Note 1 - Summary of Significant Accounting Policies

Principles of Consolidation. The Company consolidates all entities in which it has a controlling financial interest. All significant intercompany balances and transactions are eliminated.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications. Certain prior year amounts have been reclassified to conform with current year presentation.

Earnings for Interim Periods. The Company, in its opinion, has included all adjustments (which consist of only normally recurring adjustments, unless otherwise disclosed in this Form 10-Q) that are necessary for a fair statement of the results of operations for the reported periods. The consolidated financial statements and notes thereto, included herein, should be read in conjunction with the financial statements and notes for the years ended September 30, 2013, 2012 and 2011 that are included in the Company's 2013 Form 10-K. The consolidated financial statements for the year ended September 30, 2014 will be audited by the Company's independent registered public accounting firm after the end of the fiscal year.

The earnings for the three months ended December 31, 2013 should not be taken as a prediction of earnings for the entire fiscal year ending September 30, 2014. Most of the business of the Utility and Energy Marketing segments is seasonal in nature and is influenced by weather conditions. Due to the seasonal nature of the heating business in the Utility and Energy Marketing segments, earnings during the winter months normally represent a substantial part of the earnings that those segments are expected to achieve for the entire fiscal year. The Company’s business segments are discussed more fully in Note 7 – Business Segment Information.

Consolidated Statement of Cash Flows. For purposes of the Consolidated Statement of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity of generally three months or less to be cash equivalents.

Hedging Collateral Deposits. This is an account title for cash held in margin accounts funded by the Company to serve as collateral for hedging positions. At December 31, 2013, the Company did not have any hedging collateral deposits. At September 30, 2013, the Company had hedging collateral deposits of $1.1 million related to its exchange-traded futures contracts. In accordance with its accounting policy, the Company does not offset hedging collateral deposits paid or received against related derivative financial instruments liability or asset balances.

Gas Stored Underground - Current. In the Utility segment, gas stored underground – current is carried at lower of cost or market, on a LIFO method. Gas stored underground – current normally declines during the first and second quarters of the year and is replenished during the third and fourth quarters. In the Utility segment, the current cost of replacing gas withdrawn from storage is recorded in the Consolidated Statements of Income and a reserve for gas replacement is recorded in the Consolidated Balance Sheets under the caption “Other Accruals and Current Liabilities.” Such reserve, which amounted to $7.0 million at December 31, 2013, is reduced to zero by September 30 of each year as the inventory is replenished.

Property, Plant and Equipment. In the Company’s Exploration and Production segment, oil and gas property acquisition, exploration and development costs are capitalized under the full cost method of accounting. Under this methodology, all costs associated with property acquisition, exploration and development activities are capitalized, including internal costs directly identified with acquisition, exploration and development activities. The internal costs that are capitalized do not include any costs related to production, general corporate overhead, or similar activities. The Company does not recognize any gain or loss on the sale or other disposition of oil and gas properties unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves of oil and gas attributable to a cost center.

Capitalized costs include costs related to unproved properties, which are excluded from amortization until proved reserves are found or it is determined that the unproved properties are impaired. Such costs amounted to $130.3 million and $106.1 million at December 31, 2013 and September 30, 2013, respectively. All costs related to unproved properties are reviewed quarterly to determine if impairment has occurred. The amount of any impairment is transferred to the pool of capitalized costs being amortized.

Capitalized costs are subject to the SEC full cost ceiling test. The ceiling test, which is performed each quarter, determines a limit, or ceiling, on the amount of property acquisition, exploration and development costs that can be capitalized. The ceiling under this test represents (a) the present value of estimated future net cash flows, excluding future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, using a discount factor of 10%, which is computed by applying prices of oil and gas (as adjusted for hedging) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet, less estimated future expenditures, plus (b) the cost of unevaluated properties not being depleted, less (c) income tax effects related to the differences between the book and tax basis of the properties. The natural gas and oil prices used to calculate the full cost ceiling are based on an unweighted arithmetic average of the first day of the month oil and gas prices for each month within the twelve-month period prior to the end of the reporting period. If capitalized costs, net of accumulated depreciation, depletion and amortization and related deferred income taxes, exceed the ceiling at the end of any quarter, a permanent impairment is required to be charged to earnings in that quarter. At December 31, 2013, the ceiling exceeded the book value of the oil and gas properties by approximately $166.9 million.

Accumulated Other Comprehensive Loss. The components of Accumulated Other Comprehensive Loss and changes for the three months ended December 31, 2013, net of related tax effect, are as follows (amounts in parentheses indicate debits) (in thousands):



Three Months Ended December 31, 2013
					Funded Status of
	Gains and Losses				the Pension and
	on Derivative		Gains and Losses		Other Post-
	Financial		on Securities		Retirement Benefit
	Instruments		Available for Sale		Plans		Total
Balance at October 1, 2013	$	30,722	$	6,337	$	(56,293)	$	(19,234)

Other Comprehensive Gain
Before Reclassifications		1,507		1,573		-		3,080

Amounts Reclassified From
Other Comprehensive Loss		(5,884)		-		-		(5,884)

Balance at December 31, 2013	$	26,345	$	7,910	$	(56,293)	$	(22,038)

Reclassifications Out of Accumulated Other Comprehensive Loss. The details about the reclassification adjustments out of accumulated other comprehensive loss for the three months ended December 31, 2013 are as follows (amounts in parentheses indicate debits to the income statement) (in thousands):



Three Months Ended December 31, 2013

Details About Accumulated		Amount of Gain or (Loss)	Affected Line Item in the
Other Comprehensive		Reclassified from Accumulated	Statement Where Net Income
Loss Components		Other Comprehensive Loss	is Presented
Gains (Losses) on Derivative Financial
Instrument Cash Flow Hedges:

Commodity Contracts	$	9,787	Operating Revenues
Commodity Contracts		396	Purchased Gas
		10,183	Total Before Income Tax
		(4,299)	Income Tax Expense
	$	5,884	Net of Tax

Other Current Assets. The components of the Company’s Other Current Assets are as follows (in thousands):



	At December 31, 2013		At September 30, 2013

Prepayments	$	6,142	$	10,605
Prepaid Property and Other Taxes		16,106		13,079
Federal Income Taxes Receivable		-		1,122
State Income Taxes Receivable		-		3,275
Fair Values of Firm Commitments		-		1,829
Regulatory Assets		22,949		26,995
	$	45,197	$	56,905

Other Accruals and Current Liabilities. The components of the Company’s Other Accruals and Current Liabilities are as follows (in thousands):



	At December 31, 2013		At September 30, 2013

Accrued Capital Expenditures	$	35,749	$	41,100
Regulatory Liabilities		17,597		20,013
Reserve for Gas Replacement		7,003		-
Federal Income Taxes Payable		14,563		-
State Income Taxes Payable		1,902		-
Other		25,895		22,833
	$	102,709	$	83,946

Earnings Per Common Share. Basic earnings per common share is computed by dividing net income available for common stock by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For purposes of determining earnings per common share, the potentially dilutive securities the Company has outstanding are stock options, SARs, restricted stock units and performance shares. The diluted weighted average shares outstanding shown on the Consolidated Statements of Income reflects the potential dilution as a result of these securities as determined using the Treasury Stock Method. Stock options, SARs, restricted stock units and performance shares that are antidilutive are excluded from the calculation of diluted earnings per common share. There were 272 and 422,681 securities excluded as being antidilutive for the quarters ended December 31, 2013 and 2012, respectively.

Stock-Based Compensation. The Company granted 116,090 performance shares during the quarter ended December 31, 2013. The weighted average fair value of such performance shares was $67.16 per share for the quarter ended December 31, 2013. Performance shares represent an award constituting units denominated in common stock of the Company (or the equivalent value in cash, as determined by the Company), the number of which such units may be adjusted over a performance cycle based upon the extent to which performance goals have been satisfied. The performance shares do not entitle the participant to receive dividends during the vesting period.

Half of the performance shares granted during the quarter ended December 31, 2013 must meet a performance goal related to relative return on capital over the performance cycle of October 1, 2013 to September 30, 2016. The performance goal over the performance cycle is the Company’s total return on capital relative to the total return on capital of other companies in a group selected by the Compensation Committee (“Report Group”). Total return on capital for a given company means the average of the Report Group companies’ returns on capital for each twelve month period corresponding to each of the Company’s fiscal years during the performance cycle, based on data reported for the Report Group companies in the Bloomberg database. The number of these performance shares that will vest and be paid will depend upon the Company’s performance relative to the Report Group and not upon the absolute level of return achieved by the Company. The fair value of these performance shares is calculated by multiplying the expected number of shares that will be issued by the average market price of Company common stock on the date of grant reduced by the present value of forgone dividends over the vesting term of the award. The fair value is recorded as compensation expense over the vesting term of the award. The other half of the performance shares granted during the quarter ended December 31, 2013 must meet a performance goal related to total shareholder return over the performance cycle of October 1, 2013 to September 30, 2016. The performance goal over the performance cycle is the Company’s three-year total shareholder return relative to the three-year total shareholder return of the other companies in the Report Group. Three-year shareholder return for a given company will be based on the data reported for that company (with the starting and ending stock prices over the performance cycle calculated as the average closing stock price for the prior calendar month and with dividends reinvested in that company’s securities at each ex-dividend date) in the Bloomberg database. The number of these performance shares that will vest and be paid will depend upon the Company’s performance relative to the Report Group and not upon the absolute level of return achieved by the Company. The fair value price at the date of grant for these performance shares is determined using a Monte Carlo simulation technique, which includes a reduction in value for the present value of forgone dividends over the vesting term of the award. This price is multiplied by the number of performance shares awarded, the result of which is recorded as compensation expense over the vesting term of the award.

The Company granted 80,951 non-performance based restricted stock units during the quarter ended December 31, 2013. The weighted average fair value of such non-performance based restricted stock units was $65.23 per share for the quarter ended December 31, 2013. Restricted stock units represent the right to receive shares of common stock of the Company (or the equivalent value in cash or a combination of cash and shares of common stock of the Company, as determined by the Company) at the end of a specified time period. These non-performance based restricted stock units do not entitle the participant to receive dividends during the vesting period. The accounting for non-performance based restricted stock units is the same as the accounting for restricted share awards, except that the fair value at the date of grant of the restricted stock units must be reduced by the present value of forgone dividends over the vesting term of the award.

The Company did not grant any stock options, SARs or restricted share awards during the quarter ended December 31, 2013.

New Authoritative Accounting and Financial Reporting Guidance. In December 2011, the FASB issued authoritative guidance requiring enhanced disclosures regarding offsetting assets and liabilities. Companies are required to disclose both gross information and net information about instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. This authoritative guidance became effective for the quarter ended December 31, 2013 and there was no impact to the Company’s consolidated financial statements and disclosures.

In February 2013, the FASB issued authoritative guidance requiring enhanced disclosures regarding the reporting of amounts reclassified out of accumulated other comprehensive income. The authoritative guidance requires parenthetical disclosure on the face of the financial statements or a single footnote that would provide more detail about the components of reclassification adjustments that are reclassified in their entirety to net income. If a component of a reclassification adjustment is not reclassified in its entirety to net income, a cross reference would be made to the footnote disclosure that provides a more thorough discussion of the component involved in that reclassification adjustment. This authoritative guidance became effective for the quarter ended December 31, 2013. The Company has updated its financial statements to reflect the new guidance.