Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
Schedule 1 – Schedule of Assets (Held at End of Year)
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Consent of Auditors
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Certain
Supplemental Schedules required by the rules and regulations of the Department of Labor are omitted because of the absence of conditions under which they are required.
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401(k) Investment Review Committee
Laclede Gas Company
Wage Deferral Savings Plan
St. Louis, Missouri
We have audited the accompanying statements of net assets available for benefits of the Laclede Gas
Company Wage Deferral Savings Plan as of July 31, 2014 and 2013, and the related statements of
changes in net assets available for benefits for the years then ended. These financial statements are the
responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain assurance
about whether the financial statements are free of material misstatement. Our audits also included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management and evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In
our opinion, the financial statements referred to above present fairly, in all material respects, the net
assets available for benefits of the Laclede Gas Company Wage Deferral Savings Plan as of July 31, 2014
and 2013, and the changes in its net assets available for benefits for the years then ended in conformity
with accounting principles generally accepted in the United States of America.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as
a whole. The accompanying schedule of assets (held at end of year) is not a required part of the basic
financial statements,
but is supplementary information required by the Department of Labor’s Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974.
The supplemental information is the responsibility of the Plan’s management. Such information has been
subjected to the auditing procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a
Basis of Accounting – The accompanying financial statements of the Laclede Gas Company Wage Deferral Savings Plan (“The Plan”) have been prepared on the accrual basis.
Fair Value of Plan Assets – Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level
1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
A description of the valuation methodologies used for assets measured at fair value on a recurring
basis and recognized in the accompanying statements of net assets available for benefits, as well as the general classification of such assets pursuant to the valuation hierarchy is included in Note 3.
Investment Valuation and Income Recognition – The Plan’s investments in common stock and mutual funds are stated at the market value of the underlying assets, which are determined by quoted market prices. Common collective trusts are valued based on information reported by the trust based on its underlying assets and audited financial statements. Purchases and sales of securities are recorded on a trade-date basis. Interest and dividend income are recorded on the accrual basis.
Use of Estimates – The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America requires the Plan sponsor to make estimates and assumptions that affect the reported amounts of net assets and changes in net assets and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
The investment funds consist of various securities including mutual funds, common and collective trusts and company stock in the Laclede Group, Inc., the parent company of Laclede Gas Company. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes
could materially affect the amounts reported in the statements of net assets available for benefits.
Administrative Expenses – The administrative cost of the Plan is paid by Laclede Gas Company (the “Company”), the Plan sponsor. Participants bear the cost of some individual transactions such as loan fees, dividend pass-through checks, overnight check fees, and purchases of Laclede Group, Inc. stock.
Payment of Benefits – Benefits are recorded when paid. There were no distributions payable to Plan participants as of July 31, 2014 and 2013.
Presentation/
Reclassifications - Certain reclassifications have been made to the prior period financial statements to conform to the current period financial statement presentation. These reclassifications had no effect on Net Assets Available for Benefits.
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Review of Subsequent Events – Subsequent events have been evaluated through January 27, 2015, which is the date the financial statements were issued.
2.
INFORMATION
REGARDING THE PLAN
The following description pertains to the Plan as in effect during the years ended July 31, 2014 and 2013 and is provided for informational purposes only. In case of conflict or discrepancy with the Plan text, the Plan text governs.
General - The Plan is a defined contribution plan which covers collectively bargained employees of the Company, provided they meet the prescribed eligibility requirements. Assets of the plan are maintained in trust with Fidelity Management Trust Company, the Plan trustee. The Company is the Plan administrator. The Plan is subject to the provisions of the Employee Retirement Income Security Act of
1974 (“ERISA”).
Eligibility – To be eligible to participate in the Plan, an employee must be a member of a collective bargaining unit, complete 90 days of service and attain the age of 21.
Contributions – The Plan provides for voluntary employee contributions subject to certain Internal Revenue Code (“IRC”) limitations, up to 75% of the participants compensation. Participants who attain age 50 by each December 31 are permitted to make additional contributions (catch-up contributions) as permitted by the IRC. Employee contributions are matched 100% up to 5% of compensation in accordance with the collective bargaining agreement. Participants may change the amount of their contributions frequently, usually effective within
one or two payroll cycles. Employees can make Roth 401(k) contributions to the Plan. As of January 2, 2013, newly hired employees are auto-enrolled in the Plan at a deferral rate of 5%, along with the 5% matching employer contribution, effective on the first pay period after they become eligible, unless they decline to defer or choose an alternative deferral amount in advance.
Vesting – Participant and Company matching contributions are immediately 100% vested.
Investment Options – Contributions to the Plan are invested in one or more investment funds at the option of the employee. A minimum of 1% of the employee’s contribution must be directed into each fund selected.
Employee
Stock Ownership Plan – The Laclede Group, Inc. Employee Stock Ownership Plan (“ESOP”) constitutes a portion of the Plan, not a separate plan. Employee allocated contributions and employer matching contributions are invested directly into the ESOP. A participant may elect to receive dividends on the ESOP shares paid in cash directly to him/her. The election to receive cash dividends shall remain in effect until changed by the participant. Dividends not paid in cash are reinvested under the terms of the Plan.
Participant Accounts – In addition to the employee and Company matching contributions, each participant’s account is credited with an allocation of Plan earnings or charged with an allocation of the Plan losses, based on participant account balances, as defined in the Plan document.
Notes
Receivable from Participants – Participants may borrow against their individual account balances a minimum of $500 up to 50% of their account balance, as long as the loan amount does not exceed $50,000, less the highest outstanding loan balance over the last twelve months, if any. Loans are taken from investment accounts in the same proportion as the investment funds bear to each other. The maximum repayment period is 234 weeks, except for primary residence loans, which have a maximum repayment period of 494 weeks. Loans are secured by the balance in the participant’s account and bear interest at a rate comparable to the rate charged by commercial lenders for similar loans. Participant loans are valued at the outstanding loan balance, plus accrued interest. Delinquent participant loans are reclassified as distributions upon the terms of the Plan document. Principal and interest are repaid in level payments through payroll deductions. Interest
rates on participant loans ranged from 4.25% to 9.5% at July 31, 2014.
Payment of Benefits- Distributions are generally made to participants upon separation from service due to retirement, termination of employment, death or total and permanent disability. Participants aged 59-1/2 years or older may elect a partial or total distribution of their account. Distributions are normally made in single lump-sum cash payments; however, participants in the Laclede Group, Inc. ESOP may elect to receive their distribution in the form of shares, with the value of fractional shares distributed in cash. Active employees who suffer a financial hardship and cannot obtain funds from other resources, including a loan from the Plan, may apply for a hardship
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withdrawal.
Hardship withdrawals are subject to approval by the Plan administrator and are limited to the participant’s elective deferrals, plus related earnings as of December 31, 1988, less amounts of previous hardship distributions. Employees making hardship withdrawals may not contribute to the Plan until the first payroll date following the expiration of a six month period after receipt of the hardship withdrawal.
Transfers – The accounts for those Participants in the Plan who remain employees of the Company, but who are no longer covered by a collective bargaining agreement, are transferred to the Laclede Gas Company Salary Deferral Savings Plan. Similarly, the accounts of those participants not covered by a collective bargaining agreement, but who later become covered by such an agreement, are transferred to the applicable Company defined contribution plan.
Such transfers are reflected as a net amount in the included Statements of Changes in Net Assets.
3.
INVESTMENTS
The following table presents the fair values of investments that represent 5% or more of the Plan’s net assets:
Laclede Group, Inc. - ESOP (also known as Laclede Group, Inc. Common Stock Fund) (937,104.628 and 974,045.415 shares, respectively)
$
44,025,175
$
44,669,724
BlackRock
Equity Index Fund - H (500,505.080 and 572,448.305 units, respectively)
35,410,885
34,644,571
BlackRock Russell 2000 Index Fund - K (558,017.284
and 640,853.834 units, respectively)
12,797,066
13,522,016
BlackRock Money Market Fund W (10,257,046.070 and 11,015,853.390 units, respectively)
10,257,046
11,015,853
BlackRock
U. S. Debt Index Fund - K (240,605.137 and 264,947.858 units, respectively) *
7,537,052
7,977,580
* Current year investment below 5% of total holdings, but included for comparative purposes.
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During
2014 and 2013, the Plan's investments (including gains and losses on investments bought, sold, as well as held during the year) appreciated by $11,099,904 and $19,008,583, respectively, as follows:
American Funds® EuroPacific Growth Fund® - Class R5
300,347
284,265
Delaware
Small Cap Value Fund Institutional Class
100,031
106,186
Total net appreciation
$
11,099,904
$
19,008,583
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The
Plan holds investments in a stable value fund, which consists of debt and equity securities wrapped by fully benefit-responsive investment contracts. The fully benefit-responsive investment contracts enable the fund to realize a specific known value for the assets if it needs to liquidate them for benefit payments. The fully benefit-responsive investment contracts are issued by banks and insurance companies and serve to preserve the value of the fund’s investments by mitigating fluctuations in the market value of the associated underlying investments. These investment contracts are fully benefit-responsive in that they allow for participant withdrawals at contract value for benefit-responsive requirements. Contract value represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses. The contract value of these contracts was $1,411,050 as of July 31, 2014 and
$832,386 as of July 31, 2013. There are no reserves against the contract value for credit risk of the contract issuer or otherwise. The average yield was 1.55% and 1.74% at July 31, 2014 and 2013, respectively. The average crediting interest rate was 1.25% and 1.44% at July 31, 2014 and 2013, respectively. The crediting interest rate is based on a formula agreed upon with the issuer, but may not be less than zero. Such interest rates are reviewed by the investment manager on a quarterly basis for resetting. Certain events, such as layoffs or early retirement incentives, may limit the ability of participants to access their investments at contract value. The likelihood of such events limiting the ability of the Plan to transact
at contract value is not probable. The Plan is required to present in the Statement of Net Assets Available for Benefits the fair value of fully benefit-responsive investment contracts plus an adjustment of the fair value to contract value.
Recurring Measurements - The table below presents the fair value measurements of assets recognized in the accompanying Statements of Net Assets Available for Benefits measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at July 31, 2014 and 2013.
Where quoted market prices are available in an active market, securities are
classified within Level 1 of the valuation hierarchy. Level 1 securities include mutual funds and Laclede Group, Inc. common stock (held in the ESOP). If quoted market prices are not available, the fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Level 2 securities include investments in common and collective trusts (CCTs). In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within level 3 of the hierarchy.
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Fair
Value Measurements Using
Quoted Prices in Active Markets for Identical Assets
The Plan obtained its latest determination letter, dated March 4 2014, in which the Internal Revenue Service stated that the Plan and related trust, as then designed, were in compliance with the applicable requirements of the Internal Revenue Code and therefore not subject to tax. The Plan has been amended since receiving the determination letter, however the Plan Administrator believes that the Plan and related trust are currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. The Plan is no longer subject to U.S. federal tax examinations by tax authorities for years before 2010.
The Plan will be filing for an updated determination letter with the Internal Revenue Service. Accompanying the determination
letter application will be a Voluntary Correction Program (VCP) filing due to late adoption of some Plan amendments. The Plan Administrator believes the operations of the Plan and related trust were not impacted even though the Plan document had not been timely updated.
5.
PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions set forth in ERISA.
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6.
RELATED
PARTIES
At July 31, 2014 and 2013, the Plan held 937,104.628 and 974,045.415 shares, respectively, of common stock of The Laclede Group, Inc., the parent company of the sponsoring employer, with a market basis of $44,025,175 and $44,669,724, respectively. During the years ended July 31, 2014 and 2013, the Plan received dividend income of $1,386,113 and $1,418,558, respectively.