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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Southern Union Company Common Stock | NYSE:SUG | NYSE | Ordinary Share |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 41.10 | 0.00 | 01:00:00 |
Delaware
(State or other jurisdiction of
incorporation or organization)
|
75-0571592
(I.R.S. Employer
Identification No.)
|
5444 Westheimer Road
Houston, Texas
(Address of principal executive offices)
|
77056-5306
(Zip Code)
|
PART I. FINANCIAL INFORMATION:
|
Page(s)
|
|
2
|
ITEM 1. Financial Statements (Unaudited):
|
|
3
|
|
4-5
|
|
6
|
|
7
|
|
|
|
8
|
|
34
|
|
51
|
|
53
|
|
PART II. OTHER INFORMATION:
|
|
55
|
|
55
|
|
55
|
|
55
|
|
55
|
|
|
|
56
|
|
56
|
|
61
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(In thousands, except per share amounts)
|
||||||||||||||||
Operating revenues
(Note 13)
|
$ | 438,451 | $ | 657,283 | $ | 1,575,339 | $ | 2,343,036 | ||||||||
Operating expenses:
|
||||||||||||||||
Cost of gas and other energy
|
165,029 | 361,970 | 737,008 | 1,431,171 | ||||||||||||
Operating, maintenance and general
|
113,270 | 131,076 | 358,486 | 356,265 | ||||||||||||
Depreciation and amortization
|
53,486 | 50,049 | 159,316 | 147,993 | ||||||||||||
Revenue-related taxes
|
3,560 | 4,736 | 25,582 | 29,660 | ||||||||||||
Taxes, other than on income and revenues
|
12,931 | 12,172 | 40,411 | 36,835 | ||||||||||||
Total operating expenses
|
348,276 | 560,003 | 1,320,803 | 2,001,924 | ||||||||||||
Operating income
|
90,175 | 97,280 | 254,536 | 341,112 | ||||||||||||
Other income (expenses):
|
||||||||||||||||
Interest expense
|
(50,234 | ) | (53,232 | ) | (146,969 | ) | (154,536 | ) | ||||||||
Earnings from unconsolidated investments
|
24,421 | 21,624 | 63,688 | 59,451 | ||||||||||||
Other, net
|
2,277 | 769 | 8,371 | 1,827 | ||||||||||||
Total other income (expenses), net
|
(23,536 | ) | (30,839 | ) | (74,910 | ) | (93,258 | ) | ||||||||
Earnings before income taxes
|
66,639 | 66,441 | 179,626 | 247,854 | ||||||||||||
Federal and state income tax expense (Note 9)
|
19,720 | 19,665 | 53,170 | 75,260 | ||||||||||||
Net earnings
|
46,919 | 46,776 | 126,456 | 172,594 | ||||||||||||
Preferred stock dividends
|
(2,171 | ) | (2,264 | ) | (6,512 | ) | (10,041 | ) | ||||||||
Loss on extinguishment of preferred stock
|
- | (2,036 | ) | - | (4,031 | ) | ||||||||||
Net earnings available for common stockholders
|
$ | 44,748 | $ | 42,476 | $ | 119,944 | $ | 158,522 | ||||||||
Net earnings available for common stockholders per share:
|
||||||||||||||||
Basic
|
$ | 0.36 | $ | 0.34 | $ | 0.97 | $ | 1.29 | ||||||||
Diluted
|
0.36 | 0.34 | 0.97 | 1.28 | ||||||||||||
Dividends declared on common stock per share
|
$ | 0.15 | $ | 0.15 | $ | 0.45 | $ | 0.45 | ||||||||
Weighted average shares outstanding (Note 4):
|
||||||||||||||||
Basic
|
124,057 | 123,975 | 124,050 | 123,264 | ||||||||||||
Diluted
|
124,568 | 124,205 | 124,273 | 123,523 |
September 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
(In thousands)
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 7,037 | $ | 4,318 | ||||
Accounts receivable, net of allowances of
|
||||||||
$6,939 and $6,003, respectively
|
163,721 | 327,358 | ||||||
Accounts receivable – affiliates
|
9,142 | 14,743 | ||||||
Inventories (Note 3)
|
235,672 | 337,858 | ||||||
Deferred gas purchases
|
81,977 | 64,330 | ||||||
Gas imbalances - receivable
|
127,306 | 174,100 | ||||||
Derivative instruments (Notes 10 and 11)
|
11,146 | 91,423 | ||||||
Prepayments and other assets
|
19,227 | 18,226 | ||||||
Total current assets
|
655,228 | 1,032,356 | ||||||
|
||||||||
Property, plant and equipment:
|
||||||||
Plant in service
|
6,156,523 | 5,980,297 | ||||||
Construction work in progress
|
556,345 | 451,359 | ||||||
|
6,712,868 | 6,431,656 | ||||||
Less accumulated depreciation and amortization
|
(1,131,023 | ) | (974,651 | ) | ||||
Net property, plant and equipment
|
5,581,845 | 5,457,005 | ||||||
|
||||||||
Deferred charges:
|
||||||||
Regulatory assets
|
70,910 | 69,554 | ||||||
Deferred charges
|
61,187 | 59,958 | ||||||
Total deferred charges
|
132,097 | 129,512 | ||||||
|
||||||||
Unconsolidated investments (Note 5)
|
1,319,644 | 1,259,270 | ||||||
|
||||||||
Goodwill
|
89,227 | 89,227 | ||||||
|
||||||||
Other
|
26,758 | 30,537 | ||||||
|
||||||||
Total assets
|
$ | 7,804,799 | $ | 7,997,907 | ||||
September 30,
|
December 31,
|
||||||||
2009
|
2008
|
||||||||
(In thousands)
|
|||||||||
Stockholders’ equity:
|
|||||||||
Common stock, $1 par value; 200,000 shares authorized;
|
|||||||||
125,188 and 125,122 shares issued, respectively
|
$ | 125,188 | $ | 125,122 | |||||
Preferred stock, no par value; 6,000 shares authorized;
|
|||||||||
460 and 460 shares issued, respectively
|
115,000 | 115,000 | |||||||
Premium on capital stock
|
1,899,136 | 1,893,975 | |||||||
Less treasury stock: 1,124 and 1,120
|
|||||||||
shares, respectively, at cost
|
(28,071 | ) | (28,004 | ) | |||||
Less common stock held in trust: 650
|
|||||||||
and 663 shares, respectively
|
(11,583 | ) | (11,908 | ) | |||||
Deferred compensation plans
|
11,583 | 11,908 | |||||||
Accumulated other comprehensive loss
|
(66,711 | ) | (51,423 | ) | |||||
Retained earnings
|
377,402 | 313,282 | |||||||
Total stockholders' equity
|
2,421,944 | 2,367,952 | |||||||
Long-term debt obligations (Note 7)
|
3,419,870 | 3,257,434 | |||||||
Total capitalization
|
5,841,814 | 5,625,386 | |||||||
Current liabilities:
|
|||||||||
Long-term debt due within one year (Note 7)
|
140,500 | 60,623 | |||||||
Notes payable
|
80,000 | 401,459 | |||||||
Accounts payable and accrued liabilities
|
190,161 | 246,884 | |||||||
Federal, state and local taxes payable
|
13,352 | 54,027 | |||||||
Accrued interest
|
59,143 | 41,141 | |||||||
Gas imbalances - payable
|
241,658 | 341,987 | |||||||
Derivative instruments (Notes 10 and 11)
|
65,371 | 77,554 | |||||||
Other
|
111,938 | 128,190 | |||||||
Total current liabilities
|
902,123 | 1,351,865 | |||||||
Deferred credits
|
227,341 | 298,106 | |||||||
Accumulated deferred income taxes
|
833,521 | 722,550 | |||||||
Commitments and contingencies (Note 12)
|
|||||||||
Total stockholders' equity and liabilities
|
$ | 7,804,799 | $ | 7,997,907 |
Nine Months Ended September 30,
|
||||||||
2009
|
2008
|
|||||||
(In thousands)
|
||||||||
Cash flows provided by (used in) operating
activities:
|
||||||||
Net earnings
|
$ | 126,456 | $ | 172,594 | ||||
Adjustments to reconcile net earnings to net cash flows
|
||||||||
provided by operating activities:
|
||||||||
Depreciation and amortization
|
159,316 | 147,993 | ||||||
Deferred income taxes
|
93,856 | 68,871 | ||||||
Unrealized loss on commodity derivatives
|
5,597 | 5,387 | ||||||
Earnings from unconsolidated investments, adjusted
|
||||||||
for cash distributions
|
(63,688 | ) | (18,701 | ) | ||||
Provision for bad debts
|
14,088 | 18,344 | ||||||
Share-based compensation expense
|
5,537 | 4,611 | ||||||
Loss on assets
|
5,491 | 368 | ||||||
Changes in operating assets and liabilities
|
117,760 | (26,025 | ) | |||||
Net cash flows provided by operating activities
|
464,413 | 373,442 | ||||||
Cash flows used in investing activities:
|
||||||||
Additions to property, plant and equipment
|
(316,880 | ) | (482,121 | ) | ||||
Plant retirements and other
|
(2,542 | ) | 16,581 | |||||
Net cash flows used in investing activities
|
(319,422 | ) | (465,540 | ) | ||||
Cash flows provided by (used in) financing activities:
|
||||||||
Increase (decrease) in book overdraft
|
3,869 | (9,110 | ) | |||||
Issuance cost of debt
|
(3,938 | ) | (4,145 | ) | ||||
Issuance of common stock
|
- | 100,000 | ||||||
Issuance of long-term debt
|
302,582 | 400,860 | ||||||
Dividends paid on preferred stock
|
(6,512 | ) | (12,118 | ) | ||||
Dividends paid on common stock
|
(55,814 | ) | (55,185 | ) | ||||
Extinguishment of preferred stock
|
- | (110,905 | ) | |||||
Repayment of long-term debt obligation
|
(60,623 | ) | (476,829 | ) | ||||
Net change in revolving credit facilities and short-term debt
|
(321,459 | ) | 254,246 | |||||
Other
|
(377 | ) | 2,654 | |||||
Net cash flows provided by (used in) financing activities
|
(142,272 | ) | 89,468 | |||||
Change in cash and cash equivalents
|
2,719 | (2,630 | ) | |||||
Cash and cash equivalents at beginning of period
|
4,318 | 5,690 | ||||||
Cash and cash equivalents at end of period
|
$ | 7,037 | $ | 3,060 | ||||
Common
|
Preferred
|
Premium
|
Common
|
Deferred
|
Accumulated
|
Total
|
|||||||||||||
Stock,
|
Stock,
|
on
|
Treasury
|
Stock
|
Compen-
|
Other
|
Stock-
|
||||||||||||
$1 Par
|
No Par
|
Capital
|
Stock,
|
Held
|
sation
|
Comprehensive
|
Retained
|
holders'
|
|||||||||||
Value
|
Value
|
Stock
|
at cost
|
In Trust
|
Plans
|
Loss
|
Earnings
|
Equity
|
|||||||||||
(In thousands)
|
|||||||||||||||||||
Balance December 31
, 2008
|
$125,122
|
$115,000
|
$1,893,975
|
$(28,004)
|
$(11,908)
|
$11,908
|
$(51,423)
|
$313,282
|
$2,367,952
|
||||||||||
Comprehensive income:
|
|||||||||||||||||||
Net earnings
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
126,456
|
|
126,456
|
||
Net change in other
|
|||||||||||||||||||
comprehensive income (Note 6)
|
-
|
-
|
-
|
-
|
-
|
-
|
(15,288)
|
-
|
(15,288)
|
||||||||||
Comprehensive income
|
|
111,168
|
|||||||||||||||||
Preferred stock dividends
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(6,512)
|
|
(6,512)
|
||
Common stock dividends declared
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(55,824)
|
(55,824)
|
||||||||||
Share-based compensation
|
-
|
-
|
5,537
|
-
|
-
|
-
|
-
|
-
|
5,537
|
||||||||||
Restricted stock issuances
|
59
|
-
|
(493)
|
(67)
|
-
|
-
|
-
|
-
|
(501)
|
||||||||||
Exercise of stock options
|
7
|
-
|
117
|
-
|
-
|
-
|
-
|
-
|
124
|
||||||||||
Contributions to Trust
|
-
|
-
|
-
|
-
|
(820)
|
820
|
-
|
-
|
-
|
||||||||||
Disbursements from Trust
|
-
|
-
|
-
|
-
|
1,145
|
(1,145)
|
-
|
-
|
-
|
||||||||||
Balance September 30, 2009
|
$125,188
|
|
$115,000
|
|
$1,899,136
|
|
$(28,071)
|
|
$(11,583)
|
|
$11,583
|
|
$(66,711)
|
|
$377,402
|
|
$2,421,944
|
Transportation & Storage
|
Gathering & Processing
|
Distribution
|
Total
|
||||||||||||||
At September 30, 2009
|
(In thousands) | ||||||||||||||||
Current
|
|||||||||||||||||
Natural gas held for operations (1)
|
$ | 121,509 | $ | - | $ | - | $ | 121,509 | |||||||||
Materials and supplies
|
16,108 | 9,631 | 3,980 | 29,719 | |||||||||||||
NGL (2)
|
- | 717 | - | 717 | |||||||||||||
Natural gas in underground storage (3)
|
- | - | 83,727 | 83,727 | |||||||||||||
Total Current
|
137,617 | 10,348 | 87,707 | 235,672 | |||||||||||||
Non-Current
|
|||||||||||||||||
Natural gas held for operations (1)
|
13,651 | - | - | 13,651 | |||||||||||||
$ | 151,268 | $ | 10,348 | $ | 87,707 | $ | 249,323 | ||||||||||
At December 31, 2008
|
|||||||||||||||||
Current
|
|||||||||||||||||
Natural gas held for operations (1)
|
$ | 182,547 | $ | - | $ | - | $ | 182,547 | |||||||||
Materials and supplies
|
14,056 | 9,278 | 4,488 | 27,822 | |||||||||||||
NGL (2)
|
- | 8,521 | - | 8,521 | |||||||||||||
Natural gas in underground storage (3)
|
- | - | 118,968 | 118,968 | |||||||||||||
Total Current
|
196,603 | 17,799 | 123,456 | 337,858 | |||||||||||||
Non-Current
|
|||||||||||||||||
Natural gas held for operations (1)
|
17,687 | - | - | 17,687 | |||||||||||||
$ | 214,290 | $ | 17,799 | $ | 123,456 | $ | 355,545 |
(1)
|
Natural gas volumes held for operations at September 30, 2009 and December 31, 2008 were 24,555,000 MMBtu and 31,751,000 MMBtu,
respectively.
|
(2)
|
NGL at September 30, 2009 and December 31, 2008 was 1,449,000 gallons and 20,453,000 gallons, respectively.
|
(3)
|
Natural gas volumes in underground storage at September 30, 2009 and December 31, 2008 were 17,712,000 MMBtu and 12,702,000 MMBtu, respectively.
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Weighted average shares outstanding - Basic
|
124,057 | 123,975 | 124,050 | 123,264 | ||||||||||||
Add assumed vesting of restricted stock
|
88 | 29 | 61 | 14 | ||||||||||||
Add assumed exercise of stock options and SARs
|
423 | 201 | 162 | 245 | ||||||||||||
Weighted average shares outstanding - Diluted
|
124,568 | 124,205 | 124,273 | 123,523 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(In thousands, except per share amounts)
|
||||||||||||||||
Options excluded
|
1,287 | 717 | 1,625 | 717 | ||||||||||||
Exercise price of options excluded
|
$22.68 - $28.48 | $28.48 | $16.83 - $28.48 | $28.48 | ||||||||||||
SARs excluded
|
386 | 416 | 386 | 416 | ||||||||||||
Exercise price ranges of SARs excluded
|
$28.07 - $28.48 | $28.07 - $28.48 | $28.07 - $28.48 | $28.07 - $28.48 | ||||||||||||
Weighted-average market price
|
$19.47 | $24.91 | $16.61 | $25.67 |
September 30,
|
December 31,
|
|||||||
Unconsolidated Investments
|
2009
|
2008
|
||||||
(In thousands)
|
||||||||
Equity investments:
|
||||||||
Citrus
|
$ | 1,296,046 | $ | 1,238,198 | ||||
Other
|
23,598 | 21,072 | ||||||
$ | 1,319,644 | $ | 1,259,270 |
Three Months Ended September 30,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Citrus
|
Other
|
Citrus
|
Other
|
|||||||||||||
(In thousands) | ||||||||||||||||
Revenues
|
$ | 141,083 | $ | 5,548 | $ | 139,513 | $ | 2,593 | ||||||||
Operating income
|
81,599 | 3,842 | 81,080 | (320 | ) | |||||||||||
Net earnings
|
40,325 | 3,801 | 38,609 | (642 | ) | |||||||||||
Nine Months Ended September 30,
|
||||||||||||||||
2009 | 2008 | |||||||||||||||
Citrus
|
Other
|
Citrus
|
Other
|
|||||||||||||
(In thousands) | ||||||||||||||||
Revenues
|
$ | 389,306 | $ | 14,655 | $ | 386,738 | $ | 10,603 | ||||||||
Operating income
|
214,142 | 7,762 | 218,017 | 1,637 | ||||||||||||
Net earnings
|
104,839 | 7,632 | 102,246 | 534 |
Three Months Ended
|
Nine Months Ended
|
||||||||||||||||
September 30,
|
September 30,
|
||||||||||||||||
Comprehensive Income (Loss)
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(In thousands)
|
|||||||||||||||||
Net Earnings
|
$ | 46,919 | $ | 46,776 | $ | 126,456 | $ | 172,594 | |||||||||
Changes in Other Comprehensive Income (Loss):
|
|||||||||||||||||
Change in fair value of interest rate hedges, net of tax of $(2,474),
|
|||||||||||||||||
$(2,096), $(2,062) and $(3,090), respectively | (3,681 | ) | (3,118 | ) | (3,068 | ) | (4,523 | ) | |||||||||
Reclassification of unrealized loss on interest rate hedges
|
|||||||||||||||||
into earnings, net of tax of $2,257, $1,280, $5,833 and $2,978, | |||||||||||||||||
respectively | 3,388 | 1,940 | 8,767 | 4,537 | |||||||||||||
Realized gain (loss) on interest rate hedges, net of tax of $0, $0,
|
|||||||||||||||||
$0 and $(620), respectively | - | - | - | (1,175 | ) | ||||||||||||
Change in fair value of commodity hedges, net of tax of $(3,496),
|
|||||||||||||||||
$21,257, $1,011 and $7,006, respectively | (6,205 | ) | 37,724 | 1,794 | 12,434 | ||||||||||||
Reclassification of unrealized (gain) loss on commodity hedges
|
|||||||||||||||||
into earnings, net of tax of $(4,809), $(268), $(12,983) and $1,352, | |||||||||||||||||
respectively | (8,534 | ) | (475 | ) | (23,040 | ) | 2,399 | ||||||||||
Prior service cost relating to other postretirement benefit
|
|||||||||||||||||
plan amendment, net of tax of $0, $0, $0 and $(3,231), | |||||||||||||||||
respectively | - | - | - | (6,603 | ) | ||||||||||||
Reclassification of net actuarial loss and prior service credit
|
|||||||||||||||||
relating to pension and other postretirement benefits into | |||||||||||||||||
earnings, net of tax of $736, $(30), $2,208 and $921, respectively | 974 | (110 | ) | 2,920 | 1,349 | ||||||||||||
Change in other comprehensive income (loss) from equity
|
|||||||||||||||||
investments, net of tax of $(1,646), $0, $(1,646) and $0, | |||||||||||||||||
respectively | (2,661 | ) | - | (2,661 | ) | - | |||||||||||
Total other comprehensive income (loss)
|
(16,719 | ) | 35,961 | (15,288 | ) | 8,418 | |||||||||||
Total comprehensive income
|
$ | 30,200 | $ | 82,737 | $ | 111,168 | $ | 181,012 |
September 30, 2009
|
December 31, 2008
|
||||||||||||||||
Carrying Value
|
Fair Value
|
Carrying Value
|
Fair Value
|
||||||||||||||
(In thousands)
|
|||||||||||||||||
Long-Term Debt Obligations:
|
|||||||||||||||||
Southern Union
|
|||||||||||||||||
7.60% Senior Notes due 2024
|
$ | 359,765 | $ | 398,310 | $ | 359,765 | $ | 272,165 | |||||||||
8.25% Senior Notes due 2029
|
300,000 | 336,000 | 300,000 | 229,470 | |||||||||||||
7.24% to 9.44% First Mortgage Bonds
|
|||||||||||||||||
due 2020 to 2027
|
19,500 | 21,625 | 19,500 | 16,248 | |||||||||||||
6.089% Senior Notes due 2010
|
100,000 | 100,775 | 100,000 | 92,701 | |||||||||||||
7.20% Junior Subordinated Notes due 2066
|
600,000 | 479,400 | 600,000 | 215,999 | |||||||||||||
Term Loan due 2011
|
150,000 | 149,925 | - | - | |||||||||||||
Note Payable
|
6,402 | 6,402 | 3,820 | 3,820 | |||||||||||||
1,535,667 | 1,492,437 | 1,383,085 | 830,403 | ||||||||||||||
Panhandle
|
|||||||||||||||||
6.05% Senior Notes due 2013
|
250,000 | 265,190 | 250,000 | 211,646 | |||||||||||||
6.20% Senior Notes due 2017
|
300,000 | 318,906 | 300,000 | 230,956 | |||||||||||||
6.50% Senior Notes due 2009
|
- | - | 60,623 | 59,604 | |||||||||||||
8.125% Senior Notes due 2019
|
150,000 | 173,888 | - | - | |||||||||||||
8.25% Senior Notes due 2010
|
40,500 | 41,715 | 40,500 | 39,668 | |||||||||||||
7.00% Senior Notes due 2029
|
66,305 | 72,292 | 66,305 | 46,158 | |||||||||||||
7.00% Senior Notes due 2018
|
400,000 | 440,344 | 400,000 | 318,033 | |||||||||||||
Term Loans due 2012
|
815,391 | 752,236 | 815,391 | 753,262 | |||||||||||||
Net premiums on long-term debt
|
2,507 | 2,507 | 2,153 | 2,153 | |||||||||||||
2,024,703 | 2,067,078 | 1,934,972 | 1,661,480 | ||||||||||||||
Total Long-Term Debt Obligations
|
3,560,370 | 3,559,515 | 3,318,057 | 2,491,883 | |||||||||||||
Credit Facilities
|
80,000 | 78,357 | 251,459 | 243,205 | |||||||||||||
Short-Term Facility
|
- | - | 150,000 | 148,496 | |||||||||||||
Total consolidated debt obligations
|
3,640,370 | $ | 3,637,872 | 3,719,516 | $ | 2,883,584 | |||||||||||
Less current portion of long-term debt
|
140,500 | 60,623 | |||||||||||||||
Less short-term debt
|
80,000 | 401,459 | |||||||||||||||
Total long-term debt
|
$ | 3,419,870 | $ | 3,257,434 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||||
(In thousands)
|
||||||||||||||||||
Pension Benefits
|
||||||||||||||||||
Service cost
|
$ | 738 | $ | 686 | $ | 2,213 | $ | 2,058 | ||||||||||
Interest cost
|
2,524 | 2,470 | 7,572 | 7,410 | ||||||||||||||
Expected return on plan assets
|
(2,069 | ) | (2,877 | ) | (6,209 | ) | (8,631 | ) | ||||||||||
Prior service cost (credit) amortization
|
138 | 138 | 414 | 414 | ||||||||||||||
Recognized actuarial (gain) loss
|
2,101 | 1,717 | 6,304 | 5,150 | ||||||||||||||
Sub-total
|
3,432 | 2,134 | 10,294 | 6,401 | ||||||||||||||
Regulatory adjustment (1)
|
(125 | ) | 705 | (375 | ) | 2,114 | ||||||||||||
Net periodic benefit cost
|
$ | 3,307 | $ | 2,839 | $ | 9,919 | $ | 8,515 | ||||||||||
Other Postretirement Benefits
|
||||||||||||||||||
Service cost
|
$ | 749 | $ | 689 | $ | 2,248 | $ | 1,942 | ||||||||||
Interest cost
|
1,348 | 1,405 | 4,043 | 4,090 | ||||||||||||||
Expected return on plan assets
|
(771 | ) | (832 | ) | (2,315 | ) | (2,471 | ) | ||||||||||
Prior service cost (credit) amortization
|
(317 | ) | (212 | ) | (951 | ) | (888 | ) | ||||||||||
Recognized actuarial (gain) loss
|
(212 | ) | (307 | ) | (636 | ) | (919 | ) | ||||||||||
Sub-total
|
797 | 743 | 2,389 | 1,754 | ||||||||||||||
Regulatory adjustment (1)
|
667 | 666 | 1,999 | 1,998 | ||||||||||||||
Net periodic benefit cost
|
$ | 1,464 | $ | 1,409 | $ | 4,388 | $ | 3,752 |
(1)
|
In the Distribution segment, the Company recovers certain qualified pension benefit plan and other postretirement benefit plan costs through rates charged to utility customers. Certain utility commissions require that the recovery of these costs be based on the Employee Retirement Income Security Act of 1974, as amended, or other utility commission
specific guidelines. The difference between these amounts and periodic benefit cost calculated pursuant to GAAP is deferred as a regulatory asset or liability and amortized to expense over periods in which this difference will be recovered in rates, as promulgated by the applicable utility commission.
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Income tax expense
|
$ | 19,720 | $ | 19,665 | $ | 53,170 | $ | 75,260 | ||||||||
Effective tax rate
|
30 | % | 30 | % | 30 | % | 30 | % |
Asset Derivatives
|
Liability Derivatives
|
|||||||||
Balance Sheet
|
Fair
|
Balance Sheet
|
Fair
|
|||||||
Location
|
Value (1)
|
Location
|
Value (1)
|
|||||||
(In thousands)
|
(In thousands)
|
|||||||||
Cash Flow Hedges
|
||||||||||
Interest rate contracts:
|
||||||||||
Interest rate swaps
|
$ | - |
Derivative instruments-liabilities
|
$ | 18,894 | |||||
Deferred credits
|
16,827 | |||||||||
Commodity contracts - Gathering and Processing:
|
||||||||||
Natural gas price swaps
|
Derivative instruments-assets
|
3,363 |
Deferred credits
|
5,827 | ||||||
$ | 3,363 | $ | 41,548 | |||||||
Economic Hedges
|
||||||||||
Commodity contracts - Gathering and Processing:
|
||||||||||
NGL processing spread swaps
|
Derivative instruments-assets
|
$ | 7,298 | $ | - | |||||
Deferred credits
|
1,594 | |||||||||
Other derivative instruments
|
Derivative instruments-assets
|
280 |
Derivative instruments-assets
|
1 | ||||||
Derivative instruments-liabilities
|
444 |
Derivative instruments-liabilities
|
521 | |||||||
Commodity contracts - Distribution:
|
||||||||||
Natural gas price swaps
|
Other non-current assets
|
2,198 |
Other non-current assets
|
236 | ||||||
Derivative instruments-liabilities
|
1,577 |
Derivative instruments-liabilities
|
47,977 | |||||||
Deferred credits
|
15 |
Deferred credits
|
858 | |||||||
$ | 13,406 | $ | 49,593 | |||||||
Other
|
||||||||||
Commodity contracts - Gathering and Processing:
|
||||||||||
Other derivative instruments
|
Derivative instruments-assets
|
$ | 239 |
Derivative instruments-assets
|
$ | 33 | ||||
Total
|
$ | 17,008 | $ | 91,174 |
(1)
|
See
Note 11 – Fair Value Measurement
for information related to the framework used by the Company to measure the fair value of its derivative instruments as of September 30, 2009.
|
Three Months Ended
|
Nine Months Ended
|
|||||||
September 30, 2009
|
September 30, 2009
|
|||||||
Cash Flow Hedges (1)
|
(In thousands)
|
|||||||
Interest rate contracts:
|
||||||||
Change in fair value - increase in
Accumulated other comprehensive loss,
|
||||||||
excluding tax expense effect of $2,474 and $2,062
|
$ | 6,155 | $ | 5,130 | ||||
Reclassification of unrealized loss from
Accumulated other comprehensive loss -
|
||||||||
increase of
Interest expense
, excluding tax expense effect of $2,257
|
||||||||
and $5,833
|
5,645 | 14,600 | ||||||
Commodity contracts - Gathering and Processing:
|
||||||||
Change in fair value - increase/(decrease) in
Accumulated other comprehensive
|
||||||||
loss
, excluding tax expense effect of $(3,496) and $1,011
|
9,701 | (2,805 | ) | |||||
Reclassification of unrealized gain from
Accumulated other comprehensive loss -
|
||||||||
increase of
Operating revenues
, excluding tax expense effect of $4,809
|
||||||||
and $12,983
|
13,343 | 36,023 | ||||||
Economic Hedges
|
||||||||
Commodity contracts - Gathering and Processing:
|
||||||||
Change in fair value - (increase)/decrease in
Operating revenues
|
(2,312 | ) | 32,819 | |||||
Commodity contracts - Distribution:
|
||||||||
Change in fair value - decrease in
Deferred gas purchases
|
25,682 | 47,403 | ||||||
Other
|
||||||||
Commodity contracts - Gathering and Processing:
|
||||||||
Change in fair value - decrease in
Operating revenues
|
595 | 757 |
(1)
|
See
Note 6 – Comprehensive Income (Loss)
for additional related information.
|
Fair Value Measurements Using Fair Value Hierarchy
|
||||||||||||||||
Quoted Prices in Active Markets for Identical Assets
|
Significant Other Observable Inputs
|
Significant Unobservable Inputs
|
||||||||||||||
At September 30, 2009
|
Fair Value
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
(In thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Cash equivalents (money
|
||||||||||||||||
market investments)
|
$ | 5,517 | $ | 5,517 | $ | - | $ | - | ||||||||
Commodity derivatives (1)
|
13,108 | - | 13,108 | - | ||||||||||||
Long-term investments
|
792 | 792 | - | - | ||||||||||||
Total
|
$ | 19,417 | $ | 6,309 | $ | 13,108 | $ | - | ||||||||
Liabilities:
|
||||||||||||||||
Commodity derivatives (1)
|
$ | 51,553 | $ | (5 | ) | $ | 51,558 | $ | - | |||||||
Interest-rate derivatives (1)
|
35,721 | - | 35,721 | - | ||||||||||||
Total
|
$ | 87,274 | $ | (5 | ) | $ | 87,279 | $ | - |
(1)
|
See related information in
Note 10 – Derivative Instruments and Hedging Activities
.
|
Assets
|
Liabilities
|
|||||||||||
Commodity
|
Commodity
|
Interest-rate
|
||||||||||
Derivatives
|
Derivatives
|
Derivatives
|
||||||||||
(In thousands)
|
||||||||||||
Three Months Ended September 30, 2009
|
||||||||||||
Beginning balance
|
$ | - | $ | - | $ | 34,691 | ||||||
Total gains or losses (realized and unrealized):
|
||||||||||||
Included in operating revenues
|
- | - | - | |||||||||
Included in other comprehensive income
|
- | - | 6,088 | |||||||||
Purchases and settlements, net
|
- | - | (5,058 | ) | ||||||||
Transfers out of level 3 (2)
|
- | - | (35,721 | ) | ||||||||
Ending balance
|
$ | - | $ | - | $ | - | ||||||
Nine Months Ended September 30, 2009
|
||||||||||||
Beginning balance
|
$ | 964 | $ | (94 | ) | $ | 43,630 | |||||
Total gains or losses (realized and unrealized):
|
||||||||||||
Included in operating revenues
(1)
|
290 | 61 | - | |||||||||
Included in other comprehensive income
|
- | - | 4,787 | |||||||||
Purchases and settlements, net
|
- | (206 | ) | (12,696 | ) | |||||||
Transfers out of level 3
(2)
|
(1,254 | ) | 239 | (35,721 | ) | |||||||
Ending balance
|
$ | - | $ | - | $ | - | ||||||
(1)
|
The amounts included in operating revenues for the nine months ended September 30, 2009 attributable to the change in unrealized gains or losses relating to commodity derivative assets and commodity derivative liabilities were gains of $725,000 and $221,000, respectively.
|
(2)
|
Transfer to Level 2 was made effective September 30, 2009 for interest-rate derivatives and March 31, 2009 for commodity derivatives.
|
September 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
(In thousands)
|
||||||||
Current
|
$ | 5,471 | $ | 3,513 | ||||
Noncurrent
|
15,314 | 15,626 | ||||||
Total Environmental Liabilities
|
$ | 20,785 | $ | 19,139 |
|
13. Reportable Segments
|
·
|
items that do not impact net earnings, such as extraordinary items, discontinued operations and the impact of changes in accounting principles;
|
·
|
income taxes;
|
·
|
interest;
|
·
|
dividends on preferred stock; and
|
·
|
loss on extinguishment of preferred stock.
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
Segment Data
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
(In thousands)
|
||||||||||||||||
Revenues from external customers:
|
||||||||||||||||
Transportation and Storage
|
$ | 176,093 | $ | 173,400 | $ | 541,003 | $ | 528,784 | ||||||||
Gathering and Processing
|
189,557 | 392,328 | 532,946 | 1,248,313 | ||||||||||||
Distribution
|
71,393 | 89,892 | 497,949 | 561,449 | ||||||||||||
Total segment operating revenues
|
437,043 | 655,620 | 1,571,898 | 2,338,546 | ||||||||||||
Corporate and other
|
1,408 | 1,663 | 3,441 | 4,490 | ||||||||||||
Total consolidated revenues from external
|
||||||||||||||||
customers
|
$ | 438,451 | $ | 657,283 | $ | 1,575,339 | $ | 2,343,036 | ||||||||
Depreciation and amortization:
|
||||||||||||||||
Transportation and Storage
|
$ | 28,338 | $ | 26,133 | $ | 84,684 | $ | 76,885 | ||||||||
Gathering and Processing
|
16,733 | 15,721 | 49,689 | 46,537 | ||||||||||||
Distribution
|
7,880 | 7,615 | 23,359 | 22,909 | ||||||||||||
Total segment depreciation and amortization
|
52,951 | 49,469 | 157,732 | 146,331 | ||||||||||||
Corporate and other
|
535 | 580 | 1,584 | 1,662 | ||||||||||||
Total depreciation and amortization expense
|
$ | 53,486 | $ | 50,049 | $ | 159,316 | $ | 147,993 | ||||||||
Earnings (loss) from unconsolidated investments:
|
||||||||||||||||
Transportation and Storage
|
$ | 22,715 | $ | 22,212 | $ | 60,483 | $ | 60,026 | ||||||||
Gathering and Processing
|
1,338 | (914 | ) | 2,364 | (1,180 | ) | ||||||||||
Corporate and other
|
368 | 326 | 841 | 605 | ||||||||||||
$ | 24,421 | $ | 21,624 | $ | 63,688 | $ | 59,451 | |||||||||
Segment performance:
|
||||||||||||||||
Transportation and Storage EBIT (1)
|
$ | 101,120 | $ | 93,501 | $ | 292,264 | $ | 306,127 | ||||||||
Gathering and Processing EBIT
|
7,734 | 26,951 | (5,222 | ) | 67,641 | |||||||||||
Distribution EBIT (1)
|
5,103 | 1,494 | 36,450 | 30,904 | ||||||||||||
Total segment EBIT
|
113,957 | 121,946 | 323,492 | 404,672 | ||||||||||||
Corporate and other (1)
|
2,916 | (2,273 | ) | 3,103 | (2,282 | ) | ||||||||||
Interest expense
|
50,234 | 53,232 | 146,969 | 154,536 | ||||||||||||
Federal and state income tax expense
|
19,720 | 19,665 | 53,170 | 75,260 | ||||||||||||
Net earnings
|
46,919 | 46,776 | 126,456 | 172,594 | ||||||||||||
Preferred stock dividends
|
2,171 | 2,264 | 6,512 | 10,041 | ||||||||||||
Loss on extinguishment of preferred stock
|
- | 2,036 | - | 4,031 | ||||||||||||
Net earnings available for common stockholders
|
$ | 44,748 | $ | 42,476 | $ | 119,944 | $ | 158,522 |
(1)
|
In the fourth quarter of 2008, the Company ceased including the management and royalty fees charged by Southern Union to its Transportation and Storage segment in its evaluation of segment results as it was no longer deemed necessary by executive management. The Company had not previously included management and royalty fees in the evaluation
of its other reportable segments. Additionally, in the fourth quarter of 2008, the Company commenced allocating certain corporate administrative services costs to the Distribution segment. Previously, the corporate administrative services costs allocation was limited to the Transportation and Storage and Gathering and Processing segments. Executive management determined that such allocation to all of the Company's reportable segments would enable it to better measure and evaluate
the performance of each of its reportable segments. The allocations to the Distribution segment for the three- and nine- month periods ended September 30, 2009 were $2.5 million and $7.3 million, respectively. The administrative services allocation was primarily based upon each reportable segment's pro-rata share of combined net investment, margin and certain expenses. Management believes that the allocation method and underlying assumptions utilized by the Company were reasonable.
|
Three Months Ended September 30, 2008
|
||||||||||||
Recast Adjustments
|
||||||||||||
Segment Impacted
|
EBIT as Reported
|
Increase (Decrease)
|
Recast EBIT
|
|||||||||
(In thousands)
|
||||||||||||
Transportation and Storage
|
$ | 89,128 | $ | 4,373 | $ | 93,501 | ||||||
Distribution
|
3,613 | (2,119 | ) | 1,494 | ||||||||
Corporate and Other
|
(19 | ) | (2,254 | ) | (2,273 | ) | ||||||
Nine Months Ended September 30, 2008
|
||||||||||||
Recast Adjustments
|
||||||||||||
Segment Impacted
|
EBIT as Reported
|
Increase (Decrease)
|
Recast EBIT
|
|||||||||
(In thousands)
|
||||||||||||
Transportation and Storage
|
$ | 292,822 | $ | 13,305 | $ | 306,127 | ||||||
Distribution
|
36,733 | (5,829 | ) | 30,904 | ||||||||
Corporate and Other
|
5,194 | (7,476 | ) | (2,282 | ) |
September 30,
|
December 31,
|
||||||||||||||||
Segment Data
|
2009
|
2008
|
|||||||||||||||
(In thousands)
|
|||||||||||||||||
Total assets:
|
|||||||||||||||||
Transportation and Storage
|
$ | 5,032,235 | $ | 4,969,336 | |||||||||||||
Gathering and Processing
|
1,620,546 | 1,764,497 | |||||||||||||||
Distribution
|
1,036,629 | 1,177,124 | |||||||||||||||
Total segment assets
|
7,689,410 | 7,910,957 | |||||||||||||||
Corporate and other
|
115,389 | 86,950 | |||||||||||||||
Total consolidated assets
|
$ | 7,804,799 | $ | 7,997,907 | |||||||||||||
Three Months Ended
|
Nine Months Ended
|
||||||||||||||||
September 30,
|
September 30,
|
||||||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||||||
(In thousands)
|
|||||||||||||||||
Expenditures for long-lived assets:
|
|||||||||||||||||
Transportation and Storage
|
$ | 75,966 | $ | 75,023 | $ | 205,854 | $ | 347,852 | |||||||||
Gathering and Processing
|
12,887 | 19,365 | 29,405 | 52,144 | |||||||||||||
Distribution
|
11,244 | 12,152 | 34,512 | 28,860 | |||||||||||||
Total segment expenditures for
|
|||||||||||||||||
long-lived assets
|
100,097 | 106,540 | 269,771 | 428,856 | |||||||||||||
Corporate and other
|
7,179 | 5,479 | 24,182 | 7,235 | |||||||||||||
Total consolidated expenditures for
|
|||||||||||||||||
long-lived assets (1)
|
$ | 107,276 | $ | 112,019 | $ | 293,953 | $ | 436,091 | |||||||||
(1)
|
Includes net period changes in capital accruals totaling $(8.8)
million and $(16.4)
million for the three-month periods ended September 30, 2009 and 2008, respectively. Includes net period changes in capital accruals totaling
$(19.2)
million and $(32.7)
million for the nine-month periods ended September 30, 2009 and 2008, respectively.
|
Shareholder Record Date
|
Date Paid
|
Amount Per Share
|
Amount Paid
|
|||
(In thousands)
|
||||||
September 25, 2009
|
October 9, 2009
|
$ 0.15
|
$18,610
|
|||
June 26, 2009
|
July 10, 2009
|
0.15
|
18,607
|
|||
March 27, 2009
|
April 10, 2009
|
0.15
|
18,607
|
|
16. Other Income (Expense), Net
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(In thousands)
|
||||||||||||||||
EBIT:
|
||||||||||||||||
Transportation and storage segment (1)
|
$ | 101,120 | $ | 93,501 | $ | 292,264 | $ | 306,127 | ||||||||
Gathering and processing segment
|
7,734 | 26,951 | (5,222 | ) | 67,641 | |||||||||||
Distribution segment (1)
|
5,103 | 1,494 | 36,450 | 30,904 | ||||||||||||
Corporate and other (1)
|
2,916 | (2,273 | ) | 3,103 | (2,282 | ) | ||||||||||
Total EBIT
|
116,873 | 119,673 | 326,595 | 402,390 | ||||||||||||
Interest
|
50,234 | 53,232 | 146,969 | 154,536 | ||||||||||||
Earnings before income taxes
|
66,639 | 66,441 | 179,626 | 247,854 | ||||||||||||
Federal and state income tax expense
|
19,720 | 19,665 | 53,170 | 75,260 | ||||||||||||
Net earnings
|
46,919 | 46,776 | 126,456 | 172,594 | ||||||||||||
Preferred stock dividends
|
2,171 | 2,264 | 6,512 | 10,041 | ||||||||||||
Loss on extinguishment of preferred stock
|
- | 2,036 | - | 4,031 | ||||||||||||
Net earnings available for common stockholders
|
$ | 44,748 | $ | 42,476 | $ | 119,944 | $ | 158,522 | ||||||||
(1)
|
The amounts reported for the 2008 periods have been recasted. See
Part 1, Item 1. Financial Information (Unaudited), Note 13 – Reportable Segments
for information related to the recasted amounts.
|
·
|
Higher EBIT contributions of $7.6 million from the Transportation and Storage segment primarily due to a decrease of operating, maintenance and general expenses of $7.4 million primarily due to $13.3 million of lower net hurricane-related repair and abandonment costs recorded in 2009 as compared to 2008, partially offset by a $5.9 million increase in
other operating, maintenance and general expenses, an increase in transportation reservation revenues of $3.4 million primarily due to higher average rates realized on PEPL and higher LNG terminalling revenue of $1.8 million primarily due to higher reservation revenues attributable to a one-time rate increase effective January 1, 2009, partially offset by higher depreciation and amortization expense of $2.2 million primarily attributable to an increase in property, plant and equipment placed in service;
|
·
|
Higher EBIT contributions of $5.2 million from Corporate and other primarily due to higher legal fees of $3.7 million in the 2008 period and collection by the Company in 2009 of a $1.8 million litigation settlement;
|
·
|
Higher EBIT contributions of $3.6 million from the Distribution segment associated with higher net operating revenues of $1.7 million primarily due to a higher contribution of $2 million from New England Gas Company and lower operating, maintenance and general expenses of $2.2 million primarily due to lower bad debt expense resulting from improved collectability
on aged accounts receivable;
|
·
|
Lower interest expense of $3 million primarily attributable to lower interest expense of $2 million primarily due to lower LIBOR interest rates associated with the Company’s variable rate debt, and the impact of a $1.6 million increase in interest costs capitalized attributable to higher average capital project balances outstanding in 2009 compared
to 2008, partially offset by higher net interest expense of $600,000 primarily due to higher net debt balances outstanding on fixed-rate debt obligations and the impact of lower net debt premium amortization;
|
·
|
Lower EBIT contributions of $19.2 million from the Gathering and Processing segment primarily due to lower operating revenues of $216.3 million, excluding hedging gains and losses, largely attributable to lower market-driven realized average natural gas and NGL prices, partially offset by the impact of $13.6 million of higher net hedging gains and lower
market-driven natural gas and NGL purchase costs of $177.7 million in the 2009 period versus the 2008 period; and
|
·
|
Impact of a $2 million loss recorded in the 2008 period related to the Company’s purchase of 248,225 shares of its Preferred Stock and the reduction in related dividends of $100,000 in the 2009 period versus the 2008 period associated with the Company’s purchase of 459,999 total shares of Preferred Stock during 2008.
|
·
|
Lower EBIT contributions of $72.9 million from the Gathering and Processing segment primarily due to lower operating revenues of $744.5 million, excluding hedging gains and losses, largely attributable to lower market-driven realized average natural gas and NGL prices, partially offset by the impact of $29.2 million of higher revenues from hedging activities
and lower market-driven natural gas and NGL purchase costs of $632.7 million in the 2009 period versus the 2008 period; and
|
·
|
Lower EBIT contributions of $13.9 million from the Transportation and Storage segment primarily due to higher operating, maintenance and general expenses of $16.4 million attributable to higher environmental costs of $3.8 million, a $3.3 million increase in third-party transportation expense, a $4 million increase in net hurricane-related expenses
and $5.3 million of other operating, maintenance and general expenses, and higher depreciation and amortization expense of $7.8 million primarily due to increases in property, plant and equipment placed in service, partially offset by higher operating revenues of $12.2 million primarily attributable to higher transportation reservation revenues primarily due to higher average rates realized on PEPL of $11 million and higher LNG terminalling revenues of $6.5 million, partially offset by lower transportation usage
revenues of $8.1 million primarily due to reduced volumes flowing after Hurricane Ike on Sea Robin.
|
·
|
Higher EBIT contributions of $5.5 million from the Distribution segment primarily due to the impact of $3.5 million of income in 2009 related to a settlement agreement with an insurance company releasing the insurance company from certain potential future environmental claim obligations and higher net operating revenues of $2.4 million, partially
offset by higher property tax assessments of $1 million associated with natural gas inventory stored in the state of Kansas, which became assessable for property tax purposes beginning in 2009;
|
·
|
Higher EBIT contributions of $5.4 million from Corporate and other primarily due to higher legal fees of $4.9 million in the 2008 period, a settlement of $1.9 million with an insurance company releasing the insurance company from certain potential future environmental claim obligations and collection by the Company of $1.8 million related to a litigation
settlement, partially offset by lower contributions of $1.4 million from PEI Power Corporation and lower interest income of $1 million associated with short-term investments held by the Company;
|
·
|
Lower interest expense of $7.6 million primarily attributable to lower interest expense of $7.9 million due to lower LIBOR interest rates associated with the Company’s variable rate debt and the impact of a $4.4 million increase in interest costs capitalized attributable to higher average capital project balances outstanding in 2009 compared to
2008, partially offset by higher net interest expense of $4.9 million primarily due to higher net debt balances outstanding on fixed-rate debt obligations and the impact of lower net debt premium amortization;
|
·
|
Impact of a $4 million loss recorded in the 2008 period related to the Company’s purchase of 440,109 shares of its Preferred Stock and the reduction in related dividends of $3.5 million in the 2009 period versus the 2008 period associated with the Company’s purchase of 459,999 total shares of Preferred Stock during 2008; and
|
·
|
Lower federal and state income tax expense of $22.1 million primarily due to lower pre-tax earnings of $68.2 million.
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
Transportation and Storage Segment
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
(In thousands)
|
||||||||||||||||
Operating revenues
|
$ | 176,093 | $ | 173,400 | $ | 541,003 | $ | 528,784 | ||||||||
Operating, maintenance and general
|
61,127 | 68,485 | 199,302 | 182,906 | ||||||||||||
Depreciation and amortization
|
28,338 | 26,133 | 84,684 | 76,885 | ||||||||||||
Taxes other than on income and revenues
|
8,398 | 8,226 | 25,636 | 24,419 | ||||||||||||
Total operating income
|
78,230 | 70,556 | 231,381 | 244,574 | ||||||||||||
Earnings from unconsolidated investments
|
22,715 | 22,212 | 60,483 | 60,026 | ||||||||||||
Other income, net
|
175 | 733 | 400 | 1,527 | ||||||||||||
EBIT
|
$ | 101,120 | $ | 93,501 | $ | 292,264 | $ | 306,127 | ||||||||
Operating information:
|
||||||||||||||||
Panhandle natural gas volumes transported (TBtu)
|
331 | 356 | 1,134 | 1,085 | ||||||||||||
Florida Gas natural gas volumes transported (TBtu) (1)
|
233 | 226 | 636 | 610 |
(1)
|
Represents 100 percent of natural gas volumes transported by Florida Gas versus the Company’s effective equity ownership interest of 50 percent.
|
·
|
Higher operating revenues of $2.7 million primarily as the result of:
|
o
|
Higher transportation reservation revenues of $3.4 million primarily due to higher average rates realized on PEPL;
|
o
|
A $1.8 million increase in LNG terminalling revenue primarily due to higher reservation revenues attributable to a one-time annual rate increase associated with certain capacity effective January 1, 2009;
|
o
|
Lower parking revenues of $900,000 primarily due to decreased customer demand for parking services and market conditions; and
|
o
|
Lower transportation usage revenues of $800,000 primarily due to reduced volumes flowing in 2009;
|
·
|
Lower operating, maintenance and general expenses of $7.4 million primarily attributable to:
|
o
|
Lower net hurricane-related repair and abandonment costs of $13.3 million recorded in 2009 as compared to 2008. The majority of such costs are generally expected to be recovered in the future through insurance recoveries and rate proceedings;
|
o
|
A $2.8 million increase in environmental reserves primarily attributable to estimated costs to remediate PCBs at the Company’s facilities;
|
o
|
A $2.6 million increase in outside services costs primarily attributable to higher pipeline testing costs and legal expenses; and
|
o
|
A $1.4 million increase in third-party transportation expense primarily due to additional capacity contracted; and
|
·
|
Increased depreciation and amortization expense of $2.2 million primarily attributable to a $166 million increase in property, plant and equipment placed in service after September 30, 2008. Depreciation and amortization expense is expected to continue to increase primarily due to higher capital spending, primarily from the LNG terminal infrastructure
enhancement construction project.
|
·
|
Higher other income of $7.4 million primarily due to higher equity AFUDC resulting from Florida Gas’ Phase VIII Expansion project;
|
·
|
Higher transportation revenues of $800,000 primarily due to higher reservation revenue attributable to additional phased-in capacity contracted resulting from Florida Gas’ Phase VII Expansion project;
|
·
|
Higher debt interest cost of $6.7 million primarily due to interest on a $500 million construction and term loan agreement funded in October 2008 and on the $600 million 7.90% Senior Notes issued in May 2009, partially offset by lower average outstanding revolver debt balances and lower LIBOR interest rates;
|
·
|
Higher income tax of $400,000 primarily due to higher pretax earnings; and
|
·
|
Higher depreciation expense of $400,000 primarily due to increased property, plant and equipment placed in service after September 30, 2008.
|
·
|
Higher operating revenues of $12.2 million primarily as the result of:
|
o
|
Higher transportation reservation revenues of $11 million primarily due to higher average rates realized on PEPL and contributions from various expansion projects, partially offset by lower average rates realized on Trunkline, and $1.2 million of additional revenues in the 2008 period attributable to the extra day in the 2008 leap year;
|
o
|
Higher parking revenues of $4.1 million resulting from customer demand for parking services and market conditions;
|
o
|
Lower transportation usage revenues of $8.1 million primarily due to reduced volumes flowing after Hurricane Ike on Sea Robin of $5.6 million and lower interruptible volumes on Trunkline and PEPL due to market conditions; and
|
o
|
A $6.5 million increase in LNG terminalling revenue primarily due to approximately $3.7 million of higher reservation revenues attributable to a one-time annual rate increase associated with certain capacity effective January 1, 2009 and $2.7 million associated with a change in the power reimbursement mechanism in the fourth quarter of 2008 that allows
the Company to recover actual monthly LNG electric power costs from the customer.
|
·
|
Higher operating, maintenance and general expenses of $16.4 million primarily attributable to:
|
o
|
A $2 million increase in net hurricane-related repair and abandonment costs and a $2 million increase in accretion expense on the additional hurricane-related asset retirement obligations. The majority of such costs are generally expected to be recovered in the future through insurance recoveries and rate proceedings;
|
o
|
A $3.8 million increase in environmental reserves primarily attributable to estimated costs to remediate PCBs at the Company’s facilities;
|
o
|
A $3.3 million increase in third-party transportation expense primarily due to additional capacity contracted;
|
o
|
A $2.9 million increase in fuel tracker costs primarily due to a net over-recovery in 2008 versus a net under-recovery in 2009; and
|
o
|
A $1.9 million increase in LNG electric power expense primarily resulting from actual costs recovered in rates through the power reimbursement mechanism; and
|
·
|
Increased depreciation and amortization expense of $7.8 million primarily attributable to a $166 million increase in property, plant and equipment placed in service after September 30, 2008. Depreciation and amortization expense is expected to continue to increase primarily due to higher capital spending, primarily from the LNG terminal infrastructure
enhancement construction project.
|
·
|
Higher other income of $17.4 million primarily due to higher equity AFUDC resulting from Florida Gas’ Phase VIII Expansion project;
|
·
|
Higher operating revenues of $1.3 million primarily attributable to:
|
o
|
Higher reservation revenues of $2.3 million primarily due to increased capacity from prior expansions, partially offset by the impact of additional revenues in the 2008 period attributable to the extra day in the 2008 leap year; and
|
o
|
Lower commodity revenues of $1.1 million primarily attributable to lower parking revenues largely due to decreased customer demand for parking services and market conditions and lower interruptible transportation revenues due to lower volumes;
|
·
|
Higher debt interest cost of $14.4 million primarily due to interest on a $500 million construction and term loan agreement funded in October 2008 and on the $600 million 7.90% Senior Notes issued in May 2009, partially offset by lower average outstanding revolver debt balances and lower LIBOR interest rates;
|
·
|
Higher operating expenses of $1.5 million primarily attributable to:
|
o
|
Higher outside service costs of $1 million primarily due to outside legal services;
|
o
|
Higher costs of $1 million experienced in 2009 primarily applicable to employee labor, rents, transportation expense, and other costs; and
|
o
|
A $600,000 decrease in employee benefits largely associated with terminated cash balance plan expenses;
|
·
|
Higher depreciation expense of $1.4 million primarily due to increased property, plant and equipment placed in service after September 30, 2008; and
|
·
|
Higher income tax of $400,000 primarily due to higher pretax earnings.
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
Gathering and Processing Segment
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
(In thousands)
|
||||||||||||||||
Operating revenues, excluding impact of
|
||||||||||||||||
commodity derivative instruments
|
$ | 174,498 | $ | 390,825 | $ | 530,499 | $ | 1,275,044 | ||||||||
Realized and unrealized commodity derivatives
|
15,059 | 1,503 | 2,447 | (26,731 | ) | |||||||||||
Operating revenues
|
189,557 | 392,328 | 532,946 | 1,248,313 | ||||||||||||
Cost of gas and other energy (1)
|
(142,455 | ) | (320,281 | ) | (426,853 | ) | (1,058,820 | ) | ||||||||
Gross margin (2)
|
47,102 | 72,047 | 106,093 | 189,493 | ||||||||||||
Operating, maintenance and general
|
22,736 | 27,488 | 60,521 | 70,626 | ||||||||||||
Depreciation and amortization
|
16,733 | 15,721 | 49,689 | 46,537 | ||||||||||||
Taxes other than on income and revenues
|
1,210 | 976 | 3,716 | 3,495 | ||||||||||||
Total operating income
|
6,423 | 27,862 | (7,833 | ) | 68,835 | |||||||||||
Earnings from unconsolidated investments
|
1,338 | (914 | ) | 2,364 | (1,180 | ) | ||||||||||
Other expense, net
|
(27 | ) | 3 | 247 | (14 | ) | ||||||||||
EBIT
|
$ | 7,734 | $ | 26,951 | $ | (5,222 | ) | $ | 67,641 | |||||||
Operating information:
|
||||||||||||||||
Volumes
|
||||||||||||||||
Avg natural gas processed (MMBtu/d)
|
357,182 | 386,977 | 395,054 | 409,460 | ||||||||||||
Avg NGL produced (gallons/d)
|
1,162,488 | 1,225,386 | 1,308,472 | 1,329,725 | ||||||||||||
Avg natural gas wellhead (MMBtu/d)
|
530,558 | 535,153 | 569,649 | 593,972 | ||||||||||||
Natural gas sales (MMBtu)
|
22,871,214 | 22,646,553 | 68,100,131 | 70,471,942 | ||||||||||||
NGL sales (gallons) (3)
|
125,247,667 | 123,993,890 | 435,737,044 | 424,253,218 | ||||||||||||
Average Pricing
|
||||||||||||||||
Realized natural gas ($/MMBtu) (4)
|
$ | 3.08 | $ | 8.15 | $ | 3.20 | $ | 8.60 | ||||||||
Realized composite NGL ($/gallon) (4)
|
0.81 | 1.64 | 0.70 | 1.55 | ||||||||||||
Natural Gas Daily WAHA ($/MMBtu)
|
3.08 | 7.68 | 3.20 | 8.59 | ||||||||||||
Natural Gas Daily El Paso ($/MMBtu)
|
3.05 | 7.53 | 3.13 | 8.45 | ||||||||||||
Estimated plant processing spread ($/gallon)
|
0.52 | 0.89 | 0.41 | 0.76 |
(1)
|
Cost of gas and other energy
consists of natural gas and NGL purchase costs and producer and other fees.
|
(2)
|
Gross margin consists of
Operating revenues
less
Cost of gas and other energy
. The Company believes that this measure is more meaningful for under
standing and analy
zing t
he
Gathering and Processing
segment’s operating results for the periods presented because commodi
ty costs are a sig
nifica
nt factor in the determinati
on of the segment’s revenues.
|
(3)
|
Volumes processed by SUGS include volumes sold under various buy-sell arrangements. For the three-month periods ended September 30, 2009 and 2008, the Company’s operating revenues and related volumes attributable to its buy-sell arrangements for natural gas totaled $8.5 million and $21.2 million, and 2,713,000 million MMBtus and 2,568,000
million MMBtus, respectively. The Company’s operating revenues and related volumes for the three-month periods ended September 30, 2009 and 2008 attributable to its buy-sell arrangements for NGL totaled $15.3 million and $26.3 million, and 19,923,000 million gallons and 17,437,000 million gallons, respectively. For the nine-month periods ended September 30, 2009 and 2008, the Company’s operating revenues and related volumes attributable to its buy-sell arrangements
for natural gas totaled $30 million and $82 million, and 9,057,000 million MMBtus and 9,299,000 million MMBtus, respectively. The Company’s operating revenues and related volumes for the nine-month periods ended September 30, 2009 and 2008 attributable to its buy-sell arrangements for NGL totaled $41.9 million and $104.1 million, and 63,037,000 million gallons and 71,761,000 million gallons, respectively.
|
(4)
|
Excludes impact of realized and unrealized commodity derivative gains and losses detailed in the above EBIT presentation.
|
·
|
Lower gross margin of $24.9 million primarily as the result of:
|
o
|
Lower operating revenues of $216.3 million largely attributable to lower market-driven realized average natural gas and NGL prices (unadjusted for the impact of realized and unrealized commodity derivative gains and losses) of $3.08 per MMBtu and $0.81 per gallon in the 2009 period versus $8.15 per MMBtu and $1.64 per gallon in the 2008 period, respectively;
|
o
|
Impact of lower market driven natural gas and NGL purchase costs of $177.7 million in the 2009 period versus the 2008 period;
|
o
|
Impact of $13.6 million of higher net hedging gains in the 2009 period versus the 2008 period (which includes the impact of $15.1 million of unrealized gains recorded in 2009);
|
o
|
Impact of approximate $10.6 million reduction in gross margin in 2008 resulting from damage by Hurricane Ike to the Company’s third-party NGL fractionator; and
|
o
|
Impact of approximate $4.6 million reduction in gross margin attributable to a fire on July 17, 2009 at the Keystone processing plant resulting in a production outage until August 1, 2009 and additional reduced production flow, which is expected to continue until late in the fourth quarter of 2009;
|
·
|
Higher depreciation and amortization expense of $1 million primarily attributable to a $50.7 million increase in property, plant and equipment placed in service after September 30, 2008;
|
·
|
Lower operating, maintenance and general expenses of $4.8 million primarily due to:
|
o
|
Impact of a $2.7 million bad debt reserve for receivables associated with a company that filed for bankruptcy protection in the third quarter of 2008;
|
o
|
A $1.8 million decrease in maintenance, contract services costs and other plant operating costs largely attributable to a 2009 cost reduction initiative primarily related to the Company’s variable and discretionary costs;
|
o
|
Impact of a $1.4 million provision in the third quarter of 2008 related to the settlement of the GP II Energy litigation;
|
o
|
A $1 million decrease in chemical and lubricants costs, which generally track the price of oil;
|
o
|
A $600,000 decrease in utilities costs primarily due to lower compressor fuel costs attributable to the associated declining costs of natural gas in 2009 versus 2008;
|
o
|
Lower corporate services costs of $600,000; and
|
o
|
A $4.5 million net loss in 2009 versus 2008 primarily resulting from the write-off of property and equipment damaged by the fire at the Keystone natural gas processing plant in 2009; and
|
·
|
Higher equity earnings of $2.3 million from the Company’s unconsolidated investment in Grey Ranch due to the processing plant being out of service during the third quarter of 2008 resulting from a fire at the facility in June 2008.
|
·
|
Lower gross margin of $83.4 million primarily as the result of:
|
o
|
Lower operating revenues of $744.5 million largely attributable to lower market-driven realized average natural gas and NGL prices (unadjusted for the impact of realized and unrealized commodity derivative gains and losses) of $3.20 per MMBtu and $0.70 per gallon in the 2009 period versus $8.60 per MMBtu and $1.55 per gallon in the 2008 period, respectively;
|
o
|
Impact of lower market-driven natural gas and NGL purchase costs of $632.7 million in the 2009 period versus the 2008 period;
|
o
|
Impact of $29.2 million of higher revenues from hedging activities primarily due to a net gain of $2.4 million in the 2009 period versus a net loss of $26.7 million in the 2008 period (which includes the impact of $5.6 million of unrealized losses recorded in 2009);
|
o
|
Impact of approximate $10.6 million reduction in gross margin in 2008 resulting from damage by Hurricane Ike to the Company’s third-party NGL fractionator; and
|
o
|
Impact of approximate $4.6 million reduction in gross margin attributable to a fire on July 17, 2009 at the Keystone processing plant resulting in a production outage until August 1, 2009 and additional reduced production flow, which is expected to continue until late in the fourth quarter of 2009;
|
·
|
Higher depreciation and amortization expense of $3.2 million primarily attributable to a $50.7 million increase in property, plant and equipment placed in service after September 30, 2008;
|
·
|
Lower operating, maintenance and general expenses of $10.1 million primarily due to:
|
o
|
Impact of a $2.7 million bad debt reserve for receivables associated with a company that filed for bankruptcy protection in the third quarter of 2008;
|
o
|
A $3.1 million decrease in maintenance, contract services and other plant operating costs largely attributable to a 2009 cost reduction initiative primarily related to the Company’s variable and discretionary costs;
|
o
|
A $1.7 million decrease in chemical and lubricants costs, which generally track the price of oil;
|
o
|
A $1.6 million decrease in utilities costs primarily due to lower compressor fuel costs attributable to the declining costs of natural gas in 2009 versus 2008;
|
o
|
Impact of a $1.4 million provision in the third quarter of 2008 related to the settlement of the GP II Energy litigation;
|
o
|
Lower corporate services costs of $1.1 million; and
|
o
|
A $4.5 million net loss in 2009 versus 2008 primarily resulting from the write-off of property and equipment damaged by the fire at the Keystone natural gas processing plant in 2009; and
|
·
|
Higher equity earnings of $3.5 million from the Company’s unconsolidated investment in Grey Ranch primarily due to higher volumes in 2009 versus the 2008 period resulting from an increase in capacity from 90 MMcf/d to 200 MMcf/d effective December 31, 2008 and due to a plant outage at the processing plant during the third quarter of 2008 resulting
from a fire at the facility in June 2008.
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||||||
September 30,
|
September 30,
|
||||||||||||||||
Distribution Segment
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(In thousands)
|
|||||||||||||||||
Net operating revenues (1)
|
$ | 45,528 | $ | 43,825 | $ | 162,962 | $ | 160,585 | |||||||||
Operating, maintenance and general
|
29,371 | 31,529 | 96,292 | 97,360 | |||||||||||||
Depreciation and amortization
|
7,880 | 7,615 | 23,359 | 22,909 | |||||||||||||
Taxes other than on income and revenues
|
3,047 | 2,747 | 9,929 | 8,391 | |||||||||||||
Total operating income (loss)
|
5,230 | 1,934 | 33,382 | 31,925 | |||||||||||||
Other income (expenses), net
|
(127 | ) | (440 | ) | 3,068 | (1,021 | ) | ||||||||||
EBIT
|
$ | 5,103 | $ | 1,494 | $ | 36,450 | $ | 30,904 | |||||||||
Operating Information:
|
|||||||||||||||||
Gas sales volumes (MMcf)
|
3,718 | 3,612 | 42,524 | 46,945 | |||||||||||||
Gas transported volumes (MMcf)
|
5,033 | 5,131 | 18,999 | 20,817 | |||||||||||||
Weather – Degree Days:
(2)
|
|||||||||||||||||
Missouri Gas Energy service territories
|
43 | 54 | 2,996 | 3,474 | |||||||||||||
New England Gas Company service territories
|
80 | 74 | 3,827 | 3,505 |
(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.
|
(2)
|
"Degree days" are a measure of the coldness of the weather experienced. A degree day is equivalent to each degree that the daily mean temperature for a day falls below 65 degrees Fahrenheit.
|
·
|
Higher net operating revenues of $1.7 million primarily due to a higher contribution of $2 million from New England Gas Company largely attributable to the impact of new rates associated with the $3.7 million annual rate case increase effective February 3, 2009 and colder weather in the 2009 period; and
|
·
|
Lower operating, maintenance and general expenses of $2.2 million primarily due to lower bad debt expense of $2.2 million in 2009 resulting from improved collectability on aged accounts receivables and impact of higher injuries and damages claims reserves of $1.4 million in the 2008 period primarily due to litigation, partially offset by the impact of
$1 million of higher environmental reserves primarily due to $1.5 million of insurance recoveries in the 2008 period, and $400,000 of higher pension costs in 2009, which are recovered in current rates.
|
·
|
Higher other income, net, of $4.1 million primarily due to a settlement of $3.5 million with an insurance company in 2009 releasing the insurance company from certain potential future environmental claim obligations;
|
·
|
Higher net operating revenues of $2.4 million primarily due to a higher contribution of $4.6 million from New England Gas Company largely attributable to the impact of new rates associated with the $3.7 million annual rate case increase effective February 3, 2009 and colder weather in the 2009 period, partially offset by $2.2 million of lower net operating
revenues at Missouri Gas Energy primarily due to the impact of warmer weather for its non-residential customers;
|
·
|
Higher taxes other than on income and revenues of $1.5 million largely attributable to $1 million of property taxes associated with natural gas inventory stored in the state of Kansas, which became assessable for property tax purposes beginning in 2009. The Company expects an impact of $1.4 million in 2009 will result from the new property
tax assessments for natural gas stored in the state of Kansas, which amount will vary as the assessment is based upon inventory balances as of each year end; and
|
·
|
Higher operating, maintenance and general expenses of $1.1 million primarily due to higher employee benefits of $2 million primarily attributable to higher pension costs of $1.3 million, which are recovered in current rates, and higher labor costs of $1.1 million largely due to salaries previously capitalized in the 2008 period, new positions filled
in the 2009 period and merit and incentive increases in 2009 versus 2008, partially offset by $1.7 million of lower environmental remediation costs primarily attributable to the establishment of reserves in 2008 related to completed site investigation evaluations.
|
·
|
Higher legal fees of $3.7 million in the 2008 period primarily attributable to litigation; and
|
·
|
Collection of a $1.8 million settlement awarded to the Company related to the Southwest Gas litigation action filed by the Company in 2002 against former Arizona Corporation Commissioner James Irvin.
|
·
|
Higher legal fees of $4.9 million in the 2008 period primarily attributable to litigation;
|
·
|
A settlement of $1.9 million in March 2009 with an insurance company releasing the insurance company from certain potential future environmental claim obligations;
|
·
|
Collection of a $1.8 million settlement awarded to the Company related to the Southwest Gas litigation action filed by the Company in 2002 against former Arizona Corporation Commissioner James Irvin;
|
·
|
Lower contributions of $1.4 million from PEI Power Corporation primarily due to lower revenues of $1 million primarily attributable to lower electricity prices in 2009 and the impact of a scheduled maintenance outage during May and June 2009 and a first quarter 2009 increase of $400,000 in a reserve associated with the Company’s obligation to fund
the potential shortfall in estimated future incremental tax revenues associated with the financing obtained by certain tax authorities for the development of an industrial complex; and
|
·
|
Lower interest income of $1 million in the 2009 period versus the 2008 period associated with short-term investments held by the Company.
|
·
|
Lower interest expense of $2 million primarily due to the effect of lower LIBOR interest rates on the $465 million term loan agreement;
|
·
|
Lower interest expense of $1.6 million primarily due to the impact of the higher level of interest costs capitalized attributable to higher average capital project balances outstanding in 2009 compared to 2008;
|
·
|
Lower interest expense of $1.3 million due to the repayment of the $150 million Short-Term facility in July 2009 and lower average interest rates in 2009 versus 2008;
|
·
|
Higher other interest costs of $1.5 million primarily attributable to lower net debt premium amortization in 2009 resulting from debt retirements; and
|
·
|
Higher net interest expense of $400,000 primarily due to a higher outstanding debt balance from the $150 million 8.125% Senior Notes issued in June 2009 and the $150 million term loan issued in August 2009, partially offset by lower interest expense resulting from the repayment of the $300 million 4.80% Senior Notes in August 2008, the $125 million 6.15%
Senior Notes in August 2008 and the $60.6 million 6.50% Senior Notes in July 2009.
|
·
|
Lower interest expense of $7.9 million primarily due to the effect of lower LIBOR interest rates and a lower debt balance on the $465 million term loan agreement;
|
·
|
Lower interest expense of $4.4 million primarily due to the impact of the higher level of interest costs capitalized attributable to higher average capital project balances outstanding in 2009 compared to 2008;
|
·
|
Higher other interest costs of $1.9 million primarily attributable to lower net debt premium amortization in 2009 resulting from debt retirements; and
|
·
|
Higher net interest expense of $3 million primarily due to higher outstanding debt balances from the $400 million 7.00% Senior Notes issued in June 2008, the $150 million 8.125% Senior Notes issued in June 2009 and the $150 million term loan issued in August 2009, partially offset by lower interest expense resulting from the repayment of the $300 million
4.80% Senior Notes in August 2008, the $125 million 6.15% Senior Notes in August 2008 and the $60.6 million 6.50% Senior Notes in July 2009.
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Income tax expense
|
$ | 19,720 | $ | 19,665 | $ | 53,170 | $ | 75,260 | ||||||||
Effective tax rate
|
30 | % | 30 | % | 30 | % | 30 | % |
Nine months ended September 30,
|
||||||||
2009
|
2008
|
|||||||
(In thousands)
|
||||||||
Cash flows provided by (used in):
|
||||||||
Operating activities
|
$ | 464,413 | $ | 373,442 | ||||
Investing activities
|
(319,422 | ) | (465,540 | ) | ||||
Financing activities
|
(142,272 | ) | 89,468 | |||||
Increase (decrease) in cash and cash equivalents
|
$ | 2,719 | $ | (2,630 | ) |
Nine Months Ended
|
||||||||
September 30,
|
||||||||
Property, Plant and Equipment Additions
|
2009
|
2008
|
||||||
(In thousands)
|
||||||||
Transportation and Storage Segment
|
||||||||
LNG Terminal Expansions/Enhancements
|
$ | 75,995 | $ | 122,474 | ||||
Trunkline Field Zone Expansion
|
1,326 | 69,729 | ||||||
East End Enhancement
|
- | 35,503 | ||||||
Compression Modernization
|
6,462 | 51,578 | ||||||
Other, primarily pipeline integrity, system
|
||||||||
reliability, information technology, air
|
||||||||
emission compliance and hurricane
|
||||||||
expenditures
|
122,071 | 68,568 | ||||||
Total
|
205,854 | 347,852 | ||||||
Gathering and Processing Segment
|
29,405 | 52,144 | ||||||
Distribution Segment
|
||||||||
Missouri Safety Program
|
10,259 | 9,873 | ||||||
Other, primarily system replacement
|
||||||||
and expansion
|
24,253 | 18,987 | ||||||
Total
|
34,512 | 28,860 | ||||||
Corporate and other
|
24,182 | 7,235 | ||||||
Total (1)
|
$ | 293,953 | $ | 436,091 |
(1)
|
Includes net period changes in capital accruals totaling $(19.2)
million and $(32.7)
million for the nine-month periods ended September 30, 2009 and 2008, respectively.
|
·
|
Processing plant outages;
|
·
|
Higher than anticipated fuel, flare and unaccounted-for natural gas levels;
|
·
|
Impact of commodity prices in general;
|
·
|
Decline in drilling and/or connections of new supply;
|
·
|
Reduction in available NGL take-away capacity;
|
·
|
Reduction in NGL available from wellhead supply;
|
·
|
Lower than expected recovery of NGL from the inlet gas stream; and
|
·
|
Lower than expected receipt of natural gas volumes to be processed.
|
Average
|
Fair Value
|
||||||||||||||||||||
Fixed Price
|
Volumes (MMBtu/d)
|
of Assets
|
|||||||||||||||||||
Instrument Type
|
Index
|
(per MMBtu)
|
2009 (3)
|
2010 (3)
|
2011 (3)
|
(Liabilities)
(4)
|
|||||||||||||||
(In thousands)
|
|||||||||||||||||||||
Natural Gas - Cash Flow Hedges
(1)
|
|||||||||||||||||||||
Receive-fixed swap
|
Gas Daily - Waha
|
$6.69 | 22,100 | - | - | $ | 4,485 | ||||||||||||||
Receive-fixed swap
|
Gas Daily - Waha
|
$5.33 | - | 24,863 | - | (4,719 | ) | ||||||||||||||
Receive-fixed swap
|
Gas Daily - Waha
|
$6.14 | - | - | 11,050 | (1,127 | ) | ||||||||||||||
Receive-fixed swap
|
Gas Daily - El Paso Permian
|
$6.69 | 17,900 | - | - | 3,632 | |||||||||||||||
Receive-fixed swap
|
Gas Daily - El Paso Permian
|
$5.33 | - | 20,137 | - | (3,822 | ) | ||||||||||||||
Receive-fixed swap
|
Gas Daily - El Paso Permian
|
$6.14 | - | - | 8,950 | (913 | ) | ||||||||||||||
Total
|
40,000 | 45,000 | 20,000 | $ | (2,464 | ) | |||||||||||||||
Processing Spread - Economic Hedges
(2)
|
|||||||||||||||||||||
Receive-fixed swap
|
Gas Daily - Waha (natural gas)
|
||||||||||||||||||||
OPIS - Mt. Belvieu (NGL)
|
$7.18 | 19,338 | - | - | $ | 2,653 | |||||||||||||||
Receive-fixed swap
|
Gas Daily - Waha (natural gas)
|
||||||||||||||||||||
OPIS - Mt. Belvieu (NGL)
|
$4.98 | - | 11,050 | - | 2,261 | ||||||||||||||||
Receive-fixed swap
|
Gas Daily - El Paso Permian (natural gas)
|
||||||||||||||||||||
OPIS - Mt. Belvieu (NGL)
|
$7.18 | 15,662 | - | - | 2,149 | ||||||||||||||||
Receive-fixed swap
|
Gas Daily - El Paso Permian (natural gas)
|
||||||||||||||||||||
OPIS - Mt. Belvieu (NGL)
|
$4.98 | - | 8,950 | - | 1,831 | ||||||||||||||||
Total
|
35,000 | 20,000 | - | $ | 8,894 |
(1)
|
The Company’s natural gas swap arrangements have been designated as cash flow hedges. The effective portion of changes in the fair value of the cash flow hedges is recorded in
Accumulated other comprehensive loss
until the related hedged items impact earnings. Any ineffective
portion of a cash flow hedge is reported in current-period earnings.
|
(2)
|
The Company’s processing spread swap arrangements, which hedge the pricing differential between NGL volumes and natural gas volumes, are treated as economic hedges. The ratio of NGL product sold per MMBtu is approximately: 33 percent ethane, 32 percent propane, 5 percent isobutane, 14 percent normal butane and 16 percent natural gasoline. The
change in fair value is reported in current-period earnings.
|
(3)
|
All volumes are applicable to the period October 1, 2009 to December 31, 2009, January 1, 2010 to December 31, 2010 and January 1, 2011 to December 31, 2011, as applicable.
|
(4)
|
See
Part I, Item 1. Financial Statements (Unaudited),
Note 10 – Derivative Instruments and Hedging Activities – Commodity Contracts – Gathering and Processing Segment
for additional related information.
|
·
|
changes in demand for natural gas or NGL and related services 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 or NGL 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;
|
·
|
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;
|
·
|
the Company’s exposure to highly competitive commodity businesses through its Gathering and Processing segment;
|
·
|
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.
|
Total Number of
|
Average Price
|
|||||||
Period
|
Shares Purchased (1)
|
Paid per Share
|
||||||
July 1, 2009 through July 31, 2009
|
5,532 | $ | 17.53 | |||||
August 1, 2009 through August 31, 2009
|
41 | 19.55 | ||||||
September 1, 2009 through September 30, 2009
|
4,230 | 20.39 | ||||||
Total
|
9,803 | $ | 18.78 |
(1)
|
Shares of common stock purchased in open-market transactions and held in various Company employee benefit plan trusts by the trustees using cash amounts deferred by the participants in such plans (and quarterly cash dividends issued by the Company on shares held in such plans).
|
2(a)
|
Purchase and Sale Agreement by and among SRCG, Ltd. and SRG Genpar, L.P., as Sellers and Southern Union Panhandle LLC and Southern Union Gathering Company LLC, as Buyers, dated as of December 15, 2005. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on December 16, 2005 and incorporated herein by reference.)
|
2(b)
|
Purchase and Sale Agreement between Southern Union Company and UGI Corporation, dated as of January 26, 2006. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on January 30, 2006 and incorporated herein by reference.)
|
2(c)
|
First Amendment to the Purchase and Sale Agreement between Southern Union Company and UGI Corporation, dated as of August 24, 2006. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on August 30, 2006 and incorporated herein by reference.)
|
2(d)
|
Purchase and Sale Agreement between Southern Union Company and National Grid USA, dated as of February 15, 2006. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on February 17, 2006 and incorporated herein by reference.)
|
2(e)
|
Limited Settlement Agreement between Southern Union Company, Narragansett Electric Company d/b/a National Grid, the Department of the Attorney General for the State of
|
2(f)
|
First Amendment to the Purchase and Sale Agreement between Southern Union Company and National Grid USA, dated as of August 24, 2006. (Filed as Exhibit 10.3 to Southern
Union’s Current Report on Form 8-K
filed on August 30, 2006 and incorporated herein
by reference.)
|
2(g)
|
Redemption Agreement by and between CCE Holdings, LLC and Energy Transfer Partners, L.P., dated as of
September 18, 2006. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on
September 18, 2006 and incorporated herein by reference.)
|
3(a)
|
Amended and Restated Certificate of Incorporation of Southern Union Company. (Filed as Exhibit 3(a) to Southern Union’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated herein by reference.)
|
3(b)
|
By-Laws of Southern Union Company, as amended through January 3, 2007. (Filed as Exhibit 3.1 to Southern Union’s Current Report on Form 8-K filed on January 3, 2007 and incorporated herein by reference.)
|
3(c)
|
Certificate of Designations, Preferences and Rights re: Southern Union Company’s 7.55% Noncumulative Preferred Stock, Series A. (Filed as Exhibit 4.1 to Southern Union’s Form 8-A/A dated October 17, 2003 and incorporated herein by reference.)
|
4(a)
|
Specimen Common Stock Certificate. (Filed as Exhibit 4(a) to Southern Union's Annual Report on Form 10-K for the year ended December 31, 1989 and incorporated herein by reference.)
|
4(b)
|
Indenture between The Bank of New York Mellon Trust Company, N.A., as successor to Chase Manhattan Bank, N.A., as trustee, and Southern Union Company dated January 31, 1994. (Filed as Exhibit 4.1 to Southern Union's Current Report on Form 8-K dated February 15, 1994 and incorporated herein by reference.)
|
4(c)
|
Officers' Certificate dated January 31, 1994 setting forth the terms of the 7.60% Senior Debt Securities due 2024. (Filed as Exhibit 4.2 to Southern Union's Current Report on Form 8-K dated February 15, 1994 and incorporated herein by reference.)
|
4(d)
|
Officer's Certificate of Southern Union Company dated November 3, 1999 with respect to 8.25% Senior Notes due 2029. (Filed as Exhibit 99.1 to Southern Union's Current Report on Form 8-K filed on November 19, 1999 and incorporated herein by reference.)
|
4(e)
|
Form of Supplemental Indenture No. 1, dated June 11, 2003, between Southern Union Company and The Bank of New York Mellon Trust Company, N.A., as successor to JP Morgan Chase Bank (formerly the Chase Manhattan Bank, National Association). (Filed as Exhibit 4.5 to Southern Union’s Form 8-A/A dated June 20, 2003 and incorporated herein by reference.)
|
4(f)
|
Supplemental Indenture No. 2, dated February 11, 2005, between Southern Union Company and The Bank of New York Mellon Trust Company, N.A., as successor to JP Morgan Chase Bank, N.A. (f/n/a JP Morgan Chase Bank). (Filed as Exhibit 4.4 to Southern Union’s Form 8-A/A dated February 22, 2005 and incorporated herein by reference.)
|
4(g)
|
Subordinated Debt Securities Indenture between Southern Union Company and The Bank of New York Mellon Trust Company, N.A., as successor to JP Morgan Chase Bank (as successor to The Chase Manhattan Bank, N.A.), as Trustee. (Filed as Exhibit 4-G to Southern Union’s Registration Statement on Form S-3 (No. 33-58297) and incorporated herein by reference.)
|
4(h)
|
|
Second Supplemental Indenture, dated October 23, 2006, between Southern Union Company and The Bank of New York Mellon Trust Company, N.A., successor to JP Morgan Chase Bank, N.A., formerly known as JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank (National Association). (Filed as Exhibit 4.1 to Southern Union’s Form 8-K/A dated October 24, 2006 and incorporated herein by reference.)
|
4(i)
|
2006 Series A Junior Subordinated Notes Due November 1, 2066 dated October 23, 2006. (Filed as Exhibit 4.2 to Southern Unions Current Report on Form 8-K/A filed on October 24, 2006 and incorporated herein by reference.)
|
4(j)
|
Replacement Capital Covenant, dated as of October 23, 2006 by Southern Union Company, a Delaware corporation with its successors and assigns, in favor of and for the benefit of each Covered Debtor (as defined in the Covenant). (Filed as Exhibit 4.3 to Southern Union’s Current Report on Form 8-K/A filed on October 24, 2006 and incorporated herein by reference.)
|
10(a)
|
Settlement Agreement, dated as of March 5, 2009, among the Company, Sandell Asset Management Corp., Castlerigg Master Investment Ltd., Castlerigg International Limited and Castlerigg International Holdings Limited. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on March 5, 2009 and incorporated herein by reference.)
|
10(b)
|
First Amendment to Construction and Term Loan Agreement between Citrus Corp., as borrower, and Pipeline Funding Company, LLC, as lender and administrative agent, dated as of August 6, 2008. (Filed as Exhibit 10(a) to Southern Union Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008 and incorporated herein by reference.)
|
10(c)
|
Construction and Term Loan Agreement between Citrus Corp., as borrower, and Pipeline Funding Company, LLC, as lender and administrative agent, dated as of February 5, 2008. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on February 8, 2008 and incorporated herein by reference.)
|
10(d)
|
Amendment Number 1 to the Amended and Restated Credit Agreement between Trunkline LNG Holdings, LLC, as borrower, Panhandle Eastern Pipe Line Company, LP and CrossCountry Citrus, LLC, as guarantors, the financial institutions listed therein and Bayerische Hypo-Und Vereinsbank AG, New York Branch, as administrative agent, dated as of June 13, 2008. (Filed as Exhibit 10(d) to Southern Union Company’s Quarterly Report
on Form 10-Q for the quarter ended June 30, 2008 and incorporated herein by reference.)
|
10(e)
|
Amended and Restated Credit Agreement between Trunkline LNG Holdings, LLC, as borrower, Panhandle Eastern Pipeline Company, LP and CrossCountry Citrus, LLC, as guarantors, the financial institutions listed therein and Bayerische Hypo-Und Vereinsbank AG, New York Branch, as administrative agent, dated as of June 29, 2007. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on July 6, 2007
and incorporated herein by reference.)
|
10(f)
|
Credit Agreement between Trunkline LNG Holdings, LLC, as borrower, Panhandle Eastern Pipeline Company, LP and Trunkline LNG Company, LLC, as guarantors, the financial institutions listed therein and Hypo-Und Vereinsbank AG, New York Branch, as administrative agent, dated as of March 15, 2007. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on March 21, 2007 and incorporated herein by
reference.)
|
10(g)
|
Fifth Amended and Restated Revolving Credit Agreement, dated as of June 20, 2008, among the Company, as borrower, and the lenders party
thereto. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on June 25, 2008 and incorporated herein by reference.)
|
10(h)
|
Form of Indemnification Agreement between Southern Union Company and each of the Directors of Southern Union Company and certain senior executive officers. (Filed as Exhibit 10(g) to Southern Union’s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated herein by reference.)
|
10(i)
|
First Amendment to Indemnification Agreement, dated as of August 31, 2009, between Southern Union Company and Eric D. Herschmann (Filed as Exhibit 10.1 to Southern Union's Current Report on Form 8-K filed on August 31, 2009 and incorporated herein by reference.)
|
10(j)
|
Southern Union Company 1992 Long-Term Stock Incentive Plan, as Amended. (Filed as Exhibit 10(l) to Southern Union’s Annual Report on Form 10-K for the year ended June 30, 1998 and incorporated herein by reference.) *
|
10(k)
|
Southern Union Company Director's Deferred Compensation Plan. (Filed as Exhibit 10(g) to Southern Union's Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference.)
|
10(l)
|
First Amendment to Southern Union Company Director’s Deferred Compensation Plan, effective April 1, 2007. (Filed as Exhibit 10(h) to Southern Union Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 and incorporated herein by reference.)
|
10(m)
|
Southern Union Company Amended Supplemental Deferred Compensation Plan with Amendments. (Filed as Exhibit 4 to Southern Union’s Form S-8 filed May 27, 1999 and incorporated herein by reference.) *
|
10(n)
|
Separation Agreement and General Release Agreement between Thomas F. Karam and Southern Union Company dated November 8, 2005. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on November 8, 2005 and incorporated herein by reference.)
|
10(o)
|
Separation Agreement and General Release Agreement between John E. Brennan and Southern Union Company dated July 1, 2005. (Filed as Exhibit 10.1 to Southern Union’s Current Report on Form 8-K filed on July 5, 2005 and incorporated herein by reference.)
|
10(p)
|
Separation Agreement and General Release Agreement between David J. Kvapil and Southern Union Company dated July 1, 2005. (Filed as Exhibit 10.4 to Southern Union’s Current Report on Form 8-K filed on July 5, 2005 and incorporated herein by reference.)
|
10(q)
|
Second Amended and Restated Southern Union Company 2003 Stock and Incentive Plan. (Filed as Exhibit 4 to Form S-8, SEC File No. 333-138524, filed on November 8, 2006 and incorporated herein by reference.) *
|
10(r)
|
Third Amended and Restated Southern Union Company 2003 Stock and Incentive Plan. (Filed as Appendix I to Southern Union Company’s proxy statement on Schedule 14A filed on April 16, 2009 and incorporated herein by reference.) *
|
10(s)
|
Form of Long Term Incentive Award Agreement, dated December 28, 2006, between Southern Union Company and the undersigned. (Filed as Exhibit 99.1 to Southern Union’s Form 8-K dated January 3, 2007) and incorporated herein by reference.) *
|
10(t)
|
Employment Agreement between Southern Union Company and George L. Lindemann, dated as of August 28, 2008. (Filed as Exhibit 10(f) to Southern Union Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference.) *
|
10(u)
|
Employment Agreement between Southern Union Company and Eric D. Herschmann, dated as of August 28, 2008. (Filed as Exhibit 10(g) to Southern Union Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference.) *
|
10(v)
|
Employment Agreement between Southern Union Company and Robert O. Bond, dated as of August 28, 2008. (Filed as Exhibit 10(h) to Southern Union Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference.) *
|
10(w)
|
Employment Agreement between Southern Union Company and Monica M. Gaudiosi, dated as of August 28, 2008. (Filed as Exhibit 10(i) to Southern Union Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference.) *
|
10(x)
|
Employment Agreement between Southern Union Company and Richard N. Marshall, dated as of August 28, 2008. (Filed as Exhibit 10(j) to Southern Union Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference.) *
|
10(y)
|
Form of Change in Control Severance Agreement, between Southern Union Company and certain Executives. (Filed as Exhibit 10.2 to Southern Union’s Current Report on Form 8-K filed on August 28, 2008 and incorporated herein by reference.) *
|
14
|
Code of Ethics and Business Conduct. (Filed as Exhibit 14 to Southern Union’s Annual Report on Form 10-K filed on March 16, 2006 and incorporated herein by reference.)
|
|
31.1
|
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.
|
31.2
|
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.
|
|
|
SOUTHERN UNION COMPANY
|
|
|
(Registrant)
|
Date: November 5, 2009
|
By
/s/
GEORGE E. ALDRICH
|
George
E. Aldrich
Senior Vice President and Controller
(authorized officer and principal
accounting officer)
|
|
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