Good morning, and welcome to The Laclede Group's Second Quarter 2013 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Scott Dudley. Please go ahead.

Good morning, and welcome to our second quarter earnings call. We issued a news release this morning announcing our financial results, and you may access the release on our website at thelacledegroup.com under the News Releases tab. Today's call is scheduled for 1 hour and will include a discussion of our results and a question-and-answer session. Prior to opening up the call for questions, the operator will provide instructions on how to join the queue to ask a question. On the call are Suzanne Sitherwood, President and CEO of The Laclede Group; and Mark Waltermire, Executive Vice President and Chief Financial Officer. Also in the room with us are Steve Lindsey, Executive Vice President and Chief Operating Officer of Distribution Operations; Mike Spotanski, Senior Vice President and Chief Integration and Innovation Officer; and Steve Rasche, Senior Vice President of Finance and Accounting. Before we begin, let me cover our Safe Harbor statement and use of non-GAAP earnings measures. Today's earnings conference call, including responses during the Q&A session, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward-looking statements speak only as of today, and we assume no duty to update them. Although our forward-looking statements are based on reasonable assumptions, various uncertainties and risk factors may cause future performance or results to be different than those anticipated. A description of the uncertainties and risk factors can be found in our annual report on Form 10-K and our quarterly report on Form 10-Q, which will be filed later today. In our comments, we will be discussing finance results in terms of net economic earnings, a non-GAAP measure used by management when evaluating the company's performance. Net economic earnings exclude from net income the after-tax impacts of fair value accounting and timing adjustments associated with energy-related transactions, as well as costs related to our pending acquisition. A full explanation of the adjustments and a reconciliation of net income to net economic earnings are contained in the news release we issued this morning. So with that, I will turn the call over to Suzanne.

Thank you, Scott, and let me add my welcome to those who have joined us this morning. Earlier today, we announced improved operating results for our fiscal year 2013 second quarter. We achieved growth in earnings, both on a net income and net economic earnings basis. The gas utility drove the improvement and gas marketing continued profitable performance, but we also recognized a difficult market persist and earnings are trending down. While achieving the solid financial performance, we continued onward with our strategic growth initiatives. So it's important to state our pending acquisition of MGE remains on track. I'll have more to say on this in a moment, but first let me hand it over to Mark to review our second quarter results.

Thank you, Suzanne, and good morning, everyone. I'll go ahead and jump right into our discussion of earnings and then provide an update on our balance sheet, cash flow and capital spending. And finally, I'll conclude with a brief update on our regulatory matters and financing of our acquisition. In our news release this morning, The Laclede Group announced second quarter net income of $30.2 million, up from $29.7 million last year. Excluding MGE-related acquisition costs and routine fair value accounting adjustments, we posted consolidated net economic earnings of $32.5 million or $1.44 per diluted share, which is up 14% from $28.4 million or $1.27 per share last year. These improved earnings were driven largely by higher net income from our Gas Utility segment. During the second quarter, pretax acquisition costs related to our pending acquisition of MGE totaled $2.7 million, which impacted net income by $0.07 a share. For the first 6 months of the year, total pretax acquisition costs were $6.3 million or $0.17 per share. Exclusive of the direct cost associated with financing the deal, we expect to incur an additional $12 million to $17 million in acquisition-related costs up through the time of closing on the transaction. These costs are all reported in our Other segment. Looking specifically at Gas Utility results, net economic earnings for the quarter increased to $30.2 million from $25.8 million, due to improved weather, lower expenses and higher infrastructure replacement surcharge revenues. Let me cover each of those drivers in order. Weather in this year's second quarter was much colder and closer to normal in comparison to record warm temperatures experienced a year ago. This more favorable weather resulted in increased sales volumes and higher sales margins at the Gas Utility. On the expense side, we achieved lower operating expenses, mainly,…

Thank you, Mark. Now I want to discuss our growth initiatives, including the MGE acquisition. I'm proud to share we continue to make excellent progress. And just as a reminder, we are pursuing growth initiatives, 4 of them: one, developing and investing in emerging technology; two, investing in infrastructure; three, acquiring gas companies; and, four, leveraging our competencies. With regard to investing in emerging technologies, as you may recall, last quarter, we announced the launch of initiative to invest in compressed natural gas fueling solutions. That solution is Spire. We are teaming with Siemens who brings expertise and design build and engineering. Siemens compliments our 30 years of NGV experience and our more than 150 years of natural gas experience. Our business model targets the needs of regional and national return to base fleet. However, our first project is local with the announcement of the new NGV fueling solution at Lambert-St. Louis International Airport. This station will serve both commercial fleets and the public. Laclede will own, operate, maintain and provide the fuel and Siemens will design and build the station and provide engineering support. Regarding organic growth, as noted and as Mark shared, we've invested $53 million capital in the first half of 2013. About $30 million is ISRS, which is recoverable through the tracker. There will be additional CapEx in the second half of 2013 for completion of the 3-year IT upgrade project referred to as newBLUE and distribution pipeline replacement to improve reliability and efficiency. Lastly, I'm pleased to say the MGE acquisition is on track. I'm confident in our ability to obtain approval, to secure financing and successfully integrate MGE. We continue to expect the transaction -- or we continue to expect to close the transaction by the end of fiscal year 2013, and the regulatory…

[Operator Instructions] Our first question comes from Vedula Murti of CDP Capital.

Let's see. I came in just a little bit after the opening remarks started, and when Suzanne was going through her opening remarks she mentioned something about some earnings pressure, declining earnings, so I just want to make sure I understand what context that was in relation to whether that was for some of the non-regulated operations or -- and also to what degree or magnitude was being communicated.

I was referencing LER on the Gas Marketing segment, and then, Mark, when he was going through his remarks, he gave you a little bit more color as to what was driving that, but that is in the gas marketing area.

Could you give us a sense of any type of magnitude that we should be thinking about?

That non-regulated side of the business hasn't really been immune to the marketing pressures that others have seen. And as we look at it right now, we're probably looking at probably the low end of where we've been the last couple years which I think if you look at that part of the business, that puts your -- in the $0.40-ish range where they finished a couple of years ago is what we would expect at this point.

And just thinking about magnitude here, I would say, compared to, if you can remind me of what that number was for last year's fiscal year.

$0.55.

Okay. Secondarily, in terms of the financing, do you have an SEC-approved shelf for the equity component of the financing?

Yes. Vedula, it's Steve Rasche. Yes, we do. Actually, we have an active shelter group right now that would cover the equity component.

Okay. And in the past, I think when we've spoken, or whatever, you've indicated that you were hoping to achieve certain milestones with regards to regulatory approvals prior to commencing the financing. And it's been my understanding that you would seek to do that prior to the full completion of the merger, and this would not be something where the bridge would be exercised in totality and then we'd wait until after the merger close. So if you can just kind of refresh me on as to how you are thinking about this.

Yes. Great question. And you are right, the ultimate securing of the permit of financing is really predicated on 3 -- via 3 requirements. One is securing all of the required SEC documentation and we're well along the way and on track from that perspective. And while we have an active shelf, we would certainly have to file up a prospectus supplement that would have significant additional information. That's pretty standard fare for a permanent financing of this magnitude. Certainly, another key component is the capital markets in both the equity and the debt markets seem to be fairly strong right now, so I think we, at least right now, can tick the box on that. And then thirdly, is regulatory approval. And so we continue to have discussions with the regulators in both Missouri and Massachusetts because we're certainly moving both toward a successful completion during this fiscal year which is still our target on both transactions and we continue to have those discussions. So from that standpoint, that continues at pace and it's not unusual in rate regulated industry acquisition such as ours that the regulatory approval process is usually the pacing item that most companies look to at some point in the transaction before they decide to go up for a permanent financing. You are right in your comment and assessment that there's a history in the industry and in the market of going after market for permanent financing in advance of getting final approval of the transaction, but every company makes those decisions and contemplation of where they stand in the regulatory approval process and discussions. And for us that would largely be the discussions with the Missouri regulators whom we know well but they have to do their due diligence, and we have to give them a level of comfort in all the areas that they are concerned about, and those discussions continue at pace.

To go back to the first point though, in terms of the additional incremental information and everything like that. When do you anticipate that, that would be done because that implied to me that if you wanted to access the equity markets today because you like the market conditions and everything like that, in fact, you would not be able to do so?

No, I didn't say that. What I said is that the SEC has very specific requirements on information that is required for a deal, especially one of this size and magnitude, and that those requirements were well known as we approached and as we announced the deal, and we've been working to get those completed and at this juncture we have no concerns. In the purchase and sale agreement itself was a deadline of March 31 for the 3 years historic financial statements for the 2 LDCs and we have received that information, and it's under review right now. So that was the piece and again I think we have a high level of comfort that from an information standpoint we have everything on track.

One last question. In terms of given where the balance sheet is and kind of what you're targeting, would it be reasonable to assume then on did debt equity mix that the equity component would probably be somewhere around $400 million give or take?

I let you run the numbers on how you get to the answer. I get -- we've been fairly specific that we would expect to exit the transaction with a more balanced capital structure. And as Mark mentioned in his prepared remarks that would mean that we would lean more heavily into the Debt Capital Markets for this permanent financing race.

[Operator Instructions] Our next question comes from Spencer Joyce of Hilliard Lyons.

Just a couple of quick questions here. First, I wanted to talk -- touch on the expenses at the utility. It looks like a pretty significant decline year-over-year, they're almost $3 million. I know you mentioned a few payroll-type items that contributed to that decline. How much of that also may have been capitalizing some of the IT expenses kind of as we had discussed there?

Spencer, this is Steve. For the quarter, the capitalized expenses really didn't amount to much. It was an immaterial part of the difference between this year and last. The biggest single mover, from a positive perspective, was the employee benefit costs, as Mark mentioned in his prepared remarks. And we have to go back a year ago, and a year ago we had some non-recurring pension OPEB and employee benefit costs that occurred in our fiscal second quarter of 2012 but did not repeat. And it was really tied to a number of retirements and transitions that happened during that quarter. And again, we didn't see that kind of movement this year.

Second other small question, can you all talk a little bit about any, either strengthening or weakening, you may have seen at MGE or just in general, how operations there have gone since you announced the deal. I think didn't they file there for ISRS or possibly a rate case there, just, of any, color on operations there sort of ongoing.

Spencer, MGE has not issued any financial statements that I could point you to, although, obviously, as I mentioned in the previous callers' questions, there will be a lot of information that will flow out as we go to permanent financing. MGE clearly has benefited from the weather that has benefited us and other LDCs during this year. We saw 80-degree weather in March of last year. We didn't see anything anywhere near that this year. I think we're reverting more to the mean and we saw that in Kansas City. Kansas City also had a number of snowstorms during the quarter. So I suspect that from a weather-implication standpoint that they will have benefited greatly. You are right that MGE did file for its latest ISRS and that is in the process of being reviewed by the Public Service Commission currently.

The next question comes from Brendan Naeve of Levin Capital.

It's actually Neil Stein from Levin Capital. I had a couple of questions. Your first -- can you just update us on where you stand in Missouri? I haven't been updated on this case. Have you filed testimony? What are you proposing to do with the sharing of synergies?

We have filed our application certainly and it's under review at the commission, it's the staff itself and the various interveners. At this point in time, that interveners and the staff have not filed any positions with us. We're still responding to DRs and actively engaged in that dialogue with them. I think, broadly speaking, the exchange has been positive and constructive between the parties and at this point, like Steve said earlier, we're tracking along kind of the we way we would have expected at this point in time, but really can't comment yet on what the final position will be until we get something in writing from them.

So in your application you haven't made any proposal with regard to what you do with the synergies from this deal?

No. We've been -- in our application and our testimony, we did not, we certainly also did not ask for a recovery of transaction costs either in parallel with that. So we're trying to make this a very straightforward process. 18 months ago ET bought Southern Union and these properties. We went in our with our filing and then said we would expect the terms and conditions that they had at that point in time, that was acceptable to us and we're trying to, given this was approved 18 months ago, get it under the same type terms.

Let's -- and have the interveners filed any testimony?

No, there's been nothing filed yet from anybody on the other side.

And I guess to the extent you're not proposing anything with synergy sharing, is -- I guess by default your position is you want to keep all the synergies?

Well, yes. The way it works is you capture the synergies and then in your next rate case you give them back. So over a period of time, if you look at the -- how we file, and the timing of the MGE filing, et cetera, every time we file a rate case. We're in right now with, what, a rate case of Laclede Gas, MGE will be filing one certainly coming up so in the fall, by -- almost by definition under the ISRS statute. So over time, as we accumulate and achieve these synergies, we will be having them for a while and then building them back into the rate structure.

And I just have one follow-up point to Mark. As you know, initially, which is why we think we will be neutral year 1 and accretive year 2 and 3 is we have all of these transaction costs upfront. So out of the gate that's where we start and then we start working on creating more efficiency, but at the same time making sure we got our eyes focused on faith in the reliability of our system, as well as our customer service metrics because we will not fail on those.

And then, I mean is it conceivable since you would, I guess, propose to keep the synergies until the next rate case that you would, I guess, prior to that next rate case, feel to earn in excess of your allowed return?

Well, again, in early years here, we're going to have cost to achieve that will offset any synergies we get which was back to Suzanne's point that we're kind of communicating to everybody or we have communicated, we're going to be neutral there our first year earnings and then accretive thereafter but...

And, as you may know this, but the way that ISRS stature works, we have to file a rate case at least every 3 years, and so there is a showing. So when you look at that 3-year period and I've shared with you we'll be "neutral" year 1 and accretive year 2 and 3 and we are in essence back in for a rate case. So those -- and we've make quarterly filings with the commissions and so forth, so they watch that and we watch it as well. I'm going to tell you -- I'm not sure -- not everybody understand that we have to file a case. So...

And then the other question I had is at Laclede Gas, I guess, you followed with a equity ratio -- proposing an equity ratio of 56.7%, but then I guess with this acquisition financing you got to take your consolidated equity ratio down to 50%. So I'm wondering, I mean, ultimately won't this get trued up so when a final decision is made around that time you'll be at 50% equity. How do you expect that to be dealt with, I guess?

Well, certainly, the timing of the 2 cases stand alone and a different timing and pacing. The rate case we did file for that. It will be updated through the March 31 period for cap structure is the current plan. And depending on the timing on when we get approval of the commission for the acquisition will impact that observation that you made. What I can tell you is, regardless of what we have if we can come back in the next rate case, everything resets. So 50-50, it's a matter of the timing on when these things come to conclusion. That's probably the best way I can answer that question for you.

I guess, how -- I'm trying to think exactly what would cause the final decision here to be based on a trued up equity ratio of 50%. How soon could you or how late could you issue equity and still have that happen? Or how soon could you issue equity and not have that happen?

Neil, this is Steve Rasche. To answer your last question, the transaction is supported by a bridge facility that's fully syndicated, so we don't have the absolute need to issue any equity before the transaction would close. But as you know, bridge financing is financing that you -- isn't structured to be permanent so we would definitely out in the market post close, if that were the right answer based upon the facts and circumstances at that time that we reached that conclusion. From a capital structure standpoint and especially in the state of Missouri, Missouri's long history in general rate cases is that there's a cadence and a process to the general rate case. Generally, there is an agreed-upon true-up period, at which point, capital structure is fixed and under a normal schedule filing in December that would be a March 31 true-up period, so at March 31 our consolidated cap structure because Missouri always looks to the parent capital structure would be 57.9% equity in the long-term capital structure and no short-term debt. So that's the cadence and process that Missouri normally goes through when they look at a rate case. And certainly, we expect and plan that, that's how it'll work out. I can't, as we sit here today, think of a scenario where Missouri would reach forward to a capital structure that isn't yet in the books, so to speak, because a lot of things can happen in the markets that would change that targeted capital structure that we have, as we actually decide and go to market.

Got it. Okay. So your position would be to the extent at March 31 you had 56.7% based on past, present and it went into -- they're not going to do any other sort of hypothetical adjustment even though you're saying you are going to be at 50% probably in a few months?

That is definitely the precedent again. And again I would say that Missouri looks to the consolidated group capital structure not the Laclede Gas capital structure and that number on an equity side would be 57.9%.

Missouri is pretty much a historical test case -- test period type.

Okay. So there will also be the consolidated capital structure that does go to 50% post the acquisition financing, at least that's the plan today? Right?

Yes, sir.

The next question comes from Selman Akyol of Stifel, Nicolaus. Selman Akyol - Stifel, Nicolaus & Co., Inc., Research Division: Two quick questions. First of all, going back to the refueling stations with Siemens. Has there been any additional interest struck up? Has anyone else reached out to you? Have you got any further development plans since you've announced that you're kind of headed out there for a little while now?

Thank you for the question, and actually, I have Mike Spotanski here who is in charge so I'm going to say a couple things and then let him add any color if he'd like to. Basically, between Siemens and the Laclede team, we've got other interested parties in the funnel, so to speak, in what I call the sales cycle and so more to come on that. Of course, we don't want to talk about those particular customers and contracts until we get those deals inked. But -- so with that if Mike wants to add anything...

I think, Selman, we've seen -- I think we've seen a lot of interest in regional and national trucking firms primarily, and transit are a couple of the key markets that we're focused on right now. But again as Suzanne said, nothing specific at this point that we can talk about. Selman Akyol - Stifel, Nicolaus & Co., Inc., Research Division: Fair enough. And then if I could just one follow-up question. When you talk about the sales cycle can you, sort of, set an expectation? Is the sales cycle a year? Is it 18 month? Is it 6 months?

Selman, it depends upon the customer. These stations are very customized, depending upon obviously number of vehicles, volumes, fuel cycle requirements and a number of other factors. So it's -- there's a process of learning what the customer's needs are, exploring what the options are, going through the engineering to price it and become the most -- determine the most efficient and effective overall station design. So I guess where I'm at is it can vary depending upon the customer and on their readiness to move forward. Early on in this process, the discussion was more around is CNG a viable alternative and that discussion has changed in large part to is it right for us? So again the cycle would vary depending on the customer and their readiness.

[Operator Instructions] The next question comes from Tim Winter of the Gabelli & Company. Timothy M. Winter - Gabelli & Company, Inc.: You guys talked are -- talked a little bit about a declining earnings trend in LER, though it's still positive. Are there any evolution in how you think about LER, where it fits in with the company? And what is your sort of long-term outlook there?

Yes, Tim. This is Mark. LER, we are -- obviously they are not unaffected like the rest of the marketing people that are out there, like I mentioned before. And certainly we are looking at other ways to drive value from that organization however it is. The key is that they're able to find value and settle assets that are out there and where will we best position them to be able to do that? Certainly, in the immediate term, we know that they're -- what we talked about before, our customers are power generators and we're looking at producers service type opportunities to continue to build that group, the acquisition of MGE will more than likely offer some opportunity to do -- learn some new assets and do some marketing in another geographic area. But overall, it's about how do we look at the entirety of the assets we have available to us and how we drive value in that way. Certainty, we look at that all the time and even more so now in this period of time.

This concludes our question-and-answer session. I would now like to turn the conference back over to Scott Dudley for any closing remarks.

Okay. Thank you. And thank you all for joining us today. If you have any follow-up, feel free to give us a call today. Thanks so much.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.