
|
1,603
|
-
|
|||||||||
Amortization
of debt expense
|
4,670
|
1,064
|
4,143
|
2,919
|
|||||||||
Gain
on sale of subsidiaries and other assets
|
-
|
-
|
-
|
(62,992
|
)
|
||||||||
Loss
on sale of subsidiaries
|
-
|
-
|
1,150
|
-
|
|||||||||
Gain
on extinguishment of debt
|
-
|
-
|
(6,354
|
)
|
-
|
||||||||
Non-cash
stock compensation
|
3,848
|
-
|
-
|
-
|
|||||||||
Net
cash used by assets held for sale
|
-
|
-
|
-
|
(23,698
|
)
|
||||||||
Earnings
from unconsolidated investments, net of cash
distributions
|
(55,742
|
)
|
(4,745
|
)
|
(200
|
)
|
(422
|
)
|
|||||
Other
|
(1,821
|
) |
(1,197
|
)
|
(1,075
|
)
|
(1,312
|
)
|
|||||
Changes
in operating assets and liabilities, net of
acquisitions:
|
|||||||||||||
Accounts
receivable, billed and unbilled
|
(126,590
|
)
|
(174,716
|
)
|
(6,181
|
)
|
(48,520
|
)
|
|||||
Gas
imbalance receivable
|
736
|
(5,241
|
)
|
863
|
-
|
||||||||
Accounts
payable
|
43,681
|
45,511
|
(4,421
|
)
|
23,113
|
||||||||
Gas
imbalance payable
|
(465
|
)
|
2,307
|
1,655
|
154
|
||||||||
Customer
deposits
|
2,940
|
1,113
|
(542
|
)
|
5,013
|
||||||||
Deferred
gas purchase costs
|
59,385
|
10,239
|
20,670
|
(21,006
|
)
|
||||||||
Inventories
|
(52,420
|
)
|
(47,474
|
)
|
(9,279
|
)
|
(23,556
|
)
|
|||||
Deferred
charges and credits
|
(26,849
|
)
|
22,743
|
13,773
|
(12,561
|
)
|
|||||||
Prepaids
and other assets
|
(41,992
|
)
|
(11,974
|
)
|
8,978
|
2,541
|
|||||||
Taxes
and other liabilities
|
3,596
|
18,323
|
(4,831
|
)
|
(15,736
|
)
|
|||||||
Net
cash flows provided by (used) in operating activities
|
218,637
|
(27,254
|
)
|
327,160
|
56,081
|
||||||||
Cash
flows (used in) provided by investing activities:
|
|||||||||||||
Additions
to property, plant and equipment
|
(279,721
|
)
|
(170,644
|
)
|
(213,983
|
)
|
(79,978
|
)
|
|||||
Acquisition
of equity interest in unconsolidated investment
|
-
|
(605,388
|
)
|
-
|
-
|
||||||||
Acquisitions
of operations, net of cash received
|
-
|
-
|
-
|
(522,316
|
)
|
||||||||
Notes
receivable
|
-
|
-
|
(2,000
|
)
|
(6,750
|
)
|
|||||||
Proceeds
from sale of subsidiaries and other assets
|
-
|
-
|
2,175
|
437,000
|
|||||||||
Net
cash used by assets held for sale
|
-
|
-
|
-
|
(13,410
|
)
|
||||||||
Other
|
(2,808
|
)
|
(1,711
|
)
|
(1,131
|
)
|
(6,154
|
)
|
|||||
Net
cash flows used in investing activities
|
(282,529
|
)
|
(777,743
|
)
|
(214,939
|
)
|
(191,608
|
)
|
|||||
Cash
flows provided by (used in) financing activities:
|
|||||||||||||
Increase
(decrease) in bank overdraft
|
(17,091
|
)
|
7,405
|
1,820
|
(137
|
)
|
|||||||
Issuance
of long-term debt
|
255,626
|
-
|
750,000
|
311,087
|
|||||||||
Issuance
costs of debt
|
(914
|
)
|
(337
|
)
|
(8,530
|
)
|
(313
|
)
|
|||||
Issuance
of preferred stock
|
-
|
-
|
230,000
|
-
|
|||||||||
Issuance
costs of preferred stock
|
-
|
-
|
(6,590
|
)
|
-
|
||||||||
Issuance
of common stock
|
331,772
|
228,287
|
-
|
168,682
|
|||||||||
Issuance
of equity units
|
100,000
|
-
|
-
|
125,000
|
|||||||||
Issuance
cost of equity units
|
(2,622
|
)
|
-
|
-
|
(3,443
|
)
|
|||||||
Purchase
of treasury stock
|
(15,032
|
)
|
-
|
(2,403
|
)
|
(2,181
|
)
|
||||||
Dividends
paid on preferred stock
|
(17,365
|
)
|
(8,683
|
)
|
(8,393
|
)
|
-
|
||||||
Repayment
of debt and capital lease obligation
|
(335,567
|
)
|
(94,123
|
)
|
(908,773
|
)
|
(500,135
|
)
|
|||||
Net
(payments) borrowings under revolving credit
facilities
|
(279,000
|
)
|
678,000
|
(230,500
|
)
|
119,700
|
|||||||
Proceeds
from exercise of stock options
|
22,242
|
4,530
|
4,122
|
3,047
|
|||||||||
Other
|
8,728
|
-
|
-
|
1,217
|
|||||||||
Net
cash flows provided by (used in) financing
activities
|
50,777
|
815,079
|
(179,247
|
)
|
222,524
|
||||||||
Change
in cash and cash equivalents
|
(13,115
|
)
|
10,082
|
(67,026
|
)
|
86,997
|
|||||||
Cash
and cash equivalents at beginning of period
|
30,053
|
19,971
|
86,997
|
-
|
|||||||||
Cash
and cash equivalents at end of period
|
$
|
16,938
|
$
|
30,053
|
$
|
19,971
|
$
|
86,997
|
|||||
Cash
paid for interest, net of amounts capitalized
|
$
|
139,770
|
$
|
69,954
|
$
|
143,715
|
$
|
90,462
|
|||||
Cash
paid for income taxes, net of refunds
|
(2,007
|
)
|
7,764
|
(10,875
|
)
|
2,351
|
|||||||
Common
|
Preferred
|
Premium
|
Common
|
Deferred
|
Accumulated
|
Total
|
||||||||||||||||||||||
Stock,
|
Stock,
|
on
|
Treasury
|
Stock
|
Compen-
|
Other
|
Retained
|
Stock-
|
||||||||||||||||||||
$1
Par
|
No
Par
|
Capital
|
Stock,
|
Held
|
sation
|
Comprehensive
|
Earnings
|
holders'
|
||||||||||||||||||||
Value
|
Value
|
Stock
|
at
cost
|
In
Trust
|
Plans
|
Income
(Loss)
|
(Deficit)
|
Equity
|
||||||||||||||||||||
(In
thousands of dollars)
|
||||||||||||||||||||||||||||
Balance
July 1, 2002
|
$
|
58,055
|
$
|
-
|
$
|
707,912
|
$
|
(57,673
|
)
|
$
|
(17,821
|
)
|
$
|
9,373
|
$
|
(14,500
|
)
|
$
|
-
|
$
|
685,346
|
|||||||
Comprehensive
income (loss):
|
||||||||||||||||||||||||||||
Net
earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
76,189
|
76,189
|
|||||||||||||||||||
Unrealized
loss in investment
|
||||||||||||||||||||||||||||
securities,
net of tax benefit
|
-
|
-
|
-
|
-
|
-
|
-
|
(581
|
)
|
-
|
(581
|
)
|
|||||||||||||||||
Minimum
pension liability
|
||||||||||||||||||||||||||||
adjustment,
net of tax benefit
|
-
|
-
|
-
|
-
|
-
|
-
|
(41,930
|
)
|
-
|
(41,930
|
)
|
|||||||||||||||||
Unrealized
loss on hedging
|
||||||||||||||||||||||||||||
activities,
net of tax benefit
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,568
|
)
|
-
|
(5,568
|
)
|
|||||||||||||||||
Comprehensive
income
|
28,110
|
|||||||||||||||||||||||||||
Payment
on note receivable
|
-
|
-
|
305
|
-
|
-
|
-
|
-
|
-
|
305
|
|||||||||||||||||||
Purchase
of treasury stock
|
-
|
-
|
-
|
(2,181
|
)
|
-
|
-
|
-
|
-
|
(2,181
|
)
|
|||||||||||||||||
5%
stock dividend
|
3,468
|
-
|
55,832
|
-
|
-
|
-
|
-
|
(59,333
|
)
|
(33
|
)
|
|||||||||||||||||
Stock
compensation plan
|
-
|
-
|
480
|
-
|
737
|
-
|
-
|
-
|
1,217
|
|||||||||||||||||||
Issuance
of stock for acquisition
|
-
|
-
|
-
|
48,900
|
-
|
-
|
-
|
-
|
48,900
|
|||||||||||||||||||
Issuance
of common stock
|
10,925
|
-
|
157,757
|
-
|
-
|
-
|
-
|
-
|
168,682
|
|||||||||||||||||||
Issuance
costs of equity units
|
-
|
-
|
(3,443
|
)
|
-
|
-
|
-
|
-
|
-
|
(3,443
|
)
|
|||||||||||||||||
Contract
adjustment payment
|
-
|
-
|
(11,713
|
)
|
-
|
-
|
-
|
-
|
-
|
(11,713
|
)
|
|||||||||||||||||
Sale
of common stock held in trust
|
-
|
-
|
(243
|
)
|
-
|
2,424
|
-
|
-
|
-
|
2,181
|
||||||||||||||||||
Exercise
of stock options
|
626
|
-
|
2,304
|
487
|
(370
|
)
|
-
|
-
|
-
|
3,047
|
||||||||||||||||||
Contributions
to Trust
|
-
|
-
|
-
|
-
|
(2,165
|
)
|
2,165
|
-
|
-
|
-
|
||||||||||||||||||
Disbursements
from Trust
|
-
|
-
|
-
|
-
|
1,578
|
(1,578
|
)
|
-
|
-
|
-
|
||||||||||||||||||
Balance
June 30, 2003
|
73,074
|
--
|
909,191
|
(10,467
|
)
|
(15,617
|
)
|
9,960
|
(62,579
|
)
|
16,856
|
920,418
|
||||||||||||||||
Comprehensive
income (loss):
|
||||||||||||||||||||||||||||
Net
earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
114,025
|
114,025
|
|||||||||||||||||||
Unrealized
loss in investment
|
||||||||||||||||||||||||||||
securities,
net of tax benefit
|
-
|
-
|
-
|
-
|
-
|
-
|
(21
|
)
|
-
|
(21
|
)
|
|||||||||||||||||
Minimum
pension liability
|
||||||||||||||||||||||||||||
adjustment,
net of tax
|
-
|
-
|
-
|
-
|
-
|
-
|
10,768
|
-
|
10,768
|
|||||||||||||||||||
Unrealized
gain on hedging
|
||||||||||||||||||||||||||||
activities,
net of tax
|
-
|
-
|
-
|
-
|
-
|
-
|
1,608
|
-
|
1,608
|
|||||||||||||||||||
Comprehensive
income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
126,380
|
|||||||||||||||||||
Preferred
stock dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(12,686
|
)
|
(12,686
|
)
|
|||||||||||||||||
Payment
on note receivable
|
-
|
-
|
347
|
-
|
-
|
-
|
-
|
-
|
347
|
|||||||||||||||||||
Purchase
of treasury stock
|
-
|
-
|
-
|
(2,403
|
)
|
-
|
-
|
-
|
-
|
(2,403
|
)
|
|||||||||||||||||
5%
stock dividend
|
3,656
|
-
|
67,847
|
-
|
-
|
-
|
-
|
(71,503
|
)
|
-
|
||||||||||||||||||
Sale
of common stock held in trust
|
-
|
-
|
598
|
-
|
1,805
|
-
|
-
|
-
|
2,403
|
|||||||||||||||||||
Issuance
of preferred stock
|
-
|
230,000
|
(6,590
|
)
|
-
|
-
|
-
|
-
|
-
|
223,410
|
||||||||||||||||||
Exercise
of stock options
|
411
|
-
|
3,711
|
-
|
-
|
-
|
-
|
-
|
4,122
|
|||||||||||||||||||
Contributions
to Trust
|
-
|
-
|
-
|
-
|
(2,799
|
)
|
2,799
|
-
|
-
|
-
|
||||||||||||||||||
Disbursements
from Trust
|
-
|
-
|
-
|
-
|
799
|
(799
|
)
|
-
|
-
|
-
|
||||||||||||||||||
Balance
June 30, 2004
|
$
|
77,141
|
$
|
230,000
|
$
|
975,104
|
$
|
(12,870
|
)
|
$
|
(15,812
|
)
|
$
|
11,960
|
$
|
(50,224
|
)
|
$
|
46,692
|
$
|
1,261,991
|
|||||||
Common
|
Preferred
|
Premium
|
Common
|
Deferred
|
Accumulated
|
Total
|
||||||||||||||||||||||
Stock,
|
Stock,
|
on
|
Treasury
|
Stock
|
Compen-
|
Other
|
Retained
|
Stock-
|
||||||||||||||||||||
$1
Par
|
No
Par
|
Capital
|
Stock,
|
Held
|
sation
|
Comprehensive
|
Earnings
|
holders'
|
||||||||||||||||||||
Value
|
Value
|
Stock
|
at
cost
|
In
Trust
|
Plans
|
Income
(Loss)
|
(Deficit)
|
Equity
|
||||||||||||||||||||
(In
thousands of dollars)
|
||||||||||||||||||||||||||||
Balance
June 30, 2004
|
$
|
77,141
|
$
|
230,000
|
$
|
975,104
|
$
|
(12,870
|
)
|
$
|
(15,812
|
)
|
$
|
11,960
|
$
|
(50,224
|
)
|
$
|
46,692
|
$
|
1,261,991
|
|||||||
Comprehensive
income (loss):
|
||||||||||||||||||||||||||||
Net
earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
14,771
|
14,771
|
|||||||||||||||||||
Minimum
pension liability
|
||||||||||||||||||||||||||||
adjustment,
net of tax benefit
|
-
|
-
|
-
|
-
|
-
|
-
|
(8,832
|
)
|
-
|
(8,832
|
)
|
|||||||||||||||||
Unrealized
loss on hedging
|
||||||||||||||||||||||||||||
activities,
net of tax benefit
|
-
|
-
|
-
|
-
|
-
|
-
|
(62
|
)
|
-
|
(62
|
)
|
|||||||||||||||||
Comprehensive
income
|
5,877
|
|||||||||||||||||||||||||||
Preferred
stock dividend
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(8,683
|
)
|
(8,683
|
)
|
|||||||||||||||||
5%
stock dividend
|
242
|
-
|
4,494
|
-
|
-
|
-
|
-
|
(4,736
|
)
|
-
|
||||||||||||||||||
Payment
on note receivable
|
-
|
-
|
473
|
-
|
-
|
-
|
-
|
-
|
473
|
|||||||||||||||||||
Issuance
of common stock
|
13,042
|
-
|
215,245
|
-
|
-
|
-
|
-
|
-
|
228,287
|
|||||||||||||||||||
Exercise
of stock options
|
338
|
-
|
9,274
|
-
|
-
|
-
|
-
|
-
|
9,612
|
|||||||||||||||||||
Contributions
to Trust
|
-
|
-
|
-
|
-
|
(2,168
|
)
|
2,168
|
-
|
-
|
-
|
||||||||||||||||||
Balance
December 31, 2004
|
90,763
|
230,000
|
1,204,590
|
(12,870
|
)
|
(17,980
|
)
|
14,128
|
(59,118
|
)
|
48,044
|
1,497,557
|
||||||||||||||||
Comprehensive
income (loss):
|
||||||||||||||||||||||||||||
Net
earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
20,683
|
20,683
|
|||||||||||||||||||
Unrealized
gain on hedging
|
||||||||||||||||||||||||||||
activities,
net of tax
|
-
|
-
|
-
|
-
|
-
|
-
|
1,075
|
-
|
1,075
|
|||||||||||||||||||
Minimum
pension liabilitiy
|
||||||||||||||||||||||||||||
adjustment,
net of tax
|
-
|
-
|
-
|
-
|
-
|
-
|
1,771
|
-
|
1,771
|
|||||||||||||||||||
Comprehensive
income
|
23,529
|
|||||||||||||||||||||||||||
Preferred
stock dividends
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(17,365
|
)
|
(17,365
|
)
|
|||||||||||||||||
Distibution
of common stock
|
||||||||||||||||||||||||||||
held
in trust
|
-
|
-
|
3,130
|
-
|
4,186
|
-
|
-
|
-
|
7,316
|
|||||||||||||||||||
Issuance
of common stock
|
14,913
|
-
|
316,859
|
-
|
-
|
-
|
-
|
-
|
331,772
|
|||||||||||||||||||
Issuance
cost of equity units
|
-
|
-
|
(2,622
|
)
|
-
|
-
|
-
|
-
|
-
|
(2,622
|
)
|
|||||||||||||||||
Restricted
stock award
|
-
|
-
|
4,998
|
-
|
-
|
(4,998
|
)
|
-
|
-
|
-
|
||||||||||||||||||
Restricted
stock amortization
|
-
|
-
|
-
|
-
|
-
|
2,198
|
-
|
-
|
2,198
|
|||||||||||||||||||
Contract
adjustment payment
|
-
|
-
|
(1,759
|
)
|
-
|
-
|
-
|
-
|
-
|
(1,759
|
)
|
|||||||||||||||||
Purchase
of treasury stock
|
-
|
-
|
-
|
(15,032
|
)
|
-
|
-
|
-
|
-
|
(15,032
|
)
|
|||||||||||||||||
5%
stock dividend
|
5,294
|
-
|
129,121
|
-
|
-
|
-
|
-
|
(134,415
|
)
|
-
|
||||||||||||||||||
Stock
option award
|
-
|
-
|
3,848
|
-
|
-
|
-
|
-
|
-
|
3,848
|
|||||||||||||||||||
Exercise
of stock options
|
1,560
|
-
|
20,617
|
336
|
(271
|
)
|
-
|
-
|
-
|
22,242
|
||||||||||||||||||
Payment
on note receivable
|
-
|
-
|
2,385
|
-
|
-
|
-
|
-
|
-
|
2,385
|
|||||||||||||||||||
Contributions
to Trust
|
-
|
-
|
-
|
-
|
(1,025
|
)
|
1,025
|
-
|
-
|
-
|
||||||||||||||||||
Disbursements
from Trust
|
-
|
-
|
-
|
-
|
2,180
|
(2,180
|
)
|
-
|
-
|
-
|
||||||||||||||||||
Balance
December 31, 2005
|
$
|
112,530
|
$
|
230,000
|
$
|
1,681,167
|
$
|
(27,566
|
)
|
$
|
(12,910
|
)
|
$
|
10,173
|
$
|
(56,272
|
)
|
$
|
(83,053
|
)
|
$
|
1,854,069
|
||||||
Year
Ended
|
Six
Months Ended
|
Years
Ended
|
|||||||||||
December
31,
|
December
31,
|
June
30,
|
|||||||||||
2005
|
2004
|
2004
|
2003
|
||||||||||
(In
thousands)
|
|||||||||||||
Beginning
Balance
|
$
|
15,424
|
$
|
16,111
|
$
|
22,651
|
$
|
20,753
|
|||||
Additions:
Charged to Cost and Expenses
|
22,519
|
11,649
|
21,216
|
17,873
|
|||||||||
Deductions:
Write-off of Uncollectible Accounts
|
(22,751
|
)
|
(14,752
|
)
|
(30,809
|
)
|
(17,715
|
)
|
|||||
Other
|
701
|
2,416
|
3,053
|
1,740
|
|||||||||
Ending
Balance
|
$
|
15,893
|
$
|
15,424
|
$
|
16,111
|
$
|
22,651
|
|||||
December
31, 2005
|
December
31, 2004
|
||||||||||||||||||
Billed
|
Unbilled
|
Total
|
Billed
|
Unbilled
|
Total
|
||||||||||||||
(In
thousands)
|
|||||||||||||||||||
Transportation
and Storage Segment
|
$
|
6,281
|
$
|
47,109
|
$
|
53,390
|
$
|
3,310
|
$
|
44,913
|
$
|
48,223
|
|||||||
Distribution
Segment
|
219,047
|
147,597
|
366,644
|
159,908
|
112,781
|
272,689
|
|||||||||||||
Corporate
and other
|
8,701
|
-
|
8,701
|
1,976
|
-
|
1,976
|
|||||||||||||
Total
|
$
|
234,029
|
$
|
194,706
|
$
|
428,735
|
$
|
165,194
|
$
|
157,694
|
$
|
322,888
|
|||||||
Year
Ended
|
Six
Months Ended
|
Years
Ended
|
|||||||||||
December
31,
|
December
31,
|
June
30,
|
|||||||||||
2005
|
2004
|
2004
|
2003
|
||||||||||
(In
thousands of dollars, except per share amounts)
|
|||||||||||||
Net
earnings, as reported
|
$
|
20,683
|
$
|
14,771
|
$
|
114,025
|
$
|
76,189
|
|||||
Add
stock-based compensation expense included in
|
|||||||||||||
reported
net earnings, net of related taxes
|
3,767
|
-
|
-
|
-
|
|||||||||
Deduct
total stock-based employee compensation
|
|||||||||||||
expense
determined under fair value based method
|
|||||||||||||
for
all awards, net of related taxes
|
4,355
|
496
|
1,699
|
1,373
|
|||||||||
Pro
forma net earnings
|
$
|
20,095
|
$
|
14,275
|
$
|
112,326
|
$
|
74,816
|
|||||
Net
earnings available for common stockholders per share:
|
|||||||||||||
Basic-
as reported
|
$
|
0.03
|
$
|
0.07
|
$
|
1.26
|
$
|
1.17
|
|||||
Basic-
pro forma
|
$
|
0.02
|
$
|
0.06
|
$
|
1.24
|
$
|
1.15
|
|||||
Diluted-
as reported
|
$
|
0.03
|
$
|
0.07
|
$
|
1.24
|
$
|
1.15
|
|||||
Diluted-
pro forma
|
$
|
0.02
|
$
|
0.06
|
$
|
1.21
|
$
|
1.12
|
|||||
Year
ended
|
Year
ended
|
||||
December
31, 2005
|
June
30, 2004
|
||||
Dividend
yield
|
1.67%
|
0.00%
|
|||
Volatility
|
20.57%
to 38.83%
|
36.75%
|
|||
Risk
free interest rate
|
3.69%
to 4.52%
|
2.95%
|
|||
Expected
term
|
1
to 6.5 years
|
6
years
|
|||
Expected
forfeiture
|
0%
|
0%
|
|||
Weighted
average option fair value
|
$7.05
to $13.96
|
$7.35
|
|||
Year
Ended
|
Six
Months Ended
|
Years
Ended
|
|||||||||||
December
31,
|
December
31,
|
June
30,
|
|||||||||||
Comprehensive
Income Overview
|
2005
|
2004
|
2004
|
2003
|
|||||||||
(In
thousands)
|
|||||||||||||
Net
earnings
|
$
|
20,683
|
$
|
14,771
|
$
|
114,025
|
$
|
76,189
|
|||||
Other
comprehensive income (loss):
|
|||||||||||||
Unrealized
loss on investment securities,
|
|||||||||||||
net
of tax (benefit) of $0, $0, $(13) and $(323), respectively
|
-
|
-
|
(21
|
)
|
(581
|
)
|
|||||||
Unrealized
gain (loss) on hedging activities, net of tax (benefit)
|
|||||||||||||
of
$73, $2,031, $4,306 and $(3,092), respectively
|
108
|
2,154
|
7,105
|
(5,562
|
)
|
||||||||
Realized
gain (loss) on hedging activities in net earnings,
|
|||||||||||||
net
of tax (benefit) of $608, $(2,089), $(3,331) and $(3),
respectively
|
967
|
(2,216
|
)
|
(5,497
|
)
|
(6
|
)
|
||||||
Minimum
pension liability adjustment, net of tax (benefit)
|
|||||||||||||
of
$1,064, $(8,328), $6,526 and $(23,306), respectively
|
1,771
|
(8,832
|
)
|
10,768
|
(41,930
|
)
|
|||||||
Other
comprehensive income (loss)
|
2,846
|
(8,894
|
)
|
12,355
|
(48,079
|
)
|
|||||||
Comprehensive
income
|
$
|
23,529
|
$
|
5,877
|
$
|
126,380
|
$
|
28,110
|
|||||
In
Service
|
||||||
ARO
Description
|
Date
|
Long-Lived
Assets
|
Amount
|
|||
(In
thousands)
|
||||||
Retire
offshore lateral lines
|
Various
|
Offshore
lateral lines
|
$
2,803
|
|||
Remove
asbestos
|
Various
|
Mainlines
and compressors
|
882
|
|||
Year
Ended
|
Six
Months Ended
|
Year
Ended
|
||||||||
December
31,
|
December
31,
|
June
30,
|
||||||||
2005
|
2004
|
2004
|
||||||||
(In
thousands)
|
||||||||||
Beginning
Balance
|
$
|
5,657
|
$
|
6,407
|
$
|
6,757
|
||||
Incurred
|
2,371
|
-
|
395
|
|||||||
Settled
|
(285
|
)
|
(999
|
)
|
(1,373
|
)
|
||||
Accretion
Expense
|
457
|
249
|
628
|
|||||||
Ending
Balance
|
$
|
8,200
|
$
|
5,657
|
$
|
6,407
|
||||
At
June 11, 2003
|
|||||||
(In thousands) |
|
||||||
Property,
plant and equipment (excluding intangibles)
|
$
|
1,904,762
|
|||||
Intangibles
|
9,503
|
||||||
Current
assets (Includes cash and cash equivalents of
|
|||||||
approximately
$60 million)
|
217,645
|
||||||
Other
non-current assets
|
30,098
|
||||||
Total
assets acquired
|
2,162,008
|
||||||
Long-term
debt
|
(1,207,617
|
)
|
|||||
Current
liabilities
|
(165,585
|
)
|
|||||
Other
non-current liabilities
|
(125,785
|
)
|
|||||
Total
liabilities assumed
|
(1,498,987
|
)
|
|||||
Net
assets acquired
|
$
|
663,021
|
(Unaudited)
|
||||
Year
Ended
|
||||
June
30, 2003
|
||||
(In
thousands)
|
||||
Operating
revenues
|
$
|
1,671,114
|
||
Net
earnings from continuing operations
|
132,458
|
|||
Net
earnings per share from continuing operations:
|
||||
Basic
|
1.67
|
|||
Diluted
|
1.64
|
|||
Six
Months
|
|||||||||||||
Year
Ended
|
Ended
|
Years
Ended
|
|||||||||||
|
December
31,
|
December
31,
|
June
30,
|
||||||||||
2005
|
2004
|
2004
|
2003
|
||||||||||
(In
thousands of dollars, except per share amounts)
|
|||||||||||||
Net
earnings from continuing operations
|
$
|
20,683
|
$
|
14,771
|
$
|
114,025
|
$
|
43,669
|
|||||
Net
earnings from discontinued operations
|
-
|
-
|
-
|
32,520
|
|||||||||
Preferred
stock dividends
|
(17,365
|
)
|
(8,683
|
)
|
(12,686
|
)
|
-
|
||||||
Net
earnings available for common stockholders
|
$
|
3,318
|
$
|
6,088
|
$
|
101,339
|
$
|
76,189
|
|||||
Weighted
average shares outstanding - Basic
|
109,395,418
|
87,313,787
|
80,431,988
|
64,949,776
|
|||||||||
Weighted
average shares outstanding - Diluted
|
112,794,210
|
89,717,427
|
81,479,503
|
66,025,488
|
|||||||||
Basic
earnings per share:
|
|||||||||||||
Net
earnings available for common stockholders
|
|||||||||||||
from
continuing operations
|
$
|
0.03
|
$
|
0.07
|
$
|
1.26
|
$
|
0.67
|
|||||
Net
earnings from discontinued operations
|
-
|
-
|
-
|
0.50
|
|||||||||
Net
earnings available for common stockholders
|
$
|
0.03
|
$
|
0.07
|
$
|
1.26
|
$
|
1.17
|
|||||
Diluted
earnings per share:
|
|||||||||||||
Net
earnings available for common stockholders
|
|||||||||||||
from
continuing operations
|
$
|
0.03
|
$
|
0.07
|
$
|
1.24
|
$
|
0.66
|
|||||
Net
earnings from discontinued operations
|
-
|
-
|
-
|
0.49
|
|||||||||
Net
earnings available for common stockholders
|
$
|
0.03
|
$
|
0.07
|
$
|
1.24
|
$
|
1.15
|
Six
Months
|
|||||||||||||
Year
Ended
|
Ended
|
Years
Ended
|
|||||||||||
December
31,
|
December
31,
|
June
30,
|
|||||||||||
2005
|
2004
|
2004
|
2003
|
||||||||||
Weighted
average shares outstanding - Basic
|
109,395,418
|
87,313,787
|
80,431,988
|
64,949,776
|
|||||||||
Add
assumed vesting of restricted stock
|
15,596
|
-
|
-
|
-
|
|||||||||
Add
assumed conversion of equity units
|
2,141,033
|
1,172,431
|
-
|
-
|
|||||||||
Add
assumed exercise of stock options
|
1,242,163
|
1,231,209
|
1,047,515
|
1,075,712
|
|||||||||
Weighted
average shares outstanding - Dilutive
|
112,794,210
|
89,717,427
|
81,479,503
|
66,025,488
|
|||||||||
December
31,
|
||||||||||
Property,
Plant and Equipment
|
Lives
in Years
|
2005
|
2004
|
|||||||
(In
thousands)
|
||||||||||
Distribution
plant
|
10-75
|
$
|
1,774,802
|
$
|
1,707,174
|
|||||
Transmission
plant
|
36-46
|
1,285,848
|
1,185,647
|
|||||||
General
- LNG
|
40
|
494,827
|
388,703
|
|||||||
General
plant - other
|
1-71
|
163,684
|
143,435
|
|||||||
Underground
storage plant
|
36-46
|
275,603
|
274,337
|
|||||||
Gathering
plant
|
26
|
45,822
|
46,074
|
|||||||
Other
|
5-38
|
145,185
|
126,308
|
|||||||
Total
plant (a)
|
4,185,771
|
3,871,678
|
||||||||
Less
contributions in aid of construction
|
(2,491
|
)
|
(2,457
|
)
|
||||||
Plant
in service
|
4,183,280
|
3,869,221
|
||||||||
Construction
work in progress
|
184,423
|
237,283
|
||||||||
4,367,703
|
4,106,504
|
|||||||||
Less
accumulated depreciation and amortization (a)
|
(881,763
|
)
|
(778,876
|
)
|
||||||
Net
property, plant and equipment
|
$
|
3,485,940
|
$
|
3,327,628
|
||||||
(a)
Includes capitalized computerized software cost totaling:
|
||||||||||
Unamortized
computer software cost
|
3-15
|
$
|
119,471
|
$
|
118,596
|
|||||
Less
accumulated amortization
|
(44,588
|
)
|
(40,378
|
)
|
||||||
Net
capitalized computer software costs
|
$
|
74,883
|
$
|
78,218
|
||||||
Goodwill
Analysis
|
Amounts
|
|||
(In
thousands)
|
||||
Balance
as of July 1, 2002
|
$
|
642,921
|
||
Impairment
losses
|
-
|
|||
Balance
as of June 30, 2003
|
642,921
|
|||
Impairment
losses
|
-
|
|||
Reversal
of income tax reserve
|
(2,374
|
)
|
||
Balance
as of June 30, 2004
|
640,547
|
|||
Impairment
losses
|
-
|
|||
Balance
as of December 31, 2004
|
640,547
|
|||
Impairment
losses
|
(175,000
|
)
|
||
Balance
as of December 31, 2005
|
$
|
465,547
|
||
December
31,
|
|||||||
Regulatory
Assets
|
2005
|
2004
|
|||||
(In
thousands)
|
|||||||
Pension
and Post-retirement Benefits
|
$
|
32,627
|
$
|
26,809
|
|||
Deferred
Income Tax
|
28,076
|
28,958
|
|||||
Environmental
|
23,656
|
16,332
|
|||||
Missouri
Safety Program
|
11,956
|
15,161
|
|||||
Other
|
16,648
|
15,695
|
|||||
$
|
112,963
|
$
|
102,955
|
||||
December
31,
|
|||||||
Regulatory
Liabilities
|
2005
|
2004
|
|||||
(In
thousands)
|
|||||||
Environmental
|
$
|
8,817
|
$
|
8,740
|
|||
Other
|
1,253
|
2,145
|
|||||
$
|
10,070
|
$
|
10,885
|
||||
December
31,
|
|||||||
Unconsolidated
Investments
|
2005
|
2004
|
|||||
(In
thousands)
|
|||||||
Equity
investments:
|
|||||||
CCE
Holdings
|
$
|
668,985
|
$
|
615,861
|
|||
Other
|
13,074
|
12,919
|
|||||
Investments
at cost
|
775
|
3,113
|
|||||
$
|
682,834
|
$
|
631,893
|
||||
At
December 31, 2005
|
At
December 31, 2004
|
||||||||||||
CCE
|
Other
Equity
|
CCE
|
Other
Equity
|
||||||||||
Holdings
|
Investments
|
Holdings
|
Investments
|
||||||||||
(In
thousands)
|
|||||||||||||
Balance
Sheet Data:
|
|||||||||||||
Current
assets
|
$
|
69,983
|
$
|
2,122
|
$
|
54,078
|
$
|
1,255
|
|||||
Non-current
assets
|
2,313,874
|
28,832
|
2,257,899
|
22,847
|
|||||||||
Current
liabilities
|
49,428
|
2,955
|
64,468
|
833
|
|||||||||
Non-current
liabilities
|
1,034,092
|
356
|
1,057,907
|
2,625
|
|||||||||
For
the Year Ended December 31, 2005
|
For
the Six Months Ended December 31, 2004
|
||||||||||||
CCE
|
Other
Equity
|
CCE
|
Other
Equity
|
||||||||||
Holdings
|
Investments
|
Holdings
|
Investments
|
||||||||||
(In
thousands)
|
|||||||||||||
Income
Statement Data:
|
|||||||||||||
Revenues
|
$
|
236,359
|
$
|
6,942
|
$
|
27,194
|
$
|
1,919
|
|||||
Operating
income
|
121,000
|
1,230
|
6,576
|
394
|
|||||||||
Equity
earnings
|
72,492
|
-
|
7,549
|
-
|
|||||||||
Net
income
|
140,735
|
1,058
|
8,602
|
295
|
|||||||||
Amended
2003 Plan
|
1992
Plan
|
||||||||||||
Weighted
|
Weighted
|
||||||||||||
Shares
|
Average
|
Shares
|
Average
|
||||||||||
Under
|
Exercise
|
Under
|
Exercise
|
||||||||||
Option
|
Price
|
Option
|
Price
|
||||||||||
Outstanding
July 1, 2002
|
-
|
-
|
4,027,675
|
11.10
|
|||||||||
Granted
|
-
|
-
|
-
|
-
|
|||||||||
Exercised
|
-
|
-
|
(696,164
|
)
|
4.43
|
||||||||
Canceled
|
-
|
-
|
(188,576
|
)
|
13.94
|
||||||||
Outstanding
June 30, 2003
|
-
|
-
|
3,142,935
|
12.41
|
|||||||||
Granted
|
765,779
|
16.83
|
-
|
-
|
|||||||||
Exercised
|
-
|
-
|
(370,128
|
)
|
9.44
|
||||||||
Canceled
|
(2,206
|
)
|
16.83
|
(6,134
|
)
|
14.65
|
|||||||
Outstanding
June 30, 2004
|
763,573
|
16.83
|
2,766,673
|
12.81
|
|||||||||
Granted
|
-
|
-
|
-
|
-
|
|||||||||
Exercised
|
-
|
-
|
(357,081
|
)
|
12.69
|
||||||||
Canceled
|
(65,051
|
)
|
16.83
|
(18,887
|
)
|
14.63
|
|||||||
Outstanding
December 31, 2004
|
698,522
|
16.83
|
2,390,705
|
12.81
|
|||||||||
Granted
|
941,252
|
18.27
|
136,608
|
12.75
|
|||||||||
Exercised
|
(62,976
|
)
|
16.83
|
(794,105
|
)
|
12.47
|
|||||||
Canceled
|
(77,385
|
)
|
16.83
|
(473,584
|
)
|
12.45
|
|||||||
Outstanding
December 31, 2005
|
1,499,413
|
17.73
|
1,259,624
|
13.15
|
Options
Outstanding
|
Options
Exercisable
|
||||||||||||||||||
Weighted
Average
|
Weighted
|
Weighted
|
|||||||||||||||||
Range
of
|
Number
of
|
Remaining
|
Average
|
Number
of
|
Average
|
||||||||||||||
Exercise
Prices
|
Options
|
Contractual
Life
|
Exercise
Price
|
Options
|
Exercise
Price
|
||||||||||||||
Amended
2003 Plan:
|
|||||||||||||||||||
$0.00
- $7.49
|
209,903
|
9.67
years
|
$
|
-
|
-
|
$
|
-
|
||||||||||||
12.50
- 14.99
|
558,161
|
7.99
years
|
16.83
|
92,759
|
16.83
|
||||||||||||||
22.50
- 24.99
|
731,349
|
9.67
years
|
23.52
|
262,500
|
23.62
|
||||||||||||||
1,499,413
|
355,259
|
||||||||||||||||||
1992
Plan:
|
|||||||||||||||||||
$7.50
- $9.99
|
166,543
|
1.41
years
|
$
|
9.70
|
166,543
|
$
|
9.70
|
||||||||||||
10.00
- 12.49
|
5,134
|
1.11
years
|
10.07
|
5,134
|
10.07
|
||||||||||||||
12.50
- 14.99
|
1,085,449
|
3.71
years
|
13.69
|
973,971
|
13.64
|
||||||||||||||
15.00
- 17.49
|
2,498
|
3.72
years
|
15.95
|
2,254
|
16.01
|
||||||||||||||
1,259,624
|
1,147,902
|
Amended
|
Pennsylvania
|
Pennsylvania
|
|||||||||||
2003
|
1992
|
Option
|
Incentive
|
||||||||||
Plan
|
Plan
|
Plan
|
Plan
|
||||||||||
Options
exercisable at:
|
|||||||||||||
December
31, 2005
|
355,259
|
1,147,902
|
-
|
-
|
|||||||||
December
31, 2004
|
22,050
|
2,122,795
|
466,127
|
231,668
|
|||||||||
June
30, 2004
|
-
|
2,132,852
|
466,127
|
228,451
|
|||||||||
June
30, 2003
|
-
|
2,089,161
|
466,127
|
225,234
|
Weighted
average exercise price at:
|
||||
December
31, 2005
|
$
21.85
|
$
13.06
|
$
-
|
$
-
|
December
31, 2004
|
16.83
|
12.67
|
8.77
|
10.19
|
June
30, 2004
|
-
|
12.52
|
8.77
|
10.14
|
June
30, 2003
|
-
|
11.74
|
8.77
|
10.09
|
Carrying
Value
|
Fair
Value
|
Carrying
Value
|
Fair
Value
|
||||||||||
December
31,
|
December
31,
|
December
31,
|
December
31,
|
||||||||||
2005
|
2005
|
2004
|
2004
|
||||||||||
(In
thousands)
|
|||||||||||||
Southern
Union Company
|
|||||||||||||
7.60%
Senior Notes due 2024
|
$
|
359,765
|
$
|
411,931
|
$
|
359,765
|
$
|
406,524
|
|||||
8.25%
Senior Notes due 2029
|
300,000
|
360,723
|
300,000
|
364,365
|
|||||||||
2.75%
Senior Notes due 2006
|
125,000
|
125,000
|
125,000
|
125,000
|
|||||||||
Term
Note due 2005
|
-
|
-
|
76,087
|
76,087
|
|||||||||
6.50%
to 10.25% First Mortgage Bonds, due 2006 to 2029
|
111,419
|
111,165
|
112,421
|
112,421
|
|||||||||
4.375%
Senior Notes, due 2008
|
100,000
|
100,000
|
-
|
-
|
|||||||||
Capital
lease and other, due 2006 to 2007
|
71
|
71
|
117
|
117
|
|||||||||
996,255
|
1,108,890
|
973,390
|
1,084,514
|
||||||||||
Panhandle
Energy
|
|||||||||||||
2.75%
Senior Notes due 2007
|
200,000
|
200,000
|
200,000
|
200,000
|
|||||||||
4.80%
Senior Notes due 2008
|
300,000
|
300,000
|
300,000
|
305,214
|
|||||||||
6.05%
Senior Notes due 2013
|
250,000
|
254,450
|
250,000
|
268,450
|
|||||||||
6.50%
Senior Notes due 2009
|
60,623
|
63,228
|
60,623
|
66,024
|
|||||||||
8.25%
Senior Notes due 2010
|
40,500
|
45,135
|
40,500
|
47,430
|
|||||||||
7.00%
Senior Notes due 2029
|
66,305
|
73,521
|
66,305
|
73,492
|
|||||||||
Term
Loan due 2007
|
255,626
|
255,626
|
258,433
|
258,433
|
|||||||||
Net
premiums on long-term debt
|
12,205
|
12,205
|
14,688
|
14,688
|
|||||||||
1,185,259
|
1,204,165
|
1,190,549
|
1,233,731
|
||||||||||
Total
consolidated debt and capital lease
|
2,181,514
|
$
|
2,313,055
|
2,163,939
|
$
|
2,318,245
|
|||||||
Less
current portion
|
126,648
|
89,650
|
|||||||||||
Less
fair value swaps of Panhandle Energy
|
5,725
|
3,936
|
|||||||||||
Total
consolidated long-term debt and capital lease
|
$
|
2,049,141
|
$
|
2,070,353
|
2011
and
|
|||||||||||||||||||
2006
|
2007
|
2008
|
2009
|
2010
|
thereafter
|
||||||||||||||
(In
thousands)
|
|||||||||||||||||||
Southern
Union Company
|
$
|
126,648
|
$
|
1,648
|
$
|
101,646
|
$
|
1,375
|
$
|
1,375
|
$
|
763,492
|
|||||||
Panhandle
Energy
|
-
|
455,626
|
300,000
|
60,623
|
40,500
|
316,305
|
|||||||||||||
Total
|
$
|
126,648
|
$
|
457,274
|
$
|
401,646
|
$
|
61,998
|
$
|
41,875
|
$
|
1,079,797
|
|||||||
|
(a)
|
Under
the Company’s Long-Term Facility, the consolidated debt to total
capitalization ratio, as defined therein, cannot exceed 65
percent.
|
|
(b)
|
Under
the Company’s Long-Term Facility, the Company must maintain an EBITDA
interest coverage ratio of at least 2.00 times.
|
|
(c)
|
Under
the Company’s First Mortgage Bond indentures for the former Providence Gas
and Fall River Gas territories, the Company’s consolidated debt to total
capitalization ratio, as defined therein, cannot exceed 70 percent
at the
end of any calendar quarter.
|
|
(d)
|
All
of the Company’s major borrowing agreements contain cross-defaults if the
Company defaults on an agreement involving at least $3 million of
principal.
|
|
Pension
Benefits At
|
Post-Retirement
Benefits At
|
||||||||||||
December
31,
|
December
31,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
thousands)
|
|||||||||||||
Change
in Benefit Obligation:
|
|||||||||||||
Benefit
obligation at beginning of period
|
$
|
398,516
|
$
|
386,493
|
$
|
168,953
|
$
|
152,425
|
|||||
Service
cost
|
7,614
|
3,689
|
3,631
|
2,091
|
|||||||||
Interest
Cost
|
22,396
|
11,412
|
7,594
|
4,607
|
|||||||||
Benefits
paid
|
(20,816
|
)
|
(10,217
|
)
|
(5,121
|
)
|
(3,346
|
)
|
|||||
Actuarial
(gain) loss
|
19,956
|
9,095
|
(31,701
|
)
|
14,484
|
||||||||
Plan
amendments
|
-
|
446
|
(28,208
|
)
|
(1,308
|
)
|
|||||||
Curtailment
recognition
|
103
|
-
|
-
|
-
|
|||||||||
Settlement
recognition
|
(12,431
|
)
|
(2,402
|
)
|
-
|
-
|
|||||||
Benefit
obligation at end of period
|
$
|
415,338
|
$
|
398,516
|
$
|
115,148
|
$
|
168,953
|
|||||
Change
in Plan Assets:
|
|||||||||||||
Fair
value of plan assets at beginning of period
|
$
|
276,835
|
$
|
276,154
|
$
|
37,962
|
$
|
34,004
|
|||||
Return
on plan assets
|
35,936
|
1,980
|
1,487
|
160
|
|||||||||
Employer
contributions
|
18,765
|
11,320
|
11,181
|
7,144
|
|||||||||
Benefits
paid
|
(20,816
|
)
|
(10,217
|
)
|
(5,121
|
)
|
(3,346
|
)
|
|||||
Settlement
recognition
|
(12,431
|
)
|
(2,402
|
)
|
-
|
-
|
|||||||
Fair
value of plan assets at end of period
|
$
|
298,289
|
$
|
276,835
|
$
|
45,509
|
$
|
37,962
|
|||||
Funded
Status:
|
|||||||||||||
Funded
status at end of period
|
$
|
(117,049
|
)
|
$
|
(121,680
|
)
|
$
|
(69,639
|
)
|
$
|
(130,991
|
)
|
|
Unrecognized
net actuarial loss
|
128,930
|
130,164
|
9,404
|
41,017
|
|||||||||
Unrecognized
prior service cost
|
9,085
|
13,439
|
(23,940
|
)
|
3,409
|
||||||||
Prepaid/
(accrued) at measurement date
|
20,966
|
21,923
|
(84,175
|
)
|
(86,565
|
)
|
|||||||
Contributions
subsequent to measurement date
|
1,184
|
1,044
|
3,787
|
1,815
|
|||||||||
Net
asset (liability) recognized at end of period
|
$
|
22,150
|
$
|
22,967
|
$
|
(80,388
|
)
|
$
|
(84,750
|
)
|
|||
Amounts
recognized in the Consolidated Balance Sheet:
|
|||||||||||||
Prepaid
benefit cost
|
$
|
29,456
|
$
|
28,705
|
$
|
-
|
$
|
-
|
|||||
Accrued
benefit liability
|
(100,838
|
)
|
(101,487
|
)
|
(80,388
|
)
|
(84,750
|
)
|
|||||
Intangible
asset
|
8,249
|
10,923
|
-
|
-
|
|||||||||
Accumulated
other comprehensive loss
|
85,283
|
84,826
|
-
|
-
|
|||||||||
Net
asset (liability) recognized
|
$
|
22,150
|
$
|
22,967
|
$
|
(80,388
|
)
|
$
|
(84,750
|
)
|
|||
Pension
Benefits
|
Post-Retirement
Benefits
|
|||||||||||||||
December
31,
|
December
31,
|
December
31,
|
December
31,
|
|||||||||||||
2005
|
2004
|
2005
|
2004
|
|||||||||||||
( In
thousands)
|
||||||||||||||||
Projected
benefit obligation
|
$
|
379,474
|
$
|
365,101
|
|
N/A
|
|
N/A
|
||||||||
Accumulated
benefit obligation
|
348,593
|
332,329
|
$ |
115,148
|
$
|
168,953
|
||||||||||
Fair
value of plan assets
|
246,571
|
229,799
|
45,509
|
37,962
|
Pension
Benefits
|
Post-retirement
Benefits
|
||||||||||||||||||||||||
Year
|
Six
Months
|
Years
|
Year
|
Six
Months
|
Years
|
||||||||||||||||||||
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
||||||||||||||||||||
December
31,
|
December
31,
|
June
30,
|
December
31,
|
December
31,
|
June
30,
|
||||||||||||||||||||
2005
|
2004
|
2004
|
2003
|
2005
|
2004
|
2004
|
2003
|
||||||||||||||||||
Discount
rate:
|
|||||||||||||||||||||||||
Beginning
of year
|
5.75
|
%
|
6.00
|
%
|
6.50
|
%
|
7.50
|
%
|
5.75
|
%
|
6.00
|
%
|
6.50
|
%
|
7.50
|
%
|
|||||||||
End
of year
|
5.50
|
%
|
5.75
|
%
|
6.00
|
%
|
6.50
|
%
|
5.50
|
%
|
5.75
|
%
|
6.00
|
%
|
6.50
|
%
|
|||||||||
Rate
of compensation increase
|
|||||||||||||||||||||||||
(average)
|
3.24
|
%
|
3.40
|
%
|
3.60
|
%
|
4.00
|
%
|
N/A
|
N/A
|
N/A
|
N/A
|
|||||||||||||
Health
care cost trend rate
|
N/A
|
N/A
|
N/A
|
N/A
|
12.00
|
%
|
13.00
|
%
|
13.00
|
%
|
13.00
|
%
|
December
31,
|
June
30,
|
||||||||||||
2005
|
2004
|
2004
|
2003
|
||||||||||
Health
care cost trend rate assumed for next year
|
12.00
|
%
|
13.00
|
%
|
13.00
|
%
|
13.00
|
%
|
|||||
Ultimate
trend rate
|
4.65
|
%
|
4.75
|
%
|
4.75
|
%
|
5.00
|
%
|
|||||
Year
that the rate reaches the ultimate trend rate
|
2012
|
2012
|
2012
|
2011
|
|||||||||
Pension
Benefits
|
Post-retirement
Benefits
|
||||||||||||||||||||||||
Year
|
Six
Months
|
Years
|
Year
|
Six
Months
|
Years
|
||||||||||||||||||||
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
||||||||||||||||||||
December
31,
|
December
31,
|
June
30,
|
December
31,
|
December
31,
|
June
30,
|
||||||||||||||||||||
2005
|
2004
|
2004
|
2003
|
2005
|
2004
|
2004
|
2003
|
||||||||||||||||||
(In
thousands)
|
|||||||||||||||||||||||||
Service
cost
|
$
|
7,614
|
$
|
3,689
|
$
|
6,533
|
$
|
5,655
|
$
|
3,631
|
$
|
2,091
|
$
|
3,993
|
$
|
1,177
|
|||||||||
Interest
cost
|
22,396
|
11,412
|
22,591
|
22,899
|
7,594
|
4,607
|
8,739
|
5,579
|
|||||||||||||||||
Expected
return on plan
|
(24,211
|
)
|
(12,302
|
)
|
(21,477
|
)
|
(24,749
|
)
|
(2,552
|
)
|
(1,100
|
)
|
(1,640
|
)
|
(1,734
|
)
|
|||||||||
Amortization
of prior service cost
|
1,182
|
744
|
1,145
|
790
|
(854
|
)
|
321
|
266
|
(65
|
)
|
|||||||||||||||
Recognized
actuarial (gain) loss
|
10,213
|
3,982
|
8,402
|
2,433
|
577
|
379
|
485
|
(234
|
)
|
||||||||||||||||
Curtailment
recognition
|
3,172
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||
Settlement
recognition
|
(644
|
)
|
(386
|
)
|
(445
|
)
|
(558
|
)
|
-
|
-
|
-
|
-
|
|||||||||||||
Subtotal
|
19,722
|
7,139
|
16,749
|
6,470
|
8,396
|
6,298
|
11,843
|
4,723
|
|||||||||||||||||
Regulatory
adjustment
|
7,521
|
-
|
-
|
-
|
229
|
222
|
44
|
-
|
|||||||||||||||||
Net
periodic benefit cost
|
$
|
27,243
|
$
|
7,139
|
$
|
16,749
|
$
|
6,470
|
$
|
8,625
|
$
|
6,520
|
$
|
11,887
|
$
|
4,723
|
Pension
Benefits
|
Post-retirement
Benefits
|
||||||||||||||||||||||||
Year
|
Six
Months
|
Years
|
Year
|
Six
Months
|
Years
|
||||||||||||||||||||
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
Ended
|
||||||||||||||||||||
December
31,
|
December
31,
|
June
30,
|
December
31,
|
December
31,
|
June
30,
|
||||||||||||||||||||
2005
|
2004
|
2004
|
2003
|
2005
|
2004
|
2004
|
2003
|
||||||||||||||||||
Discount
rate:
|
|||||||||||||||||||||||||
Beginning
of year
|
6.00
|
%
|
6.50
|
%
|
7.50
|
%
|
7.50
|
%
|
6.00
|
%
|
6.50
|
%
|
7.50
|
%
|
7.50
|
%
|
|||||||||
End
of year
|
5.75
|
%
|
6.00
|
%
|
6.50
|
%
|
7.50
|
%
|
5.75
|
%
|
6.00
|
%
|
6.50
|
%
|
7.50
|
%
|
|||||||||
Expected
return on assets -
|
|||||||||||||||||||||||||
tax
exempt accounts
|
9.00
|
%
|
9.00
|
%
|
9.00
|
%
|
9.00
|
%
|
7.00
|
%
|
7.00
|
%
|
7.00
|
%
|
9.00
|
%
|
|||||||||
Expected
return on assets -
|
|||||||||||||||||||||||||
taxable
accounts
|
N/A
|
N/A
|
N/A
|
N/A
|
5.00
|
%
|
5.00
|
%
|
5.00
|
%
|
5.50
|
%
|
|||||||||||||
Rate
of compensation increase
|
3.40
|
%
|
3.60
|
%
|
4.00
|
%
|
5.00
|
%
|
N/A
|
N/A
|
N/A
|
N/A
|
|||||||||||||
Health
cost trend rate
|
N/A
|
N/A
|
N/A
|
N/A
|
13.00
|
%
|
13.00
|
%
|
13.00
|
%
|
12.00
|
%
|
|||||||||||||
December
31,
|
June
30,
|
||||||||||||
2005
|
2004
|
2004
|
2003
|
||||||||||
Health
care cost trend rate assumed for next year
|
13.00
|
%
|
13.00
|
%
|
13.00
|
%
|
12.00
|
%
|
|||||
Ultimate
trend rate
|
4.75
|
%
|
4.75
|
%
|
5.00
|
%
|
6.00
|
%
|
|||||
Year
that the rate reaches the ultimate trend rate
|
2012
|
2012
|
2011
|
2006
|
|||||||||
One
Percentage Point
|
One
Percentage Point
|
|||||||||
Increase
in Health Care
|
Decrease
in Health Care
|
|||||||||
Trend
Rate
|
Trend
Rate
|
|||||||||
|
(In
thousands)
|
|||||||||
Effect
on total service and interest cost components
|
$
|
1,192
|
$
|
(894
|
)
|
|||||
Effect
on accumulated post-retirement benefit obligation
|
$
|
12,019
|
$
|
(9,527
|
)
|
|||||
Pension
Benefits
|
Post-retirement
Benefits
|
||||||||||||||||||||||||
October
1, 2004 to
|
April
1, 2004 to
|
October
1, 2004 to
|
April
1, 2004 to
|
||||||||||||||||||||||
Asset
Category
|
September
30, 2005
|
September
30, 2004
|
September
30, 2005
|
September
30, 2004
|
|||||||||||||||||||||
Equity
securities
|
74
|
%
|
66
|
%
|
15
|
%
|
18
|
%
|
|||||||||||||||||
Debt
securities
|
19
|
%
|
28
|
%
|
37
|
%
|
47
|
%
|
|||||||||||||||||
Other
- cash equivalents
|
7
|
%
|
6
|
%
|
48
|
%
|
35
|
%
|
|||||||||||||||||
Total
|
100
|
%
|
100
|
%
|
100
|
%
|
100
|
%
|
|||||||||||||||||
Post-retirement
|
Post-retirement
|
|||||||||
Benefits
|
Benefits
|
|||||||||
Pension
|
(Gross,
Before
|
(Medicare
Part D
|
||||||||
Years
|
Benefits
|
Medicare
Part D)
|
Subsidy)
|
|||||||
(In
thousands)
|
||||||||||
2006
|
$
|
20,762
|
$
|
7,212
|
$
|
669
|
||||
2007
|
21,633
|
7,008
|
760
|
|||||||
2008
|
21,692
|
7,120
|
862
|
|||||||
2009
|
22,779
|
7,545
|
971
|
|||||||
2010
|
23,779
|
7,843
|
1,089
|
|||||||
2011-2015
|
135,265
|
47,658
|
6,150
|
Year
|
Six
Months
|
Years
|
|||||||||||
Ended
|
Ended
|
Ended
|
|||||||||||
December
31,
|
December
31,
|
June
30,
|
|||||||||||
Income
Tax Expense
|
2005
|
2004
|
2004
|
2003
|
|||||||||
(In
thousands)
|
|||||||||||||
Current:
|
|||||||||||||
Federal
|
$
|
7,155
|
$
|
1,761
|
$
|
1,497
|
$
|
(15,258
|
)
|
||||
State
|
2,511
|
84
|
151
|
(6,563
|
)
|
||||||||
9,666
|
1,845
|
1,648
|
(21,821
|
)
|
|||||||||
Deferred:
|
|||||||||||||
Federal
|
56,402
|
10,953
|
60,380
|
38,926
|
|||||||||
State
|
4,809
|
1,129
|
7,075
|
7,168
|
|||||||||
61,211
|
12,082
|
67,455
|
46,094
|
||||||||||
Total
income tax expense from
|
|||||||||||||
continuing
operations
|
$
|
70,877
|
$
|
13,927
|
$
|
69,103
|
$
|
24,273
|
|||||
December
31,
|
December
31,
|
|||||||||
Deferred
Income Tax Analysis
|
2005
|
2004
|
||||||||
(In
thousands)
|
||||||||||
Deferred
income tax assets:
|
||||||||||
Alternative
minimum tax credit
|
$
|
26,089
|
$
|
24,352
|
||||||
Insurance
accruals
|
3,024
|
2,268
|
||||||||
Bad
debt reserves
|
4,952
|
4,866
|
||||||||
Post-retirement
benefits
|
21,198
|
17,326
|
||||||||
Minimum
pension liability
|
34,017
|
39,909
|
||||||||
NOL
carry-forward
|
-
|
12,434
|
||||||||
Unconsolidated
investments
|
-
|
11,942
|
||||||||
Other
|
45,913
|
58,419
|
||||||||
Total
deferred income tax assets
|
135,193
|
171,516
|
||||||||
Valuation
allowance
|
-
|
(11,942
|
)
|
|||||||
Net
deferred income tax assets
|
135,193
|
159,574
|
||||||||
Deferred
income tax liabilities:
|
||||||||||
Property,
plant and equipment
|
(448,359
|
)
|
(427,380
|
)
|
||||||
Unconsolidated
investments
|
(7,961
|
)
|
-
|
|||||||
Unamortized
debt expense
|
(5,686
|
)
|
(5,991
|
)
|
||||||
Regulatory
liability
|
(14,620
|
)
|
(15,358
|
)
|
||||||
Other
|
(45,622
|
)
|
(48,341
|
)
|
||||||
Total
deferred income tax liabilities
|
(522,248
|
)
|
(497,070
|
)
|
||||||
Net
deferred income tax liability
|
(387,055
|
)
|
(337,496
|
)
|
||||||
Less
current income tax assets
|
9,435
|
27,998
|
||||||||
Accumulated
deferred income taxes
|
$
|
(396,490
|
)
|
$
|
(365,494
|
)
|
Year
|
Six
Months
|
Years
|
|||||||||||
Ended
|
Ended
|
Ended
|
|||||||||||
December
31,
|
December
31,
|
June
30,
|
|||||||||||
Effective
Income Tax Rate Analysis
|
2005
|
2004
|
2004
|
2003
|
|||||||||
(In
thousands)
|
|||||||||||||
Computed
statutory income tax expense
|
|||||||||||||
from
continuing operations at 35%
|
$
|
32,046
|
$
|
10,044
|
$
|
64,095
|
$
|
23,780
|
|||||
Changes
in income taxes resulting from:
|
|||||||||||||
Goodwill
impairment charge
|
61,250
|
-
|
-
|
-
|
|||||||||
Valuation
allowance
|
(11,942
|
)
|
11,942
|
-
|
-
|
||||||||
Dividend
received deduction
|
(8,731
|
)
|
(9,800
|
)
|
-
|
-
|
|||||||
State
income taxes, net of federal income tax benefit
|
4,757
|
788
|
4,697
|
326
|
|||||||||
Analysis
of deferred tax accounts
|
(4,757
|
)
|
-
|
-
|
-
|
||||||||
Investment
Tax Credit amortization
|
(422
|
)
|
(210
|
)
|
(424
|
)
|
(421
|
)
|
|||||
Other
|
(1,324
|
)
|
1,163
|
735
|
588
|
||||||||
Actual
income tax expense from continuing operations
|
$
|
70,877
|
$
|
13,927
|
$
|
69,103
|
$
|
24,273
|
December
31,
|
|||||||
2005
|
2004
|
||||||
(In
thousands)
|
|||||||
Current
|
$
|
6,541
|
$
|
4,421
|
|||
Noncurrent
|
27,274
|
25,919
|
|||||
Total
Environmental Liabilities
|
$
|
33,815
|
$
|
30,340
|
Year
Ended
|
||||
June
30,
|
||||
2003
|
||||
(In
thousands)
|
||||
Operating
revenues
|
$
|
144,490
|
||
Operating
income
|
$
|
21,602
|
||
Net
earnings from discontinued operations (a)
|
$
|
32,520
|
Quarters
Ended
|
|||||||||||||
March
31
|
June
30
|
September
30
|
December
31
|
||||||||||
(In
thousands, except per share amounts)
|
|||||||||||||
Operating
revenues
|
$
|
767,556
|
$
|
305,164
|
$
|
255,047
|
$
|
691,663
|
|||||
Operating
income (loss)
|
155,582
|
31,076
|
40,289
|
(63,903
|
)
|
||||||||
Net
earnings (loss) from continuing operations
|
92,196
|
15,676
|
19,590
|
(106,779
|
)
|
||||||||
Net
earnings (loss) available for common
|
|||||||||||||
stockholders
|
87,855
|
11,335
|
15,249
|
(111,121
|
)
|
||||||||
Diluted
net earnings (loss) per share
|
|||||||||||||
available
for common stockholders: (1)
|
|||||||||||||
Continuing
operations
|
0.81
|
0.10
|
0.13
|
(1.00
|
)
|
||||||||
Available
for common stockholders
|
0.81
|
0.10
|
0.13
|
(1.00
|
)
|
||||||||
Quarters
Ended
|
|||||||
September
30
|
December
31
|
||||||
(In
thousands, except per share amounts)
|
|||||||
Operating
revenues
|
$
|
234,576
|
$
|
559,762
|
|||
Operating
income
|
18,794
|
88,137
|
|||||
Net
earnings (loss) from continuing
|
|||||||
operations
|
(7,140
|
)
|
21,911
|
||||
Net
earnings (loss) available for
|
|||||||
common
stockholders
|
(11,481
|
)
|
17,569
|
||||
Diluted
net earnings (loss) per share
|
|||||||
available
for common stockholders: (1)
|
|||||||
Continuing
operations
|
(0.14
|
)
|
0.19
|
||||
Available
for common stockholders
|
(0.14
|
)
|
0.19
|
Quarters
Ended
|
|||||||||||||
September
30
|
December
31
|
March
30
|
June
30
|
||||||||||
(In
thousands, except per share amounts)
|
|||||||||||||
Operating
revenues
|
$
|
231,351
|
$
|
507,066
|
$
|
774,551
|
$
|
286,806
|
|||||
Operating
income
|
23,936
|
95,330
|
150,337
|
35,724
|
|||||||||
Net
earnings (loss) from continuing
|
|||||||||||||
operations
|
(3,707
|
)
|
38,422
|
75,367
|
3,943
|
||||||||
Net
earnings (loss) available for
|
|||||||||||||
common
stockholders
|
(3,707
|
)
|
34,418
|
71,026
|
(398
|
)
|
|||||||
Diluted
net earnings (loss) per share
|
|||||||||||||
available
for common stockholders: (1)
|
|||||||||||||
Continuing
operations
|
(0.05
|
)
|
0.42
|
0.87
|
-
|
||||||||
Available
for common stockholders
|
(0.05
|
)
|
0.42
|
0.87
|
-
|
||||||||
· |
items
that do not impact net earnings from continuing operations, such
as
extraordinary items, discontinued operations and the impact of accounting
changes;
|
· |
income
taxes;
|
· |
interest;
and
|
· |
dividends
on preferred stock.
|
Year
|
Six
Months
|
Years
|
|||||||||||
Ended
|
Ended
|
Ended
|
|||||||||||
December
31,
|
December
31,
|
June
30,
|
|||||||||||
Segment
Data
|
2005
|
2004
|
2004
|
2003
|
|||||||||
(In
thousands)
|
|||||||||||||
Revenues
from external customers:
|
|||||||||||||
Transportation
and Storage
|
$
|
505,233
|
$
|
242,743
|
$
|
490,883
|
$
|
24,522
|
|||||
Distribution
|
1,503,272
|
549,346
|
1,304,405
|
1,158,964
|
|||||||||
Total
segment operating revenues
|
2,008,505
|
792,089
|
1,795,288
|
1,183,486
|
|||||||||
Corporate
and other
|
10,925
|
2,249
|
4,486
|
5,014
|
|||||||||
$
|
2,019,430
|
$
|
794,338
|
$
|
1,799,774
|
$
|
1,188,500
|
||||||
Depreciation
and amortization:
|
|||||||||||||
Transportation
and Storage
|
$
|
62,171
|
$
|
30,159
|
$
|
59,988
|
$
|
3,197
|
|||||
Distribution
|
63,278
|
32,511
|
57,601
|
56,396
|
|||||||||
Total
segment depreciation and amortization
|
125,449
|
62,670
|
117,589
|
59,593
|
|||||||||
Corporate
and other
|
944
|
706
|
1,166
|
1,049
|
|||||||||
$
|
126,393
|
$
|
63,376
|
$
|
118,755
|
$
|
60,642
|
||||||
Earnings
(loss) from unconsolidated investments:
|
|||||||||||||
Transportation
and Storage
|
$
|
70,618
|
$
|
4,761
|
$
|
200
|
$
|
7
|
|||||
Corporate
and other
|
124
|
(16
|
)
|
-
|
415
|
||||||||
$
|
70,742
|
$
|
4,745
|
$
|
200
|
$
|
422
|
||||||
Other
income (expense), net:
|
|||||||||||||
Transportation
and Storage
|
$
|
571
|
$
|
89
|
$
|
7,210
|
$
|
64
|
|||||
Distribution
|
(1,452
|
)
|
(66
|
)
|
1,944
|
2,209
|
|||||||
Total
segment other income (expense), net
|
(881
|
)
|
23
|
9,154
|
2,273
|
||||||||
Corporate
and other
|
(6,188
|
)
|
(18,103
|
)
|
(3,686
|
)
|
15,706
|
||||||
$
|
(7,069
|
)
|
$
|
(18,080
|
)
|
$
|
5,468
|
$
|
17,979
|
||||
Segment
performance:
|
|||||||||||||
Transportation
and Storage EBIT
|
$
|
281,344
|
$
|
94,971
|
$
|
200,912
|
$
|
9,699
|
|||||
Distribution
EBIT
|
(43,928
|
)
|
19,330
|
120,838
|
144,971
|
||||||||
Total
segment EBIT
|
237,416
|
114,301
|
321,750
|
154,670
|
|||||||||
Corporate
and other
|
(10,699
|
)
|
(20,705
|
)
|
(10,755
|
)
|
6,095
|
||||||
Interest
|
135,157
|
64,898
|
127,867
|
83,343
|
|||||||||
Dividends
on preferred securities of subsidiary trust
|
-
|
-
|
-
|
9,480
|
|||||||||
Federal
and state income taxes
|
70,877
|
13,927
|
69,103
|
24,273
|
|||||||||
Net
earnings from discontinued operations
|
-
|
-
|
-
|
32,520
|
|||||||||
Preferred
stock dividends
|
17,365
|
8,683
|
12,686
|
-
|
|||||||||
Net
earnings
|
$
|
3,318
|
$
|
6,088
|
$
|
101,339
|
$
|
76,189
|
|||||
Year
|
Six
Months
|
Years
|
|||||||||||
Ended
|
Ended
|
Ended
|
|||||||||||
December
31,
|
December
31,
|
June
30,
|
|||||||||||
Segment
Data
|
2005
|
2004
|
2004
|
2003
|
|||||||||
(In
thousands)
|
|||||||||||||
Total
assets:
|
|||||||||||||
Transportation
and Storage
|
$
|
3,155,549
|
$
|
2,348,354
|
$
|
2,197,289
|
$
|
2,212,467
|
|||||
Distribution
|
2,490,164
|
2,448,750
|
2,231,970
|
2,243,257
|
|||||||||
Total
segment assets
|
5,645,713
|
4,797,104
|
4,429,259
|
4,455,724
|
|||||||||
Corporate
and other
|
191,106
|
771,185
|
143,199
|
135,214
|
|||||||||
Total
consolidated assets
|
$
|
5,836,819
|
$
|
5,568,289
|
$
|
4,572,458
|
$
|
4,590,938
|
|||||
Expenditures
for long-lived assets:
|
|||||||||||||
Transportation
and Storage
|
$
|
189,415
|
$
|
111,886
|
$
|
131,378
|
$
|
5,128
|
|||||
Distribution
|
84,896
|
56,442
|
78,791
|
67,327
|
|||||||||
Total
segment expenditures for
|
|||||||||||||
long-lived
assets
|
274,311
|
168,328
|
210,169
|
72,455
|
|||||||||
Corporate
and other
|
2,306
|
10,109
|
15,884
|
7,275
|
|||||||||
Total
consolidated expenditures for
|
|||||||||||||
long-lived
assets
|
$
|
276,617
|
$
|
178,437
|
$
|
226,053
|
$
|
79,730
|
|||||
Percent
of
|
Percent
of
|
||||||||||||
Transportation
and
|
Company
Total
|
||||||||||||
Storage
Segment
|
Operating
|
||||||||||||
Revenues
|
Revenues
|
||||||||||||
For
Year
|
For
Six
|
For
Year
|
For
Six
|
||||||||||
Ended
|
Months
Ended
|
Ended
|
Months
Ended
|
||||||||||
December
31,
|
December
31,
|
December
31,
|
December
31,
|
||||||||||
Customer
|
2005
|
2004
|
2005
|
2004
|
|||||||||
BG
LNG Services
|
17
|
%
|
16
|
%
|
4
|
%
|
5
|
%
|
|||||
ProLiance
|
16
|
17
|
4
|
5
|
|||||||||
Ameren
Corp
|
11
|
11
|
3
|
3
|
|||||||||
CMS
Energy and affiliates
|
8
|
9
|
2
|
3
|
|||||||||
Other
top 10 customers
|
14
|
14
|
4
|
5
|
|||||||||
Remaining
customers
|
34
|
33
|
8
|
10
|
|||||||||
Total
percentage
|
100
|
%
|
100
|
%
|
25
|
%
|
31
|
%
|
|||||
Six
Months Ended December 31,
|
|||||||
2004
|
2003
|
||||||
(In
thousands, except shares and per share amounts)
|
|||||||
(Unaudited)
|
|||||||
Operating
revenues
|
$
|
794,338
|
$
|
738,417
|
|||
Operating
income
|
106,931
|
119,266
|
|||||
Earnings
before income taxes
|
28,698
|
57,077
|
|||||
Federal
and state income taxes
|
(13,927
|
)
|
(22,362
|
)
|
|||
Net
earnings
|
14,771
|
34,715
|
|||||
Preferred
stock dividends
|
(8,683
|
)
|
(4,004
|
)
|
|||
Net
earnings available for common stockholders
|
$
|
6,088
|
$
|
30,711
|
|||
Net
earnings available for common stockholders per share:
|
|||||||
Basic
|
$
|
0.07
|
$
|
0.38
|
|||
Diluted
|
0.07
|
0.37
|
|||||
Weighted
average shares outstanding:
|
|||||||
Basic
|
87,313,787
|
81,649,310
|
|||||
Diluted
|
89,717,427
|
82,531,182
|
Page
|
|
Report of Independent Registered Public Accounting Firm |
1
|
|
|
|
|
Audited Consolidated Financial Statements |
|
Consolidated
Balance Sheets
|
2
|
Consolidated
Statements of Operations
|
3
|
Consolidated
Statements of Members’ Equity
|
4
|
Consolidated
Statements of Cash Flows
|
5
|
Notes
to Consolidated Financial
Statements
|
6-29
|
December
31,
|
December
31,
|
||||||
2005
|
2004
|
||||||
ASSETS
|
|||||||
Current
Assets
|
|||||||
Cash
and cash equivalents
|
$
|
31,904
|
$
|
5,821
|
|||
Accounts
receivable - customers, net of allowance of $98 and $0 in 2005
and 2004,
respectively
|
20,357
|
20,248
|
|||||
Accounts
receivable - associated companies
|
4,258
|
12,673
|
|||||
Transportation
and exchange gas receivable
|
4,812
|
3,406
|
|||||
Other
|
8,652
|
11,930
|
|||||
Total
Current Assets
|
69,983
|
54,078
|
|||||
Property,
Plant and Equipment, at Cost
|
|||||||
Plant
in service
|
1,092,551
|
911,174
|
|||||
Construction
work in progress
|
7,419
|
100,420
|
|||||
Less
- Accumulated depreciation and amortization
|
(25,627
|
)
|
(2,777
|
)
|
|||
Property,
Plant and Equipment, Net
|
1,074,343
|
1,008,817
|
|||||
Other
Assets
|
|||||||
Investment
in unconsolidated affiliate
|
1,010,440
|
998,549
|
|||||
Goodwill
|
113,289
|
129,042
|
|||||
Regulatory
assets
|
64,869
|
63,321
|
|||||
Other
|
50,933
|
58,170
|
|||||
Total
Other Assets
|
1,239,531
|
1,249,082
|
|||||
Total
Assets
|
$
|
2,383,857
|
$
|
2,311,977
|
|||
LIABILITIES
AND MEMBERS’ EQUITY
|
|||||||
Current
Liabilities
|
|||||||
Accounts
payable - trade and other
|
$
|
5,419
|
$
|
14,700
|
|||
Accounts
payable - associated companies
|
11,094
|
10,739
|
|||||
Transportation
and exchange gas payable
|
5,140
|
3,106
|
|||||
Accrued
taxes, other than income
|
6,008
|
6,051
|
|||||
Accrued
interest
|
5,410
|
5,188
|
|||||
Other
|
16,357
|
24,684
|
|||||
Total
Current Liabilities
|
49,428
|
64,468
|
|||||
Deferred
Credits
|
14,092
|
2,907
|
|||||
Long-term
Debt
|
1,020,000
|
1,055,000
|
|||||
Commitments
and Contingencies
(Note 10)
|
|||||||
Members’
Equity
|
1,300,337
|
1,189,602
|
|||||
Total
Liabilities and Members’ Equity
|
$
|
2,383,857
|
$
|
2,311,977
|
Year
Ended
|
From
Inception
(May
14, 2004) to
|
||||||
December
31,
|
December
31,
|
||||||
2005
|
2004
|
||||||
Revenues
|
|||||||
Transportation
|
$
|
187,274
|
$
|
22,361
|
|||
Gas
and liquids sold and other
|
49,085
|
4,833
|
|||||
Total
Revenues
|
236,359
|
27,194
|
|||||
Costs
and Expenses
|
|||||||
Operating
and maintenance expenses
|
69,474
|
15,709
|
|||||
Amortization
of regulatory assets
|
4,394
|
566
|
|||||
Depreciation
and amortization
|
30,401
|
3,414
|
|||||
Taxes,
other than income taxes
|
11,090
|
929
|
|||||
Total
Costs and Expenses
|
115,359
|
20,618
|
|||||
Operating
Income
|
121,000
|
6,576
|
|||||
Other
Income (Expense)
|
|||||||
Equity
in earnings of unconsolidated affiliate
|
72,492
|
7,549
|
|||||
Interest
expense and related charges, net
|
(58,143
|
)
|
(5,589
|
)
|
|||
Other,
net
|
5,386
|
66
|
|||||
Total
Other Income
|
19,735
|
2,026
|
|||||
Net
Income
|
$
|
140,735
|
$
|
8,602
|
|||
Southern
|
Other
Class B
|
||||||||||||
Union
|
GE
|
Interests
|
|||||||||||
(50.00%)
|
(30.02%)
|
(19.98%)
|
Total
|
||||||||||
Balance,
at Inception (May 14, 2004)
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||
Members’
contributions
|
590,500
|
590,500
|
-
|
1,181,000
|
|||||||||
Sale
to Minority Interests
|
-
|
(235,964
|
)
|
235,964
|
-
|
||||||||
Net
income
|
4,301
|
2,583
|
1,718
|
8,602
|
|||||||||
Balance,
December 31, 2004
|
594,801
|
357,119
|
237,682
|
1,189,602
|
|||||||||
Net
income
|
70,367
|
42,249
|
28,119
|
140,735
|
|||||||||
Distribution
to Members
|
(15,000
|
)
|
(9,006
|
)
|
(5,994
|
)
|
(30,000
|
)
|
|||||
Balance,
December 31, 2005
|
$
|
650,168
|
$
|
390,362
|
$
|
259,807
|
$
|
1,300,337
|
|||||
Year
Ended
|
From
Inception
(May
14, 2004) to
|
||||||
December
31,
|
December
31,
|
||||||
2005
|
2004
|
||||||
Cash
Flows From Operating Activities
|
|||||||
Net
income
|
$
|
140,735
|
$
|
8,602
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Depreciation
and amortization
|
30,401
|
3,414
|
|
||||
Amortization
of regulatory assets
|
4,394
|
566
|
|||||
Equity
in earnings of unconsolidated affiliate
|
(72,492
|
)
|
(7,549
|
)
|
|||
Distributions
received from unconsolidated affiliate
|
60,600
|
-
|
|||||
Other
assets and liabilities, noncash adjustments
|
4,721
|
107
|
|||||
Amortization
of debt costs
|
3,754
|
481
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
8,306
|
(7,487
|
)
|
||||
Transportation
and exchange gas receivable
|
(1,406
|
)
|
(282
|
)
|
|||
Accounts
payable
|
(14,716
|
)
|
13,816
|
||||
Transportation
and exchange gas payable
|
2,034
|
(3,190
|
)
|
||||
Accrued
taxes
|
(43
|
)
|
246
|
||||
Accrued
interest
|
222
|
4,864
|
|||||
Other
current assets and liabilities
|
6,066
|
10,233
|
|||||
Net
Cash Provided by Operating Activities
|
172,576
|
23,821
|
|||||
Cash
Flows From Investing Activities
|
|||||||
Acquisition
of CrossCountry Energy, LLC, net of cash acquired
|
-
|
(2,024,147
|
)
|
||||
Other
capitalized Acquisition costs
|
10,478
|
(5,032
|
)
|
||||
Additions
to property, plant and equipment
|
(88,121
|
)
|
(23,048
|
)
|
|||
Other
capital expenditures
|
(2,472
|
)
|
(184
|
)
|
|||
Proceeds
from sale of subsidiaries
|
-
|
175,000
|
|||||
Net
Cash Used in Investing Activities
|
(80,115
|
)
|
(1,877,411
|
)
|
|||
Cash
Flows From Financing Activities
|
|||||||
Members’
contributions
|
-
|
1,181,000
|
|||||
Debt
proceeds
|
20,000
|
1,055,000
|
|||||
Debt
repayments
|
(55,000
|
)
|
(352,000
|
)
|
|||
Debt
issuance costs
|
(1,378
|
)
|
(24,589
|
)
|
|||
Member
distributions
|
(30,000
|
)
|
-
|
||||
Net
Cash (Used in) Provided by Financing Activities
|
(66,378
|
)
|
1,859,411
|
||||
Increase
in Cash and Cash Equivalents
|
26,083
|
5,821
|
|||||
Cash
and Cash Equivalents at Beginning of Period
|
5,821
|
-
|
|||||
Cash
and Cash Equivalents, End of Period
|
$
|
31,904
|
$
|
5,821
|
|||
Supplemental
Disclosure of Cash Flow Information
|
|||||||
Interest
paid
|
$
|
54,736
|
$
|
810
|
November
17,
|
||||
2004
|
||||
Current
assets, including cash of $85.4
|
$
|
119.6
|
||
Noncurrent
assets
|
2,377.9
|
|||
Total
assets acquired
|
2,497.5
|
|||
Current
liabilities
|
(33.1
|
)
|
||
Noncurrent
liabilities
|
(2.9
|
)
|
||
Long-term
debt
|
(352.0
|
)
|
||
Total
liabilities assumed
|
(388.0
|
)
|
||
Net
assets acquired
|
$
|
2,109.5
|
Fair
value in excess of book value of
|
Estimated
useful lives
|
||||||
investment
attributable
to (in millions):
|
(years)
|
Amount
|
|||||
Property,
plant and equipment
|
40
|
$
|
34.0
|
||||
Long-term
debt (a)
|
4-20
|
(83.3
|
)
|
||||
Deferred
taxes (a)
|
40
|
(13.1
|
)
|
||||
Other
net liabilities
|
(b)
|
|
(21.6
|
)
|
|||
Goodwill
|
(c)
|
|
433.8
|
||||
Software
|
5
|
2.1
|
|||||
Total
|
351.9
|
||||||
Accumulated
net accretion
|
13.4
|
||||||
Net
fair value in excess of book value
|
$
|
365.3
|
The
Company’s accounting policy for the costs of computer software (all of
which is for internal use by the Company and its affiliates only)
is to
capitalize direct costs of materials and services consumed in developing
or obtaining software, including payroll and payroll-related costs
for
employees who are directly associated with and who devote time
to the
software project. Costs are capitalized during the application
development
stage. All other costs are expensed as incurred. The Company amortizes
the
costs at a rate of 10 percent per year. Impairment is evaluated
based on
changes in the expected usefulness of the software. Computer software
is
included in Property, Plant and Equipment under Intangible Assets
(see
Note 5).
|
Expenditures
that relate to an existing condition caused by past operations,
and do not
contribute to current or future revenue generation, are expensed.
Environmental expenditures relating to current or future revenues
are
expensed or capitalized as appropriate based on the nature of the
costs
incurred. Liabilities are recorded when environmental assessments
and/or
clean ups are probable and the costs can be reasonably estimated
(see
Note
10).
|
Line
pack
|
$
|
(10.6
|
) | |
Enron
working capital settlement
|
(10.2
|
)
|
||
Lease
termination and build-out costs
|
3.1
|
|||
Other
post employment benefits
|
2.3
|
|||
Miscellaneous
|
(0.3
|
)
|
||
$
|
(15.7
|
)
|
||
2005
|
2004
|
||||||
TW
Holdings
|
|||||||
Term
loan, LIBOR plus 0.875%, maturing November 17, 2009
|
$
|
-
|
$
|
230,000
|
|||
Revolving
Credit Facility, LIBOR plus 0.625%, maturing
|
|||||||
December
21, 2010
|
230,000
|
-
|
|||||
5.64%
Notes due November 17, 2014
|
125,000
|
125,000
|
|||||
5.79%
Notes due November 17, 2016
|
100,000
|
100,000
|
|||||
455,000
|
455,000
|
||||||
Transwestern
|
|||||||
5.39%
Notes due November 17, 2014
|
270,000
|
250,000
|
|||||
5.54%
Notes due November 17, 2016
|
250,000
|
250,000
|
|||||
Term
loan, LIBOR plus 0.75%, maturing November 17, 2009
|
-
|
100,000
|
|||||
Revolving
Credit Facility for up to $230.0 million, at LIBOR
|
|||||||
plus
0.45%, maturing December 21, 2010 (the Revolving
|
|||||||
Facility)
|
45,000
|
-
|
|||||
Revolving
loan for up to $130.0 million, at LIBOR plus
|
|||||||
0.75%,
maturing November 17, 2009
|
-
|
-
|
|||||
565,000
|
600,000
|
||||||
Total
outstanding
|
1,020,000
|
1,055,000
|
|||||
Less
current maturities
|
-
|
-
|
|||||
Long-term
debt
|
$
|
1,020,000
|
$
|
1,055,000
|
|||
2006
|
$
|
-
|
||
2007
|
-
|
|||
2008
|
-
|
|||
2009
|
-
|
|||
2010
|
275,000
|
|||
Thereafter
|
745,000
|
|||
$
|
1,020,000
|
Lives
|
||||||||||
(Years)
|
2005
|
2004
|
||||||||
Transmission
Plant
|
40-83
|
$
|
1,055,908
|
$
|
890,572
|
|||||
General
Plant
|
10
|
10,843
|
10,511
|
|||||||
Intangible
Assets
|
10-12
|
25,800
|
10,091
|
|||||||
Construction
Work-in-progress
|
-
|
7,419
|
100,420
|
|||||||
Property,
Plant and Equipment, at Cost
|
1,099,970
|
1,011,594
|
||||||||
Less
- Accumulated depreciation and amortization
|
(25,627
|
)
|
(2,777
|
)
|
||||||
Property,
Plant and Equipment, Net
|
$
|
1,074,343
|
$
|
1,008,817
|
|
Lives
|
|||||||||
(Years)
|
2005
|
2004
|
||||||||
Intangible
Assets included in Property, Plant and Equipment:
|
||||||||||
Computer
software
|
5-10
|
$
|
23,281
|
$
|
10,091
|
|||||
Leasehold
improvement
|
10
|
2,519
|
-
|
|||||||
Intangible
Assets
|
25,800
|
10,091
|
||||||||
Less
- Accumulated depreciation and amortization
|
(4,255
|
)
|
(342
|
)
|
||||||
Intangible
Assets included in Property, Plant and Equipment - Net
|
$
|
21,545
|
$
|
9,749
|
Intangible
Assets included in Other Assets:
|
||||||||||
Customer
contracts
|
3
|
$
|
12,600
|
$
|
12,600
|
|||||
Less
- Accumulated depreciation and amortization
|
(4,713
|
)
|
(513
|
)
|
||||||
Intangible
Assets included in Other
Assets
- Net
|
$
|
7,887
|
$
|
12,087
|
2005
|
2004
|
||||||
Southern
California Gas Company (SoCal)
|
$
|
44.1
|
$
|
6.2
|
|||
BP
Energy Company (BP)
|
26.9
|
5.2
|
|||||
Pacific
Gas and Electric Company (PGE)
|
20.9
|
2.8
|
Other
Current Assets
|
2005
|
2004
|
|||||
Prepaid
right-of-way
|
$
|
3,238
|
$
|
3,238
|
|||
Miscellaneous
prepayments
|
4,331
|
7,606
|
|||||
Materials
and supplies
|
957
|
936
|
|||||
Other
|
126
|
150
|
|||||
$
|
8,652
|
$
|
11,930
|
Other
Assets
|
2005
|
2004
|
|||||
Prepaid
right-of-way
|
$
|
12,628
|
$
|
15,891
|
|||
Unamortized
debt costs
|
26,675
|
28,746
|
|||||
Intangible
assets - contracts, net
|
7,887
|
12,087
|
|||||
Deferred
development costs
|
2,688
|
365
|
|||||
Annual
regulatory commission costs
|
799
|
915
|
|||||
Other,
net
|
256
|
166
|
|||||
$
|
50,933
|
$
|
58,170
|
||||
Other
Current Liabilities
|
|||||||
Capital
and expense accruals (1)
|
$
|
3,542
|
$
|
13,091
|
|||
Transition
costs
|
334
|
5,319
|
|||||
Incentive
plan accruals
|
3,506
|
-
|
|||||
Labor
and related benefit accruals
|
2,270
|
652
|
|||||
Reserve
for regulatory and other contingencies
|
3,591
|
2,244
|
|||||
Customer
deposits
|
637
|
1,560
|
|||||
Other
|
2,477
|
1,819
|
|||||
$
|
16,357
|
$
|
24,685
|
Deferred
Credits
|
|||||||
Environmental
liabilities
|
$
|
10,175
|
$
|
2,907
|
|||
Asset
retirement obligation - asbestos
|
865
|
-
|
|||||
Retiree
medical liabilities
|
3,026
|
-
|
|||||
Other
miscellaneous
|
26
|
-
|
|||||
$
|
14,092
|
$
|
2,907
|
Year
ended
|
||||
December
31,
|
||||
OPEB
(in
thousands)
|
2005
|
|||
Change
in Benefit Obligation
|
||||
Benefit
obligation at plan adoption
(1)
|
$
|
6,734
|
||
Service
cost
|
90
|
|||
Interest
cost
|
316
|
|||
Actuarial
gain
|
(2,917
|
)
|
||
Retiree
premiums
|
726
|
|||
Benefits
paid
|
(833
|
)
|
||
Benefit
obligation at end of year
|
$
|
4,116
|
||
Change
in Plan Assets
|
||||
Fair
value of plan assets at plan adoption (1)
(2)
|
$
|
2,862
|
||
Return
on plan assets
|
162
|
|||
Employer
contributions
|
939
|
|||
Retiree
premiums
|
726
|
|||
Benefits
paid
|
(833
|
)
|
||
Fair
value of plan assets at end of year
|
$
|
3,856
|
||
Funded
Status
|
||||
Funded
status at end of year
|
$
|
(260
|
)
|
|
Unrecognized
net actuarial gain
|
(2,766
|
)
|
||
Net
liability recognized at December 31, 2005
|
$
|
(3,026
|
)
|
|
(1) |
For
purposes of this reconciliation, the plan adoption date is considered
to
be January 1, 2005.
|
As
of December 31, 2005
|
||||
Discount
rate
|
5.50
|
%
|
||
Rate
of compensation increase
|
N/A
|
|||
Health
care cost trend rates
|
||||
(graded
to 4.65% by year 2012)
|
12.00
|
%
|
Year
Ended
|
||||
December
31,
|
||||
OPEB
(in
thousands)
|
2005
|
|||
Service
cost
|
$
|
89
|
||
Interest
cost
|
316
|
|||
Expected
return on plan assets
|
(162
|
)
|
||
Amortization
of prior service cost
|
-
|
|||
Recognized
actuarial gain
|
(151
|
)
|
||
Net
periodic benefit cost
|
$
|
92
|
Year
Ended December 31, 2005
|
||
Discount
rate
|
5.75%
|
|
Rate
of compensation increase
|
N/A
|
|
Expected
long-term return on plan assets
|
5.00%
|
|
Health
care cost trend rates
|
||
(graded
to 4.75% by year 2012)
|
12.00%
|
1
Point Increase
|
1
Point Decrease
|
||||||
(in
thousands)
|
|||||||
Effect
on total service and interest cost components
|
$
|
7
|
$
|
(6
|
)
|
||
Effect
on postretirement benefit obligation
|
$
|
125
|
$
|
(111
|
)
|
||
|
Year
Ended
|
||||||
|
December
31,
|
||||||
2005
|
|||||||
Equity
securities
|
0
|
%
|
|||||
Debt
securities
|
0
|
%
|
|||||
Cash
and cash equivalents
|
100
|
%
|
|||||
Total
|
100
|
%
|
|
2005
|
2004
|
|||||
Regulatory
assets:
|
|||||||
Accumulated
reserve adjustment
|
$
|
43,799
|
$
|
44,387
|
|||
AFUDC
gross-up
|
9,191
|
7,978
|
|||||
Environmental
costs (see Note 10)
|
4,902
|
-
|
|||||
South
Georgia deferred tax receivable
|
2,638
|
2,686
|
|||||
Other
post-retirement benefits (see Note 8)
|
1,135
|
-
|
|||||
Deferred
contract reformation costs
|
505
|
1,909
|
|||||
Deferred
loss on receivables
|
722
|
1,482
|
|||||
Litigation
costs
|
633
|
1,500
|
|||||
Purchase
gas adjustments alternative rate recovery
|
447
|
984
|
|||||
Other
|
897
|
2,395
|
|||||
$
|
64,869
|
$
|
63,321
|
Year
Ending
|
Operating
|
|||
December
31,
|
Leases
|
|||
2006
|
$
|
3.2
|
||
2007
|
3.3
|
|||
2008
|
3.3
|
|||
2009
|
3.3
|
|||
2010
|
0.3
|
|||
Thereafter
|
3.3
|
|||
Total
|
$
|
16.7
|
Year
Ended
|
Year
Ended
|
||||||
December
31,
|
December
31,
|
||||||
2005
|
2004
|
||||||
Statement
of Income Data
|
|||||||
Operating
revenues
|
$
|
476,049
|
$
|
512,418
|
|||
Natural
gas purchased
|
-
|
48,921
|
|||||
Net
revenues
|
476,049
|
463,497
|
|||||
Operations,
maintenance and other taxes
|
113,135
|
110,871
|
|||||
Depreciation
and amortization
|
91,125
|
68,053
|
|||||
Operating
income
|
271,789
|
284,573
|
|||||
Income
before income tax
|
199,030
|
206,064
|
|||||
Net
income
|
123,944
|
126,844
|
|||||
The
Company’s Interest:
|
|||||||
Allocated
income (a)
|
$
|
61,972
|
$
|
5,488
|
|||
Adjustments
(b)
|
10,520
|
2,061
|
|||||
Equity
in earnings of unconsolidated affiliate
|
$
|
72,492
|
$
|
7,549
|
December
31,
|
December
31,
|
||||||
2005
|
2004
|
||||||
Balance
Sheet Data
|
|||||||
Current
assets
|
$
|
68,119
|
$
|
59,115
|
|||
Property,
plant and equipment, net
|
2,916,548
|
2,966,747
|
|||||
Other
assets
|
104,720
|
116,074
|
|||||
Total
assets
|
$
|
3,089,387
|
$
|
3,141,936
|
|||
Current
liabilities
|
$
|
76,350
|
$
|
87,396
|
|||
Long-term
debt
|
922,355
|
1,010,825
|
|||||
Other
liabilities
|
800,894
|
759,309
|
|||||
Total
liabilities
|
$
|
1,799,599
|
$
|
1,857,530
|
(a)
|
Represents
the Company’s equity in Citrus’ earnings for the year ended December 31,
2005 and the period from the date of Acquisition, November 17,
2004,
through December 31, 2004.
|
(b) |
Reflects
(i) net accretion of $11.9 million and $1.5 million for 2005 and
2004,
respectively, pursuant to APB Opinion No. 18, related to the fair
value
in
excess of book value of the Company’s investment in certain underlying
Citrus tangible and intangible assets and liabilities. See table
below for
further breakdown of accretion; (ii) $0.4 million for 2004, related
to a
deferred compensation plan settlement recognized as expense by Citrus,
which was capitalized by the Company as a component of purchase
accounting, under the line item “other net liabilities;” (iii) $(2.7)
million for 2005, related to items recognized as income or expense
by
Citrus, which were capitalized by the Company as a component of purchase
accounting, under the line item “goodwill” and (iv) $1.3 million and $0.2
million for 2005 and 2004, respectively, related to reversal of Citrus
amortization of other comprehensive income, the remaining pro rata
balance
of which the Company capitalized as a component of purchase accounting
(see Note 1).
|
Adjustments
to the Company’s Equity
in Citrus earnings (in millions):
|
2005
|
2004
|
||||||
Net
Accretion
|
|||||||
Property,
plant and equipment……………………
|
$
|
(0.8
|
)
|
$
|
(0.1
|
)
|
|
Long-term
debt……………………………………
|
12.8
|
1.6
|
|||||
Deferred
taxes……………………………………
|
0.3
|
0.1
|
|||||
Intangibles
- software……………………………
|
(0.4
|
)
|
(0.1
|
)
|
|||
Total
Net Accretion………………………………………….
|
11.9
|
1.5
|
|||||
Citrus
(income) expense offset (ii)(iii)(iv)………………….
|
(1.4
|
)
|
0.6
|
||||
Total
Adjustments……………………………………
|
$
|
10.5
|
$
|
2.1
|
|||
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
2
|
Audited
Consolidated Financial Statements
|
|
Consolidated
Balance Sheets
|
3
|
Consolidated
Statements of Income
|
4
|
Consolidated
Statements of Stockholders’ Equity
|
5
|
Consolidated
Statements of Comprehensive Income
|
5
|
Consolidated
Statements of Cash Flow
|
6
|
Notes
to Consolidated Financial Statements
|
7-25
|
CITRUS
CORP. AND SUBSIDIARIES
|
|||||||
CONSOLIDATED
BALANCE SHEETS
|
|||||||
(In
Thousands)
|
|||||||
December
31,
|
December
31,
|
||||||
2005
|
2004
|
||||||
ASSETS
|
|||||||
Current
Assets
|
|||||||
Cash
and cash equivalents
|
$
|
21,406
|
$
|
11,645
|
|||
Accounts
receivable - customers, net of allowance for doubtful accounts
of $23 and
$33
|
41,072
|
41,475
|
|||||
Income
tax receivable
|
872
|
-
|
|||||
Materials
and supplies
|
3,077
|
3,113
|
|||||
Exchange
gas receivable
|
508
|
1,273
|
|||||
Other
|
1,184
|
1,609
|
|||||
Total
Current Assets
|
68,119
|
59,115
|
|||||
Property,
Plant and Equipment, at Cost
|
|||||||
Plant
in service
|
4,118,518
|
4,085,138
|
|||||
Construction
work in progress
|
9,693
|
12,202
|
|||||
Less
- accumulated depreciation and amortization
|
(1,211,663
|
)
|
(1,130,593
|
)
|
|||
Property,
Plant and Equipment, Net
|
2,916,548
|
2,966,747
|
|||||
Other
Assets
|
|||||||
Unamortized
debt expense
|
5,735
|
6,788
|
|||||
Regulatory
assets
|
24,092
|
22,840
|
|||||
Other
|
74,893
|
86,446
|
|||||
Total
Other Assets
|
104,720
|
116,074
|
|||||
Total
Assets
|
$
|
3,089,387
|
$
|
3,141,936
|
|||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
Current
Liabilities
|
|||||||
Long-term
debt due within one year
|
$
|
14,000
|
$
|
14,000
|
|||
Accounts
payable - trade and other
|
21,325
|
19,753
|
|||||
Accounts
payable - affiliated companies
|
5,501
|
13,471
|
|||||
Accrued
interest
|
15,091
|
15,415
|
|||||
Accrued
income taxes
|
-
|
6,332
|
|||||
Accrued
taxes, other than income
|
9,090
|
8,792
|
|||||
Exchange
gas payable
|
5,182
|
6,539
|
|||||
Other
|
6,161
|
3,094
|
|||||
Total
Current Liabilities
|
76,350
|
87,396
|
|||||
Deferred
Credits
|
|||||||
Deferred
income taxes
|
758,775
|
746,035
|
|||||
Regulatory
liabilities
|
9,049
|
5,303
|
|||||
Other
|
33,070
|
7,971
|
|||||
Total
Deferred Credits
|
800,894
|
759,309
|
|||||
Long-Term
Debt
|
922,355
|
1,010,825
|
|||||
Stockholders'
Equity
|
|||||||
Common
stock, $1 par value; 1,000 shares authorized, issued and
outstanding
|
1
|
1
|
|||||
Additional
paid-in capital
|
634,271
|
634,271
|
|||||
Accumulated
other comprehensive loss
|
(13,162
|
)
|
(15,800
|
)
|
|||
Retained
earnings
|
668,678
|
665,934
|
|||||
Total
Stockholders' Equity
|
1,289,788
|
1,284,406
|
|||||
Total
Liabilities and Stockholders' Equity
|
$
|
3,089,387
|
$
|
3,141,936
|
|||
CITRUS
CORP. AND SUSIDIARIES
|
||||||||||
CONSOLIDATED
STATEMENTS OF INCOME
|
||||||||||
(In
Thousands)
|
||||||||||
Year
Ended
|
Year
Ended
|
Year
Ended
|
||||||||
December
31,
|
December
31,
|
December
31,
|
||||||||
2005
|
2004
|
2003
|
||||||||
Revenues
|
||||||||||
Transportation
of natural gas
|
$
|
476,049
|
$
|
467,422
|
$
|
442,010
|
||||
Gas
sales
|
-
|
44,996
|
104,370
|
|||||||
Total
Revenues
|
476,049
|
512,418
|
546,380
|
|||||||
Costs
and Expenses
|
||||||||||
Natural
gas purchased
|
-
|
48,921
|
99,130
|
|||||||
Operations
and maintenance
|
78,829
|
81,306
|
117,086
|
|||||||
Depreciation
and amortization
|
91,125
|
68,053
|
64,522
|
|||||||
Taxes,
other than income taxes
|
34,306
|
29,565
|
27,436
|
|||||||
Total
Costs and Expenses
|
204,260
|
227,845
|
308,174
|
|||||||
Operating
Income
|
271,789
|
284,573
|
238,206
|
|||||||
Other
Income (Expense)
|
||||||||||
Interest
expense and related charges, net
|
(79,290
|
)
|
(93,771
|
)
|
(103,109
|
)
|
||||
Other,
net
|
6,531
|
15,262
|
(10,327
|
)
|
||||||
Total
Other Income (Expense)
|
(72,759
|
)
|
(78,509
|
)
|
(113,436
|
)
|
||||
Income
Before Income Taxes
|
199,030
|
206,064
|
124,770
|
|||||||
Income
Tax Expense
|
75,086
|
79,220
|
48,554
|
|||||||
Net
Income
|
$
|
123,944
|
$
|
126,844
|
$
|
76,216
|
||||
CITRUS
CORP. AND SUSIDIARIES
|
||||||||||
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS'
EQUITY
|
||||||||||
(In
Thousands)
|
||||||||||
Year
Ended
|
Year
Ended
|
Year
Ended
|
||||||||
December
31,
|
December
31,
|
December
31,
|
||||||||
2005
|
2004
|
2003
|
||||||||
Common
Stock
|
||||||||||
Balance,
beginning and end of period
|
$
|
1
|
$
|
1
|
$
|
1
|
||||
Additional
Paid-in Capital
|
||||||||||
Balance,
beginning and end of period
|
634,271
|
634,271
|
634,271
|
|||||||
Accumulated
Other Comprehensive Income (Loss):
|
||||||||||
Balance,
beginning of period
|
(15,800
|
)
|
(17,247
|
)
|
(18,453
|
)
|
||||
Recognition
in earnings of previously deferred net losses related
to
derivative instruments used as
cash flow hedges
|
2,638
|
1,447
|
1,206
|
|||||||
Balance,
end of period
|
(13,162
|
)
|
(15,800
|
)
|
(17,247
|
)
|
||||
Retained
Earnings
|
||||||||||
Balance,
beginning of period
|
665,934
|
679,090
|
602,874
|
|||||||
Net
income
|
123,944
|
126,844
|
76,216
|
|||||||
Dividends
|
(121,200
|
)
|
(140,000
|
)
|
-
|
|||||
|
||||||||||
Balance,
end of period
|
668,678
|
665,934
|
679,090
|
|||||||
Total
Stockholders' Equity
|
$
|
1,289,788
|
$
|
1,284,406
|
$
|
1,296,115
|
||||
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
|
||||||||||
(In
Thousands)
|
||||||||||
Year
Ended
|
Year
Ended
|
Year
Ended
|
||||||||
December
31,
|
December
31,
|
December
31,
|
||||||||
2005
|
2004
|
2003
|
||||||||
Net
income
|
$
|
123,944
|
$
|
126,844
|
$
|
76,216
|
||||
Recognition
in earnings of previously deferred net losses related
to
derivative instruments used
as cash flow
hedges
|
2,638
|
1,447
|
1,206
|
|||||||
Total
Comprehensive Income
|
$
|
126,582
|
$
|
128,291
|
$
|
77,422
|
||||
CITRUS
CORP. AND SUBSIDIARIES
|
|||||||||||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|||||||||||||
(In
Thousands)
|
|||||||||||||
Year
Ended
|
Year
Ended
|
Year
Ended
|
|||||||||||
December
31,
|
December
31,
|
December
31,
|
|||||||||||
2005
|
2004
|
2003
|
|||||||||||
Cash
Flows From Operating Activities
|
|
||||||||||||
Net income
|
$
|
123,944
|
$
|
126,844
|
$
|
76,216
|
|||||||
Adjustments
to reconcile net income to net cash provided by
|
|||||||||||||
operating
activities:
|
|||||||||||||
Depreciation
and amortization
|
91,125
|
68,053
|
64,522
|
||||||||||
Amortization
of hedge loss in other comprehensive income
|
2,638
|
1,447
|
1,206
|
||||||||||
Amortization
of discount and swap hedge loss in long term debt
|
530
|
535
|
392
|
||||||||||
Amortization
of regulatory assets and other deferred charges
|
3,380
|
5,205
|
12,000
|
||||||||||
Amortization
of debt costs
|
1,053
|
922
|
1,840
|
||||||||||
Deferred
income taxes
|
12,740
|
69,694
|
24,271
|
||||||||||
Price
risk management fair market valuation revaluation
|
-
|
10,980
|
20,599
|
||||||||||
Price
risk management gain on buy out of gas sales contract
|
-
|
(19,884
|
)
|
-
|
|||||||||
Allowance
for funds used during construction
|
(1,441
|
)
|
(1,136
|
)
|
(5,804
|
)
|
|||||||
Gain
on sale of assets
|
(1,236
|
)
|
-
|
-
|
|||||||||
Changes
in operating assets and liabilities:
|
|||||||||||||
Accounts
receivable
|
403
|
(1,762
|
)
|
9,443
|
|||||||||
Materials
and supplies
|
36
|
(198
|
)
|
422
|
|||||||||
Accounts
payable
|
(10,567
|
)
|
(17,258
|
)
|
(7,029
|
)
|
|||||||
Accrued
interest
|
(324
|
)
|
(3,639
|
)
|
(2,291
|
)
|
|||||||
Accrued
income tax
|
(7,204
|
)
|
5,183
|
4,796
|
|||||||||
Accrued
other tax
|
298
|
(1,556
|
)
|
1,241
|
|||||||||
Other
current assets and liabilities
|
2,900
|
(7,926
|
)
|
9,863
|
|||||||||
Price
risk management assets and liabilities
|
-
|
(23,162
|
)
|
7,150
|
|||||||||
Other
assets and liabilities
|
36,140
|
2,169
|
14,561
|
||||||||||
Net
Cash Provided by Operating Activities
|
254,415
|
214,511
|
233,398
|
||||||||||
Cash
Flows From Investing Activities
|
|||||||||||||
Additions
to property, plant and equipment
|
(37,306
|
)
|
(47,694
|
)
|
(142,334
|
)
|
|||||||
Allowance
for funds used during construction
|
1,441
|
1,136
|
5,804
|
||||||||||
Retirements
and disposition of property, plant and equipment, net
|
(304
|
)
|
(1,288
|
)
|
(1,074
|
)
|
|||||||
Proceeds
from sale of assets
|
1,715
|
-
|
-
|
||||||||||
Net
Cash Used in Investing Activities
|
(34,454
|
)
|
(47,846
|
)
|
(137,604
|
)
|
|||||||
Cash
Flows From Financing Activities
|
|||||||||||||
Dividends
|
(121,200
|
)
|
(140,000
|
)
|
-
|
||||||||
Borrowings
under the revolving credit facility
|
223,000
|
155,000
|
-
|
||||||||||
Payments
on the revolving credit facility
|
(298,000
|
)
|
(38,000
|
)
|
-
|
||||||||
Long-term
debt finance costs
|
-
|
(746
|
)
|
-
|
|||||||||
Payments
on long-term debt
|
(14,000
|
)
|
(256,500
|
)
|
(85,250
|
)
|
|||||||
Net
Cash Used in Financing Activities
|
(210,200
|
)
|
(280,246
|
)
|
(85,250
|
)
|
|||||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
9,761
|
(113,581
|
)
|
10,544
|
|||||||||
Cash
and Cash Equivalents, Beginning of Period
|
11,645
|
125,226
|
114,682
|
||||||||||
Cash
and Cash Equivalents, End of Period
|
$
|
21,406
|
$
|
11,645
|
$
|
125,226
|
|||||||
Supplemental
Disclosure of Cash Flow Information
|
|||||||||||||
Interest
paid (net of amounts capitalized)
|
$
|
74,714
|
$
|
95,770
|
$
|
105,641
|
|||||||
Income
tax paid
|
$
|
67,018
|
$
|
4,432
|
$
|
19,488
|
|||||||
(1)
|
Reporting
Entity
|
(2) |
Significant
Accounting Policies
|
Recent
Accounting Pronouncements
|
2005
|
2004
|
||||||
Citrus
|
|||||||
8.490%
Notes due 2007-2009
|
$
|
90,000
|
$
|
90,000
|
|||
90,000
|
90,000
|
||||||
FGT
|
|||||||
9.750%
Notes due 1999-2008
|
19,500
|
26,000
|
|||||
10.110%
Notes due 2009-2013
|
70,000
|
70,000
|
|||||
9.190%
Notes due 2005-2024
|
142,500
|
150,000
|
|||||
7.625%
Notes due 2010
|
325,000
|
325,000
|
|||||
7.000%
Notes due 2012
|
250,000
|
250,000
|
|||||
Revolving
Credit Agreement due 2007
|
42,000
|
117,000
|
|||||
Unamortized
Debt Discount and Swap Loss
|
(2,645
|
)
|
(3,175
|
)
|
|||
846,355
|
934,825
|
||||||
Total
Outstanding
|
936,355
|
1,024,825
|
|||||
Long-Term
Debt Due Within One Year
|
(14,000
|
)
|
(14,000
|
)
|
|||
$
|
922,355
|
$
|
1,010,825
|
Year
|
||||
2006
|
$
|
14,000
|
||
2007
|
86,000
|
|
||
2008
|
44,000
|
|||
2009
|
51,500
|
|||
2010
|
346,500
|
|||
Thereafter
|
397,000
|
|||
$
|
939,000
|
|
|
2005
|
2004
|
||||
Deferred
income tax assets
Alternative
minimum tax credit
|
$
|
-
|
$
|
9,577
|
|||
Regulatory
and other reserves
|
8,841 | 6,295 | |||||
Other
|
176 | 120 | |||||
9,017
|
15,992
|
||||||
Deferred
income tax liabilities
|
|||||||
Depreciation
and amortization
|
728,444
|
717,223
|
|||||
Deferred
charges and other assets
|
27,972
|
27,295
|
|||||
Regulatory
costs
|
4,901
|
13,264
|
|||||
Other
|
6,475
|
4,245
|
|||||
767,792
|
762,027
|
||||||
Net
deferred income tax liabilities
|
$
|
758,775
|
$
|
746,035
|
2005
|
2004
|
2003
|
||||||||
Current
Tax Provision
|
||||||||||
Federal
|
$
|
53,526
|
$
|
7,561
|
$
|
19,215
|
||||
State
|
8,820
|
1,965
|
5,068
|
|||||||
62,346
|
9,526
|
24,283
|
||||||||
Deferred
Tax Provision
|
||||||||||
Federal
|
11,079
|
60,808
|
21,930
|
|||||||
State
|
1,661
|
8,886
|
2,341
|
|||||||
12,740
|
69,694
|
24,271
|
||||||||
Total
income tax expense
|
$
|
75,086
|
$
|
79,220
|
$
|
48,554
|
2005
|
|
2004
|
|
2003
|
||||||
Statutory
federal income tax provision
|
$
|
69,661
|
$
|
72,122
|
$
|
43,670
|
||||
State
income taxes, net of federal benefit
|
6,813
|
7,053
|
4,816
|
|||||||
Other
|
(1,388
|
)
|
45
|
68
|
||||||
Income
tax expense
|
$
|
75,086
|
$
|
79,220
|
$
|
48,554
|
||||
Effective
Tax Rate
|
37.7
|
%
|
38.4
|
%
|
38.9
|
%
|
Year
ended
|
||||
December
31,
|
||||
OPEB
(in
thousands)
|
2005
|
|||
Change
in Benefit Obligation
|
||||
Benefit
obligation at plan adoption
(1)
|
$
|
9,872
|
||
Service
cost
|
71
|
|||
Interest
cost
|
490
|
|||
Actuarial
gain
|
(3,522
|
)
|
||
Retiree
premiums
|
757
|
|||
Benefits
paid
|
(1,003
|
)
|
||
Benefit
obligation at end of year
|
$
|
6,665
|
||
Change
in Plan Assets
|
||||
Fair
value of plan assets at plan adoption (1)
(2)
|
$
|
6,240
|
||
Return
on plan assets
|
352
|
|||
Employer
contributions
|
1,494
|
|||
Retiree
premiums
|
757
|
|||
Benefits
paid
|
(1,003
|
)
|
||
Fair
value of plan assets at end of year
|
$
|
7,840
|
||
Funded
Status
|
||||
Funded
status at end of year
|
$
|
1,175
|
||
Unrecognized
net actuarial gain
|
(3,348
|
)
|
||
Net
liability recognized at December 31, 2005
|
$
|
(2,173
|
)
|
|
(1) |
For
purposes of this reconciliation, the plan adoption date is considered
to
be January 1, 2005.
|
As
of December 31, 2005
|
||
Discount
rate
|
5.50%
|
|
Rate
of compensation increase
|
N/A
|
|
Health
care cost trend rates
|
||
(graded
to 4.65% by year 2012)
|
12.00%
|
|
Year
Ended
|
||||
December
31,
|
||||
OPEB
(in
thousands)
|
2005
|
|||
Service
cost
|
$
|
71
|
||
Interest
cost
|
490
|
|||
Expected
return on plan assets
|
(352
|
)
|
||
Amortization
of prior service cost
|
-
|
|||
Recognized
actuarial gain
|
(174
|
)
|
||
Net
periodic benefit cost
|
$
|
35
|
Year
Ended December 31, 2005
|
||
Discount
rate
|
5.75%
|
|
Rate
of compensation increase
|
N/A
|
|
Expected
long-term return on plan assets
|
5.00%
|
|
Health
care cost trend rates
|
||
(graded
to 4.75% by year 2012)
|
12.00%
|
|
One
Percentage
|
|
One
Percentage
|
|
|||
|
|
Point
Increase
|
|
Point
Decrease
|
|||
(in
thousands)
|
|||||||
Effect
on total service and interest cost components
|
$
|
19
|
$
|
(17
|
)
|
||
Effect
on postretirement benefit obligation
|
$
|
341
|
$
|
(303
|
)
|
|
Year
Ended
|
||||||
|
December
31,
|
||||||
2005
|
|||||||
Equity
securities
|
0
|
%
|
|||||
Debt
securities
|
0
|
%
|
|||||
Cash
and cash equivalents
|
100
|
%
|
|||||
Total
|
100
|
%
|
Customers
|
2005
|
2004
|
2003
|
|||||||
Florida
Power & Light Company
|
$
|
181.5
|
$
|
189.5
|
$
|
186.6
|
||||
Teco
Energy, Inc.
|
$
|
76.1
|
$
|
69.0
|
$
|
66.1
|
|
2005
|
2004
|
|||||
Transmission
Plant
|
$
|
2,812,586
|
$
|
2,783,798
|
|||
General
Plant
|
26,383
|
25,136
|
|||||
Intangible
Plant
|
27,083
|
23,738
|
|||||
Construction
Work-in-progress
|
9,693
|
12,202
|
|||||
Acquisition
Adjustment
|
1,252,466
|
1,252,466
|
|||||
4,128,211
|
4,097,340
|
||||||
Less:
Accumulated depreciation and amortization
|
(1,211,663
|
)
|
(1,130,593
|
)
|
|||
Property,
Plant and Equipment, net
|
$
|
2,916,548
|
$
|
2,966,747
|
|
2005
|
2004
|
|||||
Ramp-up
assets, net (1)
|
$
|
12,240
|
$
|
12,552
|
|||
Cash
balance plan settlement (see Note 6)
|
6,047
|
7,907
|
|||||
OPEB
|
2,173
|
-
|
|||||
Environmental
non-PCB clean-up cost (see Note 13)
|
1,000
|
-
|
|||||
Other
miscellaneous
|
2,632
|
2,381
|
|||||
Total
Regulatory Assets
|
$
|
24,092
|
$
|
22,840
|
|
2005
|
|
2004
|
||||
Long-term
receivables
|
$
|
72,570
|
$
|
73,077
|
|||
Fuel
tracker
|
-
|
11,165
|
|||||
Other
miscellaneous
|
2,323
|
2,204
|
|||||
Total
Other Assets - Other
|
$
|
74,893
|
$
|
86,446
|
|
|
2005
|
|
2004
|
|||
Post
construction mitigation costs
|
$
|
2,600
|
$
|
3,296
|
|||
Construction
prepayments
|
4,536
|
-
|
|||||
Customer
deposits (see Note 15)
|
1,249
|
1,306
|
|||||
Phase
IV retainage & Phase V surety bond
|
-
|
1,459
|
|||||
Fuel
Tracker
|
14,477
|
-
|
|||||
Deferred
compensation (see Note 6)
|
1,425
|
1,768
|
|||||
Environmental
non-PCB clean-up cost reserve (see Note 13)
|
1,631
|
-
|
|||||
Tax
contingency
|
2,594
|
-
|
|||||
Asset
retirement obligation (see Note 2)
|
493
|
-
|
|||||
OPEB
(see Note 6)
|
2,173
|
-
|
|||||
Miscellaneous
|
1,892
|
142
|
|||||
Total
Deferred Credits - Other
|
$
|
33,070
|
$
|
7,971
|
2005
|
2004
|
||||||
Carrying
Amount
|
Estimated
Fair Value
|
Carrying
Amount
|
Estimated
Fair Value
|
||||
Long-term debt |
$
939,000
|
$
1,054,965
|
$
1,028,000
|
$
1,193,793
|
(in
thousands)
|
Termination
Date
|
Original
Gain/(Loss)
|
Amortization
Period
|
Annual
Amortization
|
Balance
at December 31, 2005
|
Balance
at December 31, 2004
|
|||||||||||||
Interest
rate lock on 7.625% $325 million note due 2010
|
December
2000
|
$
|
(18,724
|
)
|
10
years
|
$
|
1,872
|
$
|
9,206
|
$
|
11,078
|
||||||||
|
|||||||||||||||||||
Interest
rate swap loss on 7.0% $250 million note due 2012
|
July
2002
|
(12,280
|
)
|
10
years
|
1,228
|
8,035
|
9,263
|
||||||||||||
Interest
rate swap gain on 9.19% $150 million note due 2005-2024
|
November
1994
|
9,236
|
20
years
|
(462
|
)
|
(4,079
|
)
|
(4,541
|
)
|
||||||||||
$
|
2,638
|
$
|
13,162
|
$
|
15,800
|
||||||||||||||