SECURITIES
AND EXCHANGE COMMISSION


Washington,
D. C. 20549




FORM
10-Q




[
      X ]
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF
      1934 For the Quarter Ended March 31,
2008


OR


[    
      ]
            TRANSITION
      REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF
      1934




Commission
      File Number
            Exact
      Name of Registrant as Specified in its Charter and Principal Office
      Address and Telephone Number
            State
      of Incorporation
            I.R.S.
              Employer
      Identification Number1-16681
            The
      Laclede Group, Inc.
              720
      Olive Street
              St.
      Louis, MO 63101
              314-342-0500
            Missouri
            74-29765041-1822
            Laclede
      Gas Company
              720
      Olive Street
              St.
      Louis, MO 63101
              314-342-0500
            Missouri
            43-0368139





Indicate
by check mark whether the registrants (1) have filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such report) and (2) have been subject to such filing requirements for
the past 90 days.





Yes
            [
      X ]
            No
            [    
      ]





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the
Exchange Act):




The
      Laclede Group, Inc.:
            Large
      accelerated filer
            [    
      ]
            Accelerated
      filer
            [
      X ]
            Non-accelerated
      filer
            [    
      ]Laclede
      Gas Company:
            Large
      accelerated filer
            [    
      ]
            Accelerated
      filer
            [    
      ]
            Non-accelerated
      filer
            [
      X ]




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act):





The Laclede Group,
      Inc.:
            Yes
            [    
      ]
            No
            [
      X ]Laclede Gas
      Company:
            Yes
            [    
      ]
            No
            [
      X ]




Indicate
the number of shares outstanding of each of the issuer’s classes of common stock
as of the latest practicable date:




Shares
      Outstanding AtRegistrant
            Description of Common
      Stock
            April 25,
      2008The Laclede Group,
      Inc.:
            Common
      Stock ($1.00 Par Value)
            21,823,168Laclede Gas
      Company:
            Common
      Stock ($1.00 Par Value)
            10,365  *


*
100% owned by The Laclede Group, Inc.




























TABLE
      OF CONTENTS
            Page
      No.PART
      1.  FINANCIAL INFORMATIONItem
      1
            Financial
      StatementsThe
      Laclede Group, Inc.:Statements
      of Consolidated Income
            4Statements
      of Consolidated Comprehensive Income
            5Consolidated
      Balance Sheets
            6-7Statements
      of Consolidated Cash Flows
            8Notes
      to Consolidated Financial Statements
            9-22Laclede
      Gas Company:Statements
      of Income
            Ex.
      99.1, p. 1Statements
      of Comprehensive Income
            Ex.
      99.1, p. 2Balance
      Sheets
            Ex.
      99.1, p. 3-4Statements
      of Cash Flows
            Ex.
      99.1, p. 5Notes
      to Financial Statements
            Ex.
      99.1, p. 6-12Item
      2
            Management’s
      Discussion and Analysis of Financial Condition andResults
      of Operations (The Laclede Group, Inc.)
            23-34Management’s
      Discussion and Analysis of Financial Condition andResults
      of Operations (Laclede Gas Company)
            Ex.
      99.1, p. 13-21Item
      3
            Quantitative
      and Qualitative Disclosures About Market Risk
            35Item
      4
            Controls
      and Procedures
            35PART
      II.  OTHER INFORMATIONItem
      1
            Legal
      Proceedings
            36Item
      2
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            36Item
      4
            Submission
      of Matters to a Vote of Security Holders
            36Item
      6
            Exhibits
            36SIGNATURES
      – The Laclede Group, Inc.
            37SIGNATURES
      – Laclede Gas Company
            38INDEX
      TO EXHIBITS
            39










FILING
FORMAT


This
Quarterly Report on Form 10-Q is a combined report being filed by two separate
registrants: The Laclede Group, Inc. (Laclede Group or the Company) and Laclede
Gas Company (Laclede Gas or the Utility).











2





PART
      I. FINANCIAL INFORMATIONThe
      interim financial statements included herein have been prepared by the
      Company, without audit, pursuant to the rules and regulations of the
      Securities and Exchange Commission. These financial statements should be
      read in conjunction with the financial statements and the notes thereto
      included in the Company’s Form 10-K for the fiscal year ended
      September 30, 2007.
















3


Item
1. Financial Statements




THE
LACLEDE GROUP, INC.


STATEMENTS
OF CONSOLIDATED INCOME


(UNAUDITED)




Three
      Months Ended
            
            
            
            Six
      Months EndedMarch
      31,
            
            
            
            March
      31,(Thousands,
      Except Per Share Amounts)
            
            
            2008
            
            
            2007
            
            
            
            
            2008
            
            
            2007Operating
      Revenues:Regulated
      Gas Distribution
            
            $
            507,089
            
            $
            493,593
            
            
            
            $
            827,981
            
            $
            842,081Non-Regulated
      Gas Marketing
            
            
            239,387
            
            
            175,850
            
            
            
            
            421,185
            
            
            329,317Other
            
            
            1,230
            
            
            1,257
            
            
            
            
            2,530
            
            
            2,434Total
      Operating Revenues
            
            
            747,706
            
            
            670,700
            
            
            
            
            1,251,696
            
            
            1,173,832Operating
      Expenses:RegulatedNatural
      and propane gas
            
            
            377,526
            
            
            373,576
            
            
            
            
            600,367
            
            
            625,099Other
      operation expenses
            
            
            38,989
            
            
            36,816
            
            
            
            
            74,202
            
            
            70,496Maintenance
            
            
            5,814
            
            
            6,060
            
            
            
            
            12,049
            
            
            11,658Depreciation
      and amortization
            
            
            8,763
            
            
            8,568
            
            
            
            
            17,476
            
            
            17,065Taxes,
      other than income taxes
            
            
            29,255
            
            
            28,348
            
            
            
            
            45,936
            
            
            47,107Total
      Regulated Operating Expenses
            
            
            460,347
            
            
            453,368
            
            
            
            
            750,030
            
            
            771,425Non-Regulated
      Gas Marketing
            
            
            234,021
            
            
            170,881
            
            
            
            
            406,893
            
            
            318,549Other
            
            
            1,455
            
            
            1,434
            
            
            
            
            2,713
            
            
            2,809Total
      Operating Expenses
            
            
            695,823
            
            
            625,683
            
            
            
            
            1,159,636
            
            
            1,092,783Operating
      Income
            
            
            51,883
            
            
            45,017
            
            
            
            
            92,060
            
            
            81,049Other
      Income and (Income Deductions) – Net
            
            
            1,076
            
            
            1,074
            
            
            
            
            3,725
            
            
            4,376Interest
      Charges:Interest
      on long-term debt
            
            
            4,875
            
            
            5,625
            
            
            
            
            10,001
            
            
            11,251Interest
      on long-term debt to unconsolidated affiliate trust
            
            
            70
            
            
            70
            
            
            
            
            139
            
            
            139Other
      interest charges
            
            
            2,056
            
            
            2,939
            
            
            
            
            6,219
            
            
            6,373Total
      Interest Charges
            
            
            7,001
            
            
            8,634
            
            
            
            
            16,359
            
            
            17,763Income
      from Continuing Operations Before Income Taxesand
      Dividends on Laclede Gas Redeemable Preferred Stock
            
            
            45,958
            
            
            37,457
            
            
            
            
            79,426
            
            
            67,662Income
      Tax Expense
            
            
            15,889
            
            
            13,437
            
            
            
            
            27,811
            
            
            24,222Dividends
      on Laclede Gas Redeemable Preferred Stock
            
            
            9
            
            
            11
            
            
            
            
            19
            
            
            23Income
      from Continuing Operations
            
            
            30,060
            
            
            24,009
            
            
            
            
            51,596
            
            
            43,417Income
      (Loss) from Discontinued Operations, Netof
      Income Tax (Note 2)
            
            
            21,294
            
            
            (3,190
            )
            
            
            
            20,661
            
            
            (3,511
            )Net
      Income
            
            $
            51,354
            
            $
            20,819
            
            
            
            $
            72,257
            
            $
            39,906Average
      Number of Common Shares Outstanding
            
            
            21,589
            
            
            21,445
            
            
            
            
            21,571
            
            
            21,413Basic
      Earnings Per Share of Common Stock:Income
      from Continuing Operations
            
            $
            1.39
            
            $
            1.12
            
            
            
            $
            2.39
            
            $
            2.03Income
      (Loss) from Discontinued Operations
            
            
            0.99
            
            
            (0.15
            )
            
            
            
            0.96
            
            
            (0.17
            )Net
      Income
            
            $
            2.38
            
            $
            0.97
            
            
            
            $
            3.35
            
            $
            1.86Diluted
      Earnings Per Share of Common Stock:Income
      from Continuing Operations
            
            $
            1.39
            
            $
            1.12
            
            
            
            $
            2.38
            
            $
            2.02Income
      (Loss) from Discontinued Operations
            
            
            0.98
            
            
            (0.15
            )
            
            
            
            0.96
            
            
            (0.16
            )Net
      Income
            
            $
            2.37
            
            $
            0.97
            
            
            
            $
            3.34
            
            $
            1.86Dividends
      Declared Per Share of Common Stock
            
            $
            0.375
            
            $
            0.365
            
            
            
            $
            0.750
            
            $
            0.730See
      Notes to Consolidated Financial Statements.





4





THE
LACLEDE GROUP, INC.


STATEMENTS
OF CONSOLIDATED COMPREHENSIVE INCOME


(UNAUDITED)








Three
      Months Ended
            
            
            
            Six
      Months EndedMarch
      31,
            
            
            
            March
      31,(Thousands)
            
            
            2008
            
            
            2007
            
            
            
            
            2008
            
            
            2007Net
      Income
            
            $
            51,354
            
            $
            20,819
            
            
            
            $
            72,257
            
            $
            39,906Other
      Comprehensive Income (Loss), Before Tax:Net
      gains (losses) on cash flow hedging derivative
instruments:Net
      hedging loss arising during period
            
            
            (6,022
            )
            
            (3,007
            )
            
            
            
            (5,878
            )
            
            (1,972
            )Reclassification
      adjustment for gains includedin
      net income
            
            
            (1,706
            )
            
            (1,340
            )
            
            
            
            (4,440
            )
            
            (1,920
            )Net
      unrealized losses on cash flow hedgingderivative
      instruments
            
            
            (7,728
            )
            
            (4,347
            )
            
            
            
            (10,318
            )
            
            (3,892
            )Amortization
      of actuarial loss included in net periodicpension
      cost
            
            
            43
            
            
            —
            
            
            
            
            86
            
            
            —Other
      Comprehensive Loss, Before Tax
            
            
            (7,685
            )
            
            (4,347
            )
            
            
            
            (10,232
            )
            
            (3,892
            )Income
      Tax Benefit Related to Items ofOther
      Comprehensive Income (Loss)
            
            
            (2,969
            )
            
            (1,680
            )
            
            
            
            (3,953
            )
            
            (1,504
            )Other
      Comprehensive Loss, Net of Tax
            
            
            (4,716
            )
            
            (2,667
            )
            
            
            
            (6,279
            )
            
            (2,388
            )Comprehensive
      Income
            
            $
            46,638
            
            $
            18,152
            
            
            
            $
            65,978
            
            $
            37,518See
      Notes to Consolidated Financial Statements.








































5


THE
LACLEDE GROUP, INC.


CONSOLIDATED
BALANCE SHEETS


(UNAUDITED)











March
      31,
            
            
            
            Sept.
      30,
            
            
            
            March
      31,(Thousands)
            
            2008
            
            
            
            2007
            
            
            
            2007ASSETSUtility
      Plant
            
            $
            1,204,984
            
            
            
            $
            1,187,828
            
            
            
            $
            1,165,232Less:  Accumulated
      depreciation and amortization
            
            
            398,661
            
            
            
            
            394,034
            
            
            
            
            388,775Net
      Utility Plant
            
            
            806,323
            
            
            
            
            793,794
            
            
            
            
            776,457Non-utility
      property
            
            
            4,026
            
            
            
            
            4,065
            
            
            
            
            4,122Other
      investments
            
            
            44,664
            
            
            
            
            43,635
            
            
            
            
            42,918Property
      and investments of discontinued operations
            
            
            —
            
            
            
            
            42,601
            
            
            
            
            43,171Other
      Property and Investments
            
            
            48,690
            
            
            
            
            90,301
            
            
            
            
            90,211Current
      Assets:Cash
      and cash equivalents
            
            
            145,510
            
            
            
            
            52,746
            
            
            
            
            35,494Accounts
      receivable:Gas
      customers – billed and unbilled
            
            
            190,298
            
            
            
            
            102,224
            
            
            
            
            153,538Other
            
            
            131,437
            
            
            
            
            57,861
            
            
            
            
            112,392Allowances
      for doubtful accounts
            
            
            (13,749
            )
            
            
            
            (11,232
            )
            
            
            
            (14,237
            )Delayed
      customer billings
            
            
            40,417
            
            
            
            
            —
            
            
            
            
            36,377Inventories:Natural
      gas stored underground at LIFO cost
            
            
            31,749
            
            
            
            
            138,256
            
            
            
            
            43,950Propane
      gas at FIFO cost
            
            
            19,904
            
            
            
            
            19,950
            
            
            
            
            19,951Materials,
      supplies, and merchandise at average cost
            
            
            5,409
            
            
            
            
            4,990
            
            
            
            
            5,900Derivative
      instrument assets
            
            
            15,133
            
            
            
            
            31,057
            
            
            
            
            19,615Unamortized
      purchased gas adjustments
            
            
            4,365
            
            
            
            
            12,813
            
            
            
            
            17,990Deferred
      income taxes
            
            
            3,029
            
            
            
            
            —
            
            
            
            
            3,781Prepayments
      and other
            
            
            5,488
            
            
            
            
            27,914
            
            
            
            
            14,292Current
      assets of discontinued operations
            
            
            —
            
            
            
            
            30,756
            
            
            
            
            19,215Total
      Current Assets
            
            
            578,990
            
            
            
            
            467,335
            
            
            
            
            468,258Deferred
      Charges:Prepaid
      pension cost
            
            
            —
            
            
            
            
            —
            
            
            
            
            58,240Regulatory
      assets
            
            
            265,495
            
            
            
            
            285,054
            
            
            
            
            155,786Other
            
            
            6,366
            
            
            
            
            4,669
            
            
            
            
            6,277Total
      Deferred Charges
            
            
            271,861
            
            
            
            
            289,723
            
            
            
            
            220,303Total
      Assets
            
            $
            1,705,864
            
            
            
            $
            1,641,153
            
            
            
            $
            1,555,229

















6








THE
LACLEDE GROUP, INC.


CONSOLIDATED
BALANCE SHEETS (Continued)


(UNAUDITED)










March
      31,
            
            
            
            Sept.
      30,
            
            
            
            March
      31,(Thousands,
      except share amounts)
            
            2008
            
            
            
            2007
            
            
            
            2007CAPITALIZATION
      AND LIABILITIESCapitalization:Common
      stock (70,000,000 shares authorized, 21,810,222,
              21,645,637,
      and 21,571,409 shares issued, respectively)
            
            $
            21,810
            
            
            
            $
            21,646
            
            
            
            $
            21,571Paid-in
      capital
            
            
            139,763
            
            
            
            
            136,061
            
            
            
            
            132,679Retained
      earnings
            
            
            323,581
            
            
            
            
            268,761
            
            
            
            
            274,674Accumulated
      other comprehensive (loss) income
            
            
            (4,422
            )
            
            
            
            1,857
            
            
            
            
            1,267Total
      Common Stock Equity
            
            
            480,732
            
            
            
            
            428,325
            
            
            
            
            430,191Redeemable
      preferred stock (less current sinking fund
              requirements)
      – Laclede Gas
            
            
            467
            
            
            
            
            627
            
            
            
            
            627Long-term
      debt to unconsolidated affiliate trust
            
            
            46,400
            
            
            
            
            46,400
            
            
            
            
            46,400Long-term
      debt (less current portion) – Laclede Gas
            
            
            309,152
            
            
            
            
            309,122
            
            
            
            
            309,082Total
      Capitalization
            
            
            836,751
            
            
            
            
            784,474
            
            
            
            
            786,300Current
      Liabilities:Notes
      payable
            
            
            171,650
            
            
            
            
            211,400
            
            
            
            
            117,050Accounts
      payable
            
            
            186,944
            
            
            
            
            99,109
            
            
            
            
            139,312Advance
      customer billings
            
            
            —
            
            
            
            
            25,440
            
            
            
            
            —Current
      portion of long-term debt and preferred stock
            
            
            160
            
            
            
            
            40,160
            
            
            
            
            40,160Wages
      and compensation accrued
            
            
            11,880
            
            
            
            
            11,532
            
            
            
            
            11,175Dividends
      payable
            
            
            8,303
            
            
            
            
            7,970
            
            
            
            
            7,962Customer
      deposits
            
            
            13,960
            
            
            
            
            15,899
            
            
            
            
            15,678Interest
      accrued
            
            
            10,185
            
            
            
            
            11,103
            
            
            
            
            10,919Taxes
      accrued
            
            
            39,921
            
            
            
            
            20,922
            
            
            
            
            43,689Deferred
      income taxes current
            
            
            —
            
            
            
            
            2,644
            
            
            
            
            —Other
            
            
            7,419
            
            
            
            
            5,756
            
            
            
            
            6,596Current
      liabilities of discontinued operations
            
            
            —
            
            
            
            
            21,730
            
            
            
            
            13,451Total
      Current Liabilities
            
            
            450,422
            
            
            
            
            473,665
            
            
            
            
            405,992Deferred
      Credits and Other Liabilities:Deferred
      income taxes
            
            
            232,531
            
            
            
            
            223,750
            
            
            
            
            226,707Unamortized
      investment tax credits
            
            
            4,086
            
            
            
            
            4,200
            
            
            
            
            4,318Pension
      and postretirement benefit costs
            
            
            67,515
            
            
            
            
            63,678
            
            
            
            
            22,182Asset
      retirement obligations
            
            
            26,908
            
            
            
            
            26,125
            
            
            
            
            25,527Regulatory
      liabilities
            
            
            64,027
            
            
            
            
            39,589
            
            
            
            
            58,058Other
            
            
            23,624
            
            
            
            
            22,554
            
            
            
            
            22,374Deferred
      credits and other liabilities of discontinued operations
            
            
            —
            
            
            
            
            3,118
            
            
            
            
            3,771Total
      Deferred Credits and Other Liabilities
            
            
            418,691
            
            
            
            
            383,014
            
            
            
            
            362,937Total
      Capitalization and Liabilities
            
            $
            1,705,864
            
            
            
            $
            1,641,153
            
            
            
            $
            1,555,229See
      Notes to Consolidated Financial Statements.











7





THE
LACLEDE GROUP, INC.


STATEMENTS
OF CONSOLIDATED CASH FLOWS


(UNAUDITED)




Six
      Months EndedMarch
      31,(Thousands)
            
            2008
            
            
            
            2007Operating
      Activities:Net
      Income
            
            $
            72,257
            
            
            
            $
            39,906Adjustments
      to reconcile net income to net cash provided by (used in)
              operating
      activities:Gain
      on sale of discontinued operations
            
            
            (44,491
            )
            
            
            
            —Depreciation,
      amortization, and accretion
            
            
            18,931
            
            
            
            
            19,258Deferred
      income taxes and investment tax credits
            
            
            (2,696
            )
            
            
            
            (20,292
            )Other
      – net
            
            
            1,410
            
            
            
            
            947Changes
      in assets and liabilities:Accounts
      receivable – net
            
            
            (159,133
            )
            
            
            
            (118,767
            )Unamortized
      purchased gas adjustments
            
            
            8,448
            
            
            
            
            26,391Deferred
      purchased gas costs
            
            
            53,094
            
            
            
            
            64,706Accounts
      payable
            
            
            87,835
            
            
            
            
            42,384Delayed
      customer billings - net
            
            
            (65,857
            )
            
            
            
            (67,820
            )Taxes
      accrued
            
            
            18,999
            
            
            
            
            28,171Natural
      gas stored underground
            
            
            106,507
            
            
            
            
            93,526Other
      assets and liabilities
            
            
            35,467
            
            
            
            
            5,559Net
      cash provided by operating activities
            
            
            130,771
            
            
            
            
            113,969Investing
      Activities:Proceeds
      from sale of discontinued operations
            
            
            83,229
            
            
            
            
            —Capital
      expenditures
            
            
            (27,744
            )
            
            
            
            (27,216
            )Other
      investments
            
            
            26
            
            
            
            
            (560
            )Net
      cash provided by (used in) investing activities
            
            
            55,511
            
            
            
            
            (27,776
            )Financing
      Activities:Maturity
      of first mortgage bonds
            
            
            (40,000
            )
            
            
            
            —Repayment
      of short-term debt – net
            
            
            (39,750
            )
            
            
            
            (90,250
            )Issuance
      of common stock
            
            
            2,439
            
            
            
            
            4,311Dividends
      paid
            
            
            (16,064
            )
            
            
            
            (15,439
            )Preferred
      stock reacquired
            
            
            (160
            )
            
            
            
            (159
            )Other
            
            
            17
            
            
            
            
            60Net
      cash used in financing activities
            
            
            (93,518
            )
            
            
            
            (101,477
            )Net
      Increase (Decrease) in Cash and Cash Equivalents
            
            
            92,764
            
            
            
            
            (15,284
            )Cash
      and Cash Equivalents at Beginning of Period
            
            
            52,746
            
            
            
            
            50,778Cash
      and Cash Equivalents at End of Period
            
            $
            145,510
            
            
            
            $
            35,494Supplemental
      Disclosure of Cash Paid During the Period for:Interest
            
            $
            19,662
            
            
            
            $
            18,560Income
      taxes
            
            
            22,501
            
            
            
            
            9,286See
      Notes to Consolidated Financial Statements.








8





THE
LACLEDE GROUP, INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





1.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





These
notes are an integral part of the accompanying consolidated financial statements
of The Laclede Group, Inc. (Laclede Group or the Company) and its subsidiaries.
In the opinion of Laclede Group, this interim report includes all adjustments
(consisting of only normal recurring accruals) necessary for the fair
presentation of the results of operations for the periods presented. This Form
10-Q should be read in conjunction with the Notes to Consolidated Financial
Statements contained in the Company’s Fiscal Year 2007 Form
10-K.


The
consolidated financial position, results of operations, and cash flows of
Laclede Group are comprised primarily from the financial position, results of
operations, and cash flowsof Laclede Gas Company
(Laclede Gas or the Utility). Laclede Gas is a regulated natural gas
distribution utility having a material seasonal cycle. As a result, these
interim statements of income for Laclede Group are not necessarily indicative of
annual results or representative of succeeding quarters of the fiscal year. Due
to the seasonal nature of the business of Laclede Gas, earnings are typically
concentrated in the November through April period, which generally corresponds
with the heating season.


DISCONTINUED OPERATIONS – On
March 31, 2008, Laclede Group sold 100% of its interest in SM&P
Utility Resources, Inc. (SM&P), its wholly-owned subsidiary, which comprised
the Non-Regulated Services segment. In accordance with generally accepted
accounting principles, the results of operations for SM&P are reported as
discontinued operations in the statement of income and its associated assets and
liabilities are classified separately in the balance sheet. The operating
results of SM&P have been aggregated and reported on the Statements of
Consolidated Income as Income (Loss) from Discontinued Operations, Net of Income
Taxes. The Company has reported in discontinued operations interest expense
based on amounts previously recorded by SM&P. Discontinued operations does
not include general corporate overheads previously recorded by SM&P. Prior
periods have been reclassified to conform to the current-period presentation.
For additional information relative to the Company’s sale of SM&P, refer to
Note 2, Discontinued Operations.


REVENUE RECOGNITION - Laclede
Gas reads meters and bills its customers on monthly cycles. The Utility records
its regulated gas distribution revenues from gas sales and transportation
services on an accrual basis that includes estimated amounts for gas delivered,
but not yet billed. The accruals for unbilled revenues are reversed in the
subsequent accounting period when meters are actually read and customers are
billed. The amounts of accrued unbilled revenues at March 31, 2008 and
2007, for the Utility, were $31.9 million and $18.5 million, respectively. The
amount of accrued unbilled revenue at September 30, 2007 was $11.9
million.


INCOME TAXES - Laclede Group
and its subsidiaries have elected, for tax purposes only, various accelerated
depreciation provisions of the Internal Revenue Code. In addition, certain other
costs are expensed currently for tax purposes while being deferred for book
purposes. Effective October 1, 2007, generally accepted accounting
principles require that tax benefits be recognized in the financial statements
as determined by new recognition and measurement provisions. These provisions
permit the benefit from a tax position to be recognized only if, and to the
extent that, it is more likely than not that the tax position will be sustained
upon examination by the taxing authority, based on the technical merits of the
position. Unrecognized tax benefits and related interest and penalties, if any,
are recorded as liabilities or as a reduction to deferred tax assets. Laclede
Group companies record deferred tax liabilities and assets measured by enacted
tax rates for the net tax effect of all temporary differences between the
carrying amounts of assets and liabilities in the financial statements, and the
related tax basis. Changes in enacted tax rates, if any, and certain property
basis differences will be reflected by entries to regulatory asset or liability
accounts for regulated companies, and will be reflected as income or loss for
non-regulated companies.


Laclede
Gas’ investment tax credits utilized prior to 1986 have been deferred and are
being amortized in accordance with regulatory treatment over the useful life of
the related property.


GOODWILL- The Company
previously reported Goodwill separately on the Consolidated Balance Sheets, the
total of which was fully attributable to SM&P, and was included in the
Non-Regulated Services operating segment. During the quarter ended March 31,
2008, the Company sold 100% of its interest in SM&P thereby reducing
Goodwill to zero at March 31, 2008. Goodwill for prior periods has been
reclassified in the Consolidated Balance Sheets and is included in the Property
and Investments of Discontinued Operations line. For further information on the
sale of SM&P, see Note 2, Discontinued Operations.


GROSS RECEIPTS TAXES - Gross
receipts taxes associated with Laclede Gas’ natural gas utility service are
imposed on the Utility and billed to its customers. These amounts are recorded
gross in the Statements of Consolidated Income. Amounts recorded in Regulated
Gas Distribution Operating Revenues for the quarters ended
March 31, 2008 and 2007 were $25.2 million and $24.1 million,
respectively. Amounts recorded in Regulated Gas Distribution Operating Revenues
for the six months ended March 31, 2008 and 2007 were $38.2 million
and $38.8 million, respectively. Gross receipts taxes are expensed by the
Utility and included in the Taxes Other Than Income line.


9





STOCK-BASED COMPENSATION–
Awards of stock-based compensation are made pursuant to The Laclede Group 2006
Equity Incentive Plan and the Restricted Stock Plan for Non-Employee Directors.
Refer to Note 1 of the Consolidated Financial Statements included in the
Company’s Form 10-K for the fiscal year ended September 30, 2007 for
descriptions of these plans.


During
the six months ended March 31, 2008, the Company awarded 74,100 shares
of performance-contingent restricted stock to executive officers at a weighted
average grant date fair value of $29.32 per share. This number of shares
represents the maximum shares that can be earned pursuant to the terms of the
awards. The shares have a performance period ending in September 2010,
during which participants are entitled to receive full dividends and voting
rights on 49,400 of these shares based on the target level of performance. The
number of shares that will ultimately vest is dependent upon the attainment of
certain levels of earnings and dividend growth performance goals; further, under
the terms of the award, the Compensation Committee (Committee) of the Board of
Directors may reduce by up to 50% the number of shares that vest if the
Company’s total shareholder return (TSR) during the performance period ranks in
the bottom quartile relative to a comparator group of companies. This TSR
provision is considered a market condition under generally accepted accounting
principles and is discussed further below.


During
the six months ended March 31, 2008, the Company made a separate award
of 15,000 shares of performance-contingent restricted stock to an executive
officer at a weighted average grant date fair value of $33.26 per share. This
number of shares represents the maximum shares that can be earned pursuant to
the terms of the award. The shares have a performance period ending in
September 2009, during which the participant is entitled to receive full
dividends and voting rights on 10,000 of these shares based on the target level
of performance. The number of shares that will ultimately vest is dependent upon
the attainment of certain business development performance metrics and
succession management objectives and is not subject to the aforementioned TSR
provision.


The
weighted average grant date fair value of performance-contingent restricted
stock awarded during the six months ended March 31, 2007 was $34.95
per share.


Performance-contingent
restricted stock activity for the six months ended March 31, 2008 is
presented below:


Weighted
      Average
                Grant
      Date
                Fair
      ValueSharesNonvested
      at September 30, 2007
              
              110,000
              
              
              
              $
              32.87Granted
              
              89,100
              
              
              
              $
              29.99Vested
              
              —
              
              
              
              $
              —Forfeited
              
              (8,000
              )
              
              
              $
              32.71Nonvested
      at March 31, 2008
              
              191,100
              
              
              
              $
              31.53


During
the six months ended March 31, 2008, the Company awarded 23,250 shares
of time-vested restricted stock to executives and key employees at a weighted
average grant date fair value of $34.25 per share. These shares vest in
December 2010. In the interim, participants receive full dividends and
voting rights.


During
the six months ended March 31, 2008, the Company made a special award
of 15,000 time-vested restricted stock units to an executive officer at a
weighted average grant date fair value of $28.49 per share. Each restricted
stock unit represents a contingent right to receive one share of The Laclede
Group common stock. The units vest in December 2011. The participant is
required to retain the shares acquired upon vesting for twelve months from the
date of delivery of the shares. No dividends are paid or accrue during the
vesting period. Furthermore, the participant has no voting rights in the
interim.


During
the six months ended March 31, 2008, the Company awarded 12,500 shares
of time-vested restricted stock to non-employee directors at a weighted average
grant date fair value of $33.77 per share. The weighted average fair value of
restricted stock awarded to non-employee directors during the six months ended
March 31, 2007 was $32.74 per share. These shares vest depending on
the participant’s age upon entering the plan and years of service as a director.
The plan’s trustee acquires the shares for the awards in the open market and
holds the shares as trustee for the benefit of the non-employee directors until
the restrictions expire. In the interim, the participants receive full dividends
and voting rights.





10


Time-vested
restricted stock and time-vested restricted stock unit activity for the six
months ended March 31, 2008 is presented below:




Weighted
      Average
                Grant
      Date
                Fair
      ValueShares/
                UnitsNonvested
      at September 30, 2007
              
              9,000
              
              
              
              $
              32.44Granted
              
              50,750
              
              
              
              $
              32.43Vested
              
              (2,900
              )
              
              
              $
              33.77Forfeited
              
              —
              
              
              
              $
              —Nonvested
      at March 31, 2008
              
              56,850
              
              
              
              $
              32.36


No
stock options were granted during the six months ended March 31, 2008.
The weighted average fair value of stock options granted during six months ended
March 31, 2007 was $8.07 per option.


Stock
option activity for the six months ended March 31, 2008 is presented
below:


WeightedAverageWeighted
              
              
              
              Remaining
              
              
              
              AggregateAverage
              
              
              
              Contractual
              
              
              
              IntrinsicExercise
              
              
              
              Term
              
              
              
              ValueShares
              
              
              
              Price
              
              
              
              (Years)
              
              
              
              ($000)Outstanding
      at September 30, 2007
              
              617,100
              
              
              
              $
              30.04Granted
              
              —
              
              
              
              $
              —Exercised
              
              (31,000
              )
              
              
              $
              28.67Forfeited
              
              (11,875
              )
              
              
              $
              30.86Expired
              
              (7,750
              )
              
              
              $
              31.14Outstanding
      at March 31, 2008
              
              566,475
              
              
              
              $
              30.08
              
              
              
              6.6
              
              
              
              $
              3,144Fully
      Vested and Expected to Vest
                at
      March 31, 2008
              
              553,612
              
              
              
              $
              30.02
              
              
              
              6.6
              
              
              
              $
              3,104Exercisable
      at March 31, 2008
              
              382,725
              
              
              
              $
              28.89
              
              
              
              6.1
              
              
              
              $
              2,580


The
closing price of the Company’s common stock was $35.63 at
March 31, 2008.


Compensation
cost for performance-contingent restricted stock awards is based upon the
probable outcome of the performance conditions. For shares that do not vest or
are not expected to vest due to the outcome of the performance conditions, no
compensation cost is recognized and any previously recognized compensation cost
is reversed.


The
fair value of awards of performance-contingent and time-vested restricted stock
and restricted stock units, not subject to the TSR provision, is estimated using
the closing price of the Company’s stock on the date of the grant. For those
awards that do not pay dividends during the vesting period, the estimate of fair
value is reduced by the present value of the dividends expected to be paid on
the Company’s common stock during the performance period, discounted using an
appropriate U.S. Treasury yield. For shares subject to the TSR provision, the
estimated impact of this market condition is reflected in the grant date fair
value per share of the awards. Accordingly, compensation cost is not reversed to
reflect any actual reductions in the awards that may result from the TSR
provision. However, if the Company’s TSR during the performance period ranks in
the bottom quartile relative to a comparator group of companies and the
Committee elects not to reduce the award (or reduce by a lesser amount), this
election would be accounted for as a modification of the original award and
additional compensation cost would be recognized at that time. The grant date
fair value per share of the awards subject to the TSR provision awarded during
the six months ended March 31, 2008 was valued by a Monte Carlo
simulation model that assessed the probabilities of various TSR
outcomes.


11





The
amounts of compensation cost recognized for share-based compensation
arrangements are presented below:


Three
      Months Ended
              
              Six
      Months EndedMarch
      31,
              
              March
      31,(Thousands)
              
              2008
              
              2007
              
              2008
              
              2007Total
      compensation cost
              
              $
              766
              
              $
              692
              
              $
              1,422
              
              $
              1,232Compensation
      cost capitalized
              
              
              (163
              )
              
              (143
              )
              
              (298
              )
              
              (261
              )Compensation
      cost recognized in net income
              
              
              603
              
              
              549
              
              
              1,124
              
              
              971Income
      tax benefit recognized in net income
              
              
              (233
              )
              
              (212
              )
              
              (434
              )
              
              (375
              )Compensation
      cost recognized in net income,net
      of income tax
              
              $
              370
              
              $
              337
              
              $
              690
              
              $
              596


As
of March 31, 2008, there was $5.5 million of total unrecognized
compensation cost related to nonvested share-based compensation arrangements
(options and restricted stock). That cost is expected to be recognized over a
weighted average period of 2.6 years.


NEW ACCOUNTING STANDARDS –In
June 2006, the Financial Accounting Standards Board (FASB) issued
Interpretation Number 48 (FIN 48), “Accounting for Uncertainty in Income Taxes.”
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with FASB Statement No. 109,
“Accounting for Income Taxes.” Under FIN 48, the Company may recognize the tax
benefit from a tax position only if it is at least more likely than not that the
tax position will be sustained on examination by the taxing authorities, based
on the technical merits of the position. The tax benefits recognized in the
financial statements from such a position should be measured based on the
largest benefit that has a greater than fifty percent likelihood of being
realized upon settlement with the taxing authorities. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in
interim periods, disclosure, and transition. The Company adopted the provisions
of FIN 48 as of October 1, 2007. For details regarding the cumulative
effect of adoption and other pertinent information, see Note 6, Income
Taxes.


In
September 2006, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 157, “Fair Value Measurements.” This Statement defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
The Statement applies to fair value measurements required under other accounting
guidance that require or permit fair value measurements. Accordingly, this
Statement does not require any new fair value measurements. The guidance in this
Statement does not apply to the Company’s stock-based compensation plans
accounted for in accordance with SFAS No. 123(R), “Share-Based Payment.” Except
as described below, SFAS No. 157 is effective for the Company as of the
beginning of fiscal year 2009. In February 2008, the FASB issued two
Staff Positions that amend SFAS No. 157. The first FASB Staff Position (FSP),
No. FAS 157-1, excludes from the scope of SFAS No. 157 accounting pronouncements
that address fair value measurements for purposes of lease classification and
measurement. The second FSP, No. FAS 157-2, delays the effective date of SFAS
No. 157 for nonfinancial assets and nonfinancial liabilities, except for items
that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). Application of SFAS No. 157 to these items
will be effective for the Company as of the beginning of fiscal year 2010. The
Company is currently evaluating the potential impact of this Statement, as
amended by these Staff Positions, on its consolidated financial
statements.


In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans.” As discussed in Note 2
to the Consolidated Financial Statements included in the Company’s Fiscal
Year 2007 Form 10-K, Laclede Group adopted the recognition and disclosure
provisions of this Statement effective September 30, 2007. The
Statement also requires that plan assets and benefit obligations be measured as
of the date of the employer’s fiscal year-end statement of financial position.
This requirement is effective for the Company as of the end of fiscal year 2009.
In conjunction with adoption of this provision of SFAS No. 158, the Company will
be required to change its valuation date for its pension and other
postretirement plans from June 30 to September 30. The Company is
currently evaluating the impact of adoption of the change in measurement date on
its consolidated financial statements.


In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.” The Statement permits entities to
choose to measure many financial instruments and certain other items at fair
value that are not currently required to be measured at fair value. SFAS No. 159
also establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. This Statement does not affect any
existing accounting literature that requires certain assets and liabilities to
be carried at fair value. Upon adoption of SFAS No. 159, entities are permitted
to choose, at specified election dates, to measure eligible items at fair value
(fair value option). Unrealized gains and losses on items for which the fair
value option has been elected are reported in earnings at each reporting date.
The decision about


12


whether
to elect the fair value option is applied instrument by instrument with few
exceptions. The decision is also irrevocable (unless a new election date occurs)
and must be applied to entire instruments and not to portions of instruments.
SFAS No. 159 requires that cash flows related to items measured at fair value be
classified in the statement of cash flows according to their nature and purpose
as required by SFAS No. 95, “Statement of Cash Flows” (as amended). SFAS No. 159
is effective for the Company as of the beginning of fiscal year 2009. The
Company is currently evaluating the provisions of this Statement.


In
June 2007, the FASB ratified the consensus reached in Emerging Issues Task
Force (EITF) Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends
on Share-Based Payment Awards.” This Issue addresses how an entity should
recognize the tax benefit received on dividends that are (a) paid to employees
holding equity-classified nonvested shares, equity-classified nonvested share
units, or equity-classified outstanding share options and (b) charged to
retained earnings under SFAS No. 123(R). The Task Force reached a consensus that
such tax benefits should be recognized as an increase in additional paid-in
capital. This EITF Issue also addresses how the accounting for these tax
benefits is affected if an entity’s estimate of forfeitures changes in
subsequent periods. This EITF Issue is effective for Laclede Group as of the
beginning of fiscal year 2009. The Company is currently evaluating the
provisions of this EITF Issue.


In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements.” This Statement amends Accounting Research
Bulletin No. 51, “Consolidated Financial Statements.” A noncontrolling interest,
sometimes called a minority interest, is the portion of equity in a subsidiary
not attributable, directly or indirectly, to a parent. SFAS No. 160 clarifies
that noncontrolling interests should be separately reported as equity in the
balance sheet. Additionally, SFAS No. 160 requires certain changes in
presentation to income statements. SFAS No. 160 also addresses accounting for
changes in the parent’s ownership interest of a subsidiary, accounting for the
deconsolidation of a subsidiary, and disclosure requirements. This Statement is
effective for Laclede Group as of the beginning of fiscal year 2010. Currently,
all of Laclede Group’s consolidated subsidiaries are wholly owned and therefore
adoption of this Statement is not expected to have any effect on the Company’s
consolidated financial statements.


In
December 2007, the FASB issued SFAS No. 141 (revised 2007) (141(R)),
“Business Combinations.” This Statement revises SFAS No. 141 but retains the
fundamental requirements in SFAS No. 141 that the acquisition method
(formerly known as purchase method) of accounting be used for all business
combinations. SFAS No. 141(R) requires an acquirer to recognize the assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the Statement. SFAS 141(R) requires
acquisition-related costs to be accounted for separately instead of being
allocated to the assets acquired and liabilities assumed. SFAS No. 141(R) also
amends the guidance related to the recognition of certain assets acquired and
liabilities assumed that relate to contingencies, research and development
assets acquired that have no alternative future use, and negative goodwill
arising from a bargain purchase. Laclede Group is required to adopt SFAS No.
141(R) prospectively to business combinations with acquisition dates on or after
October 1, 2009 (fiscal 2010). Because this Statement is only
applicable to future business combinations, existing amounts reported on the
Company’s consolidated financial statements will not be impacted by adoption of
this Statement.


In
March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities.” This Statement amends SFAS No. 133,
“Accounting for Derivative Instruments and Hedging Activities,” by requiring
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. This Statement will be
effective for the Company’s interim and annual financial statements beginning in
fiscal year 2010. This Statement encourages, but does not require,
comparative disclosures for earlier periods at initial adoption. The Company is
currently evaluating the provisions of this Statement.








2.
            DISCONTINUED
      OPERATIONS





On
March 31, 2008, the Company completed the sale of 100% of its interest
in its wholly-owned subsidiary, SM&P, to Stripe Acquisition, Inc. (an
affiliate of Kohlberg Management VI, LLC) for $85 million in cash, subject to
certain closing and post-closing adjustments. SM&P is an underground
facilities locating and marking business that comprised Laclede Group’s
Non-Regulated Services operating segment. The sales agreement included
representations, warranties, and indemnification provisions customary for such
transactions and is filed as an exhibit to this Form 10-Q. For information
concerning Laclede Group’s obligations under these provisions, see Note 9,
Commitments and Contingencies.


13





In
accordance with generally accepted accounting principles, the operating results
of SM&P have been aggregated and reported on the Statements of Consolidated
Income as Income (Loss) from Discontinued Operations, Net of Income Tax. The
Company has reported in discontinued operations interest expense based on
amounts previously recorded by SM&P. For the quarters ended
March 31, 2008 and 2007, discontinued operations includes pre-tax
interest expense of $0.8 million. For the six months ended
March 31, 2008 and 2007, discontinued operations includes pre-tax
interest expense of $1.6 million. Discontinued operations does not include
general corporate overheads. Income (Loss) from Discontinued Operations reported
in the Statements of Consolidated Income consists of the following:


Three
      Months Ended
              
              Six
      Months EndedMarch
      31,
              
              March
      31,(Thousands)
              
              2008
              
              2007
              
              2008
              
              2007Operating
      revenues
              
              $
              28,062
              
              $
              30,134
              
              $
              65,423
              
              $
              66,563Loss
      from operations
              
              
              (8,433
              )
              
              (5,107
              )
              
              (9,387
              )
              
              (5,564
              )Gain
      on disposal
              
              
              44,491
              
              
              —
              
              
              44,491
              
              
              —Pre-tax
      income (loss)
              
              
              36,058
              
              
              (5,107
              )
              
              35,104
              
              
              (5,564
              )Income
      tax expense (benefit)
              
              
              14,764
              
              
              (1,917
              )
              
              14,443
              
              
              (2,053
              )Income
      (Loss) From Discontinued Operations
              
              $
              21,294
              
              $
              (3,190
              )
              $
              20,661
              
              $
              (3,511
              )


The
assets and liabilities of SM&P have been segregated from continuing
operations and have been reported as assets or liabilities of discontinued
operations on the Consolidated Balance Sheets. Assets and liabilities of
SM&P reported in the Consolidated Balance Sheets as discontinued operations
consist of the following:


Sept.
      30,
              
              March
      31,(Thousands)
              
              2007
              
              2007AssetsProperty
      and Investments:Goodwill
              
              $
              33,595
              
              $
              33,595Property,
      plant, and equipment – net
              
              
              7,204
              
              
              7,941Other
      investments
              
              
              1,802
              
              
              1,635Total
      Property and Investments
              
              
              42,601
              
              
              43,171Current
      Assets:Accounts
      receivable – net
              
              
              28,816
              
              
              18,246Other
              
              
              1,940
              
              
              969Total
      Current Assets
              
              
              30,756
              
              
              19,215Total
      Assets
              
              $
              73,357
              
              $
              62,386LiabilitiesCurrent
      Liabilities:Accounts
      payable
              
              $
              7,720
              
              $
              4,487Wages
      and compensation accrued
              
              
              3,950
              
              
              3,672Other
              
              
              10,060
              
              
              5,292Total
      Current Liabilities
              
              
              21,730
              
              
              13,451Deferred
      credits and other liabilities
              
              
              3,118
              
              
              3,771Total
      Liabilities
              
              $
              24,848
              
              $
              17,222


14





3.
            EARNINGS
      PER SHARE





SFAS
No. 128, “Earnings Per Share,” requires dual presentation of basic and diluted
earnings per share (EPS). Basic EPS does not include potentially dilutive
securities and is computed by dividing net income by the weighted average number
of common shares outstanding during the period. Diluted EPS assumes the issuance
of common shares pursuant to the Company’s stock-based compensation plans at the
beginning of each respective period, or at the date of grant or award, if later.
Shares attributable to stock options and time-vested restricted stock are
excluded from the calculation of diluted earnings per share if the effect would
be antidilutive. For both the quarter and six months ended
March 31, 2008, 105,500 shares attributable to antidilutive
outstanding stock options were excluded from the calculation of diluted earnings
per share. For the quarter and six months ended March 31, 2007, there
were 209,500 and 115,500 antidilutive shares, respectively.
Performance-contingent restricted stock awards are only included in the
calculation of diluted earnings per share to the extent the underlying
performance conditions are satisfied (a) prior to the end of the reporting
period or (b) would be satisfied if the end of the reporting period were the end
of the related contingency period and the result would be dilutive. For both the
quarter and six months ended March 31, 2008, 158,200 shares
of nonvested performance-contingent restricted stock were excluded from the
calculation of diluted earnings per share. For both the quarter and six months
ended March 31, 2007, 110,000 shares were excluded.


Three
      Months Ended
              
              
              
              Six
      Months EndedMarch
      31,
              
              
              
              March
      31,(Thousands,
      Except Per Share Amounts)
              
              
              
              
              
              
              2008
              
              
              2007
              
              
              
              
              2008
              
              
              2007Basic
      EPS:Income
      from Continuing Operations
              
              
              
              
              
              $
              30,060
              
              $
              24,009
              
              
              
              $
              51,596
              
              $
              43,417Weighted
      Average Shares Outstanding
              
              
              
              
              
              
              21,589
              
              
              21,445
              
              
              
              
              21,571
              
              
              21,413Earnings
      Per Share of Common Stock fromContinuing
      Operations
              
              
              
              
              
              $
              1.39
              
              $
              1.12
              
              
              
              
              2.39
              
              $
              2.03Diluted
      EPS:Income
      from Continuing Operations
              
              
              
              
              
              $
              30,060
              
              $
              24,009
              
              
              
              $
              51,596
              
              $
              43,417Weighted
      Average Shares Outstanding
              
              
              
              
              
              
              21,589
              
              
              21,445
              
              
              
              
              21,571
              
              
              21,413Dilutive
      Effect of Stock Optionsand
      Restricted Stock
              
              
              
              
              
              
              96
              
              
              43
              
              
              
              
              82
              
              
              52Weighted
      Average Diluted Shares
              
              
              
              
              
              
              21,685
              
              
              21,488
              
              
              
              
              21,653
              
              
              21,465Earnings
      Per Share of Common Stock fromContinuing
      Operations
              
              
              
              
              
              $
              1.39
              
              $
              1.12
              
              
              
              $
              2.38
              
              $
              2.02


4.
            PENSION
      PLANS AND OTHER POSTRETIREMENT
BENEFITS





Laclede
Gas has non-contributory defined benefit, trusteed forms of pension plans
covering substantially all employees over the age of twenty-one. Benefits are
based on years of service and the participant’s compensation during the highest
three years of the last ten years of employment. Plan assets consist primarily
of corporate and U.S. government obligations and pooled equity
funds.


Pension
costs for the quarters ending March 31, 2008 and 2007 were $1.5
million and $1.4 million, respectively, including amounts charged to
construction. Pension costs for the six months ended March 31, 2008
and 2007 were $3.1 million and $2.7 million, respectively, including amounts
charged to construction.


The
net periodic pension costs include the following components:


15


Three
      Months Ended
              
              Six
      Months EndedMarch
      31,
              
              March
      31,(Thousands)
              
              2008
              
              2007
              
              2008
              
              2007Service
      cost – benefits earnedduring
      the period
              
              $
              3,243
              
              $
              3,105
              
              $
              6,485
              
              $
              6,211Interest
      cost on projectedbenefit
      obligation
              
              
              4,670
              
              
              4,483
              
              
              9,340
              
              
              8,965Expected
      return on plan assets
              
              
              (5,163
              )
              
              (5,074
              )
              
              (10,325
              )
              
              (10,148
              )Amortization
      of prior service cost
              
              
              272
              
              
              283
              
              
              544
              
              
              567Amortization
      of actuarial loss
              
              
              791
              
              
              921
              
              
              1,582
              
              
              1,841Sub-total
              
              
              3,813
              
              
              3,718
              
              
              7,626
              
              
              7,436Loss
      on lump sum settlement
              
              
              —
              
              
              945
              
              
              —
              
              
              945Regulatory
      adjustment
              
              
              (2,280
              )
              
              (3,309
              )
              
              (4,560
              )
              
              (5,673
              )Net
      pension cost
              
              $
              1,533
              
              $
              1,354
              
              $
              3,066
              
              $
              2,708


Pursuant
to the provisions of the Laclede Gas pension plans, pension obligations may be
satisfied by lump-sum cash payments. Pursuant to a Missouri Public Service
Commission (MoPSC or Commission) Order, lump-sum payments are recognized as
settlements (which can result in gains or losses) only if the total of such
payments exceeds 100% of the sum of service and interest costs. No lump sum
payments were recognized as settlements during the six months ended
March 31, 2008. Lump sum payments recognized as settlements during the
six months ended March 31, 2007 were $2.8 million.


Pursuant
to a MoPSC Order, the return on plan assets is based on the market-related value
of plan assets implemented prospectively over a four-year period. Gains or
losses not yet includible in pension cost are amortized only to the extent that
such gain or loss exceeds 10% of the greater of the projected benefit obligation
or the market-related value of plan assets. Such excess is amortized over the
average remaining service life of active participants. The recovery in rates for
the Utility’s qualified pension plans is based on an allowance of $4.1 million
annually effective October 1, 2005 and $4.8 million annually effective
August 1, 2007. The difference between this amount and pension expense
as calculated pursuant to the above and that otherwise would be included in the
Statements of Consolidated Income and Consolidated Comprehensive Income is
deferred as a regulatory asset or regulatory liability.


SM&P
maintains a non-qualified, defined benefit plan with four participants that was
frozen to new participants in 2002. The plan is a non-qualified plan and
therefore has no assets held in trust. Net pension cost related to the plan is
not material. The Company sold 100% of its interest in SM&P on
March 31, 2008, and the liabilities for this plan remain with
SM&P.


Laclede
Gas provides certain life insurance benefits at retirement. Medical insurance is
available after early retirement until age 65. The transition obligation not yet
includible in postretirement benefit cost is being amortized over 20 years.
Postretirement benefit costs for the quarters ended March 31, 2008 and
2007 were $1.9 million and $2.0 million, respectively, including amounts charged
to construction. Postretirement benefit costs for the six months ended
March 31, 2008 and 2007 were $3.8 million and $3.9 million,
respectively, including amounts charged to construction.


Net
periodic postretirement benefit costs consisted of the following
components:


Three
      Months Ended
              
              Six
      Months EndedMarch
      31,
              
              March
      31,(Thousands)
              
              2008
              
              2007
              
              2008
              
              2007Service
      cost – benefits earnedduring
      the period
              
              $
              1,140
              
              $
              1,015
              
              $
              2,280
              
              $
              2,031Interest
      cost on accumulatedpostretirement
      benefit obligation
              
              
              977
              
              
              900
              
              
              1,954
              
              
              1,800Expected
      return on plan assets
              
              
              (509
              )
              
              (431
              )
              
              (1,019
              )
              
              (862
              )Amortization
      of transition obligation
              
              
              34
              
              
              34
              
              
              68
              
              
              68Amortization
      of prior service cost
              
              
              (582
              )
              
              (582
              )
              
              (1,164
              )
              
              (1,164
              )Amortization
      of actuarial loss
              
              
              746
              
              
              812
              
              
              1,492
              
              
              1,623Sub-total
              
              
              1,806
              
              
              1,748
              
              
              3,611
              
              
              3,496Regulatory
      adjustment
              
              
              105
              
              
              223
              
              
              210
              
              
              446Net
      postretirement benefit cost
              
              $
              1,911
              
              $
              1,971
              
              $
              3,821
              
              $
              3,942


16





Missouri
state law provides for the recovery in rates of SFAS No. 106, “Employers’
Accounting for Postretirement Benefits Other Than Pensions,” accrued costs
provided that such costs are funded through an independent, external funding
mechanism. Laclede Gas established Voluntary Employees’ Beneficiary Association
(VEBA) and Rabbi trusts as its external funding mechanisms. VEBA and Rabbi
trusts’ assets consist primarily of money market securities and mutual funds
invested in stocks and bonds.


Pursuant
to a MoPSC Order, the return on plan assets is based on the market-related value
of plan assets implemented prospectively over a four-year period. Gains and
losses not yet includible in postretirement benefit cost are amortized only to
the extent that such gain or loss exceeds 10% of the greater of the accumulated
postretirement benefit obligation or the market-related value of plan assets.
Such excess is amortized over the average remaining service life of active
participants. Previously, the recovery in rates for the postretirement benefit
costs was based on an alternative methodology for amortization of unrecognized
gains and losses as ordered by the MoPSC. The Commission ordered that the
recovery in rates be based on an annual allowance of $7.6 million, effective
August 1, 2007. The difference between this amount and postretirement
benefit cost based on the above and that otherwise would be included in the
Statements of Consolidated Income and Consolidated Comprehensive Income is
deferred as a regulatory asset or regulatory liability.








5.
            FINANCIAL
      INSTRUMENTS





In
the course of its business, Laclede Group’s non-regulated gas marketing
affiliate, Laclede Energy Resources, Inc. (LER), enters into fixed-price
commitments associated with the purchase or sale of natural gas. LER manages the
price risk associated with these commitments by either closely matching the
offsetting physical purchase or sale of natural gas at fixed prices or through
the use of exchange-traded futures contracts to lock in margins. At
March 31, 2008, LER’s unmatched positions were not material to Laclede
Group’s financial position or results of operations.





Settled
and open futures positions were as follows at
March 31, 2008:


Position
      Month
              
              MMBtu
                (millions)
              
              Average
                Price
      per
                MMBtuSettled
      short positions
              
              April
      2008
              
              2.63
              
              $
              8.66Settled
      long positions
              
              April
      2008
              
              .01
              
              
              9.67Open
      short futures positions
              
              May
      2008
              
              .17
              
              
              8.19June
      2008
              
              .15
              
              
              8.96July
      2008
              
              .15
              
              
              9.04August
      2008
              
              .15
              
              
              9.08September
      2008
              
              .45
              
              
              9.40October
      2008
              
              .15
              
              
              9.17November
      2008
              
              .58
              
              
              9.78December
      2008
              
              .34
              
              
              9.55January
      2009
              
              .31
              
              
              9.76February
      2009
              
              .31
              
              
              9.74March
      2009
              
              .27
              
              
              9.69November
      2009
              
              .10
              
              
              8.80December
      2009
              
              .15
              
              
              8.83January
      2010
              
              .15
              
              
              8.83February
      2010
              
              .15
              
              
              8.83March
      2010
              
              .10
              
              
              8.80Open
      long futures positions
              
              May
      2008
              
              .06
              
              
              7.60June
      2008
              
              .06
              
              
              7.60July
      2008
              
              .06
              
              
              7.60August
      2008
              
              .06
              
              
              7.60September
      2008
              
              .06
              
              
              7.60October
      2008
              
              .06
              
              
              7.60November
      2008
              
              .06
              
              
              7.60December
      2008
              
              .06
              
              
              7.60April
      2009
              
              .30
              
              
              8.94


17





The
above futures contracts are derivative instruments, and management has
designated these items as cash flow hedges of forecasted transactions. The fair
values of the instruments are recognized on the Consolidated Balance Sheets. The
change in the fair value of the effective portion of these hedge instruments is
recorded, net of tax, in Other Comprehensive Income. Accumulated Other
Comprehensive Income is a component of Total Common Stock Equity. These amounts
will reduce or be charged to Non-Regulated Gas Marketing Operating Revenues or
Expenses in the Statements of Consolidated Income as the hedged transactions
occur. As of March 31, 2008, it is expected that approximately $4.2
million of pre-tax unrealized losses will be reclassified into the Consolidated
Statement of Income during the next twelve months. The ineffective portions of
these hedge instruments are charged or credited to Non-Regulated Gas Marketing
Operating Revenues or Expenses. The net amount of pre-tax losses recognized in
earnings for the ineffective portion of cash flow hedges was $0.6 million for
the quarter ended March 31, 2008 and $0.3 million for the six months
ended March 31, 2008. The amount of pre-tax losses recognized in
earnings for the ineffective portion of cash flow hedges was $1.0 million for
the quarter ended March 31, 2007 and $0.5 million for the six months
ended March 31, 2007. Cash flows from hedging transactions are
classified in the same category as the cash flows from the items that are being
hedged in the Statements of Consolidated Cash Flows.








6.
            INCOME
      TAXES





The
Company adopted the provisions of FIN 48, “Accounting for the Uncertainty in
Income Taxes,” as of October 1, 2007. FIN 48 clarifies the accounting
for uncertainty in income taxes recognized in an enterprise’s financial
statements in accordance with FASB Statement No. 109, “Accounting for Income
Taxes.” Pursuant to FIN 48, the Company may recognize the tax benefit from a tax
position only if it is at least more likely than not that the tax position will
be sustained on examination by the taxing authorities, based on the technical
merits of the position.


Upon
adoption of FIN 48, the Company recognized a reduction to beginning retained
earnings for a cumulative-effect adjustment totaling $1.1 million, reclassified
$2.5 million of income tax liabilities from current to non-current liabilities,
and increased its liabilities for accrued interest and penalties. Total
unrecognized tax benefits as of October 1, 2007 were $2.1 million, all
of which would favorably impact the effective tax rate, if recognized. The
Company recognizes potential accrued interest and penalties related to its
uncertain tax positions as interest expense and other income deductions,
respectively. Potential interest and penalties accrued (net of income tax
benefit) associated with the Company’s uncertain tax positions were $1.5 million
at October 1, 2007. Unrecognized tax benefits, accrued interest
payable, and accrued penalties payable are included in the Other line of the
Deferred Credits and Other Liabilities section of the Consolidated Balance
Sheets.


The
Company is subject to U.S. federal income tax as well as income tax of state and
city jurisdictions. The Company is no longer subject to examination for fiscal
years prior to 2004. The statute of limitations remains open until
June 15, 2009 and 2010 for fiscal years 2005 and 2006, respectively.
However, during the quarter ended March 31, 2008, the Company
effectively settled an audit with the Internal Revenue Service for those
periods. Completion of the audit represents an event requiring the Company to
re-evaluate its uncertain tax positions. As a result, the Company recognized
fiscal years 2005 and 2006 unrecognized tax benefits of $1.0 million, which
favorably impacted the effective tax rate, and reversed $1.6 million of accrued
interest and penalties (net of income tax benefit). The Company currently
expects to recognize $0.4 million of tax benefits, including the reversal of
accrued interest and penalties, in June 2008 due to the expiration of the
statute of limitations for fiscal year 2004.


Total
FIN 48 unrecognized tax benefits at March 31, 2008 were $1.1 million,
all of which would favorably impact the effective tax rate, if recognized.
Potential interest and penalties associated with these liabilities were $0.1
million. The Company does not expect to make any significant tax payment related
to any of the above obligations within the next twelve months.


18





7.
            OTHER
      INCOME AND (INCOME DEDUCTIONS) –
NET




Three
      Months Ended
              
              Six
      Months EndedMarch
      31,
              
              March
      31,(Thousands)
              
              2008
              
              2007
              
              2008
              
              2007Allowance
      for funds used during construction
              
              $
              (16
              )
              $
              (2
              )
              $
              (25
              )
              $
              (16
              )Interest
      income
              
              
              1,047
              
              
              1,292
              
              
              2,820
              
              
              3,237Other
      income
              
              
              183
              
              
              224
              
              
              720
              
              
              546Other
      income deductions
              
              
              (138
              )
              
              (440
              )
              
              210
              
              
              609Other
      Income and (Income Deductions) – Net
              
              $
              1,076
              
              $
              1,074
              
              $
              3,725
              
              $
              4,376


The
decrease in Other Income and (Income Deductions) – Net for the six months ended
March 31, 2008, compared with the six months ended
March 31, 2007, was primarily due to lower income associated with
carrying costs applied to under-recoveries of gas costs, reduced income
associated with changes in the cash surrender value of life insurance policies,
and higher investment losses, partially offset by a reversal of tax-related
expenses. Carrying costs on under-recoveries of gas costs are recovered through
the Utility’s Purchased Gas Adjustment (PGA) Clause.








8.
            INFORMATION
      BY OPERATING SEGMENT





All
of Laclede Group’s subsidiaries are wholly owned. The Regulated Gas Distribution
segment consists of the regulated operations of Laclede Gas and is the core
business segment of Laclede Group. Laclede Gas is a public utility engaged in
the retail distribution and sale of natural gas serving an area in eastern
Missouri, with a population of approximately 2.1 million, including the City of
St. Louis and parts of ten other counties in eastern Missouri. The Non-Regulated
Gas Marketing segment includes the results of LER, a subsidiary engaged in the
non-regulated marketing of natural gas and related activities. Other includes
Laclede Pipeline Company’s transportation of liquid propane regulated by the
Federal Energy Regulatory Commission (FERC) as well as non-regulated activities,
including real estate development, the compression of natural gas, and financial
investments in other enterprises. These operations are conducted through five
subsidiaries. Other also includes Laclede Gas’ non-regulated merchandise sales
business. Certain intersegment revenues with Laclede Gas are not eliminated in
accordance with the provisions of SFAS No. 71, “Accounting for the Effects of
Certain Types of Regulation.” Those types of transactions include sales of
natural gas from Laclede Gas to LER, sales of natural gas from LER to Laclede
Gas, and transportation services provided by Laclede Pipeline Company to Laclede
Gas. These revenues are shown on the Intersegment revenues lines in the table
under Regulated Gas Distribution, Non-Regulated Gas Marketing, and Other
columns, respectively.


Previously,
SM&P comprised the Non-Regulated Services segment and its financial
information was presented separately. As discussed in Note 2, Discontinued
Operations, the Company sold SM&P on March 31, 2008. Accordingly,
financial information for this segment has been reclassified and reported as
discontinued operations in the Consolidated Financial Statements. Under
generally accepted accounting principles, general corporate overhead expenses
may not be reported in discontinued operations. Amounts of such expenses that
were previously reported by SM&P but that are required to be reported in
continuing operations are reflected in the “Unallocated & Eliminations”
column of the table below. Prior periods reported in the table below have been
reclassified to conform to the current-period presentation of segment
information.
































19











Non-Regulated
            
            Regulated
            
            
            
            UnallocatedGas
            
            Gas
            
            
            
            &(Thousands)
            
            Distribution
            
            Marketing
            
            Other
            
            Eliminations
            
            ConsolidatedThree
      Months EndedMarch
      31, 2008Revenues
      from externalcustomers
            
            $
            507,031
            
            $
            237,748
            
            $
            971
            
            $
            —
            
            $
            745,750Intersegment
      revenues
            
            
            58
            
            
            1,639
            
            
            259
            
            
            —
            
            
            1,956Total
      operating revenues
            
            
            507,089
            
            
            239,387
            
            
            1,230
            
            
            —
            
            
            747,706Income
      (loss) from continuingoperations
            
            
            25,331
            
            
            4,861
            
            
            38
            
            
            (170
            )
            
            30,060Total
      assets of continuingoperations
            
            
            1,454,369
            
            
            152,256
            
            
            175,976
            
            
            (76,737
            )
            
            1,705,864Six
      Months EndedMarch
      31, 2008Revenues
      from externalcustomers
            
            $
            826,705
            
            $
            416,408
            
            $
            2,011
            
            $
            —
            
            $
            1,245,124Intersegment
      revenues
            
            
            1,276
            
            
            4,777
            
            
            519
            
            
            —
            
            
            6,572Total
      operating revenues
            
            
            827,981
            
            
            421,185
            
            
            2,530
            
            
            —
            
            
            1,251,696Income
      (loss) from continuingoperations
            
            
            41,078
            
            
            10,515
            
            
            267
            
            
            (264
            )
            
            51,596Total
      assets of continuingoperations
            
            
            1,454,369
            
            
            152,256
            
            
            175,976
            
            
            (76,737
            )
            
            1,705,864Three
      Months EndedMarch
      31, 2007Revenues
      from externalcustomers
            
            $
            483,254
            
            $
            157,837
            
            $
            998
            
            $
            —
            
            $
            642,089Intersegment
      revenues
            
            
            10,339
            
            
            18,013
            
            
            259
            
            
            —
            
            
            28,611Total
      operating revenues
            
            
            493,593
            
            
            175,850
            
            
            1,257
            
            
            —
            
            
            670,700Income
      (loss) from continuingoperations
            
            
            20,711
            
            
            3,322
            
            
            149
            
            
            (173
            )
            
            24,009Total
      assets of continuingoperations
            
            
            1,370,644
            
            
            113,825
            
            
            75,588
            
            
            (67,214
            )
            
            1,492,843Six
      Months EndedMarch
      31, 2007Revenues
      from externalcustomers
            
            $
            823,710
            
            $
            295,525
            
            $
            1,915
            
            $
            —
            
            $
            1,121,150Intersegment
      revenues
            
            
            18,371
            
            
            33,792
            
            
            519
            
            
            —
            
            
            52,682Total
      operating revenues
            
            
            842,081
            
            
            329,317
            
            
            2,434
            
            
            —
            
            
            1,173,832Income
      (loss) from continuingoperations
            
            
            36,368
            
            
            7,117
            
            
            288
            
            
            (356
            )
            
            43,417Total
      assets of continuingoperations
            
            
            1,370,644
            
            
            113,825
            
            
            75,588
            
            
            (67,214
            )
            
            1,492,843








20








9.
            COMMITMENTS
      AND CONTINGENCIES





Laclede
Gas owns and operates natural gas distribution, transmission and storage
facilities, the operations of which are subject to various environmental laws,
regulations and interpretations. While environmental issues resulting from such
operations arise in the ordinary course of business, such issues have not
materially affected the Company’s or Laclede Gas’ financial position and results
of operations. As environmental laws, regulations, and their interpretations
change, however, Laclede Gas may be required to incur additional costs. See Note
14 to the Consolidated Financial Statements included in the Company’s Fiscal
Year 2007 Form 10-K for information relative to environmental matters
generally. There have been no significant changes relative to environmental
matters during the six months ended March 31, 2008.


On
December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2
million related to Laclede Gas’ recovery of its purchased gas costs applicable
to fiscal 2005. On September 14, 2007, the Staff withdrew its pursuit
of $5.5 million of the disallowance it had originally proposed. Laclede Gas
believes that the remaining $1.7 million of the MoPSC Staff’s proposed
disallowance lacks merit and intends to vigorously oppose the adjustment in
proceedings before the MoPSC.


On
December 31, 2007, the MoPSC Staff filed a memorandum with the
Commission proposing a disallowance of $2.8 million related to the Company’s
recovery of its purchased gas costs applicable to fiscal 2006. Laclede Gas
believes that the MoPSC Staff’s position lacks merit and intends to vigorously
oppose the adjustment in proceedings before the MoPSC. In addition, the MoPSC’s
Staff’s memorandum raised questions regarding whether certain sales and capacity
release transactions subject to the FERC’s oversight were consistent with the
FERC’s regulations and policies regarding capacity release. The Company has
commenced an internal review of the questions raised by the MoPSC Staff and has
notified the FERC Staff that it has taken this action.


As
reported in Note 2, Discontinued Operations, during the quarter ended
March 31, 2008, the Company sold 100% of its interest in its
wholly-owned subsidiary SM&P. The sales agreement (Agreement) includes
representations and warranties customary for such transactions, including, among
others, representations and warranties of the parties as to brokers’ fees; of
SM&P as to its financial status, contracts, title to and condition of
personal and real property, taxes, legal compliance, environmental matters,
employee benefits, and intellectual property. The Agreement also includes
customary indemnification provisions under which Laclede’s aggregate
indemnification obligations are limited to a maximum of $7 million for most
claims. Obligations subject to this maximum apply only in the event claims
exceed a stated deductible, both individually and in the aggregate. However,
this maximum limitation and deductible do not apply to obligations associated
with taxes, employee benefits, title to personal property, and certain other
fundamental representations and warranties. A maximum potential future payment
amount cannot be estimated for these obligations. The terms of the
indemnifications in the Agreement are generally dependent upon the statute of
limitations applicable to the particular representations and warranties made by
the Company, although certain representations and warranties have an indefinite
life under the Agreement. As of March 31, 2008, the carrying amount of
the liability recognized for these indemnification obligations was $0.2 million,
based on the Company’s assessment of risk.


Laclede
Group is involved in other litigation, claims and investigations arising in the
normal course of business. While the results of such litigation cannot be
predicted with certainty, management, after discussion with counsel, believes
that the final outcome will not have a material adverse effect on the
consolidated financial position or results of operations of the
Company.


Laclede
Gas has several operating leases for the rental of vehicles that contain
provisions requiring Laclede Gas to guarantee certain amounts related to the
residual value of the leased property. These leases have various terms, the
longest of which extends through 2014. At March 31, 2008, the maximum
guarantees under these leases are $1.7 million. However, the Utility estimates
that the residual value of the leased vehicles will be adequate to satisfy most
of the guaranteed amounts. At March 31, 2008, the carrying value of
the liability recognized for these guarantees was $0.3 million.


SM&P
has several operating leases, the aggregate annual cost of which is $8.2
million, consisting primarily of 12-month operating leases, with renewal
options, for vehicles used in its business. Laclede Group previously had
parental guarantees of certain of those vehicle leases but was released from
those guarantees on or before March 31, 2008, concurrent with the sale
of SM&P.


Laclede
Gas and LER have entered into various contracts, expiring on dates through 2017,
for the storage, transportation, and supply of natural gas. Minimum payments
required under the contracts in place at March 31, 2008 are estimated
at approximately $2.3 billion. Additional contracts are generally entered into
prior to or during the heating season.


Laclede
Group had guarantees totaling $50.0 million for performance and payment of
certain wholesale gas supply purchases by LER, as of March 31, 2008.
Since that date, total guarantees issued by Laclede Group on behalf of LER
decreased by $1.0 million bringing the total to $49.0 million in guarantees
outstanding at April 23, 2008. No amounts have been recorded for these
guarantees in the financial statements.


21








10.
            SUBSEQUENT
      EVENT





In
fiscal year 2003, Laclede Group formed Laclede Capital Trust I (Trust), its
affiliated, nonconsolidated trust, for the sole purpose of issuing trust
securities and investing the gross proceeds of the sale of the trust securities
in debt securities of Laclede Group. All of the Trust securities have a
liquidation value of $25 per share and a dividend rate of 7.70%, with all of its
common securities being owned by Laclede Group and all of its preferred
securities being sold to the public. The Trust’s sole asset is the Company’s
$46.4 million aggregate principal amount of 7.70% debentures due
December 1, 2032 (Debentures), which have the same economic terms as
the Trust securities and are reflected as long-term debt to unconsolidated
affiliate trust on the Consolidated Balance Sheets. The Company’s investment in
the Trust common securities is included on the Other Investments line on the
Consolidated Balance Sheets.


On
April 1, 2008, Laclede Group announced the redemption in full of its
Debentures on May 5, 2008 (redemption date), which also triggers the
redemption of all of the Trust common and preferred securities on the redemption
date. Interest on the Debentures and distributions on the Trust securities will
cease to accrue on and after the redemption date. Upon redemption, Laclede Group
anticipates recognizing a pre-tax loss of approximately $1.3 million
attributable to unamortized debt issuance costs. A portion of the proceeds
received from the sale of SM&P will be used to fund the
redemption.





Laclede
Gas Company’s Financial Statements and Notes to Financial Statements are
included in Exhibit 99.1 to this report.





22


ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS





THE
LACLEDE GROUP, INC.





This
management’s discussion analyzes the financial condition and results of
operations of The Laclede Group, Inc. (Laclede Group or the Company) and its
subsidiaries. It includes management’s view of factors that affect its business,
explanations of past financial results including changes in earnings and costs
from the prior year periods, and their effects on overall financial condition
and liquidity.





Certain
matters discussed in this report, excluding historical information, include
forward-looking statements. Certain words, such as “may,” “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “plan,” “seek,” and similar words and
expressions identify forward-looking statements that involve uncertainties and
risks. Future developments may not be in accordance with our expectations or
beliefs and the effect of future developments may not be those anticipated.
Among the factors that may cause results to differ materially from those
contemplated in any forward-looking statement are:





•
            weather
      conditions and catastrophic events, particularly severe weather in the
      natural gas producing areas of the country;•
            volatility
      in gas prices, particularly sudden and sustained spikes in natural gas
      prices;•
            the
      impact of higher natural gas prices on our competitive position in
      relation to suppliers of alternative heating sources, such as
      electricity;•
            changes
      in gas supply and pipeline availability; particularly those changes that
      impact supply for and access to our market area;•
            legislative,
      regulatory and judicial mandates and decisions, some of which may be
      retroactive, including those affecting•
            allowed
      rates of return•
            incentive
      regulation•
            industry
      structure•
            purchased
      gas adjustment provisions•
            rate
      design structure and implementation•
            franchise
      renewals•
            environmental
      or safety matters•
            taxes•
            pension
      and other postretirement benefit liabilities and funding
      obligations•
            accounting
      standards;•
            the
      results of litigation;•
            retention
      of, ability to attract, ability to collect from and conservation efforts
      of customers;•
            capital
      and energy commodity market conditions, including the ability to obtain
      funds for necessary capital expenditures and general operations and the
      terms and conditions imposed for obtaining sufficient gas
      supply;•
            discovery
      of material weakness in internal controls; and•
            employee
      workforce issues.





Readers
are urged to consider the risks, uncertainties and other factors that could
affect our business as described in this report. All forward-looking statements
made in this report rely upon the safe harbor protections provided under the
Private Securities Litigation Reform Act of 1995. We do not, by including this
statement, assume any obligation to review or revise any particular
forward-looking statement in light of future events.





The
Management’s Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Company’s Consolidated
Financial Statements and the Notes thereto.




















23





THE
LACLEDE GROUP, INC.





RESULTS
OF OPERATIONS





Laclede
Group’s earnings are primarily derived from the regulated activities of its
largest subsidiary, Laclede Gas Company (Laclede Gas or the Utility), Missouri’s
largest natural gas distribution company. Laclede Gas is regulated by the
Missouri Public Service Commission (MoPSC or Commission) and serves the City of
St. Louis and parts of ten other counties in eastern Missouri. Laclede Gas
delivers natural gas to retail customers at rates, and in accordance with
tariffs, authorized by the MoPSC. The Utility’s earnings are primarily generated
by the sale of heating energy. The Utility’s innovative weather mitigation rate
design lessens the impact of weather volatility on Laclede Gas customers during
cold winters and stabilizes the Utility’s earnings by recovering fixed costs
more evenly during the heating season. Due to the seasonal nature of the
business of Laclede Gas, Laclede Group’s earnings are seasonal in nature and are
typically concentrated in the November through April period, which generally
corresponds with the heating season.





On
March 31, 2008, the Company completed the sale of 100% of its interest
in its wholly-owned subsidiary SM&P Utility Resources, Inc. (SM&P) to
Stripe Acquisition, Inc. (an affiliate of Kohlberg Management VI, LLC) for $85
million in cash, subject to certain closing and post-closing adjustments.
SM&P is an underground facilities locating and marking business that
comprised Laclede Group’s Non-Regulated Services operating segment. The sales
agreement included representations, warranties, and indemnification provisions
customary for such transactions and is filed as an exhibit to this Form 10-Q. In
accordance with generally accepted accounting principles, the results of
operations for SM&P are reported as discontinued operations in the
Consolidated Statements of Income and its associated assets and liabilities are
classified separately in the Consolidated Balance Sheets.





Laclede
Energy Resources, Inc. (LER) is engaged in the non-regulated marketing of
natural gas and related activities. LER markets natural gas to both on-system
Utility transportation customers and customers outside of Laclede Gas’
traditional service territory, including large retail and wholesale customers.
As such, LER’s operations and customer base are subject to fluctuations in
market conditions.





Other
subsidiaries provide less than 10% of consolidated revenues.





Laclede
Group’s strategy continues to include efforts to stabilize and improve the
performance of its core Utility, while developing non-regulated businesses and
taking a measured approach in the pursuit of additional growth opportunities
that complement the Utility business.





As
for the Utility, mitigating the impact of weather fluctuations on Laclede Gas
customers while improving the ability to recover its authorized distribution
costs and return continues to be a fundamental component of Laclede Group’s
strategy. The Utility’s distribution costs are the essential, primarily fixed
expenditures it must incur to operate and maintain a more than 16,000 mile
natural gas distribution system and related storage facilities. In addition,
Laclede Gas is working to continually improve its ability to provide reliable
natural gas service at a reasonable cost, while maintaining and building a
secure and dependable infrastructure. The settlement of the Utility’s 2007 rate
case resulted in enhancements to the Utility’s weather mitigation rate design
that better ensure the recovery of its fixed costs and margins despite
variations in sales volumes due to the impacts of weather and other factors that
affect customer usage. The Utility’s income from off-system sales remains
subject to fluctuations in market conditions. In conjunction with the settlement
of the 2005 rate case, effective October 1, 2005, the Utility retained
all pre-tax income from off-system sales and capacity release revenues up to $12
million annually. Pre-tax amounts in excess of $12 million were shared with
customers, with the Utility retaining 50% of amounts exceeding that threshold.
The Stipulation & Agreement approved by the MoPSC in the Utility’s 2007 rate
case increases the portion of pre-tax income from off-system sales and capacity
release revenues that is shared with customers. Effective
October 1, 2007, the Utility is allowed to retain 15% to 25% of the
first $6 million in annual income earned (depending on the level of income
earned) and 30% of income exceeding $6 million annually. Some of the factors
impacting the level of off-system sales include the availability and cost of the
Utility’s natural gas supply, the weather in its service area, and the weather
in other markets. When Laclede Gas’ service area experiences warmer-than-normal
weather while other markets experience colder weather or supply constraints,
some of the Utility’s natural gas supply is available for off-system sales and
there may be a demand for such supply in other markets.





Laclede
Gas continues to work actively to reduce the impact of higher costs associated
with wholesale natural gas prices by strategically structuring its natural gas
supply portfolio and through the use of financial instruments. Nevertheless, the
cost of purchased gas remains high, relative to historical levels. The Utility’s
Purchased Gas Adjustment (PGA) Clause allows Laclede Gas to flow through to
customers, subject to prudence review, the cost of purchased gas supplies,
including costs, cost reductions, and related carrying costs associated with the
use of financial instruments to hedge the purchase price of natural gas, as well
as gas inventory carrying costs. The Utility believes it will continue to be
able to


24


obtain
sufficient gas supply. The generally higher price levels may continue to affect
sales volumes (due to the conservation efforts of customers) and cash flows
(associated with the timing of collection of gas costs and related accounts
receivable from customers).





Laclede
Group continues to develop its other subsidiaries. LER continues to focus on
growing its markets on a long-term and sustainable basis by providing both
on-system Utility transportation customers and customers outside of Laclede Gas’
traditional service area with another choice in non-regulated natural gas
suppliers. Nevertheless, income from LER’s operations is subject to fluctuations
in market conditions.





Quarter
Ended March 31, 2008





Earnings





Overview – Net Income (Loss) by
      Operating Segment
            
            
            
            Quarter
      EndedMarch
      31,(millions,
      after-tax)
            
            
            
            
            2008
            
            
            
            
            2007Regulated
      Gas Distribution
            
            
            
            $
            25.3
            
            
            
            $
            20.7Non-Regulated
      Gas Marketing
            
            
            
            
            4.9
            
            
            
            
            3.3Other
            
            
            
            
            (0.1
            )
            
            
            
            —Income
      from Continuing Operations
            
            
            
            
            30.1
            
            
            
            
            24.0Income
      (Loss) from Discontinued Operations
            
            
            
            
            21.3
            
            
            
            
            (3.2
            )Net
      Income
            
            
            
            $
            51.4
            
            
            
            $
            20.8





Laclede
Group’s consolidated net income was $51.4 million for the quarter ended
March 31, 2008, compared with $20.8 million for the quarter ended
March 31, 2007. Basic and diluted earnings per share were $2.38 and
$2.37, respectively, for the quarter ended March 31, 2008 compared
with basic and diluted earnings per share of $0.97 for the quarter ended
March 31, 2007. Earnings per share increased compared to last year
largely due to the one-time gain realized on the sale of Laclede Group’s
wholly-owned subsidiary, SM&P. Earnings results reported by both Laclede
Group’s regulated gas distribution segment and its non-regulated gas marketing
segment also increased as compared to performance in the quarter ended
March 31, 2007.





Income
from Continuing Operations





Laclede
Group’s income from continuing operations was $30.1 million for the quarter
ended March 31, 2008, compared with $24.0 million for the quarter
ended March 31, 2007. Basic and diluted earnings per share from
continuing operations were $1.39 for the quarter ended March 31, 2008
compared with basic and diluted earnings per share of $1.12 for the quarter
ended March 31, 2007. Earnings results reported by both Laclede
Group’s regulated gas distribution segment and its non-regulated gas marketing
segment increased over the quarter ended March 31, 2007. Variations
in income from continuing operations were primarily attributable to the
factors described below.





Regulated
Gas Distribution net income increased by $4.6 million for the quarter ended
March 31, 2008, compared with the quarter ended
March 31, 2007. The increase in net income was primarily due to the
following factors, quantified on a pre-tax basis:








•
            the
      benefit of the general rate increase, effective August 1, 2007,
      totaling $11.5 million; and,•
            the
      recognition of previously unrecognized tax benefits and the reversal of
      related expenses, totaling $1.1
million.





These
factors were partially offset by:





•
            lower
      income from off-system sales and capacity release, totaling $4.2 million,
      primarily due to a reduction in the Utility’s share of such income
      (pursuant to the 2007 rate case); and,•
            an
      increase in the provision for uncollectible accounts, totaling $1.8
      million.





The
Non-Regulated Gas Marketing segment reported an increase in earnings of $1.6
million compared with the same quarter last year, primarily due to the benefit
of a reversal in tax-related expenses during the quarter and higher sales
volumes, partially offset by lower margins on sales of natural gas by
LER.


25





Regulated
Operating Revenues and Operating Expenses





Laclede
Gas passes on to Utility customers (subject to prudence review) increases and
decreases in the wholesale cost of natural gas in accordance with its PGA
Clause. The volatility of the wholesale natural gas market results in
fluctuations from period to period in the recorded levels of, among other items,
revenues and natural gas cost expense. Nevertheless, increases and decreases in
the cost of gas associated with system gas sales volumes have no direct effect
on net revenues and net income.





Regulated
operating revenues for the quarter ended March 31, 2008 were $507.1
million, or $13.5 million more than the same quarter last year. Temperatures
experienced in the Utility’s service area during the quarter were 10.1% colder
than the same quarter last year and 1.0% colder than normal. Total system therms
sold and transported were 0.45 billion for the quarter ended
March 31, 2008 compared with 0.40 billion for the same quarter last
year. Total off-system therms sold and transported were 0.06 billion for the
quarter ended March 31, 2008 compared with 0.09 billion for the same
quarter last year. The increase in regulated operating revenues was primarily
attributable to the following factors:





MillionsHigher
      system sales volumes, primarily due to colder weather, and other
      variations
            
            $
            42.6Lower
      wholesale gas costs passed on to Utility customers (subject to prudence
      review by the MoPSC)
            
            
            (26.6
            )Lower
      off-system sales volumes
            
            
            (24.0
            )General
      rate increase, effective August 1, 2007
            
            
            11.5Higher
      prices charged for off-system sales
            
            
            10.6Lower
      Infrastructure System Replacement Surcharge (ISRS)
revenues
            
            
            (0.6
            )Total
      Variation
            
            $
            13.5





Regulated
operating expenses for the quarter ended March 31, 2008 increased $7.0
million from the same quarter last year. Natural and propane gas expense
increased $4.0 million, or 1.1%, from last year’s level, primarily attributable
to higher system volumes purchased for sendout, partially offset by lower rates
charged by our suppliers and lower off-system gas expense. Other operation and
maintenance expenses increased $1.9 million, or 4.5%, primarily due to a higher
provision for uncollectible accounts, the effect of a gain on the disposal of
assets recorded last year, and higher wage rates. These factors were partially
offset by decreased maintenance and distribution charges. Taxes, other than
income, increased $0.9 million, or 3.2%, primarily due to higher gross receipts
taxes (attributable to the increased revenues).





Non-Regulated
Gas Marketing Operating Revenues and Operating Expenses





Non-regulated
gas marketing operating revenues increased $63.5 million primarily due to
increased sales volumes and increased per unit gas sales prices charged by LER.
The increase in non-regulated gas marketing operating expenses totaling $63.1
million was primarily associated with increased volumes purchased and higher
prices charged by suppliers.





Interest
Charges





The
$1.6 million decrease in interest charges was primarily due to a reduction in
interest on long-term debt resulting from the November 2007 maturity of $40
million principal amount of 7 1/2% First Mortgage Bonds and the reversal of
tax-related expenses.





Income
Taxes





The
$2.5 million increase in income taxes was primarily due to higher pre-tax
income, partially offset by the recognition of previously unrecognized tax
benefits recorded pursuant to Financial Accounting Standards Board
Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income
Taxes.”





Income
(Loss) from Discontinued Operations





Laclede
Group closed on the sale of 100% of its interest in SM&P on
March 31, 2008. The sale resulted in after-tax earnings of $25.8
million, net of associated costs of disposal, subject to a minor post-closing
adjustment, the amount of which is yet to be determined. Income from
discontinued operations for the quarter ended March 31, 2008 was $21.3
million, consisting of the net effect of the sale and SM&P’s seasonal
operating loss, compared with a loss of $3.2 million for the quarter ended
March 31, 2007. Basic and diluted earnings per share from discontinued
operations were $0.99 and $0.98, respectively, for the quarter ended
March 31, 2008 compared with a basic and diluted loss of $0.15 per
share for the same period last year.


26





Six
Months Ended March 31, 2008





Earnings




Overview – Net Income (Loss) by
      Operating Segment
            
            
            
            Six
      Months EndedMarch
      31,(millions,
      after-tax)
            
            
            
            
            2008
            
            
            
            
            2007Regulated
      Gas Distribution
            
            
            
            $
            41.1
            
            
            
            $
            36.4Non-Regulated
      Gas Marketing
            
            
            
            
            10.5
            
            
            
            
            7.1Other
            
            
            
            
            —
            
            
            
            
            (0.1
            )Income
      from Continuing Operations
            
            
            
            
            51.6
            
            
            
            
            43.4Income
      (Loss) from Discontinued Operations
            
            
            
            
            20.7
            
            
            
            
            (3.5
            )Net
      Income
            
            
            
            $
            72.3
            
            
            
            $
            39.9





Laclede
Group’s consolidated net income was $72.3 million for the six months ended
March 31, 2008, compared with $39.9 million for the six months ended
March 31, 2007. Basic and diluted earnings per share were $3.35 and
$3.34, respectively, for the six months ended March 31, 2008 compared
with basic and diluted earnings per share of $1.86 for the six months ended
March 31, 2007. Earnings per share increased compared to last year
largely due to the one-time gain realized on the sale of Laclede Group’s
wholly-owned subsidiary, SM&P. Earnings results reported by both Laclede
Group’s regulated gas distribution segment and its non-regulated gas marketing
segment also increased over the six months ended
March 31, 2007.





Income
from Continuing Operations





Laclede
Group’s income from continuing operations was $51.6 million for the six months
ended March 31, 2008, compared with $43.4 million for the six months
ended March 31, 2007. Basic and diluted earnings per share from
continuing operations were $2.39 and $2.38, respectively, for the six months
ended March 31, 2008 compared with basic and diluted earnings per
share of $2.03 and $2.02, respectively, for the six months ended
March 31, 2007. Earnings results reported by both Laclede Group’s
regulated gas distribution segment and its non-regulated gas marketing segment
increased over the same period last year. Variations in income from
continuing operations were primarily attributable to the factors described
below.





Regulated
Gas Distribution net income increased by $4.7 million for the six months ended
March 31, 2008, compared with the six months ended
March 31, 2007. The benefit of the general rate increase effective
August 1, 2007, totaling $21.6 million, was partially offset by the
following factors, quantified on a pre-tax basis:





•
            lower
      income from off-system sales and capacity release, totaling $7.5 million,
      primarily due to a reduction in the Utility’s share of such income
      (pursuant to the 2007 rate case);•
            the
      net effect of lower system gas sales margins, primarily due to an
      unusually late start to the heating season, and other variations totaling
      $2.7 million;•
            an
      increase in the provision for uncollectible accounts, totaling $2.3
      million; and,•
            increases
      in operation and maintenance expenses totaling $1.8
    million.





The
Non-Regulated Gas Marketing segment reported an increase in earnings of $3.4
million for the six months ended March 31, 2008, compared with the
same period last year, primarily due to the reversal of tax-related expenses,
increased sales volumes, and higher margins on sales of natural gas by
LER.





Regulated
Operating Revenues and Operating Expenses





Regulated
operating revenues for the six months ended March 31, 2008 were $828.0
million, or $14.1 million less than the same period last year. Temperatures
experienced in the Utility’s service area during the six months ended
March 31, 2008 were 5.9% colder than the same period last year, but
2.9% warmer than normal. Total system therms sold and transported were 0.72
billion for the six months ended March 31, 2008 compared with 0.68
billion for the same period last year. Total off-system therms sold and
transported were 0.11 billion for the six months ended March 31, 2008
compared with 0.15 billion for the same period last year. Increases and
decreases in the cost of gas associated with system gas sales volumes have no
direct effect on net revenues and net income. The decrease in regulated
operating revenues was primarily attributable to the following
factors:


27








MillionsLower
      wholesale gas costs passed on to Utility customers (subject to prudence
      review by the MoPSC)
            
            $
            (43.2
            )Lower
      off-system sales volumes
            
            
            (33.3
            )Higher
      system sales volumes, primarily due to colder weather, and other
      variations
            
            
            30.2General
      rate increase, effective August 1, 2007
            
            
            21.6Higher
      prices charged for off-system sales
            
            
            11.7Lower
      ISRS revenues
            
            
            (1.1
            )Total
      Variation
            
            $
            (14.1
            )





Regulated
operating expenses for the six months ended March 31, 2008 decreased
$21.4 million from the same period last year. Natural and propane gas expense
decreased $24.7 million, or 4.0%, from last year’s level, primarily attributable
to lower rates charged by our suppliers and lower off-system gas expense,
partially offset by increased system volumes purchased for sendout. Other
operation and maintenance expenses increased $4.1 million, or 5.0%, primarily
due to a higher provision for uncollectible accounts, higher injuries and
damages expense, the effect of a gain on the disposal of assets recorded last
year, increased pension costs, and higher wage rates. These factors were
partially offset by lower group insurance charges and other variations.
Depreciation and amortization expense increased $0.4 million, or 2.4%, primarily
due to additional depreciable property. Taxes, other than income, decreased $1.2
million, or 2.5%, primarily due to decreased gross receipts taxes and lower
property taxes.





Non-Regulated
Gas Marketing Operating Revenues and Operating Expenses





Non-regulated
gas marketing operating revenues increased $91.9 million primarily due to
increased sales volumes and higher per unit gas sales prices charged by LER. The
increase in non-regulated gas marketing operating expenses totaling $88.3
million was primarily associated with increased volumes purchased and higher
prices charged by suppliers.





Other
Income and (Income Deductions) – Net





The
$0.7 million decrease in other income and income deductions – net was primarily
due to lower income associated with carrying costs applied to under-recoveries
of gas costs, reduced income associated with changes in the cash surrender value
of life insurance policies, and higher investment losses, partially offset by a
reversal of tax-related expenses. Carrying costs on under-recoveries of gas
costs are recovered through the Utility’s Purchased Gas Adjustment
Clause.





Interest
Charges





The
$1.4 million decrease in interest charges was primarily due to a reduction in
interest on long-term debt resulting from the November 2007 maturity of $40
million principal amount of 7 1/2% First Mortgage Bonds and the reversal of
tax-related expenses, partially offset by higher interest on short-term debt.
Average short-term interest rates were 4.7% for the six months ended
March 31, 2008 compared with 5.3% for the same period last year.
Average short-term borrowings were $236.4 million and $190.7 million for the six
months ended March 31, 2008 and 2007, respectively.





Income
Taxes





The
$3.6 million increase in income taxes was primarily due to higher pre-tax
income, partially offset by the recognition of previously unrecognized tax
benefits recorded pursuant to FIN 48.





Income
(Loss) from Discontinued Operations





Income
from discontinued operations for the six months ended March 31, 2008
was $20.7 million, consisting of the net effect of the aforementioned sale and
SM&P’s operating loss for the period, compared with a loss of $3.5 million
for the same period last year. Basic and diluted earnings per share from
discontinued operations were $0.96 for the six months ended
March 31, 2008 compared with a basic and diluted loss of $0.17 and
$0.16 per share, respectively, for the same period last year.





28


REGULATORY
MATTERS





During
fiscal 2006, the MoPSC approved permanent modifications to the Cold Weather Rule
affecting the disconnection and reconnection practices of utilities during the
winter heating season. Those modifications included provisions to allow the
Utility to obtain accounting authorizations and defer for future recovery
certain costs incurred with the modifications. During fiscal 2007, the
Utility deferred for future recovery $2.7 million of costs associated with the
fiscal 2007 heating season. On October 31, 2007, the Utility
filed for determination and subsequent recovery of the deferred amount. On
November 16, 2007, the MoPSC directed the MoPSC Staff and the Missouri
Office of Public Counsel to submit their positions regarding the Utility’s
filing by February 28, 2008. On February 28, 2008, the
Utility and MoPSC Staff filed a Non-unanimous Stipulation & Agreement in
which these parties agreed to a recovery of $2.5 million of costs. The
Non-unanimous Stipulation & Agreement was opposed by the Office of the
Public Counsel, and a hearing in this matter was held before the Commission on
March 31, 2008. On April 17, 2008, the Commission issued its
Report and Order in which it determined that the $2.5 million of costs
recommended by the Utility and MoPSC Staff was reasonable and would be approved.
Consistent with the approved amount, the Utility recorded a reduction in its
deferral totaling $0.2 million during the quarter ended March
31, 2008.





On
November 9, 2007, the Utility made an ISRS filing with the Commission
designed to increase revenues by $1.6 million annually. On
January 15, 2008, the Commission approved implementation of the
surcharge to be effective January 18, 2008. On
April 25, 2008, the Utility made an ISRS filing with the Commission
designed to increase revenues by $1.9 million annually, pending approval by the
Commission.





On
December 28, 2006, the MoPSC Staff proposed a disallowance of $7.2
million related to Laclede Gas’ recovery of its purchased gas costs applicable
to fiscal 2005. On September 14, 2007, the Staff withdrew its pursuit
of $5.5 million of the disallowance it had originally proposed. Laclede Gas
believes that the remaining $1.7 million of the MoPSC Staff’s proposed
disallowance lacks merit and intends to vigorously oppose the adjustment in
proceedings before the MoPSC.





On
December 31, 2007, the MoPSC Staff filed a memorandum with the
Commission proposing a disallowance of $2.8 million related to the Company’s
recovery of its purchased gas costs applicable to fiscal 2006. Laclede Gas
believes that the MoPSC Staff’s position lacks merit and intends to vigorously
oppose the adjustment in proceedings before the MoPSC. In addition, the MoPSC’s
Staff’s memorandum raised questions regarding whether certain sales and capacity
release transactions subject to the Federal Energy Regulatory Commission
(FERC)’s oversight were consistent with the FERC’s regulations and policies
regarding capacity release. The Company has commenced an internal review of the
questions raised by the MoPSC Staff and has notified the FERC Staff that it has
taken this action.








CRITICAL
ACCOUNTING POLICIES





Our
discussion and analysis of our financial condition, results of operations,
liquidity, and capital resources is based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. Generally accepted
accounting principles require that we make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. We evaluate our estimates on an
ongoing basis. We base our estimates on historical experience and on various
other assumptions that we believe are reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates. We believe the following
represent the more significant items requiring the use of judgment and estimates
in preparing our consolidated financial statements:





Allowances
      for doubtful accounts – Estimates of the collectibility of trade accounts
      receivable are based on historical trends, age of receivables, economic
      conditions, credit risk of specific customers, and other factors. The
      Utility’s provision for uncollectible accounts is dependent on the
      regulatory treatment provided for such costs. As approved by the MoPSC,
      the Utility is allowed to defer for future recovery certain costs
      associated with amendments to the Cold Weather Rule.Employee
      benefits and postretirement obligations – Pension and postretirement
      obligations are calculated by actuarial consultants that utilize several
      statistical factors and other assumptions related to future events, such
      as discount rates, returns on plan assets, compensation increases, and
      mortality rates. For the Utility, the amount of expense recognized and the
      amounts reflected in other comprehensive income are dependent upon the
      regulatory treatment provided for such costs, as discussed further below.
      Certain liabilities related to group medical benefits and workers’
      compensation claims, portions of which are self-insured and/or contain
      “stop-loss” coverage with third-party insurers to limit exposure, are
      established based on historical
trends.





29





Laclede
Gas accounts for its regulated operations in accordance with Statement of
Financial Accounting Standards (SFAS) No. 71, “Accounting for the Effects of
Certain Types of Regulation.” This Statement sets forth the application of
accounting principles generally accepted in the United States of America for
those companies whose rates are established by or are subject to approval by an
independent third-party regulator. The provisions of SFAS No. 71 require, among
other things, that financial statements of a regulated enterprise reflect the
actions of regulators, where appropriate. These actions may result in the
recognition of revenues and expenses in time periods that are different than
non-regulated enterprises. When this occurs, costs are deferred as assets in the
balance sheet (regulatory assets) and recorded as expenses when those amounts
are reflected in rates. Also, regulators can impose liabilities upon a regulated
company for amounts previously collected from customers and for recovery of
costs that are expected to be incurred in the future (regulatory liabilities).
Management believes that the current regulatory environment supports the
continued use of SFAS No. 71 and that all regulatory assets and regulatory
liabilities are recoverable or refundable through the regulatory process.
Management believes the following represent the more significant items recorded
through the application of SFAS No. 71:





The
      Utility’s PGA Clause allows Laclede Gas to flow through to customers,
      subject to prudence review, the cost of purchased gas supplies, including
      the costs, cost reductions, and related carrying costs associated with the
      Utility’s use of natural gas financial instruments to hedge the purchase
      price of natural gas. The difference between actual costs incurred and
      costs recovered through the application of the PGA are recorded as
      regulatory assets and regulatory liabilities that are recovered or
      refunded in a subsequent period. The PGA Clause also authorizes the
      Utility to recover costs it incurs to finance its investment in gas
      supplies that are purchased during the storage injection season for sale
      during the heating season. The PGA Clause also permits the application of
      carrying costs to all over- or under-recoveries of gas costs, including
      costs and cost reductions associated with the use of financial
      instruments. Effective October 1, 2007, the PGA Clause also
      provides for a portion of income from off-system sales and capacity
      release revenues to be flowed through to customers.The
      Company records deferred tax liabilities and assets measured by enacted
      tax rates for the net tax effect of all temporary differences between the
      carrying amounts of assets and liabilities for financial reporting
      purposes, and the amounts used for income tax purposes. Changes in enacted
      tax rates, if any, and certain property basis differences will be
      reflected by entries to regulatory asset or liability accounts for
      regulated companies, and will be reflected as income or loss for
      non-regulated companies. Pursuant to the direction of the MoPSC, Laclede
      Gas’ provision for income tax expense for financial reporting purposes
      reflects an open-ended method of tax depreciation. Laclede Gas’ provision
      for income tax expense also records the income tax effect associated with
      the difference between overheads capitalized to construction for financial
      reporting purposes and those recognized for tax purposes without recording
      an offsetting deferred income tax expense. These two methods are
      consistent with the regulatory treatment prescribed by the
      MoPSC.Asset
      retirement obligations are recorded in accordance with SFAS No. 143,
      “Accounting for Asset Retirement Obligations” and FIN 47, “Accounting for
      Conditional Asset Retirement Obligations.” Asset retirement obligations
      are calculated using various assumptions related to the timing, method of
      settlement, inflation, and profit margins that third parties would demand
      to settle the future obligations. These assumptions require the use of
      judgment and estimates and may change in future periods as circumstances
      dictate. As authorized by the MoPSC, Laclede Gas accrues future removal
      costs associated with its property, plant and equipment through its
      depreciation rates, even if a legal obligation does not exist as defined
      by SFAS No. 143 and FIN 47. The difference between removal costs
      recognized in depreciation rates and the accretion expense and
      depreciation expense recognizable under SFAS No. 143 and FIN 47 is a
      timing difference between the recovery of these costs in rates and their
      recognition for financial reporting purposes. Accordingly, consistent with
      SFAS No. 71, these differences are deferred as regulatory
      liabilities.





The
      amount of net periodic pension and other postretirement benefit cost
      recognized in the financial statements related to the Utility’s qualified
      pension plans and other postretirement benefit plans is based upon
      allowances, as approved by the MoPSC, which have been established in the
      rate-making process for the recovery of these costs from customers. The
      differences between these amounts and actual pension and other
      postretirement benefit costs incurred for financial reporting purposes are
      deferred as regulatory assets or regulatory liabilities. SFAS No. 158,
      “Employers’ Accounting for Defined Benefit Pension and Other
      Postretirement Plans,” requires that changes that affect the funded status
      of pension and other postretirement benefit plans, but that are not yet
      required to be recognized as components of pension and other
      postretirement benefit cost, be reflected in other comprehensive income.
      For the Utility’s qualified pension plans and other postretirement benefit
      plans, amounts that would otherwise be reflected in other comprehensive
      income are deferred with entries to regulatory assets or regulatory
      liabilities.





30





For
further discussion of significant accounting policies, see Note 1 to the
Consolidated Financial Statements included in the Company’s Form 10-K for the
fiscal year ended September 30, 2007.








ACCOUNTING
PRONOUNCEMENTS





The
Company has evaluated or is in the process of evaluating the impact that
recently issued accounting standards will have on the Company’s financial
position or results of operations upon adoption. For disclosures related to the
adoption of new accounting standards, see the New Accounting Standards section
of Note 1 to the Consolidated Financial Statements.








FINANCIAL
CONDITION








CREDIT
RATINGS





As
of March 31, 2008, credit ratings for outstanding securities for
Laclede Group and Laclede Gas issues were as follows:





Type
      of Facility
            S&P
            Moody’s
            FitchLaclede
      Group Corporate Rating
            A
            
            A-Laclede
      Gas First Mortgage Bonds
            A
            A3
            A+Laclede
      Gas Commercial Paper
            A-1
            P-2Laclede
      Capital Trust I Trust Preferred Securities
            A-
            Baa3
            BBB+





The
Company has investment grade ratings, and believes that it will have adequate
access to the financial markets to meet its capital requirements. These ratings
remain subject to review and change by the rating agencies.








CASH
FLOWS





The
Company’s short-term borrowing requirements typically peak during colder months
when Laclede Gas borrows money to cover the lag between when it purchases its
natural gas and when its customers pay for that gas. Changes in the wholesale
cost of natural gas, variations in the timing of collections of gas cost under
the Utility’s PGA Clause, the seasonality of accounts receivable balances, and
the utilization of storage gas inventories cause short-term cash requirements to
vary during the year, and can cause significant variations in the Utility’s cash
provided by or used in operating activities.





Net
cash provided by operating activities for the six months ended
March 31, 2008 was $130.8 million, compared with $114.0 million for
the same period last year. The variation is primarily attributable to improved
operating cash flows at LER and a reduction in net cash payments associated with
the Utility’s use of natural gas financial instruments. These factors were
partially offset by variations associated with the timing of the collections of
gas cost under the Utility’s PGA Clause and increased cash paid for income
taxes.





Net
cash provided by investing activities for the six months ended
March 31, 2008 was $55.5 million compared with net cash used in
investing activities of $27.8 million for the six months ended
March 31, 2007. The variation is primarily attributable to the
proceeds from the sale of SM&P recorded this year.





Net
cash used in financing activities was $93.5 million for the six months ended
March 31, 2008 compared with $101.5 million for the six months ended
March 31, 2007. The variation primarily reflects a decrease in net
repayments of short-term debt, partially offset by the maturity of long-term
debt this year.








LIQUIDITY
AND CAPITAL RESOURCES





As
indicated above, the Company’s short-term borrowing requirements typically peak
during the colder months. These short-term cash requirements have traditionally
been met through the sale of commercial paper supported by lines of credit with
banks. Laclede Gas has a line of credit in place of $320 million. During the
second quarter, the expiration of this line was extended one year to
December 2011 from December 2010. In November 2007, the Utility
established a


31


seasonal
line of credit of $40 million, which expired in March 2008. The Utility had
short-term borrowings aggregating to a maximum of $298.7 million at any one time
during the second quarter. Short-term borrowings outstanding at
March 31, 2008 were $171.7 million, at a weighted average interest
rate of 3.1% per annum. Based on short-term borrowings at
March 31, 2008, a change in interest rates of 100 basis points would
increase or decrease pre-tax earnings and cash flows by approximately $1.7
million on an annual basis. Portions of such increases or decreases may be
offset through the application of PGA carrying costs.





Laclede
Gas’ lines of credit include covenants limiting total debt, including short-term
debt, to no more than 70% of total capitalization and requiring earnings before
interest, taxes, depreciation and amortization (EBITDA) to be at least 2.25
times interest expense. On March 31, 2008, total debt was 56% of total
capitalization. For the twelve months ended March 31, 2008, EBITDA was
3.67 times interest expense.





Laclede
Gas has on file with the Securities and Exchange Commission (SEC) an effective
shelf registration on Form S-3 for issuance of $350 million of securities. The
full amount of this shelf registration remains available to Laclede Gas at this
time. The Utility has authority from the MoPSC to issue up to $500 million in
first mortgage bonds, unsecured debt, and equity securities. In
February 2008, pursuant to this authority, the Utility sold 28 shares of
its common stock to Laclede Group for $1.0 million, leaving $494.2 million
remaining under this authorization as of the date of this filing. The amount,
timing and type of additional financing to be issued will depend on cash
requirements and market conditions.





On
November 1, 2007, Laclede Gas paid at maturity $40 million principal
amount of 7 1/2% First Mortgage Bonds. This maturity was funded through
short-term borrowings. At March 31, 2008, Laclede Gas had fixed-rate
long-term debt totaling $310 million. While these long-term debt issues are
fixed-rate, they are subject to changes in fair value as market interest rates
change. However, increases or decreases in fair value would impact earnings and
cash flows only if Laclede Gas were to reacquire any of these issues in the open
market prior to maturity.





On
April 1, 2008, Laclede Group announced the redemption in full of its
$46.4 million Debentures on May 5, 2008 (redemption date), which also
triggers the redemption of all of the Trust common and preferred securities on
the redemption date. Interest on the Debentures and distributions on the Trust
securities will cease to accrue on and after the redemption date. Upon
redemption, Laclede Group anticipates recognizing a pre-tax loss of
approximately $1.3 million attributable to unamortized debt issuance costs. A
portion of the proceeds received from the sale of SM&P will be used to fund
the redemption.





Laclede
Group has on file a shelf registration on Form S-3 with the SEC that allows for
the issuance of equity securities, other than preferred stock, and debt
securities. Of the $500 million of securities originally registered under this
Form S-3, $362.4 million remain registered and unissued as of
March 31, 2008. The amount, timing and type of additional financing to
be issued under this shelf registration will depend on cash requirements and
market conditions.





Short-term
cash requirements outside of Laclede Gas have generally been met with
internally-generated funds. However, Laclede Group has $50 million in working
capital lines of credit, expiring in August 2008, to meet short-term
liquidity needs of its subsidiaries. These lines of credit have covenants
limiting the total debt of the consolidated Laclede Group to no more that 70% of
the Company’s total capitalization, giving a 50% debt weighting to the
subordinated debt issued to an unconsolidated affiliated trust. This ratio stood
at 50% on March 31, 2008. These lines have been used to provide
letters of credit on behalf of SM&P, and to provide for seasonal funding
needs of the various subsidiaries from time to time. Just prior to the SM&P
sale, the letters of credit provided on behalf of SM&P totaled $2.8 million.
Such letters have been released and extinguished. There were no borrowings under
Laclede Group’s lines during the quarter.





Laclede
Gas has several operating leases for the rental of vehicles that contain
provisions requiring Laclede Gas to guarantee certain amounts related to the
residual value of the leased property. These leases have various terms, the
longest of which extends through 2014. At March 31, 2008, the maximum
guarantees under these leases are $1.7 million. However, the Utility estimates
that the residual value of the leased vehicles will be adequate to satisfy most
of the guaranteed amounts. At March 31, 2008, the carrying value of
the liability recognized for these guarantees was $0.3 million.





SM&P
had several operating leases, the aggregate annual cost of which was $8.2
million, consisting primarily of 12-month operating leases, with renewal
options, for vehicles used in its business. Laclede Group previously had
parental guarantees of certain of those vehicle leases but was released from
those guarantees on or before March 31, 2008, concurrent with the sale
of SM&P.


32





Laclede
Group had guarantees totaling $50.0 million for performance and payment of
certain wholesale gas supply purchases by LER, as of March 31, 2008.
Since that date, total guarantees issued by Laclede Group on behalf of LER
decreased by $1.0 million, bringing the total to $49.0 million in guarantees
outstanding at April 23, 2008. No amounts have been recorded for these
guarantees in the financial statements.





Utility
capital expenditures were $26.4 million for the six months ended
March 31, 2008, compared with $26.1 million for the same period last
year. Non-utility capital expenditures were $1.3 million for the six months
ended March 31, 2008, compared with $1.1 million for the same period
last year.





Consolidated
capitalization at March 31, 2008, excluding current obligations of
preferred stock, consisted of 57.5% Laclede Group common stock equity, 0.1%
Laclede Gas preferred stock equity, 5.5% long-term debt to unconsolidated
affiliate trust, and 36.9% Laclede Gas long-term debt.





It
is management’s view that the Company has adequate access to capital markets and
will have sufficient capital resources, both internal and external, to meet
anticipated capital requirements.





The
seasonal nature of Laclede Gas’ sales affects the comparison of certain balance
sheet items at March 31, 2008 and at September 30, 2007,
such as Accounts Receivable - Net, Gas Stored Underground, Notes Payable,
Accounts Payable, Regulatory Assets and Regulatory Liabilities, and Delayed and
Advance Customer Billings. The Consolidated Balance Sheet at
March 31, 2007 is presented to facilitate comparison of these items
with the corresponding interim period of the preceding fiscal year.








CONTRACTUAL
OBLIGATIONS





As
of March 31, 2008, Laclede Group had contractual obligations with
payments due as summarized below (in millions):





Payments
      due by periodRemaining
            
            
            
            
            
            Fiscal
      YearsContractual
      Obligations
            
            Total
            
            Fiscal
      Year
              2008
            
            Fiscal
      Years
              2009-2010
            
            Fiscal
      Years
              2011-2012
            
            2013
      and
              thereafterPrincipal
      Payments on Long-Term Debt (a)
            
            $
            356.4
            
            $
            —
            
            $
            —
            
            $
            25.0
            
            $
            331.4Interest
      Payments on Long-Term Debt (a)
            
            
            479.4
            
            
            11.5
            
            
            46.2
            
            
            43.7
            
            
            378.0Operating
      Leases (b)
            
            
            12.0
            
            
            2.6
            
            
            7.4
            
            
            2.0
            
            
            —Purchase
      Obligations – Natural Gas (c)
            
            
            2,328.6
            
            
            526.3
            
            
            1,195.7
            
            
            497.9
            
            
            108.7Purchase
      Obligations – Other (d)
            
            
            108.6
            
            
            10.5
            
            
            18.7
            
            
            16.3
            
            
            63.1Total
      (e)
            
            $
            3,285.0
            
            $
            550.9
            
            $
            1,268.0
            
            $
            584.9
            
            $
            881.2





(a)
            On
      April 1, 2008, Laclede Group announced that it would redeem its
      $46.4 million aggregate principal amount of 7.70% debentures held by
      Laclede Capital Trust I on May 5, 2008. Interest will cease to
      accrue on or after this date. The table above reflects obligations at
      March 31, 2008 and has not been adjusted for this announcement.
      Specifically, the table reflects principal payments of $46.4 million in
      the Fiscal Years 2013 and thereafter column and interest payments of $1.8
      million, $7.1 million, $7.1 million, and $72.3 million in the Remaining
      Fiscal Year 2008, Fiscal Years 2009-2010, Fiscal Years 2011-2012, and
      Fiscal Years 2013 and thereafter columns, respectively. For further
      details, see Note 10, Subsequent Event, of the Notes to the Consolidated
      Financial Statements.(b)
            Operating
      lease obligations are primarily for office space, vehicles, and power
      operated equipment in the gas distribution segment. Additional payments
      will be incurred if renewal options are exercised under the provisions of
      certain agreements.(c)
            These
      purchase obligations represent the minimum payments required under
      existing natural gas transportation and storage contracts and natural gas
      supply agreements in the utility gas distribution and non-regulated gas
      marketing segments. These amounts reflect fixed obligations as well as
      obligations to purchase natural gas at future market prices, calculated
      using March 31, 2008 New York Mercantile Exchange futures
      prices. Laclede Gas recovers the costs related to its purchases,
      transportation, and storage of natural gas through the operation of its
      Purchased Gas Adjustment Clause, subject to prudence review; however,
      variations in the timing of collections of gas costs from customers affect
      short-term cash requirements. Additional contractual commitments are
      generally entered into prior to or during the heating
    season.





33





(d)
            These
      purchase obligations reflect miscellaneous agreements for the purchase of
      materials and the procurement of services necessary for normal
      operations.(e)
            The
      categories of Capital Leases and Other Long-Term liabilities have been
      excluded from the table above because there are no applicable amounts of
      contractual obligations under these categories. Also, commitments related
      to pension and postretirement benefit plans have been excluded from the
      table above. The Company expects to make contributions to its qualified,
      trusteed pension plans totaling $0.6 million during the remainder of
      fiscal year 2008. Laclede Gas anticipates a $0.2 million contribution
      relative to its non-qualified pension plans during the remainder of fiscal
      year 2008. With regard to the postretirement benefits, the Company
      anticipates Laclede Gas will contribute $4.1 million to the qualified
      trusts and $0.2 million directly to participants from Laclede Gas’ funds
      during the remainder of fiscal year 2008. For further discussion of
      the Company’s pension and postretirement benefit plans, refer to Note 4,
      Pension Plans and Other Postretirement Benefits, of the Notes to
      Consolidated Financial Statements.








MARKET
RISK





Laclede
Gas adopted a risk management policy that provides for the purchase of natural
gas financial instruments with the goal of managing price risk associated with
purchasing natural gas on behalf of its customers. This policy prohibits
speculation. Costs and cost reductions, including carrying costs, associated
with the Utility’s use of natural gas financial instruments are allowed to be
passed on to the Utility’s customers through the operation of its PGA Clause,
through which the MoPSC allows the Utility to recover gas supply costs.
Accordingly, Laclede Gas does not expect any adverse earnings impact as a result
of the use of these financial instruments. At March 31, 2008, the
Utility held 10.6 million MMBtu of futures contracts at an average price of
$7.78 per MMBtu. Additionally, approximately 10.4 million MMBtu of other price
risk mitigation was in place through the use of option-based strategies. These
positions have various expiration dates, the longest of which extends through
March 2009.





In
the course of its business, Laclede Group’s non-regulated gas marketing
affiliate, LER, enters into fixed price commitments associated with the purchase
or sale of natural gas. As part of LER’s risk management policy, LER manages the
price risk associated with these commitments by either closely matching the
offsetting physical purchase or sale of natural gas at fixed prices or through
the use of exchange-traded futures contracts to lock in margins. At
March 31, 2008, LER’s unmatched positions are not material to Laclede
Group’s financial position or results of operations.








ENVIRONMENTAL
MATTERS





Laclede
Gas owns and operates natural gas distribution, transmission and storage
facilities, the operations of which are subject to various environmental laws,
regulations and interpretations. While environmental issues resulting from such
operations arise in the ordinary course of business, such issues have not
materially affected the Company’s or Laclede Gas’ financial position and results
of operations. As environmental laws, regulations, and their interpretations
change, however, Laclede Gas may be required to incur additional costs. For
information relative to environmental matters, see Note 14 to the Consolidated
Financial Statements included in the Company’s Form 10-K for the fiscal year
ended September 30, 2007. There have been no significant changes
relative to environmental matters during the six months ended
March 31, 2008.








OFF-BALANCE
SHEET ARRANGEMENTS





Laclede
Group has no off-balance sheet arrangements.








Laclede
Gas Company’s Management’s Discussion and Analysis of Financial Condition is
included in Exhibit 99.1 of this report.





34


Item
3. Quantitative and Qualitative Disclosures About Market Risk





For
this discussion, see the “Market Risk” subsection in Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations, page
34 of this report.





Item
4. Controls and Procedures





As
of the end of the period covered by this report, we carried out an evaluation,
under the supervision and with participation of our management, including our
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures pursuant to Rule
13a-15e and Rule 15d-15e under the Securities Exchange Act of 1934, as amended.
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are
effective.





There
have been no changes in our internal control over financial reporting that
occurred during our second fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.














35


PART
II. OTHER INFORMATION





Item
1. Legal Proceedings





For
a description of environmental matters and legal proceedings, see Note 14 to the
Consolidated Financial Statements included in the Company’s Form 10-K for the
fiscal year ended September 30, 2007. For a description of pending
regulatory matters of Laclede Gas, see Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations - Regulatory Matters,
on page 29 of this report.





Laclede
Group and its subsidiaries are involved in litigation, claims and investigations
arising in the normal course of business. While the results of such litigation
cannot be predicted with certainty, management, after discussion with counsel,
believes that the final outcome will not have a material adverse effect on the
consolidated financial position or results of operations of the
Company.





Item
2. Unregistered Sales of Equity Securities and Use of Proceeds





On
February 14, 2008, the Board of Directors of Laclede Gas approved the
sale of 28 shares of Laclede Gas common stock to Laclede Group. The proceeds
from the sale, totaling $1.0 million, were used to reduce short-term borrowings.
Exemption from registration was claimed under Section 4(2) of the Securities Act
of 1933.





Item
4. Submission of Matters to a Vote of Security Holders





The
annual meeting of The Laclede Group was held on January 31, 2008.
Below are the matters voted upon at the meeting.





The
following individuals were elected to the Board of Directors of The Laclede
Group:





Director
            Votes
      in Favor
            Votes
      AgainstEdward
      L. Glotzbach
            18,104,118
            305,818W.
      Stephen Maritz
            18,102,274
            307,662John
      P. Stupp, Jr.
            18,099,128
            310,808





The
other matter received the following votes:





Proposal
            Votes
      In Favor
            Votes
      Against
            AbstainRatify
      appointment of Deloitte & Touche LLP as independent auditors for
      fiscal year 2008
            18,167,079
            154,173
            88,684





Item
6. Exhibits





(a)
            See
      Exhibit Index





























36





SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrants have
duly caused this report to be signed on their behalf by the undersigned
thereunto duly authorized.




The
      Laclede Group, Inc.Dated:
            
            April
      23, 2008
            
            By:
            /s/
      Mark D. WaltermireMark
      D. WaltermireChief
      Financial Officer(Authorized
      Signatory and Chief Financial
Officer)




















37





SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrants have
duly caused this report to be signed on their behalf by the undersigned
thereunto duly authorized.




Laclede
      Gas CompanyDated:
            
            April
      23, 2008
            
            By:
            /s/
      Mark D. WaltermireMark
      D. WaltermireSenior
      Vice President andChief
      Financial Officer(Authorized
      Signatory and Chief Financial
Officer)

















38








INDEX TO
EXHIBITS








Exhibit
      No.10.1
            -
            Second
      amendment dated February 8, 2008 to syndicated loan agreement of
      Laclede Gas Company dated September 10, 2004 and first amended
      December 23, 2005.10.2
            -
            Restricted
      Stock Unit Award Agreement with Douglas H. Yaeger dated
      February 14, 2008.10.3
            -
            Stock
      Purchase Agreement between the Company and Stripe Acquisition, Inc. dated
      February 15, 2008 for the sale of SM&P Utility Resources,
      Inc.10.4
            -
            Supplemental
      Pension Agreement between Laclede Gas Company and Kenneth J. Neises dated
      March 7, 2008.10.5
            -
            Amended
      and Restated Storage Service Agreement between Laclede Gas Company and
      Centerpoint Energy - Mississippi River Transmission Corporation dated
      March 18, 2008 for Rate Schedule FSS, Contract
      #3147.10.6
            -
            Amended
      and Restated Transportation Service Agreement between Laclede Gas Company
      and Centerpoint Energy - Mississippi River Transmission Corporation dated
      March 18, 2008 for Rate Schedule FTS, Contract
      #3310.10.7
            -
            Amended
      and Restated Transportation Service Agreement between Laclede Gas Company
      and Centerpoint Energy - Mississippi River Transmission Corporation dated
      March 18, 2008 for Rate Schedule FTS, Contract
      #3311.10.8
            -
            First
      Amendment to Amended and Restated Revolving Credit Agreement between the
      Company and US Bank, National Association dated
      March 31, 2008.12
            -
            Ratio
      of Earnings to Fixed Charges.31
            -
            CEO
      and CFO Certifications under Exchange Act Rule 13a –
  14(a).32
            -
            CEO
      and CFO Section 1350 Certifications.99.1
            -
            Laclede
      Gas Company - Financial Statements, Notes to Financial Statements, and
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations.











39